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STOCK PURCHASE AGREEMENT
by and between
INTELLIGROUP, INC.
and
THE SHAREHOLDERS OF NETWORK PUBLISHING, INC. IDENTIFIED HEREIN
and
NETWORK PUBLISHING, INC.
Dated: December 21, 1998
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TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS.....................................................1
1.1 Defined Terms...................................................1
1.2 Interpretation Provisions.......................................10
ARTICLE 2. THE ACQUISITION.................................................11
2.1 The Acquisition.................................................11
2.2 Consideration...................................................11
2.3 Taking of Necessary Action; Further Action......................13
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE
SELLING SHAREHOLDERS AND THE COMPANY........................................13
3.1 Organization....................................................13
3.2 Capitalization..................................................13
3.3 Ownership of Capital Stock; Title...............................14
3.4 [Intentionally left blank]......................................14
3.5 Authorization...................................................14
3.6 Officers and Directors..........................................14
3.7 Bank Accounts...................................................14
3.8 Real Property...................................................15
3.9 Personal Property...............................................15
3.10 Environmental Matters...........................................16
3.11 Contracts.......................................................16
3.12 No Conflict or Violation; Consents..............................18
3.13 Permits.........................................................19
3.14 Financial Statements; Books and Records.........................19
3.15 Absence of Certain Changes or Events............................19
3.16 Liabilities.....................................................21
3.17 Litigation..................................................... 22
3.18 Labor Matters.................................................. 22
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3.19 Employee Plans................................................. 22
3.20 Transactions with Related Parties.............................. 22
3.21 Compliance with Law............................................ 23
3.22 Intellectual Property.......................................... 23
3.23 Tax Matters.................................................... 23
3.24 Insurance...................................................... 25
3.25 Accounts Receivable and Accounts Payable; Unbilled Costs
and Fees....................................................... 25
3.26 Customers...................................................... 26
3.27 Brokers; Transaction Costs..................................... 26
3.28 No Other Agreements to Sell the Company or the Assets.......... 26
3.29 Year 2000 Compliance........................................... 26
3.30 Certain Securities Law Representations......................... 26
3.31 NPI Name....................................................... 28
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF
INTELLIGROUP................................................................28
4.1 Organization....................................................28
4.2 Capitalization..................................................28
4.3 Authorization...................................................29
4.4 No Conflict or Violation; Consents..............................29
4.5 Reports and Financial Statements................................29
4.6 Absence of Certain Changes or Events............................30
4.7 Certain Securities Law Representations..........................30
4.8 Financial Capability............................................30
4.9 Brokers' Fees...................................................30
ARTICLE 5. COVENANTS OF THE PARTIES........................................31
5.1 By Selling Shareholders.........................................31
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5.2 By Intelligroup................................................ 31
5.3 Conduct of Business............................................ 31
5.4 Investigation by Intelligroup.................................. 33
5.5 Notification of Certain Matters................................ 33
5.6 No Mergers, Consolidations, Sales of Stock, Etc................ 33
ARTICLE 6. CONDITIONS TO THE SELLING SHAREHOLDERS' OBLIGATIONS.............34
6.1 Representations, Warranties and Covenants...................... 34
6.2 Consents....................................................... 34
6.3 No Court Orders................................................ 34
6.4 Closing Documents.............................................. 34
6.5 Option Holders................................................. 34
6.6 Employment Agreements.......................................... 35
ARTICLE 7. CONDITIONS TO INTELLIGROUP'S OBLIGATIONS........................35
7.1 Representations, Warranties and Covenants...................... 35
7.2 Consents....................................................... 35
7.3 No Actions or Court Orders..................................... 35
7.4 Closing Documents.............................................. 35
7.5 Indebtedness....................................................36
7.6 Board of Directors Approval.....................................36
7.7 Tax Matters.....................................................36
7.8 Material Adverse Change.........................................36
7.9 Exemption under Federal and State Securities Laws...............36
7.10 Completion of Intelligroup Diligence............................36
7.11 Option Holders..................................................36
7.12 Employment Agreements...........................................36
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ARTICLE 8. TAX MATTERS.....................................................37
8.1 Information and Assistance......................................37
ARTICLE 9. CLOSING.........................................................37
9.1 Deliveries by the Selling Shareholders to Intelligroup..........37
9.2 Deliveries by Intelligroup to the Selling Shareholders..........38
ARTICLE 10. CERTAIN POST-CLOSING AGREEMENTS.................................38
10.1 Proprietary Information.........................................38
10.2 No Solicitation or Hiring of Former Employees...................38
10.3 Non-Competition Agreement.......................................38
10.4 Guaranty Agreements.............................................39
10.5 Registration of Intelligroup Shares.............................39
10.6 [Intentionally Omitted].........................................40
10.7 Continuation of Business........................................40
ARTICLE 11. INDEMNIFICATION.................................................40
11.1 Survival of Representations, Etc................................40
11.2 Indemnification.................................................41
11.3 No Right of Contribution........................................42
11.4 Procedure for Claims............................................42
ARTICLE 12. MISCELLANEOUS...................................................44
12.1 Assignment......................................................44
12.2 Notices.........................................................44
12.3 Choice of Law...................................................44
12.4 Descriptive Headings............................................45
12.5 Entire Agreement; Amendments and Waivers........................45
12.6 Counterparts....................................................45
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12.7 Invalidity......................................................45
12.8 Expenses........................................................45
12.9 Publicity.......................................................45
12.10 No Third Party Beneficiaries....................................45
12.11 Termination.....................................................45
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STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT dated as of December 21, 1998 (the "Agreement"),
among Intelligroup, Inc., a New Jersey corporation ("Intelligroup"), the
shareholders of Network Publishing, Inc., a Utah corporation ("NPI"), listed on
the signature page hereto (the "Selling Shareholders"), and NPI.
WITNESSETH:
WHEREAS, the Board of Directors of Intelligroup has determined that it is
advisable and in the best interests of its shareholders for Intelligroup to
acquire all of the issued and outstanding shares of capital stock of NPI, as
well as all shares of capital stock which may be obtained under the Options more
particularly described herein (collectively, the "NPI Shares") upon the terms
and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of NPI and the Selling Shareholders each
has determined that it is advisable and in the best interests of the Selling
Shareholders for Intelligroup to acquire all of the NPI Shares upon the terms
and subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, the Board of Directors of each
of Intelligroup and NPI has approved the acquisition of all of the NPI Shares by
Intelligroup (the "Acquisition");
WHEREAS, each of the Selling Shareholders has approved the Acquisition; and
WHEREAS, pursuant to the Acquisition, the NPI Shares shall be acquired by
Intelligroup in exchange for the consideration set forth in Section 2.2 hereof
upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Intelligroup, the Selling Shareholders and NPI hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. DEFINED TERMS. As used herein, the terms below shall have the following
meanings:
"Action" means any action, suit, proceeding, or investigation before any
court, arbitrator, or administrative or governmental body.
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"Affiliate" of a Person means any other Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means 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.
"Assets" means the right, title and interest of the Company (as hereinafter
defined) in and to its properties, assets and rights of any kind, whether
tangible or intangible, real or personal, including without limitation the
right, title and interest in the following:
(a) all Contracts and Contract Rights;
(b) all Fixtures and Equipment;
(c) all Books and Records;
(d) all Proprietary Rights;
(e) all Permits;
(f) all cash, accounts receivable, deposits and prepaid expenses; and
(g) all goodwill.
"Average Share Price" means the average of the closing prices of
Intelligroup Stock on the Nasdaq National Market as reported in the Wall Street
Journal for the 31 trading days commencing on January 3, 2000 or, if lesser, the
number of trading days which have elapsed during the period commencing on
January 3, 2000 and ending on the day which is three trading days prior to the
date of determination of the earn out payment pursuant to Section 2.2(e).
"Balance Sheet" means the consolidated balance sheet of the Company as of
the Balance Sheet Date.
"Balance Sheet Date" means October 31, 1998.
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"Benefit Arrangement" means any employment, consulting, severance or other
similar contract, arrangement or policy (written or oral) and each plan,
arrangement, program, agreement or commitment (written or oral) providing for
insurance coverage (including, without limitation, any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health or
accident benefits (including, without limitation, any "voluntary employees'
beneficiary association" as defined in Section 501(c)(9) of the Internal Revenue
Code providing for the same or other benefits) or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights, stock
purchases or other forms of incentive compensation or post-retirement insurance,
compensation or benefits which (a) is not a Welfare Plan, Pension Plan or
Multiemployer Plan, (b) is entered into, maintained, contributed to or required
to be contributed to, as the case may be, by the Company or any ERISA Affiliate
or under which the Company or any ERISA Affiliate may incur any liability, and
(c) covers any employee or former employee of the Company or any ERISA Affiliate
(with respect to their relationship with such any entity).
"Books and Records" means (a) all product, business and marketing plans,
sales and promotional literature and artwork relating to the Assets or the
Business, (b) all books, records, lists, ledgers, financial data, files,
reports, product and design manuals, plans, drawings, technical manuals and
operating records of every kind relating to the Assets or the Business
(including records and lists of customers, distributors, suppliers and
personnel) and (c) all telephone and fax numbers used in the Business, in each
case whether maintained as hard copy or stored in computer memory and whether
owned by the Company or any of its Affiliates.
"Business" means the business and operations of the Company consisting of
the provision of web site design and front-end application solutions services.
"Closing" has the meaning set forth in Section 2.1(b).
"Closing Date" means the date of the Closing.
"Company" means NPI.
"Confidentiality Agreement" means the Non-Disclosure & Confidentiality
Agreement executed by Intelligroup on October 21, 1998.
"Consents" means any and all Permits and any and all consents, approvals or
waivers from third parties that are required for the consummation of the
transactions contemplated by this Agreement.
"Contract Rights" means all rights and obligations under the Contracts.
"Contracts" means all agreements, contracts, leases (whether for real or
personal property), purchase orders, undertakings, covenants not to compete,
employment agreements, confidentiality agreements, licenses, instruments,
obligations and commitments to which the Company is a party or by which the
Company or any of the Assets are bound or affected, whether written or oral.
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"Court Order" means any judgment, decision, consent decree, injunction,
ruling or order of any foreign, federal, state or local court or governmental
agency, department or authority that is binding on any Person or its property
under applicable law.
"Default" means (a) a breach of or default under any Contract, (b) the
occurrence of an event that with the passage of time or the giving of notice or
both would constitute a breach of or default under any Contract or (c) the
occurrence of an event that with or without the passage of time or the giving of
notice or both would give rise to a right of termination, renegotiation or
acceleration under any Contract.
"Employee Plans" means all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"Employees" means all officers and directors of the Company and all other
Persons employed by the Company on a full or part-time basis as of the relevant
date.
"Employment Agreements" mean the Employment Agreements in the form
contained in Exhibit A hereof to be entered into between Intelligroup and the
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Selling Shareholders.
"Encumbrance" means any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction, conditional sales agreement, encumbrance or other right of
third parties, whether voluntarily incurred or arising by operation of law, and
includes any agreement to give any of the foregoing in the future, and any
contingent sale or other title retention agreement or lease in the nature
thereof.
"Environmental Claims" means all notices of violation, liens, claims,
demands, suits, or causes of action for any damage, including, without
limitation, personal injury, property damage (including, without limitation, any
depreciation or diminution of property values), lost use of property or
consequential damages, arising directly or indirectly out of Environmental
Conditions or Environmental Laws. By way of example only (and not by way of
limitation), Environmental Claims include (i) violations of or obligations under
any contract related to Environmental Laws or Environmental Conditions between
the Company and any other person, (ii) actual or threatened damages to natural
resources, (iii) claims for nuisance or its statutory equivalent related to a
violation of Environmental Laws or Environmental Conditions, (iv) claims for the
recovery of response costs, or administrative or judicial orders directing the
performance of investigations, responses or remedial actions under any
Environmental Laws, (v) requirements to implement "corrective action" pursuant
to any order or permit issued pursuant to the Resource Conservation and Recovery
Act, as amended ("RCRA"), or similar provisions of applicable state law, (vi)
claims related to Environmental Laws or Environmental Conditions for
restitution, contribution, or indemnity, (vii) fines, penalties or liens of any
kind against property related to Environmental Laws or Environmental Conditions,
(viii) claims related to Environmental Laws or Environmental Conditions for
injunctive relief or other orders or notices of violation from federal, state or
local agencies or courts, and (ix) with regard to any present or former
employees, claims relating to exposure to or injury from Environmental
Conditions.
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"Environmental Conditions" means the state of the environment, including
natural resources (e.g., flora and fauna), soil, surface water, ground water,
any drinking water supply, subsurface strata or ambient air, relating to or
arising out of the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, pouring, emptying,
discharging, injecting, escaping, leaching, disposal, dumping or threatened
release of Hazardous Substances by the Company or any of their respective
predecessors or successors in interest, or by their respective agents,
representatives, employees or independent contractors when acting in such
capacity on behalf of the Company. With respect to Environmental Claims by third
parties, Environmental Conditions also include the exposure of persons to
Hazardous Substances at the work place or the exposure of persons or property to
Hazardous Substances migrating from or otherwise emanating from or located on
property owned or occupied by the Company.
"Environmental Laws" means all applicable federal, state, district and
local laws, all rules or regulations promulgated thereunder, and all orders,
consent orders, judgments, notices, permits or demand letters issued,
promulgated or entered pursuant thereto, relating to pollution or protection of
the environment (including, without limitation, ambient air, surface water,
ground water, land surface, or subsurface strata), including, without
limitation, (i) laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, industrial materials, wastes or
other substances into the environment and (ii) laws relating to the
identification, generation, manufacture, processing, distribution, use,
treatment, storage, disposal, recovery, transport or other handling of
pollutants, contaminants, chemicals, industrial materials, wastes or other
substances. Environmental Laws shall include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Toxic Substances Control Act, as amended, the Hazardous
Materials Transportation Act, as amended, RCRA, the Clean Water Act, as amended,
the Safe Drinking Water Act, as amended, the Clean Air Act, as amended, the
Occupational Safety and Health Act, as amended, and all analogous laws
promulgated or issued by any state, foreign or other Governmental Authority.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity which is (or at any relevant time was) a
member of a "controlled group of corporations" with, under "common control"
with, or a member of an "affiliated service group" with, or otherwise required
to be aggregated with, the Company as set forth in Section 414(b), (c), (m) or
(o) of the Internal Revenue Code.
"Escrow Agent" means the escrow agent under the Escrow Agreement, or any
successor agent designated in accordance with the terms of the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement to be entered into among
Intelligroup, the Selling Shareholders and the Escrow Agent substantially in the
form of Exhibit B hereof.
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"Facilities" means all offices, manufacturing facilities, stores,
warehouses, administration buildings and all real property and related
facilities used by the Company all as identified or listed on Schedule 3.8.
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"Fixtures and Equipment" means all of the furniture, fixtures, furnishings,
machinery, computer hardware, and other tangible personal property owned by the
Company wherever located and including any such Fixtures and Equipment in the
possession of any of the suppliers or other vendors of the Company.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or in such
other statements by such entity as may be in general use by significant segments
of the U.S. accounting profession, which are applicable to the facts and
circumstances on the date of determination.
"Governmental Authority" means a federal, state, local or foreign
government and any agency, department, commission or other instrumentality of
any such government.
"Hazardous Substances" means all pollutants, contaminants, chemicals,
wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic or
otherwise hazardous substances or materials (whether solids, liquids or gases)
subject to regulation, control or remediation under Environmental Laws. By way
of example only, the term Hazardous Substances includes petroleum, urea
formaldehyde, flammable, explosive and radioactive materials, PCBs, pesticides,
herbicides, asbestos, sludge, slag, acids, metals, solvents and waste waters.
"Intelligroup Stock" means the common stock, $0.01 par value per share, of
Intelligroup.
"Internal Revenue Code" or "Code" means the Internal Revenue Code of 1986,
as amended.
"knowledge" or "to the knowledge" of a party (or similar phrases) means to
the extent of matters (i) which are actually known by such party or (ii) which,
based on facts of which such party is aware, would be known to a reasonable
Person in similar circumstances, and when used in the context of the Selling
Shareholders or the Company shall be deemed to include the knowledge of each of
their respective executive officers.
"Liability" means any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, absolute, contingent, matured,
unmatured, liquidated, unliquidated, known or unknown.
"Material Adverse Effect" or "Material Adverse Change" or a similar phrase
means, with respect to any Person, (a) any material adverse effect on or change
with respect to (i) the business, operations, assets (taken as a whole),
liabilities (taken as a whole), condition (financial or otherwise) or results of
operations, of such Person, taken as a whole, or (ii) the right or ability of
such Person to consummate any of the transactions contemplated hereby or (b) any
event or condition which, with the passage of time, the giving or receipt of
notice or the occurrence or nonoccurrence of any other circumstance, action or
event, would reasonably be expected to constitute a "Material Adverse Effect" on
or "Material Adverse Change" with respect to such Person.
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"Multiemployer Plan" means any "multiemployer plan," as defined in Section
4001(a)(3) or 3(37) of ERISA, which (a) the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or,
after September 25, 1980, maintained, administered, contributed to or was
required to contribute to, or under which the Company or any ERISA Affiliate may
incur any liability and (b) covers any employee or former employee of the
Company or any ERISA Affiliate (with respect to their relationship with any such
entity).
"Net Asset Value" shall mean the excess of the total assets of the Company
over the total liabilities of the Company on the date as of which such Net Asset
Value is to be calculated, all determined in accordance with GAAP, consistently
applied.
"NPI Financial Statements" means (a) the balance sheets of the Company as
of October 31, 1998 and December 31, 1997 and the income statements of the
Company for the respective 10 and 12 month periods then ended, all as attached
in Schedule 1.1 and (b) the Closing Balance Sheet to be delivered to
Intelligroup within twenty five (25) days of Closing as set forth in Section
5.1(b).
"Option Holders" means a holder of an Option identified in Schedule A.
"Option Holder's Stock Purchase Agreement" means the agreement to be
entered into between Intelligroup and each Option Holder substantially in the
form of Exhibit C hereof.
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"Option" means an option to purchase capital stock of NPI identified in
Schedule A hereof.
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"Pension Plan" means any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) the Company or
any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the five years prior to the Closing Date, maintained,
administered, contributed to or was required to contribute to, or under which
the Company or any ERISA Affiliate may incur any liability (including, without
limitation, any contingent liability) and (b) covers any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with any such entity.)
"Permitted Encumbrances" means (a) liens for Taxes or governmental charges
or claims (i) not yet due and payable, or (ii) being contested in good faith, if
a reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefor, (b) statutory liens of landlords, liens of
carriers, warehousepersons, mechanics and materialpersons and other liens
imposed by law incurred in the ordinary course of business for sums (i) not yet
due and payable, or (ii) being contested in good faith, if a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor, (c) liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other similar types of social security
programs or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, performance and return of
money bonds and similar obligations, in each case in the ordinary course of
business, consistent with past practice, and (d) easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case, which do
not interfere with the ordinary conduct of business of the Company and do not
materially detract from the value of the property upon which such encumbrance
exists.
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"Permits" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any Governmental
Authority, whether foreign, federal, state or local, necessary or desirable for
the past, present or anticipated conduct or operation of the Business or
ownership of the Assets of such Person.
"Person" means any person or entity, whether an individual, trustee,
corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority or any similar entity.
"Proprietary Rights" means all (a) U.S. and foreign patents, patent
applications, patent disclosures and improvements thereto, including ▇▇▇▇▇
patents and utility models and applications therefor, (b) U.S. and foreign
trademarks, service marks, trade dress, logos, trade names and corporate names
and the goodwill associated therewith and registrations and applications for
registration thereof, (c) U.S. and foreign copyrights and registrations and
applications for registration thereof, (d) U.S. and foreign mask work rights and
registrations and applications for registration thereof, (e) Trade Secrets, (f)
other proprietary rights, (g) copies and tangible embodiments thereof (in
whatever form or medium) and (h) licenses granting any rights with respect to
any of the foregoing.
"Regulations" means any laws, statutes, ordinances, regulations, rules,
notice requirements, court decisions, agency guidelines, principles of law and
orders of any foreign, federal, state or local government and any other
governmental department or agency, including without limitation energy, motor
vehicle safety, public utility, zoning, building and health codes, Environmental
Laws, occupational safety and health laws and laws respecting employment
practices, employee documentation, terms and conditions of employment and wages
and hours.
"Related Party" means (i) any of the Company's officers, directors and
shareholders, and any officers, directors, partners, associates or relatives of
such officers, directors and shareholders, and (ii) any Person in which the
Company or any Shareholder or any Affiliate, associate or relative of any such
Person has any direct or indirect interest.
"Representative" of any Person means any officer, director, principal,
attorney, agent, employee or other representative of such Person.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which at least 50% of the securities or interests having, by their terms,
ordinary voting power to elect members to the board of directors, or other
persons performing similar functions with respect to such corporation, is held,
directly or indirectly, by such Person, (b) any partnership or limited liability
company of which (i) such Person is a general partner or managing member or (ii)
such person possesses more than a 50% interest in the total capital or total
income of such partnership or limited liability company.
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"Tax Return" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including information
returns, and any documents with respect to or accompanying requests for the
extension of time in which to file any such report, return, document,
declaration or other information.
"Taxes" mean any and all taxes, charges, fees, levies or other assessments,
including income, gross receipts, excise, real or personal property, sales,
value added, ad valorem, employment withholding, social security, retirement,
unemployment, occupation, use, service, license, net worth, payroll, franchise,
transfer and recording taxes, taxes measured by or imposed upon capital, and
license fees imposed by the Internal Revenue Service or any taxing authority
(whether domestic or foreign, including any federal, state, county, local or
foreign government or any subdivision or taxing agency thereof (including a U.S.
possession)), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest whether paid or
received, fines, penalties or additional amounts attributable to, or imposed
upon, or with respect to, any such taxes, charges, fees, levies or other
assessments.
"Trade Secrets" means all trade secrets and confidential business
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
research and development information, software, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information).
"Welfare Plan" means any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, which (a) the Company or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or under which the
Company or any ERISA Affiliate may incur any liability and (b) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with any such entity).
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1.2. INTERPRETATION PROVISIONS.
(a) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement, and article, section, schedule and
exhibit references are to this Agreement unless otherwise specified. The meaning
of defined terms shall be equally applicable to the singular and plural forms of
the defined terms. The terms "include" and "including" are not limiting and mean
"including without limitation."
(b) References to agreements and other documents shall be deemed to include
all subsequent amendments and other modifications thereto.
(c) References to statutes shall include all regulations promulgated
thereunder and references to statutes or regulations shall be construed as
including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation.
(d) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement.
(e) The language used in this Agreement shall be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against either party.
(f) The annexes, schedules and exhibits to this Agreement are a material
part hereof and shall be treated as if fully incorporated into the body of the
Agreement.
(g) Unless otherwise specifically indicated, all references to "$" or
"dollars" shall refer to United States dollars.
- 10 -
ARTICLE 2.
THE ACQUISITION
2.1. THE ACQUISITION.
(a) Effective Time. At the Closing (as defined in Section 2.1(b) hereof),
--------------
and subject to and upon the terms and conditions of this Agreement, each of the
Selling Shareholders agrees to sell to Intelligroup, and Intelligroup agrees to
purchase from each of the Selling Shareholders, the NPI Shares owned by such
Selling Shareholder, as set forth on Schedule A hereto.
----------
(b) Closing. Subject to the satisfaction or waiver, if permissible, of the
-------
conditions set forth in Articles 6 and 7, the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place (i) at the
offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Professional Corporation, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇ January 1, 1999 or (ii) at such other time, date or
place as Intelligroup and the Selling Shareholders may mutually agree.
2.2. CONSIDERATION.
(a) At the Closing.
--------------
(i) Intelligroup will deliver an aggregate of $1,384,269.70 cash by
wire transfer to the Selling Shareholders. Such cash payment shall be
allocated among such Selling Shareholders in accordance with Schedule A
----------
hereto.
(ii) Intelligroup will deliver an aggregate of $210,730.30 cash by
wire transfer to the Option Holders in exchange for the NPI Shares to be
purchased at the Closing from the Option Holders pursuant to Section 7.12
of this Agreement.
(iii) Intelligroup will deliver $205,000 cash by wire transfer to
First Security Capital Markets to discharge the obligation of the Selling
Shareholders with respect to the brokers' commission payable by the
Selling Shareholders to First Security Capital Markets.
(iv) The Selling Shareholders will deliver to Intelligroup a
certificate or certificates representing the NPI Shares, duly endorsed (or
accompanied by duly executed stock powers), with signatures guaranteed by
a commercial bank or by a member firm of the New York Stock Exchange, for
transfer to Intelligroup and such other consideration as set forth herein.
(b) Escrow. In addition to the cash delivered at Closing by Intelligroup to
------
the Selling Shareholders as provided in Section 2.2(a), at the Closing,
Intelligroup shall also deliver to the Escrow Agent $200,000 cash (the "Escrow
Cash") in accordance with the terms and conditions of the Escrow Agreement. If,
on or before the first anniversary of the Closing Date, any Intelligroup
Indemnified Party (as defined in Section 11.2 hereof) shall be entitled to any
amount due pursuant to Article 11 hereof then such Intelligroup Indemnified
Party shall be paid such amount out of the Escrow Cash in accordance with the
Escrow Agreement. The Selling Shareholders shall be paid in accordance with the
Escrow Agreement, on the first anniversary of the Closing Date, the Escrow Cash
that has not been delivered to, and is not subject to
- 11 -
outstanding Claims or required to have been delivered to, Intelligroup
Indemnified Parties pursuant to this Agreement or the Escrow Agreement on or
prior to such date. Upon the final determination of any such outstanding Claims
and after all such required disbursements, any Escrow Cash that has not been
paid out to Intelligroup Indemnified Parties shall be paid out to the Selling
Shareholders in accordance with the Escrow Agreement.
(c) Earn-Out Provision. The Selling Shareholders shall be entitled to be
------------------
paid an earn-out, payable in shares of Intelligroup Stock, if and only if the
fiscal 1999 revenue and income before provision for income taxes, each as
derived from the Business, exceeds $2,350,000 and $188,000, respectively. To
calculate the earn-out, on or about March 31, 2000, Intelligroup shall, applying
GAAP, determine the revenue and income before provision for income taxes derived
from the Business for fiscal 1999 and, immediately following such determination,
shall calculate the dollar amount of the earn-out as follows:
The dollar amount of earn-out shall be equal to the product of:
(1) The sum of
(A) (Revenue derived from the Business during fiscal 1999 less
$2,350,000) multiplied by a factor of 0.5; plus
(B) (Income before provision for income taxes derived from the
Business during fiscal 1999 less $188,000) multiplied by a factor of 7; times
(2) 0.88240
Notwithstanding the foregoing, the dollar amount of the earn-out
shall not exceed $2,206,445.00.
To the extent that an earn-out is payable pursuant to the above
calculation, Intelligroup shall deliver certificates not later than April 15,
2000 representing an aggregate number of validly issued, fully paid and
non-assessable shares of Intelligroup Stock, restricted in accordance with this
Section 2.2(c), equal in value to the dollar amount of the earn-out calculated
above up to a maximum of $2,206,445.00. Such aggregate number of shares (the
"Intelligroup Shares") of Intelligroup Stock shall be determined based upon the
Average Share Price. The Intelligroup Shares shall be allocated among the
Selling Shareholders in accordance with Schedule A hereto. The Intelligroup
----------
Shares described above shall be "restricted" within the meaning of the
Securities Act and shall not be eligible for resale except pursuant to
registration under the Securities Act or an exemption from registration such as
the exemption afforded by Rule 144 under the Securities Act.
(d) Kicker. The Selling Shareholders shall be entitled to receive, and
------
Intelligroup shall be obligated to pay, an aggregate lump sum cash payment of
$353,042.38 if, and only if, fiscal 1999 income before provision for income
taxes derived from the Business exceeds $450,000. Such lump sum payment shall be
paid by Intelligroup not later than March 31, 2000 following a determination
made by Intelligroup, applying GAAP, that such lump sum payment is owing. Such
cash payment shall be allocated among the Selling Shareholders in accordance
with Schedule A hereto.
----------
- 12 -
2.3 TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Intelligroup, the
Selling Shareholders and the Company will take all such reasonable lawful action
as may be necessary or appropriate in order to effect the Acquisition in
accordance with this Agreement as promptly as practicable. If, at any time after
the Closing, any such further action is necessary or desirable to carry out the
purposes of this Agreement, to vest Intelligroup with full right, title and
possession to all the property, rights, privileges, power and franchises of NPI,
the officers and directors of Intelligroup and the Selling Shareholders are
fully authorized in the name of their respective corporations or otherwise to
take, and will take, all such lawful and necessary action.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS
AND THE COMPANY
As an inducement of Intelligroup to enter into this Agreement, each of the
Selling Shareholders, jointly and severally, and the Company hereby makes, as of
the date hereof and as of the Closing Date, the following representations and
warranties to Intelligroup, except as otherwise set forth in written disclosure
schedules (the "Schedules") delivered to Intelligroup on or prior to the date
hereof, a copy of which is attached hereto. The Schedules are numbered to
correspond to the various sections of this Article 3 setting forth certain
exceptions to the representations and warranties contained in this Article 3 and
certain other information called for by this Agreement. Unless otherwise
specified, no disclosure made in any particular Schedule shall be deemed made in
any other Schedule unless expressly made therein.
3.1. ORGANIZATION. NPI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Utah. NPI has full corporate power
and authority to conduct the Business as it is presently being conducted and to
own or lease, as applicable, the Assets owned or leased by it. NPI is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction (domestic or foreign) in which such qualification is necessary
under applicable law as a result of the conduct of the Business or the ownership
of its properties unless the failure to be so qualified would not have a
Material Adverse Effect on the Company. Each jurisdiction in which NPI is
qualified to do business as a foreign corporation is set forth in Schedule 3.1.
3.2. CAPITALIZATION.
(a) The authorized capital stock of NPI consists of 100,000 authorized
shares of Common Stock, $1.00 par value per share, of which 18,000 shares are
issued and outstanding. NPI has no other capital stock authorized, issued or
outstanding. The Selling Shareholders together own 100% of the issued and
outstanding NPI Shares.
(b) Except for the Options identified in Schedule A, there are no
outstanding options, warrants, convertible securities or rights of any kind to
purchase or otherwise acquire any shares of capital stock or other securities of
NPI. At the Closing, all of the Options will have been exercised and terminated.
(c) All of the NPI Shares outstanding as of the date of the Closing will
be, validly
- 13 -
issued, fully paid and nonassessable and not subject to any preemptive or other
rights created by statute, NPI's Certificate of Incorporation or By-laws or any
Contract or otherwise. The NPI Shares have been, and will be, issued in
compliance with the Securities Act and applicable state securities laws and
regulations.
(d) Other than the transactions contemplated by this Agreement, there is no
outstanding vote, plan, pending proposal or right of any Person to acquire, or
to cause any redemption, of the NPI Shares or to effect the merger or
consolidation of NPI with or into any other entity.
(e) NPI has no subsidiaries.
3.3. OWNERSHIP OF CAPITAL STOCK; TITLE. The NPI Shares held by the Selling
Shareholders are not subject to any shareholder agreement, voting trust, proxy
or other agreement or understanding with respect to or concerning the purchase,
sale or voting of such NPI Shares. Upon the Acquisition by Intelligroup of the
NPI Shares, Intelligroup shall acquire good title to such NPI Shares, free and
clear of all Encumbrances.
3.4. [Intentionally left blank.]
3.5. AUTHORIZATION. Each of the Selling Shareholders and NPI has all necessary
individual capacity or corporate power and authority, as the case may be, to
enter into this Agreement and has taken all actions necessary to consummate the
transactions contemplated hereby and to perform his or its obligations
hereunder. This Agreement has been duly executed and delivered by each of the
Selling Shareholders and NPI and is, and upon the execution and delivery thereof
will be, a valid and binding obligation of each of the Selling Shareholders and
NPI, enforceable against NPI and each of the Selling Shareholders in accordance
with its terms, except that enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors or (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
3.6. OFFICERS AND DIRECTORS. Schedule 3.6 contains a true, correct and complete
list of all the officers and directors of NPI.
3.7. BANK ACCOUNTS. Schedule 3.7 contains a list of all of the Company's bank
accounts, safe deposit boxes, and persons authorized to draw thereon or have
access thereto.
- 14 -
3.8. REAL PROPERTY.
(a) Leased Real Property. The Company has a right to use all real property
--------------------
necessary for the conduct of its business as presently conducted. Schedule 3.8
sets forth a true, correct and complete list of all such real property. Except
as otherwise set forth on Schedule 3.8, the Company is not a party to any leases
of real property. All of such leases of real property are in full force and
effect; the Company has not received any notice of any, and there exists no
condition or event which constitutes or would constitute (with notice or lapse
of time or both), a default by the Company thereunder. All lessors under such
leases of real property have consented, to the extent required under such
leases, prior to Closing, to the consummation of the transactions contemplated
by this Agreement without requiring modification in the rights or obligations
thereunder. A true, correct and complete copy of each real property lease has
been furnished to Intelligroup prior to Closing.
(b) Owned Real Property. The Company does not own any real property.
-------------------
3.9. PERSONAL PROPERTY.
(a) General. The Company owns or leases or has a right to use all personal
-------
property necessary for the conduct of its business as presently conducted, and
the personal property (taken as a whole) is in such operating condition and
repair (subject to normal wear and tear) as is necessary for the conduct of its
business as presently conducted.
(b) Owned Personal Property. The Company has good and marketable title to
------------------------
all such personal property owned by it, free and clear of any and all
Encumbrances other than Permitted Encumbrances. With respect to each such item
of personal property (i) there are no leases, subleases, licenses, options,
rights, concessions or other agreements, written or oral, granting to any party
or parties the right of use of any portion of such item of personal property
(except licenses of Proprietary Rights in the ordinary course of business), (ii)
there are no outstanding options or rights of first refusal in favor of any
other party to purchase any such item of personal property or any portion
thereof or interest therein and (iii) there are no parties (other than the
Company and the employees of the Company identified in Schedule 3.18(a)) who are
in possession of or who are using any such item of personal property.
(c) Leased Personal Property. The Company has good and valid leasehold
--------------------------
title to all of its Fixtures and Equipment, vehicles and other tangible personal
property leased by it from third parties, free and clear of any and all
Encumbrances other than Permitted Encumbrances which would not permit the
termination of the lease therefor by the lessor. Schedule 3.9 sets forth a true,
correct and complete list of all leased personal property involving annual
payments by the Company in excess of $10,000.
With respect to each lease listed on Schedule 3.9, (i) there has been no
material default under any such lease by the Company or, to the knowledge of the
Selling Shareholders or the Company, by any other party, (ii) the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not cause a material default under any
such lease, (iii) such lease is a valid and binding obligation of the Company,
is in full
- 15 -
force and effect with respect to the Company, and is enforceable against the
Company, in accordance with its terms, except as the enforceability thereof may
be limited by (1) applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws in effect which affect the enforcement of creditors' rights
generally or (2) general principles of equity, whether considered in a
proceeding at law or in equity, (iv) no action has been taken by the Company,
and no event has occurred which, with notice or lapse of time or both, would
permit termination, modification or acceleration by a party thereto other than
the Company without the consent of the Company, under any such lease that is
material to the Company, (v) no party has repudiated in writing any term thereof
or threatened in writing to terminate, cancel or not renew any such lease that
is material to the Company and (vi) the Company has not assigned, transferred,
conveyed, mortgaged or encumbered any interest therein or in any leased property
subject thereto (or any portion thereof).
3.10. ENVIRONMENTAL MATTERS.
(a) The Company is in material compliance with all Environmental Laws.
Neither the Selling Shareholders nor the Company has received any notice to the
effect that, and none of the Selling Shareholders has any knowledge that, (i)
the Company is not in compliance in any material respect with, or is in
violation of, any such Environmental Laws required thereunder or (ii) any
currently existing circumstances are likely to result in a failure of the
Company to comply with, or a violation by the Company of, any such Environmental
Laws. The Company does not handle or utilize Hazardous Substances in the
operation of its Business.
(b) None of the Selling Shareholders has received (and to the knowledge of
the Selling Shareholders, the Company has not received) notice of (i) any
underground tank or other underground storage receptacle for Hazardous
Substances currently located on the Facilities, or any releases of any Hazardous
Substances from any such underground tank or related piping or (ii) releases
(i.e., any past or present releasing, spilling, leaking, pumping, pouring,
----
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping) of Hazardous Substances in quantities exceeding the reportable
quantities as defined under federal or state law by the Company on, upon or into
the Facilities other than those authorized by Environmental Laws including,
without limitation, the Permits required thereunder.
(c) None of the Selling Shareholders has received (and to the knowledge of
the Selling Shareholders, the Company has not received) notice of any PCBs or
asbestos-containing materials located at or on the Facilities.
3.11. CONTRACTS.
(a) Disclosure. Schedule 3.11 sets forth a complete and accurate list of
----------
all of the Contracts of the following categories:
(i) Contracts not made in the ordinary course of business;
(ii) License agreements or royalty agreements, whether the Company
is the licensor or licensee thereunder;
(iii) Confidentiality and non-disclosure agreements (whether the
Company is
- 16 -
the beneficiary or the obligated party thereunder);
(iv) Customer orders, contracts, agreements and proposals under
which the customer is to make a payment after the date hereof of $10,000 or
more;
(v) Research, consulting, service or distribution agreements;
(vi) Contracts or commitments involving future expenditures or
Liabilities, actual or potential, in excess of $10,000 after the date
hereof or otherwise material to the Business or the Assets;
(vii) Contracts or commitments relating to commission arrangements
with others, including, but not limited to, agreements with any sales
representatives of the Company;
(viii) Employment contracts, consulting contracts and severance
agreements, including Contracts (A) to employ or terminate executive
officers or other personnel and other contracts with present or former
officers or directors of the Company or (B) that will result in the
payment by, or the creation of any Liability of the Company, the Selling
Shareholders or Intelligroup to pay any severance, termination, "golden
parachute," or other similar payments to any present or former personnel
following termination of employment or otherwise as a result of the
consummation of the transactions contemplated by this Agreement;
(ix) Indemnification agreements;
(x) Promissory notes, loans, agreements, indentures, evidences of
indebtedness, letters of credit, guarantees, or other instruments relating
to an obligation to pay money, whether the Company shall be the borrower,
lender or guarantor thereunder (excluding credit provided by the Company
in the ordinary course of business to purchasers of its products and
obligations to pay vendors in the ordinary course of business and
consistent with past practice);
(xi) Contracts containing covenants limiting the freedom of the
Company or any officer, director, Employee or Affiliate of the Company, to
engage in any line of business or compete with any Person that relates
directly or indirectly to the Business;
(xii) Any Contract with the federal, state or local government or any
agency or department thereof;
(xiii) Any Contract with a Related Party;
(xiv) Leases of real or personal property involving annual payments
of more than $10,000;
(xv) Contracts relating to vendor authorizations; and
(xvi) Any other Contract under which the consequences of a default
or termination would reasonably be expected to have a Material Adverse
Effect on the
- 17 -
Business or the Company individually or in the aggregate.
Complete and accurate copies of all of the Contracts listed on Schedule
3.11, including all amendments and supplements thereto, have been furnished by
NPI or the Selling Shareholders to Intelligroup prior to Closing.
(b) Absence of Defaults. All of the Contracts listed on Schedule 3.11 are
-------------------
valid, binding and enforceable in accordance with their terms with no existing
(or to the knowledge of the Selling Shareholders or the Company, threatened)
Default or dispute, except as would not have a Material Adverse Effect on the
Business or the Company. Except as set forth on Schedule 3.11(b), the Company
has fulfilled, or taken all action necessary to enable it to fulfill when due,
all of its material obligations under each of such Contracts. Except as set
forth on Schedule 3.11(b), to the knowledge of the Selling Shareholders and the
Company, all parties to the Contracts listed on Schedule 3.11 have complied in
all material respects with the provisions thereof, no party is in Default
thereunder and no notice of any claim of Default has been given to the Company
or the Selling Shareholders. Except as set forth on Schedule 3.11(b), neither
the Selling Shareholders nor the Company has any reason to believe that the
products or services called for by any executory Contract cannot be supplied in
accordance with the terms of such Contract, including time specifications, and
has no reason to believe that any unfinished Contract will, upon performance by
the Company, result in a loss to the Company, except as would not have a
Material Adverse Effect on the Business or the Company.
(c) Warranties. To the knowledge of the Selling Shareholders and the
----------
Company, the Company has not committed any act, and there has been no omission,
which may result in, and there has been no occurrence which may give rise to
Liability for breach of warranty (whether or not covered by insurance) on the
part of the Company, with respect to services rendered or products sold by the
Company prior to or on the Closing Date.
3.12. NO CONFLICT OR VIOLATION; CONSENTS. Except as set forth on Schedule 3.12,
none of the execution, delivery or performance of this Agreement, the
consummation of the transactions contemplated hereby, or compliance by the
Selling Shareholders or the Company with any of the provisions hereof or
thereof, will (a) violate or conflict with any provision of the governing
documents of the Company, (b) violate, conflict with, or result in a breach of
or constitute a default (with or without notice of passage of time) under, or
result in the termination of, or accelerate the performance required by, or
result in a right to terminate, accelerate, modify or cancel under, or require a
notice under, or result in the creation of any Encumbrance upon any of its
respective assets under, any Contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, security interest or other arrangement to which the
Company or any Selling Shareholder is a party or by which the Company or any
Selling Shareholder is bound or to which any of its respective assets are
subject, (c) violate any applicable Regulation or Court Order or (d) impose any
Encumbrance on any Assets or the Business, except, in the case of each of
clauses (a), (b), (c) and (d) above, for such violations, conflicts, breaches,
defaults, terminations, accelerations or creations of Encumbrances which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Business or on the ability of the Company or any Selling Shareholder to
consummate the transactions contemplated hereby. Except as set forth on Schedule
3.12, no notices to, declaration, filing or registration with, approvals or
Consents of, or assignments by, any Persons
- 18 -
(including any federal, state or local governmental or administrative
authorities) are necessary to be made or obtained by the Company or the Selling
Shareholders in connection with the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby.
3.13. PERMITS. The operation of the Business does not require any Permits.
3.14. FINANCIAL STATEMENTS; BOOKS AND RECORDS.
(a) The NPI Financial Statements are, and will be, complete and accurate,
are, and will be, consistent with the Books and Records, and do, and will,
fairly present the Assets and Liabilities of the Company and financial condition
and results of operations indicated thereby.
(b) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
with management's authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's authorization and (iv) the recorded accountability
for assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(c) The Books and Records, in reasonable detail, accurately and fairly
reflect the activities of the Company and the Business, except to the extent as
would not have a Material Adverse Effect on the Business or the Company. All
material Books and Records have been provided to Intelligroup for its inspection
prior to Closing.
(d) The Company has not engaged in any transaction, maintained any bank
account or used any corporate funds except for transactions, bank accounts or
funds which have been and are reflected in the normally maintained Books and
Records.
(e) The stock records and minute books of the Company fully reflect all
minutes of meetings, resolutions and other material actions and proceedings of
its stockholders and boards of directors and all committees thereof, all
issuances, transfers and redemptions of capital stock of which the Company or
the Selling Shareholders are aware and contain true, correct and complete copies
of its Certificate of Incorporation and Bylaws or Articles and all amendments
thereto through the date hereof.
3.15. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Schedule
3.15, since the Balance Sheet Date there has not been any:
(a) Material Adverse Change with respect to the Business or the Company;
(b) failure to operate the Business of the Company in the ordinary course
so as to use its commercially reasonable efforts to preserve the Business intact
and to preserve the continued services of its Employees and the goodwill of
customers and others having business relations with the Company or its
Representatives, except such failures which would not have a Material Adverse
Effect on the Business;
(c) resignation or termination of any officer or Employee of the Company,
or any
- 19 -
increase in the rate of compensation payable or to become payable to any
officer, Employee or Representative of the Company, including the making of any
loan to, or the payment, grant or accrual of any bonus, incentive compensation,
service award or other similar benefit to, any such Person, or the addition to,
modification of, or contribution to any Employee Plan, except for such
resignations, terminations or increases which, in the aggregate, would not have
a Material Adverse Effect on the Business;
(d) payment, loan or advance of any amount to or in respect of, or the
sale, transfer or lease of any properties or the Assets of the Company to, or
entering into of any Contract with, any Related Party except (i) directors' fees
and (ii) forgiveness of loans in the amounts and to the individuals set forth on
Schedule 3.15;
(e) sale, assignment, license, transfer or Encumbrance of any of the Assets
of the Company, tangible or intangible, singly or in the aggregate, other than
sales of products and services in the ordinary course of business and consistent
with past practice;
(f) new Contracts, or extensions, modifications, terminations or renewals
thereof, except for Contracts entered into, modified or terminated in the
ordinary course of business and consistent with past practice;
(g) actual or threatened early termination of any material customer account
or group of accounts;
(h) disposition or lapsing of any Proprietary Rights of the Company, in
whole or in part, or, to the knowledge of the Selling Shareholders and the
Company, any disclosure of any trade secret, process or know-how to any Person
not an Employee, except for such dispositions, lapsing or disclosures which, in
the aggregate, would not have a Material Adverse Effect on the Business;
(i) material change in accounting methods or practices by the Company;
(j) revaluation by the Company of any of its Assets, including writing off
notes or accounts receivable other than for which adequate reserves have been
established;
(k) damage, destruction or loss (whether or not covered by insurance)
materially adversely affecting the Assets, the Business or the prospects of the
Company;
(l) declaration, setting aside or payment of dividends or distributions in
respect of any shares of capital stock of NPI or any redemption, purchase or
other acquisition of any equity securities of NPI;
(m) issuance or reservation for issuance by NPI or any of its Subsidiaries
of, or commitment of it to issue or reserve for issuance, any capital stock or
other equity securities or obligations or securities convertible into or
exchangeable for capital stock or other equity securities;
(n) increase, decrease or reclassification of the capital stock of NPI or
any of its Subsidiaries;
- 20 -
(o) amendment of the Certificate of Incorporation or By-laws or Articles,
as applicable, of NPI;
(p) capital expenditure or execution of any lease or any incurring of
liability therefor by the Company, involving payments in excess of $5,000;
(q) failure to pay any material obligation of the Company when due;
(r) cancellation of any indebtedness or waiver of any rights of substantial
value to the Company, except in the ordinary course of business and consistent
with past practice;
(s) indebtedness incurred by the Company for borrowed money or any
commitment to borrow money entered into by the Company, or any loans made or
agreed to be made by the Company;
(t) Liability incurred by the Company except in the ordinary course of
business and consistent with past practice, or any increase or change in any
assumptions underlying or methods of calculating any bad debt, contingency or
other reserves;
(u) payment, discharge or satisfaction of any Liabilities of the Company
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of Liabilities reflected or reserved
against in the NPI Financial Statements or incurred in the ordinary course of
business and consistent with past practice since the Balance Sheet Date;
(v) acquisition by the Company of any equity interest in any other Person;
or
(w) agreement by the Company to do any of the foregoing.
3.16. LIABILITIES. Except as set forth on Schedule 3.16:
(a) The Company has no Liabilities or obligations (absolute, accrued,
contingent or otherwise) except (i) Liabilities which are reflected and properly
reserved against in the NPI Financial Statements, (ii) Liabilities incurred in
the ordinary course of business and consistent with past practice since the
Balance Sheet Date and (iii) liabilities arising under the Contracts (other than
obligations which are required to be reflected on a balance sheet) set forth on
Schedule 3.11 or which are not required to be disclosed on such Schedule and
which have arisen or been incurred in the ordinary course of business.
(b) None of the Liabilities described in this Section 3.16 relates to any
breach of Contract, breach of warranty, tort, infringement or violation of law
or arose out of any action, order writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, investigation or dispute
(collectively, "Actions").
(c) The reserves set forth on the Balance Sheet for Liabilities are
reasonable.
- 21 -
3.17. LITIGATION. There is no Action, pending or threatened (i) against,
relating to or affecting the Company, any of its Assets or any of its officers
and directors as such, (ii) which seeks to enjoin or obtain damages in respect
of the transactions contemplated hereby or (iii) with respect to which there is
a reasonable likelihood of a determination which would prevent the Selling
Shareholders or the Company from consummating the transactions contemplated
hereby. To the knowledge of the Selling Shareholders or the Company, there is no
basis for any Action, which if adversely determined against the Company or the
Selling Shareholders, their respective directors or officers, or any other
Person could reasonably be expected to result in a loss to the Company,
individually or in the aggregate, in excess of $10,000. There are presently no
outstanding judgments, decrees or orders of any court or any governmental or
administrative agency against or affecting the Company, its Business or any of
its Assets.
3.18. LABOR MATTERS.
(a) All of the Employees of the Company are set forth on Schedule 3.18(a).
The current salaries of such Employees are also set forth on Schedule 3.18(a).
The Company is in material compliance with all applicable Regulations respecting
employment practices, terms and conditions of employment, wages and hours, equal
employment opportunity, and the payment of social security and similar taxes,
and none of them are engaged in any unfair labor practice.
(b) The Company has not entered into any severance or similar arrangement
in respect of any present or former Employee that will result in any obligation
(absolute or contingent) of Intelligroup or the Company to make any payment to
any present or former Employee following termination of employment or upon
consummation of the transactions contemplated by this Agreement.
(c) Schedule 3.18(c) sets forth a complete and accurate list of independent
contractors and consultants of the Company. The Company, prior to and including
the Closing Date, has not been required to treat such individuals as employees
under applicable local, state and federal laws.
3.19. EMPLOYEE PLANS. As of the Closing, the Company shall neither operate nor
be a participant in any Employee Plans. The Company does not operate or
participate in or have any legal obligation to contribute to any permanent
health insurance, private health provision, accident benefit or any other
ancillary schemes or have any liability with respect to any such benefit,
arrangement or scheme.
3.20. TRANSACTIONS WITH RELATED PARTIES. Except for employment agreements and
other compensation arrangements disclosed on Schedule 3.20, no Related Party has
(a) borrowed from or loaned money or other property to the Company which has not
been repaid or returned, (b) any contractual or other claims, express or
implied, of any kind whatsoever against the Company or (c) any interest in any
property used by the Company.
- 22 -
3.21. COMPLIANCE WITH LAW. The Company has conducted the Business in material
compliance with all applicable Regulations and Court Orders other than where
noncompliance with such Regulations and Court Orders would not have a Material
Adverse Effect on the Business or Company. Neither the Company nor the Selling
Shareholders has received any notice to the effect that, or has otherwise been
advised that, the Company is not in compliance with any such Regulations or
Court Orders, and each of the Selling Shareholders and the Company has no reason
to anticipate that any existing circumstances are likely to result in any
material violation of any of the foregoing.
3.22. INTELLECTUAL PROPERTY.
(a) General. Except as set forth on Schedule 3.22(a), the Company does not
-------
hold or use any patent, patent application, trademark, trademark application,
tradename, service ▇▇▇▇, service ▇▇▇▇ application, copyright, copyright
application or mask work.
(b) Adequacy. The Proprietary Rights of the Company are all those
--------
materially necessary for the normal conduct of the Business as presently
conducted and as presently contemplated.
(c) Royalties and Licenses. Except as set forth on Schedule 3.22(c), the
----------------------
Company has no obligation to compensate any Person for the use of any of its
Proprietary Rights nor, except in the ordinary course of business, has the
Company granted to any Person any license, option or other rights to use in any
manner any of its Proprietary Rights, whether requiring the payment of royalties
or not.
(d) Ownership. Except as set forth in the Contracts identified on Schedule
---------
3.22(d), the Company owns or has a valid right to use its Proprietary Rights,
and such Proprietary Rights will not cease to be valid rights of the Company by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
(e) Absence of Claims. Neither the Company nor any Selling Shareholder (A)
-----------------
has received any notice alleging, or otherwise has knowledge of facts that might
give rise to, invalidity with respect to any of the Proprietary Rights of the
Company or (B) has received any notice of alleged infringement of any rights of
others due to any activity by the Company. The Company's use of its Proprietary
Rights in its past, current and planned products or services does not and would
not infringe upon or otherwise violate the valid rights of any third party
anywhere in the world. No other Person (i) has notified the Company or the
Selling Shareholders that it is claiming any ownership of or right to use any of
the Company's Proprietary Rights or (ii) is infringing upon any such Proprietary
Rights in any way.
3.23. TAX MATTERS.
(a) Filing of Tax Returns. NPI has timely filed with the appropriate taxing
---------------------
authorities all Tax Returns in respect of Taxes required to be filed through the
date hereof. Such Tax Returns as filed are complete and accurate in all material
respects. Except as specified in Schedule 3.23, neither any Selling Shareholder
nor the Company has requested any extension of time within which to file Tax
Returns in respect of any Taxes. The Company has delivered to Intelligroup
complete and accurate copies of all Tax Returns of the Company required to be
filed
- 23 -
since inception of the Company.
(b) Payment of Taxes. All Taxes due from the Company, or for which the
-----------------
Company is reasonably likely to be liable, in respect of periods (or portions
thereof) ending on or prior to the Closing Date have been timely paid or an
adequate reserve has been established therefor, as set forth in Schedule 3.23 or
the NPI Financial Statements, and the Company has no Liability for Taxes in
excess of the amounts so paid or reserves so established. All Taxes that the
Company is required by law to withhold or collect have been duly withheld or
collected and have been timely paid over to the appropriate governmental
authorities to the extent due and payable.
(c) Audits, Investigations or Claims. No deficiencies for Taxes of the
---------------------------------
Company have been claimed, proposed or assessed by any taxing or other
governmental authority. There are no pending or, to the knowledge of the Company
or any Selling Shareholder, threatened audits, assessments or other Actions for
or relating to any Liability in respect of Taxes of the Company, and there are
no matters under discussion with any governmental authorities, or known to the
Company or any Selling Shareholder, with respect to Taxes that are likely to
result in an additional Liability for Taxes. Audits of federal, state and local
Tax Returns by the relevant taxing authorities have been completed for the
periods set forth on Schedule 3.23 and, except as set forth in such Schedule,
neither the Selling Shareholders nor the Company has been notified that any
taxing authority intends to audit a Tax Return for any other period. No
extension of a statute of limitations relating to Taxes is in effect with
respect to the Company.
(d) Lien. There are no Encumbrances for Taxes (other than for current
----
Taxes not yet due and payable) on any of the Assets.
(e) Tax Elections. All elections with respect to Taxes affecting the
--------------
Company or its Assets as of the date hereof are set forth on the Company's
latest Tax Returns or on Schedule 3.23. The Company (i) has not consented at any
time under Section 341(f)(1) of the Code to have the provisions of Section
341(f)(2) of the Code apply to any disposition of any Assets; (ii) has not
agreed, or is not required, to make any adjustment under Section 481(a) of the
Code by reason of a change in accounting method or otherwise; (iii) has not made
an election, nor is it required, to treat any Asset as owned by another Person
pursuant to the provisions of Section 168(f) of the Code or as tax-exempt bond
financed property or tax-exempt use property within the meaning of Section 168
of the Code; (iv) does not have any Assets which directly or indirectly secure
any debt the interest on which is tax exempt under Section 103(a) of the Code;
or (v) has not made any of the foregoing elections and is not required to apply
any of the foregoing rules under any comparable state or local Tax provision.
(f) Partnerships. The Company does not have an interest in and is not
------------
subject to any joint venture, partnership, or other arrangement or contract
which is treated as a partnership for federal income tax purposes. The Company
is a not successor to any other Person by way of merger, reorganization or
similar transaction.
(g) No Withholding. The transaction contemplated herein is not subject to
--------------
the tax withholding provisions of Section 3406 of the Code, or of Subchapter A
of Chapter 3 of the Code or of any other withholding provision of law.
(h) No Foreign Persons. No shareholder of the Company is a foreign person
------------------
so that
- 24 -
Sections 897 and 6039C of the Code apply to any disposition of any asset owned
by it.
(i) Not a Member of an Affiliated Group. The Company is not and has never
-----------------------------------
been a member of an affiliated group of corporations within the meaning of
Section 1504 of the Code. The Company is not a party to, is not bound by, and
does not have any obligation under, any tax sharing, tax indemnity, or similar
agreement.
3.24. INSURANCE. Schedule 3.24 contains a complete and accurate list of all
policies of insurance (showing as to each policy the carrier, policy number,
coverage limits, expiration dates, annual premiums, a general description of the
type of coverage provided and any pending claims thereunder) of which NPI is the
owner, insured or beneficiary. All of such policies are sufficient for (i)
compliance with all Regulations and all of the Contracts, (ii) covering all
reasonably foreseeable damage to and liabilities or contingencies relating to
the Company's conduct of the Business and (iii) providing replacement cost
insurance coverage for all of the Assets, Fixtures and Equipment of the Company
and all leasehold improvements. The Company is not in default under any of such
policies or binders, and the Company has not failed to give any notice or to
present any claim under any such policy or binder in a due and timely fashion.
There are no facts known to either the Company or any Selling Shareholder upon
which an insurer might be justified in reducing or denying coverage or
increasing premiums on existing policies or binders. There are no outstanding
unpaid claims under any such policies or binders. Such policies and binders are
in full force and effect on the date hereof and shall be kept in full force and
effect by the Company through the Closing Date.
3.25. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE; UNBILLED COSTS AND FEES.
(a) Accounts Receivable and Accounts Payable. The accounts and notes
--------------------------------------------
receivable reflected in the Balance Sheet, and all accounts or notes receivable
arising since the Balance Sheet Date, represent bona fide claims against debtors
for services performed or other charges arising on or before the date of
recording thereof, and all the services performed which gave rise to said
accounts were performed in accordance with the applicable orders, Contracts or
customer requirements. Schedule 3.25(a) sets forth a complete and accurate list
of all accounts receivable and accounts payable of the Company as of the Balance
Sheet Date.
(b) Unbilled Costs and Fees. The unbilled costs and fees reflected in the
-----------------------
Balance Sheet, and all costs and fees arising since the Balance Sheet Date, were
derived from bona fide services performed or expenses incurred in accordance
with the applicable Contracts or customer requirements. Schedule 3.25(b) sets
forth a complete and accurate list of all unbilled costs and fees incurred by
the Company as of the Balance Sheet Date.
(c) Collection. Nothing has come to the attention of the Selling
----------
Shareholders or the Company that would cause the Selling Shareholders or the
Company to believe that any of such receivables or unbilled costs or fees are
not fully collectible in the ordinary course of business except to the extent of
an amount not in excess of the reserve for doubtful accounts reflected on the
Balance Sheet and additions to such reserves made after the date of the Balance
Sheet as reflected on the Books and Records which have been delivered to
Intelligroup.
- 25 -
3.26. CUSTOMERS. Schedule 3.26 sets forth a complete and accurate list of the
names and addresses of the ten customers who purchased from the Company the
greatest dollar volume of services during its last fiscal year and last fiscal
quarter, showing the approximate total sales in dollars to each such customer
during such fiscal year and quarter. Since the Balance Sheet Date, there has
been no Material Adverse Change in the business relationship of the Company with
any customer named on Schedule 3.26.
3.27. BROKERS; TRANSACTION COSTS. Neither the Company nor any Selling
Shareholder has entered into or will enter into any contract, agreement,
arrangement or understanding with any Person which will result in the obligation
of Intelligroup or the Company to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby, except
for the limited obligation of Intelligroup under Section 2.2(a)(iii) of this
Agreement. The only party which is entitled to a finder's fee, brokerage
commission or similar payment from the Selling Shareholders is First Security
Capital Markets, Inc., the fees of which (except for the limited obligation of
Intelligroup under Section 2.2(a)(iii) of this Agreement) shall be paid by the
Selling Shareholders.
3.28. NO OTHER AGREEMENTS TO SELL THE COMPANY OR THE ASSETS. Neither the Company
nor any Selling Shareholder has any legal obligation, absolute or contingent, to
any other Person to sell the Assets or to sell any capital stock of the Company
or to effect any merger, consolidation or other reorganization of NPI or to
enter into any agreement with respect thereto, except pursuant to this
Agreement.
3.29. YEAR 2000 COMPLIANCE. The Company has reviewed its products, business,
services and operations which could be adversely affected by the risk that
computer applications developed, marketed, sold and delivered or used by the
Company may be unable to recognize and properly perform date-sensitive functions
involving dates prior to and after December 31, 1999 (the "Year 2000 Problem").
The products, services, applications or other deliverables provided or delivered
by the Company to, or on behalf of, its customers prior to the Closing Date, and
the products, services, applications and other deliverables currently offered by
the Company to, or on behalf of, its customers will not give rise to claims
against the Company based upon the Year 2000 Problem based upon warranties
applicable to the Company's products or services or statements made by the
Company with respect to such products or services.
3.30 CERTAIN SECURITIES LAW REPRESENTATIONS. Each of the Selling Shareholders
represents as follows with respect to the Intelligroup Shares to be acquired in
connection with the Acquisition:
(a) He has such knowledge and experience in financial business matters that
he is capable of evaluating the merits and risks of the investment in the
Intelligroup Shares;
(b) He is receiving such shares for investment for his own account and not
with a view to, or for resale in connection with, the distribution of other
disposition thereof, other than as contemplated hereby;
- 26 -
(c) He has been given the opportunity to obtain any information or
documents relating to and ask questions and receive answers about, Intelligroup
and the business and prospects of Intelligroup which he deems necessary to
evaluate the merits and risks related to his investment in such shares and to
verify the information received, and such person's knowledge and experience in
financial and business matters are such that he is capable of evaluating the
merits and risks of his receipt of such shares;
(d) His financial condition is such that he can afford to bear the economic
risk of holding the shares for an indefinite period of time and has adequate
means for providing for such person's current needs and contingencies and to
suffer to complete loss of his investment in such shares; and
(e) He has been advised that (i) Intelligroup's issuance of the
Intelligroup Shares to the Selling Shareholders will not have been registered
under the Securities Act, (ii) such shares may need to be held indefinitely, and
such person must continue to bear the economic risk of the investment in such
shares unless they are subsequently registered under the Securities Act or an
exemption from such registration is available, (iii) there may not be a public
market for such shares, (iv) when and if such shares may be disposed of without
registration in reliance on Rule 144 promulgated under the Securities Act, such
disposition can be made only in limited amounts in accordance with the terms and
conditions of such Rule, (v) if the Rule 144 exemption is not available, public
sale without registration will require compliance with an exemption under the
Securities Act and (vi) a restrictive legend in the following form shall be
placed on the certificates representing such shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR QUALIFIED
UNDER ANY APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS"), HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND QUALIFICATION UNDER THE STATE ACTS OR EXEMPTIONS FROM SUCH REGISTRATION OR
QUALIFICATION REQUIREMENTS (INCLUDING, IN THE CASE OF THE SECURITIES ACT, THE
EXEMPTION AFFORDED BY RULE 144). UNLESS WAIVED BY INTELLIGROUP, INC.,
INTELLIGROUP, INC. SHALL BE FURNISHED WITH AN OPINION OF COUNSEL OPINING AS TO
THE AVAILABILITY OF EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION AS A
PRECONDITION TO ANY SUCH TRANSFER.
- 27 -
3.31 NPI NAME. The Company's use of the name "Network Publishing, Inc." has not
infringed upon the right of any other party to the use of that name.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF INTELLIGROUP
As an inducement to the Selling Shareholders to enter into this Agreement,
as of the date hereof and the Closing Date, Intelligroup represents and warrants
to the Selling Shareholders as follows, which representations and warranties
are, as of the date hereof, true and accurate:
4.1. ORGANIZATION. Intelligroup is a corporation duly organized under the laws
of the State of New Jersey. Intelligroup has full corporate power and autority
to conduct its business as it is presently being conducted and to own or lease,
as applicable, the assets owned or leased by it. Intelligroup is duly qualified
as a foreign corporation and is in good standing in each other jurisdiction in
which such qualification is necessary under applicable law as a result of the
conduct of its business or the ownership of its properties and where the failure
to be so qualified would have a Material Adverse Effect on Intelligroup.
4.2. CAPITALIZATION. (a) There are 25,000,000 shares of Intelligroup Stock
authorized under its Certificate of Incorporation, 12,667,875 of which were
issued and outstanding as of September 30, 1998; 5,000,000 authorized shares of
Preferred Stock, $0.01 par value, of Intelligroup ("Intelligroup Preferred
Stock" and together with the Intelligroup Stock, the "Intelligroup Securities")
authorized under its Certificate of Incorporation, none of which were issued and
outstanding. Intelligroup has no other stock authorized, issued or outstanding.
(b) As of September 30, 1998, there were (i) 2,200,000 shares of
Intelligroup Stock reserved for issuance upon the exercise of options granted or
available for grant under Intelligroup's 1996 Stock Plan (the "Intelligroup
Options"), (ii) Intelligroup Options outstanding which represent the right to
purchase an aggregate of 1,646,636 shares of Intelligroup Stock and (iii)
553,364 shares of Intelligroup Stock available for future
grants of Intelligroup Options.
(c) Except for the Intelligroup Options and shares of Intelligroup
Preferred Stock listed above, and except for director options and warrants
exercisable for not more than 140,000 shares, there are no outstanding options,
warrants, convertible securities or rights of any kind to purchase or otherwise
acquire any shares of capital stock or other securities of Intelligroup. Except
as set forth above, no shares of capital stock of Intelligroup are reserved for
issuance.
(d) All shares of Intelligroup Stock to be issued hereunder will be
validly issued, fully paid and not subject to any preemptive rights created by
statute, Intelligroup's Certificate of Incorporation or Bylaws or any Contract,
and will have the same rights attaching to them as are attaching to any other
shares of the same class issued by Intelligroup.
(e) Other than the transactions contemplated by this Agreement, there is
no outstanding vote, plan or pending proposal for any redemption of stock of
Intelligroup or any merger or consolidation of Intelligroup with or into any
other entity.
- 28 -
4.3. AUTHORIZATION. Intelligroup has all necessary corporate power and authority
to enter into this Agreement and has taken all action necessary to consummate
the transactions contemplated hereby and to perform its obligations hereunder.
This Agreement has been duly executed and delivered by Intelligroup, and this
Agreement is a valid and binding obligation of Intelligroup enforceable against
Intelligroup in accordance with its terms, except that enforceability may be
limited by the effect of (a) bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting the rights of creditors or (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
4.4. NO CONFLICT OR VIOLATION; CONSENTS. None of the execution, delivery or
performance of this Agreement, the consummation of the transactions contemplated
hereby, nor compliance by Intelligroup with any of the provisions hereof, will
(a) violate or conflict with any provision of Intelligroup's governing documents
to the extent applicable, (b) violate, conflict with, or result in a breach of
or constitute a default (with or without notice of passage of time) under, or
result in the termination of, or accelerate the performance required by, or
result in a right to terminate, accelerate, modify or cancel under, or require a
notice under, or result in the creation of any Encumbrance upon any of its
assets under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which Intelligroup is a
party or by which Intelligroup is bound or to which any of their respective
assets are subject, (c) violate any Regulation or Court Order applicable to
Intelligroup or (d) impose any Encumbrance on any assets of Intelligroup. Except
as set forth on Schedule 4.4, no notices to, declaration, filing or registration
with, approvals or Consents of, or assignments by, any Persons (including any
federal, state or local governmental or administrative authorities) are
necessary to be made or obtained by Intelligroup in connection with the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
4.5. REPORTS AND FINANCIAL STATEMENTS. Intelligroup has in a timely filed manner
all reports required to be filed with the Securities and Exchange Commission
(the "SEC") pursuant to the Securities Exchange Act of 1934 (the "Exchange Act")
or Securities Act (collectively, the "SEC Reports"), and has previously made
available to the Selling Shareholders true and complete copies of all such SEC
Reports. Such SEC Reports, as of their respective dates, complied in all
materials respects with the applicable requirements of the Securities Act and
the Exchange Act, as the case may be, and none of such SEC Reports contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The consolidated
financial statements of Intelligroup, including the notes thereto, included in
the SEC Reports have been prepared in accordance with GAAP consistently applied
and fairly present the consolidated financial condition of Intelligroup as at
the dates thereof and consolidated results of operations and cash flows for the
periods then ended.
- 29 -
4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Schedule 4.6,
since the Balance Sheet Date, there has not been any fact, event, circumstance
or change affecting or relating to Intelligroup and its subsidiaries which has
had or is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on the business of Intelligroup.
4.7. CERTAIN SECURITIES LAW REPRESENTATIONS. Intelligroup is not acquiring the
NPI Shares with the intention of distributing or reselling the NPI Shares or any
part thereof, or interest therein, in any transaction that would violate the
securities laws of the United States of America or any state thereof, subject,
without prejudice, however, to Intelligroup's right at all times to sell or
otherwise dispose of all or any part of the NPI Shares under an effective
registration statement under the Securities Act or under an exemption from such
registration available under the Securities Act, and subject, nevertheless, to
any requirement of law that the disposition of Intelligroup's property be at all
times within its control.
Intelligroup agrees that until such time as such legend is no longer
required under the applicable requirements of the Securities Act, the NPI Shares
(and all securities issued in exchange therefor or substitution thereof) shall
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SAID ACT."
Intelligroup further represents that no part of the funds to be used to
purchase the NPI Shares to be purchased by Intelligroup constitutes assets
allocated to any trust which contains the assets of any Employee Plan with
respect to which the Company or any Affiliate is a party in interest or
disqualified person.
Intelligroup hereby represents that it is either (i) an "accredited
investor" (as that term is defined in Rule 501 of Regulation D under the
Securities Act) or (ii) by reason of its business and financial experience, and
the business and financial experience of those Persons, if any, retained by
Intelligroup to advise Intelligroup with respect to its investment in the NPI
Shares, Intelligroup, together with such advisors, have such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment,
Intelligroup is able to bear the economic risk of the prospective investment,
and Intelligroup is able to afford a complete loss of the prospective
investment.
4.8. FINANCIAL CAPABILITY. As of the Closing Date, Intelligroup shall have
access to sufficient funds to purchase the NPI Shares and to satisfy all of its
obligations under this Agreement and the transactions contemplated hereby.
4.9. BROKERS' FEES. Intelligroup has no Liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Selling Shareholders could become
liable or obligated.
- 30 -
ARTICLE 5.
COVENANTS OF THE PARTIES
5.1. BY SELLING SHAREHOLDERS. As an inducement of Intelligroup to enter into
this Agreement, each of the Selling Shareholders hereby covenants to
Intelligroup as follows:
(a) From and after the date hereof, any and all amounts collected by or
delivered to any of the Selling Shareholders or any of their Affiliates which
are due to the Company, including any receivables listed on Schedule 3.25(a) and
any subsequent receivables derived since the Balance Sheet Date, shall be
promptly paid to the Company within ten days of receipt thereof by such Selling
Shareholders. Notwithstanding the foregoing, in no event shall any Selling
Shareholder be required to pay any such amount prior to the Closing, but all
amounts collected by or delivered to any of such Selling Shareholders or their
Affiliates after the date hereof but prior to the Closing Date shall be paid to
the Company at the Closing.
(b) The Selling Shareholders shall deliver to Intelligroup the consolidated
balance sheet of the Company as of the Closing Date (the "Closing Balance
Sheet") as soon as practicable after the Closing Date, but in no event later
than twenty five (25) days after the Closing Date. The Closing Balance Sheet
shall be complete and accurate in all material respects, shall be consistent
with the Books and Records and shall fairly present the Assets and Liabilities
and financial condition of the Company as of the Closing Date. The parties shall
mutually agree upon the Closing Balance Sheet. The Net Asset Value reflected in
the Closing Balance Sheet shall not materially differ from Net Asset Value
reflected in the Balance Sheet.
(c) The Selling Shareholders will take all necessary actions, corporate or
otherwise, required to fulfill their obligations under this Agreement and the
transactions contemplated hereunder.
(d) The Company and Selling Shareholders shall use their best efforts to
cause each Option Holder at the Closing to exercise his or her Options, to agree
to the termination of his or her unvested Options, and to enter into the Option
Holder's Stock Purchase Agreement.
5.2. BY INTELLIGROUP. As an inducement of the Selling Shareholders to enter into
this Agreement, Intelligroup hereby covenants to the Selling Shareholders that
it will take all necessary actions, corporate or otherwise, required to fulfill
its obligations under this Agreement and the transactions contemplated
hereunder.
5.3. CONDUCT OF BUSINESS. From the date hereof through the Closing, NPI and the
Selling Shareholders shall, except as contemplated by this Agreement, or as
consented to by Intelligroup in writing, operate the Business in the ordinary
course of business and in accordance with past practice and will not take any
action inconsistent with this Agreement, the transactions contemplated hereby or
the consummation of the Closing. Without limiting the generality of the
foregoing, NPI shall not and the Selling Shareholders shall not cause or permit
NPI to, except as specifically contemplated by this Agreement or as consented to
by Intelligroup in writing:
(a) incur any indebtedness for borrowed money, or assume, guarantee,
endorse (other
- 31 -
than endorsements for deposit or collection in the ordinary course of business),
or otherwise become responsible for obligations of any other Person;
(b) issue or commit to issue any shares of its capital stock or any other
securities or any securities convertible into shares of its capital stock or any
other securities, including, without limitation, any options to acquire capital
stock;
(c) pay or incur any obligation to pay any dividend on its capital stock or
make or incur any obligation to make any distribution or redemption with respect
to capital stock;
(d) make any change to NPI's or any of its Subsidiaries' Certificate of
Incorporation or Bylaws;
(e) mortgage, pledge or otherwise encumber any Assets or sell, transfer,
license or otherwise dispose of any Assets except for the licensing of NPI's
products and services in the ordinary course of business and consistent with
past practice;
(f) cancel, release or assign any indebtedness owed to it or any claims or
rights held by it, except in the ordinary course of business and consistent with
past practice;
(g) make any investment of a capital nature either by purchase of stock or
securities, contributions to capital, property transfer or otherwise, or by the
purchase of any property or assets of any other Person;
(h) terminate any material Contract or make any change in any material
Contract;
(i) enter into or modify any employment Contract, (ii) pay any compensation
to or for any Employee, officer or director other than in the ordinary course of
business and pursuant to existing employment arrangements, (iii) pay or agree to
pay any bonus, incentive compensation, service award or other like benefit or
(iv) enter into or modify any other Employee Plan, in each case in a manner
inconsistent with any written guidelines provided by Intelligroup to the
Company;
(j) enter into or modify any Contract with a Related Party;
(k) declare any dividend or make any payment or distribution to the Selling
Shareholders or redeem or purchase any shares of its capital stock;
(l) make any change in any method of accounting or accounting practice;
(m) fail to pursue the development and introduction of new products and
technology advances in connection with the Business on a basis consistent with
past practice;
(n) fail to comply with all Regulations applicable to the Assets and the
Business consistent with past practices;
(o) fail to use its commercially reasonable efforts to (i) maintain the
Business, (ii) retain the Employees so that such Employees will remain available
to the Company and Intelligroup on and after the Closing Date (provided that NPI
shall not be required by this
- 32 -
Section 5.3(o) to enter into any employment agreement with any Employee), (iii)
maintain existing relationships with suppliers and customers and others having
business dealings with NPI and (iv) otherwise to preserve the goodwill of the
Business so that such relationships and goodwill will be preserved on and after
the Closing Date; or
(p) do any other act which would cause any representation or warranty of
NPI or the Selling Shareholders in this Agreement to be or become untrue in any
material respect or that is not in the ordinary course of business consistent
with past practice.
5.4. INVESTIGATION BY INTELLIGROUP. Subject to the Confidentiality Agreement,
from the date hereof through the Closing Date, NPI shall, and shall cause its
officers, Employees and Representatives to, afford the Representatives of
Intelligroup and its Affiliates access upon reasonable notice and at all
reasonable times to its Business for the purpose of inspecting the same, and to
its officers, Employees and Representatives, properties, Books and Records,
Contracts and other Assets, and shall furnish Intelligroup and its
Representatives, upon reasonable notice and in a timely manner, all financial,
operating and other data and information (including with respect to Proprietary
Rights) as Intelligroup or its affiliates, through their respective
Representatives, may reasonably request.
5.5. NOTIFICATION OF CERTAIN MATTERS. NPI and the Selling Shareholders shall
give prompt notice to Intelligroup of (i) the occurrence, or failure to occur,
of any event which occurrence or failure would be likely to cause any
representation or warranty of NPI or any Selling Shareholder contained in this
Agreement to be untrue or inaccurate in any material respect and (ii) any
material failure of NPI or any Selling Shareholder to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that such disclosure shall not be deemed to cure
any breach of a representation, warranty, covenant or agreement or to satisfy
any condition. NPI and the Selling Shareholders shall promptly notify
Intelligroup of any Default, the threat or commencement of any Action, or any
development that occurs before the Closing that could reasonably be expected to
result in a NPI Material Adverse Effect.
5.6. NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC. Neither NPI nor any Selling
Shareholder will, directly or indirectly, (a) solicit any inquiries or proposals
or enter into or continue any discussions, negotiations or agreements relating
to (i) the sale or exchange of NPI's capital stock, (ii) the merger of NPI with,
or the direct or indirect disposition of a significant amount of the Assets or
the Business to, any Person other than Intelligroup or its Affiliates or (iii)
the licensing of NPI's Proprietary Rights to any Person other than in the
ordinary course of business consistent with past practice or (b) provide any
assistance or any information to or otherwise cooperate with any Person in
connection with any such inquiry, proposal or transaction. NPI and the Selling
Shareholders hereby represent that neither NPI nor any Selling Shareholder is
now engaged in discussions or negotiations with any party other than
Intelligroup with respect to any transaction of the kind described in clauses
(a) (i) through (a) (iii) of the preceding sentence (a "Proposed Acquisition
Transaction"). NPI and each Selling Shareholder agrees not to release any third
party from, or waive any provision of, any confidentiality or standstill
agreement to which any of them is a party. NPI and the Selling Shareholders
shall (w) immediately notify Intelligroup (orally and in writing) if any offer
is made, any discussions or negotiations are sought to be initiated, any
inquiry, proposal or contact is made or any
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information is requested with respect to any Proposed Acquisition Transaction,
(x) promptly notify Intelligroup of the terms of any proposal which it may
receive in respect of any such Proposed Acquisition Transaction, including,
without limitation, the identity of the prospective purchaser or soliciting
party, (y) promptly provide Intelligroup with a copy of any such offer, if
written, or a written summary (in reasonable detail) of such offer, if not in
writing, and (z) keep Intelligroup informed of the status of such offer and the
offeror's efforts and activities with respect thereto. Notwithstanding anything
herein to the contrary, the Selling Shareholders and NPI agree to continue to be
bound by the no shopping provisions of the letter of intent dated November 18,
1998.
ARTICLE 6.
CONDITIONS TO THE SELLING SHAREHOLDERS' OBLIGATIONS
The obligation of the Selling Shareholders to effect the Acquisition and
complete the related transactions contemplated by this Agreement are subject, in
the discretion of the Selling Shareholders, to the satisfaction, on or prior to
the Closing Date, of each of the following conditions or the waiver of such
conditions by the Selling Shareholders:
6.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of Intelligroup contained in this Agreement shall be true and correct
in all material respects at and as of the Closing Date, and Intelligroup shall
have performed in all material respects all agreements and covenants required
hereby to be performed by it prior to or at the Closing Date. There shall be
delivered to the Selling Shareholders a certificate signed by a senior officer
of Intelligroup to the foregoing effect ("Intelligroup Closing Certificate").
6.2. CONSENTS. All Consents, approvals and waivers from governmental authorities
and other parties necessary to permit Intelligroup to consummate the Acquisition
as contemplated hereby shall have been obtained. The Selling Shareholders shall
be satisfied that all approvals required under any Regulations to permit
Intelligroup to carry out the transactions contemplated by this Agreement shall
have been obtained.
6.3. NO COURT ORDERS. No Action by any court, Governmental Authority or other
Person shall have been instituted or threatened which questions the validity or
legality of the transactions contemplated hereby and which could reasonably be
expected to damage the Selling Shareholders materially if the transactions
contemplated hereby are consummated. There shall not be any Regulation or Court
Order that makes the acquisition of the NPI Shares contemplated hereby illegal
or otherwise prohibited.
6.4. CLOSING DOCUMENTS. Intelligroup shall have delivered to the Selling
Shareholders the documents and other items described in Section 9.2 and such
other documents and items as the Selling Shareholders may reasonably require.
6.5 OPTION HOLDERS. Each Option Holder shall have entered into an Option
Holder's Stock Purchase Agreement and shall have performed all of his or her
obligations to be performed thereunder on the Closing Date. All options shall
have terminated.
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6.6 EMPLOYMENT AGREEMENTS. Intelligroup shall have executed and delivered an
Employment Agreement with the Selling Shareholders in the form set forth in
Exhibit A and otherwise in form and substance satisfactory to the Selling
Shareholders.
ARTICLE 7.
CONDITIONS TO INTELLIGROUP'S OBLIGATIONS
The obligation of Intelligroup to effect the Acquisition and complete the
related transactions contemplated by this Agreement are subject, in the
discretion of Intelligroup, to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, or the waiver of such conditions by
Intelligroup:
7.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of each of the Selling Shareholders and the Company contained in this
Agreement shall be true and correct at and as of the Closing Date, and the
Selling Shareholders and the Company shall have performed in all material
respects all agreements and covenants required hereby to be performed prior to
or at the Closing Date. There shall be delivered to Intelligroup a certificate
signed by each of the Selling Shareholders (the "Selling Shareholders Closing
Certificate") and by the Company (the "Company Closing Certificate") to the
foregoing effect.
7.2. CONSENTS. All Consents, approvals and waivers from governmental authorities
and other parties necessary to permit each of the Selling Shareholders and the
Company to consummate the Acquisition as contemplated hereby and for the
operation of the Business after the Closing (including all required third party
consents under the Contracts) shall have been obtained. Intelligroup shall be
satisfied that all approvals required under any Regulations to permit the
Selling Shareholders and the Company to carry out the transactions contemplated
by this Agreement shall have been obtained.
7.3. NO ACTIONS OR COURT ORDERS. No Action by any court, Governmental Authority
or other Person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Intelligroup, the Assets or the Business
materially if the transactions contemplated hereby or thereby are consummated,
including any material adverse effect on the right or ability of Intelligroup to
own or control or transfer NPI Shares after the Closing. There shall not be any
Regulation or Court Order that makes the acquisition of the NPI Shares
contemplated hereby illegal or otherwise prohibited or that otherwise may have a
Material Adverse Effect on the Company.
7.4. CLOSING DOCUMENTS. The Selling Shareholders shall have delivered to
Intelligroup the documents and other items described in Section 9.1 and such
other documents and items as Intelligroup may reasonably require.
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7.5. INDEBTEDNESS. Except as set forth on Schedule 7.5, on the Closing Date,
immediately prior to the Closing, there shall be no indebtedness on the
Company's balance sheet other than payables and accrued expenses incurred by the
Company in the ordinary course of business consistent with past practice and
Notes Payable which had an aggregate principal amount outstanding on December 4,
1998 of $752,351.24. In addition, the aggregate amount of cash, cash equivalents
and accounts receivable on the Company's balance sheet as of the Closing Date
shall exceed its accounts payable.
7.6. BOARD OF DIRECTORS APPROVAL. The Acquisition shall have been approved by
appropriate action of the Board of Directors of Intelligroup.
7.7. TAX MATTERS.
(a) No new elections with respect to Taxes, or changes in current elections
with respect to Taxes, affecting the Company shall have been made without the
prior written consent of Intelligroup, which consent shall not be unreasonably
withheld.
(b) The Selling Shareholders on the Closing Date shall have provided
Intelligroup with all forms, certificates and/or other instruments required to
pay any stamp or transfer taxes arising from the transactions contemplated by
this Agreement.
(c) Each Selling Shareholder and Option Holder shall have delivered to
Intelligroup a certification of non-foreign status as contemplated under Section
1.1445-2(b)(2) of the Treasury Regulations, certifying that he or she is not a
foreign person
7.8. MATERIAL ADVERSE CHANGE. There shall not have been any Material Adverse
Change of the Company.
7.9. EXEMPTION UNDER FEDERAL AND STATE SECURITIES LAWS. The issuance of shares
of Intelligroup Stock pursuant to the terms hereof shall not violate any U.S.
federal or state securities laws.
7.10. COMPLETION OF INTELLIGROUP DILIGENCE. Intelligroup shall have completed
its business and legal due diligence to its satisfaction, in its sole judgment.
7.11 OPTION HOLDERS. Each Option Holder shall have entered into the Option
Holder's Stock Purchase Agreement and shall have performed all of his or her
obligations to be performed thereunder on the Closing Date. All Options shall
have terminated.
7.12 EMPLOYMENT AGREEMENTS. The Selling Shareholders shall have executed and
delivered an Employment Agreement in form set forth in Exhibit A and otherwise
---------
in form and substance satisfactory to Intelligroup.
- 36 -
ARTICLE 8.
TAX MATTERS
8.1 INFORMATION AND ASSISTANCE. Intelligroup and each of the Selling
Shareholders agree to furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information (including access to books
and records) and assistance relating to the Company as is reasonably necessary
for the filing of any return, for the preparation for any audit, and for the
prosecution of the defense of any claim, suit, or proceeding relating to any
proposed adjustment. Intelligroup and each Selling Shareholder shall cooperate
with each other in the conduct of any audit or other proceedings involving the
Company for any tax purposes.
ARTICLE 9.
CLOSING
On the Closing Date at the place of Closing:
9.1. DELIVERIES BY THE SELLING SHAREHOLDERS TO INTELLIGROUP. The Selling
Shareholders shall deliver (or cause to be delivered) to Intelligroup:
(a) any Consents required to be obtained by the Selling Shareholders and/or
the Company;
(b) the Selling Shareholder Closing Certificate and the Company Closing
Certificate;
(c) an opinion of Stirba & Hathaway, P.C., counsel to the Selling
Shareholders, dated as of the Closing Date, in a form reasonably satisfactory to
Intelligroup and its counsel;
(d) duly executed stock powers with respect to the NPI Shares in favor of
Intelligroup;
(e) the share certificates evidencing the NPI Shares;
(f) all the Books and Records material to the Company;
(g) the books of unissued stock certificates of the Company;
(h) the Certificates of Incorporation and By-laws and Articles of the
Company;
(i) resignation of all members of the Board of Directors of NPI;
(j) Option Holder's Stock Purchase Agreements executed by each Option
Holder; and
(k) such other documents and certificates duly executed as may reasonably
be requested by Intelligroup prior to the Closing Date.
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9.2. DELIVERIES BY INTELLIGROUP TO THE SELLING SHAREHOLDERS. Intelligroup shall
deliver to the Selling Shareholders, or any other appropriate Persons:
(a) any Consents required to be obtained by Intelligroup;
(b) the Intelligroup Closing Certificate;
(c) an opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Professional Corporation, counsel to
Intelligroup, dated as of the Closing Date, in a form reasonably satisfactory to
the Selling Shareholders and their counsel;
(d) the amounts required to be delivered at the Closing pursuant to
Sections 2.2(a) and (b); and
(e) such other documents and certificates duly executed as may reasonably
be requested by the Selling Shareholders prior to the Closing Date.
ARTICLE 10.
CERTAIN POST-CLOSING AGREEMENTS
10.1. PROPRIETARY INFORMATION.
(a) The Selling Shareholders shall hold in confidence, all knowledge and
information of a secret or confidential nature with respect to the Business, and
shall not disclose, publish or make use of the same without the consent of
Intelligroup, except to the extent that such information shall have become
public knowledge other than by breach of this Agreement by any of the Selling
Shareholders or by any other persons who have agreed not to disclose, publish or
make use of such information.
(b) The Selling Shareholders agree that the remedy at law for any breach of
this Section 10.1 would be inadequate and that Intelligroup shall be entitled to
injunctive relief in addition to any other remedy it may have upon breach of any
provision of this Section 10.1.
10.2. NO SOLICITATION OR HIRING OF FORMER EMPLOYEES. Except as provided by law
or with the written consent of Intelligroup, for a period of two years after the
date hereof, each Selling Shareholder agrees that he shall not directly or
indirectly solicit any person who was an Employee of the Company on the date
hereof or on the Closing Date, and has been employed, and not terminated without
cause, by the Company or Intelligroup, to terminate his or her employment with
the Company or Intelligroup or to become an employee of any entity directly or
indirectly owned or controlled by a Selling Shareholder or an entity that
employs a Selling Shareholder or their respective Affiliates or hire any person
who was such an employee on the date hereof or on the Closing Date.
10.3. NON-COMPETITION AGREEMENT.
(a) For a period of three (3) years after the date hereof, neither any
Selling Shareholder nor any Affiliate thereof shall directly or indirectly (i)
market, sell or perform web-
- 38 -
site design and front-end application solutions services such as are offered or
conducted by the Company on the date hereof or on the Closing Date or (ii)
engage in, manage, operate, be connected with or acquire any interest in, as an
advisor, agent, owner, partner, co-venturer, principal, director, shareholder,
lender or otherwise, any business competitive with the Company with respect to
the Company's web-site design and front-end application solutions services as
conducted on the date hereof or on the Closing Date (a "Competitive Business"),
except that any of the Selling Shareholders and his Affiliates may own, in the
aggregate, not more than 1% of the outstanding shares of any publicly held
corporation which is a Competitive Business which has shares listed for trading
on a securities exchange registered with the Securities and Exchange Commission
or through the automatic quotation system of a registered securities
association.
(b) The parties hereto agree that, due to the nature of the Business, the
duration and geographic scope of the non-competition provision set forth in this
Section 10.3 are reasonable. In the event that any court determines that the
duration or the geographic scope, or both, are unreasonable and that such
provision is to that extent unenforceable, the parties hereto agree that the
provision shall remain in full force and effect for the greatest time period and
in the greatest area that would not render it unenforceable. The parties intend
that this non-competition provision shall be deemed to be a series of separate
covenants, one for each and every county of each and every state of the United
States of America and each and every political subdivision of each and every
country outside the United States of America where this provision is intended to
be effective. Each Selling Shareholder agrees that damages are an inadequate
remedy for any breach of this provision and that Intelligroup shall, whether or
not it is pursuing any potential remedies at law, be entitled to equitable
relief in the form of preliminary and permanent injunctions without bond or
other security upon any actual or threatened breach of this non-competition
provision. If any Selling Shareholder or any Affiliate shall violate this
Section 10.3, the duration of this Section 10.3 automatically shall be extended
as against such violating party for a period equal to the period during which
such party shall have been in violation of this Section 10.3. The covenants
contained in this Section 10.3 are deemed to be material and Intelligroup is
entering into this Agreement relying on such covenants.
10.4 GUARANTY AGREEMENTS. Intelligroup shall use all commercially reasonable
efforts to arrange for the termination of the individual guaranties by the
Selling Shareholders and their spouses of the Company's indebteness to Zions
First National Bank and First Security Bank (the "Guaranty Agreements"). Until
such time as the Guaranty Agreements are terminated, Intelligroup shall take all
such action as is necessary to ensure that no payments are required to be made
under the Guaranty Agreements by the Selling Shareholders or their spouses with
respect to payments required to be made on the underlying indebtedness for the
period after the Closing Date.
10.5 REGISTRATION OF INTELLIGROUP SHARES.
(a) On or before April 30, 2000, Intelligroup will use all commercially
reasonable efforts to file a registration statement on Form S-3 (or any
successor or similar form) permitting the resale of the Intelligroup Shares by
the Selling Shareholders. Intelligroup shall also use all commercially
reasonable efforts to register and qualify the securities covered by such
registration statement under such other securities or blue sky laws of such
jurisdictions as shall be reasonably requested by the Selling Shareholders,
provided that the Company shall not be required in
- 39 -
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions. Subsequent to such filings, Intelligroup shall use all reasonable
efforts to cause such registration statement, registrations, and qualifications
to become effective and keep such registration statement, registrations, and
qualifications effective until such time as the Intelligroup Shares may be sold
pursuant to Rule 144 of the Securities and Exchange Commission.
(b) It shall be a condition precedent to the obligations of Intelligroup
under this Section that the Selling Shareholders shall furnish to the
Intelligroup such information regarding themselves, the Intelligroup Shares held
by them, and the intended method of disposition of such securities as shall be
required to effect the registration of their Intelligroup Shares.
(c) To the extent permitted by law, each Selling Shareholder will indemnify
and hold harmless Intelligroup, each of its directors, officers, and legal
counsel and each person, if any, who controls Intelligroup within the meaning of
the Securities Act of 1933, as amended (the "Securities Act") against any
losses, claims, damages or liabilities (joint or several) to which Intelligroup
or any such director, officer, legal counsel and controlling person may become
subject under the Securities Act, the Securities Exchange Act of 1934 or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any written
information furnished by such Selling Shareholder for use in a registration
statement pursuant to this Section and each such Selling Shareholder will
reimburse any legal or other expenses reasonably incurred by Intelligroup or any
such director, officer, legal counsel or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action.
10.6. [INTENTIONALLY OMITTED]
10.7 CONTINUATION OF BUSINESS. From the Closing Date until December 31, 1999,
Intelligroup shall not, without the consent of the Selling Shareholders, cause
the Company to abandon any substantial part of the Company's Business as it is
conducted by the Company on the Closing Date, which abandonment is likely to
result in a Material Adverse Effect. In the event that a Selling Shareholder
believes that Intelligroup has taken any action which breaches its obligation
under this Section, he will provide Intelligroup with written notice thereof as
soon as practicable after he becomes aware of such action.
ARTICLE 11.
INDEMNIFICATION
11.1. SURVIVAL OF REPRESENTATIONS, ETC. All statements by a party contained in
this Agreement and any schedule attached hereto shall be deemed to be
representations and
- 40 -
warranties by such party hereunder. The representations and warranties contained
herein shall survive the Closing Date (and claims based upon or arising out of
such representations and warranties, as well as any claims based upon or arising
out of any covenants and agreements herein or made hereunder, may be asserted at
any time before the date which shall be) until the first anniversary of the
Closing Date; provided, however, the Selling Shareholders' representations and
warranties in Section 3.3 (Ownership of Capital Stock; Title), Section 3.10
(Environmental Matters), Section 3.19 (Employee Plans) Section 3.23 (Tax
Matters), and Section 3.27 (Brokers; Transaction Costs) shall survive until the
expiration of the applicable statute of limitations (with extensions) with
respect to the matters addressed in such sections and the Selling Shareholders'
representations and warranties in Section 3.29 (Year 2000 Compliance) shall
survive until March 31, 2000. No investigation made by any of the parties hereto
(whether prior to, on or after the Closing Date) shall in any way limit the
representations and warranties of the parties. On the Closing Date, all
representations and warranties contained in this Agreement and made by the
Company and the Selling Shareholders shall expire as to the Company and
thereafter will be deemed to have been made exclusively by the Selling
Shareholders. The termination of the representations and warranties provided
herein shall not affect the rights of a party in respect of any claim made by
such party in a writing received by the other party prior to the expiration of
the applicable survival period provided herein.
11.2. INDEMNIFICATION.
General.
-------
(a) Subsequent to the Closing, the Selling Shareholders shall indemnify
Intelligroup, its Affiliates, and each of their respective officers, directors,
employees, shareholders and agents ("Intelligroup Indemnified Parties") against,
and hold each of the Intelligroup Indemnified Parties harmless from, any damage,
claim, loss, cost, liability or expense, including without limitation, interest,
penalties, reasonable attorneys' fees and expenses of investigation, diminution
of value, response action, removal action or remedial action (collectively
"Damages") incurred by any such Intelligroup Indemnified Party, that are
incident to, arise out of, in connection with, or related to, whether directly
or indirectly, the breach of any warranty, representation, covenant or agreement
of the Selling Shareholders or the Company contained in this Agreement or any
schedule hereto or in any certificate or instrument of conveyance delivered by
or on behalf of the Selling Shareholders or the Company or any such holder
pursuant to this Agreement or in connection with the transactions contemplated
hereby; provided, however, that the indemnity provisions set forth in this
Section 11.2(a) shall not become effective until such time as the Damages exceed
$25,000, and only with respect to such excess over $25,000, in which case
Intelligroup Indemnified Parties shall be entitled to Damages in the aggregate
amount up to the consideration paid or payable by Intelligroup pursuant to
Section 2.2 of this Agreement and pursuant to the Option Holder's Stock Purchase
Agreements.
(b) In the event the Net Asset Value reflected in the Closing Balance
Sheet is less than the Net Asset Value reflected in the Balance Sheet by an
amount greater than $25,000, the Selling Shareholders shall pay to Intelligroup
the amount of such deficiency (over $25,000) in cash within thirty days after
the date the Closing Balance Sheet has been delivered to Intelligroup.
(c) Subsequent to the Closing, Intelligroup shall indemnify the Selling
Shareholders,
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its Affiliates, and each of their respective officers, directors, employees,
shareholders and agents ("the Selling Shareholder Indemnified Parties"),
against, and hold each of the Selling Shareholder Indemnified Parties harmless
from, any Damages incurred by such the Selling Shareholder Indemnified Party,
that are incident to, arise out of, in connection with, or related to, whether
directly or indirectly, the breach of any warranty, representation, covenant or
agreement of Intelligroup contained in this Agreement, any schedule or in any
certificate or instrument of conveyance delivered by or on behalf of
Intelligroup pursuant to this Agreement or in connection with the transactions
contemplated hereby; provided, however, that the indemnity provisions set forth
in this Section 11.2(d) shall not become effective until such time as the
Damages exceed $25,000, and only with respect to such excess over $25,000, in
which case the Selling Shareholder Indemnified Parties shall be entitled to
Damages in the amount up to $2,000,000 in the aggregate.
The term "Damages" as used in this Section 11.2 is not limited to matters
asserted by third parties against the Selling Shareholder Indemnified Parties or
Intelligroup Indemnified Parties, as the case may be, but includes Damages
incurred or sustained by such persons in the absence of third party claims.
Notwithstanding the foregoing, none of the parties hereto shall be liable for
any special, indirect, incidental or consequential Damages.
11.3. NO RIGHT OF CONTRIBUTION. After the Closing, the Selling Shareholders
shall not have any right of contribution against Intelligroup or the Company for
any breach of any representation, warranty, covenant or agreement of the
Company.
11.4. PROCEDURE FOR CLAIMS. If a claim for Damages (a "Claim") is to be made
under this Article 11 by a person entitled to indemnification hereunder, the
person claiming such indemnification (the "Indemnified Party") shall give
written notice (a "Claim Notice") to the indemnifying person (the "Indemnifying
Party") as soon as practicable after the Indemnified Party becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under Section 11.2. The failure of any Indemnified
Party to give timely notice hereunder shall not affect rights to indemnification
hereunder, except and only to the extent that, the Indemnifying Party
demonstrates actual material damage caused by such failure. In the case of a
Claim involving the assertion of a claim by a third party (whether pursuant to a
lawsuit or other legal action or otherwise, a "Third-Party Claim"), if the
Indemnifying Party shall acknowledge in writing to the Indemnified Party that
the Indemnifying Party shall be obligated to indemnify the Indemnified Party
under the terms of its indemnity hereunder in connection with such Third-Party
Claim, then (A) the Indemnifying Party shall be entitled and, if it so elects,
shall be obligated at its own cost, risk and expense, (1) to take control of the
defense and investigation of such Third-Party Claim and (2) to pursue the
defense thereof in good faith by appropriate actions or proceedings promptly
taken or instituted and diligently pursued, including, without limitation, to
employ and engage attorneys of its own choice reasonably acceptable to the
Indemnified Party to handle and defend the same, and (B) the Indemnifying Party
shall be entitled (but not obligated), if it so elects, to compromise or settle
such claim, which compromise or settlement shall be made only with the written
consent of the Indemnified Party, such consent not to be unreasonably withheld.
In the event the Indemnifying Party elects to assume control of the defense and
investigation of such lawsuit or other legal action in accordance with this
Section 11.4, the Indemnified Party may, at its own cost and expense,
participate in the investigation, trial and defense of such Third-Party Claim;
provided
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that, if the named persons to a lawsuit or other legal action include both the
Indemnifying Party and the Indemnified Party and the Indemnified Party has been
advised in writing by counsel that there may be one or more legal defenses
available to such Indemnified Party that are different from or additional to
those available to the Indemnifying Party, the Indemnified Party shall be
entitled, at the Indemnifying Party's reasonable cost, risk and expense, to
separate counsel of its own choosing. If the Indemnifying Party fails to assume
the defense of such Third-Party Claim in accordance with this Section 11.4
within ten (10) calendar days after receipt of the Claim Notice, the Indemnified
Party against which such Third-Party Claim has been asserted shall (upon
delivering notice to such effect to the Indemnifying Party) have the right to
undertake the defense, compromise and settlement of such Third-Party Claim. In
the event the Indemnifying Party assumes the defense of the claim, the
Indemnifying Party shall keep the Indemnified Party reasonably informed of the
progress of any such defense, compromise or settlement, and in the event the
Indemnified Party assumes the defense of the claim, the Indemnified Party shall
keep the Indemnifying Party reasonably informed of the progress of any such
defense, compromise or settlement. The Indemnifying Party shall be liable for
any settlement of any Third-Party Claim effected pursuant to and in accordance
with this Section 11.4 and for any final judgment (subject to any right of
appeal), and the Indemnifying Party agrees to indemnify and hold harmless each
Indemnified Party from and against any and all Damages by reason of such
settlement or judgment.
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ARTICLE 12.
MISCELLANEOUS
12.1. ASSIGNMENT. Neither this Agreement nor any of the rights or obligations
hereunder may be assigned by the Selling Shareholders without the prior written
consent of Intelligroup, or by Intelligroup without the prior written consent of
the Selling Shareholders.
12.2. NOTICES. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to the other
shall be in writing and delivered in person or by courier, telegraphed, telexed,
sent by facsimile transmission, sent via overnight delivery service or mailed by
registered or certified mail (such notice to be effective upon receipt), as
follows:
If to the Selling Shareholders:
To the addresses set forth on Schedule A
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Esquire
Stirba & Hathaway
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Intelligroup:
Intelligroup, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial Officer
With a copy to:
▇▇▇▇▇▇▇▇ Ingersoll Professional Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
12.3. CHOICE OF LAW. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of New
Jersey except with respect to matters of law concerning the internal corporate
affairs of any corporate entity which is a party to or the subject of this
Agreement, and as to those matters the law of the jurisdiction under which
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the respective entity derives its powers shall govern and in respect of such
matters the parties hereby submit to the authority of the courts of such
jurisdiction.
12.4. DESCRIPTIVE HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.5. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, together with
all exhibits and schedules hereto, constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
12.6. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
12.7. INVALIDITY. In the event that any one or more of the provisions contained
in this Agreement or in any other instrument referred to herein, shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any other such instrument.
12.8. EXPENSES. Each party will be liable for its own expenses incurred in
connection with the negotiation, preparation, execution and performance of this
Agreement.
12.9. PUBLICITY. Except as required by law or on advice of counsel, neither
party shall issue any press release or make any public statement regarding the
transactions contemplated hereby without the prior approval of the other
parties, and the parties hereto shall issue a mutually acceptable press release
as soon as practicable after the date hereof and after the Closing Date.
Notwithstanding the foregoing, either party shall be permitted to make any
public statement without obtaining the consent of any other party hereto if (i)
the disclosure is required by law and (ii) such party has first used its
reasonable efforts to consult with (but not to obtain the consent of) the other
parties about the form and substance of such disclosure.
12.10. NO THIRD PARTY BENEFICIARIES. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, except as
specifically set forth in Article 11 hereof.
12.11. TERMINATION.
(a) Termination. This Agreement may be terminated at any time prior to
-----------
Closing:
(i) By mutual written consent of Intelligroup and the Selling
Shareholders;
(ii) By Intelligroup or the Selling Shareholders, by written notice
to the other
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party, if the Closing shall not have occurred on or before February 15,
1999; provided, however, that this provision shall not be available to
-------- -------
Intelligroup if the Selling Shareholders have the right to terminate this
Agreement under clause (iv) of this Section 12.11(a) and this provision
shall not be available to the Selling Shareholders if Intelligroup has the
right to terminate this Agreement under clause (iii) of this Section
12.11(a);
(iii) By Intelligroup, by written notice to the Selling Shareholders,
if there is a material breach of any representation or warranty set forth
in Article 3 hereof or any covenant or agreement to be complied with or
performed by the Company or the Selling Shareholders pursuant to the terms
of this Agreement or the failure of a condition set forth in Article 7 to
be satisfied (and such condition is not waived in writing by Intelligroup)
on or prior to the Closing Date, or the occurrence of any event which
results or would result in the failure of a condition set forth in Article
7 to be satisfied on or prior to the Closing Date; or
(iv) By the Selling Shareholders, by written notice to Intelligroup,
if there is a material breach of any representation or warranty set forth
in Article 4 hereof or of any covenant or agreement to be complied with or
performed by Intelligroup pursuant to the terms of this Agreement or the
failure of a condition set forth in Article 6 to be satisfied (and such
condition is not waived in writing by the Selling Shareholders) on or prior
to the Closing Date, or the occurrence of any event which results or would
result in the failure of a condition set forth in Article 6 to be satisfied
on or prior to the Closing Date.
(b) In the Event of Termination. In the event of termination of this
------------------------------
Agreement:
(i) Each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the
party furnishing the same;
(ii) The provisions of the Confidentiality Agreement shall continue in
full force and effect; and
(iii) No party hereto shall have any liability or further obligation
to any other party to this Agreement, except as stated in subsections (i),
(ii) and (iii) of this Section 12.11(b), except for any willful breach of
this Agreement occurring prior to the proper termination of this Agreement.
The foregoing provisions shall not limit or restrict the availability of
specific performance or other injunctive relief to the extent that specific
performance or such other relief would otherwise be available to a party
hereunder.
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IN WITNESS WHEREOF, each of the parties hereto have executed this
Agreement or caused this Agreement to be duly executed on its behalf by its
officer thereunto duly authorized, as of the day and year first above written.
INTELLIGROUP, INC.,
a New Jersey corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
NETWORK PUBLISHING, INC.,
a Utah corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇
Title: President
THE SELLING SHAREHOLDERS
/s/ ▇▇▇▇▇▇▇ ▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇