SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 0-20943
INTELLIGROUP, INC.
(Exact Name of Registrant as Specified In Its Charter)
---------------------------------------------------------
New Jersey 11-2880025
- ------------------------------------ ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
499 Thornall Street, Edison, New Jersey 08837
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(732) 590-1600
---------------------------------
(Registrant's Telephone Number,
Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- --------------------- ----------------------------
None
- --------------------------- ----------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
- --------------------------------------------------------------------------------
(Title of Class)
<PAGE>
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes: X No:
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant: $373,363,733 at March 28, 2000 based on the
last sales price on that date.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of March 28, 2000:
Class Number of Shares
- ----- ----------------
Common Stock, $.01 par value 16,377,254
The following documents are incorporated by reference into the Annual
Report on Form 10-K: Portions of the Registrant's definitive Proxy Statement for
its 2000 Annual Meeting of Shareholders are incorporated by reference into Part
III of this Report.
- 2 -
<PAGE>
TABLE OF CONTENTS
Item Page
---- ----
PART I 1. Business.................................................... 4
2. Properties.................................................. 21
3. Legal Proceedings........................................... 21
4. Submission of Matters to a Vote of Security Holders......... 22
PART II 5. Market for the Company's Common Equity and Related
Shareholder Matters......................................... 23
6. Selected Financial Data..................................... 25
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 27
7A. Quantitative and Qualitative Disclosure About Market Risk... 38
8. Financial Statements........................................ 38
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure......................... 38
PART III 10. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16 (a) of the
Exchange Act................................................ 39
11. Executive Compensation...................................... 39
12. Security Ownership of Certain Beneficial Owners
and Management.............................................. 39
13. Certain Relationships and Related Transactions.............. 39
PART IV 14. Exhibits, List and Reports on Form 8-K...................... 40
SIGNATURES.................................................................. 41
EXHIBIT INDEX............................................................... 43
FINANCIAL STATEMENTS........................................................F-1
- 3 -
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
Overview
Intelligroup, Inc. ("Intelligroup" or the "Company") provides a wide range
of information technology services, including enterprise-wide business process
solutions, IT training solutions, systems integration and custom software
development based on leading technologies. In addition, through SeraNova, Inc.
("SeraNova"), a 95.2% owned subsidiary of the Company, the Company provides
professional services, primarily in the area of business to business
interactions on the Internet. Business to business interactions include
communication and commerce conducted between a company and its customers,
suppliers and partners. SeraNova offers a comprehensive set of services,
including strategic consulting, creative design, technology implementation and
management of Internet applications.
The Company was incorporated in New Jersey in October 1987 under the name
Intellicorp, Inc. to provide systems integration and custom software
development. The Company's name was changed to Intelligroup, Inc. in July 1992.
In March 1994, the Company acquired Oxford Systems Inc. ("Oxford"). On December
31, 1996, Oxford was merged into the Company and ceased to exist as an
independent entity. On September 9, 1999, the Company formed Infinient, Inc.
("Infinient") as its wholly-owned subsidiary. In November 1999, the Company
announced its intention to spin off its Internet services business to the
shareholders of Intelligroup, subject to certain conditions. On December 6,
1999, Infinient changed its name to SeraNova, Inc. On January 1, 2000 the
Company transferred its Internet services business to SeraNova. On January 27,
2000, SeraNova filed a Registration Statement with the Securities and Exchange
Commission relating to the proposed spin-off of SeraNova from Intelligroup. Such
spin-off is expected to be effective in the second quarter of 2000. The
Company's executive offices are located at 499 Thornall Street, Edison, New
Jersey 08837 and its telephone number is (732) 590-1600.
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 software developed by SAP AG, based in
Germany, and distributed through its other subsidiaries including SAP America,
Inc. (collectively "SAP") as a primary tool to implement enterprise-wide
business process solutions.
SAP's software is representative of a class of application products known
as Enterprise Resource Planning ("ERP") software. ERP products are pre-packaged
solutions for business areas, including financial information, manufacturing and
human resources. For prospective customers, ERP products are an alternative to
the custom design and development of their own applications. Although ERP
products are pre-packaged, there is a significant amount of technical work
involved in implementing them and tailoring their use for a particular
customer's needs. The Company recognized that this implementation and
customization services work represented a significant potential business
opportunity.
- 4 -
<PAGE>
ERP vendors such as SAP, Oracle, PeopleSoft and Baan, have a vested
interest in encouraging third party service companies to provide implementation
and customization services to customers. These vendors have established formal
programs which are designed to recruit and authorize third party service
companies as service partners. Companies wishing to become authorized partners
must meet performance criteria established by the ERP vendor. They are then
allowed to use the vendor's partner designation and associated logo to promote
their own services. The ERP product vendors also promote these authorized
partners to customers and prospective customers of their ERP products. The
Company believes that such partner status with the ERP vendors has and will
continue to result in direct referrals and enhanced industry recognition.
In 1995, the Company achieved the status of a SAP National Implementation
Partner. In the same year, the Company also began to utilize Oracle's ERP
application products to diversify its service offerings. In 1997, the Company
enhanced its partner status with SAP, by first achieving National Logo Partner
status and then AcceleratedSAP Partner Status. Also, in 1997, the Company
further diversified its ERP-based service offerings, by beginning to provide
PeopleSoft and Baan implementation services. In July 1997, the Company was
awarded PeopleSoft implementation partnership status. In September 1997, the
Company was awarded Baan international consulting partnership status. In June
1998, the Company also expanded its Oracle applications implementation services
practice and added upgrade services to meet market demand of mid-size to large
companies that are implementing or upgrading Oracle applications.
The Company's software implementation, custom development and maintenance
services are enhanced by round-the-clock access to qualified and experienced
programmers at its offices in the United States, United Kingdom, New Zealand and
at its Advanced Development Center ("ADC") located in India. The ADC is
connected by dedicated, high speed satellite links to certain customer sites, as
well as to the Company's operations centers in the United States, the United
Kingdom and New Zealand.
The Company believes that the ADC is one of the world's largest offshore
SAP development centers. In 1998, the ADC was awarded ISO 9001 certification for
offshore SAP development. ISO 9001 is an international certification for
organizations, which achieve and demonstrate required levels of quality in
software development processes. The Company believes that it was the first
services company to achieve ISO 9001 certification for offshore SAP development.
In September 1999, the Company's ISO 9001 certification was extended to include
development, support and optimization services for all enterprise, Internet and
client/server solutions. Such certification covers the Company's work with all
major enterprise software vendors including SAP, Oracle, PeopleSoft and Baan, as
well as Internet applications. In November 1999, the ADC achieved SEI CMM
Level-3 process certification. Such certification is required for the Capability
Maturity Model of Carnegie Mellon University's Software Engineering Institute.
The ADC is operated by Intelligroup Asia Private Ltd. ("Intelligroup
Asia"). The Company owns 99.8% of the shares of Intelligroup Asia. The remaining
shares are expected to be transferred to the Company by the founders in 2000.
Upon consummation of such transfer, Intelligroup Asia will be a wholly owned
subsidiary of the Company.
- 5 -
<PAGE>
In October 1999, the Company created its Internet Development Center
("IDC") in Hyderabad, India. At its IDC, the Company provides Internet solutions
for its clients around the world. The IDC shares the same quality processes as
the ADC. Additionally, the IDC also houses the Company's Enterprise Information
Portal ("EIP") solutions architecture team and provides global support and
training for SeraNova'a consultants.
The Company provides its services directly to end-user organizations, or as
a member of consulting teams assembled by other information technology
consulting firms. The number of customers billed by the Company has grown
substantially from three customers in 1993 to approximately 600 customers in
1999. The Company's customers are Fortune 1000 and other large and mid-sized
companies in the United States and abroad. They have included Armstrong World
Industries, AT&T, Block Drug Company, Bristol-Myers Squibb, IMC Global, Simon &
Schuster, American Express and Volkswagen. The Company has also participated in
project teams lead by information technology consulting firms such as Ernst &
Young LLP, IBM Global Services, KPMG LLP and PricewaterhouseCoopers LLP.
During 1998, the Company made the decision to expand the portfolio of
services offered to existing and potential ERP customers, as well as customers
wishing to implement Internet-based solutions. These service offerings include
management consulting, Internet solutions and ERP and Internet application
outsourcing. This decision was based on the Company's business assessment of
customer needs over the life cycle of their solution. This assessment showed
that:
o many ERP and non-ERP customers need business and technology consulting
-----------------------------------
assistance to prepare and optimize systems plans to support their
organization's business strategies;
o many ERP and non-ERP customers need assistance in designing,
implementing and managing Internet and advanced technology
---------------------------------------
applications, in areas such as web commerce and procurement, customer
relationship management and supply chain management; and
o many customers who install ERP or related Internet solutions need
assistance to maintain, manage and operate those solutions and are open
to proposals to outsource those functions.
By providing a set of services throughout a customer's solution life cycle
and adding Internet solutions services, the Company believes that it is
leveraging its strengths in the ERP market, and broadening and expanding the
potential sources of future business opportunity.
The Company has expanded and intends to continue to expand its service
offerings through an appropriate mix of internal growth and acquisitions. During
1998, the Company expanded its service operations, both domestically and
internationally, through a number of acquisitions. In May 1998, the Company
expanded its PeopleSoft services business in Europe, by acquiring the
outstanding capital stock of each of CPI Consulting Limited and CPI Resources
Limited (the "CPI Companies") located in the United Kingdom. The CPI Companies
provide consulting and implementation services related to PeopleSoft
applications. In November 1998,
- 6 -
<PAGE>
the Company acquired the outstanding capital stock of each of Azimuth Consulting
Limited, Azimuth Holdings Limited, Braithwaite Richmond Limited and Azimuth
Corporation Limited (the "Azimuth Companies") located primarily in New Zealand.
The Azimuth Companies provide business and management consulting services in
Australia, New Zealand and Southeast Asia.
In December 1998, the Application Management Services practice was
reorganized as the worldwide Enterprise Sourcing Services ("ESS") practice. The
ESS practice focuses on selling, delivering and supporting outsourced ERP and
Internet implementation and maintenance services. The offshore ADC in Hyderabad,
India is part of the ESS practice. The ADC enables ESS to take on larger and
more complex implementation projects and outsourcing arrangements, while
maintaining the Company's aggressive implementation schedules and cost-effective
services.
In January 1999, in order to augment the Internet/Advanced Technology
practice, the Company acquired the outstanding capital stock of Network
Publishing, Inc. ("NPI") located in Provo, Utah. NPI provides web site design
and front-end application solutions services. In February 1999, by way of merger
transactions, the Company augmented the PeopleSoft practice in North America by
acquiring Empower Solutions, L.L.C. and its affiliate Empower, Inc. (the
"Empower Companies") located in Plymouth, Michigan.
In November 1999, the Company made a strategic decision (1) to refocus its
core business to capitalize upon the Applications Services Provider ("ASP")
market for customized eCommerce and enterprise applications implementation,
management, support and hosting and (2) to spin off its Internet services
business. The Company services the ASP market with its ASPPlus Solutions which
include implementation, management and hosting of e-commerce solutions and
enterprise applications, as well as its myADVISOR(sm) offering which provides
web-based customer-specific user support. ASPPlus is a mass customization of
mission critical e-commerce and enterprise business applications. Through
ASPPlus, the Company offers pre-configured industry vertical solutions to its
clients' specific e-commerce and enterprise needs.
The Company's Internet services business, operated through SeraNova,
addresses the rapidly growing eBusiness services market. The Company helps its
clients achieve improved time-to-market through a lifecycle suite of Internet
solutions services, from strategy, through design and implementation, to support
and hosting. The Company offers a comprehensive set of services, including
strategic consulting, creative design, technology implementation and management
of Internet applications. The Company uses its proprietary methodology, or
Time-to-Market Approach to deliver professional services. Such methodology
identifies and prioritizes initiatives, rapidly delivers them to market,
captures valuable market experience and feedback and immediately applies the
feedback to refine the solution. The Company believes that this process results
in a solution that provides measurable competitive advantage to its clients.
This approach allows the Company to identify, capture and re-use valuable
Internet frameworks that it develops in client projects.
The Company's services enable traditional businesses to combine the scope
and efficiencies of the Internet with their existing business practices to
provide an integrated eBusiness. The Company also works with emerging
Internet-based companies that conduct their
- 7 -
<PAGE>
business exclusively through the Internet. During the last three years, the
Company has performed Internet solutions services for over 80 clients in a
variety of industries.
Trademarks and Service Marks
"Intelligroup," "4Sight," "4Sight Plus," "myADVISOR," "ASPPlus" and the
Company's logo are service marks and "OIM" and "SeraNova" are trademarks of the
Company.
"Azimuth" is a trademark of Azimuth Consulting, a subsidiary of SeraNova.
"Empower Solutions" is a trademark of Empower Solutions, a subsidiary of
the Company.
All other trade names, trademarks or service marks referenced herein are
the property of their respective owners and are not the property of the Company.
Safe Harbor Statements
This Form 10-K contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, including,
without limitation, statements regarding the Company's intention to shift to
higher margin turnkey management assignments and more complex projects and to
utilize its proprietary implementation methodology in an increasing number of
projects. In addition, statements regarding the Company's intent to expand its
service offerings through internal growth and acquisitions and the Company's
intent to spin-off its Internet services business are also forward-looking
statements. Such forward-looking statements include risks and uncertainties,
including, but not limited to:
o the substantial variability of the Company's quarterly operating
results caused by a variety of factors, many of which are not within
the Company's control, including (a) patterns of software and hardware
capital spending by customers, (b) information technology outsourcing
trends, (c) the timing, size and stage of projects, (d) timing and
impact of acquisitions, (e) new service introductions by the Company
or its competitors and the timing of new product introductions by the
Company's ERP partners, (f) levels of market acceptance for the
Company's services, (g) general economic conditions, (h) the hiring of
additional staff and (i) fixed price contracts;
o changes in the Company's billing and employee utilization rates;
o the Company's ability to manage its growth effectively, which will
require the Company (a) to continue developing and improving its
operational, financial and other internal systems, as well as its
business development capabilities, (b) to attract, train, retain,
motivate and manage its employees, (c) to continue to maintain high
rates of employee utilization at profitable billing rates, (d) to
successfully integrate the personnel and businesses acquired by the
Company, and (e) to maintain project quality, particularly if the size
and scope of the Company's projects increase;
o the Company's ability to maintain an effective internal control
structure;
- 8 -
<PAGE>
o the Company's limited operating history within its current line of
business;
o the Company's reliance on a continued relationship with SAP America
and the Company's present status as a SAP National Logo Partner;
o the Company's substantial reliance on key customers and large
projects;
o the highly competitive nature of the markets for the Company's
services;
o the Company's ability to successfully address the continuing changes
in information technology, evolving industry standards and changing
customer objectives and preferences;
o the Company's reliance on the continued services of its key executive
officers and leading technical personnel;
o the Company's ability to attract and retain a sufficient number of
highly skilled employees in the future;
o the Company's ability to continue to diversify its offerings,
including growth in its Oracle, Baan and PeopleSoft services;
o uncertainties resulting from pending litigation matters and from
potential administrative and regulatory immigration and tax law
matters;
o the Company's ability to protect its intellectual property rights; and
o Year 2000 compliance of vendors' products and related issues,
including impact of the Year 2000 problem on customer buying patterns.
o the Company's ability to successfully spin off its Internet services
business. The risks relating to such spin-off are set forth more
specifically in the Registration Statement filed by SeraNova in
connection with the proposed spin-off.
As a result of these factors and others, the Company's actual results may
differ materially from the results disclosed in such forward-looking statements.
INDUSTRY BACKGROUND
Many large and mid-sized businesses face a rapidly changing business
environment, including intense global competition, accelerating technological
change, and the need to embrace emerging web commerce and procurement
strategies. Such businesses continually seek to improve the quality of products
and services, lower costs, reduce cycle times, optimize their supply chain and
increase value to customers. Businesses are implementing and utilizing advanced
information and Internet technology solutions, that enable them to redesign
their business processes in such areas as product development, service delivery,
manufacturing, sales and human resources.
- 9 -
<PAGE>
Many businesses have adopted information systems strategies using
client/server architectures based on personal computers, local area network/wide
area network ("LAN/WAN"), shared databases and packaged software applications.
Frequently these strategies are intended to replace legacy systems, which are
often mainframe-based, running proprietary software and applications. Such
client/server systems, when developed and implemented appropriately, enable the
creation and utilization of more functional, flexible and cost effective
applications, which are critical to the competitive needs of businesses.
As part of their client/server strategies, organizations often acquire, or
consider acquisition of, packaged enterprise-wide business software
applications, including those offered by leading ERP vendors, such as SAP,
Oracle, PeopleSoft or Baan. These applications are then implemented or
customized to meet their particular business needs. Alternatively, the
organizations may develop, or commission development of, customized software
applications to meet their needs.
For many customers, the issue of Year 2000 compliance has driven their
decisions to migrate to new client/server-based ERP solutions. Others have
decided to retain their legacy mainframe applications and make them Year 2000
compliant, rather than replacing them. In both cases, these customers now have a
set of core operations applications which they use to support their central
business processes. These customers may now face competing internal demands
against their budgets and resources. The customers must balance demands from
their user departments for new, innovative business applications against the
absolute requirement to maintain, manage and optimize the core operations
applications. These competing demands reflect areas of potential business
opportunity for the Company in the areas of management consulting, Internet
solutions and the outsourcing of ERP applications maintenance.
Intense competitive and market pressures continue to force many
organizations to look for improvements in the quality, efficiency and
responsiveness of their end-to-end business models. This would normally require
an in-depth analysis of their business strategies, operational processes and
supporting delivery mechanisms, including information systems. Customers will
sometimes retain external business and management consulting organizations to
assist with this analysis and the preparation of relevant recommendations.
The Internet represents a revolutionary and powerful vehicle through which
businesses and entire industries will conduct day-to-day operations. As a
result, many companies are being forced to reevaluate their business models to
implement new or supplement current Internet-based business solutions. The
development and implementation of Internet-based services and solutions requires
the integration of strategic consulting, creative design and systems engineering
skills. Given the increasing pressure to bring products and offerings to market
quickly, training in-house employees to learn the requisite skills is
impractical. In addition, hiring and maintaining a full-service staff of trained
professionals can be inefficient and costly. Accordingly, many businesses have
chosen to outsource some or all of their Internet services requirements to
outside specialists with strategic, consulting, creative and technical
expertise.
- 10 -
<PAGE>
Two consistent conclusions result from customers' analyses. The first is
the importance of timely access to relevant information, tools and applications,
at reasonable cost, for customers, suppliers, business partners and employees.
The second conclusion is that, because of its low cost and universal
availability, the Internet and associated browser and web technology is becoming
the de-facto information access and delivery standard for many organizations
around the world. Together, these are leading to a new class of web site,
commonly called enterprise information portals. These sites need to be designed
and implemented to provide access to all information, applications and
communications tools required for internal and external users to perform their
designated business functions.
The majority of customers who have implemented, or are implementing, ERP
solutions have been Fortune 2000 companies. The Company believes that
opportunities for new ERP implementations will continue to exist in this
segment, as these companies deploy ERP solutions to subsidiaries and operating
units. In addition, these customers are also faced with the need to manage and
maintain their ERP applications. The Company believes that there is significant
potential business opportunity for implementing ERP version-to-version upgrades
and also for application outsourcing.
Because of the ERP penetration of Fortune 2000 customers, the marketing
focus of the ERP vendors has turned toward mid-market clients. In addition, the
leading ERP vendors are also realigning their sales organizations along industry
segments (e.g. manufacturing, finance etc.). The mid-market segment presents the
most opportunity for new ERP product sales and implementations. Many of these
companies are growing rapidly and are likely to have the need for core financial
and other operations systems that can be addressed by ERP products. The Company
believes that opportunity exists for ERP implementation services to mid-market
clients. This segment is very cost conscious and will require a highly efficient
services delivery model.
In both the Fortune 2000 and mid-market segments, the Company believes that
enterprise information portals will become a focus of many customers'
information systems plans. Enterprise information portals provide customized,
integrated access to information, tools and applications. Much of the demand for
new applications, to be accessed via the portals, will be driven by the
customers' need to compete on such fronts as web commerce, customer relationship
management, sales force automation and supply chain integration. A new wave of
product vendors has emerged, which address these new application requirements.
These include providers of packaged applications, as well as providers of
middleware frameworks designed to simplify the task of building or integrating
custom applications. Often, integration of these new applications with the
customers' core ERP or legacy-based business systems will be critical.
The task of developing and implementing enterprise-wide, mission-critical,
information solutions is complex. It presents significant challenges for most
customer organizations and can be a time consuming and costly undertaking, which
typically requires significant allocation of organizational resources.
Information technology managers must integrate and manage information systems
environments consisting of multiple computing platforms, operating systems,
databases and networking protocols, and as well as multiple packaged and custom
developed applications.
- 11 -
<PAGE>
Companies must also continually keep pace with a broad and often confusing
array of new technological developments, which can render internal information
technology skills obsolete. 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 work forces in the information technology management area.
Accordingly, organizations often lack sufficient, and/or appropriate, technical
resources necessary to design, develop, implement and manage the information
technology solutions needed to support their business needs.
To support their information technology needs, many businesses increasingly
engage experienced outside specialists for assistance across the full life cycle
of their solutions. Because of the heightened business pressures they face,
these customers are demanding innovative solutions, in shorter timeframes, with
lower life cycle cost of ownership, at higher levels of quality and service, all
with lower risk to themselves and their businesses.
As a result of these industry dynamics, demand for information technology
services has grown significantly and changed. It has moved from an
implementation focus to one addressing an integrated view of corporate business
and information processes; it has also moved to a focus on value-based pricing
and cost of ownership over the total life cycle of the solution. These changes
favor services companies which can provide high quality, low cost life cycle
services, and which address high value solution areas for clients' businesses.
THE INTELLIGROUP SOLUTION
Intelligroup improves its clients' business performance, through the
intelligent application of information technology. Intelligroup provides a
continuum of services throughout our clients' solution life cycle. These
services comprise management consulting, ERP solutions design and
implementation, Internet consulting and solution development and enterprise
outsourcing.
We deliver to our clients timely, cost-effective and innovative ERP,
Internet and maintenance solutions by combining our:
Proven Offshore Development and Maintenance Model: The Company has the
ability to develop, implement and maintain business solutions through its
offshore ADC, at high quality and low cost. The ADC, which the Company believes
is one of the world's largest SAP offshore development and maintenance centers,
is ISO 9001 certified for offshore development, support and optimization
services for all enterprise, Internet and client server solutions. Such
certification includes the Company's work with virtually all major enterprise
software vendors including SAP, Oracle, PeopleSoft and Baan, as well as Internet
applications. The ADC has also received SEI CMM Level-3 process certification.
Such certification is required for the Capability Maturity Model of Carnegie
Mellon University's Software Engineering Institute. The center is process driven
and connected to the Company's operations centers in Asia/Pacific, the United
States and Europe via high-speed satellite links. The center operates on a 24x7,
round-the-clock basis, allowing next business day turn-around of work units to
clients. Combining the
- 12 -
<PAGE>
center's quality processes, skilled development team and low cost of operation
allows the Company to compete for implementation and maintenance contracts on a
fixed price/fixed time basis.
The Company's offshore IDC provides Internet solutions, houses the
Company's Enterprise Information Portal (the "EIP") solutions architecture team
and provides global support and training for SeraNova's consultants. The IDC
shares the same quality processes as the ADC.
Expertise in a Wide Range of Technologies, Industries and Disciplines: The
Company's consultants have expertise with SAP, Oracle, PeopleSoft and Baan
products and with a wide variety of leading computing technologies, including
Internet, client/server architectures, object-oriented technologies, CASE,
distributed database management systems, mainframe connectivity, LAN/WAN and
telecommunications technologies. The Company believes that its personnel are
effective because of their technical excellence, their industry experience and
their strong grounding in the disciplines of project implementation and
management.
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.
Proprietary Methodologies: The Company has developed a proprietary
implementation methodology, 4Sight, as well as a software-based implementation
toolset, 4Sight Plus, which are designed to minimize the time required to
develop and implement SAP, Oracle, PeopleSoft and Baan solutions for its
customers. 4Sight and 4Sight Plus are designed to be technology independent and
modular, and have also been extended to support the Company's Internet solutions
engagements. SeraNova's proprietary methodology is SeraNova's Time-to-Market
Approach. SeraNova's Time-to-Market Approach consists of five phases: eStrategy,
discover, plan, implement and optimize. SeraNova's Time-to-Market Approach is
designed to effectively strategize, design and rapidly deploy Internet
solutions.
INTELLIGROUP SERVICES
Intelligroup provides a wide range of information technology services,
including enterprise-wide business process solutions, IT training solutions,
systems integration and custom software development based on leading
technologies.
Historically, the Company's services have ranged 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 agreements, which are terminable upon relatively short notice.
As the Company has re-oriented itself towards serving our clients' needs over
their solutions' entire life cycle, it is beginning to enter into outsourcing
- 13 -
<PAGE>
agreements with customers. The contractual arrangements in these situations will
typically be fixed term, fixed price and multi-year, as is common in the
outsourcing market. The Company's focus on life cycle services is also intended
to encourage ongoing and recurring service relationships, rather than one-time
implementation engagements.
ENTERPRISE RESOURCE PLANNING SOLUTIONS
The Company designs, develops, integrates and implements sophisticated
business process solutions based on SAP, Oracle, PeopleSoft and Baan products,
utilizing its best business practices, methodologies and toolsets. 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.
Accelerated Implementation Methodology and Toolset: As a result of our
experience in implementing ERP software, the Company has developed a proprietary
methodology (4Sight) and associated toolset (4Sight Plus) for implementing
enterprise business software applications. 4Sight Plus also contains a project
management and tracking tool, which the Company utilizes to monitor
implementation projects undertaken for clients. The Company believes that the
use of 4Sight and 4Sight Plus, throughout an implementation project, may enable
its customers to realize significant savings in time and resources. Furthermore,
the Company believes that use of 4Sight Plus also shortens the turn-around time
for program development, as it streamlines the information flow between the
Company's offices and customer sites.
4Sight and 4Sight Plus, initially used by the Company in projects
implementing SAP, were designed to be portable to other packaged software
applications and to be adaptable to the scope of a particular project. 4Sight
and 4Sight Plus have been adapted for Baan, Oracle and PeopleSoft
implementations.
ENTERPRISE SOURCING SERVICES
The ESS practice focuses on selling, delivering and supporting outsourced
ERP and Internet implementation and maintenance services. The offshore ADC in
Hyderabad, India is part of the ESS practice. ESS provides full life cycle
support of ERP and Internet applications through the following service
offerings:
o Offshore Support: These services are provided in conjunction with the
Company's ERP and Internet practices, allowing them to provide
clients with high quality, low cost and time-dependent project
implementation services.
o Outsourcing: The Company provides clients with application
management, support and maintenance services. These services may be
provided on-site, off-site through the Company's operations centers
and ADC, or a combination of both on-site and off-site. The Company's
low cost, high quality ADC delivery model allows the Company to
compete for long term fixed price/fixed time contracts.
- 14 -
<PAGE>
The ESS practice teams with the Company's various ERP and Internet
practices on their implementation projects, and will take the lead role in
selling and delivering longer term outsourcing relationships.
Advanced Development Center: The ADC is an important component of the
Company's value proposition to customers. 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. The center allows the
Company to provide cost-effective, timely and high quality software development,
maintenance and support services to customers throughout the world. Intelligroup
and SeraNova are able to deliver high value services at attractive prices due to
the following: (i) the high level of expertise and experience of our ADC
consultant programmers; (ii) the rigorous application of the Company's
proprietary 4Sight software project methodologies, tools and project management
disciplines; and (iii) the cost structures associated with the ADC's offshore
location in Hyderabad, India.
The ADC is connected by dedicated, high-speed satellite links, to certain
customer sites, as well as the Company's headquarters in the United States, its
European headquarters in the United Kingdom and its office in New Zealand. The
ADC is staffed by over 200 qualified and experienced programmers. The ADC has
performed work on projects with SAP, as well as with Baan and certain custom
Internet solutions. As the Company expands both its ERP and Internet businesses,
the ADC is being prepared to undertake projects in any of the four ERP practices
(SAP, Baan, Oracle and PeopleSoft), as well as certain Internet and other
advanced technologies.
The IDC is central to the Company's global resourcing model for Internet
solutions. The IDC provides Internet solutions for the Company's clients around
the world. Through the IDC, the Company can provide its clients with 24x7
maintenance and support. The IDC shares the same quality processes as the ADC.
Consultants with expertise in technologies from Sun (Java), Microsoft, Vignette
and other leading Internet vendors work out of the center. Additionally, the
center houses the Company's EIP solutions architecture team. The Company intends
to add additional technical competencies at the center. Such competencies
include the technologies that form the basis of the Company's EIP solution
architecture such as Broadvision, Corechange, CrossWorlds, Epicentric, Plumtree
and WebMethods.
APPLICATION SERVICE PROVIDER MARKET SOLUTIONS
The Company services the ASP market with its ASPPlus Solutions which
include implementation, management and hosting of e-commerce solutions and
enterprise applications, as well as its myADVISOR(sm) offering which provides
web-based customer-specific user support. ASPPlus utilizes a mass customization
approach, providing pre-configured vertical industry solutions of mission
critical e-commerce and enterprise business applications. Through ASPPlus, the
Company offers customized solutions to its client's specific e-commerce and
enterprise needs.
- 15 -
<PAGE>
INTERNET SOLUTIONS SERVICES
In 1998, the Company created a practice focusing on providing Internet
consulting and application development services, designed to help companies
develop innovative ways to reach their customers, suppliers and target markets
by leveraging the power of the Internet and corporate intranets. This practice
developed expertise in Internet technologies as well as the integration of those
technologies with ERP and legacy systems. Since January 1, 2000, the Company's
Internet solutions business has been conducted by its subsidiary SeraNova and
SeraNova's subsidiary, NPI.
The Company's core expertise has been in the technical development and
integration of these solutions. However, a key element of the new breed of
Internet solution relates to the projection of the customers' offerings to their
intended Internet audience. The Company, however, did not possess this required
expertise in brand marketing, graphic and multimedia design. With the
acquisition of NPI, the Company is now able to provide those services and
provide a complete Internet solution which combines NPI's web design capability
with the Company's expertise in Internet application development and integration
with ERP systems.
NPI has built a strong track record in designing web-sites that enable
clients to achieve the desired sales and marketing impact. Its customers include
a number of Fortune 500 companies in such industries as automotive, technology
and entertainment. SeraNova intends to leverage its proven 4Sight methodologies
and offshore development model to pursue Internet business opportunities.
SeraNova believes that the existing set of ERP customers will be a receptive
audience for Internet solutions. These customers represent a large and
well-defined target, which can be reached by SeraNova's direct sales and
marketing activities.
A wide variety of Internet solutions may be offered to prospective clients,
including electronic commerce, customer interaction, sales force automation and
web training. SeraNova intends to promote the use of enterprise information
portals in marketing its Internet solutions services. SeraNova's core platform
for business to business solutions development is the EIP. EIP for enterprises
is a customized browser-based interface which allows a company to aggregate all
disparate systems within an enterprise, such as ERP systems, workflow
applications, customer relationship management systems and other business
applications as well as databases under a common platform. Every constituent of
a company, including senior management, salespeople, engineers, suppliers or
customers interact with the enterprise through a single customized browser-based
interface. An EIP integrates all the internal systems, connects them to
applications residing outside the company while managing the security and access
to content and applications. In summary, it provides a flexible and scaleable
platform for business to business activities on the web.
- 16 -
<PAGE>
MANAGEMENT CONSULTING SERVICES
The Company's management consulting practice has focused on two areas: (i)
Business Consulting (covering Business Process Re-engineering, Change
Management, IT Strategy and Software selection); and (ii) Leasing & Asset
Management.
The Company believes that significant value is provided to customers, by
providing business consulting services. Such services also have the potential to
stimulate additional revenue opportunities for the Company, in the execution of
recommendations made to clients. The acquisition of Azimuth Consulting
significantly strengthened Intelligroup's management consulting capabilities.
Founded in 1984, Azimuth has built a strong IT management consulting
organization with operations in New Zealand, Australia, the Philippines and
other Southeast Asian countries. Since its contribution to SeraNova by
Intelligroup on January 1, 2000, Azimuth now operates as a wholly-owned
subsidiary of SeraNova with headquarters in Wellington, New Zealand. The Company
has integrated its existing management consulting services groups in the United
States and Europe, under Azimuth worldwide.
SALES AND MARKETING
The Company historically has generated new sales leads from (i) referrals
from existing customers, (ii) introductions to potential customers by the
Company's alliance partners, which often need to recommend qualified systems
integrators to implement their software products, and (iii) internal sales
efforts. In addition, the Company has been introduced to customers by certain of
its competitors, such as the "Big Five" accounting firms, which at times require
the Company's expertise and ability to deliver qualified personnel for complex
projects.
The Company has dedicated an increased level of resources to sales and
marketing efforts. The Company will continue to market to potential customers
with demonstrated needs for the Company's expertise in ERP and Internet
solutions. The Company intends to implement focused sales management programs,
to leverage its relationships with existing customers, as well as those with ERP
and other product vendors. In particular, the Company has reorganized its SAP
practice along industry lines and will endeavor to partner with SAP's industry
sales organization to seek and close business opportunities.
Among its sales and marketing efforts, the Company's has exhibited and
presented the Company's expertise at trade events associated with the primary
ERP offerings. These include events such as SAPPHIRE, the annual SAP conference
for SAP service providers and end-users, the Americas SAP User Group, the Oracle
Americas User Group, BaanWorld and the PeopleSoft Users Group. The Company
intends to continue participation in such industry-recognized programs and trade
shows. On December 21, 1999, the Company and SeraNova entered into a consulting
services agreement with Mueller/Shields. Additionally, on February 4, 2000, the
Company entered into a consulting services agreement with Mueller/Shields.
Pursuant to such agreements, Mueller/Shields will provide the Company and
SeraNova with sales, marketing, training and strategic planning services.
- 17 -
<PAGE>
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. The Company believes that it
has consistently met customer expectations with respect to budgets and time
schedules.
As of December 31, 1999, the Company's sales and marketing group consisted
of 34 employees in the United States, 9 for Europe, and 30 for the Asia Pacific
region. 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 offices in Phoenix, AZ; Foster City, CA;
Washington, D.C.; Atlanta, GA; Fayetteville, GA; Rosemont, IL; Auburn Hills, MI;
Houston, TX and Provo, UT serve the United States market. In addition, the
Company, also maintains offices in Europe (Denmark, the United Kingdom and
Sweden); Asia Pacific (Australia, India, Japan, New Zealand, Philippines,
Singapore and Thailand). Azimuth Consulting operates worldwide with headquarters
in Wellington, New Zealand. During 1999, the Company's existing management
consulting services groups in the United States and Europe, were merged with
Azimuth worldwide.
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 for complex business
solutions projects 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.
CUSTOMERS
The Company provides its services directly to Fortune 2000 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 Five" accounting firms. The number of
customers billed by the Company has grown substantially from three customers in
1993 to approximately 600 customers in the year ended December 31, 1999.
The Company's ten largest customers accounted for, in the aggregate,
approximately 44%, 38% and 38% of its revenue in 1997, 1998 and 1999,
respectively. During 1997, PricewaterhouseCoopers LLP and Bristol-Myers Squibb
each accounted for more than 10% of revenue. During 1998, no single customer
accounted for more than 10% of revenue. During 1999, the Government of Puerto
Rico accounted for more than 10% of revenue. In 1997, 1998 and 1999, 31%, 19%
and 38%, respectively, of the Company's revenue was generated by serving as a
member of consulting teams assembled by other information technology consulting
firms.
Although the Company has contracts with many of its large customers to
provide its services, in general such contracts are terminable upon relatively
short notice, typically not more
- 18 -
<PAGE>
than 30 days. Under the ESS practice, the Company expects to compete for
multi-year fixed term, fixed price contracts. There can be no assurance that the
Company's customers will continue to enter into contracts with the Company or
that existing contracts will not be terminated.
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. Under certain of the Company's customer
contracts, the Company warrants that it will repair errors or defects in its
deliverables without additional charge to the customer. The Company has not
experienced, to date, any material claims against such warranties. The Company
has purchased and maintains errors and omissions insurance to insure the Company
for damages and expenses incurred in connection with alleged negligent acts,
errors or omissions.
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 the following classes of
companies (some of which are also customers of the Company):
o Consulting and software integration firms: including, IBM Global
Services, Cambridge Technology Partners, MCI Systemhouse, Computer
Sciences Corporation and others.
o "Big Five" accounting firms: Deloitte & Touche, Ernst & Young, KPMG,
PricewaterhouseCoopers.
o Software applications vendors: SAP, Oracle, Baan and PeopleSoft.
o Internet professional service providers: including Sapient, Scient,
Viant and Proxicom.
o General management consulting firms: such as McKinsey & Co., Bain &
Company.
o ASP service providers: Breakaway Solutions, Inc., USinternetworking,
Inc., Interliant, Inc. and Futurelink Corporation.
In addition, the Company competes with smaller companies such as Plaut,
Clarkson-Potomac and Origin.
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
- 19 -
<PAGE>
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 across the
full life cycle of its clients' ERP and Internet solutions. This expertise
includes management consulting skills, plus design and implementation skills in
ERP products (primarily SAP, Oracle, PeopleSoft and Baan), Internet and
application integration and application outsourcing related to those solutions.
There can be no assurance that the Company will be able to continue to compete
successfully with existing and new competitors.
EMPLOYEES
As of December 31, 1999, the Company employed 1,628 full-time employees, of
whom 1,268 were engaged as consultants or as software developers, 73 were
engaged in sales and marketing, and 287 were engaged in sales and delivery
management, finance and administration. Of the total number of employees, 718
were based in the United States, 810 were based in the Asia Pacific region and
100 were based in Europe. In addition, the Company engaged 112 independent
contractors to perform information technology services.
None of the Company's employees is covered by a collective bargaining
agreement. Substantially all of the Company's employees have executed employment
agreements containing non-competition, non-disclosure and non-solicitation
clauses. In addition, the Company requires that all new employees execute such
agreements 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. 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,
non-disclosure 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
also requires that substantially all of its employees and consultants assign to
the Company their rights in
- 20 -
<PAGE>
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.
ITEM 2. PROPERTIES.
As of December 31, 1999, the Company owns no real property and currently
leases or subleases all of its office space. The Company leases its headquarters
in Edison, New Jersey, totaling approximately 48,475 square feet. Such lease has
an initial term of ten (10) years, which commenced in September 1998. 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 sales and operations in Phoenix, AZ;
Foster City, CA; Washington, D.C.; Atlanta, GA; Fayetteville, GA; Rosemont, IL;
Auburn Hills, MI; Houston, TX; and Provo, UT, and operations in Hyderabad,
India; Australia; Sweden, Denmark; Japan; New Zealand; Philippines, Singapore,
Thailand and the United Kingdom.
ITEM 3. LEGAL PROCEEDINGS.
On February 13, 1998, Russell Schultz, a former employee of the Company,
filed a complaint in the Superior Court of New Jersey, Law Division, Monmouth
County, naming the Company as a defendant. The complaint, which seeks damages,
alleges, among other things, that the Company misrepresented plaintiff's job
description in order to induce plaintiff to leave his prior employer, failed to
provide stock options to the plaintiff and violated plaintiff's written
employment contract. The Company was served with the complaint on March 16,
1998. Subsequently, on July 10, 1998, upon the Company's Motion to Compel
Arbitration, the court dismissed the plaintiff's complaint without prejudice.
Subsequently, the plaintiff's motion to reconsider the dismissal was denied. The
plaintiff filed his demand for Arbitration with the American Arbitration
Association on February 17, 1999 and the Company filed its answer on February
26, 1999. On October 12, 1999, the parties negotiated a settlement to dispose of
all claims asserted in this lawsuit. The Company drafted and circulated a
settlement agreement which has been executed by the parties and disposes of the
lawsuit with no material effect on the Company's business, financial condition
or results of operations.
On January 20, 1999, Tony Knight, a former employee of the Company, filed a
complaint in the Superior Court of the State of California, San Mateo County,
naming the Company, among others, as a defendant. The complaint, which seeks
damages, alleges, among other things, that the Company discriminated against
plaintiff because of his race, ancestry, religious creed and national origin and
thereafter wrongfully terminated the plaintiff's employment with the Company.
The Company, through its counsel, acknowledged receipt of the summons and
complaint on April 20, 1999. On May 19, 1999, the Company removed the action
from the California Superior Court to the United States District Court for the
Northern District of California. A discovery scheduling order was entered at the
case management conference held on December 2, 1999. Management believes the
outcome of these proceedings will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
- 21 -
<PAGE>
There is no other material litigation pending to which the Company is a
party or to which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
- 22 -
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
The Common Stock is quoted on the Nasdaq National Market (the "NNM") under
the symbol "ITIG." The following table sets forth, for each of the periods
indicated, the high and low sale prices per share of Common Stock as quoted on
the NNM. The prices shown represent quotations among securities dealers, do not
include retail markups, markdowns or commissions and may not represent actual
transactions.
Quarter Ended High Low
------------- ---- ---
March 31, 1998 $ 21 1/2 $14 1/2
June 30, 1998 $ 23 5/8 $15
September 30, 1998 $ 24 1/4 $16
December 31, 1998 $ 19 3/4 $10 5/8
March 31, 1999 $ 20 1/2 $ 5 1/4
June 30, 1999 $ 9 5/8 $ 5
September 30, 1999 $ 7 11/16 $ 5 1/8
December 31, 1999 $ 27 11/16 $ 6 7/8
As of March 28, 2000, the approximate number of holders of record of the
Common Stock was 89 and the approximate number of beneficial holders of the
Common Stock was 2,730.
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.
All information relating to the Common Stock of the Company in this Annual
Report on Form 10-K reflects a 81,351.1111-for-1 stock split of the Common Stock
effected July 12, 1996, prior to the Company's initial public offering of its
Common Stock in September 1996.
The following information relates to all securities of the Company sold by
the Company which were not registered under the Securities Act of 1933, as
amended (the "Securities Act"), at the time of grant, issuance and/or sale, and
have not previously been disclosed in a Quarterly Report on Form 10-Q:
On May 7, 1998, the Company, through its wholly-owned
subsidiary Intelligroup Europe Limited (No. 3205142), a
corporation formed pursuant to the laws of England and Wales
("Intelligroup Europe"), consummated the acquisition (the
"Consulting Acquisition") of thirty percent (30%) of the equity
interests in CPI Consulting Limited (No. 3316554), a corporation
formed pursuant to the laws of England and Wales ("Consulting").
In addition, on May 21, 1998, the Company consummated the
acquisition (the "Resources Acquisition") of all of the equity
interests in CPI Resources Limited (No. 2080824), a corporation
formed pursuant to the laws of England and Wales ("Resources").
As a result of the Resources Acquisition, the Company acquired
Resources' seventy percent (70%) interest in Consulting. The
principal activity of each of Resources and Consulting is
providing information technology consulting staffing services in
the United Kingdom.
- 23 -
<PAGE>
In connection with the Consulting Acquisition, on March 22,
1999, the Company issued an aggregate of 155,208 restricted
shares of its Common Stock, $0.01 par value per share, to the
minority investors relating to the earn-out provision of the
Agreement of Purchase and Sale. On June 10, 1999, the Company
filed an amendment to its Registration Statement on Form S-3 to
register an aggregate of 77,604 of such shares. On January 28,
2000, the Company filed an amendment to its Registration
Statement on Form S-3 to register an aggregate of 77,604,
representing the balance of such shares The Company did not and
will not receive any of the proceeds from sales of the shares by
the minority investors.
On February 16, 1999, the Company consummated (i) the merger
of Empower Solutions, L.L.C., a Michigan limited liability
company, with and into the Company's wholly-owned subsidiary ES
Merger Corp., a Michigan corporation ("ES Merger Corp."), and
(ii) the merger of ES Merger Corp. with and into Empower, Inc. a
Michigan corporation and an affiliate of Empower Solutions,
L.L.C. (the mergers of Empower Solutions, L.L.C. and its
affiliate Empower, Inc. shall be referred to herein collectively
as the "Merger"). As a result of the Merger, Empower, Inc.
("Empower") became a wholly-owned subsidiary of the Company.
Empower is an implementation partner of PeopleSoft and its
principle activities are business process reengineering, systems
design development, project management and training services. The
Merger was accounted for as a pooling of interests.
In connection with the Merger, on December 22, 1999, the
Company issued an aggregate of 179,611 restricted shares of its
Common Stock, $0.01 par value per share, to Patrick J. Kavanaugh,
Kurt A. Collins, Marcelo J. Casas and Jay D. Hiller relating to
the provisions of the Net Book Value Adjustment provision of the
Agreement and Plan of Merger. On January 28, 2000, the Company
filed an amendment to its Registration Statement on Form S-3 to
register such shares. The Company did not and will not receive
any of the proceeds from sales of the shares by Messrs.
Kavanaugh, Collins, Casas and Hiller.
On January 8, 1999, the Company consummated the acquisition
(the "NPI Acquisition") of all of the shares of outstanding
capital stock of Network Publishing, Inc. ("NPI"), a Utah
corporation located in Provo, Utah. As a result of the NPI
Acquisition, NPI became a wholly-owned subsidiary of the Company.
The principal activities of NPI are web site design and front-end
application solutions services.
Subsequent to the year ended December 31, 1999, and in
connection with the NPI Acquisition, on January 11, 2000, the
Company issued an aggregate of 99,558 restricted shares of its
Common Stock, $0.01 par value per share, to Richard Maw, Richard
Farr and Michael Donahue relating to the provisions of the
earn-out provision of the Stock Purchase Agreement. On January
28, 2000, the Company filed an amendment to its Registration
Statement on Form S-3 to register such shares. The Company did
not and will not receive any of the proceeds from sales of the
shares by Messrs. Maw, Farr and Donahue.
- 24 -
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The selected statement of operations data for the years ended December 31,
1997, 1998 and 1999 and the selected balance sheet data as of December 31, 1998
and 1999 are derived from, are qualified by reference to, and should be read in
conjunction with, the more detailed audited consolidated financial statements
and the related notes thereto included elsewhere herein. The selected statement
of operations data for the year ended December 31, 1995 and 1996 and the
selected balance sheet data as of December 31, 1995, 1996 and 1997 have been
derived from audited financial statements of the Company which are not included
elsewhere herein. Prior period financial information has been restated to
reflect the Company's acquisitions of Empower Solutions, L.L.C. and its
affiliate Empower, Inc. during 1999, which were accounted for in accordance with
the pooling of interests rules under generally accepted accounting principles.
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>
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................................ $ 39,283 $ 61,699 $ 98,301 $ 162,840 $ 186,067
Cost of sales.......................................... 29,263 43,142 67,452 104,984 119,857
-------- -------- -------- --------- ---------
Gross profit......................................... 10,020 18,557 30,849 57,856 66,210
-------- -------- -------- --------- ---------
Selling, general and administrative expenses........... 8,401 14,544 22,449 38,074 60,807
Acquisition expenses................................... -- -- -- 2,118 2,115
Spin-off costs......................................... -- -- -- -- 751
Restructuring and other special charges................ -- -- -- -- 7,328
-------- -------- -------- --------- ---------
Total selling, general and administrative expenses... 8,401 14,544 22,449 40,192 71,001
-------- -------- -------- --------- ---------
Operating (loss) income.............................. 1,619 4,013 8,400 17,664 (4,791)
Factor charges/interest expense (income), net.......... 1,327 1,335 (265) (187) 593
-------- -------- -------- --------- ---------
(Loss) income before provision for income taxes and
extraordinary charge................................. 292 2,678 8,665 17,851 (5,384)
Provision for income taxes............................. 587 748 2,327 4,451 1,206
-------- -------- -------- --------- ---------
(Loss) Income before extraordinary charge.............. (295) 1,930 6,338 13,400 (6,590)
Extraordinary charge, net of income tax
benefit of $296...................................... -- 1,148 -- -- --
-------- -------- -------- --------- ---------
Net (loss) income................................ $ (295) $ 782 $ 6,338 $ 13,400 $ (6,590)
======== ======== ======== ========= =========
Earnings (loss) per share(1):
Basic earnings (loss) per share:
(Loss) income before extraordinary charge.......... $ (0.02) $ 0.18 $ 0.43 $ 0.87 $ (0.42)
Extraordinary charge, net of income tax benefit.... -- 0.11 -- -- --
-------- -------- -------- --------- ---------
Net (loss) income................................ $ (0.02) $ 0.07 $ 0.43 $ 0.87 $ (0.42)
======== ======== ======== ========= =========
Weighted average number of common shares - Basic....... 15,011 11,003 14,637 15,387 15,766
======== ======== ======== ========= =========
Diluted earnings (loss) per share:
(Loss) income before extraordinary charge............ $ (0.02) $ 0.16 $ 0.42 $ 0.84 $ (0.42)
Extraordinary charge, net of income tax benefit...... -- 0.10 -- -- --
-------- -------- -------- --------- ---------
Net (loss) income................................ $ (0.02) $ 0.06 $ 0.42 0.84 $ (0.42)
======== ======== ======== ========= =========
Weighted average number of common shares - Diluted..... 15,011 12,263 15,117 15,969 15,766
======== ======== ======== ========= =========
</TABLE>
- 25 -
<PAGE>
<TABLE>
<CAPTION>
As of December 31,
-----------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- ----------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........................... $ 1,412 $ 8,301 $ 8,825 $ 4,245 $ 6,121
Working capital surplus (deficit)................... (991) 16,246 30,500 32,641 29,133
Total assets........................................ 12,571 24,945 43,064 69,565 83,062
Short-term debt, including subordinated
debentures........................................ 3,608 226 386 11 10,705
Long-term debt and obligations under capital leases,
less current portion............................... 206 108 355 60 618
Shareholders' equity................................ 128 18,280 34,036 47,949 48,654
</TABLE>
(1) Basic and diluted earnings per share have replaced primary and fully diluted
earnings per share in accordance with SFAS No. 128.
- 26 -
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
RESULTS OF OPERATIONS
OVERVIEW
The Company provides a wide range of information technology services,
including enterprise-wide business process solutions, IT training solutions,
systems integration and custom software development based on leading
technologies. In November 1999, the Company announced its intentions to spin-off
its Internet applications services business (SeraNova). Through SeraNova, the
Company provides professional services, primarily in the area of business to
business interactions on the Internet. Business to business interactions include
communication and commerce conducted between a company and its customers,
suppliers and partners. SeraNova offers a comprehensive set of services,
including strategic consulting, creative design, technology implementation and
management of Internet applications. 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 software
developed by SAP as a primary tool to implement enterprise-wide business process
solutions. In 1995, the Company achieved the status of a SAP National
Implementation Partner. In the same year, the Company also began to utilize
Oracle's ERP application products to diversify its service offerings. In 1997,
the Company enhanced its partner status with SAP, by first achieving National
Logo Partner status and then AcceleratedSAP Partner Status. Also, in 1997, the
Company further diversified its ERP-based service offerings, by beginning to
provide PeopleSoft and Baan implementation services. In July 1997, the Company
was awarded PeopleSoft implementation partnership status. In September 1997, the
Company was awarded Baan international consulting partnership status. In June
1998, the Company also expanded its Oracle applications implementation services
practice and added upgrade services to meet market demand of mid-size to large
companies that are implementing or upgrading Oracle applications.
During 1998 and 1999, the Company expanded its operations through
acquisitions. On May 7, 1998, the Company acquired thirty percent of the
outstanding share capital of CPI Consulting Limited. The acquisition of CPI
Consulting Limited was accounted for utilizing the purchase method of
accounting. The consideration paid by the Company included the issuance of
165,696 shares of the Company's Common Stock with a fair market value of $3.1
million at the time of purchase. An additional 155,208 shares of the Company's
Common Stock with a fair market value of $2.5 million was paid on March 22, 1999
pursuant to an earn-out relating to the operational results for the balance of
1998. The excess of the purchase price over the fair value of the net assets
acquired was attributed to intangible assets, amounting in the aggregate to $5.8
million.
On May 21, 1998, the Company acquired all of the outstanding share capital
of CPI Resources Limited. The acquisition of CPI Resources Limited was accounted
for as a pooling of interests. Prior results for all periods have been restated
in accordance with pooling of interests accounting. As consideration for this
acquisition, the Company issued 371,000 shares of the Company's Common Stock. At
the time of the acquisition, CPI Resources Limited owned seventy percent of the
outstanding share capital of CPI Consulting Limited.
- 27 -
<PAGE>
The CPI Companies provide consulting and implementation services related to
PeopleSoft applications.
On November 25, 1998, the Company consummated the acquisition of all of the
outstanding capital stock of each of Azimuth Consulting Limited, Azimuth
Holdings Limited, Braithwaite Richmond Limited and Azimuth Corporation Limited
(collectively the "Azimuth Companies"). The acquisition of the Azimuth Companies
was accounted for as a pooling of interests. Prior results for all periods have
been restated in accordance with pooling of interests accounting. As
consideration for this acquisition, the Company issued 902,928 shares of the
Company's Common Stock.
The Azimuth Companies provide business and management consulting services.
Founded in 1984, Azimuth has built a strong IT management consulting
organization with operations in New Zealand, Australia, the Philippines and
Southeast Asian countries.
On January 8, 1999, in order to augment the Internet/Advanced Technology
Practice, the Company acquired the outstanding capital stock of NPI located in
Provo, Utah. The purchase price included an initial cash payment in the
aggregate of $1,800,000 together with a cash payment of $200,000 to be held in
escrow. In addition, the purchase price included an earn-out payment of up to
$2,212,650 in restricted shares of the Company's Common Stock payable on or
before April 15, 2000 and a potential lump sum cash payment of $354,024 payable
no later than March 31, 2000. The value of the earn-out was determined to be
$2,430,000 which was payable by the issuance of an additional 99,558 shares of
the Company's Common Stock and cash of $340,000. Such shares were issued by the
Company on January 11, 2000, however, such transaction was accounted for in
1999. This acquisition has been accounted for utilizing the purchase method of
accounting. The excess of the purchase price over the fair value of the net
assets acquired was attributed to intangible assets amounting to $4,061,471 in
the aggregate. NPI provides web site design and front-end application solutions
services. NPI has built a strong track record in designing web-sites that enable
clients to achieve the desired sales and marketing impact.
In addition, by way of merger transactions, the Company augmented its
PeopleSoft practice in North America by acquiring the Empower Companies located
in Plymouth, Michigan on February 16, 1999. The purchase price consisted of the
issuance of an aggregate of 1,831,091 restricted shares of the Company's Common
Stock. In addition, the Company issued an additional 179,611 shares of its
Common Stock in connection with a net worth adjustment determined as of the
closing date. The acquisition of the Empower Companies was accounted for as a
pooling of interests. Prior results for all periods have been restated in
accordance with pooling of interests accounting. The Empower Companies provide
business process reengineering, system design and development, project
management and training services.
The Company generates revenue from professional services rendered to
customers. 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, typically not
more than 30 days, and without significant penalty, generally limited to fees
earned and expenses incurred by the
- 28 -
<PAGE>
Company through the date of termination. 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 provided services on certain projects in which it, at the
request of the clients, offered a fixed price for its services. For the year
ended December 31, 1999, revenues derived from projects under fixed price
contracts represented approximately 9% of the Company's total revenue. No single
fixed price project was material to the Company's business during 1999. However,
one fixed price project, which began late in 1998 and is expected to be
completed in early 2000, represented 4% of the Company's revenue during 1999.
The Company believes that, as it pursues its strategy of making turnkey project
management a larger portion of its business, it will continue to offer fixed
price projects. The Company has had limited prior experience in pricing and
performing under fixed price arrangements and believes that there are certain
risks related thereto and thus prices such arrangements to reflect the
associated risk. There can be no assurance that the Company will be able to
complete such projects within the fixed price timeframes. The failure to perform
within such fixed price contracts, if entered into, could have a material
adverse effect on the Company's business financial condition and results of
operations.
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, 1997, 1998 and 1999, the Company's
ten largest customers accounted for in the aggregate, approximately 44%, 38% and
38% of its revenue, respectively. In 1997, PricewaterhouseCoopers LLP accounted
for approximately 10% of revenue. During 1998, no customer accounted for more
than 10% of revenue. During 1999, the Government of Puerto Rico accounted for
more than 10% of revenue. For the years ended December 31, 1997, 1998 and 1999,
31%, 19% and 38%, respectively, of the Company's revenue was generated by
serving as a member of consulting teams assembled by other information
technology consulting firms. 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,
1997, 1998 and 1999, 56%, 52% and 42%, respectively, of the Company's total
revenue was derived from projects in which the Company implemented software
developed by SAP. For each of the years ended December 31, 1997 1998 and 1999,
approximately 12% 11% and 7%, respectively, of the Company's total revenue was
derived from projects in which the Company implemented software developed by
Oracle. For each of the years ended December 31, 1997, 1998 and 1999,
approximately 12%, 19% and 26%, respectively, of the Company's total revenue was
derived from projects in which the Company implemented software developed by
PeopleSoft.
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
- 29 -
<PAGE>
typically carry higher margins. The Company has been shifting 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 both new and existing customers. The
Company's inability to continue its shift to higher-margin turnkey management
assignments and more complex projects may adversely impact the Company's future
growth.
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 operations facility in India, the ADC, and in
1995 established a sales office in California. In addition, from 1994 to date,
the Company has incurred expenses to develop proprietary development tools and
its proprietary accelerated implementation methodology and toolset. Since 1995,
the Company has also been increasing its sales force and its marketing, finance,
accounting and administrative staff, in order to manage its growth.
Additionally, in September 1999, the Company established its IDC in India to
provide Internet solutions for its clients around the world. The Company
currently maintains its headquarters in Edison, New Jersey, and branch offices
in Houston, Fayetteville (Georgia), Rosemont (Illinois), Auburn Hills
(Michigan), Foster City (California), Atlanta, Phoenix, Washington, D.C. and
Provo (Utah). The Company also currently maintains offices in Europe (the United
Kingdom, Denmark, and Sweden), and Asia Pacific (Australia, India, Japan, New
Zealand, the Philippines, Singapore and Thailand). The Company leases its
headquarters in Edison, New Jersey, totaling approximately 48,475 square feet.
Such lease has an initial term of ten (10) years, which commenced in September
1998.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain financial
data expressed as a percentage of total revenue:
<TABLE>
<CAPTION>
Percentage of Revenue
-------------------------------------------
Year Ended
December 31,
-------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenue.......................................... 100.0% 100.0% 100.0%
Cost of sales.................................... 64.4 64.5 68.6
------ ------ ------
Gross profit................................... 35.6 35.5 31.4
Selling, general and administrative expenses..... 32.7 23.4 22.8
Acquisition expenses............................. 1.1 1.3 --
Spin-off costs................................... 0.4 -- --
Restructuring and other special charges.......... 3.9 -- --
------ ------ ------
Operating (loss) income........................ (2.5) 10.8 8.6
Interest and other (expense) income, net......... (0.3) 0.1 0.3
------ ------ ------
(Loss) income before provision for income taxes
and extraordinary charge......................... (2.8) 10.9 8.9
Provision for income taxes....................... 0.7 2.7 2.4
------ ------ ------
(Loss) income before extraordinary charge........ (3.5) 8.2 6.5
Extraordinary charge, net of income tax benefit.. -- -- --
------ ------ ------
Net (loss) income ............................. (3.5)% 8.2% 6.5%
====== ====== ======
</TABLE>
- 30 -
<PAGE>
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenue. Total revenue increased by 14.3% or $23.3 million, from $162.8
million in 1998 to $186.1 million in 1999. Enterprise applications services
("EAS") revenue declined by 0.8% or $1.2 million from $147.5 million in 1998 to
$146.3 million in 1999. This decrease was primarily attributable to a decrease
in expenditures on ERP implementations, related to Y2K concerns as companies
shifted resources away from mission critical, enterprise-wide applications.
Internet applications services ("IAS") revenue increased by 158.4%, or $24.4
million, from $15.4 million in 1998 to $39.8 million in 1999. The increase in
revenue is the result of an increase in the number of clients and an increase in
the average size of engagements, as well as the acquisition of Network
Publishing, Inc. on January 8, 1999.
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 14.2%, or $14.9 million, from $105.0
million in 1998 to $119.9 million in 1999. The Company's gross profit increased
$8.4 million, or 14.5%, from $57.8 million in 1998 to $66.2 million in 1999. The
Company's gross profit margin remained relatively constant at 35.5% of revenue
in 1998 and 35.6% of revenue in 1999. The EAS cost of sales increased 1.4%, or
$1.3 million, from $96.0 million in 1998 to $97.3 million in 1999. The EAS gross
profit margin decreased from 34.9% in 1998 to 33.4% in 1999. The decrease was
primarily attributable to lower staff utilization, experienced as a result of a
decrease in the ERP implementation market. IAS cost of sales increased by $13.5
million, or 150.0%, from $9.0 million in 1998 to $22.5 million in 1999. The
increase was due to personnel costs resulting from the hiring of additional
consultants to support the increase in demand for IAS. IAS gross profit margins
increased from 41.6% in 1998 to 43.5% in 1999, primarily attributable to the
higher margins generated by Network Publishing, Inc.
Selling, general and administrative expenses. Selling, general and
administrative expenses consist primarily of administrative salaries, and
related benefits costs, occupancy costs, sales person compensation, travel and
entertainment, costs associated with the ADC and the IDC and related development
costs and professional fees. Selling, general and administrative expenses
increased by 59.7%, or $22.7 million, from $38.1 million in 1998 to $60.8
million in 1999, and increased as a percentage of revenue from 23.4% to 32.7%,
respectively. EAS selling, general and administrative expenses increased by
35.4%, or $11.2 million, from $31.6 million in 1998 to $42.8 million in 1999.
IAS selling, general, and administrative expenses increased by $11.6 million, or
181.3%, from $6.4 million in 1998 to $18.0 million in 1999. The increases in
such expenses in absolute dollars and as a percentage of revenue were primarily
due to the increase in salaries and related benefits, reflecting headcount
increases in the Company's sales force and its marketing, finance, accounting
and administrative staff through acquisitions and in order to manage its growth.
The Company's occupancy costs increased as a result of the relocation of its
corporate headquarters into approximately 48,000 square feet of office space,
from its former location, which consisted of approximately 17,000 square feet.
In addition, the Company experienced increases in sales and management
recruiting costs, occupancy costs as additional offices were opened in the
United States, support services and the provision for doubtful accounts. The
Company has also entered into an agreement with a strategic marketing
- 31 -
<PAGE>
consulting company, which will generate sales leads, support sales force, and
build a salessystems infrastructure, for both the enterprise applications
services and Internet applications services businesses.
Acquisition expense. During the year ended December 31, 1999, the Company
incurred costs of $2.1 million in connection with the acquisition of the Empower
Companies. This acquisition was accounted for as a pooling of interests.
Acquisition costs primarily consisted of professional fees associated with such
acquisition.
Spin-off costs. During the year ended December 31, 1999, the Company
incurred costs of $751,000 in connection with the proposed spin-off of SeraNova
from the Company. These costs primarily consisted of professional fees.
Restructuring and other special charges. In connection with management's
plan to reduce costs and improve operating efficiencies, the Company incurred a
non-recurring charge of $5.6 million related to restructuring initiatives during
the year ended December 31, 1999. The restructuring charge included settlement
of the former chief executive officer's employment agreement and additional
severance payment, expenses associated with the termination of certain employees
in the United States and the United Kingdom, the closing of certain satellite
offices in the United States and an additional office in Belgium, and costs to
exit certain contractual obligations. Over 83% of the restructuring charges were
paid out in 1999. Additionally, the Company recorded a reserve of approximately
$1.7 million against an outstanding receivable from a large ERP account, whose
parent corporation filed for protection under Chapter 11 of the U.S. bankruptcy
laws.
Interest expense (income). Interest income has been earned on interest
bearing cash accounts and short term investments. In accordance with investment
guidelines approved by the Company's Board of Directors, cash balances in excess
of those required to fund operations have been invested in short-term U.S.
Treasury securities and commercial paper with a credit rating no lower than
A1/P1. The Company incurred approximately $800,000 in interest expense during
the year ended December 31, 1999, primarily related to its borrowings under its
line of credit. Borrowings under the line of credit were used to fund operating
activities, purchases of computer equipment and office furniture and fixtures,
as well as for acquisitions. The interest expense was partially offset by
interest income of $207,000 in 1999.
Provision for income taxes. While the Company experienced an overall
pre-tax loss, profits generated in certain foreign jurisdictions resulted in tax
expense for the year ended December 31, 1999. Although the Company expects these
foreign taxes to produce foreign tax credits in the United States, the ability
to apply these credits may be limited and, therefore, the Company has provided a
valuation allowance against such tax credits which has negatively impacted
income tax expense. The Company's effective income tax rate was 22% and 25% for
the years ended December 31, 1999 and 1998, respectively. The 1999 effective
income tax rate was negatively impacted by nondeductible amortization from the
NPI Acquisition. In 1996, the Company elected a five year tax holiday in India
in accordance with a local tax incentive program whereby no income tax will be
due during such period. Such tax holiday was extended
- 32 -
<PAGE>
an additional five years in 1999. For the year ended December 31, 1999 and 1998,
the taxholiday favorably impacted the effective tax rate by approximately 18%
and 7%, respectively. Based on current and anticipated profitability, management
believes all recorded net deferred tax assets are more likely than not to be
realized.
As discussed in Note 11 to the consolidated financial statements, on
February 16, 1999, the Company acquired Empower Solutions, L.L.C. and Empower,
Inc. (a corporation organized under subchapter S of the Internal Revenue Code).
The acquisitions were accounted for as poolings of interests and thus prior year
financial statements have been restated in accordance with the pooling of
interests rules. The Empower Companies were pass-through entities for tax
reporting purposes, thus their income was not taxed at the corporate level.
Accordingly, the Company's federal statutory tax rate was reduced by 17% and 13%
for 1999 and 1998, respectively.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenue. Revenue increased by 65.7% or $64.5 million, from $98.3 million in
1997 to $162.8 million in 1998. EAS revenue increased by 65.5%, or $58.4
million, from $89.1 million in 1997 to $147.5 million in 1998. This increase was
attributable primarily to increased demand for the Company's ERP implementation
consulting services. IAS revenue increased by 67.4%, or $6.2 million, from $9.2
million in 1997 to $15.4 million in 1998. The increase in revenue is the result
of an increase in the number of clients and an increase in the average size of
engagements.
Gross profit. The Company's cost of sales increased by 55.6%, or $37.5
million, from $67.5 million in 1997 to $105.0 million in 1998. The increase was
due to increased personnel costs resulting from the hiring of additional
consultants to support the increase in demand for the Company's services. The
Company's gross profit increased by 87.5%, or $27.0 million, from $30.8 million
in 1997 to $57.9 million in 1998. The Company's gross profit margin increased
from 31.4% of revenue in 1997 to 35.5% of revenue in 1998. The EAS cost of sales
increased 53.6%, or $33.5 million, from $62.5 million in 1997 to $96.0 million
in 1998. The EAS gross profit margin increased from 29.9% in 1997 to 34.9% in
1998. These increases in gross profit and margin reflect both the expanded
utilization of the Company's offshore development facility in India, and the
increase in implementation service projects where the Company has project
management responsibilities, which typically carry higher gross margins, than
those in which the Company provides supplemental staffing for client managed
projects. IAS cost of sales increased by $4.1 million, or 83.7%, from $4.9
million in 1997 to $9.0 million in 1998. IAS gross profit margins decreased from
46.7% in 1997 to 41.6% in 1998, primarily attributable to lower utilization
rates attained during expansion of the United States operations, and therefore,
higher costs as compared with established foreign operations.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 69.6%, or $15.6 million, from $22.4 million
in 1997 to $38.1 million in 1998, and increased as a percentage of revenue from
22.8% to 23.4%, respectively. EAS selling, general and administrative expenses
increased by 73.6%, or $13.4 million, from $18.2 million in 1997 to $31.6
million in 1998. IAS selling, general, and administrative expenses increased by
- 33 -
<PAGE>
$2.2 million, or 52.4%, from $4.2 million in 1997 to $6.4 million in 1998. The
increases in such expenses in absolute dollars and as a percentage of revenue
were due primarily to the increase in salaries and related benefits, reflecting
headcount increases in the Company's sales force and its marketing, finance,
accounting and administrative staff through acquisitions and in order to manage
its growth. The Company's occupancy costs increased as a result of the
relocation of its corporate headquarters into approximately 48,000 square feet
of office space, from its former location, which consisted of approximately
17,000 square feet. In addition, the Company experienced increases in sales and
management recruiting costs, occupancy costs as additional offices were opened
in the United States, support services and the provision for doubtful accounts.
Acquisition expense. During the year ended 1998, the Company incurred costs
of $2,118,000 in connection with the acquisitions of the CPI Resources Limited
and the Azimuth Companies, each of which was accounted for as a pooling of
interests. These costs primarily consisted of professional fees associated with
such acquisitions.
Provision for income taxes. The Company's effective income tax rate was 25%
and 27% for the years ended December 31, 1998 and 1997. During 1997, the Company
reduced its valuation allowance by $207,000 as management determined that it was
more likely than not, that the applicable portion of the net deferred tax asset
would be or had been realized. The 1997 valuation allowance reduction favorably
impacted the effective income tax rate by 3%. In 1996, the Company elected a
five year tax holiday in India in accordance with a local tax incentive program
whereby no income tax will be due during such period. For the year ended
December 31, 1998 and 1997, the tax holiday favorably impacted the effective tax
rate by approximately 7% and 6%, respectively. Based on current and anticipated
profitability, management believes all net deferred tax assets are more likely
than not to be realized.
As discussed in Note 11 to the consolidated financial statements, on
February 16, 1999, the Company acquired Empower Solutions, L.L.C. and Empower,
Inc. (a corporation organized under subchapter S of the Internal Revenue Code).
The acquisitions were accounted for as poolings of interests and thus prior year
financial statements have been restated in accordance with the pooling of
interests rules. The Empower Companies were pass-through entities for tax
reporting purposes, thus their income was not taxed at the corporate level.
Accordingly, the Company's federal statutory tax rate was reduced by 13% and 6%
for 1998 and 1997, respectively.
BACKLOG
The Company normally 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
- 34 -
<PAGE>
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
The Company funds its operations primarily from cash flow generated from
operations and financing activities, and prior to 1998 from cash balances
generated from the Company's initial and follow-on public offerings consummated
in October 1996 and July 1997, respectively.
The Company had cash and cash equivalents of $6.1 million at December 31,
1999 and $4.2 million at December 31, 1998. The Company had working capital of
$29.1 million at December 31, 1999 and $32.6 million at December 31, 1998.
Cash used in operating activities was $4.8 million during the year ended
December 31, 1999, resulting primarily from the net loss, as well as growth in
accounts receivable, unbilled services and income taxes receivable. This was
offset partially by depreciation and amortization of $4.1 million, a provision
for doubtful accounts of $4.9 million and increases in accrued payroll and
related taxes, accrued expenses and other liabilities and income taxes payable.
Cash provided by operating activities was $6.1 million during the year ended
December 31, 1998. Cash used in operating activities during the year ended
December 31, 1997 was $6.6 million.
In accordance with investment guidelines approved by the Company's Board of
Directors, cash balances in excess of those required to fund operations have
been invested in short-term U.S. Treasury securities and commercial paper with a
credit rating no lower than A1/P1.
The Company invested $4.3 million, $7.1 million and $2.4 million in
computer equipment and office furniture and fixtures in 1999, 1998 and 1997,
respectively. The increase reflects purchases of computer and telecommunications
equipment for consultants and administrative staff and office furniture and
fixtures related to the Company's headquarters in Edison, New Jersey, and other
offices opened during 1999.
On January 8, 1999, the Company acquired Network Publishing, Inc., based in
Provo, Utah. The purchase price included an initial cash payment in the
aggregate of $1,800,000 together with a cash payment of $200,000 to be held in
escrow. In addition, the purchase price included an earn-out payment of up to
$2,212,650 in restricted shares of the Company's Common Stock payable on or
before April 15, 2000, and a potential lump sum cash payment of $354,024 payable
not later than March 31, 2000. The earn-out was determined to be $2,430,000
which was payable by the issuance of an additional 99,558 shares of the
Company's Common Stock and $340,000 in cash. The Company issued such shares on
January 11, 2000.
From January 1997 until January 1999, the Company had a credit facility
with a bank, which included a revolving line of credit and a component for
equipment term loans. Such credit facility was terminated in January 1999.
- 35 -
<PAGE>
On January 29, 1999, the Company entered into an unsecured three-year $30
million Revolving Credit Loan Agreement (the "Loan Agreement") with PNC Bank,
N.A. (the "Bank"). The proceeds of the credit facility may be used by the
Company for financing acquisitions and general corporate purposes. At the
Company's option, for each loan, interest shall be computed either at the Bank's
prime rate per annum or the Adjusted Libor Rate plus the Applicable Margin, as
such terms are defined in the Loan Agreement. The Company's obligations under
the credit agreement are payable at the expiration of such facility on January
29, 2002. Approximately $10.6 million was outstanding under this credit facility
at December 31, 1999.
The credit agreement contains financial covenants which require the Company
to (i) maintain a consolidated cash flow leverage ratio equal to or less than
2.5 to 1.0 for the period of four fiscal quarters preceding the date of
determination taken together as one accounting period ("Consolidated Cash Flow
Leverage Ratio"), (ii) maintain a consolidated net worth of not less than
consolidated net worth of the prior fiscal year plus 50% of positive net income
for such fiscal year ("Consolidated Net Worth"), (iii) not enter into any
agreement to purchase and/or pay for, or become obligated to pay for capital
expenditures, long term leases, capital leases or sale lease-backs, in an amount
at any time outstanding aggregating in excess of $5,000,000 during any fiscal
year, provided, however, in a one year carry-forward basis, the Company may
incur capital expenditures not to exceed $8,000,000 during any fiscal year, and
(iv) not cause or permit the minimum fixed charge coverage ratio, calculated on
the basis of a rolling four quarters to be less than 1.4 to 1.0 as at the end of
each fiscal quarter ("Minimum Fixed Charge Coverage Ratio").
As a result of the restructuring and other special charges incurred during
the quarter ended June 30, 1999, the Company was not in compliance with the
Consolidated Cash Flow Leverage Ratio and Consolidated Net Worth financial
covenants at June 30, 1999. On August 12, 1999, the Bank notified the Company
that such non-compliance constituted an Event of Default under the Loan
Agreement. At September 30, 1999, while the Company was in compliance with the
Consolidated Net Worth financial covenant, it was not in compliance with the
Consolidated Cash Flow Leverage Ratio and Minimum Fixed Charge Coverage Ratio
financial covenants. On January 26, 2000, the Company finalized with the Bank
the terms of a waiver and amendment to the Loan Agreement to remedy defaults
which existed under the Loan Agreement. The terms of the waiver and amendment
include, among other things, (i) a $15 million reduction in availability under
the Loan Agreement, (ii) a first priority perfected security interest on all of
the assets of the Company and its domestic subsidiaries and (iii) modification
of certain financial covenants and a waiver of prior covenant defaults.
The Company believes that its available funds, together with current credit
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 12
months.
- 36 -
<PAGE>
RECENTLY ISSUED ACCOUNTING STANDARDS
In April, 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities." The SOP requires all costs incurred as start-up costs or
organization costs be expenses as incurred. The Company adopted the SOP on
January 1, 1999 and it did not have any impact on the Company's consolidated
financial statements.
In March, 1998, the Accounting Standards Executive Committee issued SOP
98-1. Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." This SOP requires that computer software costs that are incurred
in the preliminary project stage be expensed as incurred and that criteria be
met before capitalization of costs to develop or obtain internal use computer
software. The Company adopted the SOP on January 1, 1999 and it did not have a
material impact on the Company's consolidated financial statements.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative financial instruments and hedging activities
related to those instruments, as well as other hedging activities. Because the
Company does not currently hold any derivative instruments and does not engage
in hedging activities, the Company expects the adoption of SFAS No. 133 will not
have a material impact on its financial position, results of operations, or cash
flows. The Company will be required to adopt SFAS No. 133 in fiscal 2001 in
accordance with SFAS No. 137, which delays the required implementation of SFAS
No. 133 for one year.
YEAR 2000 COMPLIANCE
The Company did not experience any significant computer or systems problems
relating to the Year 2000. Upon review of the Company's internal and external
systems during 1999, the Company determined that it did not have any material
exposure to such computer problems and that the software and systems required to
operate its business and provide its services were Year 2000 compliant. As a
result, the Company did not incur, and does not expect to incur, any material
expenditures relating to Year 2000 systems issues.
EUROPEAN MONETARY UNION (EMU)
The euro was introduced on January 1, 1999, at which time the eleven
participating EMU member countries established fixed conversion rates between
their existing currencies (legacy currencies) and the euro. The legacy
currencies will continue to be used as legal tender through January 1, 2002;
thereafter, the legacy currencies will be canceled and euro bills and coins will
be used for cash transactions in the participating countries. The Company's
European sales and operations offices affected by the euro conversion have
established plans to address the systems issues raised by the euro currency
conversion and are cognizant of the potential business implications of
converting to a common currency. The Company is unable to determine the ultimate
financial impact of the conversion on its operations, if any, given that the
impact will be dependent upon the competitive situations which exist in the
various regional markets in which
- 37 -
<PAGE>
the Company participates and the potential actions which may or may not be taken
by the Company's competitors and suppliers.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS.
The financial statements required to be filed pursuant to this Item 8 are
included in this Annual Report on Form 10-K. A list of the financial statements
filed herewith is found at "Item 14. Exhibits, List, and Reports on Form 8-K."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
- 38 -
<PAGE>
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The information relating to the Company's directors, nominees for
election as directors and executive officers under the headings "Election of
Directors" and "Executive Officers" in the Company's definitive proxy statement
for the 2000 Annual Meeting of Shareholders is incorporated herein by reference
to such proxy statement.
ITEM 11. EXECUTIVE COMPENSATION.
The discussion under the heading "Executive Compensation" in the
Company's definitive proxy statement for the 2000 Annual Meeting of Shareholders
is incorporated herein by reference to such proxy statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The discussion under the heading "Security Ownership of Certain
Beneficial Owners and Management" in the Company's definitive proxy statement
for the 2000 Annual Meeting of Shareholders is incorporated herein by reference
to such proxy statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The discussion under the heading "Certain Relationships and Related
Transactions" in the Company's definitive proxy statement for the 2000 Annual
Meeting of Shareholders is incorporated herein by reference to such proxy
statement.
- 39 -
<PAGE>
PART IV
ITEM 14. EXHIBITS, LIST, AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements.
Reference is made to the Index to Financial Statements on Page F-1.
(a) (2) Financial Statement Schedules.
None.
(a) (3) Exhibits.
Reference is made to the Index to Exhibits on Page 43.
(b) Reports on Form 8-K.
Subsequent to the year ended December 31, 1999, the Company, on
March 22, 2000, filed a report on Form 8-K relating to the sale
by SeraNova, Inc., the Company's wholly-owned subsidiary, of
approximately 4.8% of its common stock to four institutional
investors for an aggregate purchase price of $10 million.
- 40 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized this 30th day of March,
2000.
INTELLIGROUP, INC.
By: /s/ Ashok Pandey
---------------------------------
Ashok Pandey, Co-Chief Executive
Officer
- 41 -
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Ashok Pandey Co-Chief Executive Officer and March 30, 2000
- --------------------------
Ashok Pandey Director (principal executive
officer)
/s/ Nagarjun Valluripalli Co-Chief Executive Officer and March 30, 2000
- --------------------------
Nagarjun Valluripalli Director
/s/ Nicholas Visco Vice President- Finance March 30, 2000
- --------------------------
Nicholas Visco (principal financial and
accounting officer)
/s/ Rajkumar Koneru Director March 30, 2000
- --------------------------
Rajkumar Koneru
/s/ Klaus Besier Director March 30, 2000
- --------------------------
Klaus Besier
/s/ Dennis McIntosh Director March 30, 2000
- --------------------------
Dennis McIntosh
- 42 -
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
2 Agreement and Plan of Merger of the Company and its wholly owned
subsidiary Oxford Systems Inc. (Incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1996).
3.1 Amended and Restated Certificate of Incorporation. (Incorporated by
reference to the Company's Registration Statement on Form SB-2
(Registration Statement No. 333-5981) declared effective on September
26, 1996).
3.2 Amended and Restated Bylaws. (Incorporated by reference to the
Company's Registration Statement on Form SB-2 (Registration Statement
No. 333-5981) declared effective on September 26, 1996).
4.1 Shareholder Protection Rights Agreement dated as of November 6, 1998,
between the Company and American Stock Transfer & Trust Company which
includes (I) the Form of Rights Certificate and (ii) the Certificate
of Amendment to the Amended and Restated Certificate of Incorporation
of Intelligroup, Inc. (Incorporated by reference to Exhibit No. 4.1 of
the Company's Report on Form 8-K dated November 9, 1998, filed with
the Securities and Exchange Commission on November 9, 1998).
10.1* 1996 Stock Plan, as amended, of the Company. (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999).
10.2* 1996 Non-Employee Director Stock Option Plan. (Incorporated by
reference to the Company's Registration Statement on Form SB-2
(Registration Statement No. 333-5981) declared effective on September
26, 1996).
10.3 Form of Indemnification Agreement entered into by the Company and each
of its Directors and officers. (Incorporated by reference to the
Company's Registration Statement on Form SB-2 (Registration Statement
No. 333-5981) declared effective on September 26, 1996).
10.4+ Employment Agreement dated October 1, 1999 between the Company and
Nicholas Visco.
10.5 Employee's Invention Assignment and Confidentiality Agreement.
(Incorporated by reference to the Company's Registration Statement on
Form SB-2 (Registration Statement No. 333-5981) declared effective on
September 26, 1996).
- 43 -
<PAGE>
10.6 Services Provider Agreement by and between Oracle Corporation and the
Company dated July 26, 1994. (Incorporated by reference to the
Company's Registration Statement on Form SB-2 (Registration Statement
No. 333-5981) declared effective on September 26, 1996). See Exhibit
10.9.
10.7 Amended and Restated Agreement by Messrs. Pandey, Koneru and
Valluripalli dated July 16, 1996 to indemnify the Company for certain
losses. (Incorporated by reference to the Company's Registration
Statement on Form SB-2 (Registration Statement No. 333-5981) declared
effective on September 26, 1996).
10.8 Agreement by and between the Company and Intelligroup Asia Private
Limited ("Intelligroup Asia") relating to operational control of
Intelligroup Asia, with related agreements. (Incorporated by reference
to the Company's Registration Statement on Form SB-2 (Registration
Statement No. 333-5981) declared effective on September 26, 1996).
10.9 Amendment No. 1 to Services Provider Agreement by and between Oracle
Corporation and the Company dated December 30, 1996. (Incorporated by
reference to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996). See Exhibit 10.6.
10.10 R/3 National Logo Partner Agreement by and between SAP America, Inc.
and the Company dated as of April 29, 1997. (Incorporated by reference
to the Company's Registration Statement on Form SB-2 (Registration
Statement No. 333-29119) declared effective on June 26, 1997). See
Exhibits 10.12 and 10.28.
10.11* Employment Agreement dated December 6, 1996 between the Company and
Anthony Knight, as amended on February 18, 1997 (Incorporated by
reference to the Company's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1997).
10.12 ASAP Partner Addendum to R/3 National Logo Partner Agreement between
SAP America, Inc. and the Company effective July 1, 1997 (amends
existing R/3 National Logo Partner Agreement). (Incorporated by
reference to the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1997). See Exhibits 10.10 and 10.28.
10.13 Implementation Partner Agreement between PeopleSoft, Inc. and the
Company effective July 15, 1997. (Incorporated by reference to the
Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997). See Exhibit 10.27.
- 44 -
<PAGE>
10.14 Consulting Alliance Agreement with Baan International B.V. and the
Company effective September 29, 1997. (Incorporated by reference to
the Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997).
10.15 Lease Agreement between Alfieri-Parkway Associates, as Landlord, and
Intelligroup, Inc., as Tenant, dated March 17, 1998. (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998).
10.16* Employment Agreement dated April 22, 1998 between the Company and
Gerard E. Dorsey. (Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998).
10.17* Employment Agreement dated April 27, 1998 between the Company and
Stephen A. Carns. (Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998).
10.18* Change in Control Severance Pay Agreement dated November 4, 1998
between the Company and Gerard Dorsey.
10.19* Change in Control Severance Pay Agreement dated November 4, 1998
between the Company and Alan Ziegler.
10.20* Revolving Credit Loan Agreement between PNC Bank, National Association
and the Company dated January 29, 1999. See Exhibit 10.36 and 10.37.
10.21 Agreement of Purchase and Sale dated as of May 7, 1998 among the
Company, Intelligroup Europe Limited and the Shareholders of CPI
Consulting Limited. (Incorporated by reference to the Company's Report
on Form 8-K filed May 27, 1998).
10.22 Agreement of Purchase and Sale dated as of May 21, 1998 among the
Company, Intelligroup Europe Limited and the Shareholders of CPI
Resources Limited. (Incorporated by reference to the Company's Report
on Form 8-K filed May 27, 1998).
10.23 Agreement of Purchase and Sale dated as of November 25, 1998 among the
Company and the Shareholders of each of Azimuth Consulting Limited,
Azimuth Holdings Limited, Braithwaite Richmond Limited and Azimuth
Corporation Limited. (Incorporated by reference to the Company's
Report on Form 8-K filed December 8, 1998).
- 45 -
<PAGE>
10.24 Stock Purchase Agreement dated as of December 21, 1998 among the
Company and the Shareholders of Network Publishing, Inc. (Incorporated
by reference to the Company's Report on Form 8-K filed January 8,
1999).
10.25 Agreement and Plan of Merger dated as of February 16, 1999 by and
among the Company, ES Merger Corp., Empower Solutions, LLC and the
members of Empower Solutions, LLC. (Incorporated by reference to the
Company's Report on Form 8-K filed February 24, 1999.)
10.26 Agreement and Plan of Merger dated as of February 16, 1999 by and
among the Company, ES Merger Corp., Empower Solutions, Inc. and the
stockholders of Empower, Inc. (Incorporated by reference to the
Company's Report on Form 8-K filed February 24, 1999.)
10.27* Fifth Amendment to the Implementation Partner Agreement dated July 15,
1998, between the Company and PeopleSoft, Inc. See Exhibit 10.13.
10.28* Amendment to the National Implementation Partner Agreement dated as of
January 1, 1999, between SAP America and the Company. See Exhibits
10.10 and 10.12.
10.29+ Contribution Agreement by and between Intelligroup, Inc. and SeraNova,
Inc. dated as of January 1, 2000.
10.30+ Distribution Agreement by and between Intelligroup, Inc. and SeraNova,
Inc. dated as of January 1, 2000.
10.31+ Services Agreement by and between Intelligroup, Inc. and SeraNova,
Inc. dated as of January 1, 2000.
10.32+ Space Sharing Agreement by and among Intelligroup, Inc. and SeraNova,
Inc. dated as of January 1, 2000.
10.33+ Tax Sharing Agreement by and between Intelligroup, Inc. and SeraNova,
Inc. dated as of January 1, 2000.
10.34+ Master Consulting Services Agreement by and between Intelligroup, Inc.
and Mueller/Shields dated as of February 4, 2000.
10.35+ Master Consulting Services Agreement by and among Intelligroup,
SeraNova, Inc. and Mueller/Shields dated as of December 21, 1999.
- 46 -
<PAGE>
10.36* First Amendment to Revolving Credit Loan Agreement by and between
Intelligroup, Inc., a New Jersey corporation, and PNC Bank, National
Association, a national banking association. (Incorporated by
reference to the Company's Amendment No. 1 to Registration Statement
on Form S-3 (Registration No. 333-94285) declared effective on
February 9, 2000. See Exhibit 10.20 and 10.37.
10.37+ Second Amendment to Revolving Credit Loan Agreement by and between
Intelligroup, Inc., a New Jersey corporation, and SeraNova, Inc., a
New Jersey corporation, and PNC Bank, National Association, a national
banking association. See Exhibit 10.20 and 10.36.
21+ Subsidiaries of the Registrant.
23+ Consent of Arthur Andersen LLP.
27.1+ Financial Data Schedule for the year ended December 31, 1999.
27.2+ Financial Data Schedule for the year ended December 31, 1998.
27.3+ Financial Data Schedule for the year ended December 31, 1997.
- ----------
* A management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 14(c) of Form 10-K.
+ Filed herewith. All other exhibits previously filed.
- 47 -
<PAGE>
INTELLIGROUP, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Public Accountants.................................... F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1999 and 1998................ F-3
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997.................................. F-4
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1999, 1998 and 1997............................ F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997................................. F-6
Notes to Consolidated Financial Statements.................................. F-7
Financial Statement Schedules
Financial Statement Schedules required by the Securities and
Exchange Commission have been omitted as the required information
is included in the Notes to the Consolidated Financial Statements
or are not applicable.
F - 1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Intelligroup, Inc.:
We have audited the accompanying consolidated balance sheets of
Intelligroup, Inc. (a New Jersey corporation) and subsidiaries as of December
31, 1999 and 1998, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial statements referred to above present
fairly, in all material respects, the financial position of Intelligroup, Inc.
and its subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 6, 2000 (except with
respect to Note 13, as to which
the date is March 14, 2000).
F - 2
<PAGE>
INTELLIGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents............................. $ 6,121,000 $ 4,245,000
Accounts receivable, less allowance for doubtful
accounts of $3,292,000 and $1,053,000 at
December 31, 1999 and 1998, respectively............ 35,063,000 33,622,000
Unbilled services..................................... 11,372,000 10,842,000
Income taxes receivable............................... 3,612,000 --
Deferred tax asset.................................... 2,481,000 808,000
Other current assets.................................. 3,468,000 4,197,000
------------- -------------
Total current assets.............................. 62,117,000 53,714,000
Property and equipment, net............................. 11,420,000 9,506,000
Intangible assets, net.................................. 8,681,000 5,629,000
Other assets............................................ 844,000 716,000
------------- -------------
$ 83,062,000 $ 69,565,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable...................................... $ 4,672,000 $ 5,347,000
Accrued payroll and related taxes..................... 7,078,000 6,254,000
Accrued expenses and other liabilities................ 5,599,000 2,999,000
Accrued acquisition costs............................. 810,000 3,302,000
Income taxes payable.................................. 4,120,000 3,160,000
Current portion of long term debt and obligations
under capital leases................................ 10,705,000 11,000
------------- -------------
Total current liabilities......................... 32,984,000 21,073,000
------------- -------------
Long term debt and obligations under capital leases, less
current portion....................................... 618,000 60,000
------------- -------------
Deferred tax liability.................................. 806,000 483,000
------------- -------------
Commitments and contingencies
Shareholders' Equity
Preferred stock, $.01 par value, 5,000,000 shares
authorized, none issued or outstanding.............. -- --
Common stock, $.01 par value, 25,000,000 shares
authorized, 15,949,000 and 15,573,000 shares issued
and outstanding at December 31, 1999 and 1998,
respectively........................................ 160,000 156,000
Additional paid-in capital............................ 43,356,000 35,261,000
Retained earnings..................................... 6,317,000 13,077,000
Currency translation adjustments...................... (1,179,000) (545,000)
------------- -------------
Total shareholders' equity ....................... 48,654,000 47,949,000
------------- -------------
$ 83,062,000 $ 69,565,000
============= =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
F - 3
<PAGE>
INTELLIGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Revenue................................................. $ 186,067,000 $ 162,840,000 $ 98,301,000
Cost of sales........................................... 119,857,000 104,984,000 67,452,000
------------- ------------- -------------
Gross profit...................................... 66,210,000 57,856,000 30,849,000
------------- ------------- -------------
Selling, general and administrative expenses............ 60,807,000 38,074,000 22,449,000
Acquisition expenses.................................... 2,115,000 2,118,000 --
Spin-off costs.......................................... 751,000 -- --
Restructuring and other special charges................. 7,328,000 -- --
------------- ------------- -------------
Total operating expenses.......................... 71,001,000 40,192,000 22,449,000
------------- ------------- -------------
Operating (loss) income........................... (4,791,000) 17,664,000 8,400,000
-------------- ------------- -------------
Other expenses:
Interest expense (income), net........................ 593,000 (187,000) (265,000)
------------- -------------- --------------
(Loss) income before provision for income taxes......... (5,384,000) 17,851,000 8,665,000
Provision for income taxes.............................. 1,206,000 4,451,000 2,327,000
------------- ------------- -------------
Net (loss) income....................................... $ (6,590,000) $ 13,400,000 $ 6,338,000
============= ============= =============
Earnings per share:
Basic earnings per share:
Net (loss) income per share..................... $ (0.42) $ 0.87 $ 0.43
============= ============ =============
Weighted average number of common shares - Basic.. 15,766,000 15,387,000 14,637,000
============ ============ =============
Diluted earnings per share:
Net (loss) income per share..................... $ (0.42) $ 0.84 $ 0.42
============= ============ =============
Weighted average number of common shares - Diluted 15,766,000 15,969,000 15,117,000
============ ============ =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F - 4
<PAGE>
INTELLIGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
CUMULATIVE
RETAINED FOREIGN COMPREHENSIVE
ADDITIONAL EARNINGS CURRENCY TOTAL (LOSS) INCOME
COMMON STOCK PAID-IN (ACCUMULATED TRANSLATION SHAREHOLDERS' FOR THE
SHARES AMOUNT CAPITAL DEFICIT) ADJUSTMENTS EQUITY PERIOD
---------- ---------- ---------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996..... 14,011,000 $ 140,000 $19,838,000 $(2,319,000) $ 85,000 $17,744,000 $ 850,000
===========
Issuance of common stock, net of
related costs.................... 1,150,000 12,000 9,888,000 -- -- 9,900,000 --
Exercise of stock options........ 102,000 1,000 838,000 -- -- 839,000 --
Tax benefit from exercise of
stock options.................... -- -- 248,000 -- -- 248,000 --
Shareholder dividends............ -- -- -- (849,000) -- (849,000) --
Currency translation adjustments -- -- -- -- (184,000) (184,000) $ (184,000)
Net income....................... -- -- -- 6,338,000 -- 6,338,000 6,338,000
---------- ---------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1997..... 15,263,000 153,000 30,812,000 3,170,000 (99,000) 34,036,000 $ 6,154,000
===========
Issuance of common stock in
connection with acquisitions..... 166,000 2,000 3,126,000 -- -- 3,128,000 --
Exercise of stock options........ 144,000 1,000 1,021,000 -- -- 1,022,000 --
Tax benefit from exercise of
stock options.................... -- -- 302,000 -- -- 302,000 --
Adjustment for difference in
Azimuth fiscal periods........... -- -- -- 32,000 -- 32,000 --
Shareholder dividends............ -- -- -- (3,525,000) -- (3,525,000) --
Currency translation adjustments -- -- -- -- (446,000) (446,000) $ (446,000)
Net income....................... -- -- -- 13,400,000 -- 13,400,000 13,400,000
---------- ---------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998..... 15,573,000 156,000 35,261,000 13,077,000 (545,000) 47,949,000 $12,954,000
===========
Issuance of common stock in
connection with acquisitions..... 155,000 2,000 4,589,000 -- -- 4,591,000 --
Exercise of stock options........ 221,000 2,000 2,996,000 -- -- 2,998,000 --
Tax benefit from exercise of
stock options.................... -- -- 510,000 -- -- 510,000 --
Shareholder dividends............ -- -- -- (170,000) -- (170,000) --
Currency translation adjustments -- -- -- -- (634,000) (634,000) $ (634,000)
Net loss......................... -- -- -- (6,590,000) -- (6,590,000) (6,590,000)
---------- ---------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999..... 15,949,000 $ 160,000 $43,356,000 $ 6,317,000 $(1,179,000) $48,654,000 $(7,224,000)
========== ========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F - 5
<PAGE>
INTELLIGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income.................................................... $ (6,590,000) $ 13,400,000 $ 6,338,000
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Depreciation and amortization.................................... 4,061,000 1,538,000 571,000
Provision for doubtful accounts.................................. 4,931,000 1,268,000 765,000
Deferred income taxes............................................ (1,400,000) (92,000) 98,000
Tax benefit from exercise of stock options....................... 510,000 302,000 248,000
Other............................................................ -- -- 78,000
Changes in operating assets and liabilities, net of acquired
businesses:
Accounts receivable.............................................. (5,461,000) (13,826,000) (11,194,000)
Unbilled services................................................ (530,000) (3,002,000) (4,920,000)
Income taxes receivable.......................................... (3,612,000) -- --
Other current assets............................................. 786,000 (3,406,000) (255,000)
Other assets..................................................... (128,000) (357,000) (134,000)
Accounts payable................................................. (680,000) 3,388,000 1,086,000
Accrued payroll and related taxes................................ 412,000 2,685,000 743,000
Accrued expenses and other liabilities........................... 2,179,000 2,130,000 (563,000)
Income taxes payable............................................. 772,000 2,081,000 521,000
------------- ------------- -------------
Net cash (used in) provided by operating activities.......... (4,750,000) 6,109,000 (6,618,000)
------------- ------------- -------------
Cash flows from investing activities:
Purchases of equipment............................................... (4,349,000) (7,116,000) (2,436,000)
Acquisition of businesses, net of cash acquired...................... (1,682,000) -- --
------------- ------------- -------------
Net cash used in investing activities........................ (6,031,000) (7,116,000) (2,436,000)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs........ -- -- 9,918,000
Proceeds from exercise of stock options.............................. 2,998,000 1,022,000 839,000
Proceeds from shareholder loans...................................... -- -- 235,000
Repayments of shareholders' loans.................................... -- (618,000) (375,000)
Shareholder dividends - Empower Companies............................ (170,000) (3,525,000) (849,000)
Proceeds from line of credit borrowings, net......................... 10,585,000 -- --
Repayments of other borrowings....................................... (110,000) -- --
Principal payments under capital leases.............................. (12,000) (6,000) (6,000)
------------- ------------- -------------
Net cash provided by (used in) financing activities.......... 13,291,000 (3,127,000) 9,762,000
------------- ------------- -------------
Effect of foreign currency exchange rate changes on cash............. (634,000) (446,000) (184,000)
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents......... 1,876,000 (4,580,000) 524,000
Cash and cash equivalents at beginning of year.......................... 4,245,000 8,825,000 8,301,000
------------- ------------- -------------
Cash and cash equivalents at end of year................................ $ 6,121,000 $ 4,245,000 $ 8,825,000
============= ============= =============
Supplemental disclosures of cash flow information:
Cash paid for interest............................................... $ 834,000 $ 24,000 $ --
============= ============= =============
Cash paid for income taxes........................................... $ 3,858,000 $ 2,428,000 $ 1,707,000
============= ============= =============
Supplemental disclosures of non-cash transactions:
Issuance of common stock in connection with acquisitions............. $ 4,591,000 $ 3,128,000 $ --
============= ============= =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F - 6
<PAGE>
INTELLIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Intelligroup, Inc., and its subsidiaries (the "Company") provide a wide
range of information technology services, including management consulting,
enterprise-wide business process solutions, Internet applications services,
applications outsourcing and maintenance, systems integration and custom
software development based on leading technologies. The Company markets its
services to a wide variety of industries, the majority of which are in the
United States. The majority of the Company's business is with large established
companies, including consulting firms serving numerous industries.
Principles of Consolidation and Use of Estimates
The accompanying financial statements include the accounts of Intelligroup,
Inc. and its majority owned subsidiaries. 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 and
disclosure of contingent 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.
Cash and Cash Equivalents
Cash and cash equivalents consist of investments in highly liquid
short-term instruments, with original maturities of three months or less from
the date of purchase.
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 related assets (five years). Leasehold improvements are
amortized over the shorter of the lease term or the estimated useful life (ten
years). Costs of maintenance and repairs are charged to expense as incurred.
Intangible Assets
Intangible assets at December 31, 1999 and 1998 include goodwill and other
intangibles totaling $8,681,000 and $5,629,000, respectively, that were
attributable to the acquisitions of Network Publishing, Inc. and CPI Consulting
(See Note 11). These intangible assets are being amortized over the estimated
useful lives ranging from 5 to 15 years using the straight-line method.
Amortization expense was $1,009,000 and $147,000 in 1999 and 1998, respectively.
F - 7
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 an hourly or 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 at December 31, 1999 and 1998
represent services provided which are billed subsequent to year-end. All such
amounts are anticipated to be realized in the following year.
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. Credit is granted to substantially all
customers on an unsecured basis. In determining the amount of the allowance,
management is required to make certain estimates and assumptions. The provision
for doubtful accounts totaled $4,931,000, $1,268,000 and $765,000 in 1999, 1998
and 1997, respectively. Accounts written off totaled $2,692,000, $1,143,000 and
$512,000 in 1999, 1998 and 1997, respectively.
Recoverability of Long-Lived Assets
The Company reviews the recoverability of its long-lived assets on a
periodic basis whenever events and changes in circumstances have occurred which
may indicate a possible impairment. The assessment for potential impairment is
based primarily on the Company's ability to recover the carrying value of its
long-lived assets from expected future cash flows from its operations on an
undiscounted basis. The Company does not believe that any such events or changes
in circumstances have occurred. The amount of impairment of goodwill would be
determined as part of the long-lived asset groupings being evaluated.
Stock-Based Compensation
Stock-based compensation is recognized using the intrinsic value method
under Accounting Principles Board (APB) No. 25. For disclosure purposes, pro
forma net (loss) income and earnings per share impacts are provided as if the
fair market value method had been applied.
Currency Translation
Assets and liabilities relating to foreign operations are translated into
U.S. dollars using exchange rates in effect at the balance sheet date; income
and expenses are translated into U.S. dollars using monthly average exchange
rates during the year. Translation adjustments associated with assets and
liabilities are excluded from income and credited or charged directly to
shareholders' equity.
F - 8
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentrations
For the years ended December 31, 1999, 1998 and 1997, approximately 42%,
52% and 56% of revenue, respectively, was derived from projects in which the
Company's personnel implemented software developed by SAP. The Company's future
success in its SAP-related consulting services depends largely on its continued
relationship with SAP and on its continued status as a SAP National
Implementation Partner, which was first obtained in 1995. The Company's
agreement with SAP (the "Agreement") is awarded on an annual basis. The
Company's current contract expires on December 31, 2000 and is automatically
renewed for successive one-year periods, unless terminated by either party. This
Agreement contains no minimum revenue requirements or cost sharing arrangements
and does not provide for commissions or royalties to either party. In July 1997,
the Company achieved Accelerated SAP Partner Status with SAP by meeting certain
established criteria established by SAP. Additionally, for each of the years
ended December 31, 1999, 1998 and 1997, approximately 7%, 11% and 12%,
respectively, of revenue was derived from projects in which the Company's
personnel implemented software developed by Oracle. For each of the years ended
December 31, 1999, 1998 and 1997, approximately 26%, 19% and 12%, respectively,
of the Company's total revenue was derived from projects in which the Company
implemented software developed by PeopleSoft.
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 years
ended December 31, 1999, 1998 and 1997, 38%, 19% and 31%, respectively, of the
Company's revenue was generated by serving as a member of consulting teams
assembled by other information technology consulting firms.
One customer accounted for approximately 11% and 8% of revenue in 1999 and
1998, respectively. Accounts receivable due from this customer was approximately
$5,900,000 and $2,560,000 as of December 31, 1999, and 1998, respectively. One
customer accounted for approximately 10% of revenue in 1997.
During 1999 and 1998, the Company derived revenues totaling $58,000 and
$1.7 million, respectively, from contracts with an entity whose chief executive
officer is a director of the Company.
Income Taxes
The provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," ("SFAS No. 109") 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 bases of
assets and liabilities, using enacted tax rates currently in effect. The Company
does not provide for additional U.S. income taxes on undistributed earnings
considered to be permanently invested in foreign subsidiaries.
F - 9
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings Per Share
Basic earnings per share is computed by dividing income attributable to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding, adjusted for the incremental dilution of outstanding stock options.
The computation of basic earnings per share and diluted earnings per share were
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- --------------
<S> <C> <C> <C>
Net (Loss) Income......................... $(6,590,000) $13,400,000 $ 6,338,000
---------- ---------- ----------
Denominator:
Weighted average number of common
shares................................. 15,766,000 15,387,000 14,637,000
Basic (loss) earnings per share........ $ (0.42) $ 0.87 $ 0.43
========== ========== ==========
Denominator:
Weighted average number of common
shares................................. 15,766,000 15,387,000 14,637,000
Common share equivalents of
outstanding stock options.............. -- 582,000 480,000
---------- ---------- ----------
Total shares.............................. 15,766,000 15,969,000 15,117,000
---------- ---------- ----------
Diluted (loss) earnings per share......... $ (0.42) $ 0.84 $ 0.42
========== ========== ==========
</TABLE>
Stock options, which would be antidilutive (3,927,280 as of December 31,
1999), have been excluded from the calculations of diluted shares outstanding
and diluted earnings per share.
Financial Instruments
Financial instruments that potentially subject the Company to credit risk
consist principally of trade receivables and unbilled services. Management of
the Company believes the fair value of accounts receivable and unbilled services
approximates the carrying value.
F - 10
<PAGE>
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 31:
1999 1998
------------ -----------
Vehicles............................... $ 172,000 $ 109,000
Furniture.............................. 3,105,000 2,459,000
Equipment.............................. 11,907,000 8,438,000
Computer software...................... 1,708,000 816,000
Leasehold improvements................. 648,000 474,000
------------ -----------
17,540,000 12,296,000
Less-Accumulated depreciation.......... (6,120,000) (2,790,000)
------------ -----------
$ 11,420,000 $ 9,506,000
============ ===========
Depreciation expense was $3,052,000, $1,391,000 and $571,000 in 1999, 1998
and 1997, respectively.
NOTE 3 - LINES OF CREDIT
From January 1997 until January 1999, the Company had a credit facility
with a bank, which included a revolving line of credit and a component for
equipment term loans. Such credit facility was terminated in January 1999.
On January 29, 1999, the Company entered into an unsecured three-year $30
million Revolving Credit Loan Agreement (the "Loan Agreement") with PNC Bank,
N.A. (the "Bank"). The proceeds of the credit facility may be used by the
Company for financing acquisitions and general corporate purposes. At the
Company's option, for each loan, interest shall be computed either at the Bank's
prime rate per annum or the Adjusted LIBOR Rate plus the Applicable Margin, as
such terms are defined in the Loan Agreement. The Company's obligations under
the credit agreement are payable at the expiration of such facility on January
29, 2002.
The credit agreement contains financial covenants which require the Company
to (i) maintain a consolidated cash flow leverage ratio equal to or less than
2.5 to 1.0 for the period of four fiscal quarters preceding the date of
determination taken together as one accounting period ("Consolidated Cash Flow
Leverage Ratio"), (ii) maintain a consolidated net worth of not less than
consolidated net worth of the prior fiscal year plus 50% of positive net income
for such fiscal year ("Consolidated Net Worth"), (iii) not enter into any
agreement to purchase and/or pay for, or become obligated to pay for capital
expenditures, long term leases, capital leases or sale lease-backs, in an amount
at any time outstanding aggregating in excess of $5,000,000 during any fiscal
year, provided, however, in a one year carry-forward basis, the Company may
incur capital expenditures not to exceed $8,000,000 during any fiscal year, and
(iv) not cause or permit the minimum fixed charge coverage ratio, calculated on
the basis of a rolling four quarters to be less than 1.4 to 1.0 as at the end of
each fiscal quarter ("Minimum Fixed Charge Coverage Ratio").
F - 11
<PAGE>
NOTE 3 - LINES OF CREDIT (CONTINUED)
As a result of the restructuring and other special charges incurred during
the quarter-ended June 30, 1999, the Company was not in compliance with the
Consolidated Cash Flow Leverage Ratio and Consolidated Net Worth financial
covenants at June 30, 1999. On August 12, 1999, the Bank notified the Company
that such non-compliance constituted an Event of Default under the Loan
Agreement. At September 30, 1999, while the Company was in compliance with the
Consolidated Net Worth financial covenant, it was not in compliance with the
Consolidated Cash Flow Leverage Ratio and Minimum Fixed Charge Coverage Ratio
financial covenants. On January 26, 2000, the Company finalized with the Bank
the terms of a waiver and amendment to the Loan Agreement to remedy defaults
which existed under the Loan Agreement. The terms of the waiver and amendment
include, among other things, (i) a $15 million reduction in availability under
the Loan Agreement, (ii) a first priority perfected security interest on all of
the assets of the Company and its domestic subsidiaries and (iii) modification
of certain financial covenants and a waiver of prior covenant defaults. As of
December 31, 1999 and 1998, the Company had outstanding borrowings on the Loan
Agreement of $10,585,000 and $0, respectively.
In addition, the Company assumed an $875,000 note payable between Network
Publishing, Inc. and a bank in connection with the acquisition of Network
Publishing, Inc. on January 8, 1999 (See Note 11). The note, which is secured by
certain equipment, furniture and fixtures of Network Publishing, Inc., bears
interest at the bank's prime rate (8.5% as of December 31, 1999) plus 2% and
matures on April 25, 2007. Principal and interest are payable in monthly
installments. The aggregate amount of principal maturities of long-term debt as
of December 31, 1999 are as follows:
For the Years Ending December 31, Amount
------------------------------------------- -----------
2000..................................... $ 120,000
2001..................................... 73,000
2002..................................... 81,000
2003..................................... 89,000
2004..................................... 99,000
Thereafter............................... 276,000
---------
$ 738,000
NOTE 4 - PROPOSED SPIN-OFF OF INTERNET APPLICATIONS SERVICES BUSINESS
In November 1999, the Company announced its intentions to spin off its
Internet applications services business to SeraNova, Inc., subject to certain
approvals and conditions. On January 1, 2000, the Company transferred its
Internet applications services business to SeraNova, a wholly-owned subsidiary
(see Note 13). Internet applications services revenues and net loss totaled
$39.8 million and $1.3 million for the year ended December 31, 1999,
respectively, and $15.4 million and $631,000 for the year ended December 31,
1998, respectively. Total assets of SeraNova were $18.9 million as of December
31, 1999.
F - 12
<PAGE>
NOTE 4 - PROPOSED SPIN-OFF OF INTERNET APPLICATIONS SERVICES BUSINESS
(CONTINUED)
In connection with the spin off, the Company incurred a non-recurring
charge of $751,000 related to professional fees during the year ended December
31, 1999.
NOTE 5 - RESTRUCTURING AND OTHER SPECIAL CHARGES
In connection with the Company's plan to reduce costs and improve operating
efficiencies, the Company incurred a non-recurring charge of approximately $5.6
million related to restructuring initiatives during the year ended December 31,
1999. The restructuring charge included settlement of the former chief executive
officer's employment agreement and additional severance payment, expenses
associated with the termination of certain employees in the United States and
United Kingdom, the closing of certain satellite offices in the United States
and an additional office in Belgium, and costs to exit certain contractual
obligations.
Activity in accrued costs for restructuring and other special charges
during the year ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Charges to Costs Accrued Costs
Operations Paid December 31, 1999
------------- -------------- -------------------
<S> <C> <C> <C>
Severance and related costs.... $5,027,000 $4,162,000 $865,000
Other costs primarily to exit
facilities, contracts, and
certain activities ............ 601,000 517,000 84,000
---------- ---------- --------
$5,628,000 $4,679,000 $949,000
========== ========== ========
</TABLE>
Additionally, in 1999 the Company recorded a reserve of approximately $1.7
million against an outstanding receivable from a large account, whose parent
corporation filed for protection under Chapter 11 of the U.S. bankruptcy laws.
NOTE 6 - INCOME TAXES
Income taxes consist of the following:
<TABLE>
<CAPTION>
1999 1998 1997
------------- -------------- ---------------
<S> <C> <C> <C>
Current:
Federal.............................. $1,737,000 $2,878,000 $1,384,000
State................................ 290,000 783,000 389,000
Foreign.............................. 579,000 882,000 456,000
---------- ---------- ----------
2,606,000 4,543,000 2,229,000
---------- ---------- ---------
Deferred:
Federal.............................. (1,239,000) (71,000) 76,000
State................................ (161,000) (21,000) 22,000
---------- ----------- ----------
(1,400,000) (92,000) 98,000
----------- ---------- ----------
Total.................................. $1,206,000 $4,451,000 $2,327,000
========== ========== ==========
</TABLE>
F - 13
<PAGE>
NOTE 6 - INCOME TAXES (CONTINUED)
The provision for income taxes differs from the amount computed by applying
the statutory rate of 34% to income before income taxes. The principal reasons
for this difference are:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Tax at federal statutory rate...................... (34)% 34% 34%
Nondeductible expenses............................. 77 5 1
State income tax, net of federal benefit........... 4 4 4
Foreign losses for which no benefit is available... 8 7 --
Changes in valuation allowance..................... -- -- (3)
Foreign operations taxed at less than U.S.
statutory rate, primarily India.................. (12) (11) (7)
S Corp and L.L.C. income passed through
to shareholders.................................. (17) (13) (6)
Other.............................................. (4) (1) 4
---- ---- ----
Effective tax rate................................. 22% 25% 27%
==== ==== ====
</TABLE>
Nondeductible expenses in 1999 primarily represent amortization of
intangibles related to the Network Publishing, Inc. acquisition. In 1996, the
Company elected a five year tax holiday in India in accordance with a local tax
incentive program whereby no income taxes will be due for such period. Such tax
holiday was extended for an additional five years in 1999. Prior to their
acquisition, the Empower Companies (see Note 11) were pass-through entities for
tax reporting purposes, thus their income was not taxed at the corporate level.
Accordingly, the Company's federal statutory tax rate was reduced by 17%, 13%
and 6% for 1999, 1998 and 1997, respectively.
Deferred income taxes reflect the tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the Company's deferred tax assets and liabilities as of December
31, 1999 and 1998 are as follows:
1999 1998
---------- ----------
Deferred tax assets:
Allowance for doubtful accounts................. $1,247,000 $ 432,000
Vacation accrual................................ 334,000 280,000
Net operating losses............................ 570,000 --
Foreign tax credits............................. 2,200,000 --
Other accrued liabilities....................... 739,000 96,000
--------- ---------
Total deferred tax assets......................... 5,090,000 808,000
Deferred tax liability-accelerated depreciation... (806,000) (483,000)
Valuation allowance............................... (2,609,000) --
--------- ---------
Net deferred tax asset............................ $1,675,000 $ 325,000
========= =========
F - 14
<PAGE>
NOTE 6 - INCOME TAXES (CONTINUED)
Realization of the net deferred tax assets is dependent on the timing of
the reversal of temporary differences. The Company has provided a valuation
allowance against foreign tax credits and certain foreign net operating losses
as the ability to apply these credits and losses may be limited in the future.
Although realization of the net deferred tax asset is not assured, management
believes it is more likely than not, that the 1999 and 1998 net deferred tax
asset will be realized.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Employment Agreements
As of December 31, 1999, the Company had employment agreements with certain
of its executives which provide for minimum payments in the event of termination
in other than for just cause. The aggregate amount of compensation commitment in
the event of termination under such agreements is approximately $1,500,000.
Leases
The Company leases office space and office equipment and vehicles under
operating leases that have initial or remaining non-cancelable lease terms in
excess of one year as of December 31, 1999. Future minimum aggregate annual
lease payments are as follows:
For the Years Ending December 31,
-------------------------------------------
2000..................................... $ 3,651,000
2001..................................... 3,204,000
2002..................................... 2,896,000
2003..................................... 2,515,000
2004..................................... 2,624,000
Thereafter............................... 4,488,000
Rent expense for the years ended December 31, 1999, 1998 and 1997 was
$3,941,000, $2,217,000 and $713,000, respectively.
Legal
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 consolidated financial position or results of
operations.
NOTE 8 - STOCK OPTION PLANS
The Company's stock option plans permit the granting of options to
employees, non-employee directors and consultants. The Option Committee of the
Board of Directors 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 non-qualified stock option), the exercise
price, vesting
F - 15
<PAGE>
NOTE 8 - STOCK OPTION PLANS (CONTINUED)
provisions, and the overall option term. A total of 1,590,000 shares of Common
Stock have been reserved for issuance under the plans. Subsequent to December
31, 1999, the Company granted options to purchase an aggregate of 23,750 shares
of its Common Stock to certain employees. All of the options issued pursuant to
these plans expire ten years from the date of grant.
Weighted
Number of Average
Shares Exercise Price
-------------------------------------------------------------------------
Options Outstanding,
December 31, 1996 (none
exercisable) 571,800 $ 8.39
Granted 647,640 $ 11.52
Exercised (102,381) $ 8.20
Canceled (74,113) $ 9.78
-------------------------------------------------------------------------
Options Outstanding,
December 31, 1997
(93,674 exercisable) 1,042,946 $ 10.25
Granted 1,257,630 $ 16.81
Exercised (143,297) $ 9.32
Canceled (258,138) $ 14.91
-------------------------------------------------------------------------
Options Outstanding,
December 31, 1998
(262,156 exercisable) 1,899,141 $ 14.14
Granted 3,465,759 $ 8.82
Exercised (220,645) $ 13.47
Canceled (1,216,975) $ 14.00
-------------------------------------------------------------------------
Options Outstanding,
December 31, 1999
(336,090 exercisable) 3,927,280 $ 9.55
========= =======
F - 16
<PAGE>
NOTE 8 - STOCK OPTION PLANS (CONTINUED)
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Exercisable
----------- -----------
Weighted Weighted Weighted
Average Average Average
Exercise Price Number of Remaining Exercise Number of Exercise
Range shares Life (in years) Price shares Price
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$5 to 8 2,103,308 9.0 $ 7.44 190,624 $ 7.65
$8 to 10 940,500 9.7 $ 8.60 -- --
$10 to 12 151,592 6.6 $ 10.71 46,203 $ 10.90
$12 to 15 54,500 7.9 $ 14.34 8,000 $ 12.13
$15 to 18 509,380 8.4 $ 16.00 71,576 $ 16.28
$18 to 24 168,000 8.4 $ 19.04 19,687 $ 18.82
---------- ----- ------ --------- -------
$5 to 24 3,927,280 9.0 $ 9.55 336,090 $ 10.69
========= =========
</TABLE>
As permitted by SFAS 123, the Company has chosen to continue accounting for
stock options at their intrinsic value. Accordingly, no compensation cost has
been recognized for the stock option plans. Had compensation cost for the
Company's stock option plans been determined based on the fair value option
pricing method, the tax-effective impact would be as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net (Loss) Income:
as reported ($6,590,000) $ 13,400,000 $ 6,338,000
pro forma ($14,975,000) $ 8,894,000 $ 5,336,000
- ----------------------------------------------------------------------------------------------
Basic Earnings per Share:
as reported ($0.42) $0.87 $0.43
pro forma ($0.95) $0.58 $0.36
- ----------------------------------------------------------------------------------------------
Diluted Earnings per Share:
as reported ($0.42) $0.84 $0.42
pro forma ($0.95) $0.56 $0.35
</TABLE>
The fair value of option grants for disclosure purposes is estimated on the
date of grant using the Black-Scholes option-pricing model using the following
weighted-average assumptions: expected volatility of 82%, 78% and 62%, risk-free
interest rate of 5.6%, 5.4% and 7.0% and expected lives of 2.9, 8.5 and 4.5
years, in 1999, 1998 and 1997, respectively. The
F - 17
<PAGE>
NOTE 8 - STOCK OPTION PLANS (CONTINUED)
weighted average fair value of options granted during 1999, 1998 and 1997 was
$9.75, $13.49 and $6.96, respectively.
The Company's subsidiary, SeraNova, Inc. adopted the SeraNova, Inc. 1999
Stock Plan covering its employees, officers and directors and certain
consultants, agents and key contractors and reserved 5 million shares of its
common stock for future issuances. During 1999, SeraNova granted employees
3,236,092 (2,694,711 that were outside the Plan) options to purchase its common
stock as of December 31, 1999. After year-end, an additional 1,667,575 options
were granted.
NOTE 9 - STOCK RIGHTS
In October 1998 the Company's Board of Directors declared a dividend
distribution of one Preferred Share Purchase Right for each outstanding share of
the Company's Common Stock. These Rights will expire in November 2008 and trade
with the Company's Common Stock. Such Rights are not presently exercisable and
have no voting power. In the event a person or affiliated group of persons,
acquires 20% or more, or makes a tender or exchange offer for 20% or more of the
Company's Common Stock, the Rights detach from the Common Stock and become
exercisable and entitle a holder to buy one one-hundredth (1/100) of a share of
Preferred Stock at $100.00.
If, after the Rights become exercisable, the Company is acquired or merged,
each Right will entitle its holder to purchase $200.00 market value of the
surviving company's stock for $100.00, based upon the current exercise price of
the Rights. The Company may redeem the Rights, at its option, at $.01 per Right
prior to a public announcement that any person has acquired beneficial ownership
of at least 20% of the Company's Common Stock. These Rights are designed
primarily to encourage anyone interested in acquiring the Company to negotiate
with the Board of Directors.
NOTE 10 - FOLLOW-ON PUBLIC OFFERING
In July 1997, the Company consummated a follow-on public offering (the
"Offering") of 1,150,000 shares of its Common Stock at a price to the public of
$9.50 per share. The net proceeds to the Company from the Offering, after
underwriting discounts and commissions and other expenses of the Offering, were
approximately $9,900,000.
NOTE 11 - ACQUISITIONS
On February 16, 1999, the Company acquired both Empower Solutions, L.L.C.
and its affiliate Empower, Inc. (a corporation organized under sub-chapter S of
the Internal Revenue Code). The acquisitions were accounted for as poolings of
interests. The accompanying consolidated financial statements as of December 31,
1998 and 1997 and each of the three years in the period ended December 31, 1999,
have been restated in accordance with pooling of interests accounting. In
connection with these acquisitions, the Company issued approximately 2,000,000
shares of the Company's Common Stock. The pre-merger results of the Empower
F - 18
<PAGE>
NOTE 11 - ACQUISITIONS
Companies were revenues of $18.0 million and net income of $6.2 million for 1998
and revenues of $4.0 million and net income of $1.7 million for 1997. In
connection with the mergers, acquisition expenses of $2.1 million were expensed
during 1999. These costs primarily relate to professional fees incurred.
On January 8, 1999, the Company acquired Network Publishing, Inc., based in
Provo, Utah. The purchase price included an initial cash payment in the
aggregate of $1,800,000 together with a cash payment of $200,000 to be held in
escrow. In addition, the purchase price included an earn-out payment of up to
$2,212,650 in restricted shares of the Company's Common Stock payable on or
before April 15, 2000 and a potential lump sum cash payment of $354,024 payable
not later than March 31, 2000. The value of the earn-out was determined to be
$2,430,000 which was payable by the issuance of an additional 99,558 shares of
the Company's Common Stock and $340,000 in cash. The Company issued such shares
on January 11, 2000. This acquisition has been accounted for utilizing the
purchase method of accounting. The excess of the purchase price over the fair
value of the net assets acquired was attributed to intangible assets amounting
to $4,061,471. Pro-forma financial information has not been presented as this
acquisition was immaterial to the Company's operations.
On November 25, 1998, the Company consummated the acquisition of all of the
outstanding capital stock of each of Azimuth Consulting Limited, Azimuth
Holdings Limited, Braithwaite Richmond Limited and Azimuth Corporation Limited
(collectively the "Azimuth Companies"). The acquisition of the Azimuth Companies
was accounted for as a pooling of interests. Prior results for all periods have
been restated in accordance with pooling of interests accounting. As
consideration for this acquisition, the Company issued 902,928 shares of the
Company's Common Stock.
On May 21, 1998, the Company acquired all of the outstanding share capital
of CPI Resources Limited. The acquisition of CPI Resources Limited was accounted
for as a pooling of interests. Prior results for all periods have been restated
in accordance with pooling of interests accounting. As consideration for this
acquisition, the Company issued 371,000 shares of the Company's Common Stock. At
the time of the acquisition, CPI Resources Limited owned seventy percent of the
outstanding share capital of CPI Consulting Limited.
The pre-merger results of CPI Resources Limited and the Azimuth Companies
were revenues of $14,137,000 and net income of $190,000 for 1997. In connection
with these mergers, $2,118,000 of non-recurring acquisition related charges were
incurred and have been charged to expense during the year ended December 31,
1998. These costs primarily relate to professional fees incurred in connection
with the mergers.
F - 19
<PAGE>
NOTE 11 - ACQUISITIONS (CONTINUED)
On May 7, 1998, the Company acquired thirty percent of the outstanding
share capital of CPI Consulting Limited. This acquisition was accounted for
utilizing the purchase method of accounting. The consideration paid by the
Company included the issuance of 165,696 shares of the Company's Common Stock
with a fair market value of $3.1 million at the time of purchase. An additional
155,208 shares of the Company's Common Stock with a fair market value of $2.5
million was paid during 1999 pursuant to an earn-out relating to the operating
results for the balance of 1998. The excess of purchase price over the fair
value of the net assets acquired was attributed to intangible assets, amounting
in the aggregate to $5.8 million.
NOTE 12 - SEGMENT DATA AND GEOGRAPHIC INFORMATION
The Company operates in one industry, IT Services. The Company's service
lines share similar customer bases. The Company's identifiable business segments
can be categorized into two groups:
o Enterprise Applications Services is the largest business segment of
the Company's operations, and includes the implementation,
integration, and development of solutions for clients utilizing a
class of application products known as Enterprise Resource Planning
software. This class of products include software developed by such
companies as SAP, Oracle, PeopleSoft, and Baan.
o Internet Applications Services provides professional services,
primarily in the area of business to business interactions on the
Internet. Business to business interactions include communication and
commerce conducted between a company and its customers, suppliers and
partners.
The following table presents financial information based upon the Company's
identifiable business segments for the years ended December 31, 1999 and 1998.
Information on revenue, operating income and margins for these segments is not
available for the year ended December 31, 1997, and the Company determined that
it would be impractical to recreate such data.
F - 20
<PAGE>
NOTE 12 - SEGMENT DATA AND GEOGRAPHIC INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Enterprise Internet
Applications Applications
Year ended December 31, 1999 Services Services Total
- ------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
Revenue $146,272,000 $39,795,000 $186,067,000
Depreciation & amortization 2,930,000 1,131,000 4,061,000
Operating loss (3,375,000) (1,416,000) (4,791,000)
Capital expenditures 2,174,000 2,175,000 4,349,000
Total assets 64,182,000 18,880,000 83,062,000
Year ended December 31, 1998
- ------------------------------
Revenue $147,462,000 $15,378,000 $162,840,000
Depreciation & amortization 1,387,000 151,000 1,538,000
Operating income (loss) 17,680,000 (16,000) 17,664,000
Capital expenditures 6,513,000 603,000 7,116,000
Total assets 65,331,000 4,234,000 69,565,000
</TABLE>
Included in the Enterprise Applications Services segment are application
maintenance and support revenues of $16.3 million and $3.5 million for the years
ended December 31, 1999 and 1998, respectively. Other information related to the
application maintenance and support business is not available and the Company
determined that it would be impractical to recreate such data.
Included in the above operating income (loss) figures are corporate
expenses for selling, general and administrative activities of $24,582,000 and
$12,820,000 and non-recurring and other special charges of $10,194,000 and
$2,118,000 for the years ended December 31, 1999 and 1998, respectively.
F - 21
<PAGE>
NOTE 12 - SEGMENT DATA AND GEOGRAPHIC INFORMATION (CONTINUED)
The following table presents financial information based upon the Company's
geographic segments for the years ended December 31, 1999, 1998 and 1997.
Information on depreciation and amortization for these segments is not available
for the year ended December 31, 1997, and the Company determined that it would
be impractical to recreate such data.
<TABLE>
<CAPTION>
UNITED STATES ASIA-PACIFIC EUROPE INDIA TOTAL
<S> <C> <C> <C> <C> <C>
1999
Revenue $134,639,000 $19,951,000 $24,601,000 $6,876,000 $186,067,000
Depreciation & amortization 2,725,000 237,000 806,000 293,000 4,061,000
Operating income (loss) (7,655,000) 213,000 (115,000) 2,766,000 (4,791,000)
Total assets 59,456,000 6,772,000 12,174,000 4,660,000 83,062,000
1998
Revenue $119,543,000 $13,650,000 $23,831,000 $5,816,000 $162,840,000
Depreciation & amortization 1,286,000 78,000 115,000 59,000 1,538,000
Operating income (loss) 13,419,000 (945,000) 1,945,000 3,245,000 17,664,000
Total assets 52,820,000 6,382,000 8,270,000 2,093,000 69,565,000
1997
Revenue $73,253,000 $9,642,000 $12,610,000 $2,796,000 $98,301,000
Operating income 5,744,000 403,000 781,000 1,472,000 8,400,000
Total assets 35,103,000 2,635,000 4,112,000 1,214,000 43,064,000
</TABLE>
NOTE 13 - SUBSEQUENT EVENT
On March 14, 2000, SeraNova, a wholly-owned subsidiary of the
Company, entered into an agreement with four institutional investors pursuant to
which such investors purchased an aggregate of 50 shares of SeraNova's common
stock as a price per share of $200,000, for an aggregate purchase price of $10
million. The investment represents approximately 4.8% of SeraNova's issued and
outstanding shares of common stock. In connection with such sale of its common
stock, SeraNova granted certain demand and piggyback registration rights to such
investors. In addition, at its option, SeraNova may sell an additional 25 shares
of its common stock for an additional $5 million to another investor.
F - 22
INTELLIGROUP
499 Thornall Street
Edison, NJ 08837
October 1st, 1999
Nicholas Visco
17 McMannus Drive
Belle Mead, NJ 08502
Dear Nick:
I am pleased to offer you ("Employee"), subject to the Offer Contingencies
below, the position as Vice President of Finance with Intelligroup, Inc. (the
"Company").
Offer Contingencies:
This offer, including this letter and the attached Employment Agreement is
contingent on your having no conflicting obligations that would prevent you from
working for the Company (please see Article 1.3 of the enclosed Employment
Agreement).
1. Compensation
------------
(a) Base Compensation. Commencing on the first day of
------------------
employment as Vice President of Finance, the Company shall pay
to Employee, during the Term of Employment, a minimum salary
at the rate of U.S. $150,000 gross per twelve month period
(the "Base Compensation"). Such salary shall be payable in
accordance with the Company's normal payroll procedures.
(b) An annual bonus of 30% of your base compensation upon
achievement of certain performance criteria to be mutually
arrived at between Employee and the Company (by Ashok Pandey,
Co-Chief Executive Officer, or his designee).
2. Fringe Benefits.
---------------
During the Term of Employment:
(a) Executive shall be eligible to participate in any and all
employee welfare and health benefit plans (including but not
limited to life insurance, health, dental, and short- and
long-term disability plans) and other employee benefit plans
(including, but not limited to pension and retirement
programs, flexible spending plans, stock option and other
incentive compensation programs, and other fringe benefit
programs made
<PAGE>
available to similarly situated executive employees of the
Company from time to time), and Executive shall be eligible to
receive such other fringe benefits as may be granted to him
from time to time by the Company. Executive shall be required
to comply with the conditions attendant to coverage by such
plans and shall be eligible for such benefits only in
accordance with the terms and conditions of such plans as they
may be amended from time to time. Nothing in this subparagraph
(a) shall be construed as requiring the Company to establish or
continue any particular benefit plans in discharge of its
obligation to the Executive.
(b) Executive shall be allowed 15 work days of paid time off
(PTO), inclusive of sick days and vacation days, for each
twelve (12) month period commencing with the start of
employment. In the event Executive's employment is terminated
for any reason, Executive shall be paid for any unused accrued
PTO.
(c) Stock Options: Executive shall be eligible to receive
--------------
50,000 stock options, subject to the approval of the
Compensation Committee of the Board, which approval is not
automatic. These stock options shall be governed in all
respects by the Company's Stock Option Plan and a Stock Option
Agreement to be signed by Employee.
This offer supersedes all earlier job offers made to you and is solely
governed by the provisions of the Employment Agreement which incorporates this
Job Offer Letter.
With best wishes on your new opportunity with Intelligroup, Inc.
Sincerely,
INTELLIGROUP, INC.
By: /s/ Ashok Pandey
-----------------------------------
Name: Ashok Pandey
Title: Co-Chief Executive Officer
I have carefully read the provisions of this offer letter and the Employment
Agreement to which it is attached, I fully understand them and I accept this
offer and agree to all the provisions contained herein and therein.
/s/ Nicholas Visco Date: October 1st, 1999
- ------------------------------
Nicholas Visco
<PAGE>
EMPLOYMENT AGREEMENT
Between:
INTELLIGROUP, INC.
and
Nicholas Visco
PLEASE READ THIS AGREEMENT CAREFULLY. THIS AGREEMENT DESCRIBES THE BASIC LEGAL
AND ETHICAL RESPONSIBILITIES THAT YOU ARE REQUIRED TO OBSERVE AS AN EXECUTIVE
EXPOSED TO HIGHLY SENSITIVE TECHNOLOGY AND STRATEGIC INFORMATION IN PERFORMING
YOUR DUTIES. THE COMPANY BELIEVES THAT THIS AGREEMENT STRIKES A FAIR BALANCE
BETWEEN ITS INTERESTS AND YOUR NEEDS AND EXPECTATIONS.
Intelligroup, Inc. /s/ AP
------
Employee /s/ NV
------
(1)
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is dated October 1, 1999 between
Intelligroup, Inc., a New Jersey Corporation with offices at 499 Thornall
Street, 11th Floor, Edison, NJ 08837 (the "Company"); and NICHOLAS VISCO (the
"Employee") with an address at 17 McMannus Drive, Hillsborough, NJ 08502.
STATEMENTS
----------
A. The Company is engaged in the business of the development and/or
implementation of computer software and other technology products for its
customers.
B. The Employee has education and experience which would be useful to the
Company in its business.
C. It is in the Company's best interest to secure the services of the
Employee and the Employee's specialized knowledge and unique capabilities with
respect to the business of the Company.
D. The Company and the Employee wish to set forth in writing the terms and
conditions of the employment of the Employee.
NOW, THEREFORE, the parties agree as follows:
ARTICLES OF AGREEMENT
---------------------
ARTICLE 1. EMPLOYMENT
- ----------------------
1.1 The Company agrees to employ the Employee as Vice President Finance
and Chief Financial Officer, and the Employee accepts such employment by the
Company on the terms and conditions set forth in this Agreement. The Employee
and Company understand that this position is that of a corporate officer of the
Company. The Employee agrees to serve the Company faithfully in this capacity,
the duties and responsibilities of which may change from time to time.
1.2 The Employee agrees to devote his best efforts, energies and skill to
the discharge of his duties as Vice-President, and to this end he will devote
his full time and attention (except for sick leave, vacations, and approved
leaves of absences) exclusively to the business and affairs of the Company.
During the term of employment, the Employee under no circumstances may work for
a competitor of the Company or have any financial interest in any competitor of
the Company; provided, however, that this Agreement does not prohibit investment
of a reasonable part of the Employee's assets in
Intelligroup, Inc. /s/ AP
------
Employee /s/ NV
------
(2)
<PAGE>
the stock or securities of any competitor whose stock or securities are traded
on a national exchange, provided that this investment does not result in his
collectively owning beneficially at any one time one percent (1%) or more of the
equity of any company engaging in activities that are in competition with the
Company or its affiliates.
1.3 The Employee agrees and represents to the Company that the Employee
is not subject to any existing contract which would affect or impede the
Employee's ability to perform in accordance with the terms of this Agreement,
including, by way of example, any restrictive covenants of past employers that
would prohibit the Employee's acceptance of the terms of this Agreement. The
Employee agrees not to disclose to the Company any confidential information or
trade secrets of others for which he may be under an obligation to a third party
not to disclose. The Employee also agrees not to breach any on-going fiduciary
duty still owed to a previous employer nor to appropriate any trade secrets
obtained while in the employ of such previous employer.
1.4 The Employee hereby acknowledges that he is in a position of trust in
performing services for the Company and its clients, including but not limited
to obtaining access to confidential and trade secret information. The Employee
represents and warrants that he has no criminal felony convictions involving
drugs, theft or violent behavior within the past five (5) years. Furthermore,
the Employee expressly authorizes the Company or its agents to conduct criminal
background checks to verify his/her above-stated representations.
ARTICLE 2. BASE COMPENSATION
- -----------------------------
The Employee's compensation, which includes but is not limited to base
salary and bonus pay, is specified in the Job Offer Letter, which is
incorporated herein by reference and attached hereto as Exhibit "A" (the "Job
Offer Letter").
ARTICLE 3. FRINGE BENEFITS
- ---------------------------
The terms of Employee's Fringe Benefits are outlined in the Job Offer
Letter.
ARTICLE 4. PAID TIME OFF
- -------------------------
The terms of Employee's Paid Time Off are outlined in the Job Offer
Letter.
ARTICLE 5. REIMBURSEMENT OF EXPENSES
- -------------------------------------
The Company shall promptly reimburse Employee for reasonable business
expenses incurred in performing Employee's duties and promoting the business of
the Company, including, but not limited to, reasonable entertainment expenses
and travel and lodging expenses, following presentation of proper documentation.
ARTICLE 6. TERM
- ----------------
Intelligroup, Inc. /s/ AP
------
Employee /s/ NV
------
(3)
<PAGE>
6.1 Term of Employment/Termination. The term of Employee's employment with
------------------------------
the Company shall be at-will ("Term of Employment"). Therefore, in accordance
with the provisions of paragraphs 6.2 and 6.3 below, both Employee and the
Company retain the absolute right to terminate their employment relationship
with or without "Cause" (as defined paragraph 6.3.1 below) at any time, subject
only to a requirement that the party terminating this agreement provide thirty
(30) days notice prior to the effective date of such termination, or the
employment relationship can be terminated because of the "Disability" of the
Employee (as set forth in paragraph 6.4 below), or the employment relationship
may be terminated by the death of the Employee. This Agreement shall remain in
effect until it has been terminated by either of the parties pursuant to this
provision.
6.2 Termination For Any Reason Upon termination of the employment
-------------------------------
relationship with or without Cause, or because of the Disability of the
Employee, or because of the death of the Employee, the Company shall be released
from any and all further obligations under this Agreement, except that the
Company shall be obligated to pay Employee, or his estate, his salary and
benefits owing to Employee through the effective date of termination. Employee,
or his estate, shall also be entitled to any reimbursement owed him in
accordance with Article 5. Employee's obligations under Article 7, 8 and 11 of
this Agreement shall survive the termination of the employment relationship, and
shall continue pursuant to the terms and conditions of this Agreement.
6.3 Termination By Company Without Cause If the Company terminates the
------------------------------------
employment relationship without Cause, in addition to the notice period provided
for in paragraph 6.1 and the benefits provided for in paragraph 6.2, for a
period of six months from the date of termination, Employee shall be entitled to
(a) the continuation of Employee's base salary as of the date of termination and
reimbursement of COBRA payments, and (b) a pro-rata bonus payment (based upon
(i) the then current salary of the Employee, (ii) the bonus percentage stated in
the Job Offer Letter (or any renewals or amendments thereof), and (iii) the
ratio of the number of months of the current fiscal year prior to the date of
termination divided by 12) (cumulatively, the "Severance Pay"). Should the
Employee become otherwise employed during said six month period, then for the
balance of the six month period, the Company will reduce the Severance Pay due
from the date of such employment forward, by the difference between the base
salary then being received by the Employee, if less than his base salary as of
the date of termination, and his base salary as of the date of termination (as
compared on a pay-period by pay-period basis). Notwithstanding the above, this
adjustment shall not result in a reduction of more than the base salary
component of the remaining Severance Pay.
Intelligroup, Inc. /s/ AP
------
Employee /s/ NV
------
(4)
<PAGE>
6.3.1 "Cause" for termination shall be defined as the following
conduct of the Employee:
(i) Willful and material breach of any provision
of this Employment Agreement by the Employee, provided the Employee
is given reasonable notice and a reasonable opportunity to cure such
breach if the breach is of a nature amenable to cure within a
reasonable time without prejudice to the Company's interests.
(ii) Gross misconduct as an Employee of the
Company, including but not limited to: misappropriating funds or
property of the Company; any attempt to obtain any personal profit
from any transaction in which the Employee has an interest that is
adverse to the Company or any breach of the duty of loyalty and
fidelity to the Company; or any other act or omission of the
Employee which substantially impairs the Company's ability to
conduct its ordinary business in its usual manner.
(iii) Gross and unreasonable neglect or
unreasonable refusal to perform the duties assigned to the Employee
under or pursuant to this Employment Agreement.
(iv) Conviction of a felony or plea of guilty or
no lo contendre to a felony; and
(v) Acts of dishonesty or moral turpitude by the
Employee that are materially detrimental to the Company or any other
act or omission which subjects the Company or any of its affiliates
to public disrespect, scandal, or ridicule, or that causes the
Company to be in violation of governmental regulations that subjects
the Company either to be sanctioned by governmental authority or to
civil liability to its Employees or third parties.
6.4 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.
6.5 Termination by Mutual Agreement. This Agreement may be terminated at
-------------------------------
any time by mutual agreement of the Employee and the Company.
Intelligroup, Inc. /s/ AP
------
Employee /s/ NV
------
(5)
<PAGE>
ARTICLE 7. CONFIDENTIALITY
- ---------------------------
7.1 The Company has acquired and developed, and will continue to acquire
and develop, without limitation, technical information (including functional and
technical specifications, designs, drawings, analysis, research, processes,
systems and procedures, computer programs, methods, ideas, "Company know how"
and the like), business information (sales and marketing research, materials,
plans, accounting and financial information, credit information on customers,
lists containing the names, addresses and business habits of customers, sales
reports, price lists, personnel records including names, addresses and salaries
of Intelligroup executives, contractors, and subcontractors and the like)
whether or not designated as confidential and other information designated as
confidential expressly or by the circumstances in which it is provided (all of
the foregoing is referred to as the "Proprietary Information"). This excludes
common and generic information as set forth by federal and state law or
generally known in the industry through no fault of the Employee.
7.2 The Proprietary Information is confidential, important, and unique to
the Company's business. The Company and the Employee acknowledge the Proprietary
Information represents trade secrets of the Company.
7.3 For the Company to protect the Proprietary Information properly, the
Employee recognizes it is essential that confidentiality be maintained by the
Employee and that certain restrictions be imposed upon the Employee during the
course of employment and continuing thereafter.
7.4 The Employee agrees to keep all Proprietary Information confidential.
The Employee agrees to refrain from communicating or divulging any of the
Proprietary Information to any person, firm or corporation or to use the
proprietary information for any purpose other than a Company purpose during the
term of employment and at all times following the termination of this Agreement
for any reason whatsoever.
7.5 The Company has acquired and developed, and will continue to acquire
and develop, Proprietary Information, and during the Term of Employment the
Employee will acquire Proprietary Information about the business of the
Company's customers or other parties (such as a licensor or contractor) with
whom the Company does business under circumstances requiring confidentiality.
The Employee agrees to treat the information acquired about the Company's
customers and licensors at least in the same manner and under the same
restrictions of this Article 7 or in a manner contractually required by any such
customer or third party to provide greater security to such customer or third
party.
7.6 Notwithstanding the foregoing restrictions, the Employee may disclose
any information to the extent required by an order of any U.S. federal or state
court or other federal or state governmental authority, but only after the
Company or its clients or contractors, as the case may be, have been so notified
and have had the opportunity, if possible, to obtain reasonable protection for
such information in connection with such
Intelligroup, Inc. /s/ AP
------
Employee /s/ NV
------
(6)
<PAGE>
disclosure. Employee shall immediately notify the Company of any court process
of which he is aware seeking the disclosure of any of the Company's information.
7.7 Upon the request of the Company or upon the termination of this
Agreement, the Employee will cause to remain with the Company all memoranda,
notes, records, drawings, manuals, disks, or other documents and media
pertaining to the Company's business, including all copies of such.
7.8 The provisions of this Article 7 shall survive the Termination of this
Agreement.
ARTICLE 8. RESTRICTIVE COVENANT; NONINTERFERENCE WITH
- ---------------------------------------------------------
CUSTOMER AND COMPANY PERSONNEL RELATIONS
-----------------------------------------
The Employee covenants and agrees that during the Term of Employment and for a
period of one year following the termination of employment for any reason
whatsoever or no reason, the Employee shall not directly or indirectly do any of
the following without the written consent of the Chief Executive Officer of the
Company or his designee:
8.1 Solicit or accept any similar business from a person, firm or
corporation that is a customer of the Company with whom the Employee had any
business dealings on the Company's behalf during the Term of Employment; and
8.2 Solicit or accept any business similar to that provided by the Company
from any person, firm or corporation that is a prospective customer of the
Company with whom the Employee had any business dealings on the Company's behalf
during the Term of Employment.
8.3 Solicit, persuade, induce, entice or attempt to entice, cause or
attempt to cause, any executive, employee or individual contractor of the
Company to terminate his or her employment or contractual relationship with the
Company.
8.4 Solicit, persuade, induce, entice or attempt to entice, cause or
attempt to cause, any customer of the Company to terminate or negatively alter
its business relationship with the Company. For the purpose of this paragraph,
such customer shall include as well firms, companies or other business entities
that have been customers of the Company within the 12 months preceding
Employee's termination but may not be actual customers at the time of
termination.
8.5 The restrictions of this Article 8 shall survive the termination of
this Agreement.
Intelligroup, Inc. /s/ AP
------
Employee /s/ NV
------
(7)
<PAGE>
ARTICLE 9. REMEDIES OF COMPANY
- -------------------------------
9.1 The Employee acknowledges the restrictions imposed by this Agreement
are reasonable and are necessary to protect the legitimate business interests of
the Company.
9.2 If the Employee breaches or threatens to breach the restrictions
imposed by this Agreement, the Employee agrees the Company would suffer
irreparable harm for which money would be an inadequate remedy. Accordingly, the
Employee agrees that the Company has the right to obtain injunctive or other
equitable relief in addition to any other available remedies and the Company
shall have the additional right to recover from the Employee court costs and
reasonable attorneys fees incurred by the Company in protection of its interests
hereunder.
ARTICLE 10. BINDING EFFECT
- ---------------------------
This Agreement is binding upon, inures to the benefit of and is
enforceable by the heirs, personal representatives, successors and permitted
assigns of the parties. This Agreement is not assignable by the Employee. Nor
may the obligations of the Employee be delegated to any person or other entity.
The Company may assign this Agreement, along with all restrictive covenants
herein, without the consent of the Employee to a subsidiary of the Company, to
an entity that acquires the Company, to an entity with which the Company merges
or to an entity which is acquired by the Company.
ARTICLE 11. INVENTIONS, TRADEMARKS, PATENTS AND OTHER WORK PRODUCTS
- --------------------------------------------------------------------
11.1 Unless otherwise authorized in writing by the Company and to the
extent the Employee generates works of authorship, copyrights, inventions,
trademarks, trade dress or other such work products dealing with the nature of
the Company's business (collectively the "Works") during the terms of employment
by the Company, or uses the premises, facilities or time of the Company to
create or fix the Works, the Employee shall and hereby does convey, assign and
transfer ownership to the Company of all right, title and interest in and to all
the Works throughout the world, including but not limited to any and all
copyright, patent, trademark and trade dress rights. Whenever permitted by law,
the Company shall have the exclusive right to obtain copyright, patent and/or
trademark registration or other protection in the Works in its own name as
inventor, author and owner and to secure any renewals and extensions of such
rights throughout the world.
11.2 The Employee hereby acknowledges that the Employee retains no rights
whatsoever with respect to the Works, including but not limited to any rights to
reproduce the Works, prepare derivative works based thereon, file copyright or
trademark applications for the Works, distribute copies of the Works in any
manner whatsoever, exhibit, use or display the Works publicly or otherwise, or
license or assign to any third party the right to do any of the foregoing,
except as otherwise authorized in writing by the Company.
Intelligroup, Inc. /s/ AP
------
Employee /s/ NV
------
(8)
<PAGE>
11.3 The Employee agrees to execute documents as may be reasonably
required by the Company to effect the Company's ownership rights as provided
herein or to otherwise further the purpose of this Agreement.
11.4 The Company shall be entitled to a shop right with respect to any of
the Works created by the Employee that is not otherwise assignable to the
Company under the terms of this Agreement. In the event of termination,
expiration or invalidation of this Agreement by statutory construction, judicial
interpretation or other means, Employee agrees that the Company has absolute
rights of first refusal to acquire any remaining portion or extension of the
copyright term in the Works.
ARTICLE 12. TAXES
- ------------------
All payments to be made to Employee under this Agreement will be subject
to any applicable withholding of federal, state and local income and employment
taxes.
ARTICLE 13. CHANGE IN CONTROL
- -----------------------------
13.1 Amendment to the Change in Control Severance Agreement. The parties
-------------------------------------------------------
acknowledge that they have previously entered into a Change in Control Severance
Agreement dated November 4, 1998. It is hereby intended that the provisions in
Section 3. Severance Pay Upon Termination by Company Without Cause or By
- --------------------------------------------------------------------------------
Employee for Cause. in the Change in Control Severance Agreement which reads as
- ------------------
follows:
In addition, upon such termination: i) the next portion under the
stock option vesting schedule of any outstanding stock options
granted to the Employee that would not otherwise have been vested
until some time after such termination occurred shall thereupon vest
immediately and be exercisable by the Employee and ii) fifty percent
of the remainder of any other outstanding but unvested stock
options, shall thereupon vest immediately and be exercisable by the
Employee.
Shall be amended as follows:
In addition, upon such termination, eighty percent of any
outstanding but unvested stock options granted to the Employee shall
thereupon vest immediately and be exercisable by the Employee.
13.2 Change in Control. Notwithstanding the foregoing, in the event of a
-----------------
"Change in Control" as defined in Section 2 of the Change in Control Severance
Agreement, whether or not the employee is terminated as set forth in Section 3
of the Change in Control Severance Agreement, eighty percent of any outstanding
but unvested stock options granted to the Employee shall thereupon vest
immediately and be
Intelligroup, Inc. /s/ AP
------
Employee /s/ NV
------
(9)
<PAGE>
exercisable by the Employee. However, to the extent that during the first 90
days after the Change in Control, the Employee should exercise any of these
options to purchase shares of the Common Stock of the Company and sell any of
those shares, the Company shall be entitled to obtain and hold in escrow any net
proceeds resulting from the sale the underlying securities of such options
exercised, for a period equal to the lesser of (i) 90 calendar days from the
Change in Control, or (ii) until the date of termination of Employee's
employment. In the event that Employee's employment is unilaterally terminated
by the Employee within 90 days of the Change in Control, the Company may recover
a pro-rata portion of the such proceeds (calculated by the ratio of (a) days
elapsed from the Change in Control until the date of termination, to (b) 90)
days directly from the escrow and prior to distribution to the Employee of the
balance of the escrow. For purposes of this paragraph, net proceeds resulting
from the sale of the underlying securities shall be the difference between the
exercise price of each stock option and the price at which the Employee sold his
shares of common stock, if greater, less any tax liability the Employee has
incurred as a result of such sale.
13.3 Ratification of Change in Control Provisions. In recognition of the
---------------------------------------------
foregoing, the Company shall take all actions necessary to ratify and affirm the
provisions related to stock options, termination, and Change in Control,
including but not limited to (i) obtaining appropriate resolutions or approvals
by the Board of Directors of the Company or its designees, (ii) preparing and
executing amendments to other agreements referenced herein, if necessary, (iii)
executing any other documents as required in connection with the provisions of
this Agreement to make such provisions enforceable. The Company represents that
such provisions, and modifications to other agreements, can be validly entered
into by inclusion in this Agreement, and acknowledges that the Employee has
relied upon this representation as assurance of the enforceability of such
provisions in the execution of this Agreement.
ARTICLE 14. NOTICES
- --------------------
All notices under this Agreement shall be made in writing and shall be
deemed given when (1) delivered in person, (2) deposited in the U.S. mail, first
class, with proper postage prepaid and properly addressed to the address first
set forth above, unless changed by notice in writing signed by the addressee, or
(3) deposited in the U.S. mail, first class, with proper postage prepaid and
properly addressed to the address first set forth above, unless changed by
notice in writing signed by the addressee, by certified mail, return receipt
requested, or (4) delivered by an overnight or other express delivery service
carrier, or (5) sent through the interoffice delivery service of Employer, if
the Employee is still employed by the Company at the time.
Intelligroup, Inc. /s/ AP
------
Employee /s/ NV
------
(10)
<PAGE>
ARTICLE 15. GOVERNING LAW AND JURISDICTION
- -------------------------------------------
This Agreement is governed by and is to be construed and enforced in
accordance with the laws of New Jersey as though made and to be fully performed
in New Jersey (without regard to the conflicts of law rules of New Jersey). All
disputes arising under this Agreement are to be resolved exclusively in the
courts of the State of New Jersey. If any party desires to commence an action to
enforce any provision of this Agreement, such action must be instituted in the
appropriate New Jersey court. The parties consent to the jurisdiction of the New
Jersey courts. The parties agree that the courts of the State of New Jersey are
to have exclusive jurisdiction over this Agreement. The parties agree that
service of any process is effective if served in the manner that a Notice may be
served pursuant to this Agreement.
ARTICLE 16. SEVERABILITY
- -------------------------
The invalidity or unenforceability of any provision of this Agreement does
not in any manner affect any other provision. If any provision is determined to
be invalid or unenforceable, this Agreement is to be construed as if the invalid
or unenforceable provision was omitted, unless it is one of the restrictive
covenant provisions contained in Articles 7 or 8 herein, in which case the
provision shall be interpreted to provide the Company with the greatest
protection allowed by law.
ARTICLE 17. POST-EMPLOYMENT OBLIGATION
- ---------------------------------------
17.1 Company Property. All records, files, lists, including computer
-----------------
generated lists, drawings, documents, equipment and similar items relating to
the Company's business that the Employee shall prepare or receive from the
Company shall remain the Company's sole and exclusive property. Upon termination
of this Agreement, Employee shall promptly return to the Company all property of
the Company in his possession. Employee further represents that he will not copy
or cause to be copied, print out, or cause to be printed out any software,
documents or other materials originating with or belonging to the Company.
Employee additionally represents that, upon termination of his employment with
the Company, he will not retain in his possession any such software, documents
or other materials.
17.2 Cooperation. Employee agrees that both during and after his
-----------
employment he shall, at the request of the Company, render reasonable assistance
and perform lawful acts that the Company considers necessary or advisable in
connection with any litigation involving the Company or any director, officer,
employee, shareholder, agent, representative, consultant, client, or vendor of
the Company.
Intelligroup, Inc. /s/ AP
------
Employee /s/ NV
------
(11)
<PAGE>
ARTICLE 18. MISCELLANEOUS
- --------------------------
This Agreement shall also be subject to the following miscellaneous
considerations:
18.1 Employee and the Company each represent and warrant to the other that
he or it has the authorization, power and right to deliver, execute, and fully
perform his or its obligations under this Agreement in accordance with its
terms.
18.2 Any rights of Employee hereunder shall be in addition to any rights
Employee may otherwise have under benefit plans, agreements, or arrangements of
the Company to which he is a party or in which he is a participant, including,
but not limited to, any Company-sponsored employee benefits plans and profit
sharing. Provisions of this Agreement shall not in any way abrogate Employee's
rights under such other plans, agreements or arrangements.
ARTICLE 19. AMENDMENTS AND NON-WAIVER
- --------------------------------------
This Agreement, including this Article 19, may only be changed or amended
by a written agreement signed by a Company Corporate Officer and the Employee. A
waiver by the Company of a breach of any provision of this Agreement by the
Employee is not to be construed as a waiver of any other current or subsequent
breach.
ARTICLE 20. ENTIRE AGREEMENT
- -----------------------------
20.1 This Agreement, together with the Job Offer Letter and the Change in
Control Agreement, as amended herein, contains the entire understanding of the
parties with respect to the matters set forth herein. Each party acknowledges
that there are no warranties, representations, promises, covenants or
understandings of any kind except those that are expressly set forth in this
Agreement. This Agreement supersedes any previous agreements between the
parties.
20.2 Employee represents and agrees that he fully understands his right to
discuss all aspects of this Agreement with his private attorney, that to the
extent he desired, he availed himself of this right, that he has carefully read
and fully understands all of the provisions of the Agreement, that he is
competent to execute this Agreement, that his decision to execute this Agreement
has not been obtained by any duress and that he freely and voluntarily enters
into this Agreement.
Intelligroup, Inc. /s/ AP
------
Employee /s/ NV
------
(12)
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement.
INTELLIGROUP, INC.
Dated: 3/23/2000
-----------------
By: /s/ Ashok Pandey
-------------------------
Ashok Pandey
Co-Chief Executive Officer
Dated: 3/23/2000
-----------------
/s/ Nicholas Visco
-------------------------
NICHOLAS VISCO
Intelligroup, Inc. /s/ AP
------
Employee /s/ NV
------
(13)
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "AGREEMENT") is entered into as of
January 1, 2000 by and between Intelligroup, Inc., a New Jersey corporation
("INTELLIGROUP"), and SeraNova, Inc., a New Jersey corporation ("SERANOVA").
BACKGROUND
WHEREAS, on September 9, 1999, Intelligroup formed SeraNova (formerly known
as Infinient, Inc.), for the purpose of operating independently a business which
provides strategic Internet consulting services, interactive Internet solutions,
application management services and management consulting services then
conducted by Intelligroup, Azimuth, NetPub and Intelligroup India Private
Limited as part of their respective business operations (the "SERANOVA
BUSINESS");
WHEREAS, the Board of Directors of Intelligroup has determined that it is
in the best interests of Intelligroup and its shareholders to separate the
SeraNova Business from the Intelligroup Group;
WHEREAS, to implement such separation, Intelligroup desires to contribute
and transfer, and SeraNova desires to accept and assume, certain of the assets
and certain of the liabilities of Intelligroup that are necessary to enable
SeraNova to conduct the SeraNova Business (the "CONTRIBUTION"), as more fully
described in this Agreement and the Ancillary Agreements;
WHEREAS in consideration for the Contribution, Intelligroup shall receive
an aggregate of nine hundred (900) shares of the common stock, $.01 par value
per share, of SeraNova.
WHEREAS the parties desire to set forth the principal transactions required
to effect the separation of SeraNova from Intelligroup and to govern the
relationship of SeraNova and Intelligroup following the Contribution.
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms shall
-----------
have the following meanings:
1.1 "ACTION" means any demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority or any arbitration or mediation
tribunal.
1.2 "AFFILIATE" of any Person means any Person that controls, is
controlled by, or is under common control with such Person, where control means
the possession, directly or indirectly of the power to direct or cause the
direction of the
<PAGE>
management and policies of such entity whether through ownership of voting
securities or other interests, by contract or otherwise.
1.3 "ANCILLARY AGREEMENTS" means the agreements set forth on EXHIBIT A
---------
hereto.
1.4 "ASSETS" means assets, property and rights (including goodwill),
wherever located (including in the possession of vendors or other third
parties), whether real, personal or fixed, tangible, intangible or contingent,
in each case whether or not recorded or reflected or required to be recorded or
reflected on the books and records or financial statements of any Person.
1.5 "AZIMUTH" means Azimuth Consulting Limited, a corporation formed
pursuant to the laws of New Zealand and a wholly-owned subsidiary of
Intelligroup, Azimuth Corporation Limited, a corporation formed pursuant to the
laws of New Zealand and a wholly-owned subsidiary of Intelligroup, Azimuth
Holdings Limited, a corporation formed pursuant to the laws of New Zealand and a
wholly-owned subsidiary of Intelligroup, Braithwaite Richmond Limited, a
corporation formed pursuant to the laws of New Zealand and a wholly-owned
subsidiary of Intelligroup, and each Subsidiary of Azimuth.
1.6 "CLOSING DATE" means the date of the Contribution.
1.7 "CONTRACT" means any written or oral contract, agreement,
commitment, lease, license, consulting agreement, supply contract, repair
contract, distribution agreement, purchase order, technology and know-how
agreement, instrument, or any other contractual commitment that is binding on
any Person or its property.
1.8 "DELAYED TRANSFER ASSETS" means any SeraNova Assets that are
expressly enumerated in this Agreement or any Ancillary Agreement to be
transferred after the Closing Date.
1.9 "ENVIRONMENTAL LAW" means any federal, state, local, foreign or
international law (including tort and environmental nuisance law), regulation,
license, permit, order, judgment or agreement with any Governmental Authority
relating to health, safety, pollution or the environment or to emissions,
discharges or releases of any substance currently or hereafter designated as
hazardous, toxic, waste, radioactive or dangerous.
1.10 "ENVIRONMENTAL LIABILITIES" means all Liabilities relating to,
arising out of or resulting from any Environmental Law or contract or agreement
relating to environmental, health or safety matters.
1.11 "GAAP" means generally accepted accounting principles in effect in
the United States consistently applied throughout the periods involved.
-2-
<PAGE>
1.12 "GOVERNMENTAL AUTHORITY" means any federal, state, local, foreign
or international court, government, commission, board, bureau, agency, official
or other regulatory, administrative or governmental authority.
1.13 "GROUP" means either the SeraNova Group or the Intelligroup Group,
as applicable.
1.14 "INFORMATION" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs, software, marketing plans, customer names, communication by
or to attorneys (including attorney-client privileged communications), memos and
other materials prepared by attorneys or under their direction (including
attorney work product) and other technical, financial, employee or business
information or data.
1.15 "INTELLIGROUP GROUP" means, collectively, Intelligroup, and each
Subsidiary of Intelligroup and each other Person that is controlled directly or
indirectly by Intelligroup immediately after the Closing Date; provided,
--------
however, that the Intelligroup Group shall not include SeraNova, Azimuth,
- -------
NetPub, Intelligroup India Private Limited or any other Subsidiary of SeraNova.
1.16 "INTELLIGROUP INDIA PRIVATE LIMITED" means Intelligroup India
Private Limited, a corporation formed pursuant to the laws of India and a
wholly-owned subsidiary of Intelligroup, and each subsidiary of Intelligroup
India Private Limited.
1.17 "JOINT BANK FACILITY" means any loan, credit, financing or other
similar agreement among a bank or other financial institution, any member of the
SeraNova Group and any member of the Intelligroup Group, with the members of the
SeraNova Group and the Intelligroup Group being co-borrowers, co-obligors or
guarantors, whether entered into prior to or after the Closing Date.
1.18 "LIABILITIES" means any and all losses, claims, charges, debts,
demands, actions, causes of action, suits, damages, obligations, payments, costs
and expenses, sums of money, accounts, bonds, indemnities and similar
obligations, covenants, contracts, agreements, promises, omissions, variances,
guarantees, make whole agreements and similar obligations, and other
liabilities, including all contractual obligations, whether absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, and including those arising under
any law, rule regulation, Action, threatened or contemplated Action (including
the costs and expenses of demands, assessments, judgments, settlements and
compromises relating thereto and attorneys' fees and any and all costs and
expenses, whatsoever reasonably incurred in investigating, preparing or
defending against any such Action or threatened or contemplated Action), order
or consent decree of any
-3-
<PAGE>
Governmental Authority or any award of any arbitrator or mediator of any kind,
and those arising under any contract, commitment or undertaking, including those
arising under this Agreement or any Ancillary Agreement, in each case, whether
or not recorded or reflected or required to be recorded or reflected on the
books and records or financial statements of any Person.
1.19 "LIEN" means any mortgage, pledge, hypothecation, right of others,
claim, security interest, encumbrance, lease, sublicense, license, occupancy
agreement, adverse claim or interest, easement, covenant, encroachment, burden,
title defect right or title retention, voting trust agreement, interest, equity,
option, lien, right of first refusal, charge or other restrictions or
limitations of any nature whatsoever (whether consensual, statutory or
otherwise).
1.20 "NETPUB" means Network Publishing, Inc., a Utah corporation and
wholly-owned subsidiary of Intelligroup.
1.21 "PERMITTED LIENS" includes liens for taxes, assessments or other
governmental charges or levies not yet delinquent or which are being contested
in good faith by appropriate action and as to which adequate reserves shall have
been set aside in conformity with GAAP; liens of mechanics, materialmen,
landlords, warehousemen, carriers and similar liens arising in the future in the
ordinary course of business for sums not yet delinquent, or being contested in
good faith if a reserve or other appropriate provision in accordance with GAAP
shall have been made therefor; statutory liens incurred in the ordinary course
of business in connection with workers' compensation, unemployment insurance,
social security and similar items for sums not yet delinquent or being contested
in good faith, if a reserve or other appropriate provision in accordance with
GAAP shall have been made therefor; lessor's liens arising from operating leases
entered into in the ordinary course of business; and consensual liens granted on
Assets contributed to SeraNova with respect to financing obligations assumed by
SeraNova.
1.22 "PERSON" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a limited
liability corporation or entity, any other entity and any Governmental
Authority.
1.23 "PROMISSORY NOTE" shall mean Promissory Note dated the date hereof
issued by SeraNova to Intelligroup, in an aggregate principal amount equal to
the intercompany debt set forth on EXHIBIT H hereto.
---------
1.24 "SECURITY INTEREST" means any mortgage, security interest, pledge,
lien, charge, claim, option, right to acquire, voting or other restriction,
right-of-way, covenant, condition, easement, encroachment, restriction on
transfer or other encumbrance of any nature whatsoever.
1.25 "SERANOVA ASSETS" means the items listed in EXHIBIT B hereto.
---------
-4-
<PAGE>
1.26 "SERANOVA BALANCE SHEET" means the consolidated balance sheet of
the SeraNova Group as of September 30, 1999, a copy which is attached hereto as
EXHIBIT C.
- ---------
1.27 "SERANOVA BANK FACILITY" means any loan, credit, financing or other
similar agreement between a bank or other financial institution and any member
of the SeraNova Group, as the borrower or obligor, which any member of the
Intelligroup Group has guaranteed, whether prior to or after the Closing Date.
1.28 "SERANOVA CONTRACTS" means the contracts and agreements assigned,
transferred and delivered from Intelligroup to the SeraNova Group to which
SeraNova or any of its Subsidiaries is or shall be a party following the
Contribution, which are listed or described in EXHIBIT D hereto.
---------
1.29 "SERANOVA GROUP" means SeraNova, each Subsidiary of SeraNova and
each other Person that is controlled directly or indirectly by SeraNova
immediately after the Closing Date.
1.30 "SERANOVA LIABILITIES" includes the Liabilities listed on EXHIBIT E
---------
hereto.
1.31 "SUBSIDIARY" of any Person means any corporation or other
organization whether incorporated or unincorporated of which at least a majority
of securities or interest having by the terms thereof ordinary voting power to
elect at least a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries; provided,
--------
however, that no person that is not directly or indirectly wholly owned by any
- -------
other Person shall be a Subsidiary of such other Person unless such other Person
controls, or has the right, power and ability to control, that Person.
1.32 "TAX SHARING AGREEMENT" means the Tax Sharing Agreement dated as of
the date hereof between Intelligroup and SeraNova.
1.33 "Taxes" has the meaning set forth in the Tax Sharing Agreement.
2. CONTRIBUTION.
------------
2.1 TRANSFER OF ASSETS AND CONTRACTS; ASSUMPTION OF LIABILITIES RELATED
-------------------------------------------------------------------
TO CONDUCT OF SERANOVA BUSINESS.
-------------------------------
(a) Subject to the conditions contained herein, as of the Closing
Date, Intelligroup shall have contributed, transferred, conveyed and delivered
to the SeraNova Group, and the SeraNova Group shall have accepted from
Intelligroup, all of Intelligroup's right, title and interest in the SeraNova
Assets, including the intellectual property set forth on EXHIBIT B attached
---------
hereto, free and clear of all Liens (other than
-5-
<PAGE>
Permitted Liens listed on EXHIBIT F attached hereto) related to the conduct of
---------
the SeraNova Business, other than any Delayed Transfer Assets.
(b) As of the Closing Date, subject to Section 3.1 Intelligroup
shall have assigned, transferred and delivered to the SeraNova Group, and the
SeraNova Group shall have accepted from Intelligroup, all of Intelligroup's
right, title and interest in and to all SeraNova Contracts pertaining to the
SeraNova Business as identified on EXHIBIT D hereto and the SeraNova Group
---------
hereby accepts and agrees to perform and comply with the SeraNova Contracts as
if an original signatory thereunder.
(c) The SeraNova Group hereby assumes only those SeraNova
Liabilities listed on EXHIBIT E attached hereto related to the conduct of the
---------
SeraNova Business, in accordance with their respective terms. Except as set
forth on EXHIBIT E, the SeraNova Group shall not otherwise acquire, discharge,
---------
assume or become responsible for any Liabilities of Intelligroup. Intelligroup
agrees to pay and satisfy when due the Liabilities not expressly assumed
hereunder by the SeraNova Group.
(d) Upon the execution hereof, Intelligroup hereby grants to
SeraNova a non-exclusive, royalty free, fully paid, irrevocable right and
license to sell, assign, copy, distribute, sub-license, use and otherwise
commercially exploit the intellectual property rights set forth on EXHIBIT G
---------
hereto (the "Licensed Intellectual Property"). Such license includes the right
to modify and enhance the Licensed Intellectual Property and to own such
modifications and enhancements, including all intellectual property related
thereto.
2.2 TRANSFER OF SERANOVA ASSETS CONSISTING OF STOCK OR OTHER EQUITY
-------------------------------------------------------------------
INTERESTS.
----------
(a) To the extent that any of the SeraNova Assets consists of
shares of stock of any corporate entity (collectively, the "Stock"), upon the
execution hereof, the certificates representing the Stock, if any, shall be
delivered to SeraNova, duly endorsed in blank, or accompanied by stock powers
duly executed in blank, with all necessary transfer tax and other revenue
stamps, acquired at the expense of Intelligroup, affixed and canceled.
Intelligroup agrees to cure any deficiencies with respect to the endorsement of
the certificates representing the Stock owned by Intelligroup or with respect to
the stock power accompanying any such certificates.
(b) To the extent that any of SeraNova Assets consists of
uncertificated securities, Intelligroup agrees to make such ledger entries, or
instruct appropriate agents or government agencies to make such entries, and to
otherwise take such steps as reasonably necessary to transfer such
uncertificated securities to SeraNova, including without limitation the payment
of any transfer fees or taxes.
2.3 ADJUSTMENT OF ASSETS AND LIABILITIES. The parties acknowledge and
-------------------------------------
agree that the information set forth in the Exhibits and Schedules hereto,
including
-6-
<PAGE>
the SeraNova Balance Sheet, is as of September 30, 1999. No later than March 31,
2000, the parties shall appropriately adjust and amend the information set forth
on the Exhibits and Schedules hereto as of December 31, 1999. Such adjustments
and amendments shall be made to reflect the closing of the respective books of
the parties (and their respective Subsidiaries) and the preparation of audited
financial statements for each of parties for the year ended December 31, 1999.
2.4 DELAYED TRANSFER ASSETS. Each of the parties hereto agrees that the
-----------------------
Delayed Transfer Assets will be contributed, transferred, conveyed and delivered
in accordance with the terms of any and all agreements that provide for such
contribution, transfer, conveyance and delivery after the date of this Agreement
or as otherwise set forth on SCHEDULE 2.4. Following such contribution,
-------------
transfer, conveyance and delivery of any Delayed Transfer Asset the applicable
Delayed Transfer Asset shall be treated for all purposes of this Agreement and
the Ancillary Agreements as a SeraNova Asset. Each applicable member of the
Intelligroup Group shall use commercially reasonable efforts to safeguard and
preserve the Delayed Transfer Assets until the applicable date of transfer to
SeraNova, normal wear and tear excepted.
2.5 HOLDING ASSETS IN TRUST. In the event that at any time or from time
-----------------------
to time (whether prior to or after the Closing Date), any party hereto (or any
member of such party's respective Group), shall receive or otherwise possess any
Asset that is allocated to any other Person pursuant to this Agreement or any
Ancillary Agreement, including, but not limited to, accounts receivable and
other cash payments, such party shall promptly transfer, or cause to be
transferred, such Asset to the Person so entitled thereto. Prior to any such
transfer, the Person receiving or possessing such Asset shall hold such Asset in
trust for such other Person.
2.6 TERMINATION OF AGREEMENTS.
-------------------------
(a) Except for the Ancillary Agreements, SeraNova, on behalf of
itself and each member of the SeraNova Group, on the one hand, and Intelligroup,
on behalf of itself and each member of the Intelligroup Group, on the other
hand, hereby terminates effective as of the Closing Date, any and all
agreements, arrangements, commitments or understandings, whether or not in
writing, between or among any member of the SeraNova Group, on the one hand, and
any member of the Intelligroup Group, on the other hand; provided, however, to
the extent any such agreement, arrangement, commitment or understanding is
inconsistent with any Ancillary Agreement, such termination shall be effective
as of the date of effectiveness of the applicable Ancillary Agreement. No such
terminated agreement, arrangement, commitment or understanding (including any
provision thereof which purports to survive termination) shall be of any further
force or effect after the Closing Date (or, to the extent contemplated by the
proviso to the immediately preceding sentence, after the effective date of the
applicable Ancillary Agreement). Each party shall, at the reasonable request of
any other party, take, or cause to be taken, such other actions as may be
necessary to effect the foregoing.
-7-
<PAGE>
(b) The provisions of Section 2.6(a) shall not apply to any of the
following agreements, arrangements, commitments or understandings (or to any of
the provisions thereof): (i) this Agreement and the Ancillary Agreements (and
each other agreement or instrument expressly contemplated by this Agreement or
any Ancillary Agreement to be entered into by any member of the SeraNova Group
or the Intelligroup Group); (ii) any agreements, arrangements, commitments or
understandings to which any Person other than the parties hereto and their
respective Affiliates is a party (it being understood that to the extent that
the rights and obligations of the members of the SeraNova Group or the
Intelligroup Group under any such agreements, arrangements, commitments or
understandings constitute SeraNova Assets or SeraNova Liabilities, they shall be
assigned pursuant to the other provisions of this Section 2); (iii) any
intercompany accounts payable or accounts receivable accrued as of the Closing
Date that are reflected in the books and records of the parties or otherwise
documented in writing in accordance with past practices; (iv) any written Tax
sharing or Tax allocation agreements to which any member of any Group is a
party; and (v) any other agreements, arrangements, commitments or understandings
that this Agreement or any Ancillary Agreement expressly contemplates will
survive the Closing Date.
2.7 DOCUMENTS RELATING TO TRANSFER OF REAL PROPERTY INTERESTS AND
-------------------------------------------------------------------
TANGIBLE PROPERTY LOCATED THEREON. In furtherance of the contribution, transfer,
- ---------------------------------
conveyance and delivery of the SeraNova Assets and the assumption of SeraNova
Liabilities set forth in Section 2.1, simultaneously with the execution and
delivery of this Agreement or as promptly as practicable thereafter, each of
Intelligroup and SeraNova or their applicable Subsidiaries, shall execute and
deliver lease assignments and assumptions, leases, subleases and sub-subleases
with respect to the properties set forth on SCHEDULE 2.7 with such changes as
------------
may be necessary to conform to any laws, regulations or usage applicable in the
jurisdiction in which the relevant real property is located.
2.8 DOCUMENTS RELATING TO OTHER TRANSFERS OF ASSETS AND ASSUMPTION OF
-------------------------------------------------------------------
LIABILITIES. In furtherance of the contribution, transfer, conveyance and
- -----------
delivery of the SeraNova Assets and the assumption of SeraNova Liabilities set
forth in Section 2.1, as promptly as practicable after each such transfer: (i)
Intelligroup shall execute and deliver, and shall cause its Subsidiaries to
execute and deliver, such bills of sale, stock powers, certificates of title,
assignments of contracts and other instruments of transfer, conveyance and
assignment as and to the extent necessary to evidence the transfer, conveyance
and assignment of all of Intelligroup's and its Subsidiaries' right, title and
interest in and to the SeraNova Assets to SeraNova and its Subsidiaries; and
(ii) SeraNova shall execute and deliver, and shall cause its Subsidiaries to
execute and deliver to Intelligroup and its Subsidiaries such bills of sale,
stock powers, certificates of title, assumptions of contracts and other
instruments of assumption as and to the extent necessary to evidence the valid
and effective assumption of the SeraNova Liabilities by SeraNova and its
Subsidiaries.
2.9 ANCILLARY AGREEMENTS. Prior to the Closing Date, Intelligroup and
---------------------
SeraNova will execute and deliver all Ancillary Agreements to which it is a
party.
-8-
<PAGE>
2.10 FINANCING ARRANGEMENTS. On a case-by-case basis, Intelligroup and
----------------------
SeraNova may agree to enter into a Joint Bank Facility or a SeraNova Bank
Facility with respect to operations of the SeraNova Business in specific
jurisdictions. In such event, Intelligroup and SeraNova agree to take all such
reasonable action as may be necessary to permit the applicable members of the
Intelligroup Group or the SeraNova Group to borrow such amount as is mutually
agreed. Intelligroup and SeraNova shall participate in the preparation of all
materials and presentations as may be reasonably necessary to secure funding
pursuant to a Joint Bank Facility or a SeraNova Bank Facility, including rating
agency presentations necessary to obtain the requisite ratings needed to secure
the financing. SeraNova shall pay (or reimburse Intelligroup for) all expenses
associated with any SeraNova Bank Facility.
2.11 OTHER GUARANTEES. On a case-by-case basis, Intelligroup shall
-----------------
consider in good faith any request by SeraNova to have Intelligroup or any other
member of the Intelligroup Group provide a contractual guaranty of a lease or
other contractual obligation of any member of the SeraNova Group. SeraNova shall
use its best good faith efforts to arrange for the release and discharge of
Intelligroup and any other member of the Intelligroup Group of all of its
obligations under any such guaranty as soon as possible, consistent with the
smooth transition of the SeraNova Business to SeraNova. SeraNova shall take all
reasonable steps necessary to arrange for the complete release and discharge of
Intelligroup and any other member of the Intelligroup Group of all of its
obligations under any such guaranty, in no event later than the spin-off
transaction contemplated by that certain Distribution Agreement by and between
Intelligroup and SeraNova of even date herewith.
2.12 GOVERNMENTAL APPROVALS AND CONSENTS.
-----------------------------------
(a) To the extent that the Contribution requires any Governmental
Authority approvals or consents, the parties will use their commercially
reasonable efforts to obtain any such approvals and consents.
(b) If and to the extent that the valid, complete and perfected
transfer or conveyance to the SeraNova Group of any SeraNova Assets would be a
violation of applicable laws or require any consent or approval of a
Governmental Authority in connection with the Contribution, then, unless
Intelligroup shall otherwise determine, the transfer or conveyance to the
SeraNova Group of such SeraNova Assets shall be automatically deemed deferred
and any such purported transfer or assignment shall be null and void until such
time as all legal impediments are removed and/or such consents or approvals have
been obtained.
(c) If the transfer or assignment of any Asset intended to be
transferred or conveyed hereunder is not consummated prior to or at the Closing
Date, then the Person retaining such Asset shall thereafter hold such Asset for
its use and benefit, insofar as reasonably possible, at the expense of the
Person entitled thereto. In addition, the Person retaining such Asset shall take
such other actions as may be reasonably requested by the Person to whom such
Asset is to be transferred in order to
-9-
<PAGE>
place such Person, insofar as reasonably
possible, in the same position as if such Asset had been transferred as
contemplated hereby and so that all the benefits and burdens relating to such
SeraNova Assets, including possession, use, risk of loss, potential for gain,
and dominion, control and command over such Assets, are to inure from and after
the Closing Date to the SeraNova Group.
(d) If and when the consents or approvals of a Governmental
Authority, the absence of which caused the deferral of transfer of any Asset,
are obtained, the transfer of the applicable Asset shall be effected in
accordance with the terms of this Agreement or the applicable Ancillary
Agreement.
2.13 NOVATION OF ASSUMED SERANOVA LIABILITIES.
----------------------------------------
(a) Each of Intelligroup and SeraNova, at the request of the
other, shall use its commercially reasonable efforts to obtain, or to cause to
be obtained, any consent, substitution, approval or amendment required to novate
(including with respect to any federal government contract) or assign all
obligations under agreements, leases, licenses and other obligations or
Liabilities of any nature whatsoever that constitute SeraNova Liabilities, or to
obtain in writing the unconditional release of all parties to such arrangements
other than any member of the SeraNova Group, so that, in any such case, SeraNova
and its Subsidiaries will be solely responsible for such Liabilities; provided,
however, that no member of the Intelligroup Group or the SeraNova Group, as the
case may be, shall be obligated to pay any consideration therefor to any third
party from whom such consents, approvals, substitutions and amendments are
requested. Without limiting the foregoing, Intelligroup and SeraNova shall use
their commercially reasonable efforts to obtain, prior to the Closing Date, a
release of any and all guarantees provided by any member of the Intelligroup
Group in connection with the SeraNova Contracts, SeraNova Assets, SeraNova
Liabilities and the SeraNova Business.
(b) If Intelligroup or SeraNova is unable to obtain, or to cause
to be obtained, any such required consent, approval, release, substitution or
amendment, the applicable member of the Intelligroup Group shall continue to be
bound by such agreements, leases, licenses and other obligations and, unless not
permitted by law or the terms thereof, SeraNova shall, as agent or subcontractor
for Intelligroup or such other Person, as the case may be, pay, perform and
discharge fully all the obligations or other Liabilities of Intelligroup or such
other Person, as the case may be, thereunder from and after the date hereof.
SeraNova shall indemnify each Intelligroup Indemnitee (as defined in Section
4.1), and hold each of them harmless against any Liabilities arising in
connection therewith. If and when any such consent, approval, release,
substitution or amendment is obtained or such agreement, lease, license or other
rights or obligations otherwise becomes assignable or able to be novated,
Intelligroup shall thereafter assign, or cause to be assigned, all its rights,
obligations and other Liabilities thereunder or any rights or obligations of any
member of its respective Group to SeraNova without payment of further
consideration and SeraNova shall, without the payment of any further
consideration, assume such rights and obligations.
-10-
<PAGE>
2.14 INTERCOMPANY DEBT. Intelligroup and SeraNova agree that, as a
-----------------
result of the transactions contemplated hereby, SeraNova shall be indebted to
Intelligroup as set forth on EXHIBIT H. Such debt shall be evidenced by the
---------
Promissory Note.
3. REPRESENTATIONS AND WARRANTIES.
------------------------------
3.1 REPRESENTATIONS AND WARRANTIES OF INTELLIGROUP.
----------------------------------------------
Intelligroup represents and warrants to SeraNova and its Subsidiaries
as follows:
(a) CORPORATE POWER AND AUTHORITY. Intelligroup has the requisite
-----------------------------
power and authority to execute, deliver, and perform its obligations under this
Agreement, any applicable Ancillary Agreement and to contribute, transfer,
convey and deliver to SeraNova and its Subsidiaries the SeraNova Assets. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
action (corporate or otherwise) on the part of Intelligroup. This Agreement
constitutes the legal, valid and binding obligation of Intelligroup, enforceable
in accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
(b) VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution, delivery
-------------------------------------
and performance of this Agreement and the consummation of the transactions
contemplated hereby do not and will not: (i) violate, breach or contravene any
of the terms, conditions or provisions of the Certificate of Incorporation or
By-laws (or the equivalent thereof) of Intelligroup; (ii) violate, or constitute
a default under, any material Contract by which Intelligroup or its property is
bound; or (iii) violate any material provision of law.
(c) TITLE TO CONTRIBUTED ASSETS. Intelligroup is in possession of
---------------------------
and has good, valid and marketable title to, or has valid leasehold interests in
or valid rights under contract to use, all of the SeraNova Assets in which it
has an interest and Intelligroup has such title, interests or rights to all of
the SeraNova Assets that are being contributed by Intelligroup. All of the
SeraNova Assets are free and clear of all Liens, other than Permitted Liens. All
tangible personal property comprising the SeraNova Assets is in good operating
condition (ordinary wear and tear excepted) and will be usable by SeraNova and
its Subsidiaries for its intended purposes.
(d) ACCOUNTS RECEIVABLE. The accounts receivable that are included
-------------------
in the SeraNova Assets (the "Accounts Receivable") constitute valid receivables,
have arisen in the ordinary course of business consistent with past practices.
No part of the Accounts Receivable is contingent upon performance by any member
of the Intelligroup Group, as applicable, or any other party of any obligation,
and no agreements for deductions or discounts have been made with respect to any
part of such Accounts Receivable.
-11-
<PAGE>
(e) BUSINESS. Upon consummation of this Agreement, SeraNova shall
--------
be the sole and exclusive owner of the SeraNova Business, the SeraNova Assets
received by SeraNova from Intelligroup are all of the assets necessary to
operate the SeraNova Business.
(f) REQUIRED CONSENTS. Intelligroup, SeraNova and the applicable
-----------------
member or members of their respective Group shall use their or its reasonable
best efforts to obtain all necessary consents from applicable third parties in
order to assign, transfer and deliver the SeraNova Contracts unless the failure
to obtain one or more consents would not be material and except for contracts
under which Intelligroup has a right to subcontract without the consent of the
other party or parties to the contract.
(g) SERANOVA BALANCE SHEET. The SeraNova Balance Sheet set forth
-----------------------
on EXHIBIT C is true and accurate in all material respects.
---------
3.2 REPRESENTATIONS AND WARRANTIES OF THE SERANOVA GROUP.
----------------------------------------------------
SeraNova and its Subsidiaries represent and warrant to Intelligroup as
follows:
(a) CORPORATE POWER AND AUTHORITY. SeraNova and its Subsidiaries
-----------------------------
have the requisite power and authority to execute, deliver and perform this
Agreement, the Ancillary Agreements and to accept the SeraNova Assets. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
action (corporate or otherwise) on the part of SeraNova and its Subsidiaries.
This Agreement constitutes the legal, valid and binding obligation of SeraNova
and its Subsidiaries, enforceable in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally.
(b) VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution, delivery
-------------------------------------
and performance of this Agreement and the consummation of the transactions
contemplated hereby do not and will not: (i) violate, breach or contravene any
of the terms, conditions or provisions of the Certificate or Articles of
Incorporation or By-laws (or the equivalent thereof) of SeraNova and its
Subsidiaries; (ii) violate, or constitute a default under, any material Contract
by which such entity or its property is bound; or (iii) violate any material
provision of law.
4. INDEMNIFICATION.
---------------
4.1 INDEMNIFICATION BY SERANOVA. Subject to the provisions of Section
---------------------------
4.3, SeraNova shall indemnify, defend and hold harmless each member of the
Intelligroup Group and each of their respective directors, officers and
employees, and
-12-
<PAGE>
each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "INTELLIGROUP INDEMNITEES") from and against any and all
Liabilities of the Intelligroup Indemnitees, relating to, arising out of or
resulting from any of the following items:
(a) the failure of any member of the SeraNova Group to pay,
perform or otherwise promptly discharge any SeraNova Liabilities or any SeraNova
Contract in accordance with their respective terms, after the Closing Date;
(b) the employment or termination of employment of any
employee of Intelligroup working in the SeraNova Business;
(c) conduct of the SeraNova Business after the Closing Date;
and
(d) any breach by any member of the SeraNova Group of this
Agreement or any of the Ancillary Agreements.
4.2 INDEMNIFICATION BY INTELLIGROUP. Subject to the provisions of
-------------------------------
Section 4.3, Intelligroup shall indemnify, defend and hold harmless SeraNova,
each member of the SeraNova Group and each of their respective directors,
officers and employees, and each of the heirs, executors, successors and assigns
of any of the foregoing (collectively, the "SERANOVA INDEMNITEES"), from and
against any and all Liabilities of the SeraNova Indemnitees relating to, arising
out of or resulting from any of the following items:
(a) the failure of Intelligroup to pay, perform or otherwise
promptly discharge any Liabilities of Intelligroup, whether prior to or after
the Closing Date;
(b) the failure of Intelligroup to pay, perform or otherwise
promptly discharge any SeraNova Liabilities or any SeraNova Contract in
accordance with their respective terms, prior to the Closing Date;
(c) conduct of the SeraNova Business prior to the Closing
Date; and
(d) any breach by Intelligroup of this Agreement or any of the
Ancillary Agreements.
4.3 INDEMNIFICATION OBLIGATIONS NET OF INSURANCE PROCEEDS AND
--------------------------------------------------------------
OTHER AMOUNTS.
- -------------
(a) The parties intend that any Liability subject to
indemnification or reimbursement pursuant to this Section 4 will be net of
insurance proceeds. Accordingly, the amount which any party (an "INDEMNIFYING
PARTY") is required to pay to any Person entitled to indemnification hereunder
(an "INDEMNITEE")
-13-
<PAGE>
will be reduced by any insurance proceeds theretofore actually recovered by or
on behalf of the Indemnitee in reduction of the related Liability. If an
Indemnitee receives a payment (an "INDEMNITY PAYMENT") required by this
Agreement from an Indemnifying Party in respect of any Liability and
subsequently receives insurance proceeds, then the Indemnitee will pay to the
Indemnifying Party an amount equal to the Indemnity Payment received less the
amount of the Indemnity Payment that would have been due if the insurance
proceeds had been received, realized or recovered before the Indemnity Payment
was made.
(b) An insurer who would otherwise be obligated to pay any
claim shall not be relieved of the responsibility with respect thereto or,
solely by virtue of the indemnification provisions hereof, have any subrogation
rights with respect thereto, it being expressly understood and agreed that no
insurer or any other third party shall be entitled to a "windfall" (i.e., a
benefit they would not be entitled to receive in the absence of the
indemnification provisions) by virtue of the indemnification provisions hereof.
Nothing contained in this Agreement or any Ancillary Agreement shall obligate
any member of any Group to seek to collect or recover any insurance proceeds.
4.4 PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS.
----------------------------------------------------
(a) If an Indemnitee shall receive notice or otherwise learn
of the assertion by a Person (including any Governmental Authority) who is not a
member of the Intelligroup Group or the SeraNova Group of any claim or of the
commencement by any such Person of any Action (collectively, a "THIRD PARTY
CLAIM") with respect to which an Indemnifying Party may be obligated to provide
indemnification to such Indemnitee pursuant to Section 4.1 or 4.2, or any other
Section of this Agreement or any Ancillary Agreement, such Indemnitee shall give
such Indemnifying Party written notice thereof within twenty (20) days after
becoming aware of such Third Party Claim. Any such notice shall describe the
Third Party Claim in reasonable detail. Notwithstanding the foregoing, the
failure of any Indemnitee or other Person to give notice as provided in this
Section 4.4(a) shall not relieve the related Indemnifying Party of its
obligations under this Section 4, except to the extent that such Indemnifying
Party is actually prejudiced by such failure to give notice.
(b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise), at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within thirty (30) days
after the receipt of notice from an Indemnitee in accordance with Section 4.4(a)
(or sooner, if the nature of such Third Party Claim so requires), the
Indemnifying Party shall notify the Indemnitee whether the Indemnifying Party
will assume responsibility for defending such Third Party Claim, which election
shall specify any reservations or exceptions. After notice from an Indemnifying
Party to an Indemnitee of its election to assume the defense of a Third Party
Claim, such Indemnitee shall have the right to employ separate counsel and to
participate in (but not control) the defense, compromise, or settlement thereof,
but the fees and
-14-
<PAGE>
expenses of such counsel shall be paid by such Indemnitee except as set forth in
subsection (c).
(c) If an Indemnifying Party elects not to assume
responsibility for defending a Third Party Claim, or fails to notify an
Indemnitee of its election as provided in Section 4.4(b), such Indemnitee may
defend such Third Party Claim at the cost and expense of the Indemnifying Party.
(d) Unless the Indemnifying Party has failed to assume the
defense of the Third Party Claim in accordance with the terms of this Agreement,
no Indemnitee may settle or compromise any Third Party Claim without the consent
of the Indemnifying Party.
(e) In the case of a Third Party Claim, no Indemnifying Party
shall consent to entry of any judgment or enter into any settlement of the Third
Party Claim without the consent of the Indemnitee if the effect thereof is to
permit any injunction, declaratory judgment, other order or other nonmonetary
relief to be entered, directly or indirectly, against any Indemnitee.
(f) The provisions of Section 4.4 and Section 4.5 shall not
apply to Taxes (which are covered by the Tax Sharing Agreement).
4.5 ADDITIONAL MATTERS.
------------------
(a) Any claim on account of a Liability which does not result
from a Third Party Claim shall be asserted by written notice given by the
Indemnitee to the related Indemnifying Party. Such Indemnifying Party shall have
a period of thirty (30) days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 30-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 30-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party as contemplated by this Agreement and the Ancillary Agreements.
(b) In the event of payment by or on behalf of any
Indemnifying Party to any Indemnitee in connection with any Third Party Claim,
such Indemnifying Party shall be subrogated to and shall stand in the place of
such Indemnitee as to any events or circumstances in respect of which such
Indemnitee may have any right, defense or claim relating to such Third Party
Claim against any claimant or plaintiff asserting such Third Party Claim or
against any other person. Such Indemnitee shall cooperate with such Indemnifying
Party in a reasonable manner, and at the cost and expense of such Indemnifying
Party, in prosecuting any subrogated right, defense or claim.
(c) In the event of an Action in which the Indemnifying Party
is not a named defendant, if the Indemnifying Party shall so request, the
parties shall
-15-
<PAGE>
endeavor to substitute the Indemnifying Party for the named defendant. If such
substitution cannot be achieved for any reason or is not requested, the named
defendant shall allow the Indemnifying Party to manage the Action as set forth
in this Section and the Indemnifying Party shall fully indemnify the named
defendant against all costs of defending the Action (including court costs,
sanctions imposed by a court, attorneys' fees, experts' fees and all other
external expenses), the costs of any judgment or settlement, and the cost of any
interest or penalties relating to any judgment or settlement.
4.6 REMEDIES CUMULATIVE. The remedies provided in this Section 4
-------------------
shall be cumulative and, subject to the provisions of Section 6, shall not
preclude assertion by any Indemnitee of any other rights or the seeking of any
and all other remedies against any Indemnifying Party.
4.7 SURVIVAL OF INDEMNITIES. The rights and obligations of each of
-----------------------
Intelligroup and SeraNova and their respective Indemnitees under this Section 4
shall survive the sale or other transfer by any party of any Assets or
businesses or the assignment of any Liabilities.
4.8 ALLEGED INFRINGEMENT OR MISAPPROPRIATION.
----------------------------------------
(a) Notwithstanding any other provision of this Agreement or
any Ancillary Agreement, in the event of any claim, action, proceeding or suit
by a third party against any member of the SeraNova Group or the Intelligroup
Group alleging an infringement of any patent, copyright, trademark or
misappropriation of a trade secret (each a "Claim") with respect to any of the
transferred intellectual property or the Licensed Intellectual Property set
forth on EXHIBIT A and EXHIBIT G, respectively (for purposes of this Section
--------- ---------
4.8, the "Disputed Intellectual Property"), the parties agree to adhere to the
procedures set forth in paragraphs (b), (c) and (d) below.
(b) If the use or distribution by any member of the SeraNova
Group or the Intelligroup Group, as applicable, of any of the Disputed
Intellectual Property is enjoined or in the opinion of such member of the
applicable Group is likely to be enjoined, SeraNova and Intelligroup shall, use
their reasonable best efforts to jointly: (i) replace the Disputed Intellectual
Property with a substitute free of any infringement; (ii) modify the Disputed
Intellectual Property so that it will be free of the infringement; or (iii)
procure for such member of the applicable Group or its distributees a license or
other right to use the Disputed Intellectual Property.
(c) Each of Intelligroup and SeraNova, on behalf of its
respective Group, agrees to provide, or cause to be provided, prompt written
notice to the other party of any Claim and Intelligroup and SeraNova shall
jointly assume the defense thereof, including appeals, and to settle the same.
Each party shall, upon request, furnish all information and provide assistance
to the appropriate members of the SeraNova Group or the Intelligroup Group, as
applicable, and cooperate in every reasonable way to facilitate the defense
and/or settlement of any such Claim.
-16-
<PAGE>
(d) The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities or expenses in connection with the
remediation efforts set forth in Section (b) above, or the defense,
adjudication, or settlement referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any Claim. Intelligroup and SeraNova agree that
it would not be just and equitable if the expenses incurred in connection with
the remediation efforts set forth in Section (b) above, or the defense,
adjudication, or settlement of a Claim under this Section 4.8 were apportioned
on a pro rata basis without regard to the liability of each respective party
according a relative finding of fault. The relative fault of the applicable
member or members of the Intelligroup Group, on the one hand, and the applicable
member or members of the SeraNova Group, on the other hand, shall be apportioned
as is appropriate to reflect not only the relative benefits achieved but also
the relative fault assessed with respect to the Disputed Intellectual Property.
(e) The foregoing indemnity will not apply to any alleged
infringement or misappropriation if and to the extent such alleged infringement
or misappropriation arises from: (i) the use by any member of the SeraNova Group
or the Intelligroup Group of any of the Disputed Intellectual Property in
combination with any product, software or other material provided by a third
party after the Closing Date; or (ii) any changes made by any member of the
SeraNova Group or the Intelligroup Group in the Disputed Intellectual Property
after the Closing Date.
5. EXCHANGE OF INFORMATION; CONFIDENTIALITY.
----------------------------------------
5.1 AGREEMENT FOR EXCHANGE OF INFORMATION; ARCHIVES.
-----------------------------------------------
(a) Each of Intelligroup and SeraNova, on behalf of its
respective Group, agrees to provide, or cause to be provided, to each member of
the other Group, as soon as reasonably practicable after written request
therefor, any Information in the possession or under the control of such
respective Group which the requesting party reasonably needs: (i) to comply with
reporting, disclosure, filing or other requirements imposed on the requesting
party (including under applicable securities or tax laws) by a Governmental
Authority having jurisdiction over the requesting party; (ii) for use in any
judicial, regulatory, administrative, tax or other proceeding or in order to
satisfy audit, accounting, claims, regulatory, litigation, tax or other similar
requirements; or (iii) to comply with its obligations under this Agreement or
any Ancillary Agreement; provided, however, that in the event that any party
determines that any such provision of Information could be commercially
detrimental, violate any law or agreement, or waive any attorney-client
privilege, the parties shall take all reasonable measures to permit the
compliance with such obligations in a manner that avoids any such harm or
consequence.
(b) After the Closing Date, SeraNova shall have access during
regular business hours (as in effect from time to time) to the documents that
relate to the SeraNova Business that are in the possession or control of any
member of the Intelligroup Group. SeraNova may obtain copies (but not originals)
of documents for bona fide
-17-
<PAGE>
business purposes. Nothing herein, however, shall be deemed to restrict the
access of any member of the Intelligroup Group to any such documents or to
impose any liability on any member of the Intelligroup Group if any such
documents are not maintained or preserved by Intelligroup.
(c) After the date hereof SeraNova shall: (i) maintain in
effect at its own cost and expense adequate systems and controls to the extent
necessary to enable the members of the Intelligroup Group to satisfy their
respective reporting, accounting, audit and other obligations; and (ii) provide,
or cause to be provided, to Intelligroup in such form as Intelligroup shall
request, at no charge to Intelligroup, all financial and other data and
Information as Intelligroup determines necessary or advisable in order to
prepare Intelligroup financial statements and reports or filings with any
Governmental Authority.
5.2 OWNERSHIP OF INFORMATION. Any Information owned by one Group
------------------------
that is provided to a requesting party pursuant to Section 5.1 shall be deemed
to remain the property of the providing party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed as granting or
conferring rights of license or otherwise in any such Information.
5.3 RECORD RETENTION. To facilitate the possible exchange of
----------------
Information pursuant to this Section 5 and other provisions of this Agreement,
the parties agree to use their reasonable best efforts to retain all Information
in their respective possession or control in accordance with the policies of
Intelligroup as in effect on the Closing Date. No party will destroy, or permit
any of its Subsidiaries to destroy, any Information which the other party may
have the right to obtain pursuant to this Agreement prior to the tenth (10th)
anniversary of the date hereof without first using its reasonable best efforts
to notify the other party of the proposed destruction and giving the other party
the opportunity to take possession of such Information prior to such
destruction; provided, however, that in the case of any Information relating to
Taxes or to Environmental Liabilities, such period shall be extended to the
expiration of the applicable statute of limitations (giving effect to any
extensions thereof).
5.4 Limitation of Liability. No party shall have any liability to
-----------------------
any other party in the event that any Information exchanged or provided pursuant
to this Agreement which is an estimate or forecast, or which is based on an
estimate or forecast, is found to be inaccurate, in the absence of willful
misconduct by the party providing such Information. No party shall have any
liability to any other party if any Information is destroyed after reasonable
best efforts by such party to comply with the provisions of Section 5.3.
5.5 OTHER AGREEMENTS PROVIDING FOR EXCHANGE OF INFORMATION. The
--------------------------------------------------------
rights and obligations granted under this Section 5 are subject to any specific
limitations, qualifications or additional provisions on the sharing, exchange or
confidential treatment of Information set forth in any Ancillary Agreement.
-18-
<PAGE>
5.6 PRODUCTION OF WITNESSES; RECORDS; COOPERATION.
---------------------------------------------
(a) After the Closing Date, except in the case of an
adversarial Action by one party against another party (which shall be governed
by such discovery rules as may be applicable under Section 6 or otherwise), each
party hereto shall use its reasonable best efforts to make available to each
other party, upon written request, the former, current and future directors,
officers, employees, other personnel and agents of the members of its respective
Group as witnesses (giving consideration to the business demands of such
individuals) and any books, records or other documents within its control or
which it otherwise has the ability to make available or as may reasonably be
required in connection with any Action in which the requesting party may from
time to time be involved, regardless of whether such Action is a matter with
respect to which indemnification may be sought hereunder. The requesting party
shall bear all costs and expenses in connection therewith.
(b) If an Indemnifying Party (Intelligroup or SeraNova as the
case may be) chooses to defend or to seek to compromise or settle any Third
Party Claim, or if any party chooses to prosecute or otherwise evaluate or to
pursue any claim against a third party, the other party shall use its best
efforts to make available to such Indemnifying Party (Intelligroup or SeraNova
as the case may be), upon written request, the former, current and future
directors, officers, employees, other personnel and agents of the members of its
respective Group as witnesses (giving consideration to the business demands of
such individuals) and any books, records or other documents within its control
or which it otherwise has the ability to make available or as may reasonably be
required in connection with such defense, settlement or compromise, or such
prosecution, evaluation or pursuit, as the case may be, and shall otherwise
cooperate in such defense, settlement or compromise, or such prosecution,
evaluation or pursuit, as the case may be.
(c) Without limiting the foregoing, the parties shall
cooperate and consult to the extent reasonably necessary with respect to any
Actions, contingent Liabilities and contingent gains.
(d) Without limiting any provision of this Section, each of
the parties agrees to cooperate, and to cause each member of its respective
Group to cooperate, with each other in the defense of any infringement or
similar claim with respect to any intellectual property and shall not claim to
acknowledge, or permit any member of its respective Group to claim to
acknowledge, the validity or infringing use of any intellectual property of a
third Person in a manner that would hamper or undermine the defense of such
infringement or similar claim.
(e) The obligation of the parties to provide witnesses
pursuant to this Section 5.6 is intended to be interpreted in a manner so as to
facilitate cooperation and shall include the obligation to provide as witnesses
inventors and other officers without regard to whether the witness or the
employer of the witness could assert a possible business conflict (subject to
the exception set forth in the first sentence of Section 5.6(a)).
-19-
<PAGE>
(f) In connection with any matter contemplated by this Section
5.6, the parties will enter into a mutually acceptable joint defense agreement
so as to maintain to the extent practicable any applicable attorney-client
privilege or work product immunity of any member of any Group.
5.7 CONFIDENTIALITY.
----------------
(a) Subject to Section 5.8, each of Intelligroup and SeraNova,
on behalf of itself and each other member of its respective Group, agrees to
hold, and to cause its respective directors, officers, employees, agents,
accountants, counsel and other advisors and representatives to hold, in strict
confidence, with at least the same degree of care that applies to Intelligroup's
confidential and proprietary information pursuant to policies in effect as of
the Closing Date, all Information concerning each such other Group that is
either in its possession (including Information in its possession prior to the
date hereof or the Closing Date) or furnished by any such other Group or its
respective directors, officers, employees, agents, accountants, counsel and
other advisors and representatives at any time pursuant to this Agreement, any
Ancillary Agreement or otherwise, and shall not use any such Information other
than for such purposes as shall be expressly permitted hereunder or thereunder,
except, in each case, to the extent that such Information has been: (i) in the
public domain through no fault of such party or any member of such Group or any
of their respective directors, officers, employees, agents, accountants, counsel
and other advisors and representatives; (ii) later lawfully acquired from other
sources by such party (or any member of such party's Group) which sources are
not themselves bound by a confidentiality obligation; or (iii) independently
generated without reference to any proprietary or confidential Information of
the other party.
(b) Each party agrees not to release or disclose, or permit to
be released or disclosed, any such Information to any other Person, except its
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives who need to know such Information (who shall be advised of
their obligations hereunder with respect to such Information), except in
compliance with Section 5.8. Without limiting the foregoing, when any
Information is no longer needed for the purposes contemplated by this Agreement
or any Ancillary Agreement, each party will promptly after request of the other
party either return to the other party all Information in a tangible form
(including all copies thereof and all notes, extracts or summaries based
thereon) or certify to the other party that it has destroyed such Information
(and such copies thereof and such notes, extracts or summaries based thereon).
5.8 PROTECTIVE ARRANGEMENTS. In the event that any party or any
------------------------
member of its Group either determines on the advice of its counsel that it is
required to disclose any Information pursuant to applicable law or receives any
demand under lawful process or from any Governmental Authority to disclose or
provide Information of any other party (or any member of any other party's
Group) that is subject to the confidentiality provisions hereof, such party
shall notify the other party prior to disclosing or providing such Information
and shall cooperate at the expense of the requesting party in seeking any
reasonable protective arrangements requested by such other party. Subject
-20-
<PAGE>
to the foregoing, the Person that received such request may thereafter disclose
or provide Information to the extent required by such law (as so advised by
counsel) or by lawful process or such Governmental Authority.
6. ARBITRATION; DISPUTE RESOLUTION.
-------------------------------
6.1 AGREEMENT TO ARBITRATE.
----------------------
(a) Except as otherwise specifically provided in any Ancillary
Agreement, the procedures for discussion, negotiation and arbitration set forth
in this Section 6.1 hereto shall apply to all disputes, controversies or claims
(each a "Dispute") that may arise out of or relate to, or arise under or in
connection with this Agreement or any Ancillary Agreement, or the transactions
contemplated hereby or thereby (including all actions taken in furtherance of
the transactions contemplated hereby or thereby on or prior to the date hereof),
or the commercial or economic relationship of the parties relating hereto or
thereto, between or among any member of the Intelligroup Group and the SeraNova
Group. Each party agrees on behalf of itself and each other member of its
respective Group that any Dispute shall be submitted to binding arbitration, in
accordance with the dispute resolution procedures specified in this Section. If
any of these procedures are determined to be invalid or unenforceable, the
remaining procedures shall remain in effect and binding on the parties to the
fullest extent permitted by law.
(b) The arbitration shall be held in Edison, New Jersey before
a panel of three arbitrators. Any member or members of the SeraNova Group or the
Intelligroup Group, as applicable, may by notice to the applicable member or
members of the SeraNova Group or the Intelligroup Group, as applicable, demand
arbitration, by serving on the other party a statement of the Dispute and the
facts relating or giving rise thereto, in reasonable detail, and the name of the
arbitrator selected by it. Within fifteen (15) days after receipt of such
notice, the other party shall name its arbitrator, and the two arbitrators named
by the parties shall, within fifteen (15) days after the date of such notice,
select the third arbitrator.
(c) The arbitration shall be conducted in accordance with the
procedures specified in this Section and shall be governed by the Commercial
Arbitration Rules of the American Aribitration Association, as may be amended
from time to time. In the event of a conflict, the provisions of this Section
shall control.
(d) Any issue concerning the extent to which any Dispute is
subject to arbitration, or concerning the applicability, interpretation, or
enforceability of these procedures, including any contention that all or part of
these procedures are invalid or unenforceable, shall be governed by the Federal
Arbitration Act and resolved by the arbitrators. No potential arbitrator may
serve on the panel unless first agreeing in writing to abide and be bound by
these procedures. The arbitrators may not award non-monetary or equitable relief
of any sort. They shall have no power to award damages inconsistent with this
Agreement or punitive damages or any other damages not measured by the
prevailing party's actual damages, and the parties expressly waive their right
to obtain
-21-
<PAGE>
such damages in arbitration or in any other forum. In no event, even if any
other portion of these procedures is adjudged invalid or unenforceable, shall
the arbitrators have power to make an award or impose a remedy that could not be
made or imposed by a court deciding the matter in the same jurisdiction.
(e) No discovery shall be permitted in connection with the
arbitration unless expressly authorized by the arbitration panel upon a showing
of substantial need by the party seeking discovery. All aspects of the
arbitration shall be treated as confidential. Neither the parties nor the
arbitrators may disclose the existence, content or results of the arbitration,
except as necessary to comply with legal or regulatory requirements. Before
making any such disclosure, a party shall give written notice to all other
parties and afford such parties a reasonable opportunity to protect their
interest. The result of the arbitration shall be a final decision that is
binding on the parties, and judgment on the arbitrators' award may be entered in
any court having jurisdiction. The cost of such arbitration shall be borne
equally by the parties.
(f) This Section shall not apply to any Dispute arising out of
or relating to the ownership of intellectual property. The application of this
Section to any other Dispute shall be waived only by written agreement of
Intelligroup and SeraNova. This Section shall be terminated only by written
agreement of Intelligroup and SeraNova.
6.2 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed
-------------------------------------
in writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Section with respect to
all matters not subject to such dispute, controversy or claim.
6.3 LAW GOVERNING ARBITRATION PROCEDURES. The interpretation of
------------------------------------
the provisions of this Section, only insofar as they relate to the agreement to
arbitrate and any procedures pursuant thereto, shall be governed by the Federal
Arbitration Act and other applicable federal law. In all other respects, the
interpretation of this Agreement shall be governed as set forth in Section 10.2.
7. EMPLOYEE RELATED MATTERS.
------------------------
7.1 EMPLOYEE OFFERS. Prior to the Closing Date, SeraNova or one of
---------------
its Subsidiaries shall have made a written offer of employment or engagement to
each employee, independent contractor or consultant working in the SeraNova
Business listed on SCHEDULE 7.1 hereto. Such employment offers shall provide
------------
that such individual shall commence work for SeraNova or the named Subsidiary on
or before the Closing Date. Such employment offers shall also require that such
individual shall, prior to the Closing Date, inform SeraNova of his or her
intention to accept or decline such offer and, if such individual intends to
accept such offer, to resign his or her employment with Intelligroup prior to or
as of the Closing Date.
-22-
<PAGE>
7.2 BENEFITS. As soon as practicable after the Closing Date,
--------
Intelligroup shall perform and undertake all acts as may be necessary to
rollover or otherwise transfer the vested interests of employees in the
qualified and non-qualified pension plans and Section 401(k) plans of
Intelligroup to the corresponding plans maintained by SeraNova. Intelligroup
shall be responsible for any COBRA coverage continuation notices required to be
provided with respect to any employee who accepts employment with SeraNova. On
or prior to the Closing Date, Intelligroup and SeraNova shall take all actions
as may be necessary to approve the stock-based employee benefit plans of
SeraNova in order to satisfy the requirement of Rule 16b-3 under the Exchange
Act of 1934, as amended, and Section 162(m) of the Internal Revenue Code of
1986, as amended.
7.3 NO SOLICITATION OF EMPLOYEES. For a period of two (2) years
-----------------------------
after the Closing Date, neither Intelligroup nor SeraNova or any member of their
respective Groups shall solicit any employee of the other to terminate his or
her employment to become an employee of the soliciting party, without the prior
written consent of the other party.
7.4 NO RIGHTS CONFERRED UPON EMPLOYEES. Nothing in this Agreement
----------------------------------
shall be deemed to confer any rights or remedies of any employees, independent
contractors or consultants of any member of the Intelligroup Group or the
SeraNova Group (including individuals to whom SeraNova is to offer employment
pursuant to Section 7.1). No Person shall be a third party beneficiary with
respect to the provisions of this Section 7.
8. FURTHER ASSURANCES AND ADDITIONAL COVENANTS.
-------------------------------------------
(a) In addition to the actions specifically provided for
elsewhere in this Agreement, each of the parties hereto shall use its reasonable
best efforts, prior to, on and after the Closing Date, to take, or cause to be
taken, all actions, and to do, or cause to be done, all things, reasonably
necessary, proper or advisable under applicable laws, regulations and agreements
to consummate and make effective the transactions contemplated by this Agreement
and the Ancillary Agreements.
(b) Without limiting the foregoing, prior to, on and after the
Closing Date, each party hereto shall cooperate with the other party, and
without any further consideration, but at the expense of the requesting party,
to execute and deliver, or use its reasonable best efforts to cause to be
executed and delivered, all instruments, including instruments of conveyance,
assignment and transfer, and to make all filings with, and to obtain all
consents, approvals or authorizations of, any Governmental Authority or any
other Person under any permit, license, agreement, indenture or other
instrument, and to take all such other actions as such party may reasonably be
requested to take by any other party hereto from time to time, consistent with
the terms of this Agreement and the Ancillary Agreements, in order to effectuate
the provisions and purposes of this Agreement and the Ancillary Agreements and
the transfers of the SeraNova Assets and the assignment and assumption of the
SeraNova Liabilities and the
-23-
<PAGE>
other transactions contemplated hereby and thereby. Without limiting the
foregoing, each party will, at the reasonable request, cost and expense of any
other party, take such other actions as may be reasonably necessary to vest in
such other party good and marketable title, if and to the extent it is
practicable to do so.
(c) On or prior to the Closing Date, Intelligroup and SeraNova
in their respective capacities as direct and indirect stockholders of their
respective Subsidiaries, shall each ratify any actions which are reasonably
necessary or desirable to be taken by Intelligroup, SeraNova or any Subsidiary
of Intelligroup or SeraNova, as the case may be, to effectuate the transactions
contemplated by this Agreement.
(d) Prior to the Closing Date, if one or more of the parties
identifies any commercial or other service that is needed to assure a smooth and
orderly transition of the businesses in connection with the consummation of the
transactions contemplated hereby that is not otherwise governed by the
provisions of this Agreement or any Ancillary Agreement, the parties will
cooperate in determining whether there is a mutually acceptable arm's-length
basis on which the other party will provide such service.
9. TERMINATION.
-----------
9.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
--------------------------------
terminated at any time prior to the date of the Closing Date by the mutual
consent of Intelligroup and SeraNova.
9.2 EFFECT OF TERMINATION. In the event of any termination of this
---------------------
Agreement prior to the Closing Date, no party to this Agreement (or any of its
directors or officers) shall have any Liability or further obligation to any
other party.
10. MISCELLANEOUS.
-------------
10.1 COUNTERPARTS; ENTIRE AGREEMENT.
------------------------------
(a) This Agreement and each Ancillary Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other party.
(b) This Agreement, the Ancillary Agreements and the Exhibits,
Schedules and Appendices hereto and thereto contain the entire agreement between
the parties with respect to the subject matter hereof, supersede all previous
agreements, negotiations, discussions, writings, understandings, commitments and
conversations with respect to such subject matter and there are no agreements or
understandings between the parties other than those set forth or referred to
herein or therein.
10.2 GOVERNING LAW. Except as set forth in Section 6.3, this
-------------
Agreement and, unless expressly provided therein, each Ancillary Agreement,
shall be
-24-
<PAGE>
governed by and construed and interpreted in accordance with the laws of the
State of New Jersey (other than as to its laws of arbitration which shall be
governed under the Federal Arbitration Act or other applicable federal law
pursuant to Section 6.3), irrespective of the choice of laws principles of the
State of New Jersey, as to all matters, including matters of validity,
construction, effect, enforceability, performance and remedies.
10.3 ASSIGNABILITY. Except as set forth in any Ancillary Agreement,
-------------
this Agreement and each Ancillary Agreement shall be binding upon and inure to
the benefit of the parties hereto and thereto, respectively, and their
respective successors and assigns; provided, however, that no party hereto or
-------- -------
thereto may assign its respective rights or delegate its respective obligations
under this Agreement or any Ancillary Agreement without the express prior
written consent of the other parties hereto or thereto.
10.4 THIRD PARTY BENEFICIARIES. Except for the indemnification
---------------------------
rights under this Agreement of any Intelligroup Indemnitee or SeraNova
Indemnitee in their respective capacities as such: (a) the provisions of this
Agreement and each Ancillary Agreement are solely for the benefit of the parties
and are not intended to confer upon any Person except the parties any rights or
remedies hereunder; and (b) there are no third party beneficiaries of this
Agreement or any Ancillary Agreement and neither this Agreement nor any
Ancillary Agreement shall provide any third person with any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement or any Ancillary Agreement. No
party hereto shall have any right, remedy or claim with respect to any provision
of this Agreement or any Ancillary Agreement to the extent such provision
relates solely to the other party hereto or the members of such other party's
Group.
10.5 NOTICES. All notices or other communications under this
-------
Agreement or any Ancillary Agreement, except as may be specifically provided in
an Ancillary Agreement, shall be in writing and shall be deemed to be duly given
when: (a) delivered in person; or (b) deposited in the United States mail or
internationally recognized courier service, postage prepaid, addressed as
follows:
If to Intelligroup, to:
-----------------------
Intelligroup, Inc.
499 Thornall Street
Edison, New Jersey 08837
Attn: President
If to SeraNova, to:
-------------------
SeraNova, Inc.
499 Thornall Street
Edison, NJ 08837
Attn: President
-25-
<PAGE>
Any party may, by notice to the other party, change the address to which such
notices are to be given.
10.6 SEVERABILITY. If any provision of this Agreement or any
------------
Ancillary Agreement or the application thereof to any Person or circumstance is
determined by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions hereof or thereof, or the application of
such provision to Persons or circumstances or in jurisdictions other than those
as to which it has been held invalid or unenforceable, shall remain in full
force and effect and shall in no way be affected, impaired or invalidated
thereby, so long as the economic or legal substance of the transactions
contemplated hereby or thereby, as the case may be, is not affected in any
manner adverse to any party. Upon such determination, the parties shall
negotiate in good faith in an effort to agree upon such a suitable and equitable
provision to effect the original intent of the parties.
10.7 HEADINGS. The article, section and paragraph headings
--------
containedn this Agreement and in the Ancillary Agreements are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement or any Ancillary Agreement.
10.8 WAIVERS OF DEFAULT. Waiver by any party of any default by the
------------------
other party of any provision of this Agreement or any Ancillary Agreement shall
not be deemed a waiver by the waiving party of any subsequent or other default,
nor shall it prejudice the rights of the other party.
10.9 AMENDMENTS. No provisions of this Agreement or any Ancillary
----------
Agreement shall be deemed waived, amended, supplemented or modified by any
party, unless such waiver, amendment, supplement or modification is in writing
and signed by the authorized representative of the party against whom it is
sought to enforce such waiver, amendment, supplement or modification.
10.10 LATE PAYMENTS. Except as expressly provided to the contrary in
-------------
this Agreement or in any Ancillary Agreement, any amount not paid when due
pursuant to this Agreement or any Ancillary Agreement (and any amounts billed or
otherwise invoiced or demanded and properly payable that are not paid within
thirty (30) days of such bill, invoice or other demand) shall accrue interest at
a rate per annum equal to six percent (6%).
* * * * *
-26-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Contribution Agreement to
be executed by their duly authorized representatives.
INTELLIGROUP, INC.
By: /s/ Ashok Pandey
--------------------------
Name:
Title
SERANOVA, INC.
By: /s/ Raj Koneru
--------------------------
Name: Raj Koneru
Title CEO
[Signature Page to Contribution Agreement]
-27-
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
------------------------------
SCHEDULES
- ---------
2.4 - Delayed Asset Transfers
2.7 - List or Properties
3.1 - Excluded Consents
7.1 - Individuals to Whom Offers Shall Be Made
EXHIBITS
- --------
A - Ancillary Agreements
B - SeraNova Assets
C - SeraNova Balance Sheet
D - SeraNova Contracts
E - SeraNova Liabilities
F - Permitted Liens
G - Licensed Intellectual Property
H - Intercompany Debt
-28-
<PAGE>
SCHEDULE 2.4
------------
DELAYED ASSET TRANSFERS
o All assets of Intelligroup Asia Private Limited relating to its Internet
services and solutions business shall be transferred to Intelligroup India
Private Limited, a corporation organized under the laws of India, as soon as
practicable after the Closing Date.
o All of the equity interest owned by Intelligroup, Inc. or any of its
subsidiaries in Intelligroup India Private Limited and each of its
subsidiaries, if any, shall be transferred to SeraNova, Inc. as soon as
practicable after the Closing Date.
<PAGE>
SCHEDULE 2.7
------------
LIST OF PROPERTIES
<PAGE>
----------------------------------------------------------------------------
PERCENTAGE OF PREMISES
LOCATION AND/OR BRANCH ALLOCATED TO SERANOVA
----------------------------------------------------------------------------
499 Thornall Street 33.65%
Edison, New Jersey
----------------------------------------------------------------------------
10210 North 25th Avenue 100.0%
Phoenix, Arizona
----------------------------------------------------------------------------
9013 North 25th Avenue 100.0%
Suite 6
Phoenix, Arizona
----------------------------------------------------------------------------
9014 North 23rd Avenue 100.0%
Suite 1
Phoenix, Arizona
----------------------------------------------------------------------------
950 Tower Lane 70.0%
Suite 300
Foster City, California
----------------------------------------------------------------------------
9399 West Higgins Building 50.0%
Suite 810, 8th Floor
Rosemont, Illinois
----------------------------------------------------------------------------
691 North Squirrel Road 100.0%
Suite 175
Auburn Hills, Michigan
----------------------------------------------------------------------------
<PAGE>
SCHEDULE 3.1
------------
EXCLUDED CONSENTS
<PAGE>
EXCLUDED CONSENTS
------------------------------------------
CONTRACT DATE
------------------------------------------
AMERICAN EXPRESS 3/22/98
------------------------------------------
AUDI 1/1/99
------------------------------------------
HEWLETT PACKARD 2/4/99
------------------------------------------
LIQUIDPRICE INC. 8/13/99
------------------------------------------
VIGNETTE CORPORATION 9/29/99
------------------------------------------
VOLKSWAGEN OF AMERICA 1/1/99
------------------------------------------
<PAGE>
SCHEDULE 7.1
------------
INDIVIDUALS TO WHOM OFFERS SHALL BE MADE
<PAGE>
NA - North America, IND - India, AP - Asia Pacific, EUR - Europe
Number Organiz Code Title
ation
EMPLOYEE NAME
- --------------------------------------------------------------------------------
1 IND A Keshav Narsipur Team Leader
2 IND A Mani Kandan Programmer
3 IND A Suneetha Madhukar Programmer
4 NA PHD Abhijit Barde Associate Software Engineer
5 NA PHD Akshay Shah Associate Software Engineer
6 NA PHA Alan Matsumoto Temporary
7 AP MC Alexander Frater Manager
8 AP MC Alistair McLeod Tennant Principal Consultant
9 IND Allam Bharath Reddy Programmer
10 NA PRD Allison Admin
11 AP APA Amanda Louise Talbot Typist Receptionist
12 IND Amit Agarwal Content Entry Analyst
13 NA PHD Anand Mani Software Engineer
14 NA NJD Anand Reddy Yedulla Software Engineer
15 IND Anand V Kothamangalam Content Entry Analyst
16 IND Anand Venkateshan Testing Analyst
17 NA PRA Andelin, Brian D. Finance
18 NA PRD Anderson, Dan Principal Consultant MC
19 AP MC Angela Mary Reynolds Principal Consultant
20 IND Aniesh Chawla Programmer
21 IND Anil Oggi Programmer
22 NA PHD Anil Singh Manager
23 IND Anita Subbiah Content Entry Analyst
24 AP MC Anthony Ian Culloden Principal Consultant
25 AP MC Anthony John Booth Manager
26 AP APA Anthony Michael Duffin Corporate Services Executive
27 NA PHD Anuradha Pandey Associate Software Engineer
28 NA PHD Arati Madhineni Associate Software Engineer
29 IND Aratikatla Shanti Programmer
30 IND Arjun Mukherjee Team Leader
31 IND Arun Gupta Programmer
32 NA PRD Asay, Taylor Software Engineer
33 IND Ashok Natrajan Programmer
34 IND DEL Ashutosh Yadav VP - Delivery
35 NA OPS Ashwin Royadurg Recruiting Manager
36 IND Babanbhai Abdul Raheem Programmer
37 NA PRD Baird, J. Russell Manager
38 NA DEL Balaji Kodali Associate Software Engineer
39 NA PRD Balaji Krishnamurthy Software Engineer
40 IND OPS Balaji Venkatachalam VP - Operations
41 IND Balasubramanian Programmer
Mariswaran
42 IND Balu Herbert Programmer
43 NA PHD Balu Srinivasan Software Engineer
44 AP MC Barend Keith Craig Manager
45 AP MC Barney Heslop Manager
<PAGE>
46 AP MC Barry Dennis Mawer Manager
47 AP APS Barry John Old Regional Account Director
48 AP APA Belinda Jane Boettcher Office Manager
49 IND Benoy Jose Programmer
50 AP VL Bernadine Clare Marwick Knowledge Manager
51 AP APA Beverley Anne Ellis Receptionist
52 NA PHD Bharat Agarwal Software Engineer
53 NA OPS Bharat Raju Recruting Manager
54 IND Bhaskar Prasad Mulugu Programmer
55 IND Bhaskar Rajagopal Team Leader
56 IND Bhaskar Reddy B V Programmer
57 IND Bheemi Krishna Mohan Programmer
58 NA PHD Biju Nair Software Engineer
59 IND Biju Ruhamma L Programmer
60 NA PHD Biswajit Sarkar Software Engineer
61 AP MC Brian Charles Bernon Principal Consultant
62 AP MC Brian Fair Principal Consultant
63 AP MC Bruce Tinsley Principal Consultant
64 AP MC Bruce Wood Manager
65 AP MC Bryce James Pottinger Manager
66 IND Bulusu Monmohanamurali S Content Entry Analyst
67 NA PHD Burton Machado Software Engineer
68 NA PRD Butler Melissa K. Interactive Designer
69 IND C Leena Rani Programmer
70 IND Candida Admin
71 NA PHA Carol Wright People Services Manager
72 NA PHD Carolyn Lim Software Engineer
73 NA FCD Chakib Jaber Software Engineer
74 IND Chandan Mishra Programmer
75 NA PHD Chandramohan Lingam Associate Software Engineer
76 IND Chirenjeevi MIS
77 EUR EUR Chris Managing Director - Europe
78 AP APA Christine Elizabeth Executive Assistant
Boonzaier
79 AP APA Christine Joan Nesbit Office Manager
80 NA DC Christopher Arokiraj Associate Software Engineer
81 AP MC Christopher Arthur Principal Consultant
Marshall
82 NA PHD Christopher Brinson Associate Software Engineer
83 AP MC Clare Louise Engel Principal Consultant
84 NA MKT Claudio Burgos Creative Director
85 AP MC Clifford John Blakely Principal Consultant
86 AP MC Colin Dinn Manager
87 AP APS Colin Graham Butler Regional Account Director
88 NA SOL Cooper, Tyler B. Manager
89 NA PRD Coronel, Carlos Associate Interactive
Designer
90 NA PRD Cragun, Brian B. Associate Content Analyst
91 IND D Kalyan Chakravarthi Programmer
92 NA VLM D.K. Chakravarthy Methodologist
93 IND Dasaradhi Agnihotram V S Programmer
94 NA OPS Dave Ferguson Recruiting Manager
95 AP MC David George Gale Principal Consultant
<PAGE>
96 AP MC David Hawkins Principal Consultant
97 AP MC David John Kelly Principal Consultant
98 NA PHD David Lyons Software Engineer
99 AP MC David Nigel Niven Principal Consultant
100 AP MC David Raine Oswald Principal Consultant
101 NA David Rogers Controller
102 NA PRD Davis, Matthew M. Interactive Designer
103 IND Debiprasad Benerjee Programmer
104 NA DEL Deep Vaswani Software Engineer
105 NA NJD Deepa Balaji Associate Software Engineer
106 IND Deepak S Agarwal Programmer
107 AP APS Denis Allan Parkinson Regional Account Manager
108 NA PHD Derek Au Software Engineer
109 AP MC Derek Paul Lister Principal Consultant
110 NA PHD Devanath Desikan Associate Software Engineer
111 NA PHD Devendra Kumar Associate Software Engineer
112 NA PHD Dhananjay Naniwadekar Associate Software Engineer
113 IND Dhanasekaran. K Programmer
114 NA SOL Dharma Katkuri Principal Consultant
115 NA SOL Donahue, Michael P. Director - Solutions
116 AP APM Donald Tristram Moore SVP - International
117 NA PHD Duane Matsen Software Engineer
118 IND Edward Samraj N Programmer
119 AP APS Eileen Wild Principal Consultant
120 NA NAM Elizabeth Massimo Admin. Assistant
121 NA PHD Eric Eckert Principal Software Engineer
122 NA PHD Fariza Ahsanuddin Associate Software Engineer
123 NA PRM Farr, Richard L. Director
124 NA MGT Fereshteh Azad Principal Consultant
125 AP MC Fiona Allan Office Manager
126 AP MC Francis Benedict Kelly Principal Consultant
127 AP MC Francisco Almeda TanKing Principal Consultant
128 AP MC Frederick Geoffrey Furkert Principal Consultant
129 AP APS Fredrick John Peter (Bill) Director - Australia
Boyd
130 NA SOL G.Venkat Principal Consultant
131 IND Gadde Ramesh Programmer
132 NA NJD Gajapathy Senthil Kumar Software Engineer
133 NA NJD Ganesh Nemmani Associate Software Engineer
134 NA PHD Ganeshbabu Subramanian Software Engineer
135 IND Ganti Subba Rao Admin
136 AP MC Gary Parker Principal Consultant
137 IND Gautam Deshpande Programmer
138 NA PRD Geary, Michael Interactive Architect
139 AP APA Genevieve Ruth Fraser Accountant
140 EUR EUR Geoff Baker Director Solutions - Europe
141 AP MC Geoffrey Allen Smith Principal Consultant
142 AP MC George Heatherwick Findlay Principal Consultant
143 IND George Korah MIS
144 NA AU George Moraetes Principal Consultant
145 NA PRD Gibbons, Thomas W. Manager
146 NA OPS Greg Killpack Recruiting Manager
<PAGE>
147 NA PRA Guilbert, Derrill E. IS
148 NA PHD Gunilla Sundstrom Manager
149 NA PHD Gunjan Vijayvergia Software Engineer
150 IND Guru Prasad Vinjamuri Programmer
151 IND Gurubachan Singh Sardar Programmer
152 NA VLM Gururaj Managuli Director - Methodology
153 NA PRD Hall, Craig Associate Content Analyst
154 IND Hari Babu Programmer
155 IND Harilal Kanakavalli Programmer
156 AP MC Harry Chopra Director Solutions Practice
157 IND Harsha Kiran Admin
158 AP APS Harvey David Calder Associate Director
159 NA PHD Himanshu Kohli Software Engineer
160 NA SOL Hitesh Seth Principal Consultant
161 NA PRA Hokanson, Amie Finance
162 NA PRD Hokanson, Nathan D. Software Engineer
163 IND I Stephen Mosses Programmer
164 AP MC Iain Michael Barraclough Principal Consultant
165 AP MC Ian Hamish Roderik Principal Consultant
McFadyen
166 AP APM Ian Hugh Taylor Managing Director - Asia
Pacific
167 AP APS Ian Johnson Director, Banking and
Finance
168 AP MC Ian Stewart Mawson Principal Consultant
169 IND J Sabesan Programmer
170 IND J V N D Prasad Team Leader
171 AP MC Jack Egon Boettcher Principal Consultant
172 NA MKT Jacobson, Rachel L. Marketing Executive
173 IND Jaffar Sulaimani Programmer
174 NA NJD Jaganadda Eluri Software Engineer
175 NA FCD Jagannath Jayapaul Software Engineer
176 IND Jagannathan Giridhar Testing Analyst
177 IND James Rozario Team Leader
178 AP MC Jan Jeremia Olivier Principal Consultant
179 NA OPS Jan Johnson Recruiting Manager
180 IND Jandhyala Kalyan Charavarthy
181 NA PRA Janelle Jackson Finance
182 IND Jasmit Singh Recruiter
183 NA AU Jay Krall Associate Director
184 IND Jaya Shankar Reddy P Content Entry Analyst
185 IND Jayaram Goli Programmer
186 IND Jayendaraj Ramamurthi Programmer
187 NA MKT Jeff Pasternak
188 NA NAS Jeff Schulmann Asssociate Director
189 AP APS Jeffrey Gordon Roberts Director - Asia
190 NA PRA Jennifer Receptionist
191 AP APA Jennifer Jane Wynne-Jones Payroll Administrator
192 NA PRA Jensen, Brea Human Resources
193 IND Jerome Amirtharaj Ua Team Leader
194 AP MC Jillian Kuch Human Resource Manager
195 IND Jitendra Kumar Rai Programmer
196 NA PRD Jochetz, Christopher Interactive Architect
<PAGE>
197 NA PHD Joe Jenkins Software Engineer
198 NA SOL Joe Postiglione Vice President -
Eprocurement
199 AP MC John Clive Emanuel Principal Consultant
200 AP MC John Edward Crisp Principal Consultant
201 NA NAS John Hardin Principal Consultant
202 NA SOL John Kimborough Manager
203 AP MC John Leslie Callcut Director, Projects
204 NA SOL John Lloyd Jones Principal Consultant
205 AP APS John Murray Downes Regional Account Manager
206 NA AU John Pas Principal Consultant
207 NA PRD Johnson, Clifford N. Content Analyst
208 AP MC Jonathan Mark Ashby Principal Consultant
209 NA PRD Jordan, Chris IS
210 Judith Rogerson Admin to CEO & VP Buss Dev
211 NA DEL Jyoti Nigam Business Analyst
212 IND K Shravan Kumar Programmer
213 NA Kala Bhatt Accounting
214 NA SOL Kalyan Subramaian Director
215 NA SOL Kanth Miriyala Associate Director
216 IND Kathiresan Palraj MIS
217 AP APA Kathleen Ann Warren Executive Assistant
218 AP APA Kathryn Young Principal Consultant
219 NA PHD Kaustubh Kunte Software Engineer
220 NA PHD Kaustubh Mule Software Engineer
221 IND Kavitha V Programmer
222 IND Kavitha Varahabhatla Programmer
223 AP APA Kenneth George Foulner Manager
224 AP MC Kerry Anne Trotter Regional Account Manager
225 AP MC Kevan Moran Principal Consultant
226 IND Khairunisa Begum Programmer
227 IND Kilambi.V. Ramanujam Testing Analyst
228 AP APS Kimberly Michelle Klasbeek Payroll Administrator
229 IND Kiran Kumar Gundimeda Programmer
230 IND Kiran Kumar Paladugu Programmer
231 NA PRD Kirkpatrick, Sam Principal Software Engineer
232 IND Kishore Lakshman Rajeti Programmer
233 NA PRD Knapp, Steven Principal Consultant MC
234 IND Koppisetti Suresh Kumar Programmer
235 IND Krishna Kanth Jandhyala Programmer
236 IND Krishna Kosuri Programmer
237 NA PHD Krishnamurthy Rajagopal Associate Software Engineer
238 NA NAS Kristen Costa Admin Assistant
239 IND Kumeta Vikram Programmer
240 NA PRD Laidig, Robert J. Software Engineer
241 NA DEL Lakshmi Narasimha Kota Software Engineer
242 IND Lakshmin Narasimhan Srivaths
243 NA PRD Larson, Brent Associate Content Analyst
244 AP MC Laurence Millar Director - Telecomm
245 NA PHD Laxmikant Dash Associate Software Engineer
246 AP APA Leslie Fearnley Principal Consultant
<PAGE>
247 Lisa Carnato Accounting
248 AP MC Lisa Jennifer Rickman Typist
249 NA PRD Lono, Erik N. Interactive Designer
250 NA PRD LuBean, Aaron R. Software Engineer
251 NA PRD LuBean, Jason I. Principal Software Engineer
252 IND M Laxmi Narayana MIS
253 IND Madan Mohan Reddy B Programmer
254 NA NJD Madhusmita Gupte Associate Software Engineer
255 IND Madhusudana Chittibhatta Programmer
256 NA DEL Mahendra Bairagi Associate Software Engineer
257 IND Mahesh Kumar Navale Programmer
258 IND Mallesh Kota Programmer
259 IND Maninder Singh Content Entry Analyst
260 NA PHD Manjula Tekal Software Engineer
261 IND Manoj Balraj BSA
262 NA MC Marcus Burrows Manager
263 AP MC Margery Jane Allison Principal Consultant
264 AP APA Maria Ann McKinley Manager
265 NA PHD Mark Bi Software Engineer
266 AP MC Mark Raymond Gordon Principal Consultant
267 NA NAS Mark Smith Regional Acct Mgr
268 AP MC Mark Thomas Turkington Regional Account Manager
269 AP MC Martin William Chambers Principal Consultant
270 NA NAS Matson, Jr. James E. Regional Account Manager
271 NA PHD Matthew Cronin Software Engineer
272 AP MCS Matthew Taylor Principal Consultant
273 NA PRA Maw, Kristin Finance
274 NA PRM Maw, Richard W. Director
275 NA PRD Mecham, David R. Associate Director
276 NA PHD Meena Gopakumar Principal Consultant MC
277 IND Mekala Srinivas Programmer
278 NA PHA Melody Vosgier Admin. Assistant
279 AP MC Michael Cartlidge Director - Solutions Asia
Pacific
280 AP MC Michael Colin Campbell Controller - Asia Pacific
281 AP MC Michael John Walls Principal Consultant
282 AP APA Michele Ruth West Principal Consultant
283 NA PHD Mike Dunn Associate Software Engineer
284 IND Mohan Kannapa Programmer
285 NA AU Morrell, Gregory D. Manager
286 NA PRD Moss, Nicolas Associate Content Analyst
287 IND Mothukuri Sridhar Content Entry Analyst
288 IND Motupalli Srinivas Rao Programmer
289 IND Mrudula Maddipati Programmer
290 NA PHD Mubasher Ahmed Software Engineer
291 IND Mudassir Hussain Md Programmer
292 NA DEL Munish Arora Associate Software Engineer
293 IND Murali Krishna Erramilli Programmer
294 NA PHD Murali Pallikonda Associate Software Engineer
295 NA DEL Murli Subramani Software Engineer
296 AP MC Murray Osborne Manager
297 IND Muthiah Palaniappa Programmer
<PAGE>
298 IND Naga Lanka MIS
299 IND Naga Raju Parsa Programmer
300 NA SOL Nagaraja Srivatsan Director
301 IND Nagaraju M Programmer
302 NA DEL Nageshwar Rao Sannidhanam Software Engineer
303 IND Nageswara Rao Paidi Programmer
304 NA PHD Nancy Cservak Principal Consultant MC
305 IND ProgrammerMurthy Upadhyayul S R
306 IND Narasimhaiah Narahari Programmer
307 NA PHD Nardesh Katoch Associate Software Engineer
308 IND Naresh Kumar G Programmer
309 NA NAS Neal Bischel Regional Account Director
310 IND Neeraj Vaddadi BSA
311 IND Neeraja A. Programmer
312 AP MC Neil Norman McDougall Principal Consultant
313 AP MC Neville Mercer Principal Consultant
314 NA PHD Nicholas Morisseau Principal Consultant MC
315 AP MC Nicola Charlotte Young Assistant Office Manager
316 NA MKT Nicole Altobello Marketing Assistant
317 AP MC Nigel Edwards Regional Account Manager
318 IND Nitin Kumar Bhatia Testing Analyst
319 NA PHD Noor Haq Software Engineer
320 IND Nuthikattu Sailaja Programmer
321 NA PHD Osmon Sukhera Software Engineer
322 IND P.V.U.Pavan Kumar Content Entry Analyst
323 IND Pagutharivu S Programmer
324 NA PRD Painter, Timothy D. Principal Software Engineer
325 IND Pankaj Hemnani Programmer
326 NA PHD Parag Matapurkar Software Engineer
327 IND Programmerhi V Neelishetty
328 IND Pardhasardhi V Neelishetty Programmer
329 IND Parul Gupta Programmer
330 NA NAS Pat Gardner Asssociate Director
331 NA PHA Patrick Kelly System Admin
332 IND Pawan Kumar Ramsastry Programmer
333 AP APA Peter Charles Bashford Manager
334 NA NAS Peter Evans Asssociate Director
335 AP APS Peter James Hicks Regional Account Manager
336 AP MC Peter Lindsay Smith Principal Consultant
337 IND Prabhakar K.M. Programmer
338 IND Prabhakar Kompella Team Leader
339 IND Pradeep Ramnath Iyer Programmer
340 IND Pradeep Sudhakar Joshi Programmer
341 NA PHD Prasad Samak Software Engineer
342 IND Prasann V.Nadgir Team Leader
343 IND Prasanna Karmarkar Programmer
344 NA NJD Prashant Gupte Senior Software Engineer
345 NA PHD Prashanth Chakrapani Software Engineer
346 IND Prashanth Mallikarjun Programmer
347 IND Pravas Ranjan Pattnayak Programmer
348 NA PHD Praveen Jhurani Associate Software Engineer
<PAGE>
349 IND Praveena Sridhara Content Entry Analyst
350 NA AU Prem Vedamuthu Principal Consultant
351 IND Pullamraju Harish Testing Analyst
352 IND R Rajashree Pathipaka Content Entry Analyst
353 IND R Subha Programmer
354 NA PHD Raghu Neelagiri Associate Software Engineer
355 NA Raj Koneru CEO
356 IND Rajagopalan Kasiraman Programmer
357 IND Rajarathinam Singaravelu Programmer
358 IND Rajashekar Reddy Programmer
359 NA PHD Rajashekhar Mukkavilli Associate Software Engineer
360 IND Rajendra Prasad Chadalavada
361 IND Rajesh Babu Sv Programmer
362 NA OPS Rajesh Iyer Recruiting Manager
363 IND Rajesh K Team Leader
364 IND Rajesh Yadali Programmer
365 NA PHD Rajmohan Kartha Associate Software Engineer
366 IND Ramaa Raghavan Testing Analyst
367 IND Ramachandran Dittavi.J. Testing Analyst
368 IND Ramakanth P B S V Programmer
369 IND Ramakrishnan Programmer
370 IND Ramana Murthy Programmer
371 IND Ramanuj Singh Programmer
372 NA PHD Rambabu Gonuguntla Associate Software Engineer
373 IND Ravi Goje Team Leader
374 IND Ravi Kiran G Programmer
375 IND Ravi Shankar L0Lla Programmer
376 NA Ravi Singh CFO
377 NA PHD Ravindra Mahajan Software Engineer
378 IND Ravindra Reddy Katukuri Programmer
379 IND Ravindrakumar Rasamsetti Testing Analyst
380 IND Ravindranath Y.V. Programmer
381 NA Richard Bevis VP, Marketing
382 NA SOL Richard Mclaren Manager
383 NA PHD Richard Reese Software Engineer
384 AP APS Richard Shenton Rice Principal Consultant
385 AP MC Richard Stephen Hatfield Principal Consultant
386 NA PHA Richard Verdugo System Admin
387 NA PRD Richey, Ronald H. Principal Consultant MC
388 NA PRD Richmond, Joe Interactive Designer
389 AP MC Robert Arthur Barclay Principal Consultant
390 AP MC Robert Ian Le Grice Principal Consultant
391 AP MC Robert Owen Barnes Principal Consultant
392 NA NAS Roger Comora Regional Account Manager
393 NA NJD Roger Thompson Associate Software Engineer
394 IND Rokala Tarkesh Reddy Programmer
395 NA OPS Rony Daniel Recruiting Manager
396 AP MC Russell John Rolland Principal Consultant
397 NA PRA Rymer, Randy L. Principal Software Engineer
398 IND S M Karthik Programmer
399 IND S Praveen Programmer
<PAGE>
400 IND S Rajesh Programmer
401 IND Sainath P Chawla Programmer
402 NA PHD Sairam Venkataraman Associate Software Engineer
403 IND Samuel Johnson Programmer
404 NA DEL Sandeep Ginde Software Engineer
405 IND Sangeeta Kour Testing Analyst
406 IND Sanjay Chaswal Programmer
407 NA PHD Sanjay Madaan Software Engineer
408 NA PHD Sanjay Rao Software Engineer
409 NA DEL Sanjay Sinha Software Engineer
410 NA DEL Santosh Ravindran Software Engineer
411 NA PHD Saptarshi Sen Software Engineer
412 IND Sathyanarayana Reddy V Programmer
413 IND Sathyaprasad K Programmer
414 NA DEL Satish Aditiwar Software Engineer
415 NA NAS Scoffield, Lance Regional Account Manager
416 NA AU Scott Crompton Director
417 IND Selvi Arulraj Testing Analyst
418 NA PHD Sendhil Chokkalingam Software Engineer
419 NA SOL Senthil Kunchithapatham Associate Director
420 IND Shaik Altaff Mohiddin Programmer
421 IND Shaik Mahammad Abbas Ali Testing Analyst
422 AP MC Sharon Ann Tait Principal Consultant
423 Sharon Barrien Accounting
424 NA DEL Sharon Glaser Principal Consultant
425 NA PHM Shashi Jasthi Director
426 IND Shashikanth Hanumanta Rao Programmer
427 IND Shibu Mathew Programmer
428 IND Shirmila Rani Thota Programmer
429 NA PHD Shyam Challapalli Associate Software Engineer
430 NA PHD Siva Chilukuri Software Engineer
431 NA PHD Siva Prasad Marella Associate Software Engineer
432 NA PRD Smith, Randall K. Principal Consultant MC
433 IND Smitha Puranik Programmer
434 IND Somayajulu Kolli.S.S.S Testing Analyst
435 IND Sonal J. Ashtikar Programmer
436 IND Sowmya Katragadda Programmer
437 NA PRD Spears, Kristin Principal Software Engineer
438 IND Sreejay Mullakandy Recruiting and Operations
Manager
439 IND Sreekant Gottimukkala Programmer
440 IND Sri Lakshmi Dronamraju Programmer
441 IND Sridhar Reddy Programmer
442 NA DC Sridhar Reddy Software Engineer
443 IND Sridhar Vamaraju Programmer
444 NA PHD Srikanth Katakam Software Engineer
445 IND Srikanth Murthy Programmer
446 IND Srikanth S Koneru Content Entry Analyst
447 IND Srinath Vamaraju Content Entry Analyst
448 NA PHD Srinivas Akkineni Associate Software Engineer
449 IND Srinivas Gullipalli Programmer
450 IND Srinivas Kumar Mukkamala Programmer
<PAGE>
451 NA PHD Srinivas Software Engineer
Nandamuri
452 IND Srinivas Pediredla Programmer
453 IND Srinivas Rao Ganti Programmer
454 IND Srinivas Tatavarthy Team Leader
455 IND Srinivas Veeramachaneni S Content Entry Analyst
456 NA PHD Srinivasan Rajamanickam Software Engineer
457 IND Sriram Muthugi Programmer
458 IND Sriram S Chari Testing Analyst
459 IND Sriram Swaminathan Programmer
460 IND Sriranjani Varadarajan Z Programmer
461 NA PHD Stefanie Sicard Associate Software Engineer
462 NA SOL Steven Hagler Director
463 AP APA Steven Heath Solution Practice Manager
464 NA PRD Stockett, Z. Ted Principal Software Engineer
465 NA PRD Stringham, Mark D. Associate Content Analyst
466 IND Subba Rao A.S.V Team Leader
467 IND Subbu Uppuluri Project Manager
468 NA PHD Subhajit Bhattacherjee Software Engineer
469 NA PHD Sudheer Mahankali Associate Software Engineer
470 IND Suman Srinivas Pothula Programmer
471 IND Sumathi Athuluri Programmer
472 NA PHD Sumit Sood Software Engineer
473 NA PRD Sumner, Richard E. Principal Consultant MC
474 IND Sundar Rajan S Testing Analyst
475 NA PHD Sunil Fernandes Programmer
476 IND Sunita Chary Recruiter
477 IND Suraj Prabhu Programmer
478 IND Surender Rao Katikineni Programmer
479 IND Sushanto Mukherjee Team Leader
480 IND Susheel Nair Programmer
481 NA PRD Swenson, Dawna S. Principal Consultant MC
482 IND Syed Amanullah Khan Team Leader
483 AP MC Tadeusz Jozef Gawor Manager
484 NA Tarun Chandra VP, Corp Strategy
485 NA NAS Teri Gallo Asssociate Director
486 AP MC Terry Adams Regional Account Manager
487 NA AU Terry Bradshaw Principal Consultant
488 NA AU Terry, Stephanie A. Principal Consultant
489 AP MC Thomas Michael Hunter Principal Consultant
490 AP MC Thomas Ward Bradshaw Operations Manager
491 NA PRD Thomas, Jennifer Manager
492 NA FCD Tim Lupton Software Engineer
493 NA DEL Tirumalesh Kowdlay Software Engineer
494 NA Tom Bernetich SVP, North America Sales
495 NA AU Troy Mclean Manager
496 IND Tummala Suresh Programmer
497 NA PHD Uday Pothakamury Associate Software Engineer
498 NA DEL Udipi Charya Software Engineer
499 IND Ugrappa Vinay.K. Programmer
500 IND INDA Unnamed Controller
501 IND INDA Unnamed Director - HR
<PAGE>
502 IND Upadyaula Raghu Programmer
503 IND Uppala Srikanth Testing Analyst
504 AP APS Utam Singh Pannu Principal Consultant
505 IND V Mahesh Yadav Programmer
506 IND V S Pavan Kumar Programmer
507 IND Vamsee Krishna Karumudi Content Entry Analyst
508 NA PRD Varkala, Venkat Software Engineer
509 IND Varun Kumar BSA
510 NA DC Venkatesh Kumar KirupakaranAssociate Software Engineer
511 NA PHD Venkatesh Rao Software Engineer
512 IND Venkatesh Sadagopan BSA
513 NA PHD Venkatesh Srinivas Rao Software Engineer
514 NA PHD Venkatesh Thirumalisamy Software Engineer
515 IND Venkateshwara Rao Programmer
516 NA NAS Venu Raghavan Account Manager
517 Veronica Soto Admin to Finance
518 AP MC Victor Ian Wardrop Principal Consultant
519 NA NAS Victoria Hedrick Account Manager
520 IND Vidhya M R Programmer
521 NA OPS Vidya Shaker Recruiting Manager
522 NA PHA Vijay Pulsani System Admin
523 IND Vijaya Kumar Rao Programmer
524 IND Vijaya Sarathi Tvr Programmer
525 IND TestinghAnalysteddy Talugul
526 IND Vikranth Pathak Programmer
527 NA PHD Vinay Bhat Software Engineer
528 NA DEL Vinayak Padaki Software Engineer
529 IND Vineesh Degapudi Programmer
530 NA DEL Vinod Mandhana Software Engineer
531 IND Visweshwar Rao M Programmer
532 AP MC Warren Topp Principal Consultant
533 AP OPS Willem Abraham Geerts Principal Consultant
534 AP MC William Johnson Director - Phillipines
535 NA PRD Wimmer, Jason Content Analyst
536 NA PRD Wing, Brent Principal Consultant MC
537 NA PRA Wuehler, Michael T. IS
538 IND Yerukala Chandra Programmer
539 NA PHD Yogendra Yadav Software Engineer
540 NA DEL Yuvraj Joshi Software Engineer
541 IND Zeenat Vastad Programmer
542 NA PRD Zimmerman, Joel Principal Consultant MC
543 NA FCA Zina Albano Admin. Assistant
<PAGE>
EXHIBIT A
---------
ANCILLARY AGREEMENTS
The term "Ancillary Agreements" includes the following agreements:
(i) Services Agreement;
(ii) Tax Sharing Agreement;
(iii) Space Sharing Agreement;
(iv) Distribution Agreement; and
(v) Promissory Note.
<PAGE>
EXHIBIT B
---------
SERANOVA ASSETS
The term "SeraNova Assets" includes:
o Assets Related to the Conduct of the SeraNova Business in the United States
by Intelligroup, Inc. (attached hereto):
o All of the equity interests of Intelligroup in the following companies:
1. NetPub;
2. Azimuth and each of its subsidiaries; and
3. Intelligroup India Private Limited and each of its subsidiaries.
<PAGE>
SERANOVA ASSETS
AS OF DECEMBER 31, 1999
(in thousands)
<TABLE>
<CAPTION>
ASSETS VALUE RECIPIENT CONTRIBUTING
ENTITY
SERANOVA INTELLIGROUP
<S> <C>
Current Assets:
Cash $ -
Accounts receivable, net of allowance for doubtful
accounts of $225 3,289
Unbilled services 2,872
Other current assets 185
----------
Total Current Assets 6,346
Property and equipment, net 1,072
Intangible assets, net -
Other assets -
Total Assets $ 7,418
==========
ASSETS VALUE RECIPIENT CONTRIBUTING
ENTITY
NETWORK NETWORK (1)
PUBLISHING PUBLISHING
Current Assets:
Cash $ 380
Accounts receivable, net of allowance for doubtful
accounts of $128 2,164
Unbilled services --
Other current assets 49
----------
Total Current Assets 2,593
Property and equipment, net 529
Intangible assets, net 3,492
Other assets --
Total Assets $ 6,614
==========
(1) Intelligroup will contribute 100% of outstanding Common Stock of Network Publishing.
ASSETS VALUE RECIPIENT CONTRIBUTING
ENTITY
AZIMUTH AZIMUTH (2)
Current Assets:
Cash $ 219
Accounts receivable, net of allowance for doubtful
accounts of $0 2,003
Unbilled services 808
Other current assets 117
----------
Total Current Assets 3,147
----------
Property and equipment, net 253
Intangible assets, net
Other assets 9
Total Assets $ 3,409
==========
(2) Intelligroup, Inc will contribute 100% of outstanding Common Stock of Azimuth.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASSETS VALUE RECIPIENT CONTRIBUTING ENTITY
INDIA INTELLIGROUP
<S> <C>
Current Assets:
Cash $ 12
Accounts receivable, net of allowance for
doubtful accounts of $0
Unbilled services
Other current assets 379
----------
Total Current Assets 391
Property and equipment, net
intangible assets, net other assets 1,009
----------
Total Assets $ 1,400
==========
ASSETS VALUE RECIPIENT CONTRIBUTING ENTITY
UK INTELLIGROUP
Current Assets:
Cash
Accounts receivable, net of allowance for
doubtful accounts of $0
Unbilled services
Other current assets 39
----------
Total Current Assets 39
Property and equipment, net intangible
assets, net other assets
----------
Total Assets $ 39
==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPUTERS
Date Description Price
<S> <C> <C>
4/8/98 Scanner for Sastry & Zip Drive for Rajan Nair 287.45
4/30/98 Laptop for Bharat Raju 3,133.00
8/5/98 Desktops for ISS Projects 10,432.20
8/28/98 Desktops for Phoenix 22,174.44
8/28/98 Server for Phoenix 16,443.32
9/2/98 Laptop Accessories for Phoenix 2,244.29
9/2/98 Laptops, Memory, SW, Server, 6,751.15
for Phoenix
9/14/98 Laptops for Phoenix 15,982.72
9/17/98 Desktops for Phoenix 22,865.37
10/19/98 Desktops for Phoenix 31,649.23
10/29/98 PostOffice Upgrade and Maintenance for 2,295.00
Phoenix
11/11/98 Desktops for Phoenix 40,716.09
1/15/99 Desktops for Phoenix 22,207.81
1/19/99 Printer for Phoenix 1,573.70
1/25/99 Laptop Accessories for Sastry 557.84
3/10/99 Adtran CSU/DSU for Phoenix 671.00
3/11/99 Swiftsite Hardware Equipment for Phoenix 9,876.20
3/31/99 Server for Dharma 18,991.87
4/15/99 Laptops for Phoenix 9,052.53
4/26/99 Desktop for Phoenix 6,409.90
5/18/99 Laptops for Phoenix 29,441.87
5/24/99 Laptop for Scott Crompton 4,064.95
6/2/99 Laptop for Roger Comora 3,162.54
6/9/99 Token Ring Cards for Phoenix 964.24
6/10/99 Laptop for Arvind Ramachandran 3,841.21
6/11/99 Memory for Phoenix 1,227.56
6/15/99 PC Cards for Phoenix 616.06
6/21/99 Laptops for Phoenix 19,806.00
7/8/99 Desktops for Phoenix 20,260.90
7/8/99 Hub, Printer, Mice, Cartridges for Phoenix 1,626.15
7/12/99 Desktops for Phoenix 20,260.90
7/13/99 Hub for Phoenix 914.06
7/29/99 Desktop for Security System in Phoenix 563.99
7/29/99 Hard Drives for Phoenix 965.20
7/30/99 Turbo and Lan Cards for Phoenix 868.73
7/31/99 Laptop Purchase for ATD 3,572.00
8/4/99 Ethernet Cards for Phoenix 186.99
8/10/99 Laptop for Scott Crompton 3,762.22
8/13/99 Desktops for Phoenix 9,599.00
8/13/99 3Com Hub for Phoenix 955.39
8/16/99 CD Recorder for Arvind Ramamchandran 426.00
8/21/99 Memory for Laptops for ISS Consultants (3) 421.58
8/31/99 Laptop Purchase for ATD 2,156.00
8/31/99 Ethernet Card for ATD 616.20
9/8/99 Desktops for Phoenix Office 8,557.22
9/13/99 Desktops for Phoenix Office 17,114.42
9/16/99 Printer for Phoenix Office 1,468.41
9/22/99 Laptops for Phoenix Office 21,960.15
9/23/99 Laptop for Chakib Jaber 4,076.75
9/24/99 Memory for Phoenix Office 1,800.99
9/24/99 Token Ring Cards for Phoenix Office 230.00
9/24/99 Docking Station for Chakib Jaber 144.41
9/28/99 Server for ISS 5,039.01
9/29/99 Hub/PCI Cards for Phoenix Office 2,809.20
9/30/99 Port Switches/Mouse/Transceiver for Phoenix 3,503.30
TOTAL COMPUTERS 441,298.71
</TABLE>
FURNITURE INVENTORY
<TABLE>
<CAPTION>
Quantity Purchase
Count Total
<S> <C> <C>
Executive Desks* 6 35,880
Manager Desks* 19 79,610
Workstation/Desks** 49 131,320
Conference Tables*** 3 21,750
Sofa 1 894
Armchair 1 894
Total Edison 270,347
Quantity Purchase
Count Total
Managers Office 4 15,860
Support Workstations 59 146,910
Conference/Trainin Area 1 3,200
Conference Rooms 3 4,800
Additional Furniture 1 16,480
Total Phoenix 187,250
TOTAL FURNITURE & FIXTURES 457,597
</TABLE>
<PAGE>
TRANSFERRED INTELLECTUAL PROPERTY
1. All processes and methodologies related to SeraNova's Time-to-Market
approach.
2. All documents relating to SPEC Solution Frameworks, including I-Discover,
I-Supplier, I-Partner, I-Employee and I-Customer.
3. All documents outlining application development standards: (a) Java Coding
Standard; (b) Visual Basic Standard; (c) GUI Standard; and (d) PowerBuilder
Standard.
<PAGE>
Exhibit C
SERANOVA COMBINED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE NINE-MONTH
DECEMBER 31, PERIOD ENDED
DECEMBER 31, FOR THE YEARS ENDED MARCH 31,
1999 1998 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 611 $ 677 $ 368 $ 635
Accounts receivable, net of
allowance for doubtful
accounts of $353, $200, $207,
$127, $0, respectively 7,456 3,096 2,169 1,230
Unbilled services 3,680 900 252 4
Other current assets 769 286 112 41
------- -------- -------- --------
Total Current Assets 12,516 4,959 2,901 1,910
Property and equipment, net 2,863 816 315 492
Intangible assets, net 3,492 - - -
Other assets 9 - - -
------- -------- -------- --------
Total Assets $18,880 $ 5,775 $ 3,216 $ 2,402
======= ======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term
debt $ 120 $ - $ - $ -
Notes payable to Parent 8,397 1,541 816 -
Accounts payable 872 526 276 137
Accrued payroll and related
Costs 1,551 1,039 965 997
Accrued expenses and
other liabilities 2,352 2,277 699 211
------- -------- -------- --------
Total Current Liabilities 13,292 5,383 2,756 1,345
Long-Term Debt, net
of current portion 618 -- 219 521
------- -------- -------- --------
Total Liabilities 13,910 5,383 2,975 1,866
Shareholders' Equity:
Preferred stock $.01 par value,
5,000,000 shares authorized,
none issued or outstanding - - - -
Common stock, $.01 par value,
40,000,000 shares authorized,
1,000 shares issued and
outstanding as of December 31,
1999 - - - -
Parent company investment 7,250 1,353 727 701
Currency Translation
Adjustment (34) 24 (53) 15
Accumulated deficit (2,246) (985) (433) (180)
------- -------- -------- --------
Total Shareholders' Equity 4,970 392 241 536
------- -------- -------- --------
Total Liabilities and
Shareholder's Equity $18,880 $ 5,775 $ 3,216 $ 2,402
======= ======== ======== ========
</TABLE>
EXHIBIT D
---------
SERANOVA CONTRACTS
<PAGE>
SERANOVA CONTRACTS
<TABLE>
<CAPTION>
CUSTOMER NAME DATE CUSTOMER NAME DATE
<S> <C> <C> <C>
Accident Compensation Corp 9/6/99 Mighty River Power 9/20/99
Agilent Inc. 12/6/99 Net Seed Development 5/11/99
Air New Zealand Limited 6/29/98 New Zealand Dairy Board 10/12/99
Altiris 2/5/99 New Zealand Police 11/8/99
American Express 3/22/98 North Shore City Council 9/8/99
Armstrong Inc. 9/15/99 Novell Electronic Marketing 6/28/99
Asian Terminals Inc 11/22/99 Novell, Inc. 2/9/99
Aspect Telecommunications 5/23/99 Ohgolly.com 9/16/99
Auckland City 10/12/99 Palmerston North CC 4/20/99
Audi 1/1/99 Penreco 3/8/99
Berli Jucker Public Company Ltd 12/19/99 Philippine National Oil 12/3/99
Big Planet 3/9/99 Philippines Long Distance 1/15/98
Canterbury Meat Packers Ltd 10/12/99 Phillip Morris Philippines 12/10/99
Cedenco Australia Limited 8/25/99 Powerco 10/21/99
Cerebos Gregg's Limited 8/25/99 PricewaterhouseCoopers 7/16/99
College Enterprises, Inc. 9/15/99 Rio Bravo Entertainment 2/5/99
Deloitte Touche Tomatsu 12/7/99 Royal Canadian Government 9/28/99
Department of Defence 8/5/99 Santa Cruz Operations 3/1/99
Department of Labour 9/30/99 Sento Corporation 7/15/99
Department of Lands 11/18/99 Simplot 4/1/99
Dominion Salt Limited 8/25/99 Tacit Group 11/15/99
EMI Music Publishing 1/4/99 Telecom New Zealand Limited 10/4/99
Fragomen, Del Rey & Bernsen 1/7/99 Telecom New Zealand Ltd 10/11/99
Genesis Power 4/6/99 Telephone Authority of Thailand 12/15/99
Globe Telecoms 12/7/99 Television New Zealand 8/2/99
Heinz Wattie's Australasia 8/26/99 The Forums Group 1/29/99
Hewlett Packard 2/4/99 The Slaymaker Group, Inc. 6/17/99
IAccess.com 3/22/99 The University of Auckland 10/18/99
IBM, Cable&Wireless A/c 10/18/99 TransAlta New Zealand Ltd 4/15/98
IHomeroom.com Corporation 9/17/99 US Cellular Corporation 10/6/99
Inland Revenue 8/30/99 Utah.com 1/6/99
Intermountain Health Care 9/14/99 Vignette Corporation 9/29/99
J.R. Simplot Company 6/9/99 Vilas Development Corporation 10/20/99
Liquidprice Inc. 8/13/99 Volkswagen of America 1/1/99
LWR Industries Limited 9/11/99 WebMethods, Inc. 9/16/99
McKesson Corporation 1/1/99 Work and Income NZ 11/12/99
Medical Assurance Society 11/15/99 Zuellig Pharma 7/30/99
Merrill, Scott and Associate 2/3/99 Zuellig Pharma Corporation 12/6/98
</TABLE>
<PAGE>
EXHIBIT E
---------
SERANOVA LIABILITIES
The term "SERANOVA LIABILITIES" includes:
Liabilities assumed from Intelligroup, Inc. with respect to the conduct of
SeraNova Business in the United States (attached hereto):
<PAGE>
SERANOVA LIABILITIES
<TABLE>
<CAPTION>
LIABILITIES VALUE RECIPIENT CONTRIBUTING ENTITY
SeraNova Intelligroup
<S> <C>
Current Liabilities:
Current portion of long-term debt $ -
Notes payable to Parent 6,880
Accounts payable -
Accrued payroll and related costs 836
Accrued expenses and other liabilities 682
----------
Total Current Liabilities 8,398
Long-Term Debt, net of current portion --
----------
Total Liabilities $ 8,398
==========
LIABILITIES VALUE RECIPIENT CONTRIBUTING ENTITY
Network Publishing Network Publishing (1)
Current Liabilities:
Current portion of long-term debt $ 120
Notes payable to Parent 45
Accounts payable 53
Accrued payroll and related costs 206
Accrued expenses and other liabilities 591
----------
Total Current Liabilities 1,015
Long-Term Debt, net of current portion 618
----------
Total Liabilities $ 1,633
==========
(1) Intelligroup will contribute 100% of outstanding Common Stock of Network
Publishing.
LIABILITIES VALUE RECIPIENT CONTRIBUTING ENTITY
Azimuth Azimuth (2)
Current Liabilities:
Current portion of long-term debt $ -
Notes payable to Parent 1,389
Accounts payable 573
Accrued payroll and related costs 505
Accrued expenses and other liabilities 1,079
----------
Total Current Liabilities 3,546
Long-Term Debt, net of current portion --
----------
Total Liabilities $ 3,546
==========
(2) Intelligroup, Inc will contribute 100% of outstanding Common Stock of
Azimuth.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES VALUE RECIPIENT CONTRIBUTING ENTITY
India Intelligroup
<S> <C>
Current Liabilities:
Current portion of long-term debt
Notes payable to Parent
Accounts payable 195
----------
Accrued payroll and related costs
Accrued expenses and other liabilities
Total Current Liabilities 195
Long-Term Debt, net of current portion --
----------
Total Liabilities $ 195
==========
LIABILITIES VALUE RECIPIENT CONTRIBUTING ENTITY
UK Intelligroup
Current Liabilities:
Current portion of long-term debt
Notes payable to Parent 83
Accounts payable 51
Accrued payroll and related costs 4
Accrued expenses and other liabilities --
----------
Total Current Liabilities 138
Long-Term Debt, net of current portion --
----------
Total Liabilities $ 138
==========
</TABLE>
<PAGE>
EXHIBIT F
---------
PERMITTED LIENS
o Liens granted to PNC Bank N.A. pursuant to that certain Revolving Credit Loan
Agreement dated January 29, 1999 and the First Amendment to Revolving Credit
Loan Agreement dated January 26, 2000.
<PAGE>
EXHIBIT G
---------
LICENSED INTELLECTUAL PROPERTY
1. All processes and tools related to 4 Sight Methodology.
2. All documents outlining the software selection process including, Business
Process Templates, Flow Process Diagrams and Organizational Chart Templates.
<PAGE>
EXHIBIT H
---------
INTERCOMPANY DEBT
<PAGE>
INTERCOMPANY DEBT
SeraNova has a loan payable to Intelligroup as of December 31, 1999, in
the amount of $8,397,000. Additional amounts may become payable to Intelligroup
stemming from income taxes and/or cash flow requirements for the periods
subsequent to December 31, 1999 and prior to proposed spin-off. A note bearing
an interest rate equal to the current prime rate will be negotiated prior to the
proposed spin-off.
DISTRIBUTION AGREEMENT
This Distribution Agreement dated as of January 1, 2000 (the
"Agreement") between Intelligroup, Inc., a New Jersey corporation
("Intelligroup") and SeraNova, Inc., a New Jersey corporation ("SeraNova").
W I T N E S S E T H:
WHEREAS, SeraNova is a wholly-owned Subsidiary of Intelligroup;
WHEREAS, the Board of Directors of Intelligroup has determined that it
is in the best interest of Intelligroup, its shareholders and SeraNova to
distribute to the holders of shares of Common Stock, par value $.01 per share,
of Intelligroup (the "Intelligroup Common Stock") all of the outstanding shares
of Common Stock, par value $.01 per share, of SeraNova (the "SeraNova Common
Stock") owned by Intelligroup;
WHEREAS, the Distribution is intended to qualify as a tax-free
spin-off under Section 355 of the Internal Revenue Code of 1986, as amended; and
WHEREAS, the parties hereto have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
the Distribution and to set forth other agreements that will govern certain
other matters prior to or following the Distribution;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and intending to be legally bound thereby, the
parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1. Definitions. The following terms, as used herein, have
the following meanings:
"Action" means any claim, suit, action, arbitration, inquiry,
investigation or other proceeding by or before any court, governmental or other
regulatory or administrative agency or commission or any other tribunal.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with, such other
Person. For the purposes of this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. For purposes of this
Agreement, no member of one Group shall be treated as an Affiliate of any member
of either of the other Groups.
<PAGE>
"Azimuth Companies" means, collectively, Azimuth Consulting, Azimuth
Corporation, Azimuth Holdings, Braithwaite Richmond and each Subsidiary of the
Azimuth Companies.
"Azimuth Consulting" means Azimuth Consulting Limited, a corporation
formed pursuant to the laws of New Zealand and a wholly-owned subsidiary of
Intelligroup.
"Azimuth Corporation" means Azimuth Corporation Limited, a corporation
formed pursuant to the laws of New Zealand and a wholly-owned subsidiary of
Intelligroup.
"Azimuth Holdings" means Azimuth Holdings Limited, a corporation
formed pursuant to the laws of New Zealand and a wholly-owned subsidiary of
Intelligroup.
"Braithwaite Richmond" means Braithwaite Richmond Limited, a
corporation formed pursuant to the laws of New Zealand and a wholly-owned
subsidiary of Intelligroup.
"Code" means the Internal Revenue Code of 1986, as amended.
"Distribution" means the distribution by Intelligroup on the
Distribution Date of the SeraNova Common Stock owned by Intelligroup to the
holders of Intelligroup Common Stock as of the Record Date.
"Distribution Agent" means American Stock Transfer & Trust Company.
"Distribution Date" means the business day as of which the
Distribution shall be effected.
"Distribution Documents" means all of the agreements and other
documents entered into in connection with the Distribution or the other
transactions contemplated hereby, including, without limitation, this Agreement,
the Contribution Agreement, Tax Sharing Agreement, Services Agreement and Space
Sharing Agreement.
"Effective Time" means immediately prior to the close of business on
the Distribution Date.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, permits, licenses and governmental
restrictions, whether now or hereafter in effect, relating to the environment,
the effect of the environment on human health or to emissions, discharges,
releases, manufacturing, storage, processing, distribution, use, treatment,
disposal, transportation or handling of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic, radioactive or hazardous
substances or wastes or the clean-up or other remediation thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
-2-
<PAGE>
"Finally Determined" means, with respect to any Action or other
matter, that the outcome or resolution of such Action or matter has been
judicially determined by judgment or order not subject to further appeal or
discretionary review (or, in the case of any matter required to be resolved by
arbitration in accordance with Section 8.11, that the outcome or resolution of
such matter has been determined thereunder).
"Group" means, as the context requires, the SeraNova Group or the
Intelligroup Group.
"Indemnified Party" has the meaning set forth in Section 4.4.
"Indemnifying Party" has the meaning set forth in Section 4.4.
"Intelligroup Business" means the Internet solutions provider business
conducted primarily by Intelligroup's Internet Solutions Group.
"Intelligroup Common Stock" has the meaning set forth in the second
recital hereto.
"Intelligroup Group" means Intelligroup and its Subsidiaries (other
than any member of the SeraNova Group).
"Intelligroup Indemnitees" has the meaning set forth in Section 4.1.
"Intelligroup India" means Intelligroup India Private Limited., a
corporation formed pursuant to the laws of India and a wholly-owned subsidiary
of Intelligroup.
"Intelligroup Liabilities" means all (i) Liabilities of the
Intelligroup Group under this Agreement or the other Distribution Documents,
(ii) except as otherwise specifically provided herein or in any other
Distribution Document, other Liabilities, whether arising before, on or after
The Distribution Date, of the parties hereto (or their respective Subsidiaries)
to the extent such Liabilities arise primarily from or relate primarily to the
management or conduct of the Intelligroup Business prior to the Effective Time
(the Liabilities listed in clauses (i) and (ii) are collectively referred to as
"True Intelligroup Liabilities") and (iii) that percentage of the Shared
Liabilities that are clearly attributable, or attributable by means of a
reasonable apportionment to the Intelligroup Group. The Intelligroup Liabilities
1999 included in Intelligroup's quarterly report on Form 10-Q for the quarter
ended on such date other than the SeraNova Balance Sheet Liabilities.
"Liabilities" means any and all claims, debts, liabilities and
obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under this
Agreement, any law (including Environmental Laws), rule, regulation, any action,
order, injunction or consent decree of any governmental agency or entity, or any
award of any arbitrator of any kind, and those arising under any agreement,
commitment or undertaking.
-3-
<PAGE>
"Losses" means, with respect to any Person, any and all damage, loss,
liability and expense incurred or suffered by such Person (including, without
limitation, reasonable expenses of investigation and reasonable attorneys' fees
and expenses in connection with any and all Actions or threatened Actions).
"Managing Party" has the meaning set forth in Section 4.6.
"Nasdaq" means the Nasdaq Stock Market.
"Netpub" means Network Publishing, Inc., a Utah corporation and
wholly-owned subsidiary of Intelligroup.
"Participating Party" has the meaning set forth in Section 4.6.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
governmental or political subdivision or an agency or instrumentality thereof.
"Pre-Distribution Policy" has the meaning set forth in Section 7.4.
"Record Date" means the date determined by Intelligroup's Board of
Directors (or determined by a committee of such Board of Directors or by any
person pursuant to authority delegated to such committee or such person) as the
record date for determining the holders of Intelligroup Common Stock entitled to
receive SeraNova Common Stock pursuant to the Distribution.
"Representatives" has the meaning set forth in Section 6.6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SeraNova Balance Sheet Liabilities" has the meaning set forth in this
Section 1.1 in the definition of "SeraNova Liabilities."
"SeraNova Business" means the business of providing Internet
solutions.
"SeraNova Common Stock" has the meaning set forth in the second
recital hereto.
"SeraNova Form 10" means the registration statement on Form 10 filed
by SeraNova with the SEC on or about January 27, 1999, to effect the
registration of SeraNova Common Stock pursuant to the Exchange Act in connection
with the Distribution, as such registration statement may be amended from time
to time.
"SeraNova Group" means SeraNova and its Subsidiaries as of (and,
except where the context clearly indicates otherwise, after) the Effective Time
(including all predecessors to
-4-
<PAGE>
such Persons). The members of the SeraNova Group are SeraNova, SeraNova Limited,
NetPub, the Azimuth Companies and Intelligroup India.
"SeraNova Indemnitees" has the meaning set forth in Section 4.2.
"SeraNova Information Statement" means the information statement that
forms a part of the SeraNova Form 10 and is to be sent to each holder of
Intelligroup Common Stock in connection with the Distribution.
"SeraNova Liabilities" means all (i) Liabilities of the SeraNova Group
under this Agreement or the other Distribution Documents, (ii) except as
otherwise specifically provided herein or in any other Distribution Document,
other Liabilities, whether arising before, on or after the Distribution Date, of
the parties hereto (or their respective Subsidiaries) to the extent such
Liabilities arise primarily from or relate primarily to the management or
conduct of the SeraNova Business (other than Shared Corporate Liabilities) prior
to the Effective Time (the Liabilities listed in clauses (i) and (ii) are
collectively referred to as "True SeraNova Liabilities") and (iii) that
percentage of the Shared Liabilities that are clearly attributable, or
attributable by means of a reasonable apportionment to the SeraNova Group. The
SeraNova Liabilities include all Liabilities set forth on the balance sheet of
SeraNova as of September 30, 1999 included in the SeraNova Information Statement
(the "SeraNova Balance Sheet Liabilities").
"Services Agreement" means the Services Agreement by and between
Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000.
"Shared Liability" means any Liability (whether arising before, on or
after the Distribution Date) of the parties hereto or their respective
Subsidiaries which (i) arises from or relates to the management or conduct prior
to the Effective Time of the businesses of Intelligroup and its Subsidiaries and
(ii) is not a True Intelligroup Liability or a True SeraNova Liability. Shared
Liabilities include, without limitation, Liabilities listed on Schedule 1.1
hereto.
"Shared Liability Claim" has the meaning set forth in Section 4.6.
"Space Sharing Agreement" means the Space Sharing Agreement by and
between Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000.
"Subsidiary" means, with respect to any Person, any other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Tax" means Tax as such term is defined in the Tax Sharing Agreement.
"Tax Sharing Agreement" means the Tax Sharing Agreement Agreement by
and between Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000.
"Third-Party Claim" has the meaning set forth in Section 4.5.
-5-
<PAGE>
"True Intelligroup Liabilities" has the meaning set forth in this
Section 1.1 in the definition of "Intelligroup Liabilities."
"True SeraNova Liabilities" has the meaning set forth in this Section
1.1 in the definition of "SeraNova Liabilities."
ARTICLE 2.
CERTAIN ACTIONS PRIOR TO THE DISTRIBUTION DATE
Section 2.1. Certificate of Incorporation; By-laws. Intelligroup and
SeraNova shall take all action necessary so that, at the Distribution Date, the
Amended and Restated Certificate of Incorporation and By-laws of SeraNova shall
be in the forms attached hereto as Schedule 2.1(a) and Schedule 2.1(b),
respectively.
Section 2.2. Issuance of Stock. Prior to or as of the Distribution
Date, the parties hereto shall take all steps necessary to reclassify the
outstanding shares of SeraNova Common Stock so that, except as otherwise
contemplated by this Agreement, immediately prior to or as of the Distribution
Date the number of shares of SeraNova Common Stock outstanding and held by
Intelligroup shall be equal to one to one (1/1) the number of shares of
Intelligroup Common Stock outstanding on the Record Date.
Section 2.3. Transfer of Certain Other Assets and Assumption of
Liabilities. Effective prior to or as of the Distribution Date or as soon as
practicable after the Distribution Date, subject to receipt of any necessary
consents or approvals of third parties or of governmental or regulatory agencies
or authorities and subject to Section 7.2, Intelligroup shall, or shall cause
the relevant member of the Intelligroup Group to, assign, contribute, convey,
transfer and deliver to SeraNova or to one or more members of the SeraNova Group
(a) all of the right, title and interest of Intelligroup or such member of the
Intelligroup Group in and to all assets (including all agreements), if any, held
by any member of the Intelligroup Group that relate predominantly to the
SeraNova Business and (b) all of the shares of capital stock of NetPub, the
Azimuth Companies, and Intelligroup India and SeraNova shall, or shall cause
such member or members of the SeraNova Group to, assume and take transfer of all
liabilities associated with such assets.
Section 2.4. Conduct of Business Pending the Distribution Date.
Each of the parties hereto agrees that from the date hereof until the
Distribution Date, except as otherwise contemplated by this Agreement, it will
use its best efforts to carry on the Intelligroup Business diligently in the
ordinary course and substantially in the same manner as heretofore conducted and
to preserve intact the business organization and goodwill of the Intelligroup
Business (including using its best efforts to cause its Subsidiaries to take
such actions.
Section 2.5. Refinancing. Each of the parties hereto agrees that it
will use reasonable efforts to obtain, prior to the Distribution Date, all
necessary consents, waivers or amendments to each bank credit agreement, debt
security or other financing facility to which it and its Subsidiaries is a party
or by which it or any of its Subsidiaries is bound, or to refinance such
agreement, security or facility, in each case on terms satisfactory to
Intelligroup and
-6-
<PAGE>
SeraNova and to the extent necessary to permit the Distribution to be
consummated without any material breach of the terms of such agreement, security
or facility.
Section 2.6. Registration and Listing. Prior to the Distribution
Date (a) Intelligroup and SeraNova shall prepare the SeraNova Information
Statement and the SeraNova Form 10. SeraNova shall file the SeraNova Form 10
with the SEC. Intelligroup and SeraNova shall use reasonable efforts to cause
the SeraNova Form 10 to become effective under the Exchange Act as promptly as
reasonably practicable. Intelligroup and SeraNova shall prepare the SeraNova
Information Statement; and after the SeraNova Form 10 becomes effective,
Intelligroup shall cause the SeraNova Information Statement to be mailed to the
holders of Intelligroup Common Stock as of the Record Date.
(b) The parties shall use their best efforts to take all such
action as may be necessary or appropriate under state securities and "blue sky"
laws in connection with the transactions contemplated by this Agreement.
(c) Intelligroup and SeraNova shall prepare, and SeraNova shall
file and seek to make effective, an application for the trading of the SeraNova
Common Stock on Nasdaq, subject to official notice of issuance.
(d) Intelligroup and SeraNova shall cooperate in preparing, filing
with the SEC and causing to become effective any registration statements or
amendments thereto that are appropriate to reflect the establishment of or
amendments to any employee benefit and other plans contemplated by this
Agreement.
ARTICLE 3.
THE DISTRIBUTION
Section 3.1. Intelligroup Board Action; Conditions Precedent. (a)
Intelligroup's Board of Directors shall, in its discretion, establish (or
delegate authority to establish) the Record Date and the Distribution Date and
any appropriate procedures in connection with the Distribution. In no event
shall the Distribution occur unless the following conditions shall have been and
continue to be satisfied:
(i) The transactions contemplated by Sections 2.1, 2.2, 2.3, 2.4,
2.5, and 2.6 shall have been consummated in all material respects;
(ii) the SeraNova Form l0 shall have become effective under the
Exchange Act and no stop order with respect thereto shall be in effect;
(iii) the SeraNova Common Stock to be delivered in the Distribution
shall have been approved for trading on Nasdaq, subject to official notice of
issuance;
(iv) the Board of Directors of Intelligroup shall be satisfied that
(a) at the time of the Distribution and after giving effect to the Distribution
and other related transactions, Intelligroup will not be insolvent (in that,
both before and immediately following the
-7-
<PAGE>
Distribution, (i) the fair market value of Intelligroup's assets would exceed
Intelligroup's liabilities, (ii) Intelligroup would be able to pay its
liabilities as they mature and become absolute and (iii) Intelligroup would not
have unreasonably small capital with which to engage in its business) and (b)
the Distribution shall be payable in accordance with applicable law;
(v) Intelligroup's Board of Directors shall have approved the
Distribution and shall not have abandoned, deferred or modified the Distribution
at any time prior to the Distribution Date;
(vi) SeraNova shall take such action as is necessary such that its
Board of Directors is comprised of those individuals named as directors in the
SeraNova Information Statement.
(vii) The Contribution Agreement, Tax Sharing Agreement, Space
Sharing Agreement and Services Agreement shall have been duly executed and
delivered by the parties thereto;
(viii) All authorizations, consents, approvals and clearances of all
federal, state, local and foreign governmental agencies required to permit the
valid consummation by the parties hereto of the transactions contemplated by
this Agreement shall have been obtained; and no such authorization, consent,
approval or clearance shall contain any conditions which would have a material
adverse effect on (a) the Intelligroup Business, (b) the assets, results of
operations or financial condition of the Intelligroup Group, in each case taken
as a whole, or (c) the ability of Intelligroup or SeraNova to perform its
obligations under this Agreement; and all statutory requirements for such valid
consummation shall have been fulfilled;
(ix) No preliminary or permanent injunction or other order, ruling
or decree issued by a court of competent jurisdiction or by a government,
regulatory or administrative agency or commission, and no statute, rule,
regulation or executive order promulgated or enacted by governmental authority,
shall be in effect preventing the payment of the Distribution;
(x) All necessary consents, amendments or waivers to each bank
credit agreement, debt security or other financing facility to which any member
of the Intelligroup Group is a party or by which any such member is bound shall
have been obtained, or each such agreement, security or facility shall have been
refinanced, in each case on terms satisfactory to Intelligroup and SeraNova and
to the extent necessary to permit the Distribution to be consummated without any
material breach of the terms of such agreement, security or facility; and
(xi) Intelligroup shall have received an opinion from Arthur
Andersen LLP, substantially in the form attached hereto as Exhibit Schedule
3.1(xi) that the Distribution should be tax-free to Intelligroup and to U.S.
stockholders of the Intelligroup Common Stock.
(b) Any determination made by the Board of Directors of
Intelligroup in good faith prior to the Distribution Date concerning the
satisfaction or waiver of any or all of the conditions set forth in this Section
3.1 shall be conclusive.
-8-
<PAGE>
Section 3.2. The Distribution. Subject to the terms and conditions
set forth in this Agreement, (i) prior to the Distribution Date, Intelligroup
shall deliver to the Distribution Agent for the benefit of holders of record of
Intelligroup Common Stock on the Record Date, stock certificates, endorsed by
Intelligroup in blank, representing all of the then-outstanding shares of
SeraNova Common Stock owned by Intelligroup, (ii) the Distribution shall be
effective as of the close of business, New York City time, on the Distribution
Date and (iii) Intelligroup shall instruct the Distribution Agent to distribute,
on or as soon as practicable after the Distribution Date, to each holder of
record of Intelligroup Common Stock as of the Record Date one share of SeraNova
Common Stock for each one share of Intelligroup Common Stock so held. SeraNova
agrees to provide all certificates for shares of SeraNova Common Stock that
Intelligroup shall require (after giving effect to Section 3.4) in order to
effect the Distribution.
Section 3.3. Stock Dividends to Intelligroup. On or prior to the
Distribution Date, SeraNova shall issue to Intelligroup as a stock dividend the
number of shares of SeraNova Common Stock as required to effect the
Distribution, as certified by the Distribution Agent. In connection therewith,
Intelligroup shall deliver to SeraNova for cancellation the share certificate
currently held by it representing SeraNova Common Stock.
Section 3.4. Fractional Shares. No certificates representing
fractional shares of SeraNova Common Stock will be distributed in the
Distribution. The Distribution Agent will be directed to determine the number of
whole shares and fractional shares of SeraNova Common Stock allocable to each
holder of Intelligroup Common Stock as of the Record Date. Upon the
determination by the Distribution Agent of such number of fractional shares, as
soon as practicable after the Distribution Date, the Distribution Agent, acting
on behalf of the holders thereof, shall sell such fractional shares for cash on
the open market and shall disburse the appropriate portion of the resulting cash
proceeds (net of any costs of selling the fractional shares) to each holder
entitled thereto.
ARTICLE 4.
INDEMNIFICATION
Section 4.1. SeraNova Indemnification of the Intelligroup Group. (a)
Subject to Section 4.3, on and after the Distribution Date, SeraNova shall
indemnify, defend and hold harmless the Intelligroup Group and the respective
directors, officers, employees and Affiliates of each Person in the Intelligroup
Group (the "Intelligroup Indemnitees") from and against any and all Losses
incurred or suffered by any of the Intelligroup Indemnitees (1) arising out of,
or due to the failure of any Person in the SeraNova Group to pay, perform or
otherwise discharge, any of the SeraNova Liabilities and (2) arising out of the
breach by any member of the SeraNova Group of any obligation under this
Agreement or any of the other Distribution Documents. This indemnification is
not intended to, and should not be construed as, limiting or amending SeraNova's
indemnification obligations defined in any of the other Distribution Documents.
(b) Subject to Section 4.3, SeraNova shall indemnify, defend and
hold harmless each of the Intelligroup Indemnitees and each Person, if any, who
controls any Intelligroup Indemnitee within the meaning of either Section 15 of
the Securities Act or Section
-9-
<PAGE>
20 of the Exchange Act from and against any and all Losses caused by any untrue
statement or alleged untrue statement of a material fact contained in the
SeraNova Form 10 or any amendment thereof or the SeraNova Information Statement
(as amended or supplemented), or caused by any omission or alleged omission to
state therein a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except
insofar as such Losses are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished to
SeraNova in writing by Intelligroup expressly for use therein.
Section 4.2. Intelligroup Indemnification of SeraNova Group. (a)
Subject to Section 4.3, on and after the Distribution Date, Intelligroup shall
indemnify, defend and hold harmless the SeraNova Group and the respective
directors, officers, employees and Affiliates of each Person in the SeraNova
Group (the "SeraNova Indemnitees") from and against any and all Losses incurred
or suffered by any of the SeraNova Indemnitees, (1) arising out of, or due to
the failure of any Person in the Intelligroup Group to pay, perform or otherwise
discharge, any of the Intelligroup Liabilities and (2) arising from any breach
by any member of the Intelligroup Group of any obligation made under this
Agreement or any of the other Distribution Documents. This indemnification is
not intended to, and should not be construed as, limiting or amending
Intelligroup's indemnification obligations defined in any of the other
Distribution Documents.
(b) Subject to Section 4.3, Intelligroup shall indemnify, defend
and hold harmless each of the SeraNova Indemnitees and each Person, if any, who
controls any SeraNova Indemnitee within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
Losses caused by any untrue statement or alleged untrue statement of a material
fact contained in the SeraNova Form 10 or any amendment thereof or in the
SeraNova Information Statement (as amended or supplemented), or caused by any
omission or alleged omission to state therein a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
such Losses are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information furnished to SeraNova in
writing by Intelligroup expressly for use therein.
Section 4.3. Insurance; Third-Party Obligations. Any indemnification
pursuant to Section 4.1 or 4.2 shall be paid net of the amount of any insurance
or other amounts that would be payable by any third party to the Indemnified
Party (as defined below) in the absence of this Agreement (irrespective of time
of receipt of such insurance or other amounts) and net of any Tax Benefit (as
defined in the Tax Sharing Agreement) to the Indemnified Party attributable to
the relevant payment or Liability. It is expressly agreed that no insurer or any
other third party shall be (i) entitled to a benefit it would not be entitled to
receive in the absence of the foregoing indemnification provisions, (ii)
relieved of the responsibility to pay any claims to which it is obligated or
(iii) entitled to any subrogation rights with respect to any obligation
hereunder.
Section 4.4. Notice and Payment of Claims. If any Intelligroup
Indemnitee or SeraNova Indemnitee (the "Indemnified Party") determines that it
is or may be entitled to indemnification by any party (the "Indemnifying Party")
under Article 4 (other than in connection with any Action subject to Section 4.5
or 4.6), the Indemnified Party shall deliver to the
-10-
<PAGE>
Indemnifying Party a written notice specifying, to the extent reasonably
practicable, the basis for its claim for indemnification and the amount for
which the Indemnified Party reasonably believes it is entitled to be
indemnified. Within 30 days after receipt of such notice, the Indemnifying Party
shall pay the Indemnified Party such amount in cash or other immediately
available funds unless the Indemnifying Party objects to the claim for
indemnification or the amount thereof. If the Indemnifying Party does not give
the Indemnified Party written notice objecting to such indemnity claim and
setting forth the grounds therefor within such 30-day period, the Indemnifying
Party shall be deemed to have acknowledged its liability for such claim and the
Indemnified Party may exercise any and all of its rights under applicable law to
collect such amount. In the event of such a timely objection by the Indemnifying
Party, the amount, if any, that is Finally Determined to be required to be paid
by the Indemnifying Party in respect of such indemnity claim shall be paid by
the Indemnifying Party to the Indemnified Party in cash within 15 days after
such indemnity claim has been so Finally Determined.
Section 4.5. Notice and Defense of Third-Party Claims Other Than
Those for Shared Liabilities. Promptly following the earlier of (i) receipt of
notice of the commencement by a third party of any Action against or otherwise
involving any Indemnified Party or (ii) receipt of information from a third
party alleging the existence of a claim against an Indemnified Party, in either
case, with respect to which indemnification may be sought pursuant to this
Agreement (a "Third-Party Claim"), the Indemnified Party shall give the
Indemnifying Party written notice thereof. The failure of the Indemnified Party
to give notice as provided in this Section 4.5 shall not relieve the
Indemnifying Party of its obligations under this Agreement, except to the extent
that the Indemnifying Party is prejudiced by such failure to give notice. Within
30 days after receipt of such notice, the Indemnifying Party may (i) by giving
written notice thereof to the Indemnified Party, acknowledge liability for such
indemnification claim and at its option elect to assume the defense of such
Third-Party Claim at its sole cost and expense or (ii) object to the claim for
indemnification set forth in the notice delivered by the Indemnified Party
pursuant to the first sentence of this Section 4.5; provided that if the
Indemnifying Party does not within such 30-day period give the Indemnified Party
written notice objecting to such indemnification claim and setting forth the
grounds therefor, the Indemnifying Party shall be deemed to have acknowledged
its liability for such indemnification claim. If the Indemnifying Party has
acknowledged liability and elected to assume the defense of a Third-Party Claim,
(x) the defense shall be conducted by counsel retained by the Indemnifying Party
and reasonably satisfactory to the Indemnified Party, provided that the
Indemnified Party shall have the right to participate in such proceedings and to
be represented by counsel of its own choosing at the Indemnified Party's sole
cost and expense; and (y) the Indemnifying Party may settle or compromise the
Third-Party Claim without the prior written consent of the Indemnified Party so
long as such settlement includes an unconditional release of the Indemnified
Party from all claims that are the subject of such Third-Party Claim, provided
that the Indemnifying Party may not agree to any such settlement pursuant to
which any remedy or relief, other than monetary damages for which the
Indemnifying Party shall be responsible hereunder, shall be applied to or
against the Indemnified Party, without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld. If the
Indemnifying Party does not assume the defense of a Third-Party Claim for which
it has acknowledged liability for indemnification hereunder, the Indemnified
Party will act in good faith with respect thereto and may require the
Indemnifying Party to
-11-
<PAGE>
reimburse it on a current basis for its reasonable expenses of investigation,
reasonable attorneys' fees and reasonable out-of-pocket expenses incurred in
defending against such Third-Party Claim and the Indemnifying Party shall be
bound by the result obtained with respect thereto by the Indemnified Party;
provided that the Indemnifying Party shall not be liable for any settlement
effected without its consent, which consent shall not be unreasonably withheld.
If the Indemnifying Party objects to a claim for indemnification, (a) the
Indemnifying Party shall not be entitled to assume the defense of the related
Third-Party Claim, (b) the Indemnified Party shall act in good faith with
respect to such Third-Party Claim, (c) the dispute as to whether the Indemnified
Party is entitled to indemnification hereunder shall be resolved in accordance
with Section 8.11 if it is determined that the Indemnified Party is entitled to
indemnification hereunder, the Indemnifying Party will be responsible for all
Losses of the Indemnified Party arising from such Third-Party Claim. The
Indemnifying Party shall pay to the Indemnified Party in cash the amount, if
any, for which the Indemnified Party is entitled to be indemnified hereunder
within 15 days after such Third-Party Claim has been Finally Determined, in the
case of a Third-Party Claim as to which the Indemnifying Party has acknowledged
liability or, in the case of any Third-Party Claim as to which the Indemnifying
Party has not acknowledged liability, within 15 days after such Indemnifying
Party's objection to liability hereunder has been Finally Determined to be
unfounded. This Section 4.5 shall govern all claims under this Article 4 for
indemnification against Third-Party Claims except Third-Party Claims in respect
of Shared Liabilities, as to which Section 4.6 shall govern.
Section 4.6. Notice and Defense of Third-Party Claims for Shared
Liabilities. Promptly following the earlier of (i) receipt of notice of the
commencement of a Third-Party Claim in respect of a Shared Liability (a "Shared
Liability Claim") or (ii) receipt of information from a third party alleging the
existence of a Shared Liability Claim, the party receiving such notice or
information shall give the other parties written notice thereof. The failure of
the party receiving notice or information with respect to a Shared Liability
Claim in respect to give notice as provided in this Section 4.6 shall not
relieve another party of its indemnification obligations under this Agreement
with respect thereto, except to the extent that such party is prejudiced by such
failure to give notice.
Each party hereto shall be entitled to participate in the defense of
such Shared Liability Claim if either the Shared Liability Claim has been
asserted or threatened against such party or such party has acknowledged in
writing its obligation to bear a portion of the potential liability in respect
of such Shared Liability Claim. (Each party that is so entitled to participate
in the defense of such Shared Liability Claim is referred to herein as a
"Participating Party".) Without limiting the terms of Sections 4.1(a) and
4.2(a), the party against whom the Shared Liability Claim is made shall have
management and administrative responsibility in respect thereof; provided that
if SeraNova is a Participating Party it shall have management and administrative
responsibility in respect thereof. The party responsible for the management and
administration of a Shared Liability Claim is referred to herein as the
"Managing Party" and such management and administrative responsibility shall
entail the defense of such Shared Liability Claim, negotiation with claimants
and potential claimants (subject to the limitations in the following paragraph)
and other reasonably related activities. The Managing Party shall retain counsel
selected by it and reasonably satisfactory to the other Participating Parties,
provided that the other Participating Parties shall have the right to
participate in such proceedings and to be
-12-
<PAGE>
represented by counsel of its or their own choosing at its or their sole cost
and expense. The legal or other expenses in respect of a Shared Liability Claim
incurred by or on behalf of any person other than the Managing Party shall not
be Losses for purposes of this Agreement. All parties hereto shall cooperate
with the Managing Party and each other in the defense or prosecution of such
Shared Liability Claim.
In no event will the party against which the claim was made admit any
liability with respect to, or settle, compromise or discharge, any Shared
Liability Claim without the prior written consent of each other Participating
Party; provided, however, that the party against which the claim was made may
settle or compromise the Shared Liability Claim without the prior written
consent of the other Participating Parties if such party releases each of the
other Participating Parties from their respective indemnification obligations
hereunder with respect to such Shared Liability Claim and such settlement,
compromise or discharge would not otherwise adversely affect the other
Participating Parties. The Managing Party shall act in good faith with respect
to the Shared Liability Claim and may require the other parties to reimburse it
on a current basis for its reasonable expenses of investigation, reasonable
attorneys' fees and reasonable out-of-pocket expenses incurred in defending
against such Shared Liability Claim, and the other parties shall be bound by the
result obtained with respect thereto; provided that a Participating Party shall
not be liable for any settlement effected without its consent, which consent
shall not be unreasonably withheld. If a party objects to, or does not within 30
------------------ ------------------
days of notice acknowledge in writing its indemnification obligations hereunder
- ----
in respect of a portion of the liability for a Shared Liability Claim, (a) such
party shall not be entitled to participate in the defense of such Shared
Liability Claim, and (b) the dispute as to whether such party is required to
provide indemnification hereunder with respect thereto shall be resolved in
accordance with Section 8.11 hereof. Each Indemnifying Party in respect of a
Shared Liability Claim shall pay to the Indemnified Party in cash the amount, if
any, for which the Indemnified Party is entitled to be indemnified hereunder by
such Indemnifying Party within 15 days after such Shared Liability Claim has
been Finally Determined, in the case of a Shared Liability Claim as to which the
Indemnifying Party has acknowledged liability or, in the case of any Shared
Liability Claim as to which the Indemnifying Party has not acknowledged
liability, within 15 days after such Indemnifying Party's objection to liability
hereunder has been Finally Determined to be unfounded.
Section 4.7. Contribution. If for any reason the indemnification
provided for in Section 4.1 or 4.2 is unavailable to any Indemnified Party, or
insufficient to hold it harmless, then the Indemnifying Party shall contribute
to the amount paid or payable by such Indemnified Party as a result of such
Losses in such proportion as is appropriate to reflect all relevant equitable
considerations.
Section 4.8. Non-Exclusivity of Remedies. The remedies provided for
in this Article 4 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any Indemnified Party at law or in equity.
-13-
<PAGE>
ARTICLE 5.
EMPLOYEE MATTERS
Section 5.1. Employee Matters Generally. (a) Stock options
outstanding under the Intelligroup Equity-Based Plans will be adjusted so that
following the Distribution the exercise price of such options shall be adjusted
to take into account the Distribution and to ensure that the aggregate intrinsic
value of the adjusted Intelligroup options after the record date in respect of
the Distribution is equal to or less than, the aggregate intrinsic value of the
related Intelligroup option prior to the record date in respect of the
Distribution.
(b) In partial consideration for all Services provided or to be
provided (including by any member of the SeraNova Group to any member of the
Intelligroup Group or by any member of the Intelligroup Group to any member of
the SeraNova Group) and other consideration provided pursuant to this Agreement
(including the transfers of assets and assumptions of liabilities as provided
herein), SeraNova and Intelligroup shall use their best efforts to accomplish
the foregoing including, but not limited to, making such grants of options and
issuing such shares of Intelligroup Common Stock and SeraNova Common Stock as
may be required hereunder.
(c) Intelligroup options held by SeraNova employees will cease to
vest beyond those options vested as of the Distribution Date. Further, such
vested options will be caused to expire 90 days after the Distribution Date.
(d) Retained Employees (as defined in Section 5(a)(ii) of the
Services Agreement executed contemporaneously with the execution of this
Distribution Agreement) to whom Intelligroup options have previously been
granted will be required to forfeit such options as follows, or will be
ineligible for grants of SeraNova options:
(i) as of the Distribution Date, all unvested options will be
forfeited immediately; and
(ii) vested options as of the Distribution Date, will be forfeited
if not exercised within 90 days of such date.
ARTICLE 6.
ACCESS TO INFORMATION
Section 6.1. Provision of Corporate Records. Prior to or as soon as
practicable following the Distribution Date, each Group shall provide or make
available to each other Group all documents, contracts, books, records and data
(including but not limited to minute books, stock registers, stock certificates
and documents of title) in its possession relating to such other Group or such
other Group's business and affairs; provided that if any such documents,
contracts, books, records or data relate to both Groups or the business and
operations of both Groups, each such Group shall provide or make available to
the other Group true and complete copies of such documents, contracts, books,
records or data.
-14-
<PAGE>
Section 6.2. Access to Information. From and after the Distribution
Date, each Group shall afford promptly to each other Group and its accountants,
counsel and other designated representatives reasonable access during normal
business hours to all documents, contracts, books, records, computer data and
other data in such Group's possession relating to such other Group or the
business and affairs of such other Group (other than data and information
subject to an attorney/client or other privilege), insofar as such access is
reasonably required by such other Group, including, without limitation, for
audit, accounting, litigation and disclosure and reporting purposes.
Section 6.3. Litigation Cooperation. Each Group shall use reasonable
efforts to make available, upon written request, its directors, officers,
employees and representatives as witnesses to each other Group and its
accountants, counsel, and other designated representatives, and shall otherwise
cooperate with each other Group, to the extent reasonably required in connection
with any legal, administrative or other proceedings arising out of any Group's
business and operations prior to the Distribution Date in which the requesting
party may from time to time be involved.
Section 6.4. Reimbursement. Each Group providing information or
witnesses to any other Group, or otherwise incurring any expense in connection
with cooperating, under Sections 6.1, 6.2 or 6.3 shall be entitled to receive
from the recipient thereof, upon the presentation of invoices therefor, payment
for all costs and expenses as may be reasonably incurred in providing such
information, witnesses or cooperation.
Section 6.5. Retention of Records. Except as otherwise required by
law or agreed to in writing, each party shall, and shall cause the members of
its respective Group to, retain all information relating to any other Group's
business and operations in accordance with the past practice of such party.
Notwithstanding the foregoing, any party may destroy or otherwise dispose of any
such information at any time, provided that, prior to such destruction or
disposal, (i) such party shall provide not less than 90 days' prior written
notice to the other parties, specifying the information proposed to be destroyed
or disposed of, and (ii) if a recipient of such notice shall request in writing
prior to the scheduled date for such destruction or disposal that any of the
information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the information as was requested at the
expense of the requesting party or parties.
Section 6.6. Confidentiality. Each party shall hold and shall cause
its Affiliates and its and their respective directors, officers, employees,
agents, consultants and advisors ("Representatives") to hold in strict
confidence all information concerning any other party or its Affiliates unless
(i) such person is compelled to disclose such information by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law or (ii) such information can be shown to have been (A) in the public
domain through no fault of such party or its Representatives or (B) lawfully
acquired after the Distribution Date on a non-confidential basis from other
sources. Notwithstanding the foregoing, such party may disclose such information
to its Representatives so long as such Persons are informed by such party of the
confidential nature of such information and are directed by such party to treat
such information
-15-
<PAGE>
confidentially. If a party or any of its Representatives becomes legally
compelled to disclose any documents or information subject to this Section 6.6,
such party will promptly notify the other applicable party so that such other
party may seek a protective order or other remedy or waive compliance with this
Section 6.6. If no such protective order or other remedy is obtained or waiver
granted, the party subject to compulsion will furnish only that portion of the
information which it is advised by counsel is legally required and will exercise
its reasonable efforts to obtain reliable assurance that confidential treatment
will be accorded such information. Each party agrees to be responsible for any
breach of this Section 6.6 by its Representatives.
Section 6.7. Inapplicability of Article 6 to Tax Matters.
Notwithstanding anything to the contrary in Article 6, Article 6 shall not apply
with respect to information, records and other matters relating to Taxes, all of
which shall be governed by the Tax Sharing Agreement.
ARTICLE 7.
CERTAIN OTHER AGREEMENTS
Section 7.1. Further Assurances and Consents. In addition to the
actions specifically provided for elsewhere in this Agreement, each of the
parties hereto shall use its reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things, reasonably necessary,
proper or advisable under applicable laws, regulations and agreements or
otherwise to consummate and make effective the transactions contemplated by this
Agreement, including but not limited to using its reasonable efforts to obtain
any consents and approvals and to make any filings and applications necessary or
desirable in order to consummate the transactions contemplated by this
Agreement; provided that no party hereto shall be obligated to pay any
consideration therefor (except for filing fees and other similar charges) to any
third party from whom such consents or approvals are requested or to take any
action or omit to take any action if the taking of or the omission to take such
action would be unreasonably burdensome to the party, its Group or its Group's
business.
Section 7.2. Intellectual Property Rights and Licenses. Except as
set forth in that certain Contribution Agreement by and between Intelligroup,
Inc. and SeraNova, Inc. dated as of January 1, 2000, none of the Groups shall
have any right or license in or to any technology, software, intellectual
property (including any trademark, service mark, patent or copyright), know-how
or other proprietary right owned, licensed or held for use by another Group.
Section 7.3. Insurance. Notwithstanding anything contained herein or
in any Distribution Document to the contrary, nothing contained herein or in any
Distribution Document shall constitute an assignment or transfer of any
insurance policy or the rights thereunder to the extent any such assignment or
transfer would cause the coverage under such policy to be reduced. If any such
assignment or transfer would result in such a reduction, the party that would
have assigned or transferred such rights will enforce the rights thereunder for
the benefit of the party to whom such assignment or transfer would have been
made but for the effect of the preceding sentence and shall hold any payment
received in respect thereof in trust for such party. Each party hereunder hereby
appoints Intelligroup as its agent to administer any claim it or any
-16-
<PAGE>
member of its Group may have under any insurance policy held by Intelligroup or
any of its Subsidiaries prior to the Distribution Date (each, a
"Pre-Distribution Policy") with respect to any claim or occurrence arising prior
to the Distribution Date. If, as a result of any retrospective loss adjustment,
stop loss, deductible, coverage limit or other similar arrangement, any party
(or any member of its Group) is required to make any payment in respect of, or
is not paid the full amount it may claim under, any Pre-Distribution Policy, the
amount of any such payment or shortfall shall be allocated among the parties
hereto in an equitable manner as determined in good faith by SeraNova, and each
party hereto shall make such payments to the other parties hereto as shall be
required in order to effect such equitable allocation.
ARTICLE 8.
MISCELLANEOUS
Section 8.1. Notices. All notices and other communications to any
party hereunder shall be in writing (including telex, telecopy or similar
writing) and shall be deemed given when received addressed as follows:
If to Intelligroup, to: Intelligroup, Inc.
499 Thornall Street
Edison, NJ 08837
Telecopy: 732-362-2100
Attention: Ashok Pandey,
Copy to: Buchanan Ingersoll Professional Corporation
650 College Road East
Princeton, NJ 08540
Telecopy: 609-520-0360
Attention: David J. Sorin
If to SeraNova, to: SeraNova, Inc.
c/o Intelligroup, Inc.
499 Thornall Street
Edison, NJ 08837
Telecopy: 732-362-2100
Attention: Rajkumar Koneru,
Copy to: Buchanan Ingersoll Professional Corporation
650 College Road East
Princeton, NJ 08540
Telecopy: 609-520-0360
Attention: David J. Sorin
Any party may, by written notice so delivered to the other parties,
change the address to which delivery of any notice shall thereafter be made. All
such notices shall be
-17-
<PAGE>
deemed received on the date of receipt by the recipient thereof if received
prior to 5 p.m. in the place of receipt and such day is a business day in the
place of receipt. Otherwise, any such notice shall be deemed not to have been
received until the next succeeding business day in the place of receipt.
Section 8.2. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by Intelligroup and
SeraNova, or in the case of a waiver, by the party against whom the waiver is to
be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 8.3. Expenses. Except as specifically provided otherwise in
this Agreement or the Tax Sharing Agreement (including, without limitation, in
Article 4, Sections 6.4, 6.5, and 8.7(c) and Schedule 5.1 of this Agreement),
all costs and expenses incurred after the date hereof in connection with the
preparation, execution and delivery of the Distribution Documents and the
consummation of the Distribution and the other transactions contemplated hereby
(including the fees and expenses of all counsel, accountants and financial and
other advisors of each Group in connection therewith, and all expenses in
connection with preparation, filing and printing of the SeraNova Form 10 and the
SeraNova Information Statement) shall be Shared Liabilities; provided (i) that
Intelligroup shall be responsible for and pay the fees, expenses and other
amounts payable to the lenders in respect of Intelligroup's credit facilities
and all other fees and expenses incurred in connection therewith (including the
fees and expenses of Intelligroup's counsel in connection with the preparation
and negotiation of all documentation relating to such credit facilities) and
(ii) that the SeraNova Group shall be responsible for and pay the fees, expenses
and other amounts payable to the lenders under the SeraNova Group's credit
facilities and all other fees and expenses incurred in connection therewith
(including the fees and expenses of counsel to the SeraNova Group in connection
with the preparation and negotiation of all documentation relating to such
credit facilities).
Section 8.4. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
Section 8.5. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of New Jersey (other than
the laws regarding choice of laws and conflicts of laws) as to all matters,
including matters of validity, construction, effect, performance and remedies.
Section 8.6. Entire Agreement. This Agreement and the other
Distribution Documents constitute the entire understanding of the parties with
respect to the subject matter
-18-
<PAGE>
hereof and thereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter hereof and thereof. No representation, inducement, promise,
understanding, condition or warranty not set forth herein or in the other
Distribution Documents has been made or relied upon by any party hereto. Neither
this Agreement nor any provision hereof is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder. To the extent
that the provisions of this Agreement are inconsistent with the provisions of
any other Distribution Document, the provisions of such other Distribution
Document shall prevail.
Section 8.7. Tax Sharing Agreement; Setoff; Certain Transfer Taxes.
(a) Except as otherwise provided herein, this Agreement shall not govern any
Tax, and any and all claims, losses, damages, demands, costs, expenses or
liabilities relating to Taxes shall be exclusively governed by the Tax Sharing
Agreement.
(b) If, at the time any party hereto is required to make any
payment to any other party under this Agreement, the party entitled to the
payment owes the obligor any amount under this Agreement or the Tax Sharing
Agreement, then such amounts shall be offset and the excess shall be paid by the
party liable for such excess.
(c) The party or parties that is or are required by applicable law
to file any Return (as defined in the Tax Sharing Agreement) or make any payment
with respect to any such Tax shall do so, and the other party or parties shall
cooperate with respect thereto as necessary. The non-paying party or parties
shall reimburse the paying party in accordance with this Section 8.7 within 5
business days after it or they receive notice of the payment of such Tax.
Section 8.8. Existing Arrangements. Except as otherwise contemplated
hereby or as set forth on Schedule 8.8, all prior agreements and arrangements,
including those relating to goods, rights or services provided or licensed,
between any member of one Group and any member of another Group shall be
terminated effective as of the Distribution Date, if not theretofore terminated.
No such agreements or arrangements shall be in effect after the Distribution
Date unless embodied in the Distribution Documents or set forth in Schedule 8.8.
Section 8.9. Termination Prior to the Distribution. The Intelligroup
Board of Directors may at any time prior to the Distribution abandon the
Distribution and, by notice to SeraNova, terminate this Agreement (whether or
not the Intelligroup Board of Directors has theretofore approved this Agreement
and/or the Distribution).
Section 8.10. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
Section 8.11. Arbitration; Dispute Resolution. Unless otherwise
provided for in this Agreement, any conflict or disagreement arising out of the
interpretation, implementation or compliance with the provisions of this
Agreement shall be finally settled pursuant to the provisions of Article 6
(Arbitration; Dispute Resolution) of that certain Contribution Agreement by and
between Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000, which
provisions are incorporated herein by reference.
-19-
<PAGE>
Section 8.12. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions, the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
-20-
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Distribution
Agreement to be duly executed by these respective authorized officers as of the
date first above written.
INTELLIGROUP, INC.
By: /s/ Ashok Pandey
-----------------------------
Name:
Title:
SERANOVA, INC.
By: /s/ Raj Koneru
-----------------------------
Name: Raj Koneru
Title: CEO
-21-
<PAGE>
SCHEDULE 1.1
SHARED LIABILITIES
1. Shared Corporate Liabilities.
2. Liabilities under the Securities Act or the Exchange Act
arising from acts or omissions of Intelligroup prior to the Distribution Date,
other than Liabilities arising from the filing by Intelligroup of a Current
Report on Form 8-K containing information on the Intelligroup Group.
<PAGE>
SCHEDULE 2.1(a)
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF SERANOVA, INC.
<PAGE>
CERTIFICATE REQUIRED TO BE FILED WITH THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SERANOVA, 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 SeraNova, Inc. (the "Corporation").
2. The Amended and Restated Certificate of Incorporation was adopted
by the Board of Directors of the Corporation on December 1, 1999 and by the sole
shareholder of the Corporation on December 1, 1999.
3. The number of shares of the Corporation entitled to vote on the
Amended and Restated Certificate of Incorporation is 1,000 shares of Common
Stock. All outstanding shares of Common Stock voted for the foregoing Amended
and Restated Certificate of Incorporation and no shares of Common Stock voted
against the foregoing 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.
IN WITNESS WHEREOF, the undersigned has signed this Certificate on
behalf of the Corporation this 25th day of January, 2000.
By: Rajkumar Koneru
--------------------------------------
Rajkumar Koneru, Chairman,
Chief Executive Officer and President
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SERANOVA, 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 SeraNova, 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 forty five million (45,000,000)
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 forty million
(40,000,000), each such share of Common Stock having a par value of $.01. 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.
FOURTH: The address of the registered office of the Corporation
shall be 499 Thornall Street, Edison, New Jersey 08837. The registered agent of
the Corporation at its registered office shall be Rajkumar Koneru.
<PAGE>
FIFTH: The number of directors constituting the current Board of
Directors is three. The names and addresses of each of such directors is as
follows:
Name Address
------------------- ------------
Rajkumar Koneru c/o SeraNova, Inc.
499 Thornall Street
Edison, New Jersey 08837
Nagarjun Valluripalli c/o SeraNova, Inc.
499 Thornall Street
Edison, New Jersey 08837
Ravi Singh c/o SeraNova, Inc.
499 Thornall Street
Edison, New Jersey 08837
SIXTH: 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, except as set
-------- -------
forth below in clause (ii), 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 sixty six and two-thirds
percent (66 2/3%) 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) 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 ARTICLE XI of the Bylaws of the Corporation
entitled "INDEMNIFICATION AND INSURANCE."
(iii) Upon the earlier of (i) the consummation of an initial
public offering of securities of the Corporation under the Securities
Act of 1933, as amended, or (ii) the registration of the Corporation's
Common Stock under the
-2-
<PAGE>
Securities Exchange Act of 1934, as amended, shareholders of the
Corporation may not take any action by written consent in lieu of a
meeting.
(iv) 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.
(v) 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, merger, consolidation, or sale of all or substantially
all of the assets of the Corporation, 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 short term and long term interests of the
Corporation and 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 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, creditors, customers and others having similar
relationships with the Corporation, upon the communities in which
the Corporation operates 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.
-3-
<PAGE>
(vi) 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 sixty six and two-thirds percent (66 2/3%) 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 Article SIXTH of this Amended
and Restated Certificate of Incorporation (other than clause (ii) of
Article SIXTH).
(vii) 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 clause (ii) of Article SIXTH or Article SEVENTH
of this Amended and Restated Certificate of Incorporation.
SEVENTH: 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.
<PAGE>
IN WITNESS WHEREOF, the undersigned has signed this Amended and
Restated Certificate of Incorporation on behalf of the Corporation this 25th day
of January, 2000.
SERANOVA, INC.
By: /s/ Rajkumar Koneru
---------------------------------------
Rajkumar Koneru, Chairman,
Chief Executive Officer and President
-5-
<PAGE>
SCHEDULE 2.1(b)
BY-LAWS OF SERANOVA, INC.
<PAGE>
BY-LAWS
OF
SERANOVA, INC.
(FORMERLY INFINIENT, INC.)
ARTICLE I
OFFICES
1.01 Registered Office: The initial registered office of the
------------------
Corporation shall be c/o Intelligroup, Inc., 499 Thornall Street, Edison, New
Jersey 08837. 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.
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.
<PAGE>
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.
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.
-2-
<PAGE>
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 By-laws 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 New Jersey
Business 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.
(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 By-laws, 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
-3-
<PAGE>
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 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,
-4-
<PAGE>
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;
(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.
(4) 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.
(5) Notwithstanding the provisions of this Section 3.06,
immediately following the consummation of an initial public offering under the
Securities Act of 1933, as
-5-
<PAGE>
amended, or registration under the Securities Exchange Act of 1934, 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.
3.07 Fixing Record Date:
------------------
(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
-6-
<PAGE>
(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.
-7-
<PAGE>
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 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
-8-
<PAGE>
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.
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.
-9-
<PAGE>
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.
ARTICLE IV
DIRECTORS
4.01 Number of Directors: The number of Directors constituting the
--------------------
entire Board shall be one or such greater number 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
-10-
<PAGE>
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 with or without cause by the shareholders by the affirmative vote of
the majority of all shares then entitled to vote for the election of the
Directors.
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
-11-
<PAGE>
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 called by the President upon at least one
days 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.
-12-
<PAGE>
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 powers of the Corporation and do all
such lawful acts and things as are not by statute or by these By-laws 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 Committees: 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 By-law 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.
-13-
<PAGE>
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 By-laws, 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 By-laws 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.
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
-14-
<PAGE>
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, or 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 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
-15-
<PAGE>
such other duties as may be prescribed by the Board of Directors or President,
under whose supervision he/she shall be.
5.08 Chief Financial Officer: The Chief Financial Officer shall keep,
-----------------------
or cause to be kept, the books and records of account of the Corporation. The
Chief Financial Officer shall deposit all monies and other valuables in the name
and to the credit of the Corporation with such depositories as may be designated
from time to time by resolution of the Board of Directors. He or she shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, shall render to the President and the Board, whenever they request
it, an account of all of his transactions as Chief Financial Officer and of the
financial condition of the Corporation, and shall have such other powers and
perform such other duties as may be prescribed from time to time by the Board or
as the President may from time to time delegate.
5.09 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.
5.10 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
-16-
<PAGE>
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.
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 By-laws.
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
-17-
<PAGE>
registered in the transfer records of the Corporation as they are issued. When
issued, they shall bear 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 Fractional Shares. The Corporation may, but shall not be required
-----------------
to, issue certificates for fractions of a share where necessary to effect
authorized transactions, or the Corporation may pay in cash the fair value of
fractions of a share as of the time when those entitled to receive such
fractions are determined, or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a shareholder except as therein
provided.
-18-
<PAGE>
7.05 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.
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.
-19-
<PAGE>
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 Corporation,
with postage pre-paid thereon. Such notice shall specify the place, day and hour
-20-
<PAGE>
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 By-laws 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.
ARTICLE X
AMENDMENTS
10.01 Amendments: The Board of Directors shall have power to adopt,
----------
amend or repeal these By-laws. By-laws adopted by the Board of Directors may be
repealed or changed, and new
-21-
<PAGE>
By-laws made, by the shareholders, and the shareholders may prescribe that any
By-law made by them shall not be altered, amended or repealed by the Board of
Directors. The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the By-laws of the Corporation, subject, however, to any
limitation thereof contained in these By-laws. The shareholders also shall have
the power to adopt, amend or repeal the By-laws 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 the Certificate of Incorporation,
the affirmative vote of the holders of at least sixty six and two-thirds percent
(66 2/3%) 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 By-laws of the Corporation; and provided further
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 ARTICLE XI of the By-laws of the Corporation entitled
"INDEMNIFICATION AND INSURANCE."
ARTICLE XI
INDEMNIFICATION AND INSURANCE
11.01 Indemnification: The Corporation shall indemnify and hold
---------------
harmless, to the fullest extent permitted by law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action or
-22-
<PAGE>
suit, whether or not by or in the right of the Corporation, or proceeding,
whether civil, criminal, administrative or investigative (collectively, a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust, enterprise or nonprofit entity, including service with
respect to employee benefit plans, against all liability and loss, including
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement, incurred, suffered or paid by or on behalf of such person, and
expenses (including attorneys' fees) reasonably incurred by such person.
11.02 Payment of Expenses: The Corporation shall pay the expenses
--------------------
(including attorneys' fees) incurred in defending any proceeding in advance of
its final disposition, provided, however, that the payment of expenses incurred
by a Director or officer in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by the Director or officer to
repay all amounts advanced if it should be ultimately determined that the
Director or officer is not entitled to be indemnified under this Article or
otherwise.
11.03 Claims: The right to indemnification and payment of expenses
------
under the Certificate of Incorporation, these By-laws or otherwise shall be a
contract right. If a claim for indemnification or payment of expenses under this
Article is not paid in full within sixty days after a written claim therefor has
been received by the Corporation, the claimant may file suit to recover the
unpaid amount of such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of prosecuting such claim. In any such action
the Corporation shall have the burden of proving that the claimant was not
entitled to the requested indemnification or payment of expenses under
applicable law.
-23-
<PAGE>
11.04 Non-Exclusivity of Rights: The rights conferred on any person by
-------------------------
this Article shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, these By-laws, agreement, vote of shareholders or disinterested
Directors or otherwise.
11.05 Other Indemnification: The Corporation's obligation, if any, to
---------------------
indemnify any person who was or is serving at its request as a Director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or nonprofit entity shall be reduced by any amount such person
may collect as indemnification from such other corporation, partnership, joint
venture, trust, enterprise or nonprofit enterprise.
11.06 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.
11.07 Amendment or Repeal: Any repeal or modification of the foregoing
-------------------
provisions of this Article XI shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
* * * * * * * *
-24-
<PAGE>
SCHEDULE 3.1(xi)
OPINION OF ARTHUR ANDERSEN LLP
RELATING TO TAX-FREE DISTRIBUTION
<PAGE>
March 3, 2000
Board of Directors
Intelligroup, Inc.
499 Thornall Street
Edison, New Jersey 08837
Dear Ladies and Gentlemen:
You have requested our opinion as to certain U.S. federal income tax
consequences under the Internal Revenue Code of 1986, as amended ("the Code"),
resulting from the proposed contribution (the "Contribution") of the "Internet
Solutions Group Division" by Intelligroup, Inc. ("ITIG") to SeraNova, Inc.
("SeraNova") followed by the distribution by ITIG of SeraNova stock pro rata to
the shareholders of ITIG (the "Distribution") under Sections 368(a)(1)(D) and
3551 pursuant to a plan described in the Contribution Agreement and the
Distribution Agreement dated January 1, 2000 (the "Principal Agreements").2 All
other terms used herein and not otherwise defined have the meanings ascribed to
them in the Principal Agreements.
In rendering our opinion, we have assumed that the Contribution and the
Distribution will occur in accordance with the Principal Agreements, and that
there are no other formal or informal arrangements between ITIG, any parties to
the Distribution, any parties to the Principal Agreements, or any shareholders
thereof. In addition, we have assumed the due authorization, execution and
delivery by each party thereto of all documents, the genuineness of all
signatures, the authority of all persons signing such documents on behalf of
each party thereto, the legal capacity of all natural persons, the authenticity
of all documents submitted to us as originals and the conformity to the original
document of any document submitted to us as a certified, conformed, or photostat
copy. Further, we have relied on and assumed to be accurate, as of the date
hereof and as of the date of the Distribution, and without further inquiry (and
without limitation as to knowledge and belief), the certifications and
representations made by, and on behalf of, ITIG, SeraNova, and the stockholders,
and all other parties contained in the representation letter addressed to us. We
have not audited or otherwise attempted to verify the accuracy or completeness
of any of the foregoing.
(a) Premise of Opinion
Our opinion is limited to the federal income tax matters addressed herein, and
no other opinions are rendered with respect to other federal tax matters or to
any issues arising under the tax laws of any
- --------
1 Unless otherwise indicated, all section references are to the Internal Revenue
Code and the Treasury Regulations promulgated thereunder.
2 The term Principal Agreements refers to the Contribution Agreement dated
January 1, 2000 and the Distribution Agreement dated January 1, 2000. Any
reference to the "Principal Agreements" also includes Registration Statement
filed on Form 10 by SeraNova with the Securities and Exchange Commission on
January 27, 2000.
<PAGE>
foreign country, state, or locality. The opinion expressed herein is based on
our interpretation of the Code, income tax regulations thereunder, court
decisions, rulings and procedures issued by the Internal Revenue Service (the
"Service") as of the date of this letter, and other authorities that we deemed
relevant. Should there be any change, including any change having retroactive
effect, in the Code, the regulations and rulings issued thereunder, judicial
interpretations thereof, or in current understanding and interpretation of tax
accounting practices, the opinion expressed herein would necessarily have to be
reevaluated in light of any such changes. Additionally, should any of the
representations or facts set forth herein prove to be either incomplete or
inaccurate, as of the date hereof, our opinion may change. We have no
responsibility to update our opinion for changes in facts, assumptions,
representations, or technical authorities that arise after the date of our tax
opinion.
We have not considered any non-income tax or any state, local, foreign, or other
income tax consequences, and therefore we express no opinion regarding the
treatment that would be accorded the Distribution for such purposes. We also
express no opinion on non-tax issues, such as corporate or securities law
matters, including whether any tax disclosures included in documents made
available to the shareholders of ITIG or the public are adequate within the
requirements of the securities or corporate laws that govern the issuance of
such documents and disclosures. Further, our opinion does not address the
potential tax ramifications to the parties named herein or the stockholders of
any transaction other than the Distribution and Contribution described herein.
Our opinion does not address the tax consequences of the Distribution to a ITIG
stockholder that has a special status, including insurance companies; tax-exempt
entities; financial institutions or broker-dealers; foreign corporations;
estates and trusts not subject to U.S. federal income tax on their income
regardless of source; persons who are not citizens or residents of the United
States; and persons who acquired their ITIG common stock as a result of the
exercise of an employee stock option, pursuant to an employee stock purchase
plan, or otherwise as compensation.
Opinion
- -------
We are of the opinion, based upon our interpretation of the Code, the Treasury
regulations, existing administrative and judicial interpretations thereof and
the foregoing facts, information, assumptions and representations, all assumed
to be accurate as of the date hereof, that for U.S. federal income tax purposes:
1. The transfer by ITIG to SeraNova of the assets of the Internet Solutions
Group Division in exchange for all the stock of SeraNova, plus the
assumption by SeraNova of liabilities associated with the Internet
Solutions Group Division, followed by the pro rata distribution of all of
the stock of SeraNova to ITIG's shareholders should qualify as a
reorganization within the meaning of Section 368(a)(1)(D) of the Code. ITIG
and SeraNova should each be a "party to the reorganization" within the
meaning of Section 368(b).
2. ITIG should recognize no gain or loss on the transfer of assets to, and the
assumption of the liabilities referred to above by, SeraNova in exchange
for the stock of SeraNova. Sections 361(a) and 357(a) of the Code.
3. SeraNova should recognize no gain or loss on the receipt of the assets from
ITIG in exchange for SeraNova stock. Section 1032(a) of the Code.
4. SeraNova's basis in the assets received from ITIG should be equal to the
basis of such assets in the hands of ITIG immediately before such transfer.
Section 362(b) of the Code.
-2-
<PAGE>
5. SeraNova's holding period of each asset received from ITIG should include
the period during which ITIG held such asset. Section 1223(2) of the Code.
6. ITIG should recognize no gain or loss upon its distribution of all the
SeraNova stock to the ITIG shareholders. Section 361(c)(1) of the Code.
7. The ITIG shareholders should recognize no gain or loss (and no amount
should be included in the income of the ITIG shareholders) upon the receipt
of SeraNova stock in the Distribution. Section 355(a)(1) of the Code.
8. The aggregate basis of the ITIG stock and the SeraNova stock in the hands
of each ITIG shareholder after the Distribution should be the same as the
aggregate basis of the ITIG stock held by each ITIG shareholder immediately
before the Distribution, allocated between the ITIG stock and the SeraNova
stock in proportion to the fair market value of each in accordance with
Treas. Reg. ss.1.358-2(a)(2). Section 358(a)(1), (b)(2), and (c) of the
Code.
9. The holding period of the SeraNova stock received by the each ITIG
shareholder should include the period that the ITIG shareholder has held
the ITIG stock as of the date of the Distribution, provided that the ITIG
stock is held as a capital by such shareholder on the date of the
Distribution. Section 1223(1) of the Code.
10. As provided in section 312(h), proper allocation of earnings and profits
between ITIG and SeraNova should be made in accordance with Treas. Reg. ss.
1.312-10(a).
This opinion is not binding on the Service, and there can be no assurance that
the Service will not take positions contrary to the opinion expressed herein.
However, if the Service challenges the tax treatment of the Distribution, the
opinion expressed herein reflects our assessment of the probable outcome of
litigation based solely on an analysis of the existing tax authorities relating
to the issues that are the subject of this opinion.
This opinion is solely for the benefit of ITIG, SeraNova, and their stockholders
and is not intended to be relied upon by any other party. Except to the extent
expressly permitted hereby, and without the prior written consent of this firm,
our opinion may not be quoted in whole or in part, or otherwise referred to in
any documents or delivered to any person or entity. Any such authorized other
party receiving a copy of our opinion must consult and rely upon the advice of
their own counsel, accountant, or other advisor.
Very truly yours,
ARTHUR ANDERSEN LLP
By
Richard D. Moriarty
-3-
<PAGE>
SCHEDULE 8.8
SURVIVING AGREEMENTS
1. Distribution Documents
SERVICES AGREEMENT
This Services Agreement ("Agreement") is made and entered into as of the
1st day of January, 2000, by and between INTELLIGROUP, INC., a New Jersey
corporation ("ITIG") and SERANOVA, INC., a New Jersey corporation ("SERANOVA").
The parties agree to be legally bound as follows:
1. SERVICES. ITIG will provide SERANOVA with various types of services
--------
("Services") listed in Exhibit A, which is attached hereto and incorporated by
---------
reference. Such Exhibit A may be amended from time to time by written agreement
---------
between the parties. The Retained Employees (as defined in Section 5(a)(ii))
shall exclusively provide Services to SERANOVA and/or SERANOVA's clients as
directed by SERANOVA and pursuant to Exhibit A.
---------
2. TERMS OF AGREEMENT. This Agreement shall become effective on January 1,
------------------
2000 (the "Effective Date"), and shall remain in full force and effect for a
period of one (1) year thereafter, unless earlier terminated pursuant to the
provisions of this Agreement. This Agreement shall automatically renew for
additional consecutive renewal terms of one (1) year unless either ITIG or
SERANOVA gives written notice of its intent not to renew the terms of this
Agreement sixty (60) days prior to the expiration of the then expiring term. The
initial one year term and any renewal period(s) thereafter shall collectively be
referred to as the "Term."
3. TERMINATION OF AGREEMENT.
------------------------
(a) This Agreement or any portion thereof may be terminated by either
party, for any reason, with thirty (30) days prior written notice
to the other party.
(b) This Agreement or any portion thereof may be terminated by either
party (the "non-defaulting party") if any of the following events
occur by or with respect to the other party (the "defaulting
party"): (i) the defaulting party commits a material breach of
any of its obligations hereunder and fails to cure such breach
within thirty (30) days of receipt of written notice from
non-defaulting party; or (ii) any insolvency of the defaulting
party, any filing of a petition in bankruptcy by or against the
defaulting party, any appointment of a receiver for the
defaulting party, or any assignment for the benefit of the
defaulting party's creditors; provided, however, that in the case
of any involuntary bankruptcy proceeding such right to terminate
shall only become effective if the proceeding is not dismissed
within sixty (60) days after the filing thereof.
Termination under this Section 3 or otherwise shall have no effect on the
respective obligations to make any payment required to be made pursuant to the
terms of this Agreement or any other obligation hereunder that survives the
termination of this Agreement. Neither party shall have any liability to the
other party for terminating the Agreement pursuant to this Section 3.
4. TRANSITION ASSISTANCE. Other than for termination by SERANOVA pursuant
----------------------
to Section 3(a) or by ITIG under Section 3(b)(ii), ITIG agrees to provide
SERANOVA with transition
<PAGE>
assistance for up to 180 days (or such shorter period as SERANOVA may elect)
after the expiration of the Term, or upon the termination of this Agreement by
either ITIG or SERANOVA. Transition assistance shall include the following: (i)
ITIG shall reasonably cooperate with SERANOVA or any relevant third party for
transferring of the Services to SERANOVA or any such third party that SERANOVA
selects; (ii) ITIG shall perform any new types of services, at a fee agreed upon
in writing by the parties, that are reasonably required to assist in
transferring of the Services to SERANOVA or any such third party that SERANOVA
selects; (iii) ITIG shall provide to SERANOVA, upon SERANOVA's reasonable
request, any records or other information relating to said Services; and (iv)
comply with SERANOVA's reasonable requests for assistance in engaging or
training another person or persons to provide the Services rendered by ITIG. So
long as ITIG is providing SERANOVA with transition assistance, SERANOVA shall be
obligated to provide compensation to ITIG pursuant to Exhibit A.
---------
5. INVOICING AND PAYMENTS.
----------------------
(a) (i) SERANOVA shall remit payment of the monthly fee set forth on
Exhibit A to ITIG on or before the first day of each month for
----------
the preceding month's Services. The first such payment shall
commence on the first day of the first month following the
Effective Date. Payment for any Services provided for a partial
month period preceding or following the initial payment shall be
prorated accordingly based on the number of days in a given
month. Notwithstanding any other provision of this Section 5,
ITIG shall make all payments to third parties as necessary to
ensure continued Services of the types contemplated in this
Agreement.
(ii) ITIG shall pay wages, provide benefits and make employer
contributions on behalf of the ITIG employees listed on Exhibit
-------
B, which is attached hereto and incorporated by reference
-
("Retained Employees") until each Retained Employee resigns
his/her employment with ITIG or is transferred and becomes an
employee of SERANOVA (the "Transfer Date") and SERANOVA shall
reimburse ITIG for all such wages, benefits and employer
contributions paid by ITIG from the Effective Date until the
Transfer Date. ITIG's obligations to continue to pay wages,
provide benefits and make employer's contributions shall
terminate on each individual Retained Employee's Transfer Date or
upon termination or resignation of employment of such Retained
Employee. In light of SERANOVA's total control over the terms and
conditions of such Retained Employees, SERANOVA retains the right
to request the termination of any Retained Employee when
necessary and appropriate. All amounts payable to any Retained
Employee terminates under this Section 5(a)(ii) by virtue of such
termination, including but not limited to severance pay, accrued
wages, accrued vacation or leave pay, shall be reimbursed to ITIG
by SERANOVA. Such Exhibit B may be amended from time to time.
---------
- 2 -
<PAGE>
(b) SERANOVA agrees to pay amounts equal to any Federal, state or
local sales, use, excise, privilege or other taxes or
assessments, however designated or levied, relating to any
amounts payable by SERANOVA to ITIG hereunder, this Agreement or
any Services provided by ITIG to SERANOVA pursuant hereto and any
taxes or amounts in lieu thereof paid or payable by ITIG,
exclusive of taxes based on ITIG's net income for the Services or
for any employees, agents or subcontractor of ITIG. ITIG will
invoice SERANOVA for any taxes payable by SERANOVA that are
required to be collected by ITIG pursuant to any applicable law,
rule, regulation or other requirement of law.
6. OBLIGATIONS.
-----------
(a) Certain Information. SERANOVA shall provide to ITIG any
information needed by ITIG to perform the Services. If the
failure to provide such information renders the performance of
any requested Services impossible or unreasonably difficult, ITIG
may upon reasonable prior written notice to SERANOVA and without
incurring any liability refuse to provide such Services until
such time as SERANOVA has provided ITIG with the requisite
information.
(b) Further Assurances. During the term of this Agreement, ITIG and
SERANOVA shall use commercially reasonable efforts to: (i)
preserve their respective and mutual reputations and market
positions in strategic markets; (ii) promote their mutual
businesses and cause the retention and expansion of their
customers; (iii) refrain from taking any action which may
jeopardize any such customer relationship without the prior
written consent of the other party; and (iv) execute and deliver
any further legal instruments which may become necessary to
effect the purposes of this Agreement.
(c) Scope of Services. If ITIG and SERANOVA agree that it is
functionally impossible to continue to provide a Service under
this Agreement, or otherwise agree to eliminate or reduce one or
more Services provided hereunder, then ITIG shall discontinue
said Service at the time and in the manner agreed to by the
parties. In the event ITIG discontinues a Service provided
hereunder, SERANOVA's Service fee shall be prorated based on a
reasonable allocation of the costs as mutually agreed by the
parties. In the event that SERANOVA requires a reasonable
increase of the Services, ITIG shall increase the amount of
Services accordingly. The parties agree to negotiate in good
faith relating to ITIG's rendering of increased services to
SERANOVA and if the parties cannot agree on a price, ITIG has no
obligation to perform such increased services.
7. OWNERSHIP. All deliverables generated pursuant to the Services as set
---------
forth in Exhibit A ("Work Product") shall be deemed works made for hire under
---------
the applicable copyright laws, and that all Work Product shall be the sole and
exclusive property of SERANOVA. To the extent that any Work Product is not
considered a work for hire under the applicable copyright laws, ITIG hereby
assigns all of its rights, title or interest in the Work Product and in all
related
- 3 -
<PAGE>
patents, copyrights, trademarks, trade secrets, rights of priority and other
proprietary rights to SERANOVA. ITIG shall make full disclosure to SERANOVA of
all such Work Product, and reasonably assist and cooperate with SERANOVA, at
SERANOVA's expense, in all respects and will execute documents, give testimony,
and take all further acts requested by SERANOVA to obtain, maintain, perfect and
enforce for SERANOVA patent, copyright, trademark, trade secret or other legal
protection for the Work Product, as well as all reissues, renewals and
extensions thereof.
8. SUBCONTRACTING SERVICES. ITIG may, with the consent or approval of
------------------------
SERANOVA, subcontract certain Services, in whole or in part, provided to
SERANOVA pursuant to this Agreement. To the extent that ITIG subcontracts
certain or all Services, ITIG shall remain solely responsible to SERANOVA for
the execution and quality of said Services.
9. RECORD KEEPING.
--------------
(a) Processing. Upon ten (10) days prior written notice from
SERANOVA, ITIG shall provide SERANOVA and/or its representatives
or any regulatory agency having jurisdiction reasonable access
during normal business hours to ITIG's facilities for the purpose
of performing audits or inspections of the business of ITIG
relating to the Services. ITIG shall provide any reasonable
assistance as may be required by SERANOVA and/or its
representatives or any regulatory agency having jurisdiction.
ITIG shall not be required to provide SERANOVA and/or its
representatives or any regulatory agency having jurisdiction
access to ITIG's data of ITIG's customer's data other than
SERANOVA. If any audit by an auditor designated by SERANOVA or
any regulatory agency having jurisdiction finds ITIG not in
compliance with any audit requirement relating to the Services,
ITIG shall meet with SERANOVA and the parties will agree on what
actions ITIG must take to be in compliance with the audit
requirements. SERANOVA shall be responsible for the cost of such
audit.
(b) Charges. Upon ten (10) days prior written notice from SERANOVA,
ITIG shall provide SERANOVA and/or its representatives reasonable
access during normal business hours to ITIG's facilities for the
purpose of performing audits or inspections to verify the
accuracy of the amounts charged by ITIG to SERANOVA for the
Services. If, as a result of such audit, it is determined that
ITIG has overcharged SERANOVA, SERANOVA shall notify ITIG of the
amount of such overcharge and ITIG shall promptly pay to SERANOVA
the amount of the overcharge, plus interest of one percent (1%)
per month, but in no event to exceed the highest lawful rate of
interest, calculated from the date of receipt by ITIG of the
overcharged amount until the date of payment to SERANOVA. In
addition, in the event any such audit reveals an overcharge to
SERANOVA by ITIG of five percent (5%) or more, ITIG shall
reimburse SERANOVA for cost of such audit.
- 4 -
<PAGE>
10. WARRANTY.
--------
(a) ITIG represents and warrants that during the performance of and
for a period of sixty (60) days after performance, the Services
will be provided in a professional and workmanlike manner in
accordance with industry standards and the Services will
materially conform to Exhibit A. In the event the Service fails
---------
to conform to the foregoing warranties in any material respect,
the sole and exclusive remedy of SERANOVA, and ITIG's liability,
as a result thereof will be for ITIG, at its expense, to use its
commercially reasonable efforts to cure or correct such failure
as soon as reasonably practical or refund any monies paid by
SERANOVA to ITIG for the nonconforming portion of the Services.
(b) ITIG represents and warrants that to its knowledge, the rendering
of Services will not infringe on any US patents, copyrights or
trademarks.
(c) Each party represents and warrants that it shall comply with all
applicable federal, state and local laws and regulations
applicable to the Services and shall obtain all applicable
permits, registrations and licenses required of it in connection
with its obligations under this Agreement.
(d) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, ITIG DOES NOT
MAKE ANY REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER SUCH
WARRANTY BE EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY
WARRANTY FROM COURSE OF DEALING OR USAGE OF TRADE.
11. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY FOR ANY SPECIAL, EXEMPLARY, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR
PUNITIVE DAMAGES OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT
LIMITATION, LOST REVENUES, PROFITS, SAVINGS OR BUSINESS), WHETHER IN AN ACTION
BASED ON CONTRACT, WARRANTY, STRICT LIABILITY, TORT (INCLUDING, WITHOUT
LIMITATION, NEGLIGENCE) OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN INFORMED IN
ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES OR SUCH DAMAGES COULD HAVE BEEN
REASONABLY FORESEEN BY SUCH PARTY. In no event shall either party's aggregate
liability to the other party exceed the total fees paid by SERANOVA to ITIG for
the twelve (12) month period immediately preceding the event that gave rise to
the liability, whether such liability is based on an action in contract,
warranty, strict liability or tort (including, without limitation, negligence)
or otherwise. Each party's entire liability under this Agreement shall be as set
out in this Section 11. The parties have agreed that the limitations specified
in this Section 11 will survive and apply even if any limited remedy specified
in this Agreement is found to have failed of its essential purpose.
- 5 -
<PAGE>
12. INDEMNIFICATION.
---------------
(a) Indemnity by SERANOVA. SERANOVA shall indemnify ITIG from and
---------------------
defend ITIG against, any liability or expenses (including
reasonable attorneys' fees) arising out of or relating to any
claim, loss, damage, cost, liability, or expense ("Claim"):
1. Relating to the employment or termination thereof of any
Retained Employee;
2. Relating to (a) a violation of Federal, state, or other laws
(including common law) or regulations, including but not
limited to a violation of Federal, state, or other laws
(including common law) or regulations for the protection of
persons or members of a protected class or category of
persons by SERANOVA, its employees, or agents, (b) sexual
discrimination or harassment by SERANOVA, its employees, or
agents, and (c) work-related injury except as maybe covered
by SERANOVA's worker's compensation or death caused by
SERANOVA, its employees, or agents;
3. Relating to amounts, including taxes, interest, and
penalties, assessed against ITIG which are the obligations
of SERANOVA pursuant to Section5(b); and
4. To the extent directly related to personal injury or
tangible personal property, damage resulting from any
Retained Employee's (prior to such Retained Employee's
Transfer Date but after SERANOVA becomes a publicly held
entity) and SERANOVA's negligent acts or omissions.
(b) Indemnity by ITIG. ITIG shall indemnify SERANOVA from and defend
-----------------
SERANOVA against, any liability or expenses (including reasonable
attorneys' fees) arising out of or relating to any Claim:
1. Relating to (a) a violation of Federal, state, or other laws
(including common law) or regulations, including but not
limited to a violation of Federal, state, or other laws or
regulations for the protection of persons or members of a
protected class or category of persons by ITIG, its
employees, or agents, (b) sexual discrimination or
harassment by ITIG, its employees, or agents, and (c )
work-related injury except as may be covered by ITIG's
worker's compensation or death caused by ITIG, its
employees, or agents;
2. Relating to amounts, including taxes, interest, and
penalties, assessed against SERANOVA which are the
obligations of ITIG pursuant to Section 5(b);
3. Relating to ITIG's non-compliance with legal or regulatory
requirements applicable to ITIG; and
4. To the extent directly related to personal injury or
tangible personal property damage resulting from ITIG's
negligent acts or omissions excluding the acts or omissions
of any Retained Employees (prior to such Retained Employee's
Transfer Date but after SERANOVA becomes a publicly held
entity).
(c) The party seeking indemnification under any provision of this
Agreement shall promptly notify the party against whom the
indemnification is sought in writing of any claim for
indemnification, specifying in detail the basis of such claim,
the
- 6 -
<PAGE>
facts pertaining thereto and, if known, the amount, or an
estimate of the amount, of the liability arising therefrom;
provided however, that failure to give such notice shall not
affect the indemnification provided hereunder except to the
extent that the indemnifying party can demonstrate actual
monetary prejudice as a direct result of such failure. The
indemnified party shall provide to the indemnifying party as
promptly as practicable thereafter all information and
documentation necessary to support and verify the claim asserted
and the indemnifying party shall be given reasonable access to
all books and records in the possession or control of the
indemnified party or any of its affiliates which the indemnifying
party reasonably determines to be related to such claim.
(d) The indemnifying party shall have sole control over the defense
and/or settlement of any claim and the indemnified party will, at
the indemnifying party's sole expense, provide reasonable
assistance to the indemnifying party. If the indemnified party
takes any overt action that unreasonably compromises the
indemnifying party's defense or settlement of any claim, the
indemnifying party shall be relieved of its indemnification
obligations for such particular claim.
13. PARTIES' RELATIONSHIP.
---------------------
(a) Independent. The parties are independent entities with each
having sole authority and control of the manner of, and is
responsible for, its performance of this Agreement. This
Agreement does not create or evidence a partnership or joint
venture between the parties. Neither party has the right or
authority to enter into any contract, warranty, guaranty or other
undertaking in the name or for the account of the other party, or
to assume or create any obligation or liability of any kind,
express or implied, on behalf of the other party, or to bind the
other party in any manner whatsoever, or to hold itself out as
having any right, power or authority to create any such
obligation or liability on behalf of the other or to bind the
other party in any manner whatsoever (except as otherwise
provided by this Agreement or as to any other actions taken by
either party at the express written request and direction of the
other party).
b) Employees. Except as otherwise described herein, for the purposes
of this Agreement each party is solely responsible for its own
employees or agents, including the actions or omissions and the
payment of compensation, taxes and benefits of those employees
and agents.
(c) Access. To the extent reasonably required for SERANOVA's
personnel to perform their job functions, ITIG shall provide
SERANOVA's personnel with reasonable access to its equipment,
office facilities and any other areas and equipment for which
SERANOVA has provided compensation to ITIG under the terms of
this Agreement. In addition, the employees of SERANOVA shall have
reasonable access to those employees of ITIG who perform any of
the Services.
- 7 -
<PAGE>
(d) Non Solicitation. During the Term hereof and for a period of
twelve (12) months thereafter, neither party shall, directly or
indirectly, solicit for employment or employ, or accept services
provided by, any employee, officer or independent contractor of
the other party who performed any work in connection with or
related to the Services without the prior written consent of the
other party and such consent shall not be unreasonably withheld.
14. DISPUTE RESOLUTION PROCEDURE. Except as otherwise stated in this
------------------------------
Agreement, the parties shall resolve all disputes in accordance with the
following procedure:
(a) Each party shall promptly negotiate in good faith to resolve all
disputes, controversies or claims arising out of or relating to
this Agreement or the performance hereunder (a "Dispute"). In the
event that the parties cannot resolve the Dispute in such manner,
they shall immediately refer the Dispute to each party's CFO or
such other senior executives as may be mutually agreed upon by
the parties from time to time. If such executives do not agree
upon a decision within a reasonable amount of time after referral
of the Dispute to them (but in no event more than thirty (30)
days from the date the party that determines there is a Dispute
becomes aware of such dispute) they shall submit the Dispute to
the following binding arbitration procedures:
1. Any Dispute shall be submitted to binding arbitration, in
accordance with the dispute resolution procedures specified in
this Section 14. If any of these procedures are determined to be
invalid or unenforceable, the remaining procedures shall remain
in effect and binding on the parties to the fullest extent
permitted by law.
2. The arbitration shall be conducted in accordance with the
procedures specified in this Section 14 and the Arbitration Rules
for Professional Accounting and Related Services Disputes of the
AAA ("AAA Rules"). In the event of a conflict, the provisions of
this Section 14 shall control. The arbitration shall be conducted
before a panel of three arbitrators, regardless of the size of
the Dispute, to be selected as provided in the AAA Rules.
3. Any issue concerning the extent to which any Dispute is
subject to arbitration, or concerning the applicability,
interpretation, or enforceability of these procedures, including
any contention that all or part of these procedures are invalid
or unenforceable, shall be governed by the Federal Arbitration
Act and resolved by the arbitrators. No potential arbitrator may
serve on the panel unless first agreeing in writing to abide and
be bound by these procedures. The arbitrators may not award
non-monetary or equitable relief of any sort. They shall have no
power to award damages inconsistent with the Agreement or
punitive damages or any other damages not measured by the
prevailing party's actual damages, and the parties expressly
waive their right to obtain such damages in arbitration or in any
other forum. In no event, even if any other portion of these
procedures is adjudged invalid or unenforceable, shall the
arbitrators have power
- 8 -
<PAGE>
to make an award or impose a remedy that could not be made or
imposed by a court deciding the matter in the same jurisdiction.
4. No discovery shall be permitted in connection with the
arbitration unless expressly authorized by the arbitration panel
upon a showing of substantial need by the party seeking
discovery. All aspects of the arbitration shall be treated as
confidential. Neither the parties nor the arbitrators may
disclose the existence, content or results of the arbitration,
except as necessary to comply with legal or regulatory
requirements. Before making any such disclosure, a party shall
give written notice to all other parties and afford such parties
a reasonable opportunity to protect their interest. The result of
the arbitration shall be a final decision that is binding on the
parties, and judgment on the arbitrators' award may be entered in
any court having jurisdiction.
15. CONFIDENTIALITY.
---------------
(a) SERANOVA and ITIG shall each (i) hold the Confidential
Information (as defined below) of the other in trust and
confidence and avoid the disclosure or release thereof to any
other person or entity by using the same degree of care as it
uses to avoid unauthorized use, disclosure, or dissemination of
its own Confidential Information of a similar nature, but not
less than reasonable care, and (ii) not use the Confidential
Information of the other party for any purpose whatsoever except
as expressly contemplated under this Agreement. Each party shall
disclose the Confidential Information of the other only to those
of its employees having a need to know such Confidential
Information and shall take all reasonable precautions to ensure
that its employees comply with the provisions of this Section 15.
(b) The term "Confidential Information" shall mean any and all
information or proprietary materials (in every form and media)
not generally known in the relevant trade or industry and which
has been or is hereafter disclosed or made available by either
party (the "disclosing party") to the other (the "receiving
party") in connection with the efforts contemplated hereunder,
including (i) all trade secrets, (ii) existing or contemplated
products, services, designs, technology, processes, technical
data, engineering, techniques, methodologies and concepts and any
information related thereto, and (iii) information relating to
business plans, sales or marketing methods and customer lists or
requirements.
(c) The obligations of either party under this Section 15 will not
apply to information that the receiving party can demonstrate (i)
was in its possession at the time of disclosure and without
restriction as to confidentiality, (ii) at the time of disclosure
is generally available to the public or after disclosure becomes
generally available to the public through no breach of agreement
or other wrongful act by the receiving party, (iii) has been
received from a third party without restriction on disclosure and
without breach of agreement or other
- 9 -
<PAGE>
wrongful act by the receiving party, (iv) is independently
developed by the receiving party without regard to the
Confidential Information of the other party, or (v) is required
to be disclosed by law or order of a court of competent
jurisdiction or regulatory authority, provided that the receiving
party shall furnish prompt written notice of such required
disclosure and reasonably cooperate with the disclosing party, at
the disclosing party's cost and expense, in any effort made by
the disclosing party to seek a protective order or other
appropriate protection of its Confidential Information.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and shall
----------------------
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned by either party hereto
without the prior written consent of the other party except ITIG may, upon prior
written notice to SERANOVA (but without any obligation to obtain the consent of
SERANOVA), assign this Agreement or any of its rights hereunder to any affiliate
of ITIG, or to any entity who succeeds (by purchase, merger, operation of law or
otherwise) to all or substantially all of the capital stock, assets or business
of ITIG, if such entity agrees in writing to assume and be bound by all of the
obligations of ITIG under this Agreement.
17. NO THIRD-PARTY BENEFICIARIES. Nothing expressed or implied in this
-----------------------------
Agreement shall be construed to give any person or entity other than the parties
any legal or equitable rights under this Agreement.
18. WAIVERS. No term or provision hereof shall be deemed waived and no
-------
breach excused unless such waiver or consent shall be in writing and signed by
an authorized representative of the party claiming to have waived or consented.
No consent by either party to, or waiver of, a breach by the other, whether
express or implied, shall constitute a consent to, waiver of, or excuse for any
different or subsequent breach.
19. NOTICES. All notices given in connection with this Agreement shall be in
-------
writing and transmitted by (i) hand delivery; (ii) courier delivery; (iii) U.S.
certified mail, return receipt requested, postage prepaid; or (iv) telecopier to
the addressed listed below. Delivery of said notices shall be deemed given upon
the date of (a) receipt of courier delivery; (b) certified mail return receipt
is signed or delivery is rejected; or (c) receipt of written confirmation of
telecopier transmittal.
If to ITIG: Intelligroup, Inc.
499 Thornall Street
Edison, New Jersey 08837
Attn: President
Fax No.: (732) 362-2100
If to SERANOVA: SeraNova, Inc.
499 Thornall Street
Edison, New Jersey 08837
Attn: President
Fax No.: (732) 362-2100
- 10 -
<PAGE>
20. FORCE MAJEURE. No delay or failure of a party to perform any of
--------------
its obligations, other than payment obligations, under this Agreement due to
causes beyond its reasonable control shall constitute a breach of this Agreement
or render that party liable for that delay or failure. Causes beyond a party's
reasonable control include, but are not limited to: (i) events or circumstances
that the party, even though using all, reasonable efforts, is unable to prevent
or overcome; or (ii) labor disputes, strikes, or other similar disturbances,
acts of God, utilities or communications failures, acts of the public enemy,
riots, insurrections, sabotage or vandalism.
21. SEVERABILITY. The invalidity, illegality or unenforceability of any
------------
provision in this Agreement shall not in any way affect the validity, legality
or enforceability of any other provision of this Agreement. This Agreement shall
be reformed and construed in all respects as if such invalid or unenforceable
provision had never been in the Agreement and such provision shall be reformed
so that it will be valid, legal and enforceable to the extent possible.
22. GOVERNING LAW, VENUE AND JURISDICTION. This Agreement shall be
-----------------------------------------
construed in accordance with and governed by the laws of the State of New
Jersey, without regard to its conflict of laws principles. Subject to Section
14, the parties consent to jurisdiction and venue in the state courts of
Middlesex County, New Jersey, or if there is exclusive federal jurisdiction, the
U.S. District Court for the District of New Jersey, shall have exclusive
jurisdiction and venue over any dispute arising out of this Agreement.
23. HEADINGS. Headings in this Agreement are included for convenience of
--------
reference only and do not constitute a part of this Agreement for any other
purpose.
24. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
----------------
between the parties with respect to the subject matter contained herein and
supersedes all prior communications, representations and agreements. It shall
not be varied except by a modification in writing which is duly executed by
authorized representatives of the parties subsequent to the date first appearing
herein
25. COUNTERPARTS. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original and of equal force and effect.
26. INSURANCE. ITIG and SERANOVA (after SERANOVA becomes a publicly held
---------
entity) agree to maintain insurance in accordance with the following:
o Workers Compensation & Employer's Liability:
As required under the law of the state in which the work is
performed with each party's liability limit not less than
$500,000 per occurrence/annual aggregate.
o Commercial General Liability:
Covering all operations of each party including product and
completed operations and contractual liability against claims for
personal bodily injury and property damage with a liability limit
not less than $1,000,000 per occurrence/annual aggregate.
- 11 -
<PAGE>
o Errors & Omission Insurance:
Covering loss or damage arising out of negligent acts or errors
or omissions which arise from professional Services provided by
ITIG under this Agreement and any services provided by SERANOVA
(using the Retained Employees after SERANOVA becomes a publicly
held entity but prior to such employee's Transfer Date) with
limits no less than $1,000,000 per occurrence.
Such insurance coverage as is required under this Agreement shall be in
form and with insurance carriers licensed to do business in the state
where the services are provided, unless otherwise provided herein. As
evidence of said coverage, ITIG shall forward Certificates of Insurance,
or copies of insurance policies, to SERANOVA, which shall contain a
provision to endeavor to notify SERANOVA in writing of a cancellation or
nonrenewal of said coverages not less than thirty (30) days before its
effective date. The foregoing statements as to the types and limits of
insurance coverage to be maintained by ITIG, is not intended to and
shall not in any manner limit or qualify the liabilities and obligations
otherwise assumed by ITIG pursuant to this Agreement, including but not
limited to the provisions concerning indemnification.
27. PUBLICITY. Neither party shall use the name of the other party in any
---------
materials, statements or press releases without the prior written consent of the
other party.
IN WITNESS WHEREOF, this Agreement has been executed effective as of the
date first above written.
WITNESSES INTELLIGROUP, INC.
- -----------------------------
BY: /s/ Ashok Pandey
- ----------------------------- -----------------------------
Ashok Pandey
Co-Chief Executive Officer
SERANOVA, INC.
- -----------------------------
BY: /s/ Raj Koneru
- ----------------------------- -----------------------------
Raj Koneru
Chairman, Chief Executive Officer
and President
- 12 -
<PAGE>
EXHIBIT A
DESCRIPTION OF SUPPORT SERVICES AND APPLICABLE FEES
INFORMATION SYSTEMS & SUPPORT
- -----------------------------
Monthly Access and Support Fee for SAP system:
- ----------------------------------------------
o Fixed charge of $4,000 per month;
o Includes application support and consultation;
o Does not include enhancement or modification of the underlying software or
configuration, except as needed to correct for system malfunction or
programming "bugs".
PC Applications and Hardware Support Services/Procurement:
- ----------------------------------------------------------
o Fixed monthly charge of $10,000 for January; $8,000 per month thereafter;
o Support for desktop systems and network management applications for Edison,
N.J. location
o Ordering, receiving and configuring of new PC's and Laptops as needed
(exclusive of actual cost of hardware and software components).
o Continued access and support for Lotus Notes e-mail system currently
installed;
o Additional charges may be invoiced for the actual cost incurred to extend or
add user licenses should these be required (based upon increases in
registered users over baseline number, determined as of December 31, 1999).
The parties acknowledge that Intelligroup has entered into contractual
relationships with various software vendors for use of the software.
Intelligroup will permit SeraNova a right to use the software or provide
services to SeraNova to the extent Intelligroup is permitted under its
applicable agreements with the software vendors. SeraNova will take all
reasonable actions requested by Intelligroup, so that SeraNova may use the
software or receive services from Intelligroup. Upon SeraNova becoming a
publicly held entity, SeraNova, at its sole cost and expense, may have to enter
into separate agreements with such software vendors and may no longer have the
right to use the software or receive services from Intelligroup.
GENERAL ADMINISTRATIVE SUPPORT
- ------------------------------
Mail Delivery & Facilities Management
- -------------------------------------
o Fixed charge of $3,000 per month, adjustable upon mutual agreement to
reflect changes in usage or underlying costs to Intelligroup;
o Monthly charge includes handling and distribution of mail and other
deliveries, incidental office supplies, copy machine usage, and general
facilities management;
o Additional charges will be invoiced for actual costs of "expressmails"
(including but not limited to Federal Express, U.S. Postal Service Exerts
Mail, Airborne Express);
o Additional charge of $1,000 per month for postage, adjustable upon mutual
agreement to reflect changes in usage or underlying costs to Intelligroup;
Receptionist
- ------------
o Fixed charge of $1,700 per month.
<PAGE>
Human Resources
- ---------------
o Fixed charge of $2,500 per month, adjustable upon mutual agreement to
reflect changes in underlying employee mix;
o Administrative support related to 401(k) Plans, applicable medical benefit
plans, employee manual;
o Employee orientation and hiring support will be invoiced at a rate of $100
per new "in-house" employee hired (covers such incidentals as key cards,
name plates, etc
Billing Support
- ---------------
o Fixed monthly charge of $1,000;
o Provides assistance with setting up and transferring A/R, and Billing
functions from Intelligroup;
o Covers the cost of continued invoice processing by Intelligroup required to
clear historical amounts.
Payroll Support
- ---------------
o Fixed charge of $1,500 per month for the months of January through March,
2000; then at a rate of $500 per month thereafter;
o Provides administrative and processing assistance for the months of January
through March, 2000, including assistance with quarterly tax reporting;
o Also provides for on-going advisory support in connection with payroll
processing;
o External charges (such as Ceridian Payroll Service) are to be directly
billed to SeraNova.
Immigration
- -----------
o Per case charge of $100 to cover administrative costs and access to
Immigration Staff;
o All external charges, including but not limited to legal (Fragomen) and
I.N.S. fees are to be directly billed to SeraNova.
Other Support and Administrative Costs
- --------------------------------------
The above assumes that certain external costs will be directly invoiced to
SeraNova. In the event that any such costs, directly attributable to SeraNova,
are invoiced by a third party to Intelligroup, these will be recoverable by
Intelligroup upon presentment of such costs to SeraNova in the form of an
invoice or other written request for payment (which will detail the costs and
purposes for such costs).
Certain other costs may be incurred by Intelligroup on behalf of both parties,
which may include but are not be limited to (i) cost of general liability,
property and casualty, and other business insurance coverages (prior to SeraNova
becoming a publicly held entity); and (ii) costs of outside retained recruiting
firms. Intelligroup may recover a proportionate share of such costs from
SeraNova upon presentment to SeraNova in the form of an invoice or other written
request for payment (which will detail the costs and purposes for such costs).
Such proportion will be determined by mutual agreement of the parties.
<PAGE>
INTELLIGROUP MONTHLY BILLING SCHEDULE FOR 2000
FOR CHARGES UNDER EXHIBIT A OF THE SERVICES
AGREEMENT
<TABLE>
<CAPTION>
Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Monthly Fixed Charges
Information Systems and Support
SAP systems access and support $ 5,500 $ 5,500 $ 5,500 $ 5,500 $ 5,500 $ 5,500 $ 5,500 $ 5,500
PC applications and H/W support $11,000 $11,000 $11,000 $11,000 $11,000 $11,000 $11,000 $11,000
General Administrative Support
Mail room and facilities $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000
Postage $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
Receptionist $ 1,700 $ 1,700 $ 1,700 $ 1,700 $ 1,700 $ 1,700 $ 1,700 $ 1,700
H/R support $ 3,500 $ 3,500 $ 3,500 $ 3,500 $ 3,500 $ 3,500 $ 3,500 $ 3,500
Billing support $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
Payroll support $ 1,500 $ 1,500 $ 1,500 $ 500 $ 500 $ 500 $ 500 $ 500
--------------------------------------------------------------------------------------
Total Fixed Charges for Services $28,200 $28,200 $28,200 $27,200 $27,200 $27,200 $27,200 $27,200
======================================================================================
Sep-00 Oct-00 Nov-00 Dec-00
------ ------ ------ ------
Monthly Fixed Charges
Information Systems and Support
SAP systems access and support $ 5,500 $ 5,500 $ 5,500 $ 5,500
PC applications and H/W support $11,000 $11,000 $11,000 $11,000
General Administrative Support
Mail room and facilities $ 3,000 $ 3,000 $ 3,000 $ 3,000
Postage $ 1,000 $ 1,000 $ 1,000 $ 1,000
Receptionist $ 1,700 $ 1,700 $ 1,700 $ 1,700
H/R support $ 3,500 $ 3,500 $ 3,500 $ 3,500
Billing support $ 1,000 $ 1,000 $ 1,000 $ 1,000
Payroll support $ 500 $ 500 $ 500 $ 500
--------------------------------------------------------------------------------------
Total Fixed Charges for Services $27,200 $27,200 $27,200 $27,200
============================================
</TABLE>
Variable ("Per drink") charges
- ------------------------------
H/R support - $100 per new in-house hire
Immigration support - $100 per case
INTELLIGROUP MONTHLY BILLING SCHEDULE
FOR RENT AND UTILITIES CHARGES UNDER THE SPACE SHARING AGREEMENT
<TABLE>
<CAPTION>
Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B
RETAINED EMPLOYEES
<TABLE>
<CAPTION>
NAME ID# NAME ID#
- ---- --- ---- ---
<S> <C> <C> <C>
Badola, Anil # 2280 Natarajan, Sambamoorthy # 228
Balakrishnan, Sridhar # 2036 Nath, Mohan # 706
Boghra, Arunkumar # 479 Padmala, Srinivas Rao # 1816
Chandran, Karthikeyan # 2010 Palvai, Sreedhar # 1898
Dasari, Nageswararao # 2251 Parekh, Hitesh # 1683
Desai, Sheetal # 2221 Pavuluri, Kiran # 1509
Errangutla, Mahesh # 606 Prasani, Vineet Rayroth # 159
Gadre, Veerdhaval # 761 Rajagopal, Raghu # 326
Gaur, Harish # 1970 Ramachandran, Aravind # 1554
Gorde, Ajay # 285 Ramaswamy, Prakash # 2300
Guduru, Vidyasaagar # 2298 Rao, Shashikant # 1859
Kalapatapu, Rama Sastry # 827 Ray, Pragnesh # 1813
Kalvit, Hemant # 910 Reddy, Venugopal # 97
Kanyan, Mathew # 1847 Roche, Conrad # 2290
Kelwalkar, Anil Balakrishna # 1931 Roy, Ashok # 1596
Keswani, Haresh # 1635 Sahoo, Rabi Narayan # 1877
Kolukuluri, Trivikram # 808 Sahu, Gajendra Kumar # 2163
Koneru, Padma # 628 Sawant, Sudhir # 535
Krishnan, Vilayanur P. # 2155 Sheth, Tushar # 1592
Kumar, Manish # 2128 Sindhwani, Manesh # 1846
Kumar, Raj # 629 Soman, Kshitish # 708
Kuttalingam, Vannamuthu # 1524 Srinivasan, Girish # 1958
Lanka , Kutumba # 413 Srinivasan, Sridhar # 562
Madhavi, Nandyala # 767 Suki, Geetanjali # 2023
Madhineni, Madhukar # 684 Sunkam, Sreehari # 638
Mathur, Praveen # 1932 Susarla, Bharat # 1710
Mohammad, Asif # 348 Thirugnanam, Gomathi # 1963
Mopati, Krishna # 369 Vedavyas, Balram # 725
Morarji, Dhirendra # 1522 Wahi, Saurabh # 181
Mysore, Prashanth # 1924 Zentelis , Nicolas # 1927
Nagwekar, Suraj # 1508 Kanthi, Hanumanth not assigned
Nair, Rajan # 732 Guntupalli, Bharat not assigned
Nallapaneni, Netaji # 831 Aruminathan, William S not assigned
Narne, Aravind # 2327 Sharan, Jaya not assigned
</TABLE>
SPACE SHARING AGREEMENT
This Space Sharing Agreement (the "Agreement") is made as of January 1,
2000, by and between Intelligroup, Inc., a New Jersey corporation
("Intelligroup") and SeraNova, Inc., a New Jersey corporation ("SeraNova").
RECITALS
A. Intelligroup is a party to a lease agreement (the "Edison, NJ Lease")
pursuant to which Intelligroup leases certain office space for its corporate
headquarters (the "Premises").
B. Intelligroup is a party to leases and/or subleases (the "Intelligroup
Leases") for other facilities (such facilities, together with the Premises, are
collectively referred to herein as the "Intelligroup Facilities") as listed on
Exhibit A hereto.
C. SeraNova desires to use a portion of the Premises and portions of the
other Intelligroup Facilities and, subject to the terms and provisions herein,
Intelligroup agrees that SeraNova shall be permitted to use a portion of the
Premises and portions of the Intelligroup Facilities.
NOW, THEREFORE, in consideration of the agreements set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Premises. Intelligroup agrees that SeraNova shall be permitted to use
--------
a portion of the Premises for the purposes permitted under the Edison, NJ Lease
subject to the terms and conditions set forth in this Agreement. SeraNova's
right to use a portion of the Premises (and its obligation to pay consideration
therefore as required pursuant to Section 3 hereof) shall terminate upon
termination of the lease for the Premises.
2. Intelligroup Facilities. Intelligroup and SeraNova acknowledge that as
-----------------------
of the date hereof SeraNova is using space at the Intelligroup Facilities.
Intelligroup agrees that SeraNova shall be permitted to continue to use the
portion of the other Intelligroup Facilities described on Exhibit A for the
---------
purposes permitted under the applicable Intelligroup Leases, subject to the
terms and conditions of this Agreement. SeraNova's right to use any Intelligroup
Facilities (and its obligation to pay consideration therefore as required
pursuant to Section 3 hereof) shall terminate upon termination of the applicable
Intelligroup Leases.
3. Consideration. So long as SeraNova uses the Premises or any
-------------
Intelligroup Facility, SeraNova shall pay to Intelligroup on the first day of
each calendar month the amount shown on Exhibit A with respect to the Premises
---------
or such Intelligroup Facility as the "Monthly Allocable Rent." The Monthly
Allocable Rent set forth on Exhibit A is based upon the ratio of the number of
---------
square feet occupied by SeraNova to the total number of square feet of the
Premises or such Intelligroup Facility. In addition to the Monthly Allocable
Rent, SeraNova shall pay to Intelligroup its proportionate share of any
operational costs, common area maintenance charges,
<PAGE>
utilities and similar items not included in the Monthly Allocable Rent
("Additional Rent"). During the term of this Agreement, such Monthly Allocable
Rent shall be adjusted, as to the Premises or any Intelligroup Facility, by the
same percentage as any rent adjustment (including without limitation, for rent
adjustments based on increases in operating expenses, common area maintenance
charges and similar items) provided under the terms of the applicable
Intelligroup Leases and/or Edison, NJ Lease, such increase to be effective on
the date such increase becomes effective under the applicable Intelligroup
Leases and/or Edison, NJ Lease. Payments for any partial calendar month shall be
prorated on a per diem basis.
4. Modification and Termination.
----------------------------
(a) Modification. If a party desires to increase or decrease the
------------
portion of the Premises or any Intelligroup Facility used pursuant to this
Agreement, then SeraNova and Intelligroup will negotiate in good faith with
respect to such increase and decrease and the adjustment to the Monthly
Allocable Rent and Additional Rent resulting therefrom. Intelligroup covenants
and agrees to offer to SeraNova the opportunity to use a portion of any new or
expanded facilities leased by Intelligroup.
(b) Term; Termination Rights. This Agreement shall become effective
------------------------
on the effective date of that certain Contribution Agreement dated the date
hereof, by and among the parties hereto, and shall terminate as to any of the
Intelligroup Facilities (including the Premises) on the effective date of the
termination contemplated by Section 1 or 2 hereof.
5. Compliance with Leases. Intelligroup has provided to SeraNova a copy
----------------------
of the Edison, NJ Lease and each other Intelligroup Leases and SeraNova
acknowledges receipt thereof. Intelligroup and SeraNova hereby agrees not to
take any action or fail to take any action in connection with its use of a
portion of the Premises and the other Intelligroup Facilities a result of which
would be Intelligroup's violation of any of the terms and conditions of the
Edison, NJ Lease or such other Intelligroup Leases, the provisions of which are
hereby incorporated by reference. SeraNova agrees to comply with the terms and
provisions (other than with respect to payment of monies) of the Edison, NJ
Lease and any other Intelligroup Leases with respect to its use of a portion of
the applicable Intelligroup Facilities or Premises, it being understood,
acknowledged and agreed that SeraNova's obligations to make payments on account
of rent, additional rent, or operating expense or common area maintenance
surcharges with respect to any and all Intelligroup Facilities or the Premises
shall be governed the terms of this Agreement. Intelligroup represents and
warrants to SeraNova that Intelligroup shall use its best reasonable efforts to
obtain all landlord consents required to be obtained for Intelligroup to allow
SeraNova to use portions of the Premises and Intelligroup Facilities, as
provided herein, except where the failure to obtain such a consent would not be
material.
6. Modification of Leases. SeraNova acknowledges and agrees that
------------------------
Intelligroup has the right to modify or otherwise amend the Edison, NJ Lease and
each other Intelligroup Leases without the consent of SeraNova; provided,
however, that in the event such modification results in an increase in the rent
or other amounts payable thereunder or a decrease or diminution of the services
or space provided therein, SeraNova's rights and obligations with respect to the
Premises
2
<PAGE>
or such Intelligroup Facility shall nonetheless remain as they were prior to
such modification unless SeraNova consents, in writing, to any such
modifications. Intelligroup will provide SeraNova with prior notice of, and a
copy of, any such amendment.
7. Indemnity.
---------
(a) By SeraNova. SeraNova will indemnify and hold harmless
------------
Intelligroup and their respective directors, shareholders, members, managers,
officers, employees and agents (collectively, the "Intelligroup Indemnitees")
from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and expenses (including without limitation reasonable
attorneys' fees and expenses) imposed upon or incurred by or asserted against
any one or more of the Intelligroup Indemnitees by reason of (a) any accident,
injury to or death of persons, (b) any failure on the part of SeraNova to
perform or comply with any of the terms of this Agreement, the Edison, NJ Lease
or the Intelligroup Leases, (c) any liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including without limitation
reasonable attorneys' fees and expenses) due to SeraNova's use and occupancy of
the Premises or any Intelligroup Facility or (d) Intelligroup being held in
default under the terms and provisions of the Edison, NJ Lease or the
Intelligroup Leases, in any such case as a result of any act or omission on the
part of SeraNova.
(b) By Intelligroup. Intelligroup will indemnify and hold harmless
---------------
SeraNova and SeraNova's directors, officers, employees and agents (collectively,
the "SeraNova Indemnitees") from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including
without limitation reasonable attorneys' fees and expenses) imposed upon or
incurred by or asserted against any one or more of the SeraNova Indemnitees by
reason of (a) any accident, injury to or death of persons, (b) any failure on
the part of any of Intelligroup to perform or comply with any of the terms of
this Agreement, the Edison, NJ Lease or any SeraNova leases or (c) SeraNova
being held in default under the terms and provisions of the Edison, NJ Lease or
any SeraNova leases, in any such case as a result of any act or omission on the
part of Intelligroup.
8. Insurance. The parties acknowledge that Intelligroup presently
---------
maintains and will continue to maintain, pursuant to the terms of that certain
Services Agreement, of even date herewith, entered into by and between
Intelligroup and SeraNova (the "Services Agreement"), insurance coverage with
respect to Intelligroup's respective leasehold interests (and following the
effective date of this Agreement, SeraNova's interests) in any and all of the
Intelligroup Facilities and the contents (whether owned by Intelligroup or
SeraNova) of such Intelligroup Facilities until the earlier to occur of (i) the
termination of this Agreement; or (ii) notification in writing by SeraNova that
such coverage is no longer required. Intelligroup shall continue to maintain in
full force and effect (including, without limitation, the timely payment of
premiums therefor) such insurance coverage in amounts no less than, and for
coverages at least as comprehensive as, those maintained as of the date hereof.
Notwithstanding the foregoing, SeraNova shall reimburse Intelligroup with
respect to SeraNova's allocable share of the premiums for such insurance
coverage in accordance with the terms of the Services Agreement. In the event
that Intelligroup, using reasonable efforts, is unable to provide such insurance
coverage for SeraNova, as an
3
<PAGE>
additional insured or otherwise, through the insurance policies that
Intelligroup presently maintains, then SeraNova shall immediately obtain its own
insurance coverage in amounts no less than, and coverages at least as
comprehensive as, those maintained by Intelligroup as of the date hereof.
9. Notices. All notices given in connection with this Agreement shall be
-------
in writing. Service of such notices shall be deemed complete (i) if hand
delivered, on the date of delivery, (ii) if by mail, on the fourth business day
following the day of deposit in the United States mail, by certified or
registered mail, first-class postage prepaid, (iii) if sent by FedEx or
equivalent courier service, on the next business day, or (iv) if by telecopier,
upon receipt by the sender of written confirmation of successful transmission.
Such notices shall be addressed to the parties at the following addresses or at
such other address for a party as shall be specified by like notice (except that
notices of change of address shall be effective upon receipt):
If to Intelligroup:
499 Thornall Street
Edison, New Jersey 08837
Attention: Ashok Pandey, Co-Chief Executive Officer
Telecopy: (732) 362-2100
If to SeraNova:
c/o Intelligroup
499 Thornall Street
Edison, New Jersey 08837
Attention: Rajkumar Koneru, President and Chairman
Telecopy: (732) 362-2100
10. Governing Law. This Agreement shall be governed by, and be construed
-------------
in accordance with, the substantive laws of the State of New Jersey.
11. Amendment. This Agreement may be amended or supplemented at any time
---------
provided that any such amendment or supplement shall be made in writing and
signed by each of the parties hereto.
12. Assignment. This Agreement shall be binding upon, and shall inure to
----------
the benefit of, the parties hereto and their respective successors and permitted
assigns. This Agreement and the rights, duties, obligations and privileges
hereunder may not be assigned by either party without the prior written consent
of the other party.
13. Entire Agreement. This Agreement constitutes the entire agreement
-----------------
between parties relating to the subject matter hereof.
4
<PAGE>
14. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original but all which
together will constitute but one agreement.
15. Section Headings. The section headings contained herein are for
------------------
convenience only and shall not affect in any way the interpretation of any of
the provisions contained herein.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Space Sharing
Agreement as of the date first above written.
INTELLIGROUP, INC.
By: /s/ Ashok Pandey
--------------------------
Ashok Pandey
Co-Chief Executive Officer
SERANOVA, INC.
By: /s/ Raj Koneru
--------------------------
Rajkumar Koneru
President and Chairman
6
<PAGE>
EXHIBIT A
--------------------------------------------------------------------
PERCENTAGE OF PREMISES
LOCATION AND/OR BRANCH ALLOCATED TO SERANOVA
--------------------------------------------------------------------
499 Thornall Street 33.65%
Edison, New Jersey
--------------------------------------------------------------------
10210 North 25th Avenue 100.0%
Phoenix, Arizona
--------------------------------------------------------------------
9013 North 25th Avenue 100.0%
Suite 6
Phoenix, Arizona
--------------------------------------------------------------------
9014 North 23rd Avenue 100.0%
Suite 1
Phoenix, Arizona
--------------------------------------------------------------------
950 Tower Lane 70.0%
Suite 300
Foster City, California
--------------------------------------------------------------------
9399 West Higgins Building 50.0%
Suite 810, 8th Floor
Rosemont, Illinois
--------------------------------------------------------------------
691 North Squirrel Road 100.0%
Suite 175
Auburn Hills, Michigan
--------------------------------------------------------------------
7
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT, dated as of January 1, 2000, is by and between
Intelligroup, Inc., a New Jersey corporation ("Intelligroup") and SeraNova,
Inc., a New Jersey corporation ("SeraNova").
WHEREAS, Intelligroup and SeraNova have executed that certain Distribution
Agreement dated as of January 1, 2000, pursuant to which Intelligroup's existing
business of providing internet solutions will be separated into an independent
public company; and
WHEREAS, it is appropriate and desirable to set forth the principles and
responsibilities of the parties to this Agreement regarding future Adjustments
with respect to Taxes, Tax Contests and other related Tax matters; and
WHEREAS, the business operations of SeraNova were previously conducted
within Intelligroup as a division and, for purposes of this Tax Sharing
Agreement, the business operations of SeraNova shall include all past, present
and future SeraNova Subsidiaries (as hereinafter defined) regardless of whether
any such subsidiary was owned by the SeraNova Group at the time a tax benefit or
detriment may arise.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following terms shall have the
following meanings:
1.1. "Adjustment" means the deemed increase or decrease in a Tax,
determined on an issue-by-issue or transaction-by-transaction basis, as
appropriate, and using the assumptions set forth in the next sentence, resulting
from an adjustment made or proposed by a Taxing Authority with respect to any
amount reflected or required to be reflected on any Return relating to such Tax.
For purposes of determining such deemed increase or decrease in a Tax, the
following assumptions will be used: (a) in the case of any income Tax, the
highest marginal Tax rate or, in the case of any other Tax, the highest
applicable Tax rate, in each case in effect with respect to that Tax for the
Taxable period or any portion of the Taxable period to which the adjustment
relates; and (b) such determination shall be made without regard to whether any
actual increase or decrease in such Tax will in fact be realized with respect to
the Return to which such adjustment relates.
1.2. "Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with, such other
Person. For the purposes of this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have
<PAGE>
meanings correlative to the foregoing. For purposes of this Agreement, no member
of one Group shall be treated as an Affiliate of any member of the other Group.
1.3. "Agreement" means this Tax Sharing Agreement, including any schedules,
exhibits and appendices attached hereto.
1.4. "Code" means the Internal Revenue Code of 1986, as amended.
1.5. "Consolidated Return" means, as appropriate, for any Taxable period or
any portion of a Taxable period ending or deemed to end on or prior to the
Distribution Date, any consolidated or combined Return that includes one or more
members of the Intelligroup Group and/or one or more members of the SeraNova
Group.
1.6. "Consolidation" means, as appropriate, any Taxable period or any
portion of a Taxable period during which one or more members of the SeraNova
Group are members of a Intelligroup Consolidated Return.
1.7. "Controlling Party" means Intelligroup or any other member of the
Intelligroup Group, SeraNova or any other member of the SeraNova Group, as the
case may be, that filed or, if no such Return has been filed, was required to
file, a Return that is the subject of any Tax Contest, or any successor and/or
assign of any of the foregoing; provided, however, that in the case of any
Consolidated Return, the Person that actually filed such Consolidated Return (or
any successor and/or assign of such Person) will be the Controlling Party,
unless such Tax Contest arises from the business activities of only SeraNova or
any other member of the SeraNova Group, in which case SeraNova will be the
Controlling Party.
1.8. "Correlative Adjustment" means, in the case of an Adjustment
comprising a Non-Line of Business Adjustment, the net present value of any
future increases or decreases in a Tax that would be realized, using the
assumptions set forth in the next sentence, by either Intelligroup or any other
member of the Intelligroup Group or SeraNova or any other member of the SeraNova
Group, as the case may be, in one or more Taxable periods (or any portion of a
Taxable period) but only if such increases or decreases (a) are a direct result
of the Non-Line of Business Adjustment and (b) will take effect or begin to take
effect in the Taxable period or portion of a Taxable period of or immediately
following the Taxable period or portion of a Taxable period in which the
Non-Line of Business Adjustment to such Tax is made. For purposes of determining
the net present value of any such future increases or decreases in a tax, the
following assumptions will be used: (i) a discount rate equal to the sum of the
Federal Short-Term Rate as of the date of the Final Determination relating to
such Non-Line of Business Adjustment plus 3.5%; (ii) in the case of any income
Tax, the highest marginal Tax rate or, in the case of any other Tax, the highest
applicable Tax rate, in each case in effect with respect to that Tax for the
Taxable period, or portion of the Taxable period, in which the Non-Line of
Business Adjustment was made; (iii) the depreciation, amortization or credit
rate or lives, if applicable, in effect for the Taxable period, or portion of
the Taxable period, in which the Non-Line of Business Adjustment was made; and
(iv) such determination shall be made without regard to whether any actual
increases or decreases in such Tax will in fact be realized with respect to the
future Returns to which such Correlative Adjustment relates.
-2-
<PAGE>
1.9. "Disputed Adjustment" has the meaning set forth in Section 3.4(b)
hereof.
1.10. "Distribution" means the distribution by Intelligroup on the
Distribution Date of the SeraNova Common Stock, par value $.01 per share, owned
by Intelligroup to the shareholders of Intelligroup as of the Record Date.
1.11. "Distribution Date" means the business day as of which the
Distribution shall be effected.
1.12. "Distribution Documents" means all of the agreements and other
documents entered into in connection with the restructuring, the Distribution or
the other transactions contemplated hereby, including without limitation, this
Agreement and the Distribution Agreement.
1.13. "Federal Short-Term Rate" means the applicable federal short-term
rate as determined under Section 1274(d) of the Code.
1.14. "Final Determination" means (a) a decision, judgment, decree or other
order by any court of competent jurisdiction, which has become final and is
either no longer subject to appeal or for which a determination not to appeal
has been made; (b) a closing agreement made under Section 7121 of the Code or
any comparable foreign, state, local, municipal or other Taxing statute; (c) a
final disposition by any Tax Authority of a claim for refund; or (d) any other
written agreement relating to an Adjustment between any Taxing Authority and any
Controlling Party the execution of which is formal and prohibits such Taxing
Authority or the Controlling Party from seeking any further legal or
administrative remedies with respect to such Adjustment.
1.15. "Group" means, as the context requires, the Intelligroup Group or the
SeraNova Group.
1.16. "Indemnified Party" has the meaning set forth in Section 4.1(c)
hereof.
1.17. "Indemnifying Party" has the meaning set forth in Section 4.1(c)
hereof.
1.18. "Independent Third Party" means a nationally recognized law firm or
any of the following accounting firms or their successors: Arthur Andersen LLP;
Ernst & Young; KPMG Peat Marwick; Deloitte & Touche; PricewaterhouseCoopers LLP.
1.19. "Intelligroup Group" means Intelligroup and its Subsidiaries (other
than any member of the SeraNova Group). The members of the Intelligroup Group,
as of the date of this Agreement, are set forth on Schedule A attached hereto.
----------
1.20. "Intelligroup Tax Benefit" means, with respect to any Taxable period
or portion of a Taxable period, and as computed separately with respect to each
Tax, the net decrease in each such Tax equal to the sum of all Adjustments made
pursuant to a Final Determination with respect to each such Tax for each such
Taxable period or portion of a Taxable period that are clearly attributable, or
attributable by means of a reasonable apportionment, to the Intelligroup Group.
-3-
<PAGE>
1.21. "Intelligroup Tax Detriment" means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net increase in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are clearly
attributable, or attributable by means of a reasonable apportionment, to the
Intelligroup Group.
1.22. "Interested Party" means Intelligroup or any other member of the
Intelligroup Group or SeraNova or any other member of the SeraNova Group
(including any successor and/or assign of any of each of the foregoing), as the
case may be, to the extent (a) such Person is not the Controlling Party with
respect to a Tax Contest; and (b) such Person (i) may be liable for, or required
to make, any indemnity payment, reimbursement or other payment pursuant to the
provisions of this Agreement with respect to such Tax Contest; or (ii) may be
entitled to receive any indemnity payment, reimbursement or other payment
pursuant to the provisions of this Agreement with respect to such Tax Contest.
1.23. "Interested Party Notice" has the meaning set forth in Section 3.4(b)
hereof.
1.24. "Non-Line of Business Adjustment" means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net increase or decrease in each such Tax, as the case may be,
equal to the sum of all Adjustments made pursuant to a Final Determination with
respect to each such Tax for each such Taxable period or portion of a Taxable
period other than (a) any Tax Detriments or (b) any Tax Benefits.
Notwithstanding any other provisions of this Agreement (except Section 2.3(e))
or the Distribution Agreement to the contrary, Non-Line of Business Adjustments
shall include, but not be limited to, Restructuring Adjustments.
1.25. "Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
governmental or political subdivision or an agency or instrumentality thereof.
1.26. "Record Date" means the date determined by Intelligroup's Board of
Directors (or determined by a committee of such Board of Directors or by any
person pursuant to authority delegated to such committee or such person) as the
record date for determining the shareholders of Intelligroup Common Stock
entitled to receive SeraNova Common Stock pursuant to the Distribution
1.27. "Restructuring Adjustment" means, with respect to any Taxable period
or portion of a Taxable period, and as computed separately with respect to each
Tax, the net increase or decrease in each such Tax, as the case may be, equal to
the sum of all Adjustments made pursuant to a Final Determination with respect
to each such Tax for each Taxable period or portion of a Taxable period that are
attributable to, or as a result of, any transactions undertaken to effectuate
the separation of Intelligroup's existing business of providing internet
solutions into one independent business as contemplated under the Distribution
Agreement including, but not limited to, any transactions undertaken pursuant to
or relating to the Distribution, the SeraNova Stock Plan, and any offering of
equity or equity-linked instruments by Intelligroup within one year of the
Distribution Date.
-4-
<PAGE>
1.28. "Return" means any return, report, form or similar statement or
document (including, without limitation, any related or supporting information
or schedule attached thereto and any information return, claim for refund,
amended return and declaration of estimated tax) that has been or is required to
be filed with any Taxing Authority or that has been or is required to be
furnished to any Taxing Authority in connection with the determination,
assessment or collection of any Taxes or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
1.29. "Separate Return" means any Return other than a Consolidated Return.
1.30. "SeraNova Group" means SeraNova and the SeraNova Subsidiaries (other
than any member of the Intelligroup Group) including the predecessor operations
of SeraNova which were formerly a division of Intelligroup and which were
contributed to SeraNova and all SeraNova Subsidiaries for any historical periods
prior to the contribution of such subsidiaries to SeraNova. "SeraNova
Subsidiaries" means all past, present and future subsidiaries of SeraNova,
regardless of whether such subsidiary was directly owned by the SeraNova Group
at such time. As of the date of this Tax Sharing Agreement, such subsidiaries
include the SeraNova Limited, Azimuth Companies, NetPub, and Intelligroup India,
all as defined in the Distribution Agreement between SeraNova and Intelligroup,
executed contemporaneously with the execution of this Tax Sharing Agreement.
1.31. "SeraNova Stock Plan" means the SeraNova 1999 Stock Plan.
1.32. "SeraNova Tax Detriment" means, with respect to any Taxable period or
portion of a Taxable period, and as computed separately with respect to each
Tax, the net increase in each such Tax equal to the sum of all Adjustments made
pursuant to a Final Determination with respect to each such Tax for each such
Taxable period or portion of a Taxable period that are clearly attributable, or
attributable by means of a reasonable apportionment, to the SeraNova Group.
1.33. "SeraNova Tax Benefit" means, with respect to any Taxable period or
portion of a Taxable period, and as computed separately with respect to each
Tax, the net decrease in each such Tax equal to the sum of all Adjustments made
pursuant to a Final Determination with respect to each such Tax for each such
Taxable period or portion of a Taxable period that are clearly attributable, or
attributable by means of a reasonable apportionment, to the SeraNova Group.
1.34. The "Shared Intelligroup Percentage" shall be such percentage as is
reasonably apportionable to Intelligroup based on the actual Tax at issue, or if
no such percentage is reasonably apportionable, then such percentage shall be
70%.
1.35. The "Shared SeraNova Percentage" shall be such percentage as is
reasonably apportionable to SeraNova based on the actual Tax at issue, or if no
such percentage is reasonably apportionable, then such percentage shall be 30%.
1.36. "Significant Obligation" means, in the case of an Interested Party,
and with respect to any Adjustment, an obligation to make or right to receive
any indemnity payment, reimbursement or other payment with respect to any such
Adjustment (including the effect of
-5-
<PAGE>
any Correlative Adjustment relating thereto) pursuant to the terms of this
Agreement that is greater than $10,000.
1.37. "Subsidiary" means, with respect to any Person, any other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the Board of Directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
1.38. "Tax" (and, with correlative meanings, "Taxes" and "Taxable") means,
without limitation, and as determined on a jurisdiction-by-jurisdiction basis,
each foreign or U.S. federal, state, local or municipal income, alternative or
add-on minimum, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or any other tax, custom, tariff, impost, levy,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or additional
amount related thereto, imposed by any Taxing Authority.
1.39. "Tax Benefits" means any Intelligroup Tax Benefit or any SeraNova Tax
Benefit, as the case may be.
1.40. "Tax Contest" means, without limitation, any audit, examination,
claim, suit, action or other proceeding relating to Taxes in which an Adjustment
may be proposed, collected or assessed and in respect of which an indemnity
payment, reimbursement or other payment may be sought under this Agreement.
1.41. "Tax Detriments" means any Intelligroup Tax Detriment or any SeraNova
Tax Detriment, as the case may be.
1.42. "Taxing Authority" means any governmental authority or any
subdivision, agency, commission or authority thereof, or any quasi-governmental
or private body having jurisdiction over the assessment, determination,
collection or other imposition of Taxes.
1.43. "Ultimate Determination" has the meaning set forth in Section
3.5(b)(i) hereof.
ARTICLE II
ADJUSTMENTS
2.1. IN GENERAL. In determining any liability and/or obligation to make, or
right to receive, any indemnity payment, reimbursement or other payment to or
from any party to this Agreement pursuant to this Agreement, any Taxable period
or portion of a Taxable period that includes the Distribution Date shall be
deemed to include and end on such Distribution Date and no party to this
Agreement shall have any liability and/or obligation to make, or right to
receive, any such indemnity payment, reimbursement or other payment with respect
to any Taxable period or portion of a Taxable period that begins or is deemed to
begin after the Distribution Date.
-6-
<PAGE>
2.2. TAX DETRIMENTS AND BENEFITS. (a) SeraNova shall be liable for, and
shall indemnify and hold harmless, subject to Section 3.4 and Section 3.5
hereof, any member of the Intelligroup Group against any and all SeraNova Tax
Detriments for any Taxable period or portion of a Taxable period ending or
deemed to end on or before the Distribution Date with respect to any Return
which properly includes any member of the SeraNova Group or the Intelligroup
Group. SeraNova shall be entitled to receive, and shall be paid, subject to
Section 3.4 and Section 3.5 hereof, by Intelligroup, the amount of any SeraNova
Tax Benefits for any Taxable period or portion of a Taxable period ending or
deemed to end on or before the Distribution Date with respect to any Return
which properly includes any member of the Intelligroup Group.
(b) Intelligroup shall be liable for, and shall indemnify and hold
harmless, as appropriate, and subject to Section 3.4 and Section 3.5 hereof, any
member of the SeraNova Group against any and all Intelligroup Tax Detriments for
any Taxable period or portion of a Taxable period ending or deemed to end on or
before the Distribution Date with respect to any Return which properly includes
any member of the SeraNova Group or the Intelligroup Group. Intelligroup shall
be entitled to receive, and shall be paid, subject to Section 3.4 and Section
3.5 hereof, by SeraNova, the amount of any Intelligroup Tax Benefits for any
Taxable period or portion of a Taxable period ending or deemed to end on or
before the Distribution Date with respect to any Return which properly includes
any member of the SeraNova Group.
2.3. NON-LINE OF BUSINESS ADJUSTMENTS. (a) SeraNova shall be liable for,
and shall indemnify and hold harmless, as appropriate, any member of the
Intelligroup Group against SeraNova's share, as determined in Section 2.3(c)
below, of any Non-Line of Business Adjustment the amount of which increases a
Tax for any Taxable period or portion of a Taxable period ending or deemed to
end on or before the Distribution Date with respect to any Return which properly
includes any member of the SeraNova Group or the Intelligroup Group. SeraNova
shall be entitled to receive, and shall be paid by Intelligroup, SeraNova's
share, as determined in Section 2.3(c) below, of any Non-Line of Business
Adjustment the amount of which decreases a Tax for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the Distribution Date
with respect to any Return which properly includes any member of the
Intelligroup Group.
(b) Intelligroup shall be liable for, and shall indemnify and hold
harmless, as appropriate, any member of the SeraNova Group against
Intelligroup's share, as determined in Section 2.3(c) below, of any Non-Line of
Business Adjustment the amount of which increases a Tax for any Taxable period
or portion of a Taxable period ending or deemed to end on or before the
Distribution Date with respect to any Return which properly includes any member
of the SeraNova Group or the Intelligroup Group. Intelligroup shall be entitled
to receive, and shall be paid by SeraNova, Intelligroup's share, as determined
in Section 2.3(c) below, of any Non-Line of Business Adjustment the amount of
which decreases a Tax for any Taxable period or portion of a Taxable period
ending or deemed to end on or before the Distribution Date with respect to any
Return which properly includes any member of the SeraNova Group.
(c) Intelligroup and SeraNova shall share the amount of any Non-Line
of Business Adjustment to the extent each such party is liable for and/or has an
obligation to make, or has the right to receive, as the case may be, any
indemnity payment, reimbursement or other
-7-
<PAGE>
payment with respect to such Non-Line of Business Adjustment under this
Agreement, in proportion to the Shared Intelligroup Percentage and the Shared
SeraNova Percentage, respectively; provided, however, that in the event that
there is any Correlative Adjustment with respect to any such Non-Line of
Business Adjustment, then Intelligroup and SeraNova shall share such Non-Line of
Business Adjustment in the following manner in order to ensure that the party or
parties that will bear the burden or inure to the benefit of the Correlative
Adjustment in the future will share the Non-Line of Business Adjustment in
proportion to each of their respective Shared Percentages after giving effect to
such Correlative Adjustment:
(i) first, the amount of any such Non-Line of Business Adjustment
shall be increased or decreased, as appropriate, by the amount of the
Correlative Adjustment, the net amount resulting from such increase or decrease
being hereinafter referred to as the "Net Non-Line of Business Adjustment" for
purposes of this Section 2.3(c);
(ii) second, the Net Non-Line of Business Adjustment shall be
allocated among Intelligroup and SeraNova in proportion to the Shared
Intelligroup Percentage and the Shared SeraNova Percentage, respectively, to the
extent each such party is liable for and/or has an obligation to make, or has
the right to receive, as the case may be, any indemnity payment, reimbursement
or other payment with respect to such Non-Line Of Business Adjustment under this
Agreement; and
(iii) finally, with respect to a party to which a Correlative
Adjustment is attributable, that party's share of the Net Non-Line of Business
Adjustment as allocated pursuant to paragraph (ii) of this Section 2.3(c) will
be increased or decreased, as appropriate, by the amount, if any, of the
Correlative Adjustment that is attributable to such party in order to arrive at
such party's share of the Non-Line of Business Adjustment.
(d) Following the determination of a party's share of a Non-Line of
Business Adjustment pursuant to Section 2.3(c) above, and subject to Section 3.4
and 3.5 hereof, the Controlling Party that controls the Tax Contest to which
such Non-Line of Business Adjustment relates shall (i) be entitled to
reimbursement from Intelligroup or SeraNova, as the case may be, for each of
their respective shares, if any, of any Non-Line of Business Adjustment the
amount of which increases a Tax; and (ii) reimburse Intelligroup or SeraNova, as
the case may be, for each of their respective shares, if any, of any Non-Line of
Business Adjustment the amount of which decreases a Tax.
(e) Notwithstanding any other provision of this Agreement or the
Distribution Agreement to the contrary, if after the Distribution Date,
Intelligroup or SeraNova takes any action or fails to take any action that
directly or indirectly results in the Distribution not qualifying as a tax-free
distribution under Section 355 of the Code, then Intelligroup or SeraNova, as
the case may be, will be liable for any increased tax liability of Intelligroup
and SeraNova arising therefrom. For purposes of this subparagraph (e), in the
event the shareholders of either Intelligroup or SeraNova engage in a
transaction which results in the Distribution not qualifying as a tax-free
distribution under Section 355 of the Code, then the corporation which such
shareholders own (that is, either Intelligroup or SeraNova, as the case may be)
shall be liable for any increased tax liability arising therefrom.
-8-
<PAGE>
(f) Notwithstanding any other provision of this Agreement or the
Distribution Agreement to the contrary, if the Distribution does not qualify as
a tax-free distribution under Section 355 of the Code for reasons other than
those described within subparagraph (e) above, including an Internal Revenue
Service challenge or other third-party action, then any tax liability arising
therefrom (including any settlement of liability) shall be allocated among
Intelligroup and SeraNova in proportion to the Shared Intelligroup Percentage
and the Shared SeraNova Percentage, respectively.
ARTICLE III
TAX CONTESTS
3.1. NOTIFICATION OF TAX CONTESTS. The Controlling Party shall promptly
notify all Interested Parties of (a) the commencement of any Tax Contest
pursuant to which such Interested Parties may be required to make or entitled to
receive an indemnity payment, reimbursement or other payment under this
Agreement; and (b) as required and specified in Section 3.4 hereof, any Final
Determination made with respect to any Tax Contest pursuant to which such
Interested Parties may be required to make or entitled to receive any indemnity
payment, reimbursement or other payment under this Agreement. The failure of a
Controlling Party to promptly notify any Interested Party as specified in the
preceding sentence shall not relieve any such Interested Party of any liability
and/or obligation which it may have to the Controlling Party under this
Agreement except to the extent that the Interested Party was prejudiced by such
failure, and in no event shall such failure relieve the Interested Party from
any other liability or obligation which it may have to such Controlling Party.
3.2. TAX CONTEST SETTLEMENT RIGHTS. The Controlling Party shall have the
sole right to contest, litigate, compromise and settle any Adjustment that is
made or proposed in a Tax Contest without obtaining the prior consent of any
Interested Party; provided, however, that, unless the parties provide notice of
the waiver of such right, the Controlling Party shall, in connection with any
proposed or assessed Adjustment in a Tax Contest for which an Interested Party
may be required to make or entitled to receive an indemnity payment,
reimbursement or other payment under this Agreement (a) keep all such Interested
Parties informed in a timely manner of all actions taken or proposed to be taken
by the Controlling Party; and (b) provide all such Interested Parties with
copies of any correspondence or filings submitted to any Taxing Authority or
judicial authority, in each case in connection with any contest, litigation,
compromise or settlement relating to any such Adjustment in a Tax Contest. The
failure of a Controlling Party to take any action as specified in the preceding
sentence with respect to an Interested Party shall not relieve any such
Interested Party of any liability and/or obligation which it may have to the
Controlling Party under this Agreement except to the extent that the Interested
Party was prejudiced by such failure, and in no event shall such failure relieve
the Interested Party from any other liability or obligation which it may have to
such Controlling Party. The Controlling Party may, in its sole discretion, take
into account any suggestions made by an Interested Party with respect to any
such contest, litigation, compromise or settlement of any Adjustment in a Tax
Contest. All costs of any Tax Contest are to be borne by the Controlling Party
and all Interested Parties in proportion to their respective liability to make
indemnity payments, reimbursements or other payments under this Agreement with
respect to an Adjustment made in such Tax Contest; provided, however, that (x)
any costs related to an
-9-
<PAGE>
Interested Party's attendance at any meeting with a Taxing Authority or hearing
or proceeding before any judicial authority pursuant to Section 3.3 hereof, and
(y) the costs of any legal or other representatives retained by an Interested
Party in connection with any Tax Contest that is subject to the provisions of
this Agreement, shall be borne by such Interested Party.
3.3. TAX CONTEST PARTICIPATION. Unless waived by the parties in writing,
the Controlling Party shall provide an Interested Party with notice reasonably
in advance of, and such Interested Party shall have the right to attend, any
formally scheduled meetings with Taxing Authorities or hearings or proceedings
before any judicial authorities in connection with any contest, litigation,
compromise or settlement of any proposed or assessed Adjustment that is the
subject of any Tax Contest pursuant to which such Interested Party may be
required to make or entitled to receive an indemnity payment, reimbursement or
other payment under this Agreement, but only if the Interested Party bears, or
in the good faith judgment of the Controlling Party, may bear, a Significant
Obligation with respect to such Adjustment; provided, however, that the
Controlling Party may, in its sole discretion, permit an Interested Party that
does not bear, or potentially bear, such a Significant Obligation with respect
to such an Adjustment, to attend any such meetings, hearings or proceedings that
relate to such Adjustment. In addition, unless waived by the parties in writing,
the Controlling Party shall provide each Interested Party with draft copies of
any correspondence or filings to be submitted to any Taxing Authority or
judicial authority with respect to such Adjustments for such Interested Party's
review and comment. The Controlling Party shall provide such draft copies
reasonably in advance of the date that they are to be submitted to the Taxing
Authority or judicial authority and the Interested Party shall provide its
comments, if any, with respect thereto within a reasonable time before such
submission. The failure of a Controlling Party to provide any notice,
correspondence or filing as specified in this Section 3.3 to an Interested Party
shall not relieve any such Interested Party of any liability and/or obligation
which it may have to the Controlling Party under this Agreement except to the
extent that the Interested Party was prejudiced by such failure, and in no event
shall such failure relieve the Interested Party from any other liability or
obligation which it may have to such Controlling Party.
3.4. TAX CONTEST WAIVER. (a) The Controlling Party shall promptly provide
notice to all Interested Parties in a Tax Contest (i) that a Final Determination
has been made with respect to such Tax Contest; and (ii) enumerating the amount
of the Interested Party's share of each Adjustment reflected in such Final
Determination of the Tax Contest for which such Interested Party may be required
to make or entitled to receive an indemnity payment, reimbursement or other
payment under this Agreement.
(b) Within thirty (30) days after an Interested Party receives the
notice described in Section 3.4(a) hereof from the Controlling Party, such
Interested Party shall give notice to the Controlling Party (i) that the
Interested Party agrees with each Adjustment (and its share thereof) enumerated
in the notice described in Section 3.4(a) hereof except with respect to those
Adjustments (and/or its shares thereof) that, in the good faith judgment of the
Interested Party, it disagrees with and has specifically enumerated its
disagreement with, including the amount of such disagreement, in the statement
(each such disagreed Adjustment (and/or share thereof) hereinafter referred to
as a "Disputed Adjustment"); and (ii) that the Interested Party thereby waives
its right to a determination by an Independent Third Party pursuant to the
provisions of Section 3.5 hereof with respect to all Adjustments to which it
agrees with its share
-10-
<PAGE>
(this statement hereinafter referred to as the "Interested Party Notice"). The
failure of an Interested Party to provide the Interested Party Notice to the
Controlling Party within the thirty (30) day period specified in the preceding
sentence shall be deemed to indicate that such Interested Party agrees with its
share of all Adjustments enumerated in the notice described in Section 3.4(a)
hereof and that such Interested Party waives its right to a determination by an
Independent Third Party with respect to all such Adjustments (and its shares
thereof) pursuant to Section 3.5 hereof.
(c) During the thirty (30) day period immediately following the
Controlling Party's receipt of the Interested Party Notice described in Section
3.4(b) above, the Controlling Party and the Interested Party shall in good faith
confer with each other to resolve any disagreement over each Disputed Adjustment
that was specifically enumerated in such Interested Party Notice. At the end of
the thirty (30) day period specified in the preceding sentence, unless notice is
provided of the mutual consent of the parties to the extension of such time
period, the Interested Party shall be deemed to agree with all Disputed
Adjustments that were specifically enumerated in the Interested Party Notice and
waive its right to a determination by an Independent Third Party pursuant to
Section 3.5 hereof with respect to all such Disputed Adjustments unless, and to
the extent, that at any time during such thirty (30) day (or extended) period,
the Interested Party has given the Controlling Party notice that it is seeking a
determination by an Independent Third Party pursuant to Section 3.5 hereof
regarding the propriety of any such Disputed Adjustment.
(d) Notwithstanding anything in this Agreement to the contrary, an
Interested Party that does not have a Significant Obligation with respect to an
Adjustment has no right to a determination by an Independent Third Party under
Section 3.5 hereof with respect to any such Adjustment.
3.5. TAX CONTEST DISPUTE RESOLUTION. (a) In the event that an Interested
Party has given the Controlling Party notice as required in Section 3.4(c)
hereof that it is seeking a determination by an Independent Third Party pursuant
to this Section 3.5 with respect to any Disputed Adjustment that was enumerated
in an Interested Party Notice, then the parties shall, within ten (10) days
after the Controlling Party has received such notice, jointly select an
Independent Third Party to make such determination. In the event that the
parties cannot jointly agree on an Independent Third Party to make such
determination within such ten (10) day period, then the Controlling Party and
the Interested Party shall each immediately select an Independent Third Party
and the Independent Third Parties so selected by the parties shall jointly
select, within ten (10) days of their selection, another Independent Third Party
to make such determination.
(b) In making its determination as to the propriety of any Disputed
Adjustment, the Independent Third Party selected pursuant to Section 3.5(a)
above shall assume that the Interested Party is not required or entitled under
applicable law to be a member of any Consolidated Return. In addition, the
Independent Third Party shall make its determination according to the following
procedure:
(i) The Independent Third Party shall analyze each Disputed
Adjustment for which a determination is sought pursuant to this Section 3.5 to
determine what is
-11-
<PAGE>
a fair and appropriate outcome (hereinafter referred to as the "Ultimate
Determination") with respect to any such Disputed Amount, taking into account
the following exclusive criteria: (A) the facts relating to such Adjustment; (B)
the applicable law, if any, with respect to such Adjustment; (C) the position of
the applicable Taxing Authority with respect to compromise, settlement or
litigation of such Adjustment; (D) the strength of the factual and legal
arguments made by the Controlling Party in reaching the outcome with respect to
such Adjustment as reflected in the Final Determination of the Tax Contest; (E)
the strength of the factual and legal arguments being made by the Interested
Party for the alternative outcome being asserted by such Interested Party
(including the availability of facts, information and documentation to support
such alternative outcome); (F) the strength of the legal and factual support for
other potential, non-frivolous Adjustments with respect to matters that were
actually raised and contested by the applicable Taxing Authority in the Tax
Contest for which the Interested Party could have been liable under this
Agreement but which were eliminated or reduced as a result of the Controlling
Party agreeing to the Disputed Adjustment as reflected in the Final
Determination of the Tax Contest; (G) the effect of the actual outcome reached
with respect to the Disputed Adjustment on other Taxable periods and on other
positions taken or proposed to be taken in Returns filed or proposed to be filed
by the Interested Party; (H) the realistic possibility of avoiding examination
of potential, non-frivolous issues for which the Interested Party could be
liable under this Agreement and that were contemporaneously identified in
writings by the party or parties during the course of the Tax Contest but which
had not been raised and contested by the applicable Taxing Authority in the Tax
Contest; and (I) the benefits to the Interested Party in reaching a Final
Determination, and the strategy and rationale with respect to the Interested
Party's Disputed Adjustment that the Controlling Party had for agreeing to such
Disputed Adjustment in reaching the Final Determination, in each case that were
contemporaneously identified in writings by the party or parties during the
course of the Tax Contest.
(ii) The Interested Party shall only be entitled to modification
of its share of a Disputed Adjustment under this Section 3.5 if, as the case may
be, either (A) the amount that would be paid by the Interested Party under the
Ultimate Determination with respect to such Disputed Adjustment is less than 80%
of the amount that would be paid by the Interested Party with respect to such
Disputed Adjustment under the actual outcome reached with respect to such
Disputed Adjustment; or (B) the amount that would be received by the Interested
Party under the Ultimate Determination with respect to such Disputed Adjustment
is more than 120% of the amount that the Interested Party would receive with
respect to such Disputed Adjustment under the actual outcome reached with
respect to such Disputed Adjustment. If an Interested Party is entitled to
modification of its share of any Disputed Adjustment under the preceding
sentence, the amount the Interested Party is entitled to receive, or is required
to pay, as the case may be, with respect to such Disputed Adjustment shall be
equal to the amount of the Ultimate Determination of such Disputed Adjustment.
The Independent Third Party will provide notice to the Controlling Party and the
Interested Party stating whether the Interested Party is entitled to
modification of its share of the Disputed Adjustment pursuant to this paragraph
(ii) and, if the Interested Party is entitled to such modification, the amount
as determined in the preceding sentence that the Interested Party is entitled to
receive from, or required to pay to, the Controlling Party with respect to such
Disputed Adjustment.
(c) Any determination made or notice given by an Independent Third
Party pursuant to this Section 3.5 shall be (i) in writing; (ii) made within
thirty (30) days following the
-12-
<PAGE>
selection of the Independent Third Party as set forth in Section 3.5(a) of this
Agreement unless such period is otherwise extended by the mutual consent of the
parties; and (iii) final and binding upon the parties. The costs of any
Independent Third Party retained pursuant to this Section 3.5 shall be shared
equally by the parties. The Controlling Party and the Interested Party shall
provide the Independent Third Party jointly selected pursuant to Section 3.5(a)
hereof with such information or documentation as may be appropriate or necessary
in order for such Independent Third Party to make the determination requested of
it. Upon issuance of an Independent Third Party's notice under Section
3.5(b)(ii) hereof, the Controlling Party or the Interested Party, as the case
may be, shall pay as specified in Article IV of this Agreement, the amount, if
any, of the Disputed Adjustment to the appropriate party.
ARTICLE IV
PROCEDURE AND PAYMENT
4.1. PROCEDURE. (a) If an Interested Party has any liability and/or
obligation to make, or the right to receive, any indemnity payment,
reimbursement or other payment with respect to an Adjustment under this
Agreement for which it does not have a right to a determination by an
Independent Third Party under Section 3.5 hereof, then the amount of such
Adjustment shall be immediately due and payable upon receipt by the Interested
Party of a notice of Final Determination of a Tax Contest as required and
specified in Section 3.4(a) hereof.
(b) If after (i) notice of a Final Determination of a Tax Contest as
required and specified in Section 3.4(a) hereof has been given by a Controlling
Party to an Interested Party; and (ii) the Interested Party receiving such
notice has either:
(A) failed to provide the Interested Party Notice specified
in Section 3.4(b) hereof within the thirty (30) day period set forth in Section
3.4(b);
(B) provided the Interested Party Notice specified in
Section 3.4(b) hereof within the thirty (30) day period specified in Section
3.4(b) agreeing to all Adjustments (and the Interested Party's share of all such
Adjustments) and waiving the right to an Independent Third Party determination
pursuant to Section 3.5 hereof with respect to all such Adjustments (and the
Interested Party's share of such Adjustments);
(C) provided the Interested Party Notice specified in
Section 3.4(b) hereof within the thirty (30) day period specified in Section
3.4(b) agreeing with some, but not all, Adjustments (and the Interested Party's
share of such agreed Adjustments) and waiving the right to an Independent Third
Party Determination pursuant to Section 3.5 hereof with respect to all such
agreed Adjustments (and the Interested Party's share of such Adjustments); or
(D) provided the Interested Party Notice specified in
Section 3.4(b) hereof within the thirty (30) day period specified in Section
3.4(b) specifically enumerating the Disputed Adjustments to which it does not
agree and for which the notice specified in either Section 3.5(b)(ii) hereof
relating to any such Disputed Adjustment has been given by an Independent Third
Party,
-13-
<PAGE>
then the amount of any Adjustment agreed to or deemed to be agreed to by the
Interested Party, or for which an Independent Third Party notice has been given
pursuant to either Section 3.5(b)(ii) hereof, as set forth in each of clauses
(A), (B), (C) or (D) above, shall be immediately due and payable.
(c) Any Person entitled to any indemnification, reimbursement or other
payment under this Agreement with respect to the amount of any Adjustment that
has become immediately due and payable under Section 4.1(b) (the "Indemnified
Party") shall notify the Person against whom such indemnification, reimbursement
or other payment is sought (the "Indemnifying Party") of its right to and the
amount of such indemnification, reimbursement or other payment; provided,
however, that the failure to notify the Indemnifying Party shall not relieve the
Indemnifying Party from any liability and/or obligation which it may have to an
Indemnified Party on account of the provisions contained in this Agreement
except to the extent that the Indemnifying Party was prejudiced by such failure,
and in no event shall such failure relieve the Indemnifying Party from any other
liability or obligation which it may have to such Indemnified Party. The
Indemnifying Party shall make such indemnity payment, reimbursement or other
payment to the Indemnified Party within thirty (30) days of the receipt of the
notice specified in the preceding sentence; provided, however, that, in the case
of any Final Determination of a Tax Contest involving a state, local or
municipal Tax in which the Indemnifying Party is also the Controlling Party with
respect to such Tax Contest and, as Controlling Party, is entitled to receive an
overall net refund from the applicable state, local or municipal Taxing
Authority with respect to such state, local or municipal Tax, then the
Indemnifying Party shall make such indemnity payment, reimbursement or other
payment to the Indemnified Party within thirty (30) days from the date the
Indemnifying Party actually receives payment of or obtains the benefit of the
net refund due from the applicable state, local or municipal Taxing Authority.
4.2. PAYMENT. Any indemnity payment, reimbursement or other payment
required to be made pursuant to this Agreement by an Indemnifying Party to an
Indemnified Party shall be made, at the option of the Indemnifying Party, by (a)
certified check payable to the order of the Indemnified Party; or (b) wire
transfer of immediately available funds to such bank and/or other account of the
Indemnified Party as from time to time the Indemnified Party shall have directed
the Indemnifying Party, in writing. Any indemnity payment, reimbursement or
other payment required to be made by an Interested Party pursuant to this
Agreement shall bear interest at the Federal Short-Term Rate plus 2%, per annum,
from the date such Interested Party receives the notice of Final Determination
made with respect to a Tax Contest as provided in Section 3.4(a) hereof. Any
indemnity payment, reimbursement or other payment required to be made by a
Controlling Party to an Interested Party pursuant to this Agreement shall bear
interest at the Federal Short-Term Rate plus 2%, per annum, from a date thirty
(30) days after the date of a Final Determination made with respect to a Tax
Contest; provided, however, that, in the case of any Final Determination of a
Tax Contest involving a state, local or municipal Tax in which the Controlling
Party is entitled to receive an overall net refund from the applicable state,
local or municipal Taxing Authority with respect to such state, local or
municipal Tax, such indemnity payment, reimbursement or other payment to be made
by the Controlling Party shall bear interest at the Federal Short-Term Rate plus
2%, per annum, from the date the Controlling Party actually receives payment of
or obtains the benefit of the net refund due from the applicable state, local or
municipal Taxing Authority.
-14-
<PAGE>
ARTICLE V
OTHER TAX MATTERS
5.1. TAX POLICIES AND PROCEDURES DURING CONSOLIDATION. It is understood and
agreed that during Consolidation:
(b) Members of the SeraNova Group shall adopt and follow the Tax
policies and procedures that have been established by Intelligroup, unless
Intelligroup shall otherwise consent as provided herein.
(c) Intelligroup shall establish all Return positions and make all Tax
elections relating to a Consolidated Return. Members of the SeraNova Group shall
take such Consolidated Return positions and make such Tax elections relating to
a Consolidated Return as may be taken or made by Intelligroup, or as reasonably
requested by Intelligroup to be taken or made by any member of the SeraNova
Group, unless Intelligroup shall otherwise consent, as provided herein.
(d) With respect to the Consolidated Return for the taxable period
including the Distribution Date, the parties of this Agreement shall indemnify
each other in a manner consistent with Article II for the amount of any
difference between (i) the Tax liability of such party (including all of the
members of its respective Group) as calculated on a separate basis for purposes
of determining the final tax accrual provision for the period ending on the
Distribution Date and (ii) the Tax liability of such party (including all the
members of its respective Group) as calculated on a separate basis for purposes
of determining the total Tax liability as reported on the Consolidated Return
filed with respect to the taxable period including the Distribution Date. Any
payments to be made pursuant to this Section 5.1(c) shall be made within
forty-five (45) days of the filing of such Consolidated Return.
5.2. COOPERATION. Except as otherwise provided in this Agreement, each
member of the Intelligroup Group and the SeraNova Group, as the case may be,
shall, at their own expense, cooperate with each other in the filing of, or any
Tax Contest relating to, any Return and any other matters relating to Taxes and,
in connection therewith, shall (i) maintain appropriate books and records for
any and all Taxable periods or any portion of a Taxable period that may be
required by Intelligroup's record retention policies; (ii) provide to each other
such information as may be necessary or useful in the filing of, or any Tax
Contest relating to, any such Return; (iii) execute and deliver such consents,
elections, powers of attorney and other documents as may be required or
appropriate for the proper filing of any such Return or in conjunction with any
Tax Contest relating to any such Return; and (iv) make available for responding
to inquiries of any other party or any Taxing Authority, appropriate employees
and officers of and advisors retained by any member of the Intelligroup Group or
the SeraNova Group, as the case may be.
5.3. FILING OF RETURNS. The Person that would be the Controlling Party with
respect to any Tax Contest relating to a Return for which any indemnity payment,
reimbursement or other payment may be sought under this Agreement shall (a)
prepare and file, or cause to be prepared and filed, any such Return within the
time prescribed for filing such Return (including all extensions of time for
filing); and (b) shall timely pay, or cause to be timely paid, the amount
-15-
<PAGE>
of any Tax shown to be due and owing on any such Return. Such Person shall bear
all costs associated with preparing and filing, or causing to be prepared and
filed, any such Return. Except as provided in Section 5.1(b) hereof (relating to
Consolidated Returns), such Person shall establish all Return positions and make
all Tax elections relating to such Returns.
ARTICLE VI
MISCELLANEOUS
6.1. GOVERNING LAW. To the extent not preempted by any applicable foreign
or U.S. federal, state, or local Tax law, this Agreement shall be governed by
and construed and interpreted in accordance with the laws of the State of New
Jersey, irrespective of the choice of laws principles of the State of New
Jersey, as to all matters, including matters of validity, construction, effect,
performance and remedies.
6.2. AFFILIATES. Each of the parties hereto shall cause to be performed,
and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Affiliate of such party;
provided, however, that for purposes of the foregoing, no Person shall be
considered an Affiliate of a party if such Person is a member of another party's
Group.
6.3. AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Intelligroup and SeraNova, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
6.4. NOTICES. On behalf of Intelligroup and SeraNova, the individuals set
forth below (or any other individuals delegated in writing by each of the
foregoing) shall serve as the single point of contact to receive or give any
notice or other communication required or permitted to be given to any member of
each of their respective Groups under this Agreement. Unless the individual
designated to receive any notice or other communication is the same individual
designated to give such notice or other communication, all notices or other
communications under this Agreement shall be in writing and shall deemed to be
duly given when (a) delivered in person; or (b) sent by facsimile; or (c)
deposited in the United States mail, postage prepaid and sent certified mail,
return receipt requested; or (d) deposited in private express mail, postage
prepaid, addressed as follows:
-16-
<PAGE>
If to any member of the Intelligroup Group, to:
Intelligroup, Inc.
499 Thornall Street
Edison, NJ 08837
Attn: Ashok Pandey, Co-Chief Executive Officer
Facsimile: 732-362-2100
If to any member of the SeraNova Group, to:
SeraNova ,Inc.
c/o Intelligroup, Inc.
499 Thornall Street
Edison, NJ 08837
Attn: Rajkumar Koneru, President and Chairman
Facsimile: 732-362-2100
Copies of any and all notices shall be (a) delivered in person; or (b) sent by
facsimile; or (c) deposited in the United States mail, postage prepaid and sent
certified mail, return receipt requested; or (d) deposited in private express
mail, postage prepaid, addressed as follows:
David J. Sorin
Buchanan Ingersoll Professional Corporation
650 College Road East
Princeton, NJ 08540
Facsimile: (609) 520-0360
Any party may, by written notice to the other parties, change the address to
which such notices (or copies of notices) are to be given.
6.5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties hereto.
6.6. ENTIRE AGREEMENT; CONFLICTING OR INCONSISTENT PROVISIONS. This
Agreement is intended to provide rights, obligations and covenants in respect of
Taxes and shall supercede all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof and
thereof. In the event that any provision or term of this Agreement conflicts or
is inconsistent with any provision or term of any other agreement between or
among Intelligroup or any other member of the Intelligroup Group and/or SeraNova
or any other member of the SeraNova Group, as the case may be, which is in
effect on or prior to the date hereof, the provision or term of this Agreement
shall control and apply and the provision or term of any other agreement shall,
to the extent of such conflict or inconsistency, be inoperative and
inapplicable.
6.7. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when
-17-
<PAGE>
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
6.8. HEADINGS. The descriptive headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
6.9. ARBITRATION. Unless otherwise provided for in this Agreement, any
conflict or disagreement arising out of the interpretation, implementation or
compliance with the provisions of this Agreement shall be finally settled
pursuant to the provisions of Article 6 (Arbitration; Dispute Resolution) of
that certain Contribution Agreement by and between Intelligroup, Inc. and
SeraNova, Inc. dated as of January 1, 2000, which provisions are incorporated
herein by reference.
6.10. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good faith negotiations to
replace the invalid, illegal or unenforceable provisions, the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
6.11. DURATION. Notwithstanding anything in this Agreement or the
Distribution Agreement to the contrary, the provisions of this Agreement shall
survive for the full period of all applicable statutes of limitations (giving
effect to any waiver, mitigation or extension thereof).
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Tax Sharing
Agreement to be executed by their duly authorized representatives as of date
hereof.
INTELLIGROUP, INC.
By: /s/ Ashok Pandey
----------------------------------------
Ashok Pandey, Co-Chief Executive Officer
SERANOVA, INC.
By: /s/ Raj Koneru
---------------------------------------
Rajkumar Koneru, President and Chairman
-19-
<PAGE>
SCHEDULE A
List of Intelligroup Subsidiaries
- --------------------------------------------------------------------------
United States
- --------------------------------------------------------------------------
Intelligroup Inc. Empower Solutions Inc.
499 Thornall Street 3343 Peachtree Road, NE
Edison, NJ 08837 Suite 270
Atlanta, GA 30326
- --------------------------------------------------------------------------
United Kingdom
- --------------------------------------------------------------------------
Intelligroup Europe Ltd. CPI Resources Ltd
Del Monte House The Manor House
Staines TW18 4JD Mount Street
England Diss
Norfolk IP22 3QQ
England
CPI Consulting Ltd
The Manor House
Mount Street
Diss
Norfolk IP22 3QQ
England
- --------------------------------------------------------------------------
New Zealand Australia
- --------------------------------------------------------------------------
Intelligroup New Zealand Ltd. Intelligroup Australia Pty, Ltd.
11th Floor, Morrison Kent House Suite 103, 90 Mount Street
105 The Terrace North Sydney NSW 2060
Wellington New Zealand Australia
- --------------------------------------------------------------------------
Denmark Japan
- --------------------------------------------------------------------------
Intelligroup Nordic A/S Intelligroup Japan Ltd.
Slotsgade 18 Office - Masuyama Bldg. 5F
DK-5000 Odense C Kiba-5-1-1, Koto-Ku,
Tokyo - 135-0042
- --------------------------------------------------------------------------
India Singapore
- --------------------------------------------------------------------------
Intelligroup Asia Pvt. Ltd. Intelligroup Singapore Pvt. Ltd.
Plot #s 883 & 884, Road #45, 10 Hoe Chiang Road
Jubilee Hills, #17-02
Hyderabad 500 033, India. Keppel Towers
Singapore 089315
- --------------------------------------------------------------------------
-20-
MASTER CONSULTING SERVICES AGREEMENT
THIS MASTER CONSULTING SERVICES AGREEMENT (this "Agreement"), made and entered
into this 4th day of February, 2000 ("Effective Date"), by and between
Intelligroup, Inc. (hereinafter "Intelligroup"), a New Jersey corporation, and
Mueller/Shields (hereinafter "Consultant"), a California corporation:
Recitals:
Consultant represents that it has expertise in the area of sales, marketing,
training, and strategic planning, and is ready, willing, and able to provide
consulting assistance to Intelligroup on the terms and conditions set forth
herein; and
Intelligroup, in reliance on Consultant's representations, is willing to engage
Consultant as an independent contractor, and not as an employee, on the terms
and conditions set forth herein;
NOW THEREFORE, in consideration of the obligations herein made and undertaken,
the parties, intending to be legally bound, hereby agree as follows:
SECTION 1. SCOPE OF SERVICES
1.1 Consultant shall provide consulting services (the "Services") as set forth
in the Intelligroup, Inc. Integrated Sales and Marketing Program Proposal
- ESG Revision 2.4 dated October 12, 1999 (the "Proposal") and submitted
by Consultant to Intelligroup. Consultant shall render such services and
deliver the required reports and other deliverables ("Deliverables") in
accordance with the timetable and milestones set forth in Exhibit A and
the Proposal. In the event Consultant anticipates at any time that it will
not reach one or more milestones or complete one or more assignments
within the prescribed timetable, Consultant shall immediately so inform
Intelligroup by written notice, submit proposed revisions to the timetable
and milestones that reflect Consultant's best estimates of what can
realistically be achieved, and continue to work under the original
timetable and milestones until otherwise directed by Intelligroup.
Consultant shall also prepare and submit such further reports of its
performance and its progress as set forth in the Proposal and as
Intelligroup may reasonably request from time to time.
1.2 Consultant shall provide and make available to Intelligroup such resources
as shall be necessary to perform the Services called for by this
Agreement. Such resources shall include the key employees (Key employees)
named by the parties and listed in Exhibit B, as amended in writing by the
parties from time to time. If any such Key Employee leaves the employ of
Consultant during the term of this Agreement for any reason or is
unavailable to continue work at the specified level of commitment
(full-time, X number of hours/week, etc.) called for herein, and if
substitute individuals acceptable to Intelligroup are not available to
continue the work within 5 business days, Intelligroup shall have the
right to terminate this Agreement pursuant to Section 2.2 hereof.
1.3 Intelligroup shall, within 10 business days of receipt of each Deliverable
submitted to Intelligroup, advise Consultant of Intelligroup's acceptance
or rejection of such Deliverable. Any rejection shall specify the nature
and scope of the deficiencies in such Deliverable. Consultant shall, upon
receipt of such rejection, act diligently, but in no event later than 10
business days to correct such deficiencies.
1.4 All work shall be performed in a workmanlike and professional manner by
employees of Consultant having a level of skill and experience in the area
commensurate with the requirements of the scope of work to be performed.
Consultant shall make sure its employees at all times observe security and
safety policies of Intelligroup while on Intelligroup's site.
<PAGE>
1.5 Intelligroup and Consultant shall develop appropriate administrative
procedures to apply to Consultant's personnel. Intelligroup shall
periodically prepare an evaluation of the performance of Consultant's
personnel.
1.6 Intelligroup may interview the Consultant's personnel assigned to
Intelligroup's work. Consultant shall have the right, at any time, to
request removal of any employee(s) of Consultant whom Intelligroup deems
to be unsatisfactory. Upon such request, Consultant shall use its best
efforts to promptly replace such employee(s) with substitute employee(s)
having appropriate skills and training within two business days.
1.7 Anything herein to the contrary notwithstanding, the parties hereby
acknowledge and agree that Intelligroup shall have no right to control the
manner, means, or method by which Consultant performs the Services called
for by this Agreement. Rather, Intelligroup shall be entitled only to
direct Consultant with respect to the elements of Services to be performed
by Consultant and the results to be derived by Intelligroup, to inform
Consultant as to where and when such Services shall be performed, and to
review and assess the performance of such Services by Consultant for the
limited purposes of assuring that such Services have been performed and
confirming that such results were satisfactory.
SECTION 2. TERM OF AGREEMENT
2.1 This Agreement shall commence on the Effective Date, and unless modified
by mutual agreement of the parties or terminated earlier pursuant to the
terms of this Agreement, shall continue until the satisfactory completion
of the Services.
2.2 This Agreement may be terminated by either party upon sixty (60) business
days' prior written notice, if the other party breaches any term hereof
and the breaching party fails to cure such breach within such sixty (60)
business day period.
2.3 This Agreement may be terminated by Intelligroup at its discretion upon
thirty (30) business days' prior written notice.
2.4 Upon termination of this Agreement for any reason, Intelligroup shall pay
the Consultant for all services performed in accordance with the Milestone
Payment Schedule specified in Exhibit A. Consultant shall promptly return
to Intelligroup all copies of any Intelligroup data, records, or materials
of whatever nature or kind, including all materials incorporating the
proprietary information of Intelligroup and all work for hire pursuant to
this Agreement. Consultant shall furnish to Intelligroup all works in
progress or portions thereof, including all incomplete work.
2.5 In the event of termination, Consultant will assist Intelligroup in the
orderly termination of the Services and/or any applicable attachments
hereto, and the transfer of all items and Work Product (defined below),
tangible and intangible, as may be necessary for the orderly,
non-disrupted business continuation of Consultant; and shall promptly
deliver to Intelligroup, upon the expiration or termination of all or part
of the Services, complete and correct copies of all Work Product
(including any related source code) in the form and on the media in use as
of the date of such expiration or termination.
2.6 Upon termination by Intelligroup, Intelligroup shall have no liability for
any payments accruing for Services performed after the termination date.
-2-
<PAGE>
SECTION 3. FEES, EXPENSES AND PAYMENT
3.1 In consideration of the Services to be performed by Consultant,
Intelligroup shall, within thirty (30) days of receipt of an invoice for
each milestone, as set forth in the Milestone Payment Schedule in Exhibit
A attached hereto, pay Consultant the fees due pursuant to such Milestone
Payment Schedule, as well as provide the Shared Risk/Shared Reward
Compensation and Stock Options in Exhibit A.
3.2 In the event Consultant terminates this Agreement because of a material
breach by Intelligroup, Consultant shall be entitled to a pro rata payment
for work in progress based on the percentage of work then completed. No
such pro rata payment shall be made if Intelligroup terminates this
Agreement because of a breach of Consultant.
3.3 Consultant agrees that the fees and charges for any follow-on or
additional work not included in the Proposal attached hereto shall be
performed at the lesser of (1) Consultant's then-current rates for such
work as charged to Consultant's most favored customer receiving similar
services, or (2) the rates applicable to the scope of work fixed by this
Agreement, including any discount previously applied to the work set forth
in the proposal. In the event any payment is delinquent under this
Agreement, all amounts due and owing shall accrue interest at eight
percent per annum.
SECTION 4. CONSULTANT PERSONNEL
4.1 Consultant shall bear sole responsibility for payment of compensation to
its personnel. Consultant shall pay and report, for all personnel assigned
to Intelligroup's work, federal and state income tax withholding, social
security taxes, and unemployment insurance applicable to such personnel as
employees of Consultant. Consultant shall bear sole responsibility for any
health or disability insurance, retirement benefits, or other welfare or
pension benefits (if any) to which such personnel may be entitled.
Consultant agrees to defend, indemnify and hold harmless Intelligroup,
Intelligroup's officers, directors, employees and agents, and the
administrators of Intelligroup's benefit plans from and against any
claims, liabilities or expenses relating to such compensation, tax,
insurance or benefit matters; provided that Intelligroup shall promptly
notify Consultant of each such claim when and as it comes to
Intelligroup's attention. Intelligroup shall cooperate with Consultant in
the defense and resolution of such claims, and Intelligroup shall not
settle or otherwise dispose of such claims without Consultant's prior
written consent; such consent not to be unreasonably withheld.
4.2 Notwithstanding any other workers' compensation or insurance policies
maintained by Intelligroup, Consultant shall procure and maintain workers'
compensation coverage sufficient to meet the statutory requirements of
every state where Consultant's personnel assigned to Intelligroup's work
are located.
4.3 Consultant shall obtain and maintain in effect written agreements with
each of its personnel who participate in any of Intelligroup's work
hereunder. Such agreements shall contain terms sufficient for Consultant
to comply with all provisions of this Agreement.
4.4 As neither Consultant nor its personnel are Intelligroup's employees,
Intelligroup shall not take any action or provide Consultant's personnel
with any benefits or commitments inconsistent with any of such
undertakings by Consultant. In particular, Intelligroup will not withhold
FICA (Social Security) from Consultant's payments; make state or federal
unemployment insurance contributions on behalf of Consultant or its
personnel; withhold state and federal income tax from payment to
Consultant; make disability insurance contributions on behalf of
Consultant; and obtain workers' compensation insurance on behalf of
Consultant or its personnel.
-3-
<PAGE>
SECTION 5. INTELLECTUAL PROPERTY RIGHTS
5.1 All rights, titles and interests in and to the programs, systems, data,
reports, audio and video materials, databases, or other materials used or
produced by Consultant in the performance of the Services called for in
this Agreement, including any modifications, enhancements, or derivative
works thereof, shall remain or become the property of Consultant.
5.2 All rights, titles and interests in and to all Deliverables and other
materials provided pursuant to this Agreement, including all rights in
copyrights, research, databases created specifically for Intelligroup,
domain names and internet addresses, or other intellectual property rights
pertaining thereto ("Work Product"), shall be held by Intelligroup, and
all Work Product shall, to the extent possible, be considered works made
by Consultant for hire for the benefit of Intelligroup. Consultant shall
mark all Work Product with Intelligroup's copyright or other proprietary
notices as directed by Intelligroup and shall take all actions deemed
necessary by Intelligroup to protect Intelligroup's rights therein. In the
event that the Work Product does not constitute work made by Consultant
for hire for the benefit of Intelligroup under applicable law, or in the
event that Consultant otherwise retains any rights to any Work Product,
Consultant agrees to assign, and upon creation thereof hereby
automatically assigns, all rights, titles, and interests in and to such
Work Product to Intelligroup, without further consideration. Consultant
agrees to execute any documents of assignment or registration of copyright
requested by Intelligroup respecting any and all Work Product.
5.3 All rights, titles and interests in and to any programs, systems, data,
and materials furnished to Consultant by Intelligroup are and shall remain
the property of Intelligroup.
5.4 Notwithstanding the above, neither party shall be prevented from making
use of know-how and principles learned or experience gained of a
non-proprietary and non-confidential nature.
SECTION 6. CONFIDENTIAL INFORMATION
6.1 Consultant acknowledges that in order to perform the Services called for
in this Agreement, it shall be necessary for Intelligroup to disclose to
Consultant certain trade secret(s) or other confidential and proprietary
information that has been developed by Intelligroup at great expense and
that required considerable effort of skilled professionals ("Confidential
Information"). As used herein, the term Confidential Information shall
mean any scientific or technical data, marketing or strategic business
information, design, process, procedure, formula, methodology, or
improvement that is commercially valuable to Intelligroup and not
generally known in the industry. Confidential Information shall not
include information which is:
a. independently developed by Consultant or already known by Consultant
prior to Consultant's receipt of Confidential Information and
without violating its obligations hereunder or any of Intelligroup's
proprietary rights;
b. publicly known (other than through unauthorized disclosure by
Consultant);
c. disclosed by Intelligroup to a third party without any obligation of
confidentiality; or
d. required to be disclosed by Consultant pursuant to any applicable
law or order of court (provided that consultant shall provide
reasonable prior written notice to Intelligroup of such disclosure).
-4-
<PAGE>
Consultant agrees that it shall not disclose, transfer, use, copy, or
allow access to any such Confidential Information to any employees or to
any third parties, except for those who have a need to know such
Confidential Information in order to accomplish the requirements of this
Agreement and who are bound by contractual obligations of confidentiality
and limitation of use sufficient to give effect to this Section 6.
Consultant further acknowledges that the Work Product will of necessity
incorporate such Confidential Information. In no event shall Consultant
disclose any such Confidential Information to any competitors of
Intelligroup or to third parties generally.
6.2 The parties agree to hold the nature and terms of this Agreement as
Confidential Information and Consultant shall not disclose the nature of
the effort undertaken for Intelligroup or the terms of this Agreement to
any other person or entity, except as may be necessary to fulfill
Consultant's obligations hereunder, or as required by law.
6.3 Consultant shall not at any time use Intelligroup's name or any
Intelligroup trademark(s) or trade name(s) in any advertising or publicity
without the prior written consent of Intelligroup.
6.4 The obligations set forth in this Section shall survive termination of
this Agreement and continue for so long as the relevant information
remains proprietary or Confidential Information.
SECTION 7. WARRANTIES
7.1 Consultant warrants that:
a. Consultant's performance of the Services called for by this
Agreement do not and shall not violate any applicable law, rule, or
regulation; any contracts with third parties; or any third-party
rights in any patent, trademark, copyright, trade secret, or similar
right; and
b. Consultant is the lawful owner or licensee of any software programs
or other materials used by Consultant in the performance of the
Services called for in this Agreement and has all rights necessary
to convey to Intelligroup the unencumbered ownership of Work
Product.
b. Consultant warrants that all Intelligroup data and information in
Consultant's possession or accessible by Consultant are and shall
remain the property of Intelligroup. The Intelligroup data and
information shall not be: (i) used by Consultant other than in
connection with providing the Services; (ii) disclosed, sold,
assigned, leased or otherwise provided to third parties by
Consultant; or (iii) commercially exploited by or on behalf of
Consultant or any other third party.
d. Consultant warrants that it shall establish and maintain safeguards
against the destruction, loss, alteration or unauthorized disclosure
of the Intelligroup data and information in Consultant's possession
in accordance with Intelligroup's security standards as notified by
Intelligroup to Consultant from time to time, including use of
secure passwords and login IDs.
SECTION 8. INDEMNIFICATION AND EXCLUSION OF DAMAGES
8.1 Consultant hereby indemnifies and agrees to hold harmless Intelligroup
from and against any and all claims, demands, and actions, and any
liabilities, damages, or expenses resulting therefrom, including court
costs and reasonable attorney fees, arising out of or relating to the
Services performed by Consultant hereunder or any breach of the warranties
made by Consultant pursuant to Section 8 hereof. Consultant's obligations
under this Section 9.1 shall survive the termination of this Agreement for
any reason. Intelligroup agrees to give Consultant prompt notice of any
such claim, demand, or action and
-5-
<PAGE>
shall, to the extent Intelligroup is not adversely affected, cooperate
fully with Consultant in defense and settlement thereof.
8.2 EXCEPT IN THE EVENT OF BREACH OF SECTIONS 5, 7, 8, OR 9.1, NEITHER PARTY
SHALL BE LIABLE FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL,
PUNITIVE OR EXEMPLARY DAMAGES WHETHER ARISING UNDER CONTRACT, WARRANTY, OR
TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY) OR ANY OTHER THEORY OF
LIABILITY, REGARDLESS OF WHETHER SUCH PARTY KNEW OR SHOULD HAVE KNOWN OF
THE POSSIBILITY OF SUCH DAMAGES.
SECTION 9. NON-COMPETITION
9.1 Consultant hereby agrees that during the term of this Agreement and for a
period of twelve (12) months thereafter it will not directly or indirectly
offer substantially similar services to another entity that develops,
offers, or provides Internet or Enterprise Information Portal ("EIP")
services to substantially the same or similar markets as Intelligroup, as
described in the Proposal, without Intelligroup's prior written consent.
SECTION 10. MISCELLANEOUS
10.1 Consultant shall not assign, transfer, or subcontract this Agreement or
any of its obligations hereunder without the prior written consent of
Intelligroup; provided, however, that Consultant may assign its right to
receive payments hereunder to such third parties as Consultant may
designate by written notice to Intelligroup.
10.2 This Agreement shall be governed and construed in all respects in
accordance with the laws of the State of New Jersey as they apply to a
contract executed, delivered and performed solely in such State.
10.3 The parties are and shall be independent contractors to one another, and
nothing herein shall be deemed to cause this Agreement to create an
agency, partnership, or joint venture between the parties. Nothing in this
Agreement shall be interpreted or construed as creating or establishing
the relationship of employer and employee between Intelligroup and either
Consultant or any employee or agent of Consultant.
10.4 Consultant shall, at is sole expense, obtain and carry in full force and
effect, during the term of this Agreement, insurance coverage of the types
and in the amounts listed in Exhibit A. Upon the request of Intelligroup,
Consultant shall provide Intelligroup with evidence satisfactory to
Intelligroup of such insurance.
10.5 All remedies available to either party for one or more breaches by the
other party are and shall be deemed cumulative and may be exercised
separately or concurrently without waiver of any other remedies. The
failure of either party to act in a breach of this Agreement by the other
shall not be deemed a waiver of such breach or a waiver of future
breaches, unless such waiver shall be in writing and signed by the party
against whom enforcement is sought.
10.6 All notices required or permitted hereunder shall be in writing addressed
to the respective parties as set forth below, unless another address shall
have been designated, and shall be delivered by hand or by registered or
certified mail, postage prepaid.
10.7 This Agreement constitutes the entire agreement of the parties hereto and
supersedes all prior representations, proposals, discussions, and
communications, whether oral or in writing. This Agreement may be modified
only in writing and shall be enforceable in accordance with its terms when
signed by the party sought to be bound.
-6-
<PAGE>
10.8 The parties covenant and agree that, subsequent to the Effective Date and
without any additional consideration, each of the parties shall execute
and deliver any further legal instruments and perform any acts which are
or may become necessary to effectuate the purposes of this Agreement.
10.9 In the event of a conflict or an inconsistency between this Agreement, the
Proposal, and any Exhibit attached hereto, the Exhibit shall govern this
Agreement and this Agreement shall govern the Proposal.
10.10 Any dispute or controversy arising under or relating to this Agreement or
the relationship between the parties created by this Agreement shall be
resolved by final and binding arbitration under the auspices of the
American Arbitration Association. The parties shall have the right to
conduct reasonable discovery and the hearing shall be held as promptly as
possible. In the event any legal action is necessary to enforce or
interpret this Agreement, the prevailing party shall recover all costs and
attorneys' fees.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives, on the date and year first above written.
[Intelligroup] [Mueller/Shields]
/s/ Arjun Valluri /s/ Stephen Hansmire
- --------------------------------------------------------------------------------
By: By:
Arjun Valluri Stephen Hansmire
- --------------------------------------------------------------------------------
Title: Title:
Chairman and Co-CEO Executive Vice President
- --------------------------------------------------------------------------------
Address for correspondence: Address for correspondence:
499 Thornall Street 15225 Alton Parkway
Edison, NJ 08837 Building 100
Irvine, CA 92618
-7-
<PAGE>
EXHIBIT A
- --------------------------------------------------------------------------------
MONTH SCHEDULE OF WORK
- --------------------------------------------------------------------------------
October 1999 o Kick off meeting
o Assign M/S team members
o Develop and finalize the research strategy and
questionnaire
o Start research interviews
o Develop class "A" lead definition, lead distribution
protocol, lead form, and lead generation questionnaire
o IT set-up for marketing database
o List purchase and prospect database build
o Weekly reporting
- --------------------------------------------------------------------------------
November 1999 o Continue with research questionnaire interviews
o Data entry of research interviews
o Begin the development of the sales training program
o Interim market research analysis and report
o Begin development on corporate brochure
o Begin creative development for marketing programs
(direct mail and advertising)
o Begin the telecontact demand generation program
o Monthly review meeting
o Develop lead tracking/pipeline report and system
- --------------------------------------------------------------------------------
December 1999 o Complete research questionnaire interviews and data
entry
o Code, tabulate, and analysis market data
o Develop market research report and recommendations
o Present market research findings
o Finalize copy for corporate brochure
o Begin development of planning guide
o Develop initial creatives for the marketing programs
and begin the market testing
o Begin the prospect database build for the seminar and
direct marketing programs
o Final selection of seminar sites
o Continue development of the sales training program
o Continue the telecontact demand generation program
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
January 2000 o Finalize planning guide
o Print corporate brochure
o Develop the collateral carrier and envelope
o Begin development of data sheets
o Begin development of proposal template program
o Continue development of the sales training program
o Complete market testing of creatives and finalize the
creatives
o Review creatives for the marketing programs (direct
mail and advertising programs)
o Finalize the prospect database build for seminar and
direct mail programs
- --------------------------------------------------------------------------------
-8-
<PAGE>
- --------------------------------------------------------------------------------
MONTH SCHEDULE OF WORK
- --------------------------------------------------------------------------------
o Continue the telecontact demand generation program
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
February 2000 o Print the planning guide
o Print the collateral carrier and envelope
o Finalize copy and creative for data sheets
o Complete development of the white papers
o Complete development of proposal template program
o Develop and finalize telecontact scripts for the direct
marketing programs
o Continue development of the sales training program
o Finalize all creatives for marketing programs
o Trade show consulting
o Implement wave 1A of direct marketing program
o Begin telecontact program in support of the direct
marketing program
o Develop and implement collateral fulfillment program
o Begin lead qualification, distribution, and reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
March 2000 o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Delivery first sales training class
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
April 2000 o Implement wave 1B of direct marketing program
o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
May 2000 o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
-9-
<PAGE>
- --------------------------------------------------------------------------------
MONTH SCHEDULE OF WORK
- --------------------------------------------------------------------------------
June 2000 o Implement wave 2A of direct marketing program
o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Conduct sales training course
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
July 2000 o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
August 2000 o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
September 2000 o Implement wave 2B of direct marketing program
o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Conduct sales training course
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Conduct sales training course
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
October 2000 o Conduct sales training course
o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
-10-
<PAGE>
- --------------------------------------------------------------------------------
MONTH SCHEDULE OF WORK
- --------------------------------------------------------------------------------
November 2000 o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Conduct sales training course
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
December 2000 o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Conduct sales training course
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
-11-
<PAGE>
INTELLIGROUP MILESTONE PAYMENT SCHEDULE
---------------------------------------------------------------
MONTH MILESTONE PAYMENT SCHEDULE
---------------------------------------------------------------
INVOICE DATE PAYMENT DUE MONTHLY MILESTONE
PAYMENT SCHEDULE
---------------------------------------------------------------
October 1, 1999 Deposit Due Upon $141,403
Receipt
---------------------------------------------------------------
November 1, 1999 November 30, 1999 $241,483
---------------------------------------------------------------
December 1, 1999 December 31, 1999 $192,495
---------------------------------------------------------------
January 1, 2000 January 31, 2000 $150,000
---------------------------------------------------------------
February 1, 2000 February 29, 2000 $150,000
---------------------------------------------------------------
March 1, 2000 March 31, 2000 $100,000
---------------------------------------------------------------
April 1, 2000 April 30, 2000 $200,000
---------------------------------------------------------------
May 1, 2000 May 31, 2000 $200,000
---------------------------------------------------------------
June 1, 2000 June 30, 2000 $200,000
---------------------------------------------------------------
July 1, 2000 July 31, 2000 $214,490
---------------------------------------------------------------
August 1, 2000 August 31, 2000 $214,490
---------------------------------------------------------------
September 1, 2000 September 30, 2000 $272,240
---------------------------------------------------------------
October 1, 2000 October 31, 2000 $245,290
---------------------------------------------------------------
November 1, 2000 November 30, 2000 $214,490
---------------------------------------------------------------
December 1, 2000 December 31, 2000 $214,490
---------------------------------------------------------------
TOTAL PROGRAM INVESTMENT $2,950,871
---------------------------------------------------------------
-12-
<PAGE>
SHARED RISK/SHARED REWARD COMPENSATION
--------------------------------------
Mueller/Shields will receive additional compensation based on the actual
quarterly revenues achieved by Intelligroup according to the scheduled below.
The quarterly revenue goals that this compensation will be based are:
Q1 2000 $27,793,000
Q2 2000 $37,758,000
Q3 2000 $47,993,000
Q4 2000 $55,276,000
The compensation that Mueller/Shields will receive for each quarter is:
o If the actual quarterly revenue is less than 80% of the quarterly revenue
goal, Mueller/Shields will receive no compensation for that quarter.
o The compensation for the quarter will be 1.0% of the actual incremental
revenue over 80% of the quarterly revenue goal.
o If the actual revenue achieved is over 100%, Mueller/Shields will receive an
additional 2.0% of the actual incremental revenue over 100% of the quarterly
revenue goal.
o The compensation will not exceed $150,000 for each quarter.
Examples of how the compensation would be calculated are included in the
following table
----------------------------------------------------------
Quarter Actual Revenue Total
Achieved Compensation
----------------------------------------------------------
Q1 2000 $28,000,000 $60,000
----------------------------------------------------------
Q2 2000 $38,000,000 $80,000
----------------------------------------------------------
Q3 2000 $48,000,000 $96,000
----------------------------------------------------------
Q4 2000 $55,000,000 $100,000
----------------------------------------------------------
The calculated compensation will be paid within the 30 days after a quarter is
completed. Example, the Q1 2000 payment would be due on April 30, 2000.
-13-
<PAGE>
A. Stock Options
Within ten (10) business days after SeraNova becomes publicly traded,
Intelligroup shall grant Mueller/Shields fully vested options to buy
Intelligroup common stock at Twenty Dollars ($20) per share. The number of
shares covered by these options shall be 290,000 divided by the price of a June
2000 call option to buy Intelligroup stock at $20 per share on the Philadelphia
Stock Exchange.
-14-
<PAGE>
EXHIBIT B: KEY EMPLOYEES:
B. Key Employees:
Intelligroup shall have ready and unencumbered access during regular business
hours to the following Consultant personnel:
1. Phyllis Mueller
2. Craig Shields
3. Bill Thompson
4. Stephen Hansmire
The following employees shall be deemed Key Employees pursuant to the terms of
the Agreement:
- --------------------------------------------------------------------------------
Name Minimum Hours /week/month on SeraNova Project
- --------------------------------------------------------------------------------
Willie Bloomstein 15 per week/60 per month
- --------------------------------------------------------------------------------
Chris Breakfield 40 per week/175 per month
- --------------------------------------------------------------------------------
Paula Davey 10 per week/45 per month
- --------------------------------------------------------------------------------
Scot Hansen 5 per week/20 per month
- --------------------------------------------------------------------------------
Alain Jamar 10 per week/45 per month
- --------------------------------------------------------------------------------
Jordan Maliwanag 40 per week/175 per month
- --------------------------------------------------------------------------------
Sally Mikhail 10 per week/85 per month
- --------------------------------------------------------------------------------
Jennifer Murray 10 per week/85 per month
- --------------------------------------------------------------------------------
Robin O'Hanlon 40 per week/175 per month
- --------------------------------------------------------------------------------
Gary Patrick 10 per week/45 per month
- --------------------------------------------------------------------------------
Fred Roeschke 40 per week/175 per month
- --------------------------------------------------------------------------------
Allen Stanfield 40 per week/175 per month
- --------------------------------------------------------------------------------
Glenn Warren 5 per week/20 per month
- --------------------------------------------------------------------------------
Robin Young 5 per week/20 per month
- --------------------------------------------------------------------------------
-15-
MASTER CONSULTING SERVICES AGREEMENT
THIS MASTER CONSULTING SERVICES AGREEMENT (this "Agreement"), made and entered
into this 21 day of December, 1999 ("Effective Date"), by and between SeraNova,
Inc. and Intelligroup, Inc. collectively (hereinafter "SeraNova"), New Jersey
corporations, and Mueller/Shields (hereinafter "Consultant"), a California
corporation:
Recitals:
Consultant represents that it has expertise in the area of sales, marketing,
training, and strategic planning, and is ready, willing, and able to provide
consulting assistance to SeraNova on the terms and conditions set forth herein;
and
SeraNova, in reliance on Consultant's representations, is willing to engage
Consultant as an independent contractor, and not as an employee, on the terms
and conditions set forth herein;
NOW THEREFORE, in consideration of the obligations herein made and undertaken,
the parties, intending to be legally bound, hereby agree as follows:
SECTION 1. SCOPE OF SERVICES
1.1 Consultant shall provide consulting services (the "Services") as set forth
in the Intelligroup, Inc. Integrated Sales and Marketing Program for NewCo
Proposal Version 2.4 dated October 12, 1999 (the "Proposal") and submitted
by Consultant to SeraNova. Consultant shall render such services and
deliver the required reports and other deliverables ("Deliverables") in
accordance with the timetable and milestones set forth in Exhibit A and
the Proposal. In the event Consultant anticipates at any time that it will
not reach one or more milestones or complete one or more assignments
within the prescribed timetable, Consultant shall immediately so inform
SeraNova by written notice, submit proposed revisions to the timetable and
milestones that reflect Consultant's best estimates of what can
realistically be achieved, and continue to work under the original
timetable and milestones until otherwise directed by SeraNova. Consultant
shall also prepare and submit such further reports of its performance and
its progress as set forth in the Proposal and as SeraNova may reasonably
request from time to time.
1.2 Consultant shall provide and make available to SeraNova such resources as
shall be necessary to perform the Services called for by this Agreement.
Such resources shall include the key employees (Key employees) named by
the parties and listed in Exhibit B, as amended in writing by the parties
from time to time. If any such Key Employee leaves the employ of
Consultant during the term of this Agreement for any reason or is
unavailable to continue work at the specified level of commitment
(full-time, X number of hours/week, etc.) called for herein, and if
substitute individuals acceptable to SeraNova are not available to
continue the work within 5 business days, SeraNova shall have the right to
terminate this Agreement pursuant to Section 2.2 hereof.
1.3 SeraNova shall, within 10 business days of receipt of each Deliverable
submitted to SeraNova, advise Consultant of SeraNova's acceptance or
rejection of such Deliverable. Any rejection shall specify the nature and
scope of the deficiencies in such Deliverable. Consultant shall, upon
receipt of such rejection, act diligently, but in no event later than 10
business days to correct such deficiencies.
1.4 All work shall be performed in a workmanlike and professional manner by
employees of Consultant having a level of skill and experience in the area
commensurate with the requirements of the scope of
<PAGE>
work to be performed. Consultant shall make sure its employees at all
times observe security and safety policies of SeraNova while on SeraNova's
site.
1.5 SeraNova and Consultant shall develop appropriate administrative
procedures to apply to Consultant's personnel. SeraNova shall periodically
prepare an evaluation of the performance of Consultant's personnel.
1.6 SeraNova may interview the Consultant's personnel assigned to SeraNova's
work. Consultant shall have the right, at any time, to request removal of
any employee(s) of Consultant whom SeraNova deems to be unsatisfactory.
Upon such request, Consultant shall use its best efforts to promptly
replace such employee(s) with substitute employee(s) having appropriate
skills and training within two business days.
1.7 Anything herein to the contrary notwithstanding, the parties hereby
acknowledge and agree that SeraNova shall have no right to control the
manner, means, or method by which Consultant performs the Services called
for by this Agreement. Rather, SeraNova shall be entitled only to direct
Consultant with respect to the elements of Services to be performed by
Consultant and the results to be derived by SeraNova, to inform Consultant
as to where and when such Services shall be performed, and to review and
assess the performance of such Services by Consultant for the limited
purposes of assuring that such Services have been performed and confirming
that such results were satisfactory.
SECTION 2. TERM OF AGREEMENT
2.1 This Agreement shall commence on the Effective Date, and unless modified
by mutual agreement of the parties or terminated earlier pursuant to the
terms of this Agreement, shall continue until the satisfactory completion
of the Services.
2.2 This Agreement may be terminated by either party upon sixty (60) business
days' prior written notice, if the other party breaches any term hereof
and the breaching party fails to cure such breach within such sixty (60)
business day period.
2.3 This Agreement may be terminated by SeraNova at its discretion upon thirty
(30) business days' prior written notice.
2.4 Upon termination of this Agreement for any reason, SeraNova shall pay the
Consultant for all services performed in accordance with the Milestone
Payment Schedule as well as the Cancellation Fee specified in Exhibit A.
Consultant shall promptly return to SeraNova all copies of any SeraNova
data, records, or materials of whatever nature or kind, including all
materials incorporating the proprietary information of SeraNova and all
work for hire pursuant to this Agreement. Consultant shall furnish to
SeraNova all works in progress or portions thereof, including all
incomplete work.
2.5 In the event of termination, Consultant will assist SeraNova in the
orderly termination of the Services and/or any applicable attachments
hereto, and the transfer of all items and Work Product (defined below),
tangible and intangible, as may be necessary for the orderly,
non-disrupted business continuation of Consultant; and shall promptly
deliver to SeraNova, upon the expiration or termination of all or part of
the Services, complete and correct copies of all Work Product (including
any related source code) in the form and on the media in use as of the
date of such expiration or termination.
2.6 Upon termination by SeraNova, SeraNova shall have no liability for any
payments accruing for Services performed after the termination date.
-2-
<PAGE>
SECTION 3. FEES, EXPENSES AND PAYMENT
3.1 In consideration of the Services to be performed by Consultant, SeraNova
shall, within thirty (30) days of receipt of an invoice for each
milestone, as set forth in the Milestone Payment Schedule in Exhibit A
attached hereto, pay Consultant the fees due pursuant to such Milestone
Payment Schedule, as well as provide the Shared Risk/Shared Reward
Compensation and Stock Options in Exhibit A.
3.2 In the event Consultant terminates this Agreement because of a material
breach by SeraNova, Consultant shall be entitled to a pro rata payment for
work in progress based on the percentage of work then completed as well as
the Cancellation Fees in Exhibit A. No such pro rata payment shall be made
if SeraNova terminates this Agreement because of a breach of Consultant.
3.3 Consultant agrees that the fees and charges for any follow-on or
additional work not included in the Proposal attached hereto shall be
performed at the lesser of (1) Consultant's then-current rates for such
work as charged to Consultant's most favored customer receiving similar
services, or (2) the rates applicable to the scope of work fixed by this
Agreement, including any discount previously applied to the work set forth
in the proposal. In the event any payment is delinquent under this
Agreement, all amounts due and owing shall accrue interest at eight
percent per annum.
SECTION 4. CONSULTANT PERSONNEL
4.1 Consultant shall bear sole responsibility for payment of compensation to
its personnel. Consultant shall pay and report, for all personnel assigned
to SeraNova's work, federal and state income tax withholding, social
security taxes, and unemployment insurance applicable to such personnel as
employees of Consultant. Consultant shall bear sole responsibility for any
health or disability insurance, retirement benefits, or other welfare or
pension benefits (if any) to which such personnel may be entitled.
Consultant agrees to defend, indemnify and hold harmless SeraNova,
SeraNova's officers, directors, employees and agents, and the
administrators of SeraNova's benefit plans from and against any claims,
liabilities or expenses relating to such compensation, tax, insurance or
benefit matters; provided that SeraNova shall promptly notify Consultant
of each such claim when and as it comes to SeraNova's attention. SeraNova
shall cooperate with Consultant in the defense and resolution of such
claims, and SeraNova shall not settle or otherwise dispose of such claims
without Consultant's prior written consent; such consent not to be
unreasonably withheld.
4.2 Notwithstanding any other workers' compensation or insurance policies
maintained by SeraNova, Consultant shall procure and maintain workers'
compensation coverage sufficient to meet the statutory requirements of
every state where Consultant's personnel assigned to SeraNova's work are
located.
4.3 Consultant shall obtain and maintain in effect written agreements with
each of its personnel who participate in any of SeraNova's work hereunder.
Such agreements shall contain terms sufficient for Consultant to comply
with all provisions of this Agreement.
4.4 As neither Consultant nor its personnel are SeraNova's employees, SeraNova
shall not take any action or provide Consultant's personnel with any
benefits or commitments inconsistent with any of such undertakings by
Consultant. In particular, SeraNova will not withhold FICA (Social
Security) from Consultant's payments; make state or federal unemployment
insurance contributions on behalf of Consultant or its personnel; withhold
state and federal income tax from payment to Consultant; make disability
insurance contributions on behalf of Consultant; and obtain workers'
compensation insurance on behalf of Consultant or its personnel.
-3-
<PAGE>
SECTION 5. INTELLECTUAL PROPERTY RIGHTS
5.1 All rights, titles and interests in and to the programs, systems, data,
reports, audio and video materials, databases, or other materials used or
produced by Consultant in the performance of the Services called for in
this Agreement, including any modifications, enhancements, or derivative
works thereof, shall remain or become the property of Consultant.
5.2 All rights, titles and interests in and to all Deliverables and other
materials provided pursuant to this Agreement, including all rights in
copyrights, research, databases created specifically for SeraNova, domain
names and internet addresses, or other intellectual property rights
pertaining thereto ("Work Product"), shall be held by SeraNova, and all
Work Product shall, to the extent possible, be considered works made by
Consultant for hire for the benefit of SeraNova. Consultant shall mark all
Work Product with SeraNova's copyright or other proprietary notices as
directed by SeraNova and shall take all actions deemed necessary by
SeraNova to protect SeraNova's rights therein. In the event that the Work
Product does not constitute work made by Consultant for hire for the
benefit of SeraNova under applicable law, or in the event that Consultant
otherwise retains any rights to any Work Product, Consultant agrees to
assign, and upon creation thereof hereby automatically assigns, all
rights, titles, and interests in and to such Work Product to SeraNova,
without further consideration. Consultant agrees to execute any documents
of assignment or registration of copyright requested by SeraNova
respecting any and all Work Product.
5.3 All rights, titles and interests in and to any programs, systems, data,
and materials furnished to Consultant by SeraNova are and shall remain the
property of SeraNova.
5.4 Notwithstanding the above, neither party shall be prevented from making
use of know-how and principles learned or experience gained of a
non-proprietary and non-confidential nature.
SECTION 6. CONFIDENTIAL INFORMATION
6.1 Consultant acknowledges that in order to perform the Services called for
in this Agreement, it shall be necessary for SeraNova to disclose to
Consultant certain trade secret(s) or other confidential and proprietary
information that has been developed by SeraNova at great expense and that
required considerable effort of skilled professionals ("Confidential
Information"). As used herein, the term Confidential Information shall
mean any scientific or technical data, marketing or strategic business
information, design, process, procedure, formula, methodology, or
improvement that is commercially valuable to SeraNova and not generally
known in the industry. Confidential Information shall not include
information which is:
a. independently developed by Consultant or already known by Consultant
prior to Consultant's receipt of Confidential Information and
without violating its obligations hereunder or any of SeraNova's
proprietary rights;
b. publicly known (other than through unauthorized disclosure by
Consultant);
c. disclosed by SeraNova to a third party without any obligation of
confidentiality; or
d. required to be disclosed by Consultant pursuant to any applicable
law or order of court (provided that consultant shall provide
reasonable prior written notice to SeraNova of such disclosure).
Consultant agrees that it shall not disclose, transfer, use, copy, or
allow access to any such Confidential Information to any employees or to
any third parties, except for those who have a need to know such
-4-
<PAGE>
Confidential Information in order to accomplish the requirements of this
Agreement and who are bound by contractual obligations of confidentiality
and limitation of use sufficient to give effect to this Section 6.
Consultant further acknowledges that the Work Product will of necessity
incorporate such Confidential Information. In no event shall Consultant
disclose any such Confidential Information to any competitors of SeraNova
or to third parties generally.
6.2 The parties agree to hold the nature and terms of this Agreement as
Confidential Information and Consultant shall not disclose the nature of
the effort undertaken for SeraNova or the terms of this Agreement to any
other person or entity, except as may be necessary to fulfill Consultant's
obligations hereunder, or as required by law.
6.3 Consultant shall not at any time use SeraNova's name or any SeraNova
trademark(s) or trade name(s) in any advertising or publicity without the
prior written consent of SeraNova.
6.4 The obligations set forth in this Section shall survive termination of
this Agreement and continue for so long as the relevant information
remains proprietary or Confidential Information.
SECTION 7. WARRANTIES
7.1 Consultant warrants that:
a. Consultant's performance of the Services called for by this
Agreement do not and shall not violate any applicable law, rule, or
regulation; any contracts with third parties; or any third-party
rights in any patent, trademark, copyright, trade secret, or similar
right; and
b. Consultant is the lawful owner or licensee of any software programs
or other materials used by Consultant in the performance of the
Services called for in this Agreement and has all rights necessary
to convey to SeraNova the unencumbered ownership of Work Product.
b. Consultant warrants that all SeraNova data and information in
Consultant's possession or accessible by Consultant are and shall
remain the property of SeraNova. The SeraNova data and information
shall not be: (i) used by Consultant other than in connection with
providing the Services; (ii) disclosed, sold, assigned, leased or
otherwise provided to third parties by Consultant; or (iii)
commercially exploited by or on behalf of Consultant or any other
third party.
d. Consultant warrants that it shall establish and maintain safeguards
against the destruction, loss, alteration or unauthorized disclosure
of the SeraNova data and information in Consultant's possession in
accordance with SeraNova's security standards as notified by
SeraNova to Consultant from time to time, including use of secure
passwords and login IDs.
SECTION 8. INDEMNIFICATION AND EXCLUSION OF DAMAGES
8.1 Consultant hereby indemnifies and agrees to hold harmless SeraNova from
and against any and all claims, demands, and actions, and any liabilities,
damages, or expenses resulting therefrom, including court costs and
reasonable attorney fees, arising out of or relating to the Services
performed by Consultant hereunder or any breach of the warranties made by
Consultant pursuant to Section 8 hereof. Consultant's obligations under
this Section 9.1 shall survive the termination of this Agreement for any
reason. SeraNova agrees to give Consultant prompt notice of any such
claim, demand, or action and shall, to the extent SeraNova is not
adversely affected, cooperate fully with Consultant in defense and
settlement thereof.
-5-
<PAGE>
8.2 EXCEPT IN THE EVENT OF BREACH OF SECTIONS 5, 7, 8, OR 9.1, NEITHER PARTY
SHALL BE LIABLE FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL,
PUNITIVE OR EXEMPLARY DAMAGES WHETHER ARISING UNDER CONTRACT, WARRANTY, OR
TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY) OR ANY OTHER THEORY OF
LIABILITY, REGARDLESS OF WHETHER SUCH PARTY KNEW OR SHOULD HAVE KNOWN OF
THE POSSIBILITY OF SUCH DAMAGES.
SECTION 9. NON-COMPETITION
9.1 Consultant hereby agrees that during the term of this Agreement and for a
period of twelve (12) months thereafter it will not directly or indirectly
offer substantially similar services to another entity that develops,
offers, or provides Internet or Enterprise Information Portal ("EIP")
services to substantially the same or similar markets as SeraNova, as
described in the Proposal, without SeraNova's prior written consent.
SECTION 10. MISCELLANEOUS
10.1 Consultant shall not assign, transfer, or subcontract this Agreement or
any of its obligations hereunder without the prior written consent of
SeraNova; provided, however, that Consultant may assign its right to
receive payments hereunder to such third parties as Consultant may
designate by written notice to SeraNova.
10.2 This Agreement shall be governed and construed in all respects in
accordance with the laws of the State of New Jersey as they apply to a
contract executed, delivered and performed solely in such State.
10.3 The parties are and shall be independent contractors to one another, and
nothing herein shall be deemed to cause this Agreement to create an
agency, partnership, or joint venture between the parties. Nothing in this
Agreement shall be interpreted or construed as creating or establishing
the relationship of employer and employee between SeraNova and either
Consultant or any employee or agent of Consultant.
10.4 Consultant shall, at is sole expense, obtain and carry in full force and
effect, during the term of this Agreement, insurance coverage of the types
and in the amounts listed in Exhibit A. Upon the request of SeraNova,
Consultant shall provide SeraNova with evidence satisfactory to SeraNova
of such insurance.
10.5 All remedies available to either party for one or more breaches by the
other party are and shall be deemed cumulative and may be exercised
separately or concurrently without waiver of any other remedies. The
failure of either party to act in a breach of this Agreement by the other
shall not be deemed a waiver of such breach or a waiver of future
breaches, unless such waiver shall be in writing and signed by the party
against whom enforcement is sought.
10.6 All notices required or permitted hereunder shall be in writing addressed
to the respective parties as set forth below, unless another address shall
have been designated, and shall be delivered by hand or by registered or
certified mail, postage prepaid.
10.7 This Agreement constitutes the entire agreement of the parties hereto and
supersedes all prior representations, proposals, discussions, and
communications, whether oral or in writing. This Agreement may be modified
only in writing and shall be enforceable in accordance with its terms when
signed by the party sought to be bound.
10.8 The parties covenant and agree that, subsequent to the Effective Date and
without any additional consideration, each of the parties shall execute
and deliver any further legal instruments and perform any acts which are
or may become necessary to effectuate the purposes of this Agreement.
-6-
<PAGE>
10.9 In the event of a conflict or an inconsistency between this Agreement, the
Proposal, and any Exhibit attached hereto, the Exhibit shall govern this
Agreement and this Agreement shall govern the Proposal.
10.10 Any dispute or controversy arising under or relating to this Agreement or
the relationship between the parties created by this Agreement shall be
resolved by final and binding arbitration under the auspices of the
American Arbitration Association. The parties shall have the right to
conduct reasonable discovery and the hearing shall be held as promptly as
possible. In the event any legal action is necessary to enforce or
interpret this Agreement, the prevailing party shall recover all costs and
attorneys' fees.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives, on the date and year first above written.
[SeraNova] [Mueller/Shields]
/s/ Raj Koneru /s/ Phyllis L. Mueller
- --------------------------------------------------------------------------------
By: By:
Raj Koneru Phyllis L. Mueller
- --------------------------------------------------------------------------------
Title: Title:
CEO, SeraNova, Inc. CEO, Mueller/Shields
- --------------------------------------------------------------------------------
Address for correspondence: Address for correspondence:
499 Thornall Street 15225 Alton Parkway
Edison, NJ 08837 Building 100
Irvine, CA 92618
-7-
<PAGE>
EXHIBIT A - DELIVERABLES
- --------------------------------------------------------------------------------
MONTH SCHEDULE OF WORK
- --------------------------------------------------------------------------------
October 1999 o Kickoff meeting
o Assign M/S team members
o Develop and finalize the research strategy and
questionnaire
o Start research interviews
o Develop Class "A" lead definition, lead distribution
protocol, lead form, and lead generation questionnaire
o IT setup for marketing database
o List purchase and prospect database build
o Weekly reporting
- --------------------------------------------------------------------------------
November 1999 o Continue with research questionnaire interviews
o Data entry of research interviews
o Begin the development of the sales training program
o Interim market research analysis and report
o Begin development on corporate brochure
o Begin creative development for corporate identity
program
o Begin creative development for marketing programs
(direct mail, seminar program, and advertising)
o Begin the telecontact demand generation program
o Monthly review meeting
o Develop lead tracking/pipeline report and system
- --------------------------------------------------------------------------------
December 1999 o Complete research questionnaire interviews and data
entry
o Code, tabulate, and analysis market data
o Develop market research report and recommendations
o Present market research findings
o Complete creative development of corporate identity
program
o Finalize copy for corporate brochure
o Begin development of planning guide
o Develop initial creatives for the marketing programs
and begin the market testing
o Begin the prospect database build for the seminar and
direct marketing programs
o Final selection of seminar sites
o Continue development of the sales training program
o Continue the telecontact demand generation program
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
-8-
<PAGE>
- --------------------------------------------------------------------------------
MONTH SCHEDULE OF WORK
- --------------------------------------------------------------------------------
January 2000 o Finalize planning guide
o Print corporate brochure
o Develop the collateral carrier and envelope
o Begin development of data sheets
o Begin development of proposal template program
o Complete the sales training materials
o Continue development of the sales training program
o Complete market testing of creatives and finalize the
creatives
o Review creatives for the marketing programs (direct
mail, advertising, and seminar programs)
o Finalize the prospect database build for seminar and
direct mail programs
o Continue the telecontact demand generation program
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
February 2000 o Print the planning guide
o Print the collateral carrier and envelope
o Finalize copy and creative for data sheets
o Complete development of the white papers
o Complete development of proposal template program
o Develop and finalize telecontact scripts for the direct
marketing and seminar programs
o Continue development of the sales training program
o Finalize all creatives for marketing programs
o Mail invitations for the first seminar
o Begin telecontact program in support of the seminar
program
o Begin seminar confirmation and reminder programs
o Trade show consulting
o Implement wave 1A of direct marketing program
o Begin telecontact program in support of the direct
marketing program
o Develop and implement collateral fulfillment program
o Begin lead qualification, distribution, and reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
-9-
<PAGE>
- --------------------------------------------------------------------------------
MONTH SCHEDULE OF WORK
- --------------------------------------------------------------------------------
March 2000 o On-site management and setup of first seminar
o First seminar held
o Qualify and distribute all leads from the seminar
o Mail invitations for the second seminar
o Continue telecontact program in support of the seminar
program
o Continue seminar confirmation and reminder programs
o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Deliver first sales training class
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
April 2000 o On-site management and setup of second seminar
o Second seminar held
o Qualify and distribute all leads from the seminar
o Mail invitations for the third seminar
o Continue telecontact program in support of the seminar
program
o Continue seminar confirmation and reminder programs
o Implement wave 1B of direct marketing program
o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
May 2000 o On-site management and setup of third seminar
o Third seminar held
o Qualify and distribute all leads from the seminar
o Mail invitations for the fourth seminar
o Continue telecontact program in support of the seminar
program
o Continue seminar confirmation and reminder programs
o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
-10-
<PAGE>
- --------------------------------------------------------------------------------
MONTH SCHEDULE OF WORK
- --------------------------------------------------------------------------------
June 2000 o Implement wave 2A of direct marketing program
o On-site management and setup of fourth seminar
o Fourth seminar held
o Qualify and distribute all leads from the seminar
o Continue seminar confirmation and reminder programs
o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Conduct sales training course
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
July 2000 o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
August 2000 o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
September 2000 o Implement wave 2B of direct marketing program
o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Conduct sales training course
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Conduct sales training course
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
October 2000 o Conduct sales training course
o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
-11-
<PAGE>
- --------------------------------------------------------------------------------
MONTH SCHEDULE OF WORK
- --------------------------------------------------------------------------------
November 2000 o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Conduct sales training course
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
December 2000 o Continue telecontact program in support of the direct
marketing program
o Continue collateral fulfillment program
o Conduct sales training course
o Continue lead qualification, distribution, and
reporting
o Continue lead tracking/pipeline report
o Program management
o Weekly reporting
o Monthly status review meeting
- --------------------------------------------------------------------------------
-12-
<PAGE>
SERANOVA MILESTONE PAYMENT SCHEDULE
---------------------------------------------------------------
MILESTONE PAYMENT SCHEDULE
---------------------------------------------------------------
INVOICE DATE PAYMENT DUE MONTHLY MILESTONE
PAYMENT SCHEDULE
---------------------------------------------------------------
October 1, 1999 Deposit Due Upon $294,905
Receipt
---------------------------------------------------------------
November 1, 1999 November 30, 1999 $503,630
---------------------------------------------------------------
December 1, 1999 December 31, 1999 $401,465
---------------------------------------------------------------
January 15, 2000 February 15, 2000 $520,000
---------------------------------------------------------------
February 1, 2000 February 29, 2000 $520,000
---------------------------------------------------------------
March 1, 2000 March 31, 2000 $560,000
---------------------------------------------------------------
April 15, 2000 May 15, 2000 $644,714
---------------------------------------------------------------
May 1, 2000 May 31, 2000 $573,915
---------------------------------------------------------------
June 1, 2000 June 30, 2000 $232,041
---------------------------------------------------------------
July 1, 2000 July 31, 2000 --
---------------------------------------------------------------
August 1, 2000 August 31, 2000 --
---------------------------------------------------------------
September 1, 2000 September 30, 2000 --
---------------------------------------------------------------
October 1, 2000 October 31, 2000 --
---------------------------------------------------------------
November 1, 2000 November 30, 2000 --
---------------------------------------------------------------
December 1, 2000 December 31, 2000 --
---------------------------------------------------------------
TOTAL PROGRAM INVESTMENT $4,250,670
---------------------------------------------------------------
-13-
<PAGE>
SHARED RISK/SHARED REWARD COMPENSATION
--------------------------------------
Mueller/Shields will receive additional compensation based on the actual
quarterly revenues generated in the United States by SeraNova according to the
schedule below.
The quarterly revenue goals (generated in the United States) on which this
compensation will be based:
Q1 2000 $12,070,000
Q2 2000 $15,964,000
Q3 2000 $19,345,000
Q4 2000 $23,821,000
The compensation that Mueller/Shields will receive for each quarter is:
o If the actual quarterly revenue is less than 80% of the goal of that quarter,
Mueller/Shields will receive no compensation for that quarter.
o The compensation for the quarter will be 3.1% of the actual incremental
revenue over 80% of the quarterly revenue goal.
o If the actual revenue achieved is over 100%, Mueller/Shields will receive an
additional 5% of the actual incremental revenue over 100% of the quarterly
revenue goal.
o The compensation will not exceed $150,000 for each quarter.
Examples of how the compensation would be calculated are included in the
following table
----------------------------------------------------------
Quarter Actual Revenue Total
Achieved Compensation
----------------------------------------------------------
Q1 2000 $12,000,000 $73,000
----------------------------------------------------------
Q2 2000 $16,000,000 $101,000
----------------------------------------------------------
Q3 2000 $20,000,000 $150,000
----------------------------------------------------------
Q4 2000 $24,000,000 $150,000
----------------------------------------------------------
The calculated compensation will be paid within the 30 days after a quarter is
completed. Example, the Q1 2000 payment would be due on April 30, 2000.
-14-
<PAGE>
A. Stock Options
Mueller/Shields is hereby granted options to buy 15,000 shares of SeraNova
common stock, at a strike price of $6.66 per share exercisable after January 1,
2000. The rights to exercise these options will expire on December 31, 2000.
In addition, Mueller/Shields will be granted options to buy 5,000 additonal
shares of SeraNova common stock on July 15, 2000 if SeraNova meets 80% of its
cumulative Q1 2000 and Q2 2000 revenue targets or $22,427,000. The strike price
of these 5,000 shares will be the market price on July 1, 2000 exercisable until
June 30, 20001.
-15-
<PAGE>
CANCELLATION FEES
-----------------
If the contract is terminated for any reason, Muller/Shields will be paid a
cancellation fee as detailed in the following table. These cancellation fees are
in addition to the fees specified in the Milestone Payment Schedule.
--------------------------------------------------
Month of Notice of Contract Cancellation
Termination Fee
--------------------------------------------------
October 1999 to January 1999 $0
--------------------------------------------------
February 2000 $267,000
--------------------------------------------------
March 2000 $534,000
--------------------------------------------------
April 2000 $800,000
--------------------------------------------------
May 2000 $400,000
--------------------------------------------------
June 2000 to December 2000 $0
--------------------------------------------------
-16-
<PAGE>
EXHIBIT B: KEY EMPLOYEES
SeraNova shall have ready and unencumbered access during regular business hours
to the following Consultant personnel:
1. Phyllis Mueller
2. Craig Shields
3. Bill Thompson
4. Stephen Hansmire
The following employees shall be deemed Key Employees pursuant to the terms of
the Agreement:
- --------------------------------------------------------------------------------
Name Minimum Hours per Week/Month on SeraNova Project
- --------------------------------------------------------------------------------
Willie Bloomstein 15 per week/60 per month
- --------------------------------------------------------------------------------
Paula Davey 10 per week/45 per month
- --------------------------------------------------------------------------------
Scot Hansen 5 per week/20 per month
- --------------------------------------------------------------------------------
Alain Jamar 10 per week/45 per month
- --------------------------------------------------------------------------------
Bill Kline 40 per week/175 per month
- --------------------------------------------------------------------------------
Sally Mikhail 10 per week/45 per month
- --------------------------------------------------------------------------------
John Moriarty 40 per week/175 per month
- --------------------------------------------------------------------------------
Jennifer Murray 10 per week/45 per month
- --------------------------------------------------------------------------------
Gary Patrick 10 per week/45 per month
- --------------------------------------------------------------------------------
Kalee Przybylak 40 per week/175 per month
- --------------------------------------------------------------------------------
John Simmons 40 per week/175 per month
- --------------------------------------------------------------------------------
Glenn Warren 5 per week/20 per month
- --------------------------------------------------------------------------------
Robin Young 5 per week/20 per month
- --------------------------------------------------------------------------------
-17-
SECOND AMENDMENT TO REVOLVING CREDIT LOAN AGREEMENT
---------------------------------------------------
THIS SECOND AMENDMENT TO REVOLVING CREDIT LOAN AGREEMENT (the "Amendment")
is made as of this 1st day of January, 2000, by and between INTELLIGROUP, INC.,
a New Jersey corporation and SERANOVA, INC., a New Jersey corporation
(collectively, the "Borrower") and PNC BANK, NATIONAL ASSOCIATION, a national
banking association (the "Lender").
WHEREAS, Intelligroup, Inc. and the Lender are parties to a certain
Revolving Credit Loan Agreement dated January 29, 1999 as amended (the "Loan
Agreement"), relating to financing by the Lender to the Borrower (all
capitalized terms used, but not specifically defined herein, shall have the
meaning provided for such terms in the Loan Agreement); and
WHEREAS, SeraNova, Inc. is a corporation affiliated to and with common
interests with Intelligroup, Inc. and wishes to avail itself of certain of the
financial accommodations available to Intelligroup, Inc. pursuant to the Loan
Agreement and to become a co-borrower under the Loan Agreement with
Intelligroup, Inc.; and
WHEREAS, to induce the Lender to amend certain terms and conditions of the
Loan Agreement, the Borrower has offered to execute and deliver the Amendment.
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Lender and the Borrower agree as follows:
1.(a) Assumption of Loan Agreement. SeraNova, Inc. hereby assumes and
-----------------------------
accepts as a joint and several obligor, all of the Obligations, covenants, terms
and conditions of the Loan Agreement in the same manner and to the same extent
as Intelligroup, Inc. and agrees to pay all sums due pursuant to the Loan
Agreement in the manner and at the times set forth therein.
(b) No Release of Intelligroup, Inc. It is hereby agreed and
------------------------------------
understood that SeraNova, Inc.'s acceptance of the Obligations as herein set
forth does not diminish or release and shall not in any way affect any of the
Obligations, duties or liabilities of Intelligroup, Inc. to the Lender.
2. As used in any Loan Document, the term "Borrower" is hereby amended
and changed to include SeraNova, Inc., a New Jersey corporation, with offices
located at 499 Thornall Street, Edison, New Jersey 08837 as a co-borrower.
"Borrower" shall mean individually and collectively SeraNova, Inc. and
Intelligroup, Inc., jointly and severally, as the context shall require.
<PAGE>
3. The term "Revolving Credit Facility" in the first recital of the
Loan Agreement is hereby amended and changed from "up to Fifteen Million
($15,000,000.00) Dollars" to "up to Fifteen Million ($15,000,000.00) Dollars in
the aggregate with a sublimit of up to Ten Million ($10,000,000.00) Dollars
available to SeraNova, Inc."
4. Article I of the Loan Agreement, the term "Commitment" is hereby
amended and changed to read as follows:
"Commitment" shall mean, at any particular time during the term of
------------
the Revolving Credit Facility, the principal amount of the Revolving Credit
Facility which the Lender has committed to make available to the Borrower, as
said principal amount may be permanently reduced by the Borrower pursuant to
Section 2.01(v) of this Loan Agreement. As of the date of the Amendment, the
- ----------------
initial amount committed is $15,000,000.00 with a sublimit of up to Ten Million
($10,000,000.00) Dollars to be made available to SeraNova, Inc.
5. Article II of the Loan Agreement, Section 2.01(i) is hereby amended
and changed by adding the following to the end of said Section 2.01(i):
"It is agreed and understood that notwithstanding anything to
the contrary contained in this Section, SeraNova, Inc. shall at no time
have aggregate outstanding Revolving Credit Loans in excess of Ten Million
($10,000,000.00) Dollars."
6. Article VI of the Loan Agreement, Section 6.10 is hereby amended to
read as follows:
"Section 6.10 Additional Corporate Guarantors. Excluding SeraNova,
-------------------------------
Inc., the Borrower shall cause each domestic and foreign operating (i)
Majority Owned Subsidiary or (ii) Affiliate in which the Borrower is the
owner (whether legal or beneficial and whether direct or indirect) of at
least fifty percent (50%) or more of the authorized, issued and
outstanding common stock of said Affiliate, or other form of ownership
interest in the event the Affiliate is not a corporation, which is
acquired or formed after the Closing Date, to enter into and execute the
Agreement of Guaranty, thereby becoming a Corporate Guarantor. Schedule
--------
6.10 contains a current list of Corporate Guarantors as of January 29,
----
1999."
7. Article VI of the Loan Agreement is hereby amended and changed by
adding new Section 6.13 as follows:
"Section 6.13 SeraNova Inc. Spinoff. It is agreed and
------------------------
understood that as of the date of the Amendment, Intelligroup, Inc.
owns one hundred (100%) percent of the
-2-
<PAGE>
issued and outstanding capital stock of SeraNova, Inc. In the event
Intelligroup, Inc. requests and the Lender approves of a Change in Control
of the ownership of SeraNova, Inc., all Obligations due hereunder shall, at
the option of the Lender, become immediately due and payable."
8. Article VII of the Loan Agreement, Section 7.04 is hereby amended
by deleting subsection (viii) in its entirety with no material to be placed in
its stead.
9. The Borrower shall pay on demand all reasonable legal fees,
recording expenses and other reasonable and necessary disbursements of the
Lender incident to the preparation, execution and delivery of this Amendment.
10. The Borrower acknowledges that its obligations to the Lender
pursuant to the Loan Agreement, as amended herein, are due and owing by the
Borrower to the Lender without any defenses, set-offs, recoupments, claims or
counterclaims of any kind as of the date hereof.
11. The Borrower hereby agrees with, reaffirms and acknowledges the
representations and warranties contained in the Loan Agreement. Furthermore, the
Borrower represents that the representations and warranties contained in the
Loan Agreement continue to be true and in full force and effect.
12. All other terms and conditions of the Loan Agreement, and any and
all Exhibits annexed thereto and all other writings submitted by the Borrower to
the Lender pursuant thereto, shall remain unchanged and in full force and
effect.
13. This Amendment shall not constitute a waiver or modification of any
of the Lender's rights and remedies or of any of the terms, conditions,
warranties, representations, or covenants contained in the Loan Agreement,
except as specifically set forth above, and the Lender hereby reserves all of
its rights and remedies pursuant to the Loan Agreement and applicable law.
14. Each "Borrower" shall be jointly and severally liable hereunder
without regard to which receives the proceeds of the Revolving Credit Loans.
Each Borrower expects to derive economic advantage from each Revolving Credit
Loan made hereunder.
15. The failure of the Borrower to satisfy any of the terms and
conditions of this Amendment shall constitute an Event of Default under the Loan
Agreement, and the Lender shall be entitled to all of its rights and remedies
under the Loan Agreement and applicable law.
16. This Amendment may be executed in counterparts, each of which, when
taken together, shall be deemed to be one and the same instrument. Delivery of
an executed counterpart of a
-3-
<PAGE>
signature page of this Amendment by facsimile shall be effective as delivery of
a manually executed counterpart of this Amendment.
Effective as of the 1st day of January, 2000.
WITNESS: INTELLIGROUP, INC.
/s/ Edward S. Carr By: /s/ Nicholas Visco
- ----------------------------- -------------------------------
Edward S. Carr VP Finance & CFO
SERANOVA, INC.
/s/ Edward S. Carr By: /s/ Raj Koneru
- ----------------------------- -------------------------------
Edward S. Carr
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Gary Wessels
-------------------------------
Gary Wessels,
Vice President
-4-
Subsidiaries:
Intelligroup New Zealand Limited, a corporation formed pursuant to the
laws of New Zealand and a wholly-owned subsidiary of Intelligroup, Inc.
Intelligroup Europe Limited, a corporation formed pursuant to the laws
of the United Kingdom and a wholly-owned subsidiary of Intelligroup, Inc.
CPI Resources, a corporation formed pursuant to the laws of the
United Kingdom and a wholly-owned subsidiary of Intelligroup Europe
Limited.
CPI Consulting Limited, a corporation formed pursuant to the laws of
the United Kingdom and 70% owned by CPI Resources and 30% owned by
Intelligroup Europe Limited.
Intelligroup Singapore Private Ltd., a corporation formed pursuant to
the laws of Singapore and 50% owned by each of Intelligroup, Inc., and Rajkumar
Koneru, Chief Executive Officer, President of U.S. Operations and Director of
Intelligroup, Inc.
Intelligroup Nordic A/S, a corporation formed pursuant to the laws of
Denmark and a wholly-owned subsidiary of Intelligroup, Inc.
Intelligroup Australia Pty Limited, a corporation formed pursuant to the
laws of Australia and a wholly-owned subsidiary of Intelligroup, Inc.
Intelligroup Asia Private, Ltd., a corporation formed pursuant to the
laws of India, and 99.8% owned and wholly-controlled subsidiary of Intelligroup,
Inc.
Empower, Inc., a Michigan corporation and a wholly-owned subsidiary of
Intelligroup, Inc.
SeraNova, Inc., a New Jersey corporation and a 95.2% owned and
wholly-controlled subsidiary of Intelligroup, Inc. (as of March 30, 2000).
Azimuth Consulting Limited, a corporation formed pursuant to the laws
of New Zealand and a wholly-owned subsidiary of SeraNova, Inc.
Azimuth Consulting Philippines, Inc., a corporation formed
pursuant to the laws of the Philippines and a wholly-owned
subsidiary of Azimuth Consulting Limited.
Azimuth Holdings Limited, a corporation formed pursuant to the laws
of New Zealand and a wholly-owned subsidiary of SeraNova, Inc.
Azimuth Holdings Pty Limited, a corporation formed pursuant to
the laws of Australia and a wholly-owned subsidiary of Azimuth
Holdings Limited.
Azimuth Consulting Australia Pty Limited, a corporation formed
pursuant to the laws of Australia and a wholly-owned subsidiary
of Azimuth Holdings Limited.
<PAGE>
Braithwaite Richmond Limited, a corporation formed pursuant to the
laws of New Zealand and a wholly-owned subsidiary of SeraNova, Inc.
Azimuth Corporation Limited, a corporation formed pursuant to the
laws of New Zealand and a wholly-owned subsidiary of SeraNova, Inc.
New Zealand Public Information Management Limited, a corporation
formed pursuant to the laws of New Zealand and a wholly-owned
subsidiary of Azimuth Corporation Limited.
Network Publishing, Inc., a Utah corporation and a wholly-owned
subsidiary of SeraNova, Inc.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Intelligroup, Inc.:
As independent public accountants, we hereby consent to the
incorporation by reference of our report included in this Form 10-K, into the
Company's previously filed Registration Statement File Nos. 333-11486,
333-31809, 333-56143, 333-67583, 333-73051 and 333-94285.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1999 AND FOR THE TWELVE MONTH
PERIOD ENDED DECEMBER 31, 1999 WHICH ARE INCLUDED IN THE REGISTRANT'S FORM 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001016439
<NAME> Intelligroup, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 6,121
<SECURITIES> 0
<RECEIVABLES> 38,355
<ALLOWANCES> 3,292
<INVENTORY> 0
<CURRENT-ASSETS> 62,117
<PP&E> 17,540
<DEPRECIATION> 6,120
<TOTAL-ASSETS> 83,062
<CURRENT-LIABILITIES> 32,984
<BONDS> 0
0
0
<COMMON> 160
<OTHER-SE> 48,494
<TOTAL-LIABILITY-AND-EQUITY> 83,062
<SALES> 186,067
<TOTAL-REVENUES> 186,067
<CGS> 119,857
<TOTAL-COSTS> 190,858
<OTHER-EXPENSES> (113)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 706
<INCOME-PRETAX> (5,384)
<INCOME-TAX> 1,206
<INCOME-CONTINUING> (6,590)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,590)
<EPS-BASIC> 0.42 <F1>
<EPS-DILUTED> 0.42 <F2>
<FN>
<F1> This amount represents Basic Earnings per Share in accordance with the
requirements of Statement of Financial Accounting Standards No. 128 -
"Earnings per Share".
<F2> This amount represents Diluted Earnings per Share in accordance with
the requirements of Statement of Financial Accounting Standards No.
128 - "Earnings per Share".
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1998 AND FOR THE TWELVE MONTH
PERIOD ENDED DECEMBER 31, 1998 WHICH ARE INCLUDED IN THE REGISTRANT'S FORM 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001016439
<NAME> Intelligroup, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0.87 <F1>
<EPS-DILUTED> 0.84 <F2>
<FN>
<F1> This amount represents Basic Earnings per Share in accordance with the
requirements of Statement of Financial Accounting Standards No. 128 -
"Earnings per Share".
<F2> This amount represents Diluted Earnings per Share in accordance with
the requirements of Statement of Financial Accounting Standards No.
128 - "Earnings per Share".
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1997 AND FOR THE TWELVE MONTH
PERIOD ENDED DECEMBER 31, 1997 WHICH ARE INCLUDED IN THE REGISTRANT'S FORM
10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001016439
<NAME> Intelligroup, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0.43 <F1>
<EPS-DILUTED> 0.42 <F2>
<FN>
<F1> This amount represents Basic Earnings per Share in accordance with the
requirements of Statement of Financial Accounting Standards No. 128 -
"Earnings per Share".
<F2> This amount represents Diluted Earnings per Share in accordance with
the requirements of Statement of Financial Accounting Standards No.
128 - "Earnings per Share".
</FN>
</TABLE>
