-----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, KzN/tZiLIsUnj3/6G72rKFSP1k+teyh/1q3Tle79GnwwCVmyPw1m3qJFRwjc488Y epCC65RdYzxRQ+G9FBa7RA== 0000950127-02-000111.txt : 20020414 0000950127-02-000111.hdr.sgml : 20020414 ACCESSION NUMBER: 0000950127-02-000111 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20020220 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020206 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: 02527963 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 a_8k.txt FORM 8-K UNITED STATES 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): February1, 2002 Infocrossing, Inc. ------------------- (Exact name of registrant as specified in its charter) Delaware -------- (State of or other jurisdiction or incorporation) 13-3252333 ------------- ---------- (Commission File (I.R.S. Employer Number) Identification Number) 2 Christie Heights Street Leonia, New Jersey 07605 Attention: Secretary ------------------------------ (Address of Principal Executive Offices) (201) 840-4700 -------------- (Registrant's Telephone Number, Including Area Code) Not Applicable ------------------------------ (Former Name or Former Address, if Changed Since Last Report) Item 2. Acquisition or Disposition of Assets On February 5, 2002, Infocrossing, Inc. (the "Company") (Nasdaq:IFOX) entered into a Stock Purchase Agreement with American Software, Inc., a Georgia corporation ("ASI") whereby the Company purchased all of the outstanding capital stock of AmQUEST, Inc., a Georgia corporation ("AmQUEST"), from its former parent company ASI (the "AmQUEST Acquisition"). As consideration for the purchase of AmQUEST's shares, the Company paid to ASI an amount in cash equal to $20,283,072, which amount will be adjusted upon final determination of the working capital of AmQUEST as of January 31, 2002. The Company and ASI jointly issued a press release announcing the event which is attached hereto as Exhibit 99.1. The Company financed the AmQUEST Acquisition through (i) the application of the proceeds of the financing described in Item 5 of this Form and (ii) cash held by the Company. AmQUEST is a managed services provider which delivers technology infrastructure management services to enterprise clients. AmQUEST's principal assets consist of rights under contracts, leases and licenses of the employees, equipment, real estate, and intellectual property used in performing AmQUEST's business. From and after the AmQUEST Acquisition, AmQUEST will continue to operate its business as a wholly-owned subsidiary of the Company. The Stock Purchase Agreement is attached hereto as Exhibit 2.1 as is incorporated herein by reference. Item 5. Other Events On February 1, 2002, in anticipation of the consummation of the AmQUEST Acquisition, the Company entered into a Securities Purchase Agreement (the "SPA") with Cahill, Warnock Strategic Partners Fund, L.P., Strategic Associates, L.P., Camden Partners Strategic Fund II-A, L.P., and Camden Partners Strategic Fund II-B, L.P. (collectively known as "Camden") whereby the Company issued Senior Subordinated Debentures (the "Debentures") and warrants (the "Initial Warrant") to purchase, initially, 2 million shares of the common stock (the "Common Stock") par value $.01 of the Company (subject to adjustments as discussed below) in exchange for an investment of $10,000,000 from Camden. Pursuant to the SPA the proceeds of the sale of the Debentures to Camden have been used to partially fund the AmQUEST Acquisition. The SPA is attached hereto as Exhibit 4.1 and is incorporated herein by reference. The Debentures have been issued in an aggregate principal amount of $10,000,000 with a maturity of three (3) years (the "Initial Maturity Date") from February 1, 2002, the date of their issuance (the "Issuance Date"), with an option to extend the term of the Debentures for one additional year beyond the Initial Maturity Date to February 1, 2006 at the Company's sole option. Pursuant to the terms of the Debenture, the Company is required to make semi-annual interest payments of (i) 12% per annum commencing on the Issuance Date and ending on February 1, 2004, (ii) 13% per annum for the period commencing on February 1, 2004 and ending on February 1, 2005, and (iii) if the Company elects to extend the maturity date pursuant to the terms of the Debentures, 14% per annum. The company has the option to pay interest in the form of (a) cash; (b) additional Debentures , or (c) a combination of cash and additional Debentures. If the Company chooses to make interest payments using additional Debentures the Company will be required to issue up to 639,420 additional warrants (the "Additional Warrants") pursuant to the terms of the Debentures. The Additional Warrants issued by the Company will be exercisable for that number of shares of Common Stock equal to one share for each ten dollars ($10.00) paid in the form of additional Debentures, provided, however that the Additional Warrants shall not be issued (i) until the two year anniversary of the Issuance Date, or (ii) at all, if all of the indebtedness outstanding under the Debentures has been repaid in full before the two year anniversary of the date the Debentures were issued. The Form of Debenture is attached hereto as Exhibit 4.2 and is incorporated herein by reference. The Initial Warrants have been issued pursuant to that certain Warrant Agreement dated as of February 1, 2002 by and between the Company and Camden (the "Warrant Agreement") and are subject to certain customary anti-dilution adjustments. The exercise price of the Initial Warrants is $5.86. The Warrants expire five (5) years from the Closing Date. In addition, up to 1.5 million of the Initial Warrants may be cancelled upon the prepayment of the Debentures. Cancellation of the Initial Warrants may take place in the following manner: (i) Upon prepayment of the Debentures in full during the first year, 1.5 million Initial Warrants will be immediately canceled; (ii) Upon prepayment of the Debentures in full after the first anniversary and before the third anniversary of the Closing Date, Initial Warrants will be canceled according to the following formula: 62,500 shares multiplied by the number of full months between the prepayment and the third anniversary of the Closing Date; (iii) Notwithstanding the foregoing, the Company will be entitled, at any time, to make one (and only one) partial prepayment of the Debentures in the amount of at least 50% of the total outstanding indebtedness (the "Partial Prepayment"). In the event of a Partial Prepayment, the number of Initial Warrants to be canceled shall be equal to the product of (x) the number of Warrants to be canceled pursuant to subsections (i) and (ii) above assuming full repayment of the Debentures, and (y) a fraction, the numerator of which shall be the aggregate principal amount of Debentures actually prepaid and the denominator of which shall be equal to the aggregate principal amount of Debentures outstanding on the date of such Partial Prepayment (the "Prepayment Fraction"); and (iv) In the event of full repayment of the Debentures that is both (A) after a Partial Prepayment; and (B) before the third anniversary of the Closing Date, the number of Initial Warrants to be canceled shall be equal to the product of (x) the number of Initial Warrants to be canceled pursuant to subsections (i) and (ii) above assuming full repayment of the Debentures, and (y) 1 minus the Prepayment Fraction. Additional Warrants, when issued, will not be subject to cancellation. The Warrant Agreement governing the Warrants is attached hereto as Exhibit 4.3 and is incorporated herein by reference. Pursuant to the rules of the Nasdaq National Market, the issuance of shares of Common Stock representing more than 19.999% of the outstanding Common Stock upon the exercise of any warrants requires the approval of the stockholders of the Company. The Company has agreed to seek this approval at its next annual meeting of stockholders and will not issue more than this number of shares upon the exercise of the Warrants until such approval has been granted. If the company does not obtain the required stockholder approval before the earlier to occur of (i) the occurrence of an event of default under the terms of the Debentures or (ii) the date of the Company's next annual meeting of its stockholders, the Company is required to pay to the holders of the Debentures a cash payment equal to seventeen percent (17%) of the outstanding initial principal amount of the debentures per year from such date until the required stockholder approval is obtained. As of February 1, 2002, pursuant to the Company's Second Amended and Restated Stockholders Agreement, stockholders representing 46.5% of the outstanding voting power of the Company's stock have agreed to vote to approve such issuance. The execution and delivery of such agreement, which is attached hereto as Exhibit 99.5 and is incorporated herein by reference, was a condition precedent to Camden's investment. Item 7. Financial Statements and Exhibits (c) Exhibit 2.1 Stock Purchase Agreement dated as of February 5, 2002 by and between Infocrossing Inc. and American Software, Inc. Exhibit 4.1 Securities Purchase Agreement dated as of February 1, 2002 by and between Infocrossing, Inc. and the Purchasers named therein. Exhibit 4.2 Form of Debenture of Infocrossing, Inc. Exhibit 4.3 Warrant Agreement dated as of February 1, 2002 by and between Infocrossing as Issuer and the Warrantholders party thereto. Exhibit 99.1 Press Release of Infocrossing, Inc., and American Software, Inc., dated February [5], 2002.] Exhibit 99.2 Guaranty Agreement dated as of February 1, 2002 by and between the Infocrossing, Inc. Subsidiaries named therein, Infocrossing, Inc. and the Purchasers named therein. Exhibit 99.3 Management Rights Letter dated as of February 1, 2002 between Infocrossing, Inc. and the Purchasers named therein. Exhibit 99.4 Amended and Restated Registration Rights Agreement dated as of February 1, 2002 by and between Infocrossing, the DB Holder named therein, the Sandler Holders named therein and the Camden Holders named therein. Exhibit 99.5 Second Amended and Restated Stockholders' Agreement dated as of February 1, 2002 by and between Infocrossing and the Stockholders named therein. Exhibit 99.6 Agreement Letter dated as of February 1, 2002 between Infocrossing Inc., the Warrantholders named therein and the Camden entities named therein. Exhibit 99.7 Lease Agreement, dated as of February 5, 2002, between ASI Properties, Inc. and AmQUEST, Inc. Exhibit 99.8 Guaranty of Lease, dated as of February 5, 2002, from Infocrossing, Inc. to ASI Properties, Inc. 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. By /s/ Nicholas J. Letizia ------------------------------------------- Name: Nicholas J. Letizia Title: Secretary Dated: February 5, 2002 EX-2.1 3 astockpurchaseagtex2_1.txt STOCK PURCHASE AGREEMENT - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT Dated as of February 5, 2002 by and between AMERICAN SOFTWARE, INC. and INFOCROSSING, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT (this "Agreement") dated as of February 5, 2002 by and among AMERICAN SOFTWARE, INC., a Georgia corporation ("Seller") and INFOCROSSING, INC., a Delaware corporation ("Purchaser"). W I T N E S S E T H: WHEREAS, Seller owns 1,000 shares (the "Shares") of common stock, no par value, of AMQUEST, INC., a Georgia 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. "Application Service Provider Services" shall mean the management and distribution of Seller Software based services and solutions to Persons from a data center that is (i) owned or leased by a Seller Entity, and (ii) operated by a Seller Entity. "Business Day" shall mean any day, other than a Saturday, Sunday or a day on which banks located in New York, New York or Atlanta, Georgia 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, the Seller or American Software USA, Inc. Company Intellectual Property (i) shall include, without limitation, any item reflected on the Unaudited Balance Sheet, and (ii) shall not include application software products or data provided by and hosted for third parties. "Company Property" shall mean any real property and improvements owned (directly, indirectly, or beneficially), leased, used, 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 the protection of human health or the environment, or to the manufacture, use, transport, treatment, storage, disposal, release or threatened release of petroleum products, asbestos, urea formaldehyde insulation, polychlorinated biphenyls or any substance listed, classified or regulated as hazardous or toxic, or any similar term, under such Environmental Law. "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. "Indebtedness" of any Person shall mean and include (i) indebtedness for borrowed money 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) commitments or obligations by which such Person assures a creditor against loss (including contingent reimbursement obligations with respect to letters of credit), (v) indebtedness secured by a Lien on assets or properties of such Person, (vi) obligations or commitments to repay deposits or other amounts advanced by and owing to third parties, (vii) obligations under any interest rate, currency or other hedging agreement, (viii) any obligation to pay rent or other amounts under -2- 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 (ix) 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 (viii) 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 any of the following: (i) patents, domestic and foreign, and applications and statutory registrations of any nature and their direct off-shoots; (ii) registered and common law trade and service marks, pending registration applications therefor, and intent-to-use registrations or similar reservations of marks; (iii) registered and unregistered copyrights, and applications for registration; (iv) Sites; (v) trade secrets and proprietary information not otherwise listed in (i) through (iv) above, including inventions, invention disclosures, moral and economic rights of authors and inventors (however denominated), confidential information, technical data, customer lists, corporate and business names, trade names, trade dress, brand names, know-how, methods, designs, processes, procedures, technology, source codes, object codes, computer software, databases or collections and derivatives, improvements and refinements thereof, howsoever recorded, or unrecorded; and (vi) good will associated with any of the foregoing. "IRS" shall mean the United States Internal Revenue Service. "Key Employee" shall mean the individuals set forth on Schedule 1.1(a)(i). "Law" shall mean any statute, law, ordinance, rule or regulation of 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 on use of real or personal property or irregularities in title thereto. "Material Adverse Change" or "Material Adverse Effect" shall mean, (i) when used with respect to the Company, any materially adverse change in or effect on the business, assets, liabilities, results of operation, condition (financial or otherwise) or prospects of the Company, taken as a whole, other than changes or effects relating to general economic conditions, or general conditions in the information technology infrastructure management services industry, in each case, 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. "Order" shall mean any judgment, order, injunction, decree, writ, permit or license of any Governmental or Regulatory Authority or any arbitrator. -3- "Permitted Liens" shall mean (i) Liens reflected in the Balance Sheet, (ii) 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 and (iii) Liens for current taxes, assessments or governmental charges or levies not yet due and payable. "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. "Seller Entity" shall mean each of Seller, American Software USA, Inc., Logility, Inc. and each other Affiliate of the Seller (other than the Company) as of the Closing Date. "Seller Software" shall mean software applications which have been developed by or for any Seller Entity as at the Closing Date which are licensed by any Seller Entity in the ordinary and regular course of its business to any third Person. "Sites" shall mean internet domain names, applications and reservations therefor, universe resource locators and the corresponding Internet sites. "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 taxes, assessments, charges, duties, fees, levies or other governmental charges, including 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 governmental charges of any kind whatsoever (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 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. "Working Capital" shall mean the amount by which the Company's current assets exceed its current liabilities, determined in accordance with GAAP, in a manner consistent with the policies and principles used by the Company in connection with the preparation of the Balance Sheet, except that the current portion of any capital leases shall be excluded from -4- current liabilities for purposes of determining such amount. For purposes of the foregoing sentence, the current portion of capital leases shall include any sums accruing under such leases with respect to the twelve months following the date on which Working Capital is determined. "Working Capital Target Amount" shall mean Two Hundred and Fifty Thousand Dollars ($250,000). (b) Additional Defined Terms. In addition to the terms defined in 1.1, the following terms shall have the respective meanings assigned thereto in the sections indicated below. Defined Term Section Acquired Entity 5.3(b) Actual Value 2.3(b)(ii) ADSP 7.8 Agreed Claims 8.3(c) Agreement Preamble Allocation 7.8 Arbitrator 2.3(b)(ii) ASI Software 5.7 Avery Assignment Agreement 6.1(d)(iii) Avery Claim 5.6 Balance Sheet 3.7(a) Balance Sheet Date 3.7(a) Certificate 8.3(a) Closing 2.4 Closing Date 2.4 COBRA 5.5 Common Stock 3.5 Company First Recital Company Customer 5.3(a)(i) Company/Sprint Agreements 5.3(a)(ii)(C) Confidentiality Agreement 5.1(a) Contract 3.3(a) Effective Date 2.2(a) Effective Date Working Capital 2.3(a) Employee Benefit Plans 3.21(a) ERISA 3.21(a) Estimated Working Capital 2.2(a) Estimated Working Capital Difference 2.2(a) Exhibit A Property 3.17(a) High Value 2.3(b)(ii) Indemnified Party 8.3(a) Indemnifying Party 8.3(a) Lease Agreement 6.1(d)(i) Lease Guaranty 6.1(d)(vii) Losses 8.2(a) -5- Defined Tem Section Low Value 2.3(b)(ii) Medical Plan 5.5 Multiemployer Plan 3.21(c) Notice of Objection 2.3(b)(i) Overlap Period 7.1(b) Permit 3.25 Pre-Closing Periods 3.15(b) Purchase Price 2.2(b) Purchaser Preamble Purchaser Indemnitee 8.2(a) Returns 3.15(a) Seller Preamble Seller Indemnitee 8.2(b) Seller/Sprint Agreements 8.2(b) Service Fee Letter Agreement 6.1(d)(vi) Services Agreement 6.1(d)(ii) Shares First Recital Tax Benefit 8.2(f) Tax Matter 7.3(a) Temporary Staffing Business 3.6(b) Unaudited Balance Sheet 3.7(a) Unaudited Balance Sheet Date 7(a) VEBAs 3.21(a) WARN 3.20(l) Warranty Claims 3.29 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 -6- (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. Where any representation or warranty contained in this Agreement is expressly qualified by reference to the knowledge of Seller, it means the actual or implied knowledge of the officers and directors of Seller, and for this purpose, "implied knowledge" means all information that such officers and directors should have known (i) in the course of operating and managing the business and affairs of the Company, assuming they operated and managed such business and affairs in accordance with prudent and customary business practices, or (ii) after having made due and diligent inquiry of all persons responsible for the operation and management of the business and affairs of 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 or implied knowledge of Zach Lonstein, Robert Wallach and Nicholas Letizia, and for this purpose, "implied knowledge" means all information that such persons should have known (i) in the course of operating and managing the business and affairs of Purchaser, assuming they operated and managed such business and affairs in accordance with prudent and customary business practices, or (ii) after having made due and diligent inquiry of all persons responsible for the operation and management of the business and affairs 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 on the Closing Date, and Purchaser agrees to purchase from Seller on the Closing Date, the Shares. The certificates representing the Shares shall be 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. Seller agrees to cure any deficiencies with respect to the endorsement of the certificates representing the Shares or with respect to the stock power accompanying any such certificates. 2.2 Determination and Payment of Closing Payment. At least two (2) but no more than five (5) Business Days prior to the Closing Date, Seller shall have caused the Company to prepare and deliver to Purchaser (i) a statement setting forth a good faith estimate of the aggregate Working Capital of the Company (the "Estimated Working Capital"), as of -7- January 31, 2002 (the "Effective Date"), which shall quantify in reasonable detail the items constituting such Working Capital, and (ii) a statement of the difference between the Working Capital Target Amount and the Estimated Working Capital, which amount could be a positive or a negative number (such amount, the "Estimated Working Capital Difference"). The statement of Estimated Working Capital shall be prepared in accordance with GAAP and in a manner consistent with the policies and principles used by the Company in connection with the preparation of the Balance Sheet. (b) In consideration for the sale of the Shares by Seller to Purchaser, Purchaser shall deliver to Seller at the Closing an amount equal to the amount by which Twenty Million Dollars ($20,000,000) exceeds the Estimated Working Capital Difference (which Estimated Working Capital Difference could be a positive or a negative number) (the "Purchase Price"), by certified check or 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. 2.3 Determination of Purchase Price. Promptly after the Closing Date, and in any event not later than sixty (60) days following the Closing Date, Purchaser shall cause the Company to prepare and deliver to Seller a statement of the aggregate Working Capital of the Company (the "Effective Date Working Capital"), as of the Effective Date, which shall quantify in reasonable detail the items constituting such Working Capital. The Effective Date Working Capital shall be prepared in accordance with GAAP and in a manner consistent with the policies and principles used by the Company in connection with the preparation of the Balance Sheet. Upon delivery of such statements by Purchaser, Purchaser shall provide Seller and its representatives with reasonable access during business hours to the books and records of the Company in order to allow Seller and its representatives to verify the accuracy of determination by Purchaser of the Effective Date Working Capital. (b) (i) In the event that Seller does not object to the determination by Purchaser of the Effective Date Working Capital by written notice of objection (the "Notice of Objection") delivered to Purchaser within fifteen (15) Business Days after Seller's receipt of the statements referred to in Section 2.3(a), such Notice of Objection to describe in reasonable detail Seller's proposed adjustments to the Effective Date Working Capital, the Effective Date Working Capital shall be deemed final and binding. (ii) If Seller delivers a Notice of Objection to Purchaser, then any dispute shall be resolved as follows: (A) Seller and Purchaser shall promptly endeavor to agree upon the determination of the Effective Date Working Capital. In the event that a written agreement determining the amount of the Effective Date Working Capital has not been reached within ten (10) Business Days after the date of receipt by Purchaser from Seller of the Notice of Objection, Purchaser's determination of the Effective Date Working Capital shall be submitted to a certified public accountant who has a minimum of ten (10) years of experience with, and is currently employed by, one of the top five (5) national accounting firms with which none of the parties have had a prior relationship (the "Arbitrator"). -8- (B) Within thirty (30) days of the submission of any dispute concerning the determination of the Effective Date Working Capital to the Arbitrator, the Arbitrator shall render a decision in accordance with this Section 2.3(b) along with a statement of reasons therefor. The decision of the Arbitrator shall be final and binding upon each party hereto. (C) In the event Seller and Purchaser submit any unresolved disputes to the Arbitrator for resolution, Seller and Purchaser shall share responsibility for the fees and expenses of the Arbitrator as follows: (1) if the Arbitrator resolves all of the remaining objections in favor of Purchaser's position (the Effective Date Working Capital so determined is referred to herein as the "Low Value"), then Seller shall be responsible for all of the fees and expenses of the Arbitrator; (2) if the Arbitrator resolves all of the remaining objections in favor of Seller's position (the Effective Date Working Capital so determined is referred to herein as the "High Value"), then Purchaser shall be responsible for all of the fees and expenses of the Arbitrator; and (3) if the Arbitrator neither resolves all of the remaining objections in favor of Purchaser's position nor resolves all of the remaining objections in favor of Seller's position (the Effective Date Working Capital so determined is referred to herein as the "Actual Value"), Seller shall be responsible for that fraction of the fees and expenses of the Arbitrator for the Effective Date Working Capital equal to (x) the difference between the High Value and the Actual Value over (y) the difference between the High Value and the Low Value, for the Effective Date Working Capital, and Purchaser shall be responsible for the remainder of the fees and expenses of the Arbitrator. (c) If the Effective Date Working Capital is less than the amount of the Estimated Working Capital, then Seller shall be obligated to pay to Purchaser the amount of any such deficiency within three (3) Business Days after the determination of the Effective Date Working Capital by wire transfer of immediately available funds to an account designated in writing by Purchaser. If the Effective Date Working Capital exceeds the amount of the Estimated Working Capital, then Purchaser shall be obligated to pay to Seller the amount of any such excess within three (3) Business Days after the determination of the Effective Date Working Capital by wire transfer of immediately available funds to an account designated in writing by Seller. (d) Notwithstanding any other provision in this Agreement, the parties hereto agree that all earnings, cash flow and other receipts of the Company for the period from the Effective Date through the Closing Date shall be for the benefit of and retained by the Company. 2.4 Closing. The sale referred to in Section 2.1 (the "Closing") shall take place immediately after the execution of this Agreement by the parties hereto at the offices of Holland & Knight LLP, 1201 West Peachtree Street, Atlanta, Georgia or at such other time, date -9- (not later than February 5, 2002) and place as the parties hereto shall agree. Such date is referred to herein as the "Closing Date". 2.5 Transaction Costs of the Company. At the Closing, Seller shall pay, or reimburse the Company for, all fees and expenses (including the fees and expenses of counsel, accountants and other professional advisors) incurred by the Company in connection with the transactions contemplated hereby. ARTICLE III REPRESENTATIONS OF SELLER 3. Representations of Seller. Seller represents, warrants and agrees as follows: 3.1 Ownership of Shares; Existence and Good Standing of Seller. Seller is the lawful owner, beneficially and of record, of all of the Shares, free and clear of all Liens. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia. The delivery to Purchaser of the Shares pursuant to this Agreement will, assuming the payment in full of the Purchase Price, transfer to Purchaser good and valid title to all of the outstanding capital stock of the Company, free and clear of all Liens. 3.2 Authority and Enforceability. Seller has the corporate 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 corporate 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 Seller's Board of Directors and no other corporate or shareholder action on the part of Seller or its shareholders is necessary to authorize the execution, delivery and performance of this Agreement and such other instruments and agreements by Seller and 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 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. Other than as set forth on 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 -10- contemplated hereby and thereby 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, or result in the creation of any Lien on any of the properties or assets of Seller or the Company under: (i) any provision of the articles of incorporation or by-laws of Seller or the Company; (ii) subject to obtaining and making any of the approvals, consents, notices and filings referred to in paragraph (b) below, 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 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 Seller or the Company. (b) Except for such filings and approvals as are set forth on Schedule 3.3(b), no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority or private third party is necessary or required under any of the terms, conditions or provisions of any Law or Order applicable to Seller or the Company or by which any of their respective properties or assets may be bound, any 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, for the execution and delivery of this Agreement by Seller, the performance by Seller of its obligations hereunder or the consummation of the transactions contemplated hereby other than those which, the failure to obtain or make, could not reasonably be expected to have a Material Adverse Effect with respect to the Company or Seller. 3.4 Existence and Good Standing of the Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia. The Company has all requisite corporate power and authority to own its property and to carry on its business as now being conducted. The Company is duly qualified to do business 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. 3.5 Capital Stock. The Company has an authorized capitalization consisting of 100,000 shares of common stock, no par value ("Common Stock"), of which 1,000 shares are issued and outstanding and no shares are held in the Company's treasury. All such outstanding shares of capital stock 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, 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 -11- 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 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 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 and Investments. (a) 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. (b) The temporary staffing business conducted by the Company prior to the Closing, together with all Contracts to which the Company is a party and all other rights and obligations of the Company relating thereto (collectively, the "Temporary Staffing Business") have been terminated or disposed of, transferred or spun-off to Seller, without liability or cost to the Company. 3.7 Financial Statements; Accounts Receivable; Working Capital. Seller has furnished Purchaser with the audited balance sheets of the Company as of April 30, 2000 and April 30, 2001, and the related audited statements of operations, shareholders' equity and cash flows for the years then ended together with statements of operations, shareholders' equity and cash flows for the year ended April 30, 1999, all certified by the Company's accountants, and the unaudited balance sheet of the Company as at December 31, 2001 and the related unaudited statements of operations, shareholders' equity and cash flows for the eight (8) months then ended (the audited balance sheet of the Company as at April 30, 2001 (the "Balance Sheet Date") is hereinafter referred to as the "Balance Sheet", and the unaudited balance sheet of the Company as at December 31, 2001 (the "Unaudited Balance Sheet Date") is hereinafter referred to as the "Unaudited Balance Sheet"). The financial statements referred to above, including the footnotes thereto, except as described therein, 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, shareholders' equity and cash flows for the eight (8) months ended December 31, 2001, 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). -13- (b) The Balance Sheet and such other audited balance sheets of the Company referred to in (a) above fairly present, in all material respects, the financial condition of the Company at the date 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 periods 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 are legal, valid and binding obligations of the respective debtors. No person has any Lien on, valid set-off or counterclaim against any of the Company's accounts or notes receivable and no request or Contract for any deduction or discount has been made or is contemplated with respect to any of the Company's accounts or notes receivable. No account or note receivable has been collected prior to the due date thereof except in a manner consistent with past practices in the ordinary course of business. 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. Except as set forth on Schedule 3.8(a), the Company has no claims, obligations or liabilities, whether absolute, accrued, contingent or otherwise, except for (i) claims, obligations or liabilities set forth in the Balance Sheet or specifically disclosed in the footnotes thereto, (ii) accounts payable to trade creditors and accrued expenses incurred subsequent to the Balance Sheet Date in the ordinary course of business and which, individually and in the aggregate, could not reasonably be expected to have a Material Adverse Effect with respect to the Company, and (iii) claims, obligations or liabilities which are not of the type required to be reflected on a balance sheet prepared in accordance with GAAP which do not exceed $5,000 individually or $15,000 in the aggregate. (b) Except as set forth on Schedule 3.8(b), the Company has no Indebtedness. 3.9 Books and Records. 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 shareholders and Board of Directors of the Company. The Company has none of its records, systems, controls, data or information 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 on Schedule 3.10(a), the Company has good title to or, in the case of leased assets, a valid leasehold interest in, free and - -13- 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. Except as set forth on Schedule 3.10(b), 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 is in good operating condition and repair, ordinary wear and tear excepted, and is adequate and suitable for the purposes for which it is presently being used. 3.11 Owned Real Property. The Company does not own any real property, in whole or in part. 3.12 Leased Real Property. The Company does not lease or sublease any real property or hold any other possessory interest in real property, except pursuant to leases of real property owned by Seller, which such leases will be terminated, without liability to the Company, at Closing. 3.13 Material Contracts. 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 in respect of which assets, rights or property 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 assets or properties (other than purchase orders for inventory or supplies in the ordinary course of business) in excess of $10,000 individually; (iii) all Contracts involving a loan (other than accounts receivable from trade debtors in the ordinary course of business) or advance to (other than travel and entertainment allowances to the employees of the Company extended in the ordinary course of business), 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; -14- (viii) all Contracts limiting the ability of the Company to engage in any line of business or to compete with any Person; (ix) all Contracts (other than this Agreement and any agreement or instrument entered into pursuant to this Agreement) with (A) Seller, any other Affiliate of the Company or any Affiliate of Seller (other than the Company) or (B) any current or former officer or director 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 confidentiality, 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 including an indemnity by the Company for or against costs relating to infringement of any of the Company Intellectual Property (unless capped in liability at or below three months' of the Company's revenues thereunder); (xvii) all Contracts which include an obligation of the Company to provide web hosting services or software maintenance services (unless, in either case, terminable by the Company on no more than thirty (30) days' prior notice); (xviii) all network interconnection Contracts; (xix) all Contracts currently in effect or pursuant to which the Company could have any future liability with respect to the Company's former temporary staffing operations; (xx) all Contracts involving $10,000 or more which are not cancelable by the Company without penalty on thirty (30) days or less notice; or (xxi) all other Contracts that are material to the business of the Company taken as a whole. -15- (b) Except as noted on Schedule 3.13(a), each Contract set forth on Schedule 3.13(a) (or required to be set forth on Schedule 3.13(a)) is in full force and effect and each covenant of Seller and, to the knowledge of Seller, of any 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 any Person (including Seller or any of its Affiliates) holding rights, assets or property for use 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 amendments, of each Contract set forth on Schedule 3.13(a) that has been reduced to writing and a summary of the material terms of each Contract set forth on Schedule 3.13(a) that has not been reduced to writing. 3.14 Litigation. Except as set forth on 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, against the Company or any of its properties, assets or rights (or any properties, assets or rights held by any other Person for use by the Company). Seller does not know of any valid basis for any such action, proceeding or investigation. Except as set forth on 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, including any amendments thereto, if any, accurately reflect all liability for Taxes of the Company for the periods covered thereby. (b) Payment of Taxes. All Taxes and Tax liabilities of the Company for all taxable years or periods that end on or before the Closing Date and, with respect to any taxable year or period beginning before and ending after the Closing Date, the portion of such taxable year or period ending on and including the Closing Date ("Pre-Closing Periods") have been timely paid or, except for income taxes which may accrue by reason of the Section 338(h)(10) election referred to Section 7.7 hereof, accrued and adequately disclosed and fully provided for on the books and records of the Company in accordance with GAAP applied on a consistent basis. (c) Other Tax Matters. Except as set forth on 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 relating to any issue which could result in a material Tax liability of the Company. -16- (ii) Except as set forth on Schedule 3.15(c)(ii), neither Seller nor the Company, as of the Closing Date, (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) Except as set forth on Schedule 3.15(c)(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 with respect to Taxes for any taxable period for which the statute of limitations has not expired. (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 predecessor or 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. - -17- (xii) The Company is a member of Seller's affiliated group (as such term is defined in Section 1504 of the Code) and will be included in Seller's consolidated Federal income Tax Return that includes the period from May 1, 2001 through the Closing Date. As such, Seller is and will be eligible to file an election under Section 338(h)(10) of the Code with respect to a "qualified stock purchase" (as such term is defined in Section 338 of the Code) of the stock of the Company. 3.16 Insurance. Set forth on Schedule 3.16 is an accurate and complete list of each insurance policy which covers the Company or its business, property, assets or employees (including self-insurance). Such policies are in the name of Seller and are in full force and effect; all premiums thereon have been paid; and Seller is otherwise in compliance in all material respects with the terms and provisions of such policies. The Company will not be covered by such policies following the Closing. Seller is not in default under any of the insurance policies set forth on Schedule 3.16 (or required to be set forth on Schedule 3.16), and, to the knowledge of Seller, there exists no event, occurrence, condition or act (including the purchase of the Shares hereunder) which, with the giving of notice, the lapse of time or the happening of any other event or condition, would become a default thereunder. Seller 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 such policies or arrangements has never been threatened. To the knowledge of Seller, there exists no event, occurrence, condition or act (including the purchase of the Shares hereunder) which, with the giving of notice, the lapse of time or the happening of any other event or condition, would entitle any insurer to terminate or cancel any such policies. Such policies, with respect to their amounts and types of coverage, are adequate to insure fully, until the Closing Date, against risks to which the Company and its property and assets are normally exposed in the operation of the business. Since October 31, 2000, there has not been any material adverse change in Seller's relationship with its insurers or in the premiums payable pursuant to such policies. Schedule 3.16 also sets forth a list of all pending claims and the claims history for the Company during the past three (3) years (including with respect to insurance obtained but not currently maintained). 3.17 Intellectual Properties. Schedule 3.17(a) lists all the Company Intellectual Property owned by or licensed to Seller or American Software USA, Inc., respectively, and any license therefor running to Seller or American Software USA, Inc. that Seller or American Software USA, Inc. granted (if owned) or assigned (if licensed) to the Company prior to the Closing. All other Company Intellectual Property that is owned by or licensed to Seller or American Software USA, Inc., respectively, is listed on Exhibit A to the Services Agreement (the "Exhibit A Property"). (b) Schedule 3.17(b) sets forth each item of Company Intellectual Property (i) officially registered to or in the name of the Company, Seller or American Software USA, Inc. (i.e., registered copyrights, trade or service marks, patents and applications) or (ii) material to the conduct of the Company's business. For each registered listed item, Schedules 3.17(b) sets forth the (i) registrant, (ii) the jurisdiction where issued, registered, legally sanctioned, filed or the equivalent, (iii) the jurisdictions of issuance and use. (c) Schedule 3.17(c) sets forth each license or other agreement by which the Company enjoys the use of Company Intellectual Property, together with (i) the identity of the licensor and licensee, and (ii) if the licensee is the Seller or American Software USA, Inc., the basis (documented or otherwise) pursuant to which the Company enjoys such rights. -18- (d) Schedule 3.17(d) sets forth each item of Intellectual Property licensed by the Company as licensor, if any. (e) The Intellectual Property and rights under licenses and agreements set forth on Schedules 3.17(b), 3.17(b) and 3.17(c) include all Intellectual Property rights necessary or material to the Company to conduct its business as and where conducted on the Closing Date (including all necessary rights to install and operate licensed Intellectual Property on the CPUs currently used by the Company), and the Company does not use Intellectual Property which is not owned by the Company or licensed to, and enjoyed by, the Company under an agreement listed in Schedule 3.17(c). The business operations of the Company, and those of Seller and American Software USA, Inc. to the extent related to the business of the Company, do not violate, infringe, misappropriate or misuse the Intellectual Property rights of another Person or licenses thereof, except for such violations, infringements, misappropriations or misuses which would not (i) individually or in the aggregate (A) interfere with the Company's ability to conduct its business operations in a manner substantially similar to the conduct thereof on the Closing Date, or (B) cause the Company to suffer, incur or pay any material damages, penalties, liabilities or claims; and (ii) in the case of Exhibit A Property, exist or arise if the Company (rather than Seller or American Software USA, Inc.) was a signatory or express license grantee thereof. (f) Each item of Company Intellectual Property listed on Schedules 3.17(b) which is registered, filed, issued or applied for, has been duly and validly registered in, filed in or issued by, the official governmental registrars and/or issuers (or officially recognized issuers) of patents, trademarks, copyrights or Internet domain names, in the various jurisdictions (national, state, provincial, prefectural and local) indicated on such Schedules, and except as set forth on Schedule 3.17(f), each such registration, filing and/or issuance (i) has not been abandoned, cancelled or otherwise compromised, (ii) has been maintained by all requisite filings, renewals and payments, and (iii) remains in full force and effect as of the Closing Date. Except as set forth on Schedule 3.17(f), there are no actions that must be taken or payments that must be made by the Company within one hundred and eighty (180) days following the Closing Date that, if not taken, will adversely effect the Intellectual Property or the right of the Company to use same as and where used as of the Closing Date. (g) To the extent any Intellectual Property is or has been used under license in the business of the Company, including that listed in Schedule 3.17(c), the Company, Seller, and American Software USA, Inc., as applicable, are in compliance with such license, except for such non-compliance that would not (i) individually or in the aggregate, (A) interfere with the Company's ability to conduct its business operations in a manner substantially similar to the conduct thereof on the Closing Date, or (B) cause the Company to suffer, incur or pay any material damages, penalties, liabilities or claims; and (ii) in the case of Exhibit A Property, exist or arise if the Company (rather than Seller or American Software USA, Inc.) was a signatory or express license grantee thereof. None of the Company, Seller or American Software USA, Inc. has received notice of (A) a material default of any license which remains uncured, (B) any claim, or a threat of any claim, from any third party challenging (1) the right of the Company (or the Seller or American Software USA, Inc., as applicable) to use any Intellectual Property or alleging any violation, infringement, misuse or misappropriation by the Company, Seller or American Software USA, Inc. of Intellectual Property or indicating that the failure to take a -19- license would result in any such claim, or (2) the ownership rights of the Company, Seller or American Software USA, Inc. in any Company Intellectual Property or asserting any opposition, interference, invalidity, termination, abandonment, unenforceability or other infirmity of any Company Intellectual Property, which remains unresolved. The Seller's execution, delivery and performance hereof (together with the other instruments and agreements contemplated hereby) will not result in any such default, infringement or impairment, except for such defaults, infringements or impairments that would not (i) individually or in the aggregate, (A) interfere with the Company's ability to conduct its business operations in a manner substantially similar to the conduct thereof on the Closing Date, or (B) cause the Company to suffer, incur or pay any material damages, penalties, liabilities or claims; and (ii) in the case of Exhibit A Property, exist or arise if the Company (rather than Seller or American Software USA, Inc.) was a signatory or express license grantee thereof. Each license of Company Intellectual Property to which the Company, Seller or American Software USA, Inc. is a party is a legal, valid and binding obligation of the Company, Seller or American Software USA, Inc. and the relevant other parties thereto, enforceable in accordance with the terms thereof, 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, and the transactions contemplated by this Agreement will not breach the terms thereof, except for such breaches that would not (i) individually or in the aggregate, (A) interfere with the Company's ability to conduct its business operations in a manner substantially similar to the conduct thereof on the Closing Date, or (B) cause the Company to suffer, incur or pay any material damages, penalties, liabilities or claims; and (ii) in the case of Exhibit A Property, exist or arise if the Company (rather than Seller or American Software USA, Inc.) was a signatory or express license grantee thereof. Except as set forth on Schedule 3.17(g), the Company owns or is licensed to use the Company Intellectual Property free and clear of any Liens, other than Permitted Liens without obligation to pay any royalty or any other fees with respect thereto. (h) Except as set forth on Schedule 3.17(h), none of the Company, Seller or American Software USA, Inc. has made any claim of a violation, infringement, misuse or misappropriation by any third party (including any employee or former employee of the Company) of the Company's, Seller's or American Software USA, Inc.'s rights to, or in connection with, any Company Intellectual Property, which claim is pending. Except as set forth on Schedule 3.17(h), none of the Company, Seller or American Software USA, Inc. has entered into any agreement to indemnify any other Person against any charge of infringement of any Company Intellectual Property, other than indemnification provisions contained in customer agreements, purchase orders or license agreements arising in the ordinary course of business. (i) Except as set forth on Schedule 3.17(i), the Company, Seller or American Software USA, Inc., as applicable, has secured valid written assignments or irrevocable, perpetual, royalty-free licenses from all consultants, contractors and employees who contributed to the creation or development of any Company Intellectual Property for any rights to such contributions that the Company does not already own by operation of law. (j) The Company has published internal policies and taken all other necessary and 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); -20- and all disclosure of such information to, and use by, any third party (other than (i) to competent regulators, accountants and counsel, in each instance acting in their professional capacities, or (ii) pursuant to an applicable Order) has been pursuant to the terms of a written confidentiality undertaking between such third party and the Company. The Company has not breached any agreements of non-disclosure or confidentiality, nor is it currently alleged or claimed to have done so. (k) Except as set forth on Schedule 3.17(k), for the twelve month period prior to the Closing Date, the internet domain names and universal resource locators listed in Schedule 3.17(a) (i) generally direct and resolve to the appropriate internet protocol addresses, (ii) are and have been generally accessible to Internet users supporting the Sites, and (iii) are and have been generally operational for downloading content from the those computers supporting the Sites, on a "24/7" basis. The Company maintains current back-up copies of the Sites (and all related software, databases and other information) and such back-up copies are and have been stored in a safe and secure environment, fit for the back-up of such media, and are not located at the same location as the server supporting the Sites. The Company has no reason to believe that the Sites will not operate or will not continue to be accessible to internet users on substantially a 24/7 basis prior to, at the time of, and after the Closing Date. (l) Except as set forth on Schedule 3.17(l), each customer agreement between the Company and a customer includes (i) either (A) a customer's representation and warranty that performance thereof shall not violate any right or duty owed to the owner or licensor of said customer's application and/or data, or (B) a customer's indemnity of the Company for costs and expenses relating to claims of infringement (whether or not proven); and (ii) the Company's hosting of its customers applications and/or data files has not, and does not, violate the Intellectual Property or other rights of any third party. 3.18 Compliance with Laws. The Company has complied and is in compliance with all applicable Laws and Orders except where the failure to so comply, individually and in the aggregate, could not reasonably be expected to have a Material Adverse Effect with respect to the Company. The Company has received no notice that any violation of the foregoing is being or may be alleged. 3.19 Suppliers and Customers. Schedule 3.19(a) sets forth each supplier and customer accounting for more than $5,000 of monthly purchases and sales, as the case may be, of the Company. Except as set forth on Schedule 3.19(b), the relationships of the Company with each such supplier and customer are good commercial working relationships. Except as set forth on Schedule 3.19(c), no such supplier or customer has canceled or otherwise terminated or, to the knowledge of Seller, threatened to cancel or otherwise terminate, its relationship with the Company, and Seller has not received any notice that any such supplier or 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 on Schedule 3.20, the Company has been and is in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, except where -21- the failure to so comply, individually and in the aggregate, could not reasonably be expected to have a Material Adverse Effect with respect to the Company. The Company has not been and is not engaged in any unfair labor practice. (b) 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. (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 operations of the Company. (e) No arbitration proceeding arising out of or under any collective bargaining agreement is pending and, to the knowledge of Seller, no grievance with respect thereto exists and no claim therefor has been asserted. (f) 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. (g) The Company has not experienced any material labor difficulty or work stoppage during the last three years. (h) There has not been, and to the knowledge of Seller there will not be, any material adverse change in relations with employees of the Company as a result of any announcement of the transactions contemplated by this Agreement. (i) The Company has no Equal Employment Opportunity Commission charges or other claims of employment discrimination pending or threatened against it. (j) To the knowledge of Seller, no wage and hour department investigation has been made of the Company. (k) There are no occupational health and safety claims pending or, to the knowledge of Seller, threatened against the Company. (l) Since the enactment of the Worker Adjustment and Retraining Notification Act ("WARN"), the Company has not effectuated either (i) 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 or (ii) a "mass layoff" (as defined in WARN) affecting 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 and none of the employees of the Company has not suffered an "employment loss" (as defined in WARN) during the six months prior to the Closing Date. -22- (m) The Company is in compliance with the terms and provisions of the Immigration Reform and Control Act of 1996, as amended, and all related regulations promulgated thereunder except for such non-compliance which, individually and in the aggregate, could not reasonably be expected to have a Material Adverse Effect with respect to the Company. (n) Prior to the date hereof, Seller has provided Purchaser with 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 exceed 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 and for services expected to be rendered during the current fiscal year. 3.21 Employee Benefit Plans. (a) List of Plans. Set forth on Schedule 3.21(a) is an accurate and complete list of all U.S. and non-U.S. (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, stock option, stock purchase, restricted stock, incentive, fringe benefit, "voluntary employees' beneficiary associations" ("VEBAs"), under Section 501(c)(9) of the Code, profit-sharing, pension, or retirement, deferred compensation, medical, life, disability, accident, salary continuation, severance, accrued leave, vacation, sick pay, sick leave, supplemental retirement and unemployment benefit plans, programs, arrangements, commitments and/or practices (whether or not insured); and (iii) employment, consulting, termination, and severance contracts or agreements for active, retired or former employees or directors, whether or not any such plans, programs, arrangements, commitments, contracts, agreements and/or practices (referred to in (i), (ii) or (iii) 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 is borne by the Company (including, for this purpose and for the purpose of all of the representations in this Section 3.21, any predecessors to the Company and 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 compliance with its terms and the requirements of all applicable laws, including ERISA and the Code, except for such non-compliance which, individually and in the aggregate, could not reasonably be expected to have a Material Adverse Effect with respect to the Company. No complete or partial termination of any Employee Benefit Plan has occurred or is expected to occur, and no proceedings have been instituted, and no condition exists and no event has occurred that would constitute grounds, under Title IV of ERISA to terminate, or appoint a trustee to administer, any Employee Benefit Plan. 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 -23- 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. 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. No Employee Benefit Plan is a plan described in Section 4063(a) of ERISA. (c) Liabilities. The Company has never maintained or contributed to, or had any obligation to contribute to (or borne any liability with respect to) 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; any "multiple employer plan" (within the meaning of the Code or ERISA) or any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) (each such plan, a "Multiemployer Plan"). 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 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. No Employee Benefit Plan is a "multiple employer welfare arrangement," within the meaning of Section 3(40) of ERISA. 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. 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. The Company does not maintain any Employee Benefit Plan (whether qualified or non-qualified under Section 401(a) of the Code) providing for post-employment or retiree health, life insurance and/or other welfare benefits and having unfunded liabilities, 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. 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. 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. No asset of the Company is subject to any Lien arising under Section 302(f) of ERISA or Section 412(n) of the Code, and no event has occurred and no condition or circumstance has existed that would give rise to any such Lien. The Company has not been required to provide any security under Section 307 of ERISA or Section 401(a)(29) or 412(f) of the Code and, to the knowledge of Seller, no event has occurred and no condition or -24- circumstance has existed that would give rise to any such requirement to provide any such security. 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. (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. 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. 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) Funded Status; Withdrawal Liability. No Employee Benefit Plan is covered by Title IV of ERISA, and the Company is not currently required to contribute to, and never has been required to contribute to, a Multiemployer Plan. (f) Tax Qualification. Each Employee Benefit Plan intended to be qualified under Section 401(a) of the Code has, as currently in effect, been determined to be so qualified by the IRS. Each trust established in connection with any Employee Benefit Plan which is intended to be exempt from Federal income taxation under Section 501(a) of the Code has, as currently in effect, been determined to be so exempt by the IRS. Each VEBA has been determined by the IRS to be exempt from Federal income tax under Section 501(c)(9) of the Code. Since the date of each most recent determination referred to in this paragraph (f), no event has occurred and no condition or circumstance has existed that resulted in or, to the knowledge of Seller, is likely to result in the revocation of any such determination or would adversely affect the qualified status of any such Employee Benefit Plan or the exempt status of any such trust or VEBA. (g) 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 -25- 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. (h) 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. (i) Documents. Seller has delivered or caused to be delivered to Purchaser and its counsel true and complete copies of all material documents in connection with each Employee Benefit Plan, including (where 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 or 990 for each of the last three years for each Employee Benefit Plan required to file such form; (vi) the most recently prepared actuarial valuation report for each Employee Benefit Plan covered by Title IV of ERISA; (vii) the most recently prepared financial statements; and (viii) 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 recordkeeping agreements and collective bargaining agreements. 3.22 Environmental Laws and Regulations. Except as set forth on Schedule 3.22 and except as could not reasonably be expected to have a Material Adverse Effect with respect to the Company, (i) the Company is in compliance with all applicable Environmental Laws, and has obtained, and is in compliance with, all Permits required of it under applicable Environmental Laws; (ii) there are no 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 under any Environmental Law; and (iii) there are no facts, circumstances or conditions relating to the past or present business or operations of the Company (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. -26- 3.23 Interests in Clients, Suppliers, Etc.; Affiliate Transactions. Except as set forth on Schedule 3.23, (a) there are no Contracts, liabilities or obligations between the Company, on the one hand, and either (i) Seller or any or Affiliate of Seller (other than the Company) or (ii) any other Affiliate of the Company, on the other hand, and (b) neither Seller, any Affiliate of Seller nor any officer or director of the Company possesses, directly or indirectly, any 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 Securities Exchange Act of 1934, as amended, of 1% or less of any class of such securities shall not be deemed to be a financial interest for purposes of this Section 3.23. 3.24 Bank Accounts and Powers of Attorney. Set forth on 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 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. 3.25 Permits. Seller has delivered or made available to Purchaser for inspection a true and correct copy of each permit (including occupancy permit), certificate, license, consent or authorization of any Governmental or Regulatory Authority (each, a "Permit") obtained or possessed by the Company. The Company has obtained and possesses all Permits and has made all registrations or filings with or notices to any Governmental or Regulatory Authority necessary for the lawful conduct of its business as presently conducted, or 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 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 a Material Adverse Effect with respect to the Company. Each such Permit can be renewed or transferred in the ordinary course of business by 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 modify, suspend, revoke, withdraw, terminate or otherwise limit any such Permit is pending or, to the knowledge of Seller, threatened, and Seller does not know of any valid basis for such proceeding, including the transactions contemplated hereby. No administrative or governmental action or proceeding has been taken or, to the knowledge of Seller, threatened, in connection with the expiration, continuance or renewal of any such Permit, and Seller does not know of any valid basis for any such proceeding. 3.26 No Changes Since Balance Sheet Date. Except as set forth on Schedule 3.26, since the Balance Sheet Date, the operations of the Company have been conducted in the ordinary and usual course of business and there has been no Material Adverse Change with respect to the Company; no fact, circumstance or event exists or has occurred which could reasonably be expected to result in a Material Adverse Change with respect to the Company; and the Company has not: -27- (a) amended or restated its charter or by-laws (or comparable organizational or governing documents); (b) authorized for issuance, issued, sold, delivered or agreed or committed to issue, sell or deliver (i) any capital stock of, or other equity or voting interest in, the Company or (ii) any securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire either (A) any shares of 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, any shares of the capital stock of, or other equity or voting interest in, the Company; (c) declared, paid or set aside any dividend or made any distribution with respect to, or split, combined, redeemed, reclassified, purchased or otherwise acquired directly, or indirectly, any shares of capital stock of, or other equity or voting interest in, the Company, or made any other change in the capital structure of the Company; (d) increased the compensation payable (including, but not limited to, wages, salaries, bonuses or any other remuneration) or to become payable to any officer, employee or agent being paid an annual base salary of $50,000 or more, or any director of the Company, except for (i) such increases that were required in accordance with the terms of any Employee Benefit Plan set forth on Schedule 3.21(a) and (ii) salary increases made in the ordinary course of business not exceeding four percent (4%) of the annual base salary for any individual; (e) made any bonus, profit sharing, pension, retirement or insurance payment, distribution or arrangement to or with any officer, employee or agent being paid an annual base salary of $50,000 or more, or any director of the Company, except for payments that were already accrued prior to the Balance Sheet Date or were required by the terms of any Employee Benefit Plan set forth on Schedule 3.21(a); (f) except as set forth on Schedule 3.26, entered into, materially amended or become subject to any Contract of a type described in Section 3.13(a) or outside the ordinary course of business; (g) incurred, assumed or modified any Indebtedness not set forth on Schedule 3.13(a), except Indebtedness incurred, assumed or modified in the ordinary course of business consistent with past practice; (h) permitted any of its properties or assets to be subject to any Lien (other than Permitted Liens); (i) sold, transferred, leased, licensed or otherwise disposed of any assets or properties material to the Company, taken as a whole except for (i) sales of inventory in the ordinary course of business consistent with past practice, and (ii) leases or licenses entered into in the ordinary course of business consistent with past practice with annual lease or royalty payments that are not reasonably expected to exceed $10,000; (j) acquired any business or Person, by merger or consolidation, purchase of substantial assets or equity interests, or by any other manner, in a single transaction or a series -28- of related transactions, or entered into any Contract, letter of intent or similar arrangement (whether or not enforceable) with respect to the foregoing; (k) made any capital expenditure or commitment therefor in excess of $10,000 individually or otherwise acquired any assets or properties (other than inventory in the ordinary course of business consistent with practice) that are material to the Company, taken as a whole, or entered into any Contract, letter of intent or similar arrangement (whether or not enforceable) with respect to the foregoing; (l) entered into, materially amended or become subject to any joint venture, partnership, strategic alliance, shareholders' agreement, co-marketing, co-promotion, co-packaging, joint development or similar arrangement; (m) written-off as uncollectible any notes or accounts receivable, except write-offs in the ordinary course of business consistent with past practice charged to applicable reserves which individually and in the aggregate are not material to the Company, taken as a whole; (n) canceled or waived any claims or rights of substantial value; (o) made any change in any method of accounting or auditing practice; (p) made any tax election or settled and/or compromised any tax liability; prepared 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; incurred any material liability for Taxes other than in the ordinary course of business; or filed an amended Return or a claim for refund of Taxes with respect to the income, operations or property of the Company; (q) paid, discharged, settled or satisfied any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than payments, discharges or satisfactions in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against in the Balance Sheet; (r) planned, announced, implemented or effected 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; (s) established, adopted, entered into, amended or terminated any Employee Benefits Plan or any collective bargaining, thrift, compensation or other plan, agreement, trust, fund, policy or arrangement for the benefit of any directors, officers or employees; (t) conducted its cash management customs and practices (including the collection of receivables and payment of payables) other than in the ordinary course of business consistent with past practice; or (u) entered into any contract or letter of intent with respect to (whether or not binding), or otherwise committed or agreed, whether or not in writing, to do any of the foregoing. -29- 3.27 Disclosure. None of this Agreement,the financial statements referred to in Section 3.7 (including the footnotes thereto), any Schedule, Exhibit or certificate delivered to Purchaser or its representatives by or on behalf of Seller, the Company or any of their respective directors, officers or employees pursuant to this Agreement or any document or statement in writing which has been supplied to Purchaser or its representatives by or on behalf of Seller, the Company or any of their respective directors, officers or employees in connection with the transactions contemplated by this Agreement, contains any untrue statement of a material fact, or omits any statement of a material fact necessary to make the statements contained herein or therein not misleading. There is no fact known to Seller that would have a Material Adverse Effect with respect to the Company which has not been set forth in this Agreement, the financial statements referred to in Section 3.7 (including the footnotes thereto) any Schedule, Exhibit or certificate or delivered pursuant to this Agreement. 3.28 Government Contracts. Except as set forth on Schedule 3.28, 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. 3.29 Warranty Claims. There are no pending or, to the knowledge of Seller, threatened Warranty Claims against the Company in connection with the sales of the Company's products, which Warranty Claims exceed $10,000 in the aggregate or are not covered by insurance, the proceeds of which will be available to the Company at or after Closing. Except as set forth on Schedule 3.29, the Company does not make any representation or warranty to its customers with respect to products sold or services delivered by it. Schedule 3.29 contains a complete list of the pending, and, to the knowledge of Seller, threatened Warranty Claims against the Company. As used herein, the phrase "Warranty Claims" means claims by third parties for defects in products sold by the Company which the customer claims do not meet the product warranty. 3.30 Brokers' or Finders' Fees. No agent, broker, person or firm acting on behalf of either Seller or the Company is, or will be, entitled to any commission or brokers' or finders' fees from the Company or Purchaser, or from any of their Affiliates, in connection with any of the transactions contemplated by this Agreement. -30- 3.31 Inter-company Balances. At the Closing, all inter-company Indebtedness, and amounts owed, and all inter-company balances outstanding, between Seller or any Affiliate of Seller (other than the Company), on the one hand, and the Company, on the other hand, have been satisfied in full in a manner that does not create any Tax or other liability for or obligation of the Company. 3.32 Conduct of Business of the Company. Without prejudice to the generality of any of the foregoing representations and warranties, during the period from the Effective Date through the Closing Date: (b) Seller has caused the Company to conduct its operations only in the ordinary and usual course of business and to preserve intact its business organization, keep available the services of its officers and employees and maintain satisfactory relationships with licensors, suppliers, distributors, clients and others having business relationships with the Company. Notwithstanding the immediately preceding sentence, during such period, except as set forth on Schedule 3.32, Seller has caused the Company to refrain from the following: (i) declaring, paying or setting aside any dividend or making any distribution with respect to the Company; (ii) increasing or promising to increase the compensation payable (including, but not limited to, wages, salaries, bonuses or any other remuneration) or to become payable to any officer, employee, agent or director of the Company or making or promising to make any bonus, profit sharing, pension, retirement or insurance payment, distribution or arrangement to or with any such officer, employee, agent or director of the Company; (iii) entering into, materially amending, becoming subject to or terminating any Contract of a type described in Section 3.13(a) or any real property lease or sublease (other than pursuant to the Lease Agreement); (iv) incurring, assuming or modifying any Indebtedness; (v) subjecting any of its properties or assets or any capital stock, or other equity or voting interests to any Lien; (vi) selling, transferring, leasing, licensing or otherwise disposing of any assets or properties except for leases or licenses entered into in fulfillment of Seller's obligations under the Services Agreement; ( vii) making any capital expenditure or commitment therefor individually or otherwise acquiring any assets or properties; (viii) writing-off as uncollectible any notes or accounts receivable or waiving any claims or rights of substantial value; -31- (ix) paying, discharging, settling or satisfying any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) including, without limitation, any accounts payable or other debts due by the Company; (x) taking any action, engaging in any transaction or entering into any Contract that is material to the Company; (xi) making any loans, advances or capital contributions to, or investments in, any other Person; (xii) making changes to the working capital of the Company, other than in the ordinary and usual course of business consistent with this Section 3.32, or taking any action or omitting to take any action that has, or could reasonably be expected to have, an adverse effect on the working capital of the Company; and (xiii) entering into any contract or letter of intent (whether or not binding) with respect to, or committing or agreeing to do, whether or not in writing, any of the foregoing. (c) Seller has caused the Company to retain for its own benefit and account all earnings, cash flow and other receipts accruing to the Company in the conduct of its business for the period from the Effective Date through the Closing Date including, without limitation, receipts arising from payment of any accounts receivable, invoices and other debts due to the Company. ARTICLE IV REPRESENTATIONS OF PURCHASER 4. Representations of Purchaser. Purchaser represents, warrants and agrees 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 purchase 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 Purchaser as contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by Purchaser's Board of Directors and no other corporate or stockholder action 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 and 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 -32- 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. 4.2 Consents and Approvals; No Violations. Other than as set forth on 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 will not and the consummation by Purchaser of the transactions contemplated hereby and thereby 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, or result in the creation of any Lien upon any of the properties or assets of Purchaser under: (1) any provision of the certificate of incorporation or by-laws of Purchaser; (2) subject to obtaining and making any of the approvals, consents, notices and filings referred to in paragraph (b) below, any Law or Order applicable to Purchaser or by which any of its properties or assets may be bound; or (3) 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 (2) and (3) 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 on Schedule 4.2(b) no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority or private third party is 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 execution and delivery of this Agreement by Purchaser, the performance by Purchaser of its obligations hereunder or the consummation of the transactions contemplated hereby other than those, the failure to obtain or make, which could not reasonably be expected to have a Material Adverse Effect with respect to Purchaser. 4.3 Purchase for Investment. Purchaser will acquire the Shares for its own account for investment and not with a view toward any resale or distribution thereof; provided, however, that the disposition of Purchaser's property shall at all times remain within the sole control of Purchaser. 4.4 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. 4.5 Brokers' or Finders' Fees. No agent, broker, person or firm acting on behalf of Purchaser is, or will be, entitled to any commission or brokers' or finders' fees from Seller or from any Affiliate of Seller, in connection with any of the transactions contemplated by this Agreement. 4.6 Financing. On the Closing Date, Purchaser shall have sufficient cash available to satisfy its obligations to pay the Purchase Price pursuant to this Agreement. -33- 4.7 Disclosure. There is no fact known to Purchaser that would have a Material Adverse Effect with respect to the Purchaser. ARTICLE V COVENANTS OF SELLER AND PURCHASER 5.1 Confidentiality. Effective upon the Closing, Infocrossing, Inc.'s obligations under that certain Agreement regarding Mutual Disclosure of Information made on August 2, 2001, between American Software, Inc. and Infocrossing, Inc. (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; provided, that, for the purposes hereof, "Confidential Information" shall be deemed to include any information, technical data or know-how regarding the Company or Purchaser, provided or available to Seller and/or its Affiliates pursuant to (i) the Services Agreement, or relating to any Supplier Agreement and the Subject Matter (as those terms are defined in the Services Agreement), (ii) the Avery Assignment Agreement; and (ii) the Service Fee Letter Agreement) concerning Purchaser and/or the Company and its business and operations. Seller agrees that it will, and will cause its Affiliates and its and their respective directors, officers, employees, agents and representatives, including financial advisors, consultants, accountants and counsel (collectively "representatives") 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 and may be disclosed to its representatives only to the extent necessary for Seller to evaluate the transactions contemplated by this Agreement (it being understood that Seller shall be responsible for any breach of these confidentiality provisions by any such representative, other than breaches by the Company following the Closing). 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. Notwithstanding the foregoing, any Seller Entity may make use of Confidential Information to the extent and for the purpose that such Confidential Information is used by such Seller Entity in the conduct of its business as conducted as at the Closing Date; provided, -34- however, that such purpose and use are each in compliance with Seller's obligations under Section 5.3, any other provision of this Agreement and the Services Agreement. 5.2 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 so long as 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. 5.3 Non-Competition; Non-Interference. In consideration of the purchase of the Shares by Purchaser, Seller shall not, and shall cause its Affiliates to not: (i) for the period from the Closing Date until the fifth (5th) anniversary of the Closing Date, 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 (each, a "Company Customer"), or attempt to hurt, hinder, diminish or interfere with the relationship between the Company and any such Company Customer (including making any negative or disparaging statements or communications about the Company). (ii) for the period from the Closing Date until the fourth (4th) anniversary of the Closing Date, within the United States of America or any state, region or territory thereof, conduct, directly or indirectly, any business of the type and character engaged in or competitive with that conducted by the Company on the Closing Date, other than the business of such type that Logility, Inc., currently conducts with certain existing customers or clients of Logility, Inc., but including any services involving the management of software applications (other than Seller Software); provided, however, that: (A) if the business of any Person (other than any Company Customer) involves Seller Software licensed to or otherwise used by such Person, and such Person requests any Seller Entity to provide to it Application Service Provider Services related to such Seller Software which would otherwise cause Seller to violate the provisions of this Section 5.3(a)(ii), a Seller Entity may provide such Application Service Provider Services to such Person if: (1) Seller shall have given the Company the opportunity to provide the same services to such Person as follows: Seller shall, within three (3) Business Days or such shorter period as is consistent with the urgency of the request, have (w) given written notice to the Company of each request made to the Seller or any of its Affiliates to provide Application Service Provider Services to such Person, (x) given written notice to such Person that such services are provided by the Company, (y) recommended to such Person that it utilize the services of the Company and not the services of Seller or any of its Affiliates, and (z) used its -35- commercially reasonable efforts to provide the Company with an opportunity to make a presentation to such Person for the provision of such services to it; and (2) within thirty (30) days from the date of receipt by the Company of the written notice referred to in clause (A)(1)(w) above, such Person has notified Seller that, despite Seller's notification and recommendation referred to in clause (A)(1) above, it requires that a specific Seller Entity perform such Application Service Provider Services in preference to the Company, or the Company has notified Seller in writing that it does not wish to provide such services to such Person; or (B) if the business of any Person (other than any Company Customer) involves Seller Software licensed to or otherwise used by such Person, and such Person requests any Seller Entity to provide to it Application Service Provider Services related to such Seller Software which would otherwise cause Seller to violate the provisions of this Section 5.3(a)(ii), a Seller Entity may provide such Application Service Provider Services to such Person if such Person pays less than $5,000 per month for such Application Service Provider Services; provided, however, that such Seller Entity shall first have used its commercially reasonable efforts to cause the provision of such Application Service Provider Services to be subcontracted to the Company, unless the Company shall have notified such Seller Entity, within five (5) Business Days of receipt by the Company of written notice by such Seller Entity to subcontract such services to the Company (including the terms and conditions applicable thereto), that it does not wish to provide such services; (C) if, at any time prior to the fourth (4th) anniversary of the Closing Date, the Company fails to provide the Services (as defined in that certain Equipment Rental and Services Agreement between Sprint Spectrum L.P. and the Company, dated June 21, 1999 (the "Company/Sprint Agreement"), excluding the deliveries of the software and hardware pursuant thereto), or such other services to be provided under a replacement agreement for the Company/Sprint Agreement, substantially in the form set forth in Exhibit L, and Sprint Spectrum L.P. has not frustrated the Company's performance and is in material compliance with its obligations thereunder, then, if the Company shall not cure such failure within ten (10) Business Days following receipt by it of written notice thereof, Seller shall be entitled to provide such services to Sprint Spectrum L.P. or to enter into an agreement with a third party to provide such services to Sprint Spectrum L.P; or (D) Seller shall be entitled to lease or sublease its data processing facilities located at 470 East Paces Ferry Road, Atlanta, Georgia or any part thereof to any Person (other than any Company Customer) and provide to any such lessee or sublessee access to such facility, in each case, on terms consistent with a customary landlord/tenant relationship, provided that no part of the rent or other consideration received by or on behalf of Seller or any of its Affiliates from such lessee or sublessee shall be tied to, or determined by reference to, the revenues or profits of any such lessee or sublessee; provided, however, that if the business of any such lessee or sublessee is not of a type or character competitive with that conducted by the Company on the Closing -36- Date, Seller shall be entitled to tie or determine such rent or other consideration received from such lessee or sublessee to, or by reference to, the revenues or profits of any such lessee or sublessee. (b) Notwithstanding Section 5.3(a)(ii), Seller may, and may permit its Affiliates to, engage in activities which violate Section 5.3(a)(ii) of this Agreement if, it does so solely in connection with, or as a result of, the acquisition of all of the capital stock or other equity interests of a Person which is not an individual Person (the "Acquired Entity") and which is primarily engaged in (i) a business other than the business engaged in by the Company on the Closing Date or (ii) a business competitive with the business engaged in by the Company on the Closing Date, if (A) the activities of the Acquired Entity are incidental to the primary business of the Acquired Entity and do not result in net revenues in excess of forty percent (40%) of the net revenues of the Acquired Entity, and (B) Seller and its Affiliates continue to comply with this Section 5.3 (except that Seller and its Affiliates shall not be required to comply with Section 5.3(a)(ii) with respect to any Person who is a customer of the Acquired Entity on the date on which the Acquired Entity is acquired). (c) It is the desire and intent of the parties to this Agreement that the provisions of this Section 5.3 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 provisions or portion of this Section 5.3 shall be adjudicated to be invalid or unenforceable, this Section 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 Section in the particular jurisdiction in which such adjudication is made. (d) The parties recognize that the performance of the obligations under this Section 5.3 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 5.3 to be performed by Seller, Purchaser and the Company shall be entitled, if it so elects, to seek damages for any breach of this Section 5.3, and/or to enforce the specific performance thereof by Seller or to enjoin Seller from performing services for any Person. 5.4 Non-Solicitation of Employees. In consideration of the purchase of the Shares by Purchaser, Seller shall not, and shall cause its Affiliates to not, for the period from the Closing Date until the third (3rd) anniversary of the Closing Date, (i) solicit (A) the employment, or (B) the engagement as a consultant or contractor, for itself or any third Person, of, or (ii) employ or engage as a consultant or contractor, any Key Employee. Nothing herein is intended to preclude (1) Seller's or its Affiliates' general solicitations in public media regarding opportunities in general executive, programming or product development capacities or (2) Seller's or its Affiliates' solicitation of or hiring any Key Employee (as an employee, consultant or otherwise) 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), if the activities associated with such solicitation or hiring are commenced after the date which is one hundred and eighty (180) days after the last date of employment of such Key Employee by the Company (or its Affiliate, as the case may be). -37- (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 provisions or portion of this Section 5.4 shall be adjudicated to be invalid or unenforceable, this Section 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 Section 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 Employee Matters. Immediately upon Closing, Purchaser shall offer all employees of the Company who were employees immediately prior to the Closing eligibility to participate in a medical benefit plan, program, arrangement or commitment (whether or not insured) (a "Medical Plan"); provided, however, that any such employee receiving long-term disability benefits under any of Seller's welfare benefit plans shall continue to receive such benefits under Seller's welfare benefit plan, and Purchaser shall not be required to provide such benefits to such employees on or following the Closing. The terms and conditions of the Medical Plan shall permit all such employees to participate immediately in the Medical Plan and to be eligible immediately to receive benefits under the Medical Plan, so that if any such employee terminated his or her employment following the Closing, any post-employment obligations with respect to the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") related to medical benefits shall not be obligations of Seller with respect to any such employees solely as a result of their termination following the Closing. Seller shall be responsible for any severance, termination, retention pay, benefits or similar payments to any employees of the Company whose employment is terminated or who elects to retire, resign or otherwise terminate their employment, in each case only to the extent that all action resulting in any such termination, retirement or resignation occurs before the Closing. Seller agrees to indemnify and hold Purchaser and its Affiliates harmless on an after-tax basis from and against all Losses suffered, incurred or paid, directly or indirectly, as a result of, in connection with or arising out of any such termination, retirement or resignation. Effective as of the Closing, Seller agrees that Company and/or Purchaser will have no liability under, or with respect to, any employee benefit plans sponsored or maintained by Seller or any of its Affiliates. 5.6 Avery Claim. Prior to the Closing Date, the Company shall assign to the Seller all of the benefits, rights and interests of the Company (including any rights of the Company arising out of any judgment award or settlement in favor of the Company) in and to the litigation proceedings entitled AmQUEST, Inc. v. Avery Dennison Corporation, Case No. 1:00-CV-2618, filed December 15, 2000 and pending before the United States District Court for the Northern District of Georgia and any appeals arising therefrom (the "Avery Claim") to Seller, on the terms and subject to the conditions set forth in the Avery Assignment Agreement; provided, however, that the fees, costs, expenses and any liabilities and obligations associated therewith shall be borne by Seller and Seller shall, at all times, have complied with its indemnification obligations under Section 8.2(a)(iii). Seller shall assume the conduct and control -38- of the prosecution and settlement of the Avery Claim, through counsel selected by Seller. Purchaser shall cooperate, upon the written request of Seller and at the cost of Seller, with Seller in all reasonable respects in connection with the prosecution and settlement of the Avery Claim. Seller shall not, except with the prior written consent of Purchaser, agree to any settlement of the Avery Claim or consent to entry into of any judgment with respect thereto that results in any restriction on the Company and does not include as an unconditional term thereof the giving by Avery Dennison Corporation to the Company of an unconditional release from all liability and obligations of the Company with respect thereto. 5.7 Outsourcing Charges. From and after the Closing, Seller agrees not to charge, and to cause American Software USA, Inc. not to charge, licensees of ASI Software a transfer, access or additional license fee as a result of Purchaser's purchase of the Company or as a result of the Company's relocation of any processing units to another facility of Company, Purchaser or its Affiliates; provided, however, that the prohibition contained in this Section 5.7 shall not apply to any such licensee that terminates its existing customer contract with the Company and enters into a new customer contract with a third party. For the purposes of this Section 5.7, "ASI Software" shall mean software licensed by Seller or American Software USA, Inc. to third parties. 5.8 AS 400 Process Units. Purchaser agrees that, for a period of two (2) years following the Closing, it will, and will cause the Company to, refrain from moving any of the AS 400 processing units located at 470 East Paces Ferry Road, N.E., Atlanta, Georgia on the date hereof; provided, however, that Purchaser and the Company shall be entitled to move any such processing units (a) in compliance with any obligations or contracts in existence on the date hereof or otherwise at the direction of any customer that owns or leases any such processing unit; (b) on termination of the customer contract relating to any such processing unit or the termination of any applicable lease; or (c) as may otherwise be required by any applicable Laws. ARTICLE VI DELIVERIES AT CLOSING 6.1 Seller's Obligations. At the Closing, Seller shall deliver to Purchaser: (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 -39- 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 (i) each of James C. Edenfield, J. Michael Edenfield and Roger A. Barrios, pursuant to which each of them has resigned from all of his positions as a member of the Board of Directors and as an officer of the Company; and (ii) each of Vincent C. Klinges, James G. Jaworski, Jerry Purvis and James R. McGuone, pursuant to which each of them has resigned from all of his positions as an officer of the Company; (d) (i) the Lease Agreement between Seller and the Company (the "Lease Agreement"), in the form attached hereto as Exhibit A, (ii) the Services Agreement between Seller, Purchaser, the Company and American Software USA, Inc. (the "Services Agreement"), in the form attached hereto as Exhibit B, (iii) the Assignment Agreement between Seller and the Company relating to the Avery Claim (the "Avery Assignment Agreement"), in the form attached hereto as Exhibit C, (iv) the letter agreement between Seller and the Company regarding Norfolk Southern Corporation, in the form attached hereto as Exhibit D, (v) one or more assignment agreements, in the form attached hereto as Exhibit E, between Seller and the Company relating to Seller's rights and obligations under the Contracts set forth on Schedule 6.1(g), in each case duly executed by Seller and the Company; (vi) the letter agreement between Seller and the Company (the "Service Fee Letter Agreement") with respect to certain service fee cost allocations, in the form attached hereto as Exhibit F; and (vii) the Guaranty of Lease from Purchaser to ASI Properties, Inc. (the "Lease Guaranty") with respect to the Lease Agreement, in the form attached hereto as Exhibit G, and (vii) the First Amendment to Customer Agreement Number 2070 and Statements of Work Numbers One, Two, Three, Four, Five, Eight and Nine thereunder between Seller and the Company, in the form attached hereto as Exhibit H, in each such case duly executed by or on behalf of Seller, the Company and/or American Software USA, Inc., as applicable; and (e) a favorable opinion, dated the Closing Date, of Holland & Knight LLP, in the form and substance set forth in Exhibit I. 6.2 Purchaser's Obligations. At the Closing, Purchaser shall deliver to Seller: (a) a favorable opinion, dated the Closing Date, of White & Case LLP, in the form and substance set forth in Exhibit J; and (b) (i) the Services Agreement; and (ii) the Lease Guaranty, in each such case duly executed by or on behalf of Purchaser; and (c) the Purchase Price (subject to adjustment pursuant to Section 2.3 of this Agreement). 6.3 Further Assurances. Each party shall use commercially reasonable efforts to assist the other party in realizing the benefits of this Agreement and the transactions -40- contemplated hereby, including by delivering any further certificates and documents as may be requested by the other party and by taking all actions necessary to acquire such governmental and third party consents, waivers, approvals, assignments or novations as the other party may consider necessary or useful in realizing the benefits of the transactions contemplated by this Agreement. ARTICLE VII TAX MATTERS 7.1 Tax Returns. Seller shall have the exclusive authority and obligation to prepare, 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 with respect to any taxable year or other taxable period ending prior to or ending on and including 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 in such Returns; provided that 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 and such Returns shall not be filed without the prior written consent of Purchaser, which consent shall not be unreasonably withheld or delayed. (b) Except as provided in Section 7.1(a), 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; provided that with respect to Returns to be filed by Purchaser pursuant to this Section 7.1 for taxable periods beginning before the Closing Date and ending after the Closing Date (the "Overlap Period"), items set forth on such Returns shall be treated in a manner consistent with the past practices with respect to such items unless otherwise required by Law. 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. 7.2 Payment of Taxes. Except for additional income taxes accruing by reason of the Section 338(h)(10) election described in Section 7.7 hereof, Seller shall be responsible and liable for the timely payment of any and all Taxes imposed on or with respect to the properties, income and operations of the Company for all Pre-Closing Periods, including the portion of the Overlap Period up to and including the Closing Date. In addition, Seller shall pay to Purchaser the amount of any Taxes allocated to Seller pursuant to Section 7.2(b) below (to the extent that Seller is liable therefor and to the extent not already paid by Seller on or before the Closing Date) on or prior to the due date of such Taxes. (b) All Taxes and Tax liabilities with respect to the income, property or operations of the Company that relate to the Overlap Period shall be apportioned between Seller and Purchaser as follows: (i) in the case of Taxes other than income, sales and use and withholding Taxes, on a per diem basis, and (ii) in the case of income, sales and use and withholding Taxes, as determined from the books and records of the Company as though the taxable year of the Company terminated at the close of business on the Closing Date. Seller shall be liable for Taxes of the Company which are attributable to the portion of the Overlap Period -41- ending on and including the Closing Date and Purchaser shall be liable for Taxes of the Company which are attributable to the portion of the Overlap Period beginning on the day following the Closing Date. 7.3 Controversies. Purchaser shall promptly notify Seller upon receipt by Purchaser or any Affiliate of Purchaser (including the Company after the Closing Date) of written notice of any inquiries, claims, assessments, audits or similar events with respect to Taxes relating to a taxable period ending prior to or ending on and including the Closing Date for which Seller may be liable under this Agreement (any such inquiry, claim, assessment, audit or similar event, a "Tax Matter"). Seller, at its sole expense, shall have the authority to represent the interests of the Company with respect to any Tax Matter before the IRS, any other taxing authority, any other Governmental or Regulatory Authority or any court and shall have the sole right to control the defense, compromise or other resolution of any Tax Matter, including responding to inquiries, filing Returns and contesting, defending against and resolving any assessment for additional Taxes or notice of Tax deficiency or other adjustment of Taxes of, or relating to, a Tax Matter; provided that neither Seller nor any of its Affiliates shall enter into any settlement of or otherwise compromise any Tax Matter that adversely affects or may adversely affect the Tax liability of Purchaser, the Company or any Affiliate of the foregoing for any period ending after the Closing Date, including the portion of the Overlap Period that is after the Closing Date, without the prior written consent of Purchaser, which consent shall not be unreasonably withheld or delayed. Seller shall keep Purchaser fully and timely informed with respect to the commencement, status and nature of any Tax Matter. Seller shall, in good faith, allow Purchaser to make comments to Seller regarding the conduct of or positions taken in any such proceeding. (b) Except as otherwise provided in this Section 7.3, 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. 7.4 Transfer Taxes. 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 shall be borne solely by Seller. 7.5 Indemnification. Notwithstanding any provision to the contrary contained in this Agreement, Seller agrees to indemnify, defend and hold Purchaser and its Affiliates (including the Company) and their respective stockholders, officers, directors, employees agents, successors and assigns, harmless on an after-tax basis from and against: (i) all Taxes and Losses resulting from, arising out of, or incurred with respect to, any claims that may be asserted by any party based on, attributable to, or resulting from the failure of any representation or warranty made pursuant to Section 3.15 to be true and correct in all respects as of the Closing Date; (ii) all Taxes imposed on or asserted against the properties, income or operations of the Company for all Pre-Closing Periods; (iii) all Taxes imposed on Seller or any corporation in which Seller or its Affiliates have a direct or indirect equity interest, for any taxable year or period; and (iv) all Taxes imposed on the Company, or for which the Company may be liable, as a result of any transaction contemplated by this Agreement excluding any Taxes imposed on Purchaser or the -42- Company as a result of a joint election under Section 338(h)(10) of the Code to treat the sale of stock pursuant to this Agreement as an asset sale for Federal income tax purposes, and any analogous provisions of state and local Law, except, in each instance, to the extent such Taxes have been paid prior to the Closing Date. 7.6 Post-Closing Access and Cooperation. From and after the Closing Date, Purchaser agrees, and agrees to cause the Company, to permit Seller to have reasonable access, during normal business hours, to the Company's books and records, to the extent that such books and records relate to a Pre-Closing Period, and personnel, for the purpose of enabling Seller to: (i) prepare the Returns specified in Section 7.1(a); (ii) investigate or contest any Tax Matter which Seller has the authority to conduct under Section 7.3; and (iii) evaluate any claim for indemnification under Section 7.5. 7.7 Section 338 Election. Purchaser may elect, in its sole and absolute discretion, at the Closing or thereafter, to make an election under Section 338(h)(10) of the Code (with respect to the Company). In such event, Seller and Purchaser shall jointly complete and make such election on a timely basis on Form 8023 or in such other manner as may be required by rule or regulation of the IRS, and shall jointly make an election in the manner required under any analogous provisions of state or local Law as Purchaser shall designate or as shall be required, concerning the transactions contemplated by this Agreement. In such event, Purchaser shall, with the assistance and cooperation of Seller, prepare all such Section 338(h)(10) forms required as attachments to Form 8023 (and all forms under analogous provisions of state or local Law) in accordance with applicable Tax laws, and Purchaser shall deliver such forms and related documents to Seller at least sixty (60) days prior to the due date of filing. Seller shall deliver to Purchaser, at least forty-five (45) days prior to the due date of filing, such duly executed completed forms as are required to be filed under Section 338(h)(10) of the Code (and analogous provisions of state or local Law). (b) In the event that Purchaser elects to make an election under Section 338(h)(10) of the Code (with respect to the Company) pursuant to Section 7.7(a), Purchaser agrees that it shall, within ten (10) Business Days of making such election, pay to Seller the amount of $530,000. The parties hereto agree that any payment made pursuant to this Section 7.7(b) shall, to the extent permitted by applicable law, be treated as an adjustment to the Purchase Price. 7.8 Allocation. The purchase price and all other items that comprise the aggregate deemed sale price ("ADSP") (as defined under Treasury Regulations Section 1.338-4) shall be allocated to the assets of the Company for all purposes in accordance with the allocation (the "Allocation") contained in a schedule to be prepared by Purchaser. Seller hereby agrees in advance to the Allocation by Purchaser in such schedule. The valuations and Allocations determined pursuant to this Section 7.8 shall be used for purposes of all relevant Tax Returns, reports and filings. -43- ARTICLE VIII SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION 8.1 Survival of Representations. 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 twenty-four (24) months after the Closing Date. (b) The representations and warranties contained in Sections 3.1 (Ownership of Shares; Existence and Good Standing of Seller) and 3.5 (Capital Stock) shall survive indefinitely. The representations and warranties contained in Sections 3.2 (Authority and Enforceability), 3.15 (Taxes), 3.21 (Employee Benefit Plans), 3.22 (Environmental Laws and Regulations), 3.30 (Brokers' or Finders' Fees) and 4.1 (Existence and Good Standing of Purchaser; Power and Authority) shall survive until sixty (60) days after the expiration of the applicable statute of limitations period (after giving effect to any waivers and extensions thereof). 8.2 Indemnification. Seller agrees to indemnify and hold Purchaser and its Affiliates (including the Company) and their respective stockholders, officers, directors, employees, agents, successors and assigns (each a "Purchaser Indemnitee"), harmless on an after-tax basis from and against any damages, losses, liabilities, penalties, obligations, claims of any kind, interest or expenses (including reasonable attorneys' fees and expenses, but excluding any special, incidental, indirect, or consequential damages) (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 any Schedule, Exhibit or certificate delivered pursuant to this Agreement (other than pursuant to Section 3.15 (Taxes)) to be true and correct in all respects as of the Closing Date (without giving effect to any "materiality", "material adverse effect" or similar qualification), (ii) any breach by Seller of any of its covenants or agreements contained herein, (iii) the Avery Claim and the matters referred to in Section 5.6, and (iv) the operation, termination, disposal, transfer or spin-off of the Temporary Staffing Business. (b) Purchaser agrees to indemnify and hold Seller and its Affiliates and their respective shareholders, officers, directors, employees, agents, successors and assigns (other than the Company and its Subsidiaries) (each a "Seller Indemnitee") harmless from and against 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 Schedule, Exhibit or certificate delivered pursuant to this Agreement to be true and correct in all respects as of the Closing Date, (ii) any breach by Purchaser of any of its covenants or agreements contained herein, and (iii) any failure of the Company from and after the Closing Date, to perform any of the agreements, the performance of which is guaranteed by a Seller Entity, which agreements and guarantees are listed on Schedule 8.2(b). In addition, Purchaser agrees to indemnify and hold Seller and American Software USA, Inc. harmless from and against all out-of-pocket amounts Seller or -44- American Software USA, Inc. is obliged to pay to Sprint Spectrum L.P. and all amounts that Sprint Spectrum L.P. is entitled to set off against amounts that it would otherwise be obligated to pay Seller or American Software USA, Inc. under the terms of (A) that certain Software License and Support Agreement between American Software USA, Inc., and Sprint Spectrum L.P., dated June 22, 1999, and (B) that certain Custom Software Modification and Support Services Agreement between Sprint Spectrum L.P. and American Software USA, Inc., dated June 22, 1999, in each case as amended through the Closing Date, or the corresponding provisions of any replacement agreements substantially in the form set forth in Exhibit M which are executed after the Closing Date (such agreements and any replacements thereof, the "Seller/Sprint Agreements"), in each case to the extent directly attributable to the failure of the Company, from and after the Closing Date, to provide any of the Services (as defined in the Company/Sprint Agreement) which the Company is required to perform under the terms of the Company/Sprint Agreement, in effect from time to time. (c) The obligations to indemnify 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. (d) Except as otherwise expressly provided in Sections 5.5 (Employee Matters), 5.6 (Avery Claim), 7.3 (Tax Matters - Controversies) and 7.5 (Tax Matters - Indemnification) of this Agreement, and excluding fraud and 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) Neither Seller nor Purchaser shall have any liability with respect to the matters described in Sections 8.2(a)(i) and 8.2(b)(i), respectively, until the total of all Losses with respect thereto exceeds two hundred thousand dollars ($200,000.00), and then only for the amount by which such Losses exceed two hundred thousand dollars ($200,000.00). In no event shall the aggregate liability of Seller or Purchaser under this Article VIII exceed the Purchase Price, provided that the limitations on indemnification contained in this Section 8.2(e) and the limitations on the time when Purchaser is entitled to seek indemnification pursuant to this Article VIII shall not apply to Losses suffered, incurred or paid as a result of, in connection with or arising out of the failure of any of the representations and warranties made by Seller in (i) Section 3.8(b), (ii) Section 3.31; and (iii) Section 3.32; provided, further, that for purposes of calculating the threshold set forth in the first section of this Section 8.2(e), any individual Loss (or series of related Losses arising out of the same or substantially related facts and circumstances) shall be disregarded unless the aggregate amount of such Loss (or series of related Losses) exceeds one thousand dollars ($1,000.00). (f) If Seller pays an amount to Purchaser pursuant to a claim for indemnification and Purchaser determines in its reasonable discretion that it or any of its -45- Affiliates has actually received or realized in connection therewith any refund or any reduction of, or credit against, its Tax liabilities in or prior to the taxable year in which the indemnification amount is paid (a "Tax Benefit"), Purchaser shall pay to Seller an amount that Purchaser shall reasonably determine is equal to Seller's proportionate share of the actual net benefit (calculated on the basis of the actual reduction in cash payments for Taxes), after tax, which was obtained by Purchaser or any of its Affiliates in or prior to such year as a consequence of such Tax Benefit; provided, however, that (i) Purchaser shall not be obligated to file amended Tax Returns for such purpose; (ii) any Taxes that are imposed on Purchaser or any of its Affiliates as a result of a disallowance or reduction (including through the expiration of any tax credit carryover or carryback of Purchaser or such Affiliate that otherwise would not have expired) of any Tax Benefit with respect to which Purchaser has made a payment to Seller pursuant to this Section 8.2(f) shall be treated as a Tax for which Seller is obligated to indemnify Purchaser pursuant to Section 8.2 hereof without any exclusions or defenses or limitations on the time when Purchaser shall be entitled to seek repayment of such Tax; and (iii) nothing in this Section 8.2(f) shall require Purchaser to disclose any confidential information to Seller (including, without limitation, its Tax Returns). (g) 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 the 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 the 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(g) unless and until any such remaining unsatisfied claim of Purchaser or the Company for Losses has been satisfied in full. 8.3 Indemnification Procedure. 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 K (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 -46- (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) 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) 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) days of the determination of the amount of any Agreed Claims, 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 (other than the Avery Claim, which shall be governed by the provisions of Section 5.6), 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 -47- 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 consent of the Indemnified Party, enter into any settlement that 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. 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. ARTICLE IX MISCELLANEOUS 9.1 Expenses. 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 counsel and financial advisers. Seller shall be responsible for all expenses of the Company relating to the transactions contemplated by this Agreement. -48- 9.2 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. 9.3 Jurisdiction. Any judicial proceeding brought against any of the parties to this Agreement on any dispute arising out of this Agreement or any matter related hereto may be brought in the courts of the State of New York, or in the United States District Court for the Southern District of New York and, by execution and delivery of this Agreement, each of the parties to this Agreement accepts the non-exclusive jurisdiction of such courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. The foregoing consents to 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 9.4 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 9.3. 9.4 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: if to Seller, to American Software, Inc. 470 East Paces Ferry Road, N.E. Atlanta, GA 30305 Telephone: (404) 261-4381 Facsimile: (404) 264-5394 Attn: Chief Financial Officer with a copy to Holland & Knight LLP 1201 West Peachtree Street, N.E. One Atlantic Center, Suite 2000 Atlanta, GA 30309 Telephone: 404-817-8500 Facsimile: 404-881-0470 Attn: James R. McGuone, Esq. and if to Purchaser, to Infocrossing, Inc. -49- Two Christie Heights Street Leonia, NJ 07605 Telephone: 201-840-4700 Facsimile: 201-840-7100 Attn: Chief Executive Officer with a copy to White & Case LLP 1155 Avenue of the Americas New York, NY 10036 Telephone: (212) 819-8200 Facsimile: (212) 354-8113 Attn: S. Ward Atterbury, Esq., or such other address or number as shall be furnished in writing by any such party. 9.5 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 hereunder (a) to any direct or indirect wholly owned Subsidiary of Purchaser and (b) in connection with the transfer by Purchaser of all or substantially all of the capital stock and/or assets of the Company and/or its Subsidiaries; 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. 9.6 Counterparts. This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one instrument. 9.7 Entire Agreement. This Agreement, including the other documents referred to herein which form a part hereof, contains the entire understanding of the parties hereto with respect to the subject matter contained herein and therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 9.8 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. 9.9 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 -50- 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. 9.10 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. 9.11 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. 9.12 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 FOREOING 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 9.12. IN WITNESS WHEREOF, each of Seller and Purchaser has caused its corporate name to be hereunto subscribed by its officer thereunto duly authorized all as of the day and year first above written. AMERICAN SOFTWARE, INC. By: ----------------------------- Name: Title: -51- INFOCROSSING, INC. By: ------------------------------- Name: Title: -52- TABLE OF CONTENTS Page ARTICLE I DEFINITIONS...................................................1 1.1 Definitions............................................................1 1.2 Construction...........................................................6 1.3 Schedules and Exhibits.................................................7 1.4 Knowledge..............................................................7 ARTICLE II SALE OF SHARES................................................7 2.1 Sale of Shares.........................................................7 2.2 Determination and Payment of Closing Payment...........................7 2.3 Determination of Purchase Price........................................8 2.4 Closing................................................................9 2.5 Transaction Costs of the Company......................................10 ARTICLE III REPRESENTATIONS OF SELLER....................................10 3. Representations of Seller.............................................10 3.1 Ownership of Shares; Existence and Good Standing of Seller............10 3.2 Authority and Enforceability..........................................10 3.3 Consents and Approvals; No Violations.................................10 3.4 Existence and Good Standing of the Company............................11 3.5 Capital Stock.........................................................11 3.6 Subsidiaries and Investments..........................................12 3.7 Financial Statements; Accounts Receivable; Working Capital............12 3.8 Liabilities; Indebtedness.............................................13 3.9 Books and Records.....................................................13 3.10 Title to Personal Properties..........................................13 3.11 Owned Real Property...................................................14 3.12 Leased Real Property..................................................14 3.13 Material Contracts....................................................14 3.14 Litigation............................................................16 3.15 Taxes.................................................................16 3.16 Insurance.............................................................18 3.17 Intellectual Properties...............................................18 3.18 Compliance with Laws..................................................21 3.19 Suppliers and Customers...............................................21 3.20 Employment Relations..................................................21 3.21 Employee Benefit Plans................................................23 3.22 Environmental Laws and Regulations....................................26 3.23 Interests in Clients, Suppliers, Etc.; Affiliate Transactions.........27 3.24 Bank Accounts and Powers of Attorney..................................27 3.25 Permits...............................................................27 3.26 No Changes Since Balance Sheet Date...................................27 -i- 3.27 Disclosure............................................................30 3.28 Government Contracts..................................................30 3.29 Warranty Claims.......................................................30 3.30 Brokers' or Finders' Fees.............................................30 3.31 Inter-company Balances................................................31 3.32 Conduct of Business of the Company....................................31 ARTICLE IV REPRESENTATIONS OF PURCHASER.................................32 4. Representations of Purchaser..........................................32 4.1 Existence and Good Standing of Purchaser; Power and Authorit..........32 4.2 Consents and Approvals; No Violations.................................33 4.3 Purchase for Investment.............................................. 33 4.4 No Action or Proceedings..............................................33 4.5 Brokers' or Finders' Fees.............................................33 4.6 Financing.............................................................33 4.7 Disclosure............................................................34 ARTICLE V COVENANTS OF SELLER AND PURCHASER............................34 5.1 Confidentiality.......................................................34 5.2 Public Announcements..................................................35 5.3 Non-Competition; Non-Interference.....................................35 5.4 Non-Solicitation of Employees.........................................37 5.5 Employee Matters......................................................38 5.6 Avery Claim...........................................................38 5.7 Outsourcing Charges...................................................39 5.8 AS 400 Process Units..................................................39 ARTICLE VI DELIVERIES AT CLOSING........................................39 6.1 Seller's Obligations..................................................39 6.2 Purchaser's Obligations...............................................40 6.3 Further Assurances....................................................40 ARTICLE VII TAX MATTERS..................................................41 7.1 Tax Returns...........................................................41 7.2 Payment of Taxes......................................................41 7.3 Controversies.........................................................42 7.4 Transfer Taxes........................................................42 7.5 Indemnification.......................................................42 7.6 Post-Closing Access and Cooperation...................................43 7.7 Section 338 Election..................................................43 7.8 Allocation............................................................43 ARTICLE VIII SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.................44 8.1 Survival of Representations...........................................44 8.2 Indemnification.......................................................44 -ii- 8.3 Indemnification Procedure.............................................46 8.4 Third Party Claims....................................................47 ARTICLE IX MISCELLANEOUS................................................48 9.1 Expenses..............................................................48 9.2 Governing Law.........................................................49 9.3 Jurisdiction..........................................................49 9.4 Notices...............................................................49 9.5 Assignment; Parties in Interest.......................................50 9.6 Counterparts..........................................................50 9.7 Entire Agreement......................................................50 9.8 Amendments............................................................50 9.9 Severability..........................................................50 9.10 Third Party Beneficiaries.............................................51 9.11 No Strict Construction................................................51 9.12 Waiver of Jury Trial..................................................51 EXHIBIT A Form of Lease Agreement EXHIBIT B Form of Services Agreement EXHIBIT C Form of Avery Assignment Agreement EXHIBIT D Form of Letter Agreement: Norfolk Southern Corporation EXHIBIT E Form of Contract Assignment Agreement EXHIBIT F Form of Service Fee Letter Agreement EXHIBIT G Form of Lease Guaranty EXHIBIT H Form of Amendment to Seller Customer Agreement and Statement of Work thereunder EXHIBIT I Form of Seller's Counsel Legal Opinion EXHIBIT J Form of Purchaser's Counsel Legal Opinion EXHIBIT K Form of Certificate: Indemnification Procedures EXHIBIT L Form of Company/Sprint Agreement EXHIBIT M Form of Seller/Sprint Agreement -iii- EX-4.1 4 a857821_ex4-1.txt SECURITIES PURCHASE AGREEMENT EXECUTION COPY SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT dated as of February 1, 2002 (this "Agreement"), by and between Infocrossing, Inc., a Delaware corporation (the "Company"), Cahill Warnock Strategic Partners Fund, L.P., a Delaware limited partnership ("CW"), Strategic Associates, L.P., a Delaware limited partnership ("SA"), Camden Partners Strategic Fund II-A, L.P., a Delaware limited partnership ("Camden II-A"), and Camden Partners Strategic Fund II-B, L.P., a Delaware limited partnership ("Camden II-B" and together with CW, SA and Camden II-A, the "Purchasers"). W I T N E S S E T H: WHEREAS, the Company proposes, subject to the terms and conditions set forth herein, to issue and sell to Purchasers the Debentures (as defined below); WHEREAS, to induce the Purchasers to acquire the Debentures and as consideration hereunder, the Company has agreed to grant the Purchasers warrants (the "Warrants") to purchase shares of the common stock, par value $.01 of the Company ("Common Stock"), as more fully set forth in the Warrant Agreement (as defined below); WHEREAS, each Purchaser wishes to purchase from the Company, severally and not jointly, the Debentures in the principal amount set forth next to such Purchaser's name on Schedule A attached hereto; and WHEREAS, the parties intend that the proceeds of the sale of the Debentures will be used to fund the Proposed Acquisition (as defined below); and WHEREAS, the transactions contemplated by this Agreement benefit the Company and the Subsidiaries (as defined below), and in consideration for such each Subsidiary will enter into a Guaranty Agreement (as defined below) pursuant to which they will agree, among other things, to guarantee repayment of all amounts due and payable under the Debentures. NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows. ARTICLE I DEFINITIONS Section 1.1 Defined Terms. (a) As used in this Agreement, the following terms shall have the following meanings: "Additional Assets" means (a) any property or assets (other than indebtedness for money borrowed and Capital Stock) to be used by the Company in a Permitted Business; (b) the Capital Stock of a Person that becomes a Subsidiary as a result of the acquisition of such Capital Stock by the Company; or (c) Capital Stock constituting a minority interest in any Person that at such time is a Subsidiary; provided, however, that any such Subsidiary described in clauses (b) or (c) above is primarily engaged in a Permitted Business. "Affiliate" means, with respect to (i) the Company, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with the Company; and (ii) the Purchasers, any general or limited partners or retired partners of any of the Purchasers, or any Person or entity that directly or indirectly, through one or more intermediaries, controls, with the general partner of Purchasers, the Purchasers. 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. "Applicable Law" means any United States federal, state, or local law, statute, rule, regulation, order, writ, injunction, judgment, decree or permit of any Governmental Authority. "Business Day" means any day other than a Saturday, a Sunday, or a day when banks in The City of New York are authorized by Applicable Law to be closed. "Camden Representative" shall mean Camden Partners, Inc., a Delaware corporation. "Capital Stock" means (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. "Cash Equivalents" means (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from date of acquisition thereof; (b) investments in commercial paper maturing within 365 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's; (c) investments in certificates of deposit, banker's acceptance and time deposits maturing within 365 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any state thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; and (d) money market funds substantially all of whose assets comprise securities of the type described in clauses (a), (b) and (c) above. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Commission" means the United States Securities and Exchange Commission. "Commission Filings" means all reports, registration statements and other filings filed by the Company with the Commission (and all notes, exhibits and schedules thereto and all documents incorporated by reference therein). "Company Disclosure Schedule" shall mean the Company disclosure schedule delivered to the Purchasers concurrently with the date hereof. 2 "Contract" means any contract, lease, loan agreement, mortgage, security agreement, trust indenture, note, bond, instrument, or other agreement or arrangement (whether written or oral). "Debentures" means the Company's senior subordinated debentures due 2005 to be issued to the Purchasers on the date hereof in the aggregate original principal amount of Ten Million Dollars ($10,000,000). Such debentures shall be substantially in the form set forth as Exhibit A. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and all regulations promulgated thereunder, as in effect from time to time. "Escrow Agreement" means that certain Escrow Agreement, dated as of the date hereof, to be entered into by the Camden Representative and the Company, in substantially the form attached hereto as Exhibit B. "Exchange Act" means, as of any date, the Securities Exchange Act of 1934, as amended through such date, and the rules and regulations of the Commission promulgated thereunder in effect on such date. "Financing Documents" means this Agreement, the Registration Rights Agreement, the Debenture, the Warrant Agreement, the Escrow Agreement, Management Rights Letter, the Stockholders Agreement and each Subsidiary Guaranty Agreement, and each certificate, instrument and agreement delivered in connection with any of the foregoing. "GAAP" means, as of any date, United States generally accepted accounting principles, consistently applied, as in effect on such date. "Governmental Authority" means (i) any 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 Commission recognized trading market on which securities issued by the Company or any of the Subsidiaries are listed or quoted. "Guaranty Agreement" shall mean each of those certain Guaranty Agreements, dated as of the date hereof, by and among the Purchasers and each of the Subsidiaries, in substantially the form attached hereto as Exhibit C. "Indebtedness" means all principal, accrued and unpaid interest and all other obligations arising under the Debentures. "Initial Warrants" shall have the meaning set forth in the Warrant Agreement. "Lien" means any mortgage, pledge, lien, security interest, claim, restriction, charge or encumbrance of any kind. "Management Rights Letter" means that certain Management Rights Letter, to be dated as of the Closing Date, by and between the Company and each of the Purchasers, substantially in the form attached hereto as Exhibit D. "Management Stockholders" means the individuals listed on Schedule A to the Stockholders Agreement, as of the Closing Date. 3 "Material Adverse Effect" shall mean, with respect to the Company any materially adverse change in or effect on the business, operations, financial condition, or results of operations of the Company and the Subsidiaries, taken as a whole, provided, however, that a Material Adverse Effect shall not include any materially adverse change in or effect on the business or financial condition of the Company resulting from general financial and economic conditions and industry trends. "Net Available Cash" from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of indebtedness for borrowed money or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other non-cash form) therefrom, in each case net of (a) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition, (b) all payments made on any indebtedness for borrowed money which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, (c) all distributions and other payments required to be made to minority interest holders in subsidiaries or joint ventures as a result of such Asset Disposition and (d) appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed of in such Asset Disposition and retained by the Company after such Asset Disposition. "Permitted Business" means (a) any business engaged in by the Company or its Subsidiaries on the Closing Date; and (b) any business substantially related to the business of the Company or its Subsidiary on the Closing Date. "Person" means any individual, partnership, corporation, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or agency or political subdivision thereof, or other entity. "Purchaser Affiliate" means (a) any direct or indirect holder of any equity interests or securities in Purchaser (whether limited or general partners, members, stockholders or otherwise), (b) any Affiliate of Purchaser, (c) any director, officer, employee, representative or agent of (i) Purchaser, (ii) any Affiliate of Purchaser or (iii) any holder of equity interests or securities referred to in clause (a) above or (d) any person who is a "control person" of Purchaser, as defined under Section 15 of the Securities Act or Section 20 of the Exchange Act. "Registration Rights Agreement" means the Amended and Restated Registration Rights Agreement, to be dated as of the Closing Date, to be entered into by and between the Company and the parties thereto, in the form attached hereto as Exhibit E. "Securities" shall mean, collectively, the Debentures, the Warrants and the Warrant Shares. "Securities Act" means, as of any date, the Securities Act of 1933, as amended as of such date, and the rules and regulations of the Commission promulgated thereunder in effect on such date. 4 "Series A Certificate of Designations" means the Certificate of Designation of the Powers, Preferences and Other Special Rights and Qualifications thereof relating to the Series A Preferred Stock. "Series A Preferred Stock" means the Company's 8% Series A Cumulative Convertible Participating Preferred Stock, par value $0.01 per share. "Stockholders' Agreement" means the Second Amended and Restated Stockholders' Agreement, to be dated as of the Closing Date, to be entered into by and between the Company and the parties thereto, in the form attached hereto as Exhibit F. "subsidiary" means, with respect to any Person (i) a corporation a majority of whose capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by a subsidiary of such Person, or by such Person and one or more subsidiaries of such Person, (ii) a partnership in which such Person or a subsidiary of such Person is, at the date of determination, a general partner of such partnership and has the power to direct the policies and management of such partnership or (iii) any other Person (other than a corporation) in which such Person, a subsidiary of such Person or such Person and one or more subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has (A) at least a majority ownership interest or (B) the power to elect or direct the election of a majority of the directors or other governing body of such Person. "Subsidiary" means any direct or indirect subsidiary (as defined above) of the Company. "Transactions" means the transactions contemplated by the Financing Documents. "Warrant Agreement" means the Warrant Agreement, to be dated as of the Closing Date, to be entered into by and between the Company and the parties thereto, in the form attached hereto as Exhibit G. "Warrant Shares" means shares of the Company's Common Stock to be issued upon exercise of the Warrants. Section 1.2 Additional Defined Terms. As used in this Agreement, the following terms shall have the meanings given thereto in the Sections set forth opposite such terms: TERM SECTION Additional Subsidiary...............................................Section 5.12 Agreement...............................................................Preamble Asset Disposition....................................................Section 6.2 Camden II-A.............................................................Preamble Camden II-B.............................................................Preamble Claims..............................................................Section 3.18 Closing..............................................................Section 2.2 Closing Date.........................................................Section 2.2 Common Stock......................................................Second Recital 5 Company.................................................................Preamble Company Intellectual Property.......................................Section 3.11 Company Property....................................................Section 3.18 CW Preamble Employee Plan....................................................Section 3.12(a) Employees........................................................Section 3.12(a) Environmental Claims................................................Section 3.18 Environmental Law...................................................Section 3.18 Escrow Agent.........................................................Section 2.1 Escrow Release Date..................................................Section 2.1 Governmental Licenses...............................................Section 3.10 Hazardous Materials.................................................Section 3.18 Immigration Laws.................................................Section 3.12(i) Indemnified Party.................................................Section 8.1(c) indemnified person................................................Section 8.1(b) Indemnifying Party................................................Section 8.1(c) Intellectual Property...............................................Section 3.11 Issuable Maximum.....................................................Section 6.8 Losses............................................................Section 8.1(b) Material Contracts..................................................Section 3.15 Notices..............................................................Section 8.3 Offer.............................................................Section 6.2(b) Permitted Encumbrances...............................................Section 6.5 Permitted Liens.....................................................Section 3.14 Proposed Acquisition.................................................Section 2.1 Purchasers..............................................................Preamble Release.............................................................Section 3.18 Required Stockholder Approval........................................Section 6.8 SA Preamble Senior Indebtedness...............................................Section 6.2(d) Senior Subordinated Indebtedness..........................Section 6.2(a)(iii)(B) Tax..............................................................Section 3.13(f) Tax Controversy..................................................Section 3.13(c) Tax Return.......................................................Section 3.13(f) URLs................................................................Section 3.11 Warrants..........................................................Second Recital Section 1.3 Knowledge. Where any representation or warranty contained in this Agreement is expressly qualified to the knowledge of the Company, knowledge of the Company shall mean the actual knowledge of Zach Lonstein, Robert Wallach, Patricia Digan, William Fischer, John Platt, Robert Graham, Laurence Carpenter and Nicholas Letizia, as well any knowledge or any fact or circumstance that would have or should have come to the attention of any of them in the course of discharging his or her duties in a reasonable and prudent manner consistent with sound business practices. ARTICLE II SALE AND PURCHASE Section 2.1 Agreement to Sell and to Purchase; Purchase Price. On the Closing Date, and upon the terms and subject to the conditions set forth in this Agreement, the Company shall deliver to the escrow agent (the "Escrow Agent") named in the Escrow Agreement in the name of each Purchaser, (A) a Debenture for the aggregate purchase price set forth opposite such Purchaser's name on Schedule A attached hereto and (B) a certificate or certificates for Initial Warrants registered in the name of such Purchaser. Each Purchaser shall deliver to the Escrow Agent the purchase price set forth opposite such Purchaser's name on Schedule A attached hereto. The Escrow Agent shall deliver the (i) (A) Debentures and (B) a certificate or certificates for Initial Warrants registered in the name of such Purchaser to each Purchaser and (ii) the aggregate purchase price to the Company, as set forth more fully in the Escrow Agreement (but in no event before the closing of the acquisition of a target company reasonably acceptable to the Purchasers (the "Proposed Acquisition") upon terms and conditions satisfactory to the Purchasers. The date of the delivery of (A) Debentures and (B) a certificate or certificates for Initial Warrants required in the name of such Purchaser in accordance with the Escrow Agreement shall be referred to as the "Escrow Release Date." If the Proposed Acquisition has not been consummated on terms and conditions satisfactory to the Purchasers within 30 days from the date hereof, the Escrow Agent shall return the aggregate purchase price, plus all accrued interest, to the Purchasers, and shall return the (A) Debentures and (B) a certificate or certificates for Initial Warrants registered in the name of such Purchaser to the Company. At the Closing: (a) each Purchaser shall deliver: (i) against delivery of the (A) Debenture being issued to such Purchaser and (B) a certificate or certificates for Initial Warrants registered in the name of such Purchaser, an amount equal to the aggregate purchase price of such Debenture and Initial Warrants as set forth on Schedule A attached hereto via wire transfer of immediately available funds to such bank account as the Company shall designate not later than two Business Days prior to the Closing Date; and (ii) each document, instrument, agreement and certificate referenced in Section 7.1. (b) The Company shall deliver to each of the Purchasers: (i) against payment of the purchase price therefor as set forth opposite such Purchaser's name on Schedule A attached hereto, (A) a Debenture and (B) a certificate or certificates for Initial Warrants registered in the name of such Purchaser; (ii) each document, instrument, agreement and certificate referenced in Section 7.2. (c) The Company shall deliver to Purchasers evidence of the payment of all costs and expenses of Purchasers required to be reimbursed by the Company pursuant to Section 8.10 hereof. 7 Section 2.2 Closing. Subject to the satisfaction or waiver of the conditions set forth in this Agreement, the issuance and sale of the Securities hereunder (the "Closing") shall take place on the date of this Agreement or on such other date as may be mutually agreed, at the offices of Wilmer, Cutler & Pickering at 100 Light Street, 13th Floor, Baltimore, Maryland 21202 (the date of the closing is the "Closing Date"). ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to each Purchaser on the date hereof as follows: Section 3.1 Organization and Standing. Each of the Company and the Subsidiaries is duly organized, validly existing and in good standing under the laws of its state of incorporation and has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted and as currently proposed to be conducted. Each of the Company and the Subsidiaries is duly qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or the nature of its business makes such qualification necessary, except for any such failures to so qualify or be in good standing that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has delivered to Purchasers true and complete copies of the Company's Certificate of Incorporation, as amended to date, and by-laws, as in effect on the date hereof and the certificates of incorporation, by-laws or other similar organizational documents of its other Subsidiaries, in each case, as amended through the date hereof. Section 3.2 Capital Stock; Warrants. (a) As of the date hereof, the authorized Capital Stock of the Company consists solely of (i) 50,000,000 shares of Common Stock, of which 5,342,426 shares are issued and outstanding, 594,990 shares are held in treasury and 5,579,467 are reserved for issuance upon the exercise of outstanding warrants, options and other convertible or exchangeable securities, and (ii) 3,000,000 shares of preferred stock, par value $0.01 per share, of which, 300,000 shares have been designated as Series A Preferred Stock and 157,377 shares are issued or outstanding. Each share of Capital Stock of the Company that will be issued and outstanding immediately following the Closing Date will be duly authorized and validly issued and, to the extent such concepts are applicable, fully paid and nonassessable, and the issuance thereof will not have been subject to any preemptive rights (other than preemptive rights contained in the Series A Certificate of Designations which shall have been waived) or made in violation of any Applicable Law. (b) Except as set forth on Schedule 3.2 of the Company Disclosure Schedule, as of the date of this Agreement, there are (i) no outstanding options, warrants, agreements, conversion rights, exchange rights, preemptive rights or other rights (whether contingent or not) to subscribe for, purchase or acquire any issued or unissued shares of Capital Stock of the Company or any Subsidiary, and (ii) no restrictions upon, or Contracts or understandings of the Company or any Subsidiary, or, to the knowledge of the Company, Contracts or understandings 8 of any other Person, with respect to, the voting or transfer of any shares of Capital Stock of the Company or any Subsidiary. (c) The Debentures and Warrants have been duly authorized by the Company and, when issued and delivered by the Company in accordance with the terms of this Agreement and the Warrant Agreement will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms except that to the extent that their enforceability may be subject to applicable bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors' rights generally and to general equitable principles. (d) The Warrant Shares have been duly and validly authorized and validly reserved for issuance in contemplation of the exercise of the Warrants and, when issued and delivered in accordance with the terms of the Warrant Agreement, will be validly issued, fully paid and non-assessable, and the issuance thereof will not have been subject to any preemptive rights (other than preemptive rights contained in the Series A Certificate of Designations which shall have been waived) or made in violation of Applicable Law. Section 3.3 Authorization; Enforceability. The Company has all necessary corporate power and authority to execute, deliver and perform its obligations under each of the Financing Documents, and has taken all corporate action necessary to authorize the execution, delivery and performance by it of each of such Financing Documents and to consummate the Transactions. No other corporate or stockholder proceeding (other than the approval of the stockholders of the Company contemplated by Section 5.7) on the part of the Company is necessary for such authorization, execution, delivery and consummation. The Company has duly executed and delivered this Agreement and the other Financing Documents. Each of the Financing Documents constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. Section 3.4 No Violation; Consents. (a) The execution, delivery and performance by the Company of each of the Financing Documents and the consummation by the Company of the Transactions do not and will not contravene any Applicable Law except where any such contravention would not reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 3.4 of the Company Disclosure Schedule, the execution, delivery and performance by the Company of each of the Financing Documents and the consummation of the Transactions (i) will not (A) violate, result in a breach of or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under any Contract to which the Company or any Subsidiary is a party or by which the Company or any such Subsidiary is bound or to which any of its assets is subject, or (B) result in the creation or imposition of any Lien upon any of the assets of the Company or any Subsidiary, except for any such violations, breaches, defaults or Liens that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or have a material adverse effect on the ability of the Company to perform its obligations under the Financing Documents and (ii) will not conflict with or violate any provision of the Certificate of Incorporation, by-laws or resolutions of the Company or the certificate of incorporation, by-laws or other similar organizational documents of the Subsidiaries. 9 (b) No consent, authorization or order of, or filing or registration with, any Governmental Authority or other Person is required to be obtained or made by the Company for the execution, delivery and performance of this Agreement or the consummation by the Company of the Transactions, or for the execution, delivery and performance by the Company of the Financing Documents, except where the failure to obtain such consents, authorizations or orders, or make such filings or registrations, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or a material adverse effect on the ability of the Company to perform its obligations under the Financing Documents. Section 3.5 Commission Filings; Financial Statements. (a) The Company has timely filed all reports, registration statements and other filings, together with any amendments or supplements required to be made with respect thereto, that it has been required to file with the Commission under the Securities Act and the Exchange Act. As of the respective dates of their filing with the Commission, the Commission Filings complied in all material respects with the applicable provisions of the Securities Act and the Exchange Act and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (b) Each of the historical consolidated financial statements of the Company (including any related notes or schedules) included in the Commission Filings was prepared in accordance with GAAP (except as may be disclosed therein), and complied in all material respects with the rules and regulations of the Commission. Such financial statements fairly present the consolidated financial position of the Company and the Subsidiaries as of the dates thereof and the consolidated results of operations, cash flows and changes in stockholders' equity for the periods then ended (subject, in the case of the unaudited interim financial statements, to normal, recurring year-end audit adjustments). Except as set forth or reflected in the Commission Filings filed prior to the date hereof, the Company does not have any liabilities or obligations of any nature (whether accrued, absolute, contingent, unasserted or otherwise). Section 3.6 Absence of Certain Changes. Except as disclosed in the Commission Filings filed prior to the date hereof or on Schedule 3.6 of the Company Disclosure Schedule, since September 30, 2001, (i) there has not been any event, occurrence or development of a state of circumstances or facts (or the failure of any of the foregoing to occur) that has had, or would reasonably be expected to have (a) a Material Adverse Effect or (b) a material adverse effect on the ability of the Company to perform its obligations under this Agreement or the Financing Documents; (ii) the business of the Company and the Subsidiaries has been conducted only in the ordinary course; (iii) neither the Company nor any of the Subsidiaries has incurred any material liabilities (direct, contingent or otherwise) or engaged in any material transaction or entered into any material agreement outside of the ordinary course of business; (iv) the Company and its Subsidiaries have not increased the compensation of any officer or director or granted any general salary or benefits increase, other than in the ordinary course of business; (v) neither the Company nor any of the Subsidiaries has taken any action referred to in Section 5.1, except as permitted thereby, (vi) there has been no declaration, setting aside or payment of any dividend or distribution with respect to any Capital Stock of the Company; or (vii) there has been no change by the Company or any of the Subsidiaries in accounting principles, practices or methods. 10 Section 3.7 Private Offering. Assuming the accuracy of the representations of the Purchasers, the offer and sale of the Securities is exempt from the registration and prospectus delivery requirements of the Securities Act. Neither the Company, nor anyone acting on behalf of it, has offered or sold or intends to offer or sell any securities, or has taken or will take any other action (including, without limitation, any offering of any securities of the Company under circumstances that would require, under the Securities Act, the integration of such offering with the offering and sale of the Securities), which would subject the Transactions to the registration provisions of the Securities Act. Section 3.8 Provided Information. All financial projections concerning the Company, its Subsidiaries and the Transactions that have been prepared by or on behalf of the Company or any of the Company's authorized representatives and that have been or will be made available to the Purchasers or any of their authorized representatives in connection with the Transactions have been, and at the time made available will be, reasonably prepared on a basis reflecting the best currently available estimates and judgments of the Company's management as to the future financial performance of the Company, the Subsidiaries and the individual business segments thereof. Section 3.9 Litigation. Except as disclosed in the Commission Filings or as set forth in Schedule 3.9, there is no action, suit, proceeding at law or in equity, or any arbitration or any administrative or other proceeding by or before (or to the knowledge of the Company any investigation by) any Governmental Authority, pending, or, to the knowledge of the Company, threatened, against or affecting the Company, or any of its Subsidiaries, or any of their properties or rights which would reasonably be expected to have a Material Adverse Effect or would be reasonably likely to prevent or materially delay consummation of the Transactions. There are no such suits, actions, claims, proceedings or investigations pending or, to the knowledge of the Company, threatened, seeking to prevent or challenging the transactions contemplated by this Agreement. Except as disclosed in the Commission Filings filed prior to the date hereof, neither the Company nor any of its Subsidiaries is subject to any judgment, order or decree entered in any lawsuit or proceeding which would have a Material Adverse Effect on the ability of the Company or any Subsidiary to conduct its business as presently conducted or contemplated to be conducted or would be reasonably likely to prevent or materially delay consummation of the Transactions. Section 3.10 Permits and Licenses. The Company and the Subsidiaries have obtained all governmental permits, licenses, franchises and authorizations required for the Company and each of the Subsidiaries to conduct its business as currently conducted (collectively, "Governmental Licenses"), except for those of which the failure to obtain would not have a Material Adverse Effect or prevent or materially delay the consummation of the Transactions; the Company and each of the Subsidiaries, except where the failure to so comply would not, singly or in the aggregate, reasonably be expected to (i) have a Material Adverse Effect or (ii) prevent or materially delay the consummation of the Transactions, is in compliance with the terms and conditions of all such Governmental Licenses; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not reasonably be expected to (i) have a Material Adverse Effect, or (ii) prevent or materially delay the consummation of the Transactions; and neither the Company nor any of the Subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to (i) have a Material Adverse Effect or (ii) prevent or materially delay the consummation of the Transactions. There exists no reason or cause that could justify the variation, suspension, cancellation or termination 11 of any such Governmental Licenses held by the Company or any of the Subsidiaries with respect to the current or contemplated operation of their respective businesses, which variation, suspension, cancellation or termination would reasonably be expected to (i) have a Material Adverse Effect or (ii) prevent or materially delay the consummation of the Transactions. Section 3.11 Intellectual Property, etc. In the operation of its business the Company and all of the Subsidiaries have used, and currently uses, domestic and foreign patents and patent applications, inventions, patent licenses, software licenses, know-how licenses, trade names, trademarks (registered or unregistered), copyrights (registered or unregistered), service marks (registered or unregistered), uniform resource locators ("URLs"), Internet domain names, trade secrets and other confidential and proprietary information (collectively the "Intellectual Property"). Schedule 3.11 of the Company Disclosure Schedule lists all, (i) registered Intellectual Property (and applications for registration thereof) and (ii) licenses which are of material importance to the operation of the business of the Company or any Subsidiary (collectively the "Company Intellectual Property"). Unless otherwise indicated in the Commission Filings or on Schedule 3.11 of the Company Disclosure Schedule, the Company (or the Subsidiary indicated) owns the entire right, title and interest in and to the Company Intellectual Property listed on such Schedule 3.11 of the Company Disclosure Schedule (including, without limitation, the exclusive right to sue and license the same) free and clear of any Liens (and without obligation to pay any royalty or other fee with respect thereto). Each item constituting part of the Company Intellectual Property which is owned by the Company (or the Subsidiary indicated) and listed on Schedule 3.11 of the Company Disclosure Schedule has been, to the extent indicated in Schedule 3.11 of the Company Disclosure Schedule, 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 and such registrations, filings and issuances remain in full force and effect. No Company operations (including products or services of the Company or any Subsidiary) now infringe upon any other Person's Intellectual Property rights except as would not reasonably be expected to have a Material Adverse Effect. No Company Intellectual Property set forth on Schedule 3.11 of the Company Disclosure Schedule has been canceled, abandoned, adjudicated invalid, or to Company's knowledge become subject to any outstanding judgment, order, decree, ruling, injunction, writ or consent restricting their use or adversely affecting Company's or any Subsidiary's rights thereto except as would not reasonably be expected to have a Material Adverse Effect; and all maintenance fees and renewal fees (if applicable) in respect thereof have been duly paid. Except as stated in Schedule 3.11 of the Company Disclosure Schedule, there are no pending or to the knowledge of the Company, threatened proceedings or litigation or other claims adversely affecting the Company Intellectual Property listed on Schedule 3.11 of the Company Disclosure Schedule except as would not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company, except as indicated on Schedule 3.11 of the Company Disclosure Schedule, no Person is infringing, misappropriating or misusing any of the Company Intellectual Property. Section 3.12 Employee Benefit Plans and Employment Matters. (a) Schedule 3.12 of the Company Disclosure Schedule sets forth as of the date hereof a true and complete list of each "employee benefit plan" (as defined 12 in Section 3(3) of ERISA) of the Company and its Subsidiaries in which current or former employees, agents, directors, or independent contractors of the Company or its Subsidiaries ("Employees") participate or pursuant to which the Company or any of its Subsidiaries has a liability with respect to Employees (each, an "Employee Plan"). Except as disclosed in the Commission Filings or on Schedule 3.12 of the Company Disclosure Schedule, neither the Company 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 Company has made available to the Purchasers with respect to each Employee Plan: (i) a true and complete copy of all material written documents comprising such Employee Plan (including amendments and individual agreements relating thereto); 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 except for any failure to establish and maintain or make contributions to, any Employee Plan, that would not have a Material Adverse Effect, or as disclosed on Schedule 3.12. (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, (or has submitted, or is within the remedial amendment period for submitting, an application for a determination letter and is awaiting a response from the Internal Revenue Service) and, to the Company'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 Company nor any Subsidiary currently maintains or contributes to, or has at any time within the four-year period ending on the date hereof 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 Company nor any Subsidiary, nor, to the Company'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) Except as set forth in the Commission Filings or on Schedule 3.12 of the Company Disclosure Schedule, none of the execution or delivery of the Financing Documents or the consummation of the transactions contemplated hereby or thereby, constitutes an event under any Employee Plan, loan to, or individual agreement or contract with, an Employee that may reasonably be expected to result in any material payment (whether of severance pay or otherwise), restriction or limitation upon the assets of any Employee Plan, acceleration of payment or vesting, increase in benefits or compensation, or required funding, with respect to any Employee, or the forgiveness of any loan or other commitment of any Employees. (g) There are no actions, suits, arbitrations, inquiries, investigations or other proceedings (other than routine claims for benefits) pending or, to the 13 Company'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. (h) No amounts paid or payable by the Company or any Subsidiary to or with respect to any Employee (including any such amounts that may be payable as a result of the execution and delivery of the Financing Documents or the consummation of the transactions contemplated hereby or thereby) will fail to be deductible for United States federal income tax purposes by reason of Section 280G of the Code, except as would not reasonably be expected, individually or in the aggregate to have a Material Adverse Effect. (i) The Company and the 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"). With respect to each employee of the Company and the Subsidiaries for whom compliance with the Immigration Laws is required, the Company has supplied, or shall supply prior to the Closing Date, to Purchaser such employee's Form I-9 (Employment Eligibility Verification Form) and all other records, documents or other papers which are retained with the Form I-9 by the employer pursuant to the Immigration Laws. The Company and the 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 Company's knowledge, threatened. (j) Except as set forth in the Commission Filings or on Schedule 3.12 of the Company Disclosure Schedule, the Company and the Subsidiaries are in compliance in all material respects with all Applicable Laws respecting employment and employment practices, terms and conditions and wages and hours. Section 3.13 Taxes. Except as set forth on Schedule 3.13 of the Company Disclosure Schedule: (a) The Company and each of its Subsidiaries have timely filed or caused to be timely filed all material United States federal, state, county, local and foreign Tax Returns required to be filed by or with respect to them. Such Tax Returns have accurately reflected all material liability for Taxes of the Company and its Subsidiaries for the periods covered thereby. All material Taxes have been paid in full on a timely basis other than Taxes which are being contested in good faith by appropriate proceedings, diligently pursued, and which have been fully reserved on the balance sheet of the Company. The amount of the liability of the Company and each of its Subsidiaries for unpaid Taxes for all periods (or portions thereof) ending on or before September 30, 2001, does not, in the aggregate, materially exceed the amount of the current liability accrual for Taxes (excluding reserves for deferred Taxes) reflected on the Company's September 30, 2001 balance sheet; and all Tax liabilities of the Company and each of its Subsidiaries since such time have been incurred in the ordinary course of business of the Company or the Subsidiaries; and all material Tax liabilities since such time have been set forth on the books and records of the Company or each of its Subsidiaries, as the case may be, and disclosed to the Purchasers prior to the date hereof. 14 (b) There are no material Tax assessments or adjustments that have been asserted in writing against the Company or any of its Subsidiaries for any period. (c) There are no material audits, examinations, actions, suits, proceedings, investigations, claims or assessments pending or, to the knowledge of the Company, threatened, against the Company or any of its Subsidiaries for any alleged deficiency in any Tax (a "Tax Controversy") and neither the Company nor or any of its Subsidiaries has been notified in writing of any proposed Tax Controversy against the Company or any of its Subsidiaries (other than a Tax Controversy set forth on Schedule 3.13 of the Company Disclosure Schedule which is being contested in good faith). Neither the Company nor any of its Subsidiaries have been included in any "consolidated," "unitary" or "combined" Tax Return provided for under the law of the United States, any foreign jurisdiction or any state or locality with respect to Taxes for any taxable period for which the statute of limitations has not expired. The Company and each of its Subsidiaries has delivered to the Purchasers correct and complete copies of all United States federal 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 Company or any of its Subsidiaries, or any other similar correspondence from a taxing authority, relating to taxable years 1997, 1998, 1999 and 2000. (d) There are no liens for Taxes on the assets of the Company or any of its Subsidiaries, except for statutory liens for current Taxes not yet due and payable or which (A) have been validly reserved for under GAAP and are being validly contested, and (B) are set forth on Schedule 3.14 (as referred to below). (e) There are no Tax sharing, allocation, indemnification or similar agreements in effect as between the Company or any of its Subsidiaries or any predecessor or affiliate thereof and any other party under which the Company, any of its Subsidiaries, or the Purchasers could be liable for material Taxes or other material claims of any third party. (f) 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 or having been 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 a report, return or other information (including any attached schedules or any amendments to such report, return 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. Section 3.14 Title to Assets. The Company and each of the Subsidiaries has good and valid title to (i) all of its material tangible properties and assets (real and personal), including, without limitation, all the properties and assets reflected in the consolidated balance sheet as of September 30, 2001 15 except as indicated in the notes thereto and except for properties and assets reflected in the consolidated balance sheet as of September 30, 2001 which have been sold or otherwise disposed of in the ordinary course of business after such date, and (ii) all the tangible properties and assets purchased by the Company and any of its Subsidiaries since September 30, 2001 except for such properties and assets which have been sold or otherwise disposed of in the ordinary course of business; in each case subject to no Lien, except for Permitted Liens. "Permitted Liens" means: (i) Liens for Taxes not yet due or payable or which (A) have been validly reserved for under GAAP and are being validly contested, and (B) are set forth on Schedule 3.14; (ii) Liens reflected in the Commission Filings (including the financial statements included therein); (iii) Liens imposed by applicable law and incurred in the ordinary course of business for obligations not yet due and payable to laborers, materialmen and the like; (iv) zoning and other restrictions, variances, covenants, rights-of-way, encumbrances, easements and or other minor irregularities of title, none of which, individually or in the aggregate, would reasonably be expected to have a material adverse effect on the value of any of the real property of the Company, or would impair in any material respect the ability of the Company or the relevant Subsidiary to sell such property for its current use; (v) with respect to items of personal property, unperfected purchase money security interests existing in the ordinary course of business without the execution of a security agreement and (vi) other Liens which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Section 3.15 Contracts. Schedule 3.15 of the Company Disclosure Schedule sets forth the following oral or written contracts and other agreements to which the Company or any of the Subsidiaries is a party: (a) any agreement (or group of related agreements, with the same third party or any of its Affiliates) for the lease of personal property providing for lease payments in excess of One Hundred Thousand Dollars ($100,000) per annum; (b) any agreement (or group of related agreements) for the purchase or sale of supplies, products or other personal property, or for the furnishing or receipt of services, the performance of which involve consideration in excess of Fifty Thousand Dollars ($50,000) for any one such agreement (or Two Hundred Fifty Thousand Dollars ($250,000) for any group of related agreements) per annum; provided, however, that this clause (b) shall not include any employment agreement included pursuant to clause (e) below or excluded from clause (e) below by virtue of the monetary threshold set forth therein; (c) any agreement concerning a partnership or joint venture; (d) any agreement (or group of related agreements, with the same third party or any of its Affiliates) under which the Company or any of the Subsidiaries has created, incurred, assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, in excess of Fifty Thousand Dollars ($50,000) per annum or under which it has imposed a Lien on any of its material assets, tangible or intangible; (e) any agreement with an employee of the Company or any of the Subsidiaries, providing for a base salary per annum in excess of One Hundred Thousand Dollars ($100,000); (f) any other agreement (or group of related agreements with the same third party) the performance of which involves consideration or obligations 16 valued in excess of Fifty Thousand Dollars ($50,000) per annum; provided, however, that this clause (f) shall not include any employment agreement excluded from clause (e) above by virtue of the monetary threshold set forth therein; (g) any agreement (or group of related agreements with the same third party or any of its Affiliates) in respect of any loan or advance to, or investment in, any other Person, or any commitment to make any of the foregoing, by the Company or any of the Subsidiaries in an amount in excess of Fifty Thousand Dollars ($50,000) excluding (i) loans (along with accrued and unpaid interest) among the Company and its wholly-owned Subsidiaries and (ii) among the Company and Zach Lonstein and Robert Wallach; (h) any agreement, indenture or other instrument which contains restrictions on the Company's or the Subsidiaries' ability to pay dividends or otherwise make distributions with respect to their Capital Stock; (i) any agreement, contract or commitment limiting the ability of the Company or any Subsidiary to compete with any Person or engage in any line of business; (j) any agreement, contract or commitment with any Affiliate (other than a wholly-owned Subsidiary) of the Company; and (k) any other material agreement, contract or commitment not entered into in the ordinary course of business. The foregoing are referred to hereafter as the "Material Contracts". With respect to the Material Contracts, except as set forth in Schedule 3.15 of the Company Disclosure Schedule or would not reasonably be expected to have a Material Adverse Effect (i) all are in full force and effect; (ii) neither the Company nor any of the Subsidiaries and, to the Company's knowledge, no other party thereto, is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration, under any such Material Contract; (iii) neither the Company nor any of the Subsidiaries has assigned any of its rights or obligations under any of the Material Contracts; and (iv) neither the Company nor any of the Subsidiaries has received any outstanding notice of cancellation or termination in connection with any of them. Section 3.16 Insurance. The Company and the Subsidiaries have obtained and maintained in full force and effect insurance (including director's and officer's liability insurance) with insurance companies or associations in such amounts, on such terms and covering such risks as disclosed in Schedule 3.16 of the Company Disclosure Schedule. Section 3.17 Investment Company. None of the Company or the Subsidiaries are an "investment company" or "promoter" or "principal underwriter" for an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. Section 3.18 Environmental Laws and Regulations. Except as set forth in the Commission Filings or on Schedule 3.18 of the Company Disclosure Schedule, (a) Hazardous Materials have not at any time been generated, use, treated or stored on, or transported to or from, any Company Property or, to the knowledge of the 17 Company, any property adjoining or adjacent to any Company Property, (b) Hazardous Materials have not at any time been released or disposed of on any Company Property or, to the knowledge of the Company, any property adjoining or adjacent to any Company Property, (c) the Company and each of the Subsidiaries is in compliance in all material respects with all Environmental Laws and the requirements of any permits issued under such Environmental Laws with respect to any Company Property, (d) there are no past, pending or threatened material Environmental Claims against the Company or any of the Subsidiaries or any Company Property, (e) there are no facts or circumstances, conditions or occurrences regarding any Company Property or, to the knowledge of the Company, any property adjoining or adjacent to any Company Property, that could reasonably be anticipated (A) to form the basis of a material Environmental Claim against the Company or any of the Subsidiaries or any Company Property or (B) to cause such Company Property to be subject to any material restrictions on its ownership, occupancy, use or transferability under any Environmental Law, and (f) there are not now and never have been any underground storage tanks located on any Company Property or, to the knowledge of the Company, on any property adjoining or adjacent to any Company Property. For purposes of this Agreement, the following terms shall have the following meanings: (A) "Company Property" means any real property and improvements owned or leased by the Company or any of the Subsidiaries; (B) "Hazardous Materials" means (i) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; (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; and (iii) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority; (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 date hereof and Closing Date, and any judicial or administrative interpretation thereof applicable to the Company or its operations or property as of the date hereof and Closing Date, including any judicial or administrative order, consent decree or judgment, relating to the environment, health, safety or Hazardous Materials, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Sections 6901 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Sections 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq.; the Clean Air Act, 42 U.S.C. Sections7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Sections 3808 et seq.; (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 (E), "Claims", including without limitation (i) any and all Claims by governmental or regulatory authorities 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 (F) "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. 18 Section 3.19 Brokers and Finders. No agent, broker, Person or firm acting on behalf of the Company is, or will be, entitled to any fee, commission or broker's or finder's fees from any of the parties hereto, or from any Person controlling, controlled by, or under common control with any of the parties hereto, in connection with this Agreement or any of the Transactions. Section 3.20 Subsidiaries. The company has no subsidiaries except for those set forth on Schedule 3.20, and each such subsidiary has entered into a Guaranty Agreement. Section 3.21 Solvency. As of the date hereof and after giving effect to the transactions contemplated by this Agreement: (i) the property of the Company, at a fair valuation, will exceed its debt; (ii) the capital of the Company will not be unreasonably small to conduct its business; and (iii) the Company will not have incurred debts, or have intended to incur debts, beyond its ability to pay such debts as they mature. Section 3.22 US Real Property Holding Corporation. The Company is not now and has not been at any time for a five (5) year period ending on the Closing Date a "United States real property holding corporation," as defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations promulgated by the Internal Revenue Service. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER Each Purchaser hereby severally, and not jointly, represents and warrants to the Company, as to itself and as to no other person, as of the date hereof and as of the Closing Date as follows: Section 4.1 Organization; Authorization; Enforceability. Such Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite partnership power and authority to own its properties and assets and to carry on its business as it is now being conducted and as currently proposed to be conducted. Such Purchaser has the power to execute, deliver and perform its obligations under each of the Financing Documents to which it is a party and has taken all partnership action necessary to authorize the execution, delivery and performance by it of such Financing Documents and to consummate the transactions contemplated hereby and thereby. No other proceedings on the part of such Purchaser are necessary for such authorization, execution, delivery and consummation. Such Purchaser has duly executed and delivered this Agreement and each of the other Financing Documents to be executed and delivered. This Agreement constitutes, and each of the other Financing Documents to which such Purchaser is a party, when executed and delivered by such Purchaser, will constitute, a legal, valid and binding obligation of such Purchaser, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors' rights generally and to general equitable principles. Section 4.2 Private Placement. (a) Such Purchaser understands that (i) the offering and sale of the Securities in the Transactions by the Company is intended to be exempt from 19 registration under the Securities Act pursuant to Section 4(2) thereof and (ii) there is no existing public or other market for the Securities. (b) Such Purchaser (either alone or together with its advisors) has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Securities and is capable of bearing the economic risks of such investment. (c) Such Purchaser is acquiring the Securities to be acquired hereunder (and will acquire the Warrant Shares) for its own account, for investment and not with a view to the public resale or distribution thereof, in violation of any securities law. (d) Such Purchaser understands that the Securities will be issued in a transaction exempt from the registration or qualification requirements of the Securities Act and applicable state securities laws, and that such securities must be held indefinitely unless a subsequent disposition thereof is registered or qualified under the Securities Act and such laws or is exempt from such registration or qualification. (e) Such Purchaser (A) has been furnished with or has had full access to all of the information that it considers necessary or appropriate to make an informed investment decision with respect to the Securities and that it has requested from the Company, (B) has had an opportunity to discuss with management of the Company the intended business and financial affairs of the Company and to obtain information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to it or to which it had access and (C) can bear the economic risk of (x) an investment in the Securities indefinitely and (y) a total loss in respect of such investment, has such knowledge and experience in business and financial matters so as to enable it to understand and evaluate the risks of and form an investment decision with respect to its investment in the Securities and to protect its own interest in connection with such investment; it being understood that nothing set forth in this Section 4.2(e) shall affect the representations, warranties or other obligations of the Company, or the rights and remedies of such Purchaser, under this Agreement in any way whatsoever. Section 4.3 No Violation; Consents. (a) The execution, delivery and performance by such Purchaser of each of the Financing Documents to which it is a party and the consummation of the Transactions do not and will not contravene any Applicable Law. The execution, delivery and performance by such Purchaser of each of the Financing Documents to which it is a party and the consummation of the Transactions contemplated therein (i) will not violate, result in a breach of or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under any Contract to which such Purchaser is party or by which such Purchaser is bound or to which any of its assets is subject, except for any such violations, breaches or defaults that would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of such Purchaser to perform its obligations under this Agreement, and (ii) will not conflict with or violate any provision of the partnership agreement or certificate of limited partnership of such Purchaser. 20 (b) No consent, authorization or order of, or filing or registration with, any Governmental Authority or other Person is required to be obtained or made by such Purchaser for the execution, delivery and performance of any of the Financing Documents to which it is a party or the consummation of any of the transactions contemplated therein, except where the failure to obtain such consents, authorizations or orders, or make such filings or registrations, would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of such Purchaser to perform its obligations under this Agreement. ARTICLE V COVENANTS OF THE COMPANY Section 5.1 Maintain Existence. The Company agrees that, except as permitted, required or specifically contemplated by, or otherwise described in, this Agreement or the other Financing Documents or otherwise consented to or approved in writing by Purchasers, so long as any Indebtedness under the Debentures remains outstanding the Company shall, and shall cause its Subsidiaries to use reasonable best efforts to take all appropriate actions to preserve and keep in full force and effect the existence of the Company as a corporation and maintain the right to do business in all jurisdictions necessary for the conduct of business in the ordinary course. Section 5.2 Access to Books and Records. So long as any Indebtedness under the Debentures remains outstanding the Company shall, and shall cause its Subsidiaries to, afford to Purchasers and Purchasers' accountants, counsel and representatives reasonable access on reasonable notice of during normal business hours to all its properties, books and records (including, but not limited to, Tax Returns). Section 5.3 Reservation of Shares. The Company shall: (i) cause to be authorized and reserve and keep available at all times during which any of the Warrants remain outstanding, free from preemptive rights, out of its treasury stock or authorized but unissued shares of Capital Stock, or both, solely for the purpose of effecting the exercise of the Warrants pursuant to the terms of the Warrant Agreement, as the case may be, sufficient shares of Common Stock to provide for the issuance of the maximum number of shares issuable upon exercise of the Warrants; (ii) issue and cause the transfer agent to deliver such shares of Common Stock as required upon exercise of the Warrants, and take all actions necessary to ensure that all such shares will, when issued and paid for pursuant to the exercise of the Warrants, be duly and validly issued, fully paid and nonassessable; and (iii) if any shares of Common Stock reserved for the purpose of issuance upon exercise of the Warrants require registration with or approval of any Governmental Authority under any Applicable Law before such shares may be validly issued or delivered, secure such registration or approval, as the case may be, and maintain such registration or approval in effect so long as so required. 21 Section 5.4 Use of Proceeds. The Company shall use the proceeds from the Transactions to finance the Proposed Acquisition on terms and conditions reasonably acceptable to the Purchasers and the remainder of such proceeds, if any, for general corporate purposes. Section 5.5 Periodic Information. So long as any Indebtedness is outstanding under the Debentures, the Company shall file all reports, if any, required to be filed by the Company under Section 13 or 15(d) of the Exchange Act and shall provide the holders of the Warrant Shares and prospective purchasers of such shares with the information specified in Rule 144A(d) under the Securities Act. Section 5.6 Legends. So long as applicable, each certificate representing any Warrant or any portion of the Warrant Shares shall be stamped or otherwise imprinted with a legend in the following form (in addition to any legend required under applicable state securities laws): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS AGAINST TRANSFER SET FORTH IN A SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (THE "STOCKHOLDERS' AGREEMENT") DATED AS OF FEBRUARY 1, 2002, AS MAY BE AMENDED FROM TIME TO TIME. A COPY OF SUCH STOCKHOLDERS AGREEMENT HAS BEEN FILED IN THE OFFICE OF THE COMPANY LOCATED AT 2 CHRISTIE HEIGHTS STREET, LEONIA, NEW JERSEY 07605, WHERE THE SAME MAY BE INSPECTED DAILY DURING BUSINESS HOURS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OTHER THAN PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THAT CERTAIN WARRANT AGREEMENT (THE "WARRANT AGREEMENT") DATED AS OF FEBRUARY 1, 2002. PURSUANT TO SECTION 2 OF THE WARRANT AGREEMENT THE NUMBER OF SHARES MAY BE SUBJECT TO REDUCTION FOR WHICH THIS WARRANT MAY BE EXERCISED AS PROVIDED THEREIN. A COPY OF SUCH WARRANT AGREEMENT HAS BEEN FILED IN THE OFFICE OF THE COMPANY LOCATED AT 2 CHRISTIE HEIGHTS STREET, LEONIA, NEW JERSEY 07605, WHERE THE SAME MAY BE INSPECTED DAILY DURING BUSINESS HOURS." 22 After the above requirement for a legend is no longer applicable because the Warrant Shares are freely transferable under the Securities Act, the Company shall remove such legend upon request from a holder of such Warrant Shares, if outside counsel for such holder reasonably determines that the transfer of such Warrant Shares is no longer restricted by the Securities Act and outside counsel for the Company reasonably concurs in such determination. Section 5.7 Stockholders' Approval; Proxy Statement. On or before the date of the Company's next annual meeting of its stockholders, the Company, acting through its Board of Directors, shall, in accordance with Applicable Law use reasonable efforts to, take all such action as is necessary or appropriate to submit to the stockholders of the Company at the Company Stockholders' Meeting a resolution approving the issuance of the Securities and the other Transactions. The Company agrees that it shall use its reasonable best efforts to solicit from its stockholders proxies, and shall take all other action necessary and advisable, to secure the vote of its stockholders required by Applicable Law to obtain the approval of this Agreement and will include in the Proxy Statement supplement described below the recommendation of its Board of Directors that holders of Common Stock approve and adopt the resolutions authorizing the issuance of the Securities and the Transactions. For the avoidance of doubt, it is intended that this provision is intended to satisfy the stockholder vote requirement set forth in NASDAQ Rule 4350(i). Section 5.8 No Default Certificates. So long as any Indebtedness is outstanding under the Debentures, within 45 days of the end of each quarter for the first three quarters and 90 days after year end of each year, the Company shall deliver a certificate of an officer of the Company stating that no default has occurred or is occurring under any of the Financing Documents. Section 5.9 Material Litigation. So long as any Indebtedness is outstanding under the Debentures, the Company shall within thirty (30) days of the filing of the same provide the Purchasers with prompt written notice of, and upon the request of the Purchasers, copies of all pleadings related to, any material lawsuits filed by or against the Company or any of the Subsidiaries. Section 5.10 Default Notice. So long as any Indebtedness is outstanding under the Debentures, the Company will provide the Purchasers written notice of, and upon the request of the Purchaser, copies of any notification received of any defaults on, any material loans or leases to which the Company or any Subsidiary is a party within ten (10) days of the receipt thereof. Section 5.11 Insurance. So long as any Indebtedness is outstanding under the Debentures, the Company will (and will cause its Subsidiaries to) maintain liability, hazard and business interruption insurance in form, amounts, coverages and basis determined by the Board of Directors to be adequate to protect the assets and business of the Company and its Subsidiaries. Section 5.12 Additional Subsidiaries. Upon the Company creating or acquiring any subsidiary after the date hereof (including as a result of the Proposed Acquisition (each such subsidiary referred to herein as an "Additional Subsidiary"), the Company shall cause each such subsidiary to promptly execute and deliver the Guaranty Agreement, all such agreements, guarantees, documents and certificates as the Purchasers may reasonably request and do such other acts and things as the Purchasers may reasonably request in order to have such Additional Subsidiary guarantee the Indebtedness. 23 Section 5.13 US Real Property Interest Statement. The Company shall provide prompt written notice to each Purchaser following any "determination date" (as defined in Treasury Regulation Section 1.897-2(c)(1)) on which the Company becomes a United States real property holding corporation. In addition, upon a written request by any Purchaser, the Company shall provide such Purchaser with a written statement informing the Purchaser whether such Purchaser's interest in the Company constitutes a U.S. real property interest. The Company's determination shall comply with the requirements of Treasury Regulation Section 1.897-2(h)(1) or any successor regulation, and the Company shall provide timely notice to the Internal Revenue Service, in accordance with and to the extent required by Treasury Regulation Section 1.897-2(h)(2) or any successor regulation, that such statement has been made. The Company's written statement to any Purchaser shall be delivered to such Purchaser within ten (10) days of such Purchaser's written request therefor. ARTICLE VI NEGATIVE COVENANTS Section 6.1 Transactions with Related Parties. So long as any Indebtedness remains outstanding under the Debentures, the Company will not, and will cause its Subsidiaries not to, enter into any transaction with any current director, officer or Affiliate of the Company or any of the Subsidiaries, except for (i) Contracts that are determined by a majority of the disinterested members of the Board of Directors to be at arm's length on terms no less favorable to the Company or such Subsidiary as those that could be obtained from any unaffiliated third party; and (ii) the existing loans made by the Company to Zach Lonstein and Robert B. Wallach plus interest accruing thereon. Section 6.2 Dissipation of Assets. (a) So long as any Indebtedness remains outstanding under the Debentures, the Company shall not, and shall cause its Subsidiaries not to, transfer, pledge, or otherwise encumber in any manner (other than granting non-exclusive licenses and sublicenses of software in the ordinary course of business and consistent with past practice) any assets (an "Asset Disposition") unless such assets are obsolete or no longer needed; provided that the Company may make other Asset Dispositions if: (i) the Company receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the fair market value as determined in the good faith judgment of the Board of Directors of the shares and assets subject to such Asset Disposition, (ii) at least 75% of the consideration thereof received by the Company is in the form of cash or Cash Equivalents, and (iii) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company: (A) first, to the extent the Company elects (or is required by the terms of any Indebtedness of the Company), to prepay, repay, redeem or purchase the Indebtedness of the Company pursuant to any senior credit facility or other Senior Indebtedness) or to reinvest in 24 Additional Assets, in each case, within 180 days after the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) second, to the extent of the balance of such Net Available Cash after application in accordance with clause (A), to make an Offer (as defined in Section 6.2(b)) to purchase Debentures pursuant to and subject to the conditions of Section 6.2(b); provided, however, that if the Company elects (or is required by the terms of any other Indebtedness of the Company or any of its Subsidiaries that specifically provides that such Indebtedness is to rank pari passu with the Debentures in rights of payment and which is not by its terms subordinated to any Indebtedness of the Company or any of its Subsidiaries which is not Senior Indebtedness (as such term is defined below) (such other Indebtedness, together with the Debentures, the "Senior Subordinated Indebtedness"), such Offer may be made ratably to purchase the Debentures and such other Senior Subordinated Indebtedness of the Company; and (C) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), for any general corporate purpose permitted by the terms of this Agreement; provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness of the Company pursuant to clause (A) or (B) above, the Company shall retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchase. Notwithstanding the foregoing provisions of this Section 6.2, the Company shall not be required to apply any Net Available Cash in accordance with this Section 6.2 except to the extent that the aggregate Net Available Cash from all Asset Dispositions that is not applied in accordance with this Section 6.2 exceeds $250,000. For the purposes of this Section 6.2, securities received by the Company from the transferee that are promptly converted by the Company into cash shall be deemed to be cash consideration. (b) In the event of an Asset Disposition that requires the purchase of Debentures (and other Senior Subordinated Indebtedness) pursuant to Section 6.2(a)(iii)(B), the Company will be required to purchase Debentures tendered pursuant to an offer by the Company for the Debentures (and other Senior Subordinated Indebtedness) (the "Offer") at a purchase price of 100% of their principal amount plus accrued and unpaid interest thereon, if any, to the date of purchase (subject to the right of holders of record on the relevant date to receive interest due on the relevant interest payment date) in accordance with the procedures (including pro-rating in the event of over subscription), set forth in the Financing Documents. If the aggregate purchase price of Debentures (and other Senior Subordinated Indebtedness) tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the Debentures (and other Senior Subordinated Indebtedness), the Company shall apply the remaining Net Available Cash in accordance with Section 6.2(a)(iii)(C). The Company will not be required to make an Offer for Debentures (and other Senior Subordinated Indebtedness) pursuant to this Section 6.2 if the Net Available Cash available therefor (after application of the proceeds as provided in Section 6.2(a)(iii)(A)) is less than $250,000 for any particular Asset Disposition (which lesser amount shall be carried forward for purposes of determining 25 whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). The Offer shall be in the form of a written notice delivered to the holders of the Debentures (and other Senior Subordinated Indebtedness). Such notice shall state the total amount of Net Available Cash available for distribution pursuant to this Section 6.2 and shall allow the holders of the Debentures (and other Senior Subordinated Indebtedness) twenty (20) Business Days to either accept or reject such Offer, provided, however, that the rejection of any Offer does not act as a waiver to the right to future distributions of Net Available Cash in accordance with this Section 6.2. (c) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Debentures (and other Senior Subordinated Indebtedness) pursuant to this Section 6.2. To the extent that the provisions of any securities laws or regulations conflict with this Section 6.2, the Company shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section by virtue thereof. (d) As used herein "Senior Indebtedness" with respect to the payor of indebtedness or any of its subsidiaries shall mean the principal of, premium (if any) and accrued and unpaid interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization of the Company or any of its Subsidiaries, regardless of whether a claim for post filing interest is incurred in such proceedings) any Permitted Encumbrance (other than the Debentures, including any additional Debentures issued by the Company to the Purchasers as a payment-in-kind interest payment). Section 6.3 No Dividends. So long as any Indebtedness remains outstanding under the Debentures, the Company shall not, and shall cause its Subsidiaries not to: (a) declare or pay any dividend or distribution (whether in cash, stock or property) in respect of its Capital Stock (other than dividends payable with respect to any stock splits and similar recapitalizations that affect all stockholders equally, the payment of dividends to any Subsidiary, or to the Company and dividends paid in kind to preferred stockholders); and (b) repurchase or redeem any of its Capital Stock or the capital stock of any Subsidiary or any equity interest in the Company or any Subsidiary (except pursuant to equity incentive agreements or arrangements with service providers upon termination of their services to the Company or pursuant to agreements entered into to evidence grants or awards or other compensation under any equity incentive plan). Section 6.4 No Subsidiaries. So long as any Indebtedness remains outstanding under the Debentures, the Company will not, and will cause its Subsidiaries not to, establish any subsidiaries unless the subsidiary becomes a co-borrower or guarantor of the Debentures and the Indebtedness of such subsidiary, when incurred, would constitute a Permitted Encumbrance as such term is defined in Section 6.5 below if incurred by the Company. The Company shall not permit any Subsidiary to consolidate or merge into or with or sell or transfer all or substantially all its assets, except (i) that any Subsidiary may merge into or sell or transfer assets to the Company or any other Subsidiary or (ii) in compliance with Section 6.2. The Company shall not sell or otherwise transfer any shares of capital stock of any Subsidiary or permit any Subsidiary 26 to issue, sell or otherwise transfer any shares of its capital stock or the capital stock of any Subsidiary, except, in each case, (i) to the Company or any other Subsidiary or (ii) in compliance with Section 6.2. The Company will cause each Subsidiary to comply with the covenants in Article V and this Article VI and the protective provisions of the Financing Documents as if such covenants and protective provisions applied directly to such Subsidiary. Section 6.5 Additional Indebtedness. So long as any Indebtedness remains outstanding under the Debentures, the Company will not, and will cause its Subsidiaries not to, incur any additional indebtedness or other liabilities for borrowed money, or create or incur any contingent liability or act as guarantor for any such indebtedness or other liabilities for borrowed money other than (i) the Debentures (including any additional Debentures issued by the Company to the Purchasers as a payment-in-kind interest payment); (ii) up to $10 million in asset-based or receivable-based financing, which may, in each case be secured by such assets or receivables; (iii) all leases of equipment used by the Company in conducting its business in the ordinary course; (iv) indebtedness for money borrowed of the Company owed to and held by any subsidiary of the Company or any indebtedness for money borrowed of a subsidiary of the Company owed to and held by the Company; (v) indebtedness for borrowed money that the Company issues, assumes, guarantees, incurs or otherwise becomes liable for to refund, refinance, replace, renew, repay or extend (including pursuant to any defeasance or discharge mechanism) any indebtedness for borrowed money existing as of the Closing Date and disclosed on Schedule 6.5 or incurred in connection with the Financing Documents; (vi) indebtedness for money borrowed in respect of performance bonds, bankers' acceptances, letters of credit and surety or appeal bonds provided by the Company in the ordinary course of business; and (vii) obligations owed pursuant to operating leases entered into in the ordinary course of business (collectively, the "Permitted Encumbrances"). Section 6.6 Nature of Business. So long as any Indebtedness remains outstanding under the Debentures, the Company shall not, and shall cause its Subsidiaries to not, change the nature of its business operations or its form of entity in a manner that imposes unlimited liability on the equity holders of the Company. Section 6.7 No Encumbrances. So long as any Indebtedness remains outstanding under the Debentures, the Company shall not and shall cause its Subsidiaries to not, permit to exist against any of its material assets any encumbrances, except for liens securing Permitted Encumbrances. Section 6.8 Issuance of Warrants. So long as the Common Stock of the Company is listed for trading on the NASDAQ or the Nasdaq SmallCap Market and the Company has not obtained the Required Stockholder Approval (as defined below), then the Company may not issue warrants exercisable for more than 1,066,705 shares of Common Stock (which equals 19.999% of the number of shares of Common Stock outstanding on the trading day immediately preceding the date hereof (the "Issuable Maximum")) . In the event that the Company issues warrants exercisable into shares of Common Stock in excess of the Issuable Maximum, the Company shall use its reasonable best efforts to obtain the Required Stockholder Approval thereafter. "Required Stockholder Approval" shall mean the vote of the Company's stockholders as required by the rules and regulations of NASDAQ (or any successor entity) applicable to approve the issuance of warrants exercisable into shares of Common Stock in excess of the Issuable Maximum. 27 ARTICLE VII CONDITIONS PRECEDENT TO CLOSING Section 7.1 Conditions to the Company's Obligations. The obligations of the Company with respect to each Purchaser required to be performed on the Closing Date shall be subject to the satisfaction or waiver in writing, at or prior to the Closing, of the following conditions: (a) The representations and warranties of such Purchaser contained in this Agreement which are qualified by any "materiality", "material adverse effect" or any similar qualifier shall be true and correct in all respects and the representations and warranties of such Purchaser which are not so qualified shall be true and correct in all material respects, in each case on and as of the Closing Date except for representations and warranties made as of a specific date which shall be true and correct, or true and correct in all material respects, as the case may be, as of such date. (b) Such Purchaser shall have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants contained in this Agreement to be performed and complied with by such Purchaser at or prior to the Closing Date. (c) No provision of any Applicable Law shall be in effect which has the effect of making the Transactions illegal or shall otherwise restrain or prohibit the consummation of the Transactions. (d) The Purchasers shall have executed and delivered the Registration Rights Agreement. (e) The Purchasers shall have executed and delivered the Stockholders Agreement. (f) The Company shall have received the purchase price payable in respect of each Debenture purchased by such Purchaser. (g) The Purchasers shall have executed and delivered the Escrow Agreement. Section 7.2 Conditions to Purchaser's Obligations. The obligations of each Purchaser required to be performed on the Closing Date shall be subject to the satisfaction or waiver in writing, at or prior to the Closing, of the following conditions: (a) The representations and warranties of the Company contained in this Agreement which are qualified by any "materiality", "material adverse effect" or any similar qualifier shall be true and correct in all respects and the representations and warranties of the Company which are not so qualified shall be true and correct in all material respects, in each case on and as of the Closing Date except for representations and warranties made as of a specific date which shall be true and correct, or true and correct in all material respects, as the case may be, as of such date. (b) The Company shall have performed in all material respects all of its obligations, agreements and covenants contained in this Agreement to be performed and complied with at or prior to the Closing Date. 28 (c) No provision of any Applicable Law shall be in effect which has the effect of making the Transactions illegal or shall otherwise restrain or prohibit the consummation of the Transactions. (d) The Company shall have delivered to Purchaser a certificate executed by it or on its behalf by duly authorized representative, dated the Closing Date, to the effect that each of the conditions specified in paragraph (a), (b), (c), (f), (j), and (k) of this Section 7.2 has been satisfied. (e) The Company, DB Capital Partners, Sandler Capital Partners and Zach Lonstein shall have executed and delivered the Registration Rights Agreement. (f) The Company shall have executed and delivered the Warrant Agreement and the Initial Warrants shall have been delivered to the Escrow Agent pursuant to the terms of the Escrow Agreement. (g) The Company, DB Capital Partners, Sandler Capital Partners and the Management Stockholders shall have executed and delivered the Stockholders' Agreement. (h) Each Subsidiary shall have executed and delivered a Guaranty Agreement. (i) Purchasers shall have received an opinion of counsel to the Company, dated the Closing Date, and addressed to Purchasers, in form and substance reasonably acceptable to Purchasers. (j) The Company shall have executed and delivered the Debentures and the Debentures shall have been delivered to the Escrow Agent pursuant to the terms of the Escrow Agreement. (k) there shall not have occurred any event, circumstance, condition, fact, effect or other matter which has had or would reasonably be expected to have a material adverse effect (x) on the business, operations, results of operations or financial conditions of the Company or (y) on the ability of the Company to perform on a timely basis any material obligation under this Agreement or to consummate the Transactions contemplated hereby. (l) a certificate of the secretary of the Company setting forth (A) a copy of the Certificate of Incorporation of the Company and all amendments thereto as in effect on the date hereof and on the Closing Date all certified by the Secretary of State of the State of Delaware, (B) a copy of the by-laws of the Company, as in effect on the date hereof and on the Closing Date, (C) copies of all resolutions of the Company authorizing the Transactions; and (D) an incumbency certificate setting forth the name, title and authorized signature of each officer of the Company who will execute documents in connection with the transaction contemplated hereby. (m) The Company shall have executed and delivered the Management Rights Letter. (n) The Company shall have executed and delivered the Escrow Agreement. 29 ARTICLE VIII MISCELLANEOUS Section 8.1 Survival; Indemnification. (a) All representations, warranties and covenants contained in this Agreement or in any certificate delivered in connection with the Closing shall survive the Closing for 12 months (except (i) covenants that are required to be performed after the Closing Date and the representations contained in Sections 3.1, 3.2, 3.3 and 3.4, which shall survive indefinitely and (ii) representations and warranties contained in Section 3.13 (Taxes), which shall survive for the applicable statute of limitation, including extensions thereof). Notwithstanding the foregoing, with respect to claims asserted pursuant to this Section 8.1 before the expiration of the applicable representation or warranty, such claims shall survive until the date they are finally adjudicated or otherwise resolved. The Covenants in Articles V and VI shall terminate upon repayment in full of all Indebtedness. (b) (i) The Company agrees to indemnify and hold harmless Purchaser, each Purchaser Affiliate and each of their respective representatives, heirs, successors and assigns (each an "indemnified person") on an after-tax basis, from and against (and to reimburse each indemnified person as the same are incurred) any and all losses claims, damages, liabilities, costs and expenses (collectively, "Losses") to which any indemnified person may become subject or which any indemnified person may incur based upon, arising out of, or in connection with (i) a breach of any representation or warranty of this Agreement by the Company, or (ii) any breach of any covenant or agreement contained herein or in the Financing Documents by the Company, or (iii) any claim, litigation, investigation or proceeding brought by or on behalf of any Person other than the Company relating to the Transactions, and to reimburse each indemnified person upon demand for any reasonable legal or other reasonable out of pocket expenses incurred in connection with investigating or defending any of the foregoing, provided (A) the Company shall have no obligation to indemnify any indemnified person for any Loss resulting from any breach of any representation or warranty hereunder (other than representations and warranties contained in Sections 3.1, 3.2, 3.3, 3.4, or 3.13 which shall be indemnified from the first dollar of Loss) unless and until the aggregate amount of all such Losses exceeds $150,000 (and then only to the extent of such excess) and (B) the maximum amount indemnifiable to indemnified persons for breaches of the representations or warranties contained in this Agreement shall not exceed $10,000,000. (ii) Each Purchaser severally, and not jointly, agrees to indemnify and hold harmless the Company, each Company Affiliate and each of their respective representatives, heirs, successors and assigns (each an "indemnified person") on an after-tax basis, from and against (and to reimburse each indemnified person as the same are incurred) any Losses to which any indemnified person may become subject or which any indemnified person may incur based upon, arising out of, or in connection with a breach of any representation or warranty of this Agreement by such Purchaser and to reimburse each indemnified person upon demand for any reasonable legal or other reasonable out of pocket expenses incurred in connection with investigating or defending any of the foregoing, provided (A) Purchaser shall have no obligation to indemnify any indemnified person for any Loss resulting from any breach of any representation or warranty hereunder (other than representations and warranties contained in Sections 4.1 or 4.3 which shall be indemnified from the first dollar of Loss) unless and until the aggregate amount of all such Losses exceeds $150,000 (and then only to the 30 extent of such excess) and (B) the maximum amount indemnifiable to indemnified persons for breaches of the representations or warranties contained in this Agreement shall not exceed the aggregate amount of the purchase price set forth opposite such Purchaser's name on Schedule A attached hereto. (c) If a Person entitled to indemnity hereunder (an "Indemnified Party") asserts that another party hereto (the "Indemnifying Party") has become obligated to the Indemnified Party pursuant to Section 8.1(b), or if any suit, action, investigation, claim or proceeding is begun, made or instituted as a result of which the Indemnifying Party may become obligated to the Indemnified Party hereunder, the Indemnified Party shall notify the Indemnifying Party promptly and shall cooperate with the Indemnifying Party, at the Indemnifying Party's expense, to the extent reasonably necessary for the resolution of such claim or in the defense of such suit, action or proceedings, including making available any information, documents and things in the possession of the Indemnified Party. Notwithstanding the foregoing notice requirement, the right to indemnification hereunder shall not be affected by any failure to give, or delay in giving, notice unless, and only to the extent that, the rights and remedies of the Indemnifying Party shall have been actually and materially prejudiced as a result of such failure or delay. (d) In fulfilling its obligations under this Section 8.1, the Indemnifying Party shall have the right to investigate, defend, settle or otherwise handle, with the aforesaid cooperation, any claim, suit, action or proceeding brought by a third party in such manner as the Indemnifying Party may in its sole discretion reasonably deem appropriate; provided, that (i) counsel retained by the Indemnifying Party is reasonably satisfactory to the Indemnified Party and (ii) the Indemnifying Party will not consent to any settlement or entry of judgment imposing any obligations on any other party hereto other than financial obligations for which such party will be indemnified hereunder, unless such party has consented in writing to such settlement or judgment (which consent may be given or withheld in its sole discretion) and (iii) the Indemnifying Party will not consent to any settlement or entry of judgment unless, in connection therewith, the Indemnifying Party obtains a full and unconditional release of the Indemnified Party from all liability with respect to such suit, action, investigation claim or proceeding. Notwithstanding the Indemnifying Party's election to assume the defense or investigation of such claim, action or proceeding, the Indemnified Party shall have the right to employ separate counsel and to participate in the defense or investigation of such claim, action or proceeding, which participation shall be at the expense of the Indemnifying Party, if (i) on the advice of counsel to the Indemnified Party use of counsel of the Indemnifying Party's choice could be expected to give rise to a material conflict of interest, (ii) the Indemnifying Party shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of the assertion of any such claim or institution of any such action or proceeding, or (iii) if the Indemnifying Party shall authorize the Indemnified Party to employ separate counsel at the Indemnifying Party's expense. (e) The Company and the Purchasers agree that any payment of Losses made hereunder will be treated by the parties on their tax returns as an adjustment to the Purchase Price. If, notwithstanding such treatment by the parties, a final determination with respect to the Indemnified Party or any of its affiliates causes any such payment not to be treated as an adjustment to Purchase Price, then the Indemnifying Party shall indemnify the Indemnified Party for any taxes payable by the Indemnified Party or any subsidiary by reason of the receipt of such payment (including any payments under this 8.1(e)), determined at an assumed marginal tax rate equal to the highest marginal tax rate then in effect for corporate taxpayers in the relevant jurisdiction. 31 (f) The obligations of the Indemnifying Party under this Section 8.1 shall survive the transfer, redemption or conversion of the Securities, the Warrant Shares and the Common Stock issued upon the conversion or exercise thereof, or the closing or termination of any Financing Document. The agreements contained in this Section 8.1 shall be in addition to any other rights of the Indemnified Party against the Indemnifying Party or others. (g) All obligations of the Purchasers hereunder shall be several and not joint. Section 8.2 Termination. Any time from the date of this Agreement and before (i) the Cash Consideration (as defined in the Escrow Agreement) is delivered to the Company; and (ii) the Debentures and Initial Warrants are delivered to the Purchasers, both in accordance with the terms of the Escrow Agreement, this Agreement, and all of the Financing Documents shall automatically terminate upon either: (a) The return of the Cash Consideration to the Purchasers and the Debentures and Initial Warrants to the Company as provided in the Escrow Agreement; or (b) The occurrence of an Event of Default, as defined in the Debenture. Section 8.3 Notices. All notices, demands, requests, consents, approvals or other communications (collectively, "Notices") required or permitted to be given hereunder or which are given with respect to this Agreement shall be in writing and shall be personally served, delivered by reputable air courier service with charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile, addressed as set forth below, or to such other address as such party shall have specified most recently by written notice. Notice shall be deemed given on the date of service or transmission if personally served or transmitted by telegram, telex or facsimile. Notice otherwise sent as provided herein shall be deemed given on the next Business Day following delivery of such notice to a reputable air courier service. Notices shall be delivered as follows: If to the Company: Infocrossing, Inc. 2 Christie Heights Street Leonia, New Jersey 07605 Attn: Zach Lonstein Chief Executive Officer Telephone: (201) 840-8717 Fax: (201) 840-7126 with a copy to: White & Case LLP 1155 Avenue of the Americas New York, New York 10036 Attn: S. Ward Atterbury, Esq. Telephone: (212) 819-8331 Fax: (212) 354-8113 if to any Purchaser, to such Purchaser at its address as set forth on Schedule A: 32 with a copy to: Wilmer, Cutler & Pickering 100 Light Street Baltimore, Maryland 21202 Attn: Jay Watkins, Esq. Telephone: (410) 986-2800 Fax: (410) 986-2828 Section 8.4 Governing Law. This Agreement shall be governed by, interpreted under, and construed in accordance with the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. Section 8.5 Entire Agreement. As between the Company and Purchaser this Agreement and the Financing Documents (including all agreements entered into pursuant hereto and thereto and all certificates and instruments delivered pursuant hereto and thereto) constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior and contemporaneous agreements, representations, understandings, negotiations and discussions between the parties, whether oral or written, with respect to the subject matter hereof. Section 8.6 Modifications and Amendments. No amendment, modification or termination of this Agreement as between the Company and Purchaser shall be binding unless executed in writing by the Company and Purchaser intending to be bound thereby. Section 8.7 Waivers and Extensions. Any party to this Agreement may waive any condition, right, breach or default that such party has the right to waive, provided that such waiver will not be effective against the waiving party unless it is in writing, is signed by such party, and specifically refers to this Agreement. Waivers may be made in advance or after the right waived has arisen or the breach or default waived has occurred. Any waiver may be conditional. No waiver of any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof nor of any other agreement or provision herein contained. No waiver or extension of time for performance of any obligations or acts shall be deemed a waiver or extension of the time for performance of any other obligations or acts. Section 8.8 Titles and Headings. Titles and headings of sections of this Agreement are for convenience only and shall not affect the construction of any provision of this Agreement. Section 8.9 Exhibits and Schedules. Each of the exhibits and schedules referred to herein and attached hereto is an integral part of this Agreement and is incorporated herein by reference. Section 8.10 Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense; provided, however, that (a) the Company shall reimburse the Purchasers at Closing for all expenses of Purchasers (including the expenses of Wilmer, Cutler & Pickering, counsel to the Purchasers, and such other consultants and advisors) incurred in connection with the Transactions; provided, that the Company shall not be required to reimburse the Purchasers for more than $60,000 in expenses. 33 Section 8.11 Press Releases and Public Announcements. All public announcements or disclosures relating to the Transactions or this Agreement shall be made only if mutually agreed upon by the Company and Purchasers, except to the extent such disclosure is required by Applicable Law, provided that (a) any such required disclosure shall only be made, to the extent consistent with Applicable Law and (b) the Company shall promptly notify each Purchaser if such disclosure or announcement identifies such Purchaser or an Affiliate of the Purchasers. Section 8.12 Assignment; No Third Party Beneficiaries. This Agreement and the rights, duties and obligations hereunder may not be assigned or delegated by the Company without the prior written consent of the Purchasers which shall not be unreasonably withheld, and may not assigned or delegated by the Purchasers without the Company's prior written consent which shall not be unreasonably withheld except that a Purchaser may assign any or all of its rights and obligations under this Agreement to any one or more of its Affiliates. Any assignment or delegation of rights, duties or obligations hereunder made by the Company without the prior written consent of Purchaser, shall be void and of no effect. This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and their respective successors and permitted assigns. This Agreement is not intended to confer any rights or benefits on any Persons other than the parties hereto, except as expressly set forth in Section 5.2, Section 8.1, this Section 8.12 or Section 8.18. Section 8.13 Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable. Section 8.14 Counterparts; Fax Signatures. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Any signature page delivered by a fax machine or telecopy machine shall be binding to the same extent as an original signature page, with regard to any agreement subject to the terms hereof or any amendment thereto. Any party who delivers such a signature page agrees to later deliver an original counterpart to any party which requests it. Section 8.15 Further Assurances. As between the Company and Purchaser, each party hereto, upon the request of any other party hereto, shall do all such further acts and execute, acknowledge and deliver all such further instruments and documents as may be necessary or desirable to carry out the transactions contemplated by this Agreement, including, in the case of the Company, such acts, instruments and documents as may be necessary or desirable to convey and transfer to each Purchaser the Debentures to be purchased by it hereunder. Section 8.16 Remedies Cumulative. The remedies provided herein shall be cumulative and shall not preclude the assertion by any party hereto of any other rights or the seeking of any remedies against the other party hereto. Section 8.17 Specific Performance. The parties hereto agree that the remedy at law for any breach of this Agreement may be inadequate, and that as between the Company and Purchaser any party by whom this Agreement is enforceable shall 34 be entitled to specific performance in addition to any other appropriate relief or remedy. Such party may, in its sole discretion, apply to a court of competent jurisdiction for specific performance or injunctive or such other relief as such court may deem just and proper in order to enforce this Agreement as between the Company and Purchaser, or prevent any violation hereof, and, to the extent permitted by applicable law, as between the Company and Purchaser, each party waives any objection to the imposition of such relief. Section 8.18 No Purchaser Affiliate Liability. No Purchaser Affiliate shall have any liability or obligation of any nature whatsoever in connection with or under this Agreement or the transactions contemplated hereby, and the Company hereby waives and releases all claims of any such liability and obligation, it being understood that no such Person or entity (other than Purchaser) shall be liable for or in respect of this Agreement with the transactions contemplated hereby. Section 8.19 Tax Matters. (a) The Company and the Purchasers hereby acknowledge and agree that the Debenture and Warrant issued to each Purchaser constitute an investment unit within the meaning of section 1273(c)(2) of the Code. The Company and the Purchasers hereby further acknowledge and agree that, for purposes of allocating the issue price of the investment unit between the Debentures and the Warrants pursuant to section 1.1273-2(h) of the Treasury Regulations, the Company shall engage an independent third party reasonably acceptable to the Purchasers to determine the fair market value of the Warrants issued at Closing. Such determination shall be made within seventy-five (75) days of Closing. The Company and the Purchasers agree that they will report consistently with such determination for all income tax purposes with respect to the Warrant and Debentures. (b) The Company and the Purchasers hereby acknowledge that the amount and timing of certain payments on the Debentures may be affected by contingencies, and that if such payments were to qualify as "contingent payments" for federal income tax purposes, the Debentures would be treated as contingent payment debt instruments subject to section 1.1275-4 of the Treasury Regulations. The Company has determined that all such contingencies are remote and/or incidental within the meaning of section 1.1275-2(h) of the Treasury Regulations and, pursuant to section 1.1275-4(b)(5) of the Treasury Regulations, the Debentures do not constitute contingent payment debt instruments subject to section 1.1275-4 of the Treasury Regulations. The Company shall report consistently with the preceding sentence for all income tax purposes. The Company shall not take any position that a change in circumstances has occurred within the meaning of section 1.1275-2(h)(6)(i) of the Treasury Regulations or with respect to any deemed retirement and reissuance of the Debentures pursuant to section 1.1275-2(h)(6)(ii) of the Treasury Regulations without consent of the Purchasers, such consent not to be unreasonably withheld, conditioned or delayed. [SIGNATURE PAGES FOLLOW] IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. INFOCROSSING, INC. By: ------------------------------------- Name: Zach Lonstein Title: Chief Executive Officer CAMDEN PARTNERS STRATEGIC FUND II-A, L.P. By: Camden Partners Strategic II, LLC, its General Partner By: ------------------------------------------ Name: David L. Warnock Title: Managing Member Address: Camden Partners One South Street, Suite 2150 Baltimore, MD 21201 Fax No.: (410) 895-3805 Attention: David Warnock CAMDEN PARTNERS STRATEGIC FUND II-B, L.P. By: Camden Partners Strategic II, LLC, its General Partner By: ------------------------------------------ Name: David L. Warnock Title: Managing Member Address: Camden Partners One South Street, Suite 2150 Baltimore, MD 21201 Fax No.: (410) 895-3805 Attention: David Warnock CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: Cahill, Warnock Strategic Partners, L.P., its General Partner By: ------------------------------------------ Name: David L. Warnock Title: General Partner Address: Camden Partners One South Street, Suite 2150 Baltimore, MD 21201 Fax No.: (410) 895-3805 Attention: David Warnock STRATEGIC ASSOCIATES, L.P. By: Cahill, Warnock Strategic Partners, L.P., its General Partner By: ------------------------------------------ Name: David L. Warnock Title: General Partner Address: Camden Partners One South Street, Suite 2150 Baltimore, MD 21201 Fax No.: (410) 895-3805 Attention: David Warnock Schedule A PURCHASERS Purchaser Committed Investment Amounts Camden Partners Strategic Fund II-A, L.P. $ 5,192,000.00 One South Street, Suite 2150 Baltimore, Maryland 21202 Attn: Mr. David L. Warnock Camden Partners Strategic Fund II-B, L.P. $ 308,000.00 One South Street, Suite 2150 Baltimore, Maryland 21202 Attn: Mr. David L. Warnock Cahill, Warnock Strategic Partners Fund, L.P. $ 4,410,000.00 One South Street, Suite 2150 Baltimore, Maryland 21202 Attn: Mr. David L. Warnock Strategic Associates, L.P. $ 90,000.00 One South Street, Suite 2150 Baltimore, Maryland 21202 Attn: Mr. David L. Warnock TOTAL: $10,000,000.00 EX-4.2 5 a855422_ex4-2.txt DEBENTURE THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THIS DEBENTURE MAY NOT BE SOLD OR OTHERWISE TRANSFERRED OR PLEDGED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS, OR IF THE PROPOSED TRANSFER MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR REGISTRATION OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. THIS DEBENTURE IS SUBJECT TO THE TERMS AND PROVISIONS OF THE SECURITIES PURCHASE AGREEMENT AMONG INFOCROSSING, INC., AND CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., STRATEGIC ASSOCIATES, L.P., CAMDEN PARTNERS STRATEGIC FUND II-A, L.P., AND CAMDEN PARTNERS STRATEGIC FUND II-B, L.P., DATED AS OF FEBRUARY 1, 2002, AS AMENDED FROM TIME TO TIME, AND THE HOLDERS OF THIS DEBENTURE ARE ENTITLED TO THE BENEFITS THEREOF. INFOCROSSING, INC. 12% SENIOR SUBORDINATED DEBENTURE $____________ February 1, 2002 SECTION 1. GENERAL; INTEREST. 1.1 General. For value received, INFOCROSSING, INC., a Delaware corporation (the "Company") (the Company, including any successors of the Company (by way of merger, consolidation, sale or otherwise), the "Payor"), hereby promises to pay to the order of Cahill, Warnock Strategic Partners Fund, L.P. or such payee's successors or assigns (the "Payee"), $____________ or such lesser principal amount, plus any accrued and unpaid interest thereon and all other obligations arising hereunder (the "Indebtedness"), which may be outstanding hereunder on February 1, 2005 (the "Maturity Date"), provided, however, that the Maturity Date may be extended until February 1, 2006 at the sole option of the Payor upon written notice to the Payee delivered at least 60 days before the Maturity Date as in effect prior to giving effect to such extension or such earlier date as all obligations under the Debenture have been paid in full provided, further, that the Payor may not extend the Maturity Date if a Default has occurred. This Debenture is one of the Debentures (each a "Debenture" and collectively, the "Debentures") issued pursuant to that certain Securities Purchase Agreement, dated as of February 1, 2002 (the "Purchase Agreement"), by and between the Payor, Cahill Warnock Strategic Partners Fund, L.P., a Delaware limited partnership ("CW"), Strategic Associates, L.P., a Delaware limited partnership ("SA"), Camden Partners Strategic Fund II-A, L.P., a Delaware limited partnership ("Camden II-A"), and Camden Partners Strategic Fund II-B, L.P., a Delaware limited partnership ("Camden II-B" and together with CW, SA and Camden II-A, each a "Payee" and collectively, the "Payees"). The unpaid principal amount of this Debenture and the accrued and unpaid interest thereon, shall be payable in U.S. Dollars by wire transfer of immediately available funds to the account of the Payee or by certified or official bank check payable to the Payee mailed to the Payee at the address of the Payee as set forth on the records of the Payor or such other address as shall be designated in writing by the Payee to the Payor. Capitalized terms used and not otherwise defined herein have the meanings ascribed thereto in the Purchase Agreement. 1.2 Guaranty. This Debenture is unconditionally guaranteed by the Subsidiaries of the Payor (the "Guarantors"), pursuant to a Guaranty (each, a "Guaranty") executed and delivered on the date hereof by each Subsidiary of the Payor, to which reference is made for a statement of the nature and extent of the benefits and security for this Debenture afforded thereby and the rights of the holder of this Debenture and the Guarantor in respect hereof. 1.3 Interest. The Payor promises to pay interest on the outstanding principal amount of this Debenture at the rate of (i) 12% per annum for the period commencing on the date hereof (the "Closing Date") and ending on February 1, 2004, (ii) 13% per annum for the period commencing on February 1, 2004 and ending on the Maturity Date or such earlier date as all obligations under this Debenture have been paid in full, and (iii), if the Maturity Date is extended, 14% per annum commencing on February 1, 2005 and ending on the Maturity Date as so extended or such earlier date as all obligations under the Debenture have been paid in full (the "Interest Rate"); provided, however, that upon the occurrence of an Event of Default, the Payor promises to pay interest on the outstanding principal amount of this Debenture at the rate of seventeen percent (17%) per annum (or, if less, to the maximum rate allowed under applicable law) ("Default Interest") from the date that such Event of Default has occurred and is continuing until the date such Event of Default is cured, waived in writing by the Payee or all Indebtedness under this Debenture has been paid in full. The Payor shall pay interest (the "Interest Amount") semi-annually in arrears on each July 31 and January 31 of each year or, if any such date shall not be a Business Day, on the next succeeding Business Day to occur after such date (each date upon which interest shall be so payable, an "Interest Payment Date"). Interest shall be payable, at the option of the Payor, in (i) cash in U.S. Dollars by wire transfer to Payee of immediately available funds equal to such Interest Amount, (ii) additional Debentures in an aggregate principal amount equal to the aggregate Interest Amount due to the Payee on such Interest Payment Date ("PIK Debentures") with Additional Warrants (as such term is defined in Section 2 below), or (iii) a combination of cash and PIK Debentures with Additional Warrants. The Payor shall signify its election to make payment of an Interest Amount in the form of cash or PIK Debentures with Additional Warrants, or a combination of cash and PIK Debentures with Additional Warrants, by notifying the Payee of such election at least twenty (20) days prior to each Interest Payment Date. If the Payor fails to give notice under the preceding sentence, the payment shall be made in cash. Interest on this Debenture shall accrue daily, and compound semi-annually, from the date of issuance until the date of repayment in full of the principal amount of this Debenture, plus any accrued and unpaid interest thereon. Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed. Subject to Applicable Law, any interest that shall accrue on Default Interest on this Debenture and shall not have been paid in full on or before the next Interest Payment Date to occur after the Interest Payment Date on which the Default Interest became due and payable shall itself be deemed to be overdue interest on this Debenture. PIK Debentures shall contain terms and conditions (including rate of interest) substantially similar (except for the date of issuance and aggregate principal amount thereof) as those in this Debenture. "Business Day" shall mean any other day -2- other than a Saturday, a Sunday or a day on which banking institutions in New York City, New York are not required to be open. SECTION 2. WARRANT. As part of the consideration for the loan evidenced by this Debenture, the Payor has authorized and issued, initially, warrants to purchase (the "Initial Warrants") 2 million shares of the Common Stock, par value $.01 per share, of the Payor (the "Common Stock") to the Payee. The Initial Warrants shall be exercisable in accordance with the terms and conditions of that certain Warrant Agreement, of even date herewith, between the Payor and the Payees (the "Warrant Agreement"). If the Payor elects to pay any of the Interest Amount in PIK Debentures, the Payor will issue additional warrants (the "Additional Warrants") as more fully set forth in the Warrant Agreement. Notwithstanding anything to the contrary set forth herein no Additional Warrants shall be issued with respect to any PIK Debentures issued prior to February 1, 2004; provided that, to the extent that any Debentures remain outstanding on such date, the Payor shall issue Additional Warrants to purchase one (1) share of Common Stock for each $10.00 aggregate principal amount of PIK Debentures actually issued on, or prior to, February 1, 2004, and, thereafter, shall issue Additional Warrants in respect of all PIK Debentures in accordance with the terms thereof. The Initial Warrants and this Debenture are not attached and may be separately assigned. Any PIK Debentures and Additional Warrants to be issued also shall not be attached and may be separately assigned. SECTION 3. PREPAYMENT. 3.1 Prepayment at the Option of the Payor. (a) Prepayment in Full. The principal amount of this Debenture, together with the accrued and unpaid interest thereon, may be prepaid in whole, without premium, at the option of the Payor at any time. (b) Partial Prepayment. At the Payor's option, the Payor may make one (and only one) partial prepayment of at least 50% of the principal amount of this Debenture, without premium, together with the accrued and unpaid interest thereon, at any time. 3.2 Mandatory Prepayment. Unless agreed to in writing by the Payee, the Payor shall be required to prepay all Indebtedness: (i) upon a Change of Control. The Payor shall provide the Payee with written notice ten (10) business days prior to a Change of Control. For purposes of this Section 3.2 only, "Change of Control" means any event or series of events that results in (A) any Person or entity (an "Acquiring Person") other than (x) one or more members of the Control Group, and (y) the Payees and their Affiliates, obtaining at least 35% of the Payor's Common Stock (calculated on a fully-diluted basis), provided, that the acquisition by an Acquiring Person of more than 35% of the Payor's Common Stock shall not be a Change of Control so long as the Control Group and the Payees jointly hold more of the Payor's Common Stock (calculated on a fully-diluted basis) than the Acquiring Person; (B) the merger, consolidation, reorganization, recapitalization, dissolution or liquidation of the Payor as a result of which the stockholders of the Payor immediately prior to -3- giving effect to such transaction do not own more than 50% or more of the securities of the Payor ordinarily entitled to vote for the election of Directors, immediately after giving effect to such transactions; (C) any sale, lease, exchange or other transfer of all, or substantially all, of the assets of the Payor and its Subsidiaries taken as a whole; or (D) the adoption of a plan leading to the liquidation or dissolution of the Payor. "Person" means any individual, partnership, corporation, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or agency or political subdivision thereof, or other entity. "Control Group" shall include Zach Lonstein, DB Capital Investors, L.P., Sandler Capital Partners V, L.P., Sandler Internet Partners, L.P. and Sandler Co-Investment Partners, L.P. and their Affiliates; and (ii) pursuant to Section 4 hereof. SECTION 4. EVENTS OF DEFAULT. 4.1 Definition. In each case of the happening of the following events (each of which is an "Event of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, a "Default"), (a) (i) if a default occurs in the due observance or performance of any covenant or agreement of the Payor to be observed or performed pursuant to Section 6.1, Section 6.2, Section 6.4, Section 6.6, or Section 6.7 of the Purchase Agreement and such default shall continue for more than fifteen (15) days after notice thereof from Payee; or (ii) if any default occurs in the due observance or performance of any covenant or agreement of the Payor to be observed or performed pursuant to Section 5.7, Section 6.3 or Section 6.5 of the Purchase Agreement; (b) if a default occurs in the due observance or performance of any covenant or agreement of the Payor to be observed or performed pursuant to the terms of this Debenture or any of the Financing Documents (other than those set forth in Section 4.1(a) above) and such default shall continue for more than forty-five (45) days after notice thereof from the Payee; (c) if a default occurs in the payment of any principal or interest under this Debenture and such default shall continue for more than ten (10) business days from the date such payment is due; (d) if any representation or warranty of the Payor in this Debenture, the Purchase Agreement or that certain Escrow Agreement of even date herewith, by and among the Payor, the Payee and the Escrow Agreement named therein shall prove to have been false in any material respects upon the Closing Date or if such representation or warranty is made as of a specific date, as of such date; (e) if any representation or warranty of any Subsidiary of the Payor in any Guaranty shall prove to have been false in any material respects upon the Closing Date; (f) the lenders under any senior credit facility accelerate the payment of principal or interest under such senior credit facility; -4- (g) if the Payor shall (1) discontinue its business, (2) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or any of its property, (3) admit in writing its inability to pay its debts as they mature, (4) make a general assignment for the benefit of creditors, or (5) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors, or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation laws, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law; (h) there shall be filed against the Payor an involuntary petition seeking reorganization of the Payor or the appointment of a receiver, trustee, custodian or liquidator of the Payor or a substantial part of its assets, or an involuntary petition under any bankruptcy, reorganization or insolvency law of any jurisdiction, whether now or hereafter in effect; (i) if final judgment(s) for the payment of money in excess of an aggregate amount of $750,000 shall be rendered against the Payor and shall remain undischarged for a period of 30 consecutive days during which such judgment and any levy or execution thereof shall not have been effectively stayed or vacated; and (j) any violation of ERISA that could reasonably be expected to result in liability to the Payor in excess of $250,000. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and all regulations and rules issued thereunder, or any successor law. then, upon the occurrence of each and every such Event of Default (other than an Event of Default specified in Sections 4.1(f) or (g)) and at any time thereafter during the continuance of such Event of Default, the holders of at least a majority in the aggregate principal amount of the outstanding Debentures (including, without limitation, PIK Debentures) may, by written notice to the Payor declare the principal and accrued and unpaid interest on all Debentures to be immediately due and payable. If an Event of Default specified in Sections 4.1(f) or (g) occurs, the principal and accrued and unpaid interest on this Debenture and all other Debentures (including, without limitation PIK Debentures), shall ipso facto become due and payable without any declaration or other act on the part of the holders thereof. The holders of at least a majority in aggregate principal amount of the outstanding Debentures (including, without limitation, PIK Debentures) may, by notice to the Company rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Event of Default or impair any right consequent thereto. ("Financing Documents" means the Purchase Agreement, the Registration Rights Agreement, the Warrant Agreement, the Stockholders' Agreement, the Escrow Agreement, the Management Rights Agreement, the Guaranty Agreement, and each document, certificate or instrument delivered in connection). 4.2 Failure to Obtain Stockholder Consent. In addition to any other remedy available to the Payee hereunder (including acceleration of this Debenture), if the Company does not obtain the Required Stockholder Approval (as defined in the Purchase Agreement) before the -5- earlier to occur of (i) the occurrence of an Event of Default or (ii) the date of the Company's next annual meeting of its stockholders, the Payor promises to pay a cash payment equal to seventeen percent (17%) of the Initial Amount per annum from such date until the occurrence of the Required Stockholder Approval. 4.3 Remedies on Default, Etc. In case any one or more Events of Default shall occur and be continuing and acceleration of this Debenture shall have occurred, the Payee may, among other things, proceed to protect and enforce its rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in the Purchase Agreement, or for an injunction against a violation of any of the terms hereof or thereof or in and of the exercise of any power granted hereby or thereby or by law. No right conferred upon the Payee hereby or by the Purchase Agreement shall be exclusive of any other right referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. 4.4 Waiver of Past Defaults. The holders of a majority in the aggregate principal amount of the outstanding Debentures (including, without limitation, PIK Debentures) may waive an existing Event of Default and its consequences. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. 4.5 Control by Majority. The holders of a majority in the aggregate principal amount of the outstanding Debentures (including, without limitation, PIK Debentures) may direct the time, method and place of conducting any proceeding for any remedy available to the holders of such Debenture. SECTION 5. SUBORDINATION. 5.1 Agreement to Subordinate. The Payor agrees, and each holder of Debentures by accepting a Debenture agrees, that the Indebtedness evidenced by the Debentures is subordinated in right of payment, to the extent and in the manner provided in this Section 5, to the prior payment in full of all Senior Indebtedness of the Payor and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Debentures shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Payor and only indebtedness of the Payor that is Senior Indebtedness of the Company shall rank senior to the Debentures in accordance with the provisions set forth herein. 5.2 Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of t he assets of the Payor to creditors upon a total or partial liquidation or a total or partial dissolution of the Payor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Payor or its property: (a) holders of Senior Indebtedness of the Payor shall be entitled to receive payment in full of such Senior Indebtedness before holders of Debentures shall be entitled to receive any payment of principal or interest on the Debentures; and (b) until the Senior Indebtedness of the Payor is paid in full, any payment or distribution to which holders of Debentures would be entitled but for this Section 5 shall -6- be made to holders of such Senior Indebtedness as their interests may appear, except that holders of Debentures may receive shares of stock and any debt securities that are subordinated to such Senior Indebtedness to at least the same extent as the Debentures. 5.3 Default on Senior Indebtedness. The Payor may not pay the principal of, premium (if any) or interest on the Debentures and may not otherwise repurchase, redeem or otherwise retire any Debentures (collectively, "pay the Debentures") if (a) any Senior Indebtedness of the Payor is not paid when due or (b) any other default on such Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (i) the default has been cured or waived and any such acceleration has been rescinded or (ii) such Senior Indebtedness has been paid in full: provided, however, that the Payor may pay the Debentures without regard to the foregoing if the Payor receives written notice approving such payment from the Representative (as such term is defined in Section 5.12 below) of such Senior Indebtedness with respect to which either of the events set forth in clause (a) or (b) of this sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (a) or (b) of the preceding sentence) with respect to any Senior Indebtedness of the Payor pursuant to which the maturity thereof may be accelerated immediately with further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Payor may not pay the Debenture for a period (a "Payment Blockage Period") commencing upon the receipt by the Payor of written notice (a "Blockage Notice") of such default from the Representative of such Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 180 days thereafter (or earlier if such Payment Blockage Period is terminated (a) by written notice to the Payor from the Person or Persons who gave such Blockage Notice, (b) by repayment in full of such Senior Indebtedness or (c) because the default giving rise to such Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of such Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Senior Indebtedness, the Payor may resume payments on the Debentures after the end of such Payment Blockage Period, including any missed payments. For purposes of this Section, no default or event of default that existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. 5.4 Acceleration of Payment of Debentures. If payment of the Debentures is accelerated because of an Event of Default, the Payor shall promptly notify the holders of the Senior Indebtedness of the Payor (or their Representative) of the acceleration. If any Senior Indebtedness of the Payor is outstanding the Payor may not pay the Debentures until five Business Days after such holders or the Representative of such Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Debentures only if this Section 5 otherwise permits payment at that time. 5.5 When Distribution Must Be Paid Over. If a distribution is made to holders of -7- Debentures that because of this Section 5 should not have been made to them, the holders of Debentures who receive the distribution shall hold it in trust for holders of Senior Indebtedness of the Payor and pay it over to them as their interests may appear. 5.6 Subrogation. After all Senior Indebtedness of the Payor is paid in full and until the Debentures are paid in full, holders of Debentures shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to Senior Indebtedness. A distribution made under this Section 5 to holders of such Senior Indebtedness which otherwise would have been made to holders of Debentures is not, as between the Payor and holders of Debentures, a payment by the Payor on such Senior Indebtedness. 5.7 Relative Rights. This Section 5 defines the relative rights of holders of Debentures and holders of Senior Indebtedness of the Payor. Nothing in this Section 5 of Debentures shall: (a) impair, as between the Payor and holders of Debentures, the obligation of the Payor, which is absolute and unconditional, to pay principal of (premium, if any) and interest on the Debentures in accordance with their terms; or (b) prevent any holder of Debentures from exercising its available remedies upon an Event of Default, subject to the rights of holders of Senior Indebtedness of the Payor to receive distributions otherwise payable to such holder of Debentures. 5.8 Subordination May Not Be Impaired by Payor. No right of any holder of Senior Indebtedness of the Payor to enforce the subordination of the indebtedness evidenced by the Debentures shall be impaired by any act or failure to act by the Payor or by its failure to comply with this Section 5. 5.9 Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Payor, the distribution may be made and the notice given to their Representative (if any). 5.10 Section 5 Not To Prevent Events of Default or Limit Right to Accelerate. The failure to make a payment pursuant to the Debentures by reason of any provision in this Section 5 shall not be construed as preventing the occurrence of an Event of Default. Nothing in this Section 5 shall have any effect on the right of the holders of Debentures to accelerate the maturity of the Debentures. 5.11 Reliance by Holders of Senior Indebtedness on Subordination Provisions. Each holder of a Debenture by accepting such Debenture acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Payor, whether such Senior Indebtedness was created or acquired before or after the issuance of the Debentures, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. 5.12 Definitions. As used herein, the following terms shall have the following meanings: -8- "Representative" shall mean the trustee, agent or representative (if any) for any issue of Senior Indebtedness; "Senior Indebtedness" shall have the meaning set forth in Section 6.2 of the Purchase Agreement; and 5.13 "Senior Subordinated Indebtedness" shall have the meaning set forth in Section 6.2 of the Purchase Agreement. SECTION 6. COVENANTS. The Payor agrees to comply with and of the covenants set forth in the Purchase Agreement (including, without limitation, Articles V and VI) and such covenants are incorporated herein by reference thereto. SECTION 7. DEFENSES. The obligations of the Payor under this Debenture shall not be subject to reduction, limitation, impairment, termination, defense, set-off, counterclaim or recoupment for any reason. SECTION 8. EXCHANGE OR REPLACEMENT OF DEBENTURE. 8.1 The Payee may, at its option, in person or by duly authorized attorney, surrender this Debenture for exchange, at the principal business office of the Payor, and the Payee will receive in exchange therefor, a new Debenture or Debentures, as the case may be, in the same principal amount as the unpaid principal amount of this Debenture and bearing interest at the same annual rate as this Debenture, such new Debenture, or Debentures, as the case may be, to be dated as of the date of this Debenture and to be in such principal amount as remains unpaid and payable to such person or persons, or order, as the Payees may designate in writing. 8.2 Upon receipt by the Payor of evidence satisfactory to it of the loss, theft, destruction, or mutilation of this Debenture, and (in case of loss, theft or destruction) of an indemnity reasonably satisfactory to it, and upon surrender and cancellation of this Debenture, if mutilated, the Payor will deliver a new Debenture of like tenor in lieu of this Debenture. Any Debenture delivered in accordance with the provisions of this Section 8 shall be dated as of the date of this Debenture. SECTION 9. EXTENSION OF MATURITY. Should the principal of or interest on this Debenture become due and payable on other than a Business Day, the maturity date thereof shall be extended to the next succeeding Business Day, and, in the case of principal, interest shall be payable thereon at the rate per annum herein specified during such extension. SECTION 10. ATTORNEYS' AND COLLECTION FEES. Should any obligation of Payor under this Debenture (including without limitation, the Indebtedness or any part thereof, evidenced by this Debenture and interest or any part thereof) be -9- collected at law or in equity or in bankruptcy, receivership or other court proceedings, or this Debenture be placed in the hands of attorneys for collection, the Payor agrees to pay, in addition to principal and interest due and payable hereon, all reasonable costs of collection, including reasonable attorneys' fees and expenses, incurred by the Payee in collecting or enforcing this Debenture. SECTION 11. WAIVERS. 11.1 The Payor waives presentment, demand for payment, notice of dishonor, notice of protest and all other notices or demands in connection with the delivery, acceptance, performance or default of this Debenture. 11.2 No delay by any Payee in exercising any power or right hereunder shall operate as a waiver of any power or right, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof, or the exercise of any other power or right hereunder or otherwise; and no waiver whatsoever or modification of the terms hereof shall be valid unless set forth in writing by any Payee and then only to the extent set forth therein. SECTION 12. AMENDMENTS AND WAIVERS. No provision of this Debenture may be amended or waived except if such amendment and waiver is in writing and is signed, in the case of an amendment, by the Payee, or, in the case of a waiver, by the holders of at least a majority in the aggregate principal amount of the outstanding Debentures (including, without limitation, PIK Debentures). SECTION 13. GOVERNING LAW. This Debenture is made and delivered in, and shall be governed by and construed in accordance with the laws of the State of New York (without giving effect to principles of conflicts of laws). SECTION 14. NOTICES. All notices, consents, requests, reports, demands or other communications hereunder (collectively, "Notices") shall be in writing and may be given personally, by registered mail, fax or by Federal Express (or other reputable overnight delivery service): if to Payee, to it at: Cahill, Warnock Strategic Partners Fund, L.P. c/o Camden Partners, Inc. One South Street Suite 2150 Baltimore, MD 21202 Attention: David L. Warnock Tel: 410.895.3800 Fax: 410.895.3805 -10- with a copy to: Wilmer, Cutler & Pickering 100 Light Street Baltimore, MD 21202 Attention: Jay Watkins, Esq. Tel: 410.986.2800 Fax: 410.986.2828 if to Infocrossing, Inc., to it at: 2 Christie Heights Street Leonia, NJ 07605 Attention: Zach Lonstein Tel: 201.840.8717 Fax: 201.840.7126 with a copy to: White & Case LLP 1155 Avenue of the Americas New York, New York 10036 Attn: S. Ward Atterbury, Esq. Telephone: 212.819.8331 Fax: 212.354.8113 or to such other address or such other person as the addressee party shall have last designated by notice to the other party. All Notices shall be deemed to have been given (i) when delivered personally, (ii) three (3) days after being sent by registered mail with proper postage prepaid, (iii) upon transmission by fax and receipt of confirmation of such transmission by the sender's fax machine, or (iv) one day after being sent by Federal Express (or other reputable overnight delivery service) with proper postage prepaid. SECTION 15. SEVERABILITY. If any provision of this Debenture is held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Debenture or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, such provision shall automatically be amended to the extent (but only to the extent) necessary to make it not invalid, prohibited or unenforceable in such jurisdiction, without invalidating the remaining provisions of this Debenture or amending or affecting the validity or enforceability of such provision in any other jurisdiction. -11- SECTION 16. ASSIGNMENT. Payor may not assign its rights or obligations hereunder to any Person, without the prior written consent of Payee, such consent shall not be unreasonably withheld. Payee may assign any of its rights and obligations hereunder to any one of its Affiliates. "Affiliate" means, with respect to (i) the Payor, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with the Payor; and (ii) the Payees, any current or former members of or any general or limited partners or retired partners of any of the Payees, or any Person or entity that directly or indirectly, through one or more intermediaries, controls, with the general partner of the Payees, the Payees. 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. SECTION 17. NO IMPAIRMENT. The Payor will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Debenture, but will at all times in good faith use its reasonable best efforts to assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Payor against impairment due to such event. Without limiting the generality of the foregoing, the Payor will not consolidate with or merge into any other person or entity or permit any such person or entity to consolidate or merge into the Payor, unless such other person (or, in the case of a merger or consolidation in which the Company is the surviving entity, the person issuing the securities involved in such merger or consolidation) shall expressly assume in writing and will be bound by all terms of this Debenture. (Signature page follows) IN WITNESS WHEREOF, the Payor has duly executed and delivered this Debenture as of the date first written above. INFOCROSSING, INC. By: -------------------------------------------- Name: Zach Lonstein Title: Chief Executive Officer and Chairman of the Board of Directors EX-4.3 6 a857820_ex4-3.txt WARRANT AGREEMENT EXECUTION COPY - ------------------------------------------------------------------------------ WARRANT AGREEMENT Dated as of February 1, 2002 between Infocrossing, Inc. as Issuer, and the Warrantholders Party Hereto ----------------------------------- Common Stock Warrants of Infocrossing, Inc. ------------------------------------- - ------------------------------------------------------------------------------ WARRANT AGREEMENT WARRANT AGREEMENT dated as of February 1, 2002, between, Infocrossing, Inc., a Delaware corporation (the "Company"), and each of the warrantholders party hereto (collectively, with their successors and assigns, the "Warrantholders"). W I T N E S S E T H: WHEREAS, the Company proposes, among other things, to issue and sell pursuant to a Securities Purchase Agreement, dated the date hereof, among the Company, Cahill Warnock Strategic Partners Fund, L.P., a Delaware limited partnership, Strategic Associates, L.P., a Delaware limited partnership, Camden Partners Strategic Fund II-A, L.P., a Delaware limited partnership, Camden Partners Strategic Fund II-B, L.P., a Delaware limited partnership (the "Securities Purchase Agreement"), Senior Subordinated Debentures due 2005 in the aggregate principal amount of $10,000,000 (the "Debentures"); and WHEREAS, in connection with the issuance of the Debentures, the Company agrees to issue to each of the Warrantholders warrants to purchase shares of the common stock, par value $.01 of the Company (the "Common Stock") pursuant to the terms and conditions set forth herein (the "Initial Warrants"); and WHEREAS, the Company will issue additional warrants (the "Additional Warrants" and, together with the Initial Warrants, the "Warrants") if and when the Company pays interest accruing on the Debentures by the issuance of additional Debentures (the "PIK Debentures"); and WHEREAS, the execution and delivery of this Agreement is a condition to the consummation of the transactions contemplated by the Securities Purchase Agreement. NOW, THEREFORE, in consideration of the premises and mutual agreements herein, the Company hereby agrees as follows for the equal and ratable benefit of the Warrantholders: ARTICLE I Definitions Section 1.01. Definitions. "Affiliate" means, with respect to (i) the Company, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, the Company; and (ii) the Warrantholders, any current or former members of or any general or limited partners or retired partners of any of the Purchasers, or any Person or entity that directly or indirectly, through one or more intermediaries, controls, with the general partner of Warrantholders, the Warrantholders. 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. "Agreement" means this Warrant Agreement as amended or supplemented from time to time. "Board of Directors" or "Board" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Business Day" means each day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York are authorized or required by law to close. "Cashless Exercise Ratio" means a fraction, the numerator of which is the excess of the Current Market Value per share of Common Stock on the Exercise Date over the Exercise Price per share as of the Exercise Date and the denominator of which is the Current Market Value per share of the Common Stock on the Exercise Date. "Capital Stock" means (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. "Commission" means the United States Securities and Exchange Commission. "Current Market Value" per share of Common Stock or any other security at any date means (i) if the security is not registered under the Exchange Act, the value of the security, determined in good faith by the Board of Directors and certified in a board resolution, or (ii) if the security is registered under the Exchange Act, the average of the daily closing bid prices (or the equivalent in an over-the-counter market) for each Business Day during the period commencing 30 Business Days before such date and ending on the date one day prior to such date, or if the security has been registered under the Exchange Act for less than 30 consecutive Business Days before such date, the average of the daily closing bid prices (or such equivalent) for all of the Business Days before such date for which daily closing bid prices are available; provided, however, that if the closing bid price is not determinable for at least five Business Days in such period, the "Current Market Value" of the security shall be determined as if the security were not registered under the Exchange Act. "Debenture Issue Date" means the date on which the Debentures are issued. "Exchange Act" means, as of any date, the Securities Exchange Act of 1934, as amended through such date, and the rules and regulations promulgated thereunder in effect on such date. "Exercise Date" means, for a given Warrant, the day on which such Warrant is exercised pursuant to Section 3.04. "GAAP" means as of any date, United States generally accepted accounting principles, consistently applied, as in effect on such date. 2 "Holder" means the Person in whose name a Warrant is registered on the Warrant Registrar's books. "Indebtedness" means all of the amounts owed under the Debentures, including, without limitation, all accrued and unpaid interest and all other obligations arising thereunder. "Issue Date" means the date on which the Warrants are initially issued. "Officer" means the Chairman of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary of the Company. "Person" means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PIK Debenture" has the meaning assigned to it in the Third Recital hereto. "PIK Debenture Issue Date" means the date on which the PIK Debentures are issued. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "Securities" means the Warrants and the Warrant Shares. "Securities Act" means, as of any date, the Securities Act of 1933, as amended as of such date and the rules and regulations of the Commission promulgated thereunder in effect as of such date. "Securities Purchase Agreement" has the meaning assigned to it in the recitals hereto. "Stockholders' Agreement" means the Second Amended and Restated Stockholders' Agreement, dated as of the date hereof, to be entered into by and between the Company and the parties thereto. "Subsidiary" means, with respect to any Person (i) a corporation a majority of whose capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by a subsidiary of such Person, or by such Person and one or more subsidiaries of such Person, (ii) a partnership in which such Person or a subsidiary of such Person is, at the date of determination, a general partner of such partnership and has the power to direct the policies and management of such partnership or (iii) any other Person (other than a corporation) in which such Person, a subsidiary of such Person or such Person and one or more subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has (A) at 3 least a majority ownership interest or (B) the power to elect or direct the election of a majority of the directors or other governing body of such Person. "Uniform Commercial Code" shall mean the New York Uniform Commercial Code, as in effect from time to time. "Warrant Certificates" mean the registered certificates issued by the Company under this Agreement representing the Warrants. "Warrant Percentage" shall mean, with respect to a Warrantholder, the percentage of Warrants held by such Warrantholder when compared to the number of Warrants held by all Warrantholders. The Warrant Percentage for each Warrantholder is set forth on Schedule A next to the name of such Warrantholder. "Warrant Shares" mean the shares of Common Stock (and any other securities) for which the Warrants are exercisable or which have been issued upon exercise of Warrants. Section 1.02. Other Definitions. Term Defined in Section ---- ------------------ "Additional Warrants" Third Recital "Additional Warrant Expiration Date" 3.02(b) "Cashless Exercise" 3.04 "Common Stock" Second Recital "Common Stock Record Date" 4.07 "Company" Preamble "Debentures" First Recital "Default" 2.14 "Exercise Price" 3.01 "Exercise Rate" 4.01 "Initial Warrants" Second Recital "Initial Warrant Expiration Date 3.02(b) "non-electing share" 4.05 "Partial Prepayment" 2.02 "Prepayment Fraction" 2.03 "protected purchaser" 2.11 "Stock Registrar" 3.07 "Stock Transfer Agent" 3.05 "Transfer Notice" 2.10 "Warrant" Third Recital "Warrantholder" Preamble "Warrant Registrar" 2.09 Section 1.03. Rules of Construction. Unless the context otherwise requires: (i) a defined term has the meaning assigned to it; 4 (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP as in effect as of the date hereof; (iii) "or" is not exclusive; (iv) "including" means including without limitation; and (v) words in the singular include the plural and words in the plural include the singular. ARTICLE II Warrant Certificates Section 2.01. Issuance of Warrants. On the date hereof, the Company shall issue to the Warrantholders Initial Warrants to purchase an aggregate of 2,000,000 shares of Common Stock. Each Warrantholder shall receive a warrant for the number of shares of Common Stock set forth next to such Warrantholder's name on Schedule A attached hereto. Section 2.02. Reduction of Initial Warrants Upon Repayment in Full. Subject to Section 2.14, if the Company repays all of the Indebtedness under the Debentures before the first anniversary of the Debenture Issue Date, 1,500,000 Initial Warrants will be immediately cancelled. If the Company repays all of the Indebtedness under the Debentures after the first anniversary and before the third anniversary of the Debenture Issue Date, the amount of shares for which the Initial Warrants are exercisable shall be reduced by multiplying 62,500 shares by the number of full months between the date of the repayment in full and the third anniversary of the Debenture Issue Date; it being understood that at no time will the Company be permitted to cancel more than 1,500,000 Initial Warrants, provided, however, that if the Company exercises its right to make a partial prepayment as set forth in Section 3.1(b) of the Debenture (a "Partial Prepayment"), this Section 2.02 shall not apply and the shares for which the Initial Warrants are exercisable shall be reduced in accordance with Section 2.03 below. Section 2.03. Reduction of Initial Warrants upon Partial Prepayment. Subject to Section 2.14, if the Company makes a Partial Prepayment, the amount of shares for which the Initial Warrants are exercisable shall be reduced in an amount equal to the product of (x) the number of Initial Warrants that would then be reduced pursuant to Section 2.02, assuming full repayment of the Debentures, and (y) a fraction, the numerator of which shall be the aggregate principal amount of Debentures actually prepaid and the denominator of which shall be equal to the aggregate principal amount of Debentures outstanding on the date of such Partial Prepayment (the "Prepayment Fraction"). Section 2.04. Reduction of Initial Warrants upon Full Prepayment Following Partial Prepayment. Subject to Section 2.14, in the event of a full repayment of all of the Indebtedness under the Debenture that is both (i) after a Partial Prepayment; and (ii) before the third anniversary of the Debenture Issuance Date, the amount of shares for the which the Initial Warrants are exercisable shall be further reduced in an amount equal to the product of (x) the number of Initial Warrants that would then be reduced pursuant to Section 2.02, assuming full repayment of the Debentures, and (y) one (1) minus the Prepayment Fraction. 5 Section 2.05. Issuance of Additional Warrants. In the event that the Company elects to repay any portion of the interest due on the Debentures in the form of PIK Debentures, the Company shall upon and as of the due date of such interest payment, issue Additional Warrants (on terms and conditions identical to the Initial Warrants) to purchase the number of shares of Common Stock equal to one share for each ten dollars ($10.00) of interest paid in the form of PIK Debentures, provided, however, that the Additional Warrants shall not be issued until the two-year anniversary of the Debenture Issue Date, provided, further, subject to Section 2.14, that no Additional Warrants shall be issued if all of the Indebtedness outstanding under the Debentures has been repaid in full before the two year anniversary of the Debenture Issue Date; and provided, further, that the exercise price of the Additional Warrants shall be the price equal to the average of the daily closing bid prices (or the equivalent in an over-the-counter market) for each Business Day during the period commencing 30 Business Days before such date and ending on the date one day prior to such date, or if the security has been registered under the Exchange Act for less than 30 consecutive Business Days before such date, the average of the daily closing bid prices (or such equivalent) for all of the Business Days before such date for which daily closing bid prices are available. Section 2.06. Multiple Warrantholders. All Warrants issued by the Company shall be issued separately to the Warrantholders in accordance with each Warrantholder's Warrant Percentage set forth on Schedule A. Section 2.07. Form and Dating. The Warrant Certificates shall each be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made a part of this Agreement. The Warrant Certificates may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage. Each Warrant Certificate shall be dated the date that it is executed by the Company. Section 2.08. Execution and Countersignature. Two Officers shall sign the Warrant Certificates for the Company by manual or facsimile signature. If an Officer whose signature is on a Warrant Certificate no longer holds that office at the time the Company issues the Warrant Certificate, the Warrant Certificate shall be valid nevertheless. Section 2.09. Warrant Registrar. The Company shall maintain an office or agency where Warrants may be presented for registration of transfer, exchange or exercise (the "Warrant Registrar"). The Warrant Registrar shall keep a register of the Warrants and of their transfer, exchange or exercise. The Company may have one or more co-registrars. The Company may act as Warrant Registrar. The term Warrant Registrar includes any co-registrars. The Company shall initially serve as Warrant Registrar in connection with the Warrants. The Company shall enter into an appropriate agency agreement with any Warrant Registrar not a party to this Agreement. The agreement shall implement the provisions of this Agreement that relate to such agent. The Company shall notify the Warrantholders of the name and address of any such agent. If the Company fails to maintain a Warrant Registrar, the Company shall act as such. 6 The Company may remove any Warrant Registrar upon written notice to such Warrant Registrar and to the Warrantholders; provided, however, that no such removal shall become effective until (1) acceptance of an appointment by a successor as evidenced by an appropriate agreement entered into by the Company and such successor Warrant Registrar and delivered to the Warrantholders or (2) notification to the Warrantholders that the Company shall serve as Warrant Registrar until the appointment of a successor in accordance with clause (1) above. The Warrant Registrar may resign at any time upon written notice. The Company and the Warrant Registrar may deem and treat the Person in whose name a Warrant Certificate is registered as the absolute owner of such Warrant Certificate for all purposes whatsoever and neither the Company and the Warrant Registrar shall be affected by notice to the contrary. Section 2.10. Transfer and Exchange. The Warrants shall be issued in registered form and shall be transferable only upon the surrender of a Warrant Certificate for registration of transfer and in compliance with the provisions of this Agreement. When a Warrant is presented to the Warrant Registrar with a request to register a transfer, the Warrant Registrar shall register the transfer as requested if the requirements of Section 8-401(a) of the Uniform Commercial Code are met. When Warrants are presented to the Warrant Registrar with a request to exchange them for an equal number of Warrants of other denominations, the Warrant Registrar shall make the exchange as requested if the requirements of Section 8-401(a)(1) and (2) of the Uniform Commercial Code are met. To permit registration of transfers and exchanges, the Company shall execute Warrant Certificates at the Warrant Registrar's request. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer, exchange or exercise pursuant to this Section 2.10. Subject to the restrictions set forth in this Section 2.10, each Warrantholder may at any time and from time to time freely transfer its Warrant and the Warrant Shares in whole or in part. No Warrant has been, and the Warrant Shares at the time of their issuance may not be, registered under the Securities Act, and, except as provided in any separate agreement providing for registration rights, nothing herein contained shall be deemed to require the Company to so register any Warrant or Warrant Shares. The Warrants and the Warrant Shares are issued or issuable subject to the provisions and conditions contained herein, and every Holder of a Warrant or Warrant Shares by accepting such Warrant or Warrant Shares agrees with the Company to such provisions and conditions, and represents to the Company that such Warrant has been acquired and the Warrant Shares will be acquired for the account of such Warrantholder for investment and not with a view to or for sale in connection with any distribution thereof. Except as otherwise permitted by this Section 2.10, each Warrant (including each Warrant issued upon the transfer of any Warrant) and all Warrant Shares shall be stamped or otherwise imprinted with legends in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS AGAINST TRANSFER SET FORTH IN A SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (THE "STOCKHOLDERS' AGREEMENT") DATED AS OF FEBRUARY 1, 2002, AS MAY BE AMENDED FROM TIME TO TIME. A COPY OF SUCH STOCKHOLDERS AGREEMENT HAS BEEN FILED IN THE OFFICE OF THE COMPANY LOCATED 7 AT 2 CHRISTIE HEIGHTS STREET, LEONIA, NEW JERSEY 07605, WHERE THE SAME MAY BE INSPECTED DAILY DURING BUSINESS HOURS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OTHER THAN PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THAT CERTAIN WARRANT AGREEMENT (THE "WARRANT AGREEMENT") DATED AS OF FEBRUARY 1, 2002. PURSUANT TO SECTION 2 OF THE WARRANT AGREEMENT THE NUMBER OF SHARES MAY BE SUBJECT TO REDUCTION FOR WHICH THIS WARRANT MAY BE EXERCISED AS PROVIDED THEREIN. A COPY OF SUCH WARRANT AGREEMENT HAS BEEN FILED IN THE OFFICE OF THE COMPANY LOCATED AT 2 CHRISTIE HEIGHTS STREET, LEONIA, NEW JERSEY 07605, WHERE THE SAME MAY BE INSPECTED DAILY DURING BUSINESS HOURS. Transfers of Warrants and Warrant Shares are subject to restrictions as provided in the Stockholders' Agreement. Prior to any transfer or attempted transfer of any Warrants, the Holder of such Warrants shall give 10 days' prior written notice (a "Transfer Notice") to the Company of such Holder's intention to effect such transfer, describing the manner and circumstances of the proposed transfer, and, if requested by the Company, obtain from counsel to such Holder who shall be reasonably satisfactory to the Company, an opinion that the proposed transfer of such Warrants may be effected without registration under the Securities Act. After receipt of the Transfer Notice and opinion, the Company shall, within five days thereof, so notify the Holder of such Warrants and such Holder shall thereupon be entitled to transfer such Warrants, in accordance with the terms of the Transfer Notice. Each Warrant issued upon such transfer shall bear the restrictive legends set forth above, unless, with respect to the legend in paragraph (a) above, in the opinion of such counsel such legend is not required in order to ensure compliance with the Securities Act. The Holder of the Warrants giving the Transfer Notice shall not be entitled to transfer such Warrants until receipt of notice from the Company under this Section 2.10. Section 2.11. Replacement Certificate. If a mutilated Warrant is surrendered to the Company or if a Warrantholder claims that the Warrant Certificate has been lost, destroyed or wrongfully taken, the Company shall use all reasonable efforts to execute a replacement Warrant Certificate if the requirements of Section 8-405 of the Uniform Commercial Code are met, such that the Warrantholder (i) notifies the Company within a reasonable time after he has notice of such loss, destruction or wrongful taking and the Company does not register a transfer prior to receiving such notification, (ii) makes such request to the Company prior to the Warrant being acquired by a protected purchaser as defined in Section 8-303 of the Uniform Commercial Code (a "protected purchaser") and (iii) satisfies any other reasonable requirements of the Company. If required by the Company, such Warrantholder shall furnish an indemnity bond sufficient in the reasonable judgment of the Company to protect 8 the Company from any loss that it may suffer if a Warrant is replaced. The Company may charge the Warrantholder for its expenses in replacing a Warrant Certificate. Every replacement Warrant is an additional obligation of the Company. The provisions of this Section 2.11 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement of mutilated, lost, destroyed or wrongfully taken Securities. Section 2.12. Outstanding Warrants. Warrants outstanding at any time are all Warrant Certificates executed by the Company except for those canceled by it, those delivered to it for cancellation and those described in this Section 2.12 as not outstanding. A Warrant does not cease to be outstanding because an Affiliate of the Company holds the Warrant. A Warrant ceases to be outstanding if the Company holds the Warrant. If a Warrant Certificate is replaced pursuant to Section 2.11, it ceases to be outstanding unless the Company receives proof satisfactory to it that the replaced Warrant Certificate is held by a protected purchaser. Section 2.13. Cancellation. The Company at any time may cancel Warrant Certificates which have been surrendered for registration of transfer, exchange, exercise or cancellation. The Company and no one else shall cancel all Warrant Certificates surrendered for registration of transfer, exchange, exercise or cancellation. The Company may not issue new Warrant Certificates to replace Warrants Certificates that have been exercised or Warrants which the Company has purchased or otherwise acquired. Section 2.14. Default. Notwithstanding anything to the contrary contained herein, upon the occurrence of a Default (as defined in the Debenture) all Initial Warrants will no longer be subject to reduction as set forth in Sections 2.02, 2.03 or 2.04 and all Additional Warrants (if any) shall immediately be issued notwithstanding the application of Section 2.05. ARTICLE III Exercise Terms Section 3.01. Exercise. Each Warrant shall initially entitle the Holder thereof, subject to adjustment pursuant to the terms of this Agreement, to purchase one (1) share of Common Stock. The exercise price (the "Exercise Price") of each Warrant is $5.86 per share (which is equal to the Current Market Value on the date hereof), subject to adjustment pursuant to Article IV hereof. Section 3.02. Time of Exercise; Separability (a) Subject to the terms and conditions set forth herein, the Warrants shall be exercisable at any time and from time to time on any Business Day on or after the Issue Date; provided, that no Initial Warrant shall be exercisable until it is no longer subject to cancellation. Further, until approval of the Company has been received pursuant to Section 5.7 of the Purchase Agreement, no Warrants may be exercised if such exercise, together with all exercises of Warrants results in the issuance by the Company of more than 1,066,705 shares of Common Stock (which equals 19.999% of the 9 number of shares of Common Stock outstanding on the trading day immediately preceding the date hereof). (b) No Initial Warrant shall be exercisable after January 30, 2007 (the "Initial Warrant Expiration Date") and no Additional Warrant shall be exercisable after the five-year anniversary of the issue date of such Additional Warrants (the "Additional Warrant Expiration Date"). (c) The Initial Warrants will be separately transferable, subject to compliance with applicable securities laws, on the Debenture Issue Date and the Additional Warrants will be separately transferable, subject to compliance with applicable securities laws on the PIK Debenture Issue Date. Section 3.03. Expiration. An Initial Warrant shall terminate and become void as of the earlier of (i) the close of business on the Initial Warrant Expiration Date or (ii) the date such Initial Warrant is exercised. An Additional Warrant shall terminate and become void as of the earlier of (i) the close of business on the Additional Warrant Expiration Date or (ii) the date such Additional Warrant is exercised. The Company shall give notice not less than 90, and not more than 120, days prior to the Initial Warrant Expiration Date or Additional Warrant Expiration Date, as applicable, to the Holders of all then outstanding Warrants to the effect that the Warrants will terminate and become void as of the close of business on the Initial Warrant Expiration Date or Additional Warrant Expiration Date, as applicable; provided, however, that if the Company fails to give notice as provided in this Section 3.03, the Initial Warrants will nevertheless terminate on the Initial Warrant Expiration Date and the Additional Warrants will nevertheless terminate on the Additional Warrant Expiration Date. Section 3.04. Manner of Exercise. Warrants may be exercised upon (i) surrender to the Warrant Registrar at its office of the related Warrant Certificate, together with the form of election attached thereto to purchase Common Stock duly filled in and signed by the Holder thereof; (ii) payment to the Company of the Exercise Price for each Warrant Share or other security issuable upon the exercise of such Warrants then exercised; or (iii) by the election of Cashless Exercise set forth below. Such payment shall be made (i) in cash or by certified or official bank check payable to the order of the Company or by wire transfer of funds to an account designated by the Company for such purpose or (ii) without the payment of cash, by reducing the number of shares of Common Stock obtainable upon the exercise of a Warrant and payment of the Exercise Price in cash so as to yield a number of shares of Common Stock upon the exercise of such Warrant equal to the product of (a) the number of shares of Common Stock issuable as of the Exercise Date upon the exercise of such Warrant (if payment of the Exercise Price were being made in cash) and (b) the Cashless Exercise Ratio. An exercise of a Warrant in accordance with the immediately preceding clause (ii) is herein called a "Cashless Exercise". Upon surrender of a Warrant Certificate representing more than one Warrant in connection with the Holder's option to elect a Cashless Exercise, the number of shares of Common Stock deliverable upon a Cashless Exercise shall be equal to the number of shares of Common Stock issuable upon the exercise of Warrants that the Holder specifies are to be exercised pursuant to a Cashless Exercise multiplied by the Cashless Exercise Ratio. All provisions of this Agreement shall be applicable with respect to a surrender of a Warrant Certificate pursuant to a Cashless Exercise for less than the full number of Warrants represented thereby. Subject to Section 3.02, the rights represented by the Warrants shall be exercisable at the election of the Warrantholders thereof either in full at any time or from 10 time to time in part and in the event that a Warrant Certificate is surrendered for exercise of less than all the Warrants represented by such Warrant Certificate at any time prior to the Initial Warrant Expiration Date in the case of the Initial Warrants and the Additional Warrant Expiration Date in the case of Additional Warrants, a new Warrant Certificate representing the remaining Warrants shall be issued. Section 3.05. Issuance of Warrant Shares. Subject to Section 2.11, upon the surrender of Warrant Certificates and payment of the per share Exercise Price or election of a Cashless Exercise, as set forth in Section 3.04, the Company shall issue and cause the transfer agent for the Common Stock ("Stock Transfer Agent") to countersign and deliver to or upon the written order of the Warrantholder and in such name or names as the Holder may designate, a certificate or certificates for the number of full Warrant Shares so purchased upon the exercise of such Warrants or other securities or property to which it is entitled, registered or otherwise, to the Person or Persons entitled to receive the same (including any depositary institution so designated by a Warrantholder), together with cash as provided in Section 3.06 in respect of any fractional Warrant Shares otherwise issuable upon such exercise. Such certificate or certificates shall be deemed to have been issued and any Person so designated therein shall be deemed to have become a Holder of record of such Warrant Shares as of the date of the surrender of such Warrant Certificates and payment of the per share Exercise Price or election of a Cashless Exercise, as aforesaid; provided, however, that if, at such date, the transfer books for the Warrant Shares shall be closed, the certificates for the Warrant Shares in respect of which such Warrants are then exercised shall be issuable as of the date on which such books shall next be opened and until such date the Company shall be under no duty to deliver any certificates for such Warrant Shares; provided further, however, that such transfer books, unless otherwise required by law, shall not be closed at any one time for a period longer than 90 calendar days. Section 3.06. Fractional Warrant Shares. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be exercised in full at the same time by the same Warrantholder, the number of full Warrant Shares which shall be issuable upon such exercise shall be computed on the basis of the aggregate number of Warrant Shares which may be purchasable pursuant thereto. If any fraction of a Warrant Share would, except for the provisions of this Section 3.06, be issuable upon the exercise of any Warrant (or specified portion thereof), the Company shall pay an amount in cash equal to the Current Market Value per Warrant Share, as determined on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole cent. Section 3.07. Reservation of Warrant Shares. The Company shall at all times keep reserved out of its authorized shares of Common Stock a number of shares of Common Stock sufficient to provide for the exercise of all outstanding Warrants. The registrar for the Common Stock (the "Stock Registrar") shall at all times until the Initial Warrant Expiration Date in the case of the Initial Warrants and the Additional Warrant Expiration Date in the case of the Additional Warrants reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Stock Transfer Agent. The Company will supply such Stock Transfer Agent with duly executed stock certificates for such purpose and will itself provide or otherwise make available any cash which may be payable as provided in Section 11 3.06. The Company will furnish to such Stock Transfer Agent a copy of all notices of adjustments (and certificates related thereto) transmitted to each Holder. The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants shall, upon issue, be fully paid, nonassessable, free from all taxes and free from all liens, charges and security interests with respect to the issue thereof. Section 3.08. No Dilution or Impairment. The Company (a) will not permit the par or nominal value of any Warrant Shares issuable upon the exercise of Warrants to exceed the amount payable therefor upon such exercise, (b) will take all reasonable action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the exercise of the Warrants from time to time outstanding and (c) will not take any action which results in any adjustment of the Exercise Rate (as such term is defined in Section 4.01 below) if the total number of shares of Common Stock (or other securities) issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock (or other securities) then authorized by the Company's Certificate of Incorporation and available for the issuance of shares of Common Stock (or other securities) upon such exercise. ARTICLE IV ANTIDILUTION PROVISIONS Section 4.01. General. The number of shares of Common Stock issuable upon the exercise of each Warrant (the "Exercise Rate") is subject to adjustment from time to time upon the occurrence of the events enumerated in this Article IV. The Exercise Rate shall initially be 1.0000. Section 4.02. Adjustment for Common Stock Dividends. If the Company shall hereafter pay a dividend or make a distribution to holders of any of its securities in shares of Common Stock, the Exercise Rate in effect at the opening of business on the date following the date fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be increased by multiplying such Exercise Rate by a fraction of which the numerator shall be the sum of the number of shares of Common Stock outstanding at the close of business on the Common Stock Record Date (as defined in Section 4.07) and the total number of shares constituting such dividend or other distribution and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the Common Stock Record Date fixed for such determination, such increase to become effective immediately after the opening of business on the day following the Common Stock Record Date. If any dividend or distribution of the type described in this Section 4.02 is declared but not so paid or made, the Exercise Rate shall again be adjusted to the Exercise Rate which would then be in effect if such dividend or distribution had not been declared. Section 4.03. Adjustment for Issuances of Common Stock, Options, Warrants, Rights and Convertible or Exchangeable Securities. If the Company shall issue, sell or distribute any shares of Common Stock or offer or issue, sell or distribute options, rights or warrants to any Person entitling them to subscribe 12 for or purchase shares of Common Stock or issue, sell or distribute convertible or exchangeable securities which are convertible or exchangeable for shares of Common Stock, in each case, at a price per share less than the Exercise Price, the Exercise Rate shall be adjusted so that the same shall equal the rate determined by multiplying the Exercise Rate in effect at the opening of business on the date immediately prior to such sale, issuance or distribution of shares, options, rights, warrants or exchangeable or convertible securities by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on such date plus the total number of additional shares of Common Stock to be issued, sold or distributed or subject to such options, rights, warrants or exchangeable or convertible securities for subscription or purchase and of which the denominator shall be the number of shares of Common Stock outstanding at the close of business on such date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock to be issued, sold or distributed or subject to such options, rights, warrants or exchangeable or convertible securities would purchase at the Exercise Price. Such adjustment shall become effective immediately after the opening of business on the day following the issuance, sale or distribution of such shares, options, rights, warrants or exchangeable or convertible securities. To the extent that shares of Common Stock are not delivered pursuant to such options, rights, warrants or exchangeable or convertible securities, upon the expiration or termination of such options, rights, warrants or exchangeable or convertible securities the Exercise Rate shall again be adjusted to be the Exercise Rate which would then be in effect had the adjustments made upon the issuance, sale or distributions of such options, rights, warrants or exchangeable or convertible securities been made on the basis of delivery of only the number of shares of Common Stock actually delivered. If such shares, options, rights, warrants or exchangeable or convertible securities are not so issued, the Exercise Rate shall again be adjusted to be the Exercise Rate which would then be in effect if such date fixed for the determination of shareholders entitled to receive such shares, options, rights, warrants or exchangeable or convertible securities had not been fixed. In determining whether any shares, options, rights, warrants or exchangeable or convertible securities entitle the Holders to subscribe for or purchase shares of Common Stock at less than the Exercise Price per share, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received for such options, rights, warrants or exchangeable or convertible securities, with the value of such consideration, if other than cash, to be determined in good faith by the Board of Directors and the amount of any exercise price or subscription price required to be paid upon exercise of such options, rights, warrants or exchangeable or convertible securities. No adjustment of the Exercise Rate shall be made if such adjustment would result in a decrease of the number of shares issuable upon application of the adjusted Exercise Rate. Section 4.04. Adjustment upon Subdivision, Reclassification or Combination of Common Stock. If the outstanding shares of Common Stock shall be subdivided or reclassified into a greater number of shares of Common Stock, the Exercise Rate in effect at the opening of business on the day following the day upon which such subdivision or reclassification becomes effective shall be proportionately increased, and, conversely, if the outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Exercise Rate in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately reduced, such increase or reduction, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. 13 Section 4.05. Adjustments for Mergers, Consolidations, etc. In case of any consolidation of the Company with, or merger of the Company into, any other corporation, or in case of any merger of another corporation into the Company (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company), or in case of any sale, conveyance or transfer of all or substantially all the assets of the Company, the Holder of each Warrant shall have the right thereafter, during the period such Warrant shall be exercisable in accordance with its terms, to exercise such Warrant for the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer by a holder of the number of shares of shares of Common Stock of the Company into which such Warrant might have been exercised immediately prior to such consolidation, merger, conveyance or transfer, assuming such Holder of shares of Common Stock of the Company failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer (provided that, if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer is not the same for each Common Share of the Company in respect of which such rights of election shall not have been exercised ("nonelecting share"), then for the purpose of this Section 4.05 the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer by each nonelecting share shall be deemed to be the kind and amount so receivable per share by a plurality of the nonelecting shares). Such securities shall provide for adjustments which, for events subsequent to the effective date of the triggering event, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article IV. The above provisions of this Section 4.05 shall similarly apply to successive consolidations, mergers, conveyances or transfers. The Company shall deliver written notice at least five (5) Business Days prior to any consummation of the events enumerated in the first sentence of this Section 4.05. Section 4.06. Other Events. If any event occurs as to which the foregoing provisions of this Article IV are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board of Directors, fairly and adequately protect the purchase rights of the Warrants in accordance with the essential intent and principles of such provisions, then such Board of Directors shall make such adjustments in the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of such Board of Directors, to protect such purchase rights as aforesaid, but in no event shall any such adjustment have the effect of decreasing the Exercise Rate or decreasing the number of Warrant Shares issuable upon exercise of the Warrants. Section 4.07. Certain Definitions. For purposes of this Article IV, the following term shall have the meaning indicated: "Common Stock Record Date" shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of shareholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise). 14 Section 4.08. Deferral of Certain Adjustments. No adjustment in the Exercise Rate shall be required unless such adjustment would require an increase or decrease of at least 1% in such rate; provided, however, that any adjustments which by reason of this Section 4.08 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article IV shall be made by the Company and shall be rounded to fourth decimal place. No adjustment need be made for a change in the par value or no par value of the Common Stock. Section 4.09. Officers Certificate; Notice of Adjustment. Whenever the Exercise Rate is adjusted as herein provided, the Company shall promptly file with the Warrant Registrar an Officers' certificate setting forth the Exercise Rate after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Exercise Rate setting forth the adjusted Exercise Rate and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Exercise Rate to each Warrantholder at such Warrantholder's last address appearing on the register of Warrantholders maintained by the Warrant Registrar for that purpose within 20 days of the effective date of such adjustment. Failure to deliver such notice shall not affect the legality or validity of any such adjustment. Section 4.10. Right to Delay Issuance of Incremental Common Stock. In any case in which this Article IV provides that an adjustment shall become effective immediately after a Common Stock Record Date for an event, the Company may defer until the occurrence of such event issuing to any holder of Warrants exercised after such Common Stock Record Date and before the occurrence of such event the additional shares of Common Stock issuable upon such exercise by reason of the adjustment required by such event over and above the shares of Common Stock issuable upon such exercise before giving effect to such adjustment. Section 4.11. Treasury Shares Disregarded. For purposes of this Article IV, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. The Company shall not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. Section 4.12. No Adjustment for Certain Issuances. Notwithstanding anything to the contrary set forth herein, this Article IV shall not apply, and no adjustment to the Exercise Rate shall be made with respect to (i) compensatory or incentive stock options (or any shares of Common Stock issued upon the exercise thereof) issued pursuant to employee stock option plans of the Company which have been approved by the Board of Directors of the Company, (ii) issuances of Common Stock to employees, officers, directors and consultants of the Company, pursuant to employee benefit plans approved by the Board of Directors of the Company, (iii) shares of Common Stock issued upon the conversion of the Series A Preferred Stock; (iv) shares of Common Stock issuable under warrants, options or convertible securities (including shares issued as a result of the operation of any anti-dilution provisions contained therein) of the Company outstanding on the date hereof; (v) shares of Common Stock (or options, rights, warrants or exchangeable or convertible securities) issued or issuable as an inducement to senior lenders of the Company to advance sums or otherwise to make financial accommodations, or as compensation to senior lenders for advancing sums or otherwise making financial accommodations, to the Company or one or more of its Subsidiaries, to the extent such issuance is approved by the Board of Directors which in the aggregate (together with issuances pursuant to clause (vi) hereof) shall not exceed 5% of the Company's equity securities on 15 a fully-diluted basis as of the date hereof; or (vi) shares of Common Stock (or options, rights, warrants or exchangeable or convertible securities) issued or issuable in consideration of the acquisition by the Company of the assets, Capital Stock or other equity interests on, or in connection with a joint venture with, another entity (including, without limitation, shares issued to key employees of such sellers), to the extent such issuance is approved by the Board of Directors which in the aggregate (together with issuances pursuant to clause (v) hereof) shall not exceed 5% of the Company's equity securities on a fully-diluted basis as of the date hereof. Section 4.13. Notice of Certain Adjustments. If the Company shall take any action requiring an adjustment to the Exercise Rate pursuant to this Article IV, then the Company shall cause to be filed with the Warrant Registrar, and shall cause to be mailed to all Warrantholders at their last addresses as they shall appear in the Warrant Register, at least 20 Business Days (or 10 Business Days in any case specified in clause 4.02 or 4.03 above) prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of shares of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined or (y) the date on which a reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up. Failure to give the notice required by this Section 4.13 or any defect therein shall not affect the legality or validity of any dividend, distribution, right, warrant, reclassification, consolidation, merger, sale transfer, dissolution, liquidation or winding-up, or the vote upon any such action. Section 4.14. Adjustment to Warrant Certificate. The form of Warrant Certificate need not be changed because of any adjustment made pursuant to this Article IV, and Warrant Certificates issued after such adjustment may state the same Exercise Price and the same number of shares of Common Stock issuable upon exercise of the Warrants as are stated in the Warrant Certificates initially issued pursuant to this Agreement. The Company, however, may at any time in its sole discretion make any change in the form of Warrant Certificate that it may deem appropriate to give effect to such adjustments and that does not affect the substance of the Warrant Certificate, and any Warrant Certificate thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant Certificate or otherwise, may be in the form as so changed. ARTICLE V Miscellaneous Section 5.01. Persons Benefiting. Nothing in this Agreement is intended or shall be construed to confer upon any Person other than the Company and the Warrantholders any right, remedy or claim under or by reason of this Agreement or any part hereof. 16 Section 5.02. Rights of Warrantholders. Holders of unexercised Warrants are not entitled to (i) receive dividends or other distributions, (ii) receive notice of or vote at any meeting of the stockholders, (iii) consent to any action of the stockholders, (iv) receive notice of any other proceedings of the Company, (v) exercise any preemptive right or (vi) exercise any other rights whatsoever as stockholders of the Company with respect to the unexercised Warrants, but if such Holder is a stockholder, nothing in this Agreement shall be construed as diminishing the rights of conferred upon such Holder in its capacity as a stockholder. Section 5.03. Amendment. Any amendment or supplement to this Agreement shall require the written consent of the Warrantholders of a majority of the then outstanding Warrants. The consent of each Warrantholder affected shall be required for any amendment pursuant to which the Exercise Price would be increased, the Exercise Rate would be decreased (other than pursuant to adjustments provided herein) or the antidilution provisions in Article IV are altered in a manner which adversely affects the Warrantholders. In determining whether the Warrantholders of the required number of Warrants have concurred in any direction, waiver or consent, Warrants owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding. Also, subject to the foregoing, only Warrants outstanding at the time shall be considered in any such determination. Section 5.04. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows: Infocrossing, Inc. 2 Christie Heights Street Leonia, New Jersey 07605 Attn: Zach Lonstein, Chief Executive Officer with a copy to: White & Case LLP 1155 Avenue of the Americas New York, New York 10036 Attn: S. Ward Atterbury, Esq. Telephone: (212) 819-8331 Fax: (212) 354-8113 The Company by notice to the Warrantholders may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Warrantholder shall be mailed to the Warrantholder at the Warrantholder's address as it appears on the Company's records and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a party hereto or any defect in it shall not affect its sufficiency with respect to other parties hereto. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. 17 Section 5.05. Governing Law. THIS AGREEMENT AND THE WARRANTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 5.06. Successors. All agreements of the Company in this Agreement and the Warrant Certificates shall bind its successors. Section 5.07. Multiple Originals; Fax Signatures. The parties may sign any number of copies of this Agreement. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Agreement. Any signature page delivered by a fax machine or telecopy machine shall be binding to the same extent as an original signature page, with regard to any agreement subject to the terms hereof or any amendment thereto. Any party who delivers such a signature page agrees to later deliver an original counterpart to any party which requests it. Section 5.08. Table of Contents. The table of contents and headings of the Articles and Sections of this Agreement have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. Section 5.09. Severability. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction. Signatures on following page. 18 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above. INFOCROSSING, INC. By: ------------------------------------ Name: Zach Lonstein Title: Chief Executive Officer WARRANTHOLDERS: CAMDEN PARTNERS STRATEGIC FUND II-A, L.P. By: Camden Partners Strategic II, LLC, its General Partner By: ------------------------------------ Name: David L. Warnock Title: Managing Member CAMDEN PARTNERS STRATEGIC FUND II-B, L.P. By: Camden Partners Strategic II, LLC, its General Partner By: ------------------------------------ Name: David L. Warnock Title: Managing Member CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: Cahill, Warnock Strategic Partners, LP, its General Partner By: ------------------------------------ Name: David L. Warnock Title: General Partner STRATEGIC ASSOCIATES, L.P. By: Cahill, Warnock Strategic Partners, L.P., its General Partner By: ------------------------------------ Name: David L. Warnock Title: General Partner EXHIBIT A FORM OF FACE OF COMMON STOCK WARRANT OF INFOCROSSING, INC. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS AGAINST TRANSFER SET FORTH IN A SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (THE "STOCKHOLDERS' AGREEMENT") DATED AS OF FEBRUARY 1, 2002, AS MAY BE AMENDED FROM TIME TO TIME. A COPY OF SUCH STOCKHOLDERS AGREEMENT HAS BEEN FILED IN THE OFFICE OF THE COMPANY LOCATED AT 2 CHRISTIE HEIGHTS STREET, LEONIA, NEW JERSEY 07605, WHERE THE SAME MAY BE INSPECTED DAILY DURING BUSINESS HOURS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OTHER THAN PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THAT CERTAIN WARRANT AGREEMENT (THE "WARRANT AGREEMENT") DATED AS OF FEBRUARY 1, 2002. PURSUANT TO SECTION 2 OF THE WARRANT AGREEMENT THE NUMBER OF SHARES MAY BE SUBJECT TO REDUCTION FOR WHICH THIS WARRANT MAY BE EXERCISED AS PROVIDED THEREIN. A COPY OF SUCH WARRANT AGREEMENT HAS BEEN FILED IN THE OFFICE OF THE COMPANY LOCATED AT 2 CHRISTIE HEIGHTS STREET, LEONIA, NEW JERSEY 07605, WHERE THE SAME MAY BE INSPECTED DAILY DURING BUSINESS HOURS. No. [ ] COMMON STOCK WARRANT OF INFOCROSSING, INC. THIS CERTIFIES THAT [ ], or its registered assigns, is the registered holder of Common Stock Warrants (the "Warrants"). Each Warrant entitles the holder thereof (the "Holder"), at its option and subject to the provisions contained herein and in the Warrant Agreement referred to below, to purchase from Infocrossing, Inc., a Delaware corporation ("the Company"), [_____] shares of Common Stock, par value of $.01 per share, of the Company, subject to adjustment from time to time pursuant to Section [__] of the Warrant Agreement (the "Common Stock") at the per share exercise price of $[___] (the "Exercise Price") or by Cashless Exercise referred to below. This Warrant shall terminate and become void as of the close of business on [January ___, 2007] (the "Expiration Date") or upon the exercise hereof as to all the shares of Common Stock subject hereto. The number of shares issuable upon exercise of the Warrants and the Exercise Price per share shall be subject to adjustment from time to time as set forth in the Warrant Agreement (as defined below). This Warrant Certificate is issued under and in accordance with a Warrant Agreement dated as of February __, 2002 (the "Warrant Agreement"), between the Company and various Warrantholders party thereto (the "Warrantholders"), and is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions the Holder of this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full statement of the respective rights, limitations of rights, duties and obligations of the Company and the Warrantholders. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Warrant Agreement. A copy of the Warrant Agreement may be obtained for inspection by the Holder hereof upon written request to the Company at 2 Christie Heights Street, Leonia, New Jersey 07605, Attention: Chief Executive Officer. Subject to the terms of the Warrant Agreement, the Warrants may be exercised in whole or in part (i) by presentation of this Warrant Certificate with the Election to Purchase attached hereto duly executed and with the simultaneous payment of the Exercise Price in cash (subject to adjustment) to the Company for the account of the Company or (ii) by Cashless Exercise. Payment of the Exercise Price in cash shall be made by certified or official bank check payable to the order of the Company or by wire transfer of funds to an account designated by the Company for such purpose. Payment by Cashless Exercise shall be made without the payment of cash by reducing the amount of Common Stock that would be obtainable upon the exercise of a Warrant and payment of the Exercise Price in cash so as to yield a number of shares of Common Stock upon the exercise of such Warrant equal to the product of (1) the number of shares of Common Stock for which such Warrant is exercisable as of the Exercise Date (if the Exercise Price were being paid in cash) and (2) a fraction, the numerator of which is the excess of the Current Market Value per share of Common Stock on the Exercise Date over the Exercise Price per share as of the Exercise Date and the denominator of which is the Current Market Value per share of the Common Stock on the Exercise Date. As provided in the Warrant Agreement and subject to the terms and conditions therein set forth, the Warrants shall be exercisable at any time and from time to time on any Business Day after the Issue Date; provided, however, that no Warrant shall be exercisable after the Expiration Date. As provided in the Warrant Agreement, the Exercise Rate is subject to adjustment upon the happening of certain events. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with the transfer or exchange of the Warrant Certificates pursuant to the terms of the Warrant Agreement, but not for any exchange or original issuance (not involving a transfer) with respect to temporary Warrant Certificates, the exercise of the Warrants or the Warrant Shares. Upon any partial exercise of the Warrants, there shall be countersigned and issued to the Warrantholder hereof a new Warrant Certificate representing those Warrants which were not exercised. This Warrant Certificate may be exchanged at the office of the Company by presenting this Warrant Certificate properly endorsed with a request to exchange this Warrant Certificate for other Warrant Certificates evidencing an equal number of Warrants. No fractional Warrant Shares will be issued upon the exercise of the Warrants, but the Company shall pay an amount in cash equal to the Current Market Value per Warrant Share on the day immediately preceding the date the Warrant is exercised, multiplied by the fraction of a Warrant Share that would be issuable on the exercise of any Warrant. All shares of Common Stock issuable by the Company upon the exercise of the Warrants shall, upon such issue, be duly and validly issued and fully paid and non-assessable. The Warrantholder in whose name the Warrant Certificate is registered may be deemed and treated by the Company as the absolute owner of the Warrant Certificate for all purposes whatsoever and the Company shall not be affected by notice to the contrary. The Warrants do not entitle any Warrantholder hereof to any of the rights of a stockholder of the Company. (Signature page follows) This Warrant Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Company. INFOCROSSING, INC. By: --------------------------------------- Name: Title: Attest: - ------------------------------- Name: Title: DATED: FORM OF ELECTION TO PURCHASE WARRANT SHARES (to be executed only upon exercise of Warrants) INFOCROSSING, INC. The undersigned hereby irrevocably elects to exercise __________________ Warrants to acquire shares of Common Stock, par value $.001 per share, of Infocrossing, Inc. (the "Company"), (i) at an exercise price per share of Common Stock of $[___] (subject to adjustment as provided in the Warrant Agreement) or (ii) through Cashless Exercise and otherwise on the terms and conditions specified in the Warrant Certificate and the Warrant Agreement, surrenders this Warrant Certificate and all right, title and interest therein to the Company and directs that the shares of Common Stock deliverable upon the exercise of such Warrants be registered or placed in the name and at the address specified below and delivered thereto. Check method of exercise: Exercise at $[___] per share of Common Stock (subject to adjustment as provided in the Warrant Agreement): ___ Cashless Exercise: _____ Date: ------------------, ------- (1) - ------------------------------------------------------------- (Signature of Owner) (Street Address) - ------------------------------------------------------------- (City) (State) (Zip Code) Signature Guaranteed by: - ------------------------------------------------------------- Securities and/or check to be issued to: - -------------- (1) The signature must correspond with the name as written upon the face of the Warrant Certificate in every particular, without alteration or enlargement or any change whatever, and must be guaranteed by a national bank or trust company or by a member firm of any national securities exchange. Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: A new Warrant Certificate evidencing any unexercised Warrants evidenced by the within Warrant Certificate is to be issued to: Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: Schedule A Purchaser Committed Investment Amounts Camden Partners Strategic Fund II-A, L.P. $ 5,192,000.00 One South Street, Suite 2150 Baltimore, Maryland 21202 Attn: Mr. David L. Warnock Camden Partners Strategic Fund II-B, L.P. $ 308,000.00 One South Street, Suite 2150 Baltimore, Maryland 21202 Attn: Mr. David L. Warnock Cahill, Warnock Strategic Partners Fund, L.P. $ 4,410,000.00 One South Street, Suite 2150 Baltimore, Maryland 21202 Attn: Mr. David L. Warnock Strategic Associates, L.P. $ 90,000.00 One South Street, Suite 2150 Baltimore, Maryland 21202 Attn: Mr. David L. Warnock TOTAL: $10,000,000.00 ASSIGNMENT FORM To assign this Warrant, fill in the form below: I or we assign and transfer this Warrant to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Warrant on the books of the Company. The agent may substitute another to act for him. - ----------------------------------------------------------------- Date: Your Signature: ----------------- ----------------------------------------- - -------------- (1) The signature must correspond with the name as written upon the face of the Warrant Certificate in every particular, without alteration or enlargement or any change whatever, and must be guaranteed by a national bank or trust company or by a member firm of any national securities exchange. TABLE OF CONTENTS Page ARTICLE I Definitions.........................................................1 Section 1.01. Definitions....................................................1 Section 1.02. Other Definitions..............................................4 Section 1.03. Rules of Construction..........................................4 ARTICLE II Warrant Certificates...............................................5 Section 2.01. Issuance of Warrants...........................................5 Section 2.02. Reduction of Initial Warrants Upon Repayment in Full...........5 Section 2.03. Reduction of Initial Warrants upon Partial Prepayment..........5 Section 2.04. Reduction of Initial Warrants upon Full Prepayment Following Partial Prepayment...................................5 Section 2.05. Issuance of Additional Warrants................................6 Section 2.06. Multiple Warrantholders........................................6 Section 2.07. Form and Dating................................................6 Section 2.08. Execution and Countersignature.................................6 Section 2.09. Warrant Registrar..............................................6 Section 2.10. Transfer and Exchange..........................................7 Section 2.11. Replacement Certificate........................................8 Section 2.12. Outstanding Warrants...........................................9 Section 2.13. Cancellation...................................................9 Section 2.14. Default........................................................9 ARTICLE III Exercise Terms....................................................9 Section 3.01. Exercise...................................................... 9 Section 3.02. Time of Exercise; Separability................................ 9 Section 3.03. Expiration....................................................10 Section 3.04. Manner of Exercise............................................10 Section 3.05. Issuance of Warrant Shares....................................11 Section 3.06. Fractional Warrant Shares.....................................11 Section 3.07. Reservation of Warrant Shares.................................11 Section 3.08. No Dilution or Impairment.....................................12 ARTICLE IV ANTIDILUTION PROVISIONS...........................................12 Section 4.01. General.......................................................12 Section 4.02. Adjustment for Common Stock Dividends.........................12 Section 4.03. Adjustment for Issuances of Common Stock, Options, Warrants, Rights and Convertible or Exchangeable Securities....................................................12 Section 4.04. Adjustment upon Subdivision, Reclassification or Combination of Common Stock...................................13 Section 4.05. Adjustments for Mergers, Consolidations, etc..................14 Section 4.06. Other Events..................................................14 Section 4.07. Certain Definitions...........................................14 Section 4.08. Deferral of Certain Adjustments...............................15 Section 4.09. Officers Certificate; Notice of Adjustment....................15 Section 4.10. Right to Delay Issuance of Incremental Common Stock...........15 Section 4.11. Treasury Shares Disregarded...................................15 Section 4.12. No Adjustment for Certain Issuances...........................15 Section 4.13. Notice of Certain Adjustments.................................16 Section 4.14. Adjustment to Warrant Certificate.............................16 ARTICLE V Miscellaneous......................................................16 Section 5.01. Persons Benefiting............................................16 Section 5.02. Rights of Warrantholders......................................17 Section 5.03. Amendment.....................................................17 Section 5.04. Notices.......................................................17 Section 5.05. Governing Law.................................................18 Section 5.06. Successors....................................................18 Section 5.07. Multiple Originals; Fax Signatures............................18 Section 5.08. Table of Contents.............................................18 Section 5.09. Severability..................................................18 EX-99 7 aalaska_announcement.txt EXHIBIT 99.1 infocrossing Media Relations: Investor Relations: Michael Bendit William Fischer Infocrossing, Inc. Infocrossing, Inc. 201-840-4780 201-840-4946 mbendit@infocrossing.com wfischer@infocrossing.com - ------------------------ ------------------------- INFOCROSSING ACQUIRES AMQUEST FOR $20 MILLION IN CASH Acquisition Strengthens Infocrossing's Position as a Leader in Providing Mission-Critical IT Outsourcing Solutions LEONIA, N.J., February 6, 2002--Infocrossing, Inc. (Nasdaq: IFOX), announced today the acquisition of AmQUEST, Inc., the Atlanta, Georgia based IT outsourcing subsidiary of American Software, Inc. (Nasdaq: AMSWA), for approximately $20 million in cash. The acquisition will combine two highly complimentary businesses and will allow Infocrossing and its customers to benefit from increased scale, enhanced services and expanded geographic reach. The combination strengthens Infocrossing's position as one of the leading providers of IT outsourcing solutions for large to mid-size companies and will enable the Company to continue its aggressive growth strategy. The combined entity is anticipated to have projected 2002 revenue of approximately $50 million, over 200 customers, and a broad array of high-availability mainframe, midrange and open system outsourcing solutions. Infocrossing expects to realize significant cost savings from the combination of the two businesses and expects the acquisition to be accretive in 2002. "The synergies between Infocrossing and AmQUEST make this an ideal combination," stated Zach Lonstein, Chairman and CEO of Infocrossing. "Greater scale of the combined businesses enables us to cost effectively deploy the latest technology to more customers, yielding improvements in both operations and service offerings. This acquisition also enhances Infocrossing's capabilities in the mid-range computer outsourcing business and strengthens our position in the broader IT outsourcing market." Infocrossing and AmQUEST provide similar information technology services such as mainframe and open systems outsourcing, business continuity services, and systems and network management. Both companies also serve similar customers - large to mid-sized enterprises across a broad range of industries including financial services, security, publishing, healthcare, telecommunications and manufacturing. Roger Barrios, President of AmQUEST, commented, "We are very excited about joining Infocrossing. The increased financial and operational strength created through our combined companies will translate directly into benefits for our customers, who will continue to receive the high level of service they have come to expect from AmQUEST." "This acquisition is a major milestone for Infocrossing," said Mr. Lonstein. "We expect that the addition of AmQUEST's solid revenue base and operational efficiencies will accelerate our return to positive cash flow and create a firm foundation for future growth. Our goal is to continue to grow Infocrossing organically and through additional strategic acquisitions, to increase market share, and expand the scope of our offerings to customers. The Infocrossing and AmQUEST combination is a win-win for everyone involved - customers, shareholders and employees of both companies," Mr. Lonstein added. In a related transaction, the Company received $10 million of financing from Camden Partners. The financing is in the form of senior subordinated debentures and detachable warrants to purchase common stock of Infocrossing. The senior subordinated debentures have a maximum maturity of four years, with interest payable semiannually in cash or additional debentures, at the Company's option. The warrants have an exercise price of $5.86 per share. The remaining portion of the purchase price was financed from the Company's existing cash balance. David Warnock, General Partner of Camden Partners commented, "We believe that the combination of AmQUEST and Infocrossing creates a powerful platform addressing the security and economic issues related to IT investments. We are excited about expanding our long-standing relationship with Infocrossing." "The strong cash flow characteristics of this deal allowed us to obtain attractive financing terms. Camden is a great partner and has known the Company for a long time. We look forward to their continued involvement with Infocrossing," Mr. Lonstein concluded. Infocrossing will hold a teleconference to discuss the acquisition with the financial community on Monday, February 11, 2002 at 11:00 a.m. Eastern Time. Dial in: 1-888-694-4767 at least 10 minutes before the start of the call. A telephone replay will also be available for six weeks starting one hour after the conclusion of the teleconference. Interested persons may listen to the playback of the teleconference by calling the following toll-free number: 1-877-519-4471 and entering the access code number 3099657. About Infocrossing, Inc. (http://www.infocrossing.com) --------------------------- Infocrossing, Inc. is a premier provider of a full range of IT outsourcing services, including mainframe and open system outsourcing, remote systems and network management, business process outsourcing, and IT infrastructure consulting. With more than 17 years of experience managing large, mission-critical IT systems, Infocrossing assures the optimal performance, security, reliability and scalability of customers' mainframes, distributed servers and networks, irrespective of where the systems components are located. About American Software, Inc. (http://www.amsoftware.com) ------------------------- Headquartered in Atlanta, American Software, Inc. develops, markets and supports one of the industry's most comprehensive offering of integrated business applications, including enterprise-wide, supply chain management, Internet commerce, financial, warehouse management and manufacturing packages. Intelliprise(TM) is a total ERP/supply chain management suite, which leverages Internet connectivity and includes multiple manufacturing methodologies, full global capability and integrated data marts. American Software holds 85% ownership in Logility Inc., (NASDAQ: LGTY), a leading supplier of collaborative value chain planning solutions via the Internet. About Camden Partners, Inc. (http://www.camdenpartners.com) ----------------------------- Camden Partners, Inc. specializes in private equity and negotiated direct investments in emerging public and private companies. Camden Partners is dedicated to funding and participating in the growth of well-managed businesses across a broad range of industries, including business services, education, healthcare and technology. Portfolio companies include Blue Rhino Corporation (NASDAQ: RINO), Aradigm Corporation (NASDAQ: ARDM), Concorde Career Colleges, Inc. (OTCBB: CCDC) and Occupational Health + Rehabilitation Inc. (OTCBB: OHRI). 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; 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-99.2 8 a857674_ex99-2.txt GUARANTY AGREEMENT EXECUTION COPY GUARANTY AGREEMENT This GUARANTY AGREEMENT (the "Guaranty") is made and entered into as of February 1, 2002 by and among the subsidiaries of Infocrossing listed on Schedule A attached hereto (each a "Guarantor" and collectively, the "Guarantor(s)"), Infocrossing, Inc., a Delaware corporation ("Infocrossing"), Cahill Warnock Strategic Partners Fund, L.P., a Delaware limited partnership ("CW"), Strategic Associates, L.P., a Delaware limited partnership ("SA"), Camden Partners Strategic Fund II-A, L.P., a Delaware limited partnership ("Camden II-A"), and Camden Partners Strategic Fund II-B, L.P., a Delaware limited partnership ("Camden II-B" and, together with CW, SA, Camden II-A and Camden II-B, the "Purchasers"), WHEREAS, the Purchasers and Infocrossing (the parent company of the Guarantor(s)) are parties to that certain Securities Purchase Agreement, dated as of the date hereof (the "Purchase Agreement") providing for the issuance by Infocrossing to the Purchasers of the aggregate principal amount of $10 million in debentures (the "Debentures") and warrants to acquire common stock of Infocrossing (the "Warrants"); and WHEREAS, it is a condition of the consummation of the transactions contemplated by the Purchase Agreement that the Guarantor(s) enter into and deliver this Guaranty; and WHEREAS, the transactions contemplated by the Purchase Agreement are beneficial to the Guarantor(s) and it is in consideration for such benefits that the Guarantor(s) agrees to enter into this Guaranty. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: Defined terms used herein shall have the meaning set forth in the Purchase Agreement if not defined herein. ARTICLE I GUARANTEE Section 1.01. The Guarantee. The Guarantors hereby jointly and severally guarantee as a primary obligor and not as a surety to each Purchaser and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest (including any interest, fees, costs or charges that would accrue but for the provisions of the United States Federal Bankruptcy Code of 1978, as amended or supplemented from time to time (the "Bankruptcy Code") after any bankruptcy or insolvency petition under the Bankruptcy Code) on the Debentures issued to and held by the Purchasers from time to time owing to the Purchasers by Infocrossing under the Purchase Agreement, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "Guaranteed Obligations.") The Guarantors hereby jointly and severally agree that if Infocrossing shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. Subject to Section 1.03, the obligations of the Guarantors under this Section 1.01 shall terminate when all Guaranteed Obligations have been paid in full. Section 1.02. Obligations Unconditional. The obligations of the Guarantors under Section 1.01 are absolute, irrevocable and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of Infocrossing under the Debenture or the Purchase Agreement or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or Guarantor (except for payment in full). Without limiting the generality of the foregoing, the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder, which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above: (i) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of the Debenture or the Purchase Agreement or any other agreement or instrument referred to herein or therein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended in any respect, or any right under the Debenture or the Purchase Agreement or any other agreement or instrument referred to herein or therein shall be amended or waived in any respect or any other guarantee of any of the Guaranteed Obligations or any security therefore shall be released or exchanged in whole or in part or otherwise dealt with; (iv) any other Guarantor shall be released; or (v) any other Person shall become a guarantor of the Guaranteed Obligations. The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that any Purchaser thereof exhaust any right, power or remedy or proceed against Infocrossing under the Debenture or the Purchase Agreement or any other agreement or instrument referred to herein or therein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed 2 Obligations The Guarantors waive any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Purchaser upon this guarantee or acceptance of this guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this guarantee, and all dealings between Infocrossing and the Purchasers, shall likewise by conclusively presumed to have been had or consummated in reliance upon this guarantee. This guarantee shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by the Purchasers, and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Purchasers or any other Person at any time of any right or remedy against Infocrossing or against any other Person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral security or guarantee therefore or right of offset with respect thereto. This guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and the successors and assigns thereof, and shall inure to the benefit of the Purchasers, and their respective successors and assigns, notwithstanding that from time to time during the term of this Guaranty there may be no Guaranteed Obligations outstanding. Section 1.03. Reinstatement. The obligations of the Guarantors under this Guaranty shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of Infocrossing in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise. The Guarantors jointly and severally agree that they will indemnify each Purchaser on demand for all reasonable costs and expenses (including reasonable fees of counsel) incurred by such Purchaser 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 preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law, other than any costs or expenses resulting from the gross negligence or bad faith of such Purchaser. Section 1.04. Subrogation; Subordination. Each Guarantor hereby agrees that until the indefeasible payment and satisfaction in full in cash of all Guaranteed Obligations and the expiration and termination of the obligations of Infocrossing under the Debenture it shall not exercise any right or remedy arising by reason of any performance by it of its guarantee in Section 1.01, whether by subrogation or otherwise, against Infocrossing or any other Guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. The payment of any amounts due with respect to any indebtedness of Infocrossing or any other Guarantor now or hereafter owing to any Guarantor by reason of any payment by such Guarantor under this Guaranty is hereby subordinated to the prior indefeasible payment in full in cash of the Guaranteed Obligations. Each Guarantor agrees that it will not demand, sue for or otherwise attempt to collect any such indebtedness of Infocrossing to such Guarantor until the Guaranteed Obligations shall have been indefeasibly paid in full in cash. Section 1.05. The Guarantors jointly and severally agree that, as between the Guarantors and the Purchasers, the obligations of Infocrossing under the 3 Debenture and the Purchase Agreement may be declared to be forthwith due and payable as provided in Section 3.2 of the Debenture (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 3.2 of the Debenture) for purposes of Section 1.01, notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against Infocrossing and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by Infocrossing) shall forthwith become due and payable by the Guarantors for purposes of Section 1.01. Section 1.06. Instrument for the Payment of Money. Each Guarantor hereby acknowledges that the guarantee in this Guaranty constitutes an instrument for the payment of money, and consents and agrees that any Purchaser, as its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213. Section 1.07. Continuing Guarantee. The guarantee in this Guaranty is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising. Section 1.08. General Limitation on Guarantee Obligations. In any action or proceeding involving any state corporate law, or any state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 1.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors on account of the amount of its liability under Section 1.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Purchaser or any other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. Section 1.09. Limitation on Guaranty Amount. The obligations of the Guarantor hereunder shall be limited to an aggregate amount that is equal to the largest amount that would not render the obligations of the Guarantor hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of applicable law. Section 1.10. Additional Guarantors. Upon Infocrossing creating or acquiring any subsidiary after the date hereof (including as a result of the Proposed Acquisition (as defined in the Purchase Agreement)), each such subsidiary shall become a Guarantor by executing a counterpart signature page to this Agreement. At such time, Infocrossing shall revise Schedule A accordingly and such subsidiary shall have the rights and obligations of a Guarantor hereunder. 4 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS Each Guarantor hereby severally, and not jointly, represents and warrants to each Purchaser, as of the date hereof as follows: Section 2.01. Organization; Authorization; Enforceability. Such Guarantor is duly organized, validly existing and in good standing under the laws of its state of incorporation and has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted and as currently proposed to be conducted. Such Guarantor has all the necessary corporate or power and authority to execute, deliver and perform its obligations under this Guaranty and has taken all corporate action necessary to authorize the execution, delivery and performance by it of this Guaranty and to consummate the transactions contemplated hereby and thereby. No other corporate or stockholder proceedings on the part of such Guarantor are necessary for such authorization, execution, delivery and consummation. Such Guarantor has duly executed and delivered this Guaranty. The execution, delivery and performance of the transactions contemplated by this Guaranty and compliance with their provisions by the such Guarantor will not violate any provision of law and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, or require a consent or waiver under, the certificate of incorporation or bylaws of the Guarantor, or any indenture, lease, agreement or other instrument to which the Guarantor is a party or by which it or any of its properties is bound. This Guaranty constitutes a legal, valid and binding obligation of such Guarantor, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors' rights generally and to general equitable principles. Section 2.02. No Liens. The personal property, real property, intellectual property and assets of the Guarantor are free of all Liens. "Liens" shall mean, any mortgage, pledge, assessment, security interest, lease, sublease, lien, adverse claim, levy, charge, option, right of others or restriction (whether on voting, sale, transfer, disposition or otherwise) or other encumbrance of any kind. ARTICLE III COVENANTS Section 3.01. Covenants. Each Guarantor covenants and agrees to act in accordance with the covenants set forth in Article V of the Purchase Agreement and not to take any action prohibited by the negative covenants set forth in Article VI of the Purchase Agreement by substituting such Guarantor for each reference to the "Company" (and deleting references to "Subsidiaries") in Articles V and VI of the Purchase Agreement. ARTICLE IV MISCELLANEOUS Section 4.01. Termination. This Guaranty shall terminate upon the satisfaction in full by Infocrossing or the Guarantors of all of the Guaranteed Obligations. 5 Section 4.02. Governing Law. This Agreement shall be governed by, interpreted under, and construed in accordance with the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. Section 4.03. Modifications and Amendments. No amendment, modification or termination of this Guaranty shall be binding unless executed in writing by each Guarantor and each Purchaser. Section 4.04. Waivers and Extensions. The Purchasers may waive any condition, right, breach or default under this Guaranty, provided that such waiver will not be effective against the Purchasers unless it is in writing, is signed by each Purchaser, and specifically refers to this Agreement. Waivers may be made in advance or after the right waived has arisen or the breach or default waived has occurred. Any waiver may be conditional. No waiver of any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof nor of any other agreement or provision herein contained. No waiver or extension of time for performance of any obligations or acts shall be deemed a waiver or extension of the time for performance of any other obligations or acts. Section 4.05. Severability. This Guaranty shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Guaranty or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Guaranty a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable. Section 4.06. Counterparts; Fax Signatures. This Guaranty may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Any signature page delivered by a fax machine or telecopy machine shall be binding to the same extent as an original signature page, with regard to any agreement subject to the terms hereof or any amendment thereto. Any party who delivers such a signature page agrees to later deliver an original counterpart to any party which requests it. Section 4.07. Further Assurances. As between the Guarantors and the Purchasers, each party hereto, upon the request of any other party hereto, shall do all such further acts and execute, acknowledge and deliver all such further instruments and documents as may be necessary or desirable to carry out the transactions contemplated by this Guaranty. Section 4.08. Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted hereunder shall be in writing and shall be deemed given only if delivered personally or sent by telefax (with confirmation of transmission), by recognized courier service (with receipt acknowledged) or by registered or certified mail, postage prepaid, as follows: 6 (a) If to Guarantor or Infocrossing, to: 2 Christie Heights Street Leonia, NJ 07605 Attention: Zach Lonstein Fax: 201.840.7126 with a copy, which shall not constitute adequate notice, to: White & Case 1155 Avenue of the Americas New York, New York 10036 Fax: 212.354.8113 Attention: S. Ward Atterbury, Esq. (b) If to the Purchasers, to: Camden Partners, Inc. One South Street, Suite 2150 Baltimore, Maryland 21202 Attention: Mr. David L. Warnock Fax No.: 410.895.3805 with a copy, which shall not constitute adequate notice, to: Wilmer, Cutler & Pickering 100 Light Street, 13th Floor Baltimore, Maryland 21202 Attention: Jay Watkins, Esq. Fax: 410.986.2828 or such other address as the addressee may have specified in a notice duly given to the sender as provided herein. Such notice, request, demand, waiver, consent, approval or other communication shall be deemed to have been given as of the date so delivered personally or by courier, telefaxed or five (5) business days after deposited in the mail. (Signature page follows) 7 IN WITNESS WHEREOF, the parties hereto have executed this Guaranty as of the date first above written. ETG, INC. By: ---------------------------------------- Name: Zach Lonstein Title: Chief Executive Officer INFOCROSSING, INC. By: ---------------------------------------- Name: Zach Lonstein Title: Chief Executive Officer CAMDEN PARTNERS STRATEGIC FUND II-A, L.P. By: Camden Partners Strategic II, LLC, its General Partner By: ---------------------------------------- Name: David L. Warnock Title: Managing Member Address: Camden Partners One South Street, Suite 2150 Baltimore, MD 21201 Fax No.: (410) 895-3805 Attention: David L. Warnock CAMDEN PARTNERS STRATEGIC FUND II-B, L.P. By: Camden Partners Strategic II, LLC, its General Partner By: ---------------------------------------- Name: David L. Warnock Title: Managing Member Address: Camden Partners One South Street, Suite 2150 Baltimore, MD 21201 Fax No.: (410) 895-3805 Attention: David L. Warnock CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: Cahill, Warnock Strategic Partners, L.P., its General Partner By: ---------------------------------------- Name: David L. Warnock Title: General Partner Address: Camden Partners One South Street, Suite 2150 Baltimore, MD 21201 Fax No.: (410) 895-3805 Attention: David L. Warnock STRATEGIC ASSOCIATES, L.P. By: Cahill, Warnock Strategic Partners, L.P., its General Partner By: ---------------------------------------- Name: David L. Warnock Title: General Partner Address: Camden Partners One South Street, Suite 2150 Baltimore, MD 21201 Fax No.: (410) 895-3805 Attention: David L. Warnock Schedule A Guarantors ETG, Inc., a Delaware corporation EX-99.3 9 a857817_ex99-3.txt MANAGEMENT RIGHTS LETTER EXECUTION COPY INFOCROSSING, INC. 2 Christie Heights Street Leonia, New Jersey 07605 February 1, 2002 Cahill, Warnock Strategic Partners Fund, L.P., Strategic Associates, L.P., Camden Partners Strategic Fund II-A, L.P., Camden Partners Strategic Fund II-B, L.P. One South Street Suite 2150 Baltimore, MD 21201 RE: Management Rights Ladies and Gentlemen: This letter will confirm our agreement that in connection with your purchase of $10.0 million principal amount Senior Subordinated Debentures due 2005 (the "Debentures"), together with warrants (the "Warrants") to purchase, initially, up to 2,000,000 shares of common stock (subject to adjustment), par value $.01 per share (the "Common Stock") of Infocrossing, Inc. (the "Company"), you shall be entitled to the following contractual management rights, in addition to any rights to non-public financial information, inspection rights, and other rights specifically provided to you in the applicable financing instruments. 1. Each of you (the "Camden Group") shall be entitled to consult with and advise management of the Company on significant business issues, including management's proposed annual operating plans, and management will, upon your reasonable request, meet with each of you at reasonable intervals at the Company's facilities at mutually agreeable times for such consultation and advice and to review progress in achieving said plans. Without limitation to the foregoing, the Company will provide the Camden Group with (i) an annual budget and operating plan for each fiscal year, within a reasonable time (but in no event more than 5 business days) after the Company's management has first presented such budget and operating plan to the Company's Board of Directors (the "Board"); and (ii) a copy of each report, schedule and other document filed or received by any of them pursuant to the requirements of Federal or state securities laws. Page 2 2. Representatives of the Camden Group may, upon reasonable notice, during normal business hours, examine the books and records of the Company and inspect its facilities and may make reasonable requests for information at reasonable times and intervals concerning the general status of the Company's financial condition and operations. 3. The Company shall provide to the Camden Group (i) audited fiscal year-end financial statements, prepared by a national accounting firm; (ii) monthly financial statements (including revenue and gross profit information, year-to-date results, comparisons to previous year's results, for such period and comparisons to budget), together with a brief management executive summary report, and (iii) before each fiscal year-end, a copy of the Company's monthly budget for the next fiscal year and projections for the next three years in the same format as the financial statements. 4. If the Camden Group is represented on the Company's Board pursuant to the right granted in that certain Amended and Restated Stockholders Agreement, by and between the Company and the stockholders party thereto, of even date herewith (the "Stockholders' Agreement"), your representative Director may bring a visitor who is not a Board member to all meetings of the Board, except that the visitor may be excluded from access to any material or meeting or portion thereof if the Company believes, upon advice of counsel (which may be the Company's general counsel), that such exclusion is reasonably necessary to preserve the attorney-client privilege. If your representative Director will not attend a meeting of the Board, upon reasonable notice to the Board, the Camden Group may designate a substitute to attend that Board meeting as an observer and address the Board with respect to any business issues facing the Company except that the observer may be excluded from access to any material or meeting or portion thereof if the Company believes, upon advice of counsel (which may be the Company's general counsel). The Company shall provide to the Camden Group all notices and materials delivered to members of the Board, substantially concurrently with the delivery to the members of the Board. 5. If the Camden Group is not represented on the Board, the Company shall give a representative of the Camden Group copies of all notices, minutes, consents and other material that the Company provides to its directors and allow a representative of the Camden Group to attend all Board meetings as a visitor at the Company's reasonable expense, except that the representatives may be excluded from access to any material or meeting or portion thereof if the Company believes, upon advice of counsel (which may be the Company's general counsel), that such exclusion is reasonably necessary to preserve the attorney-client privilege. Upon reasonable notice and at a scheduled meeting of the Board, such representatives may address the Board with respect to the Camden Group's concerns regarding significant business issues facing the Company. The Company shall provide to the Camden Group all notices and materials delivered to members of the Board, substantially concurrently with the delivery to the members of the Board. Page 3 6. For so long as the Camden Group is either (A) represented on the Board pursuant to the right granted in the Stockholders Agreement; or (B) entitled to attend all Board meetings as a visitor in accordance with paragraph 5 hereof, the Company shall (i) maintain directors' and officers' insurance with policy limits and deductibles at least as favorable to the beneficiaries of such insurance as are currently maintained and otherwise on terms reasonably comparable to the coverage maintained by the Company on the date hereof, such insurance to be maintained with an insurer with an A.M. Best financial strength rating of "A-minus" or better; and (ii) the Company shall indemnify the Company's directors and officers to the fullest extent permitted under the General Corporation Law of the State of Delaware and shall enter into all such agreements and use its best efforts to obtain any necessary amendments to its Certificate of Incorporation or by-laws to give effect to this paragraph 6. 7. The Camden Group has agreed, and any representative the Camden Group may appoint will agree, to hold in confidence and trust and not use or disclose any confidential information provided to or learned by it in connection with your rights under this letter. The Camden Group acknowledges that it is aware (and that the representatives of the Camden Group who are apprised of this matter have been or will be advised) that the United States securities laws restrict persons with material non-public information about a company obtained directly or indirectly from that company from purchasing or selling securities of such company and from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. 8. The Company shall, upon reasonable notice, furnish to the Camden Group all information that the Camden Group may reasonably request to enable the Camden Group to file any form required by any governmental authority. 9. With respect to the Camden Group, the rights described herein shall terminate and be of no further force or effect with respect to you upon the earlier to occur of (i) there ceasing to be any indebtedness outstanding under the Debentures; and (ii) seven years from the date hereof. For the avoidance of doubt, the rights conferred to the Camden Group pursuant to this letter are separate rights and any member of the Camden Group may seek enforcement of said rights unless the rights terminate with respect to you in accordance with this paragraph 9. The confidentiality provisions hereof will survive any such termination. (Signature page follows) Very truly yours, INFOCROSSING, INC. By: ----------------------------------------- Name: Title: Acknowledged and agreed to this 1st day of February, 2002 CAHILL WARNOCK STRATEGIC CAMDEN PARTNERS STRATEGIC PARTNERS FUND, L.P. FUND II-A, L.P. By: Cahill, Warnock Strategic Partners, By: Camden Partners Strategic II, LLC, L.P., its General Partner its General Partner By: By: ------------------------------------- ------------------------------------ Name: David L. Warnock Name: David L. Warnock Title: Managing Member Title: Managing Member STRATEGIC ASSOCIATES, L.P. CAMDEN PARTNERS STRATEGIC FUND II-B, L.P. By: Cahill, Warnock Strategic Partners, By: Camden Partners Strategic II, LLC, L.P., its General Partner its General Partner By: By: ------------------------------------- ------------------------------------ Name: David L. Warnock Name: David L. Warnock Title: General Partner Title: General Partner
EX-99.4 10 a837614_ex99-4.txt REGISTRATION RIGHTS AGREEMENT EXECUTION COPY This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT ("Agreement"), is made as of February 1, 2002, by and among Infocrossing, Inc. (f/k/a Computer Outsourcing Services, Inc.), a Delaware corporation, (the "Company"), DB Capital Investors, L.P. (the "Initial DB Holder"), Sandler Capital Partners V, L.P., Sandler Capital Partners V FTE, L.P., Sandler Technology Partners, L.P. (f/k/a Sandler Internet Partners, L.P.), Sandler Co-Investment Partners, L.P., Price Family Limited Partners and Benake, L.P. (each an "Initial Sandler Holder" and, collectively, the "Initial Sandler Holders"), Zach Lonstein, a resident of the State of New York ("Lonstein") and Cahill Warnock Strategic Partners Fund, L.P., Strategic Associates, L.P., Camden Partners Strategic Fund II-A, L.P., and Camden Partners Strategic Fund II-B, L.P. (each an "Initial Camden Holder" and, collectively, the "Initial Camden Holders"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company and the Initial DB Holder and the Initial Sandler Holders have entered into, or have been assigned an interest in, a Securities Purchase Agreement dated April 7, 2000 (the "Securities Purchase Agreement"); and WHEREAS, pursuant to the terms of the Securities Purchase Agreement, the Initial DB Holder and the Initial Sandler Holders have collectively purchased, or have been assigned an interest in, (x) 157,377 shares (the "Shares") of the 8% Series A Cumulative Convertible Participating Preferred Stock of the Company (the "Series A Preferred Stock"), which such Shares are initially convertible into 1,573,770 shares of the Common Stock, par value $.01 per share, of the Company ("Common Stock"), subject to adjustment in accordance with the terms of the Series A Preferred Stock, and (y) Series A Common Stock Warrants (the "Warrants") to purchase, initially 2,531,926 shares of Common Stock, subject to adjustment in accordance with the terms of the Warrants; and WHEREAS, Lonstein is the holder of 1,673,349 shares of Common Stock (the "Lonstein Shares"); and WHEREAS, Lonstein has granted the Initial DB Holder and the Initial Sandler Holders an option (the "Option") to purchase up to 750,000 shares of Common Stock currently owned by Lonstein; and WHEREAS, on May 10, 2000, the Company, the Initial DB Holder, the Initial Sandler Holders and Lonstein entered into a Registration Rights Agreement (the "Initial Registration Rights Agreement") pursuant to which each of them was granted certain registration rights; and WHEREAS, the Company has entered into a Securities Purchase Agreement dated as of the date hereof (the "Camden Purchase Agreement"), and a Warrant Agreement dated as of the date hereof (the "Camden Warrant Agreement") with the Initial Camden Holders; and WHEREAS, pursuant to the terms of the Camden Purchase Agreement, the Company shall have authorized for sale, issue and delivery to the Initial Camden Holders an aggregate of (x) $10.0 million principal amount of Senior Subordinated Debentures due 2005 (the "Camden Debentures") and (y) warrants to purchase, initially 2,000,000 shares of Common Stock (the "Initial Camden Warrants") subject to adjustment in accordance with the terms of the Camden Warrants; and WHEREAS, pursuant to the terms of the Camden Warrant Agreement and the Camden Debentures, the Company may issue additional warrants to purchase Common Stock (the "Additional Camden Warrants") in lieu of cash payment of interest thereon; and WHEREAS, it is a condition to the consummation of the transactions contemplated by the Camden Purchase Agreement that the parties hereto execute and deliver this Agreement; and WHEREAS, the Company, the Initial DB Holder, the Initial Sandler Holders, Lonstein and the Intitial Camden Holders wish to amend and restate the Initial Registration Rights Agreement as set forth below; and WHEREAS, this Agreement replaces in its entirety the Initial Registration Rights Agreement. NOW THEREFORE, in consideration of the premises, mutual promises and covenants contained in this Agreement and intending to be legally bound, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01 Definitions. Terms defined in the Securities Purchase Agreement are used herein as therein defined. In addition, the following terms, as used herein, have the following meanings: "Additional Camden Warrants" has the meaning set forth in the eighth recital. "Agreement" has the meaning set forth in the preamble. "Camden Debentures" has the meaning set forth in the seventh recital. "Camden Holders" means the Initial Camden Holders, their direct and indirect successors and assigns and any direct or indirect transferee of any Registrable Securities initially held by any Initial Camden Holder. -2- "Camden Purchase Agreement" has the meaning set forth in the sixth recital. "Camden Warrant Agreement" has the meaning set forth in the sixth recital. "Camden Warrants" means all Initial Camden Warrants and all Additional Camden Warrants. "Camden Warrant Shares" means all shares of Common Stock or other securities issued upon the exercise of Camden Warrants. "Closing Date" means February 1, 2002. "Commission" means the Securities and Exchange Commission. "Common Stock" has the meaning set forth in the second recital. "Company" has the meaning set forth in the preamble. "Conversion Shares" means all shares of Common Stock or other securities issued upon the conversion of the Series A Preferred Stock in accordance with its terms. "Demand Registration" means a registration under the Securities Act requested in accordance with Section 2.01. "DB Holders" means the Initial DB Holder, its direct and indirect successors and assigns and any direct or indirect transferee of any Registrable Securities initially held by the Initial DB Holder. "Excluded Holders" has the meaning set forth in Section 2.01(f). "Holders" shall mean the DB Holders, the Sandler Holders, the Lonstein Holders and the Camden Holders. "Indemnified Party" has the meaning set forth in Section 4.03. "Indemnifying Party" has the meaning set forth in Section 4.03. "Initial Camden Holder" and "Initial Camden Holders" have the meanings set forth in the preamble. "Initial Camden Warrants" has the meaning set forth in the seventh recital. "Initial DB Holder" has the meaning set forth in the preamble. "Initial Sandler Holder" and "Initial Sandler Holders" have the meanings set forth in the preamble. -3- "Initial Holders" means the Initial DB Holder, the Initial Sandler Holders and the Initial Camden Holders. "Initial Registration Rights Agreement" shall have the meaning set forth in the fifth recital. "Lonstein" has the meaning set forth in the preamble. "Lonstein Holders" means Lonstein, his direct and indirect heirs, successors and assigns and any direct or indirect transferee of any Registrable Securities initially held by Lonstein. "Lonstein Shares" has the meaning set forth in the third recital. "Losses" has the meaning set forth in Section 4.01. "Material Adverse Effect" has the meaning set forth in Section 2.01(f). "Option" has the meaning set forth in the fourth recital. "Option Shares" means any shares of Common Stock or other securities issued upon the exercise of the Option. "Original Closing Date" means May 10, 2000. "Person" means any individual, partnership, joint venture, corporation, limited liability company, limited liability partnership, trust incorporated organization, government, or agency or political subdivision thereof, or other entity. "Piggyback Registration" has the meaning set forth in Section 2.02. "Registrable Camden Securities" means (a) any Registrable Common Stock acquired by any Camden Holder upon the exercise of any Registrable Camden Warrants and (b) any securities of the Company or any successor entity into which Registrable Common Stock or Registrable Camden Warrants may hereafter be reclassified, converted or changed. As to any particular Registrable Camden Securities, such securities shall cease to be Registrable Camden Securities upon the earlier to occur of (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of under such registration statement in accordance with the plan of distribution set forth therein; (ii) such securities shall have been transferred pursuant to Rule 144; (iii) such securities shall have been otherwise transferred or disposed of, and new certificates therefor not bearing a legend restricting further transfer shall have been delivered by the Company, and subsequent transfer of such securities shall not require registration or qualification under the Securities Act or any similar state law then in force, or (iv) such securities shall have ceased to be outstanding. -4- "Registrable Camden Warrants" means the Camden Warrants, together with any additional shares of Common Stock or other securities issued in respect thereof (other than any Camden Warrant Shares) in connection with any stock split, stock dividend, merger, consolidation, reclassification, recapitalization or other similar event with respect to such Camden Warrants. "Registrable Common Stock" means the Conversion Shares, the Warrant Shares, the Option Shares and the Camden Warrant Shares, in each case, together with any additional shares of Common Stock or other securities issued in respect thereof in connection with any stock split, stock dividend, merger, consolidation, reclassification, recapitalization or similar event with respect to such shares of Common Stock. "Registrable DB Securities" means (a) any Registrable Series A Preferred Stock purchased by any DB Holder on the Original Closing Date or thereafter acquired, (b) any Registrable Common Stock acquired by any DB Holder upon the conversion of any Registrable Series A Preferred Stock, the exercise of any Registrable Warrants or the exercise of the Option, (c) any Registrable Warrants purchased by any DB Holder on the Original Closing Date or thereafter acquired, and (d) any securities of the Company or any successor entity into which Registrable Common Stock, Registrable Warrants or Registrable Series A Preferred Stock may hereafter be reclassified, converted or changed. As to any particular Registrable DB Securities, such securities shall cease to be Registrable DB Securities upon the earlier to occur of (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of under such registration statement in accordance with the plan of distribution set forth therein; (ii) such securities shall have been transferred pursuant to Rule 144; (iii) such securities shall have been otherwise transferred or disposed of, and new certificates therefor not bearing a legend restricting further transfer shall have been delivered by the Company, and subsequent transfer of such securities shall not require registration or qualification under the Securities Act or any similar state law then in force, or (iv) such securities shall have ceased to be outstanding. "Registrable Lonstein Securities" means the Lonstein Shares (other than any Lonstein Shares subject to the Option), together with any additional shares of Common Stock or other securities issued in respect thereof in connection with any stock split, stock dividend, merger, consolidation, reclassification, recapitalization or similar event with respect to such shares of Common Stock. As to any particular Registrable Lonstein Securities, such securities shall cease to be Registrable Lonstein Securities upon the earlier to occur of (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of under such registration statement in accordance with the plan of distribution set forth therein; (ii) such securities shall have been transferred pursuant to Rule 144; (iii) such securities shall have been otherwise transferred or disposed of, and new certificates therefor not bearing a legend restricting further transfer shall have been delivered by the Company, and subsequent transfer of such securities shall not require registration or qualification under the Securities Act or any similar state law then in force, or (iv) such securities shall have ceased to be outstanding. -5- "Registrable Sandler Securities" means (a) any Registrable Series A Preferred Stock purchased by any Sandler Holder on the Original Closing Date or thereafter acquired, (b) any Registrable Common Stock acquired by any Sandler Holders upon the conversion of any Registrable Series A Preferred Stock, the exercise of any Registrable Warrants or the exercise of the Option, (c) any Registrable Warrants purchased by any Sandler Holder on the Original Closing Date or thereafter acquired, and (d) any securities of the Company or any successor entity into which Registrable Common Stock, Registrable Warrants or Registrable Series A Preferred Stock may hereafter be reclassified, converted or changed. As to any particular Registrable Sandler Securities, such securities shall cease to be Registrable Sandler Securities upon the earlier to occur of (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of under such registration statement in accordance with the plan of distribution set forth therein; (ii) such securities shall have been transferred pursuant to Rule 144; (iii) such securities shall have been otherwise transferred or disposed of, and new certificates therefor not bearing a legend restricting further transfer shall have been delivered by the Company, and subsequent transfer of such securities shall not require registration or qualification under the Securities Act or any similar state law then in force, or (iv) such securities shall have ceased to be outstanding. "Registrable Series A Preferred Stock" means the Shares, together with any additional shares of Series A Preferred Stock or other securities issued in respect thereof (other than any Conversion Shares) in connection with any stock split, stock dividend, merger, consolidation, reclassification, recapitalization or similar event with respect to such Shares. "Registrable Securities" means the Registrable DB Securities, the Registrable Sandler Securities, the Registrable Lonstein Securities and the Registrable Camden Securities. "Registrable Warrants" means the Warrants, together with any Warrants or other securities issued in respect thereof (other than any Warrant Shares) in connection with any stock split, stock dividend, merger, consolidation, reclassification, recapitalization or similar event with respect to such Warrants. "Requesting Holders" means the Holders requesting a Demand Registration, and shall include parties deemed "Requesting Holders" pursuant to Sections 2.01(a)(v), (vi), (vii) and (viii). "Rule 144" means Rule 144 (or any successor rule of similar effect) promulgated under the Securities Act. "Sandler Holders" means the Initial Sandler Holders, their direct and indirect successors and assigns and any direct or indirect transferee of any Registrable Securities initially held by any Initial Sandler Holder. "Securities Purchase Agreement" has the meaning set forth in the first recital. "Selling Holder" means any Holder who is selling Registrable Securities pursuant to a public offering registered hereunder. -6- "Series A Preferred Stock" has the meaning set forth in the second recital. "Shares" has the meaning set forth in the second recital. "Shelf Registration" means a Demand Registration which is effected pursuant to Rule 415 under the Securities Act. "Underwriter" means a securities dealer who purchases any Registrable Securities as principal in connection with a Demand Registration or a Piggyback Registration and not as part of such dealer's market-making activities. "Warrants" has the meaning set forth in the second recital. "Warrant Shares" means all shares of Common Stock or other securities issued upon the exercise of the Warrants. Section 1.02 Internal References. Unless the context indicates otherwise, references to Articles, Sections and paragraphs shall refer to the corresponding articles, sections and paragraphs in this Agreement, and references to the parties shall mean the parties to the Securities Purchase Agreement. ARTICLE II REGISTRATION RIGHTS Section 2.01 Demand Registration. (a) (i) Holders of not less than a majority of the Registrable DB Securities may make up to two written requests for a Demand Registration (of which such Demand Registrations, one may be a Shelf Registration) of all or any part of the Registrable DB Securities held by such DB Holders; provided that the DB Holders shall not be entitled to a Demand Registration if, during the 6 months preceding such request, the Holders have requested a Demand Registration (unless such Demand Registration was preempted pursuant to Section 2.01(e)). (ii) Holders of not less than a majority of the Registrable Sandler Securities may make up to two written requests for a Demand Registration (of which such Demand Registrations, one may be a Shelf Registration) of all or any part of the Registrable Sandler Securities held by such Sandler Holders; provided that the Sandler Holders shall not be entitled to a Demand Registration if, during the 6 months preceding such request, the Holders have requested a Demand Registration (unless such Demand Registration was preempted pursuant to Section 2.01(e)). (iii) Holders of not less than a majority of the Registrable Lonstein Securities may make up to two written requests for a Demand Registration of all or any part of the Registrable Lonstein Securities held by such Lonstein Holders; provided that (A) no such Demand Registration may be requested by the Lonstein Holders prior to the second anniversary of the Original Closing Date, and (B) the Lonstein Holders shall not be entitled to a Demand Registration if, during the 6 months preceding such request, the Holders have requested a -7- Demand Registration (unless such Demand Registration was preempted pursuant to Section 2.01(e)). (iv) Holders of not less than a majority of the Registrable Camden Securities may make one written request for a Demand Registration (of which such Demand Registration may be a Shelf Registration) of all or any part of the Registrable Camden Securities held by such Camden Holders; provided that (A) no such Demand Registration may be requested by the Camden Holders prior to the first anniversary of the Closing Date, and (B) the Camden Holders shall not be entitled to a Demand Registration if, during the 6 months preceding such request, the Holders have requested a Demand Registration (unless such Demand Registration was preempted pursuant to Section 2.01(e)). (v) Any request for a Demand Registration will specify the aggregate number of shares of Registrable Securities proposed to be sold by the Requesting Holders and will also specify the intended method of disposition thereof. Any such request for a Demand Registration shall specify whether such registration will be a Shelf Registration. For so long as the Initial DB Holder holds Registrable DB Securities, no Demand Registration made by any DB Holder shall be a Shelf Registration without the consent of the Initial DB Holder. For so long as the Initial Sandler Holders hold Registrable Sandler Securities, no Demand Registration made by any Sandler Holder shall be a Shelf Registration without the consent of a majority in interest of the Initial Sandler Holders. For so long as the Initial Camden Holders hold Registrable Camden Securities, no Demand Registration made by any Camden Holder shall be a Shelf Registration without the consent of a majority in interest of the Initial Camden Holders. A registration will not count as a Demand Registration until it has become effective. If the Requesting Holders withdraw or do not pursue the request for the Demand Registration (in each of the foregoing cases, provided that at such time the Company is in compliance in all material respects with its obligations under this Agreement), then such Demand Registration shall be deemed to have been effected, provided that (i) if, the Demand Registration does not become effective because a material adverse change has occurred, or is reasonably likely to occur, in the condition (financial or otherwise), business, properties, assets, liabilities, operations or prospects of the Company and its subsidiaries taken as a whole subsequent to the date of the written request made by the Requesting Holders or (ii) if, after the Demand Registration has become effective, an offering of Registrable Securities pursuant to a registration is interfered with by any stop order, injunction, or other order or requirement of the Commission or other governmental agency or court then the Demand Registration shall not be deemed to have been effected and will not count as a Demand Registration. (vi) Upon receipt of any request for a Demand Registration by Holders of not less than a majority of the Registrable DB Securities held by the DB Holders, the Company shall promptly (but in any event within ten (10) days) give written notice of such proposed Demand Registration to all other Holders, and subject to Section 2.01(f), all such Holders shall have the right, exercisable by written notice to the Company within twenty (20) days of their receipt of the Company's notice, to elect to include in such Demand Registration such portion of their Registrable Securities as they may request. All such Holders requesting to have their Registrable Securities included in a Demand Registration in accordance with the preceding sentence shall be deemed to be "Requesting Holders" for purposes of this Section 2.01; provided -8- that any Sandler Holders, any Lonstein Holders and any Camden Holders shall not be deemed to be "Requesting Holders" for purposes of Section 2.01(c). (vii) Upon receipt of any request for a Demand Registration by Holders of not less than a majority of the Registrable Sandler Securities held by the Sandler Holders, the Company shall promptly (but in any event within ten (10) days) give written notice of such proposed Demand Registration to all other Holders, and subject to Section 2.01(f), all such Holders shall have the right, exercisable by written notice to the Company within twenty (20) days of their receipt of the Company's notice, to elect to include in such Demand Registration such portion of their Registrable Securities as they may request. All such Holders requesting to have their Registrable Securities included in a Demand Registration in accordance with the preceding sentence shall be deemed to be "Requesting Holders" for purposes of this Section 2.01; provided that any DB Holders, any Lonstein Holders and any Camden Holders shall not be deemed to be "Requesting Holders" for purposes of Section 2.01(c). (viii) Upon receipt of any request for a Demand Registration by Holders of a majority of the Registrable Lonstein Securities held by the Lonstein Holders, the Company shall promptly (but in any event within ten (10) days) give written notice of such proposed Demand Registration to all other Holders, and subject to Section 2.01(f), all such Holders shall have the right, exercisable by written notice to the Company within twenty (20) days of their receipt of the Company's notice, to elect to include in such Demand Registration such portion of their Registrable Securities as they may request. All such Holders requesting to have their Registrable Securities included in a Demand Registration in accordance with the preceding sentence shall be deemed to be "Requesting Holders" for purposes of this Section 2.01; provided that any DB Holders, any Sandler Holders and any Camden Holders shall not be deemed to be "Requesting Holders" for purposes of Section 2.01(c). (ix) Upon receipt of any request for a Demand Registration by Holders of not less than a majority of the Registrable Camden Securities held by the Camden Holders, the Company shall promptly (but in any event within ten (10) days) give written notice of such proposed Demand Registration to all other Holders, and subject to Section 2.01(f), all such Holders shall have the right, exercisable by written notice to the Company within twenty (20) days of their receipt of the Company's notice, to elect to include in such Demand Registration such portion of their Registrable Securities as they may request. All such Holders requesting to have their Registrable Securities included in a Demand Registration in accordance with the preceding sentence shall be deemed to be "Requesting Holders" for purposes of this Section 2.01; provided that any DB Holders, any Sandler Holders and any Lonstein Holders shall not be deemed to be "Requesting Holders" for purposes of Section 2.01(c). (b) In the event that the Requesting Holders withdraw or do not pursue a request for a Demand Registration and, pursuant to Section 2.01(a) hereof, such Demand Registration is deemed to have been effected, the Holders may reacquire such Demand Registration (such that the withdrawal or failure to pursue a request will not count as a Demand Registration hereunder) if the Selling Holders reimburse the Company for any and all Registration Expenses actually incurred by the Company in connection with such request for a Demand Registration. -9- (c) If the Requesting Holders so elect, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of a "firm commitment" underwritten offering. A majority in interest of the Requesting Holders shall have the right to select the managing Underwriters and any additional investment bankers and managers to be used in connection with any offering under this Section 2.01, subject to the Company's approval, which approval shall not be unreasonably withheld. (d) The Requesting Holders will inform the Company of the time and manner of any disposition of Registrable Securities (which may be pursuant to a Shelf Registration), and agree to take reasonable action to cooperate with the Company in effecting the disposition of the Registrable Securities in a manner that does not unreasonably disrupt the public trading market for the Common Stock. (e) The Company shall have the right for up to 180 days in any consecutive 360 day period to delay or suspend any Demand Registration in the event that the Board determines, in good faith, that it is in the best interest of the Company for the Company to proceed with its own offering of equity securities. The Company may so proceed by delivering written notice (within five business days after the Company has received a request for such Demand Registration) of such intention to the Selling Holder indicating that the Company has identified a specific business need and use for the proceeds of the sale of such securities and the Company shall use its best efforts to effect a primary registration within 60 days of such notice. In the ensuing primary registration, the Holders will have such piggyback registration rights as are set forth in Section 2.02 hereof. Upon the Company's preemption of a requested Demand Registration, such requested registration will not count as the Holders' Demand Registration. The Company may exercise the right to preempt only once in any 360-day period. Notwithstanding anything to the contrary contained herein, during any 360-day period the Company shall not exercise its right to preempt, delay or postpone the filing or effectiveness of any registration statement, pre- or post-effective amendment or supplement or prospectus supplement pursuant to this Section 2.01(e), the first proviso to Section 3.01(a), or Section 3.01(b) for more than 180 days in the aggregate for all such provisions during any period of 360 consecutive days. (f) Priority on Demand Registrations. No securities to be sold for the account of any Person (including the Company) other than a Requesting Holder shall be included in a Demand Registration unless the managing Underwriter or Underwriters shall advise the Company and the Requesting Holders in writing that the inclusion of such securities will not materially and adversely affect the price, distribution or timing of the offering (a "Material Adverse Effect"). Any additional securities to be included in a Demand Registration pursuant to this Section 2.01(f) shall be included in such Demand Registration in accordance with their relative rights. Furthermore, in the event the managing Underwriter or Underwriters shall advise the Company or the Requesting Holders that even after exclusion of all securities of other Persons (including the Company) pursuant to the immediately preceding sentence, the amount of Registrable Securities proposed to be included in such Demand Registration by Requesting Holders is sufficiently large to cause a Material Adverse Effect, the Registrable Securities of the Requesting Holders to be included in such Demand Registration shall equal the number of shares which the Company and the Requesting Holders are so advised can be sold in such offering -10- without a Material Adverse Effect and such shares shall be allocated pro rata among the Requesting Holders on the basis of the number of Registrable Securities requested to be included in such registration by each such Requesting Holder; provided, however, that if any Registrable Securities requested to be registered pursuant to a Demand Registration under Section 2.01 are excluded from registration hereunder, then the Holder(s) having shares excluded ("Excluded Holders") shall have the right to withdraw all, or any part, of their shares from such registration; provided, further, that if less than 80% of the Registrable Securities requested to be included in such Demand Registration are actually included therein, such registration will not count as a Demand Registration for purposes of this Section 2.01. Section 2.02 Piggyback Registration. (a) If the Company at any time proposes to file a registration statement under the Securities Act with respect to an offering of securities for its own account or for the account of another Person (other than a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the Commission) and other than a Demand Registration hereunder), the Company shall give written notice of such proposed filing to the Holders at the address set forth in the share register of the Company as soon as reasonably practicable (but in no event less than 15 days before the anticipated date on which such registration will be first filed with the Commission), undertaking to provide each Holder the opportunity to register on the same terms and conditions such number and type of Registrable Securities as such Holder may request (a "Piggyback Registration"). Each Holder will have ten business days after receipt of any such notice to notify the Company as to whether it wishes to participate in a Piggyback Registration (which notice shall not be deemed to be a request for a Demand Registration); provided that should a Holder fail to provide timely notice to the Company, such Holder will forfeit any rights to participate in the Piggyback Registration with respect to such proposed offering. In the event that the registration statement is filed on behalf of a Person other than the Company, the Company will use its best efforts to have the shares of Registrable Securities that the Holders wish to sell included in the registration statement. If the Company shall determine in its sole discretion not to register or to delay the proposed offering, the Company shall provide written notice of such determination to the Holders and (i) in the case of a determination not to effect the proposed offering, shall thereupon be relieved of the obligation to register such Registrable Securities in connection therewith, and (ii) in the case of a determination to delay a proposed offering, shall thereupon be permitted to delay registering such Registrable Securities for the same period as the delay in respect of the proposed offering. As between the Company and the Selling Holders, the Company shall be entitled to select the Underwriters in connection with any Piggyback Registration. (b) Priority on Piggyback Registrations. If the Registrable Securities requested to be included in the Piggyback Registration by any Holder differ from the type of securities proposed to be registered by the Company and the managing Underwriter advises the Company that due solely to such differences the inclusion of such Registrable Securities would cause a Material Adverse Effect, then (i) the number of such Holders' Registrable Securities to be included in the Piggyback Registration shall be reduced to an amount which, in the opinion of the managing Underwriter, would eliminate such Material Adverse Effect or (ii) if no such reduction would, in the opinion of the managing Underwriter, eliminate such Material Adverse Effect, then the Company shall have the right to exclude all such Registrable Securities from such Piggyback Registration, provided that no other securities of such type are included and -11- offered for the account of any other Person in such Piggyback Registration. Any partial reduction in number of Registrable Securities of any Holder to be included in the Piggyback Registration pursuant to clause (i) of the immediately preceding sentence shall be effected pro rata based on the ratio which such Holder's requested shares bears to the total number of shares requested to be included in such Piggyback Registration by all Persons other than the Company who have the contractual right to request that their shares be included in such registration statement and who have requested that their shares be included. If the Registrable Securities requested to be included in the registration statement are of the same type as the securities being registered by the Company and the managing Underwriter advises the Company that the inclusion of such Registrable Securities would cause a Material Adverse Effect, the Company will be obligated to include in such registration statement, as to each Holder only a portion of the shares such Holder has requested be registered equal to the ratio which such Holder's requested shares bears to the total number of shares requested to be included in such registration statement by all Persons who have the contractual right to request that their shares be included in such registration statement and who have requested their shares be included; provided, however, that the provisions of this sentence shall not be applicable to the Person or Persons initiating such registration statement. If the Company initiated the registration, then the Company may include all of its securities in such registration statement before any such Holder's requested shares are included. If another security holder initiated the registration, then the Company may not include any of its securities in such registration statement unless all Registrable Securities requested to be included in the registration statement by all Holders are included in such registration statement. If as a result of the provisions of this Section 2.02(b) any Holder shall not be entitled to include all Registrable Securities in a registration that such Holder has requested to be so included, such Holder may withdraw such Holder's request to include Registrable Securities in such registration statement prior to its effectiveness. ARTICLE III REGISTRATION PROCEDURES Section 3.01 Filings; Information. In connection with the registration of Registrable Securities pursuant to Section 2.01 and Section 2.02 hereof, the Company will use its best efforts to effect the registration of such Registrable Securities as promptly as is reasonably practicable, and in connection with any such request: (a) The Company will expeditiously prepare and file as soon as practicable (but in any event within 60 days) with the Commission a registration statement on any form for which the Company then qualifies and which counsel for the Company shall deem appropriate and available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use its reasonable best efforts to cause such filed registration statement to become and remain effective (i) with respect to any Demand Registration (other than a Shelf Registration) or Piggyback Registration, for such period, not to exceed 120 days, as may be reasonably necessary to effect the sale of such securities and (ii) with respect to a Shelf Registration, until the earlier of the sale of all Registrable Securities thereunder and the end of the 36th calendar month from the time the second Shelf Registration becomes effective; provided -12- that if the Company shall furnish to the Selling Holder a certificate signed by the Company's Chairman or President stating that the Company's Board of Directors has determined in good faith that it would be detrimental or otherwise disadvantageous to the Company or its shareholders for such a registration statement to be filed as expeditiously as possible because the sale of Registrable Securities covered by such registration statement or the disclosure of information in any related prospectus or prospectus supplement would materially interfere with any acquisition, financing or other material event or transaction which is then intended or the public disclosure of which at the time would be materially prejudicial to the Company, the Company may postpone the filing or effectiveness of a registration statement for a period of not more than 180 days; provided, further, that the Company shall not exercise its right to preempt, delay or postpone any registration pursuant to Section 2.01(e), the first proviso to this Section 3.01(a), or Section 3.01(b) for more than 180 days in the aggregate for all such provisions during any period of 360 consecutive days; provided, further, that the Company may exercise its rights under Section 3.01(a) only once with respect to any particular registration statement; and provided, further, that if (i) the effective date of any registration statement filed pursuant to a Demand Registration would otherwise be at least 45 calendar days, but fewer than 90 calendar days, after the end of the Company's fiscal year, and (ii) the Securities Act requires the Company to include audited financial statements of the Company as of the end of such fiscal year, the Company may delay the effectiveness of such registration statement for such period as is reasonably necessary to include therein its audited financial statements for such fiscal year. (b) Anything in this Agreement to the contrary notwithstanding, it is understood and agreed that the Company shall not be required to keep any Shelf Registration effective or useable for offers and sales of the Registrable Securities, file a post effective amendment to a Shelf Registration statement or prospectus supplement or to supplement or amend any registration statement, if the Company is then involved in discussions concerning, or otherwise engaged in, any material financing or investment, acquisition or divestiture transaction or other material business purpose, if the Company determines in good faith that the making of such a filing, supplement or amendment at such time would interfere with such transaction or purpose. The Company shall promptly give the Holders of Registrable Securities written notice of such postponement containing a general statement of the reasons for such postponement and an approximation of the anticipated delay. Upon receipt by a Holder of Registrable Securities of notice of an event of the kind described in this Section 3.01(b), such Holder shall forthwith discontinue such Holder's disposition of Registrable Securities until such Holder's receipt of notice from the Company that such disposition may continue and of any supplemented or amended prospectus indicated in such notice. Notwithstanding anything to the contrary contained herein, the Company shall not be entitled to preempt, delay or postpone the filing or effectiveness of any registration statement, pre- or post-effective amendment or supplement to any registration statement or prospectus supplement pursuant to Section 2.01(e), the first proviso of Section 3.01(a), or this Section 3.01(b) for more than 180 days in the aggregate for all such provisions during any period of 360 consecutive days. -13- (c) Before filing a registration statement or prospectus or any amendments or supplements thereto, the Company will furnish to any Selling Holder and to the applicable managing Underwriters, if any, draft copies of all such documents proposed to be filed at least ten (10) business days prior thereto, which documents will be subject to the reasonable review of such Selling Holders, the applicable managing Underwriters, if any, and their respective counsel, agents and representatives, and the Company will not file any registration statement or amendment thereto or any prospectus or any supplement thereto (including such documents incorporated by reference) to which any Selling Holder or Underwriter shall reasonably object. (d) The Company will notify the Selling Holders requesting such registration and (if requested) confirm such advice in writing, as soon as practicable after notice thereof is received by the Company (i) when the registration statement or any amendment thereto has been filed or becomes effective, the prospectus or any amendment or supplement to the prospectus has been filed, (ii) of any request by the Commission for amendments or supplements to the registration statement or the prospectus or for additional information, (iii) if at any time the representations and warranties contemplated by Section 5.01 cease to be true and correct and (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. (e) After the filing of the registration statement, the Company will promptly notify the Selling Holders of any stop order issued, or, to the Company's knowledge, threatened to be issued, by the Commission and use its best efforts to prevent the entry of such stop order or to remove it if entered. (f) The Company will prepare and file with the Commission such amendments, post-effective amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than 120 days (or such shorter period which will terminate when all Registrable Securities covered by such registration statement have been sold or withdrawn, but not prior to the expiration of the applicable period referred to in Section 4(3) of the Securities Act and Rule 174 thereunder, if applicable), cause the prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the Selling Holders set forth in such registration statement. (g) The Company will furnish to each Selling Holder requesting such registration and the managing Underwriter, if any, without charge, one signed copy and such number of conformed copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and any amendments or supplements thereto, any documents incorporated by reference therein and such other documents as any such Selling Holder or such managing Underwriter may reasonably request in order to facilitate the disposition of -14- the Registrable Securities (it being understood that the Company consents to the use of the prospectus (including the preliminary prospectus) and any amendment or supplement thereto by the Selling Holder requesting such registration and the managing Underwriter, if any, in connection with the offering and sale of the Registrable Securities covered by the prospectus or any amendment or supplement thereto). (h) The Company will use its best efforts to qualify the Registrable Securities for offer and sale under such other securities or blue sky laws of such jurisdictions in the United States as the Selling Holders reasonably request; keep each such registration or qualification (or exemption therefrom) effective during the period in which such registration statement is required to be kept effective; and do any and all other acts and things which may be reasonably necessary or advisable to enable each Selling Holder to consummate the disposition of the Registrable Securities owned by such Selling Holder in such jurisdictions; provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph 3.01(h), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction. (i) The Company will as promptly as is practicable notify the Selling Holders, at any time when a prospectus relating to the sale of the Registrable Securities is required by law to be delivered under the Securities Act, of the occurrence of any event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and promptly make available to the Selling Holders and to the Underwriters any such supplement or amendment. Upon receipt of any notice of the occurrence of any event of the kind described in the preceding sentence, Selling Holders will forthwith discontinue the offer and sale of Registrable Securities pursuant to the registration statement covering such Registrable Securities until receipt by the Selling Holders and the Underwriters of the copies of such supplemented or amended prospectus and, if so directed by the Company, the Selling Holders will deliver to the Company all copies, other than permanent file copies then in the possession of Selling Holders, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective as provided in Section 3.01(a) hereof by the number of days during the period from and including the date of the giving of such notice to the date when the Company shall make available to the Selling Holders such supplemented or amended prospectus. (j) The Company will enter into customary agreements (including an underwriting agreement in customary form, including customary representations, warranties, covenants, conditions and indemnities) and take such other actions as are required or reasonably requested by the Selling Holders or the managing Underwriter in order to expedite or facilitate the sale of such Registrable Securities. -15- (k) At the request of any Underwriter in connection with an underwritten offering the Company will furnish an opinion of counsel, addressed to the Underwriters, covering such customary matters as the managing Underwriter may reasonably request and (ii) a comfort letter or comfort letters (and updates thereof) from the Company's independent public accountants covering such customary matters as the managing Underwriter may reasonably request. (l) If requested by the managing Underwriter or any Selling Holder, the Company shall promptly incorporate in a prospectus supplement or post effective amendment such information as the managing Underwriter or any Selling Holder reasonably requests to be included therein, including without limitation, with respect to the Registrable Securities being sold by such Selling Holder, the purchase price being paid therefor by the Underwriters and with respect to any other terms of the underwritten offering of the Registrable Securities to be sold in such offering, and promptly make all required filings of such prospectus supplement or post effective amendment. (m) The Company shall promptly make available for inspection by any Selling Holder or Underwriter participating in any disposition pursuant to any registration statement, and any attorney, accountant or other agent or representative retained by any such Selling Holder or Underwriter, all financial and other records, pertinent corporate documents and properties of the Company, as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information requested by any such Selling Holder or Underwriter in connection with such registration statement. (n) The Company shall cause the Registrable Securities included in any registration statement to be (A) listed on each securities exchange, if any, on which similar securities issued by the Company are then listed, or (B) authorized to be quoted and/or listed (to the extent applicable) on the Nasdaq National Market if the Registrable Securities so qualify. (o) The Company shall provide a CUSIP number, registrar and transfer agent for the Registrable Securities included in any registration statement not later than the effective date of such registration statement. (p) The Company shall cooperate with each Selling Holder and each Underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (q) The Company shall during the period when the prospectus is required to be delivered under the Securities Act, promptly file all documents required to be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. (r) The Company will make generally available to its security holders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, -16- beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. (s) The Company will use its best efforts to cause all such Registrable Securities and, in the event of a public offering of Series A Preferred Stock, the Series A Preferred Stock (subject to applicable listing requirements), to be listed on each securities exchange or quoted on each inter-dealer quotation system on which the Common Stock is then listed or quoted. The Company may require Selling Holders promptly to furnish in writing to the Company such information regarding such Selling Holders, the plan of distribution of the Registrable Securities and other information as may be legally required in connection with such registration. Section 3.02 Registration Expenses. The Company will pay all registration expenses of the Selling Holders in connection with any Demand and/or Piggyback Registrations including but not limited to (i) registration and filing fees with the Commission and the National Association of Securities Dealers, Inc., (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) fees and expenses incurred in connection with the listing or quotation of the Registrable Securities, (v) fees and expenses of counsel to the Company and the reasonable fees and expenses of independent certified public accountants for the Company (including fees and expenses associated with the special audits or the delivery of comfort letters), (vi) the reasonable fees and expenses of any additional experts retained by the Company in connection with such registration, (vii) all roadshow costs and expenses not paid by the Underwriters, (viii) rating agency fees and (ix) fees and expenses of counsel to the holders of Registrable Securities. The Company will not be required to pay for any underwriting discounts and commissions attributable to the sale of Registrable Securities. ARTICLE IV INDEMNIFICATION AND CONTRIBUTION Section 4.01 Indemnification by the Company. The Company agrees to indemnify and hold harmless, to the fullest extent permitted by applicable law, each Selling Holder and its Affiliates and their respective officers, directors, partners, stockholders, members, employees, agents and representatives and each Person (if any) which controls a Selling Holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages, liabilities, costs and expenses (including attorneys, fees) (collectively, "Losses") caused by, arising out of, resulting from or related to any untrue statement or alleged untrue statement of a material fact contained in any registration statement, preliminary prospectus or prospectus relating to the Registrable Securities (as amended or supplemented from time to time), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such Losses are caused by or contained in or based upon any information furnished in writing to the Company by or on behalf of such Selling Holder or any Underwriter expressly for use therein (which was not subsequently corrected in writing prior to or concurrently with the sale of Registrable Securities to the Person asserting the Loss) or by the Selling Holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished the Selling Holder with copies of the same. The Company also agrees to indemnify any Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters on substantially the same basis as that of the indemnification of the Selling Holders provided in this Section 4.01. Notwithstanding the foregoing, the Company shall have no obligation to indemnify under this Section 4.01 to the extent any such Losses have been finally and non-appealably determined by a court of competent jurisdiction to have resulted from a Selling Holder's or Underwriter's willful misconduct or gross negligence. Section 4.02 Indemnification by Selling Holders. The Selling Holders agree to indemnify and hold harmless, to the fullest extent permitted by applicable law, the Company and its Affiliates and their respective officers, directors, partners, stockholders, members, employees, agents and representatives and each Person (if any) which controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all Losses caused by, arising out of, resulting from or related to any untrue statement or alleged untrue statement of a material fact contained in any registration statement, preliminary prospectus or prospectus relating to the Registrable Securities (supplemented from time to time) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only insofar as such Losses are caused by or contained in or based upon any information furnished in writing to the Company by or on behalf of such Selling Holder or any Underwriter expressly for use therein (which was not subsequently corrected in writing prior to or concurrently with the sale of Registrable Securities to the Person asserting the Loss). Notwithstanding the foregoing, the Selling Holder shall have no obligation to indemnify under this Section 4.02 to the extent that any such Losses have been finally and non-appealably determined by a court of competent jurisdiction to have resulted from the Company's willful misconduct or gross negligence. Section 4.03 Conduct of Indemnification Proceedings. In case any proceeding (including any governmental investigation) shall be instituted or threatened involving any Person in respect of which indemnity may be sought pursuant to Section 4.01 or Section 4.02, such Person (the "Indemnified Party") shall promptly notify the Person against whom such indemnity may be sought (the "Indemnifying Party") in writing (it being understood that the failure to give such notice shall not relieve any Indemnifying Party from any liability which it may have hereunder except to the extent the Indemnifying Party is actually and materially prejudiced by such failure) and the Indemnifying Party, upon the request of the Indemnified Party, shall retain counsel reasonably satisfactory to such Indemnified Party to represent such Indemnified Party and any other Persons the Indemnifying Party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. If the Indemnifying Party does not elect within 15 days after receipt of the notice required hereby to assume the defense of -18- any proceeding, the Indemnified Party may assume such defense with counsel of its choice at the cost and expense of the Indemnifying Party. In any such proceeding where the Indemnifying Party has assumed the defense, any Indemnified Party shall have the right to retain its own counsel and participate in the defense, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party and, in the opinion of counsel for the Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential conflicting interests between them or there exist defenses available to the Indemnified Party which are not available to the Indemnifying Party. It is understood that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel for each such jurisdiction) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by the Indemnified Parties. The Indemnifying Party shall not settle any claim or proceeding without the written consent of the Indemnified Party, unless such settlement (x) requires no relief or penalty other than the payment of money damages, (y) does not require any Indemnified Party to admit culpability or fault in any respect and (z) contains a full and complete release of the Indemnified Party with respect to all matters arising from the facts giving rise to the underlying claim or proceeding. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent (not to be unreasonably withheld), or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Section 4.04 Contribution. If the indemnification provided for in this Article IV is unavailable to an Indemnified Party in respect of any Losses in respect of which indemnity is to be provided hereunder, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall to the fullest extent permitted by law contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of such party in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of the Company, each Selling Holder and the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each Selling Holder agrees that it would not be just and equitable if contribution pursuant to this Section 4.04 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the Losses referred to in the immediately preceding paragraph shall be deemed to include, subject to the -19- limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Article IV, no Selling Holder shall be required to indemnify for or contribute any amount in excess of the amount by which the net proceeds of the offering received by such Selling Holder exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. ARTICLE V MISCELLANEOUS Section 5.01 Participation in Underwritten Registrations. No Person may participate in any underwritten registered offering contemplated hereunder unless such Person (a) agrees to sell its securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements, (b) completes and executes all questionnaires, powers of attorney, custody arrangements, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and this Agreement and (c) furnishes in writing to the Company such information regarding such Person, the plan of distribution of the Registrable Securities and other information as the Company may from time to time request or as may be legally required in connection with such registration; provided, however, that no such Person shall be required to make any representations or warranties in connection with any such registration other than representations and warranties as to (i) such Person's ownership of his or its Registrable Securities to be sold or transferred free and clear of all liens, claims and encumbrances, (ii) such Person's power and authority to effect such transfer and (iii) such matters pertaining to compliance with securities laws as may be reasonably requested; provided further, however, that the obligation of such Person to indemnify pursuant to any such underwriting agreements shall be several, not joint and several, among such Persons selling Registrable Securities, and the liability of each such Person will be in proportion to, and limited to, the net amount received by such Person from the sale of such Person's Registrable Securities pursuant to such registration. Section 5.02 Rule 144. The Company covenants that it will file any reports required to be filed by it under the Securities Act and the Exchange Act and that it will take such further action as the Holders may reasonably request to the extent required from time to time to enable the Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such reporting requirements. Section 5.03 Holdback Agreements. Each Holder agrees, in the event of an underwritten offering for the account of the Company not to offer, sell, contract to sell or otherwise dispose of any Registrable Securities, or any securities convertible into or -20- exchangeable or exercisable for such securities, including any sale pursuant to Rule 144 under the Securities Act (except as part of such underwritten offering), during the 14 days prior to, and during the 120 day period (or such lesser period as the lead or managing underwriters may require) beginning on, the effective date of the registration statement for such underwritten offering (or, in the case of an offering pursuant to an effective shelf registration statement pursuant to Rule 415, the pricing date for such underwritten offering). Section 5.04 Termination. The registration rights granted under this Agreement will terminate at such time as there shall no longer be any Registrable Securities. Section 5.05 Amendments, Waivers, Etc. This Agreement may not be amended, waived or otherwise modified or terminated except by an instrument in writing signed by the Company and Holders of at least 66-2/3% of the Registrable Securities then held by all Holders, if the amendment is to be effective against the Holders, provided that to the extent such amendment, waiver, discharge or termination could reasonably be expected to adversely affect the rights of a particular Holder or class of Holders in a manner different from its effect on all other Holders or classes of Holders, then such Holder (or a majority-in-interest determined by holdings of Registrable Securities on a fully-converted basis) of such class of Holders, as the case may be, must consent to such amendment, waiver, discharge or termination. Section 5.06 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement. Each party need not sign the same counterpart. Section 5.07 Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. Section 5.08 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. Section 5.09 Assignment of Registration Rights. Each Holder of the Registrable Securities may assign all or any part of its rights under this Agreement to any Person to whom such Holder sells, transfers or assigns such Registrable Securities. In the event that the Holder shall assign its rights pursuant to this Agreement in connection with the transfer of less than all its Registrable Securities, the Holder shall also retain his rights with respect to its remaining Registrable Securities. Section 5.10 Specific Performance. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by the Holders by reason of any breach by it of the provisions of this Agreement and hereby agrees that the Holders, in addition to any remedies which they may have at law, including monetary damages, will be entitled to the remedy of specific performance. Section 5.11 No Superior Registration Rights. The Company will not grant registration rights superior to those of the Holders pursuant to this Agreement. -21- IN WITNESS WHEREOF, the Company and The Holders have caused this Agreement to be signed on its behalf by its officer thereunto duly authorized as of the date first written above. INFOCROSSING, INC. By: ----------------------------------------- Name: Zach Lonstein Title: Chief Executive Officer DB CAPITAL INVESTORS, L.P. By: ----------------------------------------- Name: Title: DB Capital Partners, L.P., its General Partner By: ----------------------------------------- Name: Title: DB Capital Partners, Inc., its General Partner By: ----------------------------------------- Name: Title: SANDLER CAPITAL PARTNERS V, L.P. By: Sandler Investment Partners, L.P., General Partner By: Sandler Capital Management, General Partner By: MJDM Corp., a General Partner By: ----------------------------------------- Name: Title: Signature page to the Reg Rights Agreement NDLER CAPITAL PARNTERS V FTE, L.P. By: Sandler Investment Partners, L.P., General Partner By: Sandler Capital Management, General Partner By: MJDM Corp., a General Partner By: ----------------------------------------- Name: Title: SANDLER TECHNOLOGY PARTNERS, L.P. By: Sandler Investment Partners, L.P., General Partner By: Sandler Capital Management, General Partner By: MJDM Corp., a General Partner By: ----------------------------------------- Name: Title: SANDLER CO-INVESTMENT PARTNERS, L.P. By: Sandler Investment Partners, L.P. General Partner By: Sandler Capital Management, General Partner By: MJDM Corp., a General Partner By: ----------------------------------------- Name: Title: PRICE FAMILY LIMITED PARTNERS By: ----------------------------------------- Name: Title: Signature page to the Reg Rights Agreement BENAKE, L.P. By: ----------------------------------------- Name: Title: CAMDEN PARTNERS STRATEGIC FUND II-A, L.P.. By: Camden Partners Strategic II, LLC. its General Partner By: ----------------------------------------- Name: David L. Warnock Title: Managing Member CAMDEN PARTNERS STRATEGIC FUND II-B, L.P.. By: Camden Partners Strategic II, LL its General Partner By: ----------------------------------------- Name: David L. Warnock Title: Managing Member CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: Camden Partners Strategic II, LLC., its General Partner By: ----------------------------------------- Name: David L. Warnock Title: Managing Member STRATEGIC ASSOCIATES, L.P.. By: Camden Partners Strategic II, LLC., its General Partner By: ----------------------------------------- Name: David L. Warnock Title: Managing Member EX-99.5 11 a837686_ex99-5.txt STOCKHOLDER'S AGREEMENT EXECUTION COPY ================================================================================ SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT Dated as of February 1, 2002 By and Among INFOCROSSING, INC., DB CAPITAL INVESTORS, L.P., SANDLER CAPITAL PARTNERS V, L.P., SANDLER CAPITAL PARTNERS V FTE, L.P. SANDLER TECHNOLOGY PARTNERS, L.P., SANDLER CO-INVESTMENT PARTNERS, L.P., Cahill Warnock Strategic Partners Fund, L.P., Strategic Associates, L.P., Camden Partners Strategic Fund II-A, L.P., Camden Partners Strategic Fund II-B, L.P., THE MANAGEMENT STOCKHOLDERS LISTED ON SCHEDULE A HERETO and THE NON-MANAGEMENT STOCKHOLDERS LISTED ON SCHEDULE B HERETO ================================================================================ SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of February 1, 2002 by and among Infocrossing, Inc., a Delaware corporation (the "Company"), DB Capital Investors, L.P. ("DB Capital"), Sandler Capital Partners V, L.P., Sandler Capital Partners V FTE, L.P., Sandler Technology Partners, L.P., Sandler Co-Investment Partners, L.P. (each individually, a "Sandler Entity," and, collectively, the "Sandler Entities"1), Cahill Warnock Strategic Partners Fund, L.P., Strategic Associates, L.P., Camden Partners Strategic Fund II-A, L.P., and Camden Partners Strategic Fund II-B, L.P. (each individually, a "Camden Entity" and, collectively, the "Camden Entities"), the individuals listed on Schedule A hereto (each individually, a "Management Stockholder" and, collectively, the "Management Stockholders") and each of the Persons listed on Schedule B hereto (each, individually a "Non-Management Stockholder" and, collectively, the "Non-Management Stockholders") (each of DB Capital, each Sandler Entity, each Camden Entity, the Management Stockholders and the Non-Management Stockholders is hereinafter referred to as a "Stockholder"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Management Stockholders own shares of Common Stock, $0.01 par value of the Company (the "Common Stock"); and WHEREAS, pursuant to the terms of that certain Securities Purchase Agreement dated as of April 7, 2000 (the "Securities Purchase Agreement"), by and between the Company, DB Capital and the Sandler Entities, DB Capital and the Sandler Entities have acquired shares of 8% Series A Cumulative Convertible Participating Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock"), together with warrants (the "Warrants") to purchase Common Stock (the "Warrant Shares"); and WHEREAS, on May 10, 2000, the Company, and DB Capital, the Sandler Entities, the Management Stockholders party thereto and the Non-Management Stockholders party thereto (collectively the "Original Stockholders") entered into a Stockholders' Agreement (the "Original Stockholders' Agreement") pursuant to which each of them granted to the others certain rights in connection with the Series A Preferred Stock, Warrants, Warrant Shares and Common Stock then or thereafter owned by them as set forth therein and assumed certain obligations; and WHEREAS, on December 10, 2000, the Original Stockholders amended and restated the Original Stockholders' Agreement (the "Existing Stockholders' Agreement"); and WHEREAS, the Company has entered into a Securities Purchase Agreement dated as of the Closing Date (the "Camden Purchase Agreement") with the Camden Entities; and WHEREAS, pursuant to the terms of the Camden Purchase Agreement, the Company shall have authorized for sale, issue and delivery to the Camden Entities an aggregate of (x) $10.0 million principal amount of Senior Subordinated Debentures due 2005 (the "Camden Debentures"), together with (y) warrants (the "Initial Camden Warrants") to purchase, initially 2,000,000 shares of Common Stock (the "Initial Camden Warrant Shares") subject to adjustment in accordance with the terms of the Initial Camden Warrants and (z) warrants (the "Additional Camden Warrants" and, together with the Initial Camden Warrants, the "Camden Warrants") to purchase additional shares of Common Stock (the "Additional Camden Warrant Shares" and, together with the Initial Camden Warrant Shares, the "Camden Warrant Shares") (the Series A Preferred Stock, the Warrants, the Warrant Shares, the Camden Debentures, the Camden Warrants, the Camden Warrant Shares and the Common Stock are referred to herein, collectively as the "Securities) ; WHEREAS, the Company has entered into a Settlement and Release Agreement dated as of November 6, 2001 (the "Auster Settlement Agreement"), with Charles Auster (the "Exited Stockholder"), pursuant to which the Exited Stockholder has agreed to resign from his positions of President and Chief Executive Officer of the Company; WHEREAS, the requisite number of parties to the Existing Stockholders' Agreement have agreed to release the Exited Stockholder from his obligations under the Existing Stockholders' Agreement; WHEREAS, the Exited Stockholder has agreed to surrender his rights under the Existing Stockholders' Agreement; WHEREAS, the execution and delivery of this Agreement is a condition to the consummation of the transactions contemplated by the Camden Purchase Agreement; and WHEREAS, the Company, the Original Stockholders the Camden Entities and the Exited Stockholder wish to amend and restate in its entirety the Existing Stockholders' Agreement as set forth below. NOW, THEREFORE, in consideration of the mutual covenants herein set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree to amend and restate the Existing Stockholders' Agreement as follows: ARTICLE I CERTAIN DEFINITIONS Section 1.1 Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings: -2- (a) "Affiliate" means, with respect to (i) the Company, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, the Company; and (ii) the Camden Entities, any current or former members of or any general or limited partners or retired partners of any of the Camden Entities, or any Person or entity that directly or indirectly, through one or more intermediaries, controls, with the general partner of the Camden Entities, the Camden Entities. 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. (b) "Applicable Law" means (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 Commission recognized trading market on which securities issued by the Company or any of the Subsidiaries are listed or quoted. (c) "Board of Directors" or "Board" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. (d) "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting and/or non-voting) of such Person's capital stock, whether outstanding on the Original Closing Date or issued after the Original Closing Date, and any and all rights (other than any evidence of indebtedness), warrants or options exchangeable for or convertible into such capital stock. (e) "Change of Control" means the occurrence of any of the following 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 Company or (b) the Company consolidates with, or merges with or into, another Person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with, or merges with or into the Company, in any such event pursuant to a transaction in which the holders of the outstanding Voting Capital Stock of the Company immediately prior to such transaction hold less than 50% of the outstanding Voting Capital Stock of the surviving or transferee company or its parent company immediately after the transaction or 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" or "group" shall be deemed to have "beneficial ownership" of all securities that such "person" or "group" has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more -3- than 50% of the total Voting Capital Stock of the surviving or transferee company or its parent company immediately after the transaction as applicable or (c) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election by the Board of Directors or whose nomination for election by the stockholders of the Company 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 then in office or (d) any transaction subject to Rule 13e-3 under the Exchange Act if following such Rule 13e-3 transaction a Person owns more than 50% of the total Voting Capital Stock of the Company. (f) "Closing Date" means February 1, 2002. (g) "Commission" means the United States Securities and Exchange Commission. (h) "Exchange Act" means, as of any date, the Securities Exchange Act of 1934, as amended through such date, and the rules and regulations of the Commission promulgated thereunder in effect on such date. (i) "Governmental Authority" means (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 Commission recognized trading market on which securities issued by the Company or any of the Subsidiaries are listed or quoted. (j) "Holder" means the Person in whose name any of the Securities are registered. (k) "Lonstein" means Zach Lonstein. (l) "Option Agreements" means each of those certain Option Agreements dated as of the Original Closing Date between each of DB Capital and each of the Sandler Entities, on the one hand, and Lonstein, on the other hand. (m) "Original Closing Date" means May 10, 2000. (n) "Person" means any individual, partnership, corporation, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or agency or political subdivision thereof, or other entity. (o) "Registration Rights Agreement" means the Amended and Restated Registration Rights Agreement, to be dated as of the Closing Date to be entered into by and between the Company, DB Capital, the Sandler Entities, the Camden Entities, and Lonstein. -4- (p) "Securities Act" means, as of any date, the Securities Act of 1933, as amended through such date, and the rules and regulations of the Commission promulgated thereunder in effect on such date. (q) "Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other equity interests entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other managing authority thereof is at the time owned or controlled, directly or indirectly, by such Person and its Subsidiaries. (r) "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. ARTICLE II TRANSFER OF SHARES Section 2.1 Restrictions. (a) No Stockholder shall sell, assign, pledge, hypothecate, deposit in any voting trust, or in any manner, transfer or dispose of any of the Securities or any right or interest therein, to any Person (each such action, a "Transfer") except as permitted by this Agreement. (b) From and after the Closing Date, all certificates representing Securities held by any of the Stockholders shall bear a legend which shall state as follows: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS AGAINST TRANSFER SET FORTH IN A SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (THE "STOCKHOLDERS AGREEMENT") DATED AS OF FEBRUARY 1, 2002, AS MAY BE AMENDED FROM TIME TO TIME. A COPY OF SUCH STOCKHOLDERS AGREEMENT HAS BEEN FILED IN THE OFFICE OF THE COMPANY LOCATED AT 2 CHRISTIE HEIGHTS STREET, LEONIA, NEW JERSEY 07605, WHERE THE SAME MAY BE INSPECTED DAILY DURING BUSINESS HOURS. Notwithstanding the foregoing, any such certificates representing Securities issued prior to the Closing Date and bearing a legend required by the Original Stockholders' Agreement or the Existing Stockholder's Agreement shall not be required to be relegended. (c) In addition to the legend required by Section 2.1(b) above, all certificates representing Securities held by any of the Stockholders shall bear a legend which shall state as follows: -5- "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OTHER THAN PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS." (d) Promptly upon execution and delivery of this Agreement, each Stockholder shall deliver to the Secretary of the Company all certificates then held by such Stockholder representing Securities which do not have such legends affixed thereto as are required by this Section 2.1. The Company shall cause such legends to be affixed promptly to each of such certificates and such certificates to be returned promptly to the registered Holder thereof. The Company agrees that it will not cause or permit the Transfer of any Securities to be made on its books unless the Transfer is permitted by this Agreement and has been made in accordance with the terms hereof. (e) For so long as any indebtedness under the Camden Debentures remains outstanding, Lonstein shall not make a Transfer of more than 20% of the Securities beneficially owned by him, provided that such Transfer restriction shall not apply to any Transfer made by Lonstein pursuant to Sections 2.2(a)(i), (ii), (vi), (vii) and (ix) below (a "Permitted Lonstein Transfer"). Section 2.2 Permitted Transfers. (a) Notwithstanding anything to the contrary contained herein, a Stockholder may at any time effect any of the following Transfers (each a "Permitted Transfer" and each transferee, a "Permitted Transferee"): (i) A Stockholder's Transfer of any or all Securities owned by such Stockholder following such Stockholder's death by will or intestacy to such Stockholder's legal representative, heir or legatee. (ii) A Stockholder's Transfer of any or all Securities owned by such Stockholder as a gift or gifts during such Stockholder's lifetime to such Stockholder's spouse, children, grandchildren or a trust or other legal entity for the benefit of any Stockholder or any of the foregoing, provided that such Stockholder retains voting control of the Securities so transferred. (iii) With respect to the Management Stockholders prior to the second anniversary of the Original Closing Date, any Transfer approved in advance by the Board of Directors. (iv) With respect to any Management Stockholder, a Transfer of any or all Securities owned by such Management Stockholder (a) which occurs after the second anniversary of the Original Closing Date and (b) is (i) in any transaction in compliance with Rule 144 under the Securities Act or any successor rule or regulation; provided, however, that, without the consent of the Board of Directors of the Company, no -6- Management Stockholder shall Transfer an amount of Securities in any twelve month period which exceeds the number of such Securities which such Management Stockholder could permissibly sell under Rule 144(e)(1) under the Securities Act (whether or not such Management Stockholder is then subject to Rule 144(e)(1)), (ii) in any transaction exempt from the registration requirements of the Securities Act or (iii) pursuant to a registration statement. (v) With respect to any of DB Capital, any Sandler Entity, any Camden Entity or any Non-Management Stockholder, a Transfer of any or all Securities owned by it (a) to an Affiliate that has agreed in writing to be bound by the terms and provisions of Section 2.1 and 2.2 to the same extent that such party would be bound if it beneficially owned the Securities transferred to such Affiliate or (b) (i) in any transaction in compliance with Rule 144 under the Securities Act or any successor rule or regulation, (ii) in a transaction exempt from the registration requirements of the Securities Act or (iii) pursuant to a registration statement. (vi) With respect to any Management Stockholder, any transfer to any Person at any time after the date on which (x) the Company has terminated the employment of such Management Stockholder other than for cause or (y) such Management Stockholder has terminated his employment with the Company for "good reason" as defined in such Management Stockholder's employment agreement or consulting agreement with the Company (or if such Management Stockholder does not have an employment or consulting agreement with the Company or such employment agreement or consulting agreement does not define "good reason", as "good reason" is defined in Lonstein's employment agreement with the Company). (vii) A Transfer pursuant to a registered offering of securities which is effected pursuant to rights granted to the transferring Stockholder pursuant to the Registration Rights Agreement. (viii) A Transfer by a Stockholder to the Company. (ix) A Transfer by Lonstein to DB Capital or any Sandler Entity pursuant to any Option Agreement. (b) In any such Transfer referred to above in Section 2.2(a)(i), (ii) or (ix), the Permitted Transferee shall receive and hold such Securities subject to the provisions of this Agreement as if such Permitted Transferee were an original signatory hereto and such Permitted Transferee shall be deemed to be a party to this Agreement. (c) Not later than ten (10) days before effecting any Transfer of Securities, the Holder proposing to make such Transfer shall give notice to the Company (with a copy to DB Capital, the Sandler Entities and the Camden Entities) of such proposed Transfer, specifying the method of disposition and the amount of shares to be so Transferred (the "Transfer Notice"). -7- ARTICLE III BOARD OF DIRECTORS OF THE COMPANY Section 3.1 Board of Directors. (a) Each Stockholder agrees to vote all of the Securities held by such Stockholder (to the extent all such Securities are entitled to vote) so as to elect and maintain a Board composed of the following: (i) two people designated by Lonstein; provided that so long as Lonstein is the Chief Executive Officer of the Company one such designee shall be Lonstein, (ii) two people designated by DB Capital (the "DB Capital Directors"), (iii) two people designated by the Sandler Entities (the "Sandler Directors") and (iv) not less than three additional directors, each of whom shall be unaffiliated with the Company, designated by mutual consent of Lonstein, DB Capital and the Sandler Entities; provided that, for so long as any indebtedness under the Camden Debentures remains outstanding, the Camden Entities shall have the right to (x) designate one observer to attend and participate (but not vote) in each meeting of the Board of Directors at the Company's reasonable expense; (y) be notified of each regular or special meeting of the Board of Directors concurrently with notification given to the directors of the Company; and (z) receive all materials provided to directors concurrently with delivery to other directors (other than the Company's annual budget and operating plan for each fiscal year which shall be presented to such observer within a reasonable time (but, in no event, no more than five (5) business days) after the Company's management has first presented such budget and operating plan to the Board); provided, further, that, in the event that Lonstein is neither Chief Executive Officer nor Chairman of the Board of the Company, then David Warnock ("Warnock") will (A) be designated as a member of the Board of Directors and (B) be appointed to the nominating committee of the Board of Directors; provided, further, that, notwithstanding anything to the contrary herein, if the Chief Executive Officer of the Company has not been designated as a director of the Company pursuant to clause (i), (ii) or (iii) of this Section 3.1(a), then one of the persons designated as a director pursuant to this clause (iv) (other than Warnock) shall be the Chief Executive Officer of the Company. (b) In the event that any director designated by any Stockholder for any reason ceases to serve as a director during his term of office, the resulting vacancy on the Board shall be filled by a director designated by such Stockholder. Section 3.2 Election. Promptly upon the execution and delivery of this Agreement, the Stockholders shall take all such action as may be necessary (including, but not limited to, the removal of directors). ARTICLE IV CERTAIN DECISIONS Section 4.1 Series A Preferred Stock Directors Approval. The following acts, expenditures, decisions and obligations made or incurred by the Company shall require the prior written approval of the DB Capital Directors and the Sandler Directors: (a) the hiring or termination of any senior officers of the Company or any Subsidiary including, without limitation, with respect to the Company and Infocrossing, -8- Inc., the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, President or any officer reporting directly to the President, or Chief Executive Officer and, with respect to any other Subsidiary, the Chief Executive Officer, Chief Operating Officer or President; (b) approval of the Company's annual business plan, operating budget and capital budget; (c) any capital expenditure or series of related capital expenditures by the Company or any Subsidiary to the extent (i) not otherwise included in the approved annual capital budget or (ii) such expenditure or series of expenditures would cause, together with all other capital expenditures to such time, the Company's capital budget to be exceeded by $250,000 in the aggregate; (d) in a single transaction or series of related transactions, the consolidation or merger with or into, or sale, assignment, transfer, lease, conveyance or disposal of all or substantially all of the Company's assets to, any Person; the agreement to any plan of recapitalization; consent to, approval or recommendation of any tender offer for any class or series of the Company's Capital Stock or consent to, approval or recommendation of any Change of Control of, or action which is expected to result in a Change of Control of, the Company; or adoption of a plan of liquidation or the making of any payments in liquidation or with respect to the winding up of the Company; (e) the authorization or creation of, modification of the terms of or, increase in the authorized amount of any class or series of equity securities of the Company or the issuance or sale of any equity securities or any equity securities which are convertible or exchangeable into or exercisable for any equity securities of the Company, other than (i) compensatory or incentive stock options (or any shares of Common Stock issued upon the exercise thereof) issued pursuant to employee stock option plans of the Company which have been approved by the Board of Directors of the Company, (ii) issuances of Common Stock to employees, officers, directors and consultants of the Company, pursuant to employee benefit plans approved by the Board of Directors of the Company, or (iii) shares of Common Stock issued upon (x) the conversion of the Series A Preferred Stock or (y) the exercise of the Warrants or Camden Warrants. (f) the making, or permitting of any of the Subsidiaries to make, any acquisition or divestiture in which the total consideration exceeds $5,000,000; (g) incurring, guaranteeing or otherwise incurring or assuming any obligations or any indebtedness for borrowed money or capitalized leases (other than indebtedness of the Company to any of its wholly owned Subsidiaries or of any Subsidiary of the Company to the Company or any wholly owned Subsidiary of the Company) (other than trade payables in the ordinary course of business) in excess of $2,500,000 in the aggregate; (h) entering into any transaction with (including, without limitation, the purchase, lease or sale of any property of the rendering of or contracting for any services) -9- with any Affiliate (other than a wholly owned Subsidiary) of the Company; provided, that the Company may issue options or shares of Common Stock to Affiliates (other than wholly owned Subsidiaries) of the Company to the extent such options or shares are issued pursuant to the terms of employee benefit plans approved by the Board of Directors of the Company; and (i) increasing the number of options, shares of Common Stock, or other securities which may be granted under, or which are subject to or underlie any employee benefits plan of the Company or any Subsidiary, including, without limitation, any stock option plan, stock incentive plan, restricted stock plan, stock appreciation rights plan, phantom stock plan or other similar plan. Section 4.2 Certain Actions. Each Stockholder hereby agrees to take all such action as may be required to give effect to Section 4.1, including, but not limited to, the adoption by the Board of Directors of the Company of resolutions giving effect to such Section, and shall take all such action as may be necessary (including the removal of directors) to cause any Person designated by such Stockholder as a director pursuant to Article III hereof and cause such resolutions to be adopted. Section 4.3 Issuance of Camden Warrants. Each of DB Capital, each Sandler Entity and Lonstein, severally and jointly, covenants and agrees to vote, or cause the vote of, all shares of Voting Capital Stock of the Company and other voting securities of the Company and which such Person has voting control, and will take all other necessary or desirable actions within his, her or its control as a Stockholder of the Company (and not in any other capacity) to approve the issuance of all Camden Warrants in accordance with the terms thereof. ARTICLE V RIGHT OF CO-SALE; PREEMPTIVE RIGHTS Section 5.1 Co-Sale. (a) For so long as any indebtedness under the Camden Debentures remains outstanding and Lonstein is either the Chief Executive Officer or Chairman of the Board of Directors of the Company, if Lonstein proposes to sell Securities other than pursuant to a Permitted Lonstein Transfer, each of the Camden Entities shall have the right (the "Co-Sale Right"), exercisable upon written notice to the Company within ten (10) days following receipt of the Transfer Notice, to participate in Lonstein's proposed Transfer of Securities pursuant to the specified terms and conditions set forth in the Transfer Notice, provided that, Lonstein shall be permitted to sell up to 50,000 shares of Common Stock per year without giving such Transfer Notice to the Camden Entities. To the extent that any of the Camden Entities exercises such Co-Sale Right in accordance with the terms and conditions set forth below, the number of Camden Warrant Shares which such Camden Entity may transfer in such Transfer shall be subject to the following terms and conditions (and the number of Securities proposed to be sold by Lonstein shall be correspondingly reduced): (i) Calculation of Shares. Each of the Camden Entities may transfer all or any part of that number of Camden Warrant Shares then held by such Camden Entity equal to the product obtained by multiplying (x) the aggregate number of shares of -10- Common Stock covered by the Transfer Notice by (y) a fraction, the numerator of which is the number of Camden Warrant Shares then held by such Camden Entity (assuming the exercise of all the Camden Warrants) and the denominator of which is the total number of Camden Warrant Shares plus the number of shares of Common Stock then held by Lonstein on a fully-diluted basis (the "Co-Sale Shares"). (ii) Delivery of Certificates. Each of the Camden Entities may effect their participation in the Transfer by delivering to Lonstein for transfer to the Permitted Transferee one or more certificates, properly endorsed for transfer, which represent the number of Co-Sale Shares which such Camden Entities elect to be subject to such Transfer. (b) The certificates which the Camden Entities deliver to Lonstein pursuant to Section 5.1(a)(ii) shall be delivered by Lonstein to the Permitted Transferee in consummation of the Transfer pursuant to the terms and conditions specified in the Transfer Notice, and Lonstein shall promptly thereafter remit that portion of any proceeds to which the Camden Entities are entitled by reason of their participation in such Transfer. (c) The exercise or non-exercise of the rights of any of the Camden Entities hereunder to participate in one or more Transfers made by Lonstein shall not adversely affect their rights to participate in subsequent Transfers made by Lonstein to the extent of their remaining holdings of Camden Warrant Shares. (d) Any transferee or assignee of any Securities (including Camden Warrants and Camden Warrant Shares), regardless or whether the Transfer or assignment was made in compliance with this Agreement, shall receive and hold such Securities subject to all of the provisions and restrictions of Articles II and III. Section 5.2 Preemptive Rights. (a) The Company hereby grants to the Camden Entities the right to purchase, pro rata, "New Securities" (as defined in this Section 5.2) that the Company may, from time to time propose to sell and issue (such right, the "Preemptive Rights"). Such pro rata share, for purposes of such Preemptive Rights, is equal to the product obtained by multiplying (x) the aggregate number of New Securities to be issued by (y) a fraction, the numerator of which is the number of Camden Warrant Shares then held by the Camden Entities and the denominator of which is the total number of shares of Common Stock then outstanding on a fully-diluted basis. Such Preemptive Rights shall be subject to the following provisions: (b) "New Securities" shall be Common Stock (or any security convertible into Common Stock) issued by the Company after the date of this Agreement, other than shares of Common Stock issued or issuable: (i) to officers, directors or employees of, or consultants to, the corporation pursuant to a stock grant, stock option, restricted stock purchase agreement, stock appreciation right, option plan, purchase plan or other employee stock incentive program or agreement, in each case, where the grant of such options is approved by the Board of Directors ; (ii) upon conversion of shares of the Series A Preferred Stock; -11- (iii) upon the exercise of (x) Warrants and/or (y) Camden Warrants; (iv) (x) as a dividend or other distribution on the Series A Preferred Stock or (y) as a paid in kind interest payment made pursuant to the Camden Debentures; (v) pursuant to an underwritten public offering; (vi) pursuant to a consolidation of the Company with, or merger of the Company into, any other Person, or in case of any merger of another Person into the Company (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company), or in case of any sale, conveyance or transfer of all or substantially all the assets of the Company; (vii) to customers and suppliers of the Company; provided that such issuance is approved by a majority of the -------- Board of Directors; (viii) to banks, savings and loan associations, equipment lessors or other similar lending institutions in connection with such entities providing working capital credit facilities or equipment financing to the Company; provided that such arrangements are approved by a majority of the Board of Directors; and (ix) in any stock split, stock dividend, or like recapitalization. (c) In the event that the Company proposes to undertake an issuance of New Securities, it shall give the Camden Entities written notice of its intention, describing the price and the general terms upon which the Company proposes to issue the same. The Camden Entities shall have thirty (30) days after receipt of such notice to agree to purchase up to their pro rata share of such New Securities (determined pursuant to Section 5.2(a)) at the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased. (d) Whether or not any of the Camden Entities exercise their respective Preemptive Rights within the thirty (30) day period specified above, the Company shall have ninety (90) days thereafter to sell (or enter into an agreement pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within ninety (90) days from the date of said agreement) the New Securities at a price and upon terms no more favorable to the purchasers thereof than specified in the Company's notice. In the event the Company has not sold the New Securities within such 90-day period (or sold and issued New Securities in accordance with the foregoing within ninety (90) days from the date of such agreement) the Company shall not thereunder issue or sell any New Securities without first offering such New Securities to the Camden Entities in the manner provided above. The closing of the sale of New Securities to the Camden Entities and other purchasers shall occur simultaneously. (e) The Preemptive Rights shall terminate at such time as the Camden Entities cease to own, in aggregate, Camden Warrants to purchase at least 1,000,000 Camden Warrant Shares, subject to adjustment in connection with a stock split, stock dividend or like recapitalization. -12- ARTICLE VI MISCELLANEOUS Section 6.1 Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior arrangements or understandings (whether written or oral) with respect thereto. Section 6.2 Captions. The Article and Section captions used herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. Section 6.3 Counterparts. For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties hereto and each such executed counterpart shall be deemed to be an original instrument. Section 6.4 Notices. All notices, consents, requests, instructions, approvals and other communications provided for herein and all legal process in regard hereto shall be validly given, made or served, if in writing and delivered by personal delivery, overnight courier, telecopier or registered or certified mail, return-receipt requested and postage prepaid addressed as follows: If to the Company, to: Infocrossing, Inc. 2 Christie Heights Street Leonia, New Jersey 07605 Attention: Zach Lonstein, Chief Executive Officer Tel.: (201) 840-4717 Fax: (201) 840-7216 With a copy to: White & Case LLP 1155 Avenue of the Americas New York, New York 10036 Attention: S. Ward Atterbury, Esq. Tel.: (212) 819-8331 Fax: (212) 354-8113 if to DB Capital, to: c/o DB Capital Partners, L.P. 31 West 52nd Street 26th Floor New York, New York 10019 Attention: Tyler T. Zachem, Managing Director Tel.: (646) 324-2415 Fax: (646) 324-7842 With a copy to: White & Case LLP 1155 Avenue of the Americas New York, New York 10036 Attention: S. Ward Atterbury, Esq. Tel.: (212) 819-8331 Fax: (212) 354-8113 if to the Sandler Entities, to: c/o Sandler Capital Management 767 Fifth Avenue, 45th Floor New York, New York 10153 Attention: Rich Keller, Managing Director Tel: (212) 754-8100 Fax: (212) 826-0280 if to the Camden Entities, to: c/o Camden Partners, Inc. One South Street, Suite 2150 Baltimore, Maryland 21202 Attention: David Warnock Tel: (410) 895-3800 Fax: (410) 895-3805 With a copy to: Wilmer Cutler & Pickering 100 Light Street 13th Floor Baltimore, Maryland 21202 Attention: Jay Watkins, Esq. Tel: (410) 986-2800 Fax: (410) 986-2828 if to any of the Management Stockholders or Non-Management Stockholders, to the addresses set forth on the books and records of the Company. or to such other address as any such party hereto may, from time to time, designate in writing to all other parties hereto, and any such communication shall be deemed to be given, made or served as of the date so delivered or, in the case of any communication delivered by mail, as of the date so received. Secton 6.5 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Company, the Stockholders and their respective heirs, devisees, legal representatives, successors, permitted assigns and other permitted transferees. The rights of a Stockholder under this Agreement may not be assigned or otherwise conveyed by any Stockholder except in connection with a Transfer of shares which is in compliance with this Agreement. Section 6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO SUCH STATE'S CHOICE OF LAW PROVISIONS. Section 6.7 Submission to Jurisdiction. (a) Each of the parties hereto hereby irrevocably acknowledges and consents that any legal action or proceeding brought with respect to any of the obligations arising under or relating to this Agreement may be brought in the courts of the State of New York or in the United States District Court for the Southern District of New York, as the party bringing such action or proceeding may elect, and each of the parties hereto hereby irrevocably submits to and accepts with regard to any such action or proceeding, for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Subject to Section 6.7(b), the foregoing shall not limit the rights of any party to serve process in any other manner permitted by law. The foregoing consents to jurisdiction shall not constitute general consents to service of process in the State of New York for any purpose except as provided above and shall not be deemed to confer rights on any Person other than the respective parties to this Agreement. (b) Each of the parties hereto hereby waives any right it may have under the laws of any jurisdiction to commence by publication any legal action or proceeding with respect to this Agreement. To the fullest extent permitted by Applicable Law, each of the parties hereto hereby irrevocably waives the objection which it may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement in any of the -3- courts referred to in Section 6.7(a) and hereby further irrevocably waives any claim that any such court is not a convenient forum for any such suit, action or proceeding. (c) The parties hereto agree that any judgment obtained by any party hereto or its successors or assigns in any action, suit or proceeding referred to above may, in the discretion of such party (or its successors or assigns), be enforced in any jurisdiction, to the extent permitted by Applicable Law. (d) The parties hereto agree that the remedy at law for any breach of this Agreement may be inadequate and that should any dispute arise concerning the sale or disposition of any shares or the voting thereof or any other similar matter hereunder, this Agreement shall be enforceable in a court of equity by an injunction or a decree of specific performance. Such remedies shall, however, be cumulative and nonexclusive, and shall be in addition to any other remedies which the parties hereto may have. (e) The parties hereto agree that the prevailing party or parties, as the case may be, in any action, suit, arbitration or other proceeding arising out of or with respect to this Agreement or the transactions contemplated hereby shall be entitled to reimbursement of all costs of litigation, including reasonable attorneys' fees, from the non-prevailing party. For purposes of this Section 6.7(e), each of the "prevailing party" and the "non-prevailing party" in any action, suit, arbitration or other proceeding shall be the party designated as such by the court, arbitrator or other appropriate official presiding over such action, suit, arbitration or other proceeding, such determination to be made as a part of the judgment rendered thereby. Section 6.8 Benefits Only to Parties. Nothing expressed by or mentioned in this Agreement is intended or shall be construed to give any Person, other than the parties hereto and their respective successors or permitted assigns, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and their respective successors and permitted assigns, and for the benefit of no other Person. Section 6.9 Termination. This Agreement shall terminate upon the happening of any one of the following events: (a) with respect to all parties, the voluntary or involuntary dissolution of the Company; (b) with respect to DB Capital and the Sandler Entities only, upon each of DB Capital and the Sandler Entities ceasing to hold at least 25% of the shares of Common Stock (calculated assuming the conversion of the Series A Preferred Stock and the exercise of the Warrants) held by DB Capital or the Sandler Entities, as the case may be, on the Original Closing Date; (c) with respect to the Camden Entities only, upon the Camden Entities ceasing to own, in aggregate, Camden Warrants to purchase at least 1,000,000 Camden Warrant Shares, subject to adjustment in connection with a stock split, stock dividend or -16- like recapitalization and there ceasing to be any indebtedness outstanding under the Camden Debentures; and (d) with respect to all parties, upon the occurrence of the events specified in clauses (b) and (c) of this Section 6.5. Section 6.10 Sunset Provisions. (a) On the date on which Lonstein ceases to hold at least 50% of the shares of Common Stock (calculated assuming the exercise of all vested in-the-money stock options) held by Lonstein on the Original Closing Date, then the number of persons whom Lonstein shall have the right to designate to serve as directors of the Company under Section 3.1(a)(i) shall be reduced to one. On the date on which Lonstein ceases to hold at least 25% of the shares of Common Stock (calculated assuming the exercise of all vested in-the-money stock options) held by Lonstein on the Original Closing Date, Lonstein's right to designate Persons to serve as directors of the Company under Section 3.1(a)(i) and 3.1(a)(iv) shall terminate as of such date. (b) Upon the date on which DB Capital ceases to hold at least 25% of the shares of Common Stock (calculated assuming the conversion of the Series A Preferred Stock and the exercise of the Warrants) held by DB Capital on the Original Closing Date, then DB Capital's right to designate Persons to serve as directors of the Company under Section 3.1(a)(ii) and 3.1(a)(iv) and DB Capital's right to approve the actions specified under Section 4.1 shall terminate as of such date. (c) Upon the date on which the Sandler Entities and/or Sandler Capital Partners V FTE, L.P. cease to hold at least 25% of the shares of Common Stock (calculated assuming the conversion of the Series A Preferred Stock and the exercise of the Warrants) held by the Sandler Entities on the Original Closing Date, then the Sandler Entities' right to designate Persons to serve as directors of the Company under Section 3.1(a)(iii) and 3.1(a)(iv) and the Sandler Entities' right to approve the actions under Section 4.1 shall terminate as of such date. (d) Upon the date on which any indebtedness under the Camden Debentures ceases to remain outstanding, the Camden Entities' (i) rights to maintain an observer role or serve as a director of the Company under Section 3.1(a)(iv) and (ii) Co-Sale Right pursuant to Section 5.1 shall terminate as of such date. Upon the date on which the Camden Entities cease to own, in aggregate, Camden Warrants to purchase at least 1,000,000 Camden Warrant Shares, subject to adjustment in connection with a stock split, stock dividend or like recapitalization, the Camden Entities' Preemptive Rights pursuant to Section 5.2 shall terminate as of such date. Section 6.11 Publicity. Except as otherwise required by Applicable Laws, none of the parties hereto shall issue or cause to be issued any press release or make or cause to be made any other public statement in each case relating to or connected with or arising out of this Agreement or the matters contained herein, without obtaining the prior approval of DB Capital, a majority in interest of the Sandler Entities, a majority of interest of the Camden Entities (for so long as any indebtedness under the Camden Debentures remains outstanding) and the Company to the contents and the manner of presentation and publication thereof. -17- Section 6.12 Amendments; Waivers. No provision of this Agreement may be amended, modified or waived without approval of DB Capital, a majority in interest of the Sandler Entities, a majority in interest of the Camden Entities (for so long as any indebtedness under the Camden Debentures remains outstanding), the Company, 66-2/3% in interest of the Management Stockholders (calculated based on ownership of Common Stock) and 66-2/3% in interest of the Non-Management Stockholders (calculated based on ownership of Common Stock); provided that no such amendment or waiver of a provision of this Agreement which adversely affects the rights of any Stockholder in a manner that does not adversely affect all other Stockholders equally may be made without such Stockholder's consent; provided that (x) the Management Stockholders shall be considered as a group with the determination by the holders of 66-2/3% of the outstanding shares of Common Stock held by the Management Stockholders to be binding on all Management Stockholders and (y) the Non-Management Stockholders shall be considered as a group with the determination by the holders of 66-23% of the outstanding shares of Common Stock held by the Non-Management Stockholders to be binding on all Non-Management Stockholders; provided, further, that in no circumstances shall Article III or Article IV be amended, modified, waived or repealed without the express written consent of DB Capital and the Sandler Entities. Section 6.13 Effectiveness. This Agreement shall become effective upon the execution and delivery of this Agreement by each of DB Capital, the Sandler Entities, the Camden Entities, Lonstein, 66-2/3% of the Management Stockholders (including, without limitation, Lonstein) and 66-2/3% of the Non-Management Stockholders. Section 6.14 No Inconsistent Agreements. Each Stockholder hereby covenants and agrees that neither it nor any of its Affiliates shall enter into any voting agreement or grant a proxy or power of attorney with respect to the Securities it beneficially owns which is inconsistent with this Agreement. Section 6.15 Exited Stockholder. The Exited Stockholder hereby agrees to surrender his rights under the Existing Stockholders' Agreement and agrees that he shall have no rights under this Agreement. [SIGNATURE PAGE FOLLOWS] -18- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. INFOCROSSING, INC. By: -------------------------------- Name: Zach Lonstein Title: Chief Executive Officer DB CAPITAL INVESTORS, L.P. By: DB Capital Partners, L.P., its general partner By: DB Capital Partners, Inc., its general partner By: -------------------------------- Name: Title: Signature Page to the Stockholders Agreement SANDLER CAPITAL PARTNERS V, L.P. By: Sandler Investment Partners, L.P., General Partner By: Sandler Capital Management, General Partner By: MJDM Corp., a General Partner By: -------------------------------- Name: Moira Mitchell Title: President SANDLER CAPITAL PARTNERS V FTE, L.P. By: Sandler Investment Partners, L.P., General Partner By: Sandler Capital Management, General Partner By: MJDM Corp., a General Partner By: -------------------------------- Name: Moira Mitchell Title: President SANDLER TECHNOLOGY PARTNERS, L.P. By: Sandler Investment Partners, L.P., General Partner By: Sandler Capital Management, General Partner By: MJDM Corp., a General Partner By: -------------------------------- Name: Moira Mitchell Title: President Signature Page to the Stockholders Agreement SANDLER CO-INVESTMENT PARTNERS, L.P. By: Sandler Capital Management, General Partner By: MJDM Corp., a General Partner By: -------------------------------- Name: Moira Mitchell Title: President Signature Page to the Stockholders Agreement CAMDEN PARTNERS STRATEGIC FUND II-A, L.P. By: Camden Partners Strategic II, LLC, its General Partner By: -------------------------------- Name: David L. Warnock Title: Managing Member CAMDEN PARTNERS STRATEGIC FUND II-B, L.P. By: Camden Partners Strategic II, LLC, its General Partner By: -------------------------------- Name: David L. Warnock Title: Managing Member CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: Camden Partners Strategic II, LLC, its General Partner By: -------------------------------- Name: David L. Warnock Title: Managing Member Signature Page to the Stockholders Agreement STRATEGIC ASSOCIATES, L.P. By: Camden Partners Strategic II, LLC, its General Partner By: -------------------------------- Name: David L. Warnock Title: Managing Member Signature Page to the Stockholders Agreement MANAGEMENT STOCKHOLDERS ------------------------------------- Name: Zach Lonstein ------------------------------------- Name: Robert Wallach ------------------------------------- Name: Thomas Laudati ------------------------------------- Name: Kenneth DiSessa ------------------------------------- Name: Nicholas J. Letizia ------------------------------------- Name: Garry Lazarewicz ------------------------------------- Name: John C. Platt Signature Page to the Stockholders Agreement EXITED STOCKHOLDER ------------------------------------- Name: Charles Auster Signed solely for the purpose of acknowledgment of Section 6.15 above. Signature Page to the Stockholders Agreement NON-MANAGEMENT STOCKHOLDERS PRICE FAMILY LIMITED PARTNERS By: -------------------------------- Name: Title: BENAKE, L.P. By: -------------------------------- Name: Title: Signature Page to the Stockholders Agreement Management Stockholders: Zach Lonstein Robert Wallach Thomas Laudati Kenneth DiSessa Nicholas J. Letizia Garry Lazarewicz John C. Platt Non-Management Stockholders: Price Family Limited Partners Benake, L.P. TABLE OF CONTENTS Page ARTICLE I CERTAIN DEFINITIONS.........................................2 Section 1.1 Certain Definitions.........................................2 ARTICLE II TRANSFER OF SHARES..........................................5 Section 2.1 Restrictions................................................5 Section 2.2 Permitted Transfers.........................................6 ARTICLE III BOARD OF DIRECTORS OF THE COMPANY...........................8 Section 3.1 Board of Directors..........................................8 Section 3.2 Election....................................................8 ARTICLE IV CERTAIN DECISIONS...........................................8 Section 4.1 Series A Preferred Stock Directors Approval.................8 Section 4.2 Certain Actions............................................10 Section 4.3 Issuance of Camden Warrants................................10 ARTICLE V RIGHT OF CO-SALE; PREEMPTIVE RIGHTS........................10 Section 5.1 Co-Sale....................................................10 Section 5.2 Preemptive Rights..........................................11 ARTICLE VI MISCELLANEOUS..............................................13 Section 6.1 Entire Agreement...........................................13 Section 6.2 Captions...................................................13 Section 6.3 Counterparts...............................................13 Section 6.4 Notices....................................................13 Section 6.5 Successors and Assigns.....................................15 Section 6.6 GOVERNING LAW..............................................15 Section 6.7 Submission to Jurisdiction.................................15 Section 6.8 Benefits Only to Parties...................................16 Section 6.9 Termination................................................16 Section 6.10 Sunset Provisions..........................................17 Section 6.11 Publicity..................................................17 Section 6.12 Amendments; Waivers........................................18 Section 6.13 Effectiveness..............................................18 Section 6.14 No Inconsistent Agreements.................................18 Section 6.15 Exited Stockholder.........................................18 SCHEDULE A - Management Stockholders SCHEDULE B - Non-Management Stockholders EX-99.6 12 a836556_ex99-6.txt AGREEMENT LETTER EXECUTION COPY Sandler Capital Partners V, L.P. Sandler Capital Partners V FTE, L.P. Sandler Technology Partners, L.P. Sandler Co-investment Partners, L.P. DB Capital Partners c/o Sandler Capital Management 31 West 52nd Street, 26th Floor 767 Fifth Avenue, 45th Floor New York, New York 10019 New York, New York 10153 February 1, 2002 Camden Partners, Inc. One South Street, Suite 2150 Baltimore, Maryland 21201 Attn: Mr. David L. Warnock Dear Mr. Warnock: Reference is made to (i) that certain Warrant Agreement (the "Warrant Agreement"), dated as of May 10, 2000, by and between Infocrossing, Inc. (f/k/a Computer Outsourcing Services, Inc., the "Company"), DB Capital Investors, L.P. ("DB Capital"), Sandler Capital Partners V, L.P. ("Sandler V"), Sandler Capital Partners V FTE, L.P., Sandler Technology Partners, L.P. (f/k/a Sandler Internet Partners, L.P.) and Sandler Co-Investment Partners, L.P. (each a "Sandler Entity" and, collectively, the "Sandler Entities"), Price Family Limited Partners ("Price") and Benake L.P. ("Benake", and together with DB Capital, the Sandler Entities and Price the "Warrantholders") and (ii) that certain Certificate of Designation of the Powers, Preferences, and Other Special Rights of Series A Cumulative Convertible Participating Preferred Stock dated as of May 10, 2000 (the "Certificate of Designations"), issued pursuant to that certain Securities Purchase Agreement dated as of April 7, 2000, by and between the Company, DB Capital and the Sandler Entities (it being understood that Sandler Capital Partners IV, L.P. and Sandler Capital Partners IV FTE, L.P., both original parties to the Securities Purchase Agreement (as defined below), have transferred all of their rights, interests and obligations therein to one or more of the Sandler Entities) (the "Securities Purchase Agreement" and together with the Warrant Agreement and the Certificate of Designations, the "Transaction Documents"). Capitalized terms used herein and not otherwise defined herein shall have the same meanings herein as are ascribed to them in the Securities Purchase Agreement. Notwithstanding any contrary provision contained in the Transaction Documents, (i) each of the Warrantholders hereby agrees to defer the application of the anti-dilution protection otherwise provided pursuant to Article IV of the Warrant Agreement with respect to the Warrants and (ii) each of the Warrntholders hereby agrees to defer the application of the anti-dilution protection otherwise provided pursuant to Section 12 of the Certificate of Designations with respect to the 8% Series A Cumulative Convertible Participating Preferred Stock (the "Shares"), in each case, unless until and only to the extent that any of the warrants to purchase shares of Common Stock (the "Camden Warrants") issued to Camden Partners Strategic Fund II-A, L.P., Camden Partners Strategic Fund II-B, L.P., Cahill Warnock Strategic Partners Fund, and Strategic Associates, L.P. (each a "Camden Entity", and, collectively, the "Camden Entities") pursuant to that certain Warrant Agreement dated as of February 1, 2002, between the Company and the Camden Entities (the "Camden Warrant Agreement") become vested and not subject to cancellation (the "Vested Warrants"), in the manner provided in the Camden Warrant Agreement. For avoidance of doubt, each of the Warrantholders, agree and acknowledge that, as the Camden Warrants become Vested Warrants, each of the Warrantholders, shall be entitled to receive anti-dilution protection in accordance with the terms of the Transaction Documents. Further, the Company and Camden Entities hereby agree that, in the event that any of the Warrantholders exercise the Warrants or convert any of their Shares prior to February 1, 2004, then, in the event that any Camden Warrants become Vested Warrants after the date of the exercise of such Warrants or the conversion of any such Shares, the Company will, from time to time issue to the Warrantholders, as the case may be, a number of shares of its Common Stock equal to the difference between (x) that number of shares of Common Stock to which the Warrantholders, as the case may be, would have been (entitled after giving effect to all anti-dilution adjustments) if such Warrants or Shares had been exercised or converted on the date on which such Camden Warrants become Vested Warrants and not on such prior date and (y) the number of shares of Common Stock previously issued by the Company in respect of such Warrants or Shares. The Company agrees and acknowledges not to effectuate (including by the issuance of securities or by notation upon the Company's stock ledger or books and records) any anti-dilution adjustment except in accordance with the terms and conditions of this letter agreement. This letter agreement is limited as specified and shall not constitute a modification of any other provision of the Transaction Documents, nor shall it be applicable to any further issuance of securities of any kind by the Company. This letter agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. THIS LETTER AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. [Signature Pages Follow] DB CAPITAL INVESTORS, L.P. By: DB Capital Partners, L.P., its General Partner By: DB Capital Partners, Inc., its General Partner By --------------------------------------- Name: Title: SANDLER CAPITAL PARTNERS V, L.P. By: Sandler Investment Partners, L.P., General Partner By: Sandler Capital Management, General Partner By: MJDM Corp., a General Partner By ---------------------------------------- Name: Moira Mitchell Title: President SANDLER CAPITAL PARTNERS V FTE, L.P. By: Sandler Investment Partners, L.P., General Partner By: Sandler Capital Management, General Partner By: MJDM Corp., a General Partner By ----------------------------------------- Name: Moira Mitchell Title: President SANDLER TECHNOLOGY PARTNERS, L.P. By: Sandler Investment Partners, L.P., General Partner By: Sandler Capital Management, General Partner By: MJDM Corp., a General Partner By ---------------------------------------- Name: Moira Mitchell Title: President SANDLER CO-INVESTMENT PARTNERS, L.P. By: Sandler Capital Management, General Partner By: MJDM Corp., a General Partner By ---------------------------------------- Name: Moira Mitchell Title: President PRICE FAMILY LIMITED PARTNERS By: --------------------------------------- Name: Title: BENAKE L.P. By: --------------------------------------- Name: Title: Accepted and Agreed this ___ day of January, 2002: CAMDEN PARTNERS STRATEGIC FUND II-A, L.P. By: Camden Partners Strategic II, LLC, By: ------------------------------------------------ Name: David L. Warnock Title: Managing Member CAMDEN PARTNERS STRATEGIC FUND II-B, L.P. By: Camden Partners Strategic II, LLC, its General Partner By: ------------------------------------------------ Name: David L. Warnock Title: Managing Member CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: Camden Partners Strategic II, LLC, its General Partner By: ------------------------------------------------ Name: David L. Warnock Title: Managing Member STRATEGIC ASSOCIATES, L.P. By: Camden Partners Strategic II, LLC, its General Partner By: ------------------------------------------------ Name: David L. Warnock Title: Managing Member INFOCROSSING, INC. By: ------------------------------------------------ Name: Zack Lonstein Title: Chief Executive Officer EX-99.7 13 aleaseagtex99_7.txt LEASE AGREEMENT LEASE AGREEMENT THIS LEASE AGREEMENT ("Lease"), is made and entered into this ___ day of February, 2002, by and between Landlord (sometimes called also "Lessor") and Tenant (sometimes called also "Lessee"). W I T N E S S E T H: 1. Certain Definitions. For purposes of this Lease, the following terms shall have the meanings hereinafter ascribed thereto: (a) Landlord: ASI Properties, Inc., a Georgia corporation (b) Landlord's Address: Rent Payment and Mailing Address: 470 East Paces Ferry Road Atlanta, Georgia 30305-3300 Attn: Chief Financial Officer (c) Tenant: AmQUEST, Inc., a Georgia corporation (d) Tenant's Initial Address: 470 East Paces Ferry Road, Suite 1 Atlanta, Georgia 30305-3300 (e) Building Address: 470 East Paces Ferry Road, N.E. Atlanta, Georgia 30305-3300 (f) Suite (Floor) Numbers: 1, 2, 6 and 7 (g) Rentable Floor Area of Demised Premises: 33,446 rentable square feet (h) Intentionally Deleted. (i) Lease Term: Rental Commencement Date through and including January 31, 2006. (j) Base Rental Rate: First month's rental due on Lease execution.
-1- MONTHS 01 (February, 2002) - 03 (April, 2002) RATE PER SQUARE FOOT OF MONTHLY BASE RENTABLE FLOOR AREA OF RENTAL RATE DEMISED PREMISES TOTAL BASE RENTAL RATE $17,725.00 $35.05 (For Suite 7) $212,700.00 $ 0.00 (For Suites 1, 2 and 6) MONTHS 04 (May, 2002) - 48 (January, 2006) RATE PER SQUARE FOOT OF MONTHLY BASE RENTABLE FLOOR AREA OF RENTAL RATE DEMISED PREMISES TOTAL BASE RENTAL RATE $90,856.67 $20.00 (For Suites 1 and 2) $1,090,280.00 $40.00 (For Suites 6 and 7) (k) Intentionally Deleted. (l) Rental Commencement Date: Rent will commence on the date of this Lease. (m) Intentionally Deleted. (n) Intentionally Deleted. (o) Intentionally Deleted. (p) Intentionally Deleted. 2. Lease of Premises. Landlord, in consideration of the covenants and agreements to be performed by Tenant, and upon the terms and conditions hereinafter stated, does hereby rent and lease unto Tenant, and Tenant does hereby rent and lease from Landlord, certain premises (the "Demised Premises") in the building (hereinafter referred to as "Building") located on that certain tract of land (the "Land") commonly known as 470 East Paces Ferry Road, N.E., Atlanta, Georgia , which Demised Premises comprise all of the Rentable Floor Area in Suites 1, 2, 6 and 7 of the Building and are outlined on the floor plan attached hereto as Exhibit "A" and by this reference made a part hereof, with no easement for light, view or air included in the Demised Premises or being granted hereunder. The "Project" is comprised of the Building, the Land, the Building's parking facilities, any walkways, covered walkways or other means of access to the Building and the Building's parking facilities, all common areas, including any plazas, and any other improvements or landscaping on the Land. 3. Term. The term of this Lease ("Lease Term") shall commence on the date of this Lease, and, unless sooner terminated as provided in this Lease, shall end on the January 31, 2006. -2- 4. Possession. Tenant shall be deemed to have taken possession of the Demised Premises as of the date of this Lease, and Tenant agrees it shall take such possession of the Demised Premises in its "as is" condition with all faults other than latent defects. 5. Rental Payments. (a) Commencing on the Rental Commencement Date, and continuing thereafter throughout the Lease Term, Tenant hereby agrees to pay all Rent due and payable under this Lease. As used in this Lease, the term "Rent" shall mean the Base Rental ( as defined in Section 6 below), and any other amounts that Tenant specifically assumes or agrees to pay under the provisions of this Lease that are owed to Landlord, including without limitation any that may become due by reason of any default of Tenant or failure on Tenant's part to comply with the agreements, terms, covenants and conditions of this Lease to be performed by Tenant. Base Rental shall be due and payable in equal installments on the first day of each calendar month, commencing on the Rental Commencement Date and continuing thereafter throughout the Lease Term and any extensions or renewals thereof, and Tenant hereby agrees to pay Base Rent to Landlord at Landlord's address as provided herein (or such other address as may be designated by Landlord from time to time) monthly in advance. Tenant shall pay all Rent and other sums of money as the same shall become due from and payable by Tenant to Landlord under this Lease at the times and in the manner provided in this Lease, without demand, set-off or counterclaim. (b) If the Rental Commencement Date is other than the first day of a calendar month or if this Lease terminates on other than the last day of a calendar month, then the installments of Base Rental for any such months shall be prorated on a daily basis and the installment so prorated shall be paid in advance. Also, if the Rental Commencement Date occurs on other than the first day of a the month, the Base Rental for the month in which said date occurs shall be payable on the Rental Commencement Date. 6. Base Rental. Subject to adjustment as specifically set forth in this Lease (including, without limitation, the Special Stipulations as set forth in Exhibit C), from and after the Rental Commencement Date Tenant shall pay to Landlord in equal monthly installments a base annual rental (herein called "Base Rental") for each Lease Year equal to the Total Rental Rate set forth for such Lease Year in Article 1(j) above. As used in this Lease, the term "Lease Year" shall mean the twelve month period commencing on the Rental Commencement Date, and each successive twelve month period thereafter during the Lease Term, except that if the Rental Commencement Date is not on the first day of a calendar month, the first Lease Year shall extend through the end of the twelfth full calendar month after the Rental Commencement Date. 7. Intentionally Deleted.. 8. Operating Expenses. For the purposes of this Lease, "Operating Expenses" shall mean all expenses, costs and disbursements (but not specific costs chargeable to specific tenants of the Project) of every kind and nature, computed on an accrual basis, relating to or incurred or paid in connection with the ownership, management, operation, repair and maintenance of the Project. Subject to any specific sections of this Lease, including the Special Stipulations set forth in Exhibit C, to the contrary, Landlord, at Landlord's sole cost and expense, shall be responsible for all Operating Expenses and Tenant shall have no obligation to pay or contribute to same. -3- 9. Landlord's Alterations and Improvements. Landlord reserves the right at any time and from time to time to make or permit changes or revisions in the common areas of the Project, including, without limitation, additions to, subtractions from, rearrangements of, alterations of, and modifications or supplements to the common areas of the Project; provided, however, Landlord agrees that no such changes, revisions, additions, subtractions, rearrangements, alterations, modifications or supplements shall have the effect of reducing the number of parking spaces available for use by Tenant, or with respect to other tenants and occupants of the Building, below the number required by governmental laws and ordinances, or shall materially interfere with access to the Building or the Demised Premises. 10. Tenant Taxes. Tenant shall pay promptly when due all taxes directly or indirectly imposed or assessed upon Tenant's gross sales, business operations, machinery, equipment, trade fixtures and other personal property or assets, which may become a lien on any portion of the Project whether such taxes are assessed against Tenant, Landlord or the Building. In the event that such taxes are imposed or assessed against Landlord or the Building, Landlord shall furnish Tenant with all applicable tax bills, public charges and other assessments or impositions and Tenant shall forthwith pay the same either directly to the taxing authority or, at Landlord's option, to Landlord, upon Landlord's request together with evidence of Landlord's payment of such taxes. Notwithstanding anything contained herein or elsewhere to the contrary, Tenant shall not be responsible for any real estate taxes or assessments for the Land, Building or Project, including, without limitation any special assessment for public improvement and any business improvement assessment or any franchise taxes or taxes imposed upon or measured by the income or profits of the Landlord; Landlord shall pay, when due, all such taxes. 11. Payments. All payments of Rent and other payments to be made to Landlord shall be made on a timely basis and shall be payable to Landlord or as Landlord may otherwise designate. All such payments shall be mailed or delivered to Landlord's Address designated in Article 1(b) above or at such other place as Landlord may designate from time to time in writing. If mailed, all payments shall be mailed in sufficient time and with adequate postage thereon to be received by Landlord no later than the due date for such payment. 12. Interest and Late Charges. Any rent or other amounts payable to Landlord under this Lease, if not paid by the tenth (10th) day after Tenant receives notice from Landlord of non-payment, shall incur a late charge of three percent (3%) for Landlord's administrative expense in processing such delinquent payment and in addition thereto shall bear interest at the "Prime Rate" as published in The Wall Street Journal (or, if The Wall Street Journal is no longer published, some other daily financial publication of national circulation as selected by Landlord) on the last business day prior to the expiration of such ten (10) day period, plus two percent (2%) per annum from and after the expiration of such ten (10) day period. Notwithstanding the foregoing, Landlord shall not be required to give notice as a condition to imposition of the late charge or interest more than twice during any twelve-month period. In no event shall the rate of interest payable on any late payment exceed the legal limits for such interest enforceable under applicable law. The interest shall accrue from the date herein specified until the date such payment is received. Such late charge and interest shall be payable immediately to Landlord as additional rent hereunder. Acceptance of such late charge by Landlord shall in no event constitute a waiver of Tenant's default with respect to such overdue amount, or prevent Landlord from exercising any of the other rights and remedies granted hereunder. Nothing contained in this paragraph, however, shall be construed to require Landlord to accept a late payment from Tenant. There will also be a twenty-five dollar ($25.00) charge should any check be returned by a bank for insufficient funds. 13. Use Rules. Suites 1 and 2 of the Demised Premises shall be used for data center space - -4- and office space, and for no other purposes, and Suites 6 and 7 of the Demised Premises shall be used for data center space and no other purpose, all space to be leased in accordance with all applicable laws, ordinances, rules and regulations of governmental authorities, and the Rules and Regulations attached hereto and made a part hereof. Tenant covenants and agrees to abide by the Rules and Regulations in all respects as now set forth and attached hereto or as hereafter promulgated by Landlord, provided that such Rules and Regulations are equally applicable to all tenants of the Building and are not enforced in a discriminatory manner. Landlord shall have the right at all times during the Lease Term to publish and promulgate and thereafter enforce such rules and regulations or changes in the existing Rules and Regulations as it may reasonably deem necessary to protect the tenantability, safety, operation, and welfare of the Demised Premises and the Project. Tenant hereby expressly agrees that Tenant shall comply in all respects with all applicable laws, ordinances, rules and regulations of governmental authorities regarding the handling, storage, transportation and disposal of contaminants in connection with the operation of Tenant's business in the Demised Premises. 14. Alterations. Except for non-structural, interior alterations which cost less than Ten Thousand Dollars ($10,000) and in no way affect the systems of the Building other than to a deminimus extent and except the alterations and construction to be performed by American Software, Inc. ("ASI") for Norfolk Southern Corporation pursuant to that certain letter agreement between ASI and Tenant, Tenant shall not make, suffer or permit to be made any alterations, additions or improvements to or of the Demised Premises or any part thereof, or attach any fixtures or equipment thereto, without first obtaining Landlord's written consent, which consent shall not be unreasonably withheld. Subject to Section 31, and any other specific sections of this Lease to the contrary, all such alterations, additions and improvements shall become Landlord's property at the expiration or earlier termination of the Lease Term and shall remain on the Demised Premises without compensation to Tenant unless Landlord elects by notice to Tenant at the time of approval of said alterations to have Tenant remove such alterations, additions and improvements, in which event notwithstanding any contrary provisions respecting such alterations, additions and improvements contained in Article 31 thereof, Tenant shall promptly restore, at its sole cost and expense, the Demised Premises to its condition prior to the installation of such alterations, additions and improvements, normal wear and tear excepted. Notwithstanding the above, Tenant may remove trade-fixture items from the Demised Premises provided that Tenant shall repair any damage to the Leased Premises occasioned by such removal. All of Tenant's personal property on the Demised Premises shall remain the property of Tenant. 15. Repairs. (a) Subject to Tenant's obligations pursuant to Paragraph 2 of the Special Stipulations attached hereto or as may otherwise be agreed between Tenant and ASI, Landlord shall maintain in good order and repair, subject to normal wear and tear and subject to casualty and condemnation, the Project, including the Building (except the Demised Premises and other portions of the Building leased to other tenants), the Building parking facilities, the public areas and the landscaped areas. Notwithstanding the foregoing obligation, the cost of any repairs or maintenance to the foregoing necessitated by the negligence or otherwise of Tenant or its agents, contractors, employees, subtenants or assigns subject to normal wear and tear, shall be borne solely by Tenant and shall be deemed Rent hereunder and shall be reimbursed by Tenant to Landlord promptly. Landlord shall not be required to make any non-structural repairs or improvements to the Demised Premises, other than repairs and improvements necessitated by the negligence or otherwise of Landlord or its agents, contractors or employees, subject to normal wear and tear. (b) Subject to Landlord's obligations in Section 15(a), Tenant covenants and agrees that it will take good care of the interior of Demised Premises and all alterations, additions and improvements thereto and -5- will keep and maintain the same in good condition and repair, except for normal wear and tear. Tenant shall promptly report, in writing, to Landlord any defective or dangerous condition known to Tenant. To the fullest extent permitted by law, Tenant hereby waives all rights to make repairs at the expense of Landlord or in lieu thereof to vacate the Demised Premises as may be provided by any law, statute or ordinance now or hereafter in effect except for any condition (not caused by Tenant) which threatens imminent injury to persons or material damage to property, or prevents Tenant's access to or use of the Demised Premises, which Tenant shall have the right to correct at Landlord's expense in the form of abatement of Rent (not to exceed Twenty Five percent (25%) of the Rent otherwise due and payable the month or months that such abatement is taken) if not corrected by Landlord within two (2) business days after Tenant's notice of the same to Landlord. Landlord has no obligation and has made no promise to alter, remodel, improve, repair, decorate or paint the Demised Premises or any part thereof, except as specifically and expressly herein set forth. 16. Landlord's Right of Entry. Landlord shall retain duplicate keys to all doors of the Demised Premises and Landlord and its agents, employees and independent contractors shall have the right to enter the Demised Premises at reasonable hours to inspect and examine same, to make repairs, additions, alterations, and improvements, to exhibit the Demised Premises to mortgagees, prospective mortgagees, purchasers or, if within the last six (6) months of term, tenants, and to inspect the Demised Premises to ascertain that Tenant is complying with all of its covenants and obligations hereunder; provided, however, that Landlord shall, except in case of emergency, afford Tenant such prior notification of an entry into the Demised Premises as shall be reasonably practicable under the circumstances and shall not interrupt or unreasonably interfere with Tenant's use of the Demised Premises. Subject to the foregoing, Landlord shall be allowed to take into and through the Demised Premises any and all materials that may be required to make such repairs, additions, alterations or improvements. During such time as such work is being carried on in or about the Demised Premises, the Rent provided herein shall not abate, and Tenant waives any claim or cause of action against Landlord for damages by reason of interruption of Tenant's business or loss of profits therefrom because of the prosecution of any such work or any part thereof. 17. Insurance. (a) Tenant shall procure at its expense and maintain throughout the Lease Term a policy or policies of fire and extended coverage insurance insuring the full replacement cost of its furniture, equipment, supplies, and other property owned, leased, held or possessed by it and contained in the Demised Premises, together with the value of any leasehold alterations, additions and/or improvements to the Demised Premises which Tenant is responsible to maintain or repair pursuant to this Lease, and workmen's compensation insurance as required by applicable law. Tenant shall also procure at its expense and maintain throughout the Lease Term a policy or policies of insurance, insuring Tenant, Landlord, Landlord's managing agent and Landlord's mortgagee, if any, against any and all liability for injury to or death of a person or persons and for damage to property occasioned by or arising out of any construction work performed by Tenant or Tenant's contractors on the Demised Premises, or arising out of the condition, use, or occupancy of the Demised Premises, or in any way occasioned by or arising out of the activities of Tenant, its agents, contractors or employees in the Demised Premises, or other portions of the Building or the Project, and of Tenant's guests and licensees while they are in the Demised Premises, the limits of such policy or policies to be in combined single limits for both damage to property and personal injury and in amounts not less than Two Million Dollars ($2,000,000) for each occurrence. Such insurance shall, in addition, extend to any liability of Tenant arising out of the indemnities provided for in this Lease. Tenant shall also carry such other types of insurance in form and amount which Landlord shall reasonably -6- deem to be prudent for Tenant to carry, should the circumstances or conditions so merit Tenant carrying such type of insurance and provided that such insurance is then customarily required to be maintained by landlords of similar projects. All insurance policies procured and maintained by Tenant pursuant to this Article 17 shall name Landlord, Landlord's managing agent and Landlord's mortgagee, if any, and any additional parties designated by Landlord, as additional insureds, shall be carried with companies licensed to do business in the State of Georgia reasonably satisfactory to Landlord and shall be non-cancelable and not subject to material change except after twenty (20) days written notice to Landlord. Such policies or duly executed certificates of insurance with respect thereto, accompanied by proof of payment of the premium therefor, shall be delivered to Landlord on or by the date of the Lease, and renewals of such policies shall be delivered to Landlord at least twenty (20) days prior to the expiration of each respective policy term. (b) Landlord shall procure at its expense and shall thereafter maintain throughout the Lease Term a policy or policies of fire and extended coverage insurance with respect to the Building and the improvements to the Demised Premises, insuring against loss or damage by fire and such other risks as are from time to time included in a standard form of fire and extended coverage policy of insurance available in the State of Georgia. Said Building and improvements to the Demised Premises shall be insured for the benefit of Landlord in an amount not less than the full replacement costs thereof as determined from time to time by the insurance company (excluding any costs of replacing any leasehold alterations, additions or improvements to the Demised Premises which Tenant is responsible to maintain or repair pursuant to the terms of this Lease and such insurance may provide for a reasonable deductible). Landlord shall also procure at its expense and shall thereafter maintain throughout the Lease Term a policy or policies of commercial general liability insurance insuring against the liability of Landlord arising out of the maintenance, use and occupancy of the Project, with limits of such policy or policies to be in combined single limits for both damage to property and personal injury and in amounts not less than One Million Dollars ($1,000,000.00) for each occurrence. Such insurance required herein shall be issued by and binding upon an insurance company approved by the Insurance Commissioner of the State of Georgia and licensed to do business in the State of Georgia. Upon reasonable request from Tenant, Landlord will provide a certificate of insurance evidencing the maintenance of the insurance required herein. 18. Waiver of Subrogation. Landlord shall have included in all policies of fire, extended coverage, business interruption and other insurance obtained by Landlord covering the Demised Premises, the Building and contents therein, a waiver by the insurer of all right of subrogation against the Tenant in connection with any loss or damage thereby insured against. Any additional premium for such waiver shall be paid by the Landlord. To the full extent permitted by law, Landlord waives all right of recovery against the Tenant for, and agrees to release the Tenant from liability for, loss or damage to the extent such loss or damage is covered by valid and collectible insurance in effect at the time of such loss or damage or would be covered by the insurance required to be maintained under this Lease by the Landlord. 19. Default. (a) The following events shall be deemed to be events of default by Tenant under this Lease: (i) Tenant shall fail to pay any installment of Base Rental within ten (10) days after the due date thereof; (ii) Tenant shall fail to comply with any term, provision, covenant or warranty made under this Lease by Tenant, other than the payment of the Base Rental or any other charge or assessment payable by Tenant, and shall not diligently attempt to cure such failure within thirty (30) days after notice thereof to Tenant; (iii) Tenant or any guarantor of this Lease shall make a general assignment for the benefit of creditors, or -7- shall admit in writing its inability to pay its debts as they become due, or shall file a petition in bankruptcy, or shall be adjudicated as bankrupt or insolvent, or shall file a petition in any proceeding seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, or shall file an answer admitting or fail timely to contest the material allegations of a petition filed against it in any such proceeding; (iv) a proceeding is commenced against Tenant or any guarantor of this Lease seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, and such proceeding shall not have been dismissed within forty-five (45) days after the commencement thereof; (v) a receiver or trustee shall be appointed for the Demised Premises or for all or substantially all of the assets of Tenant or of any guarantor of this Lease; (vi) Tenant shall do or permit to be done anything which creates a lien upon the Demised Premises or the Project and such lien is not removed or discharged within thirty (30) days after notice thereof; (vii) Tenant shall fail to return a properly executed instrument to Landlord in accordance with the provisions of Article 27 hereof within the time period provided for such return following Landlord's request for same as provided in Article 27; or (viii) Tenant shall fail to return a properly executed estoppel certificate to Landlord in accordance with the provisions of Article 28 hereof within the time period provided for such return following Landlord's request for same as provided in Article 28. (b) Upon the occurrence of any of the aforesaid events of default, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever: (i) terminate this Lease, in which event Tenant shall promptly surrender the Demised Premises to Landlord and if Tenant fails to do so, Landlord may without prejudice to any other remedy which it may have for possession or arrearages in Rent, enter upon and take possession of the Demised Premises and expel or remove Tenant and any other person who may be occupying said Demised Premises or any part thereof, by force, if necessary, without being liable for prosecution or any claim of damages therefor (provided such action shall not constitute a breach of the peace); Tenant hereby agreeing to promptly pay to Landlord on demand the amount of all reasonable loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the Demised Premises on satisfactory terms or otherwise; (ii) terminate Tenant's right of possession (but not this Lease) and enter upon and take possession of the Demised Premises and expel or remove Tenant and any other person who may be occupying said Demised Premises or any part thereof, by entry (including the use of force, if necessary), dispossessory suit or otherwise, without thereby releasing Tenant from any liability hereunder, without terminating this Lease, and without being liable for prosecution or any claim of damages therefor (provided such action shall not constitute a breach of the peace) and, if Landlord so elects (without any obligation of Landlord), make such alterations, redecorations and repairs as, in Landlord's reasonable judgment, may be necessary to relet the Demised Premises, and Landlord shall make reasonable efforts to relet the Demised Premises or any portion thereof in Landlord's or Tenant's name, but for the account of Tenant, for such term or terms (which may be for a term extending beyond the Lease Term) and at such rental or rentals and upon such other terms as Landlord may reasonably deem advisable, in order to mitigate Landlord's loss, with or without advertisement, and by private negotiations, and Landlord may receive the rent therefor, Tenant hereby agreeing to pay to Landlord the deficiency, if any, between the amount of all Rent reserved hereunder and the total rental applicable to the Lease Term hereof obtained by Landlord re-letting, and Tenant shall be liable for Landlord's reasonable expenses in redecorating and restoring the Demised Premises as necessary to enable re-letting (but in no case to a condition better than that in which the Tenant is obligated to return the Demised Premises under Section 31), and all reasonable costs incident to such re-letting, including broker's commissions and lease assumptions, and in no event shall Tenant be entitled to any rentals received by Landlord in excess of the amounts due by Tenant hereunder; or (iii) enter upon the -8- Demised Premises by force, if necessary (without any breach of the peace), and do whatever Tenant is obligated to do under the terms of this Lease; and Tenant agrees to promptly reimburse Landlord on demand for any expenses including, without limitation, reasonable attorneys' fees which Landlord may incur in thus effecting compliance with Tenant's obligations under this Lease. (c) Pursuit of any of the foregoing remedies shall not preclude pursuit of any other remedy herein provided or any other remedy provided by law or at equity, nor shall pursuit of any remedy herein provided constitute an election of remedies thereby excluding the later election of an alternate remedy, or a forfeiture or waiver of any Rent or other charges and assessments payable by Tenant and due to Landlord hereunder or of any damages accruing to Landlord by reason of violation of any of the terms, covenants, warranties and provisions herein contained. No reentry or taking possession of the Demised Premises by Landlord or any other action taken by or on behalf of Landlord shall be construed to be an acceptance of a surrender of this Lease or an election by Landlord to terminate this Lease unless written notice of such intention is given to Tenant. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. In determining the amount of loss or damage which Landlord may suffer by reason of termination of this Lease or the deficiency arising by reason of any reletting of the Demised Premises by Landlord as above provided, allowance shall be made for the expense of repossession. Tenant agrees to pay to Landlord all reasonable costs and expenses incurred by Landlord in the enforcement of this Lease, including, without limitation, the reasonable fees of Landlord's attorneys as provided in Article 25 hereof. 20. Waiver of Breach. No waiver of any breach of the covenants, warranties, agreements, provisions, or conditions contained in this Lease shall be construed as a waiver of said covenant, warranty, provision, agreement or condition or of any subsequent breach thereof, and if any breach shall occur and afterwards be compromised, settled or adjusted, this Lease shall continue in full force and effect as if no breach had occurred. 21. Assignment and Subletting. 21.1 Lessor's Consent Required. (a) Lessee shall not assign, transfer, mortgage or encumber (collectively, "assign" or "assignment") or sublet all or any part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent which consent shall not be unreasonably withheld, conditioned or delayed, but the following assignments shall be permitted, subject to the Landlord's satisfaction of the conditions outlined herein: (i) Assignment to a parent or a wholly owned subsidiary of the Tenant; or (ii) Assignment to a new entity that is wholly owned by the same owners of the Tenant. (b) The involvement of Lessee or all or substantially all of its assets in any transaction, or series of transactions (by way of merger, sale, transfer or leveraged buy-out), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs, which results or will result in a reduction of the Net Worth of Lessee by an amount greater than forty (40%) of such Net Worth as it exists immediately prior to said transaction or transactions constituting such reduction, shall be considered an assignment of this Lease to which Lessor may withhold its consent unless otherwise permitted hereunder. "Net Worth of -9- Lessee" shall mean the net worth of Lessee (excluding any guarantors) established under generally accepted accounting principles. (c) An unpermitted assignment or subletting without consent shall, at Lessor's option, be a default curable after notice per Paragraph 19, or a noncurable breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a noncurable breach, Lessor may terminate this Lease. 21.2 Terms and Conditions Applicable to Assignment and Subletting. (a) Regardless of Lessor's consent, any assignment or subletting shall not (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations to Landlord hereunder, or (iii) alter the primary liability of Lessee to Landlord for the payment of Rent or for the performance of any other obligations to be performed by Lessee. (b) Lessor may accept Rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for Lessee's Default or Breach. (c) Lessor's consent to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting. (d) In the event of any default or breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee's obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therefore to Lessor, or any security held by Lessor. (e) Each request for consent to an assignment or subletting shall be in writing, accompanied by information, relevant to Landlord's determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any, together with a fee of $150.00 as consideration for Lessor's considering and processing said request. Lessee agrees to provide Lessor with such other or additional information and/or documentation as may be reasonably requested. 21.3 Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein. (a) Lessee hereby assigns and transfers to Lessor all of Lessee's interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee's obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee's obligations, Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating -10- that a Breach exists in the performance of Lessee's obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without any obligations or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary. (b) In the event of a Breach of Lessee, Lessor may, at its option, require sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior Defaults or Breaches of such sublessor. (c) No sublessee shall further assign or sublet all or any part of the Premises without Lessor's prior written consent. (d) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any, specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee. 22. Destruction. (a) If the Demised Premises are damaged by fire or other casualty, the same shall be repaired or rebuilt as speedily as practical under the circumstances at the expense of Landlord, unless this Lease is terminated as provided in this Article 22, and from the date of such damage through restoration, a just and proportionate part of Rent shall be abated until the Demised Premises are repaired or rebuilt. (b) If the Demised Premises are (i) damaged to such an extent that repairs cannot, in Landlord's reasonable judgment, be completed within one hundred eighty (180) days after the date of the casualty or (ii) damaged or destroyed as a result of a risk which is not insured under standard fire insurance policies with extended coverage endorsement, or (iii) damaged or destroyed during the last eighteen (18) months of the Lease Term, or if the Building is damaged in whole or in part (whether or not the Demised Premises are damaged), to such an extent that the Building cannot, in Landlord's judgment, be operated economically as an integral unit, then and in any such event Landlord may at its option terminate this Lease by notice in writing to the Tenant within thirty (30) days after the date of such occurrence. Unless Landlord elects to terminate this Lease as hereinabove provided, this Lease will remain in full force and effect and Landlord shall repair such damage at its expense to the extent required under subparagraph (c) below as expeditiously as possible under the circumstances. (c) If Landlord should elect or be obligated pursuant to subparagraph (a) above to repair or rebuild because of any damage or destruction, Landlord's obligation shall be limited to the original Building, excluding any leasehold alterations, additions or improvements to the Demised Premises to be maintained or repaired by Tenant pursuant to the terms of this Lease. If the cost of performing such repairs exceeds the actual proceeds of insurance paid or payable to Landlord on account of such casualty, or if Landlord's mortgagee or the lessor under a ground or underlying lease shall require that any insurance proceeds from a casualty loss be paid to it, Landlord may terminate this Lease if Landlord elects not to rebuild a building of substantially similar size and scope, unless Tenant, within thirty (30) days after demand therefor, deposits -11- with Landlord a sum of money sufficient to pay the difference between the cost of repair and the proceeds of the insurance available to Landlord for such purpose. 23. Intentionally Deleted. 24. Services by Landlord. Landlord shall provide the Building Standard Services described on Exhibit "B" attached hereto and by reference made a part hereof. 25. Attorneys' Fees. In the event Landlord or Tenant defaults in the performance of any of the terms, agreements or conditions contained in this Lease and the other party places the enforcement of this Lease, or any part thereof, or the collection of any Rent due or to become due hereunder, or recovery of the possession of the Demised Premises, in the hands of an attorney, or files suit upon the same, and should such other party prevail in such suit, the defaulting party, to the extent permitted by applicable law, agrees to pay the other party (as prevailing party) all reasonable attorneys' fees actually incurred by such prevailing party. 26. Time. Time is of the essence of this Lease and whenever a certain day is stated for payment or performance of any obligation of Tenant or Landlord, the same enters into and becomes a part of the consideration hereof. 27. Subordination and Attornment. (a) Tenant agrees that this Lease and all rights of Tenant hereunder are and shall be subject and subordinate to any ground or underlying lease which may now or hereafter be in effect regarding the Project or any component thereof, to any mortgage now or hereafter encumbering the Demised Premises or the Project or any component thereof, to all advances made or hereafter to be made upon the security of such mortgage, to all amendments, modifications, renewals, consolidations, extensions, and restatements of such mortgage, and to any replacements and substitutions for such mortgage; provided, however, that as a condition to such subordination, Tenant shall be provided a written nondisturbance agreement from the lessor under any such lease or from the mortgagee under any such mortgage, on terms and conditions reasonably acceptable to Tenant and such lessor or mortgagee, confirming that Tenant's rights under this Lease will not be disturbed in connection with any circumstances as described in this Paragraph 27 so long as Tenant performs its obligations under this Lease, and that Tenant shall have a right to attorn to such lessor or mortgagee under such circumstances. The terms of this provision shall be self-operative and no further instrument of subordination shall be required. Tenant, however, upon request of Landlord or any party in interest, shall execute promptly such instrument or certificates as may be reasonably required to carry out the intent hereof, whether said requirement is that of Landlord or any other party in interest, including, without limitation, any mortgagee. (b) If any mortgagee or lessee under a ground or underlying lease elects to have this Lease superior to its mortgage or lease and signifies its election in the instrument creating its lien or lease or by separate recorded instrument, then this Lease shall be superior to such mortgage or lease, as the case may be. The term "mortgage", as used in this Lease, includes any deed of trust, deed to secure debt, or security deed and any other instrument creating a lien in connection with any other method of financing or refinancing. The term "mortgagee", as used in this Lease, refers to the holder(s) of the indebtedness secured by a mortgage. (c) In the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under, any mortgage covering the Demised Premises or the Project, or in the event the -12- interests of Landlord under this Lease shall be transferred by reason of deed in lieu of foreclosure or other legal proceedings, or in the event of termination of any such lease under which Landlord may hold title, provided the transferee or purchaser at foreclosure agrees not to disturb Tenant's use and occupancy of the Demised Premises for so long as the Tenant is not in default of its obligations hereunder beyond any applicable grace or cure period, Tenant shall attorn to the transferee or purchaser at foreclosure or under power of sale, or the lessor of Landlord upon such lease termination, as the case may be (sometimes hereinafter called "such person"), and shall recognize and be bound and obligated hereunder to such person as "Landlord" under this Lease; provided, further however, that no such person shall be (i) bound by any payment of Rent for more than one (1) month in advance, except prepayments in the nature of security for the performance by Tenant of its obligations under this Lease (and then only if such prepayments have been deposited with and are under the control of such person); (ii) bound by any amendment or modification of this Lease made without the express written consent of the mortgagee or lessor of Landlord, as the case may be; (iii) obligated to cure any defaults under this Lease of any prior landlord (including Landlord); (iv) liable for any act or omission of any prior landlord (including Landlord); (v) subject to any offsets or defenses which Tenant might have against any prior landlord (including Landlord); or (vi) bound by any warranty or representation of any prior landlord (including Landlord) relating to work performed by any prior landlord (including Landlord) under this Lease. Tenant agrees to execute any attornment agreement not in conflict herewith requested by Landlord, its mortgagee or such person. Tenant's obligation to attorn to such person shall survive the exercise of any such power of sale, foreclosure or other proceeding. Tenant agrees that the institution of any suit, action or other proceeding by any mortgagee to realize on Landlord's interest in the Demised Premises or the Building pursuant to the powers granted to a mortgagee under its mortgage, shall not, by operation of law or otherwise, result in the cancellation or termination of the obligations of Tenant hereunder. Tenant shall not be named as a party defendant in any such proceeding, unless required by applicable law. Landlord and Tenant agree that notwithstanding that this Lease is expressly subject and subordinate to any mortgages, any mortgagee, its successors and assigns, or other holder of a mortgage or of a note secured thereby, may sell the Demised Premises or the Building, in the manner provided in the mortgage and may, at the option of such mortgagee, its successors and assigns, or other holder of the mortgage or note secured thereby, make such sale of the Demised Premises or Building subject to this Lease. (d) Landlord shall provide prompt notice of the existence or placement of any mortgage or underlying ground lease upon the Project which would be superior to the Lease. 28. Estoppel Certificates. Within ten (10) days after request therefor by Landlord, Tenant agrees to execute and deliver to Landlord in recordable form an estoppel certificate addressed to Landlord, any mortgagee or assignee of Landlord's interest in, or purchaser of, the Demised Premises or the Building or any part thereof, certifying (if such be the case) that this Lease is unmodified and is in full force and effect (and if there have been modifications, that the same is in full force and effect as modified and stating said modifications); that there are no defenses or offsets against the enforcement thereof or stating those claimed by Tenant; and stating the date to which Rent and other charges have been paid. Such certificate shall also include such other information as may reasonably be required by such mortgagee, proposed mortgagee, assignee, purchaser or Landlord. Any such certificate may be relied upon by Landlord, any mortgagee, proposed mortgagee, assignee, purchaser and any other party to whom such certificate is addressed. -13- 29. Cumulative Rights. All rights, powers and privileges conferred hereunder upon the parties hereto shall be cumulative to, but not restrictive of, or in lieu of those conferred by law. 30. Holding Over. If Tenant remains in possession after expiration or termination of the Lease Term with or without Landlord's written consent, Tenant shall become a tenant-at-sufferance, and there shall be no renewal of this Lease by operation of law. During the period of any such holding over, all provisions of this Lease shall be and remain in effect except that the monthly rental shall be and remain in effect except that the monthly rental shall be one and one-quarter (1/4) times the amount of Rent (including any adjustments as provided herein) payable for the last full calendar month of the Lease Term including renewals or extensions. The inclusion of the preceding sentence in this Lease shall not be construed as Landlord's consent for Tenant to hold over. 31. Surrender of Premises. Upon the expiration or other termination of this Lease, Tenant shall quit and surrender to Landlord the Demised Premises and every part thereof (except trade fixtures which Tenant may remove subject to Section 14, above) and all alterations, additions and improvements thereto, broom clean and in good condition and state of repair, reasonable wear and tear only excepted. Tenant shall remove all personalty and equipment not attached to the Demised Premises which it has placed upon the Demised Premises, and Tenant shall restore the Demised Premises to the condition immediately preceding the time of placement thereof. If Tenant shall fail or refuse to remove all of Tenant's effects, personalty and equipment from the Demised Premises upon the expiration or termination of this Lease for any cause whatsoever or upon Tenant being dispossessed by process of law or otherwise, such effects, personalty and equipment shall be deemed conclusively to be abandoned and may be appropriated, sold, stored, destroyed or otherwise disposed of by Landlord. Tenant shall pay Landlord promptly any and all reasonable expenses incurred by Landlord in the removal of such property, including, without limitation, the cost of repairing any damage to the Building or Project caused by the removal of such property and storage charges (if Landlord elects to store such property). The covenants and conditions of this Article 31 shall survive any expiration or termination of this Lease. For purposes of this Section 31 and elsewhere in this Lease, Landlord and Tenant hereby acknowledge and agree that Tenant's trade fixtures, effects, personalty and equipment includes any free standing air conditioning units (excluding duct work), power distribution units, racks, cages, tape storage shelving units, satellite dishes, roof antennas and nonstructural electrical telecommunications, or computer equipment exclusively serving the Demised Premises and installed by or on behalf of Tenant. 32. Notices. All notices required or permitted to be given hereunder shall be in writing and may be delivered in person to either party or may be sent by courier or by United States Mail, certified, return receipt requested, postage prepaid. Any such notice shall be deemed received by the party to whom it was sent (i) in the case of personal delivery or courier delivery, on the date of delivery to such party, and (ii) in the case of certified mail, the date receipt is acknowledged on the return receipt for such notice or, if delivery is rejected or refused or the U.S. Postal Service is unable to deliver same because of changed address of which no notice was given pursuant hereto, the first date of such rejection, refusal or inability to deliver. All such notices shall be addressed to Landlord or Tenant at their respective address set forth herein above or at such other address as either party shall have theretofore given to the other by notice as herein provided. 33. Damage or Theft of Personal Property. Subject to Landlord's maintenance of security in accordance with Building Standard Services, as set forth on Exhibit "B", all personal property brought into the Demised Premises by Tenant, or Tenant's employees or business visitors, shall be at the risk of Tenant only, and Landlord shall not be liable for theft thereof or any damage thereto occasioned by any act of -14- co-tenants, occupants, invitees or other users of the Building or any other person, unless such theft or damage is the result of the act of Landlord or its employees and Landlord is not relieved therefrom by Article 18 hereof. Unless caused by the gross negligence of Landlord or its employees, Landlord shall not at any time be liable for damage to any property in or upon the Demised Premises which results from power surges or other deviations from the constancy of the electrical service or from gas, smoke, water, rain, ice or snow which issues or leaks from or forms upon any part of the Building or from the pipes or plumbing work of the same, or from any other place whatsoever. 34. Eminent Domain. (a) If all or a material part of the Demised Premises shall be taken for any public or quasi-public use by virtue of the exercise of the power of eminent domain or by private purchase in lieu thereof, this Lease shall terminate as to the part so taken as of the date of taking, and, in the case of a partial taking, either Landlord or Tenant shall have the right to terminate this Lease as to the balance of the Demised Premises by written notice to the other within thirty (30) days after such date; provided however, that a condition to the exercise by Tenant of such right to terminate shall be either (i) that more than fifteen percent (15%) of the Demised Premises was taken or (ii) that the portion of the Demised Premises taken shall be of such extent and nature as substantially to handicap, impede or impair Tenant's use of the balance of the Demised Premises. If title to so much of the Building is taken that a reasonable amount of reconstruction thereof will not in Landlord's sole discretion result in the Building being a practical improvement and reasonably suitable for use for the purpose for which it is designed, then this Lease shall terminate on the date that the condemning authority actually takes possession of the part so condemned or purchased. (b) If this Lease is terminated under the provisions of this Article 34, Rent shall be apportioned and adjusted as of the date of termination. Tenant shall have no claim against Landlord or against the condemning authority for the value of any leasehold estate or for the value of the unexpired Lease Term provided that the foregoing shall not preclude any claim that Tenant may have against the condemning authority for the unamortized cost of leasehold improvements, to the extent the same were installed at Tenant's expense or for loss of business, moving expenses or other consequential damages, in accordance with subparagraph (d) below. (c) If there is a partial taking of the Building and this Lease is not thereupon terminated under the provisions of this Article 34, then this Lease shall remain in full force and effect, and Landlord shall, within a reasonable time thereafter, repair or reconstruct the remaining portion of the Building to the extent necessary to make the same a complete architectural unit; provided that in complying with its obligations hereunder Landlord shall not be required to expend more than the net proceeds of the condemnation award and any available condemnation insurance proceeds which are paid to Landlord. (d) All compensation awarded or paid to Landlord upon a total or partial taking of the Demised Premises or the Building shall belong to and be the property of Landlord without any participation by Tenant. Nothing herein shall be construed to preclude Tenant from prosecuting any claim directly against the condemning authority for loss of business, for damage to, and cost of removal of, trade fixtures, furniture and other personal property belonging to Tenant, and for the unamortized cost of leasehold improvements to the extent same were installed at Tenant's expense. In no event shall Tenant have or assert a claim for the value of any unexpired term of this Lease. Except for compensation to which Tenant is entitled according to the foregoing provisions of this subparagraph (d), Tenant hereby assigns to -15- Landlord any and all of its right, title and interest in or to any compensation awarded or paid as a result of any such taking. (e) Notwithstanding anything to the contrary contained in this Article 34, if, during the Lease Term, the use or occupancy of any part of the Building or the Demised Premises shall be taken or appropriated temporarily for any public or quasi-public use under any governmental law, ordinance, or regulations, or by right of eminent domain, this Lease shall be and remain unaffected by such taking or appropriation; provided, however, that the Tenant's obligation to pay Rent shall abate during the period of such temporary taking or appropriation. In the event of any such temporary appropriation or taking, Tenant shall be entitled to receive that portion of any award which represents compensation for the loss of use or occupancy of the Demised Premises during the Lease Term, and Landlord shall be entitled to receive that portion of any award which represents the cost of restoration and compensation for the loss of use or occupancy of the Demised Premises after the end of the Lease Term. 35. Parties. The term "Landlord", as used in this Lease, shall include Landlord and its assigns and successors. It is hereby covenanted and agreed by Tenant that should Landlord's interest in the Demised Premises cease to exist for any reason during the Lease Term, then notwithstanding the happening of such event, this Lease nevertheless shall remain in full force and effect, and Tenant hereby agrees to attorn to the then owner of the Demised Premises. The term "Tenant" shall include Tenant and its heirs, legal representatives and successors, and shall also include Tenant's assignees and sublessees, if this Lease shall be validly assigned or the Demised Premises sublet for the balance of the Lease Term or any renewals or extensions thereof. In addition, Landlord and Tenant covenant and agree that Landlord's right to transfer or assign Landlord's interest in and to the Demised Premises, or any part or parts thereof, shall be unrestricted, and that in the event of any such transfer or assignment by Landlord which includes the Demised Premises, Landlord's obligations to Tenant thereafter arising hereunder shall cease and terminate, and Tenant shall look only and solely to Landlord's assignee or transferee for performance thereof. 36. Liability of Tenant. Each of the parties hereby indemnifies and agrees to hold the other party, and its partners, shareholders, directors and officers, harmless from and against any and all liability, loss, cost, damage or expense, including, without limitation, court costs and reasonable attorney's fees, imposed on the indemnified party by any person whomsoever, arising from or in connection with the use or occupancy or ownership of the Demised Premises and caused in whole or in part by any negligent act or omission of the indemnifying party or any of its employees, contractors, servants, agents, subtenants or assignees, or of the indemnifying party's invitees while such invitees are within the Demised Premises, or otherwise occurring in connection with any default of the indemnifying party hereunder. The provisions of this Article 36 shall survive any termination of this Lease. 37. Force Majeure. In the event of strike, lockout, labor trouble, civil commotion, act of God, or any other cause beyond a party's control (collectively "force majeure") resulting in Landlord's inability to supply the services or perform the other obligations required of Landlord hereunder, this Lease shall not terminate and Tenant's obligation to pay Rent and all other charges and sums due and payable by Tenant shall not be affected or excused and Landlord shall not be considered to be in default under this Lease provided Landlord is reasonably attempting to cure any such inability. If, as a result of force majeure, Tenant is delayed in performing any of its obligations under this Lease, other than Tenant's obligation to take possession of the Demised Premises on or before the Rental Commencement Date and to pay Rent and all other charges and sums payable by Tenant hereunder, Tenant's performance shall be excused for a period equal to such delay and Tenant -16- shall not during such period be considered to be in default under this Lease with respect to the obligation, performance of which has thus been delayed. 38. Landlord's Liability. Landlord shall have no personal liability with respect to any of the provisions of this Lease. If Landlord is in default with respect to its obligations under this Lease, Tenant shall look for satisfaction of Tenant's remedies, if any, solely to the equity of Landlord in the Project and to the proceeds of Landlord's insurance policy or policies actually paid to Landlord and not applied by Landlord by the applicable claim or to the restoration of the Building as required by the terms of this Lease (unless same are not so applied because such proceeds are required by the holder of a mortgage to be paid to it to reduce the debt secured by such mortgage). It is expressly understood and agreed that Landlord's liability under the terms of this Lease shall in no event exceed the amount of its interest in and to said Project and the aforesaid proceeds of insurance. In no event shall any partner of Landlord nor any joint venturer in Landlord, nor any officer, director or shareholder of Landlord or any such partner or joint venturer of Landlord be personally liable with respect to any of the provisions of this Lease. 39. Landlord's Covenant of Quiet Enjoyment. So long as Tenant is not in default hereunder beyond any applicable grace or cure period, Landlord covenants and agrees to take all necessary steps to secure and to maintain for the benefit of Tenant the quiet and peaceful possession of the Demised Premises, for the Lease Term, without hindrance, claim or molestation by Landlord or any other person. 40. Intentionally Deleted. 41. Hazardous Substances. Tenant hereby covenants and agrees that Tenant shall not cause or permit any "Hazardous Substances" (as hereinafter defined) to be generated, placed, held, stored, used, located or disposed of at the Project or any part thereof other than commonly used office cleaning supplies in commercially reasonable quantities. For purposes of this Article 41, "Hazardous Substances" shall mean and include those elements or compounds which are contained in the list of Hazardous Substances adopted by the United States Environmental Protection Agency (EPA) or in any list of toxic pollutants designated by Congress or the EPA or which are defined as hazardous, toxic, pollutant, infectious or radioactive by any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability (including, without limitation, strict liability) or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereinafter in effect (collectively "Environmental Laws"). Tenant hereby agrees to indemnify Landlord and hold Landlord harmless from and against any and all losses, liabilities, including strict liability, damages, injuries, expenses, including reasonable attorneys' fees, costs of settlement or judgment and claims of any and every kind whatsoever paid, incurred or suffered by, or asserted against, Landlord by any person, entity or governmental agency for, with respect to, or as a direct or indirect result of, the presence in, or the escape, leakage, spillage, discharge, emission or release from, the Demised Premises of any Hazardous Substances (including, without limitation, any losses, liabilities, including strict liability, damages, injuries, expenses, including reasonable attorneys' fees, costs of any settlement or judgment or claims asserted or arising under the Comprehensive Environmental Response, Compensation and Liability Act ["CERCLA"], any so-called federal, state or local "Superfund" or "Superlien" laws or any other Environmental Law); provided, however, that the foregoing indemnity is limited to matters arising solely from Tenant's violation of the covenant contained in this Article. The obligations of Tenant under this Article shall survive any expiration or termination of this Lease. To the best of the Landlord's knowledge, there are currently no Hazardous Substances existing in building. -17- 42. Submission of Lease. The submission of this Lease for examination does not constitute an offer to lease and this Lease shall be effective only upon execution hereof by Landlord and Tenant. 43. Severability. If any clause or provision of the Lease is illegal, invalid or unenforceable under present or future laws, the remainder of this Lease shall not be affected thereby, and in lieu of each clause or provision of this Lease which is illegal, invalid or unenforceable, there shall be added as a part of this Lease a clause or provision as nearly identical to the said clause or provision as may be legal, valid and enforceable. 44. Entire Agreement. This Lease contains the entire agreement of the parties with respect to the subject matter hereof and no representations, inducements, promises or agreements, oral or otherwise, between the parties not embodied herein shall be of any force or effect. No failure of Landlord to exercise any power given Landlord hereunder, or to insist upon strict compliance by Tenant with any obligation of Tenant hereunder, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver of Landlord's right to demand exact compliance with the terms hereof. This Lease may not be altered, waived, amended or extended except by an instrument in writing signed by Landlord and Tenant. This Lease is not in recordable form, and Tenant agrees not to record or cause to be recorded this Lease or any short form or memorandum thereof. 45. Headings. The use of headings herein is solely for the convenience of indexing the various paragraphs hereof and shall in no event be considered in construing or interpreting any provision of this Lease. 46. Broker. Landlord and Tenant each hereby warrant and represent to the other that no brokers were instrumental or involved in any way in the procurement of this Lease, and Landlord and Tenant each hereby agree to indemnify and hold harmless the other from and against any costs, claims, damages, expenses, fees, including its reasonable legal fees, resulting from or relating to the breach of any warranty or representation made in this section by the indemnifying party. 47. Governing Law. The laws of the State of Georgia shall govern the validity, construction, performance and enforcement of this Lease. 48. Special Stipulations. The Special Stipulations attached hereto as Exhibit "C" are hereby incorporated herein by this reference as though fully set forth. In the event of any conflict between the terms and provisions of Special Stipulations and the terms and provisions of other portions of this Lease, the terms and provisions of the Special Stipulations shall control. 49. Authority. Each of the persons executing this Lease on behalf of Landlord and Tenant does hereby personally represent and warrant on behalf of their respective entity that said entity is a duly organized and validly existing corporation and is fully authorized and qualified to do business in the State of Georgia, that Tenant has full right and authority to enter into this Lease, and that each person signing on behalf of said entity is an authorized representative of same and is authorized to sign on behalf of same. Upon the request of either party, the other shall deliver to the requesting party documentation satisfactory to the requesting party evidencing the other party's compliance with this Article, and Tenant agrees to promptly execute all necessary and reasonable applications or documents as reasonably requested by Landlord, required by the jurisdiction in which the Demised Premises is located, to permit the issuance of necessary permits and certificates for Tenant's use and occupancy of the Demised Premises. - -18- 50. Parking. Tenant shall be entitled to utilize, on a non-exclusive basis, one (1) parking space for every two hundred (200) square feet of Rentable Floor Area of the Demised Premises. In the event the Rentable Floor Area of the Demised Premises decreases, as contemplated in the Special Stipulations attached as Exhibit C hereto, then the number of parking spaces Tenant shall be entitled to utilize shall decrease proportionately, so that the above ratio of parking spaces to square footage of the Demised Premises shall be maintained. Only Tenant and Tenant's agents, employees and customers shall have the right to utilize such spaces, and Tenant shall have no right to assign, (sub)lease or otherwise convey the parking space rights granted herein, except in connection with an assignment of this Lease or sublease of the Demised Premises permitted hereunder. Further, in the event of (sub)lease of parking space in connection with Tenant's sublease of the Demised Premises, Tenant shall not be permitted to (sub)lease more than one (1) parking space for each two hundred (200) square feet of the Demised Premises subleased. 51. Compliance With Laws. Landlord, at is sole cost and expense, shall be responsible for compliance with all laws generally applicable to the Building and/or Project, including but not limited to the Americans' with Disabilities Act; provided , however, Tenant, at its sole cost and expense, shall be responsible for having the Demised Premises comply with any rules, laws and/or codes specifically applicable to the Demised Premises at the time of and directly resulting from, any alterations or other changes or modifications to the Demised Premises made by Tenant. Landlord hereby agrees to indemnify and hold harmless Tenant from and against any and all costs, claims, damages, liabilities and fees, including reasonable legal fees and loss of equipment rental income, directly attributable to Landlord's failure to comply with its obligations pursuant to this Section; and Tenant hereby agrees to indemnify and hold harmless Landlord from and against any and all costs, claims, damages, liabilities and fees, including reasonable legal fees and loss of rental income directly attributable to Tenant's failure to comply with its obligations pursuant to this Section. 52. Roof Rights. Tenant shall be allowed access to and use of the roof of the Building in order to fulfill the terms of that certain agreement between Tenant and Norfolk Southern for installation of certain equipment thereupon. The exact location of the equipment shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. If Tenant seeks additional roof space for the installation of additional equipment, Tenant must obtain the prior written consent of Landlord which consent may not be unreasonably withheld, conditioned or delayed, but may be conditioned upon the payment of additional rent therefor. Tenant shall exercise its rights hereunder in coordination with Landlord in such a manner as not to invalidate any roof warranties and/or maintenance agreements now in place. Landlord may require Tenant to use Landlord's roofing contractor for the installation of the equipment. Tenant will repair any damage to the roof or roof structure caused by such installation. Tenant shall obtain (through Landlord or with Landlord's approval), all permits and approvals required by any governmental entities to install, operate or maintain said equipment. Tenant, at Tenant's sole cost and expense, shall maintain the equipment and comply with all laws, rules, regulations and ordinances standard of governmental authorities having jurisdiction over the equipment and/or the Building as a result of such equipment. Tenant shall be responsible for all roof repair and additional out of pocket maintenance costs, if any, attributable to the equipment and Tenant's use of the roof pursuant to this Section. Tenant may connect into the Building's electrical utilities and will pay all personal property taxes, if any, directly assessed with respect to the equipment. Landlord shall have access to the equipment twenty-four (24) hours a day, seven (7) days a week. Within thirty (30) days following the expiration or early termination of this Lease, Tenant shall remove the equipment, repair any damage caused by such removal and restore the Roof and any other affected areas of the Building to a condition at least as good as the condition immediately prior to the installation of the equipment, ordinary wear and tear excepted. If Tenant fails to so remove the equipment and restore the Building, Landlord may do so on Tenant's behalf and Tenant, within ten (10) days after demand, shall pay to Landlord the actual cost incurred by Landlord in doing so. Any - -19- equipment so installed shall be installed and used at Tenant's sole risk and in no event shall Landlord be liable under any circumstances for any damage to the equipment, loss or related use to the equipment except to the extent that damage is the result of the negligence or intentional misconduct of Landlord, its employees, agents or contractors. Nothing in this Section is intended to create an exclusive right in favor of Tenant to use the Roof of the Building. IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of the day, month and year first above written. Landlord: ASI Properties, Inc., a Georgia corporation By: Name: _________________________________ Title: _________________________________ [Corporate Seal] Tenant: AmQUEST, Inc., a Georgia corporation By: Name: _________________________________ Title: _________________________________ [Corporate Seal] -20- RULES AND REGULATIONS 1. No sign, picture, advertisement or notice visible from the exterior of the Demised Premises shall be installed, affixed, inscribed, painted or otherwise displayed by Tenant on any part of the Demised Premises or the Building unless the same is first approved by Landlord. Any such sign, picture, advertisement or notice approved by Landlord shall be painted or installed for Tenant at Tenant's cost by Landlord or by a party approved by Landlord. No awnings, curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with any window or door of the Demised Premises without the prior consent of Landlord, including approval by Landlord of the quality, type, design, color and manner of attachment. 2. Tenant agrees that its use of electrical current shall never exceed the capacity of existing feeders, risers or wiring installation. 3. The Demised Premises shall not be used for storage of merchandise held for sale to the general public. Tenant shall not do or permit to be done in or about the Demised Premises or Building anything which shall increase the rate of insurance on said Building or obstruct or interfere with the rights of other lessees of Landlord or annoy them in any way, including, but not limited to, using any musical instrument, making loud or unseemly noises, or singing, etc. The Demised Premises shall not be used for sleeping or lodging. No cooking or related activities shall be done or permitted by Tenant in the Demised Premises except with permission of Landlord. Tenant will be permitted to use for its own employees within the Demised Premises approved equipment for brewing coffee, tea, hot chocolate and similar beverages, provided that such use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules and regulations. No vending machines of any kind will be installed, permitted or used on any part of the Demised Premises without the prior consent of Landlord. No part of said Building or Demised Premises shall be used for gambling, immoral or other unlawful purposes. No intoxicating beverage shall be sold in said Building or Demised Premises without prior written consent of Landlord. No area outside of the Demised Premises shall be used for storage purposes at any time. Tenant may bring in food to cook in a microwave oven and have a refrigerator. 4. No birds or animals of any kind shall be brought into the Building (other than trained seeing-eye dogs required to be used by the visually impaired). No bicycles, motorcycles or other motorized vehicles shall be brought into the Building. 5. The sidewalks, entrances, passages, corridors, halls, elevators, and stairways in the Building shall not be obstructed by Tenant or used for any purposes other than those for which same were intended as ingress and egress. No windows, floors or skylights that reflect or admit light into the Building shall be covered or obstructed by Tenant. Toilets, wash basins and sinks shall not be used for any purpose other than those for which they were constructed, and no sweeping, rubbish, or other obstructing or improper substances shall be thrown therein. Any damage resulting to them, or to heating apparatus, from misuse by Tenant or its employees, shall be borne by Tenant. 6. Five (5) keys for the front door and five (5) keys for the rear door will be furnished Tenant without charge. Landlord may make a reasonable charge for any additional keys. No additional lock, latch or bolt of any kind shall be placed upon any door nor shall any changes be made in existing locks without written consent Page 1 of 3 of Landlord and Tenant shall in each such case furnish Landlord with a key for any such lock. At the termination of the Lease, Tenant shall return to Landlord all keys furnished to Tenant by Landlord, or otherwise procured by Tenant, and in the event of loss of any keys so furnished, Tenant shall pay to Landlord the cost thereof. 7. Landlord shall have the right to prescribe the weight, position and manner of installation of heavy articles such as safes, machines and other equipment brought into the Building. No safes, furniture, boxes, large parcels or other kind of freight shall be taken to or from the Demised Premises or allowed in any elevator, hall or corridor except at times allowed by Landlord. In no event shall any weight be placed upon any floor by Tenant so as to exceed the design conditions of the floors at the applicable locations. 8. Tenant shall not cause or permit any gases, liquids or odors to be produced upon or permeate from the Demised Premises, and no flammable, combustible or explosive fluid, chemical or substance shall be brought into the Building. 9. Unless agreed to in writing by Landlord, Tenant shall not employ any person other than Landlord's contractors for the purpose of cleaning and taking care of the Demised Premises. Cleaning service will not be furnished on nights when rooms are occupied after 8:00 p.m., unless, by agreement in writing, service is extended to a later hour for specifically designated rooms. 10. No connection shall be made to the electric wires or gas or electric fixtures, without the consent in writing on each occasion of Landlord. All glass, locks and trimmings in or upon the doors and windows of the Demised Premises shall be kept whole and in good repair. Tenant shall not injure, overload or deface the Building, the woodwork or the walls of the Demised Premises, nor permit upon the Demised Premises any noisome, noxious, noisy or offensive business. 11. If Tenant requires wiring for a bell or buzzer system, such wiring shall be done by the electrician of Landlord only, and no outside wiring men shall be allowed to do work of this kind unless by the written permission of Landlord or its representatives. Any wiring for telephone service must be approved by Landlord, and no boring or cutting for wiring shall be done unless approved by Landlord or its representatives, as stated. 12. Tenant and its employees and invitees shall observe and obey all parking, security and traffic regulations and measures imposed by Landlord. All vehicles shall be parked only in areas designated for vehicle parking by Landlord. 13. Canvassing, peddling, soliciting and distribution of handbills or any other written materials in the Building are prohibited, and Tenant shall cooperate to prevent the same. 14. Landlord shall have the right to change the name of the Building and to change the street address of the Building, provided that in the case of a change in the street address, Landlord shall give Tenant not less than 180 days' prior notice of the change, unless the change is required by governmental authority. 15. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular lessee, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in Page 2 of 3 favor of any other lessee, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all of the other lessees of the Building. 16. These Rules and Regulations are supplemental to, and shall not be construed to in any way modify or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of any premises in the Building. 17. Landlord reserves the right upon fifteen (15) days' prior written notice to Tenant to make such other and reasonable Rules and Regulations as in its judgment may from time to time be needed for the safety, care and cleanliness of the Building and the Land, and for the preservation of good order therein. 18. Building is non-smoking. 19. Electric space heaters are not allowed in building. Page 3 of 3 EXHIBIT "A" FLOOR PLAN EXHIBIT "B" BUILDING STANDARD SERVICES Landlord shall furnish the following services to Tenant during the Lease Term (the "Building Standard Services"): (a) Subject to curtailment as required by governmental laws, rules or mandatory regulations. Central heat and air conditioning in season, at such temperatures and in such amounts as are in keeping with the standards of buildings comparable to the Building in the metropolitan Atlanta, Georgia area. Such heating and air conditioning shall be furnished between 7:00 a.m. and 6:00 p.m. on weekdays (from Monday through Friday, inclusive) and between 8:00 a.m. and 1:00 p.m. on Saturdays, all exclusive of Holidays, as defined below (the "Building Operating Hours"). (b) Electric lighting service for all public areas and special service areas of the Building in the manner and to the extent reasonably deemed by Landlord to be in keeping with the standards of buildings comparable to the Building in the metropolitan Atlanta, Georgia area. (c) Janitor service shall be provided five (5) days per week, exclusive of Holidays (as hereinbelow defined), in a manner that Landlord reasonably deems to be consistent with the standards of office buildings comparable to the Building in the metropolitan Atlanta, Georgia area. In the event any special cleaning services are required for laboratories, special health care areas or other non-office space (and which are not required for office space), any incremental cost of providing such special cleaning services shall be borne solely by Tenant, and shall be paid by Tenant to Landlord as additional rent. (d) If any of Tenant's electrical equipment requires conditioned air in excess of Building Standard air conditioning, the same shall be installed by Landlord (on Tenant's behalf), and Tenant shall pay all design, installation, metering and operating costs relating thereto. (e) All Building Standard fluorescent bulb replacement in all areas. To the extent the services described above require electricity and water supplied by public utilities, Landlord's covenants thereunder shall only impose on Landlord the obligation to use its reasonable efforts to cause the applicable public utilities to furnish same. Except for deliberate and willful acts of Landlord, failure by Landlord to furnish the services described herein, or any cessation thereof, shall not render Landlord liable for damages to either person or property, nor be construed as an eviction of Tenant, nor work an abatement of rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof. In addition to the foregoing, should any of the equipment or machinery, for any cause, fail to operate, or function properly, Tenant shall have no claim for rebate of rent or damages on account of an interruption in service occasioned thereby or resulting therefrom; provided, however, Landlord agrees to use reasonable efforts to promptly repair said equipment or machinery and to restore said services during normal business hours. The following dates shall constitute "Holidays" as that term is used in this Lease: New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas, and any other holiday generally recognized as such by landlords of office space in the Atlanta office market, as determined by Landlord in good faith. If in the case of any specific holiday mentioned in the preceding sentence, a different day shall be Exhibit B-1 observed than the respective day mentioned, then that day which constitutes the day observed by national banks in Atlanta, Georgia shall constitute the Holiday under this Lease. Landlord hereby agrees to maintain the security systems in place as of the date of this Lease or otherwise consistent with its current level of security, specifically including twenty-four (24) hour per day, seven (7) days per week, Three Hundred Sixty-five (365) days per year guard and security access card keys. Should Tenant require any further or additional security measures, Tenant shall be responsible for the costs of same, unless Landlord is generally providing same to all tenants of the Building as part of a building wide security upgrade. Exhibit B-2 EXHIBIT "C" SPECIAL STIPULATIONS 1. Base Rental Rate. Base Rental Rate of $20.00 prsf of Rentable Floor Area for Suites 1 and 2 set forth in Section 1(j) of this Lease was established assuming such space will continue to be used as office space, and the Base Rental Rate of $40.00 prsf of Rentable Floor Area for Suites 6 and 7 set forth in Section 1(j) of this Lease was established assuming such space will continue to be actually used as data center space. In the event that all or any portion of Suites 1 or 2 is hereafter used for data center space, then the Base Rental Rate for that portion of said suites actually so used shall increase to $40.00 prsf, with the remainder of the space in said suite(s) continuing to have a Base Rental Rate of $20.00 prsf. For purposes hereof, Landlord and Tenant hereby acknowledge and agree that as of the date of this Lease, (a) the Rentable Floor Area of each Suite is as follows, (b) all of Suites 1 and 2 are actually being used solely as office space, and (c) all of Suites 6 and 7 are actually being used solely as data center space: Suite Rentable Floor Area 1 6,520 sf 2 5,858 sf 6 15,000 sf 7 6,068 sf In the event Tenant hereafter actually uses less Rentable Floor Area in Suites 6 and/or 7 as data center space, then, commencing with the first monthly installment of Base Rental thereafter becoming due and payable, the Base Rental shall be reduced by the number of square feet of Rentable Floor Area in such Suite(s) no longer actually being so used multiplied by the $40.00 Base Rental Rate; provided, however, (a) in the event such space is at any time thereafter again actually used for such purpose, then, commencing with the first monthly installment of Base Rental thereafter becoming due and payable, Base Rental thereafter be increased by the number of square feet of Rentable Floor Area in such Suite(s) again actually being so used multiplied by the $40.00 Base Rental Rate, (b) there shall be no reduction of the Base Rental for months 01 (February, 2002) through 03 (April, 2002) under any circumstances, and (c)Tenant shall not be entitled to a reduction of Base Rental at any time it is in material default under the Lease. In the event Tenant hereafter actually uses less Rentable Floor Area in Suites 1 and/or 2 as office space, then, commencing with the first monthly installment of Base Rental thereafter becoming due and payable, the Base Rental shall be reduced by the number of square feet of Rentable Floor Area in such Suite(s) no longer actually being used multiplied by the $20.00 Base Rental Rate; provided, however, (a) in the event such space is at any time thereafter again actually used for such purpose, then, commencing with the first monthly installment of Base Rental thereafter becoming due and payable, Base Rental thereafter be increased by the number of square feet of Rentable Floor Area in such Suite(s) again actually being so used multiplied by the $20.00 Base Rental Rate, (b) there shall be no reduction of the Base Rental for months 01 (February, 2002) through 03 (April, 2002) under any circumstances, and (c)Tenant shall not be entitled to a reduction of Base Rental at any time it is in material default under the Lease. Landlord and Tenant hereby agree to cooperate in good faith to establish the amount of any increase or decrease of Rentable Floor Area as set forth above. In order to obtain an adjustment of Base Rental as set forth above, Tenant must first request same in writing to Landlord and enter into an amendment to this Lease with Landlord excluding from the Demised Premises that portion of same no longer actually being used as data center space and/or office space. In the event that Landlord and Tenant cannot agree on the reduction in square footage within Exhibit C-1 ten (10) days of a written request for a Base Rental Adjustment by Tenant, then Landlord shall submit the matter to an independent B.O.M.A. qualified inspector for determination and such determination shall be controlling. The cost of such inspector shall be shared equally by the parties and Tenant's share shall be payable as additional rent. Tenant shall have no right to adjust or abate Base Rental unilaterally. 2. Utilities. Anything contained in Section 8 or elsewhere in this Lease to the contrary notwithstanding, beginning on the Rental Commencement Date and continuing throughout the Lease Term, Tenant shall only be responsible for paying the cost and expense of the electric current charges for the separately submetered data center space in Suites 6 and 7 of the Demised Premises, and communication charges which are rendered or furnished to the Demised Premises. Except for deliberate and willful acts of Landlord, failure by Landlord to furnish the services described herein, or any cessation thereof, shall not render Landlord liable for damages to either person or property, nor be construed as an eviction of Tenant, nor work an abatement of rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof. In addition to the foregoing, should any of Landlord's equipment or machinery, for any cause, fail to operate, or function properly, Tenant shall have no claim for rebate of rent or damages on account of an interruption in service occasioned thereby or resulting therefrom; provided, however, Landlord agrees to use reasonable efforts to promptly repair said equipment or machinery and to restore said services. Tenant shall have the right to make such repairs as are necessary to keep its equipment and machinery operational and Tenant shall have the right to an abatement of rent for the cost thereof if Landlord is obligated to repair and/or maintain same pursuant to this Lease and fails to do so; provided, however, the abatement shall not be greater than Twenty-five (25%) percent of the Rental then coming due in any month during which such abatement is sought. 3. To the extent permitted by the applicable utility provider, Landlord, at its sole cost and expense, shall install (sub)meters or other similar devices to measure such utility usage at the Demised Premises, and Tenant shall pay Landlord as additional Rent, together with the installment of Base Rental next coming due, the cost of such service as determined in accordance with the (sub)meters or similar devices . To the extent the providers of such utilities will not permit the installation of such meters, Landlord shall make the determination of the cost of such utilities applicable to the Demised Premises, and Tenant shall pay Landlord, as additional Rent, together with the installment of Base Rental next coming due, the cost of such service as determined by Landlord. Landlord shall provide copies of the applicable invoices and Landlord's calculations, together with Landlord's request for payment. 4. Conference Room Usage. During months 01 through 03 of this Lease Tenant, at no additional costs, shall have free access and full use of any of Landlord's conference rooms in the Building. Thereafter, Tenant shall have such access and use of such conference rooms upon Tenant's request, subject to availability and payment of Landlord's then current rental fee for same. 5. Fiber and Electric Cable/Wiring Upgrades. Tenant, at Tenant's sole cost and expense, shall have the right to access all optic fiber and electric cable/wiring in the Building for purposes of increasing or otherwise improving service, subject to (i) Landlord's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed and (ii) the following conditions: (a) Tenant is not then in default of its obligations under this Lease beyond any applicable notice or cure period; (b) Tenant obtains all required consents and approvals of utility providers to such work; Exhibit C-2 (c) Tenant obtains all required municipal permits and approvals for such work. and Tenant performs all such work in accordance with all applicable laws, rules and regulations; (d) Tenant performs all such work in such a manner so as to minimize the interference with the conduct of business by other tenants and/or occupants of the Building; (e) Tenant performs all such work in such a manner that utility service to the Building is not interrupted or reduced at any time, and in the event such work cannot be performed without interruption or reduction of utility service, then such work shall only be performed pursuant to criteria reasonably established by Landlord to minimize such interruption or reduction; (f) Tenant provides Landlord with fourteen (14) days' prior written notice of its intent to perform such work, together with copies of written plans and specifications therefor, except in the case of an emergency, in which case only such notice and plans and specifications as are reasonable under the circumstances shall be required; and (g) Tenant provides Landlord with evidence of such insurance as Landlord reasonably deems necessary for purposes of the work, which insurance shall be obtained at Tenant's sole cost and expense, and, in the event the premiums for Landlord's insurance required pursuant to this Lease increase a result of such work, Tenant shall reimburse upon demand Landlord such increase as additional Rent. Anything contained in this Lease to the contrary notwithstanding, Tenant hereby agrees to indemnify and hold harmless Landlord from and against any and all liability, loss, cost, damage or expense, including without limitation, court costs and reasonable attorney's fees, incurred by Landlord which arise from or relate to the performance of any such work by Tenant. This indemnity shall survive the expiration or earlier termination of this Lease. Exhibit C-3 LEASE AGREEMENT by and between ASI Properties, Inc., a Georgia corporation ("Landlord") and AmQUEST, Inc., a Georgia corporation "Tenant" dated February ______, 2002 for 470 East Paces Ferry Road Suites 1, 2, 6 and 7 Atlanta, Georgia 30305-3300 containing 33,446 square feet of Rentable Floor Area Term: Forty-Eight (48) months TABLE OF CONTENTS Page 1. Certain Definitions ..................................................1 2. Lease of Premises ....................................................2 3. Term .................................................................2 4. Possession ...........................................................3 5. Rental Payments ......................................................3 6. Base Rental ..........................................................3 7. Intentionally Deleted ................................................3 8. Operating Expenses ...................................................3 9. Landlord's Alterations and Improvements ..............................4 10. Tenant Taxes .........................................................4 11. Payments .............................................................4 12. Interest and Late Charges ............................................4 13. Use Rules ............................................................4 14. Alterations ..........................................................5 15. Repairs ..............................................................5 16. Landlord's Right of Entry ............................................6 17. Insurance ............................................................6 18. Waiver of Subrogation ................................................7 19. Default ..............................................................7 20. Waiver of Breach .....................................................9 21. Assignment and Subletting ............................................9 22. Destruction .........................................................11 i 23. Intentionally Deleted ...............................................12 24. Services by Landlord ................................................12 25. Attorneys' Fees and Homestead .......................................12 26. Time ................................................................12 27. Subordination and Attornment ........................................12 28. Estoppel Certificates ...............................................13 29. Cumulative Rights ...................................................13 30. Holding Over ....................................................... 14 31. Surrender of Premises ...............................................14 32. Notices .............................................................14 33. Damage or Theft of Personal Property ................................14 34. Eminent Domain ......................................................15 35. Parties .............................................................16 36. Liability of Tenant .................................................16 37. Force Majeure .......................................................16 38. Landlord's Liability ................................................17 39. Landlord's Covenant of Quiet Enjoyment ..............................17 40. Intentionally Deleted. ..............................................17 41. Hazardous Substances ................................................17 42. Submission of Lease .................................................17 43. Severability ........................................................18 44. Entire Agreement ....................................................18 45. Headings ............................................................18 46. Broker ..............................................................18 ii 47. Governing Law .......................................................18 48. Special Stipulations ................................................18 49. Authority ...........................................................18 50. Parking .............................................................18 51. Compliance With Laws ................................................19 52. Roof Rights .........................................................19 Rules and Regulations Exhibit "A" - Floor Plan Exhibit "B" - Building Standard Services Exhibit "C" - Special Stipulations EX-99.8 14 aguarantyex99_8.txt GUARANTY OF LEASE GUARANTY OF LEASE THIS GUARANTY is made and executed as of February 5th, 2001, from INFOCROSSING, INC., a Delaware corporation (hereinafter referred to as "Guarantor"), to (ii) ASI PROPERTIES, INC., its successors and assigns (hereinafter referred to as "Landlord"). WITNESSETH: WHEREAS, Landlord has or will enter into that certain Lease (hereinafter referred to as the "Lease"), on or about the date hereof, whereby Landlord has agreed to lease to AmQUEST, INC., a Georgia corporation. (hereinafter referred to as "Tenant") certain premises (hereinafter referred to as the "Premises") commonly known as Suites 1,2,6 and 7 in the building located at 470 East Paces Ferry Road, Atlanta, Georgia containing approximately 32,096 of Rentable Floor Area. WHEREAS, Guarantor desires to induce Landlord to execute and deliver the Lease to Tenant and Landlord is willing to execute and deliver the Lease to Tenant only if Guarantor guarantees to Landlord the prompt performance by Tenant of all the covenants, terms, conditions and obligations to be performed by Tenant under the Lease. NOW, THEREFORE, in consideration of the foregoing, and of the mutual promises hereinafter set forth, the parties hereto hereby agree as follows: 1. Guarantor hereby absolutely, unconditionally, irrevocably, jointly and severally guarantees to Landlord (i) the prompt and complete payment by Tenant to Landlord of the Base Rental and additional or other Rent (as defined in the Lease) payable by Tenant to Landlord under the Lease, (ii) the prompt and complete payment by Tenant to Landlord of all sums of money payable by Tenant to Landlord under the Lease, (iii) the prompt and complete performance by Tenant of all covenants, conditions, terms and obligations to be performed by Tenant under the Lease, and (iv) the prompt and complete payment by Tenant to Landlord of all damages, costs and expenses that, by reason of the Lease, may become payable by Tenant to Landlord. 2. Guarantor's liability hereunder shall in no way be affected by any indulgence, extension, or forbearance which Landlord may grant to Tenant with respect to the payment or performance of any obligation of Tenant, or any waiver, on the part of Landlord of any breach of the Lease by Tenant; and Guarantor waives any requirement that Guarantor be notified of any such indulgence, extension, forbearance or waiver, and Guarantor waives notice of such matters and of any default by Tenant under the Lease. 3. If a default (as defined in the Lease) occurs with respect to any obligation of Tenant under the Lease, Guarantor covenants and agrees to perform such obligation forthwith upon demand (in the same manner if the same constituted the direct primary obligation and liability of Guarantor), including, without limitation, payments of all sums owing to Landlord by reason of such default. 4. Landlord shall have the right, at any time and from time to time, to enforce all rights and remedies available to Landlord under the Lease, including, without limitation, agreements with Tenant modifying or in any way changing any of the terms or provisions of the Lease, extending or renewing the time of payment of any sum payable under the Lease, compromising or making settlement of any obligation of Tenant under the Lease, terminating the Lease or resuming possession of the Premises, making demand upon or instituting legal proceedings against Tenant, granting any indulgence, extension or forbearance to Tenant with respect to the performance of any obligation of Tenant, or waiving any breach of the Lease by Tenant, all without notice to, or consent of, Guarantor and without affecting the continuing validity and enforceability of this Guaranty. 5. Provided Landlord gives Tenant any required notice as set forth in the Lease, Landlord may make demand and/or institute legal proceedings against Guarantor for the performance of any obligation of Tenant under the Lease without first proceeding in any way against Tenant and without enforcing any rights or remedies under the Lease. 6. No delay of Landlord in exercising any rights and/or powers hereunder or in taking any action to enforce the performance of Tenant's obligations under the Lease shall operate as a waiver as to such rights or powers or in any manner prejudice any or all of Landlord's rights and powers hereunder against Guarantor. 7. All claims which Guarantor may have against Tenant by reason of this Guaranty, whether by way of subrogation to any position of Landlord or for contribution or reimbursement, shall be subordinate to any outstanding claims which Landlord shall then have against Tenant. Guarantor hereby releases Landlord from all liability to Guarantor or Tenant for failing to recognize or observe or protect any legal or equitable rights of Guarantor with respect to Tenant, the Premises or the Lease. 8. This Guaranty may not be modified, altered or terminated except pursuant to an instrument in writing executed by Guarantor and Landlord. No waiver of any provision of this Guaranty shall be valid unless in writing and signed by Landlord. A failure of Landlord to insist upon strict performance of any obligation or covenant or Guarantor under this Guaranty in any one or more instances shall not be construed as a waiver or relinquishment of the right to insist upon strict performance of such obligation or covenant in the future. 9. This Guaranty is governed by and construed and enforced under the laws of the State of Georgia. Guarantor irrevocably submits to the jurisdiction of any state or federal court sitting in or having jurisdiction over Cobb County, Georgia, in any action or proceeding brought to enforce or otherwise arising out of or relating to this Guaranty. Guarantor waives any objection to venue in such court and waives any claim that such form is an inconvenience form. 10. This Guaranty shall be binding upon Guarantor, its successors or assigns, and shall inure to the benefit of, and be enforceable by, Landlord, its successors or assigns, and by any successor to the interest of Landlord under the Lease. 11. Any notice, demand or request by Landlord, its successors or assigns, to Guarantor shall be in writing, and shall be deemed to have been duly given or made if 2 either delivered personally to Guarantor or mailed by certified or registered mail, addressed to Guarantor, at the following address: 2 Christie Heights, Leonia, New Jersey 07605, and to Landlord at the following address 470 East Paces Ferry Road, N.E., Atlanta, Georgia 30305, Attn: James C. Edenfield. Guarantor hereby appoints as its agent for the receipt of service of process under this Guaranty, Corporation Service Company at 4845 Jimmy Carter Blvd., Norcross, Georgia 30093. Guarantor shall pay to Landlord all costs, including without limitation reasonable attorneys' fees, court costs and other disbursements, incurred by Landlord in connection with enforcing any provision of this Guaranty, whether or not any action or lawsuit is actually instituted by Landlord. 12. To the extent permitted by law, Guarantor expressly waives and relinquishes any and all rights and remedies of surety, including but not limited to, any rights described in Official Code of Ga. Ann., ' 10-7-1, et. seq. IN WITNESS WHEREOF, the undersigned have executed this Guaranty on the day and year first above written. GUARANTOR: INFOCROSSING, INC., a Delaware corporation By: _______________________________ Name: ____________________________ Title: _____________________________ (Corporate Seal) 3 -----END PRIVACY-ENHANCED MESSAGE-----