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AGREEMENT AND PLAN OF MERGER
by and among
INTELLIGROUP, INC.
ES MERGER CORP.,
EMPOWER SOLUTIONS, L.L.C.
and
THE MEMBERS OF EMPOWER SOLUTIONS, L.L.C.
Dated as of February 16, 1999
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TABLE OF CONTENTS Page
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ARTICLE 1. DEFINITIONS......................................................1
1.1.DEFINED TERMS............................................................1
1.2.CERTAIN ADDITIONAL DEFINED TERMS.........................................9
1.3.INTERPRETATION PROVISIONS...............................................10
ARTICLE 2. THE MERGER......................................................11
2.1.THE MERGER..............................................................11
2.2.EFFECTIVE TIME..........................................................11
2.3.EFFECT OF THE MERGER....................................................11
2.4.ARTICLES OF INCORPORATION; BYLAWS.......................................11
2.5.DIRECTORS AND OFFICERS..................................................11
2.6.EFFECT ON SECURITIES....................................................12
▇.▇.▇▇▇▇▇▇▇▇ OF CERTIFICATES................................................12
2.8.ESCROW OF MERGER SHARES.................................................12
▇.▇.▇▇▇ BOOK VALUE ADJUSTMENT...............................................13
2.10.MEMBER REPRESENTATIVE..................................................14
2.11.TAKING OF NECESSARY ACTION; FURTHER ACTION.............................14
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF EMPOWER AND THE MEMBERS.......15
3.1.ORGANIZATION OF EMPOWER.................................................15
3.2.CAPITALIZATION OF EMPOWER...............................................15
3.3.MEMBERS'AGREEMENTS, ETC.................................................15
3.4.AUTHORIZATION...........................................................16
3.5.MANAGING MEMBERS AND SUPERVISORY PERSONNEL..............................16
▇.▇.▇▇▇▇ ACCOUNTS...........................................................16
▇.▇.▇▇ SUBSIDIARIES.........................................................16
3.8.REAL PROPERTY...........................................................16
3.9.PERSONAL PROPERTY.......................................................17
3.10.ENVIRONMENTAL MATTERS..................................................18
3.11.CONTRACTS..............................................................19
▇.▇▇.▇▇ CONFLICT OR VIOLATION; CONSENTS.....................................20
3.13.PERMITS................................................................21
▇.▇▇.▇▇▇▇▇▇▇▇▇ STATEMENTS; BOOKS AND RECORDS................................21
3.15.ABSENCE OF CERTAIN CHANGES OR EVENTS...................................22
3.16.LIABILITIES............................................................23
3.17.LITIGATION.............................................................24
3.18.LABOR MATTERS..........................................................24
3.19.EMPLOYEE BENEFIT PLANS.................................................25
3.20.TRANSACTIONS WITH RELATED PARTIES......................................27
3.21.COMPLIANCE WITH LAW....................................................28
3.22.INTELLECTUAL PROPERTY..................................................28
▇.▇▇.▇▇▇ MATTERS............................................................29
▇.▇▇.▇▇▇▇▇▇▇▇▇..............................................................30
3.25.ACCOUNTS RECEIVABLE....................................................30
3.26.INVENTORY..............................................................31
3.27.PURCHASE COMMITMENTS AND OUTSTANDING BIDS..............................31
3.28.CUSTOMERS AND SUPPLIERS................................................31
3.29.YEAR 2000 COMPLIANCE...................................................31
3.30.BROKERS; TRANSACTION COSTS.............................................32
▇.▇▇.▇▇ OTHER AGREEMENTS TO SELL EMPOWER OR THE ASSETS......................32
3.32.ACCOUNTING TREATMENT...................................................32
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3.33.MATERIAL MISSTATEMENTS OR OMISSIONS....................................32
ARTICLE 3A REPRESENTATIONS AND WARRANTIES OF MEMBERS.......................32
3A.1 AUTHORIZATION..........................................................32
3A.2 NO CONFLICT OR VIOLATION; CONSENTS.....................................33
3A.3 OWNERSHIP OF MEMBERSHIP INTERESTS; TITLE...............................33
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF INTELLIGROUP AND SUB..........33
4.1.ORGANIZATION............................................................33
4.2.CAPITALIZATION..........................................................34
4.3.AUTHORIZATION...........................................................34
▇.▇.▇▇ CONFLICT OR VIOLATION; CONSENTS......................................34
4.5.REPORTS AND FINANCIAL STATEMENTS........................................35
4.6.ABSENCE OF CERTAIN CHANGES OR EVENTS....................................35
4.7.S-3 ELIGIBILITY.........................................................35
4.8.DISCLOSURE..............................................................35
4.9. LITIGATION.............................................................36
ARTICLE 5. ACTIONS BY EMPOWER, THE MEMBERS AND INTELLIGROUP PRIOR TO THE
CLOSING.....................................................................36
5.1.CONDUCT OF BUSINESS.....................................................36
5.2.INVESTIGATION BY INTELLIGROUP...........................................37
5.3.NOTIFICATION OF CERTAIN MATTERS.........................................38
▇.▇.▇▇ MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC..........................38
5.5.POOLING ACCOUNTING TREATMENT............................................38
5.6.FURTHER ASSURANCES......................................................39
ARTICLE 6. CONDITIONS TO EMPOWER'S AND THE MEMBERS'OBLIGATIONS.............39
6.1.REPRESENTATIONS, WARRANTIES AND COVENANTS...............................39
6.2.CONSENTS................................................................39
▇.▇.▇▇ ACTIONS OR COURT ORDERS..............................................39
6.4.CLOSING DOCUMENTS.......................................................40
6.5.EMPLOYMENT AND NON-COMPETE AGREEMENTS...................................40
6.6.POOLING LETTER..........................................................40
6.7.OPINION OF INTELLIGROUP COUNSEL.........................................40
6.8.MATERIAL ADVERSE CHANGE.................................................40
ARTICLE 7. CONDITIONS TO INTELLIGROUP'S AND SUB'S OBLIGATIONS..............40
7.1.REPRESENTATIONS, WARRANTIES AND COVENANTS...............................40
7.2.CONSENTS................................................................41
▇.▇.▇▇ ACTIONS OR COURT ORDERS..............................................41
7.4.CLOSING DOCUMENTS.......................................................41
7.5.EXEMPTION UNDER FEDERAL AND STATE SECURITIES LAWS.......................41
▇.▇.▇▇▇▇▇▇▇▇ OF CERTIFICATES................................................41
▇.▇.▇▇▇ MATTERS.............................................................41
7.8.EMPLOYMENT AND NON-COMPETE AGREEMENTS...................................42
7.9.OPINION OF EMPOWER COUNSEL..............................................42
7.10.POOLING LETTER.........................................................42
7.11.MATERIAL ADVERSE CHANGE................................................42
ARTICLE 8. THE CLOSING; COVENANTS OF THE MEMBERS AND INTELLIGROUP FOLLOWING
THE CLOSING.................................................................42
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8.1.DELIVERIES BY EMPOWER AND THE MEMBERS TO INTELLIGROUP...................42
8.2.DELIVERIES BY INTELLIGROUP..............................................43
8.3.POST-CLOSING OBLIGATION OF SUB REGARDING EMPLOYEE COMPENSATION..........43
8.4. POST-CLOSING OBLIGATION OF THE MEMBERS REGARDING EMPOWER EMPLOYEES.....43
8.5. POST-CLOSING OBLIGATION OF THE MEMBERS REGARDING CONTRACTS.............43
ARTICLE 9. INDEMNIFICATION.................................................43
9.1.SURVIVAL OF REPRESENTATIONS, ETC........................................43
9.2.INDEMNIFICATION.........................................................44
▇.▇.▇▇ RIGHT OF CONTRIBUTION................................................46
9.4.ESCROW OF MERGER SHARES.................................................46
9.5.THRESHOLD; LIMITATIONS ON INDEMNITY.....................................47
ARTICLE 10. RESTRICTIVE COVENANTS..........................................48
10.1.NON-COMPETITION........................................................48
10.2.NON-SOLICITATION OF EMPLOYEES OF INTELLIGROUP..........................48
10.3.NON-SOLICITATION OR INTERFERENCE WITH CUSTOMERS AND SUPPLIERS OF
INTELLIGROUP................................................................48
10.4.ACKNOWLEDGMENTS........................................................48
ARTICLE 11. MISCELLANEOUS..................................................49
11.1.CERTAIN SECURITIES LAWS REPRESENTATIONS................................49
11.2.ASSIGNMENT.............................................................50
11.3.NOTICES................................................................50
11.4.CHOICE OF LAW..........................................................51
11.5.ARBITRATION............................................................51
11.6.DESCRIPTIVE HEADINGS...................................................51
11.7.ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS...............................51
11.8.COUNTERPARTS...........................................................51
11.9.INVALIDITY.............................................................52
11.10.EXPENSES..............................................................52
11.11.PUBLICITY.............................................................52
▇▇.▇▇.▇▇ THIRD PARTY BENEFICIARIES..........................................52
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TABLE OF EXHIBITS
Exhibit A Form of Employment and Non-Compete Agreement
Exhibit B Form of Escrow Agreement
Exhibit C Empower Financial Statements
Exhibit D Empower Employee Nonsolicitation Agreement
Exhibit E Form of Registration Rights Agreement
Exhibit F Form of Affiliate Letter
Exhibit G Form of Opinion of Intelligroup and Sub Counsel
Exhibit H Form of Intelligroup Employee Confidentiality, Nonsolicitation
and Invention Assignment Agreement
Exhibit I Form of Opinion of Empower Counsel
Exhibit J Empower Employee Compensation Plan
AGREEMENT AND PLAN OF MERGER dated as of February 16, 1999 (the
"Agreement"), by and among Intelligroup, Inc., a New Jersey corporation
("Intelligroup"), ES Merger Corp., a Michigan corporation ("Sub"), Empower
Solutions, L.L.C., a Michigan limited liability company ("Empower"), and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇ (each a
"Member" and collectively, the "Members").
WITNESSETH:
WHEREAS, the Boards of Directors of Intelligroup and Sub and the Members
of Empower have determined that it is advisable and in the best interests of the
stockholders of Intelligroup and Sub and Members of Empower to enter into a
business combination upon the terms and subject to the conditions set forth
herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
Intelligroup and Sub and the Members of Empower have each approved the merger of
Empower with and into Sub (the "Merger"), upon the terms and subject to the
conditions set forth herein, in accordance with the applicable provisions of the
New Jersey Business Corporation Law (the "NJBCA"), in the case of Intelligroup,
the Michigan Business Corporation Act (the "MBCA"), in the case of Sub, and the
Michigan Limited Liability Company Act (the "MLLCA") in the case of Empower;
WHEREAS, Intelligroup, Sub and Empower intend for the Merger to be
accounted for as a pooling of interests pursuant to Opinion No. 16 of the
Accounting Principles Board; and
WHEREAS, pursuant to the Merger, all Membership Interests (as defined
herein) of Empower shall be converted into the right to receive Intelligroup
Stock (as defined herein), 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, Sub, Empower and the Members hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. DEFINED TERMS.
As used herein, the terms below shall have the following meanings:
"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 direct or indirect ownership of fifty percent (50%) or more of
the voting securities of such Person.
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"Ancillary Agreements" means the Escrow Agreement, the Employment and
Non-Compete Agreements, the Registration Rights Agreement and all other
agreements required hereunder to consummate the Merger.
"Assets" means the right, title and interest of Empower 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 Inventory;
(d) all Books and Records;
(e) all Proprietary Rights;
(f) all Permits;
(g) all return and other rights under or pursuant to all warranties,
representations and guarantees made by suppliers and other third parties in
connection with the Assets or services furnished to such Person;
(h) all cash, accounts receivable, deposits and prepaid expenses;
and
(i) all goodwill.
"Average Share Price" means the average of the closing prices of
Intelligroup Stock on the Nasdaq National Market as reported (absent manifest
error in the printing thereof) in the Wall Street Journal (Eastern Edition) for
the 20 trading days ending on the day which is five trading days prior to the
Closing Date.
"Balance Sheet" means the balance sheet of Empower as of the Balance
Sheet Date.
"Balance Sheet Date" means December 31, 1998.
"Benefit Arrangement" means 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 Empower or any ERISA Affiliate or under which Empower or any ERISA Affiliate
may incur any liability, and (c) covers any employee or former employee of
Empower or any ERISA Affiliate (with respect to their relationship with such
entity).
"Books and Records" means (a) all product, business and marketing plans,
sales and promotional literature and artwork owned by Empower and relating to
the Assets or the Business, (b) all books,
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records, lists, ledgers, financial data, files, reports, product and design
manuals, plans, drawings, technical manuals and operating records of every kind
owned by Empower and relating to the Assets or the Business (including records
and lists of customers, distributors, suppliers and personnel) and (c) all
telephone and fax numbers owned by Empower and used in the Business, in each
case whether maintained as hard copy or stored in computer memory.
"Business" means (i) for the purpose of Article 10 hereunder, any business
currently conducted by Intelligroup or its Affiliates or conducted by
Intelligroup or its Affiliates within three years after the date hereof,
including, without limitation, providing comprehensive information technology
solutions and services; and (ii) for all other purposes hereunder, the business
and operations of Empower, including the implementation of PeopleSoft systems to
governmental entities and higher education institutions, as such business is
conducted as of the date hereof.
"Closing" has the meaning set forth in Section 2.1(b).
"Closing Date" means the date of the Closing.
"Confidentiality Agreement" means that certain Confidentiality Agreement
dated as of October 27, 1998 between Intelligroup and Empower.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Consents" means 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 Empower is a party or by which Empower or
any of the Assets are bound or affected, whether written or oral.
"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.
"Effective Time" has the meaning set forth in Section 2.2.
"Employee Plans" means all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"Employees" means all Senior Managers of Empower and all other Persons
employed by Empower on a full or part-time basis, together with any Person
retained as an independent contractor, as of the relevant date.
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"Employment and Non-Compete Agreements" means the Employment and
Non-Compete Agreements, substantially in the form of Exhibit A hereof, to be
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entered into between Intelligroup and each of the Senior Managers.
"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
Empower and any other person, (ii) actual or threatened damages to natural
resources, (iii) claims for nuisance or its statutory equivalent, (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.
"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 Empower or any of its predecessors or
successors in interest, or by its respective agents, representatives, employees
or independent contractors when acting in such capacity on behalf of Empower.
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 Empower.
"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
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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 or other Governmental Authority.
"Environmental Reports" means any and all written analyses, summaries or
explanations, in the possession or control of Empower, of (a) any Environmental
Conditions in, on or about the properties of Empower, or (b) Empower's
compliance with Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974 and the
regulations promulgated thereunder.
"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, Empower as set forth in Section 414(b), (c), (m) or (o)
of the 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, Empower, the Escrow Agent and the Members substantially in the
form of Exhibit B hereof.
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"Escrow Shares" has the meaning set forth in Section 2.8.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Statements" means the balance sheet of Empower as of December
31, 1997 and December 31, 1998 and the related statements of income of Empower
for the years then ended, which statements were prepared using the accrual
method of accounting and which do not contain all of the footnotes that would
otherwise be included in accordance with GAAP, which financial statements are
set forth on Exhibit C hereof.
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"Facilities" means all real property and related facilities leased by
Empower, all as identified or listed on Schedule 3.8(c).
"Fixtures and Equipment" means all of the furniture, fixtures,
furnishings, machinery, computer hardware, and other tangible personal property
owned by Empower, wherever located and including any such Fixtures and Equipment
in the possession of any of Empower's respective suppliers or other vendors.
"Former Properties" means all plants, offices, manufacturing facilities,
stores, warehouses, administration buildings and all real property and related
facilities owned, leased or operated by Empower prior to the date hereof, but
excluding Facilities.
"GAAP" means generally accepted accounting principles in the United States
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 applied on a
consistent basis.
"Hazardous Substances" means all pollutants, contaminants, chemicals,
wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic or
otherwise hazardous substances or materials
5
(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, par value $.01 per share, of
Intelligroup and all associated purchase rights pursuant to the Intelligroup
Shareholder Protection Rights Plan dated as of November 6, 1998.
"Inventory" means all merchandise owned by Empower and intended for resale
and all raw materials, work in process, finished goods, wrapping, supply and
packaging items and similar items, whether or not located on the premises, on
consignment to a third party, or in transit or storage.
"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 exercising reasonable judgment, and when used in
the context of Empower shall be deemed to include the knowledge of the Members
of Empower.
"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.
"Managing Member" means only ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
"Material Adverse Effect" or "Material Adverse Change" or a similar phrase
means, with respect to any Person, (a) any material adverse effect on or
material adverse change with respect to (i) the business, operations and assets
(taken as a whole), liabilities (taken as a whole), condition (financial or
otherwise) or results of operations, of such Person and its subsidiaries, taken
as a whole, or (ii) the right or ability of such Person or any of its
subsidiaries 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.
"Member Expenses" means all expenses incurred by Empower or any of its
Members in conjunction with the transactions contemplated by this Agreement,
including without limitation expenses incurred for outside legal counsel,
independent accountants and financial advisors including, but not limited to,
BancBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"Member Representative" has the meaning set forth in Section 2.10.
"Membership Interests" shall mean the membership interests in Empower,
expressed as a percentage, of the Members, as set forth on Schedule 3.2(a)
hereof.
"Merger Consideration" means $31,540,000.
"Multiemployer Plan" means any "multiemployer plan," as defined in Section
4001(a)(3) or 3(37) of ERISA, which (a) Empower 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 Empower or any ERISA Affiliate may
incur any liability and
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(b) covers any employee or former employee of Empower or any ERISA Affiliate
(with respect to their relationship with any such entity).
"Net Book Value" means the amount by which the assets of Empower exceed
the liabilities of Empower, both determined in accordance with GAAP.
"Nonsolicitation Agreements" means the Empower Employee Nonsolicitation
Agreements signed by each of the Employees listed on Schedule 3.18, each in
substantially the form attached hereto as Exhibit D.
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"Number of Intelligroup Shares" means that number of shares of
Intelligroup Stock (rounded down to the nearest whole number) calculated by
dividing (a) the Merger Consideration by (b) the Average Share Price.
"Operating Agreement" means the Amended and Restated Operating Agreement
of Empower dated as of February 28, 1997.
"Pension Plan" means any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) Empower 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
Empower or any ERISA Affiliate may incur any liability (including, without
limitation, any contingent liability) and (b) covers any employee or former
employee of Empower 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, warehouse persons, mechanics and material persons 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 Empower and do not
materially detract from the value of the property upon which such encumbrance
exists.
"Permits" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state (including the Commonwealth of Puerto
Rico) or local, necessary or desirable for the current 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 pending
patents and utility models and applications therefor, (b) U.S. and foreign
trademarks, service marks, trade dress, logos, trade names and corporate
7
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)
copies and tangible embodiments thereof (in whatever form or medium) and (g)
licenses granting any rights with respect to any of the foregoing.
"Registration Rights Agreement" means the Registration Rights Agreement to
be entered into between Intelligroup and the Members substantially in the form
of Exhibit E hereof.
---------
"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 and laws respecting employment practices,
employee documentation, terms and conditions of employment and wages and hours.
"Related Party" means (i) any of Empower's Members, and any officers,
directors, partners, associates or relatives of such Members, and (ii) any
Person in which Empower or any Member 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, managing member or other representative of such
Person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Managers" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇.
"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, 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, withholding, social security, retirement, unemployment,
occupation, use, service, license, net worth, payroll, franchise and transfer
and recording, 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 that is not generally known to the public (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
8
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) Empower or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or under which
Empower or any ERISA Affiliate may incur any liability and (b) covers any
employee or former employee of Empower or any ERISA Affiliate (with respect to
their relationship with any such entity).
1.2. CERTAIN ADDITIONAL DEFINED TERMS.
Defined in
Term: Section:
----- --------
Actions............................................ 3.16
Affiliate Letter................................... 5.5(a)
Agreement.......................................... Recitals
Buyer's Accountants................................ 2.9(b)
Buyer's Closing Balance Sheet...................... 2.9(b)
Certificate of Merger.............................. 2.2
Certificates....................................... 2.7
Claim.............................................. 9.2(b)
Claim Notice....................................... 9.2(b)
Closing Net Book Value............................. 2.9(a)
Damage Ceiling..................................... 9.5(a)
Damage Threshold................................... 9.5(a)
Damages............................................ 9.2(a)
Empower............................................ Recitals
Empower Inc. Merger Agreement...................... 6.8
Existing Employment Agreements..................... 3.18(c)
Final Resolution 2.8
Indemnified Party.................................. 9.2(b)
Indemnifying Party................................. 9.2(b)
Intelligroup....................................... Recitals
Intelligroup Closing Certificate................... 6.1
Intelligroup Indemnified Parties................... 9.2(a)
Intelligroup Material Adverse Affect............... 4.6
Intelligroup Options............................... 4.2(b)
Intelligroup Preferred Stock....................... 4.2(a)
Intelligroup Securities............................ 4.2(a)
Leased Property.................................... 3.8(c)
Majority Holders................................... 2.10(a)
MBCA............................................... Recitals
Member............................................. Recitals
Member Indemnified Parties......................... 9.2(a)
Members........................................... Recitals
Member's Closing Certificate....................... 7.1
Merger............................................. Recitals
Merger Shares...................................... 2.6(a)
MLLCA.............................................. Recitals
NJBCA.............................................. Recitals
9
Defined in
Term: Section:
----- --------
Pooling Letter..................................... 6.7
Proposed Acquisition Transaction.................. 5.4
Salary Table....................................... 3.18(d)
SEC Reports........................................ 4.5
Seller's Closing Balance Sheet..................... 2.9(a)
Sub................................................ Recitals
Survival Period.................................... 9.1
Surviving Corporation.............................. 2.1(a)
Third-Party Claim.................................. 9.2(b)
Year 2000 Problem.................................. 3.29
1.3. 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 term "or" is disjunctive but
not necessarily exclusive. 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.
10
ARTICLE 2.
THE MERGER
2.1. THE MERGER.
(a) Effective Time. At the Effective Time (as defined in Section 2.2
hereof), and subject to and upon the terms and conditions of this Agreement, the
MBCA and the MLLCA, Empower shall be merged with and into Sub, the separate
existence of Empower shall cease, and Sub shall continue as the surviving
corporation. Sub as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
(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, College Centre, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, as promptly as practicable (and in any
event within five business days) after satisfaction or waiver, if permissible,
of the conditions set forth in Articles 6 and 7 or (ii) at such other time, date
or place as Intelligroup and Empower may mutually agree.
2.2. EFFECTIVE TIME.
As promptly as practicable after the satisfaction or waiver of the
conditions set forth in Articles 6 and 7, the parties hereto shall cause the
Merger to be consummated by filing a certificate as contemplated by the MBCA
(the "Certificate of Merger"), together with any required related documents,
with the appropriate administrator, as indicated in the MBCA and the MLLCA, in
such form as required by, and executed in accordance with the relevant
provisions of, the MBCA and the MLLCA. The Merger shall be effective at the time
indicated in such Certificate of Merger (the "Effective Time").
2.3. EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as provided in
this Agreement, the Certificate of Merger and the applicable provisions of the
MBCA and the MLLCA.
2.4. ARTICLES OF INCORPORATION; BYLAWS.
(a) Articles of Incorporation. At the Effective Time, the Articles
of Incorporation of Sub shall be the Articles of Incorporation of the Surviving
Corporation until thereafter duly amended in accordance with applicable law and
such Articles of Incorporation.
(b) Bylaws. At the Effective Time, the Bylaws of Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter duly amended in accordance with applicable law, the
Articles of Incorporation of the Surviving Corporation and such Bylaws.
2.5. DIRECTORS AND OFFICERS.
The directors of Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation, and the officers of Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, in each case until
their respective successors are duly
11
elected or appointed and qualified in the manner provided in the Articles of
Incorporation and Bylaws of the Surviving Corporation and in accordance with
applicable law.
2.6. EFFECT ON SECURITIES.
At the Effective Time, by virtue of the Merger and without any further
action on the part of Intelligroup, Sub, Empower or the Members:
(a) Conversion of Securities.
------------------------
(i) Each Member's Membership Interest (as constituted
immediately prior to the Effective Time) shall be converted into the right to
receive such number of validly issued, fully paid and nonassessable shares of
Intelligroup Stock as shall equal the product obtained by multiplying such
Member's Membership Interest by the Number of Intelligroup Shares. The shares of
Intelligroup Stock issued in connection with the Merger as a result of such
conversion are sometimes referred to herein as the "Merger Shares."
(ii) Each share of common stock, $.01 par value, of Sub issued
and outstanding immediately prior to the Effective Time shall remain outstanding
and thereafter represent one validly issued, fully paid and nonassessable share
of common stock, $.01 par value, of the Surviving Corporation, so that
Intelligroup shall be the sole and exclusive owner of the outstanding capital
stock of the Surviving Corporation.
(c) Fractional Shares. No certificates or scrip representing
-------------------
fractional shares of Intelligroup Stock shall be issued in connection with the
Merger, and any fractional share interests will be canceled and thereafter will
not entitle the owner thereof to vote or to any rights as a Member of
Intelligroup. In lieu thereof, each Member who would otherwise have been
entitled to a fraction of a share of Intelligroup Stock, will be paid the cash
value of such fraction, which shall be equal to such fraction multiplied by the
Average Share Price.
2.7. DELIVERY OF CERTIFICATES.
At the Effective Time, Intelligroup shall deliver to the Members stock
certificates (the "Certificates"), registered in the name of such Member,
representing such number of shares of Intelligroup Stock as equals (A) the
aggregate Merger Shares which such Member is entitled to receive pursuant to the
Merger less (B) such number of shares as equals the product obtained by
multiplying the aggregate number of Escrow Shares by such Member's Membership
Interest as constituted immediately prior to the Effective Time.
2.8. ESCROW OF MERGER SHARES.
Notwithstanding the other provisions of this Article 2, at the Effective
Time, Intelligroup and the Members shall deliver to the Escrow Agent, registered
in the name of each Member, that number of shares of Intelligroup Stock equal to
ten percent of the Number of Intelligroup Shares (the "Escrow Shares"). The
Escrow Shares shall be held by the Escrow Agent pursuant to the terms of the
Escrow Agreement. Upon a final adjudication of a disputed matter (the "Final
Resolution") or upon the prior written consent of the Members, any Intelligroup
Indemnified Party (as defined in Section 9.2(a) hereof) shall be entitled to
delivery from the Escrow Agent of such number of shares of Intelligroup Stock as
shall have a value equal to the amount due such Intelligroup Indemnified Party
pursuant to Article 9 hereof. For purposes of this Section 2.8, the value of
shares of Intelligroup Stock so delivered to any Intelligroup Indemnified Party
shall be equal to the Average Share Price. Except for Escrow Shares with
12
a value (determined in accordance with this Section 2.8) equal to the amount of
any Claims by Intelligroup Indemnified Parties that may be pending at such time,
on the first anniversary of the Closing Date, the Members shall be entitled to
delivery from the Escrow Agent any Escrow Shares that have not been delivered
to, or required to have been delivered to, Intelligroup Indemnified Parties
pursuant to this Section 2.8, Article 9 hereof or the Escrow Agreement on or
prior to such date. At all times that all or any part of the Escrow Shares are
held by the Escrow Agent, (i) all dividends or distributions made with respect
to the Escrow Shares shall be deposited with the Escrow Agent and held in
accordance with the Escrow Agreement and (ii) the Members shall have the sole
right and power to exercise all voting rights pertaining to all or any part of
the Escrow Shares.
2.9. NET BOOK VALUE ADJUSTMENT.
(a) The parties acknowledge that the amount of the Merger
Consideration is based, in part, on an assumption that the Net Book Value of
Empower on the Closing Date (the "Closing Net Book Value") will be approximately
$0. In order to assist the parties in calculating the Closing Net Book Value,
the Members will prepare and deliver to Intelligroup at Closing an estimated
balance sheet for Empower as of the Closing Date (the "Seller's Closing Balance
Sheet") and an estimate of the Closing Net Book Value based thereon together
with any work papers or other supporting documentation. The Seller's Balance
Sheet shall be prepared in accordance with GAAP. For purposes of calculating the
Closing Net Book Value, any unbilled time shall be included as an account
receivable.
(b) Following the Closing Date, Intelligroup shall prepare a balance
sheet of Empower as of the Closing Date (the "Buyer's Closing Balance Sheet'),
which balance sheet shall be prepared in accordance with GAAP, and a calculation
of the Closing Net Book Value. Intelligroup shall submit the Buyer's Closing
Balance Sheet to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, its independent public accountants (the
"Buyer's Accountants"), which will audit the Buyer's Closing Balance Sheet and
render an opinion thereon not later than 90 days following the Closing Date.
Intelligroup shall deliver a copy of the audit report on the Buyer's Closing
Balance Sheet to the Member Representative immediately following receipt thereof
from the Buyer's Accountant. The Members agree to cooperate with Intelligroup
and the Buyer's Accountants in connection with the preparation of the Buyer's
Closing Balance Sheet.
(c) The Member Representative shall, within 15 days following
receipt of the audit report on the Buyer's Closing Balance Sheet, advise
Intelligroup in writing of whether the Members dispute any of the items
presented therein. If the Member Representative fails to so notify Intelligroup,
the Buyer's Closing Balance Sheet shall be deemed final and binding on the
parties as of the fifteenth day following the Member Representative's receipt of
the Buyer's Closing Balance Sheet. If the Member Representative notifies
Intelligroup of a dispute with respect to any items presented in the Buyer's
Closing Balance Sheet within such 15-day period, the parties shall seek to
resolve such dispute in good faith. In the event the parties are unable to
resolve such dispute within 30 days following delivery of the dispute notice,
such dispute shall be referred to a nationally recognized accounting firm
mutually selected by the parties (or if the parties shall fail to agree on such
selection, such accounting firm shall be selected by lot from one firm selected
by the Buyer's Accountants and one firm selected by Empower's independent
accountants), which firm shall be requested to seek to resolve such dispute
within 30 days after such dispute is referred to such firm. The determination of
such dispute by such accounting firm shall be binding on the parties hereto. The
fees and expenses of such accounting firm in resolving such dispute shall be
borne 50% by Intelligroup and 50% by the Members.
(d) If, after (i) the Members have accepted the Buyer's Closing
Balance Sheet and the Buyer's Accountants' audit report thereon, or (ii)
resolving any dispute as to the Buyer's Closing Balance Sheet, or the manner in
which the Closing Net Book Value was calculated therein, in accordance with
Section 2.9(c) hereof, (A) the Closing Net Book Value is less than $0, the
Merger Consideration
13
shall be reduced dollar-for-dollar by the amount of such deficiency and (B) if
the Closing Net Book Value exceeds $0 the Merger Consideration shall be
increased dollar-for-dollar by the amount of such excess; provided, however,
that no adjustment to the Merger Consideration shall be made pursuant to this
Section 2.9 unless the amount of such adjustment (positive or negative) is at
least $50,000. In order to effect a decrease in the Merger Consideration, a
number of Escrow Shares equal to the amount of the deficiency divided by the
Average Closing Price shall be released from escrow and delivered to
Intelligroup for cancellation. In order to effect an increase in the Merger
Consideration, Intelligroup shall issue and deliver to the Members (on a
pro-rata basis in accordance with their respective Membership Interests) a
number of additional shares of Intelligroup Stock equal to (1) the amount of the
excess divided by the Average Closing Price, less (2) that number of shares of
Intelligroup Stock equal to ten percent of the number of shares to be issued to
the Members on account of the adjustment required by this Section 2.9 (which
shares shall be deposited with the Escrow Agent and held pursuant to the terms
of the Escrow Agreement) Such cancellation or issuance shall be effected within
10 business days following final agreement of the parties or determination in
accordance with Section 2.9(d) that such decrease or increase is applicable.
2.10. MEMBER REPRESENTATIVE.
(a) The parties agree that it is desirable to designate a
representative to act on behalf of the Members for certain limited purposes, as
specified herein (the "Member Representative"), who shall initially be ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇. The Member Representative may resign at any time, and the Member
Representative may be removed by the vote of Persons, which collectively held a
majority of the Membership Interests immediately prior to the Effective Time
("Majority Holders"). In the event that a Member Representative has resigned or
been removed, a new Member Representative shall be appointed by a vote of
Majority Holders, such appointment to become effective upon the written
acceptance thereof by the new Member Representative.
(b) The Member Representative shall have such powers and authority
as are necessary to carry out the functions assigned to it under this Agreement;
provided, however, that the Member Representative will have no obligation to act
on behalf of the Members, except as expressly provided herein. Without limiting
the generality of the foregoing, the Member Representative shall have full
power, authority and discretion to (i) make such determinations and take such
actions as are required to be made by the Members with respect to the conditions
and other provisions contained in this Agreement including, without limitation,
the provisions of Article 9 hereof, (ii) exercise such other rights and powers
(subject to such other obligations) of the Members as are set forth in this
Agreement, the Escrow Agreement and/or the Registration Rights Agreement and
(iii) perform its obligations as set forth in, and in accordance with, the
Registration Rights Agreement and the Escrow Agreement. The Member
Representative will have no liability to Intelligroup, Empower or the holders of
any equity securities of Empower with respect to actions taken or omitted to be
taken in its capacity as Member Representative, except with respect to any
liability resulting primarily from the Member Representative's gross negligence
or willful misconduct. The Member Representative will at all times be entitled
to rely on any directions received from the Majority Holders.
2.11. TAKING OF NECESSARY ACTION; FURTHER ACTION.
Each of Intelligroup, Sub, Empower and each Member will take all such
reasonable lawful action as may be reasonably necessary or appropriate in order
to effect the Merger in accordance with this Agreement as promptly as
practicable. If, at any time after the Effective Time, any such further action
is reasonably 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 Empower and to vest the
Members with full right, title and possession of the Merger Shares, the officers
and
14
directors of Sub, Intelligroup and Empower immediately prior to the Effective
Time 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 EMPOWER AND THE MEMBERS
As an inducement of Intelligroup to enter into this Agreement, Empower and
each Member hereby makes, jointly and severally, 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 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 (by cross-reference or otherwise).
3.1. ORGANIZATION OF EMPOWER.
Empower is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Michigan. Empower has the
requisite 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.
Empower is duly qualified to do business as a foreign limited liability company
and is in good standing in each jurisdiction in which such qualification is
necessary under applicable law as a result of the conduct of the Business or the
ownership of its properties and where the failure to be so qualified or in good
standing would not have a Material Adverse Effect on Empower. Each jurisdiction
in which Empower is qualified to do business as a foreign limited liability
company is set forth in Schedule 3.1.
3.2. CAPITALIZATION OF EMPOWER.
(a) Schedule 3.2(a) sets forth the name of each Member and such
Member's Membership Interest as constituted immediately prior to the Effective
Time.
(b) Except as set forth on Schedule 3.2(a), there are no other
Members or Membership Interests and no outstanding options, warrants,
convertible securities or rights of any kind to purchase or otherwise acquire
any Membership Interests or other securities of Empower.
(c) Except as set forth on Schedule 3.2(c), other than the
transactions contemplated by this Agreement, there is no outstanding vote, plan,
pending proposal or right of any Person to cause any redemption of Membership
Interests or the merger or consolidation of Empower with or into any other
entity.
3.3. MEMBERS' AGREEMENTS, ETC.
Except as set forth on Schedule 3.3, there are no operating agreements,
voting trusts, proxies or other agreements or understandings with respect to or
concerning the purchase, sale or voting of the Membership Interests of Empower.
15
3.4. AUTHORIZATION.
Empower has all necessary power and authority to enter into this Agreement
and the Ancillary Agreements to which Empower is a party and has taken all
action necessary to consummate the transactions contemplated hereby and thereby
and to perform its obligations hereunder and thereunder. This Agreement has been
duly executed and delivered by Empower, and this Agreement is, and upon
execution and delivery each of the Ancillary Agreements to which Empower is a
party will be, a valid and binding obligation of Empower, enforceable against
Empower in accordance with its terms, except that enforceability may be limited
by the effect of (a) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws relating to or affecting the rights
of creditors or (b) general principals of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
3.5. MANAGING MEMBERS AND SUPERVISORY PERSONNEL.
Schedule 3.5 contains a true, correct and complete list of the Managing
Members and supervisory personnel of Empower.
3.6. BANK ACCOUNTS.
Schedule 3.6 contains a list of all of Empower's bank accounts, safe
deposit boxes, and persons authorized to draw thereon or have access thereto.
3.7. NO SUBSIDIARIES
Empower has no equity or voting interest in any Person.
3.8. REAL PROPERTY.
(a) General. Empower leases all real property necessary for the
conduct of its business as presently conducted.
(b) Owned Real Property. Empower does not own any real property.
(c) Leased Real Property. Schedule 3.8 sets forth all Leases
pursuant to which Facilities are leased by Empower (as lessee), true and correct
copies of which have been delivered to Intelligroup. Such Leases constitute all
Leases, subleases or other occupancy agreements pursuant to which Empower
occupies or uses Facilities. Empower has good and valid leasehold title to, and
enjoys peaceful and undisturbed possession of, all leased property described in
such Leases (the "Leased Property"), free and clear of any and all Encumbrances
created by Empower other than any Permitted Encumbrances which would not permit
the termination of the Lease therefor by the lessor. With respect to each such
parcel of Leased Property (i) to the knowledge of Empower, there are no pending
or threatened condemnation proceedings relating to such Leased Property or any
portion thereof, (ii) neither Empower nor third party has entered into any
sublease, license, option, right, concession or other agreement or arrangement,
written or oral, granting to any person the right to use or occupy such Leased
Property or any portion thereof or interest therein and (iii) Empower has not
received notice of any pending or threatened special assessment relating to such
Leased Property or otherwise have any knowledge of any pending or threatened
special assessment relating thereto. Each leased Facility is supplied with
utilities necessary for the operation of such Facility as currently conducted.
With respect to each Lease listed on Schedule 3.8, (i) there has been no
material default under any such Lease by Empower or, to the knowledge of
Empower, by any other party, (ii) the execution,
16
delivery and performance of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby will not cause
a material default under any such Lease, (iii) such Lease is a valid and binding
obligation of Empower, is in full force and effect with respect to Empower and
is enforceable against Empower, in accordance with its terms, except as the
enforceability thereof may be limited by (1) applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance 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 Empower, 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 Empower without the consent of
Empower under any such Lease that is material to Empower, (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 Empower and (vi) Empower
has not assigned, transferred, conveyed, mortgaged or encumbered any interest
therein or in any leased property subject thereto (or any portion thereof).
3.9. PERSONAL PROPERTY.
(a) General. Empower owns or leases all personal property Assets
necessary for the conduct of its Business as presently conducted, and the
personal property Assets (taken as a whole) are 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. Except as set forth in Schedule 3.9(b),
Empower 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 Empower and its Employees) who are in possession of or who
are using any such item of personal property.
(c) Leased Personal Property. Empower has good and valid leasehold
title to all of such Fixtures and Equipment, vehicles and other tangible
personal property Assets leased by it from third parties, free and clear of any
and all Encumbrances created by Empower other than Permitted Encumbrances which
would not permit the termination of the lease therefor by the lessor. Except as
set forth in Schedule 3.9(c), Empower is not a party to any Lease for personal
property involving annual payments in excess of $25,000.
With respect to each Lease listed on Schedule 3.9(c), (i) there has been
no material default under any such Lease by Empower or, to the knowledge of
Empower, by any other party, (ii) the execution, delivery and performance of
this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby will not cause a material default
under any such Lease, (iii) such Lease is a valid and binding obligation of
Empower, is in full force and effect with respect to Empower, and is enforceable
against Empower, in accordance with its terms, except as the enforceability
thereof may be limited by (1) applicable bankruptcy, insolvency, moratorium,
reorganization, fraudulent conveyance 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 Empower, 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 Empower without the consent of Empower under any such Lease
that is material to Empower, (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
17
material to Empower and (vi) Empower 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) Empower is in material compliance with all Environmental Laws,
including, without limitation, all Permits required thereunder to conduct its
business as currently being conducted or proposed to be conducted. All such
Permits are listed on Schedule 3.10. Empower has not received any notice to the
effect that, or otherwise have knowledge that, (i) Empower is not in compliance
in any material respect with, or is in violation of, any such Environmental Laws
or Permits required thereunder or (ii) any currently existing circumstances are
likely to result in a failure of Empower to comply with, or a violation by
Empower of, any such Environmental Laws or Permits required thereunder. Empower
has not taken any action during the previous five years that would, to the
knowledge of Empower or any Member, constitute a violation of any Environmental
Laws.
(b) To the knowledge of Empower, there are no existing or potential
Environmental Claims against Empower, nor has it received any written
notification or otherwise have any knowledge, of any allegation of any actual,
or potential responsibility for, or any inquiry or investigation regarding, any
disposal, release or threatened release at any location of any Hazardous
Substance generated or transported by Empower.
(c) To the knowledge of Empower, (i) no underground tank or other
underground storage receptacle for Hazardous Substances is currently located on
the Facilities, and there have been no releases of any Hazardous Substances from
any such underground tank or related piping and (ii) there have been no 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 Empower on, upon or into the
Facilities other than those authorized by Environmental Laws including, without
limitation, the Permits required thereunder. In addition, to the knowledge of
Empower, there have been no such releases by Empower or Empower's corporate
predecessors and no releases in quantities exceeding the reportable quantities
as defined under federal or state law on, upon, or into any real property in the
vicinity of any of the real properties of Empower other than those authorized by
Environmental Laws which, through soil or ground water contamination, may have
come to be located on the properties of Empower.
(d) To the knowledge of Empower, there are no PCBs or
asbestos-containing materials located at or on the Facilities.
(e) Empower is not a party, whether as a direct signatory or as
successor, assign or third-party beneficiary, or otherwise bound, to any Lease
or other Contract (excluding insurance policies disclosed on the Schedules)
under which Empower is obligated by or entitled to the benefits of, directly or
indirectly, any representation, warranty, indemnification, covenant, restriction
or other undertaking concerning Environmental Conditions.
(f) Empower has not released any other person from any claim under
any Environmental Law or waived any rights concerning any Environmental
Condition.
(g) There are no consent decrees, consent orders, judgments,
judicial or administrative orders or agreements (other than Permits) with or
liens by, any Governmental Authority
18
or quasi-governmental entity relating to any Environmental Law which regulate,
obligate or bind Empower.
(h) Complete and accurate copies of the Environmental Reports, as
well as all other written environmental reports, audits or assessments which
have been conducted, either by Empower, or any person engaged by Empower for
such purpose, at any Facility owned or formerly owned by Empower have been made
available to Intelligroup and a list of all such Environmental Reports, audits
and assessments is set forth on Schedule 3.10.
(i) Empower has submitted on a timely basis all applications for
operating permits required pursuant to Title V of the Clean Air Act, and to the
knowledge of Empower, no additional capital expenditures will be required by
Empower for purposes of compliance with permitting conditions likely to be
imposed pursuant to Title V of the Clean Air Act.
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) Joint development agreements;
(iii) License agreements or royalty agreements, whether
Empower is the licensor or licensee thereunder;
(iv) Confidentiality and non-disclosure agreements (whether
Empower is the beneficiary or the obligated party thereunder);
(v) Customer orders or sales contracts under which the
customer is to make a payment after the date hereof of $25,000 or more;
(vi) Research agreements;
(vii) Contracts or commitments involving future expenditures
or Liabilities, actual or potential, in excess of $25,000 after the date hereof;
(viii) Contracts or commitments (other than Employment
Agreements and Empower's contract with BancBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ relating to
commission arrangements with others;
(ix) Employment contracts, consulting contracts and severance
agreements, including Contracts (A) to employ or terminate personnel and other
contracts with present or former Members of Empower or (B) that will result in
the payment by, or the creation of any Liability of Empower, the Members 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;
(x) Indemnification agreements;
(xi) Promissory notes, loans, agreements, indentures,
evidences of indebtedness, letters of credit, guarantees, or other instruments
relating to an obligation to pay money,
19
whether Empower shall be the borrower, lender or guarantor thereunder (excluding
credit provided by Empower 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);
(xii) Contracts containing covenants limiting the freedom of
Empower, or any Member, Employee or Affiliate of Empower, to engage in any line
of business or compete with any Person that relates directly or indirectly to
the Business;
(xiii) Any Contract with the federal, state or local
government or any agency or department thereof other than a contract described
in subsection 3.11(a)(v) hereof;
(xiv) Any Contract with a Related Party;
(xvi) Any other Contract under which the consequences of a
default or termination would reasonably be expected to have a Material Adverse
Effect on Empower.
Complete and accurate copies of all of the Contracts listed on Schedule
3.11, including all amendments and supplements thereto, have been made available
to Intelligroup. Empower has included as part of Schedule 3.11 a brief summary
of the material terms of each oral Contract.
(b) Absence of Defaults. All of the Contracts are valid, binding and
enforceable in accordance with their terms with no existing (or to the knowledge
of Empower, or any of the Members, threatened) Default or dispute. Empower has
fulfilled, or taken all action necessary to enable it to fulfill when due, all
of its material obligations under each of such Contracts. To the knowledge of
Empower, any of the Members, all parties to such Contracts 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 Empower, or any of the
Members. None of the Members or Empower 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
Empower result in a loss to Empower.
(c) Product Warranty. To Empower's knowledge, Empower 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, product liability or
Liability for breach of warranty (whether covered by insurance or not) on the
part of Empower, with respect to products designed, manufactured, assembled,
sold, repaired, maintained, delivered or installed or services rendered 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 or any
Ancillary Agreement, the consummation of the transactions contemplated hereby or
thereby, nor compliance by Empower or any Member with any of the provisions
hereof or thereof, will (a) violate or conflict with any provision of the
governing documents of Empower or any Member, (b) materially violate, materially
conflict with, or result in a material 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 Empower or any Member is a party or by
which Empower or any Member 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 as set forth on Schedule
3.12, no notices to, declaration, filing or registration with, approvals or
Consents of, or assignments by,
20
any Persons (including any federal, state or local governmental or
administrative authorities) are necessary to be made or obtained by Empower or
any Member in connection with the execution, delivery or performance of this
Agreement or any Ancillary Agreement or the consummation of the transactions
contemplated hereby or thereby.
3.13. PERMITS. Schedule 3.13 sets forth a complete list of all material
Permits, all of which are as of the date hereof, and will be as of the Closing
Date, in full force and effect. Empower has, and at all times has had, all
material Permits required under any applicable Regulation in its operation of
the Business or in its ownership of the Assets, and owns or possesses such
Permits free and clear of all Encumbrances. Empower is not in Default, nor has
Empower or any Member received any notice of any claim of Default, with respect
to any such Permit. Except as otherwise governed by law, all such Permits are
renewable by their terms or in the ordinary course of business without the need
to comply with any special qualification procedures or to pay any amounts other
than routine filing fees and, except as set forth on Schedule 3.13, will not be
adversely affected by the completion of the transactions contemplated by this
Agreement or the Ancillary Agreements.
3.14. FINANCIAL STATEMENTS; BOOKS AND RECORDS.
(a) The Financial Statements fairly present the Assets and
Liabilities of Empower and financial condition and results of operations
indicated thereby. Except as set forth on Schedule 3.14, the balance sheet and
income statement for the year ended December 31, 1998 was prepared in accordance
with GAAP.
(b) Empower 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 Empower and the Business and have been made
available to Intelligroup for its inspection.
(d) Empower 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. A complete list of such accounts, including account numbers and
identifications of authorized signatures with respect to such accounts, is set
forth in Schedule 3.14(d).
(e) The minute book of Empower that has been made available to
Intelligroup fully reflects all minutes of meetings, resolutions and other
material actions and proceedings of its Managing Members and Members and all
committees thereof and all issuances, transfers and redemptions of Membership
Interests. Empower has supplied Intelligroup with a true, correct and complete
copy of the Operating Agreement 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;
21
(b) failure to operate the Business 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 suppliers,
customers and others having business relations with Empower;
(c) resignation or termination of any Manager or Employee, or,
except as set forth on the Salary Table, any increase in the rate of
compensation payable or to become payable to any officer, Employee or
Representative of Empower, 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 (as defined below);
(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 to, or entering into
of any Contract with, any Related Party except (i) directors' fees, (ii)
compensation to Employees at the rates disclosed pursuant to Section 3.18(d) and
(iii) 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, 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 termination of any material customer
account or group of accounts or actual or threatened material reduction in
purchases or royalties payable by any such customer or occurrence of any event
that is likely to result in any such termination or reduction;
(h) disposition or lapsing of any Proprietary Rights of Empower, in
whole or in part, or any disclosure of any trade secret, process or know-how to
any Person not an Employee;
(i) change in accounting methods or practices by Empower;
(j) revaluation by Empower of any of the 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) having a Material Adverse Effect on the Assets or the Business of
Empower;
(l) except as contemplated by Section 2.9, declaration, setting
aside or payment of distributions in respect of any Membership Interests of
Empower or any redemption, purchase or other acquisition of any equity
securities of Empower;
(m) issuance or reservation for issuance by Empower of, or
commitment of it to issue or reserve for issuance, Membership Interests or other
equity securities or obligations or securities convertible into or exchangeable
for Membership Interests or other equity securities;
(n) increase, decrease or reclassification of the Membership
Interests of Empower;
22
(o) amendment of the Articles of Organization or Operating Agreement
of Empower;
(p) capital expenditure or execution of any lease or any incurring
of liability therefor by Empower, involving payments in excess of $10,000 in the
aggregate that are not in the ordinary course of business;
(q) failure to pay any material obligation of Empower when due;
(r) cancellation of any indebtedness or waiver of any rights of
substantial value to Empower, except in the ordinary course of business and
consistent with past practice;
(s) indebtedness incurred by Empower for borrowed money or any
commitment to borrow money entered into by Empower, or any loans made or agreed
to be made by Empower;
(t) liability incurred by Empower except for liabilities for Member
Expenses and Liabilities incurred 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 Empower
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 Financial Statements or incurred in the ordinary course of
business and consistent with past practice since the Balance Sheet Date or
Member Expenses;
(v) acquisition of any equity interest in any other Person; or
(w) agreement by Empower to do any of the foregoing.
3.16. LIABILITIES.
Empower has no Liabilities (absolute, accrued, contingent or otherwise)
except (i) Liabilities which are reflected and properly reserved against in the
Financial Statements, (ii) Liabilities incurred in the ordinary course of
business and consistent with past practice since the Balance Sheet Date or
liabilities for Member Expenses and (iii) liabilities arising under the
Contracts (other than obligations which are required to be reflected on a
balance sheet prepared in accordance with GAAP) 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. 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"). The
reserves set forth on the Balance Sheet for liabilities are reasonable.
23
3.17. LITIGATION.
Except as set forth on Schedule 3.17, there is no Action, pending or, to
the knowledge of Empower or any Member, threatened or anticipated against,
relating to or affecting Empower, any of the Assets or which seeks to enjoin or
obtain damages in respect of the transactions contemplated hereby or by the
Ancillary Agreements. To the knowledge of Empower or any Member, there is no
basis for any Action, which if adversely determined against any Member or
Empower, or any other Person could reasonably be expected to result in a loss to
Empower, 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 Empower, the Business
or any of the Assets. Schedule 3.17 contains a complete and accurate description
of all Actions since December 31, 1993 to which Empower or Members has been a
party or which relate to any of the Assets as such, or any such Actions which
were settled prior to the institution of formal proceedings, other than Actions
brought by Empower for collection of monies owed in the ordinary course of
business. No representation is made in this Section 3.17 with respect to matters
covered in Section 3.23 (Tax Matters).
3.18. LABOR MATTERS.
(a) Schedule 3.18 contains a complete list of Employees. Empower is
not a party to any labor agreement with respect to its Employees with any labor
organization, group or association and has not experienced any attempt by
organized labor or its representatives to make Empower conform to demands of
organized labor relating to its Employees or to enter into a binding agreement
with organized labor that would cover the Employees of Empower. There is no
unfair labor practice charge or complaint against Empower pending before the
National Labor Relations Board or any other governmental agency arising out of
Empower's activities, and none of Empower, or any Member has any knowledge of
any facts or information which would give rise thereto; there is no labor strike
or labor disturbance pending or threatened against Empower nor is any grievance
currently being asserted against it; and neither Empower has experienced a work
stoppage or other labor difficulty. There are no material controversies pending
or, to the knowledge of Empower or any Member, threatened between Empower and
any of its Employees, and none of Empower or any Member is aware of any facts
which could reasonably result in any such controversy.
(b) Empower 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. Empower is not liable for any claims for past due wages or any
penalties for failure to comply with any of the foregoing.
(c) Except with respect to the employment agreements identified on
Schedule 3.11 (the "Existing Employment Agreements"), Empower 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 Empower to make any payment to any present or former Employee
following termination of employment or upon consummation of the transactions
contemplated by this Agreement. Neither the execution and delivery of this
Agreement or any Ancillary Agreement nor the consummation of the transactions
contemplated hereby or thereby will result in the acceleration or vesting of any
other rights of any Person to benefits under any Employee Plans.
(d) Attached hereto as Schedule 3.18 is a list as of the date of
this Agreement of the names of all present Employees. Empower has provided
Intelligroup with a table setting forth the
24
current salary or hourly wages and other compensation payable by Empower to each
of such Employees (the "Salary Table").
3.19. EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.19 contains a complete list of Employee Plans. True
and complete copies of each of the following documents have been delivered by
Empower to Intelligroup: (i) each Employee Plan (and, if applicable, related
trust agreements, annuity contracts or other funding instruments) which covers
or has covered employees of Empower (with respect to their relationship with
Empower) and all amendments thereto, all summary plan descriptions, summary of
material modifications (as defined in ERISA) and all written interpretations and
descriptions thereof which Empower generally has distributed to participants
therein, the number of and a general description of the level of employees
covered by each Benefit Arrangement and a complete description of any Employee
Plan which is not in writing, (ii) the most recent determination letter, if any,
issued by the Internal Revenue Service and any opinion letter issued by the
Department of Labor with respect to each Pension Plan and each voluntary
employees' beneficiary association as defined under Section 501(c)(9) of the
Code (other than a Multiemployer Plan) which covers or has covered employees of
Empower (with respect to their relationship with Empower), (iii) for the three
most recent plan years, Annual Reports on Form 5500 Series required to be filed
with any governmental agency for each Pension Plan or Welfare Plan which covers
or has covered Employees of Empower (with respect to their relationship with
Empower), (iv) all actuarial reports prepared for the last three plan years for
each Pension Plan which covers or has covered Employees of Empower (with respect
to their relationship with Empower), and (v) a description setting forth the
amount of any liability of Empower as of the Closing Date for payments more than
thirty (30) calendar days past due with respect to any Welfare Plan.
(b)
(i) Pension Plans.
(A) No Pension Plan is subject to the minimum
funding requirements of ERISA. As of the last day of the last plan year of each
Pension Plan and as of the Closing Date, the "amount of unfunded benefit
liabilities" as defined in Section 4001(a)(18) of ERISA (but excluding from the
definition of "current value" of "assets" of such Pension Plan, accrued but
unpaid contributions) did not and will not exceed zero. None of Empower or any
ERISA Affiliate has engaged in, or is a successor or parent corporation to an
entity that has engaged in, a transaction described in Section 4069 of ERISA.
None of Empower or any ERISA Affiliate has, at any time, (1) ceased operations
at a facility so as to become subject to the provisions of Section 4062(e) of
ERISA, (2) withdrawn as a substantial employer so as to become subject to the
provisions of Section 4063 of ERISA, or (3) ceased making contributions on or
before the Closing Date to any Pension Plan subject to Section 4064(a) of ERISA
to which Empower or any ERISA Affiliate made contributions during the six years
prior to the Closing Date.
(B) Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument which covers or has covered
employees or former employees of Empower (with respect to their relationship
with Empower) which has been operated as a qualified plan (1) has received, or
has filed for but has not yet received, a favorable determination letter (or is
not required under applicable law to have received) from the Internal Revenue
Service stating that such Pension Plan and each related trust is qualified and
tax-exempt under the provisions of Code Sections 401(a) and 501(a) and (2) has
been so qualified during the period from its adoption to the date of such
determination letter.
25
(C) Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument which covers or has covered
employees or former employees of Empower (with respect to their relationship
with Empower) currently complies in all material respects and has been
maintained in compliance in all material respects with its terms and, both as to
form and in operation, with the requirements prescribed by any and all statutes,
orders, rules and regulations which are applicable to such plans, including,
without limitation, ERISA and Code Sections 401(a) and 501(a).
(ii) Multiemployer Plans. Neither Empower nor any ERISA
Affiliate has any liability with respect to a Multiemployer Plan, and no
liability will arise or be imposed on Empower or any ERISA Affiliate under, or
with respect to, any Multiemployer Plan.
(iii) Welfare Plans.
(A) Each Welfare Plan which covers or has covered
employees or former employees of Empower (with respect to their relationship
with Empower) currently complies in all material respects and has been
maintained in compliance in all material respects with its terms and, both as to
form and operation, with the requirements prescribed by any and all statutes,
orders, rules and regulations which are applicable to such Welfare Plan,
including, without limitation, ERISA and the Code.
(B) Except as required by Section 4980B of the Code or
Part 6 of Title 1, Subtitle B of ERISA, none of Empower, any ERISA Affiliate or
any Welfare Plan has any present or future obligation to make any payment to, or
with respect to any present or former employee of Empower or any ERISA Affiliate
pursuant to, any retiree medical benefit plan, or other retiree Welfare Plan,
and no condition exists which would prevent Empower or an ERISA Affiliate from
amending or terminating any such benefit plan or such Welfare Plan.
(C) Each Welfare Plan which covers or has covered
employees or former employees of Empower (with respect to their relationship
with Empower) and which is a "group health plan," as defined in Section 607(1)
of ERISA, presently complies in all material respects with and has been operated
in compliance in all material respects with provisions of Part 6 of Title I,
Subtitle B of ERISA and Sections 162(k) and 4980B of the Code at all times.
(D) Neither Empower nor any ERISA Affiliate has, at any
time, maintained, contributed to or had any obligation to maintain or contribute
to any Welfare Plan that is a "multiemployer plan," as defined in Section 3(37)
of ERISA.
(E) The insurance policies or other funding instruments,
if any, for each Welfare Plan provide coverage for each employee, consultant,
independent contractor or retiree of Empower (and, if applicable, their
respective dependents) who has been advised by Empower, whether through an
Employee Plan or otherwise, that he or she is covered by such Welfare Plan.
(iv) Benefit Arrangements. Each Benefit Arrangement presently
complies and has been maintained in compliance in all material respects with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Benefit Arrangement,
including, without limitation, the Code. Except as provided by law or in any
employment agreement set forth on Schedule 3.19 or the Employment and
Non-Compete Agreements, the employment of all persons presently employed or
retained by Empower is terminable at will.
(v) Unrelated Business Taxable Income; Unpaid Contributions.
No Employee Plan (or trust or other funding vehicle pursuant thereto) has
incurred any liability under Code Section 511.
26
Neither Empower nor any ERISA Affiliate has any liability for unpaid
contributions under Section 515 of ERISA with respect to any Employee Plan.
(vi) Deductibility of Payments. There is no contract,
agreement, plan or arrangement covering any employee or former employee of
Empower (with respect to such employee's relationship with Empower) that,
individually or collectively, requires the payment by Empower of any amount (i)
that is not deductible under Section 162(a)(1) or 404 of the Code or (ii) that
is an "excess parachute payment" pursuant to Section 280G of the Code.
(vii) Fiduciary Duties and Prohibited Transactions. None of
Empower, or any plan fiduciary of any Welfare Plan or Pension Plan has engaged
in, or has any liability in respect of, any transaction in violation of Sections
404 or 406 of ERISA or any "prohibited transaction," as defined in Section
4975(c)(1) of the Code, for which no exemption exists under Section 408 of ERISA
or Section 4975(c)(2) or (d) of the Code, or has otherwise violated the
provisions of Part 4 of Title I, Subtitle B of ERISA so as to create any
liability of Empower or any Employee Plan. Empower has not participated in a
violation of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary of any
Welfare Plan or Pension Plan, and Empower has not been assessed any civil
penalty under Section 502(l) of ERISA.
(viii) Litigation. There is no action, order, writ,
injunction, judgment or decree outstanding or claim (other than routine claims
for benefits), suit, litigation, proceeding, arbitration proceeding,
governmental audit or investigation relating to or seeking benefits under any
Employee Plan that is pending or, to the knowledge of Empower, anticipated or
threatened against Empower, any ERISA Affiliate or any Employee Plan.
(ix) No Amendments. Neither Empower nor any ERISA Affiliate
has announced to employees, former employees, consultants or directors an
intention to create, or otherwise created, a legally binding commitment to adopt
any additional Employee Plan which is intended to cover employees or former
employees of Empower (with respect to their relationship with Empower) or to
amend or modify any existing Employee Plan which covers or has covered employees
or former employees of Empower (with respect to their relationship with
Empower).
(x) Insurance Contracts. None of Empower or any Employee Plan
(other than a Multiemployer Plan) holds as an asset of any Employee Plan any
interest in any annuity contract, guaranteed investment contract or any other
investment or insurance contract issued by an insurance company that is the
subject of bankruptcy, conservatorship or rehabilitation proceedings.
(xi) No Acceleration or Creation of Rights. Except with
respect to the Existing Employment Agreements, neither the execution and
delivery of this Agreement or the Ancillary Agreements by Empower nor the
consummation of the transactions contemplated hereby or the related transactions
will result in the acceleration or creation of any rights of any person to
benefits under any Employee Plan (including, without limitation, the
acceleration of the vesting or exercisability of any stock options, the
acceleration of the vesting of any restricted stock, the acceleration of the
accrual or vesting of any benefits under any Pension Plan or the acceleration or
creation of any rights under any severance, parachute or change in control
agreement).
(xii) No Other Material Liability. No event has occurred which
could subject Empower or any Employee Plan to any material liability (A) under
any statute, regulation or governmental order relating to any Employee Plan or
(B) pursuant to any obligation of Empower to indemnify any person against
liability incurred under any such statute, regulation or order as they relate to
the Employee Plans.
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3.20. TRANSACTIONS WITH RELATED PARTIES.
Except as disclosed on Schedule 3.20, to the knowledge of Empower, no
Related Party or Employee has (a) borrowed or loaned money or other property to
Empower which has not been repaid or returned, (b) any contractual or other
claims, express or implied, of any kind whatsoever against Empower or (c) any
interest in any property used by Empower.
3.21. COMPLIANCE WITH LAw.
Empower has conducted the Business in material compliance with all
applicable Regulations and Court Orders. Neither Empower nor any Member has
received any notice to the effect that, or has otherwise been advised that,
Empower is not in compliance with any such Regulations or Court Orders, and
neither Empower nor any Member has any 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. Schedule 3.22 sets forth with respect to Proprietary
Rights of Empower: (i) for each patent and patent application, including pending
patents and utility models and applications therefor, as applicable, the number,
normal expiration date, title and priority information for each country in which
such patent has been issued, or, the application number, date of filing, title
and priority information for each country, (ii) for each trademark, trade name
or service ▇▇▇▇, whether or not registered, the date first used, the application
serial number or registration number, the class of goods covered, the nature of
the goods or services, the countries in which the names or ▇▇▇▇ is used and the
expiration date for each country in which a trademark has been registered, (iii)
for each copyright for which registration has been sought, whether or not
registered, the date of creation and first publication of the work, the number
and date of registration for each country in which a copyright application has
been registered, (iv) for each mask work, whether or not registered, the date of
first commercial exploitation and if registered, the registration number and
date of registration, (v) a description of all Trade Secrets and (vi) all such
Proprietary Rights in the form of licenses. True and correct copies of all
Proprietary Rights (including all pending applications, application related
documents and materials and written materials relating to Trade Secrets) owned,
controlled or used by or on behalf of Empower or in which Empower has any
interest whatsoever have been provided or made available to Intelligroup.
(b) Adequacy. The Proprietary Rights of Empower are all those
necessary for the normal conduct of the Business as presently conducted,
including the design, manufacture and sale of all products currently under
development, planned for development or in production.
(c) Royalties and Licenses. Except with respect to the Existing
Employment Agreements, Empower 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 Empower 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. Empower owns or has a valid right to use its
Proprietary Rights, and such Proprietary Rights will not cease to be valid
rights of Empower by reason of the execution, delivery and performance of this
Agreement or the Ancillary Agreements or the consummation of the transactions
contemplated hereby or thereby. The patents are valid and in full force and
effect and are not subject to any fines, maintenance fees or Actions falling due
within 90 days after the Closing Date.
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(e) Absence of Claims. Except as set forth on Schedule 3.22, Empower
has not (A) received any notice alleging, or otherwise have knowledge of facts
that might give rise to, invalidity with respect to any of the Proprietary
Rights of Empower or (B) received any notice of alleged infringement of any
rights of others due to any activity by Empower. To the knowledge of Empower,
Empower's use of its Proprietary Rights in its past and current products do 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 Empower or any
Member that it is claiming any ownership of or right to use any of Empower's
Proprietary Rights or (ii) to the knowledge of Empower, is infringing upon any
such Proprietary Rights in any way.
(f) Protection of Proprietary Rights. All of the pending
applications for Empower's Proprietary Rights have been duly filed and all other
actions to protect such Proprietary Rights have been taken. Empower has taken
reasonable steps necessary or appropriate (including, entering into appropriate
confidentiality and nondisclosure agreements with officers, directors,
subcontractors, Employees, licensees and customers in connection with the Assets
or the Business) to safeguard and maintain the secrecy and confidentiality of,
and the proprietary rights in, the Proprietary Rights that are material to the
Business. Neither Empower nor any Member has knowledge of any breach of any such
confidentiality or nondisclosure agreement by any party thereto.
3.23. TAX MATTERS.
(a) Filing of Tax Returns. Except as set forth in Schedule 3.23,
Empower has timely filed with the appropriate taxing authorities all Tax Returns
in respect of Taxes required to be filed through the date hereof. The Tax
Returns filed are complete and accurate in all material respects. Except as
specified in Schedule 3.23, Empower has not requested any extension of time
within which to file Tax Returns in respect of any Taxes. Empower has delivered
to Intelligroup complete and accurate copies of federal, state and local Tax
Returns of Empower for the year ended December 31, 1997.
(b) Payment of Taxes. All Taxes due from Empower, or for which it
could be liable, in respect of periods (or portions thereof) beginning before
the Closing Date have been timely paid or an adequate reserve (in conformity
with GAAP) has been established therefor, as set forth in Schedule 3.23 or the
Financial Statements, and Empower has no material Liability for Taxes in excess
of the amounts so paid or reserves so established. All Taxes that Empower 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
Empower has been claimed, proposed or assessed by any taxing or other
governmental authority. There are no pending or, to the knowledge of Empower or
any Member, threatened audits, assessments or other Actions for or relating to
any Liability in respect of Taxes of Empower or any Member, and there are no
matters under discussion with any governmental authorities, or known to Empower
or any Member, 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, Empower has not 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 Empower.
(d) Lien. There are no Encumbrances for Taxes (other than for
Permitted Encumbrances) on any of the Assets.
29
(e) Tax Elections. All elections with respect to Taxes affecting
Empower or the Assets as of the date hereof are set forth on Empower's latest
Tax Returns or on Schedule 3.23. Empower has not (i) 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) 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 made an election, or is 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) directly or
indirectly secured any debt the interest on which is tax exempt under Section
103(a) of the Code; or (v) made any of the foregoing elections or is required to
apply any of the foregoing rules under any comparable state or local Tax
provision.
(f) Prior Affiliated Groups. Empower has never been a Member of an
affiliated group of corporations within the meaning of Section 1504 of the Code
or any group that has filed a combined consolidated or unitary state or local
return.
(g) Tax Sharing Agreements. There are no Tax-sharing agreements or
similar arrangements (including indemnity arrangements) with respect to or
involving Empower, and, after the Closing Date, Empower shall not be bound by
any such Tax-sharing agreements or similar arrangements or have any Liability
thereunder for amounts due in respect of periods prior to the Closing Date.
(h) Partnerships. Except for the Operating Agreement, Empower has no
interest in or is subject to any joint venture, partnership, or other
arrangement or contract, which is treated as a partnership for federal income
tax purposes. Empower is not a successor to any other Person by way of merger,
reorganization or similar transaction.
(i) 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 provision of law.
3.24. INSURANCE.
Schedule 3.24 contains a complete and accurate list of all policies or
binders of insurance (showing as to each policy or binder 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 Empower is the owner, insured or beneficiary. Copies of all such
policies have been made available to Intelligroup. To the knowledge of Empower,
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 Empower's conduct of the Business and
(iii) providing replacement cost insurance coverage for all of the Assets,
Fixtures and Equipment and all leasehold improvements. Empower is not in default
under any of such policies or binders, and 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 Empower or any Member 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 Empower through
the Closing Date.
3.25. ACCOUNTS RECEIVABLE.
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 sales,
30
services performed or other charges arising on or before the date of recording
thereof, and all the goods delivered and services performed which gave rise to
said accounts were delivered or performed in accordance with the applicable
orders, Contracts or customer requirements. To the knowledge of Empower or any
Member, all such receivables are 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
as reflected on the Books and Records.
3.26. INVENTORY.
The value at which the Inventory is shown on the Balance Sheet has been
determined in accordance with the normal valuation policy of Empower,
consistently applied and in accordance with GAAP. The Inventory (and the
specific items acquired or manufactured subsequent to the Balance Sheet Date)
consists only of items of quality and quantity commercially usable and salable
in the ordinary course of business, except for any items of obsolete material or
material below standard quality, all of which have been written down to
realizable market value, or for which adequate reserves have been provided, and
the present quantity of all Inventory is reasonable in the present circumstances
of the Business.
3.27. PURCHASE COMMITMENTS AND OUTSTANDING BIDS.
Except as disclosed on Schedule 3.27, as of the date of this Agreement,
the aggregate of all Contracts for the purchase of supplies by Empower does not
exceed $25,000, all of which were made in the ordinary course of business. No
outstanding purchase or outstanding lease commitment of Empower presently is in
excess of the normal, ordinary and usual requirements of the Business or was
made at any price in excess of the now current market price or contains terms
and conditions more onerous than those usual and customary in Empower's
business. To the knowledge of Empower, there is no outstanding bid, proposal,
contract or unfilled order of Empower which will or would, if accepted, result
in a net loss to Empower. Schedule 3.27 sets forth a list of all currently
outstanding proposals for Contracts providing for, in the aggregate, payments to
Empower by third parties in excess of $25,000.
3.28. CUSTOMERS AND SUPPLIERS.
Schedule 3.28 sets forth a complete and accurate list of the names of the
ten customers who purchased from Empower the greatest dollar volume of products
or services during its last fiscal year and last fiscal quarter. Since the
Balance Sheet Date, there has been no Material Adverse Change in the business
relationship of Empower with any customer or supplier named on Schedule 3.28.
Empower has not received any written communication from any customer or supplier
named on Schedule 3.28 of any intention to return, terminate or materially
reduce purchases from or supplies to Empower.
3.29. YEAR 2000 COMPLIANCE.
Empower 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 Empower may be unable to recognize and
properly perform date-sensitive functions involving dates prior to and after
December 31, 1999 (the "Year 2000 Problem"). Empower's products, services,
applications or other deliverables provided or delivered to its customers and
Empower's internal information and business systems are Year 2000 compliant. The
Year 2000 Problem has not resulted in, and, to the knowledge of Empower or the
Members, is not reasonably expected to have, a Material Adverse Effect on
Empower or the Business.
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3.30. BROKERS; TRANSACTION COSTS.
Except for Empower's commitments to pay Member Expenses, Empower has not
entered into or will enter into any contract, agreement, arrangement or
understanding with any Person which will result in the obligation of
Intelligroup, Empower or any of the Members to pay any finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby.
3.31. NO OTHER AGREEMENTS TO SELL EMPOWER OR THE ASSETS.
Neither Empower nor any Member has any legal obligation, absolute or
contingent, to any other Person to sell the Assets (other than Inventory in the
ordinary course of business) or to sell any Membership Interests of Empower or
to effect any merger, consolidation or other reorganization of Empower or to
enter into any agreement with respect thereto, except pursuant to this
Agreement.
3.32. ACCOUNTING TREATMENT.
Neither Empower nor any Member has taken any action that, to the knowledge
of Empower, would prevent the Merger from qualifying for pooling of interests
accounting treatment under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations. For purposes of this Section 3.32,
knowledge shall mean the actual knowledge of the Members without independent
investigation.
3.33. MATERIAL MISSTATEMENTS OR OMISSIONS.
No representations or warranties by Empower or any Member in this
Agreement or any Ancillary Agreement to which it is a party or in any document,
written information, exhibit, statement, certificate or schedule heretofore or
hereinafter furnished by Empower or such Member or any of its Representatives to
Intelligroup or Sub pursuant hereto, or in connection with the transactions
contemplated by this Agreement or by such Ancillary Agreements contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary to make the statements or facts contained therein
not misleading.
ARTICLE 3A
REPRESENTATIONS AND WARRANTIES OF MEMBERS
As an inducement of Intelligroup and Sub to enter into this Agreement,
each Member severally, and not jointly, represents and warrants with respect to
itself only to Intelligroup and Sub as follows, which representations and
warranties are, as of the date hereof, and will be, as of the Closing Date, true
and correct:
3A.1 AUTHORIZATION.
Each such Member has all necessary power and authority to enter into this
Agreement and the Ancillary Agreements to which it is a party and has taken all
actions necessary to consummate the transactions contemplated hereby and thereby
and to perform its obligations hereunder and thereunder. This Agreement has been
duly executed and delivered by each Member and is, and upon the execution and
delivery thereof each Ancillary Agreement to which it is a party will be, a
valid and binding obligation of each Member, enforceable against each Member in
accordance with its terms, except that enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar
32
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).
3A.2 NO CONFLICT OR VIOLATION; CONSENTS.
None of the execution, delivery or performance of this Agreement or any
Ancillary Agreement, the consummation of the transactions contemplated hereby or
thereby, nor compliance by any Member with any of the provisions hereof or
thereof, will (a) 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 any Member is a party or by
which any Member is bound or to which any of its assets are subject or (b)
violate any applicable Regulation or Court Order. Except as set forth on
Schedule 3A.2, 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 any Member in connection with the execution, delivery or
performance of this Agreement or any Ancillary Agreement or the consummation of
the transactions contemplated hereby or thereby.
3A.3 OWNERSHIP OF MEMBERSHIP INTERESTS; TITLE.
The Membership Interests of Empower are accurately set forth on Schedule
3.2(a) and all of such Membership Interests are lawfully owned of record and
beneficially by such Member, free and clear of any Encumbrances. Except as set
forth on Schedule 3A.3 and 3.3, the Membership Interests held by such Member are
not subject to any voting trust, proxy or other agreement or understanding with
respect to or concerning the purchase, sale or voting of such Membership
Interests.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF Intelligroup AND SUB
As an inducement of Empower and each of the Members to enter into this
Agreement, Intelligroup and Sub hereby make as of the date hereof and as of the
Closing Date, the following representations and warranties to Empower and the
Members, except as otherwise set forth in written disclosure schedules (the
"Schedules") delivered to Empower and the Members 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 4 setting forth certain exceptions to the
representations and warranties contained in this Article 4 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 (by cross-reference or otherwise).
4.1. ORGANIZATION.
Intelligroup is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey. Intelligroup has full
corporate power and authority 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 to do business as a foreign corporation and is in
good standing in each 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
33
Adverse Effect on Intelligroup. Each jurisdiction in which Intelligroup is
qualified to do business as a foreign corporation is set forth in Schedule 4.1.
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the state of Michigan. Sub has not engaged in any business (other
than in connection with this Agreement and the transactions contemplated hereby)
since the date of its incorporation.
4.2. CAPITALIZATION.
(a) There are 25,000,000 shares of Intelligroup Stock authorized
under its Amended and Restated Certificate of Incorporation, 13,571,269 of which
were issued and outstanding as of December 31, 1998 and 5,000,000 authorized but
undesignated shares of Preferred Stock, $.01 par value, of Intelligroup
("Intelligroup Preferred Stock" and together with the Intelligroup Stock, the
"Intelligroup Securities") authorized under its Amended and Restated Certificate
of Incorporation, none of which were issued and outstanding. Intelligroup has no
other stock authorized, issued or outstanding.
(b) As of December 31, 1998, there were 2,340,000 shares of
Intelligroup Stock reserved for issuance upon the exercise of options granted or
available for grant under the Intelligroup Option Plan (the "Intelligroup
Options").
(c) Except for the Intelligroup Options 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) The authorized capital stock of Sub consists of 1,000 shares of
common stock, $.01 par value, of which 1,000 shares are issued and outstanding.
All of such outstanding shares are owned by Intelligroup and are validly issued,
fully paid and non-assessable.
4.3. AUTHORIZATION.
Each of Intelligroup and Sub has all necessary corporate power and
authority to enter into this Agreement and the Ancillary Agreements to which it
is a party and has taken all action necessary to consummate the transactions
contemplated hereby and thereby and to perform its respective obligations
hereunder and thereunder. This Agreement has been duly executed and delivered by
each Intelligroup and Sub, and this Agreement is, and upon execution and
delivery each of the Ancillary Agreements to which each of Intelligroup and Sub
is a party will be, a valid and binding obligation of each of Intelligroup and
Sub enforceable against each of Intelligroup and Sub 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 or any
Ancillary Agreement, the consummation of the transactions contemplated hereby or
thereby, nor compliance by Intelligroup or Sub with any of the provisions hereof
or thereof, will (a) violate or conflict with any provision of Intelligroup's or
Sub'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
34
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 or Sub is a party or by which Intelligroup or Sub is bound or to
which any of their respective assets are subject, (c) violate any Regulation or
Court Order applicable to Intelligroup or Sub or (d) impose any Encumbrance on
any assets of Intelligroup or Sub. 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 or Sub in connection with the execution, delivery or performance
of this Agreement or any Ancillary Agreement or the consummation of the
transactions contemplated hereby or thereby.
4.5. REPORTS AND FINANCIAL STATEMENTS.
Intelligroup has timely filed all reports required to be filed with the
SEC pursuant to the Exchange Act or the Securities Act (collectively, the "SEC
Reports"), and has previously made available to Empower 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.
4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth in the SEC Reports, since September 30, 1998, there
has not been any fact, event, circumstance or change affecting or relating to
Intelligroup which has had or is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Intelligroup (a "Intelligroup
Material Adverse Effect"); provided, however, that an Intelligroup Material
Adverse Effect shall not include any adverse effect following the date of this
Agreement which is solely attributable to (i) the announcement or pendency of
the transactions contemplated by this Agreement or (ii) changes in national
economic conditions or industry conditions generally.
4.7. S-3 ELIGIBILITY.
Intelligroup satisfies the registrant requirements set forth in the
general instructions for use of Form S-3 under the Securities Act.
4.8. DISCLOSURE.
No representations or warranties by Intelligroup in this Agreement or any
Ancillary Agreement to which it is a party or in any document, written
information, exhibit, statement, certificate or schedule heretofore or
hereinafter furnished by Intelligroup or Sub, or any of Intelligroup's officers,
directors, affiliates or any of its Representatives to Empower pursuant hereto,
or in connection with the transactions contemplated by this Agreement or by such
Ancillary Agreements contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary to make the
statements or facts contained therein not misleading.
35
4.9. LITIGATION.
Except as may be set forth in the SEC Reports, there is no action, suit,
or other legal or administrative proceeding or governmental investigation
pending, threatened, anticipated or contemplated against, by or affecting
Intelligroup and Sub, or any of their respective properties or assets, or which
questions the validity or enforceability of this Agreement or the transactions
contemplated hereby, and, to the knowledge of Intelligroup or Sub, there is no
basis for any of the forgoing. Except as may be set forth in the SEC Reports,
there are no outstanding court orders in any proceeding to which Intelligroup or
Sub are or was a party which have not been complied with in full or which
continue to impose any material obligations on Intelligroup and Sub.
ARTICLE 5.
ACTIONS BY EMPOWER, THE MEMBERS
AND Intelligroup PRIOR TO THE CLOSING
Empower, the Members, Intelligroup and Sub, each as indicated below,
covenant as follows for the period from the date hereof through the Closing
Date:
5.1. CONDUCT OF BUSINESS.
From the date hereof through the Closing, Empower and the Members shall,
except as contemplated by this Agreement, or as consented to by Intelligroup in
writing, or as set forth on Schedule 5.1, which Intelligroup is deemed to have
consented to, 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 Ancillary Agreements or the consummation of the Closing.
Without limiting the generality of the foregoing, Empower shall not and the
Members shall not cause Empower 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 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 Membership Interests (except as
required pursuant to the Employment Agreements with ▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇) or any other securities or any securities convertible into Membership
Interests or any other securities, including, without limitation, any options to
acquire Membership Interests;
(c) pay or incur any obligation to pay any distribution or dividend
or effect any redemption with respect to any Membership Interest;
(d) make any change to Empower's Articles of Organization or
Operating Agreement;
(e) mortgage, pledge or otherwise encumber any Assets or sell,
transfer, license or otherwise dispose of any Assets except for the licensing of
Empower'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;
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(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) except as set forth in Schedule 5.1, 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;
(j) enter into or modify any Contract with a Related Party;
(j) make any payment or distribution to the Members or redeem
or purchase any Membership Interest;
(l) make any change in any method of accounting or accounting
practice;
(m) fail to pursue new Contracts or 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 material 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 Intelligroup on and after the Closing Date (provided that Empower
shall not enter into any employment agreement with any Employee pursuant to this
Section 5.1(o)), (iii) maintain existing relationships with suppliers and
customers and others having business dealings with Empower 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 Empower or Members 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.
5.2. INVESTIGATION BY INTELLIGROUP.
Subject to the Confidentiality Agreement, from the date hereof through the
Closing Date, Empower shall, and shall cause Empower's Employees and
Representatives to, afford the Representatives of the 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.
37
5.3. NOTIFICATION OF CERTAIN MATTERS.
Empower and the Members 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 Empower or any Member
contained in this Agreement to be untrue or inaccurate in any material respect
and (ii) any material failure of Empower or any Member 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. Empower and the Members 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 an
Empower Material Adverse Effect.
5.4. NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC.
Neither Empower nor any Member 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 Empower's
Membership Interests, (ii) the merger of Empower 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 Empower'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. Empower and the Members hereby represent that neither
Empower, nor any Member 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"). Empower and each Member 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. Empower and the Members
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 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.
5.5. POOLING ACCOUNTING TREATMENT.
(a) Set forth on Schedule 5.5 is a list of all Persons who are, in
Empower's reasonable judgment, "affiliates" of Empower as defined in Rule 144
under the Securities Act or for purposes of qualifying the Merger as a pooling
of interests under Opinion 16 of the Accounting Principles Board and applicable
SEC rules and regulations. Empower and the Members shall use diligent efforts in
good faith to cause each such Person to deliver to Intelligroup and Sub on or
prior to the Closing Date a written agreement substantially in the form attached
hereto as Exhibit F (an "Affiliate Letter").
---------
(b) Empower and the Members shall use diligent efforts in good faith
to cause the transactions contemplated by this Agreement to be accounted for as
a pooling of interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations, and to have such accounting treatment
accepted by Empower's independent public accountants, by Intelligroup's
38
independent public accountants, and by the SEC, respectively. Empower and each
Member agrees that none of them will take any action that would cause such
accounting treatment not to be obtained.
5.9. FURTHER ASSURANCES.
Upon the terms and subject to the conditions contained herein, the parties
agree, in each case both before and after the Closing, (i) to use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement and the Ancillary Agreements,
(ii) to execute any documents, instruments or conveyances of any kind which may
be reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder and thereunder and (iv) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, the parties agree
to use their respective reasonable efforts (A) to give all notices to, and make
all registrations and filings with third parties, including submissions of
information requested by governmental authorities and (B) to fulfill all other
conditions to this Agreement. Notwithstanding the foregoing, (y) no amendment or
modification shall be made to any Contract to obtain any required Consent
without the prior written consent of Intelligroup and (z) no party hereto or any
of their respective Affiliates shall be required to sell, transfer, divest or
otherwise dispose of any of its respective business, assets or properties in
connection with this Agreement or any of the transactions contemplated hereby.
ARTICLE 6.
CONDITIONS TO Empower's and THE MEMBERS' OBLIGATIONS
The obligations of Empower and the Members to effect the Merger and
complete the related transactions contemplated by this Agreement are subject, in
the discretion of Empower and the Member Representative, on behalf of the
Members, to the satisfaction, on or prior to the Closing Date, of each of the
following conditions or the waiver of such conditions by Empower and the Member
Representative on behalf of the Members:
6.1. REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations and warranties of Intelligroup and Sub contained in
this Agreement shall be true and correct at and as of the Closing Date as if
such representations and warranties were made at and as of the Closing Date, and
Intelligroup and Sub 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 Empower and the Member
Representative on behalf of the Members a certificate signed by a senior officer
of Intelligroup and Sub to the foregoing effect ("Intelligroup Closing
Certificate").
6.2. CONSENTS.
Empower and the Member Representative on behalf of the Members shall be
satisfied that all approvals required under any Regulations to permit
Intelligroup and Sub to carry out the transactions contemplated by this
Agreement and the Ancillary Agreements shall have been obtained.
6.3. 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 by the
39
Ancillary Agreements. There shall not be any Regulation or Court Order that
makes the Merger contemplated hereby illegal or otherwise prohibited.
6.4. CLOSING DOCUMENTS.
Intelligroup shall have delivered to the Member Representative on behalf
of the Members the documents and other items described in Section 8.2 and such
other documents and items as Empower or the Members may reasonably require.
6.5. EMPLOYMENT AND NON-COMPETE AGREEMENTS.
Intelligroup shall execute and deliver to each of the Senior Managers an
Employment and Non-Competition Agreement.
6.6. POOLING LETTER.
The independent certified public accountants of Empower and Intelligroup
shall have delivered to Intelligroup and Empower a letter (the "Pooling
Letter"), dated the Closing Date, which shall be satisfactory to Intelligroup in
its sole discretion, stating without qualification that the accounting for the
business combination contemplated in this Agreement and the Ancillary Agreements
qualifies as a "pooling of interests" under Opinion 16 of the Accounting
Principles of Board and applicable rules and regulations of the SEC.
6.7. OPINION OF INTELLIGROUP COUNSEL.
▇▇▇▇▇▇▇▇ Ingersoll Professional Corporation, counsel to Intelligroup,
shall have delivered its opinion dated as of the Closing Date, in the form
attached hereto as Exhibit G.
6.8. MATERIAL ADVERSE CHANGE.
There shall not have been any Material Adverse Change with respect to
Intelligroup.
ARTICLE 7.
CONDITIONS TO Intelligroup'S AND SUB'S OBLIGATIONS
The obligations of Intelligroup and Sub to effect the Merger 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 Empower and each Member contained in
this Agreement shall be true and correct at and as of the Closing Date as if
such representations and warranties were made at and as of the Closing Date, and
Empower and each of the Members 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 Member (each, a "Member's Closing Certificate") to the foregoing effect.
40
7.2. CONSENTS.
All Consents, approvals and waivers from governmental authorities and
other parties necessary to permit Empower and the Members to consummate the
Merger as contemplated hereby and by the Ancillary Agreements 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 Empower
and the Members to carry out the transactions contemplated by this Agreement and
the Ancillary Agreements 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 by the Ancillary Agreements 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, operate or transfer Empower after the Closing. There shall not be any
Regulation or Court Order that makes the Merger contemplated hereby illegal or
otherwise prohibited or that otherwise may have a Material Adverse Effect on
Empower.
7.4. CLOSING DOCUMENTS.
Empower and/or the Members, as the case may be, shall have delivered to
Intelligroup the documents and other items described in Section 8.1 and such
other documents and items as Intelligroup may reasonably require.
7.5. EXEMPTION UNDER FEDERAL AND STATE SECURITIES LAWS.
The issuance of shares of Intelligroup Stock in the Merger shall not
violate any federal or state securities laws.
7.6. DELIVERY OF CERTIFICATES.
Each Member shall have delivered to Intelligroup the Certificate or
Certificates representing Membership Interests in Empower held by such Member.
7.7. TAX MATTERS.
(a) No new elections with respect to Taxes, or changes in current
elections with respect to Taxes, affecting Empower shall have been made after
the date of this Agreement without the prior written consent of Intelligroup,
which consent shall not be unreasonably withheld.
(b) Empower and each Member surrendering Certificates on the Closing
Date in accordance with Section 2.7(b)(i) shall have provided Intelligroup with
(i) all forms, certificates and/or other instruments required to pay the
transfer and recording taxes and charges, if any, arising from the transactions
contemplated by this Agreement, together with evidence satisfactory to
Intelligroup that such transfer taxes and charges have been paid by Empower or
such Member, and (ii) a clearance certificate or similar document(s) which may
be required by any state taxing authority to relieve Intelligroup of any
obligation to withhold any portion of the payments to such Member pursuant to
this Agreement.
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7.8. EMPLOYMENT AND NON-COMPETE AGREEMENTS.
Each of the Senior Managers shall execute and deliver to Intelligroup an
Employment and Non-Compete Agreement.
7.9. OPINION OF EMPOWER COUNSEL.
▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇, PLC, counsel to Empower, shall deliver its
opinion letter dated as of the Closing Date, in the form attached hereto as
Exhibit H
7.10. POOLING LETTER.
The accountants for Empower and Intelligroup shall have delivered the
Pooling Letter by Intelligroup and Empower.
7.11. MATERIAL ADVERSE CHANGE.
There shall not have been any Material Adverse Change with respect to
Empower.
ARTICLE 8.
THE CLOSING; COVENANTS OF THE MEMBERS AND INTELLIGROUP FOLLOWING THE CLOSING
On the Closing Date at the Closing Place:
8.1. DELIVERIES BY EMPOWER AND THE MEMBERS TO INTELLIGROUP.
Empower and each Member, as applicable, shall deliver (or cause to be
delivered) to Intelligroup:
(a) the Ancillary Agreements, duly executed by each party thereto
other than Intelligroup and Sub;
(b) each of the Member's Closing Certificates;
(c) a statement prepared in accordance with Section 1445 of the Code
and Treasury Regulations thereunder certifying that Empower is not, and was not
at any time after January 1, 1993, a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code.
(d) a fully executed Affiliate Letter from each of the Persons
identified on Schedule 5.5 hereof;
(e) such other documents and certificates duly executed as may
reasonably be requested by Intelligroup or Sub prior to the Closing Date.
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8.2. DELIVERIES BY INTELLIGROUP.
Intelligroup shall deliver to the Member Representative for the benefit of
the Members, to the Members, or any other appropriate Persons:
(a) the Ancillary Agreements to which Intelligroup or Sub is a
party, duly executed by them;
(b) the Intelligroup Closing Certificate;
(c) the Merger Shares to be issued to each Member in accordance
with Section 2.7(b)(i);
(d) cash in lieu of any fractional shares as provided in Section
2.6(c); and
(e) such other documents and certificates duly executed as may
reasonably be requested by Empower or the Member Representative prior to the
Closing Date.
8.3. POST-CLOSING OBLIGATION OF SUB REGARDING EMPLOYEE COMPENSATION.
Intelligroup shall cause Sub to use its commercially reasonable best
efforts to continue the current Empower Employee Compensation Plan set forth on
Exhibit J hereto for a period of twelve months following the Closing Date.
8.4. POST-CLOSING OBLIGATION OF THE MEMBERS REGARDING EMPOWER
EMPLOYEES.
The Members shall use their best efforts after the Closing Date to cause
those Employees listed on Schedule 8.4 to enter into Employee Confidentiality,
Nonsolicitation and Invention Assignment Agreements attached
hereto as Exhibit I, with Sub or Intelligroup.
8.5. POST-CLOSING OBLIGATION OF THE MEMBERS REGARDING CONTRACTS.
With respect to those Contracts identified on Schedule 8.5 hereto, the
Members shall use their best efforts after the Closing Date to assist
Intelligroup in obtaining the consent of the customers under such Contracts to
the assignment by Empower and the assumption by Sub of Empower's rights and
obligations under such Contracts as a result of the Merger.
ARTICLE 9.
INDEMNIFICATION
9.1. SURVIVAL OF REPRESENTATIONS, ETC.
On the Closing Date, all representations and warranties contained in this
Agreement, any schedule or in any certificate or instrument of conveyance
delivered by or on behalf of the parties pursuant to this Agreement or in
connection with the transactions contemplated hereby, and made by Empower and
the Members shall expire as to Empower and thereafter will be deemed to have
been made exclusively by the Members. All such representations, warranties and
covenants, and all other representations, warranties and covenants contained
herein, shall survive the Closing Date and continue in full force and effect the
earlier of (i) as to claims arising from audit items, the completion of an audit
43
of Intelligroup's financial statements which include periods subsequent to the
Closing Date, or (ii) until the first anniversary of the Closing Date (the
"Survival Period"). 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. 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.
9.2. INDEMNIFICATION.
(a) General.
(i) Subsequent to the Closing and subject to the limitations
on indemnity set forth in Section 9.5, the Members shall, jointly and severally,
indemnify Intelligroup, its Affiliates, and each of their respective, officers,
directors, employees, members 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 after
deduction for any net tax savings, insurance reimbursement or other third party
recoveries (collectively "Damages") incurred by any such Intelligroup
Indemnified Party, that are incident to, arise out of, in connection with, or
relate to, (A) the breach of any warranty, representation, covenant or agreement
of Empower or any Member contained in this Agreement or any schedule hereto or
in any certificate delivered by or on behalf of Empower or any such Member
pursuant to this Agreement or in connection with the transactions contemplated
hereby, other than any warranty or representation contained in Article 3A of
this Agreement or any covenants set forth in Article 10 hereof, (B) any Member
Expenses (to the extent not taken into account in the Net Book Value Adjustment
set forth in Section 2.9 hereof), (C) Taxes to the extent based upon, relating
to or arising out of the operation of the Business prior to the Closing, (D) any
Damages based on, arising out of or relating to any matter disclosed on Schedule
3.17 to the extent attributable to any action of failure to act of Empower or
any Member on or before the Closing Date or any Member after the Closing Date,
except to the extent that any such Member's action or failure to act following
the Closing Date is at the direction of Intelligroup or has been expressly
consented to by Intelligroup, or (E) the failure by Empower, with respect to any
Pension Plan and related trust agreement, annuity contract or other funding
instrument which covers or has covered Employees or former Employees (with
respect to their relationship with Empower), to obtain a favorable determination
letter from the Internal Revenue Service stating that each such Pension Plan and
each related trust is qualified and tax-exempt under the provisions of Code
Sections 401 (a) and 501(a) and corresponding regulatory authority in Puerto
Rico to like effect.
(ii) Subsequent to the Closing, and subject to the limitation
on indemnity set forth in Section 9.5 hereof, each Member shall, severally and
not jointly, indemnify the Intelligroup Indemnified Parties against, and hold
each of the Intelligroup Indemnified Parties harmless from, any Damages incurred
by such Intelligroup Indemnified Party, that are incident to, arise out of, in
connection with, or related to, whether directly or indirectly, (A) the breach
of any warranty or representation of such Member contained in Article 3A of this
Agreement, or any warranty or representation of substantially similar subject
matter to those contained in Section 3A of this Agreement that are contained in
any schedule hereto or in any certificate or instrument of conveyance delivered
by or on behalf of such holder pursuant to this Agreement or in connection with
the transactions contemplated hereby, and (B) the breach of any covenant of such
Member contained in Article 10 of this Agreement.
(iii) Subsequent to the Closing, Intelligroup shall indemnify
the Members and their Affiliates, ("Member Indemnified Parties"), against, and
hold each of the Member Indemnified Parties harmless from, any Damages incurred
by such Member Indemnified Party, that are incident to,
44
arise out of, in connection with, or related to, whether directly or indirectly,
the breach of any warranty, representation, covenant or agreement of
Intelligroup or Sub contained in this Agreement, any schedule or in any
certificate or instrument of conveyance delivered by or on behalf of
Intelligroup or Sub pursuant to this Agreement or in connection with the
transactions contemplated hereby.
The term "Damages" as used in this Section 9.2 is not limited to matters
asserted by third parties against Member Indemnified Parties or Intelligroup
Indemnified Parties, but includes Damages incurred or sustained by such persons
in the absence of third party claims.
(b) Procedure for Claims.
(i) If a claim for Damages (a "Claim") is to be made by a
person entitled to indemnification hereunder, the person claiming such
indemnification (the "Indemnified Party"), subject to clause (ii) below, shall
give written notice (a "Claim Notice") to the indemnifying person (the
"Indemnifying Party") (or, if the Indemnifying Party is a Member or group of
Members, the Member Representative) 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 this Section 9.2, but in
no event shall the Claim Notice be effective if it is received after the
expiration of the Survival Period. 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 Claim Notice is received after the
expiration of the Survival Period or the Indemnifying Party (or, if the
Indemnifying Party is a Member or group of Members, the Member Representative)
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 (or, if the Indemnifying Party is a Member or group of
Members, the Member Representative) 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 (or, if the
Indemnifying Party is a Member or group of Members, the Member Representative)
shall be entitled and, if it so elects, shall be obligated at its own cost, risk
and expense (or, if the Person making such election is the Member
Representative, at the cost, risk and expense of the Member or group of Members
that is the Indemnifying Party), (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 (or, if the
Indemnifying Party is a Member or group of Members, the Member Representative)
shall be entitled (but not obligated), if it so elects, to compromise or settle
such claim, as long as such proposed settlement or judgment involves only the
payment of money damages; otherwise, the Indemnifying Party shall not compromise
or settle such claim without the prior written consent of the Indemnified Party,
which consent shall not be unreasonably withheld. In the event the Indemnifying
Party (or, if the Indemnifying Party is a Member or group of Members, the Member
Representative) elects to assume control of the defense and investigation of
such lawsuit or other legal action in accordance with this Section 9.2(b), the
Indemnified Party may, at its own cost and expense, participate in the
investigation, trial and defense of such Third-Party Claim; provided that, if
the named persons to a lawsuit or other legal action include both the
Indemnifying Party (or the Member Representative acting on behalf of such
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 (or the Member Representative acting
on behalf of such Indemnifying Party), the Indemnified Party shall be entitled,
at the Indemnified Party's cost, risk and expense, to separate counsel of its
own choosing. If the Indemnifying Party (or, if the Indemnifying
45
Party is a Member or group of Members, the Member Representative) fails to
assume the defense of such Third-Party Claim in accordance with this Section 9.2
within 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 (or, if the Indemnifying Party
is a Member or group of Members, the Member Representative)) have the right to
undertake, at the Indemnifying Party's cost, risk and expense, the defense,
compromise and settlement of such Third-Party Claim on behalf of and for the
account of the Indemnifying Party; and shall be entitled to settle or compromise
such Third Party Claim without the prior written consent of such Indemnified
Party, as long as such compromise or settlement involves only the payment of
money damages, otherwise provided that such Third-Party Claim shall not be
compromised or settled without the written consent of the Indemnifying Party
(or, if the Indemnifying Party is a Member or group of Members, the Member
Representative), which consent shall not be unreasonably withheld. In the event
the Indemnifying Party (or, if the Indemnifying Party is a Member or group of
Members, the Member Representative) assumes the defense of the claim, the
Indemnifying Party (or, if the Indemnifying Party is a Member or group of
Members, the Member Representative) 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 (or, if the Indemnifying
Party is a Member or group of Members, the Member Representative) 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 9.2 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.
(ii) Notwithstanding clause (i) above, in the event that any
Indemnified Party is a Member Indemnified Party, any Claim Notice, election or
other notification or correspondence required pursuant to such clause (i) shall
only be valid if it is delivered by the Member Representative to Intelligroup.
Each Member hereby irrevocably appoints the Member Representative as its agent
and attorney-in-fact with respect to the matters set forth in this Article 9,
and hereby irrevocably grants to the Member Representative the authority to
administer Claims on behalf of such Member, to exercise such other rights and
powers as are set forth in this Agreement and to enter into, and to bind such
Member with respect to, the settlement of any such Claim. Each Intelligroup
Indemnified Party shall be entitled to rely on the agreements and
representations of, and notices and other correspondence from, the Member
Representative as such agent and attorney-in-fact in connection with any Claim
by or against any Member pursuant to this Article 9. For purposes of this
Section 9.2(b)(ii) the Member Representative shall be entitled to rely on the
direction of (y) the Majority Holders, with respect to any Claims pursuant to
Section 9.2(a)(i), and (z) the Indemnifying Party, with respect to any Claim
pursuant to Section 9.2(a)(ii).
9.3. NO RIGHT OF CONTRIBUTION.
After the Closing, no Member shall have any right of contribution against
Sub, its successors or assigns for any breach of any representation, warranty,
covenant or agreement of Empower. The Members and Intelligroup shall be entitled
to specific performance and injunctive relief, without posting bond or other
security, for the purpose of asserting their respective rights under this
Article 9. The remedies described in this Article 9 shall be in addition to, and
not in lieu of, any other remedies at law or in equity that the parties may
elect to pursue.
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9.4. ESCROW OF MERGER SHARES.
If the Escrow Agreement is in effect at the time an assertion of
indemnification is made by a Intelligroup Indemnified Party and except as
otherwise provided in Section 2.11, the obligations of the Members hereunder
with respect to the Damages shall only be satisfied by the distribution to the
Intelligroup Indemnified Party of Merger Shares held pursuant to the Escrow
Agreement.
9.5. THRESHOLD; LIMITATIONS ON INDEMNITY.
(a) Except with respect to the indemnification obligations set forth
in Section 9.2(a)(i)(B), (C), (D) or (E) hereof, the Intelligroup Indemnified
Parties shall not be entitled to recover for any Damages until such time as the
Damages claimed by the Intelligroup Indemnified Parties in the aggregate exceed
$100,000 (the "Damage Threshold"), at which time the Intelligroup Indemnified
Parties shall be entitled to be indemnified against and compensated and
reimbursed for only those Damages in excess of the Damage Threshold. With
respect to the indemnification obligations set forth in Section 9.2(a)(i)(D)
hereof, the Intelligroup Indemnified Parties shall not be entitled to recover
legal fees and expenses in excess of an aggregate of $150,000 where such fees
and expenses are incurred to defend claims which involve, in whole or in part,
(i) any action or inaction by the Members occurring after the Closing Date as to
which the Intelligroup Indemnified Parties would otherwise be indemnified
hereunder, or (ii) any action or inaction of Intelligroup occurring after the
Closing Date. In no event whatsoever shall any Intelligroup Indemnified Party be
entitled to recover from the Members for any Damages that exceed (collectively
or individually) that amount equal to the Escrow Shares multiplied by the
Average Share Price (the "Damage Ceiling").
(b) Except with respect to Intelligroup's obligation to issue and
cause its transfer agent to deliver to the Members additional shares of
Intelligroup stock on account of any positive adjustment to the Merger
Consideration pursuant to Section 2.9(d) hereof, the Member Indemnified Parties
shall not be entitled to recover for any Damages until such time as the Damages
claimed by the Member Indemnified Parties in the aggregate exceed the Damage
Threshold, at which time the Member Indemnified Parties shall be entitled to be
indemnified against and compensated and reimbursed for only those Damages in
excess of the Damage Threshold. Notwithstanding the foregoing, except with
respect to Intelligroup's obligation to issue and cause its transfer agent to
deliver to the Members additional shares of Intelligroup stock on account of any
positive adjustment to the Merger Consideration pursuant to Section 2.9(d)
hereof, Intelligroup's aggregate liability to the Members (collectively or
individually) for Damages shall not exceed the Damage Ceiling.
(c) Any Claim Notice delivered after the expiration of the Survival
Period shall be null and void and of no force or effect.
(d) Intelligroup and Sub acknowledge and agree that, except (i)
where Claims, disputes, breaches, failures, Defaults or actions arise out of or
are related to the knowing, intentional fraudulent act or willful misconduct of
any of the Members, or (ii) in cases arising out of a breach or alleged breach
of the covenant of any Member under Article 10 hereof, the foregoing
indemnification provisions of this Article 9 shall be the sole and exclusive
remedy of Intelligroup and Sub against the Members, whether in law, equity,
contract, tort or otherwise, for any and all Claims, disputes, breaches,
failures, Defaults or actions arising out of this Agreement or any Ancillary
Agreements, Schedules, documents, certificates or instruments relating to this
Agreement, or the transactions contemplated hereby. Except in instances
involving damages related to the knowing, intentional fraudulent act or willful
misconduct of any member, Intelligroup and Sub shall not be entitled to recover
any damages from the Members that are not Damages provided for in this Article
9.
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ARTICLE 10.
RESTRICTIVE COVENANTS
10.1. NON-COMPETITION.
If the Merger is consummated, except as otherwise provided in this Section
10.1, no Member nor any of his Affiliates shall, for a period of three (3) years
after the Effective Date, directly or indirectly, engage, in a business or
enterprise which is the same as or similar to the Business, provided, that a
Member shall be permitted, after the termination of any term of employment with
Sub, its successors or assigns following the Closing Date, to provide
information technology implementation services as an independent contractor to
any parties that were not customers of Intelligroup or its Affiliates during the
term of such employment.
10.2. NON-SOLICITATION OF EMPLOYEES OF INTELLIGROUP.
If the Merger is consummated, no Member shall directly or indirectly, for
himself or on behalf of any other individual or entity, hire any employee of
Intelligroup or its subsidiaries, including, without limitation, any employees
of Empower, or induce nor attempt to induce any such employee to leave his or
her employment with Intelligroup or any of its subsidiaries, at any time within
three (3) years from the Effective Date.
10.3. NON-SOLICITATION OR INTERFERENCE WITH CUSTOMERS AND SUPPLIERS OF
INTELLIGROUP.
If the Merger is consummated, no Member shall, directly or indirectly, for
himself or on behalf of any other individual or entity, solicit, divert, take
away or attempt to take away any of Intelligroup's or any of its subsidiaries'
current customers or suppliers or the business or patronage of any such
customers or suppliers or in any way knowingly interfere with, disrupt or
attempt to disrupt any then existing relationships between Intelligroup or any
of its subsidiaries and any of their current customers or suppliers at any time
within three (3) years from the Effective Date. If the Merger is not consummated
due to a breach, default or termination by Empower or any Member, neither
Empower, any Member nor any of their respective Affiliates shall, directly or
indirectly, for himself or itself or on behalf of any other individual or
entity, solicit, divert, take away or attempt to take away any current customers
or suppliers of Intelligroup or any of its subsidiaries made known in writing to
Empower or such Member by Intelligroup during the negotiation of this Agreement
or subsequent to its signing, or the business or patronage of any such customers
or suppliers or in any way knowingly interfere with or disrupt any then existing
relationships between Intelligroup or any of its subsidiaries, and any of such
customers or suppliers at any time within three (3) years from the date of
written notice of termination of this Agreement.
10.4. ACKNOWLEDGMENTS.
Each Member acknowledges that, in view of the nature of Empower's business
and the business objectives of Intelligroup in acquiring Empower, and the
consideration paid in the Merger to the Members therefor, the restrictions
contained in this Article 10 are reasonably necessary to protect the legitimate
business interests of Intelligroup and that any violation of such restrictions
will result in irreparable injury to Intelligroup and the business Intelligroup
has acquired hereunder for which damages will not be an adequate remedy. Each
Member therefore acknowledges that, if any such restrictions are violated,
Intelligroup shall be entitled to preliminary and injunctive relief as well as
to an equitable accounting of earnings, profits, and other benefits arising from
such violation.
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ARTICLE 11.
MISCELLANEOUS
11.1. CERTAIN SECURITIES LAWS REPRESENTATIONS.
Each Member represents as follows with respect to the Merger Shares to be
acquired in connection with the Merger:
(a) (i) Such Member is an "accredited investor" as such term is
defined in Rule 501(a) promulgated under the Securities Act; or
(ii) Such Member has such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and risks of
the investment in the Merger Shares;
(b) Such Member is receiving such shares for investment for its own
account and not with a view to, or for resale in connection with, the
distribution or other disposition thereof, other than as contemplated hereby;
(c) Such Member has been given the opportunity to obtain any
information or documents relating to, and to ask questions and receive answers
about, Intelligroup and the business and prospects of Intelligroup which it
deems necessary to evaluate the merits and risks related to its investment in
such shares and to verify the information received, and such Member's knowledge
and experience in financial and business matters are such that it is capable of
evaluating the merits and risks of its receipt of such shares;
(d) Such Member's financial condition is such that it 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 Member's current needs and
contingencies and to suffer a complete loss of its investment in such shares;
(e) All information that such Member has provided to Intelligroup
concerning itself and its financial position (if any) is correct and complete;
and
(f) Such Member has been advised that (i) Intelligroup's issuance of
shares to the Members will not have been registered under the Securities Act,
(ii) such shares may need to be held indefinitely, and such Member 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
49
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.
11.2. ASSIGNMENT.
Neither this Agreement nor any of the rights or obligations hereunder may
be assigned by Empower or any Member without the prior written consent of
Intelligroup, or by Intelligroup or Sub without the prior written consent of
Empower or the Members.
11.3. 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 a Member, to the address of such Member as set forth on Annex 1
hereto.
If prior to the Closing, to Empower:
Empower Solutions, LLC
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax:
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
With a copy to:
▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇, PLC
Detroit Center, Suite 2500
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to Intelligroup or Sub or, if after the Closing, to the Surviving
Corporation:
Intelligroup, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
50
With a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Professional Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
or to such other place and with such other copies as either party may
designate as to itself by written notice to the others.
11.4. 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 Michigan with
respect to the Merger and the laws of the State of New Jersey with respect to
all other matters, except with respect to matters of law concerning the internal
affairs of any entity which is a party to or the subject of this Agreement, and
as to those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
11.5. ARBITRATION.
Any and all disputes, controversies or claims arising out of or relating
to this Agreement shall be resolved exclusively and conclusively by binding
arbitration in accordance with the rules of the American Arbitration
Association. Such arbitration shall be held in New York City. Any award or
decision in arbitration shall be final and binding upon the parties, shall not
be subject to appeal and shall be enforceable by judgment of any court of
competent jurisdiction. The costs of any arbitration conducted under this
Section 11.6, including, without limitation, the fees and expenses of the
arbitrator, but not including each party's own costs incurred in connection with
the preparation for and conduct of the arbitration, shall be borne equally by
the party initiating the arbitration and the party (or parties) responding to
the initiation of the arbitration.
11.6. 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.
11.7. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS.
This Agreement, together with all exhibits and schedules hereto, and the
Confidentiality Agreement, 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.
11.8. 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.
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11.9. 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. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein shall be held to be invalid, illegal or unenforceable in any
jurisdiction, such provisions shall be deemed amended to the extent necessary
for such provisions to be valid, reasonable and enforceable in such
jurisdiction; provided, however, that such provisions shall not be deemed
amended for purposes of their enforcement in any jurisdiction in which such
provisions would be valid, legal and enforceable without amendment.
11.10. EXPENSES.
Except as otherwise provided in this Agreement, Intelligroup will be
liable for its and Sub's expenses, and Empower will be liable for the Member
Expenses, incurred in connection with the negotiation, preparation, execution
and performance of this Agreement.
11.11. 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, Intelligroup 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) Intelligroup 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.
11.12. 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 9 hereof.
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IN WITNESS WHEREOF, 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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its:President and Chief Executive
Officer
--------------------------------
ES MERGER CORP.,
a Michigan corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its:President
--------------------------------
EMPOWER SOLUTIONS, LLC,
a Michigan limited liability company
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its:Manager
--------------------------------
THE MEMBERS:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇