<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 15, 1997
SAPIENT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-28074 04-3130648
(Commission File Number) (IRS Employer Identification No.)
One Memorial Drive, Cambridge, MA 02142
(Address of principal executive offices) (Zip Code)
(617) 621-0200
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
On December 15, 1997, Sapient Corporation ("Sapient") acquired all of
the outstanding common stock of EXOR Technologies, Inc. ("EXOR") pursuant to a
Stock Purchase Agreement ("Purchase Agreement") dated as of December 4, 1997,
entered into by and among Sapient and each of the stockholders of EXOR. As a
result of this acquisition, EXOR, a Dallas-based corporation engaged in the
business of implementing Enterprise Resource Planning (ERP) solutions using
Oracle software applications, became a wholly owned subsidiary of Sapient. The
acquisition will be accounted for as a "pooling of interests" for financial
accounting purposes.
Sapient issued 305,869 shares of its common stock (the "Purchase Price
Shares"), which was valued at $16 million, to the EXOR stockholders as
consideration for the EXOR stock. Pursuant to the Purchase Agreement, Sapient
has agreed to use its best efforts to register with the Securities and Exchange
Commission 45% of the Purchase Price Shares at various times during the next
year.
Sapient expects to incur a one-time charge of approximately $560,000 in
the fourth quarter of 1997 for costs relating to the acquisition.
The terms of the acquisition were determined on the basis of arm's
length negotiations. Prior to the execution of the Purchase Agreement, neither
Sapient nor any of its affiliates, officers, or directors had any relationship
with EXOR.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of EXOR
See Index to Financial Statements attached hereto
(b) Pro Forma Financial Information
See Index to Financial Statements attached hereto
(c) Exhibits
See Exhibit Index attached hereto
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SAPIENT CORPORATION
Date: December 22, 1997 By: /s/ Susan D. Johnson
-------------------------------
Susan D. Johnson
Chief Financial Officer
3
<PAGE> 4
EXHIBIT INDEX
Page No.
(2) Stock Purchase Agreement among Sapient Corporation,
Carolyn Waygood, Mark Hallman, Boyd Scroggins and
Charles Waygood, dated as of December 4, 1997, excluding
the disclosure schedules thereto (In accordance with SEC rules,
certain schedules and exhibits to the Agreement, which are listed
in the table of contents to the Agreement, are omitted. Such
schedules and exhibits will be furnished supplementally to the SEC
upon request.)
4
<PAGE> 5
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report F-1
EXOR Technologies, Inc. Balance Sheets as of December F-2
31, 1996 and September 30, 1997 (Unaudited)
EXOR Technologies, Inc. Statements of Operations for the F-3
year ended December 31, 1996 and the nine-month period
ended September 30, 1997 (Unaudited)
EXOR Technologies, Inc. Statements of Stockholders' Equity F-4
for the year ended December 31, 1996 and the nine-months
ended September 30, 1997 (Unaudited)
EXOR Technologies, Inc. Statements of Cash Flows for the F-5
year ended December 31, 1996 and the nine-month period
ended September 30, 1997 (Unaudited)
EXOR Technologies, Inc. Notes to Financial Statements F-6
Pro Forma Condensed Combining Balance Sheet as of F-11
September 30, 1997
Pro Forma Condensed Combining Statement of Operations F-12
for the nine-month period ended September 30, 1997
Pro Forma Condensed Combining Statement of Operations F-13
for the year ended December 31, 1996
Notes to Pro Forma Condensed Combining Financial F-14
Statements
5
<PAGE> 6
Independent Auditors' Report
To the Shareholders and Board of Directors of
Exor Technologies, Inc.:
We have audited the accompanying balance sheet of Exor Technologies, Inc. as of
December 31, 1996, and the related statements of operations, stockholders'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Exor Technologies, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
November 14, 1997
Boston, Massachusetts
F-1
<PAGE> 7
EXOR TECHNOLOGIES, INC.
Balance Sheets
December 31, 1996 and September 30, 1997
<TABLE>
<CAPTION>
December 31, September 30,
Assets 1996 1997
---------- ------------ -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 303,380 595,720
Accounts receivable, net of allowance for doubtful accounts
of $0 and $50,000 at December 31, 1996 and September 30,
1997, respectively 356,239 1,487,539
Prepaid expenses and other current assets 15,672 3,994
Deferred income taxes 129,487 131,842
------------ -------------
Total current assets 804,778 2,219,095
Property and equipment, net 318,506 428,646
Other assets 7,000 7,000
------------ -------------
Total assets $ 1,130,284 2,654,741
============ =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 22,545 41,757
Accrued compensation 118,969 270,417
Accrued expenses - 250,000
Current portion of long-term debt 117,518 99,285
Deferred income taxes 142,496 115,778
Income taxes payable - 537,353
Other current liabilities 15,000 15,000
------------ -------------
Total current liabilities 416,528 1,329,590
Long-term debt 170,583 165,011
------------ -------------
587,111 1,494,601
Commitments and contingencies
Stockholders' equity:
Common stock, $0.10 par value; 50,000 shares authorized;
10,526 shares issued and outstanding 1,053 1,053
Additional paid-in capital 279,947 279,947
Retained earnings 262,173 879,140
------------ -------------
Total stockholders' equity 543,173 1,160,140
------------ -------------
Total liabilities and stockholders' equity $ 1,130,284 2,654,741
============ =============
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 8
EXOR TECHNOLOGIES, INC.
Statements of Operations
Year ended December 31, 1996 and the nine-month period ended
September 30, 1997
<TABLE>
<CAPTION>
Nine-Month
Year Ended Period Ended
December 31, September 30,
1996 1997
----------- ------------
(Unaudited)
<S> <C> <C>
Revenues $ 4,429,441 6,075,571
Operating expenses:
Project personnel costs 1,952,409 3,068,604
Selling and marketing 122,937 244,912
General and administrative 2,523,387 1,595,991
----------- ----------
Total operating expenses 4,598,733 4,909,507
----------- ----------
Operating (loss) income (169,292) 1,166,064
Other income (expense):
Interest expense (39,195) (42,671)
Other income 45,760 1,854
----------- ----------
6,565 (40,817)
----------- ----------
(Loss) income before income taxes (162,727) 1,125,247
Income tax benefit (expense) 61,587 (508,280)
----------- ----------
Net (loss) income $ (101,140) 616,967
=========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 9
EXOR TECHNOLOGIES, INC.
Statements of Stockholders' Equity
Year ended December 31, 1996 and the nine-month period ended
September 30, 1997
<TABLE>
<CAPTION>
Common Stock
------------------ Additional Total
Number of Par Paid-In Retained Stockholders'
Shares Value Capital Earnings Equity
--------- ------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 10,000 $1,000 $ 20,000 $ 363,313 $ 384,313
Issuance of common stock in
consideration for services
rendered 526 53 259,947 -- 260,000
Net loss -- -- -- (101,140) (101,140)
------ ------ -------- --------- -----------
Balance at December 31, 1996 10,526 1,053 279,947 262,173 543,173
Net income -- -- -- 616,967 616,967
------ ------ -------- --------- -----------
Balance at September 30, 1997 (unaudited) 10,526 $1,053 $279,947 $ 879,140 $ 1,160,140
====== ====== ======== ========= ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 10
EXOR TECHNOLOGIES, INC.
Statements of Cash Flows
Year ended December 31, 1996 and the nine-month period ended
September 30, 1997
<TABLE>
<CAPTION>
Nine-Month
Year Ended Period Ended
December 31, September 30,
1996 1997
----------- ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $(101,140) 616,967
Adjustments to reconcile net loss to net cash
provided by operating activities:
Stock compensation 260,000 --
Depreciation and amortization 154,684 108,000
Allowance for doubtful accounts -- 50,000
Deferred income taxes (73,864) (29,073)
Changes in operating assets and liabilities:
Accounts receivable (49,501) (1,181,300)
Prepaid expenses and other assets 16,409 11,678
Accounts payable and accrued expenses 138,397 958,013
Advances from customers (50,000) --
--------- ----------
Net cash provided by operating activities 294,985 534,285
--------- ----------
Cash flows from investing activities:
Purchase of property and equipment (37,477) (153,807)
--------- ----------
Net cash used in investing activities (37,477) (153,807)
--------- ----------
Cash flows from financing activities:
Principal payments under capital lease obligations (83,000) (88,138)
--------- ----------
Net cash used in financing activities (83,000) (88,138)
--------- ----------
Net increase in cash 174,508 292,340
Cash at beginning of period 128,872 303,380
--------- ----------
Cash at end of period $ 303,380 595,720
========= ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 41,619 42,671
========= ==========
Taxes $ 1,983 --
========= ==========
Non-cash transaction:
Capital lease obligations assumed for property and equipment $ 103,656 64,333
========= ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 11
EXOR TECHNOLOGIES, INC.
Notes to Financial Statements
December 31, 1996
(1) THE COMPANY
Exor Technologies, Inc. (the "Company") is a professional services firm
that offers consulting services related to the implementation,
customization, and enhancement of enterprise based computing systems.
The Company provides services generally to customers in the United
States.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from
those estimates.
(b) Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
accelerated methods over the estimated useful lives of the assets as
follows:
Computer software 3 years
Computer equipment and automobiles 5 years
Furniture and fixtures 7 years
(c) Income Taxes
The Company, a cash-basis tax payer, accounts for income taxes under the
asset and liability method. Under this method, deferred tax assets
and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted rates in effect for the year in which those
temporary differences are expected to be recovered or settled.
(d) Revenue Recognition
The Company recognizes revenue from consulting services as services are
provided.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Computer software $ 175,071
Computer equipment 321,475
Automobiles 29,171
Furniture and fixtures 172,582
-----------
698,299
Less accumulated depreciation (379,793)
-----------
$ 318,506
===========
</TABLE>
F-6
<PAGE> 12
EXOR TECHNOLOGIES, INC.
Notes to Financial Statements
Substantially all of the Company's property and equipment is financed
under capital lease obligations. Amortization of such assets is
recorded over the useful lives of the assets consistent with the
Company's depreciation policy for owned assets.
(4) INCOME TAXES
The income tax benefit for the year ended December 31, 1996 consists of
the following:
<TABLE>
<S> <C>
Federal expense, current $ (12,277)
Federal benefit, deferred 73,864
---------
Income tax benefit $ 61,587
=========
</TABLE>
At December 31, 1996, deferred income tax assets and liabilities
resulted from reporting differences in the recognition of income and
expense for tax and financial reporting purposes. The sources and tax
effects of these temporary differences are as follows at December 31,
1996:
<TABLE>
<S> <C>
Deferred tax assets:
Stock compensation $ 104,000
Capitalized interest 16,714
Accounts payable 8,773
-----------
Total gross deferred tax assets 129,487
Deferred tax liabilities:
Accounts receivable (142,496)
-----------
Total gross deferred tax liabilities (142,496)
-----------
Net deferred income taxes $ (13,009)
===========
</TABLE>
In assessing the realizability of deferred tax assets, the Company
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Due to the fact that
the Company has significant taxable income in the federal carryback
period and anticipates sufficient future taxable income over the
periods which deferred tax assets are deductible, the realization of
deferred tax assets for federal and state income tax purposes appears
more likely than not.
(5) STOCKHOLDERS' EQUITY
During 1996, the Company issued 526 shares of common stock to an officer
of the Company as additional consideration for services rendered. The
grant date fair value of the shares was determined to be $260,000 and
was recorded as compensation expense in the accompanying statement of
operations.
F-7
<PAGE> 13
EXOR TECHNOLOGIES, INC.
Notes to Financial Statements
(6) COMMITMENTS AND CONTINGENCIES
The Company has obligations under capital leases for computer and office
equipment and furniture. The Company finances its office space and
certain automobiles under operating leases. Obligations under capital
and operating leases are as follows at December 31, 1996:
<TABLE>
<CAPTION>
Capital Operating
---------- ---------
<S> <C> <C>
1997 $ 159,365 97,036
1998 127,168 85,455
1999 35,277 56,970
2000 25,720 --
---------- --------
Total future minimum lease payments $ 347,530 239,461
---------- ========
Less interest 59,429
----------
Present value of minimum lease payments 288,101
Less current portion 117,518
----------
Present value of minimum lease payments, net of
current portion $ 170,583
==========
</TABLE>
Rent expense under operating leases amounted to approximately $110,000
for the year ended December 31, 1996.
(7) RELATED PARTY TRANSACTIONS
The Company utilizes legal services of a member of the Board of Directors
who is also a relative of the President of the Company. Legal fees
paid to this individual were approximately $83,000 for the year ended
December 31, 1996.
The Company is indebted to a member of the Board of Directors in the form
of a promissory note. The balance outstanding at December 31, 1996
was $15,000 and is recorded as other liabilities in the accompanying
balance sheet.
(8) EMPLOYEE BENEFIT PLAN
The Company has established a defined contribution plan under Section
401(k) of the Internal Revenue Code (the "Plan"). All full-time
employees are eligible to participate in the Plan. The Company may
make a discretionary profit-sharing contribution annually. Company
contributions charged to operations for the year ended December 31,
1996 were approximately $119,000.
F-8
<PAGE> 14
EXOR TECHNOLOGIES, INC.
Notes to Financial Statements
(9) SIGNIFICANT CUSTOMERS
At December 31, 1996, and for the year then ended, the following
customers accounted for greater than 10% of revenues and accounts
receivable, respectively:
<TABLE>
<CAPTION>
Revenues for the Accounts Receivable
Year Ended at December 31,
December 31,1996 1996
---------------- -------------------
<S> <C> <C>
Customer A 28% -
Customer B 27% 15%
Customer C 11% 17%
Customer D - 17%
Customer E - 17%
Customer F - 21%
</TABLE>
(10) SUBSEQUENT EVENTS
(a) Rental of additional office space
In August 1997, the Company entered into an operating lease agreement
for additional office space adjacent to its existing offices. During
1997, the Company plans to spend approximately $386,000 for furniture
and fixtures and office equipment to furnish this additional space.
(b) Line of credit agreement
In May 1997, the Company entered into a $300,000 revolving line of
credit agreement with a bank. The maximum amount available under the
line is determined as the greater of 80% of the Company's trade
accounts receivable or $300,000. Interest is charged at the bank's
prime rate plus 0.5%. The agreement terminates in May 1998.
(c) Acquisition of Company
On October 10, 1997, the Company entered into a Letter of Intent to be
acquired by Sapient Corporation ("Sapient"), an information
technology application and solution provider. The transaction will be
accounted for as a pooling of interests and will be effected through
the exchange of all of the outstanding common stock of the Company
for the number of shares of common stock of Sapient which equate to
$16,000,000.
F-9
<PAGE> 15
The following unaudited pro forma condensed combined financial statements give
effect to the acquisition by Sapient Corporation ("Sapient") of all of the
outstanding common stock of EXOR Technologies, Inc. ("Exor"). This acquisition
will be accounted for using the pooling-of-interests method of accounting. The
unaudited pro forma condensed combined financial statements give effect to the
issuance of common stock by Sapient to the shareholders of Exor as well as the
estimated transaction costs incurred in connection with the acquisition. These
statements are based on the historical financial statements of Sapient and Exor
and the estimates and assumptions noted in the unaudited condensed combined
financial statements and the footnotes thereto.
The unaudited pro forma condensed combined balance sheet gives effect to the
acquisition as if it had occurred on September 30, 1997. The unaudited pro
forma condensed combined statements of operations for the year ended December
31, 1996 and the nine-month period ended September 30, 1997 give effect to the
acquisition as if it had occurred on January 1, 1996.
The pro forma adjustments are based upon preliminary estimates, currently
available information and certain assumptions that management deems
appropriate. The unaudited pro forma combined financial data presented herein
are not necessarily indicative of the results the Company would have obtained
had such events occurred on January 1, 1996, as assumed, or the future results
of the Company. The unaudited pro forma condensed combined financial statements
should be read in conjunction with the other financial statements and notes
thereto included in the Sapient Form 10-K for the year ended December 31, 1996
as filed with the Securities and Exchange Commission on March 31, 1997.
F-10
<PAGE> 16
PRO FORMA CONDENSED COMBINING BALANCE SHEET
SEPTEMBER 30, 1997
(IN 000'S)
<TABLE>
<CAPTION>
Sapient Exor Adj. Combined
------- ------ ---- --------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $38,783 $ 596 (560)(1) $38,819
Short-term investments 18,519 -- -- 18,519
Accounts receivable, net 21,040 1,487 -- 22,527
Other current assets 1,227 137 -- 1,364
------- ------ ---- -------
Total current assets 79,569 2,220 (560) 81,229
Other assets 5,054 436 -- 5,490
------- ------ ---- -------
Total assets $84,623 $2,656 (560) $86,719
======= ====== ==== =======
Current liabilities:
Accounts payable and accrued expenses $ 4,379 $ 562 -- $ 4,941
Other current liabilities 2,351 768 -- 3,119
------- ------ ---- -------
Total current liabilities 6,730 1,330 -- 8,060
Other liabilities 2,224 165 -- 2,389
Commitments and contingencies
Stockholders equity
Common stock 116 1 3 (2) 120
Additional paid-in-capital 55,390 280 (3)(2) 55,667
Retained earnings 20,163 880 (560)(1) 20,483
------- ------ ---- -------
Total stockholders' equity 75,669 1,161 (560) 76,270
------- ------ ---- -------
Total liabilities and stockholders' equity $84,623 $2,656 (560) $86,719
======= ====== ==== =======
</TABLE>
(1) To adjust for estimated transaction costs of $560,000.
(2) To adjust for the issuance of 305,869 shares of common stock in the
transaction.
The accompanying notes are an integral part of the Pro Forma Condensed
Combining Financial Statements.
F-11
<PAGE> 17
PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
(IN 000'S)
<TABLE>
<CAPTION>
Sapient Exor Combined
------- ------ --------
<S> <C> <C> <C>
Revenues 57,319 6,076 63,395
Operating expenses
Project personnel costs 27,751 3,068 30,819
Selling and marketing 3,558 245 3,803
General and administrative 14,029 1,597 15,626
------ ------ ------
Total operating expenses 45,338 4,910 50,248
Operating income 11,981 1,166 13,147
Other income (expense) 1,613 (41) 1,572
------ ------ ------
Income before income taxes 13,594 1,125 14,719
Income tax expense 5,089 508 5,597
------ ------ ------
Net income 8,505 617 9,122
====== ====== ======
Net income per share .67 .70
====== ======
Weighted Average Shares Outstanding 12,653 12,959
====== ======
</TABLE>
The accompanying notes are an integral part of the Pro Forma Condensed
Combining Financial Statements.
F-12
<PAGE> 18
PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN 000'S)
<TABLE>
<CAPTION>
Sapient Exor Adj. Combined
------- ------ ---- --------
<S> <C> <C> <C> <C>
Revenues 44,580 4,429 -- 49,009
Operating expenses
Project personnel costs 21,033 1,952 -- 22,985
Selling and marketing 2,299 123 -- 2,422
General and administrative 11,770 2,523 (750)(1) 13,543
------ ------ ---- ------
Total operating expenses 35,102 4,598 (750) 38,950
------ ------ ---- ------
Operating income (loss) 9,478 (169) 750 10,059
Other income 1,091 6 -- 1,097
------ ------ ---- ------
Income (loss) before income taxes 10,569 (163) 750 11,156
Income tax expense (benefit) 3,998 (62) 285 (1) 4,221
------ ------ ---- ------
Net income (loss) 6,571 (101) 465 6,935
====== ====== ==== ======
Net income (loss) per share .56 .57
====== ======
Weighted average common shares
outstanding 11,772 12,078
====== ======
</TABLE>
(1) To adjust 1996 compensation paid to principles of Exor to reflect their
expected future compensation based on employment agreements.
The accompanying notes are an integral part of the Pro Forma Condensed
Combining Financial Statements.
F-13
<PAGE> 19
Notes to Pro Forma Condensed Combining Financial Statements
Notes:
1. The financial statements of both Sapient and Exor have been prepared and are
presented in conformity with generally accepted accounting principles.
2. There have been no intercompany transactions between the companies.
3. The earnings per share have been calculated as if the business combination
had occurred as a pooling of interests at the beginning of each of the
periods presented.
F-14
<PAGE> 1
EXHIBIT 2
---------
STOCK PURCHASE AGREEMENT
by and among
Sapient Corporation
and
Mark Hallman,
Boyd Scroggins,
Carolyn R. Waygood
and
Charles M. Waygood
dated as of
December 4, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I - PURCHASE AND SALE OF THE EXOR SHARES.............................1
1.1 Purchase of the EXOR Shares from the Stockholders...............1
1.2 Purchase Price..................................................1
1.3 The Closing.....................................................2
1.4 Further Assurances..............................................3
ARTICLE IIA - REPRESENTATIONS AND WARRANTIES REGARDING
THE EXOR SHARES AND THE STOCKHOLDERS...................3
2A.1 Ownership of EXOR Shares........................................3
2A.2 Authority.......................................................4
2A.3 Noncontravention................................................4
2A.4 Investment Representations......................................4
ARTICLE IIB - REPRESENTATIONS AND WARRANTIES REGARDING
EXOR.................................................................5
2B.1 Organization....................................................5
2B.2 Capitalization..................................................6
2B.3 Noncontravention................................................6
2B.4 Financial Statements and Information............................6
2B.5 Intellectual Property...........................................7
2B.6 Trademarks......................................................9
2B.7 Real Property Owned and Leased..................................9
2B.8 Assets..........................................................9
2B.9 Contracts......................................................10
2B.10 Books and Records; Bank Accounts; Powers of Attorney...........11
2B.11 Tax Matters....................................................11
2B.12 Warranties.....................................................12
2B.13 Customers......................................................12
2B.14 Insurance......................................................12
2B.15 Legal Compliance; Environmental Matters........................12
2B.16 Permits........................................................13
2B.17 Litigation.....................................................14
2B.18 Confidential Information.......................................14
2B.19 Employees and Consultants......................................14
2B.20 Employee Benefits..............................................14
2B.21 Business Relationships With Affiliates.........................17
2B.22 Brokers' Fees..................................................17
2B.23 Pooling........................................................17
2B.24 Disclosure.....................................................17
-i-
<PAGE> 3
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE BUYER...................18
3.1 Organization...................................................18
3.2 Capitalization.................................................18
3.3 Authorization..................................................18
3.4 Noncontravention...............................................18
3.5 Buyer Reports and Financial Statements.........................19
3.6 Litigation.....................................................19
3.7 Brokers' Fees..................................................19
3.8 Investment Representations.....................................19
3.9 Absence of Certain Changes.....................................20
3.10 Disclosure.....................................................20
ARTICLE IV - PRE-CLOSING COVENANTS..........................................20
4.1 Efforts........................................................20
4.2 Notices and Consents...........................................20
4.3 Operation of Business..........................................21
4.4 Full Access....................................................22
4.5 Monthly Financial Statements...................................22
4.6 Notice of Breaches.............................................22
4.7 Exclusivity....................................................23
ARTICLE V - CONDITIONS TO CLOSING...........................................23
5.1 Conditions to Obligations of the Buyer.........................23
5.2 Conditions to Obligations of the Stockholders..................25
ARTICLE VI - INDEMNIFICATION................................................26
6.1 Indemnification by the Stockholders............................26
6.2 Indemnification by the Buyer...................................26
6.3 Claims for Indemnification.....................................27
6.4 Payment of Amounts By Stockholders.............................28
6.5 Survival.......................................................29
6.6 Limitations....................................................29
ARTICLE VII - TERMINATION...................................................30
7.1 Termination of Agreement.......................................30
7.2 Effect of Termination..........................................30
ARTICLE VIII - REGISTRATION RIGHTS..........................................31
8.1 Registration of Shares. .......................................31
8.2 Piggyback Registration Rights..................................32
8.3 Limitations on Registration Rights.............................33
8.4 Registration Procedures........................................33
8.5 Requirements of Stockholders...................................34
8.6 Indemnification................................................35
-ii-
<PAGE> 4
8.7 Assignment of Rights...........................................36
8.8 Rule 144 Reports...............................................36
ARTICLE IX - MISCELLANEOUS..................................................36
9.1 Grant of Stock Options.........................................36
9.2 Certain Agreements Regarding Pooling Accounting................36
9.3 Press Releases and Public Disclosure...........................36
9.4 No Third Party Beneficiaries...................................37
9.5 Entire Agreement...............................................37
9.6 Succession and Assignment......................................37
9.7 Counterparts...................................................37
9.8 Headings.......................................................37
9.9 Notices........................................................37
9.10 Governing Law. ...............................................39
9.11 Dispute Resolution.............................................39
9.12 Amendments and Waivers. ......................................40
9.13 Severability. ................................................40
9.14 Specific Performance. .........................................40
9.15 Expenses. .....................................................41
9.16 Construction. .................................................41
9.17 Incorporation of Exhibits and Schedules. ......................41
9.18 Facsimile Signature. .........................................42
SCHEDULES
Schedule I - Stockholders and EXOR Shares
Disclosure Schedule
EXHIBITS
Exhibit A - Forms of Employment Agreements
Exhibit A-1 - Form of Employment Agreement (Mark Hallman and
Boyd Scroggins)
Exhibit A-2 - Form of Employment Agreement (Carolyn R. Waygood)
Exhibit B - Form of Non-Disclosure and Non-Solicitation Agreement
Exhibit C - Form of Stockholder Noncompetition Agreement
Exhibit D - Form of Opinion of Dechert, Price & Rhoads
Exhibit E - Form of Opinion of Hale and Dorr LLP
Exhibit F - Form of Stock Option Grant
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TABLE OF DEFINED TERMS
Defined Term Section
- ------------ -------
Affiliate Relationships 2B.21
Agreed Amount 6.3(b)
Buyer Preamble
Buyer Activity 8.3(a)
Buyer Common Stock 1.2(a)
Buyer Reports 3.5
Claim Notice 6.3(b)
Claimed Amount 6.3(b)
Closing 1.1
Closing Date 1.3(a)
Code 2B.20(a)
Contracts 2B.9(a)
Damages 6.1
Disclosure Schedule Article IIB
Employee Benefit Plan 2B.20(a)
Environmental Law 2B.15(b)
ERISA 2B.20(a)
ERISA Affiliate 2B.20(a)
EXOR Introduction
EXOR Intellectual Property 2B.5(a)
EXOR Shares Introduction
First Registration Statement 8.1(a)
GAAP 2B.4(a)
Governmental Entity 2A.3
Indemnified Party 6.3(a)
Indemnifying Party 6.3(a)
Intellectual Property 2B.5(a)
Materials of Environmental Concern 2B.15(c)
Nasdaq 7.1(e)
Parties Preamble
Permit(s) 2B.16
Personal Property 2B.8(c)
Purchase Price Shares 1.2(b)
Required Consents 2B.3
SEC 3.5
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Second Registration Statement 8.1(a)
Securities Act 2A.4(a)
Security Interest 2A.1
Stockholder(s) Preamble
Stockholder Registration Statement 8.1(a)
Stockholders' Representative 6.4(d)
Tax(es) 2B.11
Tax Return 2B.11
Third Registration Statement 8.1(a)
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STOCK PURCHASE AGREEMENT
This Agreement is entered into as of December 4, 1997 by and among Sapient
Corporation, a Delaware corporation (the "BUYER"), and Mark Hallman, Boyd
Scroggins, Carolyn R. Waygood and Charles M. Waygood (individually, a
"STOCKHOLDER" and collectively, the "STOCKHOLDERS"). The Buyer and the
Stockholders are referred to collectively herein as the "PARTIES."
INTRODUCTION
1. The Stockholders collectively own all of the outstanding shares of the
capital stock (the "EXOR SHARES") of EXOR Technologies Inc., a Texas corporation
("EXOR"), as set forth in more detail on SCHEDULE I attached hereto.
2. The Buyer desires to purchase from the Stockholders, and the
Stockholders desire to sell to the Buyer, the EXOR Shares for the consideration
set forth below, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Parties agree as
follows:
ARTICLE I
PURCHASE AND SALE OF THE EXOR SHARES
1.1 PURCHASE OF THE EXOR SHARES FROM THE STOCKHOLDERS. Upon and subject to
the terms and conditions of this Agreement, at the closing of the purchase and
sale of the EXOR Shares contemplated by this Agreement (the "CLOSING"), each
Stockholder shall sell, transfer, convey, assign and deliver to the Buyer, and
the Buyer shall purchase, acquire and accept from each Stockholder, all of the
EXOR Shares owned by such Stockholder.
1.2 PURCHASE PRICE.
(a) The purchase price to be paid by the Buyer for all of the EXOR
Shares shall be paid in the form of shares of common stock, par value $0.01 per
share, of the Buyer (the "BUYER COMMON STOCK").
(b) The aggregate number of shares of Buyer Common Stock to be issued
to the Stockholders at the Closing (the "PURCHASE PRICE SHARES") shall be
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305,869 (subject to equitable adjustment in the event of any stock split, stock
dividend, reverse stock split or similar event affecting the Buyer Common Stock
between the date of this Agreement and the Closing). Subject to Section 1.4(c),
each Stockholder shall be entitled to receive in payment for each EXOR Share
sold to the Buyer by such Stockholder such number of Purchase Price Shares as is
determined by dividing the aggregate number of Purchase Price Shares by the
aggregate number of EXOR Shares.
(c) No certificates or script representing fractional Purchase Price
Shares shall be issued to the Stockholders and the Stockholders shall not be
entitled to any voting rights, rights to receive any dividends or distributions
or other rights as a stockholder of the Buyer with respect to any fractional
Purchase Price Shares that would otherwise be issued to such Stockholders. In
lieu of fractional Purchase Price Shares that would otherwise be issued, each
such Stockholder that would have been entitled to receive a fractional Purchase
Price Share shall receive such whole number of Purchase Price Shares as is equal
to the precise number of Purchase Price Shares to which such Stockholder would
be entitled, rounded up or down to the nearest whole number (with a fractional
interest of 0.5 rounded to the nearest odd whole number).
1.3 THE CLOSING.
(a) TIME AND LOCATION. The Closing shall take place at the offices of
Hale and Dorr LLP in Cambridge, Massachusetts, commencing at 10:00 a.m., local
time, on December 15, 1997, or, if all of the conditions to the obligations of
the Parties to consummate the transactions contemplated hereby have not been
satisfied or waived by such date, on such mutually agreeable later date as soon
as practicable after the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(the "CLOSING DATE"). The closing of the purchase of EXOR Shares by the Buyer
from each of the Stockholders shall take place simultaneously and it shall be a
condition to the Buyer's obligation to consummate the transactions contemplated
by this Agreement that each Stockholder deliver its EXOR Shares to the Buyer at
the Closing.
(b) ACTIONS AT THE CLOSING. At the Closing:
(i) the Stockholders shall deliver (or cause to be delivered)
to the Buyer the various certificates, instruments and documents referred to in
Section 5.1;
(ii) the Buyer shall deliver (or cause to be delivered) to the
Stockholders the various certificates, instruments and documents referred to in
Section 5.2;
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(iii) each Stockholder shall deliver to the Buyer one or more
certificates evidencing all of the EXOR Shares owned by such Stockholder, duly
endorsed in blank or with stock powers duly executed by the Stockholder, with
signature guaranteed, and, to the extent applicable for any Stockholder residing
in a community property state, a duly executed spousal consent;
(iv) the Stockholders shall cause EXOR to deliver to the Buyer
the minute books, stock books, ledgers and registers, corporate seals and other
corporate records relating to the organization, ownership and maintenance of
EXOR;
(v) the Buyer shall deliver to each Stockholder a stock
certificate representing the number of Purchase Price Shares to which such
Stockholder is entitled in accordance with Section 1.2; and
(vi) the Buyer and each Stockholder shall execute and deliver a
cross-receipt evidencing the transactions referred to above.
1.4 FURTHER ASSURANCES. At any time and from time to time after the
Closing, at the reasonable request of the Buyer and without further
consideration, the Stockholders shall promptly execute and deliver such
instruments of sale, transfer, conveyance, assignment and confirmation, and take
all such other action as the Buyer may reasonably request, more effectively to
transfer, convey and assign to the Buyer, and to confirm the Buyer's title to,
all of the EXOR Shares, to put the Buyer through its ownership of the EXOR
Shares in actual possession and operating control of the assets, properties and
business of EXOR, and to carry out the purpose and intent of this Agreement.
ARTICLE IIA
REPRESENTATIONS AND WARRANTIES REGARDING THE EXOR SHARES
AND THE STOCKHOLDERS
Each Stockholder severally represents and warrants to the Buyer as follows:
2A.1 OWNERSHIP OF EXOR SHARES. Such Stockholder has good and marketable
title, free and clear of any and all Security Interests (as defined below),
conditions, restrictions and voting trust arrangements, to all of the EXOR
Shares listed on SCHEDULE I as being owned by such Stockholder. Such Stockholder
has the full right, power and authority to sell, transfer, convey, assign and
deliver to the Buyer at the Closing the EXOR Shares owned by such Stockholder
and, upon consummation of the purchase and sale contemplated hereby, the Buyer
will acquire from such Stockholder good and marketable title to such EXOR
Shares, free and clear of all Security Interests, conditions, restrictions and
voting trust arrangements. "SECURITY
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INTEREST" means any mortgage, pledge, security interest, encumbrance, charge,
lien, contractual restriction or covenant, option or other adverse claim
(whether arising by contract or by operation of law).
2A.2 AUTHORITY. Such Stockholder has all requisite power and authority to
execute and deliver this Agreement and to perform such Stockholder's obligations
hereunder. This Agreement has been duly and validly executed and delivered by
such Stockholder, and constitutes a valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its terms.
2A.3 NONCONTRAVENTION. Neither the execution and delivery of this Agreement
by such Stockholder nor the consummation by such Stockholder of the transactions
contemplated by this Agreement will: (i) conflict with or violate any provision
of the Articles of Incorporation or bylaws of EXOR; (ii) require on the part of
such Stockholder any filing with, or any permit, authorization, consent or
approval of, any court, arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency (a
"GOVERNMENTAL ENTITY"); (iii) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any agreement,
instrument, contract or arrangement to which such Stockholder is a party or by
which such Stockholder or any of his or her properties is bound; (iv) result in
the imposition of any Security Interest upon the EXOR Shares owned by such
Stockholder or any assets or properties of such Stockholder; or (v) violate any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
such Stockholder or to the EXOR Shares owned by such Stockholder.
2A.4 INVESTMENT REPRESENTATIONS.
(a) Such Stockholder is acquiring the Purchase Price Shares to be
issued to such Stockholder for such Stockholder's own account for investment
only, and not with a view to, or for sale in connection with, any distribution
of such Purchase Price Shares in violation of the Securities Act of 1933, as
amended (the "SECURITIES ACT") or any rule or regulation under the Securities
Act.
(b) Such Stockholder has had adequate opportunity to obtain from
representatives of the Buyer such information, in addition to the
representations set forth in the Agreement, as is necessary to evaluate the
merits and risks of such Stockholder's investment in the Buyer.
(c) Such Stockholder has sufficient experience in business, financial
and investment matters to be able to evaluate the risks involved in the
acquisition of the Purchase Price Shares to be issued to such Stockholder and to
make an informed investment decision with respect to such investment.
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<PAGE> 11
(d) Such Stockholder understands that the Purchase Price Shares have
not been registered under the Securities Act and are "restricted securities"
within the meaning of Rule 144 under the Securities Act; and that the Purchase
Price Shares cannot be sold, transferred or otherwise disposed of unless they
are subsequently registered under the Securities Act or an exemption from
registration is then available.
(e) Such Stockholder agrees and understands that a legend
substantially in the following form will be placed on the certificate
representing the Purchase Price Shares to be issued to such Stockholder:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the absence of an effective
registration statement under such Act or an opinion of counsel
satisfactory to the corporation to the effect that such registration
is not required."
ARTICLE IIB
REPRESENTATIONS AND WARRANTIES REGARDING EXOR
Each Stockholder represents and warrants to the Buyer that the statements
contained in this Article IIB are true and correct except as set forth in the
disclosure schedule attached hereto (the "DISCLOSURE SCHEDULE"). The Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article IIB, and the disclosures in any
paragraph of the Disclosure Schedule shall qualify another paragraph in this
Article IIB only to the extent it is clear from a reading of the disclosure that
such disclosure is applicable to such other paragraph.
2B.1 ORGANIZATION. EXOR is a corporation duly organized, validly existing
and in good standing (corporate and tax) under the laws of the State of Texas,
and has all requisite power and authority to own and use its properties and to
carry on its business as now being conducted. EXOR has qualified to transact
business as a foreign corporation and is in good standing (corporate and tax)
under the laws of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties requires such qualification, except where
the failure to so qualify would not have a material adverse effect on EXOR or
its business, properties, operations, condition (financial or otherwise), assets
or liabilities. EXOR does not control, directly or indirectly, or have any
direct or indirect equity participation in, any
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<PAGE> 12
corporation, limited liability company, partnership, trust or other business
association.
2B.2 CAPITALIZATION. The authorized capital stock of EXOR consists of
500,000 shares of common stock, par value $0.10 per share, of which 10,526
shares are issued and outstanding as of the date of this Agreement (all of which
are owned of record and beneficially by the Stockholders as set forth on
SCHEDULE I attached hereto). All of the issued and outstanding EXOR Shares are
duly authorized, validly issued, fully paid, nonassessable and issued without
violation of any preemptive rights. There are no outstanding or authorized
options, warrants, rights, agreements or commitments to which EXOR is a party or
which are binding upon EXOR providing for the issuance, disposition or
acquisition, contingent or otherwise, of any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to EXOR. There are no agreements, voting trusts, proxies or
understandings with respect to the voting, or registration under the Securities
Act of any capital stock of EXOR. All of the issued and outstanding EXOR Shares
were issued in compliance with applicable federal and state securities laws.
2B.3 NONCONTRAVENTION. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws,
neither the purchase and sale of the EXOR Shares nor the consummation of the
other transactions contemplated by this Agreement will: (i) conflict with or
violate any provision of the Articles of Incorporation or bylaws of EXOR; (ii)
require on the part of EXOR any filing with, or any permit, authorization,
consent or approval of, any Governmental Entity; (iii) conflict with, result in
a breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any agreement, instrument, contract or arrangement to which EXOR
is a party or by which EXOR or any of its assets or properties is bound; (iv)
result in the imposition of any Security Interests upon any assets or properties
of EXOR; or (v) violate any order, writ, injunction, decree, law, statute, rule
or regulation applicable to EXOR or any of its properties or assets. Section
2B.3 of the Disclosure Schedule sets forth a list of any notice, consent or
waiver required, as a result of or in connection with the purchase and sale of
EXOR Shares contemplated by this Agreement, under any agreement, instrument
contract or arrangement of EXOR or by which EXOR or any of its properties or
assets is bound (the "REQUIRED CONSENTS")
2B.4 FINANCIAL STATEMENTS AND INFORMATION.
(a) FINANCIAL STATEMENTS. EXOR has previously delivered to the Buyer
copies of its financial statements as of and for the fiscal years ended December
31, 1995 and 1996, as of and for the nine-month period ended September 30, 1997
and as of and for the 10-month period ended October 31, 1997.
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Such financial statements (i) have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the period covered thereby (except that the interim financial
statements do not include footnotes and are subject to normal recurring year-end
adjustments which will not be material in amount), and (ii) fairly present, as
of the dates and for the periods indicated, the financial condition, results of
operations and cash flows of EXOR.
(b) ABSENCE OF UNDISCLOSED LIABILITIES. EXOR has no liability or
commitment (whether known or unknown, whether absolute or contingent, whether
liquidated or unliquidated and whether due or to become due), other than (i) the
liabilities shown on EXOR's balance sheet as of October 31, 1997, and (ii)
liabilities, similar in nature to those shown on such balance sheet, which have
arisen after October 31, 1997 in the ordinary course of business consistent with
past practice (including with respect to amount).
(c) ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, (i) there
has been no material adverse change in EXOR or its business, properties,
operations, condition (financial or otherwise), assets or liabilities, and there
has occurred no event or development which may reasonably be foreseen to have in
the future a material adverse effect on EXOR or its business, properties,
operations, condition (financial or otherwise), assets or liabilities, and (ii)
EXOR has not taken any of the actions set forth in clauses (i) through (xiii) of
Section 4.3(a).
(d) ACCOUNTS RECEIVABLES. EXOR has delivered to the Buyer a true and
correct list of all accounts receivable as of October 31, 1997, including an
aging thereof. All accounts receivable of EXOR arose out of the sales of
services in the ordinary course of business and are reasonably expected to be
collectable in the face value thereof within 90 days of the date of invoice,
using normal collection procedures, net of the reserve for doubtful accounts,
which reserve is reasonably adequate and was calculated in accordance with GAAP.
2B.5 INTELLECTUAL PROPERTY.
(a) EXOR owns or has the right to use all Intellectual Property (as
defined below) used or necessary for the operation of its businesses as
presently conducted or presently proposed to be conducted (the "EXOR
INTELLECTUAL PROPERTY"). Each item of EXOR Intellectual Property will be owned
or available for use by EXOR on identical terms and conditions immediately
following the Closing as it was prior to the Closing. EXOR has taken all
reasonable measures to protect the proprietary nature of each item of EXOR
Intellectual Property, and to maintain in confidence all trade secrets and
confidential information, that it owns or uses. No other person or entity owns
or has any rights to any of the EXOR Intellectual Property (except
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<PAGE> 14
pursuant to agreements or licenses specified in Section 2B.5(c) or 2B.5(d) of
the Disclosure Schedule), and, to EXOR's knowledge, no other person or entity is
infringing, violating or misappropriating any of the EXOR Intellectual Property.
EXOR has delivered or made available to the Buyer correct and complete copies of
all written documentation evidencing ownership of, and any claims or disputes
relating to, each item of EXOR Intellectual Property. "INTELLECTUAL PROPERTY"
means all (i) patents and patent applications, (ii) copyrights and registrations
thereof, (iii) computer software, source code, data and documentation
(excluding, in each case, commercially available "off the shelf" software), (iv)
trade secrets and confidential business information, whether patentable or
unpatentable and whether or not reduced to practice, know-how, manufacturing and
production processes and techniques, research and development information,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information, and (v) other proprietary rights relating to any of the foregoing.
(b) None of the activities or business presently conducted by EXOR
infringes or violates, or constitutes a misappropriation of, any Intellectual
Property rights of any other person or entity. EXOR has not received any
complaint, claim or notice alleging any such infringement, violation or
misappropriation.
(c) Section 2B.5(c) of the Disclosure Schedule identifies each
license, distribution, reseller or other agreement pursuant to which EXOR has
granted any rights to any third party with respect to any EXOR Intellectual
Property.
(d) Section 2B.5(d) of the Disclosure Schedule identifies each item
of EXOR Intellectual Property that is owned by a party other than EXOR, and the
license or agreement pursuant to which EXOR uses it. With respect to each such
item of Intellectual Property:
(i) the license, sublicense or other agreement, covering such
item is legal, valid, binding, enforceable and in full force and effect;
(ii) such license, sublicense or other agreement may be assigned
to the Buyer and will continue to be legal, valid, binding, enforceable and in
full force and effect immediately following the Closing in accordance with the
terms thereof as in effect prior to the Closing; and
(iii) no party to such license, sublicense or other agreement is
in breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination, modification or
acceleration thereunder.
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2B.6 TRADEMARKS. EXOR has used the trademarks listed in Section 2B.6 of the
Disclosure Schedule since the dates set forth in such Section. EXOR has not
licensed or granted any right to use any such trademark to any other person or
entity. EXOR does not use, and in the past has not used, any other trademarks or
trade names other than those listed in Section 2B.6 of the Disclosure Schedule.
2B.7 REAL PROPERTY OWNED AND LEASED.
(a) EXOR does not own any real property.
(b) Section 2B.7 of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to EXOR and lists the term of such
lease or sublease, any extension and expansion options, and the rent payable
thereunder. EXOR has delivered to the Buyer correct and complete copies of the
leases and subleases (as amended to date) listed in Section 2B.7 of the
Disclosure Schedule. With respect to each lease and sublease listed in Section
2B.7 of the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding, enforceable
and in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect prior to the Closing;
(iii) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would constitute
a breach or default or permit termination, modification, or acceleration
thereunder;
(iv) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(v) EXOR has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold; and
(vi) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities.
2B.8 ASSETS.
(a) EXOR owns or leases all tangible assets necessary for the conduct
of its business as presently conducted by EXOR and as presently contemplated to
be conducted. Such tangible assets, taken as a whole, are free from material
defects,
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<PAGE> 16
have been maintained in accordance with normal industry practice, are in good
operating condition and repair (subject to normal wear and tear) and are
suitable for the purposes for which it presently is used. Except as set forth in
the Disclosure Schedule, all such tangible assets are located at EXOR's offices
at 14131 Midway Road, Dallas, Texas. With respect to any such tangible assets
which are not located at EXOR's offices at 14131 Midway Road, Dallas, Texas, the
Company has the right to retrieve such assets from their current location at any
time without any obligation to make a payment to any third party.
(b) Except as set forth in the Disclosure Schedule, no asset of EXOR
(tangible or intangible) is subject to any Security Interest.
(c) Section 2B.8(c) of the Disclosure Schedule sets forth (i) a true,
correct and complete list of all items of tangible personal property, including
without limitation purchased and capitalized software (which may be listed on
Section 2B.5(a) of the Disclosure Schedule in lieu of being listed on Section
2B.8(c) of the Disclosure Schedule), owned by EXOR as of the date hereof, or not
owned by EXOR but in the possession of or used in the business of EXOR (the
"PERSONAL PROPERTY"), other than individual assets with a book value of less
than $5,000; and (ii) a description of the owner of, and any agreement relating
to the use of, each item of Personal Property not owned by EXOR and the
circumstances under which such Personal Property is used. EXOR has good and
marketable title to each item of Personal Property owned by EXOR. Each item of
Personal Property not owned by EXOR is in such condition that upon the return of
such property to its owner in its present condition at the end of the relevant
lease term or as otherwise contemplated by the applicable agreement between the
respective entity and the owner or lessor thereof, the obligations of the
respective entity to such owner or lessor will be discharged.
2B.9 CONTRACTS.
(a) Section 2B.9 of the Disclosure Schedule lists each contract,
agreement or commitment (written or oral) material to EXOR or its business to
which EXOR is a party and under which EXOR currently has, or may in the future
have, any rights or obligations (other than those listed in Section 2B.5 of the
Disclosure Schedule), including without limitation (i) any contract, agreement
or commitment providing for the payment by EXOR of an amount in excess of
$25,000; (ii) any contract, agreement or commitment concerning confidentiality,
ownership of ideas or inventions, work-for-hire, non-disclosure or
non-competition; (iii) any contract, agreement or commitment with any current or
former stockholders or employees of or consultants to EXOR; (iv) any contract,
agreement or commitment with any suppliers of the services of EXOR; and (v) any
contract, agreement or purchase order by a customer which (x) is not in the
ordinary course of business, (y) is for an amount in excess of $15,000 or (z)
requires EXOR to perform over a period of more
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<PAGE> 17
than three months (collectively, together with the agreements and licenses
listed in Section 2B.5 of the Disclosure Schedule, the "CONTRACTS").
(b) EXOR has previously delivered or made available to the Buyer a
complete and accurate copy of each Contract. Each Contract is a valid and
binding agreement between EXOR and the other party or parties thereto, and will
continue to be so immediately following the Closing; and no defaults or breaches
exist under any of the Contracts and none will arise as a result of the purchase
and sale of EXOR Shares contemplated by this Agreement.
2B.10 BOOKS AND RECORDS; BANK ACCOUNTS; POWERS OF ATTORNEY.
(a) The corporate minute books, financial and accounting records and
other business records of EXOR, as furnished to the Buyer, are accurate and
complete in all material respects.
(b) Section 2B.10 of the Disclosure Schedule sets forth a correct
and complete list of all bank accounts and safe deposits of EXOR, and all
authorized signatories with respect thereto.
(c) There are no outstanding powers of attorney executed on behalf
of EXOR.
2B.11 TAX MATTERS. EXOR has filed on a timely basis all Tax Returns (as
defined below) that were required to be filed and all of such Tax Returns were
accurate and complete in all material respects. EXOR has paid on a timely basis
all Taxes which have become due. The Company has not paid or incurred any
penalty, fine or addition to Tax in respect of any filing or failure to file any
Tax Return, or any failure to timely pay any Tax, or in respect of any other
claim or assessment by any taxing authority in respect of any Taxes. The unpaid
Taxes of EXOR for tax periods through September 30, 1997 do not exceed the
accruals and reserves for Taxes set forth on the September 30, 1997 balance
sheet of EXOR. No unsatisfied deficiencies have been asserted or assessed
against EXOR as a result of any audit by the Internal Revenue Service or any
state or local taxing authority, and no examination or audit by any such
authority is currently in progress or, to the knowledge of EXOR, threatened. The
Company has not waived or extended any applicable statute of limitations
relating to the assessment of Taxes. All Taxes that EXOR is or was required by
law to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid on a timely basis to the proper taxing
authority. "TAXES" means all taxes, charges, fees and similar assessments
(including without limitation those relating to income, receipts, excise, real
property, personal property, sales, use, transfer, withholding, employment,
payroll, franchises and value added, and customs and import duties and fees)
imposed by the United
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States of America or any state, local or foreign government, or any agency
thereof. "TAX RETURNS" means all reports, returns, declarations, statements,
forms or other information required to be supplied to a taxing authority in
connection with Taxes.
2B.12 WARRANTIES. No service provided by EXOR is subject to any guaranty,
warranty, right of return or other indemnity other than (i) the applicable
warranty terms which are set forth in Section 2B.12 of the Disclosure Statement
and (ii) any general warranty of merchantability or fitness for a particular
purpose implied as a matter of state law which continues to be applicable
notwithstanding the disclaimer of such warranty made by EXOR in writing.
2B.13 CUSTOMERS. EXOR has good relations with its customers. No significant
customer or prospective customer has indicated to EXOR that it will not purchase
any services from EXOR in the future or that it wishes to receive a refund or
credit for any services previously purchased from EXOR. As of the date of this
Agreement, no unfilled customer order or commitment obligating EXOR to perform
services is being performed at a loss to EXOR. To EXOR's knowledge, no unfilled
customer order or commitment obligating EXOR to perform services will result in
a loss to EXOR upon completion of performance.
2B.14 INSURANCE.
(a) EXOR maintains, has maintained since its inception, and will
maintain until the Closing insurance with respect to its assets and business,
the present scope and coverage amounts of which are described in Section 2B.14
of the Disclosure Schedule.
(b) No professional liability or similar claim has ever been made
against EXOR.
2B.15 LEGAL COMPLIANCE; ENVIRONMENTAL MATTERS.
(a) EXOR, and the conduct and operations of EXOR's business, are in
compliance with each applicable law (including rules, regulations, ordinances
and codes thereunder) of any federal, state, local or foreign government or
governmental authority (including without limitation any relating to public and
employee health and safety, environmental protection, hazardous waste or
applicable building, zoning and other laws), except for any violation or default
which will not result in a material adverse effect on EXOR or its business,
properties, operations, condition (financial or otherwise), assets or
liabilities.
(b) EXOR has complied with all applicable Environmental Laws (as
defined below), except for any failure to comply which would not have a material
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adverse effect on EXOR or its business, properties, operations, condition
(financial or otherwise), assets or liabilities. There is no pending, or, to the
knowledge of EXOR, threatened, civil or criminal litigation, written notice of
violation, formal administrative proceeding, or investigation, inquiry or
information request by any governmental entity, relating to any Environmental
Law involving EXOR. "ENVIRONMENTAL LAW" means any federal, state or local law,
statute, rule or regulation or the common law relating to the environment or
occupational health and safety, including without limitation any statute,
regulation or order pertaining to (i) treatment, storage, disposal, generation
and transportation of industrial, toxic or hazardous substances or solid or
hazardous waste; (ii) air, water and noise pollution; (iii) groundwater and soil
contamination; (iv) the release or threatened release into the environment of
industrial, toxic or hazardous substances, or solid or hazardous waste,
including without limitation emissions, discharges, injections, spills, escapes
or dumping of pollutants, contaminants or chemicals; (v) the protection of wild
life, marine sanctuaries and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels and containers;
(vii) underground and other storage tanks or vessels, abandoned, disposed or
discarded barrels, containers and other closed receptacles; (viii) health and
safety of employees and other persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or oil or petroleum products or solid or hazardous waste. As used above, the
terms "release" and "environment" shall have the meaning set forth in the
federal Comprehensive Environmental Compensation, Liability and Response Act of
1980 (CERCLA).
(c) There have been no releases of any Materials of Environmental
Concern (as defined below) into the environment at any parcel of real property
or any facility formerly or currently owned, operated or controlled by EXOR.
EXOR is not aware of any releases of Materials of Environmental Concern at
parcels of real property or facilities other than those owned, operated or
controlled by EXOR that could reasonably be expected to have an impact on the
real property or facilities owned, operated or controlled by EXOR. "MATERIALS OF
ENVIRONMENTAL CONCERN" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), solid wastes and
hazardous wastes (as such terms are defined under the federal Resources
Conservation and Recovery Act), toxic materials, oil or petroleum and petroleum
products.
(d) To EXOR's knowledge, there are no environmental reports,
investigations or audits relating to premises currently or previously owned or
operated by EXOR.
2B.16 PERMITS. EXOR possesses all permits, licenses, registrations,
certificates, orders, approvals, franchises, variances and similar rights issued
by or obtained from
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any Governmental Entity or any other third party, that are required to conduct
the business of EXOR, each of which is listed in Section 2B.16 of the Disclosure
Schedule (collectively, the "PERMITS"). Each Permit will be in full force and
effect immediately following the Closing and will not expire or terminate as a
result of the transactions contemplated by this Agreement.
2B.17 LITIGATION. EXOR (a) is not subject to any unsatisfied judgment,
order, decree, stipulation or injunction and (b) is not a party to, nor, to
EXOR's knowledge, threatened with, any litigation, suit, action, investigation,
proceeding or controversy before any Governmental Entity.
2B.18 CONFIDENTIAL INFORMATION. Except as set forth in Section 2B.18 of the
Disclosure Schedule, EXOR has not disclosed any information of a proprietary or
confidential nature relating to its business, technology or financial condition
to any person or entity.
2B.19 EMPLOYEES AND CONSULTANTS.
(a) All present employees of EXOR are listed in Section 2B.19(a) of
the Disclosure Schedule, together with their job titles and salaries. Each
present and past employee of EXOR is bound by EXOR's standard confidentiality
agreement, a copy of which is attached to Section 2B.19(a) of the Disclosure
Schedule. No employees of EXOR are represented by any labor union or subject to
any collective bargaining agreement, and the employee relations of EXOR are
good.
(b) Section 2B.19(b) of the Disclosure Schedule lists all
independent contractors who have provided services to the Company since January
1, 1997; provided that such list does not need to include the names of any
persons engaged through a temporary agency which is named on Section 2B.19(b).
Each such independent contractor and each past independent contractor is bound
by EXOR's standard confidentiality agreement for independent contractors, a copy
of which is attached to Section 2B.19(b) of the Disclosure Schedule.
2B.20 EMPLOYEE BENEFITS.
(a) Section 2B.20 of the Disclosure Schedule contains a complete and
accurate list of all Employee Benefit Plans (as defined below) maintained, or
contributed to, by EXOR or any ERISA Affiliate (as defined below). "EMPLOYEE
BENEFIT PLAN" means any "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), any "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA), and any other written or oral plan, agreement or arrangement involving
direct or indirect compensation, including without limitation insurance
coverage, severance benefits,
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disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation. "ERISA AFFILIATE" means any entity
which is or at any applicable time was a member of (i) a controlled group of
corporations (as defined in Section 414(b) of the Internal Revenue Code of 1986,
as amended (the "CODE")), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined under Section 414(m) of the Code or the regulations
under Section 414(o) of the Code), any of which includes EXOR. Complete and
accurate copies of (i) all Employee Benefit Plans which have been reduced to
writing, (ii) written summaries of all unwritten Employee Benefit Plans, (iii)
all related trust agreements, insurance contracts and summary plan descriptions,
and (iv) all annual reports filed on IRS Form 5500, 5500C or 5500R for each
Employee Benefit Plan since inception of the Plan, have been delivered to the
Buyer. Each Employee Benefit Plan has been administered in all material respects
in accordance with its terms and EXOR and each ERISA Affiliate have in all
material respects met their obligations with respect to such Employee Benefit
Plan and have made all required contributions thereto. EXOR and all Employee
Benefit Plans are in compliance in all material respects with the currently
applicable provisions of ERISA and the Code and the regulations thereunder.
(b) There are no known investigations by any governmental entity,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Employee Benefit Plans and proceedings with respect
to qualified domestic relations orders), suits or proceedings against or
involving any Employee Benefit Plan or asserting any rights or claims to
benefits under any Employee Benefit Plan that could give rise to any material
liability.
(c) All the Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended since the date of
its most recent determination letter or application therefor in any respect.
(d) Neither EXOR nor any ERISA Affiliate has ever maintained an
Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.
(e) At no time has EXOR or any ERISA Affiliate been obligated to
contribute to any "multi-employer plan" (as defined in Section 4001(a)(3) of
ERISA).
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(f) There are no unfunded obligations under any Employee Benefit
Plan providing benefits after termination of employment to any employee of EXOR
(or to any beneficiary of any such employee), including but not limited to
retiree health coverage and deferred compensation, but excluding continuation of
health coverage required to be continued under Section 4980B of the Code and
insurance conversion privileges under state law.
(g) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by EXOR or any ERISA Affiliate
that would subject EXOR or any ERISA Affiliate to (i) any material fine,
penalty, tax or liability of any kind imposed under ERISA or the Code or (ii)
any contractual indemnification or contribution obligation protecting any
fiduciary, insurer or service provider with respect to any Employee Benefit
Plan.
(h) No Employee Benefit Plan is funded by, associated with, or
related to a "voluntary employee's beneficiary association" within the meaning
of Section 501(c)(9) of the Code.
(i) Each Employee Benefit Plan is amendable and terminable
unilaterally by EXOR at any time and no Employee Benefit Plan, plan
documentation or agreement, summary plan description or other written
communication distributed generally to employees by its terms prohibits EXOR
from amending or terminating any such Employee Benefit Plan.
(j) Section 2B.20 of the Disclosure Schedule discloses each: (i)
agreement with any stockholder, director, executive officer or other key
employee of EXOR (A) the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving EXOR of
the nature of any of the transactions contemplated by this Agreement, (B)
providing any term of employment or compensation guarantee or (C) providing
severance benefits or other benefits after the termination of employment of such
director, executive officer or key employee; (ii) agreement, plan or arrangement
under which any person may receive payments from EXOR that may be subject to the
tax imposed by Section 4999 of the Code or included in the determination of such
person's "parachute payment" under Section 280G of the Code; and (iii) agreement
or plan binding EXOR, including without limitation any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan, severance
benefit plan, or any Employee Benefit Plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
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(k) Section 2B.20(k) of the Disclosure Schedule sets forth EXOR's
policy with respect to accrued vacation liability, accrued sick time and earned
time-off liability and the amount of such liabilities as of September 30, 1997,
including a list of EXOR employees who have been authorized to carry 1997
accrued vacation time into 1998 and the length of such carry-over vacation time.
2B.21 BUSINESS RELATIONSHIPS WITH AFFILIATES. Section 2B.21 of the
Disclosure Schedule lists any agreements, arrangements or relationships whereby
any officer, director or stockholder of EXOR (or any member of any such person's
"immediate family" (as defined in Rule 16a-1 under the Securities Exchange Act
of 1934)) (a) owns any property or right, tangible or intangible, which is used
in the business of EXOR, (b) has any claim or cause of action against EXOR, (c)
owes any money to EXOR or is owed any money by EXOR or (d) has any other
business relationship with EXOR other than in the capacity as an officer,
director or stockholder (any relationships shall be referred to herein as
"AFFILIATE RELATIONSHIPS").
2B.22 BROKERS' FEES. No financial advisor, broker, agent or finder was
utilized by EXOR or any Stockholder in connection with the transactions
contemplated by this Agreement and no fees are due or owing to any financial
advisor, broker, finder or agent. The Stockholders agree to pay all fees,
commissions, expenses or other compensation due or owing to any financial
advisor, broker, finder, or agent utilized or engaged by EXOR or any Stockholder
in connection with the transactions contemplated hereby.
2B.23 POOLING. Neither EXOR nor, to the knowledge of EXOR, any of the
Stockholders or any other affiliate of EXOR has taken or agreed to take any
action that would prevent the Buyer from accounting for the business combination
to be effected hereby as a "pooling of interests."
2B.24 DISCLOSURE. No representation or warranty by the Stockholders
contained in this Agreement, and no statement contained in the Disclosure
Schedule or any other document, certificate or other instrument delivered to or
to be delivered by or on behalf of the Stockholders or EXOR pursuant to this
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to each Stockholder as follows:
3.1 ORGANIZATION. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The Buyer
is duly qualified to conduct business and is in good standing under the laws of
the Commonwealth of Massachusetts. The Buyer has all requisite power and
authority to own its properties and to carry on its business as now being
conducted, to execute and deliver this Agreement and to perform its obligations
hereunder.
3.2 CAPITALIZATION. The authorized capital stock of the Buyer consists of
(a) 40,000,000 shares of Buyer Common Stock, of which 11,706,591 shares were
issued and outstanding as of November 10, 1997 and (b) 5,000,000 shares of
Preferred Stock, $.01 par value per share, none of which are issued or
outstanding. All of the issued and outstanding shares of Buyer Common Stock are
duly authorized, validly issued, fully paid, nonassessable, and free of all
preemptive rights. All of the Purchase Price Shares will be, when issued in
accordance with this Agreement, duly authorized, validly issued, fully paid,
nonassessable, and free of all preemptive rights.
3.3 AUTHORIZATION. The execution and delivery by the Buyer of this
Agreement, and the consummation by the Buyer of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action on the part
of the Buyer. This Agreement constitutes a valid and binding obligation of the
Buyer, enforceable against the Buyer in accordance with its terms.
3.4 NONCONTRAVENTION. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws,
neither the execution and delivery of this Agreement by the Buyer nor the
consummation by the Buyer of the transactions contemplated by this Agreement
will: (i) conflict with or violate any provision of the Certificate of
Incorporation or bylaws of the Buyer; (ii) require on the part of the Buyer any
filing with, or any permit, authorization, consent or approval of, any
Governmental Entity; (iii) conflict with, result in the breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any agreement,
instrument, contract or arrangement to which the Buyer is a party or by which
the Buyer or any of its assets or properties is bound; or (iv) violate any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
the Buyer or any of its properties or assets.
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3.5 BUYER REPORTS AND FINANCIAL STATEMENTS. The Buyer has previously
furnished to the Stockholders (i) its Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, as filed with the Securities and Exchange
Commission (the "SEC"), (ii) its Quarterly Report on Form 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997 (collectively, the
"BUYER REPORTS"), and (iii) its Certificate of Incorporation and bylaws, as
amended to date. As of their respective dates, the Buyer Reports did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Buyer included in the Buyer Reports (i) comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto and (ii) fairly
present the consolidated financial condition, results of operations and cash
flows of the Buyer as of the respective dates thereof and for the periods
referred to therein in accordance with GAAP.
3.6 LITIGATION. There are no actions, suits, or claims or legal,
administrative or arbitratorial proceeding pending against, or, to the Buyer's
knowledge, threatened against, the Buyer which would adversely affect the
Buyer's performance under this Agreement or the consummation of the transactions
contemplated by this Agreement.
3.7 BROKERS' FEES. No broker, agent or finder was utilized by the Buyer in
connection with the transactions contemplated by this Agreement and no fees are
due or owing to any broker, finder or agent other than to Hamilton Partners. The
Buyer agrees to pay all fees, commissions, expenses or other compensation to
Hamilton Partners and to any other broker, finder or agent utilized or engaged
by the Buyer with respect to the transactions contemplated hereby.
3.8 INVESTMENT REPRESENTATIONS.
(a) The Buyer is acquiring the EXOR Shares for its own account for
investment only, and not with a view to, or for sale in connection with, any
distribution of such EXOR Shares in violation of the Securities Act or any rule
or regulation under the Securities Act.
(b) The Stockholders have informed the Buyer that the EXOR Shares
have not been registered under the Securities Act and are "restricted
securities" within the meaning of the Securities Act, and cannot be sold,
transferred or otherwise disposed of unless they are subsequently registered
under the Securities Act or an exemption from registration is then available.
(c) The Buyer agrees to place a legend substantially in the following
form on each certificate representing the EXOR Shares.
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"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be sold, transferred or otherwise disposed of in the absence
of an effective registration statement under such Act or an
opinion of counsel satisfactory to the corporation to the effect
that such registration is not required."
3.9 ABSENCE OF CERTAIN CHANGES. Since September 30, 1997, there has been
no material adverse change in the Buyer or its business, properties, operations,
condition (financial or otherwise), assets or liabilities, and there has
occurred no event or development which may reasonably be foreseen to have in the
future a material adverse effect on the Buyer or its business, properties,
operations, condition (financial or otherwise), assets or liabilities.
3.10 DISCLOSURE. No representation or warranty by the Buyer contained in
this Agreement, and no statement contained in any other document, certificate or
other instrument delivered to or to be delivered by or on behalf of the Buyer
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
ARTICLE IV
PRE-CLOSING COVENANTS
4.1 EFFORTS. Each of the Parties shall use its reasonable best efforts to
take all actions and to do all things necessary, proper or advisable to
consummate the transactions contemplated by this Agreement.
4.2 NOTICES AND CONSENTS. The Stockholders shall use their reasonable best
efforts to obtain all such waivers, permits, consents, approvals or other
authorizations from third parties and governmental agencies and to effect all
such registrations, filings and notices with or to third parties and
governmental agencies (including without limitation the Required Consents), as
may be necessary or desirable in connection with the performance by the
Stockholders of their obligations under this Agreement.
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4.3 OPERATION OF BUSINESS.
(a) Except as contemplated by this Agreement, during the period from
the date of this Agreement until the Closing, the Stockholders shall cause EXOR
to conduct its operations in the ordinary course of business and in compliance
with all applicable laws and regulations and, to the extent consistent
therewith, use all reasonable efforts to preserve intact its current business
organization, keep its physical assets in good working condition, keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be impaired in
any material respect. Without limiting the generality of the foregoing, the
Stockholders shall cause EXOR not to, except as may be required by applicable
law, without the written consent of the Buyer:
(i) issue, grant or sell any shares of capital stock of EXOR or
any rights, warrants or options to acquire any such shares;
(ii) pay any dividend or other distribution in cash or property
in respect of capital stock or redeem or repurchase any shares of capital stock;
(iii) create, incur or assume any debt not currently outstanding
(including capital leases obligations, but excluding accounts payable incurred
in the ordinary course of business); assume, guarantee, endorse or otherwise
become liable for the obligations of any other person; or make any loans,
advances or capital contributions to, or investments in, any other person;
(iv) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement; increase in any manner the
compensation or fringe benefits of, or materially modify the employment terms
of, or pay any bonuses to, its employees, except, in the case of employees other
than the Stockholders, any increase or modification in the ordinary course of
business; or hire or terminate any employee, other than in the ordinary course
of business, with an annual salary in excess of $40,000;
(v) acquire any assets or make any capital expenditures for an
amount of over $10,000 in any one instance or $50,000 in the aggregate;
(vi) pay any obligation or liability other than in the ordinary
course of business;
(vii) sell, lease, encumber, dispose of, assign, transfer or
license any assets or EXOR Intellectual Property, other than in the ordinary
course of business;
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(viii) enter into, amend, terminate, take or omit to take any
action that would constitute a violation of or default under, or waive any
rights under, any material contract;
(ix) amend its Articles of Incorporation or bylaws;
(x) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP;
(xi) take any action or fail to take any action permitted by
this Agreement with the knowledge that such action or failure to take action
would result in (i) any of the representations and warranties set forth in
Article IIB becoming untrue or (ii) any of the conditions set forth in Article V
not being satisfied;
(xii) knowingly take any action that would jeopardize the
treatment of the transactions contemplated by this Agreement as a "pooling of
interests" for accounting purposes; or
(xiii) agree in writing or otherwise to take any of the foregoing
actions.
(b) Notwithstanding Section 4.3(a), (i) EXOR may proceed with its
plans for leasing and furnishing of additional new office space as described in
the Disclosure Schedule and (ii) EXOR may engage in discussions and negotiations
with another Dallas-based consulting firm regarding a possible acquisition of
such firm by EXOR, as previously described to the Buyer.
4.4 FULL ACCESS. The Stockholders shall permit representatives of the
Buyer to have full access (at all reasonable times, and in a manner so as not to
interfere with the normal business operations of EXOR) to all premises,
properties, technology, financial and accounting records, contracts, other
records and documents, personnel, counsel and auditors of or pertaining to EXOR.
4.5 MONTHLY FINANCIAL STATEMENTS. Within 10 days after the end of each
month prior to the Closing, the Stockholders shall cause EXOR to furnish to the
Buyer an unaudited income statement for such month and a balance sheet as of the
end of such month, prepared on a basis consistent with the financial statements
previously provided to the Buyer by EXOR.
4.6 NOTICE OF BREACHES. The Stockholders shall promptly deliver to the
Buyer written notice of any event or development that would (i) render any
statement, representation or warranty of any Stockholder in this Agreement
(including the Disclosure Schedule) inaccurate or incomplete in any material
respect,
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or (ii) constitute or result in a breach by any Stockholder, or a failure by any
Stockholder to comply with, any agreement or covenant in this Agreement. The
Buyer shall promptly deliver to the Stockholders written notice of any event or
development that would (i) render any statement, representation or warranty of
the Buyer in this Agreement inaccurate or incomplete in any material respect, or
(ii) constitute or result in a breach by the Buyer of, or a failure by the Buyer
to comply with, any agreement or covenant in this Agreement. No such disclosure
shall be deemed to avoid or cure any such misrepresentation or breach.
4.7 EXCLUSIVITY. Until the later of December 31, 1997 or the date this
Agreement terminates pursuant to Article VII hereof, except as permitted by
clause (ii) of Section 4.3(b), no Stockholder shall, and the Stockholders shall
cause EXOR and its officers, directors, employees, representatives and agents
not to, directly or in directly, (i) encourage, solicit, initiate, engage or
participate in discussions or negotiations with any person or entity (other than
the Buyer) concerning any merger, consolidation, sale of material assets, tender
offer, recapitalization, purchase of shares of common stock or other equity
interest of EXOR, proxy solicitation or other business combination involving
EXOR or (ii) provide any non-public information concerning, or access to, the
business, properties or assets of EXOR to any person or entity (other than in
the ordinary course of business of EXOR to a party not interested in pursuing a
transaction of the nature described in clause (i) above). The Stockholders shall
immediately notify the Buyer of, and shall disclose to the Buyer the details of,
any inquiries or discussions of the nature described in the preceding sentence.
ARTICLE V
CONDITIONS TO CLOSING
5.1 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligation of the Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction (or waiver by the Buyer) of the following conditions:
(a) EXOR and each Stockholder shall have obtained all Required
Consents and any additional waivers, permits, consents, approvals or other
authorizations, and effected all of the registrations, filings and notices,
referred to in Section 4.2, except for any which if not obtained or effected
would not have a material adverse effect on EXOR or its business, properties,
operations, condition (financial or otherwise), assets or liabilities or on the
ability of the Parties to consummate the transactions contemplated by this
Agreement (which shall be identified to the Buyer in writing at the Closing);
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(b) no action, suit or proceeding shall be pending or threatened
wherein an unfavorable judgment, order, decree, stipulation or injunction would
(i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation or (iii) affect adversely the right of the
Buyer to own, operate or control any of the assets and operations of EXOR
following the Closing, and no such judgment, order, decree, stipulation or
injunction shall be in effect;
(c) the representations and warranties of the Stockholders set forth
in Articles IIA and IIB shall be true and correct when made on the date hereof
and shall be true and correct in all material respects (or in ALL respects in
the case of any representation or warranty which includes a concept of
materiality) as of the Closing as if made as of the Closing (except for
representations and warranties made as of a specific date, which shall be true
and correct as of such date);
(d) the Stockholders shall have performed or complied in all material
respects with all agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Closing;
(e) the stockholder's equity of EXOR as of the Closing Date shall be
greater than or equal to $2,000,000.
(f) the Stockholders shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified in clauses (a) through (e)
of this Section 5.1 is satisfied;
(g) each director and officer of EXOR shall have signed and delivered
to EXOR a resignation from their current positions as directors and officers,
which resignations shall be satisfactory in form and substance to the Buyer;
(h) each of Mark Hallman, Boyd Scroggins and Carolyn R. Waygood shall
have executed and delivered to the Buyer the applicable Employment Agreement in
substantially the form attached hereto as EXHIBIT A-1 or EXHIBIT A-2, as
applicable, along with the Non-Disclosure, Non-Solicitation and Non-Compete
Agreement attached as a Schedule thereto;
(i) each employee of EXOR shall have executed and delivered to the
Buyer the Buyer's standard form of Non-Disclosure and Non-Solicitation Agreement
in substantially the form attached hereto as EXHIBIT B;
(j) each of the Stockholders shall have executed and delivered to
EXOR a Stockholder Noncompetition Agreement in substantially the form attached
hereto as EXHIBIT C;
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(k) the Buyer shall be satisfied with its due diligence review of
EXOR, including, without limitation, with the audited financial statements of
EXOR for the year ended December 31, 1996 prepared by KPMG Peat Marwick;
(l) the Buyer shall have received from Dechert Price & Rhoads an
opinion with respect to the matters set forth in EXHIBIT D attached hereto,
addressed to the Buyer and dated as of the Closing Date;
(m) the Buyer shall have received a letter from KPMG Peat Marwick,
auditors for the Buyer, in a form reasonably satisfactory to the Buyer, to the
effect that, and the Buyer shall otherwise be reasonably satisfied that, the
Buyer may treat the transaction contemplated by this Agreement as a "pooling of
interests" for accounting purposes; and
(n) the spouse of each Stockholder residing in a community property
state shall have executed and delivered a spousal consent in form reasonably
satisfactory to the Buyer and the Stockholders.
5.2 CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDERS. The obligation of each
Stockholder to consummate the sale of his EXOR Shares contemplated hereby is
subject to the satisfaction (or waiver by the Stockholders) of the following
conditions:
(a) the representations and warranties of the Buyer set forth in
Article III shall be true and correct when made on the date hereof and shall be
true and correct in all material respects (or in ALL respects in the case of any
representation or warranty which includes a concept of materiality) as of the
Closing as if made as of the Closing (except for representations and warranties
made as of a specific date, which shall be true and correct as of such date);
(b) the Buyer shall have performed or complied in all material
respects with its agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Closing;
(c) the Buyer shall have delivered to each Stockholder a certificate
to the effect that each of the conditions specified in clauses (a) and (b) of
this Section 5.2 is satisfied;
(d) the Stockholders shall have received from Hale and Dorr LLP an
opinion with respect to the matters set forth in EXHIBIT E attached hereto,
addressed to the Stockholders and dated the Closing Date; and
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(e) the Buyer shall have delivered to the Stockholders by check or
wire transfer the payments to be paid at the Closing pursuant to the Stockholder
Noncompetition Agreements (the form of which is attached hereto as EXHIBIT C).
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders shall, jointly
and severally, indemnify the Buyer and EXOR in respect of, and hold the Buyer
and EXOR harmless against, any and all debts, obligations and other liabilities,
monetary damages, fines, fees, penalties, interest obligations, deficiencies,
losses, costs and expenses (including without limitation amounts paid in
settlement, interest, court costs, costs of investigators, fees and expenses of
attorneys, accountants, financial advisors and other experts, and other expenses
of litigation) (collectively, "DAMAGES") incurred or suffered by the Buyer or
EXOR resulting from, relating to or constituting:
(i) any misrepresentation, breach of warranty or failure to perform
any covenant or agreement of any Stockholder contained in this Agreement or in
the certificate delivered pursuant to Section 5.1(f);
(ii) the termination of employment of employees of EXOR prior to the
Closing that arose under any federal or state law or under any employee benefit
plan established or maintained by EXOR, or any workplace conditions of EXOR
existing prior to the Closing; and
(iii) any claim by a stockholder or former stockholder of EXOR, or
any other person or entity, seeking to assert, or based upon: (i) ownership or
rights to ownership of any shares of stock of EXOR or options therefor; (ii) any
rights of a stockholder, including any option or preemptive rights or rights to
notice or to vote; (iii) any rights under the Articles of Incorporation, bylaws
or other organizational document of EXOR; or (iv) any claim that his, her or its
shares were wrongfully repurchased by EXOR.
6.2 INDEMNIFICATION BY THE BUYER. The Buyer shall indemnify each
Stockholder in respect of, and hold each Stockholder harmless against, any and
all Damages incurred or suffered by such Stockholder resulting from, relating to
or constituting any misrepresentation, breach of warranty or failure to perform
any covenant or agreement of the Buyer contained in this Agreement.
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6.3 CLAIMS FOR INDEMNIFICATION
(a) THIRD-PARTY CLAIMS. A Party entitled to indemnification under
this Article VI (which, in the case of a claim by the Stockholders, shall be
deemed, solely for the purposes of this Section 6.3, to be the Stockholders'
Representative (as defined below)) (an "INDEMNIFIED PARTY") shall give prompt
written notification to the Party from whom indemnification is sought (which, in
the case of a claim by the Buyer, shall be deemed, solely for the purposes of
this Section 6.3, to be the Stockholders' Representative) (the "INDEMNIFYING
PARTY") of the commencement of any action, suit or proceeding relating to a
third-party claim for which indemnification pursuant to this Article VI may be
sought. Within 15 days after delivery of such notification, the Indemnifying
Party may, upon written notice thereof to the Indemnified Party, assume control
of the defense of such action, suit or proceeding with counsel reasonably
satisfactory to the Indemnified Party, provided the Indemnifying Party
acknowledges in writing to the Indemnified Party that any damages, fines, costs
or other liabilities that may be assessed against the Indemnified Party in
connection with such action, suit or proceeding constitute Damages for which the
Indemnified Party shall be entitled to indemnification pursuant to this Article
VI. If the Indemnifying Party does not assume control of such defense, the
Indemnified Party shall control such defense. The Party or Parties not
controlling such defense may participate therein at its or their own expense;
provided that if the Indemnifying Party assumes control of such defense and the
Indemnified Party reasonably concludes that the Indemnifying Party and the
Indemnified Party have conflicting interests or different defenses available
with respect to such action, suit or proceeding, the reasonable fees and
expenses of counsel to the Indemnified Party shall be considered "Damages" for
purposes of this Agreement. The Party or Parties controlling such defense shall
keep the other Party or Parties advised of the status of such action, suit or
proceeding and the defense thereof and shall consider in good faith
recommendations made by the other Party or Parties with respect thereto. The
Indemnified Party shall not agree to any settlement of such action, suit or
proceeding without the prior written consent of the Indemnifying Party, which
shall not be unreasonably withheld or delayed. The Indemnifying Party shall not
agree to any settlement of such action, suit or proceeding without the prior
written consent of the Indemnified Party, which shall not be unreasonably
withheld or delayed.
(b) PROCEDURE FOR OTHER CLAIMS. An Indemnified Party wishing to
assert a claim for indemnification under this Article VI which is not subject to
Section 6.3(a) shall deliver to the Indemnifying Party a written notice (a
"CLAIM NOTICE") which contains (i) a description and the amount (the "CLAIMED
AMOUNT") of any Damages incurred by the Indemnified Party, (ii) a statement that
the Indemnified Party is entitled to indemnification under this Article VI for
such Damages and a reasonable explanation of the basis therefor, and (iii) a
demand for payment in the amount of such Damages. Within twenty days after
delivery of a Claim Notice, the
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Indemnifying Party shall deliver to the Indemnified Party a written response in
which the Indemnifying Party shall: (i) agree that the Indemnified Party is
entitled to receive all of the Claimed Amount (in which case such response shall
be accompanied by a payment by the Indemnifying Party to the Indemnified Party
of the Claimed Amount), (ii) agree that the Indemnified Party is entitled to
receive part, but not all, of the Claimed Amount (the "AGREED AMOUNT") (in which
case such response shall be accompanied by a payment by the Indemnifying Party
to the Indemnified Party of the Agreed Amount) or (iii) contest that the
Indemnified Party is entitled to receive any of the Claimed Amount. If the
Indemnifying Party in such response contests the payment of all or part of the
Claimed Amount, the Indemnifying Party and the Indemnified Party shall use good
faith efforts to resolve such dispute. If such dispute is not resolved within 60
days following the delivery by the Indemnifying Party of such response, the
Indemnifying Party and the Indemnified Party shall each have the right to submit
such dispute to binding arbitration in accordance with Section 9.10.
(c) Notwithstanding the provisions of Section 6.3(a), if a third
party asserts (other than by means of a lawsuit) that the Buyer or EXOR is
liable to it for a monetary or other obligation which may constitute or result
in Damages for which the Buyer or EXOR may be entitled to indemnification
pursuant to this Article VI, and the Buyer reasonably determines that it has a
valid business reason to fulfill such obligation, then (i) the Buyer shall be
entitled to satisfy such obligation, without prior notice to or consent from the
Stockholders, (ii) the Buyer may make a claim for indemnification pursuant to
this Article VI in accordance with the provisions of this Section 6.3, and (iii)
the Buyer or EXOR shall be reimbursed, in accordance with the provisions of this
Section 6.3, for any such Damages for which it is entitled to indemnification
pursuant to this Article VI (subject to the right of the Stockholders to
dispute, in the manner set forth in this Section 6.3, the Buyer's entitlement to
indemnification or the amount for which it is entitled to indemnification).
(d) Each Stockholder hereby irrevocably appoints Charles M. Waygood
(the "STOCKHOLDERS' REPRESENTATIVE") to serve as such Stockholder's
representative and attorney-in-fact with respect to any actions and decisions
required or permitted to be made under this Article VI and agrees to be bound by
any actions or decisions taken by the Stockholders' Representative with respect
thereto.
6.4 PAYMENT OF AMOUNTS BY STOCKHOLDERS. Any amounts required to be paid to
the Buyer pursuant to the Stockholder's indemnification obligations shall be
settled by the surrender to the Buyer of Purchase Price Shares which shares will
be valued at $52.31 per share (subject to equitable adjustment in the event of
any stock split, stock dividend, reverse stock split or similar event affecting
the Buyer Common Stock after the date hereof). Notwithstanding the foregoing, if
a Stockholder no longer hold sufficient Purchase Price Shares to satisfy his or
her indemnification
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obligations, such Stockholder's indemnification obligations will be settled by
the payment of cash).
6.5 SURVIVAL.
(a) The representations and warranties of the Stockholders and the
Buyer set forth in this Agreement shall survive the execution and delivery
hereof and the Closing and continue until the first anniversary of the Closing
Date and shall not be affected by an examination made for or on behalf of the
Buyer or the knowledge of any of the Buyer's officers, directors, stockholders,
employees or agents; PROVIDED, HOWEVER, that those representations and
warranties of the Stockholders and the Buyer that relate to contingencies that
are subject to resolution through the audit process shall only survive the
execution and delivery hereof and the Closing until the earlier of (i) the
public issuance of the first independent audit report on the Buyer following the
Closing which covers a period of time subsequent to the Closing and (ii) the
first anniversary of the Closing Date.
(b) Any claim asserted in writing prior to the expiration as provided
in Section 6.5(a) of the representation or warranty that is the basis for such
claim shall survive until such claim is finally resolved and satisfied.
6.6 LIMITATIONS.
(a) Notwithstanding anything to the contrary herein, (i) the
aggregate liability of the Buyer or the Stockholders for Damages under this
Article VI shall not exceed $1,600,000 and (ii) an Indemnifying Party shall not
be liable under this Article VI unless and until the aggregate Damages of an
Indemnified Party exceed $100,000.
(b) No Stockholder shall have any right of contribution against EXOR
with respect to any breach of any of the representations, warranties, covenants
or agreements under this Agreement relating to EXOR.
(c) Notwithstanding anything to the contrary herein, with respect to
any misrepresentation or breach of warranty of a representation or warranty set
forth in Article IIB, neither Charles M. Waygood nor Boyd Scroggins shall be
liable to the Buyer or EXOR under Section 6.1 for more than his respective
proportionate share of the aggregate liability to the Buyer or EXOR under
Section 6.1 as a result of such misrepresentation or breach of warranty. For
purposes of the prior sentence Charles M. Waygood's "proportionate share" shall
be deemed to be 19% and Boyd Scroggins' "proportionate share" shall be deemed to
be 5%.
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ARTICLE VII
TERMINATION
7.1 TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
prior to the Closing, as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent; or
(b) the Buyer may terminate this Agreement by giving written notice
to the Stockholders in the event any Stockholder is in material breach, and the
Stockholders may terminate this Agreement by giving written notice to the Buyer
in the event the Buyer is in material breach, of any representation, warranty,
covenant or agreement contained in this Agreement and such breach is not
remedied within 10 days of delivery of written notice thereof; or
(c) the Buyer may terminate this Agreement by giving written notice
to the Stockholders if the Closing shall not have occurred on or before December
31, 1997 by reason of the failure of any condition precedent under Section 5.1
hereof (unless the failure results primarily from a breach by the Buyer of any
representation, warranty, covenant or agreement contained in this Agreement); or
(d) the Stockholders may terminate this Agreement by giving written
notice to the Buyer if the Closing shall not have occurred on or before December
31, 1997 by reason of the failure of any condition precedent under Section 5.2
hereof (unless the failure results primarily from a breach by a Stockholder of
any representation, warranty, covenant or agreement contained in this
Agreement).
7.2 EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to Section 7.1, all obligations of the Parties hereunder shall terminate without
any liability of any Party to the other Parties (except for any liability of a
Party for breaches of this Agreement).
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ARTICLE VIII
REGISTRATION RIGHTS
8.1 REGISTRATION OF SHARES.
(a) The Buyer shall use its best efforts to file with the SEC, within
30 days after the Closing Date, a registration statement covering the resale to
the public by the Stockholders of 15% of the Purchase Price Shares (the "FIRST
REGISTRATION STATEMENT"). The Buyer shall use its best efforts to file with the
SEC, within 180 days after the Closing Date, a second registration statement
covering the resale to the public by the Stockholders of an additional 15% of
the Purchase Price Shares (the "SECOND REGISTRATION STATEMENT"). The Buyer shall
use its best efforts to file with the SEC, within 270 days after the Closing
Date, a third registration statement covering the resale to the public by the
Stockholders of an additional 15% of the Purchase Price Shares (the "THIRD
REGISTRATION STATEMENT"). The First Registration Statement, the Second
Registration Statement and the Third Registration Statement are referred to
herein collectively as the "STOCKHOLDER REGISTRATION STATEMENTS". The Buyer
shall use its best efforts to cause each Stockholder Registration Statement to
be declared effective by the SEC as soon as practicable after the filing
thereof, PROVIDED that no Stockholder Registration Statement shall be declared
effective until after financial results covering at least 30 days of combined
operations of EXOR and the Buyer after the Closing Date shall have been publicly
released. The Buyer shall use its best efforts to cause each Stockholder
Registration Statement to remain effective until, in each case, the earlier of
(i) the first anniversary of the Closing Date and (ii) such time as all of the
Purchase Price Shares covered by such Stockholder Registration Statement have
been sold.
(b) If, following the first anniversary of the Closing Date, the
Buyer fails to timely file all reports required to be filed by it and referred
to in paragraph (c)1 of Rule 144 under the Securities Act or any similar
successor provisions and such failure results in a loss to the Stockholders of
the availability of Rule 144 for a period in excess of 15 days, then the Buyer
shall file with the SEC, within 10 days of the expiration of such 15 day period,
a registration statement covering the resale to the public by the Stockholders
of all of the Purchase Price Shares not previously sold. The Buyer shall use its
best efforts to cause such registration statement to be declared effective by
the SEC as soon as practicable after the filing thereof and to cause such
registration statement to remain effective until the earlier of (i) the second
anniversary of the Closing Date and (ii) such time as all of the Purchase Price
Shares covered by such registration statement have been sold.
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8.2 PIGGYBACK REGISTRATION RIGHTS.
(a) During the period commencing on the first anniversary of the
Closing Date and ending on the second anniversary of the Closing Date, unless
the Purchase Price Shares are then saleable without limitation as to volume
under Rule 144 or otherwise covered by an effective registration statement, if
the Buyer proposes to file for its own account a registration statement under
the Securities Act on any form (other than a Registration Statement on Form S-4
or S-8 or any successor form for securities to be offered in a transaction of
the type referred to in Rule 145 under the Securities Act or to employees of the
Buyer pursuant to any employee benefit plan, respectively) for the issuance and
sale by the Buyer of shares of Buyer Common Stock (excluding the issuance and
sale of debt securities that are convertible into Buyer Common Stock), the Buyer
will give written notice to all holders of Purchase Price Shares at least 10
days before the initial filing with the SEC of such registration statement,
which notice shall set forth the intended method of disposition of the
securities proposed to be registered by the Buyer; PROVIDED, that no notice need
be given if the Buyer is not, under Section 8.2(b), required to include Purchase
Price Shares in the registration statement that the Buyer intends to file. The
notice shall offer to include in such filing the aggregate number of Purchase
Price Shares as the Stockholders receiving such notice may request.
(b) Each Stockholder whose shares are not then saleable without
limitation as to volume under Rule 144 or otherwise covered by an effective
registration statement and who desires to have Purchase Price Shares registered
under this Section 8.2 shall advise the Buyer in writing within 10 days after
the date of receipt of such offer from the Buyer, setting forth the amount of
such Purchase Price Shares for which registration is requested. The Buyer shall
thereupon include in such filing the number of Purchase Price Shares for which
registration is so requested, subject to the next sentence, and shall use its
best efforts to effect registration under the Securities Act of such shares. If
the managing underwriter of a proposed public offering shall advise the Buyer
that, in its opinion, the distribution of all or any of the Purchase Price
Shares requested to be included in the registration concurrently with the
securities being registered by the Buyer would adversely affect the distribution
of such securities by the Buyer, then the number of Purchase Price Shares
included therein shall be reduced to such amount, if any, that the managing
underwriter believes may be sold without causing such adverse effect (provided
that any such reduction shall be effected on a pro rata basis with any other
shares requested to be included therein by any other stockholders, excluding
Sapient, entitled to include shares therein).
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8.3 LIMITATIONS ON REGISTRATION RIGHTS.
(a) The Buyer may, by written notice to the Stockholders, (i) delay
the filing or effectiveness of any registration statement filed or to be filed
pursuant to this Article VIII or (ii) suspend any registration statement filed
pursuant to this Article VIII after effectiveness and require that the
Stockholders immediately cease sales of shares pursuant to such registration
statement, in the event that:
(A) the Buyer is engaged in any activity or transaction or preparations or
negotiations for any activity or transaction ("BUYER ACTIVITY") which the Buyer
desires to keep confidential and the Board of Directors of the Buyer determines
in good faith that it would be detrimental to the Buyer for such registration to
be effected at such time; provided that the Buyer shall have the right to defer
a filing for a period of not more than 90 days; or
(B) the Buyer files a registration statement (other than a registration
statement on Form S-4 or S-8 or any successor form) with the SEC for the purpose
of registering under the Securities Act any securities to be publicly offered
and sold by the Buyer and the Buyer pursues the preparation, filing and
effectiveness of such registration statement with diligence.
(b) If the Buyer delays or suspends a registration statement filed
pursuant to this Article VIII or requires the Stockholders to cease sales of
shares pursuant to paragraph (a) above, the Buyer shall, as promptly as
practicable following the termination of the circumstance which entitled the
Buyer to do so, take such actions as may be necessary to file or reinstate the
effectiveness of such registration statement and/or give written notice to all
Stockholders authorizing them to resume sales pursuant to such registration
statement. If as a result thereof the prospectus included in the registration
statement has been amended to comply with the requirements of the Securities
Act, the Buyer shall enclose such revised prospectus with the notice to
Stockholders given pursuant to this paragraph (b), and the Stockholders shall
make no offers or sales of shares pursuant to any registration statement other
than by means of such revised prospectus.
8.4 REGISTRATION PROCEDURES.
(a) In connection with the filing by the Buyer of each registration
statement filed pursuant to this Article VIII, the Buyer shall furnish to each
Stockholder a copy of the prospectus in conformity with the requirements of the
Securities Act.
(b) The Buyer shall use its best efforts to register or qualify the
Purchase Price Shares covered by each registration statement filed pursuant to
this
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Article VIII under the securities laws of such states as the Stockholders shall
reasonably request; PROVIDED, HOWEVER, that the Buyer shall not be required in
connection with this paragraph (b) to qualify as a foreign corporation or
execute a general consent to service of process in any jurisdiction.
(c) If the Buyer has delivered preliminary or final prospectuses to
the Stockholders and after having done so the prospectus is amended to comply
with the requirements of the Securities Act, the Buyer shall promptly notify the
Stockholders and, if requested by the Buyer, the Stockholders shall immediately
cease making offers or sales of shares under the registration statement and
return all prospectuses to the Buyer. The Buyer shall promptly provide the
Stockholders with revised prospectuses and, following receipt of the revised
prospectuses, the Stockholders shall be free to resume making offers and sales
under the registration statement.
(d) The Buyer shall pay the costs and expenses incurred by it in
complying with its obligations under this Article VIII, including, without
limitation, all registration and filing fees, Nasdaq listing fees, fees and
expenses of counsel for the Buyer, and fees and expenses of accountants for the
Buyer, but excluding (i) any brokerage fees, selling commissions or underwriting
discounts incurred by the Stockholders in connection with sales under
registration statements and (ii) the fees and expenses of any counsel retained
by Stockholders.
(e) The Buyer shall have the right to select one or more nationally
recognized underwriters to manage any offering under a registration statement
filed pursuant to Section 8.1 subject to the approval of Stockholders holding a
majority of the Purchase Price Shares requested to be included in such
registration statement, which approval shall not be unreasonably withheld;
PROVIDED, that no approval of the Stockholders will be required if the managing
underwriter selected by the Buyer is Goldman, Sachs & Co., Morgan Stanley or
Deutsche Morgan Grenfell.
8.5 REQUIREMENTS OF STOCKHOLDERS.
(a) The Buyer shall not be required to include any Purchase Price Shares
in a registration statement filed pursuant to this Article VIII unless:
(i) the Stockholder owning such shares furnishes to the Buyer in
writing such information regarding such Stockholder and the proposed sale of
Purchase Price Shares by such Stockholder as the Buyer may reasonably request in
writing or as shall be required in connection therewith by the SEC or any state
securities law authorities;
(ii) such Stockholder shall have provided to the Buyer its written
agreement:
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(x) to indemnify the Buyer and each of its directors and
officers against, and hold the Buyer and each of its directors and officers
harmless from, any losses, claims, damages, expenses or liabilities (including
reasonable attorneys fees) to which the Buyer or such directors and officers may
become subject by reason of any statement or omission in the Stockholder
Registration Statement made in reliance upon, or in conformity with, a written
statement by such Stockholder previously furnished to the Buyer by the
Stockholder pursuant to this Section 8.4; and
(y) to report to the Buyer sales made pursuant to the
registration statement;
(iii) in the event of an underwritten offering pursuant to a
registration statement filed pursuant to Section 8.1, such Stockholder agrees to
execute and deliver an underwriting agreement approved by the Buyer, the holders
of at least a majority of the Purchase Price Shares requested to be registered
therein and the holders of at least a majority of any other shares of Buyer
Common Stock being registered therein; and
(iv) in the event of an underwritten offering pursuant to a
registration statement filed pursuant to Section 8.2, such Stockholder agrees to
execute and deliver a customary underwriting agreement approved by the Buyer and
the managing underwriter for such offering.
(b) As a condition to including Purchase Price Shares in any
registration statement filed pursuant to this Article VIII, the Buyer may
require each Stockholder to agree in writing to engage Goldman, Sachs & Co., to
act as such Stockholder's broker, dealer or other intermediary in connection
with sales to be made pursuant to the registration statement. Notwithstanding
the foregoing, each Stockholder shall be entitled to sell up to 2,500 shares per
calendar month through any broker of its choice.
8.6 INDEMNIFICATION. The Buyer agrees to indemnify and hold harmless each
Stockholder whose shares are included in a registration statement filed pursuant
to this Article VIII against any losses, claims, damages, expenses or
liabilities to which such Stockholder may become subject by reason of any untrue
statement of a material fact contained in such registration statement or any
omission to state therein a fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, expenses or liabilities arise out of or are based upon
information furnished to the Buyer by or on behalf of a Stockholder for use in
such registration statement. The Buyer shall have the right to assume the
defense and settlement of any claim or suit for which the Buyer may be
responsible for indemnification under this Section 8.6.
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8.7 ASSIGNMENT OF RIGHTS. A Stockholder may not assign any of its rights
under this Article VIII except in connection with the transfer of some or all of
his or her Purchase Price Shares to a child or spouse, or trust for their
benefit, PROVIDED each such transferee agrees in a written instrument delivered
to the Buyer to be bound by the provisions of this Article VIII.
8.8 RULE 144 REPORTS. During the period from the Closing until the second
anniversary of the Closing Date, the Buyer will file on a timely basis all
reports required to be filed by it and referred to in paragraph (c)1 of Rule 144
under the Securities Act or any similar successor provisions. The Buyer agrees
to promptly file thereafter any such report not so filed.
ARTICLE IX
MISCELLANEOUS
9.1 GRANT OF STOCK OPTIONS. The Buyer shall grant to persons who were
employees of EXOR prior to the Closing and who enter into a Non-Disclosure,
Non-Solicitation and Non-Compete Agreement (such agreement to be in the form
attached as a schedule to EXHIBIT A-1) in connection with their continued
employment by EXOR or the Buyer, options under the Buyer's 1996 Equity Stock
Incentive Plan, a copy of which has been provided to the Stockholders, for an
aggregate of 30,000 shares of Buyer Common Stock. Such options will be granted
at an exercise price equal to fair market value on the date of grant and will be
subject to the other terms and conditions of the 1996 Equity Stock Incentive
Plan and the form of stock option agreement attached hereto as EXHIBIT F. The
Buyer shall use its best efforts to register on Form S-8 the shares of Buyer
Common Stock issuable upon exercise of the options contemplated by this Section.
9.2 CERTAIN AGREEMENTS REGARDING POOLING ACCOUNTING. Each Stockholder
agrees that he or she will not sell, transfer or otherwise dispose of, or reduce
his or her interest in or risk relating to, any shares of Buyer Common Stock
until after such time as the Buyer has published (within the meaning of
Accounting Series Release No. 130, as amended, of the Securities and Exchange
Commission) financial results covering at least 30 days of combined operations
of EXOR and the Buyer. Until the earlier of the Closing or the termination of
this Agreement, each Stockholder agrees that he or she will not sell, transfer
or otherwise dispose of, or reduce his or her interest in or risk relating to,
any Company Shares presently owned by such Stockholder.
9.3 PRESS RELEASES AND PUBLIC DISCLOSURE. No Party shall (and the
Stockholders shall cause EXOR not to) issue any press release or other public
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disclosure relating to the subject matter of this Agreement without the prior
written approval of the other Parties; PROVIDED, HOWEVER, that the Buyer may
make any public disclosure it believes in good faith is required by law,
regulation or stock market rules (in which case the Buyer shall use reasonable
efforts to advise the Stockholders of the proposed disclosure prior to making
the disclosure and the Stockholders shall cooperate with the Buyer with respect
to such disclosure). The Parties agree that the Buyer shall be entitled to issue
a press release regarding the execution of this Agreement, which press release
shall be substantially in the form previously provided to the Stockholders.
9.4 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; PROVIDED, HOWEVER, that the provisions of
Article VI are intended for the benefit of the persons specified therein and the
respective legal representatives, successors and assigns.
9.5 ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations among the Parties, written
or oral, that may have related in any way to the subject matter hereof,
including without limitation the letter agreement dated October 14, 1997 among
the Buyer and the Stockholders, but excluding the Confidential Disclosure
Agreement between the Buyer and EXOR dated October 6, 1997 (which shall remain
in effect).
9.6 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties; provided that no such consent shall be required for such
an assignment by the Buyer to an affiliated entity of the Buyer.
9.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.8 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.9 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage
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prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service, in each case to the intended recipient as set forth
below:
IF TO THE STOCKHOLDERS:
To such Stockholder's address as set forth on Schedule I to this Agreement
WITH A COPY TO:
Paul Gluck, Esq.
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, NY 10112
Telecopy: 212-698-3599
IF TO THE BUYER:
Sapient Corporation
One Memorial Drive
Cambridge, MA 02142
Telecopy: 617-621-1300
Attn: Deborah England Gray, Esq.
General Counsel
WITH A COPY TO:
Jonathan Wolfman, Esq.
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telecopy: (617) 526-5000
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
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9.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Massachusetts without
giving effect to any choice or conflict of law provision or rule (whether of the
Commonwealth of Massachusetts or any other jurisdiction) that would cause the
application of laws of any jurisdiction other than those of the Commonwealth of
Massachusetts.
9.11 DISPUTE RESOLUTION.
(a) GENERAL. In the event that any dispute should arise among the
Parties with respect to any matter covered by this Agreement or the
interpretation of this Agreement, the Parties shall resolve such dispute in
accordance with the procedures set forth in this Section 9.11.
(b) ARBITRATION.
(i) Subject to first satisfying the requirements of Section
6.3(b), if applicable, either Party may submit any matter referred to in Section
9.11(a) to arbitration by notifying the other Party, in writing, of such
dispute. Within 10 days after receipt of such notice, the Parties shall
designate in writing one arbitrator to resolve the dispute; PROVIDED, that if
the Parties cannot agree on an arbitrator within such 10-day period, the
arbitrator shall be selected by the Boston, Massachusetts office of the American
Arbitration Association. The arbitrator so designated shall not be an Affiliate,
employee, consultant, officer, director or stockholder of any Party.
(ii) Within 15 days after the designation of the arbitrator, the
arbitrator, the Buyer and the Stockholders Representative shall meet, at which
time the Buyer and the Stockholders Representative shall be required to set
forth in writing all disputed issues and a proposed ruling on each such issue.
(iii) The arbitrator shall set a date for a hearing, which shall
be no later than 30 days after the submission of written proposals pursuant to
Section 9.11(b)(ii), to discuss each of the issues identified by the Parties.
Each Party shall have the right to be represented by counsel. The arbitration
shall be governed by the Commercial Arbitration Rules of the American
Arbitration Association; PROVIDED, HOWEVER, that the arbitrator shall have sole
discretion with regard to the admissibility of evidence.
(iv) The arbitration shall use his or her best efforts to rule
on each disputed issue within 30 days after the completion of the hearings
described in Section 9.11(b)(iii). The determination of the arbitrator as to the
resolution of any dispute shall be binding and conclusive upon all parties
hereto. All rulings of the arbitrator shall be in writing and shall be delivered
to the Parties.
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(v) The (1) attorneys' fees of the Parties in any arbitration,
(2) fees of the arbitrator, and (3) costs and expenses of the arbitration shall
be borne by the Parties as determined by the arbitrator.
(vi) Any arbitration pursuant to this Section 9.11 shall be
conducted in Boston, Massachusetts. Any arbitration award may be entered in and
enforced by any court having jurisdiction there over and shall be final and
binding upon the parties.
(vii) Notwithstanding the foregoing, nothing in this Section 9.11
shall be construed as limiting in any way the right of a party to seek
injunctive relief with respect to any actual or threatened breach of this
Agreement from a court of competent jurisdiction.
9.12 AMENDMENTS AND WAIVERS. The Parties may mutually amend or waive any
provision of this Agreement at any time. No amendment or waiver of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by each of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty, covenant or agreement hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty, covenant or agreement
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
9.13 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforce ability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction or an arbitration proceeding conducted pursuant to
Section 9.11 declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the body making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
9.14 SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees that
the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions
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<PAGE> 47
of this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof.
9.15 EXPENSES. Except as provided in the next sentence, each Party shall
bear its own costs and expenses (including legal and other professional fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby (it being understood that any such costs and expenses
incurred by EXOR shall be paid by the Stockholders). Regardless of whether the
Closing occurs, the Buyer shall bear the costs and expenses of KPMG Peat Marwick
incurred in connection with the preparation of audited financial statement of
EXOR.
9.16 CONSTRUCTION. The language used in this Agreement shall be deemed to
be the language chosen by the Parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against either Party. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.
9.17 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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9.18 FACSIMILE SIGNATURE. This Agreement may be executed by facsimile
signature.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
SAPIENT CORPORATION
By: /s/ Jerry A. Greenberg
--------------------------------
Jerry A. Greenberg
Title: Co-Chief Executive Officer
-----------------------------
/s/ Mark Hallman
-----------------------------------
Mark Hallman
/s/ Boyd Scroggins
-----------------------------------
Boyd Scroggins
/s/ Carolyn R. Waygood
-----------------------------------
Carolyn R. Waygood
/s/ Charles M. Waygood
-----------------------------------
Charles M. Waygood
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<PAGE> 49
SCHEDULE I
----------
<TABLE>
<CAPTION>
Number of
Number of Purchase Price
Shares of Shares to be
Common Stock Percentage Received at
Stockholders Owned Owned Closing
- ------------ ------------ ---------- --------------
<S> <C> <C> <C>
Carolyn R. Waygood 5,100 48.45% 148,194
14641 Heritage Lane
Addison, TX 75244
Telecopy:
Mark Hallman 2,900 27.55% 84,267
14641 Heritage Lane
Addison, TX 75244
Telecopy:
Charles M. Waygood 2,000 19.00% 58,115
11620 Fifth Street East
Treasure Island, FL 33706
Telecopy:
Boyd Scroggins 526 5.00% 15,293
1808 Doubletree Lane
Flower Mound, TX 75028
Telecopy:
------ ------ -------
TOTAL 10,526 100.00% 305,869
====== ====== =======
</TABLE>
