<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 14, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INTELLIGROUP, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEW JERSEY 7373 11-2880025
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
517 ROUTE ONE SOUTH
ISELIN, NEW JERSEY 08830
(908) 750-1600
(ADDRESS AND TELEPHONE NUMBER
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ASHOK PANDEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INTELLIGROUP, INC.
517 ROUTE ONE SOUTH
ISELIN, NEW JERSEY 08830
(908) 750-1600
(NAME, ADDRESS, AND TELEPHONE NUMBER
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
DAVID J. SORIN, ESQ. WILLIAM N. DYE, ESQ.
BUCHANAN INGERSOLL WILLKIE FARR & GALLAGHER
COLLEGE CENTRE ONE CITICORP CENTER
500 COLLEGE ROAD EAST 153 EAST 53RD STREET
PRINCETON, NEW JERSEY 08540 NEW YORK, NEW YORK 10022
(609) 987-6800 (212) 821-8000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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<CAPTION>
=======================================================================================================
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value......................... $31,050,000 $10,706.90
=======================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS (Subject to Completion)
Dated June 14, 1996
2,250,000 Shares
LOGO
INTELLIGROUP, INC.
Common Stock
------------------------------
Of the 2,250,000 shares of Common Stock offered hereby, 1,750,000 shares
are being issued and sold by Intelligroup, Inc. ("Intelligroup" or the
"Company") and 500,000 shares are being sold by certain selling shareholders of
the Company (the "Selling Shareholders.") See "Principal and Selling
Shareholders." The Company will not receive any of the proceeds from the sale of
shares by the Selling Shareholders.
Prior to this offering, there has been no public market for the Common
Stock. It is currently anticipated that the initial public offering price will
be between $ and $ per share. See "Underwriting" for information
relating to the determination of the initial public offering price. Upon
completion of this offering, the Company's current shareholders, directors and
affiliated entities will together beneficially own approximately 79% of the
Company's outstanding Common Stock. See "Risk Factors" and "Principal and
Selling Shareholders."
Application has been made to have the Common Stock quoted on the Nasdaq
National Market under the symbol "ITIG."
------------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 6 HEREOF.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
======================================================================================================
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholders
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share...................... $ $ $ $
Total(3)....................... $ $ $ $
======================================================================================================
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses, estimated to be $ , payable by the
Company.
(3) The Company and the Selling Shareholders have granted the Underwriters an
option, exercisable within 30 days of the date hereof, to purchase up to an
aggregate of 337,500 additional shares at the Price to Public less the
Underwriting Discounts and Commissions to cover over-allotments, if any. If
all such additional shares are purchased, the total Price to Public,
Underwriting Discounts and Commissions, Proceeds to Company and Proceeds to
Selling Shareholders will be $ , $ , $ and
$ , respectively. See "Underwriting."
------------------------------
The shares of Common Stock are offered by the several Underwriters named
herein, when, as and if received and accepted by them, subject to their right to
reject orders in whole or in part and subject to certain other conditions. It is
expected that delivery of certificates for such shares will be made against
payment therefor at the offices of Cowen & Company, New York, New York on or
about , 1996.
------------------------------
COWEN & COMPANY MONTGOMERY SECURITIES
, 1996
<PAGE> 3
PICTURES
[PICTURES TO BE FILED BY AMENDMENT]
The Company intends to furnish its shareholders with annual reports
containing financial statements certified by its independent public accountants
and quarterly reports containing unaudited financial information for the first
three quarters of each year.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
"Intelligroup," "4 SIGHT" and the Company's logo are service marks and OPMS
is a trademark of the Company. All other trade names, trademarks or service
marks appearing in this Prospectus are the property of their respective owners
and are not the property of the Company.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the consolidated
financial statements, including the notes thereto, appearing elsewhere in this
Prospectus. Except as otherwise noted herein, all information in this
Prospectus: (i) assumes no exercise of the Underwriters' over-allotment option;
(ii) reflects a 83,844.44-for-1 stock split of the Common Stock effected June 6,
1996; and (iii) includes 1,254,000 shares of Common Stock issuable upon the
exercise, for nominal consideration, of outstanding warrants, which warrants
will be exercised upon the effectiveness of this offering. The maximum number of
shares underlying the warrants is 1,981,780 shares of Common Stock, which number
of shares is subject to downward adjustment based upon the initial public
offering price. At an assumed initial public offering price of $11.00 per share,
there are 1,254,000 shares of Common Stock underlying the warrants. See
"Description of Capital Stock," "Principal and Selling Shareholders" and
"Underwriting."
THE COMPANY
Intelligroup provides a wide range of information technology services,
including enterprise-wide business process solutions, systems integration and
custom software development based on leading technologies. The Company has grown
rapidly since 1994 when it made a strategic decision to diversify its customer
base by expanding the scope of its integration and development services and to
utilize SAP software as a primary tool to implement enterprise-wide business
process solutions. In 1995, the Company became a SAP National Implementation
Partner and also began to utilize Oracle products to diversify its service
offerings. The Company's custom software development services are enhanced by
its exclusive access to qualified and experienced programmers at its affiliated
Advanced Development Center located in India and connected to the Company's
headquarters in the United States and to certain customer sites by dedicated,
high speed satellite links. The Company provides its services directly to
end-user organizations or as a member of a consulting team assembled by another
information technology consulting firm. The number of customers billed by the
Company has grown substantially from three customers in 1993 to 75 customers in
1995. The Company's customers are Fortune 1000 and other large and mid-sized
companies, as well as other information technology consulting firms, and include
AT&T, American Cyanamid, Citibank, Ernst & Young LLP, IBM, ICS Deloitte & Touche
LLP and Price Waterhouse LLP.
Many large and mid-sized businesses face a rapidly changing business
environment, intense global competition and accelerating technological change.
To remain competitive, businesses are implementing and utilizing advanced
information technology solutions that enable them to redesign their business
processes in such areas as product development, service delivery, manufacturing,
sales and human resources. Concurrently, businesses are migrating from legacy
systems running proprietary software to open systems and client/server systems.
Such client/server systems, when developed and implemented appropriately, enable
the creation and utilization of more functional and flexible applications which
are critical to the competitive needs of businesses. Organizations often acquire
packaged enterprise-wide business software applications for client/ server
systems, including those offered by leading vendors, such as SAP, Oracle,
PeopleSoft or Baan, and implement or customize these applications to match their
needs. Organizations also may develop customized software applications designed
for their specific business needs. Since organizations often lack sufficient
technical resources necessary to design, develop and implement emerging
information technology solutions on a timely basis, many businesses increasingly
engage experienced outside specialists to develop and implement solutions, in
shorter timeframes and at lower costs, while reducing implementation risks. As a
result, demand for information technology services has grown significantly.
According to industry sources, the global demand for SAP-related consulting
services alone was estimated to be $3.0 billion in 1995.
Intelligroup provides information technology services to develop and
implement cost-effective client/ server business solutions on a timely basis by
combining its expertise in a wide range of technologies and business processes
with its proprietary implementation methodology and development tools. The
Company's consultants have expertise with SAP and Oracle products and with a
wide variety of leading computing technologies. The Company recently has
developed a proprietary implementation methodology, 4 SIGHT,
3
<PAGE> 5
which is designed to minimize the time required to develop and implement SAP
solutions for its customers. 4 SIGHT is designed to be technology independent
and modular so that it may be utilized by the Company's consultants and project
managers in other packaged applications development or software customization
projects.
The Company's objective is to be a leading provider of a wide range of
information technology services. The Company's strategy to achieve this
objective is to: (i) accelerate a shift from implementation assignments to
turnkey project management engagements; (ii) maintain and expand long-term
customer relationships; (iii) leverage and expand strategic relationships,
including existing relationships with SAP and Oracle; (iv) maintain
technological leadership and enhance its proprietary implementation methodology
and development tools; (v) continue to attract and retain skilled, motivated
technical employees; and (vi) expand its global sales and marketing efforts.
The Company was incorporated in New Jersey in October 1987 under the name
Intellicorp, Inc. The Company's name was changed to Intelligroup, Inc. in July
1992. The Company's executive offices are located at 517 Route One South,
Iselin, New Jersey 08830, and its telephone number is (908) 750-1600.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 1,750,000 shares
Common Stock offered by the
Selling Shareholders....................... 500,000 shares
Common Stock to be outstanding
after the offering......................... 10,550,000 shares(1)
Use of proceeds.............................. For prepayment of subordinated debt;
repayment of obligations under accounts
receivable financing; purchase of capital
equipment; and other general corporate
purposes, including working capital.
Proposed Nasdaq National Market Symbol....... ITIG
</TABLE>
- ---------------
(1) Excludes 500,000 shares of Common Stock issuable upon the exercise of stock
options outstanding as of the date of this Prospectus at an exercise price
of $8.00 per share, none of which are currently exercisable. See
"Management -- 1996 Stock Plan."
4
<PAGE> 6
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue....................... $ 167 $ 481 $ 933 $ 6,800 $24,589 $ 3,850 $ 8,836
Gross profit.................. 78 129 305 958 4,568 (7) 2,413
Operating income (loss)....... -- 1 6 (28) 116 (728) 944
Net income (loss)............. -- 2 7 (437) (1,059) (1,048) 428
Net income (loss) per share... $ -- $ -- $ -- $ (0.03) $ (0.08) $ (0.08) $ 0.03
Shares used in per share
calculation(1)............. 13,967 13,967 13,967 13,967 13,967 13,967 13,967
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA(2) ADJUSTED(3)
------- ------------ ------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 79 $ 4,021 $ 12,224
Working capital (deficit)............................. (1,263) 3,237 14,537
Total assets.......................................... 7,642 11,584 19,787
Short-term debt....................................... 3,674 3,116 19
Long-term debt and capital lease obligations,
less current portion............................... 74 4,674 74
Warrants.............................................. -- 1,400 --
Shareholders' equity (deficit)........................ (938) (2,438) 14,862
</TABLE>
- ---------------
(1) Includes 5,030,666 shares repurchased by the Company from its current
shareholders in April 1996 which shares were cancelled by the Company. See
"Capitalization."
(2) Gives effect to the April 1996 issuance of five-year 9% subordinated
debentures in the aggregate principal amount of $6.0 million and warrants to
purchase Common Stock and the application of the proceeds therefrom to
purchase certain of the shares of Common Stock of the Company's current
shareholders and to repay debt.
(3) Adjusted to reflect the estimated net proceeds from the sale of 1,750,000
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $11.00 per share and the application thereof as
described in "Use of Proceeds" and "Capitalization."
RECENT DEVELOPMENTS
Upon the consummation of this offering, the Company will pre-pay all
amounts outstanding under its five-year 9% subordinated debentures and, as a
result will incur a $1.4 million extraordinary, non-cash charge expected to be
recognized in the third quarter of 1996. See "Capitalization."
5
<PAGE> 7
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should consider carefully the following risk factors in evaluating an
investment in the Company before purchasing any shares of the Common Stock
offered hereby. This Prospectus contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially from
the results discussed in such forward-looking statements. Factors that may cause
such a difference are those discussed below.
SUBSTANTIAL VARIABILITY OF QUARTERLY OPERATING RESULTS
The Company's historical operating results have varied substantially from
quarter to quarter, and the Company expects that they will continue to do so.
Due to the relatively fixed nature of certain of the Company's costs, including
personnel and facilities costs, a decline in revenue in any fiscal quarter would
result in lower profitability in that quarter. A variety of factors, many of
which are not within the Company's control, influence the Company's quarterly
operating results, including seasonal patterns of hardware and software capital
spending by customers, information technology outsourcing trends, the timing,
size and stage of projects, new service introductions by the Company or its
competitors, levels of market acceptance for the Company's services or the
hiring of additional staff. Operating results also may be impacted by changes in
the Company's billing and employee utilization rates. The Company believes,
therefore, that past operating results and period-to-period comparisons should
not be relied upon as an indication of future performance. Demand for the
Company's services generally is lower in the fourth quarter due to reduced
activity during the holiday season and fewer working days for those customers
which curtail operations during such period. The Company anticipates that its
business will continue to be subject to such seasonal variations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Selected Quarterly Results of Operations."
MANAGEMENT OF GROWTH
The Company's growth has placed significant demands on its management,
administrative and operational resources. The Company's revenue increased 262%
in 1995, from $6.8 million in 1994 to $24.6 million in 1995. From January 1,
1995 through March 31, 1996, the Company's staff increased 104% from 113 to 231
full-time employees. The Company's ability to manage its growth effectively will
require the Company to continue developing and improving its operational,
financial and other internal systems, as well as its business development
capabilities, and to attract, train, retain, motivate and manage its employees.
In addition, the Company's future success will depend in large part on its
ability to continue to maintain high rates of employee utilization at profitable
billing rates and maintain project quality, particularly if the size and scope
of the Company's projects increases. In addition, other than the Company's Chief
Financial Officer, none of the Company's senior management previously has
managed a business of the Company's scale or scope or has any experience
managing a public company. If the Company is unable to manage its growth and
projects effectively, such inability could have a material adverse effect on the
quality of the Company's services and products, its ability to retain key
personnel and its ability to report financial results in an accurate and timely
manner which could have a material adverse effect on the Company's business,
financial condition and results of operations.
WEAKNESSES IN INTERNAL CONTROLS
Following the audit of the Company's consolidated financial statements for
the year ended December 31, 1995, the Company received a management letter from
its independent public accountants, Arthur Andersen LLP, which set forth
significant deficiencies and material weaknesses in the Company's internal
control structure. The Company's independent public accountants noted that,
during 1995, the Company's internal control structure had two material
weaknesses: (i) the Company did not reconcile its supporting records to the
general ledger or perform meaningful account analysis; and (ii) the Company did
not maintain, summarize or reconcile any books or records for its foreign
operations. The Company's independent public accountants have not conducted any
further reviews of the Company's internal control structure. The Company first
hired a Chief Financial Officer in January 1996, only recently implemented an
accounting system capable of
6
<PAGE> 8
generating information and reports necessary to appropriately manage the
Company, and currently is developing and implementing a system of internal
controls and otherwise developing an appropriate administrative infrastructure.
The failure to develop and maintain an effective internal control structure
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business -- Legal
Proceedings" and " -- Employees."
LIMITED OPERATING HISTORY; HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE
FINANCIAL RESULTS
The Company's strategic decision in 1994 to diversify its customer base and
to utilize SAP software as a primary tool to implement enterprise-wide business
process solutions resulted in significant growth and a major change of the
Company's business. As a result, the Company has a limited operating history
within its current line of business. Despite the fact that the Company has
recognized substantially increased revenue during the years ended December 31,
1994 and 1995, respectively, the Company incurred net losses of $437,000 and
$1.1 million for such periods. Furthermore, the Company was profitable in only
five of the last nine quarters. Although the Company had net income of $428,000
for the quarter ended March 31, 1996, there can be no assurance that the Company
will continue to achieve profitable levels of operations in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."
DEPENDENCE ON SAP
During the years ended December 31, 1994 and 1995 and the first quarter of
1996, 33%, 69% and 70% of the Company's total revenue was derived from projects
in which the Company implemented software developed by SAP, a major
international German-based software company and the leading vendor of
client/server application software for business applications. The Company's
future success in its SAP-related consulting services depends largely on its
continued relationship with SAP America, SAP's United States affiliate, and on
its continued status as a SAP National Implementation Partner, which was first
obtained in 1995. Such status is awarded by SAP on an annual basis pursuant to
contract. The Company's 1996 contract expires on December 31, 1996. While the
Company has no reason to believe that its contract with SAP will not be renewed
or that the scope of such contract will be modified or limited in a manner
adverse to the Company, there can be no assurance that such contract will be
renewed on terms acceptable to the Company, if at all. In addition, in the event
that SAP is unable to maintain its leadership position within the business
applications software market, if the Company's relationship with SAP
deteriorates, or if SAP elects to compete directly with the Company, the
Company's business, financial condition and results of operations could be
materially adversely affected.
SUBSTANTIAL RELIANCE ON KEY CUSTOMERS AND LARGE PROJECTS
The Company has derived and believes that it will continue to derive a
significant portion of its revenue from a limited number of customers and
projects. For the years ended December 31, 1994 and 1995 and for the quarter
ended March 31, 1996, the Company's ten largest customers accounted for in the
aggregate approximately 61%, 56% and 63% of its revenue, respectively. During
1994, AT&T accounted for more than 10% of revenue, while in 1995 and the quarter
ended March 31, 1996, Ernst & Young LLP and Price Waterhouse LLP each accounted
for more than 10% of revenue. For the years ended December 31, 1994 and 1995 and
for the quarter ended March 31, 1996, 64%, 50% and 52%, respectively, of the
Company's revenue was generated by serving as a member of a consulting team
assembled by another information technology consulting firm, which also may be a
competitor of the Company. There can be no assurance that such information
technology consulting firms will continue to engage the Company in the future,
if at all. In addition, the volume of work performed for specific customers is
likely to vary from year to year, and a major customer in one year or quarter
may not continue to use the Company's services. The loss of any large customer
or project could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Customers."
7
<PAGE> 9
Most of the Company's project-based contracts are terminable by the
customer with limited advance notice and without significant penalty. The
cancellation or significant reduction in the scope of a large project could have
a material adverse effect on the Company's business, financial condition, and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Customers."
Many of the Company's engagements involve projects that are critical to the
operations of its customers' businesses and provide benefits that may be
difficult to quantify. The Company's failure or inability to meet a customer's
expectations in the performance of its services could result in a material
adverse change to the customer's operations giving rise to claims for damages
against the Company or causing damage to the Company's reputation, adversely
affecting its business, financial condition and results of operations. In
addition, certain of the Company's agreements with its customers require the
Company to indemnify the customer for damages arising from services provided to,
or on behalf of, such customer. Such indemnification, if required, could have a
material adverse effect on the Company's financial condition and results of
operations. See "Business -- Customers."
HIGHLY COMPETITIVE INFORMATION TECHNOLOGY SERVICES INDUSTRY
The markets for the Company's services are highly competitive. The Company
believes that its principal competitors include the internal information systems
groups of its prospective customers, as well as technology consulting and
systems integration firms, including the "Big Six" accounting firms, the ISSC
division of IBM, Cambridge Technology Partners, SHL Systemhouse (a subsidiary of
MCI), and Computer Sciences Corporation, and with the consulting divisions of
software applications vendors, some of which also are customers of the Company.
The consulting divisions of five of the "Big Six" accounting firms also are
customers of the Company and comprised 6%, 34% and 36% of the Company's revenue
for the years ended December 31, 1994 and 1995, and for the quarter ended March
31, 1996, respectively. Many of the Company's competitors have longer operating
histories, possess greater industry and name recognition and have significantly
greater financial, technical and marketing resources than the Company. In
addition, there are relatively low barriers to entry into the Company's markets
and the Company has faced, and expects to continue to face, additional
competition from new entrants into its markets.
The Company believes that the principal competitive factors in its markets
include quality of service and deliverables, speed of development and
implementation, price, project management capability and technical and business
expertise. The Company believes that its ability to compete also depends in part
on a number of competitive factors outside its control, including the ability of
its competitors to hire, retain and motivate project managers and other senior
technical staff, the development by others of services that are competitive with
the Company's services and the extent of its competitors' responsiveness to
customer needs. There can be no assurance that the Company will be able to
compete successfully with its competitors. See "Business -- Competition."
RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW SOLUTIONS
The Company's success will depend in part on its ability to develop
solutions that keep pace with continuing changes in information technology,
evolving industry standards and changing customer objectives and preferences.
There can be no assurance that the Company will be successful in adequately
addressing these developments on a timely basis or that, if these developments
are addressed, the Company will be successful in the marketplace. In addition,
there can be no assurance that products or technologies developed by others will
not render the Company's services non-competitive or obsolete. The Company's
failure to address these developments could have a material adverse effect on
the Company's business, financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
The success of the Company for the foreseeable future will depend largely
on the continued services of its key executive officers and leading technical
personnel. Each executive officer and key employee has entered
8
<PAGE> 10
into an employment agreement with the Company which contains a non-competition
covenant that extends for a period of two years following termination of
employment. See "Management -- Employment Agreements, Indemnification Agreements
and Non-Competition, Non-Disclosure and Non-Solicitation Agreements." Each of
the leading technical personnel has entered into an agreement with the Company
which contains non-competition, non-disclosure and non-solicitation provisions.
See "Business -- Employees." The Company maintains, and is the beneficiary of,
life insurance policies on the lives of Ashok Pandey, Rajkumar Koneru and
Nagarjun Valluripalli. The face amount of each such policy is $1.0 million. See
"Management -- Key Man Insurance." The Company does not maintain key man life
insurance on any of its other executive officers or employees. There can be no
assurance that the departure of one or more of such key personnel would not have
a material adverse effect on the Company's financial condition and results of
operations.
COMPETITIVE MARKET FOR TECHNICAL PERSONNEL
The Company's business is labor intensive and, therefore, the Company's
success will depend in large part upon its ability to attract, retain, train and
motivate highly-skilled employees, particularly project managers and other
senior technical personnel. There is significant competition for employees with
the skills required to perform the services the Company offers. Qualified
project managers and senior technical staff, including in particular, personnel
with development experience, are in great demand and are likely to remain a
limited resource for the foreseeable future. There can be no assurance that the
Company will be successful in attracting a sufficient number of highly skilled
employees in the future, or that it will be successful in retaining, training
and motivating the employees it is able to attract, and any inability to do so
could impair the Company's ability to adequately manage and complete its
existing projects and to bid for or obtain new projects. If the Company's
employees are unable to achieve expected performance levels, the Company's
business, financial condition and results of operations could be adversely
affected. See "Business -- Employees."
UNCERTAINTIES RESULTING FROM PENDING LITIGATION MATTERS AND ADMINISTRATIVE
PROCEEDINGS
The Company is involved in disputes with third parties, including certain
former employees and a competitor. Such disputes have resulted in litigation
with such parties and, although the Company is a plaintiff in one of such
matters, the Company is subject to claims and counterclaims for damages and has
incurred, and likely will continue to incur, legal expenses in connection with
such matters. There can be no assurance that such litigation will result in
favorable outcomes for the Company. The Company also is aware of certain pending
and potential administrative and regulatory immigration and tax law matters
which may result in significant costs to the Company, as well as fines and
penalties. These matters also may result in diversion of management time and
effort from the operations of the business. There can be no assurance that
damages, fines and penalties, if any, and related legal expenses and management
diversion from operations will not have a material adverse effect on the
Company's business, reputation, financial condition or results of operations.
See "Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources" and "Business -- Legal
Proceedings."
RELIANCE ON INTELLECTUAL PROPERTY RIGHTS
The Company relies upon a combination of trade secrets, nondisclosure and
other contractual arrangements, and copyright and trademark laws to protect its
proprietary rights. The Company's future success is dependent, in part, upon its
proprietary implementation methodology, 4 SIGHT, development tools and other
intellectual property rights. The Company enters into confidentiality agreements
with its employees, generally requires that its consultants and customers enter
into such agreements, and limits access to and distribution of its proprietary
information. There can be no assurance that the steps taken by the Company in
this regard will be adequate to deter misappropriation of its proprietary
information or that the Company will be able to detect unauthorized use of and
take appropriate steps to enforce its intellectual property rights. See
"Business -- Intellectual Property Rights" and " -- Legal Proceedings."
Although the Company believes that its services, methodology and
development tools do not infringe on the intellectual property rights of others,
there can be no assurance that such a claim will not be asserted
9
<PAGE> 11
against the Company in the future, or that if asserted, any such claim will be
successfully defended. See "Business -- Intellectual Property Rights."
INTERNATIONAL OPERATIONS
While international operations accounted for an insignificant portion of
the Company's total revenue in each of 1994 and 1995, the Company anticipates
that in the future a larger percentage of its revenue may be derived from
international operations. To date, the Company has established foreign
operations in New Zealand and South Africa, and anticipates that it will
establish operations in the United Kingdom by the end of 1996. In order to
expand sales on an international basis, the Company may establish additional
foreign operations. In addition, the Company has established operations in India
by forming an affiliation with Intelligroup Asia Private Limited ("Intelligroup
Asia"), an entity which currently is 100% owned by the Company's principal
shareholders. The Company and the shareholders of Intelligroup Asia intend to
enter into an agreement pursuant to which the Company will acquire, subject to
necessary Indian government approvals, all of the outstanding capital stock of
Intelligroup Asia for nominal consideration. See "Certain Transactions."
Increasing foreign operations likely will require significant management
attention and financial resources and could materially adversely affect the
Company's business, financial condition or results of operations. In addition,
there can be no assurance that the Company will be able to increase
international market demand for its services. The risks inherent in the
Company's international business activities include unexpected changes in
regulatory environments, foreign currency fluctuations, tariffs and other trade
barriers, longer accounts receivable payment cycles, difficulties in managing
international operations and potential foreign tax consequences, including
restrictions on the repatriation of earnings, and the burdens of complying with
a wide variety of foreign laws and regulations. There can be no assurance that
such factors will not have a material adverse effect on the Company's future
international sales, if any, and, consequently, on the Company's business,
financial condition or results of operations. See "Business -- Sales and
Marketing."
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of Common Stock in the public market following this offering
could adversely affect the market price of the Common Stock. Upon completion of
this offering, the 2,250,000 shares offered hereby will be freely tradeable by
persons other than "affiliates" of the Company without restriction. The
remaining 8,300,000 shares held by current shareholders of the Company are
subject to "lock-up" agreements under which the holders of such shares have
agreed not to sell or otherwise dispose of any shares of Common Stock without
the prior written consent of the representative of the Underwriters for a period
of 180 days after the date of this Prospectus. Of such shares of Common Stock,
7,096,000 shares will be eligible for resale after the expiration of the lock-up
period, subject to the provisions of Rule 144 under the Securities Act of 1933,
as amended (the "Securities Act"). The remaining 1,204,000 shares of Common
Stock will become eligible for sale over a period of less than two years and
could be sold earlier if the holders thereof exercise any available registration
rights. See "Description of Capital Stock -- Registration Rights." Of the shares
of Common Stock issuable upon the exercise of outstanding options, in December
1996, 166,667 shares will become eligible for immediate resale in the public
market, subject to compliance with Rules 144 and 701 under the Securities Act.
Sales of substantial amounts of the Common Stock in the public market, whether
by purchasers in the offering or other shareholders of the Company, or the
perception that such sales could occur, may adversely affect the market price of
the Common Stock. See "Shares Eligible for Future Sale."
CONTROL BY MANAGEMENT AND EXISTING SHAREHOLDERS
Upon completion of this offering, the Company's executive officers,
directors and affiliated entities together will beneficially own approximately
79% of the outstanding shares of Common Stock (76% if the Underwriters'
over-allotment option is exercised in full). As a result, these shareholders,
acting together, will be able to control matters requiring approval by the
shareholders of the Company, including the election of directors. Such a
concentration of ownership may have the effect of delaying or preventing a
change in control of the Company, including transactions in which shareholders
might otherwise receive a premium for their shares over then current market
prices. See "Principal and Selling Shareholders."
10
<PAGE> 12
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS AND NEW JERSEY LAW
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") authorizes the Board of Directors to issue,
without shareholder approval, 5,000,000 shares of Preferred Stock with voting,
conversion and other rights and preferences that could adversely affect the
voting power or other rights of the holders of Common Stock. The issuance of
Preferred Stock or of rights to purchase Preferred Stock could be used to
discourage an unsolicited acquisition proposal. In addition, the possible
issuance of Preferred Stock could discourage a proxy contest, make more
difficult the acquisition of a substantial block of the Company's Common Stock
or limit the price that investors might be willing to pay in the future for
shares of the Company's Common Stock. The Certificate of Incorporation also
provides that: (i) the affirmative vote of the holders of at least 80% of the
voting power of all outstanding shares of the capital stock of the Company shall
be required to adopt, amend or repeal any provision of the By-laws of the
Company; (ii) shareholders of the Company may not take any action by written
consent; (iii) special meetings of shareholders may be called only by the
President, the Chairman of the Board or a majority of the Board of Directors and
business transacted at any such special meeting shall be limited to matters
relating to the purposes set forth in the notice of such special meeting; (iv)
the Board of Directors, when evaluating an offer related to a tender or exchange
offer or other business combination, is authorized to give due consideration to
any relevant factors, including the social, legal and economic effects upon
employees, suppliers, customers, creditors, the community in which the Company
conducts its business, and the economy of the state, region and nation; and (v)
the affirmative vote of the holders of at least 80% of the voting power of all
outstanding shares of the capital stock of the Company shall be required to
amend the above provisions or the limitation on director liability. The
foregoing provisions of the Certificate of Incorporation could have the effect
of delaying, deterring or preventing a change in control of the Company. In
addition, certain "anti-takeover" provisions of the New Jersey Business
Corporation Act, among other things, restrict the ability of certain
shareholders to effect a merger or business combination or obtain control of the
Company. These provisions may have the effect of delaying or preventing a change
of control of the Company without action by the shareholders and, therefore,
could adversely affect the price of the Company's Common Stock. In the event of
a merger or consolidation of the Company with or into another corporation or the
sale of all or substantially all of the Company's assets in which the successor
corporation does not assume outstanding options or issue equivalent options, the
Board of Directors of the Company is required to provide accelerated vesting of
outstanding options. See "Description of Capital Stock -- Preferred Stock,"
"-- Anti-takeover Provisions" and "-- Limitation of Director Liability."
ABSENCE OF PRIOR TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock and there can be no assurance that following this offering an active
trading market will develop or be maintained. The initial public offering price
of the Common Stock has been determined by negotiations between the Company and
the Representative of the Underwriters and may not be indicative of the market
price of the Common Stock in the future. For a description of the factors
considered in determining the initial public offering price, see "Underwriting."
The market price of the shares of Common Stock may be highly volatile. Factors
such as fluctuation in the Company's operating results, announcements of
technological innovations or new commercial products or services by the Company
or its competitors, market conditions in the computer software and hardware
industries generally and quarterly fluctuations in financial results may have a
significant effect on the market price of the Common Stock. Furthermore, the
stock market historically has experienced volatility which has particularly
affected the market prices of securities of many technology companies and which
sometimes has been unrelated to the operating performances of such companies.
See "Underwriting."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value of their
investment from the initial public offering price. The number of shares
underlying the warrants is subject to adjustment based upon the initial public
offering price and, therefore, could result in additional dilution to existing
shareholders and to purchasers of the shares of
11
<PAGE> 13
Common Stock offered hereby. See "Dilution," "Description of Capital Stock" and
"Shares Eligible for Future Sale."
SIGNIFICANT UNALLOCATED NET PROCEEDS
A substantial majority of the anticipated net proceeds of this offering has
not been designated for specific uses. Therefore, the Board of Directors of the
Company will have broad discretion with respect to the use of the net proceeds
of this offering. See "Use of Proceeds."
ABSENCE OF DIVIDENDS
The Company does not anticipate paying any dividends on its Common Stock in
the foreseeable future. See "Dividend Policy."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,750,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$17.3 million (approximately $19.9 million if the Underwriters' over-allotment
option is exercised in full), after deducting the Underwriters' discounts and
commissions and estimated offering expenses payable by the Company, at an
assumed initial public offering price of $11.00 per share. The Company will not
receive any proceeds from the sale of shares of Common Stock by the Selling
Shareholders. See "Principal and Selling Shareholders."
The Company intends to use approximately $6.2 million of the net proceeds
from this offering to pre-pay all amounts outstanding under the five-year 9%
subordinated debentures in the aggregate principal amount of $6.0 million issued
and sold in April 1996 to Summit Ventures IV, L.P. and Summit Investors III,
L.P., investment partnerships which are affiliates of the Company. The
subordinated debentures were issued to raise funds for working capital and
general corporate purposes, to repurchase from current shareholders a total of
5,030,666 shares of Common Stock for an aggregate of $1.5 million and to repay
approximately $300,000 outstanding under a revolving credit facility, which
facility carried interest at the federal funds rate plus 1%. Such credit
facility was terminated upon such repayment. The Company also intends to use a
portion of the net proceeds to repay all amounts outstanding under its existing
factoring relationship, of which approximately $1.6 million was outstanding as
of May 31, 1996. Pursuant to such factoring arrangement, the Company is
obligated to offer all of its accounts receivable to the factor for financing.
The factor is not, however, obligated to accept such accounts receivable. The
factor charges an administrative fee of 0.75% on each invoice, plus an
additional 0.75% for each 15-day increment of time during which the invoice
remains unpaid, to a maximum of 120 days, or 6.5%. The Company also intends to
use approximately $400,000 of the net proceeds from this offering to purchase or
lease capital equipment.
The balance of the net proceeds will be used for general corporate
purposes, including working capital and possible acquisitions of businesses or
services complementary to the Company's business. Although the Company reviews
and considers possible acquisitions on an on-going basis, no specific
acquisitions are being negotiated or planned as of the date of this Prospectus.
Pending such uses, the net proceeds to the Company from this offering will be
invested in short-term, investment-grade, interest-bearing instruments.
DIVIDEND POLICY
The Company has never declared or paid any dividends on its capital stock.
The Company intends to retain any earnings to fund future growth and the
operation of its business and, therefore, does not anticipate paying any cash
dividends in the foreseeable future.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the capitalization of the Company: (i) as of
March 31, 1996; (ii) on a pro forma basis to give effect to the issuance and
sale by the Company in April 1996 of five-year 9% subordinated debentures in the
aggregate principal amount of $6.0 million and warrants to purchase Common Stock
and the application of the proceeds therefrom to purchase certain of the shares
of Common Stock of the Company's current shareholders and to repay debt; and
(iii) on a pro forma as-adjusted basis to give effect to the issuance and sale
by the Company of 1,750,000 shares of Common Stock offered hereby, at an assumed
initial public offering price of $11.00 per share, after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by the Company and the application of the estimated net proceeds therefrom by
the Company.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt................................................ $ 3,674 $ 3,116 $ 19
======= ======= =======
Long-term debt and capital lease obligations, less current
portion(1)................................................... $ 74 $ 74 $ 74
Subordinated debt(3)(5)........................................ -- 4,600 --
------- ------- -------
Total long-term debt......................................... 74 4,674 74
------- ------- -------
Warrants(3)(5)................................................. -- 1,400 --
------- ------- -------
Shareholders' equity (deficit):
Preferred Stock, $0.01 par value, 5,000,000 shares
authorized; none issued................................... -- -- --
Common Stock, $0.01 par value, 25,000,000 shares authorized,
12,576,666 shares actual (7,546,000 pro forma) (10,550,000
as adjusted) issued and outstanding(2)(4)................. 126 76 106
Additional paid-in capital................................... -- -- 18,670
Accumulated deficit(4)(5).................................... (1,064) (2,514) (3,914)
------- ------- -------
Total shareholders' equity (deficit)...................... (938) (2,438) 14,862
------- ------- -------
Total capitalization................................. $ (864) $ 3,636 $14,936
======= ======= =======
</TABLE>
- ---------------
(1) For information concerning the Company's long-term debt see Note 3 of Notes
to Consolidated Financial Statements.
(2) Excludes 500,000 shares of Common Stock issuable upon the exercise of stock
options outstanding as of the date of this Prospectus at an exercise price
of $8.00 per share, none of which are currently exercisable. See
"Management -- 1996 Stock Plan."
(3) Proceeds from the issuance of $6.0 million of 9% debentures were allocated
between the debentures and warrants based on their deemed fair market value.
The debentures were issued with detachable warrants to purchase a maximum of
20.8% of the Common Stock of the Company at a nominal exercise price,
decreasing to 11.0% based upon the initial public offering price. Using an
assumed interest rate of 15%, which the Company believes would reflect a
fair market interest rate for the debentures if the detachable warrants were
not included, the fair market value of the warrants and the resulting
discount on the debentures would be approximately $1.4 million. Other than
the extraordinary, non-cash charge that will result on the repayment of the
debentures (See note (5) below), no additional charges to earnings relating
to the warrants will occur.
(4) Reflects the repurchase and cancellation by the Company of 5,030,666 shares
from the Company's current shareholders for $1.5 million.
(5) Reflects the repayment of the debentures and the exercise of the warrants.
Based on an assumed initial public offering price of $11.00 per share, there
are 1,254,000 shares of Common Stock underlying the warrants. The repayment
of the debentures results in an extraordinary charge of $1.4 million.
13
<PAGE> 15
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1996
was approximately $(1,038,000) or $(0.14) per share of Common Stock. Pro forma
net tangible book value per share is determined by dividing the net tangible
book value of the Company (tangible assets less total liabilities) by the number
of shares of Common Stock outstanding, and gives effect to the issuance and sale
by the Company in April 1996 of five-year 9% subordinated debentures in the
aggregate principal amount of $6.0 million and the warrants issued in connection
therewith and the application of the proceeds therefrom to purchase certain of
the shares of Common Stock of the Company's current shareholders and to repay
debt as if such transactions had occurred on March 31, 1996. Dilution per share
represents the difference between the amount per share paid by purchasers of
shares of Common Stock in the offering made hereby and the pro forma net
tangible book value per share of Common Stock immediately after completion of
the offering. Without taking into account any changes in such net tangible book
value after March 31, 1996, other than to give effect to the (i) sale of
1,750,000 shares of Common Stock by the Company in this offering (at an assumed
initial public offering price of $11.00 per share and after deducting the
underwriting discounts and commissions and estimated offering expenses); (ii)
application of the estimated net proceeds therefrom; and (iii) effect of the
extraordinary charge of $1.4 million that would result from the early
extinguishment of debt to be repaid from the net proceeds of the offering if the
offering had been consummated on March 31, 1996, the pro forma net tangible book
value of the Company as of March 31, 1996 would have been $14,862,000 or $1.41
per share. This represents an immediate increase in net tangible book value of
$1.55 per share to existing shareholders and an immediate dilution in net
tangible book value of $9.59 per share to new investors. The following table
illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share(1)......... $11.00
Pro forma tangible book value per share before the
offering.............................................. $(0.14)
Increase per share attributable to new investors......... 1.55
------
Pro forma net tangible book value per share after the
offering................................................. 1.41
------
Dilution per share to new investors........................ $ 9.59
======
</TABLE>
- ---------------
(1) Before deducting the estimated underwriting discounts and commissions and
expense of the offering.
The following table summarizes, on a pro forma basis as of March 31, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by existing shareholders
and by investors purchasing shares offered by the Company hereby:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1).............. 8,800,000 83.4% $ 6,000 0.03% $ 0.001
New investors......................... 1,750,000 16.6 19,250,000 99.97 11.00
---------- ----- ---------- ----
Total(1).................... 10,550,000 100.0% $19,256,000 100.0%
========== ===== ========== ====
</TABLE>
- ---------------
(1) Excludes options to purchase 500,000 shares of Common Stock issuable under
the 1996 Stock Plan (the "1996 Stock Plan") upon the exercise of stock
options outstanding as of the date of this Prospectus at an exercise price
of $8.00 per share, none of which are currently exercisable. Additional
dilution will occur upon the exercise of outstanding options. In addition,
an aggregate of 1,090,000 shares of Common Stock are available for issuance
pursuant to the 1996 Stock Plan and the 1996 Non-Employee Director Stock
Option Plan (the "Non-Employee Director Plan"). See "Management -- 1996
Non-Employee Director Stock Option Plan" and "-- 1996 Stock Plan."
The sale of Common Stock by the Selling Shareholders in this offering will
reduce the number of shares held by existing shareholders to 8,300,000 shares,
or 78.7% of the total number of shares of Common Stock outstanding after the
offering, and will increase the number of shares held by new investors to
2,250,000 shares, or 21.3% of the total number of shares of Common Stock
outstanding after the offering.
14
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below as of December 31,
1995 and for the two years then ended are derived from and are qualified by
reference to the audited consolidated financial statements and the related notes
thereto included elsewhere in this Prospectus. The selected consolidated
financial data as of December 31, 1991, 1992, 1993, 1994 and March 31, 1996, and
for the three years ended December 31, 1993 and for the three months ended March
31, 1995 and 1996 have been derived from the unaudited consolidated financial
statements of the Company. The unaudited financial data include all adjustments
consisting only of normal, recurring adjustments that the Company considers
necessary for fair presentation of the financial position and results of
operations for these periods. The results of operations for the three months
ended March 31, 1996 are not necessarily indicative of the results for any
future period or for the full year ending December 31, 1996. The following
should be read in conjunction with the consolidated financial statements and
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing elsewhere in this Prospectus:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------------- -----------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..................... $ 166 $ 481 $ 933 $ 6,800 $ 24,589 $ 3,850 $ 8,836
Cost of sales............... 88 352 628 5,842 20,021 3,857 6,423
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit.............. 78 129 305 958 4,568 (7) 2,413
Selling, general and
administrative
expenses.................. 78 128 299 986 4,452 721 1,469
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)... -- 1 6 (28) 116 (728) 944
Factor charges/Interest
expense................... -- -- -- 409 1,175 320 315
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
provision for income
taxes..................... -- 1 6 (437) (1,059) (1,048) 629
Provision for income
taxes..................... -- -- -- -- -- -- 201
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)........... $ -- $ 1 $ 6 $ (437) $ (1,059) $ (1,048) $ 428
========== ========== ========== ========== ========== ========== ==========
Net income (loss) per
share..................... $ -- $ -- $ -- $ (0.03) $ (0.08) $ (0.08) $ 0.03
========== ========== ========== ========== ========== ========== ==========
Shares used in per share
calculation............... 13,967 13,967 13,967 13,967 13,967 13,967 13,967
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
-------------------------------------------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents... $ 6 $ 3 $ 34 $ 209 $ 71 $ 79
Working capital (deficit)... 4 (2) 146 (426) (1,597) (1,263)
Total assets................ 9 14 257 2,313 6,784 7,642
Short-term debt............. -- -- 5 1,032 3,489 3,674
Long-term debt and capital
lease obligations, less
current portion........... 7 5 52 -- 81 74
Shareholders' equity
(deficit)................. 1 3 130 (307) (1,366) (938)
</TABLE>
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was formed in 1987 to provide systems integration and custom
software development. In March 1994, the Company acquired Oxford Systems Inc.
("Oxford") in a pooling-of-interests transaction, in exchange for an aggregate
two-thirds equity interest in the Company. The Company currently provides a wide
range of information technology services, including enterprise-wide business
process solutions, systems integration and custom software development based on
leading technologies. The Company has grown rapidly since 1994 when it made a
strategic decision to diversify its customer base by expanding the scope of its
integration and development services and to utilize SAP software as a primary
tool to implement enterprise-wide business process solutions. In 1995, the
Company became a SAP National Implementation Partner and also began to utilize
Oracle products to diversify its service offerings.
The Company generates revenue from professional services rendered to
customers and revenue is recognized as services are performed. The Company's
services range from providing customers with a single consultant to
multi-personnel full-scale projects. The Company provides these services to its
customers primarily on a time and materials basis and pursuant to written
contracts which can be terminated with limited advance notice and without
significant penalty. The Company provides its services directly to end-user
organizations or as a member of a consulting team assembled by another
information technology consulting firm to Fortune 1000 and other large and
mid-sized companies. The Company generally bills its customers semi-monthly for
the services provided by its consultants at contracted rates. Where contractual
provisions permit, customers also are billed for reimbursement of expenses
incurred by the Company on the customers' behalf.
The Company has derived and believes that it will continue to derive a
significant portion of its revenue from a limited number of customers and
projects. For the years ended December 31, 1994 and 1995 and for the quarter
ended March 31, 1996, the Company's ten largest customers accounted for
approximately 61%, 56% and 63% of its revenue, respectively. During 1994, AT&T
accounted for more than 10% of revenue, while in 1995 and the quarter ended
March 31, 1996, Ernst & Young LLP and Price Waterhouse LLP each accounted for
more than 10% of revenue. During such periods, Ernst & Young LLP and Price
Waterhouse LLP each accounted for more than 10% of revenue. For the years ended
December 31, 1994 and 1995 and for the quarter ended March 31, 1996, 64%, 50%
and 52%, respectively, of the Company's revenue was generated by serving as a
member of a consulting team assembled by another information technology
consulting firm. There can be no assurance that such information technology
consulting firms will continue to engage the Company in the future at current
levels of retention, if at all. During the years ended December 31, 1994 and
1995 and the quarter ended March 31, 1996, 33%, 69% and 70%, respectively, of
the Company's total revenue was derived from projects in which the Company
implemented software developed by SAP.
The Company's most significant cost is project personnel expenses, which
consist of consultant salaries, benefits and payroll-related expenses. Thus, the
Company's financial performance is based primarily upon billing margin (billable
hourly rate less the cost to the Company of a consultant on an hourly basis) and
personnel utilization rates (billable hours divided by paid hours). The Company
believes that turnkey project management assignments typically carry higher
margins. The Company intends to accelerate a shift to such higher-margin turnkey
management assignments and more complex projects by leveraging its reputation,
existing capabilities, proprietary implementation methodology, development tools
and offshore development capabilities with expanded sales and marketing efforts
and new service offerings to develop turnkey project sales opportunities with
existing customers and to expand its market to new customers.
Since late 1994, the Company has made substantial investments in its
infrastructure in order to support its rapid growth. For example, in 1994, the
Company established and funded an affiliated operation in India, the Advanced
Development Center, and established a sales office in California. In addition,
from 1994 to date, the Company has incurred significant expenses to develop
proprietary development tools and 4 SIGHT, its proprietary accelerated
implementation methodology. Commencing in 1995, the Company has been increas-
16
<PAGE> 18
ing its sales force and its marketing, finance, accounting and administrative
staff. The Company employed 33 such personnel as of March 31, 1996, as compared
to eight such personnel as of January 1, 1995.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain financial
data as a percentage of revenue:
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE
-----------------------------------
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
--------------- ---------------
1994 1995 1995 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenue..................................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................... 85.9 81.4 100.2 72.7
----- ----- ----- -----
Gross profit.............................................. 14.1 18.6 (0.2) 27.3
Selling, general and administrative expenses................ 14.5 18.1 18.7 16.6
----- ----- ----- -----
Operating income (loss)................................... (0.4) 0.5 (18.9) 10.7
Factor fees/Interest expense................................ 6.0 4.8 8.3 3.6
----- ----- ----- -----
Income (loss) before provision for income taxes............. (6.4) (4.3) (27.2) 7.1
Provision for income taxes.................................. -- -- -- 2.3
----- ----- ----- -----
Net income (loss)........................................... (6.4)% (4.3)% (27.2)% 4.8%
===== ===== ===== =====
</TABLE>
Quarter Ended March 31, 1996 Compared to Quarter Ended March 31, 1995
Revenue. Revenue increased by 129.5%, or $4.9 million, from $3.9 million
in the first quarter of 1995 to $8.8 million in the first quarter of 1996. This
increase was attributable primarily to increased demand for the Company's
SAP-related consulting services and, to a lesser extent, to increased demand for
the Company's systems integration and custom software development services.
Gross profit. The Company's cost of sales includes primarily the cost of
salaries to consultants and related employee benefits and payroll taxes. The
Company's cost of sales increased by 66.5%, or $2.5 million, from $3.9 million
in the first quarter of 1995 to $6.4 million in the first quarter of 1996. The
increase was due to increased personnel costs resulting from the hiring of
additional consultants to support the significant increase in demand for the
Company's services. The Company's gross profit increased by $2.4 million, from a
loss of $7,000 in the first quarter of 1995 to gross profit of $2.4 million in
the first quarter of 1996. Gross profit margin increased from (0.2)% of revenue
in the first quarter of 1995 to 27.3% of revenue in the first quarter of 1996.
The increase in such gross profit margin was attributable primarily to the fact
that revenue increased at a faster rate than cost of sales which resulted from a
combination of improved billing margins and greater consultant utilization.
Selling, general and administrative expenses. Selling, general and
administrative expenses consist primarily of administrative salaries, sales
person compensation, the costs associated with the Advanced Development Center
and related development costs and professional fees. Selling, general and
administrative expenses increased by 103.7%, or $748,000, from $721,000 in the
first quarter of 1995 to $1.5 million in the first quarter of 1996, but
decreased as a percentage of revenue from 18.7% to 16.6% of revenue,
respectively. The increase in such expenses in absolute dollars was due
primarily to the expansion of the Company's sales and marketing force later in
1995 and the additional accounting and financial personnel added in the first
quarter of 1996.
Factor fees/Interest expense. Factor fees are the charges incurred by the
Company to finance its accounts receivable. The Company also incurred interest
expense for bank borrowings and capital lease transactions. Such expenses
remained relatively constant at $320,000 in the first quarter of 1995 and
$315,000 in the first quarter of 1996, but decreased as a percentage of revenue
from 8.3% to 3.6%, respectively. The Company changed factors in October 1995.
The Company's previous factor charged significantly higher fees than the current
factor. The effect of the decrease in factor rates was offset by an increase in
the volume of
17
<PAGE> 19
accounts receivable financed. The Company expects to utilize a portion of the
net proceeds from this offering to repay all amounts outstanding under its
existing factoring relationship.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenue. Revenue increased by 261.6%, or $17.8 million, from $6.8 million
in 1994 to $24.6 million in 1995. This increase was attributable primarily to
increased demand for the Company's SAP-related consulting services and, to a
lesser extent, to increased demand for the Company's systems integration and
custom software development services.
Gross profit. The Company's cost of sales increased by 242.7%, or $14.2
million, from $5.8 million in 1994 to $20.0 million in 1995. The increase was
due to increased personnel costs resulting from the hiring of additional
consultants to support the Company's significant increase in demand for the
Company's services. The Company's gross profit increased by 376.8%, or $3.6
million, from $958,000 in 1994 to $4.6 million in 1995. Gross profit margin
increased from 14.1% of revenue in 1994 to 18.6% of revenue in 1995. The
increase in such gross profit margin was attributable primarily to the fact that
revenue increased at a faster rate than cost of sales which resulted from a
combination of improved billing margins and greater consultant utilization.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 351.5%, or $3.5 million, from $986,000 in
1994 to $4.5 million in 1995, and increased as a percentage of revenue from
14.5% to 18.1% of revenue, respectively. The increases in such expenses in
absolute dollars and as percentage of revenue were due primarily to the
expansion of the Company's sales and marketing activities to support the
Company's growth. In 1995, selling, general and administrative expenses included
operations in India and California which were established in late 1994.
Factor fees/Interest expense. Factors fees and interest expense increased
by 187.3%, or $766,000, from $409,000 in 1994 to $1.2 million in 1995 as a
result of increased volume of accounts receivable financed resulting from
revenue increases. The Company did not establish a collections department until
the first quarter of 1996. Slow accounts receivable turnover in 1995 contributed
to increased factor fees. Factor fees and interest expense decreased as a
percentage of revenue from 6.0% to 4.8% of revenue in 1994 and 1995,
respectively, as a result of increased revenue.
18
<PAGE> 20
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following table presents certain condensed unaudited quarterly
financial information for each of the nine quarters through March 31, 1996. This
information is derived from unaudited consolidated financial statements of the
Company that include, in the opinion of the Company, all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of
results of operations for such periods, when read in conjunction with the
audited Consolidated Financial Statements of the Company and notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1994 1994 1994 1995 1995 1995 1995 1996
-------- -------- --------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................... $ 644 $1,082 $ 2,481 $2,593 $ 3,850 $5,623 $ 7,272 $7,844 $8,836
Cost of sales................ 437 707 1,704 2,994 3,857 4,454 5,791 5,919 6,423
-------- -------- --------- -------- -------- -------- --------- -------- --------
Gross profit............... 207 375 777 (401) (7) 1,169 1,481 1,925 2,413
Selling, general and
administrative expenses.... 30 218 372 366 721 816 1,179 1,736 1,469
-------- -------- --------- -------- -------- -------- --------- -------- --------
Operating income (loss).... 177 157 405 (767) (728) 353 302 189 944
Factor fees/Interest
expense.................... 28 67 149 165 320 317 344 194 315
-------- -------- --------- -------- -------- -------- --------- -------- --------
Income (loss) before
provision for income
taxes...................... 149 90 256 (932) (1,048) 36 (42) (5) 629
Provision for income taxes... -- -- -- -- -- -- -- -- 201
-------- -------- --------- -------- -------- -------- --------- -------- --------
Net income (loss)............ $ 149 $ 90 $ 256 $ (932) $(1,048) $ 36 $ (42) $ (5) $ 428
======= ======= ======= ====== ======= ======= ======= ====== =======
Net income (loss) per
share...................... $ 0.01 $ 0.01 $ 0.02 $(0.07) $ (0.08) $ 0.00 $ 0.00 $ 0.00 $ 0.03
======= ======= ======= ====== ======= ======= ======= ====== =======
Shares used in per share
calculation................ 13,967 13,967 13,967 13,967 13,967 13,967 13,967 13,967 13,967
======= ======= ======= ====== ======= ======= ======= ====== =======
</TABLE>
The Company's historical operating results have varied substantially from
quarter to quarter, and the Company expects that they will continue to do so.
Due to the relatively fixed nature of certain of the Company's costs, including
personnel and facilities costs, a decline in revenue in any fiscal quarter would
result in lower profitability in that quarter. A variety of factors, many of
which are not within the Company's control, influence the Company's quarterly
operating results, including seasonal patterns of hardware and software capital
spending by customers, information technology outsourcing trends, the timing,
size and stage of projects, new service introductions by the Company or its
competitors, levels of market acceptance for the Company's services or the
hiring of additional staff. Operating results also may be impacted by the timing
of billings and changes in the Company's billing and utilization rates. The
Company believes, therefore, that past operating results and period-to-period
comparisons should not be relied upon as an indication of future performance.
Demand for the Company's services generally is lower in the fourth quarter due
to reduced activity during the holiday season and fewer working days for those
customers which curtail operations during such period. The Company anticipates
that its business will continue to be subject to such seasonal variations.
BACKLOG
The Company generally enters into written contracts with its customers at
the time it commences work on a project. These written contracts contain varying
terms and conditions and the Company does not generally believe it is
appropriate to characterize such written contracts as creating backlog. In
addition, because these written contracts often provide that the arrangement can
be terminated with limited advance notice and without significant penalty, the
Company does not believe that projects in process at any one time are a reliable
indicator or measure of expected future revenue. In the event that a customer
terminates a project, the customer remains obligated to pay the Company for
services performed by it through the date of termination.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has funded its operations primarily from
cash generated by operations, factoring of accounts receivable and equipment
leases. Cash used in operating activities was $715,000 and
19
<PAGE> 21
$2.3 million in 1994 and 1995, respectively, and resulted primarily from the
growth in accounts receivable and unbilled services. During the quarter ended
March 31, 1996, cash flow from operating activities was $132,000 which resulted
primarily from net income, cash overdrafts and accrued expenses, offset in part
by the growth in accounts receivable and a reduction in accounts payable.
The Company's working capital deficits were $1.6 million and $1.3 million
at December 31, 1995 and March 31, 1996, respectively.
The Company invested $89,000, $142,000 and $27,000 in capital equipment and
furniture in 1994, 1995 and the first quarter of 1996, respectively. Although
there are no other material commitments for capital expenditures currently
outstanding, the Company intends further capital expenditures for computer
equipment in 1996 approximating $400,000. See "Use of Proceeds."
The Company's current factoring agreement with Access Capital, Inc. (the
"Factor") provides that the Company must offer all of its trade accounts
receivable to the Factor for financing; however, the Factor is under no
obligation to accept any or all of such receivables. The Factor charges an
administrative fee of 0.75% on each invoice plus an additional 0.75% for each
15-day period that the invoice remains unpaid, up to a maximum of 120 days or
6.5%. The agreement, which expires on October 19, 1996, is renewable for a term
of one year unless the Company or the Factor gives notice of cancellation. The
Factor has a security interest in all of the assets of the Company. The Company
intends to seek more traditional financing following this offering. No assurance
can be made that such financing will be available on terms acceptable to the
Company, if at all.
In October 1995 and May 1996, the Company deposited $100,000 and $200,000
of cash, respectively, in an escrow account pursuant to an agreement with its
former factor subject to the disposition of certain unresolved differences
between the Company and such factor relating to the factor fees and amounts due
between the parties. These differences were resolved by the parties in June
1996, and approximately $197,000 will be returned to the Company and the
remaining balance will be released to such former factor.
In March 1996, in anticipation of the debenture financing described below,
the Company obtained a $750,000 line of credit, payable on demand, from a bank.
The line of credit carried interest at the federal funds rate plus 1%.
Borrowings under the line totalled $200,000 at March 31, 1996 and $300,000 in
April 1996, when the Company repaid all amounts outstanding under such line in
connection with the debenture financing described below. The line of credit has
been terminated in accordance with the terms of such debenture financing.
In April 1996, the Company issued and sold five-year 9% subordinated
debentures in the aggregate principal amount of $6.0 million to Summit Ventures
IV, L.P. and Summit Investors III, L.P. The subordinated debentures were issued
to raise funds for working capital and general corporate purposes, to repurchase
from current shareholders an aggregate of 5,030,666 shares of Common Stock for
an aggregate of $1.5 million, to repay approximately $300,000 outstanding under
the $750,000 credit facility described above and to satisfy approximately
$358,000 of cash overdrafts. The Company expects to prepay in full all amounts
outstanding under such debentures with a portion of the net proceeds from this
offering. There is no prepayment penalty. See "Use of Proceeds" and "Certain
Transactions."
Subsequent to December 31, 1995, the Company determined that it had
unrecorded and unpaid federal and state payroll-related taxes for certain
employees. As a result of the Company's voluntary disclosure to the Internal
Revenue Service of certain unpaid tax liabilities, on June 5, 1996, the Company
received an audit assessment from the Internal Revenue Service for unpaid 1994
and 1995 federal income tax withholding, FICA and FUTA taxes in the aggregate
amount of $814,000. No interest or penalties were assessed. Reserves,
aggregating $1.0 million, including the amount of the Internal Revenue Service
audit assessment, have been recorded. No assurance may be given, however, that
interest, penalties or additional state or federal taxes will not be assessed in
the future. The Company's principal shareholders, Messrs. Pandey, Koneru and
Valluripalli, have agreed to indemnify the Company for any and all losses which
the Company may sustain, in excess of the $1.0 million reserve, net of any tax
benefits realized by the Company, arising from or relating to federal or state
tax, interest or penalty payment obligations resulting from the above subject
matter. See "Certain Transactions."
20
<PAGE> 22
The Company believes that the net proceeds of this offering, together with
available funds, existing factoring arrangements and the cash flow expected to
be generated from operations, will be adequate to satisfy its current and
planned operations for at least the next 24 months.
RECENT PRONOUNCEMENTS ON ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 123, "Accounting for Stock-Based Compensation,"
which requires companies to measure employee stock compensation plans based on
the fair value method using an option pricing model or to continue to apply
Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees,"
and provide pro forma footnote disclosures under the fair value method. The
Company continues to apply Accounting Principles Board No. 25 and will provide
pro forma footnote disclosure.
21
<PAGE> 23
BUSINESS
GENERAL
Intelligroup provides a wide range of information technology services,
including enterprise-wide business process solutions, systems integration and
custom software development based on leading technologies. The Company has grown
rapidly since 1994 when it made a strategic decision to diversify its customer
base by expanding the scope of its integration and development services, and to
utilize SAP software as a primary tool to implement enterprise-wide business
process solutions. In 1995, the Company became a SAP National Implementation
Partner and also began to utilize Oracle products to diversify its service
offerings. The Company's custom software development services are enhanced by
its exclusive access to qualified and experienced programmers at its affiliated
Advanced Development Center located in India and connected to the Company's
headquarters in the United States and to certain customer sites by dedicated,
high speed satellite links. The Company provides its services directly to
end-user organizations or as a member of a consulting team assembled by another
information technology consulting firm. The number of customers billed by the
Company has grown substantially from three customers in 1993 to 75 customers in
1995. The Company's customers are Fortune 1000 and other large and mid-sized
companies, as well as other information technology consulting firms, and include
AT&T, American Cyanamid, Citibank, Ernst & Young LLP, IBM, ICS Deloitte & Touche
LLP and Price Waterhouse LLP.
INDUSTRY BACKGROUND
Many large and mid-sized businesses face a rapidly changing business
environment, intense global competition and accelerating technological change.
To remain competitive, such businesses continually seek to improve the quality
of products and services, lower costs, reduce cycle times and increase value to
customers. Businesses are implementing and utilizing advanced information
technology solutions that enable them to redesign their business processes in
such areas as product development, service delivery, manufacturing, sales and
human resources. The ability of an organization to integrate and deploy
redesigned business processes and related information technologies timely and
cost effectively is critical in the changing business environment.
Concurrently, businesses are migrating from legacy systems running
proprietary software to open systems and client/server architectures based on
personal computers, LANs/WANs, shared databases and packaged software
applications. Such client/server systems, when developed and implemented
appropriately, enable the creation and utilization of more functional and
flexible applications which are critical to the competitive needs of businesses.
Organizations often acquire packaged enterprise-wide business software
applications for client/server systems, including those offered by leading
vendors, such as SAP, Oracle, PeopleSoft or Baan, and implement or customize
these applications to match their needs. Organizations also may develop
customized software applications designed for their specific business needs.
Despite the advantages of client/server systems, the complex task of
developing and implementing enterprise-wide, mission-critical, client/server
solutions presents significant challenges for most organizations and often is a
time consuming and costly undertaking. Implementing client/server solutions
typically requires significant allocation of organizational resources.
Information technology managers must integrate and manage open systems and
distributed computing environments consisting of multiple computing platforms,
operating systems, databases and networking protocols, and implement packaged
enterprise software applications to support business objectives. Companies also
must continually keep pace with new technological developments which can render
internal information technology skills outmoded. Professionals with the
requisite technology skills often are in short supply and many organizations are
reluctant to expand their internal information systems department for particular
projects. At the same time, external economic factors encourage organizations to
focus on their core competencies and trim workforces in the information
technology management area. Accordingly, organizations often lack sufficient
technical resources necessary to design, develop and implement emerging
information technology solutions on a timely basis.
22
<PAGE> 24
To support their information technology needs, many businesses increasingly
engage experienced outside specialists to develop and implement solutions, in
shorter timeframes and at lower costs, while reducing implementation risks. As a
result, demand for information technology services has grown significantly.
According to industry sources, the global demand for SAP-related consulting
services alone was estimated to be $3.0 billion in 1995.
THE INTELLIGROUP SOLUTION
Intelligroup provides information technology services to develop and
implement cost-effective client/server business solutions on a timely basis by
combining its expertise in a wide range of technologies and business processes
with its proprietary implementation methodology and development tools. The
Company believes it offers the following advantages:
Expertise in a Wide Range of Technologies: The Company's consultants have
expertise with SAP and Oracle products and with a wide variety of leading
computing technologies, including client/server architectures, object-oriented
technologies, CASE, distributed database management systems, micro-to-mainframe
connectivity, LAN/WAN and telecommunications technologies. Since many of the
Company's customers have invested in a variety of technologies, including legacy
systems, the Company also develops solutions for these environments.
Accelerated Implementation Methodology: The Company recently has developed
a proprietary implementation methodology, 4 SIGHT, which is designed to minimize
the time required to develop and implement SAP solutions for its customers.
4 SIGHT is designed to be technology independent and modular so that it may be
utilized by the Company's consultants and project managers in other packaged
applications development or software customization projects. The Company only
recently began marketing its new implementation capability, which currently is
being utilized in two projects.
Value-Oriented Implementation: The Company provides experienced project
managers and consultants to its customers. The Company believes that its
personnel are effective because of their industry experience. Currently, a
majority of its consultants have over three years information technology
consulting experience and approximately 25% of its consultants have over five
years of such experience. In addition, the Company has the ability to develop
and implement business solutions through its affiliated offshore Advanced
Development Center in India which gives the Company access to qualified and
experienced programmers at a reduced labor cost.
Customer-Driven Approach: The Company's project managers and consultants
maintain on-going communication and close interaction with customers to ensure
that they are involved in all facets of a project and that the solutions
designed and implemented by the Company meet the customer's needs. The Company's
goal is to provide training to its customers during a project to achieve high
levels of self-sufficiency among its customers' end users and internal
information technology personnel. The Company believes that its ability to
deliver the requisite knowledge base to its customers is critical to fostering
long-term relationships with, and generating referrals from, existing customers.
STRATEGY
The Company's objective is to be a leading provider of a wide range of
information technology services, including enterprise-wide business process
solutions, systems integration and custom software development based on leading
technologies. The Company's strategy includes the following key elements:
Accelerate Shift to Turnkey Project Management: The Company provides its
services directly to its customers or as a member of a consulting team in which
another information technology consulting firm serves as project manager. To
date, the Company has been retained primarily to implement project
specifications designed by other members of the project team. The Company
believes that turnkey project management assignments typically carry higher
margins. The Company intends to accelerate a shift to such higher-margin turnkey
project management assignments and to more complex projects. The Company seeks
to accomplish such shift by leveraging its reputation, existing capabilities,
proprietary implementation
23
<PAGE> 25
methodology, development tools, and offshore development capabilities with
expanded sales and marketing efforts and new service offerings to develop
turnkey project sales opportunities with existing customers and to expand its
market to new customers.
Maintain and Expand Long-Term Customer Relationships: The Company
recognizes the importance of offering superior services to its customers, which
it believes is essential to building long-term customer relationships. The
Company believes that satisfying customer expectations within established
budgets and estimated timeframes is critical to gaining repeat business and
generating new business from referrals. As information technology continues to
evolve, the Company believes that service providers with established customer
relationships and the ability to maintain a high level of expertise in new
technologies will be market leaders.
Leverage and Expand Strategic Relationships: The Company currently
maintains strategic relationships with SAP and Oracle, which are leading
enterprise software applications developers. The Company believes that its
designation as a SAP National Implementation Partner and its status as an Oracle
services provider results in direct referrals and in enhanced industry
recognition. The Company also believes that such relationships enable the
Company to broaden its customer base, maintain technological leadership and
increase its competitiveness. The Company intends to continue to cultivate its
relationships with SAP and Oracle to expand its sales opportunities. The Company
also seeks to continue to form alliances with other developers and vendors of
information technologies. In addition, the Company seeks to form strategic
alliances with other business partners, such as management consulting firms, to
pursue joint business opportunities.
Maintain Technological Leadership and Enhance Methodology and Development
Tools: The Company intends to continue to enhance its proprietary
implementation methodology and development tools as new information technology
challenges and technologies emerge. The Company also intends to leverage 4 SIGHT
by porting it to other leading software applications in addition to SAP. The
Company continually evaluates new and emerging software applications and
technologies, such as Internet and Intranet technologies, and intends to
incorporate such technologies into the Company's service offerings.
Attract and Retain Skilled, Motivated Technical Employees: The Company
believes that its future success depends upon its ability to continue to
attract, retain and train skilled, motivated technical employees. To this end,
the Company focuses on maintaining its merit-driven employment environment and
incentive systems, including the implementation of its stock incentive plan, to
continue to motivate and reward its employees and to align their goals with
those of the Company. The Company believes that it will continue to benefit from
the recruitment efforts of its existing employee base to attract additional
qualified consultants and programmers in a highly competitive employment
environment.
Expand Global Sales and Marketing Efforts: The Company intends to expand
its sales and marketing efforts by hiring additional experienced sales
personnel, leveraging existing customers to gain referrals, offering new
services to new and existing customers, and utilizing its relationships with
industry leading information technology providers. In addition, the Company
intends to expand by establishing additional sales offices in the United States
and abroad in areas in which the Company has a base of customers or perceives
significant market opportunities. The Company believes that a strong domestic
and international presence will enhance its competitiveness by providing
additional sales presence at the local level. To date, the Company has
established operations or affiliated operations in New Jersey, California,
India, New Zealand and South Africa.
INTELLIGROUP SERVICES
Intelligroup provides a wide range of information technology services,
including (i) enterprise-wide business process solutions utilizing SAP R/3 and
Oracle products, which are leading software applications; and (ii) systems
integration and custom software development solutions in a wide variety of
computing environments utilizing leading technologies, including client/server
architectures, object-oriented technologies, CASE, distributed database
management systems, LAN/WAN and telecommunications technologies. The Company's
services range from providing customers with a single consultant to
multi-personnel full-scale projects. The Company provides these services to its
customers primarily on a time and materials basis and
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<PAGE> 26
pursuant to agreements which are terminable upon relatively short notice. The
Company's custom software development services are enhanced by its exclusive
access to qualified and experienced programmers at the Advanced Development
Center located in India and connected to the Company's headquarters in the
United States and to certain customer sites by dedicated, high speed satellite
links.
ENTERPRISE-WIDE BUSINESS PROCESS SOLUTIONS
The Company designs, develops, integrates and implements sophisticated
business process solutions utilizing SAP R/3 and Oracle products and
incorporating best business practices and methods. The Company builds business
solutions for its customers by focusing on each customer's business objectives
and by providing business process re-engineering, information systems strategic
planning, technology implementation, comprehensive training and organizational
change management services. The Company believes that its expertise in a wide
variety of technologies, coupled with its ability to provide comprehensive
business process solutions and timely and cost-effective implementation of new
business systems, enables its customers to achieve substantial improvements in
efficiency and effectiveness in their businesses and fosters long-term customer
relationships.
On-line Project Management System ("OPMS"): The Company utilizes its OPMS
to monitor enterprise-wide business process solutions development projects. The
Company designed OPMS as a SAP subsystem developed in R/3 and installable on
customers' SAP systems. OPMS provides real-time information relating to: the
current stage of development of each program; the number of man-hours spent at
each stage of development; total man-hours spent on development during any
interval of time; programs developed by each programmer; analysis of time spent
on the development project; and technical information, including source code,
documentation and tables used in the system. The Company believes that OPMS also
shortens the turn-around time for program development as it streamlines the
information flow between the Company's offices and customer sites.
25
<PAGE> 27
Accelerated Implementation Methodology: As a result of its experience in
implementing SAP software, the Company has developed a proprietary methodology,
4 SIGHT, for implementing enterprise business software applications. 4 SIGHT,
used by the Company to date solely in projects implementing SAP R/3, is designed
to be portable to other packaged software applications, including those offered
by Oracle, PeopleSoft and Baan, and to be adaptable to the scope of a particular
project. The following chart outlines the framework of the Company's
methodology:
4/SIGHT
<TABLE>
<CAPTION>
PHASE DESCRIPTION SELECTED ACTIVITIES
---------------- ----------------------------- -------------------------------------
<S> <C> <C>
Requirements Develop a detailed project - Project goals definition
Analysis plan. - Project scoping and planning
- Process identification
- Cost/benefit analysis
- Data requirement analysis
- Detailed implementation plan
development
Prototyping Convert the customer's - Business process prototyping
business requirements to a - Report prototyping
basic systems solution. - Design data conversion
implementation and enhancements
- Transaction testing
Development Implement end user input to - Software customization
customize the solution, - New reports and layouts development
integrate with other systems - Data interfaces completion
and prepare for the "go-live" - Data conversion
point. - Technical implementation
- System testing
- Training preparation
Implementation Determine the most - Data conversion
appropriate implementation - Acceptance testing
approach, including "big - Maintenance handover
bang," functionally phased - Benefits tracking
and location phased - Implementation review
approaches.
</TABLE>
The Company believes that the use of 4 SIGHT throughout an implementation
project may enable its customers to realize significant savings in time and
resources.
SYSTEMS INTEGRATION AND CUSTOM SOFTWARE DEVELOPMENT
The Company provides a broad range of systems integration and customized
application solutions to customers in a wide variety of industries. The Company
is engaged by customers to undertake feasibility studies, systems engineering,
custom software development and tailoring, migration strategies, systems design,
development, testing, integration, implementation, training and support in a
wide variety of computing environments. The Company, in providing such services,
utilizes leading technologies, including client/server architectures,
object-oriented technologies, CASE, distributed database management systems,
LAN/WAN and telecommunications technologies.
ADVANCED DEVELOPMENT CENTER
The Company provides cost-effective, timely custom software development and
tailoring in the United States, at customer sites and through its affiliated
Advanced Development Center ("ADC") located in Hyderabad, India. The ADC is
connected to the Company's headquarters in the United States and to certain
26
<PAGE> 28
customer sites by dedicated, high speed satellite links. The ADC is owned by
Intelligroup Asia, a corporation organized pursuant to the laws of India and
owned by Messrs. Pandey, Koneru and Valluripalli, the principal shareholders of
the Company. The ADC is operated for the sole and exclusive use and benefit of
the Company. See "Certain Transactions." The ADC is staffed with qualified and
experienced programmers, including those with SAP configuration expertise and
SAP's ABAP/4 programming capability. The Company utilizes the programmers at the
ADC, in conjunction with its consultants in the United States who are on site at
customer locations, to provide its customers with savings in development and
implementation costs and time to project completion. All development projects
undertaken by the ADC are monitored by the Company's OPMS. OPMS also minimizes
the turn-around time for program development as it streamlines the information
flow between customer sites and the ADC. The Company intends to utilize the ADC
to provide similar development services to customers that utilize software
applications other than SAP software.
SALES AND MARKETING
The Company historically has generated new sales leads from referrals from
existing customers, and from introductions to potential customers by SAP or
Oracle, which often need to recommend qualified systems integrators to implement
their software products. In addition, the Company has been introduced to
customers by certain of its competitors, such as "Big Six" accounting firms,
which at times require the Company's expertise and ability to deliver qualified
personnel for complex projects. To date, the Company has been able to grow its
customer base without allocating significant resources to its sales and
marketing effort. The Company believes, however, that in order to continue its
growth, it must dedicate an increased level of resources to more focused sales
and marketing efforts. The Company will continue to market to potential
customers with demonstrated needs for the Company's expertise in core
information technologies and solutions such as SAP. To implement this plan, the
Company intends to expand its dedicated sales and marketing force by hiring
several individuals with experience in the industry sectors in which the Company
has prior experience.
Among its sales and marketing efforts, the Company's sales force has
presented the Company's expertise at SAPPHIRE, the annual SAP America conference
for SAP service providers and end-users, and uses direct marketing techniques.
The Company intends to increase its participation in industry-recognized
programs and trade shows. Most importantly, however, the Company believes that
satisfying customer expectations within budgets and time schedules is critical
to gaining repeat business and obtaining new business from referrals.
As of March 31, 1996, the Company's sales and marketing group consisted of
nine employees in the United States. The Company markets and delivers its
services to customers on an international basis through its network of offices.
The Company's headquarters in New Jersey and its branch office in San Jose,
California serve the United States market. Intelligroup Asia serves as the
Company's sales agent in Asia and the Middle East. In addition, the Company also
has established operations in New Zealand and currently has information
technology consultants on-site at a customer location. The Company intends to
add sales and marketing capabilities in New Zealand. In February 1996, the
Company established a sales office in South Africa. The Company also intends to
increase its local presence in the United States by opening additional sales
offices and by expanding its sales and marketing staff in New Jersey and
California.
The Company's services require a substantial financial commitment by
customers and, therefore, typically involve a long sales cycle. Once a lead is
generated, the Company endeavors to understand quickly the potential customer's
business needs and objectives in order to develop the appropriate solution and
bid accordingly. The Company's project managers are involved throughout the
sales cycle to ensure mutual understanding of customer goals, including time to
completion, and technological requirements. Sales cycles typically range from
one to six months from the time the Company initially meets with a prospective
customer until the customer decides whether to authorize commencement of an
engagement. The Company often encounters longer sales cycles for larger, complex
business solutions projects.
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CUSTOMERS
The Company provides its services directly to Fortune 1000 and other large
and mid-sized companies, many of which have information-intensive, multinational
operations, or as a member of a consulting team assembled by other information
technology consultants, such as "Big Six" accounting firms. The number of
customers billed by the Company has grown substantially from three customers in
1993 to 75 customers in 1995. In the first quarter of 1996, the Company billed
61 customers.
Since January 1, 1994, the Company has served customers in a broad range of
industries. The following list includes representative customers which have
engaged the Company to perform services for which the Company has generated a
minimum of $250,000 in revenue from January 1, 1994 through March 31, 1996.
IT CONSULTING
------------------------------
Andersen Consulting
Ernst & Young LLP
ICS Deloitte & Touche LLP
KPMG Peat Marwick LLP
Price Waterhouse LLP
TSR Consulting
BASIC INDUSTRIES
------------------------------
American Cyanamid
Coors Brewing
Hoechst Celanese
Hoffman LaRoche
National Starch
Schlumberger
Wisconsin Electric & Power
TECHNOLOGIES
---------------------
AT&T
Analog Devices
Brother Industries
GTech
IBM
Informix Software
Landmark Graphics
Merisel
NCR
Oracle
SAP America
FINANCIAL
---------------------
Citibank
PaineWebber
The Company's ten largest customers accounted for, in the aggregate,
approximately 61%, 56% and 63% of its revenue in 1994, 1995 and the quarter
ended March 31, 1996, respectively. During 1994, AT&T accounted for more than
10% of revenue, while in 1995 and the quarter ended March 31, 1996, Ernst &
Young LLP and Price Waterhouse LLP each accounted for more than 10% of revenue.
Currently, the Company is engaged in five separate projects for each of Ernst &
Young LLP and Price Waterhouse LLP. In 1994, 1995 and the quarter ended March
31, 1996, 64%, 50% and 52%, respectively, of the Company's revenue was generated
by serving as a member of a consulting team assembled by a leading information
technology consulting firm retained by an organization to manage a project to
provide an enterprise-wide business process solution.
Although the Company has service contracts with many of its large customers
to provide its services, in general, such service contracts are terminable upon
relatively short notice. There can be no assurance that the Company's customers
will continue to enter into service contracts with the Company or that existing
contracts will not be terminated.
While each customer project is different, the following case studies
illustrate some of the types of business needs addressed by the Company and the
range of information technology solutions the Company has provided to its
customers.
ENTERPRISE-WIDE IMPLEMENTATION OF SAP'S R/3 SOFTWARE:
MERISEL: Merisel, a leading national master distributor of micro-computer
products, engaged the Company to provide assistance in implementation of its SAP
business system in the United States and Canada.
Problem: Merisel, in its migration from a legacy system to a
UNIX-based SAP system, required substantial development of customized
reports in SAP to meet organizational requirements in the areas of sales
and distribution, finance, costing, and profitability and logistics. This
project required experienced
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SAP consultants, including analysts and ABAP/4 programmers. Merisel
initially believed that it required approximately 500 reports to be
developed in a six-month period.
Solution: SAP recommended to Merisel that it engage the Company to
provide assistance in its SAP implementation project. The Company was able
rapidly to form a team of experienced ABAP/4 programmers and analysts. The
Company's on-site analyst team performed requirements analysis to identify
reports needed in each functional area. The Company's analysts ensured that
the user requirements were accurately transformed into a practical
technical design and its programming staff at the ADC provided timely and
cost-effective software development. The Company utilized its OPMS to
manage effectively the development effort by providing the appropriate
communications system, document and software management system, and
progress tracking and management system. The Company's analysts also
provided end-user training and documentation.
Result: The Company achieved the project goals on time and within
Merisel's budget, while reducing the number of reports required by
approximately 65%.
GATX CAPITAL: GATX, a diversified financial services company, has selected
the Company to manage its current SAP R/3 implementation project which includes
project management, business process re-engineering, SAP configuration and
prototyping, on-site and off-shore development, training, data conversion and
implementation. The GATX project is one of the first major implementations of
the new SAP R/3 Treasury Management module.
Problem: GATX required an implementation partner with SAP-experienced
personnel for its migration from a heterogeneous collection of software
applications and computing platforms to a new integrated and flexible
system utilizing SAP R/3. The project goal is to provide the functionality
required to administer the financial and physical asset management needs of
the GATX organization, which includes over 200 subsidiaries or affiliates
worldwide.
Solution: The Company is managing the SAP implementation utilizing
4 SIGHT in implementing new business processes which incorporate accounting
and administration, treasury and cash management, invoicing, bookings,
dispositions, projections, depreciation, asset tracking and portfolio and
profitability analysis.
Result: The GATX SAP R/3 implementation project, which commenced in
January 1996, is proceeding as projected.
INTEGRATION OF INFORMATION TECHNOLOGIES:
AT&T: AT&T retained the Company to develop a creative software application
to provide instructional training exercises for certain of AT&T's customer
service representatives.
Problem: AT&T wanted to improve the efficiency and effectiveness of
its training of entry level representatives by using advanced information
technologies to enable on-line, on-the-job training.
Solution: The Company designed and developed training software using
Sun SparcStations connected via a LAN and utilizing state-of-the-art audio
and visual effects. The Company developed the software using Open Windows,
C, Xt, and Xlib in a networked environment and integrated all of these
technologies with the job functions of AT&T's proprietary customer service
applications system.
Result: The development of this software permitted AT&T to
administer, monitor and manage the performance of its trainees at reduced
costs. The Company achieved the project goals on time and within AT&T's
budget.
Many of the Company's engagements involve projects that are critical to the
operations of its customers' businesses and provide benefits that may be
difficult to quantify. The Company's failure or inability to meet a customer's
expectations in the performance of its services could result in a material
adverse change to the customer's operations giving rise to claims for damages
against the Company or causing damage to the Company's reputation, adversely
affecting its business, financial condition and results of operations. In
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<PAGE> 31
addition, certain of the Company's agreements with its customers require the
Company to indemnify the customer for damages arising from services provided to,
or on behalf of, such customer. Subsequent to the consummation of this offering,
the Company intends to purchase and maintain errors and omissions insurance to
insure the Company for damages and expenses incurred in connection with alleged
negligent acts, errors or omissions. There can be no assurance that such
insurance will be available to the Company on acceptable terms, if at all.
COMPETITION
The markets for the Company's services are highly competitive. The Company
believes that its principal competitors include the internal information systems
groups of its prospective customers, as well as consulting and software
integration firms, including the "Big Six" accounting firms, the ISSC division
of IBM, Cambridge Technology Partners, SHL Systemhouse (a subsidiary of MCI),
and Computer Sciences Corporation, and with software applications vendors, some
of which are also customers of the Company. Many of the Company's competitors
have longer operating histories, possess greater industry and name recognition
and have significantly greater financial, technical and marketing resources than
the Company. In addition, there are relatively low barriers to entry into the
Company's markets and the Company has faced, and expects to continue to face,
additional competition from new entrants into its markets.
The Company believes that the principal competitive factors in its markets
include quality of service and deliverables, speed of development and
implementation, price, project management capability and technical and business
expertise. The Company believes that its ability to compete also depends in part
on a number of competitive factors outside its control, including the ability of
its competitors to hire, retain and motivate project managers and other senior
technical staff, the development by others of services that are competitive with
the Company's services and the extent of its competitors' responsiveness to
customer needs.
The Company believes that it competes based on its expertise in SAP and
Oracle products and a wide variety of technologies. There can be no assurance
that the Company will be able to continue to compete successfully with existing
and new competitors. See "Risk Factors -- Highly Competitive Information
Technology Services Industry."
EMPLOYEES
As of March 31, 1996, the Company employed 231 full-time employees, of whom
202 were engaged as consultants, 9 were engaged in sales and marketing, and 20
were engaged in finance, administration, and management. Of the total number of
employees, 214 were based in the United States, 13 were based in New Zealand and
4 were based in South Africa. In addition, the Company engaged 27 independent
contractors to perform information technology services and has exclusive access
to all of the employees of Intelligroup Asia, which consisted of 24 software
developers and four administrative personnel at March 31, 1996.
None of the Company's employees is covered by a collective bargaining
agreement. Substantially all of the Company's employees have executed a
non-competition, non-disclosure and non-solicitation assignment. In addition,
the Company requires that all new employees execute such agreement as a
condition of employment by the Company. The Company believes that it has been
successful in attracting and retaining skilled and experienced personnel. There
is increasing competition for experienced sales and marketing personnel and
technical professionals. The Company's future success will depend in part on its
ability to continue to attract, retain, train and motivate highly qualified
personnel. See "Risk Factors -- Competitive Market for Technical Personnel." The
Company considers relations with its employees to be good.
INTELLECTUAL PROPERTY RIGHTS
The Company's success is dependent, in part, upon its proprietary
accelerated implementation methodology, development tools and other intellectual
property rights. The Company relies upon a combination of trade secret,
nondisclosure and other contractual arrangements, and copyright and trademark
laws, to protect its proprietary rights. The Company generally enters into
confidentiality agreements with its employees, consultants and customers, and
limits access to and distribution of its proprietary information. The Company
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<PAGE> 32
also requires that substantially all of its employees and consultants assign to
the Company their rights in intellectual property developed while employed or
engaged by the Company. There can be no assurance that the steps taken by the
Company in this regard will be adequate to deter misappropriation of its
proprietary information or that the Company will be able to detect unauthorized
use of and take appropriate steps to enforce its intellectual property rights.
See "Risk Factors -- Reliance on Intellectual Property Rights."
FACILITIES
The Company owns no real property and currently leases all of its office
space. The Company subleases its headquarters in Iselin, New Jersey, totaling
approximately 13,200 square feet. The sublease expires in November 1999. The
Company believes that such headquarters has sufficient space for its current and
anticipated near-term needs. The Company uses such facility for certain
technical and support personnel, sales and marketing, administrative, finance
and management personnel. The Company also leases or subleases offices for its
operations in San Jose, California and Pretoria, South Africa.
LEGAL PROCEEDINGS
The Company currently is being investigated by the Immigration and
Naturalization Service (the "INS") concerning possible violations of the
Immigration Reform and Control Act of 1990. Specifically, the INS is
investigating whether the Company improperly employed certain foreign national
individuals prior to their obtaining appropriate work authorization and failed
to complete properly employment eligibility verification forms for all
employees. The Company has and will continue to cooperate fully with the INS. A
notice of intent to fine has not been served upon the Company, and, therefore,
the potential for fines is not known at this time. The Company believes,
however, that fines, if any, will not exceed $150,000. The Company anticipates
that the INS investigation may continue for six months or more. There can be no
assurance, however, as to the ultimate amount of fines which may be assessed or
the length of time it may take to conclude the INS investigation. The Company
employs many foreign national individuals and has implemented procedures and
controls which it believes will ensure full compliance with the Immigration
Reform and Control Act of 1990 and related regulations. Toward this end, the
Company now employs in-house counsel to oversee this function.
On February 16, 1996, the Company, as plaintiff, filed a complaint in the
Superior Court of New Jersey, Chancery Division, Middlesex County, against a
former consultant to the Company, seven former employees of the Company and
Pegasus Systems, Inc. ("Pegasus"), a corporation which currently employs such
individuals (collectively, the "Defendants"). The complaint, which seeks damages
and injunctive relief against the Defendants, alleges, among other things,
misappropriation of proprietary information, unfair competition, tortious
interference, breach of employment agreements, breach of a consulting agreement
between the Company and Pegasus, and breach of duty of loyalty, good faith and
fair dealing. Upon the filing of its complaint, the Company obtained a temporary
restraining order and in May 1996 obtained a preliminary injunction prohibiting
the Defendants from using or disclosing the Company's proprietary information,
prohibiting the Defendants from contacting or soliciting certain of the
Company's customers and prohibiting the Defendants from recruiting or attempting
to recruit the Company's employees, agents or contractors. The preliminary
injunction remains in effect and the Company intends to pursue vigorously
enforcement of the injunction against the Defendants. The Defendants have filed
an answer and counterclaim. Pegasus has asserted a breach of contract
counterclaim against the Company alleging that the Company owes it $123,000 for
consulting services. Pegasus and two of the individual Defendants also asserted
claims against the Company and two of its officers for tortious interference and
defamation. In addition, one of the individual Defendants has asserted that the
Company owes him $73,000 in commissions. In addition to monetary damages the
Defendants seek injunctive relief. The Defendants unsuccessfully sought a
temporary restraining order against the Company. The Company denies the
allegations made and intends to defend vigorously the counterclaims. The Company
does not believe that the outcome of these claims and counterclaims will have a
material effect upon the Company's business, financial condition or results of
operations.
Oxford Systems Inc., a New Jersey corporation and a wholly-owned subsidiary
of the Company ("Oxford"), is named as a defendant in a civil complaint that was
filed on June 8, 1995 by Design Strategy
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Corp. ("Design Strategy"), in New York State Supreme Court in the County of New
York. Design Strategy alleges that another named defendant, Citibank, N.A.
("Citibank"), contracted with Design Strategy for database administration
services. Design Strategy claims that Citibank and Oxford conspired to deprive
it of commissions, tortiously interfered with contract, engaged in unfair
competition, damaged its reputation and misappropriated services. The Company
denies the allegations made and intends to continue to defend vigorously such
action. The Company does not believe that the outcome of the action will have a
material effect upon the Company's business, financial condition or results of
operations.
There is no other material litigation pending to which the Company is a
party or to which any of its property is subject.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEE
The executive officers, directors and key employee of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------- ---- ----------------------------------------
<S> <C> <C>
Ashok Pandey(1)(2)............................... 38 Chairman of the Board, President, Chief
Executive Officer and Director
Rajkumar Koneru.................................. 26 Vice President -- Business Solutions and
Director
Nagarjun Valluripalli............................ 28 Vice President -- Advanced Technology
and Director
Robert M. Olanoff................................ 40 Chief Financial Officer, Treasurer and
Secretary
Paul W. Coombs................................... 40 Director of Business Solutions
Kevin P. Mohan(1)(2)(3).......................... 32 Director
Thomas S. Roberts(1)(2)(3)....................... 32 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) Member of Option Committee.
All executive officers of the Company are elected annually by the Board of
Directors and serve until their successors are duly elected and qualified. All
directors hold office until the next annual meeting of shareholders and until
their successors shall have been duly elected and qualified. There are no family
relationships among any of the executive officers, directors and key employee of
the Company.
Ashok Pandey founded the Company and has served as a director, Chairman of
the Board, President, and Chief Executive Officer of the Company since its
inception in 1987. Prior to founding the Company, Mr. Pandey was a consultant to
AT&T and Bell Laboratories. He has more than twelve years of experience in
developing systems and application software.
Rajkumar Koneru joined the Company in April 1996 and currently serves as
Vice President -- Business Solutions and as a director. In May 1993, Messrs.
Koneru and Valluripalli co-founded Oxford Systems Inc., a systems integration
company ("Oxford"). In March 1994, they sold all of the issued and outstanding
capital stock of Oxford to the Company. See "Certain Transactions." From June
1992 through December 1992, Mr. Koneru was a consultant with Super Solutions
Corporation and, from March 1993 until March 1996 he was a consultant for the
Boston Group, each an information technology consulting firm. Following
consummation of the Company's transaction with Oxford, Mr. Koneru continued to
be employed by the Boston Group, which subcontracted Mr. Koneru's services to
the Company.
Nagarjun Valluripalli joined the Company in March 1994 and currently serves
as Vice President -- Advanced Technology and as a director. In May 1993, Messrs.
Koneru and Valluripalli co-founded Oxford, at which Mr. Valluripalli was
responsible for business development. In March 1994, Messrs. Koneru and
Valluripalli sold all of the issued and outstanding capital stock of Oxford to
the Company. See "Certain Transactions." Prior to founding Oxford, from 1990,
Mr. Valluripalli was marketing manager for VJ Infosystems, a software training
and services company.
Robert M. Olanoff joined the Company in January 1996 and currently serves
as its Chief Financial Officer, Treasurer and Secretary. Prior to joining the
Company, from 1993 through 1995, Mr. Olanoff was Chief Financial Officer and
Vice President of InfoMed Holdings, Inc. From 1990 to 1993, he was Controller of
Execu-Flow Systems, Inc. Each company is a turnkey software provider to the
healthcare industry. Mr. Olanoff is a certified public accountant.
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Paul W. Coombs joined the Company in July 1994 and currently serves as
Director of Business Solutions. From November 1993 through December 1994, he was
a Director of CBC Limited, a computer consulting company, of which he was a
principal shareholder. From July 1986 through November 1993, he was an
Associate -- Strategic Planning with Touche Ross & Co.
Kevin P. Mohan has been a director of the Company since April 1996. Mr.
Mohan currently serves as a Vice President of various venture capital funds
(including Summit Ventures IV, L.P. and Summit Investors III, L.P., shareholders
of the Company) affiliated with Summit Partners, a venture capital firm, at
which he has been employed since 1994. Prior to joining Summit Partners, Mr.
Mohan served as an engagement manager at McKinsey & Company, Inc. Mr. Mohan is
also a director of several privately held companies.
Thomas S. Roberts has been a director of the Company since April 1996. Mr.
Roberts currently serves as a General Partner of various venture capital funds
(including Summit Ventures IV, L.P. and Summit Investors III, L.P., shareholders
of the Company) affiliated with Summit Partners, a venture capital firm, at
which he has been employed since 1989. Mr. Roberts is also a director of AMX
Corporation, Catalyst International, Inc., PowerCerv Corporation, and several
privately held companies.
The Board of Directors has a Compensation Committee, which approves
salaries and certain incentive compensation for management and key employees of
the Company; an Audit Committee, which reviews the results and scope of the
audit and other services provided by the Company's independent public
accountants; and an Option Committee, which administers the Company's 1996 Stock
Plan.
DIRECTORS' COMPENSATION
Currently, directors do not receive cash compensation for services on the
Board of Directors. The Company provides reimbursement to directors for
reasonable and necessary expenses incurred in connection with attendance at
meetings of the Board of Directors.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
On June 3, 1996 the Board of Directors approved and shareholders adopted
the Company's Non-Employee Director Plan which became effective on June 6, 1996.
The Non-Employee Director Plan provides for the grant of options to purchase a
maximum of 140,000 shares of Common Stock of the Company to non-employee
directors of the Company. The Non-Employee Director Plan is administered by the
Board of Directors.
Each person who is a director of the Company on the effective date of the
Company's initial public offering or who becomes a director of the Company
thereafter, and who is not also an employee or officer of the Company, shall be
granted, on the effective date or the date on which he or she becomes a
director, whichever is later, an option to purchase 20,000 shares of Common
Stock, at an exercise price per share equal to the then fair market value of the
shares. No subsequent grants are permitted to such individuals under the
Non-Employee Director Plan. All options become exercisable in five equal annual
installments commencing one year after the date of grant provided that the
optionee then remains a director at the time of vesting of the installments. The
right to exercise annual installments of options will be reduced proportionately
based on the optionee's actual attendance at directors' meetings if the optionee
fails to attend at least 80% of the directors' meetings held in any calendar
year. The term of each option will be for a period of ten years from the date of
grant, unless sooner terminated in accordance with the Non-Employee Director
Plan. Options may not be transferred except by will or by the laws of descent
and distribution or pursuant to a domestic relations order and are exercisable
to the extent vested at any time prior to the scheduled expiration date of the
option. The Non-Employee Director Plan terminates on the earlier of June 5, 2006
or at such time as all shares of Common Stock currently or hereafter reserved
for issuance shall have been issued.
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<PAGE> 36
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation for
services in all capacities awarded to, earned by or paid to the Company's Chief
Executive Officer and to the only other executive officer of the Company whose
aggregate cash compensation exceeded $100,000 (collectively, the "Named
Executives") during the year ended December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------
OTHER ANNUAL ALL OTHER
COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION(1) YEAR SALARY($) (2)($) (3)($)
- ----------------------------------------------- ---- --------- ------------ ------------
<S> <C> <C> <C> <C>
Ashok Pandey................................... 1995 145,150 18,367 12,190
President and Chief
Executive Officer
Nagarjun Valluripalli.......................... 1995 147,968 19,727 3,858
Vice President -- Advanced Technology
</TABLE>
- ---------------
(1) Mr. Koneru joined the Company in April 1996 and currently serves as Vice
President -- Business Solutions and as a director. Immediately prior to
becoming an employee of the Company, Mr. Koneru was a consultant with the
Boston Group, which subcontracted Mr. Koneru's services to the Company from
March 1994 to April 1996.
(2) Represents car allowance and payment by the Company of certain non-recurring
personal expenses.
(3) Represents the value of insurance premiums paid by the Company with respect
to whole life insurance for the benefit of such Named Executive.
1996 STOCK PLAN
The 1996 Stock Plan was adopted by the Board of Directors and approved by
the shareholders of the Company on June 3, 1996 and became effective on June 6,
1996. A total of 1,450,000 shares are reserved for issuance upon the exercise of
options and/or stock purchase rights granted under the 1996 Stock Plan, 500,000
of which have been granted. Those eligible to receive stock option grants or
stock purchase rights under the 1996 Stock Plan include employees, non-employee
directors and consultants. The 1996 Stock Plan is administered by the Option
Committee of the Board of Directors of the Company, which is comprised solely of
outside directors.
Subject to the provisions of the 1996 Stock Plan, the administrator of the
1996 Stock Plan has the discretion to determine the optionees and/or grantees,
the type of options to be granted (incentive stock options ("ISOs") or
nonqualified stock options ("NQSOs")), the vesting provisions, the terms of the
grants and such other related provisions as are consistent with the 1996 Stock
Plan. The exercise price of an ISO may not be less than the fair market value
per share of the Common Stock on the date of grant or, in the case of an
optionee who beneficially owns 10% or more of the outstanding capital stock of
the Company, not less than 110% of the fair market value per share on the date
of grant. The exercise price of a NQSO may not be less than 85% of the fair
market value per share of the Common Stock on the date of grant or, in the case
of an optionee who beneficially owns 10% or more of the outstanding capital
stock of the Company, not less than 110% of the fair market value per share on
the date of grant. The purchase price of shares issued pursuant to stock
purchase rights may not be less than 50% of the fair market value of such shares
as of the offer date of such rights.
The options terminate not more than ten years from the date of grant,
subject to earlier termination on the optionee's death, disability or
termination of employment with the Company, but provide that the term of any
options granted to a holder of more than 10% of the outstanding shares of
capital stock may be no longer than five years. Options are not assignable or
otherwise transferable except by will or the laws of descent and
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<PAGE> 37
distribution. In the event of a merger or consolidation of the Company with or
into another corporation or the sale of all or substantially all of the
Company's assets in which the successor corporation does not assume outstanding
options or issue equivalent options, the Board of Directors of the Company is
required to provide accelerated vesting of outstanding options. The 1996 Stock
Plan terminates on June 5, 2006.
In June 1996, the Option Committee granted ISOs to acquire an aggregate of
220,000 shares to the following officer and key employee: Robert M. Olanoff,
88,000 shares; and Paul Coombs, 132,000 shares. All of these options have an
exercise price of $8.00 per share. One-third of the shares subject to these
options shall become exercisable on each of the sixth-month, eighteenth-month
and thirtieth-month anniversary of the date of grant.
EMPLOYMENT AGREEMENTS, INDEMNIFICATION AGREEMENTS AND NON-COMPETITION,
NON-DISCLOSURE AND NON-SOLICITATION AGREEMENTS
Each of the executive officers and key employee of the Company entered into
a two-year employment agreement with the Company commencing June 1, 1996. Under
the terms of their respective agreements, Messrs. Pandey, Koneru, Valluripalli,
Olanoff and Coombs are entitled to annual base salary of $200,000, $200,000,
$200,000, $100,000 and $200,000, respectively, and bonuses, the amounts and
payments of which are within the discretion of the Compensation Committee of the
Board of Directors. In addition, the Company and Mr. Olanoff entered into a
Change in Control Severance Pay Agreement, dated June 1, 1996, pursuant to which
the Company has agreed, subject to certain restrictions, to pay Mr. Olanoff the
equivalent of six months salary in the event that Mr. Olanoff is terminated
without cause if there is a change in control of the Company.
The above described agreements require each individual to maintain the
confidentiality of Company information. In addition, each of such persons has
agreed that during the term of his respective agreement and thereafter for a
period of two years, such person will not compete with the Company in any state
or territory of the United States, or any other country, where the Company does
business by engaging in any capacity in any business which is competitive with
the business of the Company. The employment agreements also provide that for a
period of two years following the termination of employment, each such
individual shall not solicit the Company's customers or employees.
In addition to the foregoing employment contracts, the Company has executed
indemnification agreements with each of its executive officers and directors
pursuant to which the Company has agreed to indemnify such party to the full
extent permitted by law, subject to certain exceptions, if such party becomes
subject to an action because such party is a director, officer, employee, agent
or fiduciary of the Company.
Substantially all of the Company's employees have agreed not to compete
with the Company, not to disclose Company information and not to solicit Company
employees.
KEY MAN INSURANCE
Messrs. Pandey, Koneru and Valluripalli are key employees of the Company
and the contribution of each of them to the Company has been and will be a
significant factor in the Company's future success. The loss of any of them
could adversely affect the Company's business and results of operations. The
Company maintains, and is the beneficiary of, a life insurance policy on the
life of each of Messrs. Pandey, Koneru and Valluripalli. The face amount of each
such policy is $1.0 million.
CERTAIN TRANSACTIONS
In March 1994, the Company acquired all of the issued and outstanding
shares of Oxford Systems Inc., a New Jersey corporation ("Oxford"), from Messrs.
Koneru and Valluripalli, the co-founders of Oxford, in exchange for an aggregate
of a two-thirds equity interest in the Company.
Messrs. Pandey, Koneru and Valluripalli are the shareholders of
Intelligroup Asia. Intelligroup Asia operates the Advanced Development Center in
Hyderabad, India for the sole and exclusive use and benefit of the Company. The
Company and the shareholders of Intelligroup Asia intend to enter into an
agreement
36
<PAGE> 38
pursuant to which the Company will, subject to necessary Indian government
approvals, acquire the shares of Intelligroup Asia for nominal consideration
when such shares may be transferred in accordance with the laws of India.
In March 1996, Summit Ventures IV, L.P., guaranteed a $750,000 line of
credit obtained by the Company from a bank. All borrowings under such line of
credit were repaid by the Company in April 1996, upon consummation of the
financing described below.
In April 1996, the Company issued and sold five-year 9% subordinated
debentures in the aggregate principal amount of $6.0 million to Summit Ventures
IV, L.P. and Summit Investors III, L.P. In connection therewith, the Company
also issued warrants to purchase, for nominal consideration, up to a maximum of
1,981,780 shares of Common Stock of the Company. The number of shares underlying
the warrants is subject to downward adjustment based upon the initial public
offering price. At an assumed initial public offering price of $11.00 per share,
there are 1,254,000 shares of Common Stock underlying the warrants. See
"Description of Capital Stock -- Warrants" and "Principal and Selling
Shareholders." The warrants will be exercised upon effectiveness of this
offering. The holders of the shares of Common Stock issuable upon the exercise
of the warrants are entitled to certain registration rights. See "Description of
Capital Stock -- Registration Rights." In addition, each of the current
shareholders have granted the warrantholders certain rights of co-sale in the
event that such shareholders propose to sell their shares of Common Stock after
this offering. The Company expects to prepay in full the amounts outstanding
under the subordinated debentures with a portion of the net proceeds of this
offering. There is no prepayment penalty. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Following the issuance and sale of the subordinated debentures, the Company
repurchased from Messrs. Pandey, Koneru and Valluripalli an aggregate of
5,030,666 shares of Common Stock for an aggregate cash payment of $1.5 million,
or $500,000 to each such shareholder. The repurchased shares were canceled upon
consummation of such transaction.
Subsequent to December 31, 1995, the Company determined that it had
unrecorded and unpaid federal and state payroll-related taxes for certain
employees. As a result of the Company's voluntary disclosure to the Internal
Revenue Service of certain unpaid tax liabilities, on June 5, 1996, the Company
received an audit assessment from the Internal Revenue Service for unpaid 1994
and 1995 federal income tax withholding, FICA and FUTA taxes in the aggregate
amount of $814,000. No interest or penalties were assessed. Reserves,
aggregating $1.0 million, including the amount of the Internal Revenue Service
audit assessment, have been recorded. No assurance may be given, however, that
interest, penalties or additional state or federal taxes will not be assessed in
the future. The Company's principal shareholders, Messrs. Pandey, Koneru and
Valluripalli, have agreed to indemnify the Company for any and all losses which
the Company may sustain, in excess of the $1.0 million reserve, net of any tax
benefits realized by the Company, arising from or relating to federal or state
tax, interest or penalty payment obligations resulting from the above subject
matter.
The Board of Directors of the Company has adopted a policy requiring that
any future transactions between the Company and its officers, directors,
principal shareholders and their affiliates be on terms no less favorable to the
Company than could be obtained from unrelated third parties. In addition, New
Jersey law requires that any such transactions be approved by a majority of the
disinterested members of the Company's Board of Directors.
37
<PAGE> 39
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1996, and as adjusted to
reflect the sale of the shares of Common Stock offered hereby, by (i) each
person who is known to the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each of the Company's directors and
Named Executives, (iii) the Selling Shareholders, and (iv) all current directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF
COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED NUMBER OF BENEFICIALLY OWNED
DIRECTORS, PRIOR TO OFFERING(1) SHARES AFTER OFFERING(1)
NAMED EXECUTIVES AND --------------------- BEING ------------------------
5% SHAREHOLDERS NUMBER PERCENT OFFERED NUMBER PERCENT(2)
- -------------------------------------- --------- ------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Ashok Pandey(3)....................... 2,515,334 28.6% 150,000 2,365,334 22.4%
Rajkumar Koneru(3).................... 2,515,333 28.6 150,000 2,365,333 22.4
Nagarjun Valluripalli(3).............. 2,515,333 28.6 150,000 2,365,333 22.4
Summit Ventures IV, L.P. and Summit
Investors III, L.P.(4).............. 1,254,000 14.3 50,000 1,204,000 11.4
Kevin P. Mohan(5)..................... 1,254,000 14.3 50,000 1,204,000 11.4
Thomas S. Roberts(6).................. 1,254,000 14.3 50,000 1,204,000 11.4
All directors and executive officers
as a group (6 persons)(7)........... 8,800,000 100.0% 500,000 8,300,000 78.7%
</TABLE>
- ---------------
(1) Except as set forth in the footnotes to this table and subject to applicable
community property law, the persons named in the table have sole voting and
investment power with respect to all shares.
(2) Applicable percentage of ownership is based on 8,800,000 shares of Common
Stock outstanding on March 31, 1996, including 1,254,000 shares of Common
Stock issuable upon the exercise, for nominal consideration, of outstanding
warrants, which warrants will be exercised upon the effectiveness of this
offering, and 10,550,000 shares of Common Stock outstanding after the
completion of this offering.
(3) The address for each of Messrs. Pandey, Koneru and Valluripalli is c/o
Intelligroup, Inc., 517 Route One South, Iselin, NJ 08830.
(4) Includes, based upon an assumed initial public offering price of $11.00,
1,191,300 shares and 62,700 shares of Common Stock issuable upon the
exercise of warrant shares owned by Summit Ventures IV, L.P. and Summit
Investors III, L.P., respectively. The number of shares underlying the
warrants is subject to a one-time adjustment upon the effectiveness of this
offering based upon the initial public offering price. Such warrants may
represent in the aggregate between 11.0% and 20.8% of the total number of
shares of Common Stock outstanding prior to this offering. The address of
both entities is 600 Atlantic Avenue, Suite 2800, Boston, MA 02210.
(5) Kevin P. Mohan is a Vice President of Summit Partners and, as such, has the
power to vote or direct the vote of and to dispose of or direct the
disposition of the shares owned by Summit Ventures IV, L.P. and Summit
Investors III, L.P. See Note 4. Mr. Mohan expressly disclaims beneficial
ownership of such shares, except as to his proportionate interest in Summit
Ventures IV, L.P. and Summit Investors III, L.P.
(6) Thomas S. Roberts is a General Partner of Summit Partners and, as such, has
the power to vote or direct the vote of and to dispose of or direct the
disposition of the shares owned by Summit Ventures IV, L.P. and Summit
Investors III, L.P. See Note 4. Mr. Roberts expressly disclaims beneficial
ownership of such shares, except as to his proportionate interest in Summit
Ventures IV, L.P. and Summit Investors III, L.P.
(7) See Notes 3, 5 and 6.
38
<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 25,000,000 shares of
Common Stock, $.01 par value per share, and, upon the effective date of this
offering, 5,000,000 shares of undesignated Preferred Stock, $.01 par value per
share (the "Preferred Stock").
The following statements are brief summaries of certain provisions with
respect to the Company's capital stock contained in its Amended and Restated
Certificate of Incorporation, a copy of which has been filed as an exhibit to
the Registration Statement. The following summary is qualified in its entirety
by reference thereto.
COMMON STOCK
Holders of shares of Common Stock are entitled to one vote for each share
held of record on matters to be voted on by the shareholders of the Company.
Holders of shares of Common Stock will be entitled to receive dividends, subject
to the senior rights of preferred shareholders, if any, when, as and if declared
by the Board of Directors (see "Dividend Policy") and to share ratably in the
assets of the Company legally available for distribution to its shareholders in
the event of the liquidation, dissolution or winding-up of the Company. Holders
of Common Stock have no preemptive, subscription, redemption or conversion
rights. All of the issued and outstanding shares of Common Stock are, and all
shares of Common Stock to be sold in this offering will be, duly authorized,
validly issued, fully paid and nonassessable.
At May 31, 1996, there were 7,546,000 shares issued and outstanding and
held of record by three shareholders, excluding shares issuable upon the
exercise of warrants. See "-- Warrants."
PREFERRED STOCK
The Company's Board of Directors may without further action by the
Company's shareholders, from time to time, direct the issuance of shares of
Preferred Stock in series and may, at the time of issuance, determine the
rights, preferences and limitations of each series. The holders of Preferred
Stock would normally be entitled to receive a preference payment in the event of
any liquidation, dissolution or winding-up of the Company before any payment is
made to the holders of the Common Stock. The Company does not presently intend
to issue any series of Preferred Stock.
The overall effect of the ability of the Company's Board of Directors to
issue Preferred Stock may be to render more difficult the accomplishment of
mergers or other takeover or change-in-control attempts. To the extent that this
ability has this effect, removal of the Company's incumbent Board of Directors
and management may be rendered more difficult. Further, this may have an adverse
impact on the ability of shareholders of the Company to participate in a tender
or exchange offer for the Common Stock and in so doing diminish the market value
of such stock. See "Risk Factors -- Control by Management and Existing
Shareholders" and "-- Anti-takeover Effect of Certain Charter and By-law
Provisions and New Jersey Law."
WARRANTS
In April 1996, in connection with the issuance and sale by the Company to
Summit Ventures IV, L.P. and Summit Investors III, L.P. of the subordinated
debentures, the Company also issued warrants to purchase, for nominal
consideration, up to a maximum of 1,981,780 shares of Common Stock of the
Company. The number of shares underlying the warrants is subject to downward
adjustment based upon the initial public offering price. At an assumed initial
public offering price of $11.00 per share, there are 1,254,000 shares of Common
Stock underlying the warrants. The warrants will be exercised upon effectiveness
of this offering. The holders of the shares of Common Stock issuable upon the
exercise of the warrants are entitled to certain registration rights. See
"-- Registration Rights."
REGISTRATION RIGHTS
In April 1996, the Company, in connection with the issuance of warrants to
Summit Ventures IV, L.P. and Summit Investors III, L.P., executed a Registration
Rights Agreement (the "Rights Agreement") pursuant to which the Company granted
certain registration rights to such entities. Pursuant to the Rights
39
<PAGE> 41
Agreement, at any time beginning six months after the consummation of this
offering, the holders of at least 25% of the Common Stock issuable upon the
exercise of the warrants (the "Registrable Securities") have the right, subject
to certain restrictions set forth in the Rights Agreement, to require that the
Company register, under the Securities Act, the Registrable Securities requested
by such holders at the Company's expense (on no more than two occasions).
Under the Rights Agreement, the Company is obligated to use its best
efforts to qualify for registration of securities on Form S-3 under the
Securities Act. After the Company has qualified for the use of Form S-3, the
holders of Registrable Securities have the right to an unlimited number of
registrations on such form. The Company is not, however, required to effect the
registration on a Form S-3 more than once in any six-month period, or if the
aggregate market value of such securities to be registered is less than $1.0
million.
Also pursuant to the Rights Agreement, if, at any time following this
offering, subject to the lock-up agreements entered into by the holders of the
Registrable Securities, the Company proposes to register any of its Common Stock
under the Securities Act for sale to the public, the holders of the Registrable
Securities have unlimited piggyback registration rights at the Company's
expense, subject to certain restrictions set forth in the Rights Agreement. In
addition, the Company has agreed to indemnify the holders of such registration
rights and each underwriter in any such offering against certain liabilities,
including liabilities under the Securities Act.
LIMITATION OF DIRECTOR LIABILITY
The Amended and Restated Certificate of Incorporation of the Company limits
the liability of directors and officers of the Company to the Company or its
shareholders to the fullest extent permitted by New Jersey law. Specifically,
directors and officers of the Company will not be personally liable for money
damages for breach of a duty as a director or an officer, except for liability
(i) for any breach of the director's or officer's duty of loyalty to the Company
or its shareholders, (ii) for acts or omissions not in good faith or which
involve a knowing violation of law, (iii) as to directors only, under section
14A:6-12(1) of the New Jersey Business Corporation Act, which relates to
unlawful declarations of dividends or other distributions of assets to
shareholders or the unlawful purchase of shares of the corporation, or (iv) for
any transaction from which the director or officer derived an improper personal
benefit.
ANTI-TAKEOVER PROVISIONS
The Company is governed by the provisions of Section 14A:10A-1 et seq., the
New Jersey Shareholders Protection Act (the "New Jersey Act"), of the New Jersey
Business Corporation Act, an anti-takeover law. In general, the statute
prohibits a publicly-held New Jersey corporation from engaging in a "business
combination" with an "interested shareholder" for a period of five years after
the date of the transaction in which the person became an interested
shareholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested shareholder. An "interested
shareholder" is a person who, together with affiliates and associates, owns (or
within three years, did own) 10% or more of the corporation's voting stock.
After the five-year waiting period has elapsed, a business combination between a
corporation and an interested shareholder will be prohibited unless the business
combination is approved by the holders of at least two-thirds of the voting
stock not beneficially owned by the interested shareholder, or unless the
business combination satisfies the New Jersey Act. The New Jersey Act's fair
price provision is intended to provide that all shareholders (other than the
interested shareholders) receive a fair price for their shares.
In addition, the Company is authorized to issue up to 5,000,000 shares of
Preferred Stock, with rights, preferences and other designations, including
voting rights, to be determined by the Board of Directors. Furthermore, the
Amended and Restated Certificate of Incorporation also provides that: (i) the
affirmative vote of the holders of at least 80% of the voting power of all
outstanding shares of the capital stock of the Company shall be required to
adopt, amend or repeal any provision of the By-laws of the Company; (ii)
shareholders of the Company may not take any action by written consent; (iii)
special meetings shareholders may be called only by the President, the Chairman
of the Board or a majority of the Board of Directors and business transacted at
any such special meeting shall be limited to matters relating to the
40
<PAGE> 42
purposes set forth in the notice of such special meeting; (iv) the Board of
Directors, when evaluating an offer related to a tender or exchange offer or
other business combination, is authorized to give due consideration to any
relevant factors, including the social, legal and economic effects upon
employees, suppliers, customers, creditors, the community in which the Company
conducts its business, and the economy of the state, region and nation; and (v)
the affirmative vote of the holders of at least 80% of the voting power of all
outstanding shares of the capital stock of the Company shall be required to
amend the above provisions or the limitation on director liability. The New
Jersey statute, the undesignated authorized Preferred Stock and the foregoing
provisions of the Amended and Restated Certificate of Incorporation may
discourage certain types of transactions involving an actual or potential change
in control of the Company and could have the effect of delaying, deterring or
preventing a change in control of the Company. In addition, in the event of a
merger or consolidation of the Company with or into another corporation or the
sale of all or substantially all of the Company's assets in which the successor
corporation does not assume outstanding options or issue equivalent options, the
Board of Directors of the Company is required to provide accelerated vesting of
outstanding options.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
10,550,000 shares of Common Stock. Of these shares, the 2,250,000 shares sold in
this offering will be freely transferable by persons other than "affiliates" of
the Company without restriction or further registration under the Securities
Act. The remaining 8,300,000 shares of Common Stock, including the remaining
1,204,000 shares underlying the warrants, such number of shares calculated on
the basis of an assumed initial public offering price of $11.00 per share, are
"restricted securities" (the "Restricted Shares") within the meaning of Rule 144
under the Securities Act and may not be sold in the absence of registration
under the Securities Act unless an exemption from registration is available,
including an exemption afforded by Rule 144.
The Company's current shareholders and warrantholders have entered into
"lock-up" agreements with the Representatives of the Underwriters, providing
that, subject to certain exceptions, they will not offer, sell or otherwise
dispose of any shares of Common Stock for a period of 180 days after the date of
this Prospectus without the prior written consent of Cowen & Company, acting as
a Representative of the Underwriters. Following the expiration of the "lock-up"
period, 7,096,000 of the Restricted Shares will be eligible for resale in the
public market pursuant to Rule 144, subject to certain limitations described
below. The remaining 1,204,000 shares of Common Stock underlying the warrants
will become eligible for sale over a period of less than two years and could be
sold earlier if the warrantholders exercise any available registration rights.
The warrantholders have the right in certain circumstances to require the
Company to register under the Securities Act the shares of Common Stock
underlying the warrants for resale to the public. See "Description of Capital
Stock -- Registration Rights."
Rule 144, as currently in effect, provides that an affiliate of the Company
or a person (or persons whose sales are aggregated) who has beneficially owned
Restricted Shares for at least two years but less than three years is entitled
to sell, commencing 90 days after the date of this Prospectus, within any
three-month period, a number of shares that does not exceed the greater of one
percent of the then outstanding shares of Common Stock (105,500 shares
immediately after this offering) or the average weekly trading volume in the
Common Stock during the four calendar weeks preceding such sale. Sales under
Rule 144 also are subject to certain manner-of-sale provisions, notice
requirements and the availability of current public information about the
Company. However, a person who is not an "affiliate" of the Company at any time
during the three months preceding a sale, and who has beneficially owned
Restricted Shares for at least three years, is entitled to sell such shares
under Rule 144 without regard to the limitations described above.
The Securities and Exchange Commission has proposed certain amendments to
Rule 144 that would reduce by one year the holding period required for shares
subject to Rule 144 to become eligible for resale in
41
<PAGE> 43
the public market. The proposal, if adopted, would substantially increase the
number of shares of Common Stock eligible for immediate resale following the
expiration of the lock-up agreements, with a potential adverse effect on the
market price. No assurance can be given concerning whether or when such proposal
will be adopted by the Securities and Exchange Commission.
As of the date of this Prospectus, there were outstanding options to
purchase an aggregate of 500,000 shares of Common Stock. Giving effect to
vesting provisions limiting the exercisability of all of the outstanding
options, 166,667 additional shares of Common Stock will be eligible, commencing
December 1996, for immediate resale in compliance with Rules 144 and 701 under
the Securities Act (relating to the sale of shares issuable under certain
compensatory stock plans).
Since there has been no public market for shares of the Common Stock prior
to this Offering, the Company is unable to predict the effect that sales made
pursuant to Rules 144 or 701, or otherwise, may have on the prevailing market
price at such times for shares of the Common Stock. Nevertheless, sales of a
substantial amount of the Common Stock in the public market, or the perception
that such sales could occur, could adversely affect market prices. See "Risk
Factors -- Shares Eligible for Future Sale."
42
<PAGE> 44
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement dated as
of the date hereof (the "Underwriting Agreement"), the Company and the Selling
Shareholders have agreed to sell to each of the Underwriters named below, and
each of the Underwriters, for whom Cowen & Company and Montgomery Securities are
acting as representatives (the "Representatives"), has severally agreed to
purchase from the Company and the Selling Shareholders the respective number of
shares of Common Stock set forth opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
Cowen & Company......................................................
Montgomery Securities................................................
---------
Total...................................................... 2,250,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters are committed to purchase all of the shares of Common Stock offered
hereby (other than those covered by the over-allotment option described below),
if any of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock, in part,
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and, in part, to certain dealers at such price
less a concession not in excess of $_________ per share. The Underwriters may
allow, and such dealers may re-allow, a concession not in excess of $_________
per share to certain brokers and dealers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the Representatives.
The Company and the Selling Shareholders have granted the Underwriters an
option, exercisable for up to 30 days after the date of this Prospectus to
purchase up to an aggregate of 337,500 additional shares of Common Stock to
cover over-allotments, if any. If the Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
to be purchased by each of them as shown in the foregoing table bears to the
2,250,000 shares of Common Stock offered hereby. The Underwriters may exercise
such option only to cover over-allotments made in connection with the sale of
the 2,250,000 shares of Common Stock offered hereby.
The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, as amended, and to contribute to payments that the
Underwriters may be required to make in respect thereof.
The Company, the Company's officers and directors, and all Selling
Shareholders have agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or any right to acquire Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent (which consent may be given without notice to the
Company's shareholders or other public announcement) of Cowen & Company. Cowen &
Company has advised the Company that it has no present intention of releasing
any of the Company's shareholders or warrantholders from such lock-up agreements
until the expiration of such 180-day period. See "Shares Eligible for Future
Sale."
The Representatives have advised the Company and the Selling Shareholders
that the Underwriters do not intend to confirm sales in excess of 5% of the
shares offered hereby to any accounts over which they exercise discretionary
authority.
43
<PAGE> 45
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined by
negotiation among the Company, the Selling Shareholders and the Representatives.
Among the factors to be considered in such negotiations are the prevailing
market conditions, the results of operations of the Company in recent periods,
the market capitalization and stage of development of other companies that the
Company, the Selling Shareholders and the Representatives believe to be
comparable to the Company, estimates of the business potential of the Company,
the present state of the Company's development, and other factors deemed
relevant. The estimated initial public offering price range set forth on the
cover of this Prospectus is subject to change as a result of market conditions
and other factors.
Application has been made to have the Common Stock quoted on the Nasdaq
National Market under the symbol "ITIG."
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Buchanan Ingersoll, Princeton, New Jersey.
Certain legal matters will be passed upon for the Underwriters by Willkie Farr &
Gallagher, New York, New York.
EXPERTS
The consolidated financial statements of the Company included in this
Prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and is included herein in reliance upon the
authority of said firm as experts in giving said report.
On December 15, 1995, the Company retained Arthur Andersen LLP to act as
its independent public accountants and informed the prior auditors, Amper,
Politziner & Mattia, the Company's independent accountants since January 1995,
of its decision. In connection with its audit of the consolidated financial
statements for the year ended December 31, 1994, there were no disagreements
with the prior auditors on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures. The prior
auditors' report on the Company's consolidated financial statements for the year
ended December 31, 1994 contained no adverse opinion or disclaimer of opinion
and was not modified or qualified as to uncertainty, audit scope, or accounting
principles. The decision to change accountants was approved by the Board of the
Directors of the Company. The Company has provided the prior auditors with a
copy of the disclosure contained in this section of the Prospectus and the prior
auditors have furnished the Company with a letter addressed to the Securities
and Exchange Commission (the "Commission") stating its agreement with the above
statements. Prior to retaining Arthur Andersen LLP, the Company had not
consulted with Arthur Andersen LLP regarding accounting principles.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-2 (the "Registration Statement") under the Securities Act, with respect to
the shares of Common Stock offered hereby. This Prospectus, which forms a part
of the Registration Statement, does not contain all the information set forth in
the Registration Statement and the exhibits and schedules filed therewith. For
further information with respect to the Company and the shares of Common Stock
offered hereby, reference is made to the Registration Statement and to such
exhibits and schedules filed therewith. Statements contained herein as to the
content of any contract or other document are not necessarily complete and, in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, and each such statement shall
be deemed qualified in its entirety by such reference.
The Registration Statement and the exhibits and schedules thereto may be
inspected without charge at the principal office of the Commission at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such documents may be obtained from the Public
Reference Section of the Commission, at prescribed rates.
44
<PAGE> 46
INTELLIGROUP, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Financial Statements:
Consolidated Balance Sheets as of December 31, 1995, March 31, 1996 (unaudited) and
March 31, 1996 Pro Forma (unaudited)............................................. F-3
Consolidated Statements of Operations for the Years Ended December 31, 1994 and 1995
and for the Three Months Ended March 31, 1995 (unaudited) and 1996 (unaudited)... F-4
Consolidated Statements of Changes in Shareholders' Equity (Deficit) for the Years
Ended December 31, 1994 and 1995 and for the Three Months Ended March 31, 1996
(unaudited)...................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994 and 1995
and for the Three Months Ended March 31, 1995 (unaudited) and 1996 (unaudited)... F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>
F-1
<PAGE> 47
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Intelligroup, Inc.:
We have audited the accompanying consolidated balance sheet of
Intelligroup, Inc. and subsidiary as of December 31, 1995, and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for the years ended December 31, 1994 and 1995 (as revised, see Note 1).
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Intelligroup, Inc. and subsidiary as of December 31, 1995, and the results of
their operations and their cash flows for the years ended December 31, 1994 and
1995 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Princeton, New Jersey
May 31, 1996
F-2
<PAGE> 48
INTELLIGROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995, MARCH 31, 1996 AND MARCH 31, 1996 PRO FORMA
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------ MARCH 31, 1996 MARCH 31, 1996
-------------- PRO FORMA
(UNAUDITED) --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................... $ 71,000 $ 79,000 $ 4,021,000
Restricted cash held in escrow.................. 100,000 100,000 100,000
Accounts receivable, less allowance for doubtful
accounts of $531,000 at December 31, 1995 and
$561,000 at March 31, 1996................... 4,729,000 5,598,000 5,598,000
Unbilled services............................... 1,569,000 1,435,000 1,435,000
Other current assets............................ 3,000 31,000 31,000
----------- ----------- -----------
Total current assets.................... 6,472,000 7,243,000 11,185,000
Property and equipment, less accumulated
depreciation of $99,000 at December 31, 1995 and
$123,000 at March 31, 1996...................... 282,000 285,000 285,000
Other assets...................................... 30,000 114,000 114,000
----------- ----------- -----------
$ 6,784,000 $ 7,642,000 $ 11,584,000
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Cash overdraft.................................. $ 83,000 $ 358,000 $ --
Lines of credit................................. 45,000 243,000 43,000
Loans from factors.............................. 3,343,000 3,054,000 3,054,000
Accounts payable................................ 1,480,000 1,113,000 1,113,000
Accrued payroll and related taxes............... 2,568,000 2,767,000 2,767,000
Accrued expenses and other liabilities.......... 532,000 751,000 751,000
Current portion of obligations under capital
leases....................................... 18,000 19,000 19,000
Income taxes payable............................ -- 201,000 201,000
----------- ----------- -----------
Total current liabilities............... 8,069,000 8,506,000 7,948,000
----------- ----------- -----------
Subordinated debt, net of unamortized
discount........................................ -- -- 4,600,000
----------- ----------- -----------
Obligations under capital leases, less current
portion......................................... 81,000 74,000 74,000
----------- ----------- -----------
Warrants.......................................... -- -- 1,400,000
----------- ----------- -----------
Commitments and Contingencies
Shareholders' Deficit:
Common stock, $0.01 par value, 25,000,000 shares
authorized, 12,576,666 shares issued and
outstanding at December 31, 1995 and March
31, 1996 and 7,546,000 shares at March 31,
1996 pro forma............................... 126,000 126,000 76,000
Accumulated deficit............................. (1,492,000) (1,064,000) (2,514,000)
----------- ----------- -----------
Total shareholders' deficit............. (1,366,000) (938,000) (2,438,000)
----------- ----------- -----------
$ 6,784,000 $ 7,642,000 $ 11,584,000
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-3
<PAGE> 49
INTELLIGROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
--------------------------- ----------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue............................... $ 6,800,000 $24,589,000 $ 3,850,000 $ 8,836,000
Cost of sales......................... 5,842,000 20,021,000 3,857,000 6,423,000
----------- ----------- ----------- -----------
Gross profit..................... 958,000 4,568,000 (7,000) 2,413,000
Selling, general and administrative
expenses............................ 986,000 4,452,000 721,000 1,469,000
----------- ----------- ----------- -----------
Operating income (loss).......... (28,000) 116,000 (728,000) 944,000
----------- ----------- ----------- -----------
Other expenses:
Interest expense.................... 3,000 4,000 1,000 8,000
Factor charges...................... 406,000 1,171,000 319,000 307,000
----------- ----------- ----------- -----------
409,000 1,175,000 320,000 315,000
----------- ----------- ----------- -----------
Income (loss) before provision for
income taxes........................ (437,000) (1,059,000) (1,048,000) 629,000
Provision for income taxes............ -- -- -- 201,000
----------- ----------- ----------- -----------
Net income (loss)................ $ (437,000) $(1,059,000) $(1,048,000) $ 428,000
=========== =========== =========== ===========
Net income (loss) per share........... $ (0.03) $ (0.08) $ (0.08) $ 0.03
=========== =========== =========== ===========
Shares used in per share
calculation......................... 13,967,000 13,967,000 13,967,000 13,967,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-4
<PAGE> 50
INTELLIGROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
RETAINED TOTAL
COMMON STOCK EARNINGS SHAREHOLDERS'
--------------------- (ACCUMULATED EQUITY
SHARES AMOUNT DEFICIT) (DEFICIT)
---------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1993................... 12,576,666 $126,000 $ 4,000 $ 130,000
Net loss..................................... -- -- (437,000) (437,000)
---------- -------- ---------- ----------
Balance at December 31, 1994................... 12,576,666 126,000 (433,000) (307,000)
Net loss..................................... -- -- (1,059,000) (1,059,000)
---------- -------- ---------- ----------
Balance at December 31, 1995................... 12,576,666 126,000 (1,492,000) (1,366,000)
Net income (unaudited)....................... -- -- 428,000 428,000
---------- -------- ---------- ----------
Balance at March 31, 1996 (unaudited).......... 12,576,666 $126,000 $(1,064,000) $ (938,000)
========== ======== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
<PAGE> 51
INTELLIGROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
--------------------------- -------------------------
1994 1995 1995 1996
----------- ----------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................... $ (437,000) $(1,059,000) $(1,048,000) $ 428,000
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation...................... 34,000 51,000 13,000 24,000
Provision for doubtful accounts... 208,000 411,000 17,000 30,000
Changes in assets and liabilities:
Restricted cash deposited in
escrow.......................... -- (100,000) -- --
Accounts receivable............... (2,009,000) (3,339,000) (209,000) (899,000)
Unbilled services................. (1,000) (1,386,000) (28,000) 134,000
Other current assets.............. -- 27,000 -- (28,000)
Other assets...................... (23,000) (30,000) 4,000 (84,000)
Cash overdraft.................... -- 83,000 -- 275,000
Accounts payable.................. -- 1,480,000 -- (367,000)
Accrued payroll and related
taxes........................... 1,466,000 1,035,000 1,174,000 199,000
Accrued expenses and other
liabilities..................... 47,000 478,000 257,000 219,000
Income taxes payable.............. -- -- -- 201,000
----------- ----------- ----------- -----------
Net cash provided by (used
in) operating activities... (715,000) (2,349,000) 180,000 132,000
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment... (89,000) (142,000) (4,000) (27,000)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Loans from factors, net.............. 994,000 2,349,000 (17,000) (289,000)
Proceeds from lines of credit, net... 38,000 6,000 -- 198,000
Principal payments of long-term
debt.............................. (53,000) -- -- --
Principal payments under capital
leases............................ -- (2,000) -- (6,000)
----------- ----------- ----------- -----------
Net cash provided by (used
in) financing activities... 979,000 2,353,000 (17,000) (97,000)
----------- ----------- ----------- -----------
Net increase (decrease) in
cash and cash
equivalents................ 175,000 (138,000) 159,000 8,000
Cash and cash equivalents at beginning
of year.............................. 34,000 209,000 209,000 71,000
----------- ----------- ----------- -----------
Cash and cash equivalents at end of
year................................. $ 209,000 $ 71,000 $ 368,000 $ 79,000
=========== =========== =========== ===========
Supplemental disclosures of cash flow
information:
Cash paid for interest............... $ 2,000 $ 4,000 $ 1,000 $ 7,000
=========== =========== =========== ===========
Noncash transactions:
Capital lease obligations............ $ -- $ 102,000 $ -- $ --
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-6
<PAGE> 52
INTELLIGROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(FINANCIAL INFORMATION WITH RESPECT TO MARCH 31, 1996 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Intelligroup, Inc. and its subsidiary (the "Company") provide a wide range
of information technology services, including enterprise-wide business process
solutions, systems integration and custom software development based on leading
technologies. The Company markets its services to a wide variety of industries
primarily in the United States. The majority of the Company's business is with
large established companies, including consulting firms, serving numerous
industries.
The Company is proposing an initial public offering of its common stock.
Existing and prospective investors should consider, among other things, the
risks and difficulties encountered by any new business, including competition
from existing companies offering the same or similar services, rapid
technological change, management of growth, lack of financial resources and
minimal previous record of operations or earnings. See "Risk Factors" included
elsewhere in this Prospectus for a discussion of these and other factors (see
Note 8).
Restatement
Subsequent to December 31, 1995, the Company determined that it had
unrecorded and unpaid Federal and state payroll related taxes for certain
employees. Accordingly, the Company has restated its 1994 and 1995 financial
statements resulting in a $320,000 and $680,000 increase in cost of sales in
1994 and 1995, respectively, with corresponding increases to accrued payroll and
related taxes. As a result of the Company's voluntary disclosure to the Internal
Revenue Service ("IRS") on June 5, 1996, the IRS issued an audit assessment to
the Company for $814,000 which has been included in the above accrual. The
Company's principal shareholders have agreed to indemnify the Company for any
and all losses which the Company may sustain in excess of the amounts accrued as
of December 31, 1995 arising from or relating to Federal or state tax, interest
or penalty payment obligations, net of any tax benefits realized by the Company,
resulting from the subject matter discussed above.
Principles of Consolidation and Use of Estimates
Effective March 31, 1994, Intelligroup, Inc. entered into an agreement with
the shareholders of Oxford Systems Inc., whereby Intelligroup, Inc. acquired all
the outstanding shares of stock of Oxford Systems Inc. in exchange for a
two-thirds interest in Intelligroup, Inc. This transaction has been accounted
for as a pooling of interests, and accordingly, the accompanying financial
statements for 1994 include the accounts of Intelligroup, Inc. and its
wholly-owned subsidiary, Oxford Systems Inc. for all periods prior to the
transaction.
The accompanying financial statements include the accounts of Intelligroup,
Inc. and its wholly-owned subsidiary, Oxford Systems Inc. All significant
intercompany balances and transactions have been eliminated.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the recorded amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Unaudited Pro Forma Consolidated Balance Sheet
The unaudited pro forma consolidated balance sheet as of March 31, 1996 has
been prepared assuming that the issuance of the subordinated debentures and
warrants and the repurchase of the shares had been consummated as of that date
(see Note 3).
F-7
<PAGE> 53
INTELLIGROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interim Financial Information
The consolidated financial statements and accompanying financial
information as of March 31, 1996 and for the three months ended March 31, 1995
and 1996 are unaudited and, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) which the Company
considers necessary for a fair presentation of the financial position of the
Company at such dates and the operating results and cash flows for those
periods. Results for interim periods are not necessarily indicative of results
for the entire year.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets (five years). Costs of maintenance and repairs are
charged to expense as incurred.
Revenue Recognition
The Company generates revenue from professional services rendered. Revenue
is recognized as services are performed with the corresponding cost of providing
those services reflected as cost of sales. Substantially all customers are
billed on a per diem basis whereby actual time is charged directly to the
customer. Billings to customers for out-of-pocket expenses are recorded as a
reduction of expenses incurred. Unbilled services represent services provided in
excess of amounts billed.
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts arising from
services, which is based upon a review of outstanding receivables as well as
historical collection information. In determining the amount of the allowance,
management is required to make certain estimates and assumptions regarding the
timing and amount of collection. Actual results could differ from those
estimates and assumptions. The provision for doubtful accounts totaled $208,000
and $411,000 in 1994 and 1995, respectively. Credit is granted to substantially
all customers on an unsecured basis.
Recoverability of Long-Lived Assets
The Company reviews the recoverability of its long-lived assets on a
periodic basis in order to identify business conditions which may indicate a
possible impairment. The assessment for potential impairment is based primarily
on the Company's ability to recover the unamortized balance of its long-lived
assets from expected future cash flows from its operations on an undiscounted
basis.
Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation," which requires companies to
measure employee stock compensation plans based on the fair value method using
an option pricing model or to continue to apply APB No. 25, "Accounting for
Stock Issued to Employees," and provide pro forma footnote disclosures under the
fair value method. The Company continues to apply APB No. 25 and will provide
the pro forma footnote disclosures.
Concentrations
For the years ended December 31, 1994 and 1995 and the three months ended
March 31, 1996, approximately 33%, 69% and 70% of revenue, respectively, was
derived from projects in which Company personnel implemented software developed
by SAP. The Company's future success in its SAP-related
F-8
<PAGE> 54
INTELLIGROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
consulting services depends largely on its continued relationship with SAP and
on its continued status as an SAP National Implementation Partner, which was
first obtained in 1995.
A substantial portion of the Company's revenue is derived from projects in
which an information technology consulting firm other than the Company has been
retained by the end-user organization to manage the overall project. For the
years ended December 31, 1994 and 1995 and for the three months ended March 31,
1996, 64%, 50% and 52%, respectively, of the Company's revenue was generated by
serving as a member of a consulting team assembled by another information
technology consulting firm.
Two customers accounted for approximately 12% and 10%, respectively, of
revenue for the year ended December 31, 1995 and two customers accounted for 17%
and 14%, respectively, of revenue for the three months ended March 31, 1996.
Accounts receivable due from these customers approximated $1,400,000 and
$611,000, respectively as of December 31, 1995 and $631,000 and $850,000 as of
March 31, 1996. One customer accounted for approximately 15% of revenue for the
year ended December 31, 1994. The loss of any large customer could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Foreign Operations
Revenues from foreign operations were not significant in 1994 and 1995 and
for the three months ended March 31, 1996. Translation effects were not
material.
Income Taxes
The Company accounts for income taxes pursuant to the provisions of
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes," which utilizes the liability method and results in the determination of
deferred taxes based on the estimated future tax effects of differences between
the financial statement and tax basis of assets and liabilities, using enacted
tax rates currently in effect. The principal differences arise from the
reporting of income and expenses under the accrual method for financial
statement purposes versus the cash basis method for income tax purposes.
Net Income (Loss) Per Share
Net income (loss) per share is computed using the weighted average number
of common and dilutive common equivalent shares outstanding during the period
after giving retroactive effect to the stock split (see Note 8). Pursuant to the
requirements of the Securities and Exchange Commission, stock options and
warrants issued by the Company during the twelve months immediately preceding
the initial public offering (see Note 8) have been included in computing net
income (loss) per share as if they were outstanding for all periods using the
treasury stock method.
Financial Instruments
Financial instruments that potentially subject the Company to credit risk
consist principally of trade receivables and unbilled services. The fair value
of accounts receivable and unbilled services approximates carrying value.
F-9
<PAGE> 55
INTELLIGROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 31, 1995 and
March 31, 1996:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Vehicles............................................ $ 26,000 $ 26,000
Furniture........................................... 98,000 98,000
Equipment........................................... 257,000 284,000
-------- ---------
381,000 408,000
Less- Accumulated depreciation...................... (99,000) (123,000)
-------- ---------
$282,000 $ 285,000
======== =========
</TABLE>
Included in the above is $102,000 of equipment held under capital leases.
Depreciation expense was $34,000 and $51,000 in 1994 and 1995, respectively, and
$13,000 and $24,000 for the three-months ended March 31, 1995 and 1996,
respectively.
(3) LINES OF CREDIT AND SUBORDINATED DEBENTURES
The Company had available, under an agreement with a bank, a $50,000 line
of credit bearing interest at the bank's prime lending rate plus 2% (10.5% as of
December 31, 1995), which was collateralized by all Company assets and
personally guaranteed by one of the Company's shareholders. The line of credit
expired May 26, 1996 and is anticipated to be renewed for a term of one year.
The outstanding balance was $45,000 as of December 31, 1995 and $43,000 as of
March 31, 1996.
In March 1996, in anticipation of the financing discussed below, the
Company obtained a $750,000 line of credit, payable on demand, from a bank. The
line of credit bears interest at the Federal funds rate plus 1%. Borrowings
under the line totaled $200,000 as of March 31, 1996. Aggregate borrowings in
the amount of $300,000 were repaid and the line was terminated by the Company in
accordance with the financing described below.
In April 1996, the Company issued $6,000,000 of five-year, 9% subordinated
debentures. All principal and interest is due at maturity (April 2001) or at
prepayment. The debentures were issued with detachable warrants to purchase
common stock of the Company (see Note 7). Proceeds from the debentures were
allocated between the debentures and the warrants based on estimated fair value
which resulted in a discount on the debentures (based on a 15% interest rate)
and a value assigned to the warrants of $1,400,000.
Subsequent to the issuance of the subordinated debentures, the Company
purchased and retired 5,030,666 shares of its common stock for $1,500,000 from
its shareholders.
(4) LOANS PAYABLE TO FACTORS
On October 20, 1995, the Company entered into a new factoring agreement
with a financing institution ("current factor") under which the Company must
offer all its trade accounts receivable to the current factor for financing;
however, the current factor is not obligated to accept them. The agreement has a
term of one year with automatic one-year renewals unless the Company or current
factor give notice of cancellation. The current factor charges an administrative
fee of 0.75% on each invoice plus an additional 0.75% for each 15-day increment
the invoice remains unpaid, to a maximum of 120 days, or 6.5%.
The Company had factoring agreements with a former financing institution
("former factor") under which it could sell qualified trade accounts receivable,
with recourse provisions. The agreements, which were terminated in October 1995
required the Company to repurchase or replace any receivable remaining
F-10
<PAGE> 56
INTELLIGROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
uncollected for more than 120 days. At December 31, 1995 and March 31, 1996, the
Company has unresolved differences with this former factor regarding the
determination of former factor fees and amounts due between the two parties. As
of December 31, 1995, the Company has placed $100,000 in escrow which was
subsequently increased to $300,000 in May, 1996, subject to the disposition of
this matter. In June 1996, the parties agreed to settle the dispute for
$103,000, which had previously been accrued. Such amount will be paid out of the
escrow fund with the remainder of the escrow fund remitted to the Company.
(5) INCOME TAXES
The provision for income taxes for the three months ended March 31, 1996
consists of $156,000 related to current Federal and $45,000 related to current
state and local income taxes.
For the years ended December 31, 1994 and 1995 and the three months ended
March 31, 1995, no income tax benefit was provided as management could not
determine that it was more likely than not that such benefit would be realized.
For the three months ended March 31, 1996, the effective rate was less than the
statutory rate due to the reversal of a portion of the valuation allowance.
The Company's deferred tax asset was $668,000 and $614,000 as of December
31, 1995 and March 31, 1996, respectively, and relates primarily to the
Company's allowance for doubtful accounts ($234,000 and $246,000, respectively)
and certain accrued liabilities ($434,000 and $368,000, respectively). Other
temporary differences are not significant. The deferred tax asset as of December
31, 1995 and March 31, 1996 has been offset by a valuation allowance.
(6) COMMITMENTS AND CONTINGENCIES
Employment Agreements
Commencing June 1, 1996, the Company entered into two year employment
agreements with five employees with aggregate annual compensation of $900,000.
Leases
The Company leases office space and office equipment under capital and/or
operating leases that have initial or remaining noncancelable lease terms in
excess of one year as of December 31, 1995. Future minimum aggregate annual
lease payments are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDING DECEMBER 31 CAPITAL OPERATING
-------------------------------- -------- ---------
<S> <C> <C>
1996........................................................... $ 37,000 $77,000
1997........................................................... 37,000 15,000
1998........................................................... 37,000 5,000
1999........................................................... 20,000
2000........................................................... 20,000
--------
151,000
Less-Interest.................................................. (52,000)
--------
99,000
Less-Current portion........................................... (18,000)
--------
$ 81,000
========
</TABLE>
Rent expense for the years ended December 31, 1994 and 1995 was $24,000 and
$74,000, respectively and $26,000 for the three months ended March 31, 1996.
F-11
<PAGE> 57
INTELLIGROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Commencing June 1, 1996, the Company entered into a lease for office space
at an annual rent of $220,000, plus common costs. The lease term is through
November 1999.
Legal
The Company currently is being investigated by the Immigration and
Naturalization Service concerning possible violations of the Immigration Reform
and Control Act of 1990. Although a notice of intent to fine has not been served
upon the Company and therefore the potential for fines is not known, the Company
believes that fines, if any, would not exceed $150,000. Management believes that
reserves recorded related to this matter are adequate. There can be no
assurance, however, as to the ultimate amount of the fines, which may be
assessed or the length of time it may take to conclude the investigation.
The Company is engaged in certain legal and administrative proceedings.
Management believes the outcome of these proceedings will not have a material
adverse effect on the Company's financial position or results of operations.
(7) STOCK OPTION PLANS AND WARRANTS
The Company's 1996 Stock Plan (the "Plan") permits the granting of options
to employees, nonemployee directors and consultants. The Plan is administered by
the Option Committee of the Board of Directors, which generally has the
authority to select individuals who are to receive options and to specify the
terms and conditions of each option so granted, including the number of shares
covered by the option, the type of option (incentive stock option or
nonqualified stock option), the exercise price (which in all cases must be at
least 100% of the fair market value of the common stock on the date of grant),
vesting provisions, and the overall option term. Options to purchase a total of
1,450,000 shares of common stock were reserved for future grants of options
under the Plan. In June 1996, the Company granted options to purchase an
aggregate of 500,000 shares of its common stock to certain key employees at an
exercise price of $8.00 per share. One-third of these options vest six months
from date of grant with the remaining options vesting over the following two
years.
The 1996 Non-Employee Director Stock Option Plan provides for the granting
of options to purchase a maximum of 140,000 shares of common stock of the
Company to non-employee directors. An option to purchase 20,000 shares of common
stock, at an exercise price equal to the then fair value of the shares, will be
granted to non-employee directors. All options will vest in five equal
installments, commencing one year after grant and have a ten-year term.
The subordinated debenture holders (see Note 3) received warrants for the
purchase of 20.8% of the fully diluted common stock of the Company, as defined,
at a nominal exercise price. If the Company becomes a public company prior to
April 10, 1997, the potential fully diluted common stock ownership of the
warrant holders reduces on a straight-line formula from the 20.8% to 11%,
depending on the premoney valuation of the public offering, as defined. The
warrants are exercisable on the earlier of April 10, 1997, an initial public
offering of the Company's common stock or a merger of or sale of 50% or more of
the Company. Such warrants expire in April, 2002. In addition, the holders have
certain registration rights, as defined. The agreement provides that the
debenture holders may put these warrants to the Company at fair market value, as
defined, in April, 2001 or earlier upon the occurrence of certain events which
include an initial public offering of the Company's common stock. The put
provision will terminate and the holders have agreed to exercise the warrants
upon the effectiveness of the initial public offering. The Company has reserved
up to a maximum of 1,981,780 shares of its common stock relating to the
warrants. At an assumed initial offering price of $11.00 per share, there are
1,254,000 shares of common stock underlying the warrants.
F-12
<PAGE> 58
INTELLIGROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) PUBLIC OFFERING, STOCK SPLIT AND PREFERRED STOCK AUTHORIZATION
In June 1996, the Board of Directors authorized management of the Company
to file a registration statement with the Securities and Exchange Commission
permitting the Company to sell common stock to the public. In June 1996, the
Company's Board of Directors amended the Company's Certificate of Incorporation
to effect an 83,844.44-for-1 stock split. All common shares and per share
amounts in the accompanying financial statements have been adjusted
retroactively to give effect to the stock split.
In addition, the Company's Board of Directors authorized a change in the
Company's authorized capitalization to 25,000,000 shares of common stock, $0.01
par value per share, and 5,000,000 shares of undesignated preferred stock, $0.01
par value per share.
F-13
<PAGE> 59
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and,
if given or made, such information or representations not contained herein must
not be relied upon as having been authorized by the Company, the Selling
Shareholders, any of the Underwriters or by any other person. This Prospectus
does not constitute an offer to sell, or a solicitation of any offer to buy, any
securities other than the shares of Common Stock offered hereby, nor does it
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby, to any person in any jurisdiction in which it is
unlawful to make such an offer or solicitation to such person. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information contained herein is
correct as of any date subsequent to the date hereof.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 6
Use of Proceeds........................ 12
Dividend Policy........................ 12
Capitalization......................... 13
Dilution............................... 14
Selected Consolidated Financial Data... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 16
Business............................... 22
Management............................. 33
Certain Transactions................... 36
Principal and Selling Shareholders..... 38
Description of Capital Stock........... 39
Shares Eligible for Future Sale........ 41
Underwriting........................... 43
Legal Matters.......................... 44
Experts................................ 44
Additional Information................. 44
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
------------------------------
Until , 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the Common Stock, whether or not participating
in this distribution, may be required to deliver a Prospectus. This delivery
requirement is in addition to the obligation of dealers to deliver a Prospectus
when acting as Underwriters and with respect to their unsold allotments or
subscriptions.
================================================================================
================================================================================
2,250,000 Shares
LOGO
INTELLIGROUP, INC.
Common Stock
------------------------------
PROSPECTUS
------------------------------
COWEN & COMPANY
MONTGOMERY SECURITIES
, 1996
================================================================================
<PAGE> 60
PART II
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 14A:3-5 of the New Jersey Business Corporation Act permits each New
Jersey business corporation to indemnify its directors, officers, employees and
agents against expenses and liabilities in connection with any proceeding
involving such persons by reason of his serving or having served in such
capacities or for each such person's acts taken in his capacity as a director,
officer, employee or agent of the corporation if such actions were taken in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal
proceeding, if he had no reasonable cause to believe his conduct was unlawful,
provided that any such proceeding is not by or in the right of the corporation.
Section 14A:2-7(3) of the New Jersey Business Corporation Act enables a
corporation in its certificate of incorporation to limit the liability of
directors and officers of the corporation to the corporation or its
shareholders. Specifically, the certificate of incorporation may provide that
directors and officers of the corporation will not be personally liable for
money damages for breach of a duty as a director or an officer, except for
liability (i) for any breach of the director's or officer's duty of loyalty to
the corporation or its shareholders, (ii) for acts or omissions not in good
faith or which involve a knowing violation of law, (iii) as to directors only,
under Section 14A:6-12(1) of the New Jersey Business Corporation Act, which
relates to unlawful declarations of dividends or other distributions of assets
to shareholders or the unlawful purchase of shares of the corporation, or (iv)
for any transaction from which the director or officer derived an improper
personal benefit.
The registrant's Amended and Restated Certificate of Incorporation limits
the liability of its directors and officers as authorized by Section 14A:2-7(3).
The affirmative vote of the holders of at least 80% of the voting power of all
outstanding shares of the capital stock of the Company is required to amend such
provisions.
Article 11 of the registrant's Amended and Restated By-laws specifies that
the registrant shall indemnify its directors, officers, employees and agents to
the extent such parties are a party to any action because he was a director,
officer, employee or agent of the Company. The Company has agreed to indemnify
such parties for their actual and reasonable expenses if such party acted in
good faith and in a manner he reasonably believed to be in the best interests of
the Company and such party had no reasonable cause to believe his conduct was
unlawful. This provision of the By-laws is deemed to be a contract between the
registrant and each director and officer who serves in such capacity at any time
while such provision and the relevant provisions of the New Jersey Business
Corporation Act are in effect, and any repeal or modification thereof shall not
offset any action, suit or proceeding theretofore or thereafter brought or
threatened based in whole or in part upon any such state of facts. The
affirmative vote of the holders of at least 80% of the voting power of all
outstanding shares of the capital stock of the Company is required to adopt,
amend or repeal such provision of the By-laws.
The registrant has executed indemnification agreements with each of its
officers and directors pursuant to which the registrant has agreed to indemnify
such parties to the full extent permitted by law, subject to certain exceptions,
if such party becomes subject to an action because such party is a director,
officer, employee, agent or fiduciary of the Company.
The registrant intends to obtain liability insurance for the benefit of its
directors and officers which will provide coverage for losses of directors and
officers for liabilities arising out of claims against such persons acting as
directors or officers of the registrant (or any subsidiary thereof) due to any
breach of duty, neglect, error, misstatement, misleading statement, omission or
act done by such directors and officers, except as prohibited by law.
At present, there is no pending litigation or proceeding involving a
director or officer of the registrant as to which indemnification is being
sought nor is the registrant aware of any threatened litigation that may result
in claims for indemnification by any director or officer.
II-1
<PAGE> 61
Reference is made to Section 6 of the Underwriting Agreement, the proposed
form of which is filed as Exhibit One, in which the Underwriters agree to
indemnify the directors and officers of the registrant and certain other
persons, against civil liabilities, including certain liabilities under the
Securities Act.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemized estimate of fees and expenses
payable by the registrant in connection with the offering described in this
registration statement, other than underwriting discounts and commissions:
<TABLE>
<S> <C>
SEC registration fee..................................................... $10,706.90
NASD filing fee.......................................................... 3,605.00
Nasdaq/NNM listing fee................................................... *
Counsel fees and expenses................................................ *
Accounting fees and expenses............................................. *
Blue sky fees and expenses............................................... 15,000.00
Printing expenses........................................................ *
Transfer agent and registrar fees........................................ *
Miscellaneous............................................................ *
----------
Total.......................................................... $ *
==========
</TABLE>
- ---------------
* To be completed by amendment.
All of the above expenses will be paid by the registrant.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to all securities of the registrant sold
by the registrant within the past three years which were not registered under
the Securities Act:
1. On March 31, 1994, the registrant issued an aggregate of 8,384,444
shares of Common Stock (on a post-stock split recapitalization basis) to
Messrs. Koneru and Valluripalli in exchange for all of the issued and
outstanding shares of Oxford Systems Inc.
2. On April 19, 1996, the registrant issued to two venture capital
funds 9.0% subordinated debentures with warrants to purchase up to 20.8% of
the Common Stock of the Company for an aggregate purchase price of
$6,000,000.
No underwriter was employed by the registrant in connection with the
issuance and sale of the securities described above. The registrant claims that
the issuance and sale of all of the foregoing securities were exempt from
registration under Section 4(2) of the Securities Act as transactions not
involving any public offering. Appropriate legends were affixed to the stock
certificates issued in such transactions. All recipients had adequate access to
information about the registrant.
There were no other securities sold by the registrant within the past three
years.
II-2
<PAGE> 62
ITEM 27. EXHIBITS AND FINANCIAL STATEMENTS.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------------------------------------------------------------------
<S> <C>
1(*) Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation.
3.2 Amended and Restated Bylaws.
4.1 Debenture and Warrant Purchase Agreement dated April 10, 1996 by and between the
Company, Messrs. Pandey, Koneru and Valluripalli and Summit Ventures IV, L.P. and
Summit Investors III, L.P.
4.2 Warrant Agreement dated April 10, 1996 by and between the Company and Summit
Ventures IV, L.P. and Summit Investors III, L.P.
4.3 Registration Rights Agreement dated April 10, 1996 by and between the Company and
Summit Ventures IV, L.P. and Summit Investors III, L.P.
4.4 Redemption Agreement dated April 10, 1996 by and between the Company and Summit
Ventures IV, L.P. and Summit Investors III, L.P.
4.5 Shareholders Agreement dated April 10, 1996 by and between the Company, Messrs.
Pandey, Koneru and Valluripalli and Summit Ventures IV, L.P. and Summit Investors
III, L.P.
5(*) Opinion of Buchanan Ingersoll as to validity of Common Stock.
10.1 1996 Stock Plan of the Company.
10.2 1996 Non-Employee Director Stock Option Plan.
10.3 Employment Agreement dated June 1, 1996 between the Company and Ashok Pandey.
10.4 Employment Agreement dated June 1, 1996 between the Company and Rajkumar Koneru.
10.5 Employment Agreement dated June 1, 1996 between the Company and Nagarjun
Valluripalli.
10.6 Employment Agreement dated June 1, 1996 between the Company and Robert M. Olanoff,
together with Change in Control Severance Pay Agreement dated June 1, 1996 between
the Company and Robert M. Olanoff.
10.7 Employment Agreement dated June 1, 1996 between the Company and Paul Coombs.
10.8 Form of Indemnification Agreement entered into by the Company and each of its
directors and officers.
10.9 Sublease Agreement between Micrognosis, Inc., as sublessor, the Company, as
sublessee, with master lease.
10.10 Employee's Invention Assignment and Confidentiality Agreement.
10.11 R/3 National Implementation Partner Agreement between SAP America, Inc. and the
Company dated January 13, 1995.
10.12 Services Provider Agreement by and between Oracle Corporation and the Company
dated July 26, 1994.
10.13 Agreement by Messrs. Pandey, Koneru and Valluripalli dated June 5, 1996 to
indemnify the Company for certain losses.
10.14 Factoring Agreement by and between Access Capital, Inc. and the Company dated as
of October 20, 1995, with exhibits.
10.15 Agreement of Waiver and Consent dated as of June 4, 1996 by and among the Company,
the current shareholders of the Company, and Summit Ventures IV, L.P. and Summit
Investors III, L.P.
11 Statement re: Computation of per share earnings.
16 Letter re: Change of Certifying Accountant.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
</TABLE>
II-3
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------------------------------------------------------------------
<S> <C>
23.2(*) Consent of Buchanan Ingersoll (contained in the opinion filed as Exhibit 5 to the
Registration Statement).
24 Powers of Attorney of certain officers and directors of the Company (contained on
the signature page of this Registration Statement).
27.1 Financial Data Schedule for the year ended December 31, 1995.
27.2 Financial Data Schedule for the quarter ended March 31, 1996.
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules
All financial statement schedules are omitted because the information is
not required, or is otherwise included in the consolidated financial statements
or the notes thereto.
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes that:
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers, and controlling persons of the registrant pursuant to
the provisions described in Item 24, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(2) For purpose of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(4) At the closing specified in the Underwriting Agreement, registrant
shall provide the Underwriters certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
II-4
<PAGE> 64
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the Township of
Iselin, State of New Jersey, on June 14, 1996.
Intelligroup, Inc.
By: /s/ ASHOK PANDEY
------------------------------------
Ashok Pandey, President, and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Ashok Pandey and Robert M. Olanoff, and
each of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and a related registration statement
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, and in each case, to file the same with all exhibits thereto, and
all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ------------------------------------ --------------
<S> <C> <C>
/s/ ASHOK PANDEY President, Chief Executive Officer June 14, 1996
- ------------------------------------- and Director
Ashok Pandey
/s/ RAJKUMAR KONERU Vice President -- Business Solutions June 14, 1996
- ------------------------------------- and Director
Rajkumar Koneru
/s/ NAGARJUN VALLURIPALLI Vice President -- Advanced June 14, 1996
- ------------------------------------- Technology and Director
Nagarjun Valluripalli
/s/ ROBERT M. OLANOFF Chief Financial Officer, Treasurer June 14, 1996
- ------------------------------------- and Secretary
Robert M. Olanoff
/s/ KEVIN P. MOHAN Director June 14, 1996
- -------------------------------------
Kevin P. Mohan
/s/ THOMAS S. ROBERTS Director June 14, 1996
- -------------------------------------
Thomas S. Roberts
</TABLE>
II-5
<PAGE> 65
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ----------- ------------------------------------------------------------------------ ----------
<S> <C> <C>
1(*) Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation.
3.2 Amended and Restated Bylaws.
4.1 Debenture and Warrant Purchase Agreement dated April 10, 1996 by and
between the Company, Messrs. Pandey, Koneru and Valluripalli and Summit
Ventures IV, L.P. and Summit Investors III, L.P.
4.2 Warrant Agreement dated April 10, 1996 by and between the Company and
Summit Ventures IV, L.P. and Summit Investors III, L.P.
4.3 Registration Rights Agreement dated April 10, 1996 by and between the
Company and Summit Ventures IV, L.P. and Summit Investors III, L.P.
4.4 Redemption Agreement dated April 10, 1996 by and between the Company and
Summit Ventures IV, L.P. and Summit Investors III, L.P.
4.5 Shareholders Agreement dated April 10, 1996 by and between the Company,
Messrs. Pandey, Koneru and Valluripalli and Summit Ventures IV, L.P. and
Summit Investors III, L.P.
5(*) Opinion of Buchanan Ingersoll as to validity of Common Stock.
10.1 1996 Stock Plan of the Company.
10.2 1996 Non-Employee Director Stock Option Plan.
10.3 Employment Agreement dated June 1, 1996 between the Company and Ashok
Pandey.
10.4 Employment Agreement dated June 1, 1996 between the Company and Rajkumar
Koneru.
10.5 Employment Agreement dated June 1, 1996 between the Company and Nagarjun
Valluripalli.
10.6 Employment Agreement dated June 1, 1996 between the Company and Robert
M. Olanoff, together with Change in Control Severance Pay Agreement
dated June 1, 1996 between the Company and Robert M. Olanoff.
10.7 Employment Agreement dated June 1, 1996 between the Company and Paul
Coombs.
10.8 Form of Indemnification Agreement entered into by the Company and each
of its directors and officers.
10.9 Sublease Agreement between Micrognosis, Inc., as sublessor, the Company,
as sublessee, with master lease.
10.10 Employee's Invention Assignment and Confidentiality Agreement.
10.11 R/3 National Implementation Partner Agreement between SAP America, Inc.
and the Company dated January 13, 1995.
10.12 Services Provider Agreement by and between Oracle Corporation and the
Company dated July 26, 1994.
10.13 Agreement by Messrs. Pandey, Koneru and Valluripalli dated June 5, 1996
to indemnify the Company for certain losses.
10.14 Factoring Agreement by and between Access Capital, Inc. and the Company
dated as of October 20, 1995, with exhibits.
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ----------- ------------------------------------------------------------------------ ----------
<S> <C> <C>
10.15 Agreement of Waiver and Consent dated as of June 4, 1996 by and among
the Company, the current shareholders of the Company, and Summit
Ventures IV, L.P. and Summit Investors III, L.P.
11 Statement re: Computation of per share earnings.
16 Letter re: Change of Certifying Accountant.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2(*) Consent of Buchanan Ingersoll (contained in the opinion filed as Exhibit
5 to the Registration Statement).
24 Powers of Attorney of certain officers and directors of the Company
(contained on the signature page of this Registration Statement).
27.1 Financial Data Schedule for the year ended December 31, 1995.
27.2 Financial Data Schedule for the quarter ended March 31, 1996.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE REQUIRED TO BE FILED WITH THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
INTELLIGROUP, INC.
Pursuant to the provisions of Section 14A:9-5(5) of the New Jersey
Business Corporations Act, the undersigned corporation hereby executes the
following certificate:
1. The name of the corporation is Intelligroup, Inc. (the "Corporation").
2. The Amended and Restated Certificate of Incorporation was adopted by
the Board of Directors of the Corporation on June 3, 1996 and by the
shareholders of the Corporation on June 3, 1996.
3. The total shares outstanding and entitled to vote thereon was 90 and
all of such shares were voted in favor of the adoption of the Amended and
Restated Certificate of Incorporation.
4. The Amended and Restated Certificate of Incorporation restates,
integrates and amends in its entirety the provisions of the Corporation's
Certificate of Incorporation, as amended to date. The Amended and Restated
Certificate of Incorporation provides for, among other things, (i) the
reclassification of each share of issued and outstanding Common Stock, no par
value, into 83,844.44 shares of Common Stock, $.01 par value, and (ii) an
increase in the number of shares of authorized Common Stock from 2,500 to
25,000,000 and for authorization, upon the effectiveness of the Company's
initial public offering of Common Stock, of 5,000,000 shares of undesignated
Preferred Stock, $.01 par value.
IN WITNESS WHEREOF, the undersigned has signed this Certificate on behalf
of the Corporation this 4th day of June, 1996.
By: ________________________________
Ashok Pandey, President
<PAGE> 2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
INTELLIGROUP, INC.
Pursuant to Section 14A:9-5 of the New Jersey Business Corporation Act
(the "Act"), the undersigned corporation hereby executes this Amended and
Restated Certificate of Incorporation.
FIRST: The name of the Corporation is Intelligroup, Inc. (the
"Corporation").
SECOND: The purpose or purposes for which the Corporation is organized is
to engage in any lawful activity within the purposes for which corporations may
be organized under Title 14A of the Act.
THIRD: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is thirty million (30,000,000) shares.
The Corporation is authorized to issue two classes of stock designated "Common
Stock" and "Preferred Stock," respectively. The total number of shares of Common
Stock authorized to be issued by the Corporation is twenty-five million
(25,000,000), each such share of Common Stock having a par value of $.01.
Effective upon the effectiveness of the Company's initial public offering of
Common Stock, the total number of shares of Preferred Stock authorized to be
issued by the Corporation shall be five million (5,000,000), each such share of
Preferred Stock having a par value of $.01, all of which is undesignated.
The undesignated Preferred Stock may be issued from time to time in
one or more series. The Board of Directors of the Corporation is hereby
authorized, by adopting a resolution or resolutions and filing a certificate or
certificates pursuant to the applicable provisions of the Act, to establish from
time to time the number of shares to be included in each such series of
Preferred Stock, and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions thereof, including but not limited to the fixing or alteration of
the dividend rights, dividend rate or rates, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of any wholly
unissued series of shares of Preferred Stock, or any of them, and to increase or
decrease the number of shares of any series subsequent to the issuance of shares
of that series, but not below the number of shares of such series then
outstanding. In the event the number of shares of any series shall be so
decreased, the shares removed from such series by such decrease shall resume the
status which they had prior to the adoption of the resolution originally fixing
the number of shares of such series.
<PAGE> 3
FOURTH: Each share of Common Stock, no par value, of the Corporation
issued and outstanding is hereby reclassified and changed into 83,844.44 fully
paid and nonassessable shares of Common Stock, $.01 par value, of the
Corporation and each holder of record of a certificate for one or more shares of
Common Stock, no par value, of the Corporation as of the close of business on
the date this Amended and Restated Certificate of Incorporation becomes
effective shall be entitled to receive, as soon as practicable, upon surrender
of such certificate, a certificate or certificates representing 83,844.44 shares
of Common Stock, $.01 par value, for each share of Common Stock, no par value,
represented by the certificate of such holder, and any fractional shares
resulting will be rounded up to the next whole share.
FIFTH: The address of the Corporation's current registered office is 517
Route One South, Iselin, New Jersey 08830 and the name of its current registered
agent at such address is Ashok Pandey.
SIXTH: The number of directors constituting the current Board of Directors
is five. The names and addresses of each of such directors is as follows:
Name Address
---- -------
Ashok Pandey c/o Intelligroup, Inc.
517 Route One South
Iselin, New Jersey 08830
Rajkumar Koneru c/o Intelligroup, Inc.
517 Route One South
Iselin, New Jersey 08830
Nagarjun Valluripalli c/o Intelligroup, Inc.
517 Route One South
Iselin, New Jersey 08830
Kevin P. Mohan c/o Summit Partners
600 Atlantic Avenue, Suite 2800
Boston, Massachusetts 02210
Thomas S. Roberts c/o Summit Partners
600 Atlantic Avenue, Suite 2800
Boston, Massachusetts 02210
- 2 -
<PAGE> 4
SEVENTH: The following provisions are included for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Board of Directors and shareholders:
(i) The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the Bylaws of the Corporation, subject to any
limitation thereof contained in the Bylaws. The shareholders also shall
have the power to adopt, amend or repeal the Bylaws of the Corporation;
provided, however, that, in addition to any vote of the holders of any
class or series of stock of the Corporation required by law or by this
Amended and Restated Certificate of Incorporation, the affirmative vote of
the holders of at least eighty percent (80%) of the voting power of all of
the then outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of directors, voting together
as a single class, shall be required to adopt, amend or repeal any
provision of the Bylaws of the Corporation.
(ii) Upon the consummation of an initial public offering of securities of
the Corporation under the Securities Act of 1933, as amended, shareholders
of the Corporation may not take any action by written consent in lieu of a
meeting.
(iii) Special meetings of shareholders may be called at any time only by
the President, the Chairman of the Board of Directors of the Corporation
(if any) or a majority of the Board of Directors of the Corporation.
Business transacted at any special meeting of shareholders shall be
limited to matters relating to the purpose or purposes set forth in the
notice of such special meeting.
(iv) The Board of Directors of the Corporation, when evaluating any offer
of another party (a) to make a tender or exchange offer for any equity
security of the Corporation or (b) to effect a business combination,
shall, in connection with the exercise of its judgment in determining what
is in the best interests of the Corporation as a whole, be authorized to
give due consideration to any such factors as the Board of Directors of
the Corporation determines to be relevant, including, without limitation:
(1) the interests of the Corporation's shareholders, including the
possibility that these interests might be best served by the
continued independence of the Corporation;
(2) whether the proposed transaction might violate federal or state
laws;
(3) not only the consideration being offered in the proposed
transaction, in relation to the then current market price for the
outstanding capital stock of the Corporation, but also to the market
price for the capital stock of the Corporation over a period of
years, the estimated price that might be
- 3 -
<PAGE> 5
achieved in a negotiated sale of the Corporation as a whole or in
part or through orderly liquidation, the premiums over market price
for the securities of other corporations in similar transactions,
current political, economic and other factors bearing on securities
prices and the Corporation's financial condition and future
prospects; and
(4) the social, legal and economic effects upon employees, suppliers,
customers, creditors and others having similar relationships with the
Corporation, upon the communities in which the Corporation conducts
its business and upon the economy of the state, region and nation.
In connection with any such evaluation, the Board of Directors of the
Corporation is authorized to conduct such investigations and engage in
such legal proceedings as the Board of Directors of the Corporation may
determine.
(v) in addition to any vote of the holders of any class or series of stock
of the Corporation required by law or by this Amended and Restated
Certificate of Incorporation, the affirmative vote of the holders of at
least eighty percent (80%) of the voting power of all of the then
outstanding shares of the capital stock of the Corporation entitled to
vote generally in the election of directors, voting together as a single
class, shall be required to amend any provision of Articles SEVENTH or
EIGHTH of this Amended and Restated Certificate of Incorporation.
EIGHTH: No director or officer shall be personally liable to the
Corporation or its shareholders for damages for breach of any duty owed to the
Corporation or its shareholders, except that this provision shall not relieve a
director or officer from liability for any breach of duty based on an act or
omission (a) in breach of such person's duty of loyalty to the Corporation or
its shareholders, (b) not in good faith or involving a knowing violation of law,
or (c) resulting in receipt by such person of an improper personal benefit. No
amendment to, expiration of or repeal of this Article shall have any effect on
the liability or alleged liability of any director or officer of the Corporation
for or with respect to any acts or omissions of such director or officer
occurring prior to such amendment, expiration or repeal.
IN WITNESS WHEREOF, the undersigned has signed this Amended and Restated
Certificate of Incorporation on behalf of the Corporation this 4th day of June,
1996.
By: ________________________________
Ashok Pandey, President
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<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
INTELLIGROUP, INC.
<PAGE> 2
AMENDED AND RESTATED BYLAWS
TABLE OF CONTENTS
ARTICLE I OFFICES................................................1
Section 1.01 Registered Office......................................1
Section 1.02 Other Offices..........................................1
ARTICLE II SEAL...................................................1
Section 2.01 Seal...................................................1
ARTICLE III SHAREHOLDERS' MEETING..................................2
Section 3.01 Place..................................................2
Section 3.02 Annual Meeting.........................................2
Section 3.03 Special Meetings.......................................2
Section 3.04 Notice of Shareholders' Meetings.......................2
Section 3.05 Waiver of Notice.......................................3
Section 3.06 Action by Shareholders Without Meeting.................3
Section 3.07 Fixing Record Date.....................................6
Section 3.08 Voting Lists...........................................7
Section 3.09 Quorum.................................................8
Section 3.10 Voting.................................................9
Section 3.11 Election of Directors..................................9
Section 3.12 Inspectors of Election................................10
Section 3.13 Conduct of Meetings...................................10
ARTICLE IV DIRECTORS.............................................11
Section 4.01 Number of Directors...................................11
Section 4.02 Term of Directors.....................................11
Section 4.03 Removal of Directors..................................12
Section 4.04 Quorum of Board of Directors and Committee;
Action of Directors Without a Meeting.................12
Section 4.05 Place of Board of Directors Meeting...................12
Section 4.06 Annual Meeting........................................12
Section 4.07 Meetings of the Board of Directors....................12
Section 4.08 Adjournment...........................................13
Section 4.09 Powers of Directors...................................13
Section 4.10 Compensation of Directors.............................14
Section 4.11 Executive Committee...................................14
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ARTICLE V OFFICERS........................................15
Section 5.01 Officers........................................15
Section 5.02 Salaries........................................15
Section 5.03 Removal.........................................15
Section 5.04 President.......................................16
Section 5.05 Vice President..................................16
Section 5.06 Chairman of the Board...........................16
Section 5.07 Secretary.......................................17
Section 5.08 Treasurer.......................................17
Section 5.09 Assistant Secretary or Treasurer................17
ARTICLE VI VACANCIES.......................................18
Section 6.01 Directors.......................................18
Section 6.02 Officers........................................18
Section 6.03 Resignations....................................18
ARTICLE VII SHARE CERTIFICATES..............................18
Section 7.01 Certificates....................................19
Section 7.02 Uncertificated Shares...........................19
Section 7.03 Transfer of Shares..............................19
Section 7.04 Loss of Certificates............................19
ARTICLE VIII BOOKS AND ACCOUNTS..............................20
Section 8.01 Records.........................................20
Section 8.02 Inspection......................................20
ARTICLE IX MISCELLANEOUS PROVISIONS........................21
Section 9.01 Monetary Disbursements..........................21
Section 9.02 Fiscal Year.....................................21
Section 9.03 Dividends.......................................21
Section 9.04 Reserve.........................................21
Section 9.05 Giving Notice...................................21
Section 9.06 Loans to Directors, Officers or Employees.......22
Section 9.07 Disallowed Compensation.........................22
ARTICLE X AMENDMENTS......................................23
Section 10.01 Amendments......................................23
ARTICLE XI INDEMNIFICATION AND INSURANCE...................23
Section 11.01 Indemnification.................................23
Section 11.02 Insurance.......................................24
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<PAGE> 4
AMENDED AND RESTATED
BYLAWS
OF
INTELLIGROUP, INC.
ARTICLE I
OFFICES
1.01 Registered Office: The registered office of the Corporation shall be
at 5 Lincoln Highway, Edison, New Jersey 08820. Effective June 1, 1996, the
registered office of the Corporation shall be changed to be at 517 Route 1
South, Iselin, New Jersey 08830. The Board of Directors may change the
registered office from time to time.
1.02 Other Offices: The Corporation may have such other offices either
within or without the State of New Jersey as the Board of Directors may
designate or as the business of the Corporation may require from time to time.
ARTICLE II
SEAL
2.01 Seal: The corporate seal shall be in the form adopted by the Board
of Directors and may be altered by them from time to time.
<PAGE> 5
ARTICLE III
SHAREHOLDERS' MEETINGS
3.01 Place: All meetings of the shareholders shall be held at the
registered office of the Corporation or at such other place or places, either
within or without the State of New Jersey, as may from time to time be selected
by the Board of Directors.
3.02 Annual Meetings: The annual meeting of shareholders shall be held at
such time as may be fixed by the Board of Directors. At that meeting the
shareholders shall elect, by a plurality vote, a Board of Directors, and
transact such other business as may properly come before the meeting.
3.03 Special Meetings: Special meetings of the shareholders may be called
only by the President, the Chairman of the Board of Directors of the Corporation
(if any) or by order of a majority of the Board of Directors. Such written
request shall state the purpose or purposes of the proposed meeting. Business
transacted at a special meeting shall be confined to the purpose or purposes
stated in the notice calling such meeting.
3.04 Notice of Shareholders' Meetings: Written notice of the time, place
and purpose or purposes of every meeting of shareholders shall be given not less
than ten or more than sixty days before the date of the meeting, either
personally or by mail (to the last address appearing on the books of the
Corporation), to each shareholder of record entitled to vote at the meeting and
to each shareholder otherwise entitled to notice by law, unless a greater period
of notice is required by statute in a particular case.
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When a meeting is adjourned to another time or place, it shall not be
necessary to give notice of the adjourned meeting if the time and place to which
the meeting is adjourned are announced at the meeting at which the adjournment
is taken and at the adjourned meeting only such business is transacted as might
have been transacted at the original meeting. However, if after the adjournment
the Board fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given to each shareholder of record on the new record
date entitled to notice.
3.05 Waiver of Notice: Notice of a meeting need not be given to any
shareholder who signs a waiver of such notice, in person or by proxy, whether
before or after the meeting. The attendance of any shareholder at a meeting, in
person or by proxy, without protesting prior to the conclusion of the meeting
the lack of notice of such meeting, shall constitute a waiver of notice by that
shareholder.
Whenever shareholders are authorized to take any action after the lapse
of a prescribed period of time, the action may be taken without such lapse if
such requirement is waived in writing, in person or by proxy, before or after
the taking of such action, by every shareholder entitled to vote thereon as of
the date of the taking of such action.
3.06 Action by Shareholders Without Meeting:
(1) Any action required or permitted to be taken at a meeting of
shareholders by statute or the Certificate of Incorporation or Bylaws of the
Corporation may be taken without a meeting if all the shareholders entitled to
vote thereon consent thereto in writing, except that in the case of any action
to be taken pursuant to Chapter 10 (concerning mergers, etc.) of the Business
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Corporation Act (the "Act"), such action may be taken without a meeting only if
all shareholders entitled to vote consent thereto in writing and the Corporation
provides to all other shareholders the advance notification required by
paragraph (2)(b) of this section. Notwithstanding the provisions of this Section
3.06, immediately following the consummation of an initial public offering under
the Securities Act of 1933, as amended, by the Corporation of any of its capital
stock, shareholders of the Corporation may not take any action by written
consent in lieu of a meeting. Notwithstanding any other provision of law, the
Certificate of Incorporation or these Bylaws, and notwithstanding the fact that
a lesser percentage may be specified by law, the affirmative vote of the holders
of at least eighty percent (80%) of the voting power of all the then outstanding
shares of the capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Section 3.06.
(2) Except as otherwise provided in the Certificate of Incorporation
and subject to the provisions of this subsection, any action required or
permitted to be taken at a meeting of shareholders by the Act, the Certificate
of Incorporation, or Bylaws, other than the annual election of directors, may be
taken without a meeting upon the written consent of shareholders who would have
been entitled to cast the minimum number of votes which would be necessary to
authorize such action at a meeting at which all shareholders entitled to vote
thereon were present and voting.
(a) If any shareholder shall have the right to dissent from a
proposed action, pursuant to Chapter 11 of the Act, the Board shall fix a date
on which written consents are to be tabulated; in any other case, it may fix a
date for tabulation. If no date is fixed, consents may be
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tabulated as they are received. No consent shall be counted which is received
more than sixty days after the date of the Board action authorizing the
solicitation of consents or, in a case in which consents, or proxies for
consents, are solicited from all shareholders who would have been entitled to
vote at a meeting called to take such action, more than sixty days after the
date of mailing of solicitation of consents, or proxies for consents.
(b) Except as provided in paragraph (2)(c), the Corporation,
upon receipt and tabulation of the requisite number of written consents, shall
promptly notify all non-consenting shareholders, who would have been entitled to
notice of a meeting to vote upon such action, of the action consented to, the
proposed effective date of such action, and any conditions precedent to such
action. Such notification shall be given at least twenty days in advance of the
proposed effective date of such action in the case of any action taken pursuant
to Chapter 10 of the Act, and at least ten days in advance in the case of any
other action.
(c) The Corporation need not provide the notification required
to be given by paragraph (2)(b) if it
(i) solicits written consents or proxies for consents from
all shareholders who would have been entitled to vote at a meeting called
to take such action, and at the same time gives notice of the proposed
action to all other shareholders who would have been entitled to notice
of a meeting called to vote upon such action;
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(ii) advises all shareholders, if any, who are entitled to
dissent from the proposed action, as provided in Chapter 11 of the Act,
of their right to do so and to be paid the fair value of their shares;
and
(iii) fixes a date for tabulation of consents not less than
twenty days, in the case of any proposed action to be taken pursuant to
Chapter 10 of the Act, or not less than ten days in the case of any other
proposed action, and not more than sixty days after the date of mailing
of solicitations of consents or proxies for consents.
(d) Any consent obtained pursuant to paragraph (2)(c) may be
revoked at any time prior to the day fixed for tabulation of consents. Any other
consent may be revoked at any time prior to the day on which the proposed action
could be taken upon compliance with paragraph (2)(b). The revocation must be in
writing and be received by the Corporation.
(3) Whenever action is taken pursuant to subsection (1) or (2), the
written consents of the shareholders consenting thereto or the written report of
inspectors appointed to tabulate such consents shall be filed with the minutes
or proceedings of shareholders.
In case the Corporation is involved in a merger, consolidation or
other type of acquisition or disposition regulated by Chapters 10 and 11 of the
Act, the pertinent provisions of the statute should be referred to and strictly
complied with.
3.07 Fixing Record Date:
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(1) The Board may fix, in advance, a date as the record date for
determining the Corporation's shareholders with regard to any corporate action
or event and, in particular, for determining the shareholders who are entitled
to
(a) notice of or to vote at any meeting of shareholders or any
adjournment thereof;
(b) give a written consent to any action without a meeting; or
(c) receive payment of any dividend or allotment of any right.
The record date may in no case be more than sixty days prior to the
shareholders' meeting or other corporate action or event to which it relates.
The record date for a shareholders' meeting may not be less than ten days before
the date of the meeting. The record date to determine shareholders to give a
written consent may not be more than sixty days before the date fixed for
tabulation of the consents or, if no date has been fixed for tabulation, more
than sixty days before the last day on which consents received may be counted.
(2) If no record date is fixed,
(a) the record date for a shareholders' meeting shall be the
close of business on the day next preceding the day on which notice is given,
or, if no notice is given, the day next preceding the day on which the meeting
is held; and
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(b) the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the resolution of
the Board relating thereto is adopted.
(3) When a determination of shareholders of record for a
shareholders' meeting has been made as provided in this section, such
determination shall apply to any adjournment thereof, unless the Board fixes a
new record date under this section for the adjourned meeting.
3.08 Voting Lists: The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make a complete list of
shareholders entitled to vote at a shareholders' meeting or any adjournment
thereof. A list required by this section may consist of cards arranged
alphabetically or any equipment which permits the visual display of the
information required. Such list shall be arranged alphabetically within each
class, series or group of shareholders maintained by the Corporation for
convenience of reference, with the address of, and the number of shares held by,
each shareholder; be produced (or available by means of a visual display) at the
time and place of the meeting; be subject to the inspection of any shareholder
for reasonable periods during the meeting; and be prima facie evidence of the
identity of the shareholders entitled to examine such list or to vote at any
meeting.
If the requirements of this section have not been complied with, the
meeting shall, on the demand of any shareholder in person or by proxy, be
adjourned until the requirements are complied with. Failure to comply with the
requirements of this section shall not affect the validity of any action taken
at such meeting prior to the making of any such demand.
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3.09 Quorum: Unless otherwise provided in the Certificate of
Incorporation or by statute, the presence of holders of shares (in person or by
proxy) entitled to cast a majority of the votes at a meeting shall constitute a
quorum at such meeting. The shareholders present in person or by proxy at a duly
organized meeting may continue to do business until adjournment, notwithstanding
the withdrawal of enough shareholders to leave less than a quorum. Less than a
quorum may adjourn.
Whenever the holders of any class or series of shares are entitled to
vote separately on a specified item of business, the provisions of this section
shall apply in determining the presence of a quorum of such class or series for
the transaction of such specified item of business.
3.10 Voting: Each holder of shares with voting rights shall be entitled
to one vote for each such share registered in his/her name, except as otherwise
provided in the Certificate of Incorporation. Whenever any action, other than
the election of directors, is to be taken by vote of the shareholders, it shall
be authorized by a majority of the votes cast at a meeting of shareholders by
the holders of shares entitled to vote thereon, unless a greater plurality is
required by statute or by the Certificate of Incorporation.
Every shareholder entitled to vote at a meeting of shareholders or to
express consent without a meeting may authorize another person or persons to act
for him/her by proxy. Every proxy shall be executed in writing by the
shareholder or his/her agent, except that a proxy may be given by a shareholder
or his/her agent by telegram or cable or its equivalent. No proxy shall be valid
for more than eleven months unless a longer time is expressly provided therein.
Unless it is coupled with an interest, a proxy shall be revocable at will. A
proxy shall not be revoked by the
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death or incapacity of the shareholder but such proxy shall continue in force
until revoked by the personal representative or guardian of the shareholder. The
presence at any meeting of any shareholder who has given a proxy shall not
revoke such proxy unless the shareholder shall file written notice of such
revocation with the Secretary of the meeting prior to the voting of such proxy.
3.11 Election of Directors: At each election of directors every
shareholder entitled to vote at such election shall have the right to vote the
number of shares owned by him for as many persons as there are directors to be
elected and for whose election he has a right to vote. Directors shall be
elected by a plurality of the votes cast at the election, except as otherwise
provided by the Certificate of Incorporation.
Elections of directors need not be by ballot unless a shareholder demands
election by ballot at the election and before the voting begins.
3.12 Inspectors of Election: The Board may, in advance of any
shareholders' meeting, or of the tabulation of written consents of shareholders
without a meeting, appoint one or more inspectors to act at the meeting or any
adjournment thereof or to tabulate such consents and make a written report
thereof. If inspectors to act at any meeting of shareholders are not so
appointed or shall fail to qualify, the person presiding at a shareholders'
meeting may, and on the request of any shareholder entitled to vote there at
shall, make such appointment.
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Each inspector, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his ability. No person shall be
elected a director in an election for which he has served as an inspector.
3.13 Conduct of Meetings:
(1) The President of the Corporation, and in the President's
absence, the Vice-President of the Corporation, shall preside at all meetings of
shareholders. In the absence of the President and the Vice-President, the
shareholders present shall, by a simple majority vote, elect a chairman of the
meeting.
(2) The Secretary of the Corporation shall act as secretary of all
meetings of shareholders; in the Secretary's absence, the chairman presiding at
any such meeting shall appoint a person to act as secretary of the meeting.
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ARTICLE IV
DIRECTORS
4.01 Number of Directors: The number of directors shall be one or such
greater number (but not more than eleven) as shall be set by the vote of a
majority of the Board of Directors then authorized to hold office. A director
shall be at least eighteen years of age and need not be a United States citizen
or resident of this State or a shareholder in the Corporation. Each director
shall be elected by the shareholders, at the annual meeting of shareholders of
the Corporation, and shall be elected for the term of one year, and until his
successor shall be elected and shall qualify.
4.02 Term of Directors: The directors named in the Certificate of
Incorporation shall hold office until the first annual meeting of shareholders,
and until their successors shall have been elected and qualified. At the first
annual meeting of shareholders and at each annual meeting thereafter, the
shareholders shall elect directors to hold office until the next succeeding
annual meeting. Each director shall hold office for the term for which he/she is
elected and until a successor shall have been elected and qualified.
4.03 Removal of Directors: Unless otherwise provided in the Certificate
of Incorporation, any or all of the directors of the Corporation may be removed
for cause by the shareholders only by the affirmative vote of the majority of
all shares then entitled to vote for the election of the Directors.
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4.04 Quorum of Board of Directors and Committees; Action of Directors
Without a Meeting:
(1) The participation of directors with a majority of the votes of
the entire Board of Directors, or of any Committee thereof, shall constitute a
quorum for the transaction of business.
(2) Any action required or permitted to be taken pursuant to
authorization voted at a meeting of the Board of Directors, or any Committee
thereof, may be taken without a meeting if, prior or subsequent to such action,
all members of the Board or such Committee, as the case may be, consent thereto
in writing and such written consents are filed with the minutes of the
proceedings of the Board or Committee.
4.05 Place of Board of Directors Meeting: Meetings of the Board of
Directors may be held either within or without the State of New Jersey, at such
times and places as the Board of Directors shall determine.
4.06 Annual Meeting: An annual meeting of the newly elected Board of
Directors shall be held immediately following the annual meeting of shareholders
(or immediately following any adjournment thereof) at the place of such annual
meeting of shareholders, for the organization of such Board of Directors and for
the transaction of any other business as may conveniently and properly be
brought before such meeting.
4.07 Meetings of the Board of Directors:
(1) Regular meetings of the Board of Directors may be held with or
without notice. Special meetings of the Board of Directors shall be held upon
notice to the directors and may be
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called by the President upon at least one day's notice to each director either
personally or by mail, wire, or telephone; special meetings shall be called by
the President or Secretary in a like manner upon written request of one or more
directors. Notice of any meeting need not be given to any director who signs a
written waiver of notice, whether before or after the meeting. The attendance of
any director at a meeting, without protesting prior to the conclusion of the
meeting, the lack of notice of such meeting shall constitute an effective waiver
of notice by that director. Neither the business to be transacted at, nor the
purpose of, any meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
(2) Where appropriate communication facilities are reasonably
available, any or all Directors shall have the right to participate in all or
any part of a meeting of the Board of Directors, or any Committee thereof, by
means of conference telephone or any means of communication by which all persons
participating in the meeting are able to hear each other.
4.08 Adjournment: A majority of the directors present, whether or not a
quorum is present, may adjourn any meeting to another time and place. Notice of
the adjournment shall be given to all directors who were absent at the time of
the adjournment. Notice of an adjourned meeting need not be given to any
directors who were present at the time of the adjournment only if the time and
place are fixed at the meeting adjourning and if the period of adjournment does
not exceed ten days in any one adjournment.
4.09 Powers of Directors: The Board of Directors shall manage or direct
the management of the business and affairs of the Corporation. In addition to
the powers and authorities expressly conferred upon them by these By-laws, the
Board may exercise all such
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powers of the Corporation and do all such lawful acts and things as are not by
statute or by these Bylaws directed or required to be exercised or done by the
shareholders.
4.10 Compensation of Directors: The Board, by the affirmative vote of a
majority of directors in office and irrespective of any personal interest of any
of them, shall have authority to establish reasonable compensation of directors
for services to the Corporation as directors, officers or otherwise.
4.11 Executive Committee: The Board of Directors, by resolution adopted
by a majority of the entire Board, may appoint from among its members an
executive committee and one or more other committees, each of which shall have
one or more members. Each such committee shall have and may exercise all the
authority delegated to it by the Board, except that no such committee shall
make, alter or repeal any Bylaw of the Corporation; elect or appoint any
director, or remove any officer or director; submit to shareholders any action
that requires shareholders' approval; or amend or repeal any resolution
theretofore adopted by the Board which by its terms is amendable or repealable
only by the Board.
Actions taken at a meeting of any such committee shall be reported to the
Board at its next meeting following such committee meeting; except that, when
the meeting of the Board is held within two days after the committee meeting,
such report shall, if not made at the first meeting, be made to the Board at its
second meeting following such committee meeting.
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ARTICLE V
OFFICERS
5.01 Officers: The officers of the Corporation shall consist of a
President, a Secretary, a Treasurer, and, if desired, a Chairman of the Board,
one or more Vice Presidents, and such other officers as the Board deems
appropriate. The officers shall be elected by the Board of Directors at its
annual meeting and shall hold office for one year and until their successors are
elected and have qualified, subject to earlier termination by removal or
resignation. The Board may also choose such employees and agents as it shall
deem necessary, who shall hold their offices for such terms and shall have such
authority and shall perform such duties as from time to time shall be prescribed
by the Board.
Unless otherwise provided by law, the Certificate of Incorporation or
these Bylaws, any two or more offices may be held by the same person but no
officer shall execute, acknowledge, or verify any instrument in more than one
capacity if such instrument is required by law or by these Bylaws to be
executed, acknowledged, or verified by two or more officers.
5.02 Salaries: The salaries of all officers, employees and agents of the
Corporation shall be fixed by the Board of Directors.
5.03 Removal: Any officer elected or appointed by the Board of Directors
may be removed by the Board with or without cause. An officer elected by the
shareholders may be removed, with or without cause, only by vote of the
shareholders but his authority to act as an officer may be suspended by the
Board for cause.
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5.04 President: The President shall be the chief executive officer of the
Corporation; he/she shall preside at all meetings of the shareholders and
directors; he/she shall have general and active management of the business of
the Corporation, shall see that all orders and resolutions of the Board are
carried into effect, subject, however, to the right of the directors to delegate
any specific powers, except such as may be by statute exclusively conferred on
the President, to any other officer or officers of the Corporation. He/she shall
execute bonds, mortgages and other contracts requiring a seal, under the seal of
the Corporation. He/she shall be EX-OFFICIO a member of all committees, and
shall have the general powers and duties of supervision and management usually
vested in the office of President of the Corporation. He/she shall present a
report of the condition of the business of the Corporation at each annual
meeting of the shareholders and the Board of Directors.
5.05 Vice President: The Vice President, if one has been appointed, shall
be vested with all the powers and be required to perform all the duties of the
President in his/her absence or refusal to act. He/she shall also exercise such
powers and perform such duties as may be properly delegated by the President or
the Board of Directors.
5.06 Chairman of the Board: The Chairman of the Board, if one has been
appointed, shall exercise such powers and perform such duties as shall be
provided in the resolution proposing that a Chairman of the Board be elected.
5.07 Secretary: The Secretary shall keep full minutes of all meetings of
the shareholders and directors; he/she shall be EX-OFFICIO Secretary of the
Board of Directors; he/she shall attend all sessions of the Board, shall act as
clerk thereof, and record all votes and the minutes of all
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proceedings in a book to be kept for that purpose; and shall perform like duties
for the standing committees when required. He/she shall give or cause to be
given, notices of all meetings of the shareholders of the Corporation and the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or President, under whose supervision he/she shall be.
5.08 Treasurer: The Treasurer shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation, and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation, in such depositories as may be designated by the Board of
Directors. He/she shall disburse the funds of the Corporation as may be ordered
by the Board, taking proper vouchers for such disbursements, and shall render to
the President and directors, at the regular meetings of the Board, or whenever
they may require it, an account of all his/her transactions as Treasurer and of
the financial condition of the Corporation, and shall submit a full financial
report at the annual meeting of the shareholders.
5.09 Assistant Secretary or Assistant Treasurer: Any Assistant Secretary
or Assistant Treasurer, if one has been appointed, shall be vested with all the
powers and be required to perform all the duties of the Secretary or Treasurer,
respectively, in his/her absence or refusal to act. He/she shall also exercise
such powers and perform such duties as may be properly delegated by the
President or the Board of Directors.
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ARTICLE VI
VACANCIES
6.01 Directors: Any directorship not filled at the annual meeting, any
vacancy, however caused, occurring in the Board, and newly created directorships
resulting from an increase in the authorized number of directors, may be filled
by the affirmative vote of a majority of the remaining directors even though
less than a quorum of the Board, or by a sole remaining director. A director so
elected by the Board shall hold office until his successor shall have been
elected and qualified. If, for any reason, the Corporation shall at any time
have no directors then in office, any shareholder may call a special meeting of
shareholders for the election of directors and, over his/her signature, shall
give notice of such meeting in accordance with these Bylaws.
6.02 Officers: Any vacancy occurring among the officers, however caused,
shall be filled by the Board of Directors.
6.03 Resignations: Any director or other officer may resign by written
notice to the Corporation. The resignation shall be effective upon receipt
thereof by the Corporation or at such subsequent time as shall be specified in
the notice of resignation.
ARTICLE VII
SHARE CERTIFICATES
7.01 Certificates: The share certificates of the Corporation shall be in
such form as the Board of Directors may from time to time prescribe and shall be
numbered consecutively and registered in the transfer records of the Corporation
as they are issued. When issued, they shall bear
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the holder's name, the number of shares, the date of issue, and shall be signed
by the President of the Corporation. The Share certificates may also be
countersigned by the Secretary of the Corporation and may be sealed with the
corporate seal or a facsimile thereof. Any or all signatures upon a certificate
may be a facsimile.
7.02 Uncertificated Shares: The Board of Directors may provide that some
or all of the shares of any class or series shall be represented by
uncertificated shares. Within a reasonable time after the issuance or transfer
of uncertificated shares, the Corporation shall send to the registered owner
thereof a written notice containing the information required to be set forth or
stated on certificates as provided in Chapter 7 of the Act.
7.03 Transfer of Shares: Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, and cancel the old certificate. Every such transfer
shall be entered on the transfer book of the Corporation which shall be kept at
its principal office. No transfer shall be made within fifteen days next
preceding the annual meeting of shareholders.
7.04 Loss of Certificates: In the event that a share certificate shall be
lost, destroyed or mutilated, a new certificate may be issued therefor upon such
terms and indemnity to the Corporation as the Board of Directors may prescribe.
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ARTICLE VIII
BOOKS AND ACCOUNTS
8.01 Records: The Corporation shall keep books and records of account and
minutes of the proceedings of the shareholders, Board of Directors and executive
committee, if any. Such books, records and minutes may be kept outside this
State. The Corporation shall keep at its principal office, its registered
office, or at the office of its transfer agent, a record or records containing
the names and addresses of all shareholders, the number, class and series of
shares held by each and the dates when they respectively became the owners of
record thereof. Any of the foregoing books, minutes or records may be in written
form or in any other form capable of being converted into readable form within a
reasonable time.
8.02 Inspection: Any person who shall have been a shareholder of record
of the Corporation for at least six months immediately preceding his demand, or
any person holding, or so authorized in writing by the holders of, at least five
percent of the outstanding shares of any class or series, upon at least five
days' written demand shall have the right for any proper purpose to examine in
person or by agent or attorney, during usual business hours, the minutes of the
proceedings of the shareholders and record of shareholders and to make extracts
therefrom at the places where the same are kept.
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ARTICLE IX
MISCELLANEOUS PROVISIONS
9.01 Monetary Disbursements: All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
9.02 Fiscal Year: The Board of Directors shall be authorized to choose
the initial fiscal year of the Corporation, and to change that fiscal year from
time to time.
9.03 Dividends: The Board of Directors may declare and pay dividends upon
the outstanding shares of the Corporation from time to time and to such extent
as they deem advisable, in the manner and upon the terms and conditions provided
by statute and the Certificate of Incorporation.
9.04 Reserve: Before payment of any dividend there may be set aside such
sum or sums as the directors, from time to time, in their absolute discretion,
think proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interests
of the Corporation, and the directors may abolish any such reserve in the manner
in which it was created.
9.05 Giving Notice: Whenever written notice is required to be given to
any person, it may be given to such person, either personally or by sending a
copy thereof through the mail. If notice is given by mail, the notice shall be
deemed to be given when deposited in the mail addressed to the person to whom it
is directed at his last address as it appears on the records of the
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Corporation, with postage pre-paid thereon. Such notice shall specify the place,
day and hour of the meeting and, in the case of a shareholders' meeting, the
general nature of the business to be transacted.
In computing the period of time for the giving of any notice required or
permitted by statute, or by the Certificate of Incorporation or these Bylaws or
any resolution of directors or shareholders, the day on which the notice is
given shall be excluded, and the day on which the matter noticed is to occur
shall be included.
9.06 Loans to Directors, Officers or Employees: The Corporation may lend
money to, or guarantee any obligation of, or otherwise assist, any director,
officer or employee of the Corporation or of any subsidiary, whenever it may
reasonably be expected to benefit the Corporation.
9.07 Disallowed Compensation: Any payments made to an officer or employee
of the Corporation as salary, commission, bonus, interest or rent, which shall
be disallowed in whole or in part as a deductible expense by the Internal
Revenue Service, shall be reimbursed by such officer or employee to the
Corporation to the full extent of such disallowance. It shall be the duty of the
directors, as a Board, to enforce payment of each such amount disallowed. In
lieu of payment by the officer or employee, subject to the determination of the
directors, proportionate amounts may be withheld from his future compensation
payments until the amount owed to the Corporation has been recovered.
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ARTICLE X
AMENDMENTS
10.01 Amendments: The Board of Directors shall have the power to adopt,
amend and repeal these Bylaws, but Bylaws adopted by the Board may be amended or
repealed, and new Bylaws may be made, by the shareholders; provided, however,
that in addition to any vote of the holders of any class or series of stock of
the Corporation required by law or by the Certificate of Incorporation, the
affirmative vote of the holders of at least eighty percent (80%) of the voting
power of all of the then outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to adopt, amend or repeal any
provision of the Bylaws of the Corporation.
ARTICLE XI
INDEMNIFICATION AND INSURANCE
11.01 Indemnification: Every person who was or is a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or a person of whom he is the legal representative is or was
a director or officer of the Corporation or is or was serving at the request of
the Corporation or for its benefit as a director or officer of another
Corporation, or as a representative in another enterprise, shall be indemnified
and held harmless to the fullest extent permissible under and pursuant to any
procedure specified in the Act, as amended from time to time, against all
expenses, liabilities and losses (including attorneys' fees, judgments, fines
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
him in connection therewith. Such right of
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indemnification shall be a contract that may be enforced in any manner desired
by such person. Such right of indemnification shall not be exclusive of any
right which such directors, officers or representatives may have or hereafter
acquire and, without limiting the generality of such statement, they shall be
entitled to their respective rights of indemnification under any agreement, vote
of shareholders, provision of law or otherwise, as well as their rights
hereunder.
11.02 Insurance: The Board of Directors may cause the Corporation to
purchase and maintain insurance on behalf of any person who is or was a director
or officer of the Corporation or is or was serving at the request of the
Corporation as a director or officer of another Corporation, or as its
representative in a partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not the Corporation would
have the power to indemnify such person.
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<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
INTELLIGROUP, INC.
DEBENTURE AND WARRANT PURCHASE AGREEMENT
Dated as of April 10, 1996
<PAGE> 2
INTELLIGROUP, INC.
DEBENTURE AND
WARRANT PURCHASE AGREEMENT
Dated as of April 10, 1996
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
Purchase and Sale of Securities
1.1 Authorization of Securities ............................................ 1
1.2 Purchase and Sale of Securities ........................................ 1
1.3 Redemption of Warrant Shares. .......................................... 2
1.4 Closing................................................................. 2
1.5 Use of Proceeds......................................................... 2
ARTICLE II
Terms of Debentures
2.1 Interest ............................................................... 2
2.2 Redemptions and Prepayments ............................................ 3
2.3 Ranking of Debentures................................................... 3
ARTICLE III
Representations and Warranties of the Company and the Principal Shareholders.
3.1 Organization and Corporate Power ....................................... 4
3.2 Authorization........................................................... 4
3.3 Government Approvals ................................................... 4
3.4 Authorized and Outstanding Stock ....................................... 4
3.5 Subsidiaries ........................................................... 5
3.6 Financial Information .................................................. 5
3.7 Events Subsequent to the Date of the Financial Statements............... 6
3.8 Litigation ............................................................. 6
</TABLE>
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<TABLE>
<S> <C> <C>
3.9 Compliance with Laws and Other Instruments ............................. 7
3.10 Taxes................................................................... 7
3.11 Real Property .......................................................... 7
3.12 Personal Property ...................................................... 8
3.13 Patents, Trademarks, etc ............................................... 8
3.14 Agreements of Directors, Officers and Employees ........................ 9
3.15 Governmental and Industrial Approvals................................... 9
3.16 Federal Reserve Regulations............................................. 9
3.17 Contracts and Commitments............................................... 10
3.18 Securities Act ......................................................... 10
3.19 Registration Rights .................................................... 10
3.20 Insurance Coverage...................................................... 10
3.21 Employee Matters........................................................ 10
3.22 No Brokers or Finders .................................................. 11
3.23 Transactions with Affiliates ........................................... 11
3.24 Assumptions, Guarantees, etc. of Indebtedness of Other Persons ......... 11
3.25 Restrictions on Subsidiaries............................................ 11
3.26 Status Under Certain Laws............................................... 12
3.27 Disclosures............................................................. 12
ARTICLE IV
Affirmative Covenants of the Company
4.1 Accounts and Reports ................................................... 12
4.2 Payment of Taxes ....................................................... 14
4.3 Maintenance of Key Man Insurance........................................ 14
4.4 Compliance with Laws, etc. ............................................. 14
4.5 Inspection.............................................................. 15
4.6 Corporate Existence; Ownership of Subsidiaries ......................... 15
4.7 Compliance with ERISA .................................................. 15
4.8 Board Approval.......................................................... 15
4.9 Financings.............................................................. 16
4.10 Meetings of the Board of Directors ..................................... 16
4.11 Insurance............................................................... 16
4.13 Stay, Extension and Usury Laws.......................................... 16
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE V
Negative Covenants of the Company
5.1 Investments in Other Persons............................................ 17
5.2 Distributions .......................................................... 18
5.3 Dealings with Affiliates ............................................... 18
5.4 Merger; Sale of Assets ................................................. 19
5.5 Liens .................................................................. 19
5.6 Operating Revenues ..................................................... 19
5.7 Limitation on Restrictions on Subsidiary Dividends and Other
Distributions ......................................................... 19
5.8 Option Shares .......................................................... 20
5.9 Conflicting Agreements ................................................. 20
5.10 Compensation ........................................................... 20
ARTICLE VI
Preemptive Right
6.1 Preemptive Right........................................................ 20
6.2 Definition of New Securities ........................................... 21
6.3 Notice from the Company ................................................ 21
6.4 Sale by the Company..................................................... 21
6.5 Termination of Rights .................................................. 21
ARTICLE VII
Investment Representations
7.1 Representations and Warranties ......................................... 21
7.2 Permitted Sales; Legends ............................................... 22
ARTICLE VIII
Conditions of Purchasers' Obligation ................................................... 25
8.1 Effect of Conditions ................................................... 23
8.2 Representations and Warranties ......................................... 23
8.3 Performance ............................................................ 23
8.4 Opinions of Counsel..................................................... 23
8.5 Certified Documents, etc................................................ 23
8.6 No Material Adverse Change.............................................. 24
8.7 Warrant Agreement ...................................................... 24
</TABLE>
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<TABLE>
<S> <C> <C>
8.8 Shareholders' Agreement ................................................ 24
8.9 Redemption Agreement ................................................... 24
8.10 Registration Rights Agreement .......................................... 24
8.11 Non-Competition Agreements ............................................. 24
8.12 Board Election.......................................................... 24
8.13 Consents and Waivers ................................................... 24
8.14 Usury Notice ........................................................... 24
8.15 Payoff of Revolving Demand Promissory Note.............................. 24
ARTICLE IX
Conditions of the Company's Obligation...................................................
ARTICLE X
Defaults and Remedies
10.1 Events of Default; Acceleration ........................................ 25
10.2 Rescission of Acceleration ............................................. 27
ARTICLE XI
Certain Definitions ..................................................................... 27
ARTICLE XII
Miscellaneous
12.1 Note and Stock Payments ................................................ 31
12.2 Form, Registration, Transfer and Exchange of Notes ..................... 31
12.3 Survival of Representations ............................................ 32
12.4 Parties in Interest..................................................... 32
12.5 Securities Owned by Affiliates ......................................... 32
12.6 Amendments and Waivers.................................................. 32
12.7 Notices ................................................................ 33
12.8 Expenses ............................................................... 34
12.9 Counterparts ........................................................... 34
12.10 Effect of Headings ..................................................... 34
12.11 Adjustments ............................................................ 35
12.12 Future Issuances ....................................................... 35
12.13 Governing Law .......................................................... 35
</TABLE>
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<PAGE> 6
EXHIBITS
A Form of Debenture
B Warrant Agreement
C Form of Escrow Agreement
D Opinion of Company Counsel
E Shareholders' Agreement
F Redemption Agreement
G Registration Rights Agreement
H Form of Non-Competition, Non-Disclosure and Inventions Agreement
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<PAGE> 7
April 10, 1996
To: The Persons listed on
Schedule I attached hereto:
Re: Subordinated Debentures and Warrants
Gentlemen:
Intelligroup, Inc., a New Jersey corporation (the "Company"), and Ashok
Pandey, Rajkumar Koneru and Nagarjun Valluripalli (individually, a "Principal
Shareholder" and collectively the "Principal Shareholders") hereby agree with
you as follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES
1.1 Authorization of Securities. The Company has authorized:
(a) the issuance and delivery to you (the "Purchasers") of its
9% Subordinated Debentures (herein, together with any debentures which may be
issued hereunder in substitution or exchange therefor, collectively called the
"Debentures"), in the aggregate principal amount of $6,000,000, to be dated the
date of issue thereof, to mature on the fifth anniversary of the date of
issuance (the "Maturity Date") and to be substantially in the form of Exhibit A
attached hereto; and
(b) the issuance and delivery to the Purchasers of Warrants
(the "Warrants") to purchase an initial aggregate number of 23.63636 shares of
Common Stock, no par value per share, of the Company (the "Common Stock"), at an
exercise price of $.01 per share of Common Stock, which number shall initially
constitute 20.8% of the Company's fully diluted capital stock after giving
effect to purchase by the Company of the shares of Common Stock held by the
Principal Shareholders as set forth in Section 1.5(ii) herein, subject to
reduction as set forth in the Warrant Agreement. The Warrants shall be issued
pursuant to a Warrant Agreement in the form of Exhibit B attached hereto (the
"Warrant Agreement"). The shares of Common Stock issuable upon exercise of the
Warrants are referred to herein as the "Warrant Shares". The Warrants shall be
purchased as a unit with the Debentures and no separate consideration shall be
payable therefor. As used herein, the term "Securities" shall include the
Debentures and the Warrants.
1.2 Purchase and Sale of Securities. The Company agrees to issue and
sell to each Purchaser and, subject to the terms and conditions herein set
forth, each Purchaser agrees to
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<PAGE> 8
purchase from the Company at the Closing (as defined below) the aggregate
principal amount of the Debentures and the number of Warrants set forth opposite
the Purchaser's name on Schedule 1 hereto, for the aggregate purchase price set
forth opposite the Purchaser's name on Schedule 1.
1.3 Redemption of Warrant Shares. Upon the earlier of the fifth
anniversary of the Closing or the occurrence of a Liquidity Event, any Purchaser
may require the Company to redeem any or all of the Warrants, or the Warrant
Shares issuable upon exercise thereof, held by such a Purchaser at a price equal
to the fair market value thereof, as of the date of such proposed repurchase, in
accordance with the terms and conditions of the Redemption Agreement.
1.4 Closing. Executed copies of this Agreement, the Debentures, the
Warrant Agreement, the Warrant Certificates, the Shareholders' Agreement, the
Redemption Agreement, the Registration Rights Agreement and the Non-Competition,
Non-Disclosure and Inventions Agreement, together with an amount equal to the
purchase price of the Securities, shall be placed in escrow in accordance with
the terms of the Escrow Agreement substantially in the form attached hereto as
Exhibit C. The purchase and sale of the Securities shall be made at a closing
(the "Closing") to be held at the offices of Hutchins, Wheeler & Dittmar, 101
Federal Street, Boston, Massachusetts, at such date and time as are determined
in accordance with the Escrow Agreement. Payment at the Closing for the
Securities shall be by wire transfer payable from the escrow account maintained
under the Escrow Agreement in immediately available federal funds. Each
Purchaser shall pay that amount for the Securities being acquired by it at the
Closing as described on Schedule 1 hereof. At the Closing, the escrow agent
under the Escrow Agreement will deliver to each Purchaser one or more
certificates representing the Debentures and the Warrants purchased by such
Purchaser, in such denominations and issued in such names as may be requested by
such Purchaser.
1.5 Use of Proceeds. Subject to the terms and conditions of Article XI
hereof, the Company shall use (i) $4,500,000 of the proceeds from the purchase
and sale of the Securities hereunder for general working capital and general
corporate purposes, and (ii) $1,500,000 of the proceeds from the purchase and
sale of the Securities hereunder to purchase shares of Common Stock held by the
Principal Shareholders as set forth on Schedule 1.5.
ARTICLE II
TERMS OF DEBENTURES
2.1 Interest. The unpaid principal balance of the Debentures shall bear
interest, compounded annually, from and including the date thereof to and
including the date upon which the principal thereof shall have been paid in full
at the rate of nine percent (9%) per annum. All interest shall accrue and shall
be payable upon payment of principal, whether upon acceleration or prepayment or
at the Maturity Date.
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<PAGE> 9
2.2 Redemptions and Prepayments of Debentures.
(a) Optional Prepayment. The Company shall be entitled to
prepay the Debentures, either in whole or in part (but if in part then in a
minimum amount of $100,000 (or such lesser amount as may then be outstanding)
and, if greater, in integral multiples of $50,000), without premium or penalty,
at any time prior to the Maturity Date, at a price equal to 100% of the
principal amount so prepaid, together with accrued interest on the principal
amount prepaid to the prepayment date. The Company shall give the Purchasers
written notice of each optional prepayment not less than five days prior to the
prepayment date, specifying such prepayment and the amount of the Debentures
proposed to be prepaid on such date, whereupon such principal amount of the
Debentures specified in such notice, together with accrued interest thereon,
shall become due and payable on the prepayment date.
(b) Partial Redemption Pro Rata. Each and every partial
prepayment of the Debentures made pursuant to this Section 2.2 shall be made
with respect to all of the Debentures then outstanding under this Agreement,
rather than to any portion thereof, and the aggregate amount of each partial
prepayment shall be allocated among all holders of the Debentures at the time
outstanding in proportion to the unpaid principal amounts of the Debentures held
by each such holder.
(c) Payment Upon Maturity. To the extent not prepaid under
Section 2.2(a), or paid upon acceleration pursuant to Section 10.1 hereto, the
entire principal amount of the Debentures, together with all interest accrued
thereon, shall be payable, without notice of demand, upon the earlier of the
occurrence of a Liquidity Event or the fifth anniversary of the Closing.
2.3 Ranking of Debentures. The Purchasers hereby acknowledge that the
Company has pledged substantially all of its assets to Access Capital, Inc.
("Access"), pursuant to a Factoring Agreement, dated as of October 20, 1995, by
and between the Company and Access, and that the Purchasers do not the right to
share in the security interest currently held by Access in the assets of the
Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE PRINCIPAL SHAREHOLDERS.
In order to induce the Purchasers to purchase the Securities, the
Company and the Principal Shareholders, acting jointly and severally, make the
following representations and warranties which shall be true, correct and
complete in all respects on the date hereof and shall be true, correct and
complete in all respects as of the Closing:
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3.1 Organization and Corporate Power. The Company, each of its
Subsidiaries, and the affiliated entities listed on Schedule 3.5, are each a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own its properties and to carry on its business as presently
conducted. The Company, each of its Subsidiaries, and the affiliated entities
listed on Schedule 3.5, are each duly licensed or qualified to do business as a
foreign corporation in each jurisdiction wherein the character of its property,
or the nature of the activities presently conducted by it, makes such
qualification necessary.
3.2 Authorization. The Company has all necessary corporate power and
has taken all necessary corporate action required for the due authorization,
execution, delivery and performance by the Company of this Agreement, the
Debentures, the Warrant Agreement, the Shareholders' Agreement referred to in
Section 8.8, the Redemption Agreement referred to in Section 8.9, the
Registration Rights Agreement referred to in Section 8.10, and the
Non-Competition Agreements referred to in Section 8.11 (collectively, the
"Related Agreements"), and any other agreements or instruments executed by the
Company in connection herewith or therewith and the consummation of the
transactions contemplated herein or therein, and for the due authorization,
issuance and delivery of the Securities. The issuance of the Securities, and the
issuance of the Warrant Shares upon exercise of the Warrants, does not require
any further corporate action and is not subject to any preemptive right, right
of first refusal or the like. This Agreement, the Related Agreements and the
other agreements and instruments executed by the Company in connection herewith
or therewith will each be a valid and binding obligation of the Company
enforceable in accordance with its respective terms.
3.3 Government Approvals. Except as set forth on Schedules 3.3, no
consent, approval, license or authorization of, or designation, declaration or
filing with, any court or governmental authority is or will be required on the
part of the Company in connection with the execution, delivery and performance
by the Company of this Agreement, any of the Related Agreements and any other
agreements or instruments executed by the Company in connection herewith or
therewith, or in connection with the issuance of the Securities, and the
issuance of the Warrant Shares upon exercise of the Warrants, except for (i)
those which have already been made or granted and (ii) the filing of
registration statements with the Securities and Exchange Commission (the
"Commission") and any applicable state securities commission as specifically
provided for in the Registration Rights Agreement referred to in Section 8.10
hereof.
3.4 Authorized and Outstanding Stock. The authorized capital stock of
the Company consists of 2,500 shares of Common Stock, of which 150 shares are
validly issued and outstanding and held of record and owned beneficially as set
forth on Schedule 3.4 attached hereto (prior to the redemption contemplated in
Section 1.5 hereof). There are no treasury shares held by the Company. All
issued and outstanding shares of capital stock are, and when issued upon
exercise of the Warrants, all Warrant Shares will be, duly and validly
authorized, validly issued and fully paid and non-assessable and free from any
restrictions on transfer, except for restrictions imposed by federal or state
securities or "blue-sky" laws and except for those
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<PAGE> 11
imposed pursuant to this Agreement or any Related Agreement. A sufficient number
of authorized but unissued shares of Common Stock have been reserved for
issuance upon exercise of the Warrants. Except as otherwise set forth in
Schedule 3.4, there are no outstanding warrants, options, commitments,
preemptive rights, rights to acquire or purchase, conversion rights or demands
of any character relating to the capital stock or other securities of the
Company. All issued and outstanding shares of stock of the Company were issued
(i) in transactions exempt from the registration provisions of the Act, and (ii)
in compliance with or in transactions exempt from the registration provisions of
applicable state securities or "blue-sky" laws.
3.5 Subsidiaries. Except as set forth in Schedule 3.5, the Company has
no Subsidiaries nor any investment or other interest in, or any outstanding loan
or advance to or from, any Person, including, without limitation, any officer,
director or shareholder. Except as set forth on Schedule 3.5, the Company owns
of record and beneficially, free and clear of all liens, charges, restrictions,
claims and encumbrances of any nature, all of the issued and outstanding capital
stock of each of its Subsidiaries. Schedule 3.5 contains a true and complete
list of the shareholders of each corporation which is an affiliate of the
Company (collectively, the "Affiliated Entities").
3.6 Financial Information. Attached hereto as Schedule 3.6 are (i) the
audited combined financial statements of the Company, its Subsidiaries and its
Affiliated Entities for the fiscal year ended December 31, 1994, accompanied by
the unqualified audit report of Amper, Politziner & Mattia, (ii) the audited
combined financial statements of the Company, its Subsidiaries and its
Affiliated Entities for the fiscal year ended December 31, 1995, accompanied by
the unqualified audit report of Arthur Andersen & Co., the Company's independent
certified public accountants, and (iii) the unaudited combined balance sheet of
the Company, its Subsidiaries and its Affiliated Entities as of February 29,
1996 and for the two months then ended (collectively, the "Financial
Statements"). The Financial Statements are complete and correct, are in
accordance with the books and records of the Company, its Subsidiaries and the
Affiliated Entities and present in accordance with GAAP, consistently applied
with prior period, the financial condition and result of operations of the
Company, its Subsidiaries and the Affiliated Entities as of the dates and for
the periods shown, except that the unaudited statements do not include the
footnotes required under GAAP, and may remain subject to immaterial year-end
adjustments. Neither the Company nor any Subsidiary or Affiliated Entities has
any liabilities or obligations, contingent or otherwise, which in the aggregate
exceed $125,000, which are not adequately reflected in, reserved against or
disclosed in the Financial Statements, except for liabilities incurred since the
date of the Financial Statements in the ordinary course of business. Since
December 31, 1995, (i) there has been no change in the business, assets,
liabilities, condition (financial or otherwise) or operations of the Company,
its Subsidiaries and Affiliated Entities except for changes in the ordinary
course of business which, individually or in the aggregate, have not been
materially adverse, and (ii) none of the business, prospects, condition
(financial or otherwise), operations, property or affairs of the Company, its
Subsidiaries and Affiliated Entities has been materially adversely affected by
any occurrence or development, individually or in the aggregate, whether or not
insured against. Schedule 3.6
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<PAGE> 12
attached hereto sets forth (i) the amount of all Indebtedness of the Company and
its Subsidiaries and Affiliated Entities outstanding on the date hereof, (ii)
any Lien with respect to such Indebtedness and (iii) a list of each instrument
or agreement governing such Indebtedness. No default exists with respect to or
under any such Indebtedness or any instrument or agreement relating thereto.
3.7 Events Subsequent to the Date of the Financial Statements. Except
as set forth on Schedule 3.7, since December 31, 1995, neither the Company nor
any Subsidiary or Affiliated Entity has (i) issued any stock, bond or other
corporate security, (ii) borrowed any amount or incurred or become subject to
any liability (absolute, accrued or contingent), except liabilities under
contracts entered into in the ordinary course of business, (iii) discharged or
satisfied any lien or encumbrance or incurred or paid any obligation or
liability (absolute, accrued or contingent) other than current liabilities shown
on the Financial Statements and current liabilities incurred since the date of
the Financial Statements in the ordinary course of business, (iv) declared or
made any payment or distribution to stockholders or purchased or redeemed any
shares of its capital stock or other securities, (v) mortgaged, pledged or
subjected to lien any of its assets, tangible or intangible, other than liens of
current real property taxes not yet due and payable, (vi) sold, assigned or
transferred any of its tangible assets except in the ordinary course of
business, or canceled any debt or claim, except in the ordinary course of
business, (vii) sold, assigned, transferred or granted any license with respect
to any patent, trademark, trade name, service mark, copyright, trade secret or
other intangible asset, except pursuant to license or other agreements entered
into in the ordinary course of business, (viii) suffered any loss of property or
waived any right of substantial value whether or not in the ordinary course of
business, (ix) made any change in officer compensation except for changes in the
ordinary course of business and consistent with past practice, (x) made any
material change in the manner of business or operations of the Company or any
Subsidiary or Affiliated Entity, (xi) entered into any transaction except in the
ordinary course of business or as otherwise contemplated hereby or (xii) entered
into any commitment (contingent or otherwise) to do any of the foregoing.
3.8 Litigation. Except as otherwise set forth on Schedule 3.8, and in a
side letter from the Company and the Principal Shareholders to the Purchasers of
even date herewith (the "Side Letter"), there is no litigation or governmental
proceeding or investigation pending or, to the knowledge of the Company and the
Principal Shareholders, threatened, against the Company or any Subsidiary or any
Affiliated Entity or affecting any of the Company's or such Subsidiary's or
Affiliated Entity's properties or assets, or against any officer, key employee
or shareholder of the Company or any Subsidiary or Affiliated Entity in his
capacity as such, nor, to the knowledge of the Company and the Principal
Shareholders, has there occurred any event or does there exist any condition on
the basis of which any litigation, proceeding or investigation might properly be
instituted with any substantial chance of recovery where such recovery would
likely have a material adverse effect on the Company and its Subsidiaries, taken
as a whole. Neither the Company nor any Subsidiary or Affiliated Entity, nor any
officer, key employee or shareholder of the Company or any Subsidiary or
Affiliated Entity in his capacity as such is, to the knowledge of the Company
and the Principal Shareholders, in default with respect to any order,
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writ, injunction, decree, ruling or decision of any court, commission, board or
other government agency which may materially and adversely affect the business
or assets of the Company, its Subsidiaries and Affiliated Entities, taken as a
whole.
3.9 Compliance with Laws and Other Instruments. Except as set forth in
the Side Letter, each of the Company, each of its Subsidiaries and each
Affiliated Entities is in compliance with all of the provisions of this
Agreement and of its charter and by-laws, and in all material respects with the
provisions of each mortgage, indenture, lease, license, other agreement or
instrument, and has not knowingly or wilfully violated any domestic or, to the
knowledge of the Company or the Principal Shareholders, foreign judgment,
decree, judicial order, statute, and regulation by which it is bound or to which
it or any of its properties are subject. Neither the execution, delivery or
performance of this Agreement and the Related Agreements, nor the offer,
issuance, sale or delivery of the Securities, with or without the giving of
notice or passage of time, or both, will violate, or result in any breach of, or
constitute a default under, or result in the imposition of any encumbrance upon
any asset of the Company or any Subsidiary pursuant to any provision of the
Company's or such Subsidiary's or Affiliated Entity's charter or by-laws, or
statute, rule or regulation, contract, lease, judgment, decree or other document
or instrument by which the Company or any Subsidiary or Affiliated Entity is
bound or to which the Company or Subsidiary or any Affiliated Entity or any of
their respective properties are subject, or, to the knowledge of the Company and
the Principal Shareholders, will cause the Company or any Subsidiary or
Affiliated Entity to lose the benefit of any right or privilege it presently
enjoys or cause any Person who is expected to normally do business with the
Company or any Subsidiary or Affiliated Entity to discontinue to do so on the
same basis.
3.10 Taxes. Except as set forth in the Side Letter, the Company and
each of its Subsidiaries and each Affiliated Entity has filed all tax returns
(including statements of estimated taxes owed) required to be filed within the
applicable periods for such filings and has paid all taxes required to be paid,
and has established adequate reserves (net of estimated tax payments already
made) for the payment of all taxes payable in respect to the period subsequent
to the last periods covered by such returns. No deficiencies for any tax are
currently assessed against the Company or any Subsidiary or Affiliated Entity,
and no tax returns of the Company or any Subsidiary or Affiliated Entity have
ever been audited, and to the knowledge of the Company and the Principal
Shareholders, there is no such audit pending or contemplated. There is no tax
lien, whether imposed by any federal, state or local taxing authority,
outstanding against the assets, properties or business of the Company or any
Subsidiary or Affiliated Entity. For the purposes of this Agreement, the term
"tax" shall include all federal, state and local taxes, including income,
franchise, property, sales, withholding, payroll and employment taxes.
3.11 Real Property.
(a) Schedule 3.11 sets forth the addresses and uses of all
real property that the Company or any Subsidiary or Affiliated Entity owns,
leases or subleases, and any Lien on any such owned real property or the
Company's or Subsidiary's or Affiliated Entity's leasehold
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interest therein, specifying in the case of each such lease or sublease, the
name of the lessor or sublessor, as the case may be, the lease term and the
obligations of the lessee thereunder.
(b) Except as set forth on Schedule 3.11, the Company or its
Subsidiary or Affiliated Entity, as the case may be, has good and marketable
title to, and owns free and clear of all Liens, all property listed as owned by
the Company or any Subsidiary or Affiliated Entity on Schedule 3.11, and there
is no material violation of any law, regulation or ordinance (including without
limitation laws, regulations or ordinances relating to zoning, environmental,
city planning or similar matters) relating to any real property owned, leased or
subleased by the Company or any Subsidiary or Affiliated Entity.
(c) All the leases listed on Schedule 3.11 are valid and
enforceable and are in full force and effect, and there are no defaults by the
Company or any Subsidiary or Affiliated Entity under any of such leases or, to
the knowledge of the Company and the Principal Shareholders, by any other party
thereto, which might curtail in any material respect the present use of the
Company's and such Subsidiary's or Affiliated Entity's property listed on
Schedule 3.11. The performance by the Company of this Agreement and the Related
Agreements will not result in the termination of, or in any increase of any
amounts payable under, any lease listed on Schedule 3.11.
3.12 Personal Property. Except as set forth on Schedule 3.12 and except
for property sold or otherwise disposed of in the ordinary course of business
since December 31, 1995, the Company and its Subsidiaries and Affiliated
Entities own, free and clear of any Liens, all of the personal property
reflected as owned by the Company and its Subsidiaries and Affiliated Entities
in the balance sheet contained in the Financial Statements for the year ended
December 31, 1995, and all other material items of personal property acquired by
the Company and its Subsidiaries and Affiliated Entities through the date
hereof. All material items of such personal property are in good operating
condition, normal wear and tear excepted.
3.13 Patents, Trademarks, etc. Set forth on Schedule 3.13 is a list and
brief description of all material patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service mark applications
trade names and copyrights, and all applications for such that are in the
process of being prepared, owned by or registered in the name of the Company or
any Subsidiary or Affiliated Entity, or of which the Company or any Subsidiary
or Affiliated Entity is a licensor or licensee or in which the Company or any
Subsidiary or Affiliated Entity has any right, and in each case a brief
description of the nature of such right. The Company and its Subsidiaries and
Affiliated Entities own or possess adequate licenses or other rights to use all
patents, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names, copyrights, manufacturing processes,
formulae, trade secrets and know how (collectively, "Intellectual Property")
necessary or desirable to the conduct of their business as conducted and as
proposed to be conducted, and none of the Principal Shareholders maintains any
ownership right therein. No claim is pending or, to the knowledge of the Company
and the Principal Shareholders, threatened to the effect that the
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operations of the Company infringe upon or conflict with the asserted rights of
any other person under any Intellectual Property, and there is no known basis
for any such claim (whether or not pending or threatened). No claim is pending
or, to the knowledge of the Company and the Principal Shareholders, threatened
to the effect that any such Intellectual Property owned or licensed by the
Company, or which the Company or any Subsidiary or Affiliated Entity otherwise
has the right to use, is invalid or unenforceable by the Company or such
Subsidiary or Affiliated Entity, and there is no known basis for any such claim
(whether, or not pending or threatened). To the knowledge of the Company and the
Principal Shareholders, all technical information developed by and belonging to
the Company and its Subsidiaries and Affiliated Entities which has not been
patented or copywritten has been kept confidential. Neither the Company nor any
Subsidiary or Affiliated Entity has granted or assigned to any other person or
entity any right to manufacture, have manufactured, assemble or sell the
products or proposed products or to provide the services or proposed services of
the Company or such Subsidiary or Affiliated Entity. Neither the Principal
Shareholders nor any other current or former stockholder, employee, officer or
director of the Company or any of its Subsidiaries has (directly or indirectly)
any right, title or interest in any of the rights described on Schedule 3.13
other than such right which such Person may enjoy as a stockholder of the
Company.
3.14 Agreements of Directors, Officers and Employees. To the knowledge
of the Company and the Principal Shareholders, no director, officer or employee
of or consultant to the Company or any Subsidiary or Affiliated Entity is in
violation of any terms of any employment contract, non-competition agreement,
non-disclosure agreement, patent disclosure or assignment agreement or other
contract or agreement containing restrictive covenants relating to the right of
any such director, officer, employee or consultant to be employed or engaged by
the Company or such Subsidiary or Affiliated Entity because of the nature of the
business conducted or proposed to be conducted by the Company or such Subsidiary
or Affiliated Entity, or relating to the use of trade secrets or proprietary
information of others.
3.15 Governmental and Industrial Approvals. The Company and each of its
Subsidiaries and Affiliated Entities has all the material permits, certificates,
licenses, orders, franchises and other rights and privileges of all federal,
state, local or, to the knowledge of the Company's or the Principal
Shareholders' knowledge, foreign governmental or regulatory bodies necessary for
the Company and such Subsidiaries and Affiliated Entities to conduct their
respective businesses as presently conducted. All such permits, certificates,
licenses, orders, franchises and other rights and privileges are in full force
and effect and, to the knowledge of the Company and the Principal Shareholders,
no suspension or cancellation of any of them is threatened, and none of such
permits, certificates, licenses, orders, franchises or other rights and
privileges will be affected by the consummation of the transactions contemplated
in this Agreement and the Related Agreements.
3.16 Federal Reserve Regulations. Neither the Company nor any of its
Subsidiaries or Affiliated Entities has engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation G of the Board of Governors of the
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Federal Reserve System), and no part of the proceeds of the sale of the
Securities will be used to purchase or carry any margin security or to extend
credit to others for the purpose of purchasing or carrying any margin security
or in any other manner which would involve a violation of any of the regulations
of the Board of Governors of the Federal Reserve System.
3.17 Contracts and Commitments. Except as set forth on Schedule 3.17
attached hereto, neither the Company nor any Subsidiary or Affiliated Entity has
any contract, obligation or commitment which is material or which involves a
potential material commitment or any stock redemption or stock purchase
agreement, financing agreement, license, lease, or stock option plan. For
purposes of this Section 3.17, a contract, obligation or commitment shall be
deemed material if it entails a liability or obligation in excess of $75,000.
3.18 Securities Act. The Company has complied and will comply with all
applicable federal or state securities laws in connection with the issuance and
sale of the Securities and the Warrant Shares. Neither the Company nor anyone
acting on its behalf has offered any of the Securities, or similar securities,
or solicited any offers to purchase any of such securities, so as to bring the
issuance and sale of the Securities under the registration provisions of the
Act.
3.19 Registration Rights. The Company has not granted any rights
relating to registration of its capital stock under the Act or state securities
laws other than those contained in this Agreement and the Registration Rights
Agreement.
3.20 Insurance Coverage. Schedule 3.20 hereto contains an accurate
summary of the insurance policies currently maintained by the Company and its
Subsidiaries and Affiliated Subsidiaries. Except as described on Schedule 3.20,
there are currently no claims pending against the Company or any Subsidiary or
Affiliated Entity under any insurance policies currently in effect and covering
the property, business or employees of the Company and its Subsidiaries and
Affiliated Entities, and all premiums due and payable with respect to the
policies maintained by the Company and its Subsidiaries and Affiliated Entities
has been paid to date.
3.21 Employee Matters.
(a) Except as set forth on Schedule 3.21(a), none of the
Company, any Subsidiary, or any Affiliated Entity has in effect or any liability
with respect to any employment agreement, change of control agreements, or labor
or collective bargaining agreement, whether written or oral. The Company and the
Principal Shareholders have no knowledge that any of the officers or other key
employees of the Company or any Subsidiary or Affiliated Entity presently
intends to terminate his employment. The Company and its Subsidiaries or
Affiliated Entities are in compliance in all material respects with all
applicable laws and regulations relating to labor, employment, fair employment
practices, terms and conditions of employment, and wages and hours.
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(b) With respect to each worker currently or previously
classified as an independent contractor, the Company and each Subsidiary and
Affiliated Entity currently have or previously had a reasonable basis for each
such classification, and have filed or will file all required 1099 informational
returns.
(c) Except as set forth on Schedule 3.21(c), none of the
Company, any Subsidiary, or any Affiliated Entity maintains, contributes to, or
has any current or contingent liability with respect to any employee benefit
plan as defined by section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), any bonus, stock option, deferred compensation,
incentive, severance, or other compensation or benefit plan (individually, a
"Plan" and collectively, the "Plans"). A true and complete copy of each Plan,
and where appropriate, a copy of the most recent IRS Form 5500 annual report,
IRS determination letter, trust agreement, and summary plan description with
respect to each such Plan has been furnished to Purchaser. Each of the Plans has
been administered at all times, and in all material respects, in accordance with
its terms and applicable law. None of the Plans is or has been subject to Title
IV of ERISA. No Plan provides benefits with respect to current or former
employees, officers, or directors (or their beneficiaries) beyond their
retirement or other termination of employment, other than (i) coverage for
benefits mandated by applicable law, or (ii) death benefits or retirement
benefits under an employee pension benefit plan as defined by section 3(2) of
ERISA.
3.22 No Brokers or Finders. No person has or will have, as a result of
the transactions contemplated by this Agreement, any right, interest or claim
against or upon the Company or any of its Subsidiaries or Affiliated Entities
for any commission, fee or other compensation as a finder or broker because of
any act or omission by the Company or any of its Subsidiaries or Affiliated
Entities.
3.23 Transactions with Affiliates. Except as set forth on Schedule
3.23, there are no loans, leases or other continuing transactions between the
Company or any Subsidiary or Affiliated Entity on the one hand, and any officer
or director of the Company or any Subsidiary or Affiliated Entity or any person
owning five percent (5%) or more of the Common Stock of the Company or any
respective family member or affiliate of such officer, director or shareholder
on the other hand.
3.24 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.
Except as otherwise set forth on Schedule 3.24 hereto, neither the Company nor
any Subsidiary or Affiliated Entity has assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on or for any Indebtedness of
any other Person, except guarantees by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business.
3.25 Restrictions on Subsidiaries. There are no restrictions on the
Company or any of its Subsidiaries or Affiliated Entities which prohibit or
otherwise restrict the transfer of cash or
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other assets between the Company and any of its Subsidiaries or between any
Affiliated Entities or Subsidiaries of the Company.
3.26 Status Under Certain Laws. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. Neither the Company nor any of its Subsidiaries is a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company", as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.
3.27 Disclosures. Neither this Agreement, any Schedule or Exhibit to
this Agreement, the Related Agreements, the Financial Statements, the Side
Letter, nor any other agreement, document or written statement made by the
Company or any Principal Shareholder and furnished by the Company or any
Principal Shareholder to the Purchasers or the Purchasers' special counsel in
connection with the transactions contemplated hereby, contains any untrue
statement of material fact or omits to state any material fact necessary to make
the statements contained herein or therein not misleading. There is no fact
known to the Company or any Principal Shareholder that has not been disclosed
herein or in any other agreement, document or written statement furnished by the
Company or any of its Subsidiaries to the Purchasers or their special counsel in
connection with the transactions contemplated hereby which materially adversely
affects or could materially and adversely affect the business, properties,
assets or financial condition of the Company and its Subsidiaries and Affiliated
Entities taken as a whole.
ARTICLE IV
AFFIRMATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will observe (and will cause each Subsidiary to
observe) the following covenants on and after the date hereof and until the
first to occur of consummation of the first Qualified Public Offering or (ii)
payment in full of the Debentures (including interest thereon); provided,
however, that if the Company has paid in full the Debentures but has not
consummated its first Qualified Public Offering, the provisions of Sections 4.1,
4.5, 4.8 and 4.10 shall continue until such consummation. Notwithstanding the
foregoing, at such time as the Purchasers have sold or conveyed to the Company
or other unaffiliated entities such number of shares of Common Stock such that
after giving effect to such sale or conveyance the Purchasers shall own or have
the right to acquire less than seventy-five percent (75%) of the shares of
Common Stock which they initially had the right to acquire upon exercise of the
Warrants (after giving effect to any adjustment to the number of Warrant Shares
issuable, as set forth in the Warrant Agreement), all of the provisions of this
Article IV other than Section 4.1 shall terminate.
4.1 Accounts and Reports. The Company will, and will cause each of its
Subsidiaries to, maintain a standard system of accounts in accordance with
generally accepted accounting
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principles consistently applied and the Company will, and will cause each of its
Subsidiaries to, keep full and complete financial records. The Company will
furnish to each Purchaser the information set forth in this Section 4.1.
(a) Within ninety (90) days after the end of each fiscal year,
a copy of the consolidated and consolidating balance sheet of the Company and
its Subsidiaries as at the end of such year, together with consolidated and
consolidating statements of income, shareholders' equity and cash flow of the
Company and its Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all in
reasonable detail and, duly audited by an independent public accountant of
national recognition selected by the Board of Directors of the Company and
reasonably acceptable to Purchasers.
(b) Within thirty (30) days after the end of each calendar
month, an unaudited consolidated balance sheet of the Company and its
Subsidiaries as of the end of such month and unaudited consolidated statements
of income and shareholders' equity for such month and for the period commencing
at the end of the previous fiscal year and ending with the end of such month,
and commencing with the fiscal year ending December 31, 1997 and for each fiscal
year thereafter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
all in reasonable detail.
(c) At the time of delivery of each monthly and annual
statement, a certificate, executed by the chief financial officer of the Company
stating that such officer has caused this Agreement and the terms of the
Debentures to be reviewed and has no knowledge of any default by the Company or
any Subsidiary in the performance or observance of any of the provisions of this
Agreement and the terms of the Debentures or, if such officer has such
knowledge, specifying such default.
(d) Prior to the end of each fiscal year, a copy of the
operating plan and budget for the next fiscal year required under Section 4.8.
(e) Promptly upon receipt thereof, any written report, so
called "management letter", and any other communication submitted to the Company
or any Subsidiary by its independent public accountants relating to the
business, prospects or financial condition of the Company and its Subsidiaries;
(f) Promptly after the commencement thereof, notice of (i) all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company (or any Subsidiary) which, if successful, could have a
material adverse effect on the Company and its Subsidiaries, taken as a whole;
and (ii) all material defaults by the Company or any Subsidiary (whether or not
declared) under any agreement for money borrowed (unless waived or cured within
applicable grace periods);
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(g) Promptly upon sending, making available, or filing the
same, all reports and financial statements as the Company (or any Subsidiary)
shall send or make available generally to the shareholders of the Company as
such or to the Commission;
(h) Promptly upon sending, making available, or filing the
same, all tax returns of the Company and other information filed with any
federal or state taxing authority or provided to the shareholders of the
Company, including, without limitation, any Form 1120S or successor form and any
Schedule K-1; and
(i) Such other information with regard to the business,
properties or the condition or operations, financial or otherwise, of the
Company or its Subsidiaries as the Purchaser may from time to time reasonably
request.
4.2 Payment of Taxes. The Company will pay and discharge (and cause any
Subsidiary to pay and discharge) all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits, or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a lien or charge upon any
properties of the Company (or any Subsidiary), provided that neither the Company
nor any Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper proceedings
if the Company or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto.
4.3 Maintenance of Key Man Insurance. The Company will, at its expense,
use its best efforts to obtain within thirty (30) days after the date hereof and
thereafter maintain a life insurance policy with a responsible and reputable
insurance company payable to the Company each in the face amount of $1,000,000
on the life of each of Ashok Pandey, Rajkumar Koneru and Nagarjun Valluripalli.
None of the Principal Shareholders has been advised that he is uninsurable, or
that he is insurable only at a premium exceeding that which is typical for one
of his age and smoking habits. The Company will maintain such policies and will
not cause or permit any assignment of the proceeds of such policies, and will
not borrow against such policies. The Company will add one designee of the
Purchasers as a notice party to such policies, and will request that the issuer
of such policies provide such designee with ten (10) days' notice before either
of such policy is terminated (for failure to pay premium or otherwise) or
assigned, or before any change is made in the designation of the beneficiary
thereof.
4.4 Compliance with Laws, etc. The Company will comply (and cause each
of its Subsidiaries to comply) with all applicable laws, rules, regulations and
orders of any governmental authority, the noncompliance with which could
materially adversely affect the business or condition, financial or otherwise,
of the Company and its Subsidiaries, taken as a whole.
4.5 Inspection. At any reasonable time during normal business hours and
from time to time, but not more frequently than once per calendar quarter for
all Purchasers and transferees
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of Purchasers as a group, upon five (5) days written notice, the Company (and
each of its Subsidiaries) will permit any one or more of the Purchasers or any
holder of five percent (5%) or more in principal amount of the Debentures or
five percent (5%) or more of the issued or issuable Warrant Shares, or any of
the agents or representatives of the foregoing Persons, to examine and make
copies, at the expense of the Purchasers, of and extracts from the records and
books of account of and visit the properties of the Company (and any of its
Subsidiaries) and to discuss the Company's affairs, finances and accounts with
any of its officers or directors. Such inspections shall be conducted at such
times and in such a manner as to not interfere with the ongoing business
operations of the Company.
4.6 Corporate Existence; Ownership of Subsidiaries. The Company will,
and will cause its Subsidiaries to, at all times preserve and keep in full force
and effect their corporate existence, and rights and franchises material to the
business of the Company and its Subsidiaries, taken as a whole, and will
qualify, and will cause each of its Subsidiaries to qualify, to do business as a
foreign corporation in any jurisdiction where the failure to do so would have a
material adverse effect on the business, condition (financial or other), assets,
properties or operations of the Company and its Subsidiaries, taken as a whole.
The Company shall at all times own of record and beneficially, free and clear of
all liens, charges, restrictions, claims and encumbrances of any nature, all of
the issued and outstanding capital stock of each of its Subsidiaries. The above
notwithstanding, the Company shall have the right to merge with its wholly-owned
Subsidiaries without prior approval or consent of the Purchasers. Within sixty
(60) days after the Closing, the Principal Shareholders shall contribute to the
Company for no additional consideration, the right, title and interest which
they have, directly or indirectly, in any corporation, partnership or other
entity through or with which the Company or any of its Subsidiaries conducts
business; provided, however, to the extent required under applicable law, the
Principal Shareholders will be entitled to retain record ownership of their
interest in such entity so long as they enter into an arrangement, reasonably
acceptable to the Purchasers, with respect to the transfer of beneficial
ownership in such entity to the Company.
4.7 Compliance with ERISA. The Company will comply, (and cause each of
its Subsidiaries and Affiliated Entities to comply) in all material respects
with the provisions of ERISA and the Code, and the rules and regulations
thereunder, which are applicable to any Plan. None of the Company, any
Subsidiary, or any Affiliated Entity shall establish, maintain, or otherwise
incur any liability or obligation with respect to (i) any employee pension
benefit plan (as defined by section 3(2) of ERISA) that is subject to Title IV
of ERISA, or (ii) any plan or arrangement which provides post-retirement medical
or life insurance benefits.
4.8 Board Approval. Prior to the end of each fiscal year, the Company
will prepare and submit to its Board of Directors for its approval prior to such
year end an operating plan and budget, cash flow projections and profit and loss
projections, all itemized in reasonable detail for the immediately following
year.
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4.9 Financings. The Company will promptly provide to the Board of
Directors the details and terms of, and any brochures or investment memoranda
prepared by the Company related to, any possible equity or debt securities
financing for the Company (or any of its Subsidiaries), whether initiated by the
Company or any other Person.
4.10 Meetings of the Board of Directors. The Directors shall schedule
regular meetings not less frequently than once every sixty (60) days, unless
otherwise agreed upon by the Purchasers and the Company, during the first year
of this Agreement, and every ninety (90) days during each year thereafter. The
Company shall reimburse the Purchasers for all direct out-of-pocket expenses
incurred by any director designee of the Purchasers in attending such meetings.
Such expenses shall not exceed the costs incurred in providing coach air fare
between Boston, Massachusetts and Newark, New Jersey, ground transportation to
and from airports and meals. Hotel accommodations will be provided if the time
for a Board of Directors meeting requires an overnight stay before or after the
meeting.
4.11 Maintenance of Properties; Insurance. The Company will maintain or
cause to be maintained in good repair, working order and condition all
properties used or useful in the business of the Company and its Subsidiaries
and from time to time will make or cause to be made all appropriate repairs,
renewals and replacements thereof. The Company shall maintain with financially
sound and reputable insurance companies insurance with respect to its properties
and business and the properties and business of its Subsidiaries against loss or
damage of the kinds customarily insured against by corporations of established
reputation engaged in the same or similar business and similarly situated, of
such type and in such amounts as are customarily carried under similar
circumstances by such other corporations.
4.12 Rule 144A Information. The Company shall, upon the written request
of any Purchaser, provide to such Purchaser and to any prospective institutional
transferee of the Securities designated by such Purchaser, such financial and
other information as is available to the Company or can be obtained by the
Company without material expense and as such Purchaser may reasonably determine
is required to permit such transfer to comply with the requirements of Rule 144A
promulgated under the Act. The Company may require the prospective institutional
transferee to execute and deliver a non-disclosure agreement before the Company
shall be obligated to release any information to the prospective institutional
transferee.
4.13 Stay, Extension and Usury Laws. For so long as any of the
Debentures remain outstanding, the Company covenants (to the extent it may
lawfully do so) that it will not at any time in any action against the
Purchasers insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Agreement; and the Company hereby expressly waives (to the
extent it may lawfully do so) all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Purchasers, but will suffer and
permit the execution of every such power as though no such law has been enacted.
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Notwithstanding anything herein or in the Debentures to the contrary, in no
event shall interest payable hereunder with respect to the Debentures exceed the
maximum amount permitted by applicable law. If any payments in the nature of
interest, additional interest and other charges made under this Agreement or
under any of the Debentures are held to be in excess of the applicable limits
imposed by any applicable federal or state law, the amount held to be in excess
shall be considered payment of principal under the Debentures and the
indebtedness evidenced thereby shall be reduced by such amount, pro-rata, in the
inverse order of maturity so that the total liability for payments in the nature
of interest, additional interest and other charges shall not exceed the
applicable limits imposed by any applicable federal or state interest rate laws.
ARTICLE V
NEGATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will comply (and will cause each Subsidiary to
comply) with each of the provisions of this Article V on and after the date
hereof until the first to occur of (i) consummation of the first Qualified
Public Offering or (ii) payment in full of the Debentures (including interest
thereon); provided, however, that if the Company has paid in full the Debentures
but has not consummated its first Qualified Public Offering, the provisions of
Sections 5.2, 5.3 and 5.4 (in each case to the extent set forth therein) shall
continue until such consummation. Notwithstanding the foregoing, at such time as
the Purchasers have sold or conveyed to the Company or other unaffiliated
entities such number of shares of Common Stock such after giving effect to such
sale or conveyance the Purchasers shall own or have the right to acquire less
than seventy-five percent (75%) of the shares of Common Stock which they
initially had the right to acquire upon exercise of the Warrants (after giving
effect to any adjustment to the number of Warrant Shares issuable, as set forth
in the Warrant Agreement), all of the provisions of this Article V shall
terminate.
5.1 Investments in Other Persons. The Company will not make or permit
any Subsidiary to make any loan or advance to any Person, or purchase, otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire, the capital
stock, assets comprising the business of, obligations of, or any interest in,
any Person, except:
(i) investments by the Company or a Subsidiary in evidences of
indebtedness issued or fully guaranteed by the United States of America
and having a maturity of not more than one year from the date of
acquisition;
(ii) investments by the Company or a Subsidiary in
certificates of deposit, Debentures, acceptances and repurchase
agreements having a maturity of not more than one year from the date of
acquisition issued by a bank organized in the United States having
capital, surplus and undivided profits of at least $50,000,000;
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(iii) loans or advances from a Subsidiary to the Company or
from a Subsidiary to another Subsidiary;
(iv) investments by the Company or a Subsidiary in A-rated or
better commercial paper having a maturity of not more than one year
from the date of acquisition;
(v) investments by the Company or a Subsidiary in "money
market" fund shares, or in "money market" accounts fully insured by the
Federal Deposit Insurance Corporation and sponsored by banks and other
financial institutions, provided that such "money market" fund or
"money market" accounts invest principally in investments of the types
described in clauses (i), (ii) or (iv) of this subsection 5.1;
(vi) loans or advances against salary in reasonable amounts
made to employees of the Company or any Subsidiary for valid business
purposes, provided that such advances are repayable to the Company or
such Subsidiary within 180 days; and
(vii) investments by the Company in an entity which is engaged
in the same line of business of the Company or which provides a product
or service which is ancillary to that provided by the Company; provided
that such investments do not exceed $150,000 in the aggregate in any
one calendar year.
5.2 Distributions. The Company will not declare or pay any dividends,
purchase, redeem, retire, or otherwise acquire for value any of its capital
stock (or rights, options or warrants to purchase such shares) now or hereafter
outstanding, return any capital to its shareholders as such, or make any
distribution of assets to its shareholders as such, or permit any Subsidiary to
do any of the foregoing, except that the Subsidiaries may declare and make
payment of cash and stock dividends, return capital and make distributions of
assets to the Company and except that nothing herein contained shall prevent the
Company from:
(i) effecting a stock split or declaring or paying any
dividend consisting of shares of any class of capital stock to the
holders of shares of such class of capital stock; or
(ii) repurchasing the Warrants or the Warrant Shares from a
Purchaser in accordance with the Redemption Agreement attached as
Exhibit F.
Notwithstanding the foregoing, subsequent to the payment in full of the
Debentures (including interest thereon), the Company shall not be required to
obtain the prior consent of the Purchasers to make any such distribution
described above, so long as the Purchasers shall receive a pro rata portion of
any such distribution, calculated on the basis of the number of shares of Common
Stock they then own or have the right to acquire upon exercise of the Warrants.
5.3 Dealings with Affiliates. The Company will not enter into any
transaction including, without limitation, any loans or extensions of credit or
royalty agreements, with any
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officer or director of the Company or any Subsidiary or holder of any class of
capital stock of the Company, or any member of their respective immediate
families or any corporation or other entity directly or indirectly controlled by
one or more of such officers, directors or shareholders or members of their
immediate families, except for advances in reasonable amounts made to employees
of the Company or any Subsidiary for valid business purposes, provided that such
advances are repaid to the Company within 180 days. Notwithstanding the
foregoing, subsequent to the payment in full of the Debentures (including all
interest thereon), the Company may enter into any transaction with an Affiliate,
provided that prior disclosure thereof is made to the Board of Directors, that
such transaction is approved by a disinterested majority of the Board of
Directors, and that the terms of any such transaction are no less favorable to
the Company than those available from a third party.
5.4 Merger; Sale of Assets. The Company shall not, and shall not permit
any Subsidiary to, merge or consolidate with or into any other corporation, or
sell, assign, lease or otherwise dispose of or voluntarily part with the control
(whether in one transaction or in a series of related transactions) all, or
substantially all, of its assets (whether now owned or hereinafter acquired), or
sell, assign or otherwise dispose of (whether in one transaction or in a series
of transactions) any of its accounts receivable (whether now in existence or
hereafter created) at a discount or with recourse, to any Person, other than
pursuant to the factoring agreement in effect on the date hereof with Access
Capital, Inc. or its successor lender, (i) except for sales or other
dispositions of assets in the ordinary course of business, and (ii) except that
(a) any wholly owned Subsidiary may merge into or transfer assets to the
Company, and (b) any wholly-owned Subsidiary may merge into or consolidate with
or transfer assets to any other wholly owned Subsidiary. Notwithstanding the
foregoing, subsequent to the payment in full of the Debentures (including
interest thereon) the Company may sell all or substantially all of its assets
without the necessity of obtaining the consent of the Purchasers under this
Agreement.
5.5 Liens. Neither the Company nor any of its Subsidiaries will create
or suffer to exist any Lien upon any of its assets, now owned or hereafter
acquired, securing any Indebtedness or other obligation except Permitted Liens.
5.6 Operating Revenues. The amount of the Operating Loss incurred by
the Company in any two (2) consecutive calendar quarters (expressed as a
positive number) shall not equal or exceed 2.5% of the aggregate Operating
Revenues of the Company for such two (2) calendar quarters, and in no event
shall the amount of the Operating Loss incurred by the Company during such two
(2) consecutive calendar quarters (expressed as a positive number) exceed
$600,000.
5.7 Limitation on Restrictions on Subsidiary Dividends and Other
Distributions. The Company shall not permit any of its Subsidiaries, directly or
indirectly, to create or suffer to exist or become effective any encumbrances or
restrictions on the ability of any of its Subsidiaries to (i) pay dividends or
make any other distributions on its capital stock or any other interest or
participation in its profit owned by any of the Company or any of its
Subsidiaries, or pay any
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Indebtedness owed by any of the Subsidiaries, (ii) make loans or advances to the
Company, or (iii) transfer any of its properties or assets to the Company.
5.8 Option Shares. Within ninety (90) days after the Closing Date, the
Company will establish an option program, which option plan shall be reasonably
satisfactory to the Purchasers. Except as set forth in the Option Plan, the
Company will not issue shares of capital stock and will not grant any options or
rights to acquire shares of its capital stock to any employees, except that not
more than 9.09 shares of Common Stock, which number includes options previously
granted, may be issued to employees of the Company and its Subsidiaries, which
options issued after the date hereof shall have an exercise price equal to the
fair market value of the shares of Common Stock at the date of grant, as
determined in good faith by the Board of Directors, and shall be approved by the
Compensation Committee of the Company's Board of Directors established pursuant
to the Shareholders' Agreement. The Principal Shareholders may not receive any
options granted under such option plan.
5.9 No Conflicting Agreements. The Company agrees that neither it nor
any Subsidiary will, without the consent of the Purchasers, enter into or amend
any agreement, contract, commitment or understanding which would limit, restrict
or prohibit the exercise by the Purchasers of any of their rights under this
Agreement or any of the Related Agreements.
5.10 Compensation. The Company shall pay to its senior management
employees compensation determined by the Compensation Committee of the Board of
Directors designated pursuant to the Shareholders' Agreement. The parties
acknowledge and agree that the annual compensation of each of Ashok Pandey,
Rajkumar Koneru and Nagarjun Valluripalli shall be fixed as of the date of the
Closing at $200,000 with an annual cost of living adjustment and such bonus, if
any, as determined in good faith by a majority of the members of the
Compensation Committee, which majority must include the designee of the
Purchasers.
ARTICLE VI
PREEMPTIVE RIGHT
6.1 Preemptive Right. The Company hereby grants to each Purchaser so
long as it shall own, of record or beneficially, or have the right to acquire,
any Common Stock, the right to purchase all or part of its pro rata share of New
Securities (as defined in Section 6.2) which the Company, from time to time,
proposes to sell and issue. A Purchaser's pro rata share, for purposes of this
preemptive right, is the ratio of the number of shares of Common Stock which
such Purchaser owns or has the right to acquire to the total number of shares of
Common Stock then outstanding. The Purchaser shall have a right of
over-allotment pursuant to this Article VI such that to the extent a Purchaser
does not exercise its preemptive right in full hereunder, such additional shares
of New Securities which such Purchaser did not purchase may be purchased by the
other Purchasers in proportion to the total number of shares of Common Stock
which each
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such other Purchaser owns or has the right to acquire compared to the total
number shares of Common Stock which all such other Purchaser own or have the
right to acquire.
6.2 Definition of New Securities. "New Securities" shall mean any
capital stock of the Company whether now authorized or not, and rights, options
or warrants to purchase capital stock, and securities of any type whatsoever
that are, or may become convertible into or exchangeable for capital stock,
issued on or after the date hereof; provided that the term "New Securities" does
not include (i) Common Stock issued as a stock dividend to holders of Common
Stock or upon any stock split, subdivision or combination of shares of Common
Stock, (ii) Warrant Shares issuable upon exercise of the Warrants, and (iii) the
aggregate number of shares of Common Stock issuable upon exercise of options
permitted under Section 5.8 hereof.
6.3 Notice from the Company. In the event the Company proposes to
undertake an issuance of New Securities, it shall give the each Purchaser
written notice of its intention, describing the type of New Securities and the
price and the terms upon which the Company proposes to issue the same. Each
Purchaser shall have 20 business days from the date of receipt of any such
notice to agree to purchase up to the Purchaser's pro rata share of such New
Securities (and any over-allotment amount pursuant to the operation of Section
6.1 hereof) for the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased.
6.4 Sale by the Company. In the event any Purchaser fails to exercise
in full its preemptive right, the Company shall have 90 days thereafter to sell
the New Securities with respect to which the Purchaser's option was not
exercised (to the extent the other Purchasers do not elect to exercise the
over-allotment rights set forth in Section 6.1), at a price and upon terms no
more favorable to the purchasers thereof than specified in the Company's notice.
To the extent the Company does not sell all the New Securities offered within
said 90 day period, the Company shall not thereafter issue or sell such New
Securities without first again offering such securities to the Purchasers in the
manner provided above.
6.5 Termination of Rights. The rights granted to the Purchasers under
this Article VI shall expire immediately prior to, and shall not apply in
connection with, the consummation of the first Qualified Public Offering.
ARTICLE VII
INVESTORS' REPRESENTATIONS
7.1 Representations and Warranties. Each Purchaser hereby represents
and warrants to the Company as follows:
(a) Assuming due execution and delivery by the Company of the
Agreement and the Related Agreements, this Agreement and the Related Agreements
to which such
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Purchaser is a party constitute legal, valid and binding obligations of such
Purchaser, enforceable against such Purchaser in accordance with their
respective terms;
(b) Such Purchaser has been advised and understands that the
Securities have not been registered under the Act, on the grounds that no
distribution or public offering of the Securities is to be effected, and that in
this connection, the Company is relying in part on the representations of such
Purchasers set forth in this Article VII;
(c) Such Purchaser has been further advised and understands
that no public market now exists for any of the securities issued by the Company
and that a public market may never exist for the Securities;
(d) Such Purchaser is purchasing the Securities for investment
purposes, for its own account and not with a view to, or for sale in connection
with, any distribution thereof in violation of Federal or state securities laws
and such Purchaser agrees that it will not divide its interest in the Securities
with others, re-sell, or otherwise distribute the Securities in violation of
Federal or state securities laws (provided that each Purchaser may in all events
distribute Securities to its partners);
(e) By reason of its business or financial experience, such
Purchaser has the capacity to protect its own interest in connection with the
transactions contemplated hereunder; and
(f) Such Purchaser is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
Securities; provided, however, that nothing in this Section 7.1 shall be deemed
to vitiate or limit the representations, warranties and covenants of the Company
and the Principal Shareholder contained in this Agreement.
7.2 Permitted Sales; Legends. Notwithstanding the foregoing
representations, the Company agrees that it will permit (i) a distribution of
the Securities by a partnership to one or more of its partners, where no
consideration is exchanged therefor by such partners, or to a retired or
withdrawn partner who retires or withdraws after the date hereof in full or
partial distribution of his interest in such partnership, or to the estate of
any such partner or the transfer by gift, will or intestate succession of any
partner to his spouse or to the siblings, lineal descendants or ancestors of
such partner or his spouse, or to a trust created for the benefit of one or more
of the foregoing, if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if it were an original Purchaser hereunder and (ii)
a sale or other transfer of any of the Securities upon obtaining assurance
satisfactory to the Company that such transaction is exempt from the
registration requirements of, or is covered by an effective registration
statement under, the Act and applicable state securities or "blue-sky" laws,
including, without limitation, receipt of an unqualified opinion to such effect
of counsel reasonably satisfactory to the Company or receipt of a no-action
letter to such effect from the Commission. The
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certificates representing the Warrant Shares shall bear a legend evidencing such
restriction on transfer substantially in the following form:
"The shares represented by this certificate have been acquired
for investment and have not been registered under the
Securities Act of 1933 (the "Act") or the securities laws of
any state. The shares may not be transferred by sale,
assignment, pledge or otherwise unless (i) a registration
statement for the shares under the Act is in effect or (ii)
the corporation has received an opinion of counsel, which
opinion is reasonably satisfactory to the corporation, to the
effect that such registration is not required under the Act."
ARTICLE VIII
CONDITIONS OF PURCHASERS' OBLIGATION
8.1 Effect of Conditions. The obligation of the Purchasers to purchase
and pay for the Securities at the Closing shall be subject at their election to
the reasonable satisfaction of each of the conditions stated in the following
Sections of this Article.
8.2 Representations and Warranties. The representations and warranties
of the Company and the Principal Shareholders contained in this Agreement shall
be true and correct on the date of such Closing with the same effect as though
made on and as of that date, and the Purchasers shall have received a
certificate dated as of such Closing and signed on behalf of the Company and the
Principal Shareholders to that effect.
8.3 Performance. The Company and the Principal Shareholders shall have
performed and complied with all of the agreements, covenants and conditions
contained in this Agreement required to be performed or complied with by them at
or prior to such Closing, and the Purchasers shall have received a certificate
dated as of such Closing and signed on behalf of the Company and by the
Principal Shareholders to that effect.
8.4 Opinions of Counsel. The Purchasers shall have received an opinion,
dated the date of such Closing, from Spadoro & Hilson, counsel to the Company,
in the form attached as Exhibit D.
8.5 Certified Documents, etc. Counsel for the Purchasers shall have
received a copy of the Company's Certificate of Incorporation, certified by the
Secretary of State of the State of New Jersey and a copy of the Company's
By-Laws, certified by its Secretary, as well as any and all other documents,
including certificates as to votes adopted and incumbency of officers and
certificates from appropriate authorities as to the legal existence and tax good
standing of the Company and its Subsidiaries, which the Purchasers or their
counsel may reasonably request.
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8.6 No Material Adverse Change. The business and properties of the
Company and its Subsidiaries shall not have been materially adversely affected
since the date of this Agreement, whether by fire, casualty, act of God or
otherwise, and there shall have been no other changes in the business, property
or financial condition of the Company or any of its Subsidiaries that would have
a material adverse effect on the value of their respective businesses or assets.
8.7 Warrant Agreement. The Warrant Agreement shall have been executed
by each Purchaser and the Company.
8.8 Shareholders' Agreement. A Shareholders' Agreement in the form of
Exhibit E attached hereto shall have been executed by each Purchaser, the
Company and the shareholders named therein.
8.9 Redemption Agreement. A Redemption Agreement in the form of Exhibit
F attached hereto shall have been executed by the Company and each of the
Purchasers.
8.10 Registration Rights Agreement. A Registration Rights Agreement in
the form of Exhibit G attached hereto shall have been executed by the Company
and each of the Purchasers.
8.11 Non-Competition Agreements. Each of the Principal Shareholders and
such other senior members of the Company's management as the Company shall
designate shall have executed a Non-Competition, Non-Disclosure and Inventions
Agreement substantially in the form of Exhibit H attached hereto.
8.12 Board Election. Concurrently with the Closing, the Board of
Directors of the Company shall have been expanded to not more than seven members
designated as provided in the Shareholders' Agreement.
8.13 Consents and Waivers. The Company shall have obtained all consents
or waivers necessary to execute this Agreement and the other agreements and
documents contemplated herein, to issue the Securities, and to carry out the
transactions contemplated hereby and thereby. All corporate and other action and
governmental filings necessary to effectuate the terms of this Agreement, the
Related Agreements and the Securities and other agreements and instruments
executed and delivered by the Company in connection herewith shall have been
made or taken.
8.14. Usury Notice. The Purchasers shall have filed with the Attorney
General of the Commonwealth of Massachusetts the notice required by M.G.L. c.
271 Section 49(d).
8.15 Payoff of Revolving Demand Promissory Note. The Company shall use
a portion of the proceeds from the purchase and sale of the Securities to pay
off any and all amounts due and owing to The First National Bank of Boston under
that certain Revolving Demand Promissory Note, dated March 22, 1996, and the
guaranty by the Purchasers or their Affiliates of amounts borrowed thereunder
shall have been terminated and returned.
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ARTICLE IX
CONDITIONS OF THE COMPANY'S OBLIGATION
The Company's obligation to sell the Securities shall be subject to the
accuracy on the date of the Closing of the representations and warranties of the
Purchasers contained in this Agreement.
ARTICLE X
DEFAULTS AND REMEDIES
10.1 Events of Default; Acceleration.
An "Event of Default" occurs if:
(1) The Company defaults in the payment of any principal of any
Debenture when the same shall become due, either by the terms thereof or
otherwise as herein provided; or
(2) The Company defaults in the payment of interest on any Debenture
when the same becomes due and payable and the default continues for a period of
5 days; or
(3) The Company shall fail to perform or observe any covenant contained
in Article V of this Agreement; or
(4) The Company or any of its Subsidiaries defaults in the performance
or observance of any other agreement, term or condition contained in the
Debentures, this Agreement or the Related Agreements and such default shall not
have been remedied within 30 days after such default shall first have become
known to any officer of the Company or written notice thereof shall have been
received by the Company (regardless of the source of such notice); or
(5) The Company or any Subsidiary shall default in the payment of any
principal of or premium, if any, or interest on any other Indebtedness or
obligation with respect to borrowed money the outstanding principal of which is
in an aggregate amount greater than $500,000 or shall default in the performance
of any material term of any instrument evidencing such Indebtedness or of any
mortgage, indenture or agreement relating thereto, and the effect of such
default is to cause the holder or holders of such obligation to cause such
Indebtedness or obligation to become due and payable prior to its stated
maturity; or
(6) The Company or any Subsidiary pursuant to or within the meaning of
any Bankruptcy Law:
(A) commences a voluntary case,
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(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) is the debtor in an involuntary case which is not
dismissed within 60 days of the commencement thereof, or
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) provides for relief against the company or any Subsidiary
in an involuntary case,
(B) appoints a Custodian of the Company or any Subsidiary for
all or substantially all of its property,
(C) orders the liquidation of the Company or any Subsidiary,
or
(8) Any representation or warranty made by the Company or any Principal
Shareholder in this Agreement or in any other document or instrument furnished
in connection with the transactions contemplated hereby, including, without
limitation, in any of the Related Agreements, shall prove to be materially false
or incorrect on the date as of which made.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
then and in any such case (a) upon the occurrence of any Event of Default
described in clause (6) or (7) above, the unpaid principal amount of and accrued
interest on the Debentures shall automatically become due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company, and (b) upon the occurrence of any other Event of
Default, in addition to any other rights, powers and remedies permitted by law
or in equity, the holder or holders of greater than 50% in principal amount of
the Debentures then outstanding may, at its or their option, by notice in
writing to the Company, declare all of the Debentures to be, and all of the
Debentures shall thereupon be and become, immediately due and payable together
with interest accrued thereon and all other sums due hereunder, without
presentment, demand, protest or other notice of any kind, all of which are
waived by the Company, provided that if with respect to a specific Event of
Default, the Purchasers shall not have exercised their right to declare the
Debentures to be due and payable within ninety (90) days (or such longer period
to which the Company may agree) after the date on which the
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Purchasers first have actual knowledge of such Event of Default (which
knowledge, in the case of a default as to which a grace or cure period applies
shall be deemed to arise only upon expiration of such grace or cure period),
then the Purchaser shall be deemed to have waived their right to declare an
Event of Default with respect to such specific default.
Upon the occurrence of any such Event of Default, the holders of
Debentures may proceed to protect and enforce their rights by an action at law,
suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained herein or in the Debentures held by them,
for an injunction against a violation of any of the terms hereof or thereof, or
for the pursuit of any other remedy which it may have by virtue of this
Agreement or pursuant to applicable law. The Company shall pay to the holders of
Debentures upon demand the costs and expenses of collection and of any other
actions referred to in this Article X, including without limitation reasonable
attorneys' fees, expenses and disbursements.
No course of dealing and no delay on the part of the holders of
Debentures in exercising any of their rights shall operate as a waiver thereof
or otherwise prejudice the rights Purchasers' rights, nor shall any single or
partial exercise of any right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
No right, power or remedy conferred hereby or by the Debentures on the holders
thereof shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by statute or
otherwise.
10.2 Rescission of Acceleration. At any time after any declaration of
acceleration of all the Debentures shall have been made pursuant to Section 10.1
by any holder or holders of the Debentures and before a judgment or decree for
the payment of money due has been obtained by such holder or holders, the holder
or holders of at least a majority in aggregate principal amount of the
Debentures at the time outstanding may, by written notice to the Company and to
the other holders of the Debentures rescind and annul such declaration and its
consequences, provided that (i) the principal of and interest on the Debentures
which shall have become due otherwise than by such declaration of acceleration
shall have been duly paid, and (ii) all Events of Default other than the
nonpayment of principal of and Interest on the Debentures which have become due
solely by such declaration of acceleration shall have been cured or waived by
the holders of a majority in aggregate principal amount of the Debentures at the
time outstanding. No rescission or annulment referred to above shall affect any
subsequent Default or any right, power or remedy arising out of such subsequent
Default.
ARTICLE XI
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
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"Access" shall have the meaning set forth in Section 2.3.
"Act" means the Securities Act of 1933, as amended.
"Affiliate" means, as to any Person, a Person who controls, is
controlled by, or is under common control with, such Person.
"Affiliated Entities" shall have the meaning set forth in Section 3.5.
"Agreement" means this Debenture and Warrant Purchase Agreement as from
time to time amended and in effect between the parties.
"Business Day" means any day on which commercial banks are not
authorized or required to close in Boston, Massachusetts.
"Change of Control" means (i) any transfer of ownership of any portion
of the Common Stock held collectively by the Principal Shareholders, or any
private placement or public offering of additional shares of Common Stock, or
any combination of the foregoing events, which results in the Principal
Shareholders together ceasing to beneficially own and control, directly or
indirectly, at least 50% of the aggregate voting power of all shares of Common
Stock entitled to vote for the election of the Board of Directors of the
Company; or (b) any sale of all or substantially all of the assets of the
Company.
"Closing" shall have the meaning set forth in Section 1.4.
"Code" shall have the meaning set forth in Section 3.10.
"Commission" shall have the meaning set forth in Section 3.3.
"Common Stock" will include (a) the Company's Common Stock as
authorized on the date of this Agreement, (b) any other capital stock of any
class or classes of the Company authorized on or after the date hereof, the
holders of which shall have the right, without limitation as to amount, either
to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference, and (c) any other securities of the Company into which
or for which any of the securities described in (a) or (b) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.
"Company" means and shall include Intelligroup, Inc., a New Jersey
corporation, and its successors and assigns.
"Default" shall mean an Event of Default or any event with notice or
lapse of time or both would become an Event of Default.
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<PAGE> 35
"Event of Default" shall have the meaning set forth in Section 10.1.
"GAAP" means generally accepted accounting principles, as modified from
time to time, as in effect in the United States.
"Indebtedness" means all obligations, contingent or otherwise, whether
current or long-term, which in accordance with generally accepted accounting
principles would be classified upon the obligor's balance sheet as liabilities
(other than deferred taxes) and shall also include capitalized leases,
guarantees, endorsements (other than for collection in the ordinary course of
business) or other arrangements whereby responsibility is assumed for the
obligations of others, including any agreement to purchase or otherwise acquire
the obligations of others or any agreement, contingent or otherwise, to furnish
funds for the purchase of goods, supplies or services for the purpose of payment
of the obligations of others.
"Lien" shall mean any mortgage, deed of trust, pledge, security
interest, encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction).
"Liquidity Event" shall mean any one or more of the following: (a) the
sale of all of substantially all of the assets of the Company and its
Subsidiaries on a consolidated basis, (b) merger or consolidation of the Company
with or into another Person or any transaction or series of related transactions
as a result of which those Persons who held all of the capital stock of the
Company immediately prior to such transaction or transactions failed to hold at
least a majority of the voting capital stock of the surviving or resulting
corporation immediately after giving effect thereto, (c) liquidation,
dissolution or winding up of the Company or (d) consummation of the sale of the
Company of securities pursuant to a Qualified Public Offering.
"Maturity Date" shall have the meaning set forth in Section 1.1.
"New Securities" shall have the meaning set forth in Section 6.2.
"Debentures" shall have the meaning set forth in Section 1.1.
"Officer's Certificate" shall mean a certificate signed in the name of
the Company by its President, Vice President, Treasurer or Secretary acting in
his official capacity.
"Operating Loss" shall mean as to any period the consolidated loss from
operations incurred by the Company and its Subsidiaries during such period,
determined in accordance with generally accepted accounting principles
consistently applied, but before giving effect to extraordinary gains and
losses, amortization of expenses associated with the sale of the
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<PAGE> 36
Securities, payments to Access or any successor factor, or interest payable with
respect to the Debentures.
"Operating Revenue" means the net consolidated revenue actually earned
by the Company and its Subsidiaries for the sale of goods or services after
giving effect to all discounts, returns and the like.
"Permitted Liens" shall mean: (i) Liens for taxes not yet due or
payable under law or being contested in good faith by appropriate proceedings
and for which adequate reserves have been provided; (ii) carriers',
warehouseman's, mechanics, materialmen's, repairmen's and similar Liens arising
in the ordinary course of business to secure amounts owing for the provision of
goods or services; (iii) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation; (iv)
easements, rights of way and similar encumbrances incurred in the ordinary
course of business which do not, individually or in the aggregate, materially
detract from the value of the property subject thereto or interfere with the
ordinary course of business of the Company or any Subsidiary; (v) Liens on goods
to secure the payment of the purchase price of such goods; and (vi) Liens
existing on the date hereof on equipment used in the ordinary course of business
to secure the payment of the cost of acquisition or leasing thereof.
"Person" means an individual, corporation, partnership, joint venture,
limited liability company, limited liability partnership, trust or
unincorporated organization or a government or agency or political subdivision
thereof.
"Purchasers" shall have the meaning set forth in Section 1.1.
"Qualified Public Offering" means the closing of an underwritten public
offering by the Company pursuant to a registration statement filed and declared
effective under the Act covering the offer and sale of Common Stock for the
account of the Company in which the aggregate net proceeds to the Company equal
at least $20,000,000 and, if so requested by the Purchasers, the Company's
obligations under the Debentures are paid in full.
"Related Agreements" shall have the meaning set forth in Section 3.2.
"Securities" shall have the meaning set forth in Section 1.1.
"Side Letter" shall have the meaning set forth in Section 3.8.
"Subsidiary" or "Subsidiaries" means any corporation, association or
other business entity of which the Company and/or any of its other Subsidiaries
(as herein defined) directly or indirectly owns at the time more than fifty
percent (50%) of the outstanding voting shares of every class of such
corporation or trust other than directors' qualifying shares.
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<PAGE> 37
"Warrants" shall have the meaning set forth in Section 1.1.
"Warrant Shares" shall have the meaning set forth in Section 1.1.
ARTICLE XII
MISCELLANEOUS
12.1. Debenture and Stock Payment. The Company agrees that, so long as
any Purchaser shall hold any Securities, it will make payments of principal and
Interest on any Debenture held by such Purchaser and dividends or other payments
in respect of any Warrant Shares held by such Purchaser not later than 2:00
p.m., Boston time, on the date such payment is due, in immediately available
funds, by credit to such Purchaser's account, as specified in Schedule 1 hereto,
or such other account or accounts as such Purchaser may designate in writing,
notwithstanding any contrary provision contained herein or any Security with
respect to the place of payment. Each Purchaser agrees that, before disposing of
any Debenture, it or its nominee will make a notation thereon of all principal
payments previously paid thereon and of the date to which Interest thereon has
been paid, and will notify the Company of the name and address of the transferee
of such Debenture. At the election of any subsequent holder of any Debenture
which has made the same agreements relating to such Debenture as the Purchasers
have made in this paragraph 12.1, the Company will make payments of principal
and Interest to the account of such successor holder in the same manner as set
forth above.
12.2 Form, Registration, Transfer and Exchange of Debentures. The
Debentures are issuable as registered Debentures and in denominations of not
less than $10,000 or any integral multiple thereof, all at the election of each
Purchaser. The Company shall keep at its principal office the register in which
the Company shall provide for the registration of the Debentures and for
transfers of the Debentures. Upon surrender for registration of transfer of any
Debenture at such office, the Company shall execute and deliver, at its expense,
one or more new such Debenture or Debentures of like tenor and of like aggregate
principal amount, which new Debenture or Debentures shall each be a registered
Debenture. At the option of the holder of any Debenture, such Debenture may be
exchanged for other Debentures, of any authorized denominations, of a like
aggregate principal amount, upon surrender of the Debenture to be exchanged at
the office of the Company. Whenever any Debenture is so surrendered for
exchange, the Company shall execute and deliver, at the expense of the holder of
such Debenture, the Debentures which the holder thereof making the exchange is
entitled to receive. Every Debenture presented or surrendered for registration
of transfer shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed by the holder of such Debenture or such holder's attorney
duly authorized in writing. Any Debenture issued in exchange for any Debenture
or upon transfer thereof shall carry the rights to unpaid Interest and Interest
to accrue which were carried by the Debenture so exchanged or transferred, and
neither gain nor loss of Interest shall result from any such transfer or
exchange. Upon receipt by the Company of an affidavit of the treasurer,
assistant treasurer, or other responsible official of any
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<PAGE> 38
Purchaser (or, in the case of holders of Debentures other than a Purchaser,
evidence reasonably satisfactory to the Company) of the ownership of and the
loss, theft, destruction or mutilation of a Debenture and (i) in case of loss,
theft or destruction of a Debenture by a holder other than a Purchaser, of
indemnity reasonably satisfactory to it or (ii) in the case of the mutilation of
any Debenture, upon surrender and cancellation thereof, the Company, at its
expense, shall execute and deliver in lieu thereof a new Debenture of like tenor
and of a like principal amount and dated and bearing Interest from the date to
which Interest has been paid on such lost, stolen, destroyed or mutilated
Debenture.
12.3 Survival of Representations. The representations, warranties,
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the closing of the transaction contemplated hereby.
12.4 Parties in Interest. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained in
this Agreement and the Related Agreements shall be binding on and shall inure to
the benefit of the respective successors and assigns of the parties hereto
(including transferees of any of the Securities). The parties agree to maintain
in confidence the terms of the purchase of the Securities hereunder, except that
the Purchasers may disclose such terms to their investors, attorneys,
accountants, potential lenders and others in receipt of their financial
statements for legitimate business purposes in the ordinary course and except
that the Company may disclose such terms to its shareholders, attorneys,
accountants, potential lenders and others in receipt of their financial
statements for legitimate business purposes in the ordinary course.
12.5 Securities Owned by Affiliates. For the purposes of applying all
provisions of this Agreement which condition the receipt of information or
access to information or exercise of any rights upon ownership of a specified
number or percentage of shares or Debentures, the shares and Debentures owned of
record by any affiliate of a Purchaser shall be deemed to be owned by such
Purchaser. For the purposes of this Agreement, the term "affiliate" shall mean
any Person controlling, controlled by, or under common control with, a Purchaser
and any general or limited partner of a Purchaser. Without limiting the
foregoing, each Purchaser shall be considered an affiliate of each other
Purchaser.
12.6 Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, (A) in respect of the Debentures issued
hereunder only if the Company shall have obtained the written consent to such
amendment, action or omission to act, of the holder or holders of not less than
a majority in aggregate principal amount of the Debentures at the time
outstanding and each holder of any Debenture at the time or thereafter
outstanding shall be bound by any consent authorized by this Section 12.6,
whether or not such Debenture shall have been marked to indicate such consent,
but any Debenture issued thereafter shall contain a reference or bear a notation
referring to any such consent; provided that notwithstanding
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<PAGE> 39
anything in this Section 12.6 to the contrary, without the written consent of
(a) the holder or holders of all Debentures at the time outstanding, no consent,
amendment or waiver to or under this Agreement shall extend or reduce the
maturity of any Debenture, or reduce the rate or affect the time of payment of
Interest with respect to any Debenture, or affect the time, amount or allocation
of any required prepayments, or reduce the proportion of the principal amount of
the Debentures required with respect to any consent, amendment or waiver, and
(b) the holder or holders of all Debentures at the time outstanding, no
amendment to this Agreement shall affect the provisions of Article VIII; and (B)
in respect of the rights accorded to holders of the Warrants and Warrant Shares
issued hereunder, if the Company shall have received the written consent of the
holder or holders of a majority of the issued or issuable Warrant Shares. The
Company shall promptly send copies of any amendment, consent or waiver (and any
requests for any such amendment, consent or waiver) relating to this Agreement
or the Securities to each Purchaser and each other holder of the Securities and,
to the extent practicable, shall consult with each Purchaser and each other
holder of the Securities, in connection with each such amendment, consent and
waiver. No course of dealing between the Company and the holder of any of the
Securities nor any delay in exercise any rights hereunder or any of the
Securities shall operate as a waiver of any rights of any holder of such
Securities.
12.7 Notices. All notices, requests, consents, reports and demands
shall be in writing and shall be hand delivered, sent by facsimile or other
electronic medium, mailed, postage prepaid, or delivered by any delivery service
for which proof of delivery is available, to the Company or to the Purchasers at
the address set forth below or to such other address as may be furnished in
writing to the other parties hereto:
The Company: Intelligroup, Inc.
5 Lincoln Highway, Suite 4
Edison, New Jersey 08818
Attention: President
with copy to: Spadoro & Hilson
90 Woodbridge Center Drive, Suite 610
Woodbridge, NJ 07075
Attention: Arthur T. Hilson, Esquire
The Purchasers: The address set forth opposite the Purchaser's name
on Schedule 1 attached hereto.
with copy to: Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attention: James Westra, Esquire
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<PAGE> 40
12.8 Expenses. The Company agrees, in the event that the transactions
hereby contemplated shall be consummated, to pay up to a maximum of an aggregate
of $50,000, and save the Purchasers harmless against liability (up to the
$50,000 maximum) for the payment of, all out-of-pocket expenses arising in
connection with this Agreement, the Securities being purchased hereunder and the
Related Agreements and the transactions hereby and thereby contemplated,
including, without limitation, (i) all costs and expenses of the Purchasers
incurred in connection with the investigation, preparation, execution and
delivery of such agreements or instruments, or the transactions contemplated
hereby or thereby (and due diligence related thereto) (ii) all document
production and duplication charges, (iii) all reasonable fees and expenses of
any counsel engaged by the Purchasers in connection with such agreements or
instruments, or the transactions contemplated hereby or thereby, and any
subsequent proposed modification of, or proposed consent under, such agreements
or instruments, whether or not such proposed modification shall be effected or
proposed consent granted, (iv) all such expenses, including reasonable
attorney's fees and expenses, incurred by the Purchasers with respect to the
enforcement of any rights or provisions of any such agreement or instrument,
including without limitation, costs and expenses in any bankruptcy case, and (v)
all expenses incurred in connection with the printing of such agreements and
instruments and all taxes which may be payable in respect of the execution and
delivery of such agreements or instruments, or the issuance, delivery or
purchase by the Purchasers of any of the Securities. The Company further agrees
to indemnify and save harmless the Purchasers and each of their respective
partners, officers, directors, employees and agents from and against any and all
actions, causes of action, suits, losses, liabilities and damages, and expenses
(including, without limitation, reasonable attorney's fees and disbursements in
connection therewith (herein called the "indemnified liabilities") incurred by
the Purchasers or any of their respective partners, officers, directors,
employees or agents as a result of, or arising out of, or relating to any of the
transactions contemplated hereby or by the Related Agreements, except for any
indemnified liabilities arising on account of the gross negligence or willful
misconduct of the Purchasers of any of their respective partners, officers,
directors, employees, or agents; provided that, if and to the extent such
agreement to indemnify may be unenforceable for any reason, the Company shall
make the maximum contribution to the payment and satisfaction of each of the
indemnified liabilities which shall be permissible under applicable law. The
obligations of the Company under this Section 12.8 shall survive the transfer of
any of the Securities.
12.9 Counterparts. This Agreement and any exhibit hereto may be executed
in multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more counterparts
of this Agreement or any exhibit hereto may be delivered via telecopier, with
the intention that they shall have the same effect as an original counterpart
hereof.
12.10 Effect of Headings. The article and section headings herein are
for convenience only and shall not affect the construction hereof.
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<PAGE> 41
12.11 Adjustments. All provisions of this Agreement shall be
automatically adjusted to reflect any stock dividend, stock split or other such
form of recapitalization.
12.12 Future Issuances. Until the consummation of a Qualified Public
Offering, all securities of the Company hereafter acquired by the Purchasers,
shall be granted the same rights and privileges afforded the Purchasers under
this Agreement and the Related Agreements.
12.13 Governing Law. This Agreement shall be deemed a contract made
under the laws of the Commonwealth of Massachusetts and together with the rights
and obligations of the parties hereunder, shall be construed under and governed
by the laws of such Commonwealth.
[The remainder of this page intentionally left blank.]
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<PAGE> 42
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon, this letter shall become a binding agreement among us.
Very truly yours,
INTELLIGROUP, INC.
By:_____________________________________
Name: Ashok Pandey
Title: President
PRINCIPAL SHAREHOLDERS:
________________________________________
Ashok Pandey
________________________________________
Rajkumar Koneru
________________________________________
Nagarjun Valluripalli
PURCHASERS
SUMMIT VENTURES IV, L.P.
By: Summit Partners, IV, L.P.,
Its General Partner
By: Stamps, Woodsum & Co. IV,
Its General Partner
By:_____________________________________
General Partner
SUMMIT INVESTORS III, L.P.
By:_____________________________________
Authorized Signatory
<PAGE> 43
Schedule 1
<TABLE>
<CAPTION>
Aggregate
Principal Amount Number of Purchase Price
Name of Purchaser of Debentures Warrant Shares of Securities
- ----------------- ---------------- -------------- --------------
<S> <C> <C> <C>
Summit Ventures IV, L.P. 5,700,000 22.45454 $5,700,000
Suite 2800
600 Atlantic Avenue
Boston, MA 02210
Attn: Cynthia R. Freedman
Bank Account Information
Wells Fargo Bank
111 Sutter Street, MAC 0188-112
San Francisco, CA 94163-5094
ABA# 121-000-248
WFB Deposits # 068
A/C # 9068507201
For Further Credit to Acc.
#324-141865-Summit Ventures IV
Attn: Mr. John Vasconcellos
Summit Investors III, L.P. 300,000 1.18182 $300,000
Suite 2800
600 Atlantic Avenue
Boston, MA 02210
Attn: Cynthia R. Freedman
Bank Account Information:
Boston Safe Deposit & Trust Co.
One Boston Place
Boston, MA 02108
ABA# 0110-01234
Acc.# 05-942-0
Attn: Brian Gregory
--------- -------- ----------
TOTAL: 6,000,000 23.63636 $6,000,000
</TABLE>
<PAGE> 1
Exhibit 4.2
EXECUTION COPY
INTELLIGROUP, INC.
WARRANT AGREEMENT
DATED AS OF APRIL 10, 1996
WARRANT AGREEMENT dated as of the 10th day of April, 1996 (the
"Effective Date") between Intelligroup, Inc., a New Jersey corporation (the
"Company"), and the entities listed on Schedule 1 attached hereto (collectively,
together with transferees permitted herein, the "Holders").
The Company proposes to issue to the Holders warrants (the "Warrants")
to purchase, in the aggregate, an initial total of 23.63636 shares of the
Company's Common Stock, no par value, at a price equal to $.01 per share (the
"Common Stock"), which shall initially constitute 20.8% of the Fully Diluted
Shares (as defined herein) of Common Stock of the Company, subject to
adjustments as herein provided, (the "Warrant Shares"). The Warrants are being
issued pursuant to a Debenture and Warrant Purchase Agreement dated as of April
10th, 1996 (the "Purchase Agreement"); Terms used as defined terms herein and
not otherwise defined shall have the meanings set forth in the Purchase
Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein set forth and for other good and valuable consideration, the
parties hereto agree as follows:
1. Issuance of Warrants; Form of Warrants. The Company has issued and
is delivering to each Holder a Warrant to purchase the initial number of shares
of Common Stock as shown on Schedule 1 attached hereto. The Warrants have been
executed and delivered on this date in connection with a Debenture and Warrant
Purchase Agreement dated as of April 10th, 1996 (the "Purchase Agreement") by
and among the Company, the Holders, Ashok Pandey, Rajkumar Koneru and Nagarjun
Valluripalli. The text of the Warrants and of the election to purchase shares to
be attached thereto shall be substantially in the form of Exhibit A hereto. The
Warrants will be executed on behalf of the Company by the manual or facsimile
signature of the President or Vice President of the Company, under its corporate
seal affixed or in facsimile, attested by the Secretary or an Assistant
Secretary of the Company. Terms used as defined terms herein and not otherwise
defined shall have the meanings set forth in the Purchase Agreement.
2. Registration. The Warrants, together with any additional Warrants
which may be issued upon partial exercise, replacement or transfer of the
original Warrants, shall be numbered and shall be registered in a Warrant
Register as they are issued. The Company shall be entitled to treat the
registered Holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person other
than the record holder.
<PAGE> 2
The Warrants may not be transferred except in accordance with Section
9. Any Warrant to be transferred may be transferred or endorsed to another party
by giving notice thereof to the Company at its principal office and, if a new
Warrant is requested in connection with such transfer, by surrender thereof for
cancellation, endorsed or accompanied by a written instrument of transfer, in
form satisfactory to the Company, duly executed by the Holder thereof in person
or by its duly authorized representative, or by its agent or attorney-in-fact
duly appointed in writing. Upon receipt thereof, the Company will issue and
deliver, in the name of the transferee or transferees, a new Warrant on like
terms.
3. Reduction of Common Stock Ownership. In the event that on or before
April 10, 1997, the Company consummates a Qualified Public Offering (by which
term it is meant that the Company receives the proceeds thereof), as such term
is defined in the Purchase Agreement, and the Pre-Money Valuation (as defined
herein) of the Company immediately prior to such consummation exceeds
$50,000,000, then the number of Warrant Shares shall be reduced as provided by
this Section 3. On the Closing Date, after giving effect to the transactions set
forth in the Purchase Agreement, the Warrants shall be exercisable for an
aggregate of 23.63636 shares of Common Stock, representing 20.8% of the Full
Diluted Shares of Common Stock. The term Fully Diluted Shares shall mean the sum
of (i) ninety (90) shares that being the number of shares of Common Stock
outstanding, after giving effect to the redemption of Shares from the Principal
Shareholders in accordance with Section 1.5 of the Purchase Agreement; and (ii)
those shares of Common Stock issuable upon exercise of the Warrants, but
excluding the shares of Common Stock issuable upon exercise of options granted
pursuant to Section 5.8 of the Purchase Agreement. If the Company consummates a
Qualified Public Offering on or before April 10, 1997, and the Pre-Money
Valuation of the Company immediately prior to such consummation exceeds
$50,000,000, then the aggregate number of Warrant Shares shall be reduced, on a
straight line interpolation basis, such that the aggregate number of Warrant
Shares which would be issuable upon exercise of the Warrants if such Pre-Money
Valuation were $120,000,000 shall be equal to 11.0% of the Fully Diluted Shares
of Common Stock. By way of illustration, and not by way of limitation, if the
Pre-Money Valuation of the Company immediately prior to consummation of a
Qualified Public Offering were $100,000,000, then the number of Warrant Shares
issuable would be reduced to equal 13.8% of the Fully Diluted Shares of Common
Stock, or 14.40835 shares. No further reduction shall be made to reflect
Pre-Money Valuation in excess of $120,000,000. Any adjustment number shall be
made after giving effect to other adjustments required under this Warrant
Agreement. If the Company has not consummated a Qualified Public Offering on or
before April 10, 1997, no adjustment shall be made under this Section 3. The
Pre-Money Valuation of the Company shall mean an amount equal to the product of
the number of shares and Common Stock actually outstanding immediately prior to
consummation of a Qualified Public Offering, and the price at which shares of
Common Stock are sold to the public in such Qualified Public Offering.
4. Term of Warrants; Exercise of Warrants.
2
<PAGE> 3
(a) Each Warrant entitles the registered Holder to purchase
from the Company shares of Common Stock at a purchase price per share of $.01,
subject to adjustment as herein provided (the "Exercise Price"). Each Warrant
may be exercised in whole or in part, from time to time, on and after the
earlier to occur of (i) April 10, 1997, (ii) the consummation of an underwritten
public offering of equity securities of the Company (a "Public Offering"), (iii)
the merger or consolidation of the Company with any Person (other than a merger
of a wholly owned Subsidiary into the Company), or the sale or other disposition
of more than fifty percent (50%) of the Company's properties and assets to any
Person, or the transfer of ownership of any voting shares of the Company to any
Person as a consequence of which those Persons who held all of the voting shares
of the Company immediately prior to such transfer do not hold a majority of the
voting shares of the Company after the consummation of such transfer (the
"Control Sale"), and (iv) the occurrence of a Default or an Event of Default
under the provisions of the Purchase Agreement which shall not have been cured
or waived within 30 days after written notice thereof shall have been received
by the Company from the holders of the Warrants, and on or before 5:00 p.m.
Eastern Standard Time on April 10, 2002 (the "Expiration Date"). The number of
shares issuable upon exercise of the Warrant and the Exercise Price are subject
to adjustment as provided in the Warrant Agreement described herein. The Warrant
shall be exercisable upon presentation and surrender of this Warrant Certificate
with the Form of Election to Purchase duly executed. This Warrant may be
exercised in whole or in part, but after exercise this Warrant shall be canceled
as to any remaining shares as to which it has not been exercised and a new
Warrant Certificate for any remaining shares shall be issued.
(b) The initial Exercise Price and the number of Warrant
Shares shall be adjusted as provided in Section 5 hereof.
(c) Subject to the provisions of this Agreement, the
registered Holder of each Warrant shall have the right, which may be exercised
in whole or in part, to purchase from the Company (and the Company shall issue
and sell to such registered Holder of the Warrant) the number of fully paid and
non-assessable shares of Common Stock evidenced by the Warrant, upon surrender
to the Company, or its duly authorized agent, of the Warrant, with the form of
election to purchase attached thereto duly completed and signed, and upon
payment to the Company of the Exercise Price in full. The Exercise Price may be
funded, at the option of the Holder, in any of the following methods: (i) by
paying the Exercise Price in cash; (ii) by transferring to the Company shares of
any class or series of capital stock of the Company then held by the Holder with
a fair market value equal to the Exercise Price; and/or (iii) by canceling a
number of the Warrant Shares covered hereby, which, when multiplied by the fair
market value thereof, equals the Exercise Price multiplied by the number of
shares as to which such Warrant is then being exercised. In the event that the
Holder shall elect to exercise this Warrant concurrently with the payment in
full of the Company's 9% Subordinated Debentures due April 10, 2001 held by the
Holder (the "Debentures"), in addition to funding the Exercise Price in the
manner provided in clauses (i), (ii) and (iii) above, the Holder may, at its
option, elect to fund the Exercise Price by tendering to the Company for
cancellation an equivalent face amount of the Debentures held by the Holder.
3
<PAGE> 4
(d) For purposes of this Agreement, fair market value means as
to any security the average of the closing prices of such security's sales on
all domestic securities exchanges on which such security may at the time be
listed, or if there have been no sales on any such exchange on any day, the
average of the highest bid and the lowest asked prices on all such exchanges at
the end of such day, or, if on any day such security is not so listed, the
average of the representative bid and asked prices quoted in the NASDAQ System
as of 4:00 P.M., New York time, on such day, or, if on any day such security is
not quoted in the NASDAQ System, the average of the high and low bid and asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which fair market value is being determined and the 20 consecutive business days
prior to such day; provided that if such security is listed on any domestic
securities exchange the term "business days" as used in this sentence means
business days on which such exchange is open for trading. If at any time such
security is not listed on any domestic securities exchange or quoted in the
NASDAQ System or the domestic over-the-counter market, the fair market value
will be the fair value thereof determined jointly by the Company and the holders
of Warrants representing at least 75% of the Common Stock purchasable upon the
exercise of all the Warrants then outstanding; provided that if such parties are
unable to reach agreement, such fair value will be determined (which
determination shall be final and binding upon the Company and the Holders) by an
appraiser jointly selected by the Company and the holders of Warrants
representing at least 75% of the Common Stock purchasable upon the exercise of
all the Warrants then outstanding, the fees and expenses of which shall be paid
one half by the Company and one half by the holders requesting such appraisal.
(e) Upon surrender of the Warrant and payment of the Exercise
Price as aforesaid, the Company shall issue and cause to be delivered with all
reasonable dispatch to or upon the written order of the registered Holder of the
Warrant and (subject to receipt of evidence of compliance with the Act in
accordance with the provisions of Section 9 of this Agreement) in such name or
names as such registered Holder may designate, a certificate or certificates for
the number of shares of stock so purchased upon the exercise of the Warrant.
Such certificate or certificates shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become a holder
of record of such shares as of the date of the surrender of the Warrant and
payment of the Exercise Price as aforesaid. If, at the date of surrender of a
Warrant and payment of such Exercise Price, the transfer books for the Common
Stock, shall be closed, the certificates for the shares in respect of which the
Warrant is then exercised shall be issuable as of the date on which such books
shall next be opened (whether before, on or after the Expiration Date) and until
such date the Company shall be under no duty to deliver any certificate for such
shares; provided, however, that the transfer books shall not be closed at any
one time for a period longer than forty-eight (48) hours unless otherwise
required by law.
4
<PAGE> 5
5. Adjustment to Exercise Price. In order to prevent dilution of the
rights granted under the Warrant, the Exercise Price will be subject to
adjustment from time to time pursuant to this Section 5.
(i) Upon Extraordinary Common Stock Event. Upon the happening of an
Extraordinary Common Stock Event (as hereinafter defined), the Exercise Price
(and all other conversion values set forth in paragraph 4(a) above) shall,
simultaneously with the happening of such Extraordinary Common Stock Event, be
adjusted by multiplying the then applicable Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Extraordinary Common Stock Event and the denominator
of which shall be the number of shares of Common Stock outstanding immediately
after such Extraordinary Common Stock Event, and the product so obtained shall
thereafter be the Exercise Price. The Exercise Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive Extraordinary
Common Stock Event or Events. Extraordinary Common Stock Event" shall mean (i)
the issue of additional shares of Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) a subdivision of outstanding
shares of Common Stock into a greater number of shares of Common Stock, or (iii)
a combination of outstanding shares of the Common Stock into a smaller number of
shares of Common Stock.
(ii) Capital Reorganization or Reclassification. If the Common Stock
issuable upon exercise of the Warrants shall be changed into the same or
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend provided for elsewhere in this Section
5), then and in each such event the holder of each Warrant shall have the right
thereafter to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification or
other change by holders of the number of shares of Common Stock for which such
Warrant might have been exercised immediately prior to such reorganization,
reclassification or change, all subject to further adjustment as provided
herein.
(iii) Capital Reorganization, Merger or Sale of Assets. If at any time
or from time to time prior to the Expiration Date there shall be a capital
reorganization of the Common Stock (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this Section 5)
or a merger or consolidation of the Company with or into another corporation, or
the sale of all or substantially all of the Company's properties and assets to
any other person, then, as a part of such reorganization, merger, or
consolidation or sale, provision shall be made so that the holders of the
Warrants shall thereafter be entitled to receive upon exercise of the Warrants,
the number of shares of stock or other securities or property of the Company, or
of the successor corporation resulting from such merger, consolidation or sale,
to which such holder would have been entitled if such holder had exercised its
Warrants immediately prior to such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Section 5 with respect to the
rights of the holders of the Warrants after the reorganization, merger,
5
<PAGE> 6
consolidation or sale to the end that the provisions of this Section 5
(including adjustment of the Exercise Price then in effect and the number of
shares issuable upon exercise of the Warrants) shall be applicable after that
event in as nearly equivalent a manner as may be practicable.
(iv) Adjustment of Number of Shares Issuable Upon Exercise. Upon each
adjustment of the Exercise Price pursuant to this Section 5, the Holder of the
Warrant shall thereafter (until another such adjustment) be entitled to
purchase, at the adjusted Exercise Price in effect on the date this Warrant is
exercised, the number of shares of Common Stock determined by (a) multiplying
the number of shares of Common Stock purchasable under the Warrant immediately
prior to the adjustment of the Exercise Price by the Exercise Price in effect
immediately prior to such adjustment, and (b) dividing the product so obtained
by the adjusted Exercise Price in effect on the date of such exercise.
6. Mutilated or Missing Warrant. If a Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue and deliver in lieu of and
substitution for the Warrant so mutilated, lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent right or interest; but only
upon receipt of evidence reasonably satisfactory to the Company of such
mutilation, loss, theft or destruction of such Warrant and indemnity or other
security, if requested, also reasonably satisfactory to the Company. An
applicant for a substitute Warrant shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
7. Reservation of Common Stock, etc. There have been reserved, and the
Company shall at all times reserve as long as the Warrants remain outstanding,
out of the authorized and unissued shares of Common Stock, a number of shares
sufficient to provide for the exercise of the rights of purchase represented by
each Warrant. Subject to the provisions of this Agreement, the Warrant, when
surrendered on the exercise of the rights thereby evidenced, shall be canceled,
and the form of election to purchase attached to such canceled Warrant, as
completed and signed by the registered Holder thereof, shall constitute
sufficient evidence of the number of shares of stock which have been issued upon
the exercise of the Warrant. Subsequent to the Expiration Date, no shares of
stock need be reserved in respect of the Warrants.
8. Fractional Interests. The Company shall issue fractions of shares of
Common Stock on the exercise of any Warrant to the extent required.
9. Absence of Registration. Neither the Warrants nor the shares of
Common Stock issuable upon exercise of the Warrants have been registered under
the Act. Each Holder represents and warrants to the Company that it will not
dispose of the Warrant or such shares except to an affiliate or pursuant to (i)
a registration statement filed under the Act or (ii) an opinion of counsel,
reasonably satisfactory to counsel for the Company, that such registration is
not required under the Act.
6
<PAGE> 7
10. Certificates to Bear Legends. The Warrants and the shares of Common
Stock issuable upon exercise of the Warrants shall be subject to a stop transfer
order and the certificate or certificates therefor shall bear the following
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE, AND MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED
FOR SALE OR SOLD EXCEPT PURSUANT TO A REGISTRATION UNDER SAID ACT AND
LAWS OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR
THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND
LAWS.
11. Rights as Shareholder. The Holders shall have any and all rights
held by any shareholder of the Company, as if the Warrant Shares were converted
to Common Stock, to vote on any and all matters affecting the value of the
Warrant Shares or the Debentures, including, but not limited to, a Liquidity
Event or an Extraordinary Common Stock Event.
12. Notices. Any Notice pursuant to this Agreement to be given or made
by the registered Holders of the Warrants to the Company shall be sufficiently
given or made if delivered by hand, transmitted by telex or telecopy, sent by
first-class mail, postage prepaid, or delivered by any delivery service for
which proof of delivery is available, addressed as follows:
Intelligroup, Inc.
5 Lincoln Highway, Suite 4
Edison, New Jersey 08818
Attention: President
Notices or demand authorized by this Agreement to be given or made by the
Company to the registered Holder of any Warrant shall be sufficiently given or
made (except as otherwise provided in this Agreement) if delivered by hand,
transmitted by telex or telecopy or sent by first-class mail, postage prepaid,
to the addresses shown on Schedule 1, or to such other address of each Holder or
subsequent Holders as shown on the Warrant Register.
13. Binding Effect; Survival. This Agreement shall survive the exercise
of the Warrant and shall be binding upon the Company and its successors and
assigns and shall be binding upon and inure to the benefit of each Holder of the
Warrants and each holder of shares of Common Stock issued upon exercise of the
Warrants.
7
<PAGE> 8
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts or, if different,
the laws of such other jurisdiction as may be applicable to the issuance of the
Warrants.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day, month and year first above written.
INTELLIGROUP, INC.
By:
-------------------------------------
Name: Ashok Pandey
Title: President
SUMMIT VENTURES IV, L.P.
By: Summit Partners IV, L.P.
General Partner
By: Stamps, Woodsum & Co., IV
General Partner
By:
-------------------------------------
General Partner
SUMMIT INVESTORS III, L.P.
By:
-------------------------------------
Authorized Signatory
9
<PAGE> 10
SCHEDULE 1
INTELLIGROUP, INC.
List of Holders
<TABLE>
<CAPTION>
Initial Number of
Shares to be Issued on
Name and Address of Purchaser Exercise of Warrants
----------------------------- ----------------------
<S> <C>
Summit Ventures IV, L.P. 22.45454
Suite 2800
600 Atlantic Avenue
Boston, MA 02210
Summit Investors III, L.P. 1.18182
Suite 2800
600 Atlantic Avenue
Boston, MA 02210
TOTAL: 23.63636
</TABLE>
<PAGE> 11
EXHIBIT A
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED FOR SALE OR SOLD EXCEPT
PURSUANT TO A REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS OR AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND LAWS.
THE TRANSFER OR EXCHANGE OF THIS WARRANT MUST BE REGISTERED IN ACCORDANCE WITH
THE WARRANT AGREEMENT REFERRED TO HEREIN.
NO. Initial Number of Shares
Subject to Purchase Upon
Exercise of Warrant:___
----------------------------
VOID AFTER 5:00 P.M. EASTERN STANDARD
TIME ON April 10, 2002
INTELLIGROUP, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received, [name of Holder], or its
registered assigns, is the owner of a Warrant which entitles the owner thereof
to purchase at any time on and after the earlier to occur of (i) April 10, 1997,
(ii) the consummation of an underwritten public offering of equity securities of
the Company (a "Public Offering"), (iii) the merger or consolidation of the
Company with any Person (other than a merger of a wholly owned Subsidiary into
the Company), or the sale or other disposition of more than fifty percent of the
Company's properties and assets to any Person, or the transfer of ownership of
any voting shares of the Company to any Person as a consequence of which those
Persons who held all of the voting shares of the Company immediately prior to
such transfer do not hold a majority of the
<PAGE> 12
voting shares of the Company after the consummation of such transfer (the
"Control Sale"), and (iv) the occurrence of a Default or an Event of Default
under the provisions of the Purchase Agreement which shall not have been cured
or waived within 30 days after written notice thereof shall have been received
by the Company from the holders of the Warrants, and on or before 5:00 p.m.
Eastern Standard Time on April 10, 2002 (the "Expiration Date"), [initial number
of shares] fully paid and nonassessable shares of the Common Stock, no par value
per share (the "Common Stock"), of Intelligroup, Inc., a New Jersey corporation
(the "Company"), at the initial purchase price per share of $.01 (the "Exercise
Price"). The number of shares issuable upon exercise of the Warrant and the
Exercise Price are subject to adjustment as provided in the Warrant Agreement
described herein. The Warrant shall be exercisable upon presentation and
surrender of this Warrant Certificate with the Form of Election to Purchase duly
executed. This Warrant may be exercised in whole or in part, but after exercise
this Warrant shall be canceled as to any remaining shares as to which it has not
been exercised and a new Warrant Certificate for any remaining shares shall be
issued.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of a Debenture and Warrant
Agreement dated as of April 10, 1996 (the "Warrant Agreement") among the Company
and the original holder hereof, which Warrant Agreement is hereby incorporated
herein by reference and made a part hereof and to which Warrant Agreement
reference is hereby made for a full description of the rights, limitation of
rights, obligations, duties and immunities hereunder of the Company and the
holder of this Warrant Certificate. Terms used as defined terms herein and not
otherwise defined shall have the meanings set forth in the Warrant Agreement.
Copies of the Warrant Agreement are on file at the principal office of the
Company.
Subject to the terms of the Warrant Agreement, this Warrant
Certificate, upon surrender at the principal office of the Company, may be
exchanged for another Warrant Certificate or Warrant Certificates of like tenor
and date evidencing Warrants entitling the holder to purchase a like aggregate
number of shares of Common Stock as the Warrants evidenced by the Warrant
Certificate or Warrant Certificates surrendered entitled such holder to
purchase.
To the extent required, fractional shares of Common Stock will be
issued upon the exercise of any Warrant evidenced hereby, as provided in the
Warrant Agreement.
The holder of this Warrant Certificate shall have any and all rights
held by any Shareholder of the Company, as if the Warrant Shares were converted
to Common Stock, to vote on any and all matters affecting the value of the
Warrant Shares and the Debentures, including, but not limited to, a Liquidity
Event or an Extraordinary Common Stock Event.
If this Warrant Certificate shall be surrendered for exercise within
any period during which the transfer books for the Company's Common Stock are
closed for any purpose, the Company shall not be required to make delivery of
certificates for shares purchasable upon such exercise until the date of the
reopening of said transfer books.
<PAGE> 13
IN WITNESS WHEREOF, Intelligroup, Inc. has caused the signature (or
facsimile signature) of its President and Assistant Secretary to be printed
hereon and its corporate seal (or facsimile) to be printed hereon.
INTELLIGROUP, INC.
By:
----------------------------------
President
Attest:
- ------------------------------------
Assistant Secretary
<PAGE> 14
FORM OF ELECTION TO PURCHASE
To be executed if holder desires to exercise the Warrant Certificate.
TO INTELLIGROUP, INC.:
The undersigned hereby irrevocably elects to exercise the Warrant
represented by this Warrant Certificate to purchase shares of Common Stock of
Intelligroup, Inc. issuable upon the exercise of such Warrant and requests that
certificates of such shares be issued in the name of:
---------------------------------
Name
---------------------------------
Address
---------------------------------
Federal Identification Number
<PAGE> 1
Exhibit 4.3
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, made as of the 10th day of April, 1996, by and among
INTELLIGROUP, INC., a New Jersey corporation (the "Company"), and those persons
set forth on Schedule I as Investors (each an "Investor" and collectively the
"Investors").
WHEREAS, the Investors are acquiring warrants (the "Warrants") to
purchase an aggregate of 23.63636 shares of Common Stock of the Company, no par
value, at a price per share equal to $.01 (the "Common Stock"), which shall
initially constitute 20.8% of the Company's fully diluted capital stock,
pursuant to the terms of a Debenture and Warrant Purchase Agreement dated the
date hereof among the Company, the Investors, Ashok Pandey, Rajkumar Koneru and
Nagarjun Valluripalli (the "Purchase Agreement"); and
WHEREAS, it is a condition to the obligations of the Investors under
the Purchase Agreement that this Agreement be executed by the parties hereto,
and the parties are willing to execute this Agreement and to be bound by the
provisions hereof;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Act" means the Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"Commission" means the Securities and Exchange Commission, or any other
Federal agency at the time administering the Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Holder" means the person who is then the record owner of Registrable
Securities which have not been sold to the public.
"Initiating Holders" means any Investors and their assignees who in the
aggregate are holders of at least twenty-five percent (25%) of the outstanding
Registrable Securities.
<PAGE> 2
"Registrable Securities" means (i) all shares of Common Stock now owned
or hereafter acquired by any Investor; (ii) all shares of Common Stock issuable
with respect to securities of the Company convertible into or exercisable for
shares of Common Stock now owned or hereafter acquired by any Investor,
including, without limitation, the Warrants (provided, however, that the
Warrants themselves shall not constitute Registerable Securities); and (iii) any
Common Stock issued in respect of the shares described in clauses (i) through
(ii) upon any stock split, stock dividend, recapitalization or other similar
event.
The terms "register" means to register under the Act and applicable
state securities laws for the purpose of effecting a public sale of securities.
"Registration Expenses" means all expenses incurred by the Company in
compliance with Sections 2, 3 or 5 hereof, including, without limitation, all
registration and filing fees, printing expenses, transfer taxes, fees and
disbursements of counsel and accountants for the Company, blue sky fees and
expenses, fees of transfer agents and registrars, reasonable fees and
disbursements of one counsel for all the selling Holders (not to exceed
$15,000), and the expense of any special audits incident to or required by any
registration initated by the Company.
"Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
2. Requested Registrations.
(a) Commencing six (6) months after consummation of the
initial sale of securities of the Company pursuant to a registration statement
filed under the Act, if on any two occasions, the Company shall receive from one
or more Initiating Holders a written request that the Company effect the
registration of Registrable Securities representing at least twenty five percent
(25%) of the Registrable Securities then outstanding or issuable (or any lesser
percentage if the reasonably anticipated aggregate price to the public of the
Registrable Securities to be included in such registration would exceed $5
million), in connection with a firm commitment underwriting managed by a
nationally recognized underwriter, the Company will:
(i) promptly give written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, use all commercially reasonable
efforts to effect such registration as may be so requested and as would
permit or facilitate the sale and distribution of such portion of such
Registrable Securities as are specified in such request, together with
such portion of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request given
within thirty days after receipt of such written notice from the
Company. If the underwriter managing the offering advises the Holders
who have requested inclusion of their Registrable Securities in such
registration that marketing considerations require a limitation on the
number of shares
2
<PAGE> 3
offered, such limitation shall be imposed pro rata among such Holders
who requested inclusion of Registrable Securities in such registration
according to the number of Registrable Securities each such Holder
requested to be included in such registration. Neither the Company nor
any other shareholder may include shares in a registration effected
under this Section 2 without the consent of the Holders holding a
majority of the Registrable Securities sought to be included in such
registration if the inclusion of shares by the Company or the other
shareholders would limit the number of Registrable Securities sought to
be included by the Holders or reduce the offering price thereof. The
Company may include shares in any registration requested by the Holders
if such inclusion of such shares would not limit the number of
Registrable Securities sought to be included by the Holders or reduce
the offering price thereof; provided that if the number of shares
included by the Company exceeds the number included by the Holders,
then such registration shall be deemed to have been affected under
Section 3 hereof and shall not count as one of the two registrations
which may be requested by the Holders under this Section 2. No
registration initiated by the Holders hereunder shall count as a
registration under this Section 2 unless and until it shall have been
declared effective. No two registrations requested under this Section 2
may be requested within a period of twelve (12) consecutive months.
(b) Selection of Underwriter. The underwriter of any
underwriting requested under this Section 2 shall be selected by the Holders
holding a majority of the Registrable Securities included therein; provided that
the selection of such underwriter is subject to the reasonable satisfaction of
the Company.
3. "Piggy Back" Registrations.
(a) If the Company shall determine to register any of its
securities, either for its own account or the account of a security holder or
holders exercising their registration rights, other than a registration relating
solely to employee benefit plans, or a registration on any registration form
which does not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company will:
(i) Promptly give to each Holder of Registrable Securities
written notice thereof (which shall include the number of shares the
Company or other security holder proposes to register and, if known,
the name of the proposed underwriter); and
(ii) Use its best efforts to include in such registration all
the Registrable Securities specified in a written request or requests,
made by any Holder within twenty (20) days after the date of delivery
of the written notice from the Company described in clause (i) above.
If the underwriter advises the Company that marketing considerations
require a limitation on the number of shares offered pursuant to any
registration statement, then the Company may offer all of the
securities it proposes to register for its
3
<PAGE> 4
own account and such limitation on any remaining securities that may,
in the opinion of the underwriter, be sold will be imposed pro rata
among all shareholders who are entitled to include shares in such
registration based on the number of securities which each of them
requested to be included in such registration.
(b) The Company shall select the underwriter for an offering
made pursuant to this Section 3; provided that such underwriter must be
reasonably acceptable to the Holders of a majority of the Registrable Securities
being registered in such offering.
4. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 2, 3, or 5 shall be paid by the Company; provided that if in connection
with a registration requested under Section 2 the Company is required to obtain
an audit of its financial statements other than as of its fiscal year end, the
fees and expenses of the Company's accountants incurred in connection with such
audit shall be borne by the Holders who requested such registration. All Selling
Expenses incurred in connection with any such registration, qualification or
compliance shall be borne by the holders of the securities registered, pro rata
on the basis of the number of their shares so registered.
5. Registration on Form S-3. The Company shall use its best efforts to
qualify for registration on Form S-3 or any comparable or successor form; and to
that end the Company shall register (whether or not required by law to do so)
the Common Stock under the Exchange Act in accordance with the provisions of the
Exchange Act following the effective date of the first registration of any
securities of the Company on Form S-l or any comparable or successor form. After
the Company has qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of this Agreement, the Holders of
Registrable Securities shall have the right to request registrations on Form S-3
(such requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of disposition
of such shares by such Holder or Holders), provided that the Company shall not
be obligated to effect any such registration pursuant to this Section 5 more
than once in any six month period, and in no event shall the Company be required
to register shares with an aggregate market value of less than $1,000,000.
6. Registration Procedures. In the case of each registration effected
by the Company pursuant to this Agreement, the Company will keep each Holder of
Registrable Securities included in such registration advised in writing as to
the initiation of each registration and as to the completion thereof. At its
expense, the Company will do the following for the benefit of such Holders:
(a) Keep such registration effective for a period of one
hundred twenty days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs, and amend or supplement such registration statement and the
prospectus contained therein from time to time to the extent necessary to comply
with the Act and applicable state securities laws:
4
<PAGE> 5
(b) Use its best efforts to register or qualify the
Registrable Securities covered by such registration under the applicable
securities or "blue sky" laws of such jurisdictions as the selling shareholders
may reasonably request; provided, that the Company shall not be obligated to
qualify to do business in any jurisdiction where it is not then so qualified or
otherwise required to be so qualified or to take any action which would subject
it to the service of process in suits other than those arising out of such
registration;
(c) Furnish such number of prospectuses and other
documents incident thereto as a Holder from time to time may reasonably request;
(d) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 2 hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and is entered into by the Holder and provided
further that, if the underwriter so requests, the underwriting agreement will
contain customary contribution provisions on the part of the Company;
(e) To the extent then permitted under applicable professional
guidelines and standards, obtain a comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters and an opinion from the Company's counsel
in customary form and covering such matters of the type customarily covered in a
public issuance of securities, in each case addressed to the Holders, and
provide copies thereof to the Holders; and
(f) Permit the counsel to the selling shareholders whose
expenses are being paid pursuant to Section 5 hereof to inspect and copy such
corporate documents as he may reasonably request.
7. Indemnification.
(a) The Company will, and hereby does, indemnify each Holder,
each of its officers, directors and partners, and each person controlling such
Holder within the meaning of the Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls such underwriter within
the meaning of the Act, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Act or the Exchange Act or securities act of any state or any rule or regulation
thereunder applicable to the Company and relating to action
5
<PAGE> 6
or inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such Holder, each of its
officers, directors and partners, and each person controlling such Holder, each
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
whether or not resulting in any liability, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement (or
alleged untrue statement) or omission (or alleged omission) based upon written
information furnished to the Company by such Holder or underwriter and stated to
be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by him
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of the Act and the rules and regulations
thereunder, each other such Holder and each of their officers, directors and
partners, and each person controlling such Holder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holder's
directors, officers, partners, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, whether or not
resulting in liability, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the company by such Holder and stated to be specifically for use
therein; provided, however, that the obligations of each Holder hereunder shall
be limited to an amount equal to the net proceeds received by such Holder upon
sale of his securities.
(c) Each party entitled to indemnification under this Section
7 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations under this Section 7 (except and to the
extent the Indemnifying Party has been prejudiced as a consequence thereof). The
Indemnifying Party will be entitled to participate in, and to the extent that it
may elect by written notice delivered to the Indemnified Party promptly after
receiving the aforesaid notice from such Indemnified Party, at its expense to
assume, the defense of any such claim or any litigation resulting therefrom,
with counsel reasonably satisfactory to such Indemnified Part, provided that the
Indemnified Party may participate in such defense at its expense,
notwithstanding the
6
<PAGE> 7
assumption of such defense by the Indemnifying Party, and provided, further,
that if the defendants in any such action shall include both the Indemnified
Party and the Indemnifying Party and the Indemnified Party shall have reasonably
concluded that there may be legal defenses available to it and/or other
Indemnified Parties which are different from or additional to those available to
the Indemnifying Party, the Indemnified Party or Parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party or
Parties and the fees and expenses of such counsel shall be paid by the
Indemnifying Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall (i) furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom and (ii) shall reasonably assist
the Indemnifying Party in any such defense, provided that the Indemnified Party
shall not be required to expend its funds in connection with such assistance.
(d) No Holder shall be required to participate in a
registration pursuant to which it would be required to execute an underwriting
agreement in connection with a registration effected under Section 2 or 3 which
imposes indemnification or contribution obligations on such Holder more onerous
than those imposed hereunder; provided, however, that the Company shall not be
deemed to breach the provisions of Section 2 or 3 if a Holder is not permitted
to participate in a registration on account of his refusal to execute an
underwriting agreement on the basis of this subsection (d).
8. Information by Holder. Each Holder of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement or otherwise required by applicable state or federal securities
laws.
9. Limitations on Registration Rights. From and after the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the outstanding Registrable Securities, enter into any
agreement with any holder or prospective holder of any securities of the Company
which would give any such holder or prospective holder (a) the right to require
the Company, upon any registration of any of its securities, to include, among
the securities which the Company is then registering, securities owned by such
holder, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of its securities will not limit the number of Registrable
Securities sought to be included by the Holders of Registrable Securities or
reduce the offering price thereof; or (b) the right to require the Company to
initiate any registration of any securities of the Company.
7
<PAGE> 8
10. Exception to Registration. The Company shall not be required to
effect a registration under this Agreement if (i) in the written opinion of
counsel for the Company, which counsel and the opinion so rendered shall be
reasonably acceptable to the Holders of Registrable Securities, such Holders may
sell without registration under the Act all Registrable Securities for which
they requested registration under the provisions of the Act and in the manner
and in the quantity in which the Registrable Securities were proposed to be
sold, or (ii) the Company shall have obtained from the Commission a "no-action"
letter to that effect provided that this Section 10 shall not apply to sales
made under Rule 144(k) or any successor rule promulgated by the Commission until
after the effective date of the Company's initial registration of shares under
the Act. Notwithstanding the foregoing, in no event shall the provisions of this
Section 10 be construed to preclude a Holder of Registrable Securities from
exercising rights under Section 3 for a period of three years after the
effective date of the Company's initial registration of shares under the Act.
11. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of
restricted securities (as that term is used in Rule 144 under the Act) to the
public without registration, the Company agrees to:
(a) make and keep public information available as those terms
are understood and defined in Rule 144 under the Act, at all times from and
after ninety days following the effective date of the first registration under
the Act filed by the Company for an offering of its securities to the general
public;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Act and the Exchange Act at any time after it has become subject to such
reporting requirements; and
(c) so long as an Investor owns any restricted securities,
furnish to the Investor forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time from and after ninety days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Act and Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents so
filed as an Investor may reasonably request in availing itself of any rule or
regulation of the Commission allowing an Investor to sell any such securities
without registration.
12. Listing Application. If shares of any class of stock of the Company
shall be listed on a national securities exchange, the Company shall, at its
expense, include in its listing application all of the shares of the listed
class then owned by any Investor.
8
<PAGE> 9
13. Damages. The parties recognize and agree that the each shall not
have an adequate remedy if the other fails to comply with the provisions of this
Agreement, and that damages will not be readily ascertainable, and each
expressly agrees that in the event of such failure the non-breaching party shall
be entitled to seek specific performance of the breaching party's obligations
hereunder and that the breaching party will not oppose an application seeking
such specific performance.
14. Representations and Warranties of the Company. The Company
represents and warrants to the Investors as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the Articles of Incorporation or By-laws of the Company or any
provision of any indenture, agreement or other instrument to which it or any or
its properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms.
15. Miscellaneous.
(a) All covenants and agreements contained in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto (including
without limitation transferees of any Registrable Securities), whether so
expressed or not.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage prepaid; telecopied or sent by other
facsimile method; or delivered by any delivery service for which proof of
delivery is available, addressed as follows:
If to the Company or any other party hereto, at the address of
such party set forth in the Purchase Agreement or the most recent
address as is shown on the stock records of the Company; and
If to any subsequent Holder of Registrable Securities, to it
at such address as may have been furnished to the Company in writing by
such Holder; or, in any case, at such other address or addresses as
shall have been furnished in writing to the Company (in the
9
<PAGE> 10
case of a Holder of Registrable Securities) or to the Holders of
Registrable Securities (in the case of the Company) in accordance with
the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
(d) This Agreement may not be amended or modified, and no
provision hereof may be waived, without the written consent of the Company and
the holders of at least a majority of the outstanding Registrable Securities.
(e) 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.
(f) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
[Remainder of Page Intentionally Left Blank]
10
<PAGE> 11
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
COMPANY:
INTELLIGROUP, INC.
By:
------------------------------------
Name: Ashok Pandey
Title: President
INVESTORS:
SUMMIT VENTURES IV, L.P.
By: Summit Partners IV, L.P.,
General Partner
By: Stamps, Woodsum & Co. IV,
General Partner
By:
------------------------------------
General Partner
SUMMIT INVESTORS III, L.P.
By:
------------------------------------
Authorized Signatory
11
<PAGE> 12
Schedule I
Investors
Name and Address
Summit Ventures IV, L.P.
600 Atlantic Avenue
Suite 2800
Boston, MA 02210
Summit Investors III, L.P.
600 Atlantic Avenue
Suite 2800
Boston, MA 02210
12
<PAGE> 1
Exhibit 4.4
EXECUTION COPY
REDEMPTION AGREEMENT
This Redemption Agreement (the "Agreement") is dated as of the 10th day
of April, 1996 by and among Intelligroup, Inc., a New Jersey corporation (the
"Company"), and the persons set forth on Schedule 1.1 (each an "Investor" and
collectively the "Investors").
As of the date of this Agreement, the Investors have purchased 9%
Subordinated Debentures in the aggregate principal amount of $6,000,000 (the
"Debentures") and warrants (the "Warrants") to purchase an aggregate of 23.63636
shares of Common Stock, no par value, at a price per share equal to $.01, of the
Company (the "Common Stock"), which initially shall constitute 20.8% of the
Company's fully diluted capital stock, pursuant to a Debenture and Warrant
Purchase Agreement dated as of April 10, 1996 (the "Purchase Agreement"). All
shares of Common Stock, or other classes or series of common or preferred stock
of the Company, now owned or hereafter acquired by the Investors (together with
any shares issued with respect thereto pursuant to any stock split, stock
dividend or the like) are referred to herein as the "Shares". Capitalized terms
used herein and not otherwise defined in this Agreement shall have the meanings
assigned to them in the Purchase Agreement.
In consideration of the execution and delivery of the Purchase
Agreement and the agreements set forth below, the parties agree with each other
as follows:
1. Option to Sell Warrants or Shares to Company.
(a) Upon the earlier of the fifth anniversary of the Closing
or the occurrence of a Liquidity Event, the Investors may require the Company to
redeem the Warrants and/or Shares. In such event, Investors holding Shares
representing at least forty percent (40%) of the aggregate number of Shares then
held by the Investors may notify the Company that they intend to offer to the
Company any or all of the Warrants or Shares then held by them for purchase by
the Company. The Company shall promptly give notice of such intention to all
other Investors who own Warrants or Shares, and any Investor may, within ten
(10) days of such notice, give the Company notice that it intends to offer to
the Company any or all of the Warrants or Shares then held by it. The Company
shall repurchase all Shares so offered under this Agreement as set forth below.
The option to sell Warrants or Shares pursuant to this Section 1 shall be
referred to as the "Option."
(b) The Company agrees to provide each Investor thirty (30)
days' written notice of the pendency of a Liquidity Event and each Investor
shall have the right to exercise this Option in the manner provided in Section
1(a) above.
2. Price.
<PAGE> 2
(a) The price to be paid by the Company for the Shares to be
sold under the Option shall be the fair market value for each Share, as of the
date of such proposed repurchase, and the price to be paid for any Warrant shall
be the fair market value of the Warrant Shares as of such date less the exercise
price thereof, in each case, as agreed upon in good faith by the Company and the
Representative (who shall be a Person selected by the Investors owning a
majority of the Shares to be redeemed hereunder and who shall be hereinafter
referred to as the "Representative"), taking into account, in valuing such
Shares, all relevant facts and circumstances; provided, however, that there
shall be no discount to reflect the fact that the Shares represent a minority
interest in the Company. If no such agreement is reached within thirty (30) days
after notice is given to the Company of the Investors' exercise of the Option,
the fair market value shall be determined by appraisal as set forth below.
(b) All appraisals shall be undertaken by two appraisers, one
selected by the Board of Directors of the Company, without voting by any
director appointed by the Investors, and one selected by the Representative. No
Director whose Shares are being appraised or who is affiliated with a person
whose Shares are being appraised shall vote on the selection of the appraiser
chosen by the Company. The fair market value shall be the fair market value
arrived at by those appraisers within thirty (30) days following the appointment
of the last appraiser to be appointed. In the event that the two appraisers
agree in good faith on such fair market value within such a period of time, such
agreed value shall be used for these purposes. If the appraisers cannot agree
but their valuations are within 10% of each other, the fair market value shall
be the mean of the two valuations. If the appraisers cannot agree and the
differences in the valuations are greater than 10%, the appraisers shall select
a third appraiser who will calculate fair market value independently, and,
except as provided in the next sentence, the fair market value of the Shares
shall be the average of the two fair market values arrived at by the appraisers
who are closest in amount. If one appraiser's valuation is the mean of the other
two valuations, such mean valuation shall be the fair market value. In the event
that the two original appraisers cannot agree upon a third appraiser within ten
(10) days following the end of the thirty (30) day period referred to above,
then the third appraiser shall be appointed by the American Arbitration
Association in Boston, Massachusetts. If, following the final determination of
the purchase price for the Shares, any Investor previously offering his Warrants
or Shares for repurchase shall choose not to sell any or all of its Shares, then
such Investor shall so notify the Company within ten (10) days following receipt
of the results of the appraisal. The expenses of the appraiser chosen by the
Company will be borne by it, the expenses of the appraiser chosen by the
Investors will be borne by them, pro rata based on the number of Shares being
redeemed, and the expenses of the third appraiser will be borne 50% by the
Company and 50% by the Investors, pro rata based on the number of Warrants or
Shares being redeemed.
3. Payment.
(a) Within twenty (20) days following either the agreement, as
provided above, of the Company and the Representative concerning the fair market
value of the Shares or the receipt of the results of the last of the appraisals
referred to above, the Company shall
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<PAGE> 3
purchase the Warrants or Shares tendered to it at the price established by this
Agreement (the "Redemption Price"), and the Investors shall deliver to the
Company, upon receipt of payment therefor, the certificates for the Warrants or
Shares duly endorsed by them for transfer.
(b) Notwithstanding the other provisions of this Agreement,
the Company shall not be obligated to repurchase any Warrants or Shares to the
extent such repurchase would violate applicable law, as determined by an opinion
of counsel to the Company, which opinion and counsel shall be reasonably
satisfactory to the Representative; provided, however, that the Company shall
use its best efforts to comply with such restriction. In the event a repurchase
is delayed on account of the preceding sentence, it shall be made at the first
time it would not violate such law and, provided that if such delay extends for
a period of six (6) months or longer, the Redemption Price shall bear interest
at the rate of fifteen percent (15%) per annum, compounded annually commencing
180 days after the date payment was otherwise required under Section 3(a)
hereof, until such time as the redemption is completed. In addition, if a
majority of the entire Board of Directors determines in good faith that the
repurchase by the Company of the Warrants or Shares would leave the Company with
insufficient working capital such that the Company would be unable to execute
successfully its business plan, then the Company may pay for the Warrants or
Shares by delivery of cash in an amount which would not leave the Company with
insufficient working capital, and a promissory note for the balance of the
purchase price thereof. Such note (i) shall be payable in twelve (12) equal
consecutive quarterly installments of principal, with accrued interest,
commencing on the last day of the first March, June, September or December
following the date on which payment is otherwise required under Section 3(a) and
continuing on the last day of each such month until payment in full; (ii) shall
bear interest at the prime rate of interest announced from time to time by
Citibank, N.A., plus 2% per annum; and (iii) shall be prepayable in the event of
a public offering of securities of the Company or the liquidation, dissolution,
bankruptcy, insolvency, merger or consolidation of the Company, the sale of all
or substantially all of the assets of the Company, or the sale by the Principal
Shareholders of such number of shares of the Company such that they cease to
own, collectively, in excess of fifty percent (50%) of the outstanding capital
stock of the Company. If on account of the first sentence of this subparagraph
(b) the Company may purchase fewer than all of the Warrants or Shares offered
for redemption, the Company shall repurchase all Warrants or Shares when
permitted, allocated pro rata among those who requested that their Warrants or
Shares be redeemed, in proportion to the amount which would have been paid to
such holder had all Warrants or Shares as to which it requested redemption been
redeemed. If on account of the first sentence of this subparagraph (b) the
Company may purchase fewer than all of the Warrants or Shares offered for
redemption, the holders of the Warrants or Shares not redeemed shall continue to
receive the benefit of the rights and privileges afforded the Warrants or Shares
under the Purchase Agreement and the Related Agreements. If the Company
purchases Warrants or Warrant Shares with cash and promissory notes, such
consideration shall be allocated to all holders of Warrants and Warrant Shares
in proportion to the amount payable to each.
(c) Payment shall be made by check or wire transfer of funds
to such bank account as each Investor shall direct.
-3-
<PAGE> 4
4. Notices. All notices or other communications required or permitted
to be delivered hereunder shall be in writing signed by the party giving the
notice and sent by telecopier, express delivery service, or regular or certified
mail to the address specified in the Purchase Agreement.
5. Entire Agreement. This Agreement and the agreements referred to
herein constitute the entire agreement of the parties with respect to the
matters contemplated herein. This Agreement and such other agreements supersede
any and all prior understandings as to the subject matter of this Agreement.
6. Amendments, Waivers and Consents. Any provision in this Agreement to
the contrary notwithstanding, changes in or additions to this Agreement may be
made, and compliance with any covenant or provision herein set forth may be
omitted or waived, if the Company shall obtain consent thereto in writing from
Persons holding an aggregate of at least 51% of the Shares owned by the
Investors.
7. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the respective parties
hereto.
8. General; Definitions. The headings contained in this Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. In this Agreement the singular includes the
plural, the plural the singular, the masculine gender includes the neuter,
masculine and feminine genders. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Massachusetts. Terms used as
defined terms herein and not otherwise defined shall have the meanings set forth
in the Purchase Agreement.
9. Severability. If any provision of this Agreement shall be found by
any court of competent jurisdiction to be invalid or unenforceable, the parties
hereby waive such provision to the extent that it is found to be invalid or
unenforceable. Such provision shall, to the maximum extent allowable by law, be
modified by such court so that it becomes enforceable, and, as modified, shall
be enforced as any other provision hereof, with all the other provisions hereof
continuing in full force and effect.
10. Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one and the same instrument.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date for first above written.
INTELLIGROUP, INC.
By:
------------------------------------------
Name: Ashok Pandey
Title: President
SUMMIT VENTURES IV, L.P.
By: Summit Partners IV, L.P.
General Partner
By: Stamps, Woodsum & Co. IV
General Partner
By:
------------------------------------------
General Partner
SUMMIT INVESTORS III, L.P.
By:
------------------------------------------
Authorized Signatory
-5-
<PAGE> 6
Schedule 1.1
Summit Ventures IV L.P.
Suite 2800
600 Atlantic Avenue
Boston, MA 02210
Summit Investors III, L.P.
Suite 2800
600 Atlantic Avenue
Boston, MA 02210
-6-
<PAGE> 1
Exhibit 4.5
EXECUTION COPY
SHAREHOLDERS' AGREEMENT
AGREEMENT, made as of the 10th day of April, 1996, by and among
Intelligroup, Inc., a New Jersey corporation (the "Company"), those persons
listed on Schedule 1 hereto (the "Current Shareholders") and those persons
listed on Schedule 2 hereto (the "Investors" and, with the Current Shareholders,
the "Shareholders") and those other persons who acquire shares of capital stock
of the Company from time to time as described in Section 18 hereof (the "Other
Shareholders").
WHEREAS, the Investors are acquiring warrants (the "Warrants") to
purchase an aggregate of 23.63636 shares of Common Stock, no par value, at a
price per share equal to $.01 (the "Common Stock"), which shall initially
constitute 20.8% of the Company's fully diluted capital stock, pursuant to the
terms of a Debenture and Warrant Purchase Agreement dated as of April 10, 1996
by and among the Company, the Investors, Ashok Pandey, Rajkumar Koneru, Nagarjun
Valluripalli (the "Purchase Agreement"); and
WHEREAS, it is a condition to the obligations of the Current
Shareholders and the Investors under the Purchase Agreement that this Agreement
be executed by the parties hereto, and the parties are willing to execute this
Agreement and to be bound by the provisions hereof.
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below, and the parties' desire to provide for continuity of ownership of
the Company to further the interests of the Company and its present and future
shareholders, the parties hereby agree with each other as follows:
1. Definition of Shares. As used in this Agreement, "Shares" shall mean
and include all shares of Common Stock now owned or hereafter acquired by the
Shareholders and the Other Shareholders and all shares of Common Stock issued or
issuable upon exercise of the Warrants. Other terms used as defined terms herein
and not otherwise defined shall have the meanings set forth in the Purchase
Agreement.
2. Prohibited Transfers. No Current Shareholder shall sell, assign,
transfer, pledge, hypothecate, mortgage, encumber or dispose of all or any of
his Shares except in compliance with the terms of this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, (a) any
Current Shareholder may transfer without the necessity of prior approval all or
any of his Shares by way of gift to his spouse, to any of his lineal descendants
or ancestors, or to any trust for the benefit of any one or more of such Current
Shareholder, his spouse or his lineal descendants or ancestors, (b) any Current
Shareholder may transfer all or any of his Shares by will or the laws of descent
and distribution (c) any Current Shareholder may pledge Shares to the Company as
collateral security pursuant to the Stock Pledge Agreement, dated March 22,
1996, executed by such Current Shareholder in favor of Summit Ventures IV, L.P.;
or (d) any Current Shareholder may transfer up to an aggregate of thirty percent
(30%) of the Shares owned by him on the date hereof to any one or
<PAGE> 2
more of his siblings or to one or more of the other Current Shareholders;
provided that any such transferee under clauses (a), (b) or (d) of this Section
2 shall agree in writing with the Company and the other Shareholders, as a
condition to such transfer, to be bound by all of the provisions of this
Agreement to the same extent as if such transferee were the Current Shareholder
transferring such Shares; provided, further, that upon foreclosure of the pledge
described in clause (c) of this Section 2, the pledgee shall agree in writing
with the Shareholders, as a condition to such foreclosure, to be bound by all of
the provisions of this Agreement to the same extent as if such pledgee were a
Current Shareholder.
3. Right of First Refusal on Dispositions.
(a) If at any time a Current Shareholder (a "Selling Current
Shareholder") desires to sell or otherwise transfer all or any part of his
Shares pursuant to a bona fide offer from a third party (the "Proposed
Transferee"), the Selling Current Shareholder shall submit a written offer (the
"Offer") by delivering the Offer to the Company and the other Current
Shareholders and Investors to sell such Shares (the "Offered Shares") to the
Company and the other Current Shareholders and Investors on terms and
conditions, including price, not less favorable than those on which the Selling
Current Shareholder proposes to sell such Offered Shares to the Proposed
Transferee. The Offer shall disclose the identity of the Proposed Transferee,
the number of Offered Shares proposed to be sold, the total number of Shares
owned by the Selling Current Shareholder, the terms and conditions, including
price, of the proposed sale, and any other material facts relating to the
proposed sale. The Offer shall further state (i) that the Company and the other
Current Shareholders and Investors may acquire, in accordance with the
provisions of this Agreement, all but not less than all, of the Offered Shares
for the price and upon the other terms and conditions set forth therein and (ii)
that if all such Offered Shares are not purchased by the Company and the other
Current Shareholders and Investors, the Investors may exercise their rights
provided pursuant to Section 4 hereof.
(b) Within fifteen (15) days after receipt of the Offer, the
Company shall advise the Selling Current Shareholder and the Other Current
Shareholders and the Investors as to the number of Shares specified in the
Offer, if any, which the Company wishes to purchase.
(c) To the extent that the Company does not elect under
subparagraph (b) to purchase all of the Offer Shares, the other Current
Shareholders and the Investors shall have the right to purchase all, but not
less then all, of the remaining Offer Shares. Each Current Shareholder and
Investor who has the right to purchase all Offer Shares under this subparagraph
(c) shall have the right to purchase his or its pro rata fraction of the Offer
Shares, determined by multiplying the number of Offer Shares available for
purchase times a fraction, the numerator of which shall be the number of Shares
then owned by such other Current Shareholder or Investor (including Shares
issuable upon exercise of any options or warrants held by such person), and the
denominator of which shall be the aggregate number of
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<PAGE> 3
Shares (including Shares issuable upon exercise of any options or warrants held
by such persons) then owned by all other Current Shareholders and Investors who
elect to purchase the Offered Shares. The amount of such Offered Shares that
other Current Shareholder or each Investor is entitled to purchase under this
Section 3(c) shall be referred to as its "Pro Rata Fraction".
(d) The other Current Shareholders and Investors shall have a
right of oversubscription such that if any other Current Shareholder or Investor
fails to accept the Offer as to its full Pro Rata Fraction, the remaining other
Current Shareholders and Investors shall, among them, have the right to purchase
up to the balance of such Offered Shares not so purchased. Other Current
Shareholders and Investors may exercise such right of oversubscription by
accepting the Offer as to more than their Pro Rata Fraction. If, as a result
thereof, such oversubscriptions exceed the total number of the Offered Shares
available in respect of such oversubscription privilege, the oversubscribing
other Current Shareholders and Investors shall be cut back with respect to over
subscriptions on a pro rata basis in accordance with their respective Pro Rata
Fractions or as they may otherwise agree among themselves.
(e) Those other Current Shareholders and Investors who desire
to purchase all or any part of the Offered Shares shall communicate in writing
their election to purchase to the Selling Current Shareholder, which
communication shall state the number of Offered Shares said other Current
Shareholders and Investors desire to purchase and shall be provided to the
Selling Current Shareholder within 45 days of the date the Offer was made. Such
communication shall, when taken in conjunction with the Offer, be deemed to
constitute a valid, legally binding and enforceable agreement for the sale and
purchase of such Offered Shares (subject to the aforesaid limitations as to the
right of the Investors to purchase more than their Pro Rata Fraction). Sales of
such Offered Shares to be sold to the other Current Shareholders and Investors
pursuant to this Section 3 shall be made at the offices of the Company within 60
days following the date the Offer was made.
(f) If the Company, the other Current Shareholders and the
Investors do not purchase all of the Offered Shares, all of the Offered Shares
may be sold by the Selling Current Shareholder at any time within 120 days after
the date the Offer was made, subject to the provisions of Section 4. Any such
sale shall be to the Proposed Transferee, at not less than the price and upon
other terms and conditions, if any, not more favorable to the Proposed
Transferee than those specified in the Offer. Any remaining Offered Shares not
sold within such 120-day period shall continue to be subject to the requirements
of a prior offer pursuant to this Section 3. If Offered Shares are sold pursuant
to this Section 3 to any purchaser who is not a party to this Agreement, the
purchaser of such Offered Shares shall execute a counterpart of this Agreement
as a precondition of the purchase of such Offered Shares and any Offered Shares
sold to such purchaser shall continue to be subject to the provisions of this
Agreement.
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<PAGE> 4
4. Right of Participation in Sales.
(a) If at any time a Selling Current Shareholder desires to
sell all or any part of the Shares owned by it or him to a Proposed Transferee,
and those Shares to be transferred have not been purchased by the Investors
under Section 3, each of the Investors (other than those who have elected to
purchase Shares pursuant to Section 3) shall have the right to sell to the
Proposed Transferee, as a condition to such sale by the Selling Current
Shareholder, at the same price per share and on the same terms and conditions as
involved in such sale by the Selling Current Shareholder, a pro rata portion of
the amount of Shares proposed to be sold to the Proposed Transferee. Subject to
the following sentence, the "pro rata portion" of Shares which an Investor shall
be entitled to sell to the Proposed Transferee shall be that number of Shares as
shall equal the number of Shares proposed to be sold to the Proposed Transferee
multiplied by a fraction, the numerator of which is the aggregate of all of
Shares which are then held by the Investor (including Shares issuable upon
exercise of any options or warrants held by the Investor), and the denominator
of which is the aggregate of all Shares which are then held by the Selling
Current Shareholder and all Investors (including Shares issuable upon exercise
of any options or warrants held by such persons) wishing to participate in any
sale under this Section 4. In the event that the Selling Current Shareholder is
the holder of a number of Shares which equals or exceeds the aggregate number of
Shares held by all of the Investors, and the Investors elect to participate as
Participating Shareholders in such sale in the manner provided herein, then the
"pro rata portion" of the amount of Shares which the Investors (treating the
Investors as one group), on the one hand, and the Selling Current Shareholder,
on the other hand, shall each be entitled to include in such sale to the
Proposed Transferee shall be equal to fifty percent (50%) of the number of
Shares proposed to be sold to the Proposed Transferee.
(b) Each Selling Current Shareholder who wishes to make a sale
to a Proposed Transferee which is subject to this Section 4 shall, after
complying with the provisions of Section 3, give to each Investor (other than
those who have elected to purchase Shares pursuant to Section 3) notice of such
proposed sale, and stating that all Offered Shares were not purchased pursuant
to the Offer as discussed in Section 3. Such notice shall be given at least 20
days prior to the date of the proposed sale to the Proposed Transferee. Each
Investor (other than those who have elected to purchase Shares pursuant to
Section 3) wishing to so participate in any sale under this Section 4 shall
notify the Selling Current Shareholder in writing of such intention within 15
days after such Investor's receipt of the notice described in the preceding
sentence.
(c) The Selling Current Shareholder and each Investor eligible
and wishing to participate in the proposed sale shall sell to the Proposed
Transferee all, or at the option of the Proposed Transferee, any part of the
Shares proposed to be sold by them at not less than the price and upon other
terms and conditions, if any, not more favorable to the Proposed Transferee than
those in the notice provided by the Selling Current Shareholder under
subparagraph (b) above; provided, however, that any purchase of less than all of
such Shares
- 4 -
<PAGE> 5
by the Proposed Transferee shall be made from the Selling Current Shareholder
and each Investor pro rata based upon the relative number of the Shares that the
Selling Current Shareholder and each Investor is otherwise entitled to sell
pursuant to Section 4(a).
(d) If any Shares are sold pursuant to this Section 4 to any
purchaser who is not a party to this Agreement, the purchaser of such Shares
shall execute a counterpart of this Agreement as a precondition to the purchase
of such Shares and such Shares shall continue to be subject to the provisions of
this Agreement.
5. Election of Directors. At each annual meeting of the shareholders of
the Company, and at each special meeting of the shareholders of the Company
called for the purpose of electing directors of the Company, and at any time at
which shareholders of the Company shall have the right to, or shall, vote for
directors of the Company, then, and in each event, the Shareholders shall vote
all Shares owned by them for the election of a Board of Directors consisting of
not more than seven directors (as may be increased as provided in Section 5(d)
below), designated in the manner set forth below.
(a) two directors shall be designated by the Investors (which
designees shall initially be Thomas S. Roberts and Kevin P. Mohan); and
(b) three directors shall be designated by the Current
Shareholders, provided that collectively the Current Shareholders own fifty-one
percent (51%) of the Common Stock of the Company (which designees shall be Ashok
Pandey, Rajkumar Koneru, and Nagarjun Valluripalli). In the event that at any
time the Current Shareholders shall collectively own less than fifty-one percent
(51%), but more than twenty-five percent (25%) of the Common Stock of the
Company they may designate two directors, and at any time the Current
Shareholders shall collectively own twenty-five percent (25%) of the Common
Stock of the Company they may designate one director;
(c) the remaining directors (if any), one of whom shall not be
an employee or affiliate of the Company (the "Independent Director"), shall be
designated by the holders of the Common Stock.
(d) if at any time the Company shall (i) default in the
payment of any principal of or interest on its Debentures due April 10, 2001,
when the same becomes due and payable (whether at maturity or at the date fixed
for mandatory or optional redemption or prepayment or by acceleration or
otherwise); or (ii) default for any reason in its obligation to repurchase the
Warrants or Shares held by the Investors pursuant to the terms of the Redemption
Agreement, or (iii default under any of the covenants contained in Articles IV
and V of the Purchase Agreement (each of such defaults described in clauses (i),
(ii) and (iii) being hereinafter referred to as a "Default"), and in the case of
those Defaults described in clause (iii) such Default shall not have been caused
by an Uncontrollable Action (as such term is defined below) and shall not have
been remedied within 30 days after written notice thereof
- 5 -
<PAGE> 6
shall have been received by the Company from the Investors, then the number of
directors constituting the Board of Directors shall be increased to either
eleven or to a lesser number selected by the Investors and the Investors shall
be entitled to designate four additional directors in the event that the number
of directors constituting the Board of Directors shall be increased to eleven
or, if the Investors designate a smaller Board, such lesser number of additional
directors as would allow the Investors to hold a majority of the directorships
on the Board of Directors (which directors shall be designated by the Investors
owning at least a majority of the Shares held by all Investors), and such right
may be exercised at any annual meeting or at any special meeting call for such
purpose or at any adjournment thereof, or by written consent of the Company's
shareholders. The Shareholders agree to promptly take such action as shall be
required to fix the number of directors at not more than eleven and for the
election of not more than four additional directors as shall be designated by
the Investors. The rights of the Investors to elect a majority of the Board of
Directors pursuant to this Section 5(d) shall continue until the curing of the
Default which gave rise to such right at which time such right shall terminate,
subject to the revesting thereof; provided that if the Investors exercise their
right to elect a majority of the Board of Directors a second time, such right
shall continue regardless of any subsequent cure.
For purposes of this section, an "Uncontrollable Action" shall mean
acts of God, war or insurrection, civil commotion, destruction of production
facilities or materials by earthquake, fire, flood, or storm, labor
disturbances, epidemic, or failure of suppliers, public utilities or common
carriers.
(e) Expenses. The Company shall reimburse the members of the
Board of Directors for all direct out-of-pocket expenses incurred by any
director in attending such meetings. Such expenses shall not exceed the costs
incurred in providing coach air fare between Boston, Massachusetts and Newark,
New Jersey, ground transportation to and from airports and meals. Hotel
accommodations will be provided if the time for a Board of Directors meeting
requires an overnight stay before or after the meeting.
6. Compensation Committee. There shall be established at all times
during the term of this Agreement a Compensation Committee of the Board of
Directors (the "Compensation Committee") which shall be comprised of three
directors as follows: one of whom will be a director designated under Section
5(a); one of whom will be a director designated under Section 5(b), and one of
whom will be the Independent Director designated under Section 5(c). The
Compensation Committee will determine the compensation of the Current
Shareholders and all senior management employees of the Company (including
salary, bonus, equity participation and benefits) and will administer the Option
Plan, as such term is defined in the Purchase Agreement.
7. Term. This Agreement shall terminate immediately prior to the first
to occur of (a) the consummation of the first Qualified Public Offering
(provided that the provisions of Section 4 hereof shall continue until the first
to occur of the events described in clauses (b) and
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<PAGE> 7
(c) of this Section 7, (b) the tenth anniversary of the date of this Agreement,
or (c) at such time that the Investors no longer own the Warrants or the Warrant
Shares and the Debentures have been paid in full. Notwithstanding the foregoing,
at such times as the Investors have sold or conveyed to the Company or other
unaffiliated entities such number of shares of Common Stock such that after
giving effect to such sale or conveyance the Investors shall own or have the
right to acquire less than seventy-five percent (75%) of the shares of Common
Stock which they initially had the right to acquire upon exercise of the
Warrants (after giving effect to any adjustment to the number of Warrant Shares
issuable, as set forth in the Warrant Agreement), all of the provisions of this
Agreement shall terminate.
8. Failure to Deliver Shares. If a Current Shareholder becomes
obligated to sell any Shares to another Shareholder under this Agreement and
fails to deliver such Shares in accordance with the terms of this Agreement,
such other Shareholders may, at their option, in addition to all other remedies
they may have, send to the defaulting Current Shareholder the purchase price for
such Shares as is herein specified. Thereupon, the Company, upon written notice
to the defaulting Current Shareholder, (a) shall cancel on its books the
certificate or certificates representing the Shares to be sold and (b) shall
issue, in lieu thereof, in the name of such other Shareholder, a new certificate
or certificates representing such Shares, and thereupon all of the defaulting
Current Shareholder's rights in and to such Shares shall terminate.
9. Specific Enforcement. Each Shareholder expressly agrees that the
other Shareholders and the Company may be irreparably damaged if this Agreement
is not specifically enforced. Upon a breach or threatened breach of the terms,
covenants and/or conditions of this Agreement by any Shareholder, the other
Shareholders and the Company shall, in addition to all other remedies, each be
entitled to apply for a temporary or permanent injunction, and/or a decree for
specific performance, in accordance with the provisions hereof.
10. Legend. Each certificate evidencing any of the Shares now owned or
hereafter acquired by the Current Shareholders shall bear a legend substantially
as follows:
"Any sale, assignment, transfer or other disposition of the shares
represented by this certificate is restricted by, and subject to,
the terms and provisions of a certain Shareholders' Agreement dated
as of April 10, 1996. A copy of said Agreement is on file with the
Secretary of the Corporation."
11. Rights as Shareholder. The Investors shall have any and all rights
held by any shareholder of the Company, as if the Warrant Shares were converted
to Common Stock, to vote as a class on any and all matters affecting the value
of the Warrant Shares or the Debentures, including, but not limited to, a
Liquidity Event or an Extraordinary Common Stock Event, as such terms are
defined in the Warrant Agreement.
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<PAGE> 8
12. Notices. Notices given hereunder shall be deemed to have been duly
given on the date of personal delivery or on the date of postmark if mailed by
certified or registered mail, return receipt requested, to the party being
notified at his or its address specified on the applicable schedule hereto or
such other address as the addressee may subsequently notify the other parties of
in writing.
13. Entire Agreement and Amendments. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
neither this Agreement nor any provision hereof may be waived, modified, amended
or terminated except by a written agreement signed by the parties hereto;
provided, however, that Investors owning at least a majority of the Shares owned
by all Investors may effect any such waiver, modification, amendment or
termination on behalf of all of the Investors and the Current Shareholders
owning at least a majority of the Shares owned by all Current Shareholders may
effect any such waiver, modification, amendment or termination on behalf of all
of the Current Shareholders. Each of the Shareholders represents that he or it
is not a party to any other agreement which would prevent him or it from
performing his or its obligations hereunder. No waiver of any breach or default
hereunder shall be considered valid unless in writing, and no such waiver shall
be deemed a waiver of any subsequent breach or default of the same or similar
nature.
14. Governing Law; Successors and Assigns. This Agreement shall be
governed by the internal laws of the Commonwealth of Massachusetts without
giving effect to the conflicts of laws principles thereof and, except as
otherwise provided herein, shall be binding upon the heirs, personal
representatives, executors, administrators, successors and assigns of the
parties.
15. Severability. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
16. Captions. Captions are for convenience only and are not deemed to
be part of this Agreement.
17. 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.
18. Other Shareholders. The term "Other Shareholders" shall refer to (a)
employees of the Company who acquire shares of Common Stock upon exercise of
stock options granted by the Company, and (b) all other Persons who shall own
five percent (5%) or more of the shares of Common Stock then outstanding. Shares
of capital stock issued to such Other
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<PAGE> 9
Shareholders shall constitute "Shares" for purposes of this Agreement and, upon
issuance of any such Shares to any such Other Shareholder, such Other
Shareholder shall, as a condition to such issuance, execute a counterpart to
this Agreement as evidence of such Other Shareholder's agreement to be bound by
all of the provisions of this Agreement to the same extent as the Current
Shareholders are bound hereunder.
[Remainder of page intentionally left blank]
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<PAGE> 10
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
COMPANY:
INTELLIGROUP, INC.
By:
-------------------------------------
Name: Ashok Pandey
Title: President
CURRENT SHAREHOLDERS:
- ----------------------------------
Ashok Pandey INVESTORS:
SUMMIT VENTURES IV, L.P.
By: Summit Partners IV, L.P.,
- ---------------------------------- its general partner
Rajkumar Koneru
By: Stamps, Woodsum & Co. IV,
its general partner
- ----------------------------------
Nagarjun Valluripalli
By:
-------------------------------------
General Partner
SUMMIT INVESTORS III, L.P.
By:
-------------------------------------
Authorized Signatory
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<PAGE> 11
Schedule 1
Name and Address
Ashok Pandey
c/o Intelligroup, Inc.
5 Lincoln Highway, Suite 4
Edison, New Jersey 08818
Rajkumar Koneru
c/o Intelligroup, Inc.
5 Lincoln Highway, Suite 4
Edison, New Jersey 08818
Nagarjun Valluripalli
c/o Intelligroup, Inc.
5 Lincoln Highway, Suite 4
Edison, New Jersey 08818
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<PAGE> 12
Schedule 2
Name and Address
Summit Ventures IV, L.P.
600 Atlantic Avenue
Suite 2800
Boston, MA 02210
Summit Investors III, L.P.
600 Atlantic Avenue
Suite 2800
Boston, MA 02210
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<PAGE> 1
EXHIBIT 10.1
INTELLIGROUP, INC.
1996 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, non-Employee
members of the Board and Consultants of the Company and its Subsidiaries and to
promote the success of the Company's business. Options granted under the Plan
may be incentive stock options (as defined under Section 422 of the Code) or
non-statutory stock options, as determined by the Administrator at the time of
grant of an option and subject to the applicable provisions of Section 422 of
the Code, as amended, and the regulations promulgated thereunder. Stock purchase
rights may also be granted under the Plan.
2. Certain Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Intelligroup, Inc., a New Jersey
corporation.
(g) "Consultant" means any person, including an advisor, who
is engaged by the Company or any Parent or subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(h) "Continuous Status as an Employee" means the absence of
any interruption or termination of the employment relationship by the Company or
any Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other
leave of absence approved by the Board, provided that such leave is for a period
of not more than ninety (90) days, unless reemployment upon the expiration of
such leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) transfers between
locations of the Company or between the Company, its Subsidiaries or its
successor.
<PAGE> 2
(i) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(k) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including without limitation
the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("Nasdaq") System, its Fair Market
Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange
for the last market trading day prior to the time of determination as
reported in the Wall Street Journal or such other source as the
Administrator deems reliable or;
(ii) If the Common Stock is quoted on Nasdaq (but not
on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its
Fair Market Value shall be the mean between the high and low asked
prices for the Common Stock or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator.
(l) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(m) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the
Plan.
(o) "Optioned Stock" means the Common Stock subject to an
Option.
(p) "Optionee" means an Employee or Consultant who receives an
Option.
(q) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(r) "Plan" means this 1996 Stock Plan.
(s) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of stock purchase rights under Section 11 below.
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<PAGE> 3
(t) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(u) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 1,450,000 shares of Common Stock if an initial public
offering of Common Stock shall have been consummated, and 700,000 shares of
Common Stock if an initial public offering of Common Stock shall not have been
consummated. The shares may be authorized, but unissued, or reacquired Common
Stock.
If an option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and
Officers. With respect to grants of Options or stock purchase rights to
Employees who are also officers or directors of the Company, the Plan
shall be administered by (A) the Board if the Board may administer the
Plan in compliance with Rule 16b-3 promulgated under the Exchange Act
or any successor thereto ("Rule 16b-3") with respect to a plan intended
to qualify thereunder as a discretionary plan, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall
be constituted in such a manner as to permit the Plan to comply with
Rule 16b-3 with respect to a plan intended to qualify thereunder as a
discretionary plan. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board.
From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
Rule 16b-3 with respect to a plan intended to qualify thereunder as a
discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by
Rule 16b-3, the Plan may be administered by different bodies with
respect to directors, non-director officers and Employees who are
neither directors nor officers.
(iii) Administration With Respect to Consultants and
Other Employees. With respect to grants of Options or stock purchase
rights to Employees who are neither directors nor officers of the
Company or to Consultants, the Plan shall be administered by
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<PAGE> 4
(A) the Board, if the Board may administer the Plan in compliance with Rule
16b-3, or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the legal requirements relating to
the administration of incentive stock option plans, if any, of New Jersey
corporate law and applicable securities laws and of the Code (the "Applicable
Laws"). Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and
Employees to whom Options and stock purchase rights may from time to
time be granted hereunder;
(iii) to determine whether and to what extent Options
and stock purchase rights or any combination thereof, are granted
hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any restriction or
limitation or waiver of forfeiture restrictions regarding any Option or
other award and/or the shares of Common Stock relating thereto, based
in each case on such factors as the Administrator shall determine, in
its sole discretion); (vii) to determine whether and under what
circumstances an Option may be settled in cash under subsection 9(f)
instead of Common Stock;
(viii) to determine whether, to what extent and under
what circumstances Common Stock and other amounts payable with respect
to an award under this Plan shall be deferred either automatically or
at the election of the participant (including providing for and
determining the amount, if any, of any deemed earnings on any deferred
amount during any deferral period);
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<PAGE> 5
(ix) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option shall have declined since the date
the Option was granted; and
(x) to determine the terms and restrictions
applicable to stock purchase rights and the Restricted Stock purchased
by exercising such stock purchase rights.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's right
to terminate his employment or consulting relationship at any time, with or
without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
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<PAGE> 6
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
of the grant of such Incentive Stock Option, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock
of the Company or any Parent or Subsidiary, the per Share exercise
price shall be no less than 110% of the Fair Market Value per Share on
the date of grant.
(B) granted to any Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of
the grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less
than 110% of the Fair Market Value per Share on the date of the grant.
(B) granted to any person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per
Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the
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<PAGE> 7
Company to retain from the total number of Shares as to which the Option is
exercised that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of Shares as to which
the option is exercised, (6) delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds required to pay the exercise price,
(7) by delivering an irrevocable subscription agreement for the Shares which
irrevocably obligates the option holder to take and pay for the Shares not more
than twelve months after the date of delivery of the subscription agreement, (8)
any combination of the foregoing methods of payment, or (9) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under Applicable Laws. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Administrator,
consist of any consideration and method of payment allowable under Section 8(b)
of the Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Employment. In the event of termination of
an Optionee's consulting relationship or Continuous Status as an Employee with
the Company (as the case may be), such Optionee may, but only within ninety (90)
days (or such other period of time as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option and not exceeding ninety (90) days) after the date of such
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<PAGE> 8
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his Option to the extent
that Optionee was entitled to exercise it at the date of such termination. To
the extent that Optionee was not entitled to exercise the Option at the date of
such termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee as a result of his total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may,
but only within twelve (12) months from the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised, at any time within twelve (12) months
following the date of death (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee. The terms of the
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
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<PAGE> 9
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock purchase rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer stock purchase rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid (which price shall not be less than 50% of the
Fair Market Value of the Shares as of the date of the offer), and the time
within which such person must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made the
determination to grant the stock purchase right. The offer shall be accepted by
execution of a Restricted Stock purchase agreement in the form determined by the
Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the Committee
may determine.
(c) Other Provisions. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the stock purchase right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the stock purchase right is exercised, except as provided in Section 13
of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or stock purchase right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by electing to
have the Company withhold
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<PAGE> 10
from the Shares to be issued upon exercise of the Option, or the Shares to be
issued in connection with the stock purchase right, if any, that number of
Shares having a Fair Market Value equal to the amount required to be withheld.
The Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this
purpose shall be made in writing in a form acceptable to the Administrator and
shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option or Right as to which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election
must comply with the applicable provisions of Rule 16b-3 and shall be subject to
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
In the event the election to have Shares withheld is made by
an Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or stock purchase
right is exercised but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization or Merger. Subject to
any required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason
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<PAGE> 11
thereof shall be made with respect to, the number or price of shares of Common
Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action. In the event of a merger or consolidation of the Company with or into
another corporation or the sale of all or substantially all of the Company's
assets (hereinafter, a "merger"), the Option shall be assumed or an equivalent
option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation. In the event that such successor
corporation does not agree to assume the Option or to substitute an equivalent
option, the Board shall, in lieu of such assumption or substitution, provide for
the Optionee to have the right to exercise the Option as to all of the Optioned
Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of a merger, the Board shall notify the
Optionee that the Option shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the Option will terminate upon the
expiration of such period. For the purposes of this paragraph, the Option shall
be considered assumed if, following the merger, the Option or right confers the
right to purchase, for each Share of stock subject to the Option immediately
prior to the merger, the consideration (whether stock, cash, or other securities
or property) received in the merger by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger was not solely common stock of the
successor corporation or its Parent, the Board may, with the consent of the
successor corporation and the participant, provide for the consideration to be
received upon the exercise of the Option, for each Share of stock subject to the
Option, to be solely common stock of the successor corporation or its Parent
equal in Fair Market Value to the per share consideration received by holders of
Common Stock in the merger or sale of assets.
14. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law
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<PAGE> 12
or regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
18. Agreements. Options and stock purchase rights shall be evidenced by
written agreements in such form as the Board shall approve from time to time.
19. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
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<PAGE> 13
20. Information to Optionees. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company. The Company shall not be required
to provide such information if the issuance of Options under the Plan is limited
to key employees whose duties in connection with the Company assure their access
to equivalent information.
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<PAGE> 1
EXHIBIT 10.2
INTELLIGROUP, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose. This Non-Qualified Stock Option Plan, to be known as the
1996 Non-Employee Director Stock Option Plan (the "Plan"), is intended to
promote the interests of Intelligroup, Inc. (the "Company") by providing an
inducement to obtain and retain the services of qualified persons who are not
employees or officers of the Company to serve as members of its Board of
Directors (the "Board"), each such person hereinafter referred to as a
"Non-Employee Director."
2. Available Shares. The total number of shares of Common Stock, par
value $.01 per share, of the Company (the "Common Stock") for which options may
be granted under the Plan shall not exceed 140,000 shares, subject to adjustment
in accordance with Section 10 of the Plan. Shares subject to the Plan are
authorized but unissued shares, or shares that were once issued and subsequently
reacquired by the Company. If any options granted under the Plan are surrendered
before exercise or lapse without exercise, in whole or in part, the shares
reserved therefor shall continue to be available under the Plan.
3. Administration. The Plan shall be administered by the Board or by a
committee appointed by the Board (the "Committee"). In the event the Board fails
to appoint or refrains from appointing a Committee, the Board shall have all
power and authority to administer the Plan. In such event, the word "Committee"
wherever used herein shall be deemed to mean the Board. The Committee shall,
subject to the provisions of the Plan, have the power to construe the Plan, to
determine all questions hereunder, and to adopt and amend such rules and
regulations for the administration of the Plan, as it may deem desirable. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
under it.
4. Automatic Grant of Options. Subject to the availability of shares
under the Plan:
(a) each Non-Employee Director who is a member of the Board on
the effective date of the Company's initial public offering (the "IPO") shall be
automatically granted on the effective date of the IPO, without further action
by the Board, an option to purchase 20,000 shares of the Common Stock; and
(b) each Non-Employee Director who first becomes a member of
the Board after the IPO shall be automatically granted, on the date such person
becomes a member of the Board, an option to purchase 20,000 shares of the Common
Stock.
The term "Grant Date" as used hereinafter shall mean, in the case of a
grant under Section 4(a), the effective date of the IPO, or, in the case of a
grant under Section 4(b), the date the optionee becomes a member of the Board.
<PAGE> 2
The options to be granted under this Section 4 shall be the only
options ever to be granted at any time to such member under the Plan.
5. Option Price. The purchase price of the stock covered by an option
granted pursuant to the Plan shall be 100% of the fair market value of such
shares on the Grant Date. The option price will be subject to adjustment in
accordance with the provisions of Section 10 of the Plan. For purposes of the
Plan, "fair market value" shall be determined as of the last business day for
which the prices or quotes discussed in this sentence are available prior to the
date such option is granted and shall mean (i) the average (on that date) of the
high and low prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock is then traded
on a national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the Nasdaq National Market, if the Common Stock is
not then traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on the Nasdaq National Market. The "fair market value" of the stock
issuable upon exercise of an option granted pursuant to Section 4(a) hereof
shall be deemed to be equal to the initial public offering price per share.
6. Period of Option. Unless sooner terminated in accordance with the
provisions of Section 8 of the Plan, an option granted hereunder shall expire on
the date which is ten (10) years after the Grant Date.
7. (a) Vesting of Shares and Non-Transferability of Options. Options
granted under the Plan shall not be exercisable until they become vested.
Options granted under the Plan shall vest in the optionee and thus become
exercisable in accordance with the following schedule, provided that the
optionee has continuously served as a member of the Board through such vesting
date, and subject also to Subsection (b) of this Section 7:
<TABLE>
<CAPTION>
Percentage of Option Shares for which
Option Will be Exercisable Date of Vesting
- ------------------------------------- ---------------------------
<S> <C>
20% One year from Grant Date
40% Two years from Grant Date
60% Three years from Grant Date
80% Four years from Grant Date
100% Five years from Grant Date
</TABLE>
The number of shares as to which options may be exercised shall be
cumulative, so that once the option shall become exercisable as to any shares it
shall continue to be exercisable as to said shares, until expiration or
termination of the option as provided in the Plan.
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<PAGE> 3
(b) Notwithstanding Subsection (a) of this Section 7, if an
optionee attends less than 80% of the Board meetings (whether regular or
special) held in any fiscal year (a "Default Year"), then either (i) the
optionee shall forfeit his exercise rights with respect to the option
installment which vested on the preceding annual vesting date, in proportion to
the percentage of Board meetings actually attended by such optionee during the
Default Year; or (ii) in the event that the optionee does not own a sufficient
number of exercisable options to satisfy the forfeiture obligation described
above, the optionee shall forfeit his right to receive the next succeeding
annual installment of the option, in proportion to the percentage of Board
meetings which the optionee actually attended in the Default Year. By way of
illustration, if an optionee attends only 50% of the actual meetings of the
Board of Directors (whether regular or special) held in any fiscal year, then
the optionee shall forfeit the right to exercise 50% of the option installment
which became exercisable on the preceding annual vesting date. If, however, the
optionee had already exercised 75% of the preceding option installment, and did
not own any additional unexercised options available to satisfy the forfeiture
obligation, the optionee would forfeit the remaining 25% of the prior
installment, and would also forfeit the right to receive or exercise 25% of the
next succeeding annual option installment. Attendance at Board meetings may be
in person or via teleconference, or any manner consistent with the Amended and
Restated Bylaws of the Company.
(c) Non-transferability. Any option granted pursuant to the
Plan shall not be assignable or transferable other than by will or the laws of
descent and distribution or pursuant to a domestic relations order and shall be
exercisable during the optionee's lifetime only by him or her.
8. Termination of Option Rights.
(a) In the event that an optionee ceases to be a member of the
Board by reason of his or her death or permanent disability, any option granted
to such optionee shall be immediately and automatically accelerated and become
fully vested and all unexercised options shall be exercisable by the optionee
(or by the optionee's personal representative, heir or legatee, in the event of
death) at any time prior to the scheduled expiration date of the option.
(b) In the event any optionee: (i) ceases to be a member of
the Board of Directors at the request of the Company; (ii) is removed without
cause; or (iii) otherwise does not stand for nomination or re-election as a
director of the Company at the request of the Company, then any unexercised
options, to the extent not vested at the date of the applicable event, shall
immediately terminate and become void, and to the extent any such options are
vested at such date, they shall continue to be exercisable for a period of one
year from the date of the applicable event; provided, however, that no portion
of any option, vested or unvested, may be exercised if the optionee is removed
from the Board of Directors for any one of the following reasons: (i)
disloyalty, gross negligence, dishonesty or breach of fiduciary duty to the
Company; (ii) the commission of an act of embezzlement, fraud or deliberate
disregard of the rules or policies of the Company which results in loss, damage
or injury to the Company, whether directly or indirectly; (iii) the unauthorized
disclosure of any trade secret or confidential information of the Company; (iv)
the commission of an act which constitutes unfair competition with the Company
-3-
<PAGE> 4
or which induces any customer of the Company to breach a contract with the
Company; or (v) engages in any conduct or activity on behalf of any organization
or entity which is a competitor of the Company (unless such conduct or activity
is approved by a majority of the members of the Board of Directors).
9. Exercise of Option. Subject to the terms and conditions of the Plan
and the option agreements, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written notice to the
Company by mail or in person addressed to Intelligroup, Inc., 5 Lincoln Highway,
Edison, New Jersey 08820, Attention: President, or at its then principal
executive offices, stating the number of shares with respect to which the option
is being exercised, accompanied by payment in full for such shares. Payment may
be (a) in United States dollars in cash or by check, (b) in whole or in part in
shares of Common Stock of the Company already owned by the person or persons
exercising the option or shares subject to the option being exercised (subject
to such restrictions and guidelines as the Board may adopt from time to time)
valued at fair market value determined in accordance with the provisions of
Section 5, or (c) consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise. There shall be no
such exercise at any one time as to fewer than one hundred (100) shares or all
of the remaining shares then purchasable by the person or persons exercising the
option, if fewer than one hundred (100) shares. The Company's transfer agent
shall, on behalf of the Company, prepare a certificate or certificates
representing such shares acquired pursuant to exercise of the option, shall
register the optionee as the owner of such shares on the books of the Company
and shall cause the fully executed certificate(s) representing such shares to be
delivered to the optionee as soon as practicable after payment of the option
price in full. The holder of an option shall not have any rights of a
stockholder with respect to the shares covered by the option, except to the
extent that one or more certificates for such shares shall be delivered to him
or her upon the due exercise of the option.
10. Adjustments Upon Changes in Capitalization and Other Events. Upon
the occurrence of any of the following events, an optionee's rights with respect
to options granted to him or her hereunder shall be adjusted as hereinafter
provided:
(a) Stock Dividends and Stock Splits. If the shares of Common
Stock shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, the number of shares of Common Stock deliverable
upon the exercise of options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
(b) Recapitalization Adjustments. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise, each option granted
under the Plan which is outstanding but unvested as of the effective date of
such event shall become exercisable in full twenty (20) days prior to the
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<PAGE> 5
effective date of such event. In the event of a reorganization,
recapitalization, merger, consolidation, or any other change in the corporate
structure or shares of the Company, to the extent permitted by Rule 16b-3 under
the Securities Exchange Act of 1934, as amended, adjustments shall be made in
the number and kind of shares authorized by the Plan and in the number of and
kind of shares covered by, and the option price of, outstanding options under
the Plan, in each case, as necessary to maintain the proportionate interest of
the optionee and preserve, without exceeding, the value of such option.
Notwithstanding the foregoing, no such adjustments shall be made which would,
within the meaning of any applicable provisions of the Internal Revenue Code of
1986, as amended, constitute a modification, extension or renewal of any option
or a grant of additional benefits to the holder of an option.
(c) Issuance of Securities. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares subject to options. No adjustments shall be made for dividends paid in
cash or in property other than securities of the Company.
(d) Adjustments. Upon the happening of any of the foregoing
events, the class and aggregate number of shares set forth in Section 2 of the
Plan that are subject to options which previously have been or subsequently may
be granted under the Plan shall also be appropriately adjusted to reflect such
events. The Board shall determine the specific adjustments to be made under this
Section 10 and its determination shall be conclusive.
11. Restrictions on Issuances of Shares. Notwithstanding the provisions
of Sections 4 and 9 of the Plan, the Company shall have no obligation to deliver
any certificate or certificates upon exercise of an option until one of the
following conditions shall be satisfied:
(a) The issuance of shares with respect to which the option
has been exercised is at the time of the issue of such shares registered under
applicable Federal and state securities laws as now in force or hereafter
amended; or
(b) Counsel for the Company shall have given an opinion that
the issuance of such shares is exempt from registration under Federal and state
securities laws as now in force or hereafter amended; and that the Company has
complied with all applicable laws and regulations with respect thereto,
including without limitation, all regulations required by any stock exchange
upon which the Company's outstanding Common Stock is then listed.
12. Legend on Certificates. The certificate representing shares issued
pursuant to the exercise of an option granted hereunder shall carry such
appropriate legend, and such written instructions shall be given to the
Company's transfer agent, as may be deemed necessary or advisable by counsel to
the Company in order to comply with the requirements of the Securities Act of
1933, as amended, or any state securities laws.
13. Representation of Optionee. If requested by the Company, the
optionee shall deliver to the Company written representations and warranties
upon exercise of the option that are necessary to show compliance with Federal
and state securities laws, including
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<PAGE> 6
representations and warranties to the effect that a purchase of shares under the
option is made for investment and not with a view to their distribution (as that
term is used in the Securities Act of 1933, as amended).
14. Option Agreement. Each option granted under the provisions of the
Plan shall be evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the optionee to whom such
option is granted. The option agreement shall contain such terms, provisions and
conditions not inconsistent with the Plan as may be determined by the officer
executing it.
15. Termination and Amendment of Plan. The Plan shall terminate on the
earlier to occur of May 31, 2006 or at such time as all shares reserved for
issuance hereunder (including any amendments hereto) shall have been issued. The
Board may at any time terminate the Plan or make such modification or amendment
thereof as it deems advisable; provided, however, that the Board may not,
without approval by the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or by proxy and voting on such matter
at a meeting, (a) increase the maximum number of shares for which options may be
granted under the Plan (except by adjustment pursuant to Section 10), (b)
materially modify the requirements as to eligibility to participate in the Plan,
(c) materially increase benefits accruing to option holders under the Plan, or
(d) amend the Plan in any manner which would cause Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, to become inapplicable to the Plan;
and provided further that the provisions of the Plan specified in Rule
16b-3(c)(2)(ii)(A) (or any successor or amended provision thereto) under the
Securities Act of 1934, as amended (including without limitation, provisions as
to eligibility, amount, price and timing of awards) may not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act, or the rules
thereunder. Termination or any modification or amendment of the Plan shall not,
without consent of a participant, affect his or her rights under an option
previously granted to him or her.
16. Withholding of Income Taxes. Upon the exercise of an option, the
Company, in accordance with Section 3402(a) of the Internal Revenue Code, as
amended, may require the optionee to pay withholding taxes in respect of amounts
considered to be compensation includible in the optionee's gross income.
17. Compliance with Regulations. It is the Company's intent that the
Plan comply in all respects with Rule 16b-3 under the Securities Exchange Act of
1934, as amended, and any applicable Securities and Exchange commission
interpretations thereof. If any provision of the Plan is deemed not to be in
compliance with Rule 16b-3, such provision of the Plan shall be null and void.
18. Governing Law. The validity and construction of the Plan and the
instruments evidencing options shall be governed by the laws of the State of New
Jersey, without giving effect to the principles of conflicts of law thereof.
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<PAGE> 7
19. Acceleration and Vesting of Option for Business Combinations. Upon
any merger, consolidation, sale of all (or substantially all) of the assets of
the Company, or a business combination involving the sale or transfer of all (or
substantially all) of the capital stock or assets of the Company in which the
Company is not the surviving entity, or, if it is the surviving entity, does not
survive as an operating going concern in substantially the same line of
business, then the options granted under the Plan shall, immediately prior to
the consummation of any of the foregoing events, become fully vested and
immediately exercisable by the optionee.
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<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT made effective as of the 1st day of June, 1996 (the
"Effective Date") by and between Intelligroup, Inc., a New Jersey corporation
with its principal place of business at 517 Route One South, Iselin, New Jersey
08830 (the "Company"), and Ashok Pandey (the "Employee").
WITNESSETH:
WHEREAS, the Company desires to secure the employment of the Employee
in accordance with the provisions of this Agreement; and
WHEREAS, the Employee desires and is willing to accept employment with
the Company in accordance herewith.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Term. The Company hereby agrees to employ the Employee and the
Employee hereby agrees to serve the Company pursuant to the terms and conditions
of this Agreement as Chairman of the Board, President and Chief Executive
Officer of the Company, or in a position at least commensurate therewith in all
material respects, for a term commencing on the Effective Date hereof and
expiring on the second anniversary thereof, provided that the Employee is
elected to such office, or a comparable or higher office, at each annual meeting
of the Board of Directors of the Company (the "Board of Directors") during the
term of this Agreement. If the Employee shall not be so elected at any such
annual meeting of the Board of Directors, the
<PAGE> 2
Employee's employment hereunder shall forthwith terminate and the Company shall
be obligated to compensate the Employee in accordance with Section 6(a) of this
Agreement.
2. Positions and Duties.
(a) Duties. The Employee's duties hereunder shall be those
which shall be prescribed from time to time by the Board of Directors in
accordance with the bylaws of the Company and shall include such executive
duties, powers and responsibilities as customarily attend the office of Chairman
of the Board, President and Chief Executive Officer of a company comparable to
the Company. The Employee will hold, in addition to the offices of Chairman of
the Board, President and Chief Executive Officer of the Company, such other
executive offices in the Company and its subsidiaries to which he may be
elected, appointed or assigned by the Board of Directors from time to time and
will discharge such executive duties in connection therewith. During the
employment period, the Employee's position (including status, offices and
reporting requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most significant of those
held, exercised and assigned immediately preceding the Effective Date. The
Employee shall devote his full working time, energy and skill (reasonable
absences for vacations and illness excepted), to the business of the Company as
is necessary in order to perform such duties faithfully, competently and
diligently; provided, however, that notwithstanding any provision in this
Agreement to the contrary, the Employee shall not be precluded from devoting
reasonable periods of time required for serving as a member of boards of
companies or organizations which have been approved by the Board of Directors so
long as such memberships or activities do not interfere with the performance of
the Employee's duties hereunder.
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<PAGE> 3
(b) Board Nomination. So long as the Employee is the Chairman
of the Board, President and Chief Executive Officer of the Company, the Company
will use diligent efforts to obtain the nomination and election of the Employee
as a director of the Company. In the event that the Employee is elected as a
director of the Company, the Employee shall perform all duties incident to such
directorship faithfully, diligently and competently and in the best interests of
the Company.
3. Compensation. During the term of this Agreement, the Employee shall
receive, for all services rendered to the Company hereunder, the following
(hereinafter referred to as "Compensation"):
(a) Base Salary. For the term hereof, the Employee shall be
paid an annual base salary equal to two hundred thousand dollars ($200,000). The
Employee's annual base salary shall be payable in equal installments in
accordance with the Company's general salary payment policies but no less
frequently than monthly. Such base salary shall be reviewed, and any increases
in the amount thereof shall be determined, by the Board of Directors or a
compensation committee formed by the Board of Directors (the "Compensation
Committee") at the end of each 12-month period of employment during the term
hereof.
(b) Bonuses. The Employee shall be eligible for and may
receive bonuses. The amount of such bonuses, if any, shall be solely within the
discretion of the Board of Directors or, if formed, the Compensation Committee
thereof.
(c) Incentive Compensation. The Employee shall be eligible for
awards from the Company's incentive compensation plans, including without
limitation any stock option plans, applicable to high level executive officers
of the Company or to key employees of the
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<PAGE> 4
Company or its subsidiaries, in accordance with the terms thereof and on a basis
commensurate with his position and responsibilities.
(d) Benefits. The Employee and his "dependents," as that term
may be defined under the applicable benefit plan(s) of the Company, shall be
included, to the extent eligible thereunder, in any and all plans, programs and
policies which provide benefits for employees and their dependents. Such plans,
programs and policies may include health care insurance, long-term disability
plans, life insurance, supplemental disability insurance, supplemental life
insurance, holidays and other similar or comparable benefits made available to
the Company's employees.
(e) Expenses. Subject to and in accordance with the Company's
policies and procedures, the Employee hereby is authorized to incur, and, upon
presentation of itemized accounts, shall be reimbursed by the Company for, any
and all reasonable and necessary business-related expenses, which expenses are
incurred by the Employee on behalf of the Company or any of its subsidiaries.
4. Absences. The Employee shall be entitled to vacations, absences
because of illness or other incapacity, and such other absences, whether for
holiday, personal time, or for any other purpose, as set forth in the Company's
employment manual or current procedures and policies, as the case may be, as
same may be amended from time-to-time.
5. Termination. In addition to the events of termination and expiration
of this Agreement provided for in Section 1 hereof, the Employee's employment
hereunder may be terminated only as follows:
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<PAGE> 5
(a) Without Cause. The Company may terminate the Employee's
employment hereunder without cause only upon action by the Board of Directors,
and upon no less than sixty (60) days prior written notice to the Employee. The
Employee may terminate employment hereunder without cause upon no less than
sixty (60) days prior written notice to the Company.
(b) For Cause, by the Company. The Company may terminate the
Employee's employment hereunder for cause immediately and with prompt notice to
the Employee, which cause shall be determined in good faith solely by the Board
of Directors. "Cause" for termination shall include, but is not limited to, the
following conduct of the Employee:
(1) Material breach of any provision of this
Agreement by the Employee, which breach shall not have been cured by the
Employee within thirty (30) days of receipt of written notice of said breach;
(2) Misconduct as an employee of the Company,
including but not limited to: misappropriating any funds or property of the
Company; attempting to willfully obtain any personal profit from any transaction
in which the Employee has an interest which is adverse to the interests of the
Company; or any other act or omission which substantially impairs the Company's
ability to conduct its ordinary business in its usual manner;
(3) Unreasonable neglect or refusal to perform the
duties assigned to the Employee under or pursuant to this Agreement;
(4) Conviction of a felony; or
(5) Any other act or omission which subjects the
Company or any of its subsidiaries to substantial public disrespect, scandal or
ridicule.
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<PAGE> 6
(c) For Good Reason by Employee. The Employee may terminate
employment hereunder for good reason immediately and with prompt notice to the
Company. "Good reason" for termination by the Employee shall include, but is not
limited to, the following conduct of the Company:
(1) Material breach of any provision of this
Agreement by the Company, which breach shall not have been cured by the Company
within thirty (30) days of receipt of written notice of said breach;
(2) Failure to maintain the Employee in a position
commensurate with that referred to in Section 2 of this Agreement; or
(3) The assignment to the Employee of any duties
inconsistent with the Employee's position, authority, duties or responsibilities
as contemplated by Section 2 of this Agreement, or any other action by the
Company which results in a diminution of such position, authority, duties or
responsibilities, excluding for this purpose any isolated action not taken in
bad faith and which is promptly remedied by the Company after receipt of notice
thereof given by the Employee.
(d) Death. The period of active employment of the Employee
hereunder shall terminate automatically in the event of his death.
(e) Disability. In the event that the Employee shall be unable
to perform duties hereunder for a period of ninety (90) consecutive calendar
days by reason of disability as a result of illness, accident or other physical
or mental incapacity or disability, the Company may, in its discretion, by
giving written notice to the Employee, terminate the Employee's employment
hereunder as long as the Employee is still disabled on the effective date of
such termination.
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<PAGE> 7
(f) Mutual Agreement. This Agreement may be terminated at any
time by mutual agreement of the Employee and the Company.
6. Compensation in the Event of Termination. In the event that the
Employee's employment pursuant to this Agreement terminates prior to the end of
the term of this Agreement because he is not reelected pursuant to Section 1 or
for a reason provided in Section 5 hereof, the Company shall pay the Employee
compensation as set forth below:
(a) Employee not Elected by Board of Directors; By Employee
for Good Reason; By Company Without Cause. In the event that the Employee's
employment hereunder is terminated: (i) because the Employee is not elected to
the office of Chairman of the Board, President and Chief Executive Officer of
the Company, or in a position at least commensurate therewith in all material
respects, at any annual meeting of the Company's Board of Directors during the
term of this Agreement, as contemplated by Section 1 hereof; (ii) by the
Employee for good reason pursuant to Section 5(c) hereof; or (iii) by the
Company without cause, then the Company shall continue to pay or provide, as
applicable, the following compensation to the Employee:
(1) Annual base salary as set forth in Section 3(a)
hereof; and
(2) Continuing coverage, but only to the extent
required by law, for the Employee and his eligible dependents under all of the
Company's benefit plans, programs and policies in effect as of the date of
termination.
Such compensation shall continue to be paid or
provided, as applicable, in the same manner as before termination, and for a
period of time ending on the date when the term of this Agreement would
otherwise have expired in accordance with Section 1 of this Agreement.
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<PAGE> 8
The Employee shall not be required to mitigate the amount of any payment
provided for in this Section 6(a) by seeking employment or otherwise, nor shall
any amounts received from employment or otherwise by the Employee offset in any
manner the obligations of the Company hereunder.
(b) By Company Upon Termination of Agreement Due to Employee's
Death or Disability. In the event of the Employee's death or if the Company
shall terminate the Employee's employment hereunder for disability pursuant to
Section 5(e) hereof, the base salary payable hereunder shall continue to be paid
at the then current rate for three (3) months after the termination of
employment to the Employee or his personal representative, as applicable.
(c) By Company For Cause or By Employee Without Good Reason.
In the event that (i) the Company shall terminate the Employee's employment
hereunder for cause pursuant to Section 5(b) hereof or (ii) the Employee shall
terminate employment hereunder without "good reason" as provided in Section 5(c)
hereof, the Company shall not be obligated to pay the Employee any compensation
except for salary and other Compensation which may have been earned and are due
and payable but which have not been paid as of the date of termination.
7. Effect of Termination. In the event of expiration or early
termination of this Agreement as provided herein, neither the Company nor the
Employee shall have any remaining duties or obligations hereunder except that:
(a) The Company shall:
(1) Pay the Employee's accrued salary and any other
accrued benefits under Section 3 hereof;
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<PAGE> 9
(2) Reimburse the Employee for expenses already
incurred in accordance with Section 3(e) hereof;
(3) To the extent required by law, pay or otherwise
provide for any benefits, payments or continuation or conversion rights in
accordance with the provisions of any benefit plan of which the Employee or any
of his dependents is or was a participant; and
(4) Pay the Employee or his beneficiaries any
compensation due pursuant to Section 6 hereof; and
(b) The Employee shall remain bound by the terms of Section 8
hereof and Exhibit A attached hereto.
8. Restrictive Covenant. (a) The Employee acknowledges and agrees that
he has access to secret and confidential information of the Company and its
subsidiaries and that the following restrictive covenant is necessary to protect
the interests and continued success of the Company. Except as otherwise
expressly consented to in writing by the Company, until the termination of the
Employee's employment (for any reason and whether such employment was under this
Agreement or otherwise) and thereafter for twenty-four (24) months (the
"Restricted Period"), the Employee shall not, directly or indirectly, acting as
an employee, owner, shareholder, partner, joint venturer, officer, director,
agent, salesperson, consultant, advisor, investor or principal of any
corporation or other business entity:
(i) engage, in any state or territory of the United States of
America or other country where the Company is doing business (determined as of
the date the Employee's employment with the Company terminates), in direct or
indirect competition with the business conducted by
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<PAGE> 10
the Company or activities which the Company plans to conduct within one year of
termination (determined as of the date the Employee's employment with the
Company terminates);
(ii) request or otherwise attempt to induce or influence,
directly or indirectly, any present customer or supplier, or prospective
customer or supplier, of the Company, or other persons sharing a business
relationship with the Company, to cancel, limit or postpone their business with
the Company, or otherwise take action which might be to the material
disadvantage of the Company; or
(iii) hire or solicit for employment, directly or indirectly,
or induce or actively attempt to influence, any Employee of the Company or any
Affiliate, as such term is defined in the Securities Act of 1933, as amended, to
terminate his or her employment or discontinue such person's consultant,
contractor or other business association with the Company.
(b) If the Employee violates any of the restrictions contained
in Section 8(a) above, the Restrictive Period shall be increased by the period
of time from the commencement of any such violation until the time such
violation shall be cured by the Employee to the satisfaction of the Company, and
the Company may withhold any and all payments, except salary, otherwise due and
owing to the Employee under this Agreement.
(c) In the event that either the geographical area or the
Restrictive Period set forth in Section 8(a) of this Agreement is deemed to be
unreasonably restrictive in any court proceeding, the court may reduce such
geographical area and Restrictive Period to the extent which it deems reasonable
under the circumstances.
(d) Nothing in this Section 8, whether express or implied,
shall prevent the Employee from being a holder of securities of a company whose
securities are registered under
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<PAGE> 11
Section 12 of the Securities Exchange Act of 1934, as amended; provided,
however, that the Employee holds of record and beneficially less than two
percent (2%) of the votes eligible to be cast generally by holders of securities
of such company for the election of directors.
(e) The Employee, as a condition of his continued employment,
acknowledges and agrees that he has reviewed and will continue to be bound by
all of the provisions set forth in Exhibit A attached hereto, which is
incorporated herein by reference and made a part hereof as though fully set
forth herein, during the term of this Agreement, and any time hereafter.
(f) Employee acknowledges and agrees that in the event of a
breach or threatened breach of the provisions of this Section 8 by Employee the
Company may suffer irreparable harm and therefore, the Company shall be
entitled, to the extent permissible by law, immediately to cease to pay or
provide the Employee any compensation being, or to be, paid or provided to him
pursuant to Sections 3 or 6 of this Agreement, and also to obtain immediate
injunctive relief restraining the Employee from conduct in breach or threatened
breach of the covenants contained in this Section 8. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
9. Resolution of Differences Over Breaches of Agreement. Except as
otherwise provided herein, any controversy or claim arising out of, or relating
to, this Agreement, or the breach hereof, shall be reviewed in the first
instance in accordance with the Company's internal review procedures, if any,
with recourse thereafter--for temporary or preliminary injunctive relief
only--to the courts having jurisdiction thereof, and if any relief other than
injunctive relief is sought, then to arbitration in Middlesex County, New Jersey
in accordance with the rules of the
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<PAGE> 12
American Arbitration Association, and judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof.
10. Waiver. The waiver by a party hereto of any breach by the other
party hereto of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by a party hereto.
11. Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company, and the Company shall be
obligated to require any successor to expressly assume its obligations
hereunder. This Agreement shall inure to the benefit of and be enforceable by
the Employee or his legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. The Employee may not
assign any of his duties, responsibilities, obligations or positions hereunder
to any person and any such purported assignment by him shall be void and of no
force and effect.
12. Notices. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing, and if personally delivered or when
sent by first class certified or registered mail, postage prepaid, return
receipt requested--in the case of the Employee, to his residence address as set
forth below, and in the case of the Company, to the address of its principal
place of business as set forth below, in care of the Board of Directors--or to
such other person or at such other address with respect to each party as such
party shall notify the other in writing.
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<PAGE> 13
13. Construction of Agreement.
(a) Governing Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the internal laws of the
State of New Jersey without reference to its principles regarding conflicts of
law.
(b) Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
(c) Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience of reference only and
shall not constitute a part of this Agreement.
14. Entire Agreement. This Agreement contains the entire agreement of
the parties concerning the Employee's employment and all promises,
representations, understandings, arrangements and prior agreements on such
subject are merged herein and superseded hereby. The provisions of this
Agreement may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom enforcement
of any amendment, modification, repeal, waiver, extension or discharge is
sought. No person acting other than pursuant to a resolution of the Board of
Directors shall have authority on behalf of the Company to agree to amend,
modify, repeal, waive, extend or discharge any provision of this Agreement or
anything in reference thereto or to exercise any of the Company's rights to
terminate or to fail to extend this Agreement. I further understand and agree
that if the Company does not consummate an initial public offering of its common
stock prior to October 31, 1996 that this Agreement shall be of no further force
or effect.
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<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and attested by its duly authorized officers, and the Employee has set
his hand, all as of the day and year first above written.
ATTEST: Intelligroup, Inc.
____________________________ By:________________________________
Robert M. Olanoff, Secretary Rajkumar Koneru, Vice President
Address:___________________________
___________________________
___________________________
WITNESS: EMPLOYEE
____________________________ ___________________________________
Ashok Pandey
Address:___________________________
___________________________
___________________________
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<PAGE> 15
EXHIBIT A
INTELLIGROUP, INC.
EMPLOYEE'S
INVENTION ASSIGNMENT AND CONFIDENTIALITY
AGREEMENT
In consideration of my employment or continued employment by
Intelligroup, Inc., a New Jersey corporation or any subsidiary or parent
corporation thereof (the "Company"), I hereby represent and agree as follows:
1. I understand that the Company is engaged in the business of
providing a wide range of information technology services, including
enterprise-wide business process solutions, systems integration and customized
applications and related services and that I may have access to or acquire
information with respect to Confidential Information (as defined below),
including processes and methods, development tools, scientific, technical and/or
business innovations.
2. Disclosure of Innovations. I agree to disclose in writing to the
Company all inventions, improvements and other innovations of any kind that I
may make, conceive, develop or reduce to practice, alone or jointly with others,
during the term of my employment with the Company, whether or not they are
related to my work for the Company and whether or not they are eligible for
patent, copyright, trademark, trade secret or other legal protection
("Innovations"). Examples of Innovations shall include, but are not limited to,
discoveries, research, inventions, formulas, techniques, processes, tools,
know-how, marketing plans, new product plans, production processes, advertising,
packaging and marketing techniques and improvements to computer hardware or
software.
3. Assignment of Ownership of Innovations. I agree that all Innovations
will be the sole and exclusive property of the Company and I hereby assign all
of my rights, title or interest in the Innovations and in all related patents,
copyrights, trademarks, trade secrets, rights of priority and other proprietary
rights to the Company. At the Company's request and expense, during and after
the period of my employment with the Company, I will assist and cooperate with
the Company in all respects and will execute documents, and, subject to my
reasonable availability, give testimony and take further acts requested by the
Company to obtain, maintain, perfect and enforce for the Company patent,
copyright, trademark, trade secret and other legal protection for the
Innovations. I hereby appoint the President and Chief Executive Officer of the
Company as my attorney-in-fact to execute documents on my behalf for this
purpose.
4. Protection of Confidential Information of the Company. I understand
that my work as an employee of the Company creates a relationship of trust and
confidence between myself and the Company. During and after the period of my
employment with the Company, I will not use or disclose or allow anyone else to
use or disclose any "Confidential Information" (as defined below) relating to
the Company, its products, suppliers or customers except as may
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<PAGE> 16
be necessary in the performance of my work for the Company or as may be
authorized in advance by appropriate officers of the Company. "Confidential
Information" shall include innovations, methodologies, processes, tools,
business strategies, financial information, forecasts, personnel information,
customer lists, trade secrets and any other non-public technical or business
information, whether in writing or given to me orally, which I know or have
reason to know the Company would like to treat as confidential for any purpose,
such as maintaining a competitive advantage or avoiding undesirable publicity. I
will keep Confidential Information secret and will not allow any unauthorized
use of the same, whether or not any document containing it is marked as
confidential. These restrictions, however, will not apply to Confidential
Information that has become known to the public generally through no fault or
breach of mine or that the Company regularly gives to third parties without
restriction on use or disclosure. Upon termination of my work with the Company,
I will promptly deliver to the Company all documents and materials of any nature
pertaining to my work with the Company and I will not take with me any documents
or materials or copies thereof containing any Confidential Information.
5. Non-Solicitation. I understand that my work as an employee of the
Company creates a relationship of trust and confidence between myself and the
Company. During and after the period of my employment with the Company, I will
not request or otherwise attempt to induce or influence, directly or indirectly,
any present customer or supplier, or prospective customer or supplier, of the
Company, or other persons sharing a business relationship with the Company to
cancel, to limit or postpone their business with the Company, or otherwise take
action which might be to the material disadvantage of the Company. During and
after the period of my employment with the Company, I will not hire or solicit
for employment, directly or indirectly, or induce or actively attempt to
influence, any Employee of the Company or any Affiliate of the Company, as such
term is defined in the Securities Act of 1933, as amended, to terminate his or
her employment or discontinue such person's consultant, contractor or other
business association with the Company.
6. Other Agreements. I represent that my performance of all the terms
of this Agreement and my duties as an employee of the Company will not breach
any invention assignment agreement, confidential information agreement,
non-competition agreement or other agreement with any former employer or other
party. I represent that I have not and will not bring with me to the Company or
use in the performance of my duties for the Company any documents or materials
of a former employer that are not generally available to the public.
7. Disclosure of this Agreement. I hereby authorize the Company to
notify others, including but not limited to customers of the Company and any of
my future employers, of the terms of this Agreement and my responsibilities
hereunder.
8. Injunctive Relief. I understand that in the event of a breach or
threatened breach of this Agreement by me the Company may suffer irreparable
harm and monetary damages alone would not adequately compensate the Company. The
Company will therefore be entitled to injunctive relief to enforce this
Agreement.
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<PAGE> 17
9. Enforcement and Severability. I acknowledge that each of the
provisions in this Agreement are separate and independent covenants. I agree
that if any court shall determine that any provision of this Agreement is
unenforceable with respect to its term or scope such provision shall nonetheless
be enforceable by any such court upon such modified term or scope as may be
determined by such court to be reasonable and enforceable. The remainder of this
Agreement shall not be affected by the unenforceability or court ordered
modification of a specific provision.
10. Governing Law. I agree that this Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
11. Superseding Agreement. I understand and agree that this Agreement
contains the entire agreement of the parties with respect to subject matter
hereof and supersedes all previous agreements and understandings between the
parties with respect to its subject matter.
12. Acknowledgments. I acknowledge that I have read this agreement, was
given the opportunity to ask questions and sufficient time to consult an
attorney and I have either consulted an attorney or affirmatively decided not to
consult an attorney. I understand that this agreement does not alter the terms
of an executed Employment Agreement with the Company, or in the absence of an
Employment Agreement, this Agreement does not alter my status as an employee at
will and that my employment may be terminated at any time, with or without
cause. I also understand that my obligations under this Agreement survive the
termination of my employment with the Company.
*.*.*.*.*.*.*.*.*.*
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<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written below.
Date: _________________ ___________________________________
Name of Employee:
Address: __________________________
__________________________
__________________________
__________________________
Intelligroup, Inc.
Date:__________________ By:________________________________
Name:
Title:
-A4-
<PAGE> 1
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT made effective as of the 1st day of June, 1996 (the
"Effective Date") by and between Intelligroup, Inc., a New Jersey corporation
with its principal place of business at 517 Route One South, Iselin, New Jersey
08830 (the "Company"), and Rajkumar Koneru (the "Employee").
WITNESSETH:
WHEREAS, the Company desires to secure the employment of the Employee
in accordance with the provisions of this Agreement; and
WHEREAS, the Employee desires and is willing to accept employment with
the Company in accordance herewith.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Term. The Company hereby agrees to employ the Employee and the
Employee hereby agrees to serve the Company pursuant to the terms and conditions
of this Agreement as Vice President - Business Solutions of the Company, or in a
position at least commensurate therewith in all material respects, for a term
commencing on the Effective Date hereof and expiring on the second anniversary
thereof, provided that the Employee is elected to such office, or a comparable
or higher office, at each annual meeting of the Board of Directors of the
Company (the "Board of Directors") during the term of this Agreement. If the
Employee shall not be so elected at any such annual meeting of the Board of
Directors, the Employee's
<PAGE> 2
employment hereunder shall forthwith terminate and the Company shall be
obligated to compensate the Employee in accordance with Section 6(a) of this
Agreement.
2. Positions and Duties.
(a) Duties. The Employee's duties hereunder shall be those
which shall be prescribed from time to time by the Board of Directors in
accordance with the bylaws of the Company and shall include such executive
duties, powers and responsibilities as customarily attend the office of Vice
President - Business Solutions of a company comparable to the Company. The
Employee will hold, in addition to the office of Vice President - Business
Solutions of the Company, such other executive offices in the Company and its
subsidiaries to which he may be elected, appointed or assigned by the Board of
Directors from time to time and will discharge such executive duties in
connection therewith. During the employment period, the Employee's position
(including status, offices and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned immediately preceding
the Effective Date. The Employee shall devote his full working time, energy and
skill (reasonable absences for vacations and illness excepted), to the business
of the Company as is necessary in order to perform such duties faithfully,
competently and diligently; provided, however, that notwithstanding any
provision in this Agreement to the contrary, the Employee shall not be precluded
from devoting reasonable periods of time required for serving as a member of
boards of companies or organizations which have been approved by the Board of
Directors so long as such memberships or activities do not interfere with the
performance of the Employee's duties hereunder.
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<PAGE> 3
(b) Board Nomination. So long as the Employee is a Vice
President of the Company, the Company will use diligent efforts to obtain the
nomination and election of the Employee as a director of the Company. In the
event that the Employee is elected as a director of the Company, the Employee
shall perform all duties incident to such directorship faithfully, diligently
and competently and in the best interests of the Company.
3. Compensation. During the term of this Agreement, the Employee shall
receive, for all services rendered to the Company hereunder, the following
(hereinafter referred to as "Compensation"):
(a) Base Salary. For the term hereof, the Employee shall be
paid an annual base salary equal to two hundred thousand dollars ($200,000). The
Employee's annual base salary shall be payable in equal installments in
accordance with the Company's general salary payment policies but no less
frequently than monthly. Such base salary shall be reviewed, and any increases
in the amount thereof shall be determined, by the Board of Directors or a
compensation committee formed by the Board of Directors (the "Compensation
Committee") at the end of each 12-month period of employment during the term
hereof.
(b) Bonuses. The Employee shall be eligible for and may
receive bonuses. The amount of such bonuses, if any, shall be solely within the
discretion of the Board of Directors or, if formed, the Compensation Committee
thereof.
(c) Incentive Compensation. The Employee shall be eligible for
awards from the Company's incentive compensation plans, including without
limitation any stock option plans, applicable to high level executive officers
of the Company or to key employees of the
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<PAGE> 4
Company or its subsidiaries, in accordance with the terms thereof and on a basis
commensurate with his position and responsibilities.
(d) Benefits. The Employee and his "dependents," as that term
may be defined under the applicable benefit plan(s) of the Company, shall be
included, to the extent eligible thereunder, in any and all plans, programs and
policies which provide benefits for employees and their dependents. Such plans,
programs and policies may include health care insurance, long-term disability
plans, life insurance, supplemental disability insurance, supplemental life
insurance, holidays and other similar or comparable benefits made available to
the Company's employees.
(e) Expenses. Subject to and in accordance with the Company's
policies and procedures, the Employee hereby is authorized to incur, and, upon
presentation of itemized accounts, shall be reimbursed by the Company for, any
and all reasonable and necessary business-related expenses, which expenses are
incurred by the Employee on behalf of the Company or any of its subsidiaries.
4. Absences. The Employee shall be entitled to vacations, absences
because of illness or other incapacity, and such other absences, whether for
holiday, personal time, or for any other purpose, as set forth in the Company's
employment manual or current procedures and policies, as the case may be, as
same may be amended from time-to-time.
5. Termination. In addition to the events of termination and expiration
of this Agreement provided for in Section 1 hereof, the Employee's employment
hereunder may be terminated only as follows:
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<PAGE> 5
(a) Without Cause. The Company may terminate the Employee's
employment hereunder without cause only upon action by the Board of Directors,
and upon no less than sixty (60) days prior written notice to the Employee. The
Employee may terminate employment hereunder without cause upon no less than
sixty (60) days prior written notice to the Company.
(b) For Cause, by the Company. The Company may terminate the
Employee's employment hereunder for cause immediately and with prompt notice to
the Employee, which cause shall be determined in good faith solely by the Board
of Directors. "Cause" for termination shall include, but is not limited to, the
following conduct of the Employee:
(1) Material breach of any provision of this
Agreement by the Employee, which breach shall not have been cured by the
Employee within thirty (30) days of receipt of written notice of said breach;
(2) Misconduct as an employee of the Company,
including but not limited to: misappropriating any funds or property of the
Company; attempting to willfully obtain any personal profit from any transaction
in which the Employee has an interest which is adverse to the interests of the
Company; or any other act or omission which substantially impairs the Company's
ability to conduct its ordinary business in its usual manner;
(3) Unreasonable neglect or refusal to perform the
duties assigned to the Employee under or pursuant to this Agreement;
(4) Conviction of a felony; or
(5) Any other act or omission which subjects the
Company or any of its subsidiaries to substantial public disrespect, scandal or
ridicule.
-5-
<PAGE> 6
(c) For Good Reason by Employee. The Employee may terminate
employment hereunder for good reason immediately and with prompt notice to the
Company. "Good reason" for termination by the Employee shall include, but is not
limited to, the following conduct of the Company:
(1) Material breach of any provision of this
Agreement by the Company, which breach shall not have been cured by the Company
within thirty (30) days of receipt of written notice of said breach;
(2) Failure to maintain the Employee in a position
commensurate with that referred to in Section 2 of this Agreement; or
(3) The assignment to the Employee of any duties
inconsistent with the Employee's position, authority, duties or responsibilities
as contemplated by Section 2 of this Agreement, or any other action by the
Company which results in a diminution of such position, authority, duties or
responsibilities, excluding for this purpose any isolated action not taken in
bad faith and which is promptly remedied by the Company after receipt of notice
thereof given by the Employee.
(d) Death. The period of active employment of the Employee
hereunder shall terminate automatically in the event of his death.
(e) Disability. In the event that the Employee shall be unable
to perform duties hereunder for a period of ninety (90) consecutive calendar
days by reason of disability as a result of illness, accident or other physical
or mental incapacity or disability, the Company may, in its discretion, by
giving written notice to the Employee, terminate the Employee's employment
hereunder as long as the Employee is still disabled on the effective date of
such termination.
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<PAGE> 7
(f) Mutual Agreement. This Agreement may be terminated at any
time by mutual agreement of the Employee and the Company.
6. Compensation in the Event of Termination. In the event that the
Employee's employment pursuant to this Agreement terminates prior to the end of
the term of this Agreement because he is not reelected pursuant to Section 1 or
for a reason provided in Section 5 hereof, the Company shall pay the Employee
compensation as set forth below:
(a) Employee not Elected by Board of Directors; By Employee
for Good Reason; By Company Without Cause. In the event that the Employee's
employment hereunder is terminated: (i) because the Employee is not elected to
the position of Vice President - Business Solutions of the Company, or in a
position at least commensurate therewith in all material respects, at any annual
meeting of the Company's Board of Directors during the term of this Agreement,
as contemplated by Section 1 hereof; (ii) by the Employee for good reason
pursuant to Section 5(c) hereof; or (iii) by the Company without cause, then the
Company shall continue to pay or provide, as applicable, the following
compensation to the Employee:
(1) Annual base salary as set forth in Section 3(a)
hereof; and
(2) Continuing coverage, but only to the extent
required by law, for the Employee and his eligible dependents under all of the
Company's benefit plans, programs and policies in effect as of the date of
termination.
Such compensation shall continue to be paid or
provided, as applicable, in the same manner as before termination, and for a
period of time ending on the date when the term of this Agreement would
otherwise have expired in accordance with Section 1 of this Agreement. The
Employee shall not be required to mitigate the amount of any payment provided
for in this
-7-
<PAGE> 8
Section 6(a) by seeking employment or otherwise, nor shall any amounts received
from employment or otherwise by the Employee offset in any manner the
obligations of the Company hereunder.
(b) By Company Upon Termination of Agreement Due to Employee's
Death or Disability. In the event of the Employee's death or if the Company
shall terminate the Employee's employment hereunder for disability pursuant to
Section 5(e) hereof, the base salary payable hereunder shall continue to be paid
at the then current rate for three (3) months after the termination of
employment to the Employee or his personal representative, as applicable.
(c) By Company For Cause or By Employee Without Good Reason.
In the event that (i) the Company shall terminate the Employee's employment
hereunder for cause pursuant to Section 5(b) hereof or (ii) the Employee shall
terminate employment hereunder without "good reason" as provided in Section 5(c)
hereof, the Company shall not be obligated to pay the Employee any compensation
except for salary and other Compensation which may have been earned and are due
and payable but which have not been paid as of the date of termination.
7. Effect of Termination. In the event of expiration or early
termination of this Agreement as provided herein, neither the Company nor the
Employee shall have any remaining duties or obligations hereunder except that:
(a) The Company shall:
(1) Pay the Employee's accrued salary and any other
accrued benefits under Section 3 hereof;
(2) Reimburse the Employee for expenses already
incurred in accordance with Section 3(e) hereof;
-8-
<PAGE> 9
(3) To the extent required by law, pay or otherwise
provide for any benefits, payments or continuation or conversion rights in
accordance with the provisions of any benefit plan of which the Employee or any
of his dependents is or was a participant; and
(4) Pay the Employee or his beneficiaries any
compensation due pursuant to Section 6 hereof; and
(b) The Employee shall remain bound by the terms of Section 8
hereof and Exhibit A attached hereto.
8. Restrictive Covenant. (a) The Employee acknowledges and agrees that
he has access to secret and confidential information of the Company and its
subsidiaries and that the following restrictive covenant is necessary to protect
the interests and continued success of the Company. Except as otherwise
expressly consented to in writing by the Company, until the termination of the
Employee's employment (for any reason and whether such employment was under this
Agreement or otherwise) and thereafter for twenty-four (24) months (the
"Restricted Period"), the Employee shall not, directly or indirectly, acting as
an employee, owner, shareholder, partner, joint venturer, officer, director,
agent, salesperson, consultant, advisor, investor or principal of any
corporation or other business entity:
(i) engage, in any state or territory of the United States of
America or other country where the Company is doing business (determined as of
the date the Employee's employment with the Company terminates), in direct or
indirect competition with the business conducted by the Company or activities
which the Company plans to conduct within one year of termination (determined as
of the date the Employee's employment with the Company terminates);
-9-
<PAGE> 10
(ii) request or otherwise attempt to induce or influence,
directly or indirectly, any present customer or supplier, or prospective
customer or supplier, of the Company, or other persons sharing a business
relationship with the Company, to cancel, limit or postpone their business with
the Company, or otherwise take action which might be to the material
disadvantage of the Company; or
(iii) hire or solicit for employment, directly or indirectly,
or induce or actively attempt to influence, any Employee of the Company or any
Affiliate, as such term is defined in the Securities Act of 1933, as amended, to
terminate his or her employment or discontinue such person's consultant,
contractor or other business association with the Company.
(b) If the Employee violates any of the restrictions contained
in Section 8(a) above, the Restrictive Period shall be increased by the period
of time from the commencement of any such violation until the time such
violation shall be cured by the Employee to the satisfaction of the Company, and
the Company may withhold any and all payments, except salary, otherwise due and
owing to the Employee under this Agreement.
(c) In the event that either the geographical area or the
Restrictive Period set forth in Section 8(a) of this Agreement is deemed to be
unreasonably restrictive in any court proceeding, the court may reduce such
geographical area and Restrictive Period to the extent which it deems reasonable
under the circumstances.
(d) Nothing in this Section 8, whether express or implied,
shall prevent the Employee from being a holder of securities of a company whose
securities are registered under Section 12 of the Securities Exchange Act of
1934, as amended; provided, however, that the
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<PAGE> 11
Employee holds of record and beneficially less than two percent (2%) of the
votes eligible to be cast generally by holders of securities of such company for
the election of directors.
(e) The Employee, as a condition of his continued employment,
acknowledges and agrees that he has reviewed and will continue to be bound by
all of the provisions set forth in Exhibit A attached hereto, which is
incorporated herein by reference and made a part hereof as though fully set
forth herein, during the term of this Agreement, and any time hereafter.
(f) Employee acknowledges and agrees that in the event of a
breach or threatened breach of the provisions of this Section 8 by Employee the
Company may suffer irreparable harm and therefore, the Company shall be
entitled, to the extent permissible by law, immediately to cease to pay or
provide the Employee any compensation being, or to be, paid or provided to him
pursuant to Sections 3 or 6 of this Agreement, and also to obtain immediate
injunctive relief restraining the Employee from conduct in breach or threatened
breach of the covenants contained in this Section 8. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
9. Resolution of Differences Over Breaches of Agreement. Except as
otherwise provided herein, any controversy or claim arising out of, or relating
to, this Agreement, or the breach hereof, shall be reviewed in the first
instance in accordance with the Company's internal review procedures, if any,
with recourse thereafter--for temporary or preliminary injunctive relief
only--to the courts having jurisdiction thereof, and if any relief other than
injunctive relief is sought, then to arbitration in Middlesex County, New Jersey
in accordance with the rules of the
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<PAGE> 12
American Arbitration Association, and judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof.
10. Waiver. The waiver by a party hereto of any breach by the other
party hereto of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by a party hereto.
11. Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company, and the Company shall be
obligated to require any successor to expressly assume its obligations
hereunder. This Agreement shall inure to the benefit of and be enforceable by
the Employee or his legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. The Employee may not
assign any of his duties, responsibilities, obligations or positions hereunder
to any person and any such purported assignment by him shall be void and of no
force and effect.
12. Notices. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing, and if personally delivered or when
sent by first class certified or registered mail, postage prepaid, return
receipt requested--in the case of the Employee, to his residence address as set
forth below, and in the case of the Company, to the address of its principal
place of business as set forth below, in care of the Board of Directors--or to
such other person or at such other address with respect to each party as such
party shall notify the other in writing.
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<PAGE> 13
13. Construction of Agreement.
(a) Governing Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the internal laws of the
State of New Jersey without reference to its principles regarding conflicts of
law.
(b) Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
(c) Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience of reference only and
shall not constitute a part of this Agreement.
14. Entire Agreement. This Agreement contains the entire agreement of
the parties concerning the Employee's employment and all promises,
representations, understandings, arrangements and prior agreements on such
subject are merged herein and superseded hereby. The provisions of this
Agreement may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom enforcement
of any amendment, modification, repeal, waiver, extension or discharge is
sought. No person acting other than pursuant to a resolution of the Board of
Directors shall have authority on behalf of the Company to agree to amend,
modify, repeal, waive, extend or discharge any provision of this Agreement or
anything in reference thereto or to exercise any of the Company's rights to
terminate or to fail to extend this Agreement. I further understand and agree
that if the Company does not consummate an initial public offering of its common
stock prior to October 31, 1996 that this Agreement shall be of no further force
or effect.
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<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and attested by its duly authorized officers, and the Employee has set
his hand, all as of the day and year first above written.
ATTEST: Intelligroup, Inc.,
____________________________ By:_____________________________________
Robert M. Olanoff, Secretary Ashok Pandey, President and
Chief Executive Officer
Address:________________________________
________________________________
________________________________
WITNESS: EMPLOYEE
____________________________ ________________________________________
Rajkumar Koneru
Address:________________________________
________________________________
________________________________
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<PAGE> 15
EXHIBIT A
INTELLIGROUP, INC.
EMPLOYEE'S
INVENTION ASSIGNMENT AND CONFIDENTIALITY
AGREEMENT
In consideration of my employment or continued employment by
Intelligroup, Inc., a New Jersey corporation or any subsidiary or parent
corporation thereof (the "Company"), I hereby represent and agree as follows:
1. I understand that the Company is engaged in the business of
providing a wide range of information technology services, including
enterprise-wide business process solutions, systems integration and customized
applications and related services and that I may have access to or acquire
information with respect to Confidential Information (as defined below),
including processes and methods, development tools, scientific, technical and/or
business innovations.
2. Disclosure of Innovations. I agree to disclose in writing to the
Company all inventions, improvements and other innovations of any kind that I
may make, conceive, develop or reduce to practice, alone or jointly with others,
during the term of my employment with the Company, whether or not they are
related to my work for the Company and whether or not they are eligible for
patent, copyright, trademark, trade secret or other legal protection
("Innovations"). Examples of Innovations shall include, but are not limited to,
discoveries, research, inventions, formulas, techniques, processes, tools,
know-how, marketing plans, new product plans, production processes, advertising,
packaging and marketing techniques and improvements to computer hardware or
software.
3. Assignment of Ownership of Innovations. I agree that all Innovations
will be the sole and exclusive property of the Company and I hereby assign all
of my rights, title or interest in the Innovations and in all related patents,
copyrights, trademarks, trade secrets, rights of priority and other proprietary
rights to the Company. At the Company's request and expense, during and after
the period of my employment with the Company, I will assist and cooperate with
the Company in all respects and will execute documents, and, subject to my
reasonable availability, give testimony and take further acts requested by the
Company to obtain, maintain, perfect and enforce for the Company patent,
copyright, trademark, trade secret and other legal protection for the
Innovations. I hereby appoint the President and Chief Executive Officer of the
Company as my attorney-in-fact to execute documents on my behalf for this
purpose.
4. Protection of Confidential Information of the Company. I understand
that my work as an employee of the Company creates a relationship of trust and
confidence between myself and the Company. During and after the period of my
employment with the Company, I will not use or disclose or allow anyone else to
use or disclose any "Confidential Information" (as defined below) relating to
the Company, its products, suppliers or customers except as may
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<PAGE> 16
be necessary in the performance of my work for the Company or as may be
authorized in advance by appropriate officers of the Company. "Confidential
Information" shall include innovations, methodologies, processes, tools,
business strategies, financial information, forecasts, personnel information,
customer lists, trade secrets and any other non-public technical or business
information, whether in writing or given to me orally, which I know or have
reason to know the Company would like to treat as confidential for any purpose,
such as maintaining a competitive advantage or avoiding undesirable publicity. I
will keep Confidential Information secret and will not allow any unauthorized
use of the same, whether or not any document containing it is marked as
confidential. These restrictions, however, will not apply to Confidential
Information that has become known to the public generally through no fault or
breach of mine or that the Company regularly gives to third parties without
restriction on use or disclosure. Upon termination of my work with the Company,
I will promptly deliver to the Company all documents and materials of any nature
pertaining to my work with the Company and I will not take with me any documents
or materials or copies thereof containing any Confidential Information.
5. Non-Solicitation. I understand that my work as an employee of the
Company creates a relationship of trust and confidence between myself and the
Company. During and after the period of my employment with the Company, I will
not request or otherwise attempt to induce or influence, directly or indirectly,
any present customer or supplier, or prospective customer or supplier, of the
Company, or other persons sharing a business relationship with the Company to
cancel, to limit or postpone their business with the Company, or otherwise take
action which might be to the material disadvantage of the Company. During and
after the period of my employment with the Company, I will not hire or solicit
for employment, directly or indirectly, or induce or actively attempt to
influence, any Employee of the Company or any Affiliate of the Company, as such
term is defined in the Securities Act of 1933, as amended, to terminate his or
her employment or discontinue such person's consultant, contractor or other
business association with the Company.
6. Other Agreements. I represent that my performance of all the terms
of this Agreement and my duties as an employee of the Company will not breach
any invention assignment agreement, confidential information agreement,
non-competition agreement or other agreement with any former employer or other
party. I represent that I have not and will not bring with me to the Company or
use in the performance of my duties for the Company any documents or materials
of a former employer that are not generally available to the public.
7. Disclosure of this Agreement. I hereby authorize the Company to
notify others, including but not limited to customers of the Company and any of
my future employers, of the terms of this Agreement and my responsibilities
hereunder.
8. Injunctive Relief . I understand that in the event of a breach or
threatened breach of this Agreement by me the Company may suffer irreparable
harm and monetary damages alone would not adequately compensate the Company. The
Company will therefore be entitled to injunctive relief to enforce this
Agreement.
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<PAGE> 17
9. Enforcement and Severability. I acknowledge that each of the
provisions in this Agreement are separate and independent covenants. I agree
that if any court shall determine that any provision of this Agreement is
unenforceable with respect to its term or scope such provision shall nonetheless
be enforceable by any such court upon such modified term or scope as may be
determined by such court to be reasonable and enforceable. The remainder of this
Agreement shall not be affected by the unenforceability or court ordered
modification of a specific provision.
10. Governing Law. I agree that this Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
11. Superseding Agreement. I understand and agree that this Agreement
contains the entire agreement of the parties with respect to subject matter
hereof and supersedes all previous agreements and understandings between the
parties with respect to its subject matter.
12. Acknowledgments. I acknowledge that I have read this agreement, was
given the opportunity to ask questions and sufficient time to consult an
attorney and I have either consulted an attorney or affirmatively decided not to
consult an attorney. I understand that this agreement does not alter the terms
of an executed Employment Agreement with the Company, or in the absence of an
Employment Agreement, this Agreement does not alter my status as an employee at
will and that my employment may be terminated at any time, with or without
cause. I also understand that my obligations under this Agreement survive the
termination of my employment with the Company.
*.*.*.*.*.*.*.*.*.*
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<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written below.
Date: _________________ ___________________________________
Name of Employee:
Address: __________________________
__________________________
__________________________
__________________________
Intelligroup, Inc.
Date:__________________ By:________________________________
Name:
Title:
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Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT made effective as of the 1st day of June, 1996 (the
"Effective Date") by and between Intelligroup, Inc., a New Jersey corporation
with its principal place of business at 517 Route One South, Iselin, New Jersey
08830 (the "Company"), and Nagarjun Valluripalli (the "Employee").
WITNESSETH:
WHEREAS, the Company desires to secure the employment of the Employee
in accordance with the provisions of this Agreement; and
WHEREAS, the Employee desires and is willing to accept employment with
the Company in accordance herewith.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Term. The Company hereby agrees to employ the Employee and the
Employee hereby agrees to serve the Company pursuant to the terms and conditions
of this Agreement as Vice President - Advanced Technology of the Company, or in
a position at least commensurate therewith in all material respects, for a term
commencing on the Effective Date hereof and expiring on the second anniversary
thereof, provided that the Employee is elected to such office, or a comparable
or higher office, at each annual meeting of the Board of Directors of the
Company (the "Board of Directors") during the term of this Agreement. If the
Employee shall not be so elected at any such annual meeting of the Board of
Directors, the Employee's
<PAGE> 2
employment hereunder shall forthwith terminate and the Company shall be
obligated to compensate the Employee in accordance with Section 6(a) of this
Agreement.
2. Positions and Duties.
(a) Duties. The Employee's duties hereunder shall be those
which shall be prescribed from time to time by the Board of Directors in
accordance with the bylaws of the Company and shall include such executive
duties, powers and responsibilities as customarily attend the office of Vice
President - Advanced Technology of a company comparable to the Company. The
Employee will hold, in addition to the office of Vice President - Advanced
Technology of the Company, such other executive offices in the Company and its
subsidiaries to which he may be elected, appointed or assigned by the Board of
Directors from time to time and will discharge such executive duties in
connection therewith. During the employment period, the Employee's position
(including status, offices and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned immediately preceding
the Effective Date. The Employee shall devote his full working time, energy and
skill (reasonable absences for vacations and illness excepted), to the business
of the Company as is necessary in order to perform such duties faithfully,
competently and diligently; provided, however, that notwithstanding any
provision in this Agreement to the contrary, the Employee shall not be precluded
from devoting reasonable periods of time required for serving as a member of
boards of companies or organizations which have been approved by the Board of
Directors so long as such memberships or activities do not interfere with the
performance of the Employee's duties hereunder.
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(b) Board Nomination. So long as the Employee is a Vice
President of the Company, the Company will use diligent efforts to obtain the
nomination and election of the Employee as a director of the Company. In the
event that the Employee is elected as a director of the Company, the Employee
shall perform all duties incident to such directorship faithfully, diligently
and competently and in the best interests of the Company.
3. Compensation. During the term of this Agreement, the Employee shall
receive, for all services rendered to the Company hereunder, the following
(hereinafter referred to as "Compensation"):
(a) Base Salary. For the term hereof, the Employee shall be
paid an annual base salary equal to two hundred thousand dollars ($200,000). The
Employee's annual base salary shall be payable in equal installments in
accordance with the Company's general salary payment policies but no less
frequently than monthly. Such base salary shall be reviewed, and any increases
in the amount thereof shall be determined, by the Board of Directors or a
compensation committee formed by the Board of Directors (the "Compensation
Committee") at the end of each 12-month period of employment during the term
hereof.
(b) Bonuses. The Employee shall be eligible for and may
receive bonuses. The amount of such bonuses, if any, shall be solely within the
discretion of the Board of Directors or, if formed, the Compensation Committee
thereof.
(c) Incentive Compensation. The Employee shall be eligible for
awards from the Company's incentive compensation plans, including without
limitation any stock option plans, applicable to high level executive officers
of the Company or to key employees of the
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<PAGE> 4
Company or its subsidiaries, in accordance with the terms thereof and on a basis
commensurate with his position and responsibilities.
(d) Benefits. The Employee and his "dependents," as that term
may be defined under the applicable benefit plan(s) of the Company, shall be
included, to the extent eligible thereunder, in any and all plans, programs and
policies which provide benefits for employees and their dependents. Such plans,
programs and policies may include health care insurance, long-term disability
plans, life insurance, supplemental disability insurance, supplemental life
insurance, holidays and other similar or comparable benefits made available to
the Company's employees.
(e) Expenses. Subject to and in accordance with the Company's
policies and procedures, the Employee hereby is authorized to incur, and, upon
presentation of itemized accounts, shall be reimbursed by the Company for, any
and all reasonable and necessary business-related expenses, which expenses are
incurred by the Employee on behalf of the Company or any of its subsidiaries.
4. Absences. The Employee shall be entitled to vacations, absences
because of illness or other incapacity, and such other absences, whether for
holiday, personal time, or for any other purpose, as set forth in the Company's
employment manual or current procedures and policies, as the case may be, as
same may be amended from time-to-time.
5. Termination. In addition to the events of termination and expiration
of this Agreement provided for in Section 1 hereof, the Employee's employment
hereunder may be terminated only as follows:
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(a) Without Cause. The Company may terminate the Employee's
employment hereunder without cause only upon action by the Board of Directors,
and upon no less than sixty (60) days prior written notice to the Employee. The
Employee may terminate employment hereunder without cause upon no less than
sixty (60) days prior written notice to the Company.
(b) For Cause, by the Company. The Company may terminate the
Employee's employment hereunder for cause immediately and with prompt notice to
the Employee, which cause shall be determined in good faith solely by the Board
of Directors. "Cause" for termination shall include, but is not limited to, the
following conduct of the Employee:
(1) Material breach of any provision of this
Agreement by the Employee, which breach shall not have been cured by the
Employee within thirty (30) days of receipt of written notice of said breach;
(2) Misconduct as an employee of the Company,
including but not limited to: misappropriating any funds or property of the
Company; attempting to willfully obtain any personal profit from any transaction
in which the Employee has an interest which is adverse to the interests of the
Company; or any other act or omission which substantially impairs the Company's
ability to conduct its ordinary business in its usual manner;
(3) Unreasonable neglect or refusal to perform the
duties assigned to the Employee under or pursuant to this Agreement;
(4) Conviction of a felony; or
(5) Any other act or omission which subjects the
Company or any of its subsidiaries to substantial public disrespect, scandal or
ridicule.
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<PAGE> 6
(c) For Good Reason by Employee. The Employee may terminate
employment hereunder for good reason immediately and with prompt notice to the
Company. "Good reason" for termination by the Employee shall include, but is not
limited to, the following conduct of the Company:
(1) Material breach of any provision of this
Agreement by the Company, which breach shall not have been cured by the Company
within thirty (30) days of receipt of written notice of said breach;
(2) Failure to maintain the Employee in a position
commensurate with that referred to in Section 2 of this Agreement; or
(3) The assignment to the Employee of any duties
inconsistent with the Employee's position, authority, duties or responsibilities
as contemplated by Section 2 of this Agreement, or any other action by the
Company which results in a diminution of such position, authority, duties or
responsibilities, excluding for this purpose any isolated action not taken in
bad faith and which is promptly remedied by the Company after receipt of notice
thereof given by the Employee.
(d) Death. The period of active employment of the Employee
hereunder shall terminate automatically in the event of his death.
(e) Disability. In the event that the Employee shall be unable
to perform duties hereunder for a period of ninety (90) consecutive calendar
days by reason of disability as a result of illness, accident or other physical
or mental incapacity or disability, the Company may, in its discretion, by
giving written notice to the Employee, terminate the Employee's employment
hereunder as long as the Employee is still disabled on the effective date of
such termination.
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(f) Mutual Agreement. This Agreement may be terminated at any
time by mutual agreement of the Employee and the Company.
6. Compensation in the Event of Termination. In the event that the
Employee's employment pursuant to this Agreement terminates prior to the end of
the term of this Agreement because he is not reelected pursuant to Section 1 or
for a reason provided in Section 5 hereof, the Company shall pay the Employee
compensation as set forth below:
(a) Employee not Elected by Board of Directors; By Employee
for Good Reason; By Company Without Cause. In the event that the Employee's
employment hereunder is terminated: (i) because the Employee is not elected to
the position of Vice President - Advanced Technology of the Company, or in a
position at least commensurate therewith in all material respects, at any annual
meeting of the Company's Board of Directors during the term of this Agreement,
as contemplated by Section 1 hereof; (ii) by the Employee for good reason
pursuant to Section 5(c) hereof; or (iii) by the Company without cause, then the
Company shall continue to pay or provide, as applicable, the following
compensation to the Employee:
(1) Annual base salary as set forth in Section 3(a)
hereof; and
(2) Continuing coverage, but only to the extent
required by law, for the Employee and his eligible dependents under all of the
Company's benefit plans, programs and policies in effect as of the date of
termination.
Such compensation shall continue to be paid or
provided, as applicable, in the same manner as before termination, and for a
period of time ending on the date when the term of this Agreement would
otherwise have expired in accordance with Section 1 of this Agreement. The
Employee shall not be required to mitigate the amount of any payment provided
for in this
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<PAGE> 8
Section 6(a) by seeking employment or otherwise, nor shall any amounts received
from employment or otherwise by the Employee offset in any manner the
obligations of the Company hereunder.
(b) By Company Upon Termination of Agreement Due to Employee's
Death or Disability. In the event of the Employee's death or if the Company
shall terminate the Employee's employment hereunder for disability pursuant to
Section 5(e) hereof, the base salary payable hereunder shall continue to be paid
at the then current rate for three (3) months after the termination of
employment to the Employee or his personal representative, as applicable.
(c) By Company For Cause or By Employee Without Good Reason.
In the event that (i) the Company shall terminate the Employee's employment
hereunder for cause pursuant to Section 5(b) hereof or (ii) the Employee shall
terminate employment hereunder without "good reason" as provided in Section 5(c)
hereof, the Company shall not be obligated to pay the Employee any compensation
except for salary and other Compensation which may have been earned and are due
and payable but which have not been paid as of the date of termination.
7. Effect of Termination. In the event of expiration or early
termination of this Agreement as provided herein, neither the Company nor the
Employee shall have any remaining duties or obligations hereunder except that:
(a) The Company shall:
(1) Pay the Employee's accrued salary and any other
accrued benefits under Section 3 hereof;
(2) Reimburse the Employee for expenses already
incurred in accordance with Section 3(e) hereof;
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<PAGE> 9
(3) To the extent required by law, pay or otherwise
provide for any benefits, payments or continuation or conversion rights in
accordance with the provisions of any benefit plan of which the Employee or any
of his dependents is or was a participant; and
(4) Pay the Employee or his beneficiaries any
compensation due pursuant to Section 6 hereof; and
(b) The Employee shall remain bound by the terms of Section 8
hereof and Exhibit A attached hereto.
8. Restrictive Covenant. (a) The Employee acknowledges and agrees that
he has access to secret and confidential information of the Company and its
subsidiaries and that the following restrictive covenant is necessary to protect
the interests and continued success of the Company. Except as otherwise
expressly consented to in writing by the Company, until the termination of the
Employee's employment (for any reason and whether such employment was under this
Agreement or otherwise) and thereafter for twenty-four (24) months (the
"Restricted Period"), the Employee shall not, directly or indirectly, acting as
an employee, owner, shareholder, partner, joint venturer, officer, director,
agent, salesperson, consultant, advisor, investor or principal of any
corporation or other business entity:
(i) engage, in any state or territory of the United States of
America or other country where the Company is doing business (determined as of
the date the Employee's employment with the Company terminates), in direct or
indirect competition with the business conducted by the Company or activities
which the Company plans to conduct within one year of termination (determined as
of the date the Employee's employment with the Company terminates);
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<PAGE> 10
(ii) request or otherwise attempt to induce or influence,
directly or indirectly, any present customer or supplier, or prospective
customer or supplier, of the Company, or other persons sharing a business
relationship with the Company, to cancel, limit or postpone their business with
the Company, or otherwise take action which might be to the material
disadvantage of the Company; or
(iii) hire or solicit for employment, directly or indirectly,
or induce or actively attempt to influence, any Employee of the Company or any
Affiliate, as such term is defined in the Securities Act of 1933, as amended, to
terminate his or her employment or discontinue such person's consultant,
contractor or other business association with the Company.
(b) If the Employee violates any of the restrictions contained
in Section 8(a) above, the Restrictive Period shall be increased by the period
of time from the commencement of any such violation until the time such
violation shall be cured by the Employee to the satisfaction of the Company, and
the Company may withhold any and all payments, except salary, otherwise due and
owing to the Employee under this Agreement.
(c) In the event that either the geographical area or the
Restrictive Period set forth in Section 8(a) of this Agreement is deemed to be
unreasonably restrictive in any court proceeding, the court may reduce such
geographical area and Restrictive Period to the extent which it deems reasonable
under the circumstances.
(d) Nothing in this Section 8, whether express or implied,
shall prevent the Employee from being a holder of securities of a company whose
securities are registered under Section 12 of the Securities Exchange Act of
1934, as amended; provided, however, that the
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<PAGE> 11
Employee holds of record and beneficially less than two percent (2%) of the
votes eligible to be cast generally by holders of securities of such company for
the election of directors.
(e) The Employee, as a condition of his continued employment,
acknowledges and agrees that he has reviewed and will continue to be bound by
all of the provisions set forth in Exhibit A attached hereto, which is
incorporated herein by reference and made a part hereof as though fully set
forth herein, during the term of this Agreement, and any time hereafter.
(f) Employee acknowledges and agrees that in the event of a
breach or threatened breach of the provisions of this Section 8 by Employee the
Company may suffer irreparable harm and therefore, the Company shall be
entitled, to the extent permissible by law, immediately to cease to pay or
provide the Employee any compensation being, or to be, paid or provided to him
pursuant to Sections 3 or 6 of this Agreement, and also to obtain immediate
injunctive relief restraining the Employee from conduct in breach or threatened
breach of the covenants contained in this Section 8. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
9. Resolution of Differences Over Breaches of Agreement. Except as
otherwise provided herein, any controversy or claim arising out of, or relating
to, this Agreement, or the breach hereof, shall be reviewed in the first
instance in accordance with the Company's internal review procedures, if any,
with recourse thereafter--for temporary or preliminary injunctive relief
only--to the courts having jurisdiction thereof, and if any relief other than
injunctive relief is sought, then to arbitration in Middlesex County, New Jersey
in accordance with the rules of the
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American Arbitration Association, and judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof.
10. Waiver. The waiver by a party hereto of any breach by the other
party hereto of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by a party hereto.
11. Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company, and the Company shall be
obligated to require any successor to expressly assume its obligations
hereunder. This Agreement shall inure to the benefit of and be enforceable by
the Employee or his legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. The Employee may not
assign any of his duties, responsibilities, obligations or positions hereunder
to any person and any such purported assignment by him shall be void and of no
force and effect.
12. Notices. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing, and if personally delivered or when
sent by first class certified or registered mail, postage prepaid, return
receipt requested--in the case of the Employee, to his residence address as set
forth below, and in the case of the Company, to the address of its principal
place of business as set forth below, in care of the Board of Directors--or to
such other person or at such other address with respect to each party as such
party shall notify the other in writing.
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13. Construction of Agreement.
(a) Governing Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the internal laws of the
State of New Jersey without reference to its principles regarding conflicts of
law.
(b) Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
(c) Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience of reference only and
shall not constitute a part of this Agreement.
14. Entire Agreement. This Agreement contains the entire agreement of
the parties concerning the Employee's employment and all promises,
representations, understandings, arrangements and prior agreements on such
subject are merged herein and superseded hereby. The provisions of this
Agreement may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom enforcement
of any amendment, modification, repeal, waiver, extension or discharge is
sought. No person acting other than pursuant to a resolution of the Board of
Directors shall have authority on behalf of the Company to agree to amend,
modify, repeal, waive, extend or discharge any provision of this Agreement or
anything in reference thereto or to exercise any of the Company's rights to
terminate or to fail to extend this Agreement. I further understand and agree
that if the Company does not consummate an initial public offering of its common
stock prior to October 31, 1996 that this Agreement shall be of no further force
or effect.
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<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and attested by its duly authorized officers, and the Employee has set
his hand, all as of the day and year first above written.
ATTEST: Intelligroup, Inc.,
__________________________ By:_____________________________
Robert M. Olanoff, Secretary Ashok Pandey, President and
Chief Executive Officer
Address:________________________________
________________________________
________________________________
WITNESS: EMPLOYEE
____________________________ ________________________________________
Nagarjun Valluripalli
Address:________________________________
________________________________
________________________________
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EXHIBIT A
INTELLIGROUP, INC.
EMPLOYEE'S
INVENTION ASSIGNMENT AND CONFIDENTIALITY
AGREEMENT
In consideration of my employment or continued employment by
Intelligroup, Inc., a New Jersey corporation or any subsidiary or parent
corporation thereof (the "Company"), I hereby represent and agree as follows:
1. I understand that the Company is engaged in the business of
providing a wide range of information technology services, including
enterprise-wide business process solutions, systems integration and customized
applications and related services and that I may have access to or acquire
information with respect to Confidential Information (as defined below),
including processes and methods, development tools, scientific, technical and/or
business innovations.
2. Disclosure of Innovations. I agree to disclose in writing to the
Company all inventions, improvements and other innovations of any kind that I
may make, conceive, develop or reduce to practice, alone or jointly with others,
during the term of my employment with the Company, whether or not they are
related to my work for the Company and whether or not they are eligible for
patent, copyright, trademark, trade secret or other legal protection
("Innovations"). Examples of Innovations shall include, but are not limited to,
discoveries, research, inventions, formulas, techniques, processes, tools,
know-how, marketing plans, new product plans, production processes, advertising,
packaging and marketing techniques and improvements to computer hardware or
software.
3. Assignment of Ownership of Innovations. I agree that all Innovations
will be the sole and exclusive property of the Company and I hereby assign all
of my rights, title or interest in the Innovations and in all related patents,
copyrights, trademarks, trade secrets, rights of priority and other proprietary
rights to the Company. At the Company's request and expense, during and after
the period of my employment with the Company, I will assist and cooperate with
the Company in all respects and will execute documents, and, subject to my
reasonable availability, give testimony and take further acts requested by the
Company to obtain, maintain, perfect and enforce for the Company patent,
copyright, trademark, trade secret and other legal protection for the
Innovations. I hereby appoint the President and Chief Executive Officer of the
Company as my attorney-in-fact to execute documents on my behalf for this
purpose.
4. Protection of Confidential Information of the Company. I understand
that my work as an employee of the Company creates a relationship of trust and
confidence between myself and the Company. During and after the period of my
employment with the Company, I will not use or disclose or allow anyone else to
use or disclose any "Confidential Information" (as defined below) relating to
the Company, its products, suppliers or customers except as may
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be necessary in the performance of my work for the Company or as may be
authorized in advance by appropriate officers of the Company. "Confidential
Information" shall include innovations, methodologies, processes, tools,
business strategies, financial information, forecasts, personnel information,
customer lists, trade secrets and any other non-public technical or business
information, whether in writing or given to me orally, which I know or have
reason to know the Company would like to treat as confidential for any purpose,
such as maintaining a competitive advantage or avoiding undesirable publicity. I
will keep Confidential Information secret and will not allow any unauthorized
use of the same, whether or not any document containing it is marked as
confidential. These restrictions, however, will not apply to Confidential
Information that has become known to the public generally through no fault or
breach of mine or that the Company regularly gives to third parties without
restriction on use or disclosure. Upon termination of my work with the Company,
I will promptly deliver to the Company all documents and materials of any nature
pertaining to my work with the Company and I will not take with me any documents
or materials or copies thereof containing any Confidential Information.
5. Non-Solicitation. I understand that my work as an employee of the
Company creates a relationship of trust and confidence between myself and the
Company. During and after the period of my employment with the Company, I will
not request or otherwise attempt to induce or influence, directly or indirectly,
any present customer or supplier, or prospective customer or supplier, of the
Company, or other persons sharing a business relationship with the Company to
cancel, to limit or postpone their business with the Company, or otherwise take
action which might be to the material disadvantage of the Company. During and
after the period of my employment with the Company, I will not hire or solicit
for employment, directly or indirectly, or induce or actively attempt to
influence, any Employee of the Company or any Affiliate of the Company, as such
term is defined in the Securities Act of 1933, as amended, to terminate his or
her employment or discontinue such person's consultant, contractor or other
business association with the Company.
6. Other Agreements. I represent that my performance of all the terms
of this Agreement and my duties as an employee of the Company will not breach
any invention assignment agreement, confidential information agreement,
non-competition agreement or other agreement with any former employer or other
party. I represent that I have not and will not bring with me to the Company or
use in the performance of my duties for the Company any documents or materials
of a former employer that are not generally available to the public.
7. Disclosure of this Agreement. I hereby authorize the Company to
notify others, including but not limited to customers of the Company and any of
my future employers, of the terms of this Agreement and my responsibilities
hereunder.
8. Injunctive Relief . I understand that in the event of a breach or
threatened breach of this Agreement by me the Company may suffer irreparable
harm and monetary damages alone would not adequately compensate the Company. The
Company will therefore be entitled to injunctive relief to enforce this
Agreement.
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9. Enforcement and Severability. I acknowledge that each of the
provisions in this Agreement are separate and independent covenants. I agree
that if any court shall determine that any provision of this Agreement is
unenforceable with respect to its term or scope such provision shall nonetheless
be enforceable by any such court upon such modified term or scope as may be
determined by such court to be reasonable and enforceable. The remainder of this
Agreement shall not be affected by the unenforceability or court ordered
modification of a specific provision.
10. Governing Law. I agree that this Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
11. Superseding Agreement. I understand and agree that this Agreement
contains the entire agreement of the parties with respect to subject matter
hereof and supersedes all previous agreements and understandings between the
parties with respect to its subject matter.
12. Acknowledgments. I acknowledge that I have read this agreement, was
given the opportunity to ask questions and sufficient time to consult an
attorney and I have either consulted an attorney or affirmatively decided not to
consult an attorney. I understand that this agreement does not alter the terms
of an executed Employment Agreement with the Company, or in the absence of an
Employment Agreement, this Agreement does not alter my status as an employee at
will and that my employment may be terminated at any time, with or without
cause. I also understand that my obligations under this Agreement survive the
termination of my employment with the Company.
*.*.*.*.*.*.*.*.*.*
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written below.
Date: _________________ ___________________________________
Name of Employee:
Address: __________________________
__________________________
__________________________
__________________________
Intelligroup, Inc.
Date:__________________ By:________________________________
Name:
Title:
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<PAGE> 1
Exhibit 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT made effective as of the 1st day of June, 1996 (the
"Effective Date") by and between Intelligroup, Inc., a New Jersey corporation
with its principal place of business at 517 Route One South, Iselin, New Jersey
08830 (the "Company"), and Robert M. Olanoff (the "Employee").
WITNESSETH:
WHEREAS, the Company desires to secure the employment of the Employee
in accordance with the provisions of this Agreement; and
WHEREAS, the Employee desires and is willing to accept employment with
the Company in accordance herewith.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Term. The Company hereby agrees to employ the Employee and the
Employee hereby agrees to serve the Company pursuant to the terms and conditions
of this Agreement as Chief Financial Officer and Treasurer of the Company, or in
a position at least commensurate therewith in all material respects, for a term
commencing on the Effective Date hereof and expiring on the second anniversary
thereof, provided that the Employee is elected to such office, or a comparable
or higher office, at each annual meeting of the Board of Directors of the
Company (the "Board of Directors") during the term of this Agreement. If the
Employee shall not be so elected at any such annual meeting of the Board of
Directors, the Employee's
<PAGE> 2
employment hereunder shall forthwith terminate and the Company shall be
obligated to compensate the Employee in accordance with Section 6(a) of this
Agreement.
2. Positions and Duties. The Employee's duties hereunder shall be those
which shall be prescribed from time to time by the Board of Directors in
accordance with the bylaws of the Company and shall include such executive
duties, powers and responsibilities as customarily attend the office of Chief
Financial Officer and Treasurer of a company comparable to the Company. The
Employee will hold, in addition to the offices of Chief Financial Officer and
Treasurer of the Company, such other executive offices in the Company and its
subsidiaries to which he may be elected, appointed or assigned by the Board of
Directors from time to time and will discharge such executive duties in
connection therewith. During the employment period, the Employee's position
(including status, offices and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned immediately preceding
the Effective Date. The Employee shall devote his full working time, energy and
skill (reasonable absences for vacations and illness excepted), to the business
of the Company as is necessary in order to perform such duties faithfully,
competently and diligently; provided, however, that notwithstanding any
provision in this Agreement to the contrary, the Employee shall not be precluded
from devoting reasonable periods of time required for serving as a member of
boards of companies or organizations which have been approved by the Board of
Directors so long as such memberships or activities do not interfere with the
performance of the Employee's duties hereunder.
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<PAGE> 3
3. Compensation. During the term of this Agreement, the Employee shall
receive, for all services rendered to the Company hereunder, the following
(hereinafter referred to as "Compensation"):
(a) Base Salary. For the term hereof, the Employee shall be
paid an annual base salary equal to one hundred thousand dollars ($100,000). The
Employee's annual base salary shall be payable in equal installments in
accordance with the Company's general salary payment policies but no less
frequently than monthly. Such base salary shall be reviewed, and any increases
in the amount thereof shall be determined, by the Board of Directors or a
compensation committee formed by the Board of Directors (the "Compensation
Committee") at the end of each 12-month period of employment during the term
hereof.
(b) Bonuses. The Employee shall be eligible for and may
receive bonuses. The amount of such bonuses, if any, shall be solely within the
discretion of the Board of Directors or, if formed, the Compensation Committee
thereof.
(c) Incentive Compensation. The Employee shall be eligible for
awards from the Company's incentive compensation plans, including without
limitation any stock option plans, applicable to high level executive officers
of the Company or to key employees of the Company or its subsidiaries, in
accordance with the terms thereof and on a basis commensurate with his position
and responsibilities.
(d) Benefits. The Employee and his "dependents," as that term
may be defined under the applicable benefit plan(s) of the Company, shall be
included, to the extent eligible thereunder, in any and all plans, programs and
policies which provide benefits for employees and their dependents. Such plans,
programs and policies may include health care
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<PAGE> 4
insurance, long-term disability plans, life insurance, supplemental disability
insurance, supplemental life insurance, holidays and other similar or comparable
benefits made available to the Company's employees.
(e) Expenses. Subject to and in accordance with the Company's
policies and procedures, the Employee hereby is authorized to incur, and, upon
presentation of itemized accounts, shall be reimbursed by the Company for, any
and all reasonable and necessary business-related expenses, which expenses are
incurred by the Employee on behalf of the Company or any of its subsidiaries.
4. Absences. The Employee shall be entitled to vacations, absences
because of illness or other incapacity, and such other absences, whether for
holiday, personal time, or for any other purpose, as set forth in the Company's
employment manual or current procedures and policies, as the case may be, as
same may be amended from time-to-time.
5. Termination. In addition to the events of termination and expiration
of this Agreement provided for in Section 1 hereof, the Employee's employment
hereunder may be terminated only as follows:
(a) Without Cause. The Company may terminate the Employee's
employment hereunder without cause only upon action by the Board of Directors,
and upon no less than sixty (60) days prior written notice to the Employee. The
Employee may terminate employment hereunder without cause upon no less than
sixty (60) days prior written notice to the Company.
(b) For Cause, by the Company. The Company may terminate the
Employee's employment hereunder for cause immediately and with prompt notice to
the Employee, which
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<PAGE> 5
cause shall be determined in good faith solely by the Board of Directors.
"Cause" for termination shall include, but is not limited to, the following
conduct of the Employee:
(1) Material breach of any provision of this
Agreement by the Employee, which breach shall not have been cured by the
Employee within thirty (30) days of receipt of written notice of said breach;
(2) Misconduct as an employee of the Company,
including but not limited to: misappropriating any funds or property of the
Company; attempting to willfully obtain any personal profit from any transaction
in which the Employee has an interest which is adverse to the interests of the
Company; or any other act or omission which substantially impairs the Company's
ability to conduct its ordinary business in its usual manner;
(3) Unreasonable neglect or refusal to perform the
duties assigned to the Employee under or pursuant to this Agreement;
(4) Conviction of a felony; or
(5) Any other act or omission which subjects the
Company or any of its subsidiaries to substantial public disrespect, scandal or
ridicule.
(c) For Good Reason by Employee. The Employee may terminate
employment hereunder for good reason immediately and with prompt notice to the
Company. "Good reason" for termination by the Employee shall include, but is not
limited to, the following conduct of the Company:
(1) Material breach of any provision of this
Agreement by the Company, which breach shall not have been cured by the Company
within thirty (30) days of receipt of written notice of said breach;
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<PAGE> 6
(2) Failure to maintain the Employee in a position
commensurate with that referred to in Section 2 of this Agreement; or
(3) The assignment to the Employee of any duties
inconsistent with the Employee's position, authority, duties or responsibilities
as contemplated by Section 2 of this Agreement, or any other action by the
Company which results in a diminution of such position, authority, duties or
responsibilities, excluding for this purpose any isolated action not taken in
bad faith and which is promptly remedied by the Company after receipt of notice
thereof given by the Employee.
(d) Death. The period of active employment of the Employee
hereunder shall terminate automatically in the event of his death.
(e) Disability. In the event that the Employee shall be unable
to perform duties hereunder for a period of ninety (90) consecutive calendar
days by reason of disability as a result of illness, accident or other physical
or mental incapacity or disability, the Company may, in its discretion, by
giving written notice to the Employee, terminate the Employee's employment
hereunder as long as the Employee is still disabled on the effective date of
such termination.
(f) Mutual Agreement. This Agreement may be terminated at any
time by mutual agreement of the Employee and the Company.
6. Compensation in the Event of Termination. In the event that the
Employee's employment pursuant to this Agreement terminates prior to the end of
the term of this Agreement because he is not reelected pursuant to Section 1 or
for a reason provided in Section 5 hereof, the Company shall pay the Employee
compensation as set forth below:
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<PAGE> 7
(a) Employee not Elected by Board of Directors; By Employee
for Good Reason; By Company Without Cause. In the event that the Employee's
employment hereunder is terminated: (i) because the Employee is not elected to
the positions of Chief Financial Officer and Treasurer of the Company, or in a
position at least commensurate therewith in all material respects, at any annual
meeting of the Company's Board of Directors during the term of this Agreement,
as contemplated by Section 1 hereof; (ii) by the Employee for good reason
pursuant to Section 5(c) hereof; or (iii) by the Company without cause, then the
Company shall continue to pay or provide, as applicable, the following
compensation to the Employee:
(1) Annual base salary as set forth in Section 3(a)
hereof; and
(2) Continuing coverage, but only to the extent
required by law, for the Employee and his eligible dependents under all of the
Company's benefit plans, programs and policies in effect as of the date of
termination.
Such compensation shall continue to be paid or
provided, as applicable, in the same manner as before termination, and for a
period of time ending on the date when the term of this Agreement would
otherwise have expired in accordance with Section 1 of this Agreement. The
Employee shall not be required to mitigate the amount of any payment provided
for in this Section 6(a) by seeking employment or otherwise, nor shall any
amounts received from employment or otherwise by the Employee offset in any
manner the obligations of the Company hereunder.
(b) By Company Upon Termination of Agreement Due to Employee's
Death or Disability. In the event of the Employee's death or if the Company
shall terminate the Employee's employment hereunder for disability pursuant to
Section 5(e) hereof, the base salary
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<PAGE> 8
payable hereunder shall continue to be paid at the then current rate for three
(3) months after the termination of employment to the Employee or his personal
representative, as applicable.
(c) By Company For Cause or By Employee Without Good Reason.
In the event that (i) the Company shall terminate the Employee's employment
hereunder for cause pursuant to Section 5(b) hereof or (ii) the Employee shall
terminate employment hereunder without "good reason" as provided in Section 5(c)
hereof, the Company shall not be obligated to pay the Employee any compensation
except for salary and other Compensation which may have been earned and are due
and payable but which have not been paid as of the date of termination.
7. Effect of Termination. In the event of expiration or early
termination of this Agreement as provided herein, neither the Company nor the
Employee shall have any remaining duties or obligations hereunder except that:
(a) The Company shall:
(1) Pay the Employee's accrued salary and any other
accrued benefits under Section 3 hereof;
(2) Reimburse the Employee for expenses already
incurred in accordance with Section 3(e) hereof;
(3) To the extent required by law, pay or otherwise
provide for any benefits, payments or continuation or conversion rights in
accordance with the provisions of any benefit plan of which the Employee or any
of his dependents is or was a participant; and
(4) Pay the Employee or his beneficiaries any
compensation due pursuant to Section 6 hereof; and
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<PAGE> 9
(b) The Employee shall remain bound by the terms of Section 8
hereof and Exhibit A attached hereto.
8. Restrictive Covenant. (a) The Employee acknowledges and agrees that
he has access to secret and confidential information of the Company and its
subsidiaries and that the following restrictive covenant is necessary to protect
the interests and continued success of the Company. Except as otherwise
expressly consented to in writing by the Company, until the termination of the
Employee's employment (for any reason and whether such employment was under this
Agreement or otherwise) and thereafter for twenty-four (24) months (the
"Restricted Period"), the Employee shall not, directly or indirectly, acting as
an employee, owner, shareholder, partner, joint venturer, officer, director,
agent, salesperson, consultant, advisor, investor or principal of any
corporation or other business entity:
(i) engage, in any state or territory of the United States of
America or other country where the Company is doing business (determined as of
the date the Employee's employment with the Company terminates), in direct or
indirect competition with the business conducted by the Company or activities
which the Company plans to conduct within one year of termination (determined as
of the date the Employee's employment with the Company terminates);
(ii) request or otherwise attempt to induce or influence,
directly or indirectly, any present customer or supplier, or prospective
customer or supplier, of the Company, or other persons sharing a business
relationship with the Company, to cancel, limit or postpone their business with
the Company, or otherwise take action which might be to the material
disadvantage of the Company; or
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<PAGE> 10
(iii) hire or solicit for employment, directly or indirectly,
or induce or actively attempt to influence, any Employee of the Company or any
Affiliate, as such term is defined in the Securities Act of 1933, as amended, to
terminate his or her employment or discontinue such person's consultant,
contractor or other business association with the Company.
(b) If the Employee violates any of the restrictions contained
in Section 8(a) above, the Restrictive Period shall be increased by the period
of time from the commencement of any such violation until the time such
violation shall be cured by the Employee to the satisfaction of the Company, and
the Company may withhold any and all payments, except salary, otherwise due and
owing to the Employee under this Agreement.
(c) In the event that either the geographical area or the
Restrictive Period set forth in Section 8(a) of this Agreement is deemed to be
unreasonably restrictive in any court proceeding, the court may reduce such
geographical area and Restrictive Period to the extent which it deems reasonable
under the circumstances.
(d) Nothing in this Section 8, whether express or implied,
shall prevent the Employee from being a holder of securities of a company whose
securities are registered under Section 12 of the Securities Exchange Act of
1934, as amended; provided, however, that the Employee holds of record and
beneficially less than two percent (2%) of the votes eligible to be cast
generally by holders of securities of such company for the election of
directors.
(e) The Employee, as a condition of his continued employment,
acknowledges and agrees that he has reviewed and will continue to be bound by
all of the provisions set forth in Exhibit A attached hereto, which is
incorporated herein by reference and made a part hereof as though fully set
forth herein, during the term of this Agreement, and any time hereafter.
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<PAGE> 11
(f) Employee acknowledges and agrees that in the event of a
breach or threatened breach of the provisions of this Section 8 by Employee the
Company may suffer irreparable harm and therefore, the Company shall be
entitled, to the extent permissible by law, immediately to cease to pay or
provide the Employee any compensation being, or to be, paid or provided to him
pursuant to Sections 3 or 6 of this Agreement, and also to obtain immediate
injunctive relief restraining the Employee from conduct in breach or threatened
breach of the covenants contained in this Section 8. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
9. Resolution of Differences Over Breaches of Agreement. Except as
otherwise provided herein, any controversy or claim arising out of, or relating
to, this Agreement, or the breach hereof, shall be reviewed in the first
instance in accordance with the Company's internal review procedures, if any,
with recourse thereafter--for temporary or preliminary injunctive relief
only--to the courts having jurisdiction thereof, and if any relief other than
injunctive relief is sought, then to arbitration in Middlesex County, New Jersey
in accordance with the rules of the American Arbitration Association, and
judgment upon the award rendered by the Arbitrator(s) may be entered in any
court having jurisdiction thereof.
10. Waiver. The waiver by a party hereto of any breach by the other
party hereto of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by a party hereto.
11. Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company, and the Company shall be
obligated to require any
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<PAGE> 12
successor to expressly assume its obligations hereunder. This Agreement shall
inure to the benefit of and be enforceable by the Employee or his legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. The Employee may not assign any of his duties,
responsibilities, obligations or positions hereunder to any person and any such
purported assignment by him shall be void and of no force and effect.
12. Notices. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing, and if personally delivered or when
sent by first class certified or registered mail, postage prepaid, return
receipt requested--in the case of the Employee, to his residence address as set
forth below, and in the case of the Company, to the address of its principal
place of business as set forth below, in care of the Board of Directors--or to
such other person or at such other address with respect to each party as such
party shall notify the other in writing.
13. Construction of Agreement.
(a) Governing Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the internal laws of the
State of New Jersey without reference to its principles regarding conflicts of
law.
(b) Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
(c) Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience of reference only and
shall not constitute a part of this Agreement.
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<PAGE> 13
14. Entire Agreement. This Agreement contains the entire agreement of
the parties concerning the Employee's employment and all promises,
representations, understandings, arrangements and prior agreements on such
subject are merged herein and superseded hereby. The provisions of this
Agreement may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom enforcement
of any amendment, modification, repeal, waiver, extension or discharge is
sought. No person acting other than pursuant to a resolution of the Board of
Directors shall have authority on behalf of the Company to agree to amend,
modify, repeal, waive, extend or discharge any provision of this Agreement or
anything in reference thereto or to exercise any of the Company's rights to
terminate or to fail to extend this Agreement. I further understand and agree
that if the Company does not consummate an initial public offering of its common
stock prior to October 31, 1996 that this Agreement shall be of no further force
or effect.
*.*.*.*.*.*.*.*.*.*
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<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and attested by its duly authorized officers, and the Employee has set
his hand, all as of the day and year first above written.
ATTEST: Intelligroup, Inc.,
_______________________________ By:_____________________________
Rajkumar Koneru, Vice President Ashok Pandey, President and
Chief Executive Officer
Address:________________________________
________________________________
________________________________
WITNESS: EMPLOYEE
____________________________ ________________________________________
Robert M. Olanoff
Address:________________________________
________________________________
________________________________
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<PAGE> 15
EXHIBIT A
INTELLIGROUP, INC.
EMPLOYEE'S
INVENTION ASSIGNMENT AND CONFIDENTIALITY
AGREEMENT
In consideration of my employment or continued employment by
Intelligroup, Inc., a New Jersey corporation or any subsidiary or parent
corporation thereof (the "Company"), I hereby represent and agree as follows:
1. I understand that the Company is engaged in the business of
providing a wide range of information technology services, including
enterprise-wide business process solutions, systems integration and customized
applications and related services and that I may have access to or acquire
information with respect to Confidential Information (as defined below),
including processes and methods, development tools, scientific, technical and/or
business innovations.
2. Disclosure of Innovations. I agree to disclose in writing to the
Company all inventions, improvements and other innovations of any kind that I
may make, conceive, develop or reduce to practice, alone or jointly with others,
during the term of my employment with the Company, whether or not they are
related to my work for the Company and whether or not they are eligible for
patent, copyright, trademark, trade secret or other legal protection
("Innovations"). Examples of Innovations shall include, but are not limited to,
discoveries, research, inventions, formulas, techniques, processes, tools,
know-how, marketing plans, new product plans, production processes, advertising,
packaging and marketing techniques and improvements to computer hardware or
software.
3. Assignment of Ownership of Innovations. I agree that all Innovations
will be the sole and exclusive property of the Company and I hereby assign all
of my rights, title or interest in the Innovations and in all related patents,
copyrights, trademarks, trade secrets, rights of priority and other proprietary
rights to the Company. At the Company's request and expense, during and after
the period of my employment with the Company, I will assist and cooperate with
the Company in all respects and will execute documents, and, subject to my
reasonable availability, give testimony and take further acts requested by the
Company to obtain, maintain, perfect and enforce for the Company patent,
copyright, trademark, trade secret and other legal protection for the
Innovations. I hereby appoint the President and Chief Executive Officer of the
Company as my attorney-in-fact to execute documents on my behalf for this
purpose.
4. Protection of Confidential Information of the Company. I understand
that my work as an employee of the Company creates a relationship of trust and
confidence between myself and the Company. During and after the period of my
employment with the Company, I will not use or disclose or allow anyone else to
use or disclose any "Confidential Information" (as defined below) relating to
the Company, its products, suppliers or customers except as may
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<PAGE> 16
be necessary in the performance of my work for the Company or as may be
authorized in advance by appropriate officers of the Company. "Confidential
Information" shall include innovations, methodologies, processes, tools,
business strategies, financial information, forecasts, personnel information,
customer lists, trade secrets and any other non-public technical or business
information, whether in writing or given to me orally, which I know or have
reason to know the Company would like to treat as confidential for any purpose,
such as maintaining a competitive advantage or avoiding undesirable publicity. I
will keep Confidential Information secret and will not allow any unauthorized
use of the same, whether or not any document containing it is marked as
confidential. These restrictions, however, will not apply to Confidential
Information that has become known to the public generally through no fault or
breach of mine or that the Company regularly gives to third parties without
restriction on use or disclosure. Upon termination of my work with the Company,
I will promptly deliver to the Company all documents and materials of any nature
pertaining to my work with the Company and I will not take with me any documents
or materials or copies thereof containing any Confidential Information.
5. Non-Solicitation. I understand that my work as an employee of the
Company creates a relationship of trust and confidence between myself and the
Company. During and after the period of my employment with the Company, I will
not request or otherwise attempt to induce or influence, directly or indirectly,
any present customer or supplier, or prospective customer or supplier, of the
Company, or other persons sharing a business relationship with the Company to
cancel, to limit or postpone their business with the Company, or otherwise take
action which might be to the material disadvantage of the Company. During and
after the period of my employment with the Company, I will not hire or solicit
for employment, directly or indirectly, or induce or actively attempt to
influence, any Employee of the Company or any Affiliate of the Company, as such
term is defined in the Securities Act of 1933, as amended, to terminate his or
her employment or discontinue such person's consultant, contractor or other
business association with the Company.
6. Other Agreements. I represent that my performance of all the terms
of this Agreement and my duties as an employee of the Company will not breach
any invention assignment agreement, confidential information agreement,
non-competition agreement or other agreement with any former employer or other
party. I represent that I have not and will not bring with me to the Company or
use in the performance of my duties for the Company any documents or materials
of a former employer that are not generally available to the public.
7. Disclosure of this Agreement. I hereby authorize the Company to
notify others, including but not limited to customers of the Company and any of
my future employers, of the terms of this Agreement and my responsibilities
hereunder.
8. Injunctive Relief. I understand that in the event of a breach or
threatened breach of this Agreement by me the Company may suffer irreparable
harm and monetary damages alone would not adequately compensate the Company. The
Company will therefore be entitled to injunctive relief to enforce this
Agreement.
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<PAGE> 17
9. Enforcement and Severability. I acknowledge that each of the
provisions in this Agreement are separate and independent covenants. I agree
that if any court shall determine that any provision of this Agreement is
unenforceable with respect to its term or scope such provision shall nonetheless
be enforceable by any such court upon such modified term or scope as may be
determined by such court to be reasonable and enforceable. The remainder of this
Agreement shall not be affected by the unenforceability or court ordered
modification of a specific provision.
10. Governing Law. I agree that this Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
11. Superseding Agreement. I understand and agree that this Agreement
contains the entire agreement of the parties with respect to subject matter
hereof and supersedes all previous agreements and understandings between the
parties with respect to its subject matter.
12. Acknowledgments. I acknowledge that I have read this agreement, was
given the opportunity to ask questions and sufficient time to consult an
attorney and I have either consulted an attorney or affirmatively decided not to
consult an attorney. I understand that this agreement does not alter the terms
of an executed Employment Agreement with the Company, or in the absence of an
Employment Agreement, this Agreement does not alter my status as an employee at
will and that my employment may be terminated at any time, with or without
cause. I also understand that my obligations under this Agreement survive the
termination of my employment with the Company.
*.*.*.*.*.*.*.*.*.*
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<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written below.
Date: _________________ ___________________________________
Name of Employee:
Address: __________________________
__________________________
__________________________
__________________________
Intelligroup, Inc.
Date:__________________ By:________________________________
Name:
Title:
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<PAGE> 19
CHANGE IN CONTROL SEVERANCE PAY AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE PAY AGREEMENT (the "Agreement") is
made as of the 1st day of June, 1996, by and between Intelligroup, Inc., a New
Jersey corporation (the "Company"), and Robert M. Olanoff an employee of the
Company (the "Employee").
Recitals:
1. The Company is a New Jersey corporation engaged in the design,
development, integration and implementation of sophisticated business solutions
utilizing leading software applications and the provision of related
professional services in specific systems integration projects. The Employee is
currently employed by the Company as Chief Financial Officer, Treasurer and
Secretary.
2. The Company and the Employee desire to provide for the payment, in
certain instances, of severance pay to the Employee in the event of the
termination of his employment preceding or following a change of control of the
Company, on the terms and conditions set forth in this Agreement:
Agreement:
In consideration of the premises and the mutual covenants and
conditions set forth herein, the Company and the Employee agree as follows:
Section 1. Operation of Agreement. This Agreement shall be effective
immediately upon its execution, but the provisions hereof shall not be operative
unless and until a "Change in Control" (as such term is defined in Section 2
hereof) has occurred. The provisions of this Agreement shall not be operative
and shall not apply to any termination of employment, for any reason, which
occurs before the period beginning three months and one day prior to a Change in
Control or which occurs after the period beginning one year and one day after a
Change in Control.
Section 2. Change in Control. The term "Change in Control" as used in
this Agreement shall mean the first to occur of any of the following:
(a) The effective date or date of consummation of any transaction or
series of transactions (other than a transaction to which only the
Company and one or more of its subsidiaries are parties) pursuant to
which the Company:
(i) becomes a subsidiary of another corporation; (ii) is merged
or consolidated with or into another corporation; (iii) engages
in an exchange of shares with another corporation; or (iv)
transfers, sells or otherwise disposes of all or substantially
all of its assets to a
<PAGE> 20
single purchaser (other than the Employee) or a group of
purchasers (none of whom is the Employee);
provided, however, that this Subsection (a) shall not be applicable to
a transaction or series of transactions in which a majority of the
capital stock of the other corporation, following such transaction or
series of transactions, is owned or controlled by the holders of a
majority of the Company's outstanding capital stock immediately before
such sale, transfer or disposition; or
(b) The date upon which any person (other than the Employee), group of
associated persons acting in concert (none of whom is the Employee) or
corporation becomes a direct or indirect beneficial owner of shares of
stock of the Company representing an aggregate of more than fifty
percent (50%) of the votes then entitled to be cast at an election of
directors of the Company; provided, however, that this Subsection (b)
shall not be applicable to a transaction or series of transactions in
which the entity acquiring such ownership in excess of fifty percent
(50%) is a person or entity who is eligible, pursuant to Rule 13d-1(b)
under the Securities Exchange Act of 1934, as amended, to file a
statement on Schedule 13G with respect to its beneficial ownership of
the Company's capital stock, whether or not such person or entity shall
have filed a Schedule 13G, unless such person or entity shall have
filed a Schedule 13D with respect to beneficial ownership of fifteen
(15%) or more of the Company's capital stock; and provided, further,
that the acquisition of shares in a bona fide public offering or
private placement of securities by an investor who is acquiring such
shares for passive investment purposes only shall not constitute a
"Change in Control;" or
(c) The date upon which the persons who were members of the Board of
Directors of the Company as of May 31, 1996 (the "Original Directors")
cease to constitute a majority of the Board of Directors; provided,
however, that any new director whose nomination or selection has been
approved by the affirmative vote of at least three of the Original
Directors then in office shall also be deemed an Original Director.
Section 3. Severance Pay Upon Termination by Company Without Cause or
By Employee for Cause. If, during the three-month period immediately preceding a
Change in Control or during the one-year period immediately following a Change
in Control, the Employee's employment with the Company is terminated:
(a) By the Company without "Cause," as such term is defined in that
certain Employment Agreement of even date herewith by and between the
Company and the Employee (the "Employment Agreement"); or
(b) By the Employee as a result of, or within 30 days of the following:
2
<PAGE> 21
(i) a reduction in his rate of regular compensation from the
Company to an amount below the rate of his regular compensation
as in effect immediately prior to his termination or immediately
prior to the Change in Control, as applicable; (ii) a
requirement that the Employee relocate to a location more than
thirty-five (35) miles from the Employee's office location with
the Company immediately prior to his termination or immediately
prior to the Change in Control, as applicable; or (iii) a change
in duties or job responsibilities from those in effect
immediately prior to his termination or immediately prior to the
Change in Control, as applicable, which change results in the
diminution of the Employee's status, authority and duties,
except for such subordination in duties or job responsibilities
as may normally be required due to the Company's change from an
independent business entity to being a subsidiary or division of
another corporate entity;
then, in the event such termination occurred during the three-month period
immediately preceding such Change in Control, the Company shall pay the
Severance Amount (hereinafter defined) within 30 days of the occurrence of the
Change in Control, or, in the event such termination occurred during the
one-year period following the occurrence of the Change in Control, the Company
shall pay the Employee, within thirty (30) days after the effective date of his
termination, the Severance Amount (hereinafter defined). For purposes of this
Agreement, Severance Amount shall mean an amount equal to the sum of (x) six
times the rate of his monthly regular compensation as in effect immediately
prior to his termination or immediately prior to the Change in Control, as
applicable, and (y) an amount equal to the value of his accrued vacation time.
The Company may withhold from any such severance compensation any federal,
state, city, county or other taxes. If the Severance Amount is due to the
Employee hereunder and the termination occurred during the three-month period
immediately preceding the Change in Control, then the Company shall also be
obligated to reimburse the Employee, upon receipt of appropriate receipts for
such payments, for actual amounts which are otherwise unreimbursable or unfunded
by any other employer and which were or are expended by the Employee to obtain,
for a maximum of six months from the date of termination, comparable insurance
benefits as are customarily provided to employees of the Company. If the
Severance Amount is due to the Employee hereunder and the termination occurred
during the one-year period immediately following the Change in Control, then the
Company shall also be obligated to provide the Employee with insurance benefits
for six months following termination of his employment; provided, however, that
if the Employer begins employment with an employer other than the Company during
such six months, then such benefits shall cease to be owed or owing on the date
the Employee begins such employment with such other employer; and provided
further, that in the event that the Employee's continued participation in any
such plans for such period is not possible under the general terms and
provisions thereof, the Company shall pay to the Employee benefits which are
substantially similar in content and value to those which the Employee was
entitled under such plans or programs for such period.
3
<PAGE> 22
Section 4. No Severance Pay Upon Any Other Termination. Upon any
termination of the Employee's employment with the Company other than as set
forth in Section 3, the sole obligation hereunder of the Company shall be to pay
his regular compensation up to the effective date of termination. The severance
pay provisions hereunder do not, however, impact in any way the rights of the
Employee or the obligations of the Company under the Employment Agreement.
Section 5. Entire Obligation. Payment to the Employee pursuant to
Sections 3 or 4 of this Agreement shall constitute the entire obligation of the
Company to the Employee and full settlement of any claim under law or equity
that the Employee might otherwise assert against the Company, or any of its
employees, officers or directors on account of the Employee's termination.
Except for payments which may be required pursuant to and in accordance with the
Employment Agreement, payments hereunder shall supersede and extinguish any
obligation the Company may have with respect to the Employee pursuant to any
other employment contract or other agreement for the payment of employment
compensation, whether such agreement(s) are in existence now or come into
existence hereafter.
Section 6. No Obligation to Continue Employment. This Agreement does
not create any obligation on the part of the Company to continue to employ the
Employee following a Change in Control or in the absence of a Change in Control.
Section 7. Term of Agreement. This Agreement shall terminate and no
longer be in effect on the earlier of: (i) May 31, 1998; (ii) the date upon
which the Employee ceases to be an employee of the Company, unless a Change in
Control occurs within three months after such termination date; or (iii) if a
Change in Control occurs while the Employee is employed by the Company, until
the date one year following the Change in Control.
Section 8. Severability. Should any clause, portion or section of this
Agreement be unenforceable or invalid for any reason, such unenforceability or
invalidity shall not affect the enforceability or validity of the remainder of
the Agreement.
Section 9. Assignment: Successors in Interest. This Agreement, being
personal to the Employee, may not be assigned by him. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the Company, and the heirs, executors and personal
representatives of the Employee.
Section 10. Waiver. Failure to insist upon strict compliance with any
of the terms, covenants or conditions of this Agreement shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times.
4
<PAGE> 23
Section 11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey applicable in
the case of agreements made and to be performed entirely within such State.
Section 12. Arbitration. Any controversy or claim arising out of or in
connection with this Agreement shall be settled by arbitration in accordance
with the rules of the American Arbitration Association then in effect in the
State of New Jersey and judgment upon such award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. The arbitration shall be
held in the State of New Jersey. The arbitration award shall include attorneys'
fees and costs to the prevailing party.
* * * * * *
5
<PAGE> 24
IN WITNESS WHEREOF, this Agreement has been executed by the undersigned
as of the date first above written.
Intelligroup, Inc.
By:________________________________
Ashok Pandey, President and
Chief Executive Officer
THE EMPLOYEE
____________________________________
Robert M. Olanoff
6
<PAGE> 1
Exhibit 10.7
EMPLOYMENT AGREEMENT
THIS AGREEMENT made effective as of the 1st day of June, 1996 (the
"Effective Date") by and between Intelligroup, Inc., a New Jersey corporation
with its principal place of business at 517 Route One South, Iselin, New Jersey
08830 (the "Company"), and Paul Coombs (the "Employee").
WITNESSETH:
WHEREAS, the Company desires to secure the employment of the Employee
in accordance with the provisions of this Agreement; and
WHEREAS, the Employee desires and is willing to accept employment with
the Company in accordance herewith.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Term. The Company hereby agrees to employ the Employee and the
Employee hereby agrees to serve the Company pursuant to the terms and conditions
of this Agreement as Director BSD Division of the Company, or in a position at
least commensurate therewith in all material respects, for a term commencing on
the Effective Date hereof and expiring on the second anniversary thereof,
provided that the Employee is elected to such office, or a comparable or higher
office, at each annual meeting of the Board of Directors of the Company (the
"Board of Directors") during the term of this Agreement. If the Employee shall
not be so elected at any such annual meeting of the Board of Directors, the
Employee's employment hereunder shall
<PAGE> 2
forthwith terminate and the Company shall be obligated to compensate the
Employee in accordance with Section 6(a) of this Agreement.
2. Positions and Duties. The Employee's duties hereunder shall be those
which shall be prescribed from time to time by the Board of Directors in
accordance with the bylaws of the Company and shall include such executive
duties, powers and responsibilities as customarily attend the position of
Director BSD Division of a company comparable to the Company. The Employee will
hold, in addition to the position of Director BSD Division of the Company, such
other executive offices in the Company and its subsidiaries to which he may be
elected, appointed or assigned by the Board of Directors from time to time and
will discharge such executive duties in connection therewith. During the
employment period, the Employee's position (including status, offices and
reporting requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most significant of those
held, exercised and assigned immediately preceding the Effective Date. The
Employee shall devote his full working time, energy and skill (reasonable
absences for vacations and illness excepted), to the business of the Company as
is necessary in order to perform such duties faithfully, competently and
diligently; provided, however, that notwithstanding any provision in this
Agreement to the contrary, the Employee shall not be precluded from devoting
reasonable periods of time required for serving as a member of boards of
companies or organizations which have been approved by the Board of Directors so
long as such memberships or activities do not interfere with the performance of
the Employee's duties hereunder.
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<PAGE> 3
3. Compensation. During the term of this Agreement, the Employee shall
receive, for all services rendered to the Company hereunder, the following
(hereinafter referred to as "Compensation"):
(a) Base Salary. For the term hereof, the Employee shall be
paid an annual base salary equal to two hundred thousand dollars ($200,000). The
Employee's annual base salary shall be payable in equal installments in
accordance with the Company's general salary payment policies but no less
frequently than monthly. Such base salary shall be reviewed, and any increases
in the amount thereof shall be determined, by the Board of Directors or a
compensation committee formed by the Board of Directors (the "Compensation
Committee") at the end of each 12-month period of employment during the term
hereof.
(b) Bonuses. The Employee shall be eligible for and may
receive bonuses. The amount of such bonuses, if any, shall be solely within the
discretion of the Board of Directors or, if formed, the Compensation Committee
thereof.
(c) Incentive Compensation. The Employee shall be eligible for
awards from the Company's incentive compensation plans, including without
limitation any stock option plans, applicable to high level executive officers
of the Company or to key employees of the Company or its subsidiaries, in
accordance with the terms thereof and on a basis commensurate with his position
and responsibilities.
(d) Benefits. The Employee and his "dependents," as that term
may be defined under the applicable benefit plan(s) of the Company, shall be
included, to the extent eligible thereunder, in any and all plans, programs and
policies which provide benefits for employees and their dependents. Such plans,
programs and policies may include health care
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<PAGE> 4
insurance, long-term disability plans, life insurance, supplemental disability
insurance, supplemental life insurance, holidays and other similar or comparable
benefits made available to the Company's employees.
(e) Expenses. Subject to and in accordance with the Company's
policies and procedures, the Employee hereby is authorized to incur, and, upon
presentation of itemized accounts, shall be reimbursed by the Company for, any
and all reasonable and necessary business-related expenses, which expenses are
incurred by the Employee on behalf of the Company or any of its subsidiaries.
4. Absences. The Employee shall be entitled to vacations, absences
because of illness or other incapacity, and such other absences, whether for
holiday, personal time, or for any other purpose, as set forth in the Company's
employment manual or current procedures and policies, as the case may be, as
same may be amended from time-to-time.
5. Termination. In addition to the events of termination and expiration
of this Agreement provided for in Section 1 hereof, the Employee's employment
hereunder may be terminated only as follows:
(a) Without Cause. The Company may terminate the Employee's
employment hereunder without cause only upon action by the Board of Directors,
and upon no less than sixty (60) days prior written notice to the Employee. The
Employee may terminate employment hereunder without cause upon no less than
sixty (60) days prior written notice to the Company.
(b) For Cause, by the Company. The Company may terminate the
Employee's employment hereunder for cause immediately and with prompt notice to
the Employee, which
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<PAGE> 5
cause shall be determined in good faith solely by the Board of Directors.
"Cause" for termination shall include, but is not limited to, the following
conduct of the Employee:
(1) Material breach of any provision of this
Agreement by the Employee, which breach shall not have been cured by the
Employee within thirty (30) days of receipt of written notice of said breach;
(2) Misconduct as an employee of the Company,
including but not limited to: misappropriating any funds or property of the
Company; attempting to willfully obtain any personal profit from any transaction
in which the Employee has an interest which is adverse to the interests of the
Company; or any other act or omission which substantially impairs the Company's
ability to conduct its ordinary business in its usual manner;
(3) Unreasonable neglect or refusal to perform the
duties assigned to the Employee under or pursuant to this Agreement;
(4) Conviction of a felony; or
(5) Any other act or omission which subjects the
Company or any of its subsidiaries to substantial public disrespect, scandal or
ridicule.
(c) For Good Reason by Employee. The Employee may terminate
employment hereunder for good reason immediately and with prompt notice to the
Company. "Good reason" for termination by the Employee shall include, but is not
limited to, the following conduct of the Company:
(1) Material breach of any provision of this
Agreement by the Company, which breach shall not have been cured by the Company
within thirty (30) days of receipt of written notice of said breach;
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<PAGE> 6
(2) Failure to maintain the Employee in a position
commensurate with that referred to in Section 2 of this Agreement; or
(3) The assignment to the Employee of any duties
inconsistent with the Employee's position, authority, duties or responsibilities
as contemplated by Section 2 of this Agreement, or any other action by the
Company which results in a diminution of such position, authority, duties or
responsibilities, excluding for this purpose any isolated action not taken in
bad faith and which is promptly remedied by the Company after receipt of notice
thereof given by the Employee.
(d) Death. The period of active employment of the Employee
hereunder shall terminate automatically in the event of his death.
(e) Disability. In the event that the Employee shall be unable
to perform duties hereunder for a period of ninety (90) consecutive calendar
days by reason of disability as a result of illness, accident or other physical
or mental incapacity or disability, the Company may, in its discretion, by
giving written notice to the Employee, terminate the Employee's employment
hereunder as long as the Employee is still disabled on the effective date of
such termination.
(f) Mutual Agreement. This Agreement may be terminated at any
time by mutual agreement of the Employee and the Company.
6. Compensation in the Event of Termination. In the event that the
Employee's employment pursuant to this Agreement terminates prior to the end of
the term of this Agreement because he is not reelected pursuant to Section 1 or
for a reason provided in Section 5 hereof, the Company shall pay the Employee
compensation as set forth below:
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<PAGE> 7
(a) Employee not Elected by Board of Directors; By Employee
for Good Reason; By Company Without Cause. In the event that the Employee's
employment hereunder is terminated: (i) because the Employee is not elected to
the position of Director BSD Division of the Company, or in a position at least
commensurate therewith in all material respects, at any annual meeting of the
Company's Board of Directors during the term of this Agreement, as contemplated
by Section 1 hereof; (ii) by the Employee for good reason pursuant to Section
5(c) hereof; or (iii) by the Company without cause, then the Company shall
continue to pay or provide, as applicable, the following compensation to the
Employee:
(1) Annual base salary as set forth in Section 3(a)
hereof; and
(2) Continuing coverage, but only to the extent
required by law, for the Employee and his eligible dependents under all of the
Company's benefit plans, programs and policies in effect as of the date of
termination.
Such compensation shall continue to be paid or
provided, as applicable, in the same manner as before termination, and for a
period of time ending on the date when the term of this Agreement would
otherwise have expired in accordance with Section 1 of this Agreement. The
Employee shall not be required to mitigate the amount of any payment provided
for in this Section 6(a) by seeking employment or otherwise, nor shall any
amounts received from employment or otherwise by the Employee offset in any
manner the obligations of the Company hereunder.
(b) By Company Upon Termination of Agreement Due to Employee's
Death or Disability. In the event of the Employee's death or if the Company
shall terminate the Employee's employment hereunder for disability pursuant to
Section 5(e) hereof, the base salary
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<PAGE> 8
payable hereunder shall continue to be paid at the then current rate for three
(3) months after the termination of employment to the Employee or his personal
representative, as applicable.
(c) By Company For Cause or By Employee Without Good Reason.
In the event that (i) the Company shall terminate the Employee's employment
hereunder for cause pursuant to Section 5(b) hereof or (ii) the Employee shall
terminate employment hereunder without "good reason" as provided in Section 5(c)
hereof, the Company shall not be obligated to pay the Employee any compensation
except for salary and other Compensation which may have been earned and are due
and payable but which have not been paid as of the date of termination.
7. Effect of Termination. In the event of expiration or early
termination of this Agreement as provided herein, neither the Company nor the
Employee shall have any remaining duties or obligations hereunder except that:
(a) The Company shall:
(1) Pay the Employee's accrued salary and any other
accrued benefits under Section 3 hereof;
(2) Reimburse the Employee for expenses already
incurred in accordance with Section 3(e) hereof;
(3) To the extent required by law, pay or otherwise
provide for any benefits, payments or continuation or conversion rights in
accordance with the provisions of any benefit plan of which the Employee or any
of his dependents is or was a participant; and
(4) Pay the Employee or his beneficiaries any
compensation due pursuant to Section 6 hereof; and
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<PAGE> 9
(b) The Employee shall remain bound by the terms of Section 8
hereof and Exhibit A attached hereto.
8. Restrictive Covenant. (a) The Employee acknowledges and agrees that
he has access to secret and confidential information of the Company and its
subsidiaries and that the following restrictive covenant is necessary to protect
the interests and continued success of the Company. Except as otherwise
expressly consented to in writing by the Company, until the termination of the
Employee's employment (for any reason and whether such employment was under this
Agreement or otherwise) and thereafter for twenty-four (24) months (the
"Restricted Period"), the Employee shall not, directly or indirectly, acting as
an employee, owner, shareholder, partner, joint venturer, officer, director,
agent, salesperson, consultant, advisor, investor or principal of any
corporation or other business entity:
(i) engage, in any state or territory of the United States of
America or other country where the Company is doing business (determined as of
the date the Employee's employment with the Company terminates), in direct or
indirect competition with the business conducted by the Company or activities
which the Company plans to conduct within one year of termination (determined as
of the date the Employee's employment with the Company terminates);
(ii) request or otherwise attempt to induce or influence,
directly or indirectly, any present customer or supplier, or prospective
customer or supplier, of the Company, or other persons sharing a business
relationship with the Company, to cancel, limit or postpone their business with
the Company, or otherwise take action which might be to the material
disadvantage of the Company; or
-9-
<PAGE> 10
(iii) hire or solicit for employment, directly or indirectly,
or induce or actively attempt to influence, any Employee of the Company or any
Affiliate, as such term is defined in the Securities Act of 1933, as amended, to
terminate his or her employment or discontinue such person's consultant,
contractor or other business association with the Company.
(b) If the Employee violates any of the restrictions contained
in Section 8(a) above, the Restrictive Period shall be increased by the period
of time from the commencement of any such violation until the time such
violation shall be cured by the Employee to the satisfaction of the Company, and
the Company may withhold any and all payments, except salary, otherwise due and
owing to the Employee under this Agreement.
(c) In the event that either the geographical area or the
Restrictive Period set forth in Section 8(a) of this Agreement is deemed to be
unreasonably restrictive in any court proceeding, the court may reduce such
geographical area and Restrictive Period to the extent which it deems reasonable
under the circumstances.
(d) Nothing in this Section 8, whether express or implied,
shall prevent the Employee from being a holder of securities of a company whose
securities are registered under Section 12 of the Securities Exchange Act of
1934, as amended; provided, however, that the Employee holds of record and
beneficially less than two percent (2%) of the votes eligible to be cast
generally by holders of securities of such company for the election of
directors.
(e) The Employee, as a condition of his continued employment,
acknowledges and agrees that he has reviewed and will continue to be bound by
all of the provisions set forth in Exhibit A attached hereto, which is
incorporated herein by reference and made a part hereof as though fully set
forth herein, during the term of this Agreement, and any time hereafter.
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<PAGE> 11
(f) Employee acknowledges and agrees that in the event of a
breach or threatened breach of the provisions of this Section 8 by Employee the
Company may suffer irreparable harm and therefore, the Company shall be
entitled, to the extent permissible by law, immediately to cease to pay or
provide the Employee any compensation being, or to be, paid or provided to him
pursuant to Sections 3 or 6 of this Agreement, and also to obtain immediate
injunctive relief restraining the Employee from conduct in breach or threatened
breach of the covenants contained in this Section 8. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
9. Resolution of Differences Over Breaches of Agreement. Except as
otherwise provided herein, any controversy or claim arising out of, or relating
to, this Agreement, or the breach hereof, shall be reviewed in the first
instance in accordance with the Company's internal review procedures, if any,
with recourse thereafter--for temporary or preliminary injunctive relief
only--to the courts having jurisdiction thereof, and if any relief other than
injunctive relief is sought, then to arbitration in Middlesex County, New Jersey
in accordance with the rules of the American Arbitration Association, and
judgment upon the award rendered by the Arbitrator(s) may be entered in any
court having jurisdiction thereof.
10. Waiver. The waiver by a party hereto of any breach by the other
party hereto of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by a party hereto.
11. Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company, and the Company shall be
obligated to require any
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<PAGE> 12
successor to expressly assume its obligations hereunder. This Agreement shall
inure to the benefit of and be enforceable by the Employee or his legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. The Employee may not assign any of his duties,
responsibilities, obligations or positions hereunder to any person and any such
purported assignment by him shall be void and of no force and effect.
12. Notices. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing, and if personally delivered or when
sent by first class certified or registered mail, postage prepaid, return
receipt requested--in the case of the Employee, to his residence address as set
forth below, and in the case of the Company, to the address of its principal
place of business as set forth below, in care of the Board of Directors--or to
such other person or at such other address with respect to each party as such
party shall notify the other in writing.
13. Construction of Agreement.
(a) Governing Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the internal laws of the
State of New Jersey without reference to its principles regarding conflicts of
law.
(b) Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
(c) Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience of reference only and
shall not constitute a part of this Agreement.
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<PAGE> 13
14. Entire Agreement. This Agreement contains the entire agreement of
the parties concerning the Employee's employment and all promises,
representations, understandings, arrangements and prior agreements on such
subject are merged herein and superseded hereby. The provisions of this
Agreement may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom enforcement
of any amendment, modification, repeal, waiver, extension or discharge is
sought. No person acting other than pursuant to a resolution of the Board of
Directors shall have authority on behalf of the Company to agree to amend,
modify, repeal, waive, extend or discharge any provision of this Agreement or
anything in reference thereto or to exercise any of the Company's rights to
terminate or to fail to extend this Agreement. I further understand and agree
that if the Company does not consummate an initial public offering of its common
stock prior to October 31, 1996 that this Agreement shall be of no further force
or effect.
*.*.*.*.*.*.*.*.*.*
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<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and attested by its duly authorized officers, and the Employee has set
his hand, all as of the day and year first above written.
ATTEST: Intelligroup, Inc.,
_______________________________ By:_____________________________
Robert M. Olanoff, Secretary Ashok Pandey, President and
Chief Executive Officer
Address:________________________________
________________________________
________________________________
WITNESS: EMPLOYEE
____________________________ ________________________________________
Paul Coombs
Address:________________________________
________________________________
________________________________
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<PAGE> 15
EXHIBIT A
INTELLIGROUP, INC.
EMPLOYEE'S
INVENTION ASSIGNMENT AND CONFIDENTIALITY
AGREEMENT
In consideration of my employment or continued employment by
Intelligroup, Inc., a New Jersey corporation or any subsidiary or parent
corporation thereof (the "Company"), I hereby represent and agree as follows:
1. I understand that the Company is engaged in the business of
providing a wide range of information technology services, including
enterprise-wide business process solutions, systems integration and customized
applications and related services and that I may have access to or acquire
information with respect to Confidential Information (as defined below),
including processes and methods, development tools, scientific, technical and/or
business innovations.
2. Disclosure of Innovations. I agree to disclose in writing to the
Company all inventions, improvements and other innovations of any kind that I
may make, conceive, develop or reduce to practice, alone or jointly with others,
during the term of my employment with the Company, whether or not they are
related to my work for the Company and whether or not they are eligible for
patent, copyright, trademark, trade secret or other legal protection
("Innovations"). Examples of Innovations shall include, but are not limited to,
discoveries, research, inventions, formulas, techniques, processes, tools,
know-how, marketing plans, new product plans, production processes, advertising,
packaging and marketing techniques and improvements to computer hardware or
software.
3. Assignment of Ownership of Innovations. I agree that all Innovations
will be the sole and exclusive property of the Company and I hereby assign all
of my rights, title or interest in the Innovations and in all related patents,
copyrights, trademarks, trade secrets, rights of priority and other proprietary
rights to the Company. At the Company's request and expense, during and after
the period of my employment with the Company, I will assist and cooperate with
the Company in all respects and will execute documents, and, subject to my
reasonable availability, give testimony and take further acts requested by the
Company to obtain, maintain, perfect and enforce for the Company patent,
copyright, trademark, trade secret and other legal protection for the
Innovations. I hereby appoint the President and Chief Executive Officer of the
Company as my attorney-in-fact to execute documents on my behalf for this
purpose.
4. Protection of Confidential Information of the Company. I understand
that my work as an employee of the Company creates a relationship of trust and
confidence between myself and the Company. During and after the period of my
employment with the Company, I will not use or disclose or allow anyone else to
use or disclose any "Confidential Information" (as defined below) relating to
the Company, its products, suppliers or customers except as may
-A1-
<PAGE> 16
be necessary in the performance of my work for the Company or as may be
authorized in advance by appropriate officers of the Company. "Confidential
Information" shall include innovations, methodologies, processes, tools,
business strategies, financial information, forecasts, personnel information,
customer lists, trade secrets and any other non-public technical or business
information, whether in writing or given to me orally, which I know or have
reason to know the Company would like to treat as confidential for any purpose,
such as maintaining a competitive advantage or avoiding undesirable publicity. I
will keep Confidential Information secret and will not allow any unauthorized
use of the same, whether or not any document containing it is marked as
confidential. These restrictions, however, will not apply to Confidential
Information that has become known to the public generally through no fault or
breach of mine or that the Company regularly gives to third parties without
restriction on use or disclosure. Upon termination of my work with the Company,
I will promptly deliver to the Company all documents and materials of any nature
pertaining to my work with the Company and I will not take with me any documents
or materials or copies thereof containing any Confidential Information.
5. Non-Solicitation. I understand that my work as an employee of the
Company creates a relationship of trust and confidence between myself and the
Company. During and after the period of my employment with the Company, I will
not request or otherwise attempt to induce or influence, directly or indirectly,
any present customer or supplier, or prospective customer or supplier, of the
Company, or other persons sharing a business relationship with the Company to
cancel, to limit or postpone their business with the Company, or otherwise take
action which might be to the material disadvantage of the Company. During and
after the period of my employment with the Company, I will not hire or solicit
for employment, directly or indirectly, or induce or actively attempt to
influence, any Employee of the Company or any Affiliate of the Company, as such
term is defined in the Securities Act of 1933, as amended, to terminate his or
her employment or discontinue such person's consultant, contractor or other
business association with the Company.
6. Other Agreements. I represent that my performance of all the terms
of this Agreement and my duties as an employee of the Company will not breach
any invention assignment agreement, confidential information agreement,
non-competition agreement or other agreement with any former employer or other
party. I represent that I have not and will not bring with me to the Company or
use in the performance of my duties for the Company any documents or materials
of a former employer that are not generally available to the public.
7. Disclosure of this Agreement. I hereby authorize the Company to
notify others, including but not limited to customers of the Company and any of
my future employers, of the terms of this Agreement and my responsibilities
hereunder.
8. Injunctive Relief . I understand that in the event of a breach or
threatened breach of this Agreement by me the Company may suffer irreparable
harm and monetary damages alone would not adequately compensate the Company. The
Company will therefore be entitled to injunctive relief to enforce this
Agreement.
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<PAGE> 17
9. Enforcement and Severability. I acknowledge that each of the
provisions in this Agreement are separate and independent covenants. I agree
that if any court shall determine that any provision of this Agreement is
unenforceable with respect to its term or scope such provision shall nonetheless
be enforceable by any such court upon such modified term or scope as may be
determined by such court to be reasonable and enforceable. The remainder of this
Agreement shall not be affected by the unenforceability or court ordered
modification of a specific provision.
10. Governing Law. I agree that this Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
11. Superseding Agreement. I understand and agree that this Agreement
contains the entire agreement of the parties with respect to subject matter
hereof and supersedes all previous agreements and understandings between the
parties with respect to its subject matter.
12. Acknowledgments. I acknowledge that I have read this agreement, was
given the opportunity to ask questions and sufficient time to consult an
attorney and I have either consulted an attorney or affirmatively decided not to
consult an attorney. I understand that this agreement does not alter the terms
of an executed Employment Agreement with the Company, or in the absence of an
Employment Agreement, this Agreement does not alter my status as an employee at
will and that my employment may be terminated at any time, with or without
cause. I also understand that my obligations under this Agreement survive the
termination of my employment with the Company.
*.*.*.*.*.*.*.*.*.*
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<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written below.
Date: _________________ ___________________________________
Name of Employee:
Address: __________________________
__________________________
__________________________
__________________________
Intelligroup, Inc.
Date:__________________ By:________________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 10.8
INTELLIGROUP, INC.
MODEL INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of May 31,
1996, by and between Intelligroup, Inc., a New Jersey corporation (the
"Company"), and [ Name ] ("Indemnitee").
WHEREAS, Indemnitee is a [ Title ] of the Company and performs a
valuable service in such capacity for the Company;
WHEREAS, the Company and Indemnitee recognize the difficulty in
obtaining liability insurance for its directors, officers, employees, agents and
fiduciaries, the significant increases in the cost of such insurance and the
general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and the Indemnitee and other
directors, officers, employees, agents and fiduciaries of the Company may not be
willing to continue to serve in such capacities without additional protection;
and
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and, in
part, in order to induce Indemnitee to continue to provide services to the
Company as a [ Title ], the Company wishes to provide for the indemnification
and advancing of expenses to Indemnitee to the maximum extent permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Indemnification of Expenses. The Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any threatened, pending or
completed action, suit, proceeding or alternative dispute resolution mechanism,
or any hearing, inquiry or investigation that Indemnitee in good faith believes
might lead to the institution of any such action, suit, proceeding or
alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other (hereinafter a "Claim") by reason of (or
arising in part out of) any event or occurrence related to the fact that
Indemnitee is
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or was a director, officer, employee, agent or fiduciary of the Company, or any
subsidiary of the Company, or is or was serving at the request of the Company as
a director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action or inaction on the part of Indemnitee while serving in such capacity
(hereinafter an "Indemnifiable Event") against any and all expenses (including
attorneys' fees and all other costs, expenses and obligations incurred in
connection with investigating, defending, being a witness in or participating in
(including on appeal), or preparing to defend, be a witness in or participate
in, any such action, suit, proceeding, alternative dispute resolution mechanism,
hearing, inquiry or investigation), judgments, fines, penalties and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) of such Claim and any federal,
state, local or foreign taxes imposed on the Indemnitee as a result of the
actual or deemed receipt of any payments under this Agreement (collectively,
hereinafter "Expenses"), including all interest, assessments and other charges
paid or payable in connection with or in respect of such Expenses. Such payment
of Expenses shall be made by the Company as soon as practicable but in any event
no later than thirty (30) days after written demand by Indemnitee therefor is
presented to the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i) the
obligations of the Company under Section l(a) shall be subject to the condition
that the Reviewing Party (as described in Section 10(e) hereof) shall not have
determined (in a written opinion, in any case in which the Independent Legal
Counsel referred to in Section 1(c) hereof is involved) that Indemnitee would
not be permitted to be indemnified under applicable law, and (ii) the obligation
of the Company to make an advance payment of Expenses to Indemnitee pursuant to
Section 2(a) (an "Expense Advance") shall be subject to the condition that, if,
when and to the extent that the Reviewing Party determines that Indemnitee would
not be permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid; provided, however, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any
Expense Advance shall be unsecured and no interest shall be charged thereon. If
there has not been a Change in Control (as defined in Section 10(c) hereof), the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel referred to in Section l(c) hereof. If there has been
no determination by the Reviewing Party or if the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in whole
or in part under applicable law, Indemnitee shall have the right to commence
litigation seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or
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any aspect thereof, including the legal or factual bases therefor, and the
Company hereby consents to service of process and to appear in any such
proceeding. Any determination by the Reviewing Party otherwise shall be
conclusive and binding on the Company and Indemnitee.
(c) Change in Control. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to payments of Expenses
and Expense Advances under this Agreement or any other agreement or under the
Company's Amended and Restated Certificate of Incorporation or Amended and
Restated Bylaws as now or hereafter in effect, the Company shall seek legal
advice only from Independent Legal Counsel (as defined in Section 10(d) hereof)
selected by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would be permitted to be indemnified under applicable law. The
Company agrees to pay the reasonable fees of the Independent Legal Counsel
referred to above and to fully indemnify such counsel against any and all
expenses (including attorneys' fees), claims, liabilities and damages arising
out of or relating to this Agreement or its engagement pursuant hereto.
(d) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 9 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
action, suit, proceeding, inquiry or investigation referred to in Section (1)(a)
hereof or in the defense of any claim, issue or matter therein, Indemnitee shall
be indemnified against all Expenses incurred by Indemnitee in connection
therewith.
2. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all
Expenses incurred by Indemnitee. The advances to be made hereunder shall be paid
by the Company to Indemnitee as soon as practicable but in any event no later
than five (5) days after written demand by Indemnitee therefor to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Financial Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
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(c) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any claim, action, suit or proceeding, by
judgment, order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that Indemnitee did not meet any particular standard of
conduct or have any particular belief or that a court has determined that
indemnification is not permitted by applicable law. In addition, neither the
failure of the Reviewing Party to have made a determination as to whether
Indemnitee has met any particular standard of conduct or had any particular
belief, nor an actual determination by the Reviewing Party that Indemnitee has
not met such standard of conduct or did not have such belief, prior to the
commencement of legal proceedings by Indemnitee to secure a judicial
determination that Indemnitee should be indemnified under applicable law, shall
be a defense to Indemnitee's claim or create a presumption that Indemnitee has
not met any particular standard of conduct or did not have any particular
belief. In connection with any determination by the Reviewing Party or otherwise
as to whether the Indemnitee is entitled to be indemnified hereunder, the burden
of proof shall be on the Company to establish that Indemnitee is not so
entitled.
(d) Notice to Insurers. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 2(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such action,
suit, proceeding, inquiry or investigation in accordance with the terms of such
policies.
(e) Selection of Counsel. In the event the Company shall be
obligated hereunder to pay the Expenses of any action, suit, proceeding, inquiry
or investigation, the Company, if appropriate, shall be entitled to assume the
defense of such action, suit, proceeding, inquiry or investigation with counsel
approved by Indemnitee, upon the delivery to Indemnitee of written notice of its
election so to do. After delivery of such notice, approval of such counsel by
Indemnitee and the retention of such counsel by the Company, the Company will
not be liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same action, suit,
proceeding, inquiry or investigation; provided that, (i) Indemnitee shall have
the right to employ Indemnitee's counsel in any such action, suit, proceeding,
inquiry or investigation at Indemnitee's expense and (ii) if (A) the employment
of counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend such
action, suit, proceeding, inquiry or investigation, then the fees and expenses
of Indemnitee's counsel shall be at the expense of the Company.
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3. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify the
Indemnitee to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of this
Agreement, the Company's Amended and Restated Certificate of Incorporation, the
Company's Amended and Restated Bylaws or by statute. In the event of any change
after the date of this Agreement in any applicable law, statute or rule which
expands the right of a New Jersey corporation to indemnify a member of its board
of directors or an officer, employee, agent or fiduciary, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits afforded by such change. In the event of any change in any applicable
law, statute or rule which narrows the right of a New Jersey corporation to
indemnify a member of its board of directors or an officer, employee, agent or
fiduciary, such change, to the extent not otherwise required by such law,
statute or rule to be applied to this Agreement, shall have no effect on this
Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this
Agreement shall be in addition to any rights to which Indemnitee may be entitled
under the Company's Amended and Restated Certificate of Incorporation, its
Amended and Restated Bylaws, any agreement, any vote of stockholders or
disinterested directors, the New Jersey Business Corporation Act, or otherwise.
The indemnification provided under this Agreement shall continue as to
Indemnitee for any action taken or not taken while serving in an indemnified
capacity even though Indemnitee may have ceased to serve in such capacity.
4. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any action, suit,
proceeding, inquiry or investigation made against Indemnitee to the extent
Indemnitee has otherwise actually received payment (under any insurance policy,
Amended and Restated Certificate of Incorporation, Bylaw or otherwise) of the
amounts otherwise indemnifiable hereunder.
5. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses in the investigation, defense, appeal or settlement of any
civil or criminal action, suit, proceeding, inquiry or investigation, but not,
however, for all of the total amount thereof, the Company shall nevertheless
indemnify Indemnitee for the portion of such Expenses to which Indemnitee is
entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
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7. Liability Insurance. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for
acts, omissions or transactions from which Indemnitee may not be relieved of
liability under applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except (1) with
respect to proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other agreement or insurance policy
or under the Company's Amended and Restated Certificate of Incorporation or
Amended and Restated Bylaws now or hereafter in effect relating to Claims for
Indemnifiable Events, (ii) in specific cases if the Board of Directors has
approved the initiation or bringing of such suit, or (iii) as otherwise required
under Section 14A:3-5 of the New Jersey Business Corporation Act, regardless of
whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be.
(c) Lack of Good Faith. To indemnify Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(d) Claims Under Section 16(b). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
9. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
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10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the
"Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees,
agents or fiduciaries, so that if Indemnitee is or was a director, officer,
employee, agent or fiduciary of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director, officer,
employee, agent or fiduciary of another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise, Indemnitee shall stand in the
same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee, agent or fiduciary of the
Company which imposes duties on, or involves services by, such director,
officer, employee, agent or fiduciary with respect to an employee benefit plan,
its participants or its beneficiaries; and if Indemnitee acted in good faith and
in a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Agreement.
(c) For purposes of this Agreement a "Change in Control" shall
be deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or a corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company, is or becomes the "beneficial owner" (as defined in Rule
13(d)(3) under said Act), directly or indirectly, of securities of the Company
representing more than 20% of the total voting power represented by the
Company's then outstanding Voting Securities, (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by the
Board of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation other than a merger or consolidation which would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the total voting
power represented by the Voting
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Securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of (in one transaction or a series of transactions)
all or substantially all of the Company's assets.
(d) For purposes of this Agreement, "Independent Legal
Counsel" shall mean an attorney or firm of attorneys, selected in accordance
with the provisions of Section 1(c) hereof, who shall not have otherwise
performed services for the Company or Indemnitee within the last three years
(other than with respect to matters concerning the rights of Indemnitee under
this Agreement, or of other indemnitees under similar indemnity agreements).
(e) For purposes of this Agreement, a "Reviewing Party" shall
mean any appropriate person or body consisting of a member or members of the
Company's Board of Directors or any other person or body appointed by the Board
of Directors who is not a party to the particular Claim for which Indemnitee is
seeking indemnification, or Independent Legal Counsel.
(f) For purposes of this Agreement, "Voting Securities" shall
mean any securities of the Company that vote generally in the election of
directors.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, spouses, heirs,
and personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all, or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. This Agreement shall
continue in effect regardless of whether Indemnitee continues to serve as a
director of the Company or of any other enterprise at the Company's request.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless as a part of such action the
court of competent jurisdiction over such action determines that each of the
material assertions made by Indemnitee as a basis for such action were not made
in good faith or were frivolous. In the event of an action instituted by or in
the name of the Company under this Agreement to enforce or interpret any of the
terms of this Agreement,
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Indemnitee shall be entitled to be paid all Expenses incurred by Indemnitee in
defense of such action (including costs and expenses incurred with respect to
Indemnitee's counterclaims and cross-claims made in such action), and shall be
entitled to the advancement Expenses with respect to such action, unless as a
part of such action the court having jurisdiction over such action determines
that each of Indemnitee's material defenses to such action were made in bad
faith or were frivolous.
14. Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of New Jersey
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Superior
Court of the State of New Jersey in and for Middlesex County, which shall be the
exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of the State of
New Jersey, as applied to contracts between New Jersey residents, entered into
and to be performed entirely within the State of New Jersey, without regard to
the conflict of laws principles thereof.
18. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a
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waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries.
**********
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
INTELLIGROUP, INC.
By: _________________________________________
[ Name of Intelligroup, Inc. Officer ]
[ Title ]
[ Address of Corporate Offices ]
AGREED TO AND ACCEPTED:
INDEMNITEE:
________________________________
(signature)
________________________________
(name of Indemnitee)
________________________________
________________________________
(address)
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Exhibit 10.9
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (this "Sublease") is made this 16th day of May,
1996, by and between MICROGNOSIS, INC. (hereinafter referred to as
"Sublessor"), and INTELLIGROUP, INC. (hereinafter collectively referred to as
"Sublessee").
WITNESSETH:
WHEREAS, Sublessor is the Tenant under a Lease dated May 25, 1994 (hereinafter
referred to as the "Master Lease"), a true, complete, and correct copy of which
is attached hereto as Exhibit A, with WOODBRIDGE PLACE ASSOCIATES, a New Jersey
limited partnership (hereinafter referred to as "Landlord") with respect to a
portion of the property at Woodbridge Place, 517 Route One South, Iselin, New
Jersey; and
WHEREAS, Sublessor desires to sublet to Sublessee approximately 13,201 rentable
square feet pursuant to the provisions of this Sublease and the Master Lease,
and Sublessee desires to sublease the same from Sublessor subject to and in
accordance with the following terms:
NOW, THEREFORE, in consideration of the mutual covenants and agreements
provided herein, and other good and valuable consideration, the receipt and
sufficiency of which the parties hereto hereby acknowledge, the parties hereto
mutually covenant and agree as follows:
1. PREMISES. Sublessor hereby sublets to Sublessee, subject to the
provisions herein contained, that office space consisting of
approximately 13,201 rentable square feet (the "Premises") located
on the 5th floor of the building known as Woodbridge Place, 517
Route One South, Iselin, New Jersey (the "Building") which
constitutes the entire premises defined as the "demised premises"
and is demised pursuant to the Master Lease.
2. TERM. The term created by this Sublease shall be for a period
commencing June 1, 1996 (the "Commencement Date") and expiring on
November 15, 1999.
3. RENT. Subject to the performance by Sublessor of its obligations
under the Master Lease and this Sublease, Sublessee covenants and
agrees to pay to
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Sublessor Base Rent in the amount of $18,371.39 a month due and payable on the
first day of each month of the term.
The Base Rent and all other amounts to be paid by Sublessee under this Sublease
shall be paid to Sublessor without deduction or offset, and in lawful money of
the United States of America which shall be by corporate check to the offices
of Sublessor located at 100 Saw Mill Road, Danbury, Connecticut 06810 or to
such other person or at such other place as Sublessor may from time to time
designate in writing. In the event any payment hereunder is not received
within five (5) business days of notice from Sublessor that payment is due,
Sublessee shall be required to pay to Sublessor a "Late Charge" of five (5%)
percent of any installment of Base Rent. Sublessee's obligation to pay a "Late
Charge" will be conditioned on Sublessor's obligation to pay a "Late Charge."
The Base Rent (as defined above), and Late Charge, and the costs of separately
metered electric utilities and any costs relating to Real Estate Taxes and
Operating Expenses as defined in Paragraph 5 shall be the exclusive payments
due from Sublessee to Sublessor. Under no circumstances will Sublessee be
obligated to make any other payments to Sublessor or to the Landlord, all such
additional payments, if any, being the sole obligation of Sublessor (whether
such amounts are greater or less than the amounts due pursuant to this
Sublease).
Sublessor shall timely pay all sums due to Landlord pursuant to the terms and
conditions of the Master Lease and shall otherwise timely and completely
perform all of its obligations and covenants pursuant to the Master Lease. In
the event Sublessor fails to make any payment due to Landlord at or before the
time required for such payment pursuant to the terms of the Master Lease or
otherwise fails to perform any of its obligations or covenants timely and fully
pursuant to the terms of the Master Lease, Sublessee shall have the right (but
not the obligation) to make such payment or perform such obligation on
Sublessor's behalf, and shall be entitled to a credit for the full amount of
any such payment or reasonable costs of performing any such obligation
(including reasonable costs incurred for legal advice) on the amounts next due
by Sublessee to Sublessor pursuant to this Sublease. These provisions shall not
be construed as a waiver by Sublessee to seek any other or additional relief
permitted by law on account of Sublessor's default of its obligations under the
Master Lease.
<PAGE> 3
In addition to the above monthly Base Rent, Sublessee shall pay for all
separately metered electric utilities for the Premises.
4. RENT ABATEMENT. Sublessee is entitled to a rent abatement of $21,000,
which abatement shall be applied to satisfy Sublessee's obligations to pay
the first amounts of Base Rent due pursuant to this Sublease.
5. REAL ESTATE TAXES AND OPERATING EXPENSES. Sublessor shall have no
obligation to pay any real estate taxes or operating expenses with regard
to the Premises, except Sublessee to pay increases if any in real estate
taxes and operating expenses beyond a 1996 base year pursuant to
Paragraph 23 of the Master Lease. Sublessor to provide Sublessee with the
documentation as provided to Sublessor from Landlord to enable it to
ascertain its share of real estate tax and operating expense increases.
6. APPLICATION OF MASTER LEASE. To the extent not otherwise inconsistent
with the context or the provisions of this Sublease, the terms,
provisions, covenants, and conditions of the Master Lease are incorporated
by this reference as is fully set forth herein and shall be specifically
effective as between the parties hereto, as follows:
(a) The term "Lessor" as used therein shall refer to Sublessor and its
successors and assigns and the term "Lessee" as used therein shall
refer to Sublessee hereunder, its successors and permitted assigns.
(b) Subject to the other provisions of this Sublease, Sublessee agrees to
perform and comply with the terms, provisions, covenants, and
conditions of the Master Lease, to be performed and complied with by
the Sublessor thereunder, subject to the limitations more
specifically set forth below, and each party hereto agrees with the
other not to do or suffer permit anything to be done which would
result in a default under or cause the Master Lease to be terminated
or forfeited:
<PAGE> 4
(i) Sublessee shall not be obligated to pay any amounts due to the
Landlord under the Master Lease except for any such amounts
specified in the Sublease or for any such amounts due for work
or other services performed by Landlord at Sublessee's
request;
(ii) Section 5 of the Master Lease shall not be applicable to
Sublessee, and Sublessee shall have no liability, with respect
to any condition, in violation of the Master Lease, or any
repairs needed, which arose prior to the date of Sublessee's
occupancy of the Premises. Sublessor shall indemnify and hold
harmless the Sublessee against any claims, liabilities,
judgments, losses, causes of action, costs, and expenses
(including reasonable attorneys' fees) which may be incurred by
Sublessee arising out of Sublessor's breach of Section 5 of the
Master Lease prior to the date of Sublessee's occupancy of the
Premises;
(iii) Sublessee shall be obligated to surrender possession of the
Premises in the same condition as the Premises were at the
commencement date of the Sublease, ordinary wear and tear
excepted.
(iv) Section 39 of the Master Lease shall not be applicable to
Sublessee; and,
(v) The Indemnity provisions in Section 33 of the Master Lease
shall only apply to Sublessee to the extent it arises out of
the actions or omissions of the Sublessee or its subtenants,
licensees, employees, agents, contractors, or invitees, except
that Sublessee shall also indemnify and hold harmless the
Sublessor (in addition to the Landlord).
(c) All capitalized terms used herein which are not defined herein shall
have the meaning ascribed to them in the Master Lease.
<PAGE> 5
7. NOTICES. All notices to be given by one (1) party to the other under this
Sublease shall be in writing and served in the manner provided herein:
If to Sublessor to: Mr. David A. Moser
MICROGNOSIS, INC.
100 Saw Mill Road
Danbury, CT 06810
If to Sublessee to: Mr. Ashok Pandey, President
INTELLIGROUP INC.
517 Route 1 South
Iselin, N.J. 08830
Copy to: Bruce D. Ettman, Esq.
Spadoro & Hilson
90 Woodbridge Center Drive
Suite 610
Woodbridge, N.J. 07095
or at such other address as either party shall designate by written notice
to the other.
Notices shall be effectively served if hand delivered to an officer of a
party hereto. Service shall likewise be deemed effective if sent by
overnight delivery services, in which case service is effective upon receipt
at the recipients address.
8. TERMINATION. Sublessee shall be deemed to be in default hereunder upon the
occurrence of any one or more of the following events, in which case if not
cured, Sublessor may terminate this Sublease as provided below by serving
upon Sublessee a written notice directed to the address of the Premises that
this Sublease will terminate on a date specified therein, which shall not be
less than fifteen (15) days after the delivery of such notice:
(a) Sublessee fails to pay any installment of Base Rent within five (5)
days of notice;
<PAGE> 6
(b) Sublessee fails to pay any other amount due from Sublessee and such
failure continues for five (5) days after notice thereof from
Sublessor to Sublessee;
(c) Sublessee fails to perform or observe any covenant or agreement
set forth in this Sublease including any covenant or agreement set
forth in the Master Lease and such failure continues following
notice thereof from Sublessor or Sublessee until fifteen (15) days; or
(d) Any event caused by Sublessee on the Premises which constitutes a
default by Sublessee under terms of the Master Lease applicable to
this Sublease.
Upon a default by Sublessee under this Sublease after the applicable grace
period, Sublessor may exercise, without limitation of any other rights and
remedies available to it hereunder or at law or equity, any and all rights
and remedies of Landlord set forth in the Master Lease in the event of a
default by Sublessor thereunder.
In the event Sublessee fails or refuses to make any payment or perform any
covenant or agreement to be performed hereunder by Sublessee after the
applicable grace period, Sublessor may, after a default by Sublessee make
such payment or undertake to perform such covenant or agreement (but shall
not have any obligation to Sublessee to do so). In such event, amounts so
paid and amounts expended in undertaking such performance, together with
all costs, expenses and attorneys' fees incurred by Sublessor in connection
therewith, shall be additional rent hereunder which shall be required to be
paid by Sublessee to Sublessor.
9. SECURITY DEPOSIT. Sublessee has deposited with Sublessor the Security
Deposit of $110,228.34 (i.e., an amount equal to six (6) installments of
Base Rent). Said deposit shall be held by Sublessor as security for the
faithful performance by Sublessee of all the terms, covenants, and
conditions of this Sublease. Sublessor agrees to apply $18,371.39 (i.e., an
amount equal to one (1) month's Base Rent) in the 6th, 12th, 18th, 24th,
30th and 36th month of the Sublessee term in lieu of payment of base
monthly rent by Sublessee. Sublessor shall have no obligation to apply the
Security Deposit as Base Rent if Sublessee is in default with respect to
any provision of this Sublease. Sublessor agrees to apply such Security
Deposit as Base
<PAGE> 7
Rent upon Sublessee's curing of such default, or if provisions for such
default are made satisfactory to Sublessor.
10. CONDITION OF PREMISES. The Sublessee accepts the Premises in "as is"
condition, and shall return possession of the Premises on expiration of the
Sublease Term in good condition, ordinary wear and tear, excepted.
11. IMPROVEMENTS. Any improvements desired by the Sublessee will be at the sole
expense and liability of the Sublessee, subject to the approval of the
Sublessor and Landlord, such approval shall not be unreasonably withheld or
delayed.
12. FURNITURE. All systems furniture (modular office landscaping and chairs)
owned by the Landlord and all office furniture (desks, chairs, filing
cabinets, tables) owned by Sublessor to remain in space for use by
Sublessee at no additional charge.
13. ASSIGNMENT AND SUBLETTING. The Sublessee shall have the right to further
assign or sublease the Premises per the attached Master Lease, at
Sublessee's expense and subject to the Sublessor's and Landlord's approval
which shall not be unreasonably withheld or delayed.
14. INSURANCE. Sublessee shall maintain insurance of the kinds and in the
amounts required to be maintained by Sublessor under the Master Lease. All
policies of liability insurance shall name as additional insured Sublessor,
the Landlord, the beneficiaries of Landlord and its manager, and their
respective agents, contractors, managers, members, partners, and employees,
as their interests may appear. Sublessee's policies shall state that such
insurance coverage may not be changed, amended, renewed or canceled without
at least thirty (30) days' prior notice to Landlord and Sublessor. Such
policies shall provide renewal certificates to Landlord and Sublessor at
least ten (10) days prior to expiration of such policies.
15. WAIVER OF CLAIMS AND INDEMNITY.
(a) Sublessee hereby releases and waives any and all claims against
Sublessor, Landlord, and all other beneficiaries of Landlord and
Sublessor, and any other managing agent of the Building, and each of
their respective managers, members, officers, directors, partners,
agents and employees (individually and
<PAGE> 8
collectively, the "Indemnitees") for injury or damage to person,
property or business sustained in or about the Premises, except
in any case which would render this release and waiver void
under law and except for claims resulting from any Indemnitees'
gross negligence or intentional misconduct or the commission of
any act which is a violation of any criminal statute, ordinance
or rule.
(b) Sublessee agrees to indemnify, defend and hold harmless, the
Indemnitees from and against any and all claims, demands, costs,
and expenses of every kind and nature, including reasonable
attorneys' fees and litigation expenses, to the extent arising
from Sublessee's occupancy of the Premises or any breach or
default on the part of the Sublessee in the performance of any
Agreement or covenant of Sublessee to be performed under this
Sublease or pursuant to the terms of this Sublease including any
covenant or agreement set forth in the Master Lease which is
applicable to this Sublease or any act or omission of Sublessee
or its agents, officers, employees, guests, servants, invitees
or customers in or about the Premises.
16. WAIVER OF SUBROGATION. Sublessor and Sublessee hereby waive rights of
subrogation against each other (and their agents and employees) on the
terms provided in Paragraph 10 of the Master Lease and each agrees to
comply with the requirements of Paragraph 10.
17. CONSENT OF LANDLORD. This Sublease is subject to and conditioned on the
written consent of the Landlord, a copy of which is attached hereto.
Sublessor is solely responsible at its sole cost to obtain such consent
using its "best efforts" to effectuate the terms of this Sublease.
Sublessee shall have no obligation to incur any expense whatsoever to
obtain such consent but will cooperate with Sublessor and Landlord to
provide timely information as requested.
18. PARKING. Subtenant to be allotted 42 Parking spaces - 14 of which will
be assigned.
19. NO DEFAULTS. Sublessor represents that it will not be in default of any
provision of the Master Lease at the time Sublessee takes possession of
the Premises. If there is an outstanding default by Sublessor of the
Master Lease at
<PAGE> 9
the commencement of the Sublease, Sublessor (at its sole cost and
expense) shall cure such default, or make provisions for such default
to be cured which are satisfactory to both the Landlord and the
Sublessee. If such default is not cured and/or if no satisfactory
provision is made for such cure, Sublessee shall have the option of
canceling this Sublease or curing such default on Sublessor's behalf, in
which case, Sublessee shall be entitled to a credit for all costs
incurred in such cure, including, but not limited to reasonable
attorney's fees.
20. DELIVERY OF NOTICES. Within two business days of the receipt of any
notice from the Landlord or other third party by either party to this
Sublease, the party which received such notice shall provide a copy to
the other party. If the notice requires any act to be performed by the
recipient of the notice, such act will be performed timely and
completely.
21. BROKER'S COMMISSION. Sublessor is solely responsible for the payment of
any and all broker's commission payable in connection with the Sublease.
Sublessor represents and warrants that Mr. Richard Baumstein of CUSHMAN
& WAKEFIELD of New Jersey is the only broker entitled to a commission in
carrying on the negotiation related to the Sublease. Sublessee
represents and warrants that Mr. Matthew McDonough of PETER ELLIOTT &
CO. INC. is the only broker entitled to a commission in carrying out the
negotiation related to this Sublease. Sublessor indemnifies Sublessee in
Sublessee's favor in the event either broker on this Sublease or some
other broker claims to be entitled to a commission or any other payment.
22. REMOVAL OF SIGNS. Sublessor warrants that all signs are to be removed
at Sublessor's sole expense prior to Sublessee's occupancy.
23. MISCELLANEOUS. Sublessor represents that Sublessee has the right to
place signage at the entrance of the Premises and on the Building's
Directory evidencing their occupancy subject to the approval of the
Landlord.
Sublessor represents that it did not store, dispose or transport any
hazardous materials on or about the Premises; that there were no
environmental enforcement proceedings commenced and there are none
pending affecting the Premises. Sublessor represents that it has
complied with all applicable environmental laws,
<PAGE> 10
statutes, ordinances or regulations. Sublessor further represents that,
at all times during its tenancy at the Premises, it has used the
Premises solely for general office purposes as required by the Master
Lease and that it has never engaged in any activity involving
manufacturing, processing, fabricating, warehousing, storage, or
transporting.
IN WITNESS WHEREOF, Sublessor and Sublessee have caused this instrument to be
executed as of the date first above written.
SUBLESSOR: SUBLESSEE:
By: /s/ David A. Moser By: /s/ Ashok Pandey
---------------------- ----------------------
Its: Manager, Corporate Real Estate President
<PAGE> 11
Exhibit A of Exhibit 10.9
LEASE AGREEMENT, made the 25th day of May, 1994, between WOODBRIDGE
PLACE ASSOCIATES, a New Jersey limited partnership, whose address is 2025 Route
27, Edison, New Jersey 08817 (hereinafter called "Lessor"); and MICROGNOSIS,
INC., a Connecticut Corporation, whose address is 100 Saw Mill Road, Danbury,
Connecticut 06810 (hereinafter called "Lessee").
W I T N E S S E T H :
For and in consideration of the covenants herein contained, and upon
the terms and conditions herein set forth, Lessor and Lessee agree as follows:
1. DESCRIPTION. Lessor hereby leases to Lessee, and Lessee hereby
hires from Lessor, the following space: Approximately 13,201 gross rentable
square feet on the fifth (5th) floor (hereinafter called "Demised Premises" or
"Premises") which includes an allocable share of the Common Facilities, as
shown on the plan or plans, initialed by the parties hereto, marked Exhibit A
attached hereto and made part of this Lease in the building known as Woodbridge
Place, located at 517 Route One South, Iselin, New Jersey 08830 (hereinafter
called the "Building") which is part of that complex known as Woodbridge Place
(hereinafter called "Complex") which is situated on that certain parcel of land
(hereinafter called "Office Building Area") as described on Exhibit A-1
attached hereto and made part of this Lease, together with the right to use in
common with other lessees of the building, their invitees, customers and
employees, those public areas of the Common Facilities as hereinafter defined.
2. TERM. The Premises are leased for a term of five (5) years and
three and one-half (3-1/2) months, commencing on August 1, 1994, and to end at
11:59 P.M. on November 15, 1999 (plus the part of a month, if any, from the
date of the commencement of the term to the first day of the first full
calendar month in the term), (hereinafter referred to as the "Term" or "Lease
Term").
3. BASIC RENT. The Lessee shall pay to the Lessor during the
term, basic rent in the amount of ____________________________________________
_________Dollars (hereinafter "rent" or "basic rent"), subject to adjustment if
the term exceeds sixty three and one-half (63-1/2) months as provided in
Paragraph 2 above, payable in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts. The basic rent shall accrue at the yearly rate of
____________________________ and _____________________ (__________) Dollars,
and shall be payable in advance on the first day of each calendar month during
the term in installments of __________________________________________ and
______ ($___________) Dollars each, except that a proportionately lesser sum
may be paid for the first and last months of the term of this Lease if the term
commences on a day other than the first day of the month, in accordance with
the provisions of this Lease herein set forth. Lessee shall pay basic rent,
and any additional rent as hereinafter provided to Lessor at Lessor's above
stated address, or at such other place as Lessor may designate in writing,
without demand and without counterclaim, deduction or setoff.
<PAGE> 12
4. USE AND OCCUPANCY. Lessee shall use and occupy the Premises as
general offices and for no other purpose.
5. CARE AND REPAIR OF PREMISES/ENVIRONMENTAL. Lessee covenants to
commit no act of waste and to take good care of the Premises and the fixtures
and appurtenances thereon, and shall, in the use and occupancy of the Premises,
comply with all laws, orders and regulations of the federal, state and municipal
governments or any of their departments affecting the Premises and with any and
all environmental requirements resulting from the Lessee's use of the Premises,
this covenant to survive the expiration or sooner termination of the Lease;
Lessor shall, at Lessee's expense, make all necessary repairs to the Premises.
Lessor shall make all necessary repairs to the Common Facilities and to the
parking areas, if any, the same to be included as an Operating Cost, except
where the repair has been made necessary by misuse or neglect by Lessee or
Lessee's agents, servants, visitors or licensees, in which event Lessor shall
nevertheless make the repair but Lessee shall pay to Lessor, as additional rent,
immediately upon demand, the reasonable costs therefor. All improvements made by
or on behalf of Lessee to the Premises, which are so attached to the Premises
that they cannot be removed without material injury to the Premises, shall
become the property of Lessor upon installation. No later than the last day of
the term, Lessee shall, at Lessee's expense, remove all Lessee's personal
property and those improvements made by Lessee which have not become the
property of Lessor, including trade fixtures, cabinetwork, movable paneling,
partitions and the like; and, at Lessor's election, any other alterations,
additions or improvements made by Lessor or Lessee to the Demised Premises
whether before or after the execution of the Lease or during the term; repair
all injury done by or in connection with the installation or removal of said
property and improvements; and surrender the Premises in as good condition as
they were at the beginning of the term, reasonable wear and damage by fire, the
elements, casualty, or other cause not due to the misuse or neglect by Lessee,
Lessee's agents, servants, visitors or licensees excepted. All other property
of Lessee remaining on the Premises after the last day of the term of this Lease
shall be conclusively deemed abandoned and may be removed by Lessor, and Lessee
shall reimburse Lessor for the cost of such removal. Lessor may have any such
property stored at Lessee's risk and expense. Lessor represents that the
Premises are in compliance with applicable laws including The Americans with
Disabilities Act, and will be in compliance as of The Commencement Date herein.
Lessee acknowledges the existence of environmental laws, rules and
regulations, including but not limited to the Environmental Clean Up
Responsibility Act of 1983, as amended (N.J.S.A. 13:1K-1 et seq.) (Now known as
Industrial Site Recovery Act - "ISRA"). Lessee shall comply with any and all
such laws, rules and regulations which subject Lessee's business operations at
the Premises to ISRA compliance requirements. Lessee represents to Lessor that
Lessee's Standard Industrial Classification (SIC) Number as designated in the
Standard Industrial Classifications Manual prepared by The Office of Management
and Budget in the Executive Offices of the President of the United States will
not subject the premises to ISRA applicability. Any change by Lessee to an
operation with a SIC Number subject to ISRA shall require Lessor's written
consent. Any such proposed change shall be sent in writing to Lessor sixty (60)
days prior to the proposed change. Lessor, at its sole option, may deny
consent.
Lessee hereby agrees to execute such documents as Lessor reasonably
deems necessary and to make such applications as Lessor reasonably requires to
assure compliance with ISRA. Lessee shall bear all reasonable costs and
expenses incurred by Lessor associated with any required ISRA compliance
resulting from Lessee's use of the Demised Premises including but not limited to
state agency fees, engineering fees, clean-up costs, filing fees, attorney's
fees and suretyship expenses. As used in this Lease,
-2-
<PAGE> 13
ISRA compliance shall include applications for determinations of
nonapplicability by the appropriate governmental authority. The foregoing
undertaking shall survive the termination or sooner expiration of the lease and
surrender of the Demised Premises and shall also survive sale, or lease or
assignment of the Demised Premises by Lessor. Lessee agrees to indemnify and
hold Lessor harmless from any violation of ISRA as a result of Lessee's use of
the Demised Premises. Lessee shall immediately provide Lessor with copies of
all correspondence, reports, notices, orders, findings, declarations and other
materials pertinent to the Lessee's compliance and the requirements of the
NJDEPE under ISRA as they are issued or received by the Lessee.
Lessee agrees not to generate, store, manufacture, refine, transport,
treat, dispose of, or otherwise permit to be present on or about the Premises,
any Hazardous Substances, as such term is defined below, except for any
Hazardous Substances which are used in the conduct of the activities of the
Lessee. All such use is and will continue to be fully in compliance with all
applicable federal, state and local laws, rules and regulations dealing with
environmental protection which subject Lessee's business operations at the
Premises to such compliance requirements. In the event that any Hazardous
Substances are generated, stored, manufactured, refined, transported, treated,
disposed of or otherwise present on or about the Premises other than in
accordance with the preceding sentence (because they are no longer used in
connection with the conduct of the Lessee's activities on the Premises, because
such use violates any applicable law, rule or regulation or otherwise), the
Lessee agrees to clean up the Premises and to remove therefrom all such
Hazardous Substances forthwith, so that after such cleanup and removal, no such
Hazardous Substances shall remain on or about the Premises other than those
which are used in the conduct of the activities of the Lessee, in full
compliance with all applicable federal, state and local laws, rules and
regulations dealing with environmental protection. Lessor warrants that to the
best of its knowledge there are no environmental or asbestos problems at the
building and the building is not subject to ISRA or alternatively, if the
building is subject to ISRA, the building is not in violation thereof.
Lessee agrees to indemnify and hold harmless the Lessor and each
mortgagee of the Premises from and against any and all liabilities, damages,
claims, losses, judgments, causes of action, costs and expenses (including the
reasonable fees and expenses of counsel) which may be incurred by the Lessor or
any such mortgagee or threatened against the Lessor or such mortgagee, relating
to or arising out of the generation, storage, manufacturing, refining,
transportation, treatment, disposal or other presence of any Hazardous
Substances on or about the Premises by Lessee, its agents, employees, servants,
licensees or invitees during the term of this Lease. This indemnity shall
survive Lease expiration or sooner termination.
As used herein, Hazardous Substances shall be defined as any "hazardous
chemical," "hazardous substance" or similar term as defined in the Comprehensive
Environmental Responsibility Compensation and Liability Act, as amended (42
U.S.C. 9601, et seq.), the New Jersey Environmental Cleanup Responsibility Act,
as amended (N.J.S.A. 13:1K-1 et seq.) (and therefore, excluding hazardous
substances exempted by the Deminimus quantity exemption" set forth in N.J.A.C.
7:26B-10.1), the New Jersey Spill Compensation and Control Act, as amended
(N.J.S.A. 58:10-23.11b, et seq.), any rules or regulations promulgated
thereunder, or in any other applicable federal state or local law, rule or
regulation dealing with environmental protection. It is understood and agreed
that the provisions contained in this Paragraph shall be applicable
notwithstanding the fact that any substance shall not be deemed to be a
Hazardous Substance at the time of its use by the Lessee but shall thereafter be
deemed to be a Hazardous Substance.
- 3 -
<PAGE> 14
6. ALTERATIONS, ADDITIONS OR IMPROVEMENTS. Lessee shall not,
without first obtaining the written consent of Lessor, make any alterations,
additions or improvements in, to or about the Premises. Lessor's consent may be
withheld in Lessor's sole discretion if any proposed alterations will affect the
buildings mechanical, electrical, HVAC and life-safety systems or the structural
portions of the building. Provided that the foregoing sentence is inapplicable
to a proposed alteration, Lessor's consent to such proposed alteration shall not
be unreasonably withheld with respect to proposed alterations which a) comply
with all applicable laws, ordinances, rules and regulations; b) are compatible
with the building and its mechanical, electrical, HVAC and life-safety systems
("Building Systems"), and do not excessively burden the capacity of such
systems; and c) will not interfere with the use and occupancy of any other
portion of the building. Lessor shall have the right to match any bids received
by Lessee and perform the alterations on the same terms and conditions.
7. ACTIVITIES INCREASING FIRE INSURANCE RATES. Lessee shall not do
or suffer anything to be done on the Premises which will increase the rate of
fire insurance on the Building. Lessor represents that general office use by
Lessee will not increase insurance rates.
8. ASSIGNMENT AND SUBLEASE. Lessee may not mortgage, pledge,
hypothecate, assign, transfer, sublet or otherwise deal with this Lease or the
Premises in any manner except as specifically provided for in this Section 8:
(A) (1) In the event Lessee desires to assign this Lease or sublet all
or part of the Premises, Lessee shall submit to Lessor in writing, not less than
30 days prior to the effective date of any such sublease or assignment: (i) the
name of the proposed assignee or sublessee; (ii) the terms of the proposed
assignment or sublease together with a conformed or photostatic copy of the
proposed assignment or sublease; (iii) the nature of business of the proposed
assignee or sublessee's business and its proposed use of the Premises; (iv) such
information as to its financial responsibility and general reputation as Lessor
may require; and (v) a summary of plans and specifications for revising the
floor layout of the Premises.
(2) Upon the receipt of such information from Lessee, Lessor shall
have the option, to be exercised in writing within fifteen (15) business days
after such receipt, to cancel and terminate this Lease if the request is to
assign this Lease or to sublet all of the Premises or, if the request is to
sublet a portion of the Premises only, to cancel and terminate this Lease with
respect to such portion for the proposed Lease Term in each case as of the date
set forth in Lessor's notice of exercise of such option.
(3) If Lessor shall cancel this Lease, Lessee shall surrender
possession of the Premises, or the portion of the Premises which is the subject
of the request, as the case may be, on the date set forth in such notice in
accordance with the provisions of this Lease relating to surrender of the
Premises. If this Lease shall be cancelled as to a portion of the Premises
only, the basic rent and additional rent payable by Lessee hereunder shall be
abated proportionately according to the ratio that the number of square feet in
the portion of space surrendered (as computed by Lessor) bears to the number of
gross rentable square feet of the Premises.
(B) In the event that the Lessor elects not to recapture the Lease
as hereinabove provided, the Lessee may nevertheless assign this Lease or sublet
the whole or any portion of the Premises, subject to the Lessor's prior written
consent, which consent shall not be unreasonably withheld, and subject to the
consent of any mortgage, trust deed holder or ground lessor, on the basis of the
terms and conditions hereinafter enumerated in
-4-
<PAGE> 15
this Subsection 8(B). Lessor shall not be deemed unreasonable if, in the
reasonable judgment of Lessor, the business of such proposed subtenant or
assignee is not compatible with the type of occupancy of the Building or Complex
or violates any exclusive granted to any other tenant in the Building or
Complex, or such business will create materially increased use of the Common
Facilities of the Office Building Area and/or Building, or if the proposed
sublease or assignment is to any state, federal or municipal agency or bureau.
(1) The Lessee shall provide to the Lessor the name and address of
the assignee or sublessee.
(2) The assignee or sublessee shall assume, by written
instrument, all of the obligations of this Lease, and a copy of such assumption
agreement shall be furnished to the Lessor within ten (10) days of its
execution. Any sublease shall expressly acknowledge that said sublesee's
rights against the Lessor shall be no greater than those of Lessee.
(3) The Lessee and each assignee shall be and remain liable for
the observance of all the covenants and provisions of this Lease, including,
but not limited to, the payment of rent reserved herein, through the entire
term of this Lease, as the same may be renewed, extended or otherwise modified.
(4) The Lessee and any assignee shall promptly pay to Lessor any
consideration received for any assignment or all of the basic rent and
additional rent, as and when received, in excess of the basic rent and
additional rent required to be paid by Lessee for the area sublet, computed on
the basis of an average square foot rent for the gross square footage Lessee
has leased. Notwithstanding anything contained herein to the contrary, Lessee
may deduct from said payment reasonable expenses incurred in subletting and/or
assigning the premises including broker's fees, legal fees, construction costs,
concessions and plans.
(5) In any event, the acceptance by Lessor of any basic rent and
additional rent from the assignee or from any of the subtenants or the failure
of the Lessor to insist upon a strict performance of any of the terms,
conditions and covenants herein shall not release the Lessee herein, nor any
assignee assuming this Lease, from any and all of the obligations herein during
and for the entire term of this Lease.
(6) Lessor shall require a Five Hundred and 00/100 ($500.00)
Dollar payment to cover its handling charges for each request for consent to
any sublet or assignment prior to its consideration of the same.
(7) Lessee shall have no claim, and hereby waives the right to
any claim, against Lessor for money damages by reason of any refusal,
withholding or delaying by Lessor of any consent, and in such event, Lessee's
only remedies therefor shall be an action for specific performance, injunction
or declaratory judgment to enforce any such requirement. In the event an
action is commenced in the courts of New Jersey concerning Section 8 of this
Lease, then the prevailing party in such an action shall be entitled to
receive its reasonable costs and attorneys' fees, incurred in the prosecution
or defense of said action, paid by the non-prevailing party.
(C) Any sublet or assignment to an affiliated company of Lessee shall
not be subject to the provisions of Subparagraphs 8(A) or 8(B)(4) hereof and
shall not require Lessor's prior written consent, but all other provisions of
this Paragraph shall apply.
(D) In the event that any or all of Lessee's interest in the Premises
and/or this Lease is transferred by operation of law to any trustee, receiver,
or other representative or agent of Lessee, or to Lessee as a debtor in
possession, and subsequently any or all of Lessee's interest in the Premises
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<PAGE> 16
and/or this Lease is offered or to be offered by Lessee or any trustee,
receiver, or other representative or agent of Lessee as to its estate or
property (such person, firm or entity being hereinafter referred to as the
"Grantor"), for assignment, conveyance, lease, or other disposition to a person,
firm or entity other than Lessor (each such transaction being hereinafter
referred to as a "Disposition"), it is agreed that Lessor has and shall have a
right of first refusal to purchase, take, or otherwise acquire, the same upon
the same terms and conditions as the Grantor thereof shall accept upon such
Disposition to such other person, firm or entity; and as to each such
Disposition the Grantor shall give written notice to Lessor in reasonable detail
of all of the terms and conditions of such Disposition within twenty (20) days
next following its determination to accept the same but prior to accepting the
same, and Grantor shall not make the Disposition until and unless Lessor has
failed or refused to accept such right of first refusal as to the Disposition,
as set forth herein.
Lessor shall have sixty (60) days next following its receipt of
the written notice as to such Disposition in which to exercise the option to
acquire Lessee's interest by such Disposition, and the exercise of the option by
Lessor shall be effected by notice to that effect sent to the Grantor; but
nothing herein shall require Lessor to accept a particular Disposition or any
Disposition, nor does the rejection of any one such offer of first refusal
constitute a waiver or release of the obligation of the Grantor to submit other
offers hereunder to Lessor. In the event Lessor accepts such offer of first
refusal, the transaction shall be consummated pursuant to the terms and
conditions of the Disposition described in the notice to Lessor. In the event
Lessor rejects such offer of first refusal, Grantor may consummate the
Disposition with such other person, firm or entity; but any decrease in price of
more than two (2%) percent of the price sought from Lessor or any change in the
terms of payment for such Disposition shall constitute a new transaction
requiring a further option of first refusal to be given to Lessee hereunder.
(E) Without limiting any of the provisions of Paragraph 12 and 13,
if pursuant to the Federal Bankruptcy Code (hereinafter the "Code") or any
similar law hereafter enacted having the same general purpose, Lessee is
permitted to assign this Lease notwithstanding the restrictions contained in
this Lease, adequate assurance of future performance by an assignee expressly
permitted under such Code shall be deemed to mean the deposit of cash security
in an amount equal to the sum of one (1) year's yearly basic rent and additional
rent for the next succeeding twelve (12) months (which additional rent shall be
reasonably estimated by Lessor), which deposit shall be held by Lessor for the
balance of the Term, without interest, as security for the full performance of
all of Lessee's obligations under this Lease, to be held and applied in the
manner specified for security in Section 16.
(F) Except as specifically set forth above, no portion of the
Demised Premises or of Lessee's interest in this Lease may be acquired by any
other person or entity, whether by assignment, mortgage, sublease, transfer,
operation of law or act of the Lessee, nor shall Lessee pledge its interest in
this Lease or in any security deposit required hereunder.
9. COMPLIANCE WITH RULES AND REGULATIONS. Lessee shall observe and
comply with the non-discriminatory rules and regulations hereinafter set forth
in Exhibit B attached hereto and made a part hereof and with such further
reasonable rules and regulations as Lessor may prescribe, on advance written
notice to the Lessee, for the safety, care and cleanliness of the Building and
the comfort, quiet and convenience of other occupants of the Building. Lessee
shall not place a load upon any floor of the Demised Premises exceeding the
floor load per square foot area which it was designed to carry and which is
allowed by law.
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<PAGE> 17
Lessor reserves the right to prescribe the weight and position of all safes,
machines and equipment. Such installations shall be placed and maintained by
Lessee, at Lessee's expense, in settings sufficient, in Lessor's reasonable
judgment, to absorb and prevent vibration, noise and annoyance.
10. DAMAGES TO BUILDING/WAIVER OF SUBROGATION. If the Building is
damaged by fire or any other cause to such extent that the cost of restoration,
as reasonably estimated by Lessor, will equal or exceed twenty-five (25%)
percent of the replacement value of the Building (exclusive of foundations) just
prior to the occurrence of the damage, then Lessor may, no later than the
sixtieth (60th) day following the damage, give Lessee a notice of election to
terminate this Lease; or if the cost of restoration will equal or exceed fifty
(50%) percent of such replacement value and if the Premises shall not be
reasonably usable for the purpose for which they are leased hereunder, then
Lessee may, no later than the sixtieth (60th) day following the damage, give
Lessor a notice of election to terminate this Lease. In either said event of
election, this Lease shall be deemed to terminate on the thirtieth (30th) day
after the giving of said notice, and Lessee shall surrender possession of the
Premises within a reasonable time thereafter, and the basic rent, and any
additional rent, shall be apportioned as of the date of said surrender and any
basic or additional rent paid for any period beyond the latter of the thirtieth
(30th) day after said notice or the date Lessee surrenders possession shall be
repaid to Lessee. If the cost of restoration as estimated by Lessor to
terminate this Lease or if, despite the cost, Lessor does not elect to terminate
this Lease, Lessor shall restore the Building and the Premises with reasonable
promptness, subject to Force Majeure, as hereinafter defined, and except as
stated above, Lessee shall have no right to terminate this Lease. Lessor need
not restore fixtures and improvements owned by Lessee.
In any case in which use of the Premises is affected by any damage to
the Building, there shall be either an abatement or an equitable reduction in
basic rent and an equitable adjustment reducing the Base Period Costs depending
on the period for which and the extent to which the Premises are not reasonably
usable for the purpose for which they are leased hereunder. The words
"restoration" and "restore" as used in this Paragraph 10 shall include repairs.
If the damage results from the fault of the Lessee, or Lessee's agents,
servants, visitors or licensees, Lessee shall not be entitled to any abatement
or reduction in basic rent, except to the extent of any rent insurance
maintained by Lessee and received by Lessor.
Notwithstanding the provisions of this Paragraph of the Lease, in the
event of any loss or damage to the Building, the Premises and/or any contents
(herein "property damage"), each party waives all claims against the other for
any such loss or damage and each party shall look only to any insurance which it
has obtained to protect against such loss (or in the case of Lessee, waives all
claims against any tenant of the Building that has similarly waived claims
against such Lessee), and each party obtain, for each policy of such insurance,
provisions waiving any claim against the other party [and against any other
tenant(s) in the Building that has waived subrogation against the Lessee] for
loss or damage within the scope of such insurance.
11. EMINENT DOMAIN. If Lessee's use of the Premises is materially
affected due to the taking by eminent domain of (a) the Premises or any part
thereof or any estate therein; or (b) any other part of the Building; then, in
either event, this Lease shall terminate on the date when title vests pursuant
to such taking. The basic rent, and any additional rent, shall be apportioned
as of said termination date and any basic rent or additional rent paid for any
period beyond said date shall be repaid to Lessee. Lessee shall not be entitled
to any part of the award for such taking or any payment in lieu thereof, but
Lessee
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<PAGE> 18
may file a separate claim for any taking of fixtures and improvements owned by
Lessee which have not become the Lessor's property, and for moving expenses,
provided the same shall in no way affect or diminish Lessor's award. In the
event of a partial taking which does not effect a termination of this Lease but
does deprive Lessee of the use of a portion of the Demised Premises, there shall
either be an abatement or an equitable reduction of the basic rent, and an
equitable adjustment reducing the Base Costs as hereinafter defined depending on
the period for which and the extent to which the Premises so taken are not
reasonably usable for the purpose for which they are leased hereunder.
12. INSOLVENCY OF LESSEE. Either (a) the appointment of a receiver
to take possession of all or substantially all of the assets of Lessee, or (b) a
general assignment by Lessee for the benefit of the creditors, or (c) any action
taken or suffered by Lessee under any insolvency or bankruptcy act, shall
constitute a default of this Lease by Lessee, and Lessor may terminate this
Lease forthwith and upon notice of such termination Lessee's right to possession
of the Demised Premises shall cease, and Lessee shall then quit and surrender to
Lessor but Lessee shall remain liable as hereinafter provided in Paragraph 14
hereof.
13. LESSOR'S REMEDIES ON DEFAULT. If Lessee defaults in the payment
of basic rent, or any additional rent, or defaults in the performance of any of
the other covenants and conditions hereof or permits the Premises to become
abandoned or deserted, Lessor may give Lessee notice of such default, and if
Lessee does not cure any basic rent or additional rent default within five (5)
days of the giving of such notice or other default within fifteen (15) days
after giving of such notice [or if such other default is of such nature that it
cannot be completely cured within such period, if Lessee does not commence such
curing within such fifteen (15) days and thereafter proceed with reasonable
diligence and in good faith to cure such default], then Lessor may terminate
this Lease on not less than ten (10) days' notice to Lessee, and on the date
specified in said notice, Lessee's right to possession of the Demised Premises
shall cease, and Lessee shall then quit and surrender the premises to Lessor,
but Lessee shall remain liable as hereinafter provided. If the Lease shall have
been so terminated by Lessor pursuant to Paragraphs 12 or 13 hereof, Lessor may
at any time thereafter resume possession of the Premises by any lawful means and
remove Lessee or other occupants of their effects.
14. DEFICIENCY. In any case where Lessor has recovered possession
of the Premises by reason of Lessee's default, Lessor may, at Lessor's option,
occupy the Premises or cause the Premises to be redecorated, altered, divided,
consolidated with other adjoining premises, or otherwise changed or prepared for
reletting, and may relet the Premises or any part thereof as agent of Lessee or
otherwise, for a term or terms to expire prior to, at the same time as, or
subsequent to, the original expiration date of this Lease, at Lessor's option,
and receive the basic rent and additional rent therefor. Basic rent and
additional rent so received shall be applied first to the payment of such
expenses as Lessor may have incurred in connection with the recovery of
possession, redecorating, altering, dividing, consolidating with other adjoining
premises, or otherwise changing or preparing for reletting, and the reletting,
including brokerage and reasonable attorney's fees, and then to the payment of
damages in amounts equal to the basic rent and additional rent hereunder and to
the costs and expenses of performance of the other covenants of Lessee as herein
provided. Lessee agrees, in any such case, whether or not Lessor has relet, to
pay to Lessor damages equal to the basic and additional rent and other sums
herein agreed to be paid by Lessee, as and when due, less the net proceeds of
the reletting, if any, as ascertained from time to time, as of the due date, and
the same shall be payable by Lessee on the several rent days above specified.
Lessee shall not be entitled to any surplus accruing as a result of any such
reletting, nor shall any surplus be
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<PAGE> 19
applied to offset the damages referred to in the preceding sentence. In
reletting the Premises as aforesaid, Lessor may grant reasonable rent
concessions, and Lessee shall not be credited therewith. No such reletting
shall constitute a surrender and acceptance or be deemed evidence thereof. If
Lessor elects, pursuant hereto, actually to occupy and use the Premises, or any
part thereof during any part of the balance of the term as originally fixed or
since extended, there shall be allowed against Lessee's obligation for basic
rent or additional rent damages as herein defined, during the period of
lessor's occupancy, the reasonable value of such occupancy, not to exceed in
any event the basic and additional rent herein reserved and such occupancy
shall not be construed as a release of lessee's liability hereunder.
Alternatively, in any case where Lessor has recovered possession of the
Premises by reason of Lessee's default, Lessor may at Lessor's option, and at
any time thereafter, and without notice of other action by Lessor, and without
prejudice to any other rights or remedies it might have hereunder or at law or
equity become entitled to recover from Lessee, as damages for such breach, in
addition to such other sums herein agreed to be paid by Lessee, to the date of
re-entry, expiration and/or dispossess, an amount equal to the difference
between the basic rent and additional rent reserved in this Lease from the date
of such default to the date of expiration of the original term demised as the
same may have been extended or renewed, and the then fair and reasonable rental
value of the Premises for the same period. Said damages shall become due and
payable to Lessor immediately upon such breach of this Lease and without regard
to whether this Lease be terminated or not, and if this Lease be terminated,
without regard to the manner in which it is terminated. In the computation of
such damages, the difference between any installments of rent (basic and
additional) thereafter becoming due and the fair and reasonable rental value of
the Premises for the period for which such installment was payable shall be
discounted to the date of such default at the rate of not more than four (4%)
percent per annum. Notwithstanding anything contained herein to the contrary,
Lessee shall not be obligated for rent in excess of additional rent and basic
rent herein from the date of such default until the end of the Lease Term.
Lessee hereby waives all right of redemption to which Lessee or any
person under Lessee might be entitled by any law now or hereafter in force. In
addition, in the event of a default which results in the Lessor recovering
possession of the Premises, Lessor shall be under no duty to mitigate Lessee's
damages as provided for in this Paragraph 14.
Lessor's remedies hereunder are in addition to any remedy allowed by
law.
Lessee agrees to pay, as additional rent, all attorney's fees and other
expenses incurred by the Lessor in enforcing any of the obligations under this
Lease, this covenant to survive the expiration or sooner termination of this
Lease.
15. SUBORDINATION OF LEASE. This Lease and any options contained
herein shall, at Lessor's option, or at the option of any holder of any
underlying lease or holder of any first mortgage or deed of trust, be subject
and subordinate to any such underlying leases and to any such first mortgage
and/or trust deed which may now or hereafter affect the real property of which
the Premises form a part, and also to all renewals, modifications, extensions,
consolidations, and replacements of said underlying leases and said first
mortgage or trust deed. Although no instrument or act on the part of Lessee
shall be necessary to effectuate such subordination, Lessee will, nevertheless
execute and deliver such further instruments confirming such subordination of
this Lease as may be desired by the holders of said first mortgage or trust
deed or by any of the lessors under such underlying leases. Lessee hereby
appoints Lessor attorney-in-fact, irrevocably, to execute and deliver any such
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<PAGE> 20
instrument for Lessee. If any underlying lease to which this Lease is subject
terminates, Lessee shall, on timely request, attorn to the owner of the
reversion.
16. PREPAID RENT/SECURITY DEPOSIT. Lessee shall prepay basic rent
discounted at 4% per annum pursuant to the following schedule:
A. $95,796.17 upon full execution of the within Lease.
B. $95,796.17 within five (5) days of the date that Lessor
notifies Lessee that the Premises are 50% complete, unless Lessor is advised, in
writing, by Lessee that Lessee's architect declares that the Premises are less
than 50% complete.
C. $176,221.13 upon issuance of a Certificate of Occupancy by
the Township of Woodbridge.
D. $19,580.12 upon substantial completion of all punch list
items as mutually agreed upon by Lessor and Lessee.
On the first day of the month after the Commencement Date herein,
Lessee shall deposit with Lessor the sum of $41,693.16 (hereinafter "Security
Deposit") as security for the performance of Lessee's obligations under this
Lease, including without limitation, the surrender of possession of the Premises
to Lessor as herein provided. If Lessor applies any part of said deposit to
cure any default of Lessee, Lessee shall on demand deposit with Lessor the
amount so applied so that Lessor shall have the full deposit on hand at all
times during the term of this Lease. In the event of a bona fide sale, subject
to this Lease, Lessor shall have the right to transfer the security to the
vendee, and Lessor shall be considered released by Lessee from all liability for
the return of such Security Deposit; and Lessee agrees to look solely to the new
lessor for the return of the said Security Deposit, and it is agreed that this
shall apply to every transfer or assignment made of the Security Deposit to a
new Lessor. The Security Deposit as provided for herein shall not be mortgaged,
assigned or encumbered by Lessee without the written consent of Lessor. Upon
Lessor's receipt of the Security Deposit, Lessor shall assume Lessee's
obligation in respect to the payment of basic rent for the 20th, 21st and 22nd
months of the lease term and one-half of the basic rent for the 23rd month of
the lease term. Subsequent to the payment of the prepaid rent and security
deposit, Lessee's obligation to pay basic rent shall commence on the first day
of the 23rd month, in an amount of $ for the 23rd month of the Lease
term. Commencing the first day of the 24th month of the Lease term, and on the
first day of each month thereafter, Lessee shall pay basic rent as set forth in
paragraph 3 herein.
In the event of the insolvency of Lessee, or in the event of the entry
of a final non-appealable judgment in any court against Lessee which is not
discharged within thirty (30) days after entry, or in the event a petition is
filed by or against Lessee under any chapter of the bankruptcy laws of the State
of New Jersey or the United States of America, then, in such event, Lessor may
require the Lessee to deposit additional security in an amount equal to one (1)
year's basic rent and additional rent (which additional rent shall be reasonably
estimated by Lessor) to adequately assure Lessee's performance of all of its
obligations under this Lease including all payments subsequently accruing.
Failure of Lessee to deposit the security required by this Paragraph within
thirty (30) days after Lessor's written demand shall constitute a material
breach of this Lease by Lessee.
17. RIGHT TO CURE LESSEE'S BREACH. If Lessee breaches any covenant
or condition of this Lease, Lessor may, on reasonable notice to Lessee (except
that no notice need be given in case of emergency), cure such breach at the
expense of Lessee and the reasonable amount of all expenses, including
attorneys' fees, incurred by Lessor in so doing (whether paid by Lessor or not)
shall be deemed additional rent payable on demand.
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<PAGE> 21
18. MECHANIC'S LIENS. Lessee shall, within thirty (30) days after
notice from Lessor, discharge or satisfy by bonding or otherwise any mechanic's
liens for materials or labor claimed to have been furnished to the Premises on
Lessee's behalf. Lessee shall not permit any Notice of Intentions to be filed
against the Premises or Building or Office Building Area as a result of
Lessee's acts and shall cause any such filings to be terminated within ten (10)
days.
19. RIGHT TO INSPECT AND REPAIR. Lessor or any Mortgagee may enter
the Premises but shall not be obligated to do so (except as required by any
specific provision of this Lease) at any reasonable time on reasonable notice
to Lessee (except that no notice need be given in advance in case of emergency)
for the purpose of inspection or the making of such repairs, replacement, or
additions, in, to, on and about the Premises or the Building, as Lessor deems
necessary or desirable. Lessee shall have no claims or cause of action against
Lessor by reason thereof. In no event shall Lessee have any claim against
Lessor or any Mortgagee for interruption to Lessee's business, however
occurring, including but not limited to that arising from the negligence of
Lessor, its agents, servants or invitees, or from defects, errors of omissions
in the construction or design of the Demised Premises and/or the Building or
Complex, including the structural and nonstructural portions thereof.
20. SERVICES TO BE PERFORMED BY LESSOR/LESSOR'S EXCULPATION.
Subject to intervening laws, ordinances, regulations and executive orders,
while Lessee is not in default under any of the provisions of this Lease,
Lessor agrees to furnish, except on holidays as set forth on Exhibit E
attached hereto and made a part hereof:
(A) The cleaning services, as set forth on Exhibit D attached
hereto and made a part hereof, and subject to the conditions therein
stated. Except as set forth on Exhibit D, Lessee shall pay the cost of
all other cleaning services required by Lessee.
(B) Heating, ventilating and air conditioning (hereinafter
"HVAC"), as appropriate for the season as set forth on Exhibit C
attached hereto and made a part hereof, together with Common Facilities
lighting and electric energy all during Building Hours, as hereinafter
defined. If Lessee makes the use of HVAC other than during the hours
provided for herein for such service, Lessor shall furnish such to
Lessee provided that Lessee pays to Lessor as additional rent on demand,
the special hourly overtime charge which Lessor will from time to time
establish therefore.
(C) Cold and hot water for drinking and lavatory purposes.
(D) Elevator services during Building Hours.
(E) Restroom supplies and exterior window cleaning when
reasonably required.
(F) Notwithstanding the requirements of Exhibit C or D (as to
HVAC) or any other provision of this Lease, Lessor shall not be liable
for failure to furnish any of the aforesaid services when such failure
is due to Force Majeure, as hereinafter defined. Lessor shall not be
liable, under any circumstances, including but not limited to, that
arising from the negligence of Lessor, its agents, servants or invitees
or from defects, errors or omissions in the construction or design of
the Demised Premises and/or the Building, including the structural and
non-structural portions thereof, for loss of or injury to Lessee or to
property, however occurring, through or in connection with or incidental
to the furnishing of, or failure to furnish, any of the aforesaid
services or for any interruption to Lessee's business however occurring.
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<PAGE> 22
21. INTERRUPTION OF SERVICES OR USE. Interruption or curtailment of
any services maintained in the Building, Complex or at the Office Building
Area, if caused by Force Majeure, as hereinafter defined, shall not entitle
Lessee to any claim against Lessor or to any abatement in basic rent or
additional rent, and shall not constitute a constructive or partial eviction,
unless Lessor fails to take measures as may be reasonable under the
circumstances to restore the service. If Lessor fails to take such measures as
may be reasonable under the circumstances to restore the curtailed service,
Lessee's remedies shall be limited to an equitable abatement of term basic rent
and additional rent for the duration of the curtailment beyond said reasonable
period, to the extent such Premises are not reasonably usable by Lessee or to a
claim of constructive eviction. If the Premises are rendered untenantable in
whole or in part, for a period of five (5) consecutive business days, by the
making of repairs, replacements or additions, other than those made with
Lessee's consent or caused by misuse or neglect by Lessee, or Lessee's agents,
servants, visitors or licensees, there shall be a proportionate abatement of
basic rent and additional rent from and after said fifth (5th) consecutive
business days and continuing for the period of such untentability. In no event
shall Lessee be entitled to claim a constructive eviction from the Premises
unless Lessee shall first have notified Lessor in writing of the condition or
conditions giving rise thereto, and, if the complaints be justified, unless
Lessor shall have failed, within a reasonable time after receipt of such
notice, to remedy, or commence and proceed with due diligence to remedy, such
condition or conditions, all subject to Force Majeure, as hereinafter defined.
The remedies provided for in this paragraph shall be Lessee's sole remedies for
any interruption of services or use as described above.
22. BUILDING STANDARD OFFICE ELECTRICAL SERVICES.
(A) Lessor agrees to redistribute Building Standard Office
Electrical Service (as hereinafter defined), to the Premises, consistent with
the requirements as set forth on Exhibit C, attached hereto and made a part
hereof (not exceeding the present electrical capacity at the Premises) upon the
following terms and conditions:
(i) Lessor shall, as part of Lessor's work as set
forth in paragraph 27, install a private electrical sub-meter to measure all or
a portion of the electric power being consumed by Lessee within the Demised
Premises as "Building Standard Office Electrical Service," and Lessee shall,
within thirty (30) days of receipt of Lessor's bill, pay to Lessor for the
amount so consumed (such consumption to be determined by calculating the
average cost of total electrical power consumed in the Building, such that in
no event will Lessee pay a higher rate per kilowatt hour than the rate paid by
Lessor for the Building's total electricity consumption) as determined by said
meter calculated at the rate structure then existing of the utility company
supplying electrical energy to the Building for Lessee's consumption, as so
measured. Said payment shall be due as Additional Rent.
(ii) Lessor shall not be liable in any way to Lessee
for any loss, damage or expense which Lessee may sustain or incur as a result
of any failure, defect or change in the quantity or character of electrical
energy available for redistribution to the Premises pursuant to this Section
nor for any interruption in the supply, and Lessee agrees that such supply may
be interrupted during after-hours periods for inspection, repairs and
replacement provided, that Lessor shall use reasonable efforts to provide
advance written notice and in emergencies. In any event, the full measure of
Lessor's liability for any interruption in the supply due to Lessor's acts or
omissions shall be an abatement of rent as provided in Section 21 above;
provided that if any such cessation or interruption continues for a period of
one hundred eighty (180) calendar days or more, Lessee shall have the right to
terminate
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<PAGE> 23
this Lease upon thirty (30) days' written notice to Lessor. In the event
Lessor cures said interruption within the aforesaid time period, then this
Lease shall continue in full force and effect. In no event shall Lessor be
liable for any business interruption suffered by Lessee.
(iii) Lessor shall furnish and install all replacement
lighting tubes, lamps, ballasts and bulbs required in the Premises, at Lessee's
expense, but provided that the costs paid therefor by Lessee shall reflect the
actual cost to Lessor of such lighting tubes, ballasts and bulbs, at
commercially competitive rates.
(iv) Lessee shall make no alteration to the existing
electrical risers, wiring and other conductors or outlets, as shown on Exhibit
A and/or C, without Lessor's consent. Should Lessor consent, all such
alterations shall be provided by contractor approved by Lessor in Lessor's sole
discretion and the actual cost therefor, at a cost not to exceed commercially
competitive rates, shall be paid for by Lessee within thirty (30) days
following demand therefor as Additional Rent.
(B) In the event the public utility company that furnishes electric
energy to Lessor for redistribution to Lessee, declines to continue furnishing
electric energy for that purpose, Lessor reserves the right to discontinue
distributing Building Standard Office Electric Service to Lessee at any time
upon reasonable notice to Lessee. If Lessor exercises such right to
termination, this Lease shall continue in full force and effect and shall be
unaffected thereby, except only that, from and after the effective date of such
termination, Lessee shall not be obligated to pay Lessor for said Building
Standard Office Electrical Service. If Lessor so discontinues distributing the
aforesaid electrical service, Lessee shall arrange to obtain electric energy
directly from the public utility furnishing electric energy to the Building.
Lessee may obtain such electric energy by means of the then-existing Building
system feeders, risers and wiring to the extent the same are available,
suitable and safe for such purposes. All meters and additional panel boards,
feeders, risers, wiring and other conductors and equipment which may be
required to obtain electric energy from the public utility company shall be
installed and maintained by Lessee at its sole expense. If Lessee is unable to
obtain such electric service after diligent efforts, Lessee may cancel this
Lease upon thirty (30) days' prior written notice to Landlord.
(C) For purposes of this Section 22, "Building Standard Office
Electrical Services" shall mean the electrical energy sufficient to Furnish to
the Premises sufficient electricity to support Lessee's needs, including
personal computers and photocopying machines, typewriters and other typical
office equipment; such Building Standard Office Electrical Service shall be up
to, but shall not exceed, 2.0 watts per rentable square foot for fluorescent
lighting and 5.0 watts per rentable square foot for convenience power, cubicles
and incandescent lighting exclusive of HVAC or any other Building core use, but
in no event to include electrical energy for the operation of any computer
installation or data processing equipment, which energy shall be provided
during Building Hours as hereinafter defined.
(D) Lessee shall make no alteration to the existing electrical
equipment or connect any substantial fixtures, appliances, or equipment without
the prior written consent of Lessor in each instance. Should Lessor grant such
consent, all additional risers or other equipment required therefor shall be
provided by Lessor and the cost thereof shall be paid by Lessee as additional
rent upon Lessor's demand. As a condition to granting such consent, Lessor
shall require an increase in the additional rent by an amount which will
reflect the cost of the additional equipment and service to be furnished by
Lessor. If Lessor and Lessee cannot agree on such increase, the additional
rent increase shall be determined by an independent electrical engineer, to be
selected by Lessor and whose fee for services rendered shall be
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paid by Lessee upon demand and shall constitute additional rent.
Notwithstanding the above, should Lessee dispute the determination made by
Lessor's independent electrical engineering consultant, then the Lessee shall
be free to, at the Lessee's sole cost and expense, employ the services of a
qualified independent electrical engineering consultant who shall conduct a
survey of Lessee's electric lighting fixtures and electric equipment to
determine the average monthly electric consumption utilized by Lessee. If the
Lessor's consultant and the Lessee's consultant cannot agree on the Lessee's
average monthly electric consumption, a mutually agreeable electrical
engineering consultant shall be selected by Lessor and Lessee within thirty
(30) days thereafter, or, if they cannot so agree on an independent electrical
engineering consultant acceptable to both whose decision shall be final and
binding, then either party may request the American Arbitration Association in
Newark, New Jersey to appoint such independent electrical engineering
consultant whose decision shall be final and binding upon the parties. The
parties shall share equal in the cost of any such consultant. Subsequent to
the final determination of the independent Consultant, the prevailing party
shall be entitled to receive its costs and attorneys' fees incurred in the
within process paid for by the non-prevailing party.
(E) Lessor shall not be liable in the event of any interruption in
the supply of electricity, and Lessee agrees that such supply may be
interrupted for inspection, repairs, replacement and in emergencies, Lessor
will exercise its best efforts, except in the case of emergencies, to give
Lessee forty-eight (48) hours' notice of any interruption of any utility
referred to in this Paragraph.
(F) The charge for electric consumption shall be based on the rates
which Lessor purchases electrical energy from the public utility supplying
electrical service to the Building, including, but not limited to any charges or
surcharges incurred or taxes payable by Lessor in connection therewith or
increase or decrease thereof by reason of fuel adjustment or any substitutions
for such rates or additions thereto.
23. ADDITIONAL RENT. It is expressly agreed that Lessee will pay
in addition to the basic rent, provided in Paragraph 3 above, an additional
rental to cover Lessee's Proportionate Share, as hereinafter defined, of the
increased cost to Lessor, for each of the categories enumerated herein, over
the "Base Period Costs" (as hereinafter defined) for each of said categories.
(A) Office Building Operating Cost Escalation. If during the
Lease term the Office Building Operating Costs incurred for the Office Building
in which the Demised Premises are located for any Calendar year or proportionate
part thereof if the Lease term expires prior to the expiration of a Calendar
Year (herein the "Comparison Period") shall be greater than the Base Office
Building Operating Costs (exclusive of extraordinary or non-recurring Costs),
(adjusted proportionately if the Comparison Period is less than a full Calendar
Year), then Lessee shall pay to Lessor, as additional rent, its Office Building
Proportionate Share, as hereinafter defined, of all such excess Office Building
Operating Costs. Office Building Operating Costs shall include, by way of
illustration and not of limitation; personal property taxes; reasonable
management fees; labor, including all wages and salaries, social security taxes,
and other taxes which may be levied against Lessor upon such wages and salaries;
supplies; repairs and maintenance (including roof and structural elements of the
Office Building); reasonable reserves for future general repairs and maintenance
(said reserves to be amortized over the useful life of the item(s) to be
repaired and/or maintained and Lessee to pay its pro rata share based upon the
term of Lessee's lease); maintenance and service contracts; painting; wall and
window washing; laundry and towel services; tools and equipment (which are not
required to be capitalized for federal income tax purposes); trash removal;
sums levied, assessed, imposed or
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required to be paid to any governmental authority on account of the parking of
motor vehicles, including all sums required to be paid pursuant to
transportation controls imposed by the Environmental Protection Agency under the
Clean Air Act of 1970, or otherwise required to be paid by any governmental
authority with respect to the parking, use or transportation of motor vehicles,
or reduction or control of motor vehicle traffic, or motor vehicle pollution;
and all other items properly constituting direct Office Building Operating Costs
according to standard accounting practices (hereinafter collectively referred
to as the "Office Building Operating Costs"), but not including: depreciation
of Office Building or equipment; interest; income or excess profits taxes;
costs of maintaining Lessor's corporate existence; franchise taxes; and any
expenditures required to be capitalized for federal income tax purposes, unless
said expenditures are for the purpose of reducing Office Building Operating
Costs, (and in such event only to the extent of any such actual reduction in
office building operating costs) or are required under any governmental law,
ordinance or regulation, in which event the costs thereof shall be included
provided Lessor was in compliance of such laws, ordinances or regulation as of
the Commencement Date herein. As used in this Subsection 23(A), the Base Period
Costs for Office Building Operating Costs (herein "Base Operating Costs") shall
be those costs incurred during the first twelve (12) months after the
commencement date.
(B) Complex Operating Costs Escalation. If during the Lease term
the Operating Costs incurred for the Complex in which the Demised Premises are
located for any Comparison Period shall be greater than the Base Complex
Operating Costs (exclusive of extraordinary or non-recurring costs), (adjusted
proportionately if the Comparison Period is less than a full Calendar Year),
then Lessee shall pay to Lessor, as additional rent, its Complex Proportionate
Share, as hereinafter defined, of all such excess Complex Operating Costs.
Complex Operating Costs shall include, by way of illustration and not of
limitation: exterior maintenance, landscaping to include tree and shrub care;
parking area maintenance, and ingress, egress, roadway and walkway maintenance
and snow removal; repairs and maintenance of the mechanical systems which
affect the Complex and structural elements of the Complex, which shall be
excluded from Subsection 23(A) above; reasonable reserves for general repairs
and maintenance; fire, rent, liability and other insurance; and all other items
properly constituting direct operating costs as more specifically described in
Subsection 23(A) above. As used in this Subsection 23(B), the Base Period Costs
for Complex Operating Costs (herein "Base Complex Operating Costs") shall be
those costs incurred during the first twelve (12) months after the
commencement date.
(C) Office Building Fuel, Utilities and Electric Cost Escalation.
(Hereinafter "Office Building Utility and Energy Costs"). If during the Lease
term the Office Building Utility and Energy Costs, including any fuel
surcharges or adjustments with respect thereto, incurred for water, sewer, gas,
electric, other utilities and heating, ventilating and air conditioning for the
Office Building to include all leased and leasable areas (not separately billed
or metered within the Office Building) and Common Facilities electric,
lighting, water, sewer and other utilities for the Office Building for any
Comparison Period shall be greater than the Base Office Building Utility and
Energy Costs (adjusted proportionately if the Comparison Period is less than a
full Calendar Year), then Lessee shall pay to Lessor as additional rent, its
Office Building Proportionate Share, as hereinafter defined, of all such excess
Office Building Utility and Energy Costs. As used in this Subsection 23(C), the
Base Period Costs for Office Building Utility and Electric Costs (herein "Base
Utility and Energy Costs") shall be determined by multiplying the rate
(including surcharges and adjustments) in effect on August 1, 1994 (hereinafter
"Base Utility Rate") by the usage incurred for the Office Building during the
first twelve (12) months after the commencement date.
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(D) Complex Fuel, Utilities and Electric Cost Escalation.
(Hereinafter "Complex Utility and Energy Costs"). If during the Lease term the
Complex Utility and Energy Costs, including any fuel surcharges or adjustments
with respect thereto incurred for water, sewer, gas, electric and other
utilities for the Complex and Complex Building Area for any Comparison Period
shall be greater than the Base Complex Utility and Energy Costs (adjusted
proportionately if the Comparison Period is less than a full Calendar Year),
then Lessee shall pay to Lessor, as additional rent, its Complex Proportionate
Share, as hereinafter defined, of all such excess Complex Utility and Energy
Costs. As used in this Subsection 23(D), the Base Period Costs for Complex
Utility and Energy Costs (herein "Base Complex Utility and Energy Costs") shall
be determined by multiplying the rate (including surcharges and adjustments) in
effect on August 1, 1994 (hereinafter "Base Utility Rate") by the usage
incurred for the Complex and Complex Building-Area during the first twelve
(12) months after the commencement date.
(E) Tax Escalation. If during the Lease Term the Real Estate
Taxes for the Building, Complex and Complex Building Area at which the Demised
Premises are located for any Comparison Period, shall be greater than the Base
Real Estate Taxes (adjusted proportionately if the comparison period is less
than a full Calendar Year), then Lessee shall pay to Lessor as additional rent,
its Proportionate Share, as hereinafter defined, of all such excess Real Estate
Taxes.
As used in this Paragraph 23(E), the words and terms which follow mean
and include the following:
(i) The Base Period Costs for "Real Estate Taxes" herein the "Base
Real Estate Taxes" shall mean those real estate taxes determined by multiplying
the lowest tax rate in effect at any time between Calendar Year 1994 and the
year in which the Building is assessed as a fully completed building (to
include the aforesaid years), times the assessment for the Complex to include
the Office Building when the Office Building is assessed as a fully completed
building.
(ii) "Real Estate Taxes" shall mean the property taxes and
assessments imposed upon the Building, Complex, and Office Building Area, or
upon the basic rent and additional rent, as such, payable to the Lessor,
including, but not limited to, real estate, city, county, village, school and
transit taxes, or taxes, assessments or charges levied, imposed or assessed
against the Building Complex and Office Building Area by any other taxing
authority, whether general or specific, ordinary or extraordinary, foreseen or
unforeseen. If due to a future change in the method of taxation, any
franchise, income or profit tax shall be levied against Lessor in substitution
for, or in lieu of, or in addition to, any tax which would otherwise constitute
a Real Estate Tax, such franchise, income or profit tax shall be deemed to be a
Real Estate Tax for the purposes hereof; conversely, any additional real estate
tax hereafter imposed in substitution for, or in lieu of, any franchise, income
or profit tax (which is not in substitution for, or in lieu of, or in addition
to, a Real Estate Tax as hereinbefore provided) shall not be deemed a Real
Estate Tax for the purposes hereof. Notwithstanding anything contained herein
to the contrary, Lessee shall assume and pay to Lessor in full at the time of
paying the Term Basic Rent, any excise, sales, use gross receipts or other
taxes (other than a net income or excess profits tax) which may be imposed on
or measured by such Term Basic Rent or Additional Rent or may be imposed on
Lessor on account of the letting or which Lessor may be required to pay or
collect under any law now in effect or hereafter enacted.
(F) Payment. At any time, and from time to time, after the
establishment of the Base Period Costs for each of the categories referred to
above, Lessor shall advise the Lessee in writing of Lessee's Proportionate
Share, as hereinafter defined,
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with respect to each of the categories as estimated for the next twelve
(12) month period [and for each succeeding twelve (12) month period or
proportionate part thereof if the last period prior to the Lease's termination
is less than twelve (12) months] as then known to the Lessor, and thereafter,
the Lessee shall pay as additional rent, its Proportionate Share, as
hereinafter defined, of the excess of these costs over the Base Period Costs
for the then current period affected by such advice (as the same may be
periodically revised by Lessor as additional costs are incurred) in equal
monthly installments on the first day of each month, such new rates being
applied to any months for which the monthly installment of Basic Rent shall
have already been paid which are affected by the Operating Cost Escalation
and/or Utility and Energy Cost Escalation and/or Tax Escalation Costs above
referred to, as well as the unexpired months of the current period, the
adjustments for the then expired months to be made at the payment of the next
succeeding monthly installment of Basic Rent, all subject to final adjustment
at the expiration of each Calendar Year as defined in Subparagraph (D) hereof
(or proportionate part thereof, if the last period prior to the Lease's
termination is less than a full Calendar Year). However, Lessor shall be
reimbursed by Lessee monthly during the first year of the Lease term for
additional Office Building and/or Complex Utility and Energy Cost Escalations
resulting from an increase in the monthly rate over the Base Utility Rate.
Notwithstanding anything herein contained to the contrary, in the
event the last period prior to the Lease's termination is less than a full
Calendar Year, the Base Period Costs during said period shall be
proportionately reduced to correspond to the duration of said final period.
(G) Books and Records. For the protection of Lessee, Lessor shall
maintain books of accounts which shall be open to Lessee and its
representatives at all reasonable times so that Lessee can determine that such
Operating, Utility, Energy and Tax Costs have, in fact, been paid or incurred.
Any disagreement with respect to any one or more of said charges if not
satisfactorily settled between Lessor and Lessee shall be referred by either
party to an independent certified public accountant to be mutually agreed upon,
and if such an accountant cannot be agreed upon, the American Arbitration
Association may be asked by either party to select an arbitrator, whose
decision on the dispute will be final and binding upon both parties, who shall
jointly share any cost of such arbitration. Pending resolution of said dispute
the Lessee shall pay to Lessor the sum so billed by Lessor subject to its
ultimate resolution as aforesaid.
(H) Right of Review. Once Lessor shall have finally determined
said Operating, Utility and Energy or Tax Costs at the expiration of a Calendar
Year, then as to the item so established, Lessee shall only be entitled to
dispute said charge as finally established for a period of one hundred twenty
(120) days after such charge is finally established and Lessee has been
notified of same, and Lessee specifically waives any right to dispute any such
charge at the expiration of said one hundred twenty (120) day period.
(I) Survival. Notwithstanding anything to the contrary contained
herein, the additional rental obligations as contained in this Paragraph 23
shall survive the Lease termination or earlier expiration of this Lease.
(J) Occupancy Adjustment. If, with respect to Operating Cost
Escalation, as established in Subparagraph (A) hereof, and Utility and Energy
Cost Escalation, as established in Subparagraph (d) hereof, the Building is not
ninety-five (95%) percent occupied during the establishment of the respective
Base Periods, then the Base Costs incurred with respect to said Operating Cost
or Utility and Energy Cost shall be adjusted during any such period within the
Base Period so as to reflect ninety-five (95%) percent
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occupancy. Similarly, if, during any Calendar Year or proportionate part
thereof subsequent to the Base Period the Building is less than ninety-five
(95%) percent occupied, then the actual costs incurred for Operating Cost and
Utility and Energy Cost shall be increased during any such period to reflect
ninety-five (95%) percent occupancy so that at all times after the Base Period
the Utilities and Energy Cost or Operating Cost shall be actual costs, but in
the event less than ninety-five (95%) percent of the Building is occupied
during all or part of the Calendar Year involved, the Utility and Energy Cost
and Operating Cost shall not be less than that which would have been incurred
had ninety-five (95%) percent of the Building been occupied. The aforesaid
adjustment shall only be made with respect to those items that are in fact
affected by variations in occupancy levels. To the extent any Operating Cost
or Utility and Energy Cost is separately billed or metered or for which Lessor
receives reimbursements, said space shall be considered vacant space for
purposes of the aforesaid adjustment. Notwithstanding anything contained
herein to the contrary, in the event the Base Period costs are adjusted to
reflect 95% occupancy, then all future periods shall similarly reflect 95%
occupancy regardless of the actual occupancy rate of the building.
24. LESSEE'S ESTOPPEL. Lessee and Lessor shall, from time to
time, on not less than ten (10) days' prior written request by Lessor, execute,
acknowledge and deliver to Lessor, within ten (10) days of receipt of said
written request, a written statement certifying that the Lease is unmodified
and in full force and effect, or that the Lease is in full force and effect as
modified and listing the instruments of modification; the dates to which the
basic and additional rents and charges have been paid; and, to the best of
Lessee's knowledge, whether or not Lessor is in default hereunder, and if so,
specifying the nature of the default and any such other reasonable information
as Lessor may request. It is intended that any such statement delivered
pursuant to this Paragraph 24 may be relied on by a prospective purchaser of
Lessor's interest or mortgagee of Lessor's interest or assignee of any mortgage
of Lessor's interest. Lessee hereby irrevocably appoints Lessor as
attorney-in-fact for the Lessee with full powers and authority to execute and
deliver in the name of Lessee such estoppel certificate if Lessee fails to
deliver the same within such ten (10) day period and such certificate as
signed by Lessor shall be fully binding on Lessee, if Lessee fails to deliver a
contrary certificate within five (5) days after receipt by Lessee of a copy of
the certificate executed by Lessor on behalf of Lessee.
25. HOLDOVER TENANCY. If Lessee holds possession of the Premises
after the term of this Lease, Lessee shall become a tenant from month to month
under the provisions herein provided, but at a monthly installment of basic
rent at the same rate in effect at the end of the Lease term for the first
month, and a rate of one and one-half times the basic rent in effect at end of
the Lease term for each succeeding month and without the requirement for demand
or notice by Lessor to Lessee demanding delivery of possession of said Premises
(but additional rent shall continue as provided in this Lease), which sum shall
be payable in advance on the first day of each month, and such tenancy shall
continue until terminated by Lessor, or until Lessee shall have given to
Lessor, at least sixty (60) days prior to the intended date of termination, a
written notice of intent to terminate such tenancy, which termination date must
be as of the end of a calendar month.
26. RIGHT TO SHOW PREMISES. Lessor may show the Premises to
prospective purchasers and mortgagees; and, during the twelve (12) months prior
to termination of this Lease, to prospective tenants, during Business Hours on
reasonable notice to Lessee.
27. LESSOR'S WORK - LESSEE'S DRAWINGS. (A) Lessor agrees that, at
Lessee's expense, prior to the commencement of the term
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of this Lease, it will do substantially all of the work in the Demised Premises
in accordance with Exhibit A and Exhibit C attached hereto and made a part
hereof. All of said Exhibit A and Exhibit C work, whether paid for in whole or
in part by Lessee, is and shall remain the Lessor's property.
(B) Lessee, at Lessee's cost, shall cause to be prepared by
Lessee's architect such drawings and information as and when required as set
forth in Exhibit C. Any delay occasioned by Lessee's failure to supply such
drawings and information on or before the dates set forth in Exhibit C
shall not delay the Commencement Date of the Term, as hereinafter defined, and
Lessee's obligations hereunder and the Commencement Date shall be the date the
Premises would have been delivered to Lessee pursuant to Section 2, but for
Lessee's delay.
(C) Lease Commencement shall occur upon written notice to Lessee and
the Commencement Date is defined as that date when Lessor has done
substantially all of the work to be done by Lessor in accordance with Exhibit C
unless Lessor has been precluded from completing said work as a result of
Lessee's acts or omissions including but not limited to its failure to comply
with Subsection 27(B) above. Occupancy by Lessee or the delivery of a
Certificate of Occupancy (temporary or permanent) by Lessor (if required
pursuant to local law) shall be prima facie evidence that Lessor has done
substantially all of the work.
(D) Lessor's work as set forth herein shall not exceed the sum of
Three Hundred Thirty Seven Thousand Two Hundred Seventy Five and 00/100
($337,275.00) Dollars, which costs shall include a ten percent (10%)
supervision fee for Woodbridge Place Associates. Lessor's costs as set forth
herein shall include the acquisition and installation of up to fifty modular
furniture work stations. Lessee shall be responsible for the acquisition and
delivery of said work stations to the leased premises. Lessee shall deliver
said work stations to the leased premises within five (5) days notice from
Lessor to Lessee. Notwithstanding the actual acquisition, delivery and
installation costs, Lessor and Lessee hereby agree that each work station
acquired, delivered and installed, shall be deemed, for purposes of this
section, to cost $1,500.00 and upon installation become the property of Lessor.
In the event the costs herein are less than Three Hundred Thirty Seven Thousand
Two Hundred Seventy Five and 00/100 ($337,275.00) Dollars Lessee shall not be
entitled to any credits. In the event said costs exceed Three Hundred Thirty
Seven Thousand Two Hundred Seventy Five and 00/100 ($337,275.00) Dollars,
Lessee shall pay any additional cost including the ten percent (10%)
supervising fee.
(E) On the Commencement Date of the leased premises, Lessor shall
reimburse Lessee with a payment of Thirteen Thousand Four Hundred Ninety One
and 00/100 ($13,491.00) Dollars as credit for Lessee's providing of
architectural plans for the leased premises. In addition, provided Lessor is
in receipt of signed and sealed architectural drawings on or before May 26,
1994, Lessor shall reimburse Lessee an additional sum of $7,500.00 on the
Commencement Date.
28. WAIVER OF TRIAL BY JURY. If Lessor commences any summary
proceedings or an action for nonpayment of Term Basic Rent or Additional Rent,
Lessee shall not interpose any nonmandatory counterclaim of any nature or
description in any such proceedings or action. Lessee and Lessor both waive a
trial by jury of any or all issues arising in any action or proceeding between
the parties hereto or their successors under or connected with this Lease or
any of its provisions.
29. LATE CHARGE. Anything in this Lease to the contrary
notwithstanding, at Lessor's option, Lessee shall pay a "Late Charge" of five
(5%) percent of any installment of basic rent or additional rent paid more than
five business (5) days after the due date thereof for each monthly period or
portion thereof that the same remains unpaid, such late charge to cover the
extra expense involved in handling delinquent payments. Notwithstanding
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anything contained herein to the contrary, Lessee shall not incur a late charge
on any additional rent received by Lessor within ten (10) days after its due
date. In addition, Lessee shall be entitled to waive late charges due and
owing once during any twelve month period during the term of the lease upon
receipt by Lessor of Lessee's late basic rent within five (5) days of notice
from Lessor to Lessee that said rent is overdue.
30. LESSEE'S INSURANCE.
(A) Lessee's Insurance.
(1) Lessee covenants and represents, said representation
being specifically designed to induce Lessor to execute this Lease, that during
the entire Term hereof, at its sole cost and expense, Lessee shall obtain,
maintain and keep in full force and effect the following insurance:
(a) "All Risk" property insurance against fire, theft,
vandalism, malicious mischief, sprinkler, leakage and such
additional perils as are now or hereafter may be, included in
a standard extended coverage endorsement from time to time in
general use in the State of New Jersey upon property of every
description and kind owned by Lessee and or under Lessee's
care, custody or control located in the Building or within the
Office Building Area or for which Lessee is legally liable or
installed by or on behalf of Lessee, including by way of
example and not by way of limitation, furniture, fixtures,
fittings, installations and any other personal property (but
excluding the work done by Lessor in connection with Exhibit C
which is owned by Lessor) in an amount equal to the full
replacement cost thereof.
(b) Comprehensive General Liability Insurance coverage to
include personal injury, bodily injury, broad form property
damages, operations hazard, owner's protective coverage,
blanket contractual liability, products and completed
operations liability naming Lessor and Lessor's mortgagee or
trust deed holder and ground lessor (if any) as additional
named insureds in an amount per occurrence of not less than
One Million and 00/100 ($1,000,000.00) Dollars combined single
limit bodily injury and property damage.
(c) Business interruption insurance in such amounts as
will reimburse Lessee for direct and indirect loss of earnings
attributable to all perils commonly insured against by prudent
tenants or assumed by Tenant pursuant to this Lease or
attributable to prevention or denial of access to the
Premises, Building or Office Building Area as a result of such
perils.
(d) Worker's Compensation insurance in form and amount as
required by law.
(e) Any other form or forms of insurance of any increase
in the limits of any of the aforesaid enumerated coverages or
other forms of insurance as Lessor or the mortgagees or ground
lessors (if any) of Lessor may reasonably require from time to
time if in the reasonable opinion of Lessor or said mortgagees
or ground lessors, said coverage and/or limits become
inadequate or less than that commonly maintained by prudent
tenants in similar buildings in the area by tenants making
similar uses.
(2) All insurance policies required pursuant to this
Section 30(A) shall be taken out with insurers rated A + XV by A.M. Best
Company, Oldwick, New Jersey and shall be licensed to do business
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in the State of New Jersey and shall be in form satisfactory from time to time
to Lessor. A policy or certificate evidencing such insurance together with a
paid bill shall be delivered to Lessor not less than fifteen (15) days prior
to the commencement of the Term hereof if required by Lessor's mortgagee.
Such insurance policy or certificate will unequivocally provide an undertaking
by the insurers to notify Lessor and the mortgagees or ground lessors (if any)
of Lessor in writing not less than thirty (30) days prior to any material
change, reduction in coverage, cancellation, or other termination thereof.
Should a certificate of insurance initially be provided, a policy shall be
furnished by Lessee within thirty (30) days of the Term's Commencement. The
aforesaid insurance shall be written with no deductible except as may be
consented to by Lessor. Lessor shall consent to an insurance policy with a
Five Thousand and 00/100 ($5,000.00) Dollar deductible.
(3) In the event of damage to or destruction of the
Building and/or Premises entitling Lessor or Lessee to terminate this Lease
pursuant to Section 9 hereof, and if this Lease be so terminated, Lessee will
immediately pay to Lessor all of its insurance proceeds, if any, relating to
the leasehold improvements and alterations (but not Lessee's trade fixtures,
equipment, furniture or other personal property of Lessee in the Premises)
which have become Lessor's property on installation or would have become
Lessor's property at the Term's expiration or sooner termination. If the
termination of the Lease, at Lessor's election, is due to damage to the
Building, and if the Premises have not been so damaged, Lessee will deliver to
Lessor, in accordance with the provisions of this Lease, the improvements and
alterations to the Premises which have become on installation or would have
become at the Term's expiration, Lessor's property.
(4) Lessee agrees that it will not keep or use or offer
for sale (if sales of goods is a permitted use pursuant to Section 4 hereof) in
or upon the Premises or within the Building or Office Building Area any article
which may be prohibited by any insurance policy in force from time to time
covering the Building or Office Building Area. In the event Lessee's occupancy
or conduct of business in or on the Premises of Building or Office Building
Area, whether or not Lessor has consented to the same, results in any increase
in premiums for insurance carried from time to time by Lessor with respect to
the Building or Office Building Area, Lessee shall pay such increase in
premiums as Additional Rent within thirty (30) days after being billed therefor
by Lessor. In determining whether increased premiums are a result of Lessee's
use and occupancy a schedule issued by the organization computing the insurance
rate on the Building or Office Building Area showing the components of such
rate shall be conclusive evidence of the items and charges making up such rate.
Lessee shall promptly comply with all reasonable requirements of the insurance
authority or of any insurer now or hereafter in effect relating to the
Building, Office Building Area or Premises.
(5) If any insurance policy carried by Lessor, as
provided in Subsection 30 (A)(2) hereof, shall be cancelled or cancellation
shall be threatened or the coverage hereunder reduced or threatened to be
reduced in any way by reason of the use or occupation of the Premises, Office
Building Area or Building or any part thereof by Lessee or any assignee or
sublessee of Lessee or anyone permitted by Lessee to be upon the Premises, and
if Lessee fails to remedy the conditions giving rise to said cancellation or
threatened cancellation or reduction in coverage on or before (i) seventy-two
(72) hours after notice thereof from Lessor, or (ii) prior to said cancellation
or reduction becoming effective, Lessee shall be in default hereunder and
Lessor shall have all of the remedies available to Lessor pursuant to this
Lease.
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(B) Lessor's Insurance. Lessor covenants and agrees that
throughout the Term it will insure the Building [excluding any property with
respect to which Lessee is obligated to insure pursuant to Subsection
30(A)(1)(a) above] against damage by fire and standard extended coverage perils
and public liability insurance in such reasonable amounts with such reasonable
deductibles as required by any mortgagee or ground lessor (if any), or if none,
as would be carried by a prudent owner of a similar building, in the area. In
addition, Lessor shall maintain and keep in force and effect during the Term,
rental income insurance insuring Lessor against abatement or loss of Term Basic
Rent, including items of Additional Rent, in case of fire or other casualty
similarly insured against, in an amount of at least equal to the Term Basic
Rent and Additional Rent during, at the minimum, one Calendar Year hereunder.
Lessor may, but shall not be obligated to, take out and carry any other forms
of insurance as it or the mortgagee or ground lessor (if any) of Lessee may
require or reasonably determine available. All insurance carried by Lessor on
the Building or Office Building Area shall be included as an Operating Expense
pursuant to Subsection 23(A). Notwithstanding its inclusion as an Operating
Expense or any contribution by Lessee to the cost of insurance premiums by
Lessee as provided herein, Lessor acknowledges that it has no right to receive
any proceeds from any such insurance policies carried by Lessee although Lessor
shall use such proceeds in the repair and reconstruction of the Building and
the Premises unless the provision of Section 10 shall apply. Lessee further
acknowledges that the exculpatory provisions of this Lease as set forth in
Section 36 and the provisions of this Subsection 30(B) as to Lessee's insurance
are designed to insure adequate coverage as to Lessee's property and business
without regard to fault and to avoid Lessor obtaining similar coverage for said
loss for its negligence or that of its agents, servants or employees which
would result in double coverage for the same perils includable as part of
Operating Expenses which are payable by Lessee. Lessor will not carry
insurance of any kind on Lessee's furniture or furnishings, or on any fixtures,
equipment, appurtenances or improvements (other than those enumerated in
Exhibit C which belong to Lessor) of Lessee under this Lease and Lessor shall
not, except as to the aforesaid Exhibit C items owned by Lessor, be obligated
to repair any damage thereto or replace the same.
(C) Waiver of Subrogation. Any all risk policy or
similar casualty insurance, which either party obtains in connection with the
Premises, Building or Office Building Area shall include a clause or
endorsement denying the insurer any rights of subrogation against the other
party (i.e. Lessor or Lessee) for all perils covered by said policy. Should
such waiver not be available then the policy for which the waiver is not
available must name the other party as an additional named insured affording it
the same coverage as that provided the party obtaining said coverage.
31. NO OTHER REPRESENTATIONS. No representations or
promises shall be binding on the parties hereto except those representations
and promises contained herein or in some future writing signed by the party
making such representations) or promise(s).
32. QUIET ENJOYMENT. Lessor covenants that if, and so
long as, Lessee pays the basic rent, and any additional rent as herein
provided, and performs the covenant hereof, Lessor shall do nothing to affect
Lessee's right to peaceably and quietly have, hold and enjoy the Premises for
the term herein mentioned, subject to the provisions of this Lease and to any
mortgage or deed of trust to which this Lease shall be subordinate. Lessor
shall use its reasonably commercial efforts in trying to obtain a
non-disturbance provision from Lessor's mortgagee.
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33. INDEMNITY. Lessee shall indemnify and save harmless
Lessor and its agents against and from (a) any and all claims (i) to the extent
arising from (x) the conduct or management by Lessee, its subtenants,
licensees, its or their employees, agents, contractors or invitees on the
Demised Premises or of any business therein, or (y) any work or thing
whatsoever done, or any condition created (other than by Lessor for Lessor's or
Lessee's account) in or about the Demised Premises during the term of this
Lease or during the period of time, if any, prior to the Commencement Date that
Lessee may have been given access to the Demised Premises, or (ii) to the
extent arising from any negligent or otherwise wrongful act or omission of
Lessee or any of its subtenants or licensees or its or their employees,
agents, contractors or invitees, and (b) all costs, expenses and liabilities
incurred in or in connection with each such claim or action or proceeding
brought thereon. In case any action or proceeding be brought against Lessor
by reason of any such claim, Lessee, upon notice from Lessor, shall resist and
defend such action or proceeding. The provisions of this paragraph shall
survive the expiration or sooner termination of this Lease.
34. PARAGRAPH HEADINGS. The paragraph headings in this
Lease and position of its provisions are intended for convenience only and
shall not be taken into consideration in any construction or interpretation of
this Lease or any of its provisions.
35. APPLICABILITY TO HEIRS AND ASSIGNS. The provisions
of this Lease shall apply to, bind and inure to the benefit of Lessor and
Lessee, and their respective heirs, successors, legal representatives and
assigns. It is understood that the term "Lessor" as used in this Lease means
only the owner, a mortgagee in possession or a term lessee of the Building, so
that in the event of any sale of the Building or Complex or of any lease
thereof, or if a mortgagee shall take possession of the Premises, the Lessor
named herein shall be and hereby is entirely freed and relieved of all
covenants and obligations of Lessor hereunder accruing thereafter, and it shall
be deemed without further agreement that the purchaser, the term lessee of the
Building or Complex, or the mortgagee in possession has assumed and agreed to
carry out any and all covenants and obligations of Lessor hereunder.
36. PARKING SPACES. Lessee's occupancy of the Demised
Premises shall include at no additional charge (subject to fines for violation
of rules and regulations) the use of forty two (42) parking spaces only, 14 of
which will be assigned. Lessee shall, upon request, promptly furnish to Lessor
the license numbers of the cars operated by Lessee and its subtenants,
licensees, invitees, concessionaires, officers and employees. If any vehicle
of the Lessee, or of any subtenant, licensee concessionaire, or of their
respective officers, agents or employees, is parked in any part of the Common
Facilities other than the employee parking area(s) designated therefor by
Lessor, Lessee shall pay to Lessor such penalty as may be fixed by Lessor from
time to time. All amounts due under the provisions of this Paragraph shall be
deemed to be additional rent. Nothing contained herein shall be deemed to
impose any obligation on Lessor to police the parking area.
37. LESSOR'S EXCULPATION. Lessor shall not be liable to
Lessee for any loss suffered by Lessee under any circumstances, including but
not limited to (i) that arising from the negligence of Lessor, its agents,
servants or invitees, or from defects, errors or omissions in the construction
or design of the Demised Premises and/or the Building and Office Building Area
including the structural and nonstructural portions thereof; or (ii) loss of or
injury to Lessee or to Lessee's property or that for which Lessee is legally
liable from any cause whatsoever, including but not limited to theft or
burglary; or (iii) that which results from or is incidental to the furnishings
of or failure to furnish or the interruption in connection with the furnishing
of any service which Lessor is obligated to furnish pursuant to this Lease; or
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(iv) that which results from any inspection, repair, alteration or addition
or the failure thereof undertaken or failed to be undertaken by Lessor; or (v)
any interruption to Lessee's business, however occurring, but this exculpatory
provision shall not preclude Lessee's remedies as specifically provided for in
paragraph 21 with respect to interruption of services or use; additionally,
this exculpatory provision shall only be effective if Lessor has satisfied its
insurance obligations as required under paragraphs 10 and 30 (c) above with
respect to all of Lessor's property insurance involving the building.
The aforesaid exculpatory paragraph is to induce the Lessor, in its
judgment to avoid or minimize covering risks which are better quantified and
covered by Lessee either through insurance of self-insurance or combinations
thereof, thereby permitting potential cost savings in connection with the
Operating Costs borne by Lessee pursuant to paragraph 23. Lessor represents
to Lessee that Lessor has not provided a more favorable exculpation clause to
any other lessee in the Building.
38. RULES OF CONSTRUCTION/APPLICABLE LAW. Any table of contents,
captions, headings and titles in this Lease are solely for convenience of
reference and shall not affect its interpretation. This Lease shall be
construed without regard to any presumption or other rule requiring
construction against the party causing this Lease to be drafted. If any words
or phrases in this Lease, shall have been stricken out or otherwise eliminated,
whether or not any other words or phrases have been added, this Lease shall be
construed as if the words or phrases so stricken out or otherwise eliminated
were never included in this Lease and no implication or inference shall be
drawn from the fact that said words or phrases were so stricken out or
otherwise eliminated. Each covenant, agreement, obligation or other provision
of this Lease on Lessee's part to be performed shall be deemed and construed
as a separate and independent covenant of Lessee, not dependent on any other
provision of this Lease. All terms and words used in this Lease regardless of
the number or gender in which they are used, shall be deemed to include any
other number and any other gender as the context may require. This Lease
shall be governed and construed in accordance with the laws of the State of New
Jersey (excluding New Jersey conflict of laws) and by the State courts of New
Jersey. If any of the provisions of this Lease, or the application thereof to
any persons or circumstances, shall to any extent be invalid or unenforceable,
the remainder of this Lease, or the application of such provision or provisions
to persons or circumstances other than those as to whom or which it is held
invalid or unenforceable, shall not be affected thereby, and every provision of
this Lease shall be valid and enforceable to the fullest extent permitted by
law.
39. BROKER. Lessee and Lessor warrant to each other that Cushman
and Wakefield of New Jersey, Inc. and Prodevco Management Group, Inc. are the
sole brokers with whom Lessee has negotiated in bringing about this Lease and
Lessee agrees to indemnify and hold Lessor and its mortgagee(s) harmless from
any and all claims of other brokers and expenses in connection therewith
arising out of or in connection with the negotiation of or the entering into
this Lease by Lessor and Lessee. In no event shall Lessor's mortgagee(s) have
any obligation to any broker involved in this transaction. Lessor shall be
responsible for paying the brokers named herein.
40. PERSONAL LIABILITY. Notwithstanding anything to the contrary
provided in this Lease, it is specifically understood and agreed, such
agreement being a primary consideration for the execution of this Lease by
Lessor, that there shall be absolutely no personal liability on the part of
Lessor, its successors, assigns or any mortgagee in possession (for the
purposes of this paragraph, collectively referred to as "Lessor"), with respect
to any of the terms, covenants and conditions of this Lease, and that Lessee
shall look solely to the equity of Lessor in the Building
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for the satisfaction of each and every remedy of Lessee in the event
of any breach by Lessor of any of the terms, covenants and conditions of this
Lease to be performed by Lessor, such exculpation of liability to be absolute
and without any exceptions whatsoever. A deficit capital account of any
portion in Lessor shall not be deemed an asset or property of Lessor. The
foregoing limitation of liability shall be noted in any judgment secured
against Lessor and in the judgment index.
41. NO OPTION. The submission of this Lease Agreement for
examination does not constitute a reservation of, or option for, the Premises,
and this Lease Agreement becomes effective as a Lease Agreement only upon
execution and delivery thereof by Lessor and Lessee.
42. DEFINITIONS. (A) Office Building Proportionate Share.
Lessee's Office Building Proportionate Share, wherever that phrase is used,
shall be 8.50 (%) percent, which the parties agree reflects and will be
continually adjusted to reflect the sum arrived at by dividing the gross square
feet of the area rented to Lessee (including an allocable share of all Common
Facilities) as set forth in paragraph 1 [the numerator], plus any additional
gross square footage leased from time to time pursuant to this Lease, by the
total number of gross square feet of the entire Office Building (the
denominator], measured outside wall to outside wall but excluding therefrom any
storage areas. Lessor shall have the right to make changes or revisions in the
Common Facilities of the Office Building so as to provide additional leasing
area. Lessor shall also have the right to construct additional buildings in
the Complex Building Area for such purposes as Lessor may deem appropriate and
subdivide the lands for that purpose if necessary, and upon so doing, the
Complex Building Area shall become the subdivided lot on which the Office
Building in which the Demised Premises is located. If any service provided for
in paragraph 23(A) or any utility provided for in paragraph 23(C) is separately
billed or separately metered within the Office Building, then the square
footage so billed or metered shall be deemed vacant and if applicable subject
to the Occupancy Adjustment set forth in paragraph 23(K). Lessee understands
that as a result of changes in the layout of the Common Facilities from time to
time occurring due to, by way of example and not by way of limitation, the
rearrangement of corridors, the aggregate of all tenant Office Building
proportionate shares or Complex proportionate shares may be equal to, less than
or greater than one hundred (100%) percent.
(B) Complex Proportionate Share. The parties agree that Lessee's
Complex Proportionate Share, wherever that phrase is used shall be 3.42 (%)
percent, and reflects and will continually be adjusted to reflect the sum
arrived at by dividing the gross square feet of the area rented to Lessee
(including an allocable share of all Common Facilities) as set forth in
paragraph 1 [the numerator], plus any additional gross square footage leased
from time to time pursuant to this Lease, by the total number of gross square
feet of the Complex (or additional buildings which may be constructed within
the Complex Building Area), [the denominator], measured outside wall to outside
wall but excluding therefrom any storage areas. During any period when any
square footage within the Office Building is not reasonably usable for the
purpose for which is was leased and as a consequence any tenant is allowed an
abatement, said square footage shall be deducted from the denominator during
said period and if Lessee is the tenant allowed said abatement, said square
footage shall be deducted from the numerator during said period and the Complex
Proportionate Share shall be recalculated. During any such period, there shall
be a corresponding reduction in the Base Period Costs for Complex Operating
Costs, as set forth in paragraph 23(B), and Complex Utility and Energy Costs,
as set forth in paragraph 23(D) to the extent of the percentage reduction in
the square footage of the Office Building during said period. Lessor shall
have the right to make changes or revisions in the Common Facilities. Lessor
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shall also have the right to construct additional buildings in the Complex
Building Area for such purposes as Lessor may deem appropriate and subdivide
the Complex Building Area for that purpose if it deems it necessary.
(C) Common Facilities. Common Facilities shall include by way of
example and not by way of limitation, the non-assigned parking areas; lobby;
elevator(s); fire stairs; public hallways; public lavatories; all other general
Building facilities that service all Building tenants; air conditioning rooms;
fan rooms; janitors' closets; electrical closets; telephone closets; elevator
shafts and machine rooms; flues; stacks; pipe shafts and vertical ducts with
their enclosing walls. Lessee's use of those Common Facilities not open to the
general public is subject to Lessor's consent which may be denied for any
reason, Lessor may at any time close temporarily any Common Facilities to make
repairs for changes therein or to effect construction, repairs or changes
within the Building or Office Building Area, or to discourage non-tenant
parking or to prevent the dedication of the same, and may do such other acts in
and to the Common Facilities as in its judgment may be desirable to improve the
convenience thereof but shall always in connection therewith endeavor to
minimize any inconvenience to Lessee.
(D) Force Majeure. Force Majeure shall mean and include those
situations beyond Lessor's control, including by way of example and not by way
of limitation, acts of God; accidents; repairs; strikes; shortages of labor;
supplies or materials; inclement weather; or where applicable, the passage of
time while waiting for an adjustment of insurance proceeds. Any time limits
required to be met by either party hereunder, whether specifically made subject
to Force Majeure or not, except those related to the payment of rent or
additional rent, shall, unless specifically stated to the contrary elsewhere in
this Lease, be automatically extended by the number of days by which any
performance called for is delayed due to Force Majeure.
(E) Building Hours. As used in this Lease the Building Hours
shall be Monday through Friday, 8:00 a.m. to 6:00 p.m., and on Saturdays from
8:00 a.m. to 1:00 p.m., excluding those holidays as set forth in Exhibit E
attached hereto and made a part hereof, except that Common Facilities lighting
in the Building, Complex and Office Building Area shall be maintained for such
additional hours as, in Lessor's sole judgment, is necessary for desirable to
insure proper operation of the Building, Complex and Office Building's Area.
(F) Additional Rent. As used in this Lease, Additional Rent shall
mean all sums in addition to term Basic Rent payable by Lessee to Lessor
pursuant to the provisions of this Lease.
43. LEASE COMMENCEMENT. Notwithstanding anything contained herein
to the contrary, if Lessor, for any reason whatsoever, including Lessor's
negligence, cannot deliver possession of the Premises as provided for in
Paragraph 27(A) to Lessee at the commencement of the agreed term as set forth
in Paragraph 2, this Lease shall not be void or voidable, nor shall Lessor be
liable to Lessee for any loss or damage resulting therefrom, but in that event,
the Lease term shall be for the full term as specified above to commence from
and after the date Lessor shall have delivered possession of the Premises to
Lessee or from the date Lessor would have delivered possession of the Premises
to Lessee but for Lessee's failure to timely supply to Lessor such drawings
and/or information required by Exhibit C or for any other reason attributable
to Lessee (herein the "Commencement Date") and to terminate midnight of the day
immediately preceding said Sixty Three and one half months (63 1/2)
anniversary of the Commencement Date, and if requested by Lessor, Lessor and
Lessee shall, by a writing signed by the parties, ratify and confirm said
commencement and termination dates. Nothing contained herein shall be deemed
to modify the commencement of the Lease Term as
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set forth in Section 2 and Lessee's obligations hereunder if Lessor is unable
to deliver the Demised Premises on the commencement date by reason of Lessee's
failure to comply with the requirement of Subsection 27(B). Notwithstanding
anything contained herein to the contrary, in the event Lessor cannot deliver
possession of the premises as provided for in Paragraph 27(A) to Lessee within
270 days of the later of (A) full execution of the within Lease or (B) the date
Lessor receives signed and sealed architectural plans, then and in that event
Lessee shall have the right to terminate this Lease. Lessee shall not be
obligated to accept possession of the Lease Premises prior to August 1, 1994.
44. NOTICES. Any notice by either party to the other shall be in
writing and shall be deemed to have been duly given only if delivered
personally or sent by registered mail or certified mail in a postpaid envelope
addressed, if to Lessee, at the above described Building; with a copy to
Micrognosis, Inc., 100 Saw Mill Road, Danbury, CT 06810, Attn: Vice President
of Human Resources and Administration; if to Lessor, at Lessor's address as set
forth above, with a copy to Hutt & Berkow, P.C., 459 Amboy Avenue, P.O.
Box 648, Woodbridge, New Jersey 07095, Attention: David M. Hutt, Esq.; or, to
either at such other address as Lessee or Lessor, respectively, may designate
in writing. Notice shall be deemed to have been duly given, if delivered
personally, on delivery thereof, and if mailed, upon the third (3rd) day after
the mailing thereof.
45. ACCORD AND SATISFACTION. No payment by Lessee or receipt by
Lessor of a lesser amount than the basic rent and additional charges payable
hereunder shall be deemed to be other than a payment on account of the earliest
stipulated basic rent and additional rent, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment for rent
or additional rent be deemed an accord and satisfaction, and Lessor may accept
such check or payment without prejudice to Lessor's right to recover the
balance of such rent and additional rent or pursue any other remedy provided
herein or by law.
46. EFFECT ON WAIVERS. No failure by Lessor or Lessee to insist
upon the strict performance of any covenant, agreement, term or condition of
this Lease, or to exercise any right or remedy consequent upon a breach
thereof, and no acceptance of full or partial monthly installment of basic rent
during the continuance of any such breach, shall constitute a waiver of any
such breach or of such covenant, agreement, term or condition. No consent or
waiver, express or implied, by Lessor or Lessee to or of any breach of any
covenant, condition or duty of either party shall be construed as a consent or
waiver to or of any other breach of the same or any other covenant, condition
or duty, unless in writing signed by Lessor and Lessee.
47. LEASE CONDITION. This Lease is expressly conditioned upon
Lessor receiving the consent and approval of Lessor's mortgagee to its terms
and provisions not later than thirty (30) days after its execution and delivery
by both parties. Should said consent not be received within the aforesaid time
period, Lessor may, at Lessor's sole option, cancel this Lease and return any
basic rent and/or security to Lessee which Lessee has deposited with Lessor
upon execution of this Lease, and thereafter the parties shall have no further
obligations to each other with respect to this Lease. Lessor shall make all
reasonable efforts to expedite receiving approval of Lessor's mortgagee as set
forth herein. Notwithstanding anything contained herein to the contrary, in
the event Lessor's mortgagee does not consent to the within Lease as provided
for in this paragraph and this Lease is subsequently terminated, then and in
that event, Lessor shall reimburse Lessee for actual payments made by Lessee
to its architect, not to exceed Fifteen Thousand and 00/100 ($15,000.00).
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48. MORTGAGEE'S NOTICE AND OPPORTUNITY TO CURE. Lessee agrees to
give any mortgagees and/or trust deed holders, by Registered Mail, a copy of
any notice of default served upon the Lessor, provided that, prior to such
notice, Lessee has been notified in writing (by way of notice of assignment of
rents and leases, or otherwise) of the address of such mortgagees and/or trust
deed holders. Lessee further agrees that, if Lessor shall have failed to cure
such default within the time provided for in this Lease, then the mortgagees
and/or trust deed holders shall have an additional thirty (30) days within
which to cure such default or if such default cannot be cured within that time,
then such additional time as may be necessary if within such thirty (30) days,
any mortgagee and/or trust deed holder has commenced and is diligently
pursuing the remedies necessary to cure such default (including but not limited
to commencement of foreclosure proceedings, if necessary to effect such cure),
in which event this Lease shall not be terminated while such remedies are being
so diligently pursued.
49. LESSOR'S RESERVED RIGHTS. Lessor and Lessee acknowledge that
the Premises are in a Building which is not open to the general public. Access
to the Building is restricted to Lessor, Lessee, their agents, employees and
contractors and to their invited visitors. In the event of a labor dispute
including a strike, picketing, informational or associational activities
directed as Lessee or any other tenant, Lessor reserves the right unilaterally
to alter Lessee's ingress and egress to the Building or make any other change
in operation conditions to restrict pedestrian, vehicular or delivery ingress
and egress to a particular location.
50. CORPORATE AUTHORITY. The undersigned officers and
representatives of the corporation executing this Lease on behalf of the
corporation represent and warrant that they are officers of the corporation
with authority to execute this Lease on behalf of the corporation, and within
fifteen (15) days of execution hereof, Lessee will provide Lessor with a
corporate resolution confirming the aforesaid.
51. ROOFTOP ACCESS. Subject to the provisions of applicable law,
the availability of rooftop space and the then-existing rights of any existing
occupants of the Building (including, without limitation, Comcast), as well as
to the Building's rules and regulations, during the Term Lessee shall have
access to the Building roof in order to install, at Lessee's sole cost and
expense, an antenna, or satellite dish. Any such installation shall be
pursuant to plans and specifications approved in writing by Lessor, which
approval may be withheld in Lessor's sole discretion (provided, that if Lessor
withholds approval of said plans and specifications, Lessor shall notify Lessee
of the reasons for Lessor's disapproval and cooperate in good faith with Lessee
in Lessee's effort to develop plans and specifications for the installation of
such rooftop unit as will be acceptable to Lessor). Lessor shall have the
right to condition Lessor's approval of such rooftop unit upon Lessee's
agreement to remove such unit at Lessor's option and anything ancillary or
pertinent to such unit at the expiration of the Term (and, as part of such
removal, Lessee shall repair any damage to the Building caused by Lessee's
removal of such rooftop unit).
52. AFTER-HOURS USE. Lessee shall be entitled to make use of said
Standard Electric Service and HVAC beyond the normal operating hours, at
Lessee's sole cost and expense. It is understood and agreed that Lessee shall
pay the sum of Fifty and 00/100 ($50.00) Dollars per hour plus such additional
percentage increase of the aforesaid hourly sum computed by measuring the
percentage increase of the aforesaid hourly sum computed by measuring the
percentage increase of the rate in effect (including fuel surcharges or
adjustments) during the month for which such overtime use is requested against
the Base Rate. The Base Rate
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for purposes hereof shall be the rate in effect (including fuel surcharges
and/or adjustments) on August 1, 1994 (herein "Base Utility Rate").
In no event shall the Lessee pay less than the sum of Fifty and 00/100
($50.00) Dollars for such aforesaid overtime use.
53. GOVERNMENT REQUIREMENTS. In the event of the imposition of
federal, state, or local governmental control, rules, regulations or
restrictions on the use or consumption of energy or other utilities or with
respect to any other aspect of this Lease during the Term, both Lessor and
Lessee shall be bound thereby. In the event of a difference in interpretation
of any governmental control, rule, regulation or restriction between Lessor and
Lessee, the interpretation of Lessor shall prevail, and Lessor shall have the
right to enforce compliance, including the right of entry into the Premises to
effect compliance.
54. RENEWAL OPTION. Provided Lessee is not in default under this
Lease, Lessee shall have the right to renew this Lease for two additional
periods of three (3) years and two (2) years, respectively, (each an "Option
Period") upon not less than nine (9) months notice prior to the expiration of
the initial term or the first option period as the case may be, upon the same
terms and provisions as provided for herein except for the basic rent which
shall be as follows:
During the first option period, basic rent shall accrue at the yearly
rate of Two Hundred Fifty Thousand One Hundred Fifty Eight and 95/100
($250,158.95) Dollars payable in advance on the first day of each calendar
month during the first option in installments of Twenty Thousand Eight Hundred
Forty Six and 58/100 ($20,846.58) Dollars each. During this first option
period, Lessor agrees to perform such work as is necessary to maintain the
Lease Premises in good order and/or renovate same as is requested by Lessee.
Notwithstanding anything contained herein to the contrary, Lessor's obligation
to perform the work set forth in this paragraph shall be limited to a total
expenditure of Thirty Three Thousand Two and 50/100 ($33,002.50) Dollars. The
aforementioned expenditure shall include a ten percent (10%) fee to Lessor, as
supervisory fee.
During the second option period basic rent shall not be less than
that paid for the Premises during the last year of the original term of the
Lease (without regard to any temporary abatement of rent then in effect
pursuant to the Lease provisions). In determining the fair rental value, the
Lessor shall notify Lessee of the fair rental value as established by Lessor.
Should Lessee dispute Lessor's determination, then the Lessee shall be free to,
at the Lessee's sole cost and expense, employ the services of an appraiser
familiar with office buildings located within the Woodbridge/Iselin, New Jersey
area comparable to the Building, who shall be a member of MAI and who shall
render an appraisal. If the Lessor and the Lessee's appraiser cannot agree on
the fair rental value, or in such case, on an independent appraiser acceptable
to both, either party may request the American Arbitration Association of
Somerset, New Jersey to appoint such independent appraiser who shall be a
member of MAI familiar with office buildings in the area of the Building and in
such event the judgment of a majority of the two appraisers and Lessor shall be
final and binding upon the parties. The parties shall share equally in the
cost of any such independent appraiser. Pending resolution of the issue of
fair rental value, the Lessee shall pay Lessor as of commencement of the
renewal term, the basic rent as established by Lessor, subject to retroactive
adjustment upon final determination of this issue.
In the event that Lessee fails to give Lessor notice that it intends
to exercise its right to renew in accordance with this Lease, said right shall
cease and this Lease shall terminate as of the last day of the term or the
first option period, as the case may be.
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Notwithstanding anything contained herein to the contrary, the renewal
options contained herein are not assignable and will become null and void as of
the date of any assignment or sublet by Lessee of its rights and obligations
pursuant to this Lease Agreement.
55. 24-HOUR ACCESS. Lessee shall be entitled to 24-hour, seven
(7) day a week access to the Demised Premises, but this shall not be construed
as authorization to make use of the Building services beyond the Building hours
without reimbursing the Lessor for the cost thereof, and shall be subject to
any governmental or municipal laws and regulations with respect to said
24-hour, seven (7) day a week access. Lessee shall obtain said access by means
of a key or similar means to be provided by Lessor to afford access to the
Building.
56. RIGHT OF FIRST OFFER. Provided Lessee is not in default
pursuant to any of the terms and conditions of this Lease, Lessee shall have a
continuing right of first offer to lease additional space located contiguous to
the Leased Premises on the (5th) floor of the building, in its "AS IS"
condition, (hereinafter referred to as the "First Offer Space"), which
hereafter is or may become vacant and available, subject only to whatever
prior rights as to said space exist in connection with the leasing of space in
the Building to the tenants to whom said leases are granted. Lessor will
advise the Lessee of the availability of said space and Lessee shall have
fifteen (15) days within which to respond to Lessor's offer, TIME HEREBY BEING
MADE OF THE ESSENCE. Should Lessee decline Lessor's offer or fail to respond,
then, and in such event, Lessee shall be deemed to have waived its right of
first offer for the First Offer Space until the same shall again become vacant
and available, and Lessor shall be free to lease said space to any other tenant
or prospect.
57. OPTION SPACE. Provided Lessee is not in default pursuant to
any of the terms and conditions of this Lease, Lessee shall have the right to
rent additional space within the Building (hereinafter "Additional Space")
upon the following terms and conditions:
1. The Additional Space shall contain between 1,950 and 3,000 gross
rentable square feet within the Building.
2. Lessee shall exercise this option on or before the first (1st)
anniversary of the Commencement Date of the Lease.
3. Basic rent for the Additional Space shall be the same as the
basic rent for the Demised Premises.
4. Lessee shall receive a pro-rata share, based on rentable space
and lease term, of workletter, rent abatement and plan allowance
as provided for herein.
5. Lessor shall be obligated to deliver possession of the Additional
Space within one (1) year of the last day available to Lessee to
exercise Lessee's option herein. Lessor will use its reasonable
commercial efforts to deliver possession to Lessee as soon as
possible.
6. All the remaining terms and conditions of this Lease shall apply
to the Additional Space.
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<PAGE> 41
58. LESSOR DEFAULT/LESSEE SETOFF. If Lessor shall fail to keep
or perform any of its obligations under the Lease in respect to the delivery of
the Premises to Lessee or the making of any repair required hereunder or the
performance of any service, and upon the continuance of such failure on Lessor's
part for thirty (30) days after the receipt by Lessor and any Mortgagee (as
said term is defined in Section 15 above of when Lessee has been given Notice)
of written notice of such default from Lessee (or, in the case of any such
failure which cannot reasonably be cured within thirty (30) days, within such
additional period, if any, as may be reasonably required by Lessor to cure such
failure with due diligence), and without waiving or releasing Lessor from any
obligation, then, provided that, upon the expiration of said thirty (30) day
period [or such longer period as may be required pursuant to the terms of this
Section 59], Lessee had provided both Lessor and any Mortgagee with an
additional five (5) day notice stating the nature of Lessor's failure, the date
Lessee's original notice was delivered and declaring Lessee's intention to
exercise the remedies provided in this Section 59, upon the expiration of said
additional five (5) day period, (should Lessor and/or any Mortgagee not cure
such failure within said additional five (5) day period) Lessee may (but is
under no obligation to) perform such obligation if the obligation the Lessor
failed to perform exclusively effects the Premises or effects the Premises more
than the other leased portions of the Building, and all sums actually paid or
incurred by Lessee and all necessary and incidental costs and expenses,
including reasonable attorney's fees, incurred by Lessee in making such
payment or performing such obligation, shall be paid by Lessor to Lessee
within thirty (30) days after demand, and if not so paid by Lessor, Lessee shall
have the right to offset such sums against any Base Rent payable by Lessee
under the Lease. Lessee may in any event pursue any other remedies available
to Lessee at law or in equity to collect payment and/or cause Lessor to cure
such default.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals the day and year first above written.
WOODBRIDGE PLACE ASSOCIATES, Lessor
By PRODEVCO MANAGEMENT GROUP, INC.
By: RANDY J. CSIK
-------------------------------
Randy J. Csik,
Executive Vice President
MICROGNOSIS, INC., Lessee
By: RYOICHI SHIRSTSUCHI
-------------------------------
Print Name: Ryoichi Shirstsuchi
-----------------------
Title: Vice President
----------------------------
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<PAGE> 42
WOODBRIDGE PLACE
EXHIBIT "A"
Floor Plan
<PAGE> 43
WOODBRIDGE PLACE
EXHIBIT "A-1"
DESCRIPTION
DESCRIPTION OF LOT 100-B, BLOCK 369 SITUATED IN THE TOWNSHIP OF WOODBRIDGE,
MIDDLESEX COUNTY, NEW JERSEY.
BEGINNING at a point Northwesterly sideline of N.J.S.H. Route No. 25
(A.K.A. U.S. Route No. 1) a 100 foot R.D.W., said point being located at the
intersection of the common dividing line between Lots 100-B and 1-A-1 in Block
369, and from said Beginning point RUNNING THENCE:
1. North 24 degrees 20' 00" West, along the common dividing line
between Lots 100-B and 1-A-1 in Block 369, a distance of 200.00
feet to a point and running thence;
2. South 65 degrees 40' 00" West, still along the common dividing
line of Lots 100-B and 1-A-1, in Block 369, a distance of 150.00
feet to a point in the Northeasterly line of Lot 1-B Block 368
and running thence;
3. North 24 degrees 20' 00" West, along the common dividing line
between Lot 100-B, Block 369 and Lot 1-B Block 368 a distance of
500.00 feet to a point and corner of Lots 100-B and 100-C in
Block 369 and Lot 1-B in Block 368 and running thence;
4. North 44 degrees 40' 00" East, along the common dividing line
between Lots 100-B and 100-C in Block 369, a distance of 561.95
feet to a point and running thence;
5. North 56 degrees 50' 00" East, still along the common dividing
line of lots 100-B and 100-C in Block 369, a distance of 468.30
feet to a point in the Southwesterly sideline of Gill's Lane and
running thence;
6. South 23 degrees 40' 00" East, along the Southwesterly sideline
of Gill's Lane, a distance of 147.17 feet to a point and running
thence;
7. South 13 degrees 22' 00" East, still along the Southwesterly
sideline of Gill's Lane, a distance of 248.69 feet to a point
and running thence;
8. South 66 degrees 00' 58" West, still along the Southwesterly
sideline of Gill's Lane, a distance of 100.00 feet to a point
and running thence;
9. South 23 degrees 59' 00" East, still along the Southwesterly
sideline of Gill's Lane, a distance of 153.33 feet to a point
and running thence;
10. South 35 degrees 19' 00" East, still along the Southwesterly
sideline of Gill's Lane, a distance of 167.80 feet to a point in
a curve and running thence;
<PAGE> 44
WOODBRIDGE PLACE
11. Along a curve to the left having a radius of 182.00 feet, an
arc length of 419.06 feet, a central angle of 131 degrees 55'
34", and a chord bearing and distance of South 15 degrees 50'
52" West 332.44 feet, to a point and running thence;
12. South 51 degrees 59' 07" West, along the Northwesterly sideline
of N.J.S.H. Route No. 25 (A.K.A. U.S. Route No. 1) a 100 foot,
R.O.W., a distance of 33.99 feet to a point and running thence;
13. North 87 degrees 59' 00" East, still along the Northwesterly
sideline of N.J.S.H. Route No. 25, a distance of 5.19 feet to a
point and running thence;
14. South 65 degrees 49' 00" West, still along the Northwesterly
sideline of N.J.S.H. Route No. 25, a distance of 566.65 feet to
a point, said point being the point and place of BEGINNING.
The above-described property contains 16.950 acres of land.
Property is subject to a 13.50 ft. wide strip to be dedicated to
N.J.D.O.T. as approved under Application No. A-1-3-116-84. Area of said
dedication = 0.132 acres of land.
Property also subject to two (2) drainage easements. Basement "A" is
located at the most Northeasterly corner of Lot 100-B, in Block 369. Basement
"B" is located at the most Northwesterly corner of Lot 100-B, in Block 369.
Description made in accordance with a map entitled, "Sketch of Property
Surveyed for Woodbridge Place, Situated in Township of Woodbridge, Middlesex
County, New Jersey", dated June 19, 1984 and revised August 1, 1984.
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<PAGE> 45
WOODBRIDGE PLACE
EXHIBIT "B"
RULES AND REGULATIONS
1. Tenant shall not obstruct or permit its employees, agents,
servants, invitees or licensees to obstruct, in any way, the sidewalks, entry
passages, corridors, halls, stairways or elevators of the Buildings, or use the
same in any way other than as a means of passage to and from the offices of
Tenant; bring in, store, test or use any materials in the Building which could
cause a fire or an explosion or produce any fumes or vapor; make or permit any
improper noises in the Building; smoke in any elevator; throw substances of any
kind out of windows or doors, or down the passages of the Building, or in the
halls or passageways; sit on or place anything upon the window sills; or clean
the windows.
2. Water closets and urinals shall not be used for any purpose
other than those for which they were constructed, and no sweepings; rubbish,
ashes, newspaper or any other substances of any kind shall be thrown into
them. Waste and excessive or unusual use of electricity or water is prohibited.
3. The windows, doors, partitions and lights that reflect or admit
light into the halls or other places of the Building shall not be obstructed.
NO SIGNS, ADVERTISEMENTS OR NOTICES SHALL BE INSCRIBED, PAINTED, AFFIXED OR
DISPLAYED IN, ON, UPON OR BEHIND ANY WINDOWS, except as may be required by law
or agreed upon by the parties; and no sign, advertisement or notice shall be
inscribed, painted or affixed on any doors, partitions or other part of the
inside of the Building, without the prior written consent of the Landlord.
Tenant shall within 14 days after occupancy, cause to be installed suite
signage as prescribed by Landlord. Should Tenant fail to do so, Landlord shall
supply and install same at Tenant's sole cost and expense.
4. No contract of any kind with any supplier of towels, water,
ice, toilet articles, waxing, rug shampooing, venetian blind washing, furniture
polishing, lamp servicing, cleaning of electrical fixtures, removal of waste
paper, rubbish or garbage, or other like service shall be entered into by
Tenant, nor shall any vending machine of any kind be installed in the Building
without the prior written consent of Landlord. Landlord hereby consents to
Tenant's installation of a soda machine and a snack vending machine.
5. When electrical wiring of any kind is introduced, it must be
connected as directed by landlord, and no stringing or cutting of wires will be
allowed, except with the prior written consent of Landlord, and shall be done
only by contractors approved by Landlord.
6. Landlord shall have the right to prescribe the weight, size and
position of all safes and other bulky or heavy equipment and all freight
brought into the Building by any tenant and the time of moving the same in and
out of the Building. All such moving shall be done under the supervision of
Landlord. Landlord will not be responsible for loss of or damage to any such
equipment or freight from any cause; but all damage done to the Building by
moving or maintaining any such equipment or freight shall be repaired at the
expense of Tenant. All safes shall stand on a base of such size as shall be
designated by Landlord. Landlord reserves the right to inspect all freight to
be brought into the Building and to exclude from the Building all freight which
violates any of these Rules and Regulations or the Leases of which these Rules
and Regulations are a part.
7. No machinery of any kind or articles of unusual weight or size
will be allowed in the Building, without the prior written consent of Landlord.
Business machines and mechanical equipment shall be placed and maintained by
Tenant, at Tenant's expense, in setting sufficient, in Landlord's judgment, to
absorb and prevent vibration, noise and annoyance to other tenants.
<PAGE> 46
WOODBRIDGE PLACE
8. No additional or different lock or locks shall be placed by
Tenant on any door in the Building, without the prior written consent of
Landlord which shall not be unreasonably withheld. Two keys will initially be
furnished to Tenant by Landlord; two additional supplied to Tenant by Landlord
upon request, without charge; any additional keys requested by Tenant shall be
paid for by Tenant. Tenant, its agents and employees, shall not have any
duplicate keys made. All keys to doors and washrooms shall be returned to
Landlord on or before the Termination Date, and, in the event of a loss of any
keys furnished, Tenant shall pay Landlord the cost thereof. Tenant shall have
the right to make duplicate keys for any and all interior doors within the Lease
Premises.
9. Any contractor employed by Tenant must first be approved by
Landlord. Such approved contractor must carry appropriate workers' compensation
and public liability insurance and shall name Landlord as an additional insured,
and shall supply to Landlord a certificate evidencing such insurance. Landlord
shall not be responsible for any damage done to the effects of Tenant by any of
its employees, or by any other person or any other cause.
10. No bicycles, vehicles or animals of any kind shall be brought
into or kept in or about the premises.
11. The requirements of Tenant will be attended to only upon
application at the office by Landlord. Employees of Landlord shall not perform
any work for Tenant or do anything outside of their regular duties, unless under
special instructions from Landlord.
12. The premises shall not be used for lodging or sleeping purposes,
and cooking therein is prohibited, except for the use of a microwave, provided
no odors emanate therefrom.
13. Tenant shall not: conduct, or permit any other person to
conduct, any auction upon the Premises; manufacture or store goods, wares or
merchandise upon the Premises, without the prior written approval of Landlord,
except the storage of usual supplies and inventory to be used by Tenant in the
conduct of its business; permit the Premises to be used for gambling; make any
unusual noises in the Building; permit to be played any musical instrument in
the Premises; permit to be played any radio, television, recorded or wired music
in such a loud manner as to disturb or annoy other tenants; or permit any
unusual odors to be produced upon the Premises.
14. Between 6 P.M. and 8 A.M. on weekdays and all day Saturday,
Sunday, and Building Holidays, the Building is closed.
15. No awnings or other projections shall be attached to the outside
walls of the Building. No curtains, blinds, shades or screens shall be attached
to or hung in, or used in connection with any window or door of the Premises,
without the prior written consent of Landlord. Such curtains, blinds and shades
must be of quality, type, design, and color, and attached in a manner approved
by Landlord.
16. Canvassing, soliciting and peddling in the Building, are
prohibited, and Tenant shall cooperate to prevent the same.
17. There shall not be used in the Premises or in the Building
either by Tenant or by others in the delivery or receipt of merchandise,
supplies or equipment, any hand trucks except those equipped with rubber tires
and side guards.
18. Each tenant before closing and leaving the Premises, shall
ensure that all entrance doors are locked.
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<PAGE> 47
WOODBRIDGE PLACE
19. Landlord shall have the right to prohibit any advertisement by
Tenant which in Landlord's reasonable opinion tends to impair the reputation of
the Building or its desirability as a building for offices, and upon written
notice from Landlord, Tenant shall refrain from or discontinue such advertising.
20. Landlord hereby reserves the right to itself any and all rights
not granted to Tenant hereunder, including, but not limited to, the following
rights which are reserved to Landlord for its purposes in operating the
Building: (a) the exclusive right to the use of the name of the Building for
all purposes except that Tenant may use the name of its business address and for
no other purpose; (b) the right to change the name or address of the Building,
without incurring any liability to Tenant for so doing; (c) the right to install
and maintain a sign or signs on the exterior of the Building; (d) the exclusive
right to use or dispose of the use of the roof of the Building; (e) the right to
limit the space on the directory of the Building to be allotted to tenant; (f)
the right to grant to anyone the right to conduct any particular business or
undertaking in the Building.
21. Tenant shall list all articles to be taken from the Building
(other than those taken out in the usual course of business of Tenant) on such
list Tenant's letterhead, or a blank which will be furnished by Landlord. Such
list shall be presented at the office of the Building for approval before such
articles are taken from the Building.
22. Tenant shall have the non-exclusive right to use in common with
Landlord and other tenants of the Building and their employees and invitees the
parking area provided by Landlord for the parking of passenger automobiles,
other than parking spaces specifically allocated to others by Landlord. Landlord
may issue parking permits, install a gate system, and impose any other system as
Landlord deems necessary for the use of the parking area. Tenant agrees that it
and its employees and invitees shall not park their automobiles in parking
spaces allocated to others by Landlord and shall comply with such rules and
regulations for use of the parking area as Landlord may from time to time
prescribe. Landlord shall not be responsible for any damage to or theft of any
vehicle in the parking area and shall not be required to keep parking spaces
clear of unauthorized vehicles or to otherwise supervise the use of the parking
area. Landlord reserves the right to change any existing or future parking
area, roads or driveways, and may make any repairs or alterations it deems
necessary to the parking area, roads and driveways and to temporarily revoke or
modify the parking rights granted to Tenant hereunder.
23. Tenant shall not use the Premises or permit the Premises to be
used for the sale of food or beverages.
24. In order to maintain uniformity throughout the Building, Tenant
agrees to obtain interior sign lettering from Landlord at Tenant's sole cost and
expense. Lessor acknowledges that the charge for said sign lettering shall
include Lessor's overhead expense but shall not include any profit to Lessor.
25. Tenant shall not permit its employees or servants to smoke or
eat in any of the corridors, halls, stairways, elevators, lobbies, mezzanine, or
restrooms.
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<PAGE> 48
WOODBRIDGE PLACE
EXHIBIT "C"
Re: Workletter Agreement for office space on the 5th floor at 517 Route One
South, Iselin, New Jersey 08830.
Date: May 25, 1994
Gentlemen:
You (hereinafter called "Lessee") and we (hereinafter called "Lessor") are
executing simultaneously with this Workletter Agreement, a written lease (the
"Lease") covering the space referred to above, as more particularly described
in the Lease and hereinafter called "the Demised Premises."
To induce Lessee to enter into the Lease (which is hereby incorporated by
reference to the extent that the provisions of this agreement may apply
thereto) and in consideration of the covenants hereinafter contained, Lessor
and Lessee mutually agree as follows:
1. Lessee, at Lessee's cost and expense, shall cause to be prepared
by Lessee's architect, subject to approval of said plans by Lessor, the
following architectural and mechanical drawings and specifications:
(a) Architectural drawings and specifications for Lessee's
partition layout, reflected ceiling and other installations, for the
work to be done by Lessor under Paragraph 2 hereof. Lessee covenants
and agrees to cause said plans and specifications to be delivered to
Lessor on or before May 26, 1994, and, upon approval by Lessor, Lessor
will cause said plans to be filed with the appropriate governmental
agencies.
(b) Mechanical plans and specifications where necessary for
installation of air conditioning system and ductwork, heating,
electrical, plumbing, and other mechanical plans, for the work to be
done by Lessor under Paragraph 2 hereof. In the event any additional
architectural services are required for purposes of Lessee's layout or
requirements, Lessee shall reimburse Lessor for the cost of such
services. All plans and specifications are expressly subject to
Lessor's written approval, which Lessor covenants it will not
unreasonably withhold.
2. Lessor agrees, in accordance with Article 27 of the Lease
(unless otherwise provided), to do the following work in the Premises. "Building
Standard" shall mean the type and grade of material, equipment and/or device
designated by the Lessor as standard for the building.
(a) Interior Finish
(i) Supply and install metal, ceiling height stud
partitions, with 5/8" gypsum wallboard taped and spackled for
painting; together with Building Standard doors, bucks, and
hardware.
(ii) All such partition work shall be in accordance
with Exhibit A.
(iii) Lessor will supply and install one (1) Herculite
Glass suite entrance door, 7'0" x
<PAGE> 49
3'0" x 1 3/4", with lock for Premises or the minimum number
required by the municipal building code. All suite doors facing
common areas must be finished as prescribed by Lessor.
(iv) Latchsets (as manufactured by Schlage or equal),
1 1/2 pair butts; wall door stop. Suite doors to have lockset
(Schlage or equal) masterkeyed to building system.
(v) Supply and install Building Standard 2'0" x 4'0" x
5/8" fissured mechanically suspended, acoustical hung ceilings;
exposed grid spline, at a height of approximately 9'0" A.F.F. as
existing except Lessor will replace any damaged tiles.
(vi) Supply and install, at Lessee's option (i)
Building Standard carpet in colors chosen from Lessor's Building
Standard color selection and 4" straight base, or (ii) Building
Standard 1/8" vinyl tile floor covering together with 4" vinyl
cove base. Should Lessee select a carpet or vinyl tile floor
covering other than Building Standard, Lessee shall be allowed a
$10.00 per square yard credit, including vinyl cove base.
(vii) Paint the peripheral walls and all Building
Standard partitions, doors, and trim with a prime coat and
finish coat in Lessee's choice of Building Standard colors.
There will be an additional charge to Lessee for dark colors and
color breaks. Doors can be choice of paint or stain.
(b) Heating, Ventilation, and Air Conditioning
(i) A closed loop heat pump system, electric fired for
air conditioning and heating supply will be provided. This
system is designed to maintain, within tolerances normal in
first-class office buildings, interior space conditions of 78
degrees Fahrenheit dry bulb when the outside temperature is 95
degrees Fahrenheit dry bulb provided that (i) in any given room
or area of the Premises the occupancy does not exceed one person
for each one hundred (100) square feet and (ii) the total
connected electrical load in the Premises for all purposes,
including equipment and lighting, does not exceed seven watts
per usable square foot. In no event does Lessor guarantee more
than a 15 degree differential in outside and inside temperatures
as respects air conditioning.
During the heating season, the system will be capable of
maintaining a minimum temperature of 70 degrees Fahrenheit dry
bulb when the outside temperature is 9 degrees Fahrenheit dry
bulb.
(c) Electrical Services and Equipment
(i) Supply and install Building Standard recessed 2' x
4' low brightness energy efficient prismatic fluorescent light
fixtures, as per Exhibit A. Existing light fixtures shall be
reused for purposes herein.
-1-
<PAGE> 50
(ii) Building Standard, wall mounted, duplex electrical
outlet as per Exhibit A.
(iii) Building Standard, wall mounted switches for
lighting control as per Exhibit A.
(iv) Electrical wiring, within the Premises, for other
than Building Standard items is not included. All telephone,
intercom or other communications systems, whether public or
private, shall be provided by Lessee.
(v) Provide a 1.5 volt amperes per square foot of
usable area (based upon the installation by Lessor of central
facilities for the joint use of all lessees) for the connection
of Lessee's standard electrical equipment and installations. In
the event that Lessee's connected load is ascertained to be
excess usage, Lessee shall reimburse Lessor for such additional
equipment as may be necessary, as set forth in the Lease.
(d) Fire Prevention
(i) At each floor, a 2 1/2" hose valve will be
provided, connected to the fire standpipe riser.
(ii) Fire extinguishers and smoke detectors will be
provided throughout public space, as required. Additional fire
extinguishers as per local code shall be the responsibility of
Lessee.
(e) Drinking Fountains
(i) Each floor shall be provided with a drinking
fountain.
(f) Telephone
(i) Lessee shall make arrangements with the telephone
company and pay for installation of its requirements within the
Premises and will cause telephone company work to be performed
at a time compatible with Lessor's schedule. Lessor shall
provide closets on each floor for distribution. Lessee shall be
responsible for any conduit required for telephone installation
and any damage caused by the telephone installation to the
Premises of building and all clean up.
(g) Window Treatment
(i) All windows will have Building Standard slim-line
venetian blinds.
3. If Lessor further agrees to perform, at Lessee's request, and
upon submission by Lessee of necessary plans and specifications, and additional
or nonstandard work and above that specified in Paragraph 2 hereof, such work
shall be performed by Lessor, at Lessee's sole expense, as Lessee's extra. Prior
to commencing any such work requested by Lessee, Lessor will submit to Lessee
written estimates of the cost of any such work. If Lessee shall fail to approve
any such estimate within one (1) week, the same shall be deemed disapproved in
all respects by Lessee and Lessor.
-2-
<PAGE> 51
It is agreed that notwithstanding the date provided in the Lease for
the Estimated Commencement Date, Lessee's obligation for the payment of Basic
Rent and Additional Rent thereunder shall not commence until Lessor has
"substantially completed" all work to be performed by Lessor as hereinbefore set
forth in Paragraph 2 above and as set forth in the Lease; provided, however,
that if Lessor shall be delayed in substantially completing said work as a
result of:
(a) Lessee's failure to furnish plans and specifications in
accordance with Paragraph 1 hereof and Paragraph 27 of the Lessee; or,
(b) Lessee's request for materials, furnishes, or installations
other than Lessor's Building Standard; or,
(c) Lessee's changes in the said plans or specifications; or,
(d) The performance by a person, firm, or corporation employed
by Lessee and the completion of the said work by said person, firm, or
corporation;
then the Commencement Date of the Term of said Lease shall be accelerated by the
number of days of such delay and Lessee's obligation to pay Basic Rent and
Additional Rent shall commence as of such earlier date.
If, after thirty (30) days after the date set forth in Paragraph 1, no
plans have been submitted by Lessee, then Lessor may complete the Premises only
in accordance with the minimum legal requirements necessary for occupancy as
"open space" and completion in this manner shall be deemed in full compliance
by Lessor of its obligation under the Lease and this Workletter (Exhibit D) and
Lessor shall have no further obligation to provide work hereunder. Such
failure on Lessee's part to submit such plans on the date set forth shall be
deemed a default under the Lease and Lessor shall have all rights and remedies
set forth therein.
Lessor may permit Tenant and its agents to enter the Demised Premises
prior to the Commencement Date in order that Lessee may perform through its own
union contractors who shall be first approved by Lessor such work and
decorations as lessee may desire subject to approval by Lessor at the same
time Lessor's contractors are working in the space. The foregoing license to
enter prior to the Commencement Date, however, is conditioned upon Lessee's
workmen working in harmony and not interfering with the labor employed by
Lessor, Lessor's mechanics or contractors or by any other Lessee or their
contractors. If at any time such entry shall cause disharmony or interference
therewith, this license may be withdrawn by Lessor upon twenty-four (24) hours
notice to Lessee. Such entry shall be deemed controlled by all of the terms,
covenants, provisions, and conditions of said Lease, except as to the covenant
to pay Basic Rent and Additional Rent. Lessor shall not be liable in way for
any injury, loss, or damage which may occur to any of Lessee's decorations or
installations so made prior to the Commencement Date the same being solely
at Lessee's risk.
- 3 -
<PAGE> 52
If the foregoing correctly sets forth our understanding, kindly sign two (2)
copies of this letter agreement where indicated.
Very truly yours,
WOODBRIDGE PLACE ASSOCIATES, Lessor
By: Prodevco Management Group, Inc.
Managing Agent
By: _______________________________
Randy J. Csik
Executive Vice President
LESSEE: MICRONOSIS, INC.
By: _______________________________
Printed Name: Ryoichi Shiratsuchi
Title: Vice-President
<PAGE> 53
WOODBRIDGE PLACE
EXHIBIT "D"
CLEANING SERVICES
1. GENERAL CLEANING
NIGHTLY.
a. Empty and clean all waste receptacles removing waste to a
designated central location for disposal. Landlord is to
provide for disposal of waste.
b. Empty and clean all ash trays and receptacles.
Weekly.
c. Remove all fingerprints, smudges, and other marks from metal
partitions, doors, and other surfaces.
d. Hand dust and clean all office furniture that has been cleared
of papers, boxes, and/or personal items, ledges, chair rails,
baseboards, and window sills.
2. FLOORS
Group A - Ceramic tile, marble terrazzo.
Group B - Linotile, asphalt, koroseal, plastic vinyl, wood, rubber,
or other composition floors and base.
Nightly.
a. All floors in Group A to be swept, wet mopped, and rinsed.
b. All floors in Group B to be dry mopped.
Weekly.
e. All floors in Group B to be damp mopped.
3. VACUUMING
Nightly.
a. Vacuum or carpet sweep all rugs and carpeted areas.
<PAGE> 54
WOODBRIDGE PLACE
Monthly.
b. Brush or dust by hand carpet edges inaccessible to high-pressure
vacuum.
4. HIGH DUSTING
Every 6 Months.
a. Dust all clothes closet shelving, pictures, charts, graphs, etc.
b. Dust clean all vertical surfaces such as walls, partitions,
doors, door backs, and other surfaces.
5. SPECIAL SERVICE
Records and General Storage Area.
Floors are to be broom cleaned weekly. Files and exposed open shelves
dusted once every 3 months.
6. OTHER SERVICES
a. Landlord shall supply all soap, towels, and toilet tissue in
both men's and women's rooms and sanitary napkins in coin
dispensers in the women's rooms.
b. Landlord will supply all coin operated dispensers and will be
responsible for the servicing of same and for the collection of
money from the machines.
c. During the term of this lease, the dispenser price for sanitary
napkins will not exceed a price equal to 150% of the wholesale
price paid by the Landlord.
7. GLASS
Annually.
a. Clean all perimeter windows, both inside and out.
8. GENERAL
a. All lights are to be extinguished and the doors as specified by
Tenant are to be locked after cleaning is completed.
b. All personnel are to be uniformed and clean in appearance during
business hours.
c. Cleaning of all private bathrooms and/or kitchen areas will be
subject to additional charges which will be determined on a
case-by-case basis.
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<PAGE> 55
WOODBRIDGE PLACE
EXHIBIT "E"
BUILDING HOLIDAYS
"Building Holidays" shall mean New Year's Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and the day after, and Christmas
Day, as each of said holidays are celebrated in the State in which the Real
Property is located and such other days as Federal and State law provide or
building service contracts or union contracts specify. However, Tenant (by
means of its own key) shall have access to the Premises and shall be entitled
to the use of utility services, subject to Paragraph 22, during building
holidays and all other times so long as not prohibited by law.
<PAGE> 1
EXHIBIT 10.10
Intelligroup, Inc.
EMPLOYEE'S
INVENTION ASSIGNMENT AND CONFIDENTIALITY
AGREEMENT
In consideration of my employment or continued employment by
Intelligroup, Inc., a New Jersey corporation or any subsidiary or parent
corporation thereof (the "Company"), I hereby represent and agree as follows:
1. I understand that the Company is engaged in the business of
providing a wide range of information technology services, including
enterprise-wide business process solutions, systems integration and customized
applications and related services and that I may have access to or acquire
information with respect to Confidential Information (as defined below),
including processes and methods, development tools, scientific, technical and/or
business innovations.
2. DISCLOSURE OF INNOVATIONS. I agree to disclose in writing to the
Company all inventions, improvements and other innovations of any kind that I
may make, conceive, develop or reduce to practice, alone or jointly with others,
during the term of my employment with the Company, whether or not they are
related to my work for the Company and whether or not they are eligible for
patent, copyright, trademark, trade secret or other legal protection
("Innovations"). Examples of Innovations shall include, but are not limited to,
discoveries, research, inventions, formulas, techniques, processes, tools,
know-how, marketing plans, new product plans, production processes, advertising,
packaging and marketing techniques and improvements to computer hardware or
software.
3. ASSIGNMENT OF OWNERSHIP OF INNOVATIONS. I agree that all
Innovations will be the sole and exclusive property of the Company and I hereby
assign all of my rights, title or interest in the Innovations and in all related
patents, copyrights, trademarks, trade secrets, rights of priority and other
proprietary rights to the Company. At the Company's request and expense, during
and after the period of my employment with the Company, I will assist and
cooperate with the Company in all respects and will execute documents, and,
subject to my reasonable availability, give testimony and take further acts
requested by the Company to obtain, maintain, perfect and enforce for the
Company patent, copyright, trademark, trade secret and other legal protection
for the Innovations. I hereby appoint the President and Chief Executive Officer
of the Company as my attorney-in-fact to execute documents on my behalf for this
purpose.
4. PROTECTION OF CONFIDENTIAL INFORMATION OF THE COMPANY. I
understand that my work as an employee of the Company creates a relationship of
trust and confidence between myself and the Company. During and after the period
of my employment with the Company, I will not use or disclose or allow anyone
else to use or disclose any "Confidential Information" (as defined below)
relating to the Company, its products, suppliers or customers except as may be
necessary in the performance of my work for the Company or as may be authorized
in
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<PAGE> 2
advance by appropriate officers of the Company. "Confidential Information" shall
include innovations, methodologies, processes, tools, business strategies,
financial information, forecasts, personnel information, customer lists, trade
secrets and any other non-public technical or business information, whether in
writing or given to me orally, which I know or have reason to know the Company
would like to treat as confidential for any purpose, such as maintaining a
competitive advantage or avoiding undesirable publicity. I will keep
Confidential Information secret and will not allow any unauthorized use of the
same, whether or not any document containing it is marked as confidential. These
restrictions, however, will not apply to Confidential Information that has
become known to the public generally through no fault or breach of mine or that
the Company regularly gives to third parties without restriction on use or
disclosure. Upon termination of my work with the Company, I will promptly
deliver to the Company all documents and materials of any nature pertaining to
my work with the Company and I will not take with me any documents or materials
or copies thereof containing any Confidential Information.
5. NON-SOLICITATION. I understand that my work as an employee of
the Company creates a relationship of trust and confidence between myself and
the Company. During and after the period of my employment with the Company, I
will not request or otherwise attempt to induce or influence, directly or
indirectly, any present customer or supplier, or prospective customer or
supplier, of the Company, or other persons sharing a business relationship with
the Company to cancel, to limit or postpone their business with the Company, or
otherwise take action which might be to the material disadvantage of the
Company. During and after the period of my employment with the Company, I will
not hire or solicit for employment, directly or indirectly, or induce or
actively attempt to influence, any Employee of the Company or any Affiliate of
the Company, as such term is defined in the Securities Act of 1933, as amended,
to terminate his or her employment or discontinue such person's consultant,
contractor or other business association with the Company.
6. OTHER AGREEMENTS. I represent that my performance of all the
terms of this Agreement and my duties as an employee of the Company will not
breach any invention assignment agreement, confidential information agreement,
non-competition agreement or other agreement with any former employer or other
party. I represent that I have not and will not bring with me to the Company or
use in the performance of my duties for the Company any documents or materials
of a former employer that are not generally available to the public.
7. DISCLOSURE OF THIS AGREEMENT. I hereby authorize the Company to
notify others, including but not limited to customers of the Company and any of
my future employers, of the terms of this Agreement and my responsibilities
hereunder.
8. INJUNCTIVE RELIEF. I understand that in the event of a breach or
threatened breach of this Agreement by me the Company may suffer irreparable
harm and monetary damages alone would not adequately compensate the Company. The
Company will therefore be entitled to injunctive relief to enforce this
Agreement.
- A2 -
<PAGE> 3
9. ENFORCEMENT AND SEVERABILITY. I acknowledge that each of the
provisions in this Agreement are separate and independent covenants. I agree
that if any court shall determine that any provision of this Agreement is
unenforceable with respect to its term or scope such provision shall nonetheless
be enforceable by any such court upon such modified term or scope as may be
determined by such court to be reasonable and enforceable. The remainder of this
Agreement shall not be affected by the unenforceability or court ordered
modification of a specific provision.
10. GOVERNING LAW. I agree that this Agreement shall be governed by
and construed in accordance with the laws of the State of New Jersey.
11. SUPERSEDING AGREEMENT. I understand and agree that this
Agreement contains the entire agreement of the parties with respect to subject
matter hereof and supersedes all previous agreements and understandings between
the parties with respect to its subject matter.
12. ACKNOWLEDGMENTS. I acknowledge that I have read this agreement,
was given the opportunity to ask questions and sufficient time to consult an
attorney and I have either consulted an attorney or affirmatively decided not to
consult an attorney. I understand that this agreement does not alter the terms
of an executed Employment Agreement with the Company, or in the absence of an
Employment Agreement, this Agreement does not alter any status as an employee at
will and that my employment may be terminated at any time, with or without
cause. I also understand that my obligations under this Agreement survive the
termination of my employment with the Company.
* * * * * * * * * *
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written below.
Date: ______________________ _______________________________
Name of Employee:
Address:_______________________
_______________________
_______________________
_______________________
Intelligroup, Inc.
Date: ______________________ By: /s/ _______________________
Name:
Title:
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<PAGE> 1
Exhibit 10.11
R/3 NATIONAL IMPLEMENTATION PARTNER AGREEMENT
SAP AMERICA, INC. - INTELLIGROUP, INC.
This R/3 National Implementation Partner Agreement (the "Agreement"), made this
13th day of January, 1995, is by and between Intelligroup, Inc. ("IGI"), a New
Jersey corporation with offices at 5 Lincoln Highway, Suite 9, Edison, NJ
08820, and SAP America, Inc., ("SAP"), a Delaware corporation with its principal
place of business at International Court One, 100 Stevens Drive, Suite 350,
Lester, Pennsylvania 19113.
RECITALS
A. WHEREAS IGI and SAP, desiring to work together, in connection with the
SAP R/3 National Implementation Partner Program (as defined below), with the
goal of furthering the implementation of SAP's R/3 Software System;
B. WHEREAS SAP desires to enhance its capabilities to market and support
SAP Products through the use of IGI's services; and
C. WHEREAS IGI and SAP desire to formalize their relationship by entering
into this Agreement to undertake cooperative efforts for SAP R/3 Products
within the SAP IGI Program.
NOW, THEREFORE, in reliance upon the foregoing recitals, intending to
be legally bound, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, IGI and SAP agree as follows:
1. Definitions.
As used in this Agreement:
(a) The SAP-IGI R/3 National Implementation Partner Program (the
"R/3 NIP Program") means the business relationship set forth in this Agreement
and Appendix A to this Agreement.
(b) Software. Software shall mean all SAP R/3 software, in whole or
in part, licensed by SAP AG or SAP America, Inc. in any release, version or
correction level and including all improvements, modifications, and extensions
thereto, whether in human or machine readable form.
(c) Documentation. Documentation shall mean all human and machine
readable materials and copies of SAP manuals, program listings, flow charts,
logic diagrams, input and
<PAGE> 2
output forms, data models, specifications, and instructions relating to the
Software made available to IGI under this Agreement, or, generally, to SAP
end-user licensees.
(d) R/3 Products. R/3 Products shall mean the Software,
Documentation and related materials.
(e) Confidential Information. Confidential Information shall
include information concerning IGI and IGI's clients, and their respective
products, businesses, techniques, designs, formulations, systems, programs,
processes, policies, business strategies and plans or other information which
is not in the public domain, and SAP's R/3 Products, program concepts including
literal and nonliteral elements, such as structure, sequence and organization,
SAP's training materials, literature, and related SAP materials, SAP's
customers, their respective products, businesses, techniques, designs,
formulations, systems, programs, processes, policies, business strategies and
plans and all other information which is disclosed by either party to the other
party either in writing and marked bearing a legend such as "confidential" or
"proprietary" or "for internal use only" or orally when contemporaneously
described as such.
(f) Territory. Territory shall mean the United States of America.
2. Authorization and Commitment of Resources.
(a) SAP hereby authorizes IGI to offer services as related to R/3
Products to potential users in the Territory under the terms of this Agreement
and any Appendices hereto. This authorization does not include maintenance of
the R/3 Products, physical installation of the R/3 Products, and training. This
authorization is non-exclusive and non-transferable.
(b) SAP in its sole discretion shall have the right to limit the
Territory, the R/3 Products, and the type of customers to be covered by this
Agreement, as SAP deems advisable in its sole discretion following reasonable
notice and consultation with IGI. SAP may authorize other parties to offer
services as related to the R/3 Products in the Territory as it deems advisable
in its sole discretion.
(c) Services to be provided by either party to its clients and
customers are to be contracted for separately by each party, independently of
each other, unless otherwise expressly agreed upon in writing between SAP and
IGI for that specific engagement. Each party shall be solely liable to its
customers and clients for its own services.
3. Services and Responsibilities of SAP.
(a) Should IGI desire to license all or any part of the Software
for use in the operation of its own business, SAP will license it to IGI under
the terms of SAP's standard end-user license agreement and at SAP's standard
license fees then in effect.
(b) With regard to training for the Software, SAP shall:
2
<PAGE> 3
(i) invite IGI, on a space available basis, at negotiated
rates, to SAP regularly scheduled alliance partner training. IGI shall be
responsible for all related travel and living expenses;
(ii) provide access, on a space available basis, to
IGI for its personnel participating in the R/3 NIP Program to customer training
courses generally offered by SAP, such training courses to be available at SAP's
current prices and terms;
(iii) provide marketing-oriented training courses to IGI on a
cost-sharing basis to be agreed upon between the parties; and
(c) SAP shall otherwise inform and instruct IGI as to R/3 Products
and provide guidance, as SAP deems necessary in its sole judgment, for IGI to
carry out its responsibilities under this Agreement.
4. Services and Responsibilities of IGI.
IGI agrees that it shall:
(a) acquire as soon as possible and maintain a comprehensive and
fundamental knowledge of the R/3 Products and ensure that its employees are
technically qualified and sufficiently trained in SAP courses, including
ongoing training at SAP, and internally, to provide appropriate advice on the
use of the R/3 Products to clients and prospective users of the Software;
(b) use its best efforts to promote internally the R/3 Products and
to offer services as related to the R/3 Products throughout the Territory and
ensure that its employees who perform any services hereunder shall have the
proper skill, training and background to enable them to demonstrate the R/3
Products in a competent and professional manner, it being understood that IGI
will have no liability to SAP in the event that it fails to successfully
promote R/3 Products and related services except as committed to in this
Agreement;
(c) use its best efforts to meet the goals relative to the R/3 NIP
Program set out in IGI's annual business plan, which is attached hereto as
Appendix A, and to update such business plan quarterly;
(d) ensure that it has the necessary number of qualified personnel
available according to IGI's annual business plan attached as Appendix A;
(e) continually improve its training of all personnel as offered in
Section 3. who are or will be acting under this Agreement;
(f) use its best efforts to make the R/3 Products known to its
customers and potential customers; make every effort to see that the R/3
Products it suggests to each potential
3
<PAGE> 4
customer meet that entity's application requirements; present the R/3 Products
using only the product names given by SAP; provide potential customers such
marketing materials and nonconfidential information necessary for evaluating
the R/3 Products being considered (except as limited by Section 10.(b) below);
and, make no warranties, assurances or statements concerning R/3 Product
features that are misleading or materially divergent from the descriptive
literature supplied by SAP;
(g) not engage in any business activity, either directly or
indirectly, in any manner or capacity, in its own behalf or in behalf of any
other person, firm, corporation or organization, nor accept or continue any
obligations which may interfere with or impair its ability to perform any of
its duties or obligations under this Agreement;
(h) to the extent it conducts end-user training within its other
consultation activities, not offer or conduct end-user training which competes
with official SAP courses offered by SAP or SAP AG or any other SAP-related
entity without prior written authorization from SAP;
(i) upon invitation by SAP to participate in SAP sponsored
marketing events by presenting speeches, providing information to potential
prospects (subject to Section 10.(b) below), and assisting, where requested, in
the organization and implementation of the events;
(j) expressly inform its customers that modifications and
extensions to the Software may impair or terminate the maintenance or support
services provided by SAP and may nullify the warranty;
(k) undertake to provide customers with release and version
management and migration support as related to the Software throughout the
period of productive installation of the Software; and
(l) dedicate a coordinator with an adequate support structure to
act as the central focal point to coordinate activities with SAP and designate
a contact person within the support group to be available to SAP who is
authorized to act on behalf of IGI within the scope of this Agreement.
5. Services and Responsibilities of the Parties.
To the extent reasonable under the circumstances, the parties shall
undertake the following cooperative activities with respect to identifying and
bringing to each other opportunities to promote the R/3 Products:
(a) Regularly inform each other about general market developments
and factors relating to the R/3 Products in the marketplace and current
projects and customer implementations in which IGI is involved; this
information shall be designated and treated as Confidential Information under
Section 10. of this Agreement;
4
<PAGE> 5
(b) Furnish each other with appropriate information for support and
planning purposes; provided, however, that each party reserves the right, in
its sole discretion, to determine the content and availability of such
information;
(c) Inform appropriate personnel in their respective organizations
of the existence of this Agreement;
(d) Subject to confidentiality constraints, endeavor to keep each
other appraised about new products and services;
(e) Exchange such other information and conduct such other
activities as the parties agree will carry out the intent of this Agreement.
6. General Representations and Warranties.
Each party hereby represents and warrants to the other that:
(a) it has the right and power to enter into this Agreement;
(b) entering into this Agreement does not violate the terms and
conditions of any other agreement providing for cooperative marketing products
of another entity, or any other legal obligations;
(c) the information which it may disclose to the other party, and
the process of disclosure and use of such information in accordance with the
provisions of this Agreement, will not violate any trade secret right,
trademark, issued United States patent, copyright or other proprietary right of
any third party;
(d) it holds good title or right, free and clear of all liens and
encumbrances, to the products and services which it is providing under this
Agreement;
(e) the products and services being provided under this Agreement
do not infringe any United States copyright, trademark, issued United States
patent, trade secret or other proprietary right of any third party; and
(f) EXCEPT AS SPECIFICALLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY
OTHER WARRANTY TO THE OTHER PARTY, EITHER EXPRESS, IMPLIED OR STATUTORY, OR
ARISING BY COURSE OF CONDUCT OR PERFORMANCE, CUSTOM OR USAGE IN THE TRADE,
INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
5
<PAGE> 6
7. Term and Termination.
(a) This Agreement shall have an initial term expiring on December 31,
1995 with an automatic renewal for one (1) additional year unless, at least six
(6) weeks prior to the renewal date, either party gives written notice of its
intention not to renew this Agreement.
(b) At least four (4) months prior to any scheduled expiration date,
SAP will decide whether to continue or terminate the Agreement applying the
following criteria:
i. Customer satisfaction with the projects conducted by IGI,
with special regard to the length and cost of the project,
the project objectives met by IGI, and the achievements and
professionalism of IGI employees;
ii. Number and scope of R/3 projects executed;
iii. Thoroughness of employee training;
iv. Accomplishment of goals set herein and in the annual
business plans; and
v. Level of effective communication with SAP.
The procedures for such audits and the weights to be assigned each
criterion will be provided in writing by SAP to IGI prior to the first such
audit.
On the basis of this evaluation and subsequent consultations with IGI,
IGI agrees that SAP, in its sole discretion, may choose to terminate this
Agreement six (6) weeks prior to the next scheduled expiration date.
(c) Notwithstanding the above, either party may terminate this
Agreement:
(i) In accordance with the provisions of Section 7.(a) and
(b) at the end of a term;
(ii) Upon thirty (30) days prior written notice in the event
of material breach of a material provision of this Agreement by the other
party, except that the party in breach shall have the right, during that 30-day
period, to cure the claimed breach or default; or
(iii) Immediately upon prior written notice if there is: (a) a
consolidation, merger or reorganization of the other party with or into another
corporation or entity; (b) creation of a new majority interest in, or change in
majority ownership of, the other party; (c) a sale of all or substantially all
of the assets of the other party; or (d) a breach of the confidentiality
provisions as specified in Section 10. below.
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<PAGE> 7
(d) Upon any termination of this Agreement:
(i) each party shall, within ten (10) business days after
termination is effective, return to the other party or dispose of as mutually
agreed all advertising materials and other properties, including all
Confidential Information, furnished to it by the other party pursuant to
this Agreement and so certify in writing;
(ii) within ten (10) business days after termination is
effective, IGI shall return to SAP materials and all copies thereof to SAP, or
as the case may be, delete all R/3 Products from IGI hardware, including binary
or other resulting files (if any), and erase all R/3 Products from any storage
media before discarding such, and so certify in writing;
(iii) IGI shall not hold itself out as a participant in the
R/3 NIP Program; and
(iv) both parties shall cease acting in a manner that would
suggest any continuing relationship between the parties regarding SAP's
Software, and shall cease all display and advertising contemplated under this
Agreement.
(e) Termination of this Agreement shall not impact upon any active
engagements in process prior to such termination.
(f) The following provisions of this Agreement shall in all events
survive its termination: Section 6. (General Representations and Warranties); 7.
(Provisions Applicable to Termination); 8. (Relationship of Parties); 10.
(Confidentiality); and 11. (General Provisions).
8. Relationship of Parties.
(a) IGI and SAP are independent contractors acting for their own
account, and neither party or its employees are authorized to make any
representation otherwise or any commitment on the other party's behalf unless
previously authorized by such party in writing. Neither party is responsible to
any end user for the quality of services or products provided by the other
party. Each party is solely responsible for establishing the prices for its own
products.
(b) Neither party is a distributor or agent for the products or
services of the other. Each party's products and services shall be available to
a prospective client only through separate agreement between that party and the
client. Each party shall independently develop and price its respective
products and services offered between such party and a client.
(c) It is understood and agreed upon by the parties hereto, that during
the term of this Agreement, the use of the terms "joint venturer,"
"co-venturer," "partner," "marketing partner," "partnership" or similar terms
to be used to describe the relationship between the parties under this
Agreement refer to the spirit of cooperation between IGI and SAP, and do
7
<PAGE> 8
not describe, or expressly or by implication create, a legal partnership or
joint venture, or any responsibility by one party for the actions of the
other.
9. Intellectual Property Rights.
(a) The name "R/3 NIP Program" shall be used by the parties only
jointly and pursuant to the terms of this Agreement; and upon any termination of
this Agreement, neither SAP nor IGI may use the name in conjunction with the
parties' respective corporate names; however, SAP shall have the right to use
the name with any other parties who choose to participate in the SAP R/3 NIP
Programs.
(b) Nothing in this Agreement grants to either party the right to
use or display any other names, trademarks, trade names, logos or service
marks of the other party, except to identify the products and associated
services and deliverables of the other party to the extent obligations are
undertaken pursuant to this Agreement. Except in the case of correspondence
and proposals issued in the ordinary course of business, each party agrees to
submit to the other party for written prepublication approval, any materials
which may use or display any name, trademark, trade name, logo or service mark
of the other party. Notwithstanding the foregoing, nothing contained in this
Agreement shall affect either party's rights and obligations to use any
trademarks, service marks or proprietary words or symbols of the other party
to properly identify the goods or services of such other party to the extent
otherwise permitted by applicable law or by written agreement between the
parties.
(c) IGI herein acknowledges that title to all intellectual property
rights, including patent, copyright, trademark, and trade secret rights in R/3
Products, including any modifications, enhancements, versions, releases, or
correction levels thereto, program concepts including literal or nonliteral
structure, sequence and organization, training materials, literature, and other
SAP related materials shall remain exclusively with SAP AG, Walldorf, Germany,
or SAP as the case may be, and that by virtue of this Agreement, no such rights
have been transferred, licensed, granted, assigned or acquired by IGI from SAP
AG or SAP.
10. Confidentiality.
(a) Each party acknowledges that, during the term of this
Agreement, it will receive Confidential Information from the other party.
Neither party shall disclose, provide or otherwise make available to any third
party (including any prospective client) any Confidential Information of the
other party and shall utilize such Confidential Information on an internal
organization need-to-know basis only to the extent necessary to effect the
provisions and purposes of, and as expressly contemplated under the terms of,
this Agreement and for no other purpose.
(b) Each party agrees that it will protect the Confidential
Information of the other party through the exercise of no less protection and
care than it customarily uses in safeguarding its own confidential and
proprietary information which it desires to retain in confidence, but always at
least a reasonable degree of care. Disclosure of the other party's
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<PAGE> 9
Confidential Information to employees shall only be made on a need-to-know
basis. Further, each party shall take reasonable steps to advise their employees
of the confidential nature of Confidential Information, to ensure by agreement
or otherwise that such employees are prohibited from copying, revealing or using
such Confidential Information except to the extent required to carry out the
parties' obligations under this Agreement, and to require that Confidential
Information be kept in a secure location. Each party will promptly notify the
other if it believes that Confidential Information has lost its status as such.
(c) The foregoing shall not prohibit or limit a party's use of
information, including but not limited to ideas, concepts, know how, techniques
and methodologies, which: (i) is or become publicly available through no act of
failure to act of the receiving party; (ii) rightfully obtained by the
receiving party without restriction; (iii) is released by the receiving party
in response to lawful legal process and with prior notice to the other party;
(iv) is rightfully already known to or is independently developed by the
receiving party prior to disclosure.
(d) Neither party will be liable to the other for any inadvertent
or accidental disclosure of Confidential Information if the disclosure occurs
notwithstanding the party's exercise of (i) the precautions set forth in this
Section; and (ii) the same level of care that each party customarily uses in
preserving and safeguarding its Confidential Information, but always at least
a reasonable degree of care.
(e) Notwithstanding the foregoing, each party hereto understands
that they may become familiar with each other's services and that IGI may
become familiar with SAP's R/3 Products, specifically its proprietary
software. Accordingly, IGI agrees, with respect to the R/3 Products (including
all program concepts therein) SAP's training materials, literature and other
SAP related materials, that as the case may be, IGI shall not copy, translate,
disassemble or decompile, nor create or attempt to create by reverse
engineering or otherwise the source code from the object code, or to use such
items to create derivative works, unless so authorized in advance, in writing,
by SAP. All updates, replacements, revisions, enhancements, additions, or
conversions to such SAP items specified above shall be subject to the
provisions as stated herein.
11. General Provisions.
(a) Non-solicitation. During the term of this Agreement and for one
(1) year after its termination, SAP and IGI agree that neither shall directly
or indirectly solicit for employment any staff of the other party who have been
directly and substantively involved in performance under this Agreement.
(b) Non-exclusivity. Nothing in this Agreement shall limit or
restrict either party from entering into or continuing any agreement or other
arrangement with any other party, whether similar to this Agreement in nature
or scope. Moreover, each party shall remain free to provide products and
services to any client or prospective client so long as the terms of this
Agreement are not violated.
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(c) Notices. All notices required to be given under this Agreement
shall be sent by certified mail to:
Intelligroup, Inc.
5 Lincoln Highway, Suite 9
Edison, NJ 08820
Attention: Ashok Pandey
and to
SAP America, Inc.
Attn: Contracts Department
International Court Three
300 Stevens Drive
Lester, PA 19113
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
without reference to its choice of law rules. To the extent that the parties are
permitted under this Agreement to seek judicial remedies, each party hereby
consents to the jurisdiction of the federal and state courts within the
Commonwealth of Pennsylvania to resolve any and all such matters.
(e) Merger. This Agreement and any Appendices hereto constitute the
entire agreement between the parties with respect to the matters set forth
herein. All prior agreements, oral or otherwise, between the parties and
relating to the subject matter contained herein, are hereby superseded,
provided, however, that in the event IGI executed an Alliance Agreement and
related License and Maintenance Agreement for SAP's R/2 Software Systems,
such agreement shall continue pursuant to its terms.
(f) Amendments. This Agreement may not be modified except by a
writing signed by both parties.
(g) Severability. If any of the provisions of this Agreement are
held invalid, such provisions shall be deemed severed and the remaining
provisions shall remain in full force and effect.
(h) Non-assignment. This Agreement may not be assigned or
transferred, nor may rights or obligations be delegated, without the prior
written agreement of the parties; notwithstanding the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties of this
Agreement, as well as their respective permitted successors and assigns.
(i) Waiver. Failure of any party to enforce, in any one or more
instances, any of the terms or conditions of this Agreement shall not be
construed as a waiver of the future performance of any such terms or conditions.
10
<PAGE> 11
(j) Limitation of Liability.
(i) SAP SHALL NOT BE LIABLE TO IGI OR THIRD PARTIES FOR
ANY LOSS OF BUSINESS, LOSS OF PROFITS, LOSS OF DATA OR COMPUTER MALFUNCTION, OR
ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, EVEN IF
SAP HAS BEEN APPRISED OF THE POSSIBILITY THEREOF; or
(ii) In no event shall the liability of SAP under this
Agreement, for any reason whatsoever, whether in contract, tort or statute
(including, without limitation, negligence), or otherwise, exceed
$1,000,000.00; provided, however, that this limitation shall not apply to
claims for personal injury caused by SAP's gross negligence or willful
misconduct.
(k) No Endorsement. Execution of this Agreement does not, and shall
not be construed to be, an endorsement by either party of the products or
services of the other party.
(l) Press Releases and Publicity. Any news release, public
announcement, advertisement, or publicity proposed to be released by either
party concerning the R/3 NTP Program or any matters arising under this
Agreement shall be subject to the approval of the designated representatives of
both parties.
(m) Dispute Resolution Procedures.
(i) Any dispute, disagreement, claim or controversy between
the parties arising under or relating to this Agreement or the parties'
performance thereunder (the "Disputed Matter") which cannot be resolved by
consultations between the senior executives of IGI and SAP shall be resolved by
binding arbitration, according to the then prevailing Commercial Arbitration
Rules of the American Arbitration Association, before a panel of three
arbitrators. Each party will select one arbitrator, and the third arbitrator
will be selected by the party-selected arbitrators. Any such arbitration shall
be held in the City of Philadelphia, Pennsylvania. The parties will share the
cost of the arbitration equally, subject to any final apportionment by the
arbitrators. The arbitrators will apply Pennsylvania law, without reference
to its choice of law rules, in resolving the Disputed Matter. The decision of
the arbitrators will be final and conclusive on the parties, and each party
consents that judgment upon an award rendered by the arbitrators may be
entered in any court of competent jurisdiction.
(ii) Neither party shall institute any action or proceeding
against the other in any court concerning any Disputed Matter that is or could
be the subject of a claim or proceeding under this Section; provided, however,
that if a party believes in good faith that a temporary or preliminary
injunction is necessary to preserve the status quo or otherwise to avoid
irreparable harm to such party, such as in the event of a breach of Section 9,
or
11
<PAGE> 12
Section 10., such party shall not be precluded by this Section from seeking
such injunctive relief from a court of competent jurisdiction.
(iii) Pending the resolution of a Disputed Matter, to the
extent feasible, both parties shall continue their performance under this
Agreement.
IN WITNESS WHEREOF and intending to be legally bound, the parties have
caused this Agreement to be signed by their authorized representatives as of
the date shown above.
INTELLIGROUP, INC. SAP AMERICA, INC.
By: /s/ Raj Koneru By: /s/ illegible
Printed Printed
Name: Raj Koneru Name:
Title: Vice President Title: Vice President CFO, VP
Standard R/3 National Implementation Partner Agreement
12
<PAGE> 1
Exhibit 10.12
ORACLE CORPORATION
Oracle Contract Services
SERVICES PROVIDER AGREEMENT
Provider: OXFORD SYSTEMS INC.
Address: 5, Lincoln Hwy,
Suite #4, Edison, NJ, 08820
THIS AGREEMENT is made by and between Oracle Corporation ("Oracle"), a
California corporation located at 500 Oracle Parkway, Redwood City, CA 94065
and the Provider listed above ("Provider") for the purpose of setting forth the
terms by which Oracle may retain Provider to provide software-related
consulting services ("Services") to Oracle on behalf of one or more Oracle
clients ("Clients").
I. Services and Compensation
Provider shall provide Services to Oracle specified in Statement(s) of
Work executed under this Agreement. Each Statement of Work shall reference this
Agreement, specify the Services to be performed, names of the individual(s) who
will work on the project described in the Statement of Work, the compensation
to be paid to Provider, the method of invoicing and payment, the reports of
work completed that may be required, any deadlines or milestones for the
completion of the Services, specifications for any deliverables and other
provisions applicable to a particular project. The compensation to be paid to
the Provider shall be as set forth in the Rate Schedule attached hereto as
Exhibit A. Except where the Provider is an individual, the Rate Schedule shall
apply to the corresponding Job Descriptions Listing in Exhibit B hereto. Oracle
shall have no obligation to pay for any work performed prior to the execution
of a Statement of Work and the issuance of an Oracle Purchase Order. Payment
shall be on net 30 day terms.
II. Term and Termination
A. The Term of this Agreement shall be one (1) year commencing on the
Effective Date written below. Thereafter, the Term shall automatically be
renewed for successive one (1) year periods unless (i) Oracle or Provider
notifies the other in writing thirty (30) days prior to the expiration of the
then-current one (1) year period of its intent not to renew the Agreement; or
(ii) Oracle or Provider terminates the Agreement as set forth below.
B. Oracle may terminate this Agreement and/or any Statement of Work
hereunder for cause immediately upon written notice to Provider. Cause for
termination under this Paragraph II.B. shall include, without limitation,
cancellation, suspension or material alteration of a relevant statement of work
or work order by an Oracle client or Oracle; substandard work or nonperformance
by Provider; rejection of Provider by an Oracle client; repeated rejection of
Provider personnel by an Oracle client or Oracle; repeated requests for
reperformance of work performed by Provider; unacceptable behavior by Provider
or Provider personnel; or material breach of this Agreement or any Statement of
Work hereunder.
C. Provider may terminate this Agreement and/or any Statement of Work
hereunder upon thirty (30) days prior written notice to Oracle if Oracle has
failed to meet any written
7/6/94 -- Oracle Contract Services. Services Provider Agreement
Page 1
<PAGE> 2
commitment made by Oracle to engage Provider for a particular number of hours
during any quarter or year.
D. Oracle may terminate any Statement of Work hereunder without cause.
Oracle shall give Provider notice of such termination as soon as commercially
reasonable. Oracle and Provider understand and agree that the implementation of
this Agreement will be enhanced by the timely and open resolution of any
disputes or disagreements between such parties. Each party hereto agrees to use
commercially reasonable efforts to cause any disputes or disagreements between
such parties to be considered, negotiated in good faith, and resolved as soon
as possible.
E. In the event of any termination of this Agreement and/or any Statement
of Work under this Article II, Provider shall be paid for time actually worked
or milestones actually completed as set forth in the Statement of Work that
meet the specifications set forth therein.
III. Rights to Developments
All software, documentation, modifications to software or documentation
and other products and inventions, as well as all papers, records and other
materials prepared or produced by Provider under this Agreement (collectively,
the "Developments") shall be sole and exclusive property of Oracle. Provider
agrees that the Developments shall be works made for hire and that Oracle shall
retain all copyright, patent, trade secret, trademark and any other intellectual
property rights ("Intellectual Property Rights") in the Developments. Provider
hereby assigns to Oracle at no additional consideration all right, title and
interest and all Intellectual Property Rights in the Developments and all
extensions and renewals thereof. Provider agrees to execute a written assignment
of such rights in the Developments to Oracle and any other documents necessary
for Oracle to establish, preserve or enforce its Intellectual Property Rights in
the Developments if so requested by Oracle. Provider hereby agrees not to assert
at any time, and otherwise waives, any "moral rights" that Provider may have in
the Developments, and Provider hereby assigns to Oracle all moral rights
therein. Provider shall provide complete copies of all Developments to Oracle.
IV. Confidential Information
Provider agrees to treat all Confidential Information as confidential
information of Oracle, both during and after the term of this Agreement.
"Confidential Information" means all information and material to which Provider
has access in connection with Services provided hereunder including, but not
limited to, (a) all Developments, (b) all software, documentation, financial,
marketing and customer data and other information, and (c) any other material or
information that is either marked as confidential or is disclosed under
circumstances that one would reasonably expect it to be confidential. Provider
agrees to use the Confidential Information received under this Agreement solely
for the purposes of providing Services under this Agreement. Provider will not
duplicate any Confidential Information unless such duplication is necessary to
provide Services under this Agreement. Provider will not make Confidential
Information available to any third party, except as specifically authorized by
Oracle in writing. All Confidential Information furnished to Provider shall
remain solely the property of Oracle. Provider further agrees that all
Confidential Information and any other information received from Oracle,
including all copies in any form, shall be returned to Oracle upon completion or
termination of the applicable Statement of Work or this Agreement.
V. Independent Contractor
The parties agree that Provider is an independent contractor and, as
such, Provider is not a partner, agent, employee or principle of Oracle.
Provider will not act for or in the place of Oracle in Oracle's relations with
third parties. Oracle is not responsible for withholding or
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Page 2
<PAGE> 3
deducting from the compensation of Provider's employees, agents and
subcontractors, any sums for federal or state income taxes, social security,
unemployment compensation, medical, dental, workers' compensation or disability
insurance coverage, pension or retirement plans or the like. Provider
specifically agrees to pay any and all federal and state taxes and other
payments lawfully due in connection with the compensation received under this
Agreement.
VI. Nondisclosure Agreement
Provider shall cause each of its employees, agents and subcontractors
who perform Services for Oracle under this Agreement to execute a separate
Individual Services Provider Proprietary Rights and Nondisclosure Agreement in
substantially the form attached hereto as Exhibit C.
VII. Representations and Warranties
A. Conflict of Interest
Provider represents that there exists no actual or potential conflict
of interest concerning the Services to be performed under this Agreement.
Provider represents that Provider's performance under this Agreement does not
require the breach of any agreement or obligation to keep in confidence the
proprietary information of another party. Provider will not bring to Oracle or
use in performance of Provider's duties under this Agreement and any Statement
of Work any materials or documents of another party considered confidential
unless Provider has obtained written authorization from such party, and the
informed consent of Oracle, for the possession and use of such materials.
During the Term of this Agreement and for a period of one (1) year thereafter,
Provider shall not provide Services to; (i) any business entity or individual
to which Oracle and Provider, as Oracle's subcontractor, have provided Services
during the Term of this Agreement; or (ii) any business entity or individual
listed on Exhibit D hereto. To the extent that, during the Term of this
Agreement and for a period of one (1) year thereafter, Provider desires to
perform services for an entity covered by the above restrictions, and Oracle
does not itself intend in good faith to provide services to such entity, Oracle
will not unreasonably withhold consent to permit Provider to provide services
to such entity.
B. Compliance with Laws
Provider hereby represents and warrants to Oracle that it will fully
comply with any and all applicable federal, state and local laws, codes,
government regulations, California Wage Orders and Executive Orders pertaining
to immigration, foreign nationals working in the United States, labor and
employment. Provider further warrants that it will fully comply with all
relevant export laws and regulations of the United States to assure that
neither the Developments, nor any direct product thereof, are exported,
directly or indirectly, in violation of United States law. Provider agrees that
it will not permit work to be performed under this Agreement by individuals who
are citizens of countries to which the United States government prohibits
export of software and related technology.
C. Equal Opportunity
Oracle is an equal opportunity employer and believes in providing
employment to qualified minorities, women, disabled persons and veterans and
expects Provider to recruit such candidates for positions in connection with
Services provided to Oracle.
D. Standard of Work
Provider hereby warrants that its work hereunder shall be of
professional quality and performed consistent with generally accepted industry
standards.
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Page 3
<PAGE> 4
VIII. Indemnification
Provider shall defend, indemnify and hold harmless Oracle, its
officers, directors, employees and clients from any losses, liabilities,
damages, demands, suits, causes of action, judgments, costs or expenses
(including court costs and reasonable attorneys' fees) resulting from or
directly or indirectly arising out of or in connection with this Agreement and
the transactions contemplated hereby whatsoever, including but not limited to
breach of any representation or warranty made herein.
Oracle shall have the right to approve any counsel retained to defend
any demand, suit or cause of action in which Oracle is a defendant, such
approval not to be unreasonably withheld. Provider agrees that Oracle shall
have the right to control and participate in the defense of any such demand,
suit or cause of action concerning matters that relate to Oracle, and that such
suit will not be settled without Oracle's consent, which consent shall not be
unreasonably withheld. If, in Oracle's reasonable judgment, a conflict exists
in the interests of Oracle and Provider in such demand, suit or cause of
action, Oracle may retain its own counsel whose reasonable fees shall be paid
by Provider.
IX. Verification
Oracle shall have the right to examine the Developments at any time. At
Oracle's written request, Provider shall provide sufficient access to its books
and records for Oracle to verify that Provider is complying with the terms of
this Agreement, including any terms set forth in any Statements of Work
attached hereto. Provider will mail copies of its relevant invoices and
consultant timesheets to: Oracle Contract Services, 222 West Las Colinas
Boulevard, Suite 100, North Tower, Irving, Texas, 75039.
X. Recruiting
A. Except as otherwise provided in Paragraph B, neither Provider
nor Oracle Services (Oracle's consulting services division) shall, during the
Term of this Agreement and for a period of one (1) year thereafter, recruit or
hire any of each other's employees. During the Term of this Agreement and for a
period of one (1) year thereafter, Provider shall not recruit or hire employees
of any Client for whom Oracle Services has subcontracted with Provider for
Services, without Oracle Services' prior written consent.
B. During the Term of this Agreement, Oracle Services may hire any
Provider employee, provided that Oracle Services shall hire no more than ten
percent (10%) of the Provider's employees in any calendar year during the Term.
Where Oracle Services hires a Provider employee who has performed less than
nine (9) months of Services for Oracle, Oracle Services shall pay Provider a
negotiated fee. Such negotiated fee shall not exceed the percentages, specified
below, of the employee's arrival base salary upon commencing employment with
Oracle Services.
Length of Time Employee Has Percentage of Employee's Arrival Base Salary
Provided Services to Oracle Upon Starting Employment at Oracle Services
- --------------------------- --------------------------------------------
0-3 months 20 percent
4-6 months 15 percent
7-9 months 10 percent
Oracle Services shall have no obligation to pay Provider any fee where Oracle
Services hires a Provider employee who has performed more than nine (9) months
of Services for Oracle. Nothing herein shall restrict Provider or Oracle
Services from hiring each other's employees after the termination or expiration
of this Agreement and the period of time specified in Section X.A above.
Page 4
<PAGE> 5
X. Assignment
Provider may not assign or otherwise transfer any of its rights or
obligations under this Agreement without Oracle's prior written consent.
XI. Governing Law Jurisdiction
This Agreement is made and entered into by the parties in the State of
California and shall be construed according to that laws of that state. Any
legal action or proceeding relating to this Agreement shall be instituted in
any state or federal court in San Francisco or San Mateo County, California.
Provider and Oracle agree to submit to the jurisdiction of, and agree that
venue is proper in, the aforesaid courts in any such legal action or proceeding.
XII. Entire Agreement Survival
This Agreement, including any Statement(s) of Work, contains the entire
Agreement between the parties and no alteration or variation of the terms of
this Agreement shall be valid unless made in writing and signed by the parties
hereto. This Agreement supersedes any prior agreements or understandings
between the parties hereto. The obligations set forth in Sections III, IV, VII
and VIII shall survive the expiration or termination of this Agreement.
XIII. Severability
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Effective Date: 07/26/1994
PROVIDER ORACLE CORPORATION
/s/ Arjun Valluri /s/ J. William Marshall
- -------------------------- ---------------------------
Authorized Signature Authorized Signature
Arjun Valluri J. William Marshall
- -------------------------- --------------------------
Name Name
Vice-President Director
- -------------------------- --------------------------
Title Title
7/6/94 -- Oracle Contract Services. Services Provider Agreement
Page 5
<PAGE> 1
` EXHIBIT 10.13
INDEMNIFICATION AGREEMENT
This Agreement (the "Agreement") is made as of June 5, 1996, by and
among each of Ashok Pandey, Rajkumar Koneru and Nagarjun Valluripalli (the
"Indemnitors"), on the one hand, and Intelligroup, Inc., a New Jersey
corporation (the "Company"), on the other.
WHEREAS, the Company has made voluntary disclosure to the Internal
Revenue Service (the "IRS") of certain unpaid 1994 and 1995 federal tax
liabilities of the Company and, as a result thereof, has received an audit
assessment, dated June 4, 1996, from the IRS for unpaid 1994 and 1995 federal
income tax withholding, FICA and FUTA payments in the aggregate amount of
approximately $814,000 (the "Audit Assessment");
WHEREAS, the Company and the IRS have not entered into a closing
agreement as provided for under Section 7121 of the Internal Revenue Code of
1986, as amended (a "Closing Agreement"), with respect to the subject matter of
the Audit Assessment and, therefore, the matters relating to the Audit
Assessment may not have been fully and finally determined, including the
possibility that interest, penalties or additional federal taxes may be assessed
in the future relating to the subject matter of the Audit Assessment;
WHEREAS, the Company also is liable for certain unpaid 1994 and 1995
state income tax withholding and state unemployment tax liabilities and has
reserved $186,000 for estimated payment obligations (the "State Tax Reserves");
WHEREAS, the Company also may be liable for additional 1994 and 1995
state income tax withholding, state unemployment and/or other state tax,
interest or penalty payment obligations, in excess of the State Tax Reserves, in
an amount or amounts not fully determinable as of the date hereof;
WHEREAS, the Indemnitors are the principal shareholders and executive
officers of the Company;
WHEREAS, the Company currently is contemplating an initial public
offering of its Common Stock (the "IPO") whereby the Company and the
Indemnitors, together with other selling shareholders, are proposing to offer
and sell Common Stock;
WHEREAS, the Indemnitors and the Company desire to insulate the Company
and potential public shareholders from the financial impact, if any, that may be
incurred by the Company for interest, penalties, and any additional state or
additional federal taxes which may be payable in the future as a result of,
arising from or in any way relating to the subject matter of the Audit
Assessment and/or the State Tax Reserves, but only to the extent of any amounts
in excess of the total of $1,000,000 to be paid by the Company pursuant to and
in accordance with the terms of such Audit Assessment and State Tax Reserves,
and for any additional losses or expenses the Company may incur in connection
therewith, including without limitation, legal expenses the Company may incur in
enforcing its rights hereunder.
<PAGE> 2
NOW, THEREFORE, the Company and the Indemnitors hereby agree as
follows:
1. Indemnification; Escrow Deposit. Each of the Indemnitors shall
jointly and severally indemnify the Company for any and all liabilities and
losses or expenses which the Company may sustain, in excess of the total of
$1,000,000 to be paid by the Company pursuant to and in accordance with the
terms of the Audit Assessment and the State Tax Reserves, which liabilities are
a result of, arise from or are in any way related to federal or state tax,
interest or penalty payment obligations which may result from or otherwise be
related to the subject matter of the Audit Assessment and the State Tax Reserves
or which losses or expenses may be incurred by the Company in connection
therewith, including without limitation, legal expenses the Company may incur in
enforcing its rights hereunder. Any indemnification payments required to be made
hereunder shall be made by the Indemnitors within thirty (30) days of receipt by
an Indemnitor of written notice of a claim for indemnification by the Company
hereunder. The failure by the Company to provide written notice of a claim for
indemnification shall not in any way limit the Company's rights to
indemnification under this Agreement. To secure the Indemnitors' payment
obligations hereunder, but without limiting the amount of such obligations, upon
consummation of the IPO, each Indemnitor hereby agrees to deposit (i) 50,000
shares of Common Stock of the Company currently owned by such Indemnitor free
and clear of any claim, security interest or encumbrance whatsoever, other than
restrictions on resale generally applicable to unregistered securities held by
affiliates of an issuer; and (ii) $250,000 cash, with an escrow agent to be
approved by the independent members of the Board of Directors of the Company
(the "Board") and pursuant to an escrow agreement and pledge agreement
satisfactory to such members of the Board. The selection of the escrow agent and
the terms of the escrow agreement and the pledge agreement shall be subject to
the approval of Cowen & Company, one of the representatives of the several
underwriters of the IPO, which approval shall not be unreasonably withheld.
Notwithstanding the foregoing, it is expressly understood and agreed that the
indemnitor/shareholder of any shares subject to the escrow and pledge
arrangements contemplated hereby shall, in the absence of a default by such
indemnitor, continue to possess all rights of a common shareholder of the
Company, including voting rights and dividend rights, but excluding any rights
of disposition, except as may be expressly agreed in the pledge agreement or
escrow agreement. All decisions of the Company with respect to this Agreement,
and the escrow and pledge arrangements and the enforcement hereof and thereof
and the transactions and documents contemplated hereby and thereby shall be made
on behalf of the Company by the independent members of the Board.
2. Closing Agreement/Release of Collateral from Escrow. The Company
agrees to seek a Closing Agreement with the IRS, if the independent members of
the Board, in consultation with the Company's independent accountants and
counsel, conclude that seeking a Closing Agreement is in the best interests of
the Company. Upon the earlier of (i) the expiration of applicable statutes of
limitation or (ii) the execution of a Closing Agreement, if any, which, in the
opinion of counsel for the independent members of the Board, fully and finally
resolves all liabilities for federal taxes, penalties, and interest, and the
payment by the Indemnitors of any additional liabilities and expenses the
Company may incur as a result thereof, the indemnification provisions hereof
shall lapse, but
-2-
<PAGE> 3
only as to federal tax matters and not as to state tax matters which may result
from or otherwise be related to the subject matter of the Audit Assessment or
the State Tax Reserves. At such time, and if no claims have been made against
the shares or cash held in escrow, the escrow agent shall release to each
Indemnitor 80% of the number of shares and the amount of cash initially
deposited in escrow by such Indemnitor. In any event, the balance of the number
of shares and cash held in escrow, if any, shall be released to the Indemnitors
upon the expiration of the last of the applicable statutes of limitation.
3. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, spouses, heirs,
and personal and legal representatives.
4. Amendment and Termination. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by all of the parties hereto and expressly approved by the independent
members of the Board. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provisions hereof (whether
or not similar) nor shall such waiver constitute a continuing waiver.
5. Governing Law and Consent to Jurisdiction. This Agreement shall be
construed in accordance with and governed by the laws of the State of New Jersey
applicable to agreements made and to be performed entirely within such State.
Each of the indemnitors agrees to (i) the irrevocable designation of the
Secretary of State of the State of New Jersey as his agent upon whom process
against him may be served and (ii) personal jurisdiction in any action brought
in any court, Federal or State, within the State of New Jersey having subject
matter jurisdiction arising under this Agreement.
6. Integration and Entire Agreement. This Agreement sets forth the
entire understanding by and among the parties hereto and supersedes and merges
all previous written and oral negotiations, commitments, understandings and
agreements, in each instance relating to the subject matter hereof between the
parties hereto.
*****
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
_______________________
Ashok Pandey
_______________________
Rajkumar Koneru
_______________________
Nagarjun Valluripalli
INTELLIGROUP, INC.
By:____________________
Robert M. Olanoff,
Chief Financial Officer
-4-
<PAGE> 1
Exhibit 10.14
FACTORING AGREEMENT
by and between
Access Capital, Inc.
and
Intelligroup, Inc.
as of October 20, 1995
<PAGE> 2
FACTORING AGREEMENT
THIS FACTORING AGREEMENT made as of the ___ day of October 1995 by and
between ACCESS CAPITAL, INC., a New York corporation ("Access Capital") and
INTELLIGROUP, INC., a New Jersey corporation (hereinafter the "Company").
W I T N E S S E T H:
WHEREAS, the Company has requested Access Capital to purchase from it,
from time to time, all of the right, title and interest of the Company in and
to certain accounts due to the Company from its customers; and
WHEREAS, Access Capital is willing to consider purchasing certain of
such accounts receivable from the Company from time to time, upon the terms and
subject to the conditions set forth in this Agreement;
NOW, THEREFORE, to induce Access Capital to purchase such accounts
receivable, and for other good valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is agreed as follows:
1. Tender of Accounts Receivable; Invoices.
(a) The Company will tender to Access Capital all of the
accounts receivable from its customers with respect to goods sold and delivered
to, or services performed for, such customers by the Company (individually, an
"Account Receivable," and, collectively, "Accounts Receivable") by delivering
to Access Capital all of the invoices to be rendered to such customers promptly
after the creation thereof. Access Capital will forward all such invoices
delivered to the Company's customers (without regard to whether such invoices
are offered for purchase by Access Capital), in accordance with Access
Capital's standard procedures, together with a notice by the Company to its
customers, in the form prescribed by Access Capital, of the assignment of
payment of such invoices to Access Capital.
(b) Access Capital will conduct such examination and
verification of the invoices delivered to it, and such credit investigation of
the account debtors, as it considers necessary or desirable, and will notify
the Company as to which of the individual Accounts Receivable tendered by the
Company, if any, Access Capital elects to purchase from the Company. Access
Capital shall have the absolute right, in its sole discretion, to reject any or
all of the Accounts Receivable tendered to it by the Company, irrespective of
whether or not Access Capital has previously purchased Accounts Receivable from
the Company or has purchased Accounts Receivable of any particular account
debtor (individually, an "Account Debtor," and, collectively, "Account
Debtors").
<PAGE> 3
2. Purchase and Sale of Accounts Receivable.
(a) Those Accounts Receivable which Access Capital elects
to purchase from the Company shall be listed in an Invoice Delivery Schedule,
substantially in the form of Exhibit A (such form, together with any schedules
and attachments thereto is hereinafter referred to as an "Invoice Schedule"),
executed by the Company and accepted by Access Capital from time to time
throughout the term of this Agreement. Upon acceptance by Access Capital of an
Invoice Schedule, the Company shall be deemed to have sold, assigned,
transferred, conveyed and delivered to Access Capital, and Access Capital shall
be deemed to have purchased and received from the Company, all right, title and
interest of the Company in and to the Accounts Receivable listed in such
Invoice Schedule. Notwithstanding the foregoing, if either the Company or
Access Capital fails to include in any Invoice Schedule a particular Account
Receivable tendered by the Company to Access Capital, but Access Capital
nonetheless makes an Initial Payment (as hereinafter defined) to the Company
for such Account Receivable, then Access Capital shall be presumed conclusively
to have purchased, and the Company shall be presumed conclusively to have sold,
such Account Receivable pursuant to this Agreement, and such Account Receivable
shall be governed by the terms and conditions (including, without limitation,
the Company's representations and warranties to Access Capital) of this
Agreement. The Accounts Receivable which Access Capital has purchased, either
by its acceptance of an Invoice Schedule or by making an Initial Payment with
respect thereto, are sometimes referred to herein as "Purchased Receivables."
(b) Upon acceptance of an Invoice Schedule, Access Capital
shall deliver to the Company the amount of the Initial Payment specified in the
Fee Schedule, a copy of which is attached as Exhibit B hereto and made a part
hereof (the "Fee Schedule") with respect to the Accounts Receivable listed
therein.
(c) By its execution of each Invoice Schedule with respect
to Accounts Receivable or acceptance of an Initial Payment with respect to an
Account Receivable, the Company shall be deemed to represent, warrant and
covenant to Access Capital with respect to each such Purchased Receivable that:
(i) The Company is the sole owner of such Purchased
Receivable and such Purchased Receivable has not previously been
assigned or encumbered in any manner; the Company has the full power and
authority to sell such Purchased Receivable and its sale to Access
Capital has been duly authorized by all necessary corporate action;
(ii) The goods or services listed or referred to in
the invoice related to such Purchased Receivable has been shipped or
rendered to the Account Debtor, and the prices and terms of shipment set
forth therein conform in all material respects to the terms of any
related purchase order or agreement with the Account Debtor;
(iii) The invoice representing such Purchased
Receivable correctly sets forth the full purchase price of the goods or
services covered thereby, and such amount, less only the applicable
trade discounts and allowances stated therein, if any, is due and owing
from the Account Debtor, subject to no set-offs, deductions, disputes,
contingencies or counterclaims against the Company or the invoice, and
payment thereof is not contingent
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<PAGE> 4
upon fulfillment of any obligation other than delivery of the goods or
services referred to in such invoice; and
(iv) Upon acceptance of the Invoice Schedule related thereto
and payment of the Initial Payment with respect thereto, Access Capital
shall be vested with all right, title and interest in and to such
Purchased Receivable, including all proceeds thereof, rights of stoppage
in transit and rights of return, contract rights and rights under
policies of insurance.
(d) If the amount of any Purchased Receivable is not paid by the
Account Debtor by reason of the financial inability of the Account Debtor to pay
at maturity, following acceptance by the Account Debtor of the goods sold or
services rendered, without dispute, the Company shall not be liable to reimburse
Access Capital the amount of the Initial Payment with respect thereto.
3. Conditions Precedent. Access Capital shall not be obligated to
purchase any Accounts Receivable from the Company until each of the following
conditions shall have been satisfied:
(a) The Company shall have entered into a Security Agreement
substantially in the form attached hereto as Exhibit C (the "Security
Agreement") to secure the performance of the representations, warranties and
covenants of the Company in this Agreement (but not the payment of the Accounts
Receivable purchased hereby) and the payment and performance by the Company of
its other obligations under this Agreement;
(b) The Company shall have executed and delivered to Access
Capital Uniform Commercial Code financing statements for filing with the
appropriate filing officer or officers in each jurisdiction where, in the
reasonable opinion of Access Capital, such filing is necessary or desirable to
perfect the security interests granted pursuant to the Security Agreement;
(c) Ashok Pandey, Rajkumar Koneru and Nagarjun Valluripalli
shall have executed and delivered to Access Capital Anti-Fraud and Performance
Agreements substantially in the form attached hereto as Exhibit D-1, D-2 and
D-3 (the "Anti-Fraud and Performance Agreement") with respect to the
performance of the representations, warranties and covenants of the Company in
this Agreement (but not the payment of the Accounts Receivable purchased
thereby) and the payment and performance by the Company of its other
obligations under this Agreement; and
(d) The Company shall have delivered to Access Capital an
opinion of counsel to the Company reasonably acceptable to Access Capital, in
form and substance satisfactory to Access Capital, covering the legal matters
set forth in Exhibit E attached hereto and such other matters as counsel to
Access Capital reasonably may request.
4. Collection of Accounts Receivable
(a) Commencing on the date of this Agreement, Access Capital
shall administer the collection of all Accounts Receivable originated by the
Company. Following identification of payments and application to the related
invoices, payments received with respect to Accounts Receivable, net of Access
Capital's administration fee as set forth in the Fee Schedule and any
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<PAGE> 5
amounts due with respect to Purchased Receivables, shall be remitted to the
Company by Access Capital at weekly intervals (or such other intervals to which
the Company and Access Capital may agree from time to time).
(b) Access Capital shall have the right of endorsement on
all payments received in connection with each Account Receivable and the
Company hereby appoints Access Capital the attorney-in-fact and agent of the
Company for this purpose, which appointment is coupled with an interest and is
irrevocable during the term of this Agreement.
(c) Access Capital shall have no liability to the Company
for any mistake in the application of any payment received by it with respect
to any Account Receivable, so long as it acts in good faith and without gross
negligence. Access Capital shall correct any mistakes in the application of
payments received by it promptly upon obtaining knowledge of any such mistake
and if, as a result of any such mistake, a credit should be made to the
Company's account, Access Capital shall promptly provide the Company with such
credit.
5. Administration of Purchased Receivables. For administrative
convenience, the Purchased Receivables delivered by the Company to Access
Capital during each week (or such other period as Access Capital may reasonably
determine) may be aggregated and administered as a single Account Receivable,
or as several discreet Accounts Receivable, in the discretion of Access Capital
(each, an "Aggregate Receivable"). As Access Capital collects the Purchased
Receivables comprising an Aggregate Receivable, it will pay to the Company an
amount equal to the excess, if any, of (i) the aggregate amount collected by
Access Capital with respect to such Aggregate Receivable, less (ii) the sum of
(A) the aggregate Initial Payments made by Access Capital with respect to such
Aggregate Receivable, (B) the fees earned by Access Capital with respect to
such Aggregate Receivable, (C) the aggregate amount theretofore paid by Access
Capital (in excess of the amounts specified in clauses (ii)(A) and (ii)(B) with
respect to such Aggregate Receivable, if any, and (D) any amounts due pursuant
to Sections 8 and 10 below which have not theretofore been paid.
6. Cross-Collateralization. If a Default (as defined in Section
11 below) shall have occurred and be continuing, Access Capital shall have the
right, which may be exercised in its sole and absolute discretion at any time
and from time to time during the continuance of such Default, to apply all
amounts collected with respect to Accounts Receivable as follows, before any
payment from such collections shall be made to the Company: (i) against the
unreimbursed balance of the Initial Payments made by Access Capital to the
Company with respect to Purchased Receivables; (ii) to the payment of all fees
accrued with respect to Accounts Receivable purchased by Access Capital from
the Company, whether or not such fees have become due and payable pursuant to
the terms of this Agreement; and (iii) to the payment of any and all other
liabilities and obligations of the Company to Access Capital pursuant to this
Agreement, the Security Agreement and any other agreement entered into between
Access Capital and the Company (the "Transaction Documents"). For purposes
of this Section 6, "Company" means and includes each person named as the Company
in the preamble to this Agreement and any parent, subsidiary, controlling
person or other affiliate.
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<PAGE> 6
7. Collection of Accounts Receivable.
(a) The Company will instruct all Account Debtors obligated
with respect to its Accounts Receivable to mail or deliver payments on such
Accounts Receivable directly to Access Capital at its address set forth at the
end of this Agreement or to such other address that Access Capital may specify
in a written notice to the Company. Such instructions shall not be rescinded or
modified without Access Capital's prior written consent. If, despite such
instructions, the Company shall receive any payments with respect to any
Accounts Receivable purchased by Access Capital, it shall receive such payments
in trust for the benefit of Access Capital, shall segregate such payments
from its other funds, and shall deliver or cause to be delivered to Access
Capital, in the same form as so received with all necessary endorsements,
all such payments received as soon as practicable, but in no event later than
two business days after the receipt thereof by the Company.
(b) Access Capital shall have the full power and authority
to collect each Account Receivable, through legal action or otherwise, and may,
in its sole discretion, settle, compromise, or assign (in whole or in part) the
claim for any of the Accounts Receivable, or otherwise exercise any other right
now existing or hereafter arising with respect to any of the Accounts
Receivable, if such action will facilitate collection; provided, so long as no
Default shall have occurred and be continuing, Access Capital shall give the
Company five (5) days notice of its intention to take any such action. The
amount of any reduction resulting from any such settlement, compromise,
assignment or other collection action shall reduce the balance otherwise due to
the Company hereunder. The Company acknowledges and agrees that Access Capital
shall have the sole and exclusive right to commence legal action to collect any
Account Receivable.
8. Payment of Expenses and Taxes; Indemnification. The Company
will (a) pay or reimburse Access Capital for all of Access Capital's
out-of-pocket costs and expenses incurred in connection with the preparation
and execution of, and any amendment, supplement or modification to, the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby, including, without limitation, the fees and disbursements
of counsel to Access Capital (whether or not such counsel is affiliated with
Access Capital), provided, Access Capital agrees to first apply the balance
remaining, if any, of the $5,000.00 good faith deposit previously paid by the
Company to Access Capital to such costs and expenses before seeking
reimbursement from the Company for such costs and expenses, (b) pay or
reimburse Access Capital for all its costs and expenses incurred in connection
with the enforcement or preservation of any rights under the Transaction
Documents, and the verification of the Accounts Receivable and the credit
worthiness of the account debtors, including, without limitation, fees and
disbursements of counsel to Access Capital (whether or not such counsel is
affiliated with Access Capital); (c) pay, indemnify, and hold Access Capital
harmless from, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from, any delay in paying, stamp,
excise and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation of any
of the transactions contemplated by, or any amendment, supplement of
modification of, or any waiver or consent under or in respect of, the
Transaction Documents; (d) pay, indemnify, and hold Access Capital harmless
from and against any and all claims, liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, whether threatened, pending or determined (including
attorneys' fees and court costs now or hereafter arising from the enforcement
of this clause), (1) with respect
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<PAGE> 7
to the execution, delivery, enforcement and performance of the Transaction
Documents, including, without limitation, the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
collateral, or (2) arising directly or indirectly from the activities of the
Company or any subsidiary, its predecessors in interest, or third parties with
whom it has a contractual relationship, or arising directly or indirectly from
the violation of any environmental protection, health, or safety law, whether
such claims are asserted by any governmental agency or any other person (all
of the foregoing, collectively, the "indemnified liabilities"); provided, that
the Company shall have no obligation hereunder to Access Capital with respect
to indemnified liabilities arising from (i) the gross negligence or willful
misconduct of Access Capital, (ii) salaries and other amounts payable by Access
Capital to its employees in the ordinary course of business (other than for
legal fees specifically billed with respect to a particular matter to which the
foregoing relates) or (iii) expenses incurred by Access Capital (other than
those specifically enumerated above) in the ordinary course of business in
connection with the performance of its obligations hereunder. The agreements in
this Section 8 shall survive the termination of this Agreement.
9. Term.
(a) This Agreement shall be effective for a period
commencing on the date hereof and continuing until the close of business on the
first anniversary of the date on which the Company shall first receive proceeds
of an Initial Payment from Access Capital (the "Initial Term"). This Agreement
shall be deemed to be automatically renewed for an additional term of one year
at the expiration of the Initial Term, and thereafter to be automatically
renewed for succeeding one year terms at the end of the first and each
succeeding renewal term, unless the Company shall deliver written notice of
cancellation to Access Capital not earlier than 90 days and not later than 60
days prior to the expiration date of the Initial Term or any succeeding renewal
term.
(b) The Company shall pay Access Capital a Due Diligence
Fee equal to $5,000 on the first day of each renewal term hereunder, which
amount at the option of Access Capital may be deducted from any amounts
otherwise due from Access Capital to the Company.
(c) The representations, warranties and covenants of the
Company and the remedies of Access Capital for a breach of such
representations, warranties and/or covenants, shall survive the termination of
this Agreement, and such termination shall not affect the rights of Access
Capital to enforce its remedies under the Transaction Documents against the
Company or against any collateral after a default by the Company.
10. Facility Fee; Credits.
(a) The fees set forth in the Fee Schedule attached hereto
have been established after negotiation between the parties on the assumption
that the aggregate acceptable Accounts Receivable tendered for purchase by (i)
the Company hereunder and (ii) Oxford Systems, Inc. under its Factoring
Agreement dated this date with Access Capital ("Oxford Agreement") will be at
least $16.5 million (the "Base Purchase Amount") during the Initial Term and
each renewal term. The Company acknowledges that the rates established in the
Fee Schedule attached hereto as Exhibit B would have been higher if the
anticipated volume of purchases of Accounts Receivable were lower.
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<PAGE> 8
(b) In consideration of Access Capital's undertakings in
this Agreement, the Company shall pay to Access Capital a fee in an amount
equal to .75% of the Base Purchase Amount (the "Facility Fee") with respect to
the Initial Term and each renewal term. The Facility Fee shall be due as of the
commencement date of the Initial Term and of each renewal term, but the amount
thereof, less any credit accrued pursuant to the provisions of this Section 10,
shall be payable in arrears within fifteen (15) days of the end of the Initial
Term and each renewal term (each such period, a "Contract Year"). Access
Capital shall allow as a credit against the Base Purchase Amount on which the
Facility Fee is computed due for each respective Contract Year (or if paid as a
Facility Fee, will refund to the Company, without interest, to the extent of
such payment) an amount equal to the aggregate Accounts Receivable tendered by
the Company to Access Capital for purchase for the applicable Contract Year;
provided, however, that the aggregate amount of any credit allowed with respect
to any Contract Year shall not exceed the amount of the Facility Fee payable
with respect to such Contract Year. Notwithstanding the foregoing, in the event
that a Facility Fee shall be due to Access Capital under the Oxford Agreement,
the total of such Facility Fee plus the Facility Fee due hereunder shall not
exceed the amount of the Facility Fee due hereunder.
11. Defaults; Remedies. If any of the following events (each
herein referred to as a "Default") shall occur:
(a) Any representation, warranty or covenant made by the
Company in any of the Transaction Documents shall prove to have been incorrect,
incomplete or misleading on or as of the date made or deemed made; or
(b) The Company shall fail to perform or observe any term
covenant or agreement contained in any Transaction Document and such failure
shall continue for a period of five (5) days after written notice thereof from
Access Capital shall have been received by the Company; or
(c) Access Capital shall reasonably believe that the
Company is failing to tender all of its Accounts Receivable to Access Capital
for purchase pursuant to Section 1 of this Agreement; or the Company shall have
failed to tender Accounts Receivable to Access Capital for purchase for a
period of thirty (30) or more consecutive business days; or
(d) The Company shall instruct any Account Debtor to mail
or deliver payment on Accounts Receivable to the Company or to any person other
than Access Capital; or
(e) There shall be any change in the controlling ownership
of the Company; or
(f) The Company (i) shall generally not pay, or shall be
unable to pay, or shall admit in writing its inability to pay its debts as such
debts become due; or (ii) shall make an assignment for the benefit of creditors,
or petition or apply to any tribunal for the appointment of a custodian,
receiver, or trustee for it or a substantial part of its assets; or (iii) shall
commence any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (iv) shall have had any
such petition or application filed or any such proceeding commenced against it
in which an order for relief is entered or an adjudication or appointment is
made, or (v) shall take any
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<PAGE> 9
corporate action indicating its consent to, approval of, or acquiescence in any
such petition, application, proceeding, or order for relief or the appointment
of a custodian, receiver, or trustee for all or any substantial part of its
properties; or (vi) shall suffer any such custodianship, receivership, or
trusteeship to continue undischarged;
then, and in any such event, Access Capital, without notice to the Company, may
exercise all of the rights provided in Section 6 and, by notice to the Company,
may: (i) declare the Facility Fee, Access Capital's accrued fees with respect
to the Purchased Receivables (calculated as provided in the Fee Schedule as if
all Purchased Receivables had been paid in full on the date of such
declaration) and all other amounts payable under the Transaction Documents to
be forthwith due and payable, whereupon the Facility Fee and all such other
amounts shall become and be forthwith due and payable, without demand, protest,
or further notice of any kind, all of which are hereby expressly waived by the
Company; or (ii) declare that its obligation to purchase and/or administer
Accounts Receivable pursuant to this Agreement is terminated, whereupon such
obligation or obligations shall forthwith terminate; or (iii) both. Access
Capital may terminate its obligation to purchase additional Accounts Receivable
pursuant to this Agreement without terminating this Agreement or its right to
administer Accounts Receivable pursuant to the terms hereof. In addition, the
Company shall pay to Access Capital a liquidation fee ("Liquidation Fee") in
the amount of two and one half percent (2-1/2%) of the face amount of each
Account Receivable outstanding at any time during a "liquidation period" (as
defined below). For the purposes hereof, "liquidation period" means a period
beginning on the earliest date of (i) an event referred to in Section 11(f) or
(ii) the cessation of business of the Company and ending on the date on which
Access Capital has actually received all fees, costs, expenses and other
amounts due and owing to it under the Transaction Documents. The Liquidation
Fee shall be paid on the earlier to occur of (i) the date on which Access
Capital collects the applicable Account Receivable and (ii) the 90th day from
invoice of such Account Receivable by deduction from any amount otherwise due
from Access Capital to the Company or by the Company directly, at the option of
Access Capital.
12. Notices. All notices and other communications hereunder and
under any other Transaction Document (unless otherwise specified in such
Transaction Document) shall be deemed given on the earlier of (x) actual
receipt or (y) three (3) days following posting thereof in the mails, first
class postage prepaid (provided, however, that notices given by telegram, telex
or telefax shall be deemed given when dispatched by telegram, telex or telefax,
as the case may be) and if to a party hereto addressed as set forth beneath its
name at the foot hereof unless a party shall give notice in writing of a
different address or telefax number in the manner provided herein.
13. Amendments, Etc. No amendment, modification, termination, or
waiver of any provision of any Transaction Document to which the Company is a
party, nor consent to any departure by the Company from any Transaction
Document to which it is a party, shall in any event be effective unless the
same shall be in writing and signed by Access Capital, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
14. No Waiver. No course of dealing between Access Capital and the
Company, nor any failure or delay on the part of Access Capital in exercising
any right, power, or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power, or remedy
preclude any other or further exercise thereof or the exercise of any other
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<PAGE> 10
right, power, or remedy hereunder. The rights and remedies provided in the
Transaction Documents are cumulative, and are not exclusive of any other
rights, powers, privileges, or remedies, now or hereafter existing, at law or
in equity or otherwise.
15. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Company and Access Capital and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights under any Transaction Document to which it is a party without the
prior written consent of Access Capital.
16. Integration. This Agreement and the other Transaction Documents
contain the entire agreement between the parties relating to the subject matter
hereof and supersede all oral statements and prior writings with respect
thereto.
17. Severability of Provisions. Any provision of any Transaction
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such
Transaction Document or affecting the validity or enforceability of such
provision in any other jurisdiction.
18. Additional Reports. In the event that at any time after the
expiration of the term of this Agreement (as the same may be extended or
modified, or terminated following the occurrence of a default), the Company or
any successor or assignee of the Company, shall request additional information
from Access Capital including, without limitation, account reports, collections
advice for previously concluded transactions or information for the Company's
accounting records, such information shall be supplied by Access Capital to the
Company if available, and the Company shall pay Access Capital based on the time
spent by Access Capital personnel in the preparation of such information for
the Company, and for the disbursements incurred by Access Capital in connection
therewith, at the hourly rates established by Access Capital for the consulting
services of its personnel.
19. Headings. Section headings in the Transaction Documents are
included in such Transaction Documents for the convenience of reference only
and shall not constitute a part of the applicable Transaction Documents for any
other purpose.
20. CONSENT TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF
MANHATTAN, THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF THE VENUE OF ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY AGREES THAT A FINAL
JUDGMENT IN ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A COURT, AFTER
ALL APPROPRIATE APPEALS, SHALL BE CONCLUSIVE AND BINDING UPON IT.
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<PAGE> 11
21. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
22. JURY TRIAL WAIVER. THE PARTIES HERETO DO HEREBY WAIVE ANY AND
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS
AGREEMENT.
23. Records. Access Capital shall keep and maintain complete and
accurate records of all transactions contemplated by this Agreement including,
but not limited to, records of all Accounts Receivable purchased, payments
advanced to the Company, payments received by Access Capital and fees due and
owing by the Company. Access Capital shall provide the Company with a summary
of all such transactions on a weekly basis.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
ACCESS CAPITAL, INC.
By: /s/ Paul Mahony
----------------------------
Name: Paul Mahony
Title: Vice President
Address for Notices:
405 Park Avenue
New York, New York 10022
Attn: Client Services Department
Telephone Number: (212) 644-9300
Telefax Number: (212) 644-5488
INTELLIGROUP, INC.
By: /s/ Ashok Pandey
----------------------------
Ashok Pandey
President
By: /s/
----------------------------
Name:
Title: Vice President
Address for Notices:
5 Lincoln Highway
Edison, NJ 08820
Telephone Number: (908) 608-8908
Telefax Number: (908) 608-8819
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<PAGE> 12
EXHIBIT A
INVOICE DELIVERY SCHEDULE
Bulk #:
-----------------------
ACI Invoice #:
-----------------
Aggregate Amount of Invoices: $
---------------
Initial Payment: $
----------------------------
Date: 199
------------- --
Pursuant to the terms and conditions of the Factoring Agreement in
effect by and between the Company (as named below) and Access Capital, Inc.
("Access Capital"), the Company hereby sells to Access Capital, and Access
Capital hereby purchases from the Company, the accounts receivable of the
Company set forth on Schedule A attached hereto and made a part hereof.
Reference is made to the Factoring Agreement between the parties, the terms and
conditions of which are incorporated herein by this reference.
Name of Company: Accepted:
INTELLIGROUP, INC. ACCESS CAPITAL, INC.
By: By:
------------------------- -------------------------
Ashok Pandey Name:
President Title:
By:
-------------------------
Name:
Title:
<PAGE> 13
EXHIBIT B
INTELLIGROUP, INC. ALONG WITH ITS WHOLLY OWNED SUBSIDIARY
FEE SCHEDULE
The fee earned by Access Capital, Inc. for purchasing Accounts
Receivable with an initial payment of 85% is at least .75% and not more than
6.5% of the amount of the Accounts Receivable purchased. From the maximum fee
of 6.5%, the Company receives a rebate for collections received within the
discount period, as follows:
The Company's rebate for invoices paid: (i) within 15 days, is $5.75
per hundred (Access Capital's fee is .75%); thereafter, (ii) in up to 30 days,
is $5.25 per hundred (Access Capital's fee is 1.25%); thereafter, (iii) in up
to 45 days, is $4.50 per hundred (Access Capital's fee is 2%); thereafter, (iv)
in up to 60 days, is $3.75 per hundred (Access Capital's fee is 2.75%);
thereafter, (v) in up to 75 days, is $3.00 per hundred (Access Capital's fee is
3.5%); thereafter, (vi) in up to 90 days, is $2.25 per hundred (Access
Capital's fee is 4.25); thereafter, (vi) in up to 105 days, is $1.50 per
hundred (Access Capital's fee is 5%); thereafter, (vi) in up to 120 days, is
$.75 per hundred (Access Capital's fee is 5.75%). There is no rebate for
invoices paid in more than 120 days (Access Capital's fee is 6.5%), but Access
Capital's fee will not exceed 6.5%, no matter how long it takes for the invoice
to be paid.
Access Capital, Inc. will earn a .75 (three quarter percent)
administrative fee for all Accounts Receivable created by the Company and
purchased by Access Capital during the term of the Account Agreements.
AGREED TO AND ACCEPTED:
INTELLIGROUP, INC.
By:
-------------------------
Ashok Pandey
President
By:
-------------------------
Name:
Title:
<PAGE> 14
EXHIBIT C
SECURITY AGREEMENT
THIS SECURITY AGREEMENT made as of the __ day of October 1995 by and
between INTELLIGROUP, INC., a New Jersey corporation, (hereinafter the
"Company") and ACCESS CAPITAL, INC., a New York corporation ("Access Capital").
WITNESSETH:
WHEREAS, the Company intends to enter into a Factoring Agreement with
Access Capital dated the date hereof (the "Factoring Agreement") pursuant to
which Access Capital will purchase certain accounts receivable represented by
invoices rendered to customers of the Company ("Accounts Receivable") on the
basis of, and in reliance upon the representations, warranties and covenants of
the Company contained in the Factoring Agreement; and
WHEREAS, it is a condition precedent to the obligation of Access
Capital to purchase Accounts Receivable pursuant to the Factoring Agreement
that the Company shall have entered into this Security Agreement for the
purpose of securing the performance of the representations, warranties and
covenants of the Company in the Factoring Agreement (but not the payment of the
Accounts Receivable purchased thereby) and the payment and performance by the
Company of its other obligations under the Factoring Agreement;
NOW, THEREFORE, to induce Access Capital to enter into the Factoring
Agreement and purchase Accounts Receivable pursuant thereto, and in
consideration thereof and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, it is hereby agreed as
follows:
1. Security Interest. The Company hereby grants Access Capital a
security interest (the "Security Interest") in all of the following property
now owned or at any time hereafter acquired by it, or in which it now has or at
any time in the future may acquire any right, title or interest (the
"Collateral"):
(a) all Accounts Receivable purchased by Access Capital
pursuant to the Factoring Agreement, all rights of the Company pursuant to the
Factoring Agreement, and all contract rights and other general intangibles
related to the Accounts Receivable purchased by Access Capital pursuant to the
Factoring Agreement and associated therewith and the proceeds and products
thereof (including without limitation proceeds of insurance) and all additions,
accessions and substitutions thereto or therefor; and
(b) all accounts not purchased by Access Capital, all other
personal property and fixtures of the Company, including, without limitation,
inventory, equipment, goods, documents, instruments, contract rights, general
intangibles and chattel paper in which the Company now has or hereafter may
acquire any right, title or interest and the proceeds and products thereof
(including
<PAGE> 15
without limitation, proceeds of insurance) and all additions, accessions and
substitutions thereto or therefor.
Terms used in clauses (a) and (b) of this Section which are defined in the
Uniform Commercial Code as enacted and in effect in the State of New York (the
"Code") are used as so defined in the Code.
2. Obligations. This Agreement and the Security Interest shall
secure the following obligations (the "Obligations"):
(a) Any and all obligations of the Company under the
Factoring Agreement (but not the payment of the Accounts Receivable purchased
pursuant thereto) or under any other agreement or instrument executed and
delivered pursuant thereto; and
(b) Any and all other liabilities and obligations of every
kind and nature whatsoever of the Company to Access Capital under the Factoring
Agreement or otherwise, whether such liabilities and obligations be direct or
indirect, absolute or contingent, secured or unsecured, now existing or
hereafter arising or acquired, due or to become due.
3. Financing Statements and Other Action. The Company will do all
lawful acts which Access Capital deems reasonably necessary or desirable to
protect the Security Interest or otherwise to carry out the provisions of this
Agreement, including, but not limited to, the execution of Uniform Commercial
Code financing, continuation, amendment and termination statements and similar
instruments in form satisfactory to Access Capital and the procurement of
waivers and disclaimers of interest in the Collateral by the owners of any real
estate on which the collateral is located and will promptly pay on demand any
filing fees or other costs in connection with the filing or recordation of such
statements and instruments. The Company irrevocably appoints Access Capital as
its attorney-in-fact during the term of this Agreement, to do all acts which it
may be required to do under this Agreement, such appointment being deemed to be
a power coupled with an interest.
4. Places of Business. The Company warrants that its principal
place of business, chief executive office and the place where the records
concerning its accounts and contract rights are located at the address for
notices set forth in the Factoring Agreement. None of the Accounts Receivable
is evidenced by a promissory note or other instrument. The Company will keep
its principal place of business and chief executive office and the office where
it keeps its records concerning its accounts and contract rights at the
location therefor specified in the previous sentence or, upon 30 days' prior
written notice to Access Capital, at any other locations in a jurisdiction
where all actions required by this Section 4 shall have been taken with respect
to the Collateral. The Company will hold and preserve its records concerning
its accounts and contract rights and will permit representatives of Access
Capital at any time during normal business hours to inspect and make abstracts
from such records.
5. Encumbrances. The Company warrants that it has title to the
Collateral purportedly owned by it and that there are no sums owed or claims,
liens, security interests or other encumbrance (collectively, "Liens") against
the Collateral other than as set forth on Schedule 1
-2-
<PAGE> 16
hereto. The Company will notify Access Capital of any Liens against the
Collateral, will defend the Collateral against any Liens adverse to Access
Capital, except for liens having priority listed on Schedule I hereto, and will
not create, incur, assume, or suffer to exist now or at any time throughout the
duration of the term of this Security Agreement, any Liens against the
Collateral, whether now owned or hereafter acquired, except liens in favor of
Access Capital, liens placed upon fixed assets hereafter acquired to secure all
or a portion of the purchase price thereof provided, any lien shall not
encumber any other property or assets of the Company and liens listed on
Schedule I.
6. Maintenance of Collateral. The Company shall preserve the
Collateral for the benefit of Access Capital. Without limiting the generality
of the foregoing, the Company shall:
(a) make all such repairs, replacements, additions and improvements
to its equipment as in its judgment are necessary to permit such
business to be properly and advantageously conducted at all times;
(b) maintain and preserve its inventory except as sold in the
ordinary course of business;
(c) preserve all beneficial contract rights to the extent
commercially reasonable;
(d) in conjunction with, and at the direction of, Access Capital,
take commercially reasonable steps to collect all accounts; and
(e) pay all taxes, assessments or other charges on the Collateral
when due, unless the amount or validity of such taxes, assessments or
charges are being contested in good faith by appropriate proceedings and
reserves have been provided on its books with respect thereto in
conformity with generally accepted principles.
Nothing contained herein shall be construed to prohibit the Company from
buying and selling equipment and inventory in the ordinary course of business.
7. Additional Provisions Concerning the Collateral
(a) The Company authorizes Access Capital to file, without the
signature of the Company, where permitted by law, one or more financing or
continuation statements, and amendments thereto, relating to the Collateral.
Access Capital may file a photographic or other reproduction of this Agreement
in lieu of a financing or continuation statement in any filing office where it
is permissible to do so.
(b) The Company irrevocably appoints Access Capital as its
attorney-in-fact (which power of attorney is coupled with an interest) and
proxy, with full authority in the place and stead of the Company and in its
name or otherwise, from time to time in Access Capital's discretion, to take
any action or execute any instrument which Access Capital may deem necessary or
advisable to accomplish the purposes of this Agreement, including, without
limitation: (i) to obtain and adjust insurance requested to be paid to Access
Capital pursuant to Section 8 hereof; (ii)
-3-
<PAGE> 17
to ask, demand, collect, sue for, recover, compound, receive, and give
acquittance and receipts for moneys due and to become due under or in respect
of any of the Collateral; (iii) to receive, endorse, and collect any checks,
drafts and other instruments, documents, and chattel paper in connection with
clause (i) or clause (ii) above; (iv) to sign the Company's name on any invoice
or bill of lading relating to any account, on drafts against customers, on
schedules and assignments of accounts, on notices of assignment, financing
statements and other public records, on verification of accounts and on notices
to customers (including notices directing customers to make payment directly to
Access Capital); (v) if a Default (as defined in the Factoring Agreement) has
occurred and is continuing, to notify the postal authorities to change the
address for delivery of its mail to an address designated by Access Capital, to
receive, open and process all mail addressed to the Company, to send requests
for verification of accounts to customers; and (vi) to file any claims or take
any action or institute any proceedings which Access Capital may deem necessary
or desirable for the collection of any of the Collateral or otherwise to
enforce the rights of Access Capital with respect to any of the Collateral. The
Company ratifies and approves all acts of said attorney; and so long as the
attorney acts in good faith and without gross negligence it shall have no
liability to the Company for any act or omission as such attorney.
(c) If the Company fails to perform any agreement contained herein,
Access Capital may itself perform, or cause performance of, such agreement or
obligation, and the costs and expenses of Access Capital incurred in connection
therewith shall be payable by the Company and shall be fully secured hereby.
(d) The powers conferred on Access Capital hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon
Access Capital to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, Access Capital shall have no duty as to any Collateral or as to
the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral except that Access Capital shall,
at all times, act in a commercial reasonable manner.
(e) Anything herein to the contrary notwithstanding, (i) the Company
shall remain liable under any contracts and agreements relating to the
Collateral, to the extent set forth therein, to perform all of its obligations
thereunder, to the same extent as if this Agreement had not been executed; (ii)
the exercise by Access Capital of any of its rights hereunder shall not release
the Company from any of its obligations under the contracts and agreements
relating to the Collateral; and (iii) Access Capital shall not have any
obligation or liability by reason of this Agreement under any contracts and
agreements relating to the Collateral, nor shall Access Capital be obligated to
perform any of the obligations or duties of the Company thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
8. Insurance. The Company shall maintain insurance covering the
Collateral with financially sound and reputable insurers satisfactory to Access
Capital against such risks as are customarily insured by a business in the same
or a similar industry and similarly situated for an amount not less than the
full replacement value of such Collateral. All such insurance policies covering
property on and after the date such property becomes subject to the Security
Interest shall be written so as to be payable in the event of loss to the
Company and Access Capital as their
-4-
<PAGE> 18
interests shall appear and shall provide for at least thirty (30) days prior
written notice to Access Capital prior to the cancellation or modification of
each such policy. At the request of Access Capital, all insurance policies
covering property subject to the Security Interest shall be furnished to and
held by Access Capital. If, while any Obligations are outstanding, any proceeds
with respect to any casualty loss are paid to Access Capital under such
policies on account of such casualty loss, and no Default (as defined in the
Factoring Agreement) has occurred and is continuing, Access Capital will pay
over such proceeds in whole or in part to the Company, for the purpose of
repairing or replacing the Collateral destroyed or damaged, with any such
repaired or replaced Collateral to be secured by this Agreement. If a Default
has occurred and is continuing, Access Capital may apply the proceeds in its
discretion to any of the Obligations. Access Capital is hereby appointed during
the term of this Agreement as irrevocable attorney-in-fact to collect the
proceeds of such insurance, to settle any claims with the insurers in the event
of loss or damage, to endorse settlement drafts and upon the occurrence and
during the continuance of a Default to cancel, assign or surrender any
insurance policies.
9. Remedies. If any Default (as defined in the Factoring
Agreement) shall have occurred and be continuing:
(a) Access Capital may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Code (whether or not the Code applies to the affected
Collateral), and also may (i) require the Company to, and the Company hereby
agrees that it will at its expense and upon request of Access Capital
forthwith, assemble all or part of the Collateral as directed by Access Capital
and make it available to Access Capital at a place to be designated by Access
Capital which is reasonably convenient to both parties and (ii) without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of Access Capital's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as Access Capital may deem commercially reasonable. The Company agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to the Company of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. Access Capital shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Access Capital may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and any such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(b) Any cash held by Access Capital as Collateral and all
cash proceeds received by Access Capital in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral may, in the
discretion of Access Capital, be held by Access Capital as Collateral for,
and/or then or any time thereafter be applied in whole or in part by Access
Capital against, all or any part of the Obligations in such order as Access
Capital shall elect. Any surplus of such cash or cash proceeds held by Access
Capital and remaining after payment in full of all the Obligations shall be
paid over to the Company or to whomsoever may be lawfully entitled to receive
such surplus.
(c) Access Capital may exercise any and all rights and
remedies of the Company under or in connection with the Collateral, including,
without limitation, any and all rights of the
-5-
<PAGE> 19
Company to demand or otherwise require payment of any amount under, or
performance of any provision of, any account, contract or agreement.
(d) All payments received by the Company under or in
connection with the Collateral shall be received in trust for the benefit of
Access Capital, shall be segregated from other funds of the Company and shall
be forthwith paid over to Access Capital in the same form as so received (with
any necessary endorsement).
10. Payment of Taxes, Charges, Etc. Access Capital, at its option,
after two (2) days notice to the Company (provided it is not, in the reasonable
opinion of Access Capital, impractical to provide such notice), may discharge
any taxes, charges, assessments, security interests, liens or other
encumbrances upon the Collateral or otherwise protect the value thereof. All
such expenditures incurred by Access Capital shall become payable by the
Company to Access Capital upon demand, shall bear interest at an annual rate
equal at all times to the lesser of 15 percent per annum or the highest legal
interest rate from the date incurred to the date of payment, and shall be
secured by the Collateral.
11. Duties with Respect to Collateral. Access Capital shall have no
duty to the Company with respect to the Collateral other than the duty to use
reasonable care in the safe custody of any of the Collateral in its possession.
Without limiting the generality of the foregoing, Access Capital, although it
may do so at its option, shall be under no obligation to the Company to take
any steps necessary to preserve rights in the Collateral against other parties.
12. Waivers. To the extent permitted by law, the Company hereby
waives demand for payment, notice of dishonor or protest and all other notices
of any kind in connection with the Obligations except notices required herein,
by law or by any other agreement between the Company and Access Capital and to
act in a commercially reasonable manner. Access Capital may release, supersede,
exchange or modify any collateral or security which it may from time to time
hold and may release, surrender or modify the liability of any third party
without giving notice hereunder to the Company. Such modifications, changes,
renewals, releases or other actions shall in no way affect the Company's
obligations hereunder.
13. Termination. This Agreement and the Security Interest shall
terminate upon the expiration, cancellation or other termination of the
Factoring Agreement, provided that all Obligations have been paid or discharged
in full. Upon termination of the Security Interest, Access Capital will deliver
to the Company appropriate termination statements with respect to Collateral so
released from the Security Interest for filing with each filing officer with
which financing statements have been filed by Access Capital to perfect the
Security Interest in such Collateral.
14. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Company and Access Capital and their respective
successors and assigns.
15. Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
-6-
<PAGE> 20
16. CONSENT TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF
MANHATTAN, THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF THE VENUE OF ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY AGREES THAT A FINAL
JUDGMENT IN ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A COURT, AFTER
ALL APPROPRIATE APPEALS, SHALL BE CONCLUSIVE AND BINDING UPON IT.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
18. JURY TRIAL WAIVER. THE PARTIES HERETO DO HEREBY WAIVE ANY AND
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS
AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.
INTELLIGROUP, INC.
By:
---------------------------
Ashok Pandey
President
By:
---------------------------
Name:
Title:
ACCESS CAPITAL, INC.
By:
--------------------------
Name:
Title:
-7-
<PAGE> 21
Schedule 1
to
Security Agreement
PERMITTED LIENS
-8-
<PAGE> 22
<TABLE>
<S> <C>
IMPORTANT--Read Instructions on back before filling out form
- -------------------------------------------------------------------------------------------------------------------
This FINANCING STATEMENT is presented for filing and will remain effective with certain exceptions for a period of
five years from the date of filing pursuant to section 9403 of the California Uniform Commercial Code.
- -------------------------------------------------------------------------------------------------------------------
1. DEBTOR (LAST NAME FIRST--IF AN INDIVIDUAL) 1A. SOCIAL SECURITY OR FEDERAL TAX NO.
Intelligroup, Inc. 11-2880025
- -------------------------------------------------------------------------------------------------------------------
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
2107 North 1st Street San Jose, CA 95131
- -------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST--IF AN INDIVIDUAL) 2A. SOCIAL SECURITY OR FEDERAL TAX NO.
- -------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
- -------------------------------------------------------------------------------------------------------------------
3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER
- -------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A. SOCIAL SECURITY NO., FEDERAL TAX NO.
or same transit and A.S.A. No.
NAME Access Capital, Inc.
MAILING ADDRESS 405 Park Avenue
CITY New York STATE NY ZIP CODE 10022
- -------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO.
or same transit and A.S.A. No.
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
- -------------------------------------------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types or items of property (INCLUDE DESCRIPTION OF REAL PROPERTY
ON WHICH LOCATED AND OWNER OF RECORD WHEN REQUIRED BY INSTRUCTION 4).
SEE RIDER A
- -------------------------------------------------------------------------------------------------------------------
7. CHECK [X] 7A. [ ] PRODUCTS OF COLLATERAL 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN
IF APPLICABLE ARE ALSO COVERED ACCORDANCE WITH INSTRUCTION 5(?) ITEM:
[ ] (1) [ ] (2) [ ] (3) [ ] (4)
- -------------------------------------------------------------------------------------------------------------------
8. CHECK [X] [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC ?????
IF APPLICABLE
- -------------------------------------------------------------------------------------------------------------------
9. DATE C 10. THIS SPACE FOR USE OF FILING OFFICER
O (DATE, TIME, FILE NUMBER
> D AND FILING OFFICER)
SIGNATURE(S) OF DEBTOR(S) E
- --------------------------------------------------------------
Intelligroup, Inc. 1
TYPE OR PRINT NAME(S) OF DEBTOR(S) 2
- --------------------------------------------------------------
> 3
SIGNATURE(S) OF SECURED PARTY(IES) 4
- --------------------------------------------------------------
Access Capital, Inc. 5
TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 6
- --------------------------------------------------------------
11. Return copy to: 7
NAME 8
ADDRESS Access Capital, Inc.
CITY 405 Park Avenue 9
STATE New York, NY 10022
ZIP CODE 0
ATTN: Janna Kruse
- --------------------------------------------------------------
FORM UCC???
Approved by the Secretary of State
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 23
RIDER A TO UCC-1 FINANCING STATEMENT
Debtor: Intelligroup, Inc. (the "Company")
2107 North 1st Street
San Jose, CA 95131
Secured Party: Access Capital Inc. ("Access Capital")
405 Park Avenue
New York, NY 10022
This financing statement covers the following types (or items) of
property:
(a) all Accounts Receivable (the "Accounts Receivable") purchased
by Access Capital pursuant to a certain factoring agreement
between Access Capital and the Company, as the same may be
modified or amended from time to time (the "Factoring
Agreement"), all rights of the Company pursuant to the Account
Agreements, and all contract rights and other general
intangibles related to the Accounts Receivable purchased by
Access Capital pursuant to the Account Agreements and associated
therewith and the proceeds and products thereof (including
without limitation proceeds of insurance) and all additions,
accessions and substitutions thereto or therefor, and
(b) all accounts not purchased by Access Capital, all contract
rights, all personal property and fixtures, equipment and other
goods, documents, instruments, certificate of deposit (whether
represented by a certificate or not), general intangibles and
chattel paper in which the Company now has or herewith acquires
any right, title or interest and the proceeds and products
thereof (including without limitation, proceeds of insurance)
and all additions, accessions and substitutions thereto or
therefor.
Pursuant to a Security Agreement between the Company and Access
Capital, the Company has agreed that it will not further encumber all or any
portion of the foregoing assets, except as otherwise permitted by the
provisions of the Security Agreement.
INTELLIGROUP, INC. ACCESS CAPITAL, INC.
By: /s/ ASHOK PANDEY By:
------------------------------- ---------------------------------
Ashok Pandey Janna Kruse
President Business Development Coordinator
<PAGE> 24
ANTI-FRAUD and PERFORMANCE AGREEMENT
THIS ANTI-FRAUD and PERFORMANCE AGREEMENT, made as of the ____ day of
October 1995, by and between ASHOK PANDEY ("Pandey") and ACCESS CAPITAL, INC.,
a New York corporation ("Access Capital").
W I T N E S S E T H:
WHEREAS, INTELLIGROUP, INC. (hereinafter the "Company") and Access
Capital intend to enter into a Factoring Agreement dated the date hereof (the
"Factoring Agreement") pursuant to which Access Capital will purchase certain
accounts receivable billed to customers of the Company ("Accounts Receivable")
on the basis of, and in reliance upon, the representations, warranties and
covenants of the Company contained in the Factoring Agreement; and
WHEREAS, Pandey is an officer and shareholder of the Company; and
WHEREAS, it is a condition precedent to the obligation of the Access
Capital to enter into the Factoring Agreement and to purchase Accounts
Receivable pursuant thereto that Pandey shall have entered into this Anti-Fraud
and Performance Agreement, guaranteeing the performance by the Company of the
representations, warranties and covenants of the Company in the Factoring
Agreement (but not the payment of the Accounts Receivable purchased thereby)
and the payment and performance by the Company of its other obligations under
the Factoring Agreement;
NOW, THEREFORE, in order to induce Access Capital to enter into the
Factoring Agreement and the Factoring Agreement and to purchase Accounts
Receivable pursuant thereto, and in consideration thereof and for other
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by Pandey, it is agreed as follows:
1. Liabilities of Pandey. Pandey hereby absolutely and
unconditionally guarantees the accuracy and completeness of the Company's
representations and warranties and the prompt and complete performance by the
Company of the Company's covenants and obligations in the Factoring Agreement,
the prompt and complete payment and performance of all other fees, expenses and
obligations of any nature that shall become due or owing to Access Capital by
the Company under the Factoring Agreement or pursuant to any modification or
amendment thereof, and the payment of any costs or expenses incurred by Access
Capital in enforcing the same (the "Obligations"). Except as provided in
Section 7, this Anti-Fraud and Performance Agreement is a continuing guaranty
of the Obligations for the duration of the term of the Factoring Agreement and
any renewals or extensions thereof. Payments to be made by Pandey hereunder may
be required by Access Capital on any number of occasions. Payment by Pandey
shall be made to Access Capital at Access
<PAGE> 25
Capital's office on demand as Obligations become due.
2. Presumption of Default. In the event that Access Capital shall
have purchased an Account Receivable from the Company which shall not have been
paid in full when due at a time when the customer to which such Account
Receivable was billed has not (i) ceased generally to pay its debts as they
become due, or (ii) made an assignment for the benefit of creditors, or
petitioned or applied to any tribunal for the appointment of a custodian,
receiver, or trustee for it or a substantial part of its assets, or (iii)
commenced any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, or (iv) had a petition or application filed or any such
proceeding commenced against it, then the failure of the customer to pay such
Account Receivable shall be presumed to be the result of the Company's breach
of a representation, warranty, covenant or obligation in the Factoring Agreement
with respect to the Account Receivable to which it relates.
3. Costs of Enforcement. Pandey shall pay to Access Capital
forthwith upon demand, all reasonable costs and expenses (including court costs
and legal expenses) incurred or expended by Access Capital in enforcing its
rights under this Anti-Fraud and Performance Agreement.
4. Waiver of Right of Subrogation. Notwithstanding any payment or
payments made by Pandey hereunder, Pandey will not exercise any rights of
Access Capital against the Company by way of subrogation, reimbursement or
indemnity, and shall have no right of recourse to any assets or property of the
Company held for the payment and performance of its Obligations, whether or not
the Obligations of the Company shall be satisfied. If there is more than one
obligor, each obligor agrees not to seek contribution from any other obligor
until all the Obligations shall have been paid in full. If any amount shall
nevertheless be paid to Pandey, such amount shall be held in trust for the
benefit of Access Capital and shall forthwith be paid to Access Capital to be
credited and applied to the Obligations, whether matured or not matured. The
provisions of this Section 4 shall survive termination of this Anti-Fraud and
Performance Agreement.
5. Waiver. Pandey hereby assents, to the extent permitted by law,
to all the terms and conditions of the Obligations and waives: (a) notice of
acceptance of this Anti-Fraud and Performance Agreement and all notice of the
creation, extension or accrual of any Obligations; (b) presentment, demand for
payment, notice of dishonor and protest; (c) notice of any other nature
whatsoever; (d) any requirement of diligence or promptness on the part of
Access Capital in the enforcement of any of its rights under the provisions of
the Factoring Agreement or any Account Agreement; (e) any requirement that
Access Capital take any action whatsoever against the Company or any other
party or file any claim in the event of the bankruptcy of the Company; or (f)
failure of Access Capital to protect, preserve or resort to any collateral. The
waivers set forth in this section shall be effective notwithstanding the fact
that the Company ceases to exist by reason of its liquidation, merger,
consolidation or otherwise.
6. Consent. Pandey hereby consents that from time to time, and
without further notice to or consent of Pandey, Access Capital may take any or
all of the following actions without affecting the liability of Pandey: (a)
extend, renew, modify, compromise, settle or
<PAGE> 26
release the Obligations; (b) release or compromise any liability of any party
or parties with respect to the Obligations; (c) release its security interest
in the collateral or exchange, surrender or otherwise deal with the collateral
as Access Capital may determine; or (d) exercise or refrain from exercising any
right or remedy of Access Capital.
7. Obligations of Pandey Unconditional; Termination. The
obligations of Pandey under this Anti-Fraud and Performance Agreement shall be
absolute and unconditional, irrespective of the validity, regularity or
enforceability of any Obligation or any instrument or agreement evidencing the
same or relating thereto or any other circumstance that might otherwise
constitute a defense available to, or a discharge of, Pandey. The obligations of
Pandey hereunder shall be absolute and unconditional under any and all
circumstances and shall not be discharged except by complete payment or
performance of the Obligations and the liabilities of Pandey hereunder.
8. Notices. All notices and other communications hereunder shall
be deemed given when delivered or deposited in the mails, first class postage
prepaid (provided, however, that notices given by telegram, telex or telefax
shall be deemed given when dispatched) and if to a party hereto addressed as
set forth beneath its name at the foot hereof unless a party shall give notice
of a different address or telefax number in the manner provided herein.
9. Survival of Agreement. This Anti-Fraud and Performance
Agreement shall inure to the benefit of and be binding upon Pandey and Access
Capital and their respective heirs, successors and assigns, including any
subsequent holder or holders of any Obligations, and the term "Access Capital"
shall include any such holder or holders whenever the context permits.
10. Independent Obligations. Access Capital may proceed against
Pandey under this Anti-Fraud and Performance Agreement without first proceeding
against the Company, against any other surety or any other person or any
security held by Access Capital and without pursuing any other remedy.
11. CONSENT TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF
MANHATTAN, THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF THE VENUE OF ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY AGREES THAT A FINAL
JUDGMENT IN ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A COURT, AFTER
ALL APPROPRIATE APPEALS, SHALL BE CONCLUSIVE AND BINDING UPON IT.
12. GOVERNING LAW. THIS ANTI-FRAUD AND PERFORMANCE AGREEMENT SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
<PAGE> 27
BY THE LAWS OF THE STATE OF NEW YORK.
13. JURY TRIAL WAIVER. THE PARTIES HERETO DO HEREBY WAIVE ANY AND
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS
AGREEMENT.
IN WITNESS WHEREOF, Pandey has executed this Agreement as a sealed
instrument as of the date first above written.
-----------------------------
Ashok Pandey
By:
-------------------------
Name:
Title:
Address for Notices:
5 Lincoln Highway
Edison, NJ 08820
Telephone Number: (908) 608-8908
Telefax Number: (908) 608-8819
The foregoing Anti-Fraud and Performance Agreement is hereby confirmed
and accepted as of the date hereof:
ACCESS CAPITAL, INC.
By:
---------------------------
Name:
Title:
Address for Notices:
405 Park Avenue
New York, New York 10022
Attn: Client Services Department
Telephone Number: (212) 644-9300
Telefax Number: (212) 644-5488
<PAGE> 28
GUARANTY
(Corporate)
New York, New York October 20, 1995
FOR VALUE RECEIVED, and in consideration of credit or other financial
accommodations extended or to be extended by Access Capital, Inc. ("Access") to
or for the account of Oxford Systems, Inc. ("Company") from time to time and at
any time and for other good and valuable consideration and to induce Access, in
its discretion, to enter into factoring arrangements and make advances,
extensions of credit and to make or grant such renewals, extensions, releases
of collateral or relinquishments of legal rights as Access may deem advisable,
the undersigned (and each of them if more than one, the liability under this
Guaranty being joint and several) unconditionally guaranties to Access, its
successors, endorsees and assigns the prompt payment when due (whether by
acceleration or otherwise) of all present and future obligations and
liabilities of any and all kinds of Company to Access and of all instruments of
any nature evidencing or relating to any such obligations and liabilities upon
which Company or one or more parties and Company is or may become liable to
Access, whether incurred by Company as maker, endorser, drawer, acceptor,
guarantor, accommodation party or otherwise, and whether due or to become due,
secured or unsecured, absolute or contingent, joint or several, and however or
whenever acquired by Access, whether arising under, out of, or in connection
with that certain Factoring Agreement between Access and Company dated this
date (as amended, supplemented, modified or restated from time to time, the
"Factoring Agreement") or any documents, instruments or agreements relating to
or executed in connection with the Factoring Agreement or any documents,
instruments or agreements referred to therein (together with the Factoring
Agreement, the "Factoring Documents"), or otherwise (all of which are herein
collectively referred to as the "Obligations"), and irrespective of the
genuineness, validity, regularity or enforceability of such Obligations, or of
any instrument evidencing any of the Obligations or of any collateral therefor
or of the existence or extent of such collateral. In furtherance of the
foregoing, the undersigned hereby agrees as follows:
1. No Impairment. Access may at any time and from time to time,
either before or after the maturity thereof, without notice to or further
consent of the undersigned, extend the time of payment of, exchange or
surrender any collateral for, renew or extend any of the Obligations or
increase or decrease any fees with respect thereto, or any interest rate
thereon, and may also make any agreement with Company or with any other party
to or person liable on any of the Obligations, or interested therein, for the
<PAGE> 29
extension, renewal, payment, compromise, discharge or release thereof, in whole
or in part, or for any modification of the terms thereof or of any agreement
between Access and Company or any such other party or person, or make any
election of rights Access may deem desirable under the United States Bankruptcy
Code, as amended, or any other federal or state bankruptcy, reorganization,
moratorium or insolvency law relating to or affecting the enforcement of
Creditors' rights generally (any of the foregoing, an "Insolvency Law") without
in any way impairing or affecting this Guaranty. This instrument shall be
effective regardless of the subsequent incorporation, merger or consolidation
of Company, or any change in the composition, nature, personnel or location of
Company and shall extend to any successor entity to Company, including a debtor
in possession or the like under any Insolvency Law.
2. Guaranty Absolute. The undersigned guarantees that the Obligations
will be paid strictly in accordance with the terms of the Factoring Agreement
and/or any other document, instrument or agreement creating or evidencing the
Obligations, regardless of any law, regulation or order now or thereafter in
effect in any jurisdiction affecting any of such terms or the rights of Company
with respect thereto. The undersigned hereby knowingly accepts the full range
of risk encompassed within a contract of "continuing guaranty" which risk
includes the possibility that Company will extract additional indebtedness for
which the undersigned may be liable hereunder after Company's financial
condition or ability to pay its lawful debts when they fall due has
deteriorated, whether or not Company has properly authorized incurring such
additional indebtedness. The undersigned acknowledges that (i) no oral
representations, including any representations to extend credit or provide
other financial accommodations to Company, have been made by Access to induce
the undersigned to enter into this Guaranty and (ii) any extension of credit to
the Company shall be governed solely by the provisions of the Factoring
Agreement. The liability of the undersigned under this Guaranty shall be
absolute and unconditional, in accordance with its terms, and shall remain in
full force and effect without regard to, and shall not be released, suspended,
discharged, terminated or otherwise affected by, any circumstance or occurrence
whatsoever, including, without limitation: (a) any waiver, indulgence, renewal,
extension, amendment or modification of or addition, consent or supplement to
or deletion from or any other action or inaction under or in respect of the
factoring Documents or any other instruments or agreements relating to the
Obligations or any assignment or transfer of any thereof; (b) any lack of
validity or enforceability of any Factoring Document or other documents,
instruments or agreements relating to the Obligations or any assignment or
transfer of any thereof; (c) any furnishing of any additional security to
Access or its assignees or any acceptance thereof or
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<PAGE> 30
any release of any security by Access or its assignees; (d) any limitation on
any party's liability or obligation under the Factoring Documents or any other
documents, instruments or agreements relating to the Obligations or any
assignment or transfer of any thereof or any invalidity or unenforceability, in
whole or in part, of any such document, instrument or agreement or any term
thereof; (e) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to
Company, or any action taken with respect to this Guaranty by any trustee or
receiver, or by any court, in any such proceeding, whether or not the
undersigned shall have notice or knowledge of any of the foregoing; (f) any
exchange, release or nonperfection of any collateral, or any release, or
amendment or waiver of or consent to departure from any guaranty or security,
for all or any of the obligations; or (g) any other circumstance which might
otherwise constitute a defense available to, or a discharge of, the undersigned.
Any amounts due from the undesigned to Access shall bear interest until such
amounts are paid in full at the highest rate then applicable to the Obligations
of Company to Access under the Factoring Agreement. Obligations include
post-petition interest whether or not allowed or allowable.
3. Waivers. (a) This Guaranty is a guaranty of payment and not a
collection. Access shall be under no obligation to institute suit, exercise
rights or remedies or take any other action against Company or any other person
liable with respect to any of the Obligations or resort to any collateral
security held by it to secure any of the obligations as a condition precedent
to the undersigned being obligated to perform as agreed herein and Guarantor
hereby waives any and all rights which it may have by statute or otherwise
which would require Access to do any of the foregoing. The undersigned further
consents and agrees that Access shall be under no obligation to marshal any
assets in favor of the undersigned, or against or in payment of any or all of
the Obligations. The undersigned hereby waives any rights to interpose any
defense, counterclaim or offset of any nature and description which it may have
or which may exist between and among Access, Company and/or the undersigned with
respect to the undersigned's obligations under this Guaranty, or which Company
may assert on the underlying debt, including but not limited to failure of
consideration, breach or warranty, fraud, payment (other than cash payment in
full of the Obligations), statute of frauds, bankruptcy, infancy, statute of
limitations, accord and satisfaction, and usury.
(b) The undersigned further waives (i) notice of the acceptance of
this Guaranty, of the making of any such loans or extensions of credit, and of
all notices and demands of any kind to which the undersigned may be entitled,
including, without limitation, notice of adverse change in Company's financial
-3-
<PAGE> 31
condition or of any other fact which might materially increase the risk of the
undersigned; (ii) presentment to or demand of payment from anyone whomsoever
liable upon any of the Obligations, protest, notices of presentment, non-payment
or protest and notice of any sale of collateral security or any default of any
sort.
(c) Notwithstanding any payment or payments made by the undersigned
hereunder, or any setoff or application of funds of the undersigned by Access,
the undersigned shall not be entitled to be subrogated to any of the rights of
Access against Company or against any collateral or guarantee or right of offset
held by Access for the payment of the Obligations, nor shall the undersigned
seek or be entitled to seek any contribution or reimbursement from Company in
respect of payments made by the undersigned hereunder, until all amounts owing
to Access by Company on account of the Obligations are paid in full and the
Factoring Agreement has been terminated. If, notwithstanding the foregoing, any
amount shall be paid to the undersigned on account of such subrogation rights at
any time when all of the Obligations shall not have been paid in full and the
Factoring Agreement shall not have been terminated, such amount shall be held by
the undersigned in trust for Access, segregated from other funds of the
undersigned; and shall forthwith upon, and in any event within two (2) business
days of, receipt by the undersigned, be turned over to Access in the exact form
received by the undersigned (duly endorsed by the undersigned to Access, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as Access may determine, subject to the provisions of the
Factoring Agreement.
4. Security. All sums at any time to the credit of the undersigned
and any property of the undersigned in Access's possession or in the possession
of any bank, financial institution or other entity that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is under
common control with, Access (each such entity, an "Affiliate") shall be deemed
held by Access or such Affiliate, as the case may be, as security for any and
all of the undersigned's obligations to Access and to any Affiliate of Access,
not matter how or when arising and whether under this or any other instrument,
agreement or otherwise.
5. Representations and Warranties. The undersigned hereby
represents and warrants (all of which representations and warranties shall
survive until all Obligations are indefeasibly satisfied in full and there
remain no outstanding commitments under the Factoring Agreement), that:
(a) Corporate Status. The undersigned is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey and
-4-
<PAGE> 32
has full power, authority and legal right to own its property and
assets and to transact the business in which it is engaged.
(b) Authority and Execution. The undersigned has full power,
authority and legal right to execute and deliver and to perform its
obligation under, this Guaranty and has taken all necessary corporate
and legal action to authorize the execution, delivery and performance of
this Guaranty.
(c) Legal, Valid and Binding Character. This Guaranty
constitutes the legal, valid and binding obligation of the undersigned
enforceable in accordance with its terms, except as enforceability may
be limited by applicable Insolvency Law.
(d) Violations. The execution, delivery and performance of
this Guaranty will not violate any requirement of law applicable to the
undersigned or any material contract, agreement or instrument to which
the undersigned is a party or by which the undersigned or its property
is bound or result in the creation or imposition of any mortgage, lien
or other encumbrance other than to Access on any of the property or
assets of the undersigned pursuant to the provisions of any of the
foregoing.
(e) Consents or Approvals. No consent of any other Person
(including, without limitation, any creditor of the undersigned) and no
consent, license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any
governmental authority is required in connection with the execution,
delivery, performance, validity or enforceability of this Guaranty.
(f) Litigation. No litigation, arbitration, investigation or
administrative proceeding of or before any court, arbitrator or
governmental authority, bureau or agency is currently pending or, to the
best knowledge of the undersigned, threatened (i) with respect to this
Guaranty or any of the transactions contemplated by this Guaranty or
(ii) against or affecting the undersigned, or any of its property or
assets, which, if adversely determined, would have a material adverse
effect on the business, operations, assets or condition, financial or
otherwise, of the undersigned.
-5-
<PAGE> 33
(g) Financial Benefit. The undersigned has derived or expects
to derive a financial or other advantage from each and every loan,
advance or extension of credit made under the Factoring Agreement or
other Obligation incurred by Company to Access.
The foregoing representations and warranties shall be deemed to have
been made by the Undersigned on the date of each sale of accounts receivable by
Company under the Factoring Agreement on and as of such date as though made
hereunder on and as of such date.
6. Acceleration. (a) If any breach of any covenant or condition
or other event of default shall occur and be continuing under any agreement
made by Company or the undersigned to Access, or either Company or the
undersigned should at any time become insolvent, or make a general assignment,
or if a proceeding in or under any Insolvency Law shall be filed or commenced
by, or in respect of, the undersigned, or if a notice of any lien, levy, or
assessment is filed of record with respect to any assets of the undersigned by
the United States or any department, agency, or instrumentality thereof, or if
any taxes or debts owing at any time or times hereafter to any one of them
becomes a lien or encumbrance upon any assets of the undersigned in Access's
possession, or otherwise, any and all Obligations shall for purposes hereof, at
Access's option, be deemed due and payable without notice notwithstanding that
any such Obligation is not then due and payable by Company.
(b) The undersigned will promptly notify Access of any default
by the undersigned in the performance or observance of any term or condition of
any agreement to which the undersigned is a party if the effect of such default
is to cause, or permit the holder of any obligation under such agreement to
cause, such obligation to become due prior to its stated maturity and, if such
an event occurs, Access shall have the right to accelerate the undersigned's
obligations hereunder.
7. Payments from Guarantor. Access, in its sole and absolute
discretion, with or without notice to the undersigned, may apply on account of
the Obligations any payment from the undersigned or any other guarantor, or
amounts realized from any security for the Obligations, or may deposit any and
all such amounts realized in a non-interest bearing cash collateral deposit
account to be maintained as security for the Obligations.
8. Costs. The undersigned shall pay on demand, all fees and
expenses (including reasonable expenses for legal services of every kind)
relating or incidental to the enforcement or
-6-
<PAGE> 34
protection of the rights of Access hereunder or under any of the Obligations.
9. No Termination. This is a continuing irrevocable guaranty and
shall remain in full force and effect and be binding upon the undersigned, and
the undersigned's successors and assigns, until all of Company's Obligations
have been paid in full and the Factoring Agreement has been terminated. If any
of the present or future Obligations are guarantied by persons, partnerships or
corporations in addition to the undersigned, the death, release or discharge in
whole or in part or the bankruptcy, merger, consolidation, incorporation,
liquidation or dissolution of one or more of them shall not discharge or affect
the liabilities of the undersigned under this Guaranty.
10. Recapture. Anything in this Guaranty to the contrary
notwithstanding, if Access receives any payment or payments on account of the
liabilities guarantied hereby, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver, or any other party under
any Insolvency Law, common law or equitable doctrine, then to the extent of any
sum not finally retained by Access, the undersigned's obligations to Access
shall be reinstated and this Guaranty shall remain in full force and effect (or
be reinstated) until payment shall have been made to Access, which payment shall
be due on demand.
11. Books and Records. The books and records of Access showing the
account between Access and Company shall be admissible in evidence in any
action or proceeding, shall be binding upon the undersigned for the purpose of
establishing the items therein set forth and shall constitute prima facie proof
thereof.
12. No Waiver. No failure on the part of Access to exercise, no
delay in exercising, any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Access of any right,
remedy or power hereunder preclude any other or future exercise of any other
legal right, remedy or power. Each and every right, remedy and power hereby
granted to Access or allowed it by law or other agreement shall be cumulative
and not exclusive of any other, and may be exercised by Access at any time and
from time to time.
13. Waiver of Jury Trial. THE UNDERSIGNED DOES HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR WITH RESPECT TO THIS GUARANTY OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR RELATING OR INCIDENTAL HERETO. THE UNDERSIGNED DOES
HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF ACCESS HAS REPRESENTED
EXPRESSLY OR OTHERWISE, THAT ACCESS WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
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<PAGE> 35
14. Governing Law; Jurisdiction; Amendments. THIS INSTRUMENT CANNOT
BE CHANGED OR TERMINATED ORALLY, AND SHALL BE GOVERNED, CONSTRUED AND
INTERPRETED AS TO VALIDITY, ENFORCEMENT AND IN ALL OTHER RESPECTS IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK. THE UNDERSIGNED EXPRESSLY CONSENTS TO
THE JURISDICTION AND VENUE OF THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY
OF NEW YORK, AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK FOR ALL PURPOSES IN CONNECTION HEREWITH. ANY JUDICIAL PROCEEDING BY
THE UNDERSIGNED AGAINST ACCESS INVOLVING, DIRECTLY OR INDIRECTLY ANY MATTER OR
CLAIM IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED HEREWITH SHALL BE
BROUGHT ONLY IN THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK
OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE
UNDERSIGNED FURTHER CONSENTS THAT ANY SUMMONS, SUBPOENA OR OTHER PROCESS OR
PAPERS (INCLUDING, WITHOUT LIMITATION, ANY NOTICE OR MOTION OR OTHER APPLICATION
TO EITHER OF THE AFOREMENTIONED COURTS OR A JUDGE THEREOF) OR ANY NOTICE IN
CONNECTION WITH ANY PROCEEDINGS HEREUNDER, MAY BE SERVED INSIDE OR OUTSIDE OF
THE STATE OF NEW YORK OR THE SOUTHERN DISTRICT OF NEW YORK BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY PERSONAL SERVICE PROVIDED A
REASONABLE TIME FOR APPEARANCE IS PERMITTED, OR IN SUCH OTHER MANNER AS MAY BE
PERMISSIBLE UNDER THE RULES OF SAID COURTS. THE UNDERSIGNED WAIVES ANY OBJECTION
TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREON AND SHALL NOT ASSERT
ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON
CONVENIENS.
15. Severability. To the extent permitted by applicable law, any
provision of this Guaranty which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
16. Amendments, Waivers. No amendment or waiver of any provision
of this Guaranty nor consent to any departure by the undersigned therefrom shall
in any event be effective unless the same shall be in writing executed by the
undersigned and Access.
17. Notice. All notices, requests and demands to or upon the
undersigned, shall be in writing or by telecopy or telex and shall be deemed to
have been duly given or made (a) when delivered, if by hand, (b) three (3) days
after being deposited in the mail, postage prepaid, if by mail, (c) when
delivered, if by telecopy or, (d) in the case of telex notice, when sent, answer
back receiver in each event, to the number and address set forth beneath the
signature of the undersigned.
18. Successors. Access may, from time to time, without notice to
the undersigned, sell, assign, transfer or otherwise dispose of all or any part
of the Obligations and/or rights under this Guaranty. Without limiting the
generality of the foregoing,
- 8 -
<PAGE> 36
Access may assign, or grant participations to, one or more banks, financial
institutions or other entities all or any part of any of the Obligations. In
each such event, Access, its Affiliates and each and every immediate and
successive purchaser, assignee, transferee or holder of all or any part of the
Obligations shall have the right to enforce this Guaranty, by legal action or
otherwise, for its own benefit as fully as if such purchaser, assignee,
transferee or holder were herein by name specifically given such right. Access
shall have an unimpaired right to enforce this Guaranty for its benefit with
respect to that portion of the Obligations which Access has not disposed of,
sold, assigned, or otherwise transferred.
19. Release. Nothing except cash payment in full of the Obligations
shall release the undersigned from liability under this Guaranty.
IN WITNESS WHEREOF, this Guaranty has been executed by the undersigned
this 20 day of October, 1995.
INTELLIGROUP, INC.
By: /s/ Ashok Pandey
--------------------
Its: President
--------------------
By: /s/ Nagarjun Valluripalli
-----------------------------
Its: Vice President
-----------------------------
Address: 5 Lincoln Highway
Edison, New Jersey, 08820
Telecopier No.: (908) 603-8819
STATE OF NEW YORK )
) : ss.:
COUNTY OF NEW YORK )
On the 20th day of October, 1995, before me personally came
Ashok Pandey and Nagarjun Valluripalli, to me known, who, being by me duly
sworn did depose and say that they are the President and Vice President of
Intelligroup, Inc., the corporation described in and which executed the above
instrument; and that he signed his name thereto by order of the board of
directors of said corporation.
/s/ Linda C. Berman
-------------------
Notary Public
LINDA C. BERMAN
Notary Public, State of New York
No. 4935835
Qualified in Nassau County
Commission Expires June 6, 1996
- 9 -
<PAGE> 37
CONSENT OF DIRECTORS IN
LIEU OF A SPECIAL MEETING OF THE BOARD OF DIRECTORS
The undersigned are the Directors of Intelligroup, Inc., a New Jersey
corporation (the "Corporation"). In lieu of taking action at a Special Meeting
of the Board of Directors, we consent to the following:
WHEREAS the Directors have reviewed the Factoring Agreement between
Access Capital, Inc. and the Corporation, together with the Security Agreement
and other related documents, which set forth the terms and obligations of the
respective parties (the "Agreements"); and
WHEREAS the Directors have determined that it is in the best interests
of the Corporation to enter into the Agreements;
NOW THEREFORE, it is
RESOLVED that the Agreements be executed and delivered by all parties
thereto; and it is further
RESOLVED that notwithstanding anything to the contrary stated or implied
in the Bylaws of the Corporation, the Agreements may be executed by any two
officers of the Corporation; and it is further
RESOLVED that officers of the Corporation are hereby authorized and
directed to take all action necessary to consummate the transaction contemplated
in the Agreements in all respects.
By signing this Consent, we hereby authorize and approve of the foregoing action
as the Directors of this Corporation.
Dated: October 20, 1995 /s/ Ashok Pandey
-------------------------
Ashok Pandey
/s/ Rajkumar Koneru
-------------------------
Rajkumar Koneru
/s/ Nagarjun Valluripalli
-------------------------
Nagarjun Valluripalli
<PAGE> 38
<TABLE>
<CAPTION>
SEE DETAILED INSTRUCTIONS ON REVERSE SIDE OF PAGE 4 (DEBTORS COPY).
Present both the Filing Officer's Copy (white) and Acknowledgement Copy (canary) to Filing Officer. DO NOT REMOVE CARBON
ENCLOSE APPROPRIATE FEE
- ------------------------------------------------------------------------------------------------------------------------------------
Maturity date
This STATEMENT is presented to a Filing Officer for filing pursuant to the Uniform Commercial Code (if any)
- ------------------------------------------------------------------------------------------------------------------------------------
This statement refers to ORIGINAL Financing Statement bearing file number Which was filed 19
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Debtor(s) Name (Last Name First and 2. Secured Party(s) Name and Complete Address(es) This Space for use of
Complete Address) PHILINKO INTERNATIONAL, Filing Officer
INTELLIGROUP, INC. A Division of Metalic Film, Inc. (Date, Time and Filing
5 Lincoln Highway A California corporation Office)
Edison, NJ 08820 23210 Mariposa Avenue
Torrance, CA 90502
- ------------------------------------------------------------------------------------------------------------------------------------
CHECK (X) THE ITEMS WHICH APPLY
- ------------------------------------------------------------------------------------------------------------------------------------
3. ( ) CONTINUATION STATEMENT R.S. 12A-9-403 4. ( ) TERMINATION STATEMENT R.S. 12A 9-404
The ORIGINAL Financing Statement bearing the above The above named Secured Party certifies that he
File number between the above named Debtor and no longer claims a security interest under the
Secured Party is still effective. ORIGINAL Financing Statement bearing the file
number shown above.
- ------------------------------------------------------------------------------------------------------------------------------------
5. ( ) STATEMENT OF ASSIGNMENT R.S. 12A-9-405 6. (xx) STATEMENT OF PARTIAL RELEASE R.S 12A-9-406
The above named Secured Party certifies that he has The above named Secured Party certifies that he has
assigned all ( ) or part ( ) of his rights under released from the types or items of property
the ORIGINAL Financing Statement bearing the file described in the ORIGINAL Financing Statement
number shown above, to bearing the file number shown above, the collateral
(Assignee(s) of Secured Party(s) Name and Complete described below:
Address(es)):
- ------------------------------------------------------------------------------------------------------------------------------------
7. DESCRIPTION OF COLLATERAL CHECK WHICH ( x ) RELEASED ( ) ASSIGNED ( ) AMENDED
( ) R.S. 12A 9 103 Collateral already subject to a security interest in the State of
All accounts receivable and/or contract rights created or acquired by the Debtor on or after October 16, 1995, together with the
accounts receivable and/or contract rights owned by the Debtor as more fully described on SCHEDULE A annexed hereto.
- ------------------------------------------------------------------------------------------------------------------------------------
8. ( ) If Collateral is crops. The above described crops are ( ) (If collateral is goods which are or are to become
growing or are to be grown on: (Description of real estate and fixtures).
name and address of record owner.) The above described goods are affixed or are to be
affixed to: (Description of real estate and name and
address of record owner).
- ------------------------------------------------------------------------------------------------------------------------------------
9. ( x ) PROCEEDS of Collateral are also covered. 10. ( ) PRODUCTS of Collateral are also covered.
No. of additional sheets presented ( 6 )
- ------------------------------------------------------------------------------------------------------------------------------------
11. ( ) File with: County Recording Officer at County: ( ) Secretary of State.
- ------------------------------------------------------------------------------------------------------------------------------------
Signature(s) of Secured Party(s) or Assignee(s)
PHILINKO INTERNATIONAL, A
Division of Metalic Film, Inc.
---------------------------------------------------------------
Dated: October 17, 1995
- -------------------------------------------------- ---------------------------------------------------------------
(Not Valid Unless Signed)
FILING OFFICERS
COPY
- -- This form of financing statement is approved by
the Secretary of State of New Jersey. THESE FORMS MAY BE PURCHASED
FROM ALL STATE LEGAL SUPPLY CO.
FORM UCC-3 STANDARD FORM -- UNIFORM COMMERCIAL CODE 1 COMMERCE DR., CRANFORD, N.J. 07014
</TABLE>
<PAGE> 39
[LETTERHEAD OF ANDERSON, ASLON, LEWIS & GALE]
FILE NO.
5073-4
TELEFAX: (908) 634-2880
October 20, 1995
George Spadoro, Esq.
Spadoro & Hilson
90 Woodbridge Center Drive
Suite 610
Woodbridge, NJ 07095
Re: Philinko/Oxford Systems and Intelligroup.
Dear Mr. Spadoro:
We are the attorneys for Philinko International. This letter is
sent to you in your capacity as attorney for Oxford Systems, Inc. and
Intelligroup, Inc.
Our client is agreeable to releasing its collateral security currently
held by it, pertaining to Oxford Systems and Intelligroup, other than as to the
specific invoices factored by them, all as more particularly set forth in the
UCC Release Statements forwarded to you in trust by separate letter. However,
as we have discussed, it is our client's analysis that this release will result
in a deficiency to our client on money owed to it, even if all account debtors
on the invoices retained by our client as collateral pay the monies due on such
invoices in full. The purpose of this letter is to establish a mutually agreed
procedure to provide collateral to protect our client from this deficiency.
This letter does not supersede or modify any other rights of any party to
recover any deficiency.
Attached are two schedules, one showing the customer as Intelligroup,
Inc. and the other showing the customer as Oxford Systems, Inc. Intelligroup and
Oxford Systems, respectively, agree that the invoice number, debtor's name,
purchase date and invoice amount are invoices financed by Philinko as
identified on each respective schedule. Such schedule shall be initialed by
them and returned to the undersigned.
Also separately attached is a schedule entitled "Checks Cashed by
Intelligroup." Intelligroup agrees that this schedule represents accounts
factored by Philinko wherein Intelligroup was
<PAGE> 40
George Spadoro, Esq.
Spadoro & Hilson
October 20, 1995
Page 2
paid by the account debtor and Philinko has not been reimbursed. Such schedule
shall be initialed by it and returned to the undersigned.
Intelligroup and Oxford Systems agree to deliver the total sum of
$300,000.00 to Anderson, Ablon, Lewis & Gale, to be held in trust as provided
herein. Intelligroup and Oxford Systems agree to deliver, concurrently
herewith, written instructions to Access Capital, Inc., which instructions can
be modified solely upon written agreement of Oxford and Intelligroup, or their
counsel on the one hand, and Philinko International or its counsel on the
other. Such instructions shall direct Access Capital to disburse from funds,
if any, due to Oxford and/or Intelligroup by Access Capital, monies payable to
the trust account of Anderson, Ablon, Lewis & Gale as follows:
1. October 20, 1995 - $100,00.00
2. November 20, 1995 - $100,00.00
3. December 5, 1995 - $100,00.00
Such funds shall be held by Anderson, Ablon, Lewis & Gale in trust as
additional collateral for settlement of Oxford Systems, Inc. and Intelligroup,
Inc. monies owed to Philinko International. Such monies shall be released
solely on written agreement of Oxford and Intelligroup, or their counsel on the
one hand, and Philinko International or its counsel on the other.
Counsel for Philinko shall coordinate with counsel for Oxford and
Intelligroup in regard to transferring such monies to an interest bearing trust
account within ten days of receipt of the first $100,00.00 by counsel for
Philinko. All additional monies shall be deposited in such account.
Subject to receipt of the $100,000.00 set forth above for disbursement
on October 20, 1995, you are authorized to file the UCC Release Statement with
the New Jersey Secretary of State and as otherwise deemed appropriate and to
use as deemed appropriate, the letter instructions executed by Philinko,
transmitted by separate letter.
Oxford Systems and Intelligroup agree that, in the event any account
debtor pays directly to Oxford Systems or Intelligroup or either of them, any
invoice set forth in the attached schedules, Oxford Systems or Intelligroup, as
applicable, shall immediately forward such check, unnegotiated, or if part of
other funds, a
<PAGE> 41
George Spadoro, Esq.
Spadoro & Hilson
October 20, 1995
Page 3
check in the amount of such payment, directly to Philinko International, at
23210 Mariposa Avenue, Torrance, California 90502.
Very truly yours,
ANDERSON, ABLON, LEWIS & GALE
/s/ Robert E. Lewis
Robert E. Lewis
THE TERMS OF THESE INSTRUCTIONS ARE AGREED TO:
OXFORD SYSTEMS, INC. INTELLIGROUP, INC.
By: /s/ Ashok Pandey By: /s/ Ashok Pandey
- -------------------- --------------------
ASHOK PANDEY ASHOK PANDEY
PHILINKO INTERNATIONAL
By: /s/ Anita Narasimhan
- ------------------------
ANITA NARASIMHAN
APPROVED AS TO FORM AND CONTENT:
By: /s/ George Spadoro
- ----------------------
GEORGE SPADORO, ESQ.
Spadoro & Hilson
<PAGE> 42
CHECKS CASHED BY OXFORD/INTELLIGROUP
FOR ASSIGNED INVOICES (NOT RE-IMBURSED)
-------------------------------------------------
Inv. # Customer Amount
-------------------------------------------------
224 Coors Brewing $26,400.00
63 Coors Brewing 35,588.00
12 Cray Research 18,400.00
97 Cray Research 7,360.00
223 Cray Research 10,120.00
271 Cray Research 7,950.00
351 Cray Research 9,200.00
VMM53195 CRG 4,224.00
380 CRG 5,720.00
83 CRG 2,688.00
VMM51595 CRG 4,224.00
7 CRG 3,540.00
247 CRG 3,840.00
267 CRG 4,160.00
573 CRG 5,720.00
MAS13095 Deloitte & Touche 21,125.00
GV043095 Deloitte & Touche 16,562.50
GH61995 Deloitte & Touche 14,375.00
AGY62195 Deloitte & Touche 12,500.00
VFT62195 Deloitte & Touche 14,550.00
26 Deloitte & Touche 9,912.50
27 Deloitte & Touche 13,350.00
28 Deloitte & Touche 7,051.25
29 Deloitte & Touche 11,550.00
65 Deloitte & Touche 6,250.00
102 Deloitte & Touche 8,400.00
101 Deloitte & Touche 17,500.00
100 Deloitte & Touche 9,100.00
167 Deloitte & Touche 12,150.00
168 Deloitte & Touche 11,250.00
245 Deloitte & Touche 13,200.00
243 Deloitte & Touche 14,657.50
270 Deloitte & Touche 12,534.38
GV51595 Deloitte & Touche 13,437.50
MAS 51595 Deloitte & Touche 7,800.03
194 Ernst & Young 35,145.00
57 Ernst & Young 15,300.00
323 Ernst & Young 16,560.00
297 Ernst & Young 11,000.00
300 Ernst & Young 15,750.00
302 Ernst & Young 13,600.00
454 Ernst & Young 15,300.00
JT60195 Ibechet Coleman 11,000.00
25 Ibechet Coleman 10,000.00
91 Ibechet Coleman 8,000.00
229 Ibechet Coleman 14,000.00
343 Ibechet Coleman 16,250.00
507 Landmark Graphics 12,000.00
506 Landmark Graphics 4,000.00
BS113195 Moriset 11,050.00
<PAGE> 43
103 Moriset $11,000.00
171 Moriset 7,975.00
234 Moriset 11,962.50
233 Moriset 10,450.00
376 Moriset 17,050.00
377 Moriset 14,025.00
337 NCCI 5,910.00
TM53195 Paine Weber 12,750.00
SSA53195 Paine Weber 6,312.50
B6 Price Waterhouse 8,800.00
64 Price Waterhouse 5,500.00
84 Price Waterhouse 8,200.00
85 Price Waterhouse 7,700.00
87 Price Waterhouse 8,800.00
88 Price Waterhouse 8,800.00
89 Price Waterhouse 10,800.00
372 SAP America 9,600.00
166 SAP America 7,620.00
-------------
Total $779,569.63
-------------
<PAGE> 44
[LETTERHEAD OF ANDERSON, ABLON, LEWIS & GALE]
FILE NO.
5073-4
TELEFAX: (212) 594-7167
October 20, 1995
George Spadoro, Esq.
Spadoro & Hilson
90 Woodbridge Center Drive
Suite 610
Woodbridge, NJ 07095
Re: Philinko/Oxford Systems and Intelligroup
Dear Mr. Spadoro:
This will modify our correspondence of October 20, 1995 in regard to
disbursement of the $100,000.00 to our trust account on October 20, 1995. You
are authorized to disregard our wire instruction information.
The instructions shall be deemed complied with if Access Capital issues
a check, payable to our trust account, in the sum of $100,000.00, and transmits
it this date by deposit in the U.S. mail or other appropriate carrier. You are
requested to transmit a fax copy of the check to our office this date.
Compliance with this amendment will deemed approval to use the UCC
Release Statement and letter instructions as is set forth in our earlier letter
to you this date. These instructions are acceptable to our client.
Very truly yours,
ANDERSON, ABLON, LEWIS & GALE
/s/ ROBERT E. LEWIS
Robert E. Lewis
REL:ek
cc: Anita Narasimhan (by fax)
<PAGE> 1
Exhibit 10.15
AGREEMENT OF WAIVER AND CONSENT
This Agreement of Waiver and Consent ( the "Agreement") is made as of
June 4, 1996, by and among Intelligroup, Inc., a New Jersey corporation (the
"Company" or "Intelligroup"), the current shareholders of Intelligroup (the
"Shareholders"), and Summit Ventures IV, L.P. and Summit Investors III, L.P.
(collectively, "Summit").
WHEREAS, Intelligroup, the Shareholders and Summit are parties to that
certain Debenture and Warrant Purchase Agreement dated as of April 10, 1996 (the
"Purchase Agreement") and certain other related agreements, including (i) the
Warrant Agreement and related Warrant Certificates, (ii) the Redemption
Agreement, (iii) the Registration Rights Agreement, and (iv) the Shareholders'
Agreement, each dated as of April 10, 1996 (all defined terms used herein and
not otherwise defined herein shall have the meaning ascribed thereto in the
applicable aforementioned agreement); and
WHEREAS, the Board of Directors of Intelligroup (the "Board") has
approved a proposed underwritten initial public offering of the Common Stock of
Intelligroup (the "IPO"), in which the Company proposes to issue and sell shares
of Common Stock and certain shareholders, including the Shareholders and, upon
the exercise of the Warrants to purchase Common Stock, Summit, propose to sell
shares of Common Stock; and
WHEREAS, as a condition precedent to the consummation of the IPO,
certain waivers and amendments are necessary to the aforementioned documents;
NOW, THEREFORE, in consideration of the mutual promises herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. WAIVER OF REDEMPTION RIGHTS.
Upon the declaration of effectiveness ("Effectiveness") by the
Securities and Exchange Commission (the "SEC") of the Company's Registration
Statement filed in connection with the IPO, Summit shall waive any and all of
its redemption rights as contemplated by section 1.3 of the Purchase Agreement
and as set forth with specificity in the Redemption Agreement. Upon
Effectiveness, the Redemption Agreement shall terminate and shall be of no
further force or effect.
2. WAIVER OF LIMITATION ON OPTION SHARES.
Effective as of the date hereof, Summit hereby waives any and all
limitations as to the scope of, size of, or eligibility under, the Company's
stock option plans as set forth in Section 5.8 of the Purchase Agreement. Upon
the date hereof, such Section 5.8 shall be deemed to be deleted from the
Purchase Agreement and shall be of no further force or effect. It is understood
and agreed that the Company shall comply in all respects with the terms of the
Company's 1996 Stock
<PAGE> 2
Plan and 1996 Non-Employee Stock Option Plan, as adopted by the Board and
approved by the shareholders of the Company.
3. WAIVER OF PREEMPTIVE RIGHTS.
Effective as of the date hereof, and subject to the condition that,
from the date hereof through Effectiveness of the IPO or until the earlier
termination of the IPO, the Company not issue any securities, other than options
granted pursuant to the 1996 Stock Plan or the 1996 Non-Employee Director Stock
Option Plan or upon the exercise of outstanding options or warrants, Summit
hereby waives any and all preemptive rights set forth in or contemplated by
Article VI, Sections 6.1-6.5 of the Purchase Agreement. Upon the date hereof and
subject to the foregoing condition, such Article VI shall be deemed to be
deleted from the Purchase Agreement and shall be of no further force or effect;
provided that upon the first to occur of termination of the IPO prior to
Effectiveness or termination of this Agreement in accordance with its terms, all
such preemptive rights shall be reinstated.
4. DEFINITION OF QUALIFIED PUBLIC OFFERING.
Effective as of the date hereof, the parties hereto agree that the
definition of "Qualified Public Offering" set forth in Article XI of the
Purchase Agreement is hereby amended to provide that the minimum net proceeds to
the Company be equal to at least $15,000,000 and not $20,000,000.
5. WAIVER OF VOTING RIGHTS OF WARRANTHOLDERS.
Effective as of the date hereof, Summit hereby waives its rights to
vote as a warrant holder on an as-converted to Common Stock basis as set forth
in Section 11 of the Warrant Agreement and as provided in the Warrant
Certificates. Upon the date hereof, Section 11 of the Warrant Agreement and the
applicable provisions set forth in the penultimate paragraph of page (ii) of
each of the Warrant Certificates shall be deemed to be deleted in their
entirety. Such provisions shall be of no further force or effect. The Company
agrees that until the first to occur of Effectiveness or termination of this
Agreement in accordance with its terms, the Company will not submit any action
for approval or any other action by its shareholders without the consent of
Summit, such consent not to be unreasonably withheld.
6. RIGHT TO EXERCISE WARRANTS; COVENANT TO EXERCISE WARRANTS.
Effective as of the date hereof, the parties hereto agree that Section
4 (a) of the Warrant Agreement and the first paragraph of each of the Warrant
Certificates are hereby amended to provide that each Warrant may first be
exercised upon the Effectiveness, as herein defined, rather than not upon the
consummation of an initial public offering of the Common Stock. Summit hereby
covenants and agrees that it shall exercise all of the outstanding Warrants held
by Summit upon notice of Effectiveness, and shall immediately thereafter deliver
to the Company (i) duly
-2-
<PAGE> 3
authorized and executed forms of election to purchase shares of Common Stock,
and (ii) the original Warrant Certificates for cancellation by the Company.
7. TERMINATION OF SHAREHOLDERS' AGREEMENT; SURVIVAL OF RIGHT OF PARTICIPATION.
Upon Effectiveness, the parties hereto agree that the Shareholders'
Agreement shall terminate and shall be of no further force or effect.
Notwithstanding the foregoing, Section 4 of the Shareholders' Agreement, which
sets forth the right of Summit to participate in sales by the current
shareholders of Intelligroup, shall survive and continue to be binding upon the
parties thereto. The other provisions of the Shareholders' Agreement which are
necessary for definition purposes shall be used for such informational purposes
only.
8. WAIVER OF CERTAIN REGISTRATION RIGHTS.
Effective upon the date hereof, Summit hereby agrees to waive any and
all registration rights as to the IPO, except as provided in the Underwriting
Agreement between the Company, the Selling Shareholders (to include Summit), and
the representatives of the underwriters. It is further understood that Summit
shall be entitled to sell an aggregate of 50,000 shares of Common Stock in the
IPO and an aggregate of 7,500 shares of Common Stock (representing Summit's pro
rata allocation of the underwriters' over-allotment option) in the event the
underwriters' over-allotment option is exercised in full.
9. TERMINATION UPON CANCELLATION OF IPO; REVERSION.
In the event the Company does not consummate the IPO by October 31,
1996, the IPO is not consummated within ten days of Effectiveness or upon
earlier notice to the Company from the representatives of the underwriters of
the IPO that the IPO has been terminated, this Agreement shall be terminated and
deemed to be of no further force and effect. The modified provisions of each
agreement referenced above shall revert to the form of the executed original as
if this Agreement never was in effect.
10. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall constitute an original.
11. BINDING EFFECT; SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors and assigns,
including any direct or indirect successor by purchase, merger, consolidation or
otherwise to all or substantially all of the business and/or assets of any of
the parties.
-3-
<PAGE> 4
12. NOTICE.
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed duly given (i) if delivered by
hand and receipt made therefor by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to any party are as shown in the Purchase Agreement, or as subsequently
modified by written notice.
13. SEVERABILITY.
The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the fullest extent permitted by law. Furthermore, to the
fullest extent possible, the provisions of this Agreement (including, without
limitation, each portion of this Agreement containing any provision held to be
invalid, void or otherwise unenforceable, that is not itself invalid, void or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
14. AMENDMENT.
No amendment, modification, termination or cancellation of this
Agreement shall be effective unless it is in writing signed by all of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
15. INTEGRATION AND ENTIRE AGREEMENT.
Except as provided in this Agreement of Waiver and Consent, the
Purchase Agreement and documents and agreements contemplated thereby and all of
their respective terms and provisions remain in full force and effect.
16. COMPOSITION OF COMMITTEES OF THE BOARD.
The Company agrees that it will take no action to enlarge or change the
composition of the Audit, Compensation, Option or Pricing Committees of the
Board, as they exist on the date hereof without the consent of Summit. Such
restriction shall continue until the first to occur of the consummation of the
IPO or the termination of this Agreement in accordance with its terms.
**************
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
INTELLIGROUP, INC.
By:_____________________________________
Ashok Pandey
President and Chief Executive Officer
SUMMIT VENTURES, IV
By: Summit Partners, IV, L.P.
Its General Partner
By: Stamps, Woodsum & Co. IV,
Its General Partner
By: ____________________________________
Its General Partner
SUMMIT INVESTORS III, L.P.
By:_____________________________________
Authorized Signatory
INTELLIGROUP SHAREHOLDERS
________________________________________
Ashok Pandey
________________________________________
Rajkumar Koneru
________________________________________
Nagarjun Valluripalli
-5-
<PAGE> 1
EXHIBIT 11
INTELLIGROUP, INC. AND SUBSIDIARY
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------- ---------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (loss)..................... $ (437,000) $(1,059,000) $(1,048,000) $ 428,000
=========== =========== =========== ===========
Weighted average shares
outstanding......................... 12,576,666 12,576,666 12,576,666 12,576,666
Incremental shares considered
outstanding (1)..................... 1,390,364 1,390,364 1,390,364 1,390,364
----------- ----------- ----------- -----------
Shares used in per share
calculation......................... 13,967,030 13,967,030 13,967,030 13,967,030
=========== =========== =========== ===========
Net income (loss) per share........... $ (0.03) $ (0.08) $ (0.08) $ 0.03
=========== =========== =========== ===========
</TABLE>
- ---------------
(1) Pursuant to the requirements of the Securities and Exchange Commission,
stock options and warrants issued by the Company during the twelve months
immediately preceding the initial public offering have been included in
computing net income (loss) per share as if they were outstanding for all
periods using the treasury stock method.
<PAGE> 1
Exhibit 16
[AMPER, POLITZINER & MATTIA LETTERHEAD]
June 12, 1996
Securities and Exchange Commission
450 Fifth Avenue N.W.
Washington D.C. 20549
RE: Intelligroup, Inc.
We have read the Experts section Intelligroup, Inc., Form SB-2 which is
scheduled to be filed with the Securities and Exchange Commission in June 1996
and are in agreement with the statements in the second paragraph as they relate
to our professional relationship with Intelligroup, Inc.
Sincerely yours,
/s/ Amper, Politziner & Mattia
- ----------------------------------
AMPER, POLITZINER & MATTIA
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
Oxford Systems Inc., a New Jersey corporation and a wholly-owned subsidiary
of Intelligroup, Inc.
Intelligroup New Zealand Limited, a corporation formed pursuant to the laws
of New Zealand and a wholly-owned subsidiary of Intelligroup, Inc.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Intelligroup, Inc.:
As independent public accountants, we hereby consent to the use of our
report and all references to our firm included in or made part of this
registration statement.
ARTHUR ANDERSEN LLP
Princeton, New Jersey
June 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS INCLUDED IN THE REGISTRANT'S FORM SB-2 FOR THE PERIOD ENDED
DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM
SB-2.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 71,000
<SECURITIES> 0
<RECEIVABLES> 5,260,000
<ALLOWANCES> (531,000)
<INVENTORY> 0
<CURRENT-ASSETS> 6,472,000
<PP&E> 381,000
<DEPRECIATION> (99,000)
<TOTAL-ASSETS> 6,784,000
<CURRENT-LIABILITIES> 8,069,000
<BONDS> 0
0
0
<COMMON> 126,000
<OTHER-SE> (1,492,000)
<TOTAL-LIABILITY-AND-EQUITY> 6,784,000
<SALES> 24,589,000
<TOTAL-REVENUES> 24,589,000
<CGS> 20,021,000
<TOTAL-COSTS> 20,021,000
<OTHER-EXPENSES> 4,452,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,175,000
<INCOME-PRETAX> (1,059,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,059,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,059,000)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED INTERIM FINANCIAL STATEMENTS INCLUDED IN THE REGISTRANT'S FORM SB-2
FOR THE PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM SB-2.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 79,000
<SECURITIES> 0
<RECEIVABLES> 6,159,000
<ALLOWANCES> (561,000)
<INVENTORY> 0
<CURRENT-ASSETS> 7,243,000
<PP&E> 408,000
<DEPRECIATION> (123,000)
<TOTAL-ASSETS> 7,642,000
<CURRENT-LIABILITIES> 8,506,000
<BONDS> 0
0
0
<COMMON> 126,000
<OTHER-SE> (1,064,000)
<TOTAL-LIABILITY-AND-EQUITY> 7,642,000
<SALES> 8,836,000
<TOTAL-REVENUES> 8,836,000
<CGS> 6,423,000
<TOTAL-COSTS> 6,423,000
<OTHER-EXPENSES> 1,469,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 315,000
<INCOME-PRETAX> 629,000
<INCOME-TAX> 201,000
<INCOME-CONTINUING> 428,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 428,000
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
