<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NEXTERA ENTERPRISES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8742 95-4697615
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
ONE CRANBERRY HILL
LEXINGTON, MA 02421
(781) 778-4400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL P. MULDOWNEY
CHIEF FINANCIAL OFFICER
NEXTERA ENTERPRISES, INC.
ONE CRANBERRY HILL
LEXINGTON, MA 02421
(781) 778-4400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
DAVID A. HAHN, ESQ. MARK H. BURNETT, ESQ.
HOWARD L. ARMSTRONG, ESQ. MICHAEL A. CONZA, ESQ.
LATHAM & WATKINS TESTA, HURWITZ & THIBEAULT, LLP
701 "B" STREET, SUITE 2100 HIGH STREET TOWER
SAN DIEGO, CALIFORNIA 92101 125 HIGH STREET
(619) 236-1234 BOSTON, MA 02110
(617) 248-7000
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------
Class A Common Stock, $.001 par value............... $87,000,000 $25,665
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(o) under the Securities Act.
(2) Includes shares that the Underwriters have the option to purchase solely to
cover over-allotments, if any.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 1998
PROSPECTUS
, 1998
[ ] SHARES
[NEXTERA ENTERPRISES, INC. LOGO]
CLASS A COMMON STOCK
All of the shares of Class A Common Stock, par value $0.001 per
share (the "Class A Common Stock"), offered hereby (the "Offering") are being
sold by Nextera Enterprises, Inc. ("Nextera" or the "Company"). The Class A
Common Stock and the Company's Class B Common Stock, par value $0.001 per share,
(the "Class B Common Stock" and together with the Class A Common Stock, the
"Common Stock"), are substantially identical except with respect to voting power
and conversion rights. The Class A Common Stock entitles its holders to one vote
per share and the Class B Common Stock entitles its holders to ten votes per
share, on all matters submitted to a vote of the Company's stockholders,
including in connection with the election of the Board of Directors. Each share
of Class B Common Stock is convertible into one share of Class A Common Stock
under certain circumstances. See "Description of Capital Stock." After the
Offering, Knowledge Enterprises, Inc. ("Knowledge Enterprises") will hold
approximately % of the combined voting power of the outstanding Common
Stock.
Prior to the Offering, there has been no public market for the Class A
Common Stock. It is currently anticipated that the initial public offering price
will be between $ and $ per share. See "Underwriting" for
information relating to the factors to be considered in determining the initial
public offering price.
The Company has applied to have the Class A Common Stock approved for
quotation on the Nasdaq National Market under the symbol "NXRA."
THE CLASS A COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 6 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- -----------------------------------------------------------------------------------------------------------
Per Share....................... $ $ $
Total(3)........................ $ $ $
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriters
and a description of the use of a portion of the net proceeds to repay
indebtedness to an affiliate of one of the Underwriters.
(2) Before deducting expenses estimated at $ , payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an aggregate of additional shares at the Price to Public less
Underwriting Discounts and Commissions, solely to cover over-allotments, if
any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$ , $ and $ , respectively. See "Underwriting."
The shares are being offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters and subject to various prior
conditions, including their right to reject orders in whole or in part. It is
expected that delivery of the shares will be made in New York, New York, on or
about , 1998.
DONALDSON, LUFKIN & JENRETTE
BANCBOSTON ROBERTSON STEPHENS
BT ALEX. BROWN
NATIONSBANC MONTGOMERY SECURITIES LLC
<PAGE> 3
[NEXTERA VALUE PROPOSITION CHART]
Graphic entitled "Nextera's Value Proposition" depicts a large triangle in the
center of the graphic with inward-pointing arrows placed along each side of the
center triangle. The top of the large triangle contains the words "Clients
Enhance Business Performance Through. . ." The center of the large triangle is
divided into three sections. The leftmost section contains the words "Dynamic
Strategic Management." The middle section contains the words "High Performance
Business Processes." The rightmost section contains the words "Continuous
Organizational Development." The bottom of the large triangle contains the words
"Applying Emerging Technologies to" with the following two bullet points listed
underneath: "Knowledge Management" and "Business Performance Support." The
inward-pointing arrow in the upper left corner of the graphic has superimposed
upon it the heading "Complementary Practice Areas" with the following four
bullet points listed underneath this heading: "Business Research," "Strategic
Management Services," "Human Capital Services" and "Business Performance
Solutions." The inward-pointing arrow in the upper right corner of the graphic
has superimposed upon it the heading "Client-Focused Results Delivery" with the
following four bullet points listed underneath this heading: "Leading Edge
Perspectives," "Proven Delivery Experience," "Flexible and Balanced Approach,"
and "Integrated Client Service Teams." The inward-pointing arrow at the lower
center of the graphic has superimposed upon it the heading "Leverageable
Business Model" with the following four bullet points listed underneath this
heading: "Portfolio Style Governance," "Leveraged Cross-selling Opportunities,"
"Shared Best Practices" and "Scaleable Infrastructure."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE
OFFERING AND MAY BID FOR AND PURCHASE SHARES OF THE CLASS A COMMON STOCK IN THE
OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
This Prospectus includes forward-looking statements, which reflect the
Company's current views with respect to future events and financial performance.
These forward-looking statements are subject to uncertainties and other factors
that could cause actual results to differ materially from such statements. These
uncertainties and other factors include, but are not limited to, those discussed
in "Risk Factors" and elsewhere in this Prospectus. The words "believe,"
"expect," "anticipate," "project" and similar expressions identify
forward-looking statements. These forward-looking statements speak only as of
the date of this Prospectus, or, if specified, as of their dates. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
------------------------
Nextera, Sibson, Pyramid Imaging, Symmetrix, SiGMA, and The Planning
Technologies Group are service marks used by the Company in providing services.
This Prospectus also includes names, trademarks, service marks and registered
trademarks and service marks of companies other than the Company, which names,
trademarks, service marks and registered trademarks and service marks are the
property of such companies.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the Historical Financial Statements and Notes thereto
and the Unaudited Pro Forma Combined Financial Statements and Notes thereto
included elsewhere in this Prospectus. The Class A Common Stock offered hereby
involves a high degree of risk. See "Risk Factors" beginning on page 6. Unless
otherwise indicated, (i) all references in this Prospectus to Nextera or the
Company mean Nextera Enterprises, Inc., Nextera Enterprises, L.L.C. ("Nextera
LLC") and their respective direct and indirect subsidiaries, including the
operations of, or the successors to, Symmetrix, Inc., SiGMA Consulting, LLC, The
Planning Technologies Group, Inc., Pyramid Imaging, Inc., Sibson & Company, L.P.
and Sibson Canada, Inc. (each an "Acquired Company" and collectively the
"Acquired Companies") prior to their acquisition by the Company, (ii) all
information in this Prospectus assumes the exchange of Class A Common Units and
Class B Common Units of Nextera LLC for shares of Class A Common Stock and Class
B Common Stock of Nextera Enterprises, Inc., respectively (see "The
Company--Exchange Transaction"), (iii) all information in this Prospectus
assumes the exchange of all exchangeable preference shares for Class A Common
Stock (see "The Company--Exchangeable Preference Shares"); and (iv) all
information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option.
THE COMPANY
Nextera Enterprises, Inc. provides leading-edge business strategy,
operations improvement, organizational design and information technology ("IT")
consulting services primarily to Fortune 500 and other multinational companies.
The Company provides services in four practice areas, which enables it to offer
a breadth and balance of services that assist clients in achieving enhanced
business performance by anticipating and addressing their complex,
multi-disciplinary consulting needs. By developing dynamic business strategies
and high performance business processes and enhancing organizational
effectiveness, the Company helps clients identify and examine business problems
and implement the strategic, organizational and operational responses needed to
solve such problems and sustain performance improvement.
The professional consulting services industry is driven by changes in the
business environment, such as increased competition, deregulation,
globalization, technological advances and evolving organizational models. In
response to these changes, many organizations are altering traditional
approaches to overall strategy, business processes, organizational design and
the use of IT. Lacking the skilled personnel, technical capabilities and time
necessary to formulate and implement strategies to benefit from these changes,
many organizations are increasingly retaining third-party service professionals
for help and expertise. According to an industry source, the worldwide market
for professional consulting services is estimated to be $46.3 billion in 1997
and is projected to increase to $88.5 billion in 2002. Consulting service
providers employing traditional approaches typically do not offer the broad and
balanced perspective and integrated solutions critical to solving the
multi-disciplinary problems organizations are currently facing. In order to
solve such problems, organizations are demanding that third-party providers have
experience in a breadth of practice areas.
The Company's portfolio of practice areas includes Business Research
Services, Strategic Management Services, Human Capital Services, and Business
Performance Solutions. The Business Research Services practice provides in-depth
and forward-looking analyses of business challenges, frameworks, and innovative
business practices. The Strategic Management Services practice helps
organizations set and pursue their goals and develop the ability of senior
management to proactively refine and manage business strategies, action plans,
and core competencies as these goals are implemented throughout the
organization. The Human Capital Services practice assists clients to implement
organizational and strategic changes established by senior management through
all levels of the organization. The Business Performance Solutions practice
helps organizations solve complex operational issues through major business
transformation programs, redesigned business processes, best practices
adaptation, and the use of emerging technologies such as web-based technologies
and electronic commerce for high impact business process support systems and
knowledge management systems.
3
<PAGE> 5
Nextera's flexible delivery model and its ability to leverage its knowledge
base enable it to provide timely and unbiased perspectives on clients'
enterprise-wide management problems and cost-effectively implement
multi-disciplinary solutions. The Company's breadth of expertise enables it to
deliver services initially in any of its four practice areas and offers
opportunities to expand the scope of its engagements to include complementary or
follow-on services in other practice areas. The Company provides its services
across a broad spectrum of industries, including communications, consumer
products and services, entertainment, financial services, health care,
insurance, manufacturing, professional services, retail and technology.
Representative clients include The Chubb Corporation, International Business
Machines Corporation, Levi Strauss & Co., Mead Johnson & Company, National
Broadcasting Company, Inc. and SmithKline Beecham, PLC.
The Company was founded in February 1997 by executives with extensive
experience at major consulting firms and industry-leading companies. The Company
has focused on building its portfolio of practice areas through selective
acquisitions and internal growth to provide a balanced perspective on the
problems and issues facing its clients in today's competitive environment. Since
inception, the Company has built competencies in its four practice areas
primarily through acquisitions. Each Acquired Company maintains a business focus
which complements the businesses of the other Acquired Companies, enabling
synergies to be realized across all of Nextera's practice areas.
The Company's objective is to be a leading provider of consulting services
in its four practice areas. Nextera intends to achieve this objective by: (i)
expanding service offerings through selective acquisitions; (ii) leveraging
cross-selling opportunities to expand the scope of engagements; (iii) attracting
and retaining key personnel who will enhance and complement the Company's
service capabilities; (iv) building a common identity for the services the
Company provides by marketing the Nextera brand name; and (v) expanding
Nextera's international presence.
The Company is a Delaware corporation and maintains its principal executive
office at One Cranberry Hill, Lexington, Massachusetts 02421. The Company's
telephone number is (781) 778-4400.
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock offered by the Company............ shares
Common Stock to be outstanding after the Offering:(1)
Class A Common Stock.............................. shares(2)
Class B Common Stock.............................. shares
Total Common Stock........................... shares
Use of proceeds........................................ To repay certain outstanding
indebtedness, including indebtedness to
certain affiliates of the Company; to
pay accrued management fees to Knowledge
Universe, L.L.C. ("Knowledge Universe"),
an affiliate of the Company; and for
general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol................. NXRA
</TABLE>
- ------------------------------
(1) The Class A Common Stock and the Class B Common Stock are substantially
identical except with respect to voting power and conversion rights. The
Class A Common Stock entitles its holders to one vote per share and the
Class B Common Stock entitles its holders to ten votes per share, on all
matters submitted to a vote of the Company's stockholders, including in
connection with the election of the Board of Directors. Each share of Class
B Common Stock is convertible into one share of Class A Common Stock under
certain circumstances. See "Risk Factors--Control by Knowledge Enterprises,
Inc.; Effect of Class B Common Stock" and "Description of Capital Stock."
(2) Excludes shares of Class A Common Stock reserved for issuance
under the Company's 1998 Equity Participation Plan (the "1998 Equity
Participation Plan") pursuant to which options to purchase shares
will be outstanding upon the closing of the Offering. See
"Management--Employee Benefit Plans." Also excludes shares of Class
A Common Stock issuable upon conversion of the outstanding shares
of the Company's Class B Common Stock. Assumes the exchange of all
exchangeable preference shares for shares of Class A Common Stock.
See "The Company--Exchangeable Preference Shares."
4
<PAGE> 6
SUMMARY CONSOLIDATED AND PRO FORMA COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)
--------------------------------------- ------------------------------------
PERIOD FROM
FEBRUARY 26, 1997
(DATE OF INCEPTION) FOR THE FOR THE FOR THE
THROUGH SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998 DECEMBER 31, 1997 JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................. $ 7,998 $22,095 $76,453 $48,502
Gross profit.................. 3,280 7,157 22,353 16,149
Loss from operations.......... (2,281) (707) (2,964) 1,614
Net loss...................... (3,015) (3,578) (7,427) (3,174)
Net loss per share, basic and
diluted(2).................. $ (0.74) $ $ $
Weighted average shares
outstanding, basic and
diluted..................... 4,061
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
----------------------------------------------
PRO FORMA
HISTORICAL PRO FORMA(3) AS ADJUSTED (3)(4)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 2,921 $ 3,080
Working capital (deficit)............................... 5,107 (27,002)
Total assets............................................ 57,498 117,433
Total short-term debt................................... 1,390 40,064
Total long-term debt.................................... 51,665 53,915
Total stockholders' equity (deficit).................... (3,905) 5,950
</TABLE>
- ------------------------------
(1) The summary pro forma combined financial data for the year ended December
31, 1997 and for the six months ended June 30, 1998 are presented as if the
acquisitions of the Acquired Companies had been consummated as of the first
day of each period presented. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Acquisitions" and Unaudited
Pro Forma Combined Financial Statements.
(2) See Note 2 of Notes to the Company's Consolidated Financial Statements for
information concerning the computation of historical net loss per share.
(3) Pro forma to give effect to the acquisitions (the "Sibson Acquisitions") of
Sibson & Company, L.P. and Sibson Canada, Inc. (collectively, "Sibson") as
if they had been consummated as of June 30, 1998. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Unaudited Pro Forma Combined Financial Statements.
(4) Pro forma as adjusted to give effect to (i) the sale of shares of
Class A Common Stock at an assumed initial public offering price of
$ per share, after deducting estimated underwriting discounts and
commissions and Offering expenses payable by the Company, and (ii) the
application of the estimated net proceeds of the Offering. See "Use of
Proceeds" and "Capitalization."
5
<PAGE> 7
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this Prospectus before purchasing the shares
of Class A Common Stock offered hereby. This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those contained in the forward-looking statements.
Factors that may cause such differences include, but are not limited to, those
discussed below as well as those discussed elsewhere in this Prospectus.
Limited Combined Operating History; Recent Acquisitions. Nextera was formed
in February 1997 and has grown substantially since its inception, principally
through the acquisitions of the Acquired Companies. Although the Acquired
Companies have been in operation for some time, the Company has a limited
history of combined operations. Consequently, the historical and pro forma
information herein may not be indicative of Nextera's financial condition and
future performance. There can be no assurances that the Company will not
encounter financial, managerial or other difficulties as a result of its lack of
combined operating history. Further, the success of Nextera's acquisitions will
depend on a number of factors, including the Company's ability to integrate the
businesses and operations of the Acquired Companies, to retain certain key
employees of the Acquired Companies and to preserve and expand the businesses
and operations of the Acquired Companies. There can be no assurance that Nextera
will be able to successfully integrate and operate the businesses of the
Acquired Companies or that the Company will not experience losses as a result of
these acquisitions. Failure to achieve the anticipated benefits of these
acquisitions or to successfully integrate the operations of the Acquired
Companies could materially adversely affect the business, operating results and
financial condition of the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business--Acquisitions."
Management of Growth. Nextera has experienced a period of rapid growth that
has challenged, and will likely continue to challenge, the Company's managerial
and other resources. Since the Company's inception in February 1997 through
August 31, 1998, the number of consultants employed by the Company has increased
to 355 and the scope of Nextera's geographic coverage has expanded
significantly. Nextera intends to hire additional consultants through
acquisitions and its own recruiting efforts and expects its geographic coverage
to continue to grow in the future. The Company's success in managing its growth
will depend on its ability to continue to enhance its operating, financial and
management information systems and to recruit, develop, motivate and manage
effectively its expanding work force. For example, Nextera is in the process of
integrating a new financial reporting system, and any failure or significant
delay in achieving the integration of such system or complications with respect
to the change to such system could materially adversely affect the Company. In
addition, Nextera's future success will depend in large part on its ability to
continue to set rates and fees competitively and to maintain high employee
utilization rates and project quality, particularly if the average size or
number of the Company's projects increases. If Nextera is unable to manage
growth or new employees effectively or if its personnel are unable to achieve
anticipated performance or utilization levels, the Company's services, its
ability to retain key personnel, and its business, operating results and
financial condition could be materially adversely affected. There can be no
assurance that Nextera will be able to effectively manage its growth or that the
Company's business will continue to expand. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business--Growth
Strategy" and "--Human Resources."
Risks Related to Acquisitions. Since its inception, Nextera has
significantly expanded through acquisitions and expects to pursue additional
acquisitions in order to enhance its service offerings and client base, expand
its geographic presence and obtain experienced consultants. The timing,
magnitude and success of the Company's acquisition efforts and the related
capital expenditures and commitments cannot be predicted. Nextera competes for
acquisitions with companies that have significantly greater financial and
management resources than the Company, which may lead to limited acquisition
opportunities for Nextera and may result in higher purchase prices or
transaction costs. There can be no assurance that the Company will be able to
integrate successfully any acquired businesses without substantial expense,
delays or other operational or financial costs or problems, including costs in
pursuing and negotiating with acquisition candidates, or that it will be able to
identify, acquire or profitably manage additional businesses or acquisitions.
Acquisitions may
6
<PAGE> 8
involve certain risks, including significant diversion of management's
attention, failure to retain key acquired personnel, unanticipated events or
circumstances and legal liabilities. Client satisfaction or performance problems
at a single acquired firm could have a material adverse impact on the reputation
of Nextera as a whole. Further, there can be no assurance that the Company's
future acquired businesses will achieve expected results or generate anticipated
revenues or earnings. In order to pursue additional acquisitions, Nextera may
also require debt or equity financing that may not be available on terms
favorable to the Company, if at all, and may result in dilution to the holders
of Class A Common Stock. Nextera will be unable to account for future
acquisitions under the pooling-of-interests method of accounting. Accordingly,
the Company will be required to account for acquisitions under the purchase
method of accounting, which may result in substantial additional annual non-cash
amortization charges for goodwill and other intangible assets in Nextera's
statements of operations. In addition, the Company could be required to make
substantial cash payments related to any such acquisition. Any of these factors
could materially adversely affect Nextera's business, operating results and
financial condition. See "--Substantial Amount of Goodwill," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business--Growth Strategy" and "--Acquisitions."
Attraction and Retention of Skilled Consultants. Because Nextera's business
involves the delivery of professional services and is labor-intensive, the
Company's success depends in large part upon its ability to attract, motivate
and retain highly skilled consultants. Qualified business consultants are in
great demand and are likely to remain a limited resource for the foreseeable
future. There can be no assurance that Nextera will be able to attract, motivate
and retain sufficient numbers of highly skilled consultants. Any inability to do
so could impair the Company's ability to effectively manage and complete its
client projects and to secure future client engagements, and as a result could
materially adversely affect Nextera's business, operating results and financial
condition. Because the Company has experienced growth principally through the
acquisitions of the Acquired Companies, substantially all of Nextera's current
consultants were initially hired by one of the Acquired Companies and not the
Company. There can be no assurance that these consultants will continue to be
satisfied with the culture or benefits of the Company or prospects for
advancement within Nextera. Further, even if the Company is able to expand the
number of qualified consultants, the resources required to attract, motivate and
retain such consultants may adversely affect Nextera's operating margins, which
could materially adversely affect the Company's business, operating results and
financial condition. To the extent that Nextera is unable to attract, motivate
or retain qualified consultants from among individuals currently legally
eligible to work in the United States, the Company may need to utilize foreign
labor under H-1B and other employment-related permits and visas granted by the
United States government. In the event that such visas are unavailable, either
due to a change in policy or law or a reduction in the number of such visas
granted, Nextera may be unable to attract or retain additional qualified
consultants or may incur unexpected substantial additional labor costs, any of
which could materially adversely affect the Company's business, operating
results and financial condition. See "Business--Human Resources."
Control by Knowledge Enterprises, Inc.; Effect of Class B Common
Stock. After the Offering, Knowledge Enterprises will own shares of
Class A Common Stock and shares of Class B Common Stock, which
together will represent % of the voting power of the outstanding Common
Stock. The Class A Common Stock entitles its holders to one vote per share and
the Class B Common Stock entitles its holders to ten votes per share, on all
matters submitted to a vote of Nextera's stockholders, including in connection
with the election of the Board of Directors. Accordingly, Knowledge Enterprises
will be able to elect all of the Company's directors, except for one director to
be elected in accordance with the terms of a stockholders agreement, and
determine the disposition of all matters submitted to a vote of Nextera's
stockholders, including mergers, transactions involving a change in control of
the Company and other corporate transactions and the terms thereof. Such control
by Knowledge Enterprises could materially adversely affect the market price of
the Class A Common Stock or delay or prevent a change in control of Nextera.
There can be no assurance that conflicts of interest between Knowledge
Enterprises and the Company will not arise or that any such conflict of interest
will be resolved in a manner favorable to Nextera, including potential
competitive business activities, indemnity arrangements, registration rights,
sales or distributions by Knowledge Enterprises of Nextera's Class A Common
Stock and Class B Common Stock and the exercise by Knowledge Enterprises of its
ability to control the management and affairs of the Company.
7
<PAGE> 9
Knowledge Enterprises is controlled by Knowledge Universe. The Company believes
that through ownership or voting control of various intermediate entities,
Lawrence J. Ellison, Michael R. Milken and Lowell J. Milken may each be deemed
to have the power to direct the voting and disposition of, and to share
beneficial ownership of, any shares of Common Stock owned by Knowledge
Enterprises. Any change in Nextera's relationship with Knowledge Enterprises or
Knowledge Universe could materially adversely affect the Company's business,
operating results and financial condition. See "The Company--Transfer to
Knowledge Enterprises," "Management--Board of Directors," "Certain
Transactions," "Principal Stockholders" and "Description of Capital Stock."
Variability and Seasonality of Quarterly Operating Results. Nextera may
experience fluctuations in its future quarterly operating results. Variations in
the Company's net revenues and operating results from quarter-to-quarter may be
caused by such factors as the number of active client projects, termination of
major client projects, the number of business days in a quarter, hiring,
integration and utilization of consultants and other employees, the mix and
timing of client projects, re-evaluation of progress on and completion of client
projects, variations in utilization rates and average billing rates for
consultants, the accuracy of estimates of resources required to complete ongoing
projects, the integration of acquired entities, and the length of Nextera's
sales cycle. Because a relatively high percentage of the Company's expenses is
relatively fixed, a variation in the number or timing of client projects,
particularly at or near the end of any quarter, may cause significant variations
in operating results from quarter-to-quarter and could result in losses to
Nextera for any particular fiscal period. Events such as write-offs of
uncollectable accounts, the unanticipated termination of a major project or the
completion during a single quarter of several major client projects without
deploying consultants to new engagements could result in the Company's
underutilization of consultants which could, in turn, materially adversely
affect Nextera's business, operating results and financial condition. To the
extent that increases in the numbers of consultants are not followed by
corresponding increases in net revenues, the operating results of the Company
could be materially adversely affected. In addition, it is difficult for Nextera
to forecast the timing of revenues because project cycles depend on factors such
as the size and scope of consulting projects and circumstances specific to each
client. Because the Company's consultants only generate revenues when they are
engaged on client projects, Nextera's operating results are adversely affected
when its consultants cannot perform services for clients due to vacations, sick
days, holidays, inclement weather, training schedules or other reasons. In
particular, the Company can be expected to generate a smaller proportion of its
net revenues and realize lower operating income during the fourth quarter of the
year due to the number of holidays in that quarter. Given the foregoing factors,
Nextera believes that quarter-to-quarter comparisons of its operating results
are not necessarily meaningful and that the results for one quarter should not
be relied upon as an indication of future performance. Demand for Nextera's
services is significantly affected by the general level of economic activity.
When economic activity slows, clients may delay or cancel plans that involve the
hiring of consultants. The Company is unable to predict the level of economic
activity at any particular time, and fluctuations in the general economy could
materially adversely affect Nextera's business, operating results and financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Substantial Amount of Goodwill. As of June 30, 1998, on a pro forma basis
reflecting the Sibson Acquisitions, the Company's intangible assets, net of
accumulated amortization, were approximately $81.2 million. As a result of the
acquisitions of the Acquired Companies, intangible assets are being amortized by
Nextera on a straight-line basis over 5 years for intangibles relating to
personnel and over 40 years for all other intangibles, including goodwill.
Future acquisitions by Nextera are expected to result in additional goodwill and
intangible assets. The amount amortized in a particular period constitutes a
non-cash expense that reduces the Company's net income. In accordance with
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets to be Disposed Of ("SFAS No. 121"), the Company
periodically evaluates the recoverability of goodwill by reviewing the
anticipated undiscounted future cash flows from operations and comparing such
cash flows to the carrying value of the associated goodwill. If goodwill becomes
impaired, Nextera will be required to write down the carrying value of the
goodwill and incur a related charge to its income. A write down of goodwill
would result in a reduction in net income which could materially adversely
affect Nextera's business, operating results and financial condition. See
"--Risks
8
<PAGE> 10
Related to Acquisitions," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business--Acquisitions."
Concentration of Net Revenues. Nextera has in the past derived, and may in
the future derive, a significant portion of its net revenues from a relatively
limited number of clients. For example, for the year ended December 31, 1997 and
for the six months ended June 30, 1998, on a pro forma basis, the Company's ten
largest clients accounted for approximately 29%, and 36% of its net revenues,
respectively. For the year ended December 31, 1997 and for the six months ended
June 30, 1998, on a pro forma basis, the Company's largest client during such
period accounted for approximately 8% and 7% of Nextera's net revenues,
respectively. There can be no assurance that these significant clients will
continue to engage the Company for additional projects or do so at the same
revenue levels or that the portion of Nextera's net revenues attributable to a
relatively limited number of clients will not increase in the future or that the
Company will not experience concentration of receivables. The loss of any such
client, or a reduction in the scope of engagements undertaken for such client,
could materially adversely affect Nextera's business, operating results and
financial condition. Clients engage the Company on a project-by-project basis,
often without a written contract, and a client can generally terminate an
engagement with little or no notice to Nextera and without penalty. Further,
clients in the financial services, manufacturing and health care industries
accounted for approximately 23%, 17% and 11%, respectively, of Nextera's pro
forma net revenues for the year ended December 31, 1997. Any economic conditions
or other factors adversely affecting any of the foregoing industries or any
increase in the size or number of the Company's competitors within these
industries could materially adversely affect Nextera's business, operating
results and financial condition. See "--Absence of Written Contracts,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Clients and Representative Engagements."
Dependence on Key Personnel. The Company's success is highly dependent upon
the efforts, abilities, business generation capabilities and project execution
skills of its senior consulting executives and other key personnel. The loss of
the services of any of these persons for any reason could materially adversely
affect Nextera's business, operating results and financial condition, including
its ability to secure and complete engagements. There can be no assurance that
the Company will be able to retain these persons or to attract suitable
replacements or additional personnel if required. In addition, if one or more of
Nextera's key personnel resigns from the Company to join a competitor or to form
a competing business, any resulting loss of existing or potential clients to any
such competitor could materially adversely affect Nextera's business, operating
results and financial condition. In the event of the loss of any such personnel,
there can be no assurance that the Company would be able to prevent the
unauthorized disclosure or use of its technical knowledge, practices or
procedures by such personnel. Nextera generally does not maintain key person
life insurance coverage for employees. See "Business--Human Resources" and
"Management."
Project Risks; Fixed Price Contracts. The Company's client engagements
often involve projects that are critical to the operation of a client's business
and provide benefits that may be difficult to quantify. Nextera's failure or
inability to meet a client's expectations in the performance of its services
could result in a client's refusal to pay or give rise to claims against the
Company or damage Nextera's reputation, any of which could materially adversely
affect its business, operating results and financial condition. There can be no
assurance that the Company will not fail to satisfy certain clients'
expectations. Nextera has undertaken and expects in the future to undertake
certain projects under fixed-price or capped-fee billing arrangements, which are
distinguishable from the Company's principal method of utilizing time and
materials billing arrangements. On a pro forma basis, fixed-price or capped-fee
billing arrangement projects accounted for approximately 11% and 19%, of
Nextera's net revenues for the year ended December 31, 1997 and for the six
months ended June 30, 1998, respectively. The failure of Nextera to complete
such fixed-price or capped-fee projects within budget or below the cap would
expose the Company to risks associated with potentially unrecoverable cost
overruns, which could materially adversely affect Nextera's business, operating
results and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Absence of Written Contracts. Nextera derives a significant portion of its
net revenues from client projects involving significant dollar values.
Accordingly, the cancellation, delay or significant reduction in the
9
<PAGE> 11
scope of a large engagement could materially adversely affect the Company's
business, operating results and financial condition. Clients engage the Company
on a project-by-project basis, often without a written contract, and a client
can generally terminate an engagement with little or no notice to Nextera and
without penalty. As a result, Nextera believes that the number of clients or the
number and size of its existing projects are not reliable indicators or measures
of future net revenues. The Company has in the past provided, and is likely in
the future to provide, services to clients without a written contract. When a
client defers, modifies or cancels a project, Nextera must be able to rapidly
deploy its consultants to other projects in order to minimize the
underutilization of employees and the resulting adverse impact on operating
results. In addition, the Company's operating expenses are relatively fixed and
cannot be reduced on short notice to compensate for unanticipated variations in
the number or size of projects in progress. As a result, any termination,
significant reduction or modification of its business relationships with any of
its significant clients or with a number of smaller clients could materially
adversely affect Nextera's business, operating results and financial condition.
Competition. The consulting services industry includes a large number of
competitors, is subject to rapid change and is highly competitive. Nextera
believes that its ability to compete depends in part on a number of factors
outside of its control, including the ability of its competitors to hire, retain
and compensate consultants, offer lower-priced services, respond to client
requirements, and develop advanced services or technology. Nextera's primary
competitors include participants from a variety of market segments, including
general management consulting companies, boutique management consulting firms
that provide specialized services or focus on certain industries, "Big Five" and
other accounting firms, systems consulting and implementation firms, application
software firms, service groups of computer equipment companies, outsourcing
companies, and systems integration companies. Many of these competitors have
significantly greater financial, technical, and marketing resources, and greater
name recognition than Nextera. In addition, many of these competitors have been
operating for a significantly longer period of time than the Company and have
established long-term client relationships. Nextera also competes with its
clients' internal resources, particularly where the resources represent a fixed
cost to the client. Such competition may impose additional pricing pressures on
Nextera. In addition, Nextera faces intense competition in its efforts to
recruit and retain qualified consultants. There can be no assurance that the
Company will be able to compete successfully with its existing competitors or
any new competitors. See "Business--Competition."
Foreign Operations. Nextera derived approximately 8% and 6% of its net
revenues on a pro forma basis from clients outside of the United States for the
year ended December 31, 1997 and the six months ended June 30, 1998,
respectively. The Company has engaged in projects in Canada and the United
Kingdom and intends to continue to seek an increasing number of foreign
engagements. One of the components of Nextera's growth strategy is to expand its
international presence and seek additional business outside the United States.
Nextera's international business operations are and will be subject to a number
of risks, including difficulties in managing foreign operations, enforcing
agreements and collecting receivables through foreign legal systems; longer
payment cycles; fluctuations in the value of foreign currencies; and unexpected
regulatory, economic or political changes in foreign markets. The relationship
between non-dollar denominated revenues and dollar denominated expenses may
subject the Company to significant foreign exchange risks. In addition, Nextera
may in the future acquire an interest in entities that operate in countries
where the repatriation or conversion of currency is restricted. There can be no
assurance that these factors will not materially adversely affect the Company's
business, operating results and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Growth Strategy."
Rapid Technological Change. Nextera's success will depend in part on its
ability to develop business consulting and strategic information technology
solutions that keep pace with continuing changes in information processing
technology and the effect of such changes on client needs and preferences. Part
of the Company's strategy is to focus on business performance solutions, which
include strategic/knowledge management systems and enabling technologies. There
can be no assurance that Nextera will be successful in adequately addressing
developments in IT on a timely basis or that, if these developments are
addressed, the Company will be successful in the marketplace. In addition, there
can be no assurance that products or \technologies developed by others or
changing client preferences will not render Nextera's services uncompeti-
10
<PAGE> 12
tive or obsolete. The Company's failure to identify or address these
developments could materially adversely affect Nextera's business, operating
results and financial condition.
Year 2000 Risks. Many currently installed computer systems are coded to
accept only two digit entries in the date code field. These date code fields
need to be modified or upgraded to accept four digit entries to distinguish 21st
century dates from 20th century dates. Many organizations are expending
significant resources to modify or upgrade their computer systems for such "Year
2000" compliance. These expenditures may result in reduced funds available to
purchase the types of services offered by the Company as resources that might
otherwise be directed towards the purchase of outside consulting services are
utilized for Year 2000 compliance. Any such reduction in the purchase of the
types of services offered by Nextera could materially adversely affect the
Company's business, operating results and financial condition. Nextera has
completed an assessment of its computer systems for Year 2000 compliance.
Although the Company does not believe that the costs of addressing Year 2000
compliance issues with respect to Nextera's own systems will materially
adversely affect its business, operating results or financial condition, the
Company depends on smooth and timely interactions with its vendors, clients and
other third parties. Any unexpected costs or disruption in the operations or
activities of such vendors, clients or other third parties as a result of Year
2000 compliance issues within such entities could materially adversely affect
Nextera's business, operating results and financial condition.
The Company has in the past and may in the future perform services related
to the planning, implementation and testing of Year 2000 compliance work for its
clients. Failure to timely or accurately perform these services could cause a
client to experience failures of one or more key systems or result in
miscalculations causing material disruptions of one or more of a client's
operations, including an inability to process transactions or engage in business
activities. A claim for product or service liability brought against Nextera
could result in substantial cost to the Company and divert management's
attention from Nextera's operations, which could materially adversely affect the
Company's business, operating results and financial condition.
Anti-Takeover Effect of Certain Charter and Bylaw Provisions. The Company's
Amended and Restated Certificate of Incorporation ("Certificate of
Incorporation") and Bylaws, as well as Delaware corporate law, contain certain
provisions that could have the effect of delaying, deferring or preventing a
change in control of Nextera. These provisions could limit the price that
certain investors might be willing to pay in the future for shares of the Class
A Common Stock. The Certificate of Incorporation authorizes the Company's Board
of Directors to issue shares of Preferred Stock of Nextera, in one or more
series, and to establish the rights and preferences (including the
convertibility of such shares of Preferred Stock into shares of Class A Common
Stock) of any series of Preferred Stock so issued. Such provisions could
diminish the opportunities for a stockholder to participate in tender offers,
including tender offers at a price above the then current market value of the
Class A Common Stock. Such provisions also may inhibit fluctuations in the
market price of the Class A Common Stock that could result from takeover
attempts. Other provisions impose various procedural and other requirements that
could make it difficult for stockholders to take certain corporate actions. In
particular, the Certificate of Incorporation provides that any action required
or permitted to be taken by stockholders of Nextera must be effected at a duly
called annual or special meeting of stockholders and may not be effected by any
consent in writing, and the Bylaws require stockholders to comply with special
advance notice procedures in order to make a proposal or director nomination
which such stockholder desires to present at any annual or special meeting of
stockholders. Special meetings of stockholders may be called only by the Board
of Directors, the Chairman of the Board, or the President of the Company. See
"--Control by Knowledge Enterprises, Inc.; Effect of Class B Common Stock" and
"Description of Capital Stock."
Intellectual Property Rights. Nextera's success is dependent in part upon
certain methodologies and other proprietary intellectual property rights.
Nextera relies upon a combination of nondisclosure, confidentiality, license and
other contractual arrangements and trade secret, copyright and trademark laws to
protect its proprietary rights and the proprietary rights of third parties from
whom Nextera licenses intellectual property. In addition, Nextera generally
limits the distribution of its proprietary information. There can be no
assurance, however, that the steps taken by Nextera to protect its intellectual
property rights will be adequate to deter misappropriation of proprietary
information or that the Company will be able to detect unauthorized use and
11
<PAGE> 13
take appropriate steps to enforce its intellectual property rights or that
competitors will not be able to develop similar or functionally equivalent
methodologies. Furthermore, effective copyright and trade secret protection may
be unavailable or limited in certain foreign countries, and no assurance can be
given that foreign copyright and trade secret laws will adequately protect the
Company's intellectual property rights. Although Nextera believes that its
services do not infringe on the intellectual property rights of others and that
it has all rights necessary to utilize the intellectual property employed in its
business, there can be no assurance that Nextera's employees will not
misappropriate the intellectual property of others. Accordingly, the Company is
subject to the risk of claims alleging infringement of third-party intellectual
property rights. Any such claims could require Nextera to spend significant sums
in litigation, pay damages, develop non-infringing intellectual property or
acquire licenses to the intellectual property that is the subject of asserted
infringement, any of which could materially adversely affect the Company's
business, operating results and financial condition. The Company presently holds
no patents or registered copyrights.
No Prior Public Market; Possible Volatility of Stock Price. Prior to the
Offering, there has been no public market for the Class A Common Stock.
Consequently, the initial public offering price per share will be determined by
negotiations between Nextera and the representatives of the Underwriters and may
not be indicative of the market price of the Class A Common Stock after the
Offering. See "Underwriting" for a discussion of factors to be considered in
determining the initial public offering price per share. Application has been
made for quotation of the Class A Common Stock on the Nasdaq National Market;
however, there can be no assurance that an active trading market will develop
and be sustained after the Offering. In the absence of a public trading market,
investors may be unable to liquidate their investments in the Company. The
market price of the Class A Common Stock may fluctuate substantially due to a
variety of factors, including quarterly fluctuations in results of operations,
adverse circumstances affecting the introduction or market acceptance of new
services offered by Nextera, announcements of new services by competitors,
changes in earnings estimates by analysts, changes in accounting principles,
sales of Class A Common Stock or Class B Common Stock by existing holders, the
depth and liquidity of the market for Class A Common Stock, loss of key
personnel, general market conditions and other factors. Equity securities of
entities with businesses similar to the Company's are subject to greater
volatility than the general market. In addition, the stock market from time to
time has experienced broad price and volume fluctuations that often have been
unrelated or disproportionate to the operating performance of individual
companies. These broad market fluctuations, as well as shortfalls in operating
results as compared to securities analysts' expectations or changes in such
analysts' projections or recommendations, and general economic market
conditions, may materially and adversely affect the market price of the Class A
Common Stock. In the past, following periods of volatility in the market price
of a company's securities, class action litigation has often been instituted
against such a company. Any such litigation brought against the Company could
result in substantial costs and a diversion of management's attention and
resources, which could materially adversely affect Nextera's business, operating
results and financial condition.
Dilution. Purchasers of shares of Class A Common Stock in the Offering will
experience immediate and substantial dilution in the pro forma net tangible book
value per share of Class A Common Stock after the Offering. To the extent
outstanding options to purchase Class A Common Stock are exercised, there will
be further dilution. There can be no assurance that the Company will not require
additional funds to support its working capital requirements or for other
purposes, in which case Nextera may seek to raise such additional funds through
public or private debt or equity financing or from other sources. There can be
no assurance that such additional financing will be available or that, if
available, such financing will be obtained on terms favorable to the Company and
would not result in additional dilution of Nextera's stockholders. See
"Dilution."
Shares Eligible for Future Sale; Registration Rights Agreement. Sales of
significant amounts of Common Stock in the public market after the Offering or
the perception that such sales will occur could materially adversely affect the
market price of the Class A Common Stock or the future ability of the Company to
raise capital through an offering of its equity securities. Of the shares of
Common Stock to be outstanding upon completion of the Offering, the
shares offered hereby will be eligible for
12
<PAGE> 14
immediate sale in the public market without restriction unless such shares are
purchased by "affiliates" of Nextera within the meaning of Rule 144 ("Rule 144")
under the Securities Act.
The remaining shares of Common Stock (including Class A
Common Stock issuable upon exchange of the Exchangeable Shares) held by existing
stockholders upon completion of the Offering will be "restricted securities" as
that term is defined in Rule 144. Restricted securities may be sold in the
public market only if registered or if they qualify for an exemption from
registration under the Securities Act. Directors, officers and certain
stockholders of the Company holding an aggregate of shares of
Class A Common Stock and shares of Class B Common Stock have
agreed that they will not sell, directly or indirectly, any Common Stock,
subject to certain exceptions, without the prior consent of Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") for a period of 180 days from the date
of this Prospectus (the "Lock-up Agreements"). In addition, Nextera's
Certificate of Incorporation provides that each holder of Common Stock, other
than the holders of the shares of Class A Common Stock acquired in the Offering,
agrees not to sell, directly or indirectly, any Common Stock, subject to certain
exceptions, without the prior consent of DLJ for a period of 180 days from the
date of this Prospectus. Subject to these Lock-up Agreements and the foregoing
provisions of the Company's Certificate of Incorporation, additional shares of
Class A Common Stock (including Class A Common Stock issuable upon conversion of
Class B Common Stock and the exchange of the Exchangeable Shares) will be
available for sale in the public market (subject in certain circumstances to
compliance with certain volume and other restrictions under Rule 144) as
follows: (i) shares will be eligible for sale 180 days after the
date of this Prospectus; and (ii) shares will become eligible
thereafter for sale under Rule 144 upon the expiration of the applicable
one-year holding periods. In addition, if the restrictions of the Lock-up
Agreements described above and the foregoing provisions of the Company's
Certificate of Incorporation were waived in full on the date hereof: (i)
shares of Common Stock would become eligible for sale in the
public market from and after the date of this Prospectus; and (ii)
shares of Common Stock would be eligible for sale in the public
market 90 days after the date of this Prospectus.
Following the date of this Prospectus, Nextera intends to register on one
or more registration statements on Form S-8 approximately shares
of Class A Common Stock issuable under the 1998 Equity Participation Plan. Of
the shares of Class A Common Stock issuable under the 1998 Equity
Participation Plan, shares were subject to outstanding options as of
September 1, 1998, of which will be exercisable at the time of
the Offering.
Upon completion of the Offering, the holders of shares of Class A
Common Stock and shares of Class B Common Stock (after conversion to Class A
Common Stock) will be entitled to certain registration rights with respect to
such shares. If such holders, by exercising their registration rights, cause a
large number of shares of Class A Common Stock to be registered and sold in the
public market, such sales could materially adversely affect the market price of
the Class A Common Stock. In addition, if the Company is required, pursuant to
such registration rights, to include shares held by such persons in a
registration statement which Nextera files to raise additional capital, the
inclusion of such shares could adversely affect the Company's ability to raise
needed capital. See "Management--Employee Benefit Plans," "Principal
Stockholders" and "Shares Eligible for Future Sale."
13
<PAGE> 15
THE COMPANY
The following discussion summarizes the Company's formation and certain
other significant events relating to its capital structure prior to the
Offering. For additional related information see "Management's Discussion and
Analysis of Financial Condition and Results of Operation--Liquidity and Capital
Resources" and "Certain Transactions."
Formation. The Company was formed on February 26, 1997 as Education
Technology Consulting, L.L.C. and renamed Nextera Enterprises, L.L.C. on April
11, 1997. The Company will operate as a Delaware limited liability company until
the consummation of the Exchange Transaction (as defined below). The initial
members of Nextera LLC were Nextera Enterprises Holdings, L.L.C. (formerly
Education Technology Consulting Holdings, LLC) ("NEH") and EDU, L.L.C. ("EDU"),
each of which was an affiliate of Knowledge Universe. In connection with the
commencement of their respective employment, Gresham T. Brebach, Jr., the
Company's President, Chief Executive Officer and Chairman of the Board of
Directors, Ronald K. Bohlin, the Company's Chief Operating Officer and Director,
Michael P. Muldowney, the Company's Chief Financial Officer, Debra I. Bergevine,
the Company's Vice President, Marketing, and certain additional individuals
became members of NEH. See "Certain Transactions--Investments in the Company."
Recapitalization. Effective as of April 30, 1998, approximately $48.0
million of Nextera LLC's contributed capital was redesignated as debt in the
form of (i) a debenture dated March 20, 1997 with a principal amount of $23.0
million, which matures on May 1, 2002 and bears interest at a rate of 10% per
annum (the "March Debenture") and (ii) a debenture dated January 5, 1998 with a
principal amount of $25.0 million, which matures on May 1, 2002 and bears
interest at a rate of 10% per annum (the "January Debenture" and together with
the March Debenture, the "Debentures"), and NEH was liquidated and dissolved. In
connection with these transactions, the former members of NEH became members of
Nextera LLC and interests in the January Debenture and March Debenture were
distributed to Knowledge Universe, Messrs. Brebach, Bohlin and Muldowney, Ms.
Bergevine and certain other employees of Nextera LLC. The March Debenture is
subordinated to the January Debenture. The interest on the principal amount of
the Debentures is deemed to have begun to accrue on the date the respective
redesignated capital contributions were originally contributed to Nextera LLC.
See "Use of Proceeds" and Note 9 of Notes to the Company's Consolidated
Financial Statements.
Transfer to Knowledge Enterprises. Effective August 5, 1998, Knowledge
Universe contributed all of its Class A Common Units and Class B Common Units of
Nextera LLC to Knowledge Universe, Inc. ("KU, Inc.") in exchange for shares of
its capital stock. Effective August 7, 1998, KU, Inc. and EDU contributed all of
their Class A Common Units and Class B Common Units of Nextera LLC to Knowledge
Enterprises in exchange for capital stock of Knowledge Enterprises (the "KE
Transaction"). See "Principal Stockholders."
Exchangeable Preference Shares. In connection with the Sibson Acquisitions,
Nextera LLC formed Sibson Acquisition Co., a wholly owned Canadian subsidiary,
which issued Exchangeable Preference Shares ("Exchangeable Shares") to the
holders of capital stock of Sibson Canada, Inc. The holders of Exchangeable
Shares may exchange such shares at any time for an aggregate of shares of
Class A Common Stock. The Exchangeable Shares are designed to provide an
opportunity for the shareholders of Sibson Canada, Inc. to achieve a Canadian
tax deferral in certain circumstances. The holders of Exchangeable Shares are
entitled to dividend and other rights equivalent to shares of Class A Common
Stock but are not entitled to vote on matters submitted to the holders of Class
A Common Stock until such time as the holders of Exchangeable Shares exchange
such shares for Class A Common Stock.
Exchange Transaction. Prior to the Offering, all of the members of Nextera
LLC (the "Members") other than the two entities that owned Sibson & Company,
L.P. prior to its acquisition by Nextera LLC (together, the "Sibson Entities")
will contribute all of their membership interests in Nextera LLC to Nextera in
exchange for Common Stock. The percentage interests and classes of Common Stock
received by each Member (other than the Sibson Entities) will correspond to the
percentage interests and classes of the Nextera LLC membership interests held by
such Member. Each Member that contributes Class A Common Units of Nextera LLC
will receive shares of Class A Common Stock and each member that contributes
Class B Common Units of Nextera LLC will receive shares of Class B Common Stock.
Contemporaneous with the exchange of membership interests of Nextera LLC for
Common Stock, the shareholders of the Sibson Entities will contribute all of the
issued and outstanding common stock of the Sibson Entities to Nextera in
exchange for shares of Class A Common Stock. The aggregate percentage interests
of Class A Common Stock that will be received by the shareholders of the Sibson
Entities will correspond to the percentage interests of Class A Common Units in
Nextera LLC held by the Sibson Entities (the collective contributions of
membership interests in Nextera LLC and capital stock of the Sibson Entities to
Nextera are referred to as the "Exchange Transaction"). After the Exchange
Transaction, the Company will hold directly 85.9% of the membership interests in
Nextera LLC and, indirectly through the Sibson Entities, will hold the remaining
14.1%. See "Principal Stockholders."
14
<PAGE> 16
USE OF PROCEEDS
The net proceeds to Nextera from the sale of the shares
offered by the Company pursuant to the Offering are estimated to be
approximately $ million ($ million if the Underwriters' over-allotment
option is exercised in full), at an assumed offering price of $ per share
after deducting the estimated underwriting discounts and commissions and
Offering expenses payable by the Company. The principal purposes of the Offering
are to create a public market for the Class A Common Stock, enhance Nextera's
ability to use its Class A Common Stock as a means of attracting, motivating and
retaining key employees, facilitate the Company's future access to public equity
markets, repay indebtedness, and obtain additional working capital. Nextera
intends to use the net proceeds from the Offering as follows:
(i) approximately $ million to repay outstanding principal and
interest under a $40 million revolving credit facility entered into
effective August 31, 1998 (the "Bridge Loan") which bears interest at the
rate of LIBOR plus 450 basis points (10.2% as of August 31, 1998) per
annum, and matures on February 28, 1999. The Company borrowed $38.0 million
under the Bridge Loan to finance the Sibson Acquisitions. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Underwriting."
(ii) approximately $ million to repay outstanding principal and
interest on the March Debenture and approximately $ million to repay
outstanding principal and interest on the January Debenture. All of the
interests in the Debentures are held by Knowledge Universe, Messrs.
Brebach, Bohlin and Muldowney, Ms. Bergevine, and two other employees of
Nextera. The indebtedness associated with the Debentures was incurred to
finance acquisitions and for general working capital purposes. See "The
Company--Recapitalization" and "Certain Transactions--Investments in the
Company."
(iii) approximately $ to pay accrued management fees to
Knowledge Universe. See "Certain Transactions--Management Agreement."
(iv) the remaining net proceeds for general corporate purposes.
Although Nextera examines potential acquisition opportunities from time to
time, the Company has no current plans, commitments, agreements or
understandings with respect to any material acquisitions or investments as of
the date of this Prospectus, and no portion of the net proceeds has been
allocated for any specific material acquisition or investment. Pending such
uses, Nextera intends to invest the net proceeds from the Offering in
short-term, investment-grade, interest-bearing securities. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
DIVIDEND POLICY
Nextera has never declared or paid any cash dividends on its capital stock.
The Company currently intends to retain all future earnings, if any, for use in
the operation and development of its business and, therefore, does not expect to
declare or pay any cash dividends on its Common Stock in the foreseeable future.
The payment of dividends in the future, if any, will be at the discretion of the
Board of Directors.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of Nextera as of June 30,
1998 on (i) a pro forma basis to give effect to the Sibson Acquisitions and the
Exchange Transaction and (ii) a pro forma as adjusted basis to give effect to
the sale of shares of Class A Common Stock offered hereby and the
application of the estimated net proceeds of the Offering at an assumed initial
public offering price of $ per share, after deducting estimated underwriting
discounts and commissions and Offering expenses payable by the Company. See "Use
of Proceeds." The information set forth below should be read in conjunction with
the Company's Consolidated Financial Statements and the related Notes thereto
and the Unaudited Pro Forma Combined Financial Statements included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
--------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Total short-term debt....................................... $40,064 $
Total long-term debt........................................ 53,915
Stockholders' equity (deficit):
Preferred Stock, $0.001 par value; 10,000,000 shares
authorized, no shares issued and outstanding, pro forma
and pro forma as adjusted.............................. -- --
Class A Common Stock, $0.001 par value; 50,000,000 shares
authorized, shares issued and outstanding,
pro forma, and shares issued and outstanding,
pro forma as adjusted(1)............................... 12,543
Class B Common Stock, $0.001 par value, 4,300,000 shares
authorized, shares issued and outstanding,
pro forma and pro forma as adjusted....................
Additional paid-in capital................................ -- --
Accumulated deficit....................................... (6,593)
------- ------
Total stockholders' equity (deficit)................... $ 5,950 $
------- ------
Total capitalization.............................. $99,929 $
======= ======
</TABLE>
- ------------------------------
(1) Excludes shares of Class A Common Stock reserved for issuance
under the 1998 Equity Participation Plan pursuant to which options to
purchase shares will be outstanding upon the closing of the
Offering. See "Management--Employee Benefit Plans." Also excludes
shares of Class A Common Stock issuable upon conversion of the
shares of the Company's Class B Common Stock. See "Description of
Capital Stock." Assumes the exchange of all Exchangeable Shares for
shares of Class A Common Stock. See "The Company--Exchangeable Preference
Shares."
16
<PAGE> 18
DILUTION
As of June 30, 1998, the pro forma net tangible book value of Nextera was
$ , or $ per share of Common Stock. Pro forma net tangible book value
per share gives effect to the Sibson Acquisitions and is equal to the amount of
total pro forma tangible assets less total pro forma liabilities, divided by the
total pro forma number of shares of Common Stock outstanding. After giving
effect to the sale of the shares of Class A Common Stock offered
hereby at an assumed initial public offering price of $ per share, and after
deducting the estimated underwriting discounts and commissions and Offering
expenses payable by the Company, the pro forma net tangible book value of
Nextera as of June 30, 1998 would have been $ , or $ per share of
Common Stock. This represents an immediate increase in pro forma net tangible
book value of $ per share of Common Stock to existing stockholders and an
immediate dilution of $ per share of Common Stock to new stockholders. The
following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share before the
Offering............................................... $
Increase per share attributable to new investors..........
------
Pro forma net tangible book value per share after the
Offering..................................................
------
Dilution per share to new investors......................... $
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1998,
the difference between the existing stockholders and new stockholders with
respect to the number of shares of Common Stock purchased from the Company, the
total consideration paid to Nextera and the average price paid per share by
existing stockholders and by new stockholders:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders................... % $ % $
New stockholders
--------- ----- ------ ------
Total......................... 100.0% $ 100.0%
========= ===== ====== ======
</TABLE>
The foregoing tables and calculations assume no exercise of the
Underwriters' over-allotment option and no exercise of options to purchase
shares of Class A Common Stock at a weighted average exercise
price of $ per share granted under the 1998 Equity Participation Plan
outstanding as of June 30, 1998. The issuance of Class A Common Stock upon the
exercise of the options granted under the 1998 Equity Participation Plan will
result in further dilution to new investors. See "Management--Employee Benefit
Plans," and "Shares Eligible for Future Sale."
17
<PAGE> 19
SELECTED CONSOLIDATED AND PRO FORMA COMBINED FINANCIAL DATA
The following selected financial data is qualified by reference to and
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Company's Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
The Statements of Operations Data presented below for the period from February
26, 1997 (date of inception) through December 31, 1997 and the Balance Sheet
Data as of December 31, 1997 have been derived from the Company's Consolidated
Financial Statements included elsewhere in this Prospectus, which have been
audited by Ernst & Young LLP, whose report with respect thereto is included
elsewhere in this Prospectus. The Statements of Operations Data for the six
months ended June 30, 1998 and the Balance Sheet Data as of June 30, 1998 have
been derived from the unaudited financial statements of Nextera. In the opinion
of management, the unaudited financial statements include all adjustments
(consisting only of normal and recurring adjustments and adjustments related to
the Company's equity recapitalization) necessary for a fair presentation of its
financial position and operating results for such periods. The Statement of
Operations data for the six months ended June 30, 1998 are not necessarily
indicative of the results to be expected for the year ending December 31, 1998
or any other future period. See the Company's Consolidated Financial Statements
and the related Notes thereto included elsewhere in this Prospectus.
The unaudited pro forma Statements of Operations Data for the year ended
December 31, 1997 and for the six months ended June 30, 1998 combine the
historical statements of operations of Nextera and the Acquired Companies as if
such acquisitions had been completed on the first day of each period presented.
The unaudited pro forma Balance Sheet Data as of June 30, 1998 combines the
historical balance sheets of the Company and Sibson as if the Sibson
Acquisitions had been consummated as of June 30, 1998. This pro forma data
should be read in conjunction with the respective Historical Financial
Statements of Nextera and the Acquired Companies (including the Notes thereto),
the Unaudited Pro Forma Combined Financial Statements (including the Notes
thereto), Management's Discussion and Analysis of Financial Condition and
Results of Operations, and other financial information of Nextera and the
Acquired Companies appearing elsewhere herein. The pro forma statements may not
be indicative of the results that would have actually been obtained had the
acquisitions reflected therein occurred on the dates indicated or which may be
obtained in the future.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)
-------------------------------------- ------------------------------------
PERIOD FROM
FEBRUARY 26, 1997
(DATE OF INCEPTION) FOR THE FOR THE FOR THE
THROUGH SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998 DECEMBER 31, 1997 JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues................................. $ 7,998 $22,095 $76,453 $48,502
Cost of revenues............................. 4,718 14,938 54,100 32,353
------- ------- ------- -------
Gross profit................................. 3,280 7,157 22,353 16,149
Selling, general and administrative
expenses................................... 5,306 7,296 18,332 13,116
Compensation expense......................... -- -- 4,126 --
Amortization expense......................... 255 568 2,859 1,419
------- ------- ------- -------
Loss from operations......................... (2,281) (707) (2,964) 1,614
Interest income (expense), net............... (32) (2,671) (4,008) (4,646)
------- ------- ------- -------
Loss before provision for income taxes....... (2,313) (3,378) (6,972) (3,032)
Provision for income taxes................... 702 200 455 142
------- ------- ------- -------
Net loss..................................... $(3,015) $(3,578) $(7,427) $(3,174)
======= ======= ======= =======
Net loss per share, basic and diluted(2)..... $ (0.74)
Weighted average shares outstanding, basic
and diluted................................ 4,061
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
AS OF ------------------------------
DECEMBER 31, 1997 HISTORICAL PRO FORMA(3)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 554 $ 2,921 $ 3,080
Working capital (deficit)................................. (335) 5,107 (27,002)
Total assets.............................................. 22,655 57,498 117,433
Total short-term debt..................................... 1,687 1,390 40,064
Total long-term debt...................................... 1,115 51,665 53,915
Total stockholders' equity (deficit)...................... 16,732 (3,905) 5,950
</TABLE>
- ------------------------------
(1) The pro forma selected combined financial data for the year ended December
31, 1997 and for the six months ended June 30, 1998 are presented as if the
acquisitions of the Acquired Companies had been consummated as of the first
day of each period presented. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Acquisitions" and Unaudited
Pro Forma Combined Financial Statements.
(2) See Note 2 of Notes to the Company's Consolidated Financial Statements for
information concerning the computation of historical net loss per share.
(3) Pro forma to give effect to the Sibson Acquisitions as if they had been
consummated as of June 30, 1998. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Unaudited Pro Forma
Combined Financial Statements.
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following section of this Prospectus contains certain forward-looking
statements that involve substantial risks and uncertainties. When used in this
section, the words "anticipate," "believe," "estimate," and "expect" and similar
expressions as they relate to the Company or its management are intended to
identify such forward-looking statements. Nextera's actual results, performance
or achievements could differ materially from the results, performance or
achievements expressed in, or implied by, these forward-looking statements.
Factors that could cause or contribute to such differences include those
discussed in "Risk Factors" and elsewhere in this Prospectus.
OVERVIEW
Nextera Enterprises, Inc. provides leading-edge business strategy,
operations improvement, organizational design and IT consulting services
primarily to Fortune 500 and other multinational companies. The Company provides
services in four practice areas, which enables it to offer a breadth and balance
of services that assist clients in achieving enhanced business performance by
anticipating and addressing their complex, multi-disciplinary consulting needs.
By developing dynamic business strategies and high performance business
processes and enhancing organizational effectiveness, the Company helps clients
identify and examine business problems and implement the strategic,
organizational and operational responses needed to solve such problems and
sustain performance improvement.
Nextera was founded in February 1997 and has focused on building its
portfolio of practice areas primarily through selective acquisitions and
internal growth. The Company has pursued an acquisition strategy that has
resulted in the acquisitions of the Acquired Companies. The Company's results of
operations have been, and will continue to be, affected by substantial annual
non-cash amortization charges for goodwill as a result of these acquisitions
being accounted for under the purchase method of accounting. Nextera will be
unable to account for future acquisitions under the pooling-of-interests method
of accounting. Accordingly, the Company will be required to account for
acquisitions under the purchase method of accounting, which may result in
substantial additional annual non-cash amortization charges for goodwill and
other intangible assets in Nextera's statements of operations. Intangible assets
are being amortized by Nextera on a straight-line basis over 5 years for
intangibles relating to personnel and over 40 years for all other intangibles,
including goodwill. In accordance with SFAS No. 121, the Company will
periodically evaluate whether recent events and circumstances have occurred that
indicate the acquired goodwill may warrant revision.
Nextera is affiliated with Knowledge Universe and Knowledge Enterprises and
from time to time has been engaged on an arm's-length basis to provide
consulting services for Knowledge Universe and its affiliates. The Company
expects that it may also be engaged to provide such services in the future. See
"Certain Transactions--Engagement of the Company by Knowledge Universe or its
Affiliates." Nextera expects to benefit from its association with Knowledge
Universe and Knowledge Enterprises through increased access to prospective
client contacts and other business opportunities and the potential ability of
Knowledge Universe and Knowledge Enterprises to enhance the Company's market
exposure, although there can be no assurance that these expected benefits will
be realized.
The Company generates net revenues by providing business and IT consulting
services primarily under time and materials, fixed-price or capped-fee billing
arrangements. Under time and materials billing arrangements, revenues are
recognized as the services are performed. Revenues on fixed-price and capped-fee
contracts are recognized using the percentage of completion method of accounting
and are adjusted monthly for the cumulative impact of any revision in estimates.
The Company determines the percentage of completion of its contracts by
comparing costs incurred to date to total estimated costs. Contract costs
include all direct labor and expenses related to the contract performance. On a
pro forma basis, fixed price or capped-fee billing arrangements accounted for
approximately 11.0% and 19.0% of Nextera's net revenues for the year ended
December 31, 1997 and for the six months ended June 30, 1998, respectively. See
"Risk Factors--Project Risks; Fixed Price Contracts." The Company believes that
the majority of its work will continue to be performed under time and materials
billing arrangements. Net revenues exclude reimbursable expenses
19
<PAGE> 21
charged to clients. The Company typically bills on a monthly basis to monitor
client satisfaction and manage its outstanding accounts receivable balances.
Substantially all of the Company's net revenues are derived from clients located
in the United States and Canada. The Company's 10 largest clients accounted for
approximately 29.1% and 36.1% of pro forma net revenues for the year ended
December 31, 1997 and for the six months ended June 30, 1998, respectively. For
the year ended December 31, 1997 and the six months ended June 30, 1998, none of
the Company's clients individually accounted for 10% or more of the Company's
pro forma net revenues. See "Risk Factors--Concentration of Revenues."
Gross profit is derived from net revenues less the cost of revenues, which
includes salaries, bonuses and benefits paid to consultants. Nextera's financial
performance is primarily based upon billing margin (billable daily rate less the
consultant's daily cost) and personnel utilization rates (billable days divided
by paid days). The Company monitors its engagements to manage billing and
utilization rates. Because most of the Company's engagements are billed on a
time and materials basis, increases in its cost of revenues are generally passed
along to the Company's clients. Generally, clients are billed for expenses
incurred by Nextera on the clients' behalf. In addition, Nextera closely
monitors and attempts to control expenses that are not passed through to its
clients. Incentive compensation expenses paid to consultants have a large
variable component relating to net revenues and profit and, therefore, vary
based upon the Company's ability to achieve its operating objectives.
Selling, general and administrative expenses consist of salaries and
benefits of certain senior management and other administrative personnel and
training, marketing and promotional costs. These expenses are associated with
the Company's development of new business and with the Company's management,
finance, recruiting, marketing and administrative activities. Incentive
compensation expenses for certain senior management also have a significant
variable component relating to net revenues and profit and, therefore, vary
based upon the Company's ability to achieve its operating objectives.
The Company's income tax rates may vary from the federal statutory rate of
34% predominately due to nondeductible goodwill amortization, the utilization of
various net operating loss carryforwards, state and local taxes and
nondeductible meal expenses. As of June 30, 1998, Symmetrix, Inc. ("Symmetrix")
had net operating loss carryforwards of approximately $5.8 million which arose
principally as a result of disqualifying dispositions of Symmetrix' previously
outstanding stock options. As a result of the ownership change of Symmetrix due
to its acquisition by the Company, these net operating losses are subject to
limitations under the Internal Revenue Code. See Note 6 of Notes to the
Company's Consolidated Financial Statements.
ACQUISITIONS
All acquisitions completed by Nextera have been accounted for under the
purchase method of accounting. Accordingly, the historical Consolidated
Financial Statements of the Company included in this Prospectus include
operating results of the Acquired Companies only from the effective date of each
respective acquisition and are not necessarily indicative of the future
financial condition or results of operations of the Company.
Effective July 30, 1997, Nextera acquired Symmetrix, a Massachusetts-based
management consulting and technology consulting company. Through Symmetrix, the
Company offers enhanced services in acquisition due diligence, customer
profitability, IT strategy assessment and design, construction, and deployment
of complete business systems. Symmetrix was acquired for $15.5 million in cash.
Effective January 5, 1998, Nextera acquired substantially all of the assets
and assumed certain liabilities of SiGMA Consulting, LLC ("SiGMA"), a New
York-based management consulting firm. Through SiGMA, the Company offers
consulting services focusing on change management and helping organizations
improve core business processes, including product development, manufacturing
and distribution, sales, and enterprise management. SiGMA was acquired for $10.0
million in cash and 669,000 shares of Class A Common Stock.
Effective March 31, 1998, Nextera acquired substantially all of the assets
and assumed certain liabilities of The Planning Technologies Group, Inc.
("PTG"), a Massachusetts-based strategy and management
20
<PAGE> 22
consulting firm. Through PTG, the Company offers strategy formulation, strategic
planning process design, and business process assessment and redesign services.
PTG was acquired for $6.7 million in cash and 214,000 shares of Class A Common
Stock.
Effective March 31, 1998, the Company acquired Pyramid Imaging, Inc.
("Pyramid"), a California-based consulting and technology firm. Through Pyramid,
the Company offers consulting services focused on providing technology-based
solutions within the areas of knowledge management, electronic commerce,
customer management, and human capital management. Pyramid was acquired for $9.2
million in cash and 586,667 shares of Class A Common Stock. In addition, the
Company agreed to an "earn-out" provision providing for the payment of up to an
additional $0.8 million in cash and 53,333 shares of Class A Common Stock upon
the achievement of certain revenue and pre-tax profit targets related to the
performance of Pyramid during the twelve months ending March 31, 1999.
Effective August 31, 1998, Nextera acquired substantially all the assets
and assumed certain liabilities of Sibson & Company, L.P. and acquired Sibson
Canada, Inc., human resources consulting firms based in New Jersey and Toronto,
Canada, respectively. Through Sibson, the Company provides human capital
consulting services offering human resource strategies, outsourcing assessments,
organizational designs, rewards/ incentives programs, performance management
processes and systems, and executive coaching services. Sibson also serves sales
and marketing organizations with sales strategy, selling process, sales channel
and selling effectiveness consulting. Sibson was acquired for $37.4 million in
cash and 2,810,900 shares of Class A Common Stock (including the Exchangeable
Shares).
RESULTS OF OPERATIONS
The following table sets forth the Company's results of operations for the
periods indicated. This information for quarterly periods has been prepared on
the same basis as the Consolidated Financial Statements and, in the opinion of
the Company's management, reflects all adjustments (consisting only of normal
and recurring adjustments and adjustments related to the Company's equity
recapitalization) necessary for the fair presentation of the information for the
periods presented.
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 26, 1997
(DATE OF INCEPTION) FOR THE THREE MONTHS ENDED
THROUGH --------------------------------------------------------------
DECEMBER 31, JUNE 30, SEPTEMBER 30 DECEMBER 31, MARCH 31, JUNE 30,
1997 1997(1) 1997 1997 1998 1998
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues............... $ 7,998 $ -- $ 3,039 $4,959 $ 8,186 $13,909
Cost of revenues........... 4,718 -- 1,851 2,867 5,623 9,315
------- ----- ------- ------ ------- -------
Gross profit............. 3,280 -- 1,188 2,092 2,563 4,594
Operating expenses:
Selling, general and
administrative
expenses.............. 5,306 987 1,848 2,471 2,886 4,410
Amortization expense..... 255 -- 101 154 224 344
------- ----- ------- ------ ------- -------
Loss from operations..... (2,281) (987) (761) (533) (547) (160)
Interest income
(expense), net........ (32) 3 8 (43) (1,567) (1,104)
------- ----- ------- ------ ------- -------
Loss before provision for
income taxes.......... (2,313) (984) (753) (576) (2,114) (1,264)
Provision for income
taxes................. 702 -- 280 422 125 75
------- ----- ------- ------ ------- -------
Net loss................... $(3,015) $(984) $(1,033) $ (998) $(2,239) $(1,339)
======= ===== ======= ====== ======= =======
</TABLE>
- ---------------
(1) During the period from February 26, 1997 (date of inception) through March
31, 1997, the Company incurred expenses of $34,000 which are included in the
three months ended June 30, 1997.
21
<PAGE> 23
The following table sets forth, for periods indicated, the percentage
relationship to net revenues of the Company's results of operations. This
information for quarterly periods has been prepared on the same basis as the
Consolidated Financial Statements and, in the opinion of the Company's
management, reflects all adjustments (consisting only of normal and recurring
adjustments and adjustments related to the Company's equity recapitalization)
necessary for the fair presentation of the information for the periods
presented.
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 26, 1997 FOR THE THREE MONTHS ENDED
(DATE OF INCEPTION) --------------------------------------------------------------
THROUGH JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
DECEMBER 31, 1997 1997 1997 1997 1998 1998
<S> <C> <C> <C> <C> <C> <C>
Net revenues................. 100% -- 100% 100% 100% 100%
Cost of revenues............. 59 -- 61 58 69 67
---- ---- ---- ---- ---- ---
Gross profit............... 41 39 42 31 33
Selling, general and
administrative
expenses................ 67 61 50 35 32
Amortization expense....... 3 3 3 3 2
---- ---- ---- ---- ---- ---
Loss from operations....... (29) (25) (11) (7) (1)
Interest income (expense),
net........................ 0 0 (1) (19) (8)
---- ---- ---- ---- ---- ---
Loss before provision for
income taxes............ (29) (25) (12) (26) (9)
Provision for income taxes... 9 9 8 1 1
---- ---- ---- ---- ---- ---
Net loss................... (38%) (34%) (20%) (27%) (10%)
</TABLE>
In light of the Company's inception on February 26, 1997, the number of
acquisitions completed and the absence of significant operations through June
30, 1997, management has decided to present a comparison of results for the
three months ended June 30, 1998 versus the three months ended March 31, 1998
and for the three months ended March 31, 1998 versus the three months ended
December 31, 1997 because it believes that such comparisons are the most
meaningful presentation of the Company's operating results.
All acquisitions completed by Nextera have been accounted for under the
purchase method of accounting. Accordingly, the historical Consolidated
Financial Statements of the Company included in the Prospectus include operating
results of the Acquired Companies only from the date of each respective
acquisition. As the Sibson Acquisitions were completed after June 30, 1998, the
following period-to-period comparisons do not reflect the Sibson Acquisitions.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 AND THREE MONTHS ENDED MARCH 31,
1998
Net Revenues. Net revenues increased 69.9% to $13.9 million for the three
months ended June 30, 1998 from $8.2 million for the three months ended March
31, 1998. This increase was due predominately to the net revenues generated by
PTG and Pyramid, which were acquired effective March 31, 1998, and to a lesser
extent from higher utilization rates and greater business levels at Symmetrix.
No net revenues from PTG or Pyramid were recorded by Nextera in the three months
ended March 31, 1998.
Gross Profit. Gross profit increased 79.2% to $4.6 million for the three
months ended June 30, 1998 from $2.6 million for the three months ended March
31, 1998. Gross margin increased to 33.0% for the three months ended June 30,
1998 from 31.3% for the three months ended March 31, 1998. The increase in gross
margin was due primarily to the addition of PTG and Pyramid and, to a lesser
extent, more effective utilization of consultants on billable projects and a
lower utilization of outside contractors, which decreased cost of revenues.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 52.0% to $4.4 million for the three months
ended June 30, 1998 from $2.9 million for the three months ended March 31, 1998.
As a percentage of net revenues, such expenses decreased to 31.7% for the three
months ended June 30, 1998 from 35.3% for the three months ended March 31, 1998.
The dollar increase was due primarily to the increase in the number of employees
attributable to the PTG and Pyramid acquisitions, as
22
<PAGE> 24
well as additional hirings. The decrease as a percentage of net revenues was due
primarily to a greater increase in net revenues in relation to the increase in
such expenses.
Interest Income (Expense), Net. Interest expense decreased 29.5% to $1.2
million for the three months ended June 30, 1998 from $1.6 million for the three
months ended March 31, 1998. This decrease was due primarily to the inclusion in
the three months ended March 31, 1998 of $0.8 million related to 1997 interest
on the Debentures, which was accrued in such period due to the recapitalization
of the Company. This decrease was partially offset by increased borrowings to
fund the PTG and Pyramid acquisitions. See "--Liquidity and Capital Resources,"
"Use of Proceeds" and Note 9 of Notes to the Company's Consolidated Financial
Statements.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND THREE MONTHS ENDED
DECEMBER 31, 1997
Net Revenues. Net revenues increased 65.1% to $8.2 million for the three
months ended March 31, 1998 from $5.0 million for the three months ended
December 31, 1997. This increase was due to the net revenues generated from
SiGMA, which was acquired under the purchase method of accounting on January 5,
1998, partially offset by reserves taken on a fixed fee contract which has now
been completed. No net revenues from SiGMA were recorded by Nextera for the
three months ended December 31, 1997.
Gross Profit. Gross profit increased 22.5% to $2.6 million for the three
months ended March 31, 1998 from $2.1 million for the three months ended
December 31, 1997. Gross margin decreased to 31.3% for the three months ended
March 31, 1998 from 42.2% for the three months ended December 31, 1997. The
decrease in gross margin was due primarily to reserves taken on a fixed-fee
contract which has been completed, partially offset by the increased gross
profit generated from SiGMA.
Selling, General and Administrative. Selling, general and administrative
expenses increased 16.8% to $2.9 million for the three months ended March 31,
1998 from $2.5 million for the three months ended December 31, 1997. As a
percentage of net revenues, such expenses decreased to 35.3% for the three
months ended March 31, 1998 from 49.8% for the three months ended December 31,
1997. The dollar increase was due primarily to the increase in the number of
employees attributable to the SiGMA acquisition as well as additional hirings.
The decrease as a percentage of net revenues was due primarily to a greater
increase in net revenues in relation to the increase in such expenses.
Interest Income (Expense), Net. Net interest expense increased to $1.6
million for the three months ended March 31, 1998 from $43,000 for the three
months ended December 31, 1997. This increase was due primarily to interest on
the Debentures which was accrued in the three months ended March 31, 1998, $0.8
million of which related to contributions made in 1997. See "--Liquidity and
Capital Resources," "Use of Proceeds" and Note 9 of Notes to the Company's
Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has funded its operations primarily through the
proceeds of equity issuances and borrowings. Nextera LLC initially issued common
and preferred equity units between February 1997 and April 1998 for total
proceeds of approximately $50.0 million. On April 30, 1998, in connection with
the recapitalization of Nextera LLC, the preferred units and a portion of the
common units were converted into the Debentures. The Debentures accrue interest
at 10% per annum, and interest on the principal amount of the Debentures was
deemed to have begun to accrue on the date the respective equity capital
contributions were originally made. The total Debentures outstanding, including
accrued interest, at June 30, 1998 was $50.7 million. The Company intends to
repay the outstanding principal balance of the Debentures plus accrued interest
with a portion of the proceeds of the Offering. See "Use of Proceeds," "Certain
Transactions--Investments in the Company" and Note 12 of Notes to the Company's
Consolidated Financial Statements.
As of June 30, 1998, the Company had utilized $41.1 million in connection
with acquisitions. Cash used by operations totaled $4.5 million and $0.1 million
for the period from February 26, 1997 (date of inception) through December 31,
1997 and the six months ended June 30, 1998, respectively.
23
<PAGE> 25
On August 31, 1998, the Company entered into the Bridge Loan. The Bridge
Loan is secured by substantially all of the Company's assets and contains
certain restrictive covenants. The Bridge Loan provides for financing in the
amount of $40.0 million, of which $38.0 million was used to finance the Sibson
Acquisitions. The Bridge Loan bears interest at the rate of LIBOR plus 450 basis
points (10.2% as of August 31, 1998) per annum and matures on February 28, 1999.
As of September 1, 1998, $38.0 million was outstanding under the Bridge Loan,
which will be repaid with a portion of the net proceeds of the Offering. See
"Use of Proceeds" and "Underwriting."
Net cash used in operating activities was $0.1 million for the six months
ended June 30, 1998. The primary components of the net cash used in operations
were a net loss of $3.6 million, an increase in accounts and notes receivable of
$1.7 million, which were partially offset by depreciation and amortization of
$0.9 million, an increase in accounts payable and accrued liabilities of $1.7
million, and an increase in accrued interest related to the Debentures of $2.7
million.
Net cash used in investing activities was $26.2 million for the six months
ended June 30, 1998. The primary components of the net cash used in investing
activities were (i) the acquisition of SiGMA in January 1998, the acquisition of
PTG effective in March 1998, and the acquisition of Pyramid effective in March
1998 totalling $25.8 million, exclusive of $1.5 million of cash acquired and
(ii) expenditures of $0.4 million for furniture, equipment and leasehold
improvements. See Note 1 of Notes to the Company's Consolidated Financial
Statements.
Nextera, through the Acquired Companies, had an aggregate of $8.4 million
under credit facilities (collectively, the "Credit Facilities") as of August 31,
1998. Interest rates on the Credit Facilities are based on prime or commercial
paper interest rates plus margins varying from 0% to 3%. The Credit Facilities
are secured by substantially all of the assets of the applicable borrower.
Collectively, on a pro forma basis, $4.3 million was outstanding under the
Company's Credit Facilities at June 30, 1998 and bore interest at a weighted
average rate of 8.8%. Certain of the Credit Facilities contain restrictive
covenants relating to maintenance of financial ratios, operating restrictions,
and restrictions of the payment of dividends to Nextera. The Company intends to
consolidate these Credit Facilities in a new credit arrangement, however there
can be no assurances that such new credit arrangement will be obtained, and if
so, when and on what terms.
The Company believes that the working capital generated from the net
proceeds from the Offering, together with available borrowings under the Credit
Facilities and cash flow expected to be generated from operations, will be
sufficient to finance the Company's currently anticipated capital requirements
for at least the next twelve months. There can be no assurance, however, that
the Company's actual needs will not exceed anticipated levels or that the
Company will generate sufficient net revenues to fund its operations in the
absence of other sources. There also can be no assurance that any additional
required financing will be available through additional bank borrowings, debt or
equity offerings or otherwise, or that if such financing is available, that it
will be available on terms favorable to the Company.
YEAR 2000 COMPLIANCE
Many currently installed computer systems are coded to accept only two
digit entries in the date code field. These date code fields need to be modified
or upgraded to accept four digit entries to distinguish 21st century dates from
20th century dates. Nextera has completed an assessment of its computer systems
for Year 2000 compliance. Although the Company does not believe that the costs
of addressing Year 2000 compliance issues with respect to Nextera's own systems
will materially adversely affect its business, operating results or financial
condition, the Company depends on smooth and timely interactions with its
vendors, clients and other third parties. Any unexpected costs or disruption in
the operations or activities of such vendors, clients or other third parties as
a result of Year 2000 compliance issues within such entities could materially
adversely affect Nextera's business, operating results and financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income ("Statement 130"). The Company will adopt
the provisions of Statement 130 during fiscal
24
<PAGE> 26
year 1998. At that time, the Company will be required to disclose comprehensive
income. Comprehensive income is generally defined as all changes in members'
equity (deficit) exclusive of transactions with owners such as capital
investments and dividends.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, Disclosures About Segments of an Enterprise and Related Information
("Statement 131"), which is required to be adopted for years beginning after
December 15, 1997. Management of the Company believes that they operate in only
one segment and accordingly does not expect the adoption of Statement 131 to
have a material impact on the Company's financial statement disclosures.
25
<PAGE> 27
BUSINESS
THE COMPANY
Nextera Enterprises, Inc. provides leading-edge business strategy,
operations improvement, organizational design and IT consulting services
primarily to Fortune 500 and other multinational companies. The Company provides
services in four practice areas, which enables it to offer a breadth and balance
of services that assist clients in achieving enhanced business performance by
anticipating and addressing their complex, multi-disciplinary consulting needs.
By developing dynamic business strategies and high performance business
processes and enhancing organizational effectiveness, the Company helps clients
identify and examine business problems and implement the strategic,
organizational and operational responses needed to solve such problems and
sustain performance improvement.
The Company's portfolio of practice areas includes Business Research
Services, Strategic Management Services, Human Capital Services, and Business
Performance Solutions. The Business Research Services practice provides in-depth
and forward-looking analyses of business challenges, frameworks, and innovative
business practices. The Strategic Management Services practice helps
organizations set and pursue their goals and develop the ability of senior
management to proactively refine and manage business strategies, action plans,
and core competencies as these goals are implemented throughout the
organization. The Human Capital Services practice assists clients to implement
organizational and strategic changes established by senior management through
all levels of the organization. The Business Performance Solutions practice
helps organizations solve complex operational issues through major business
transformation programs, redesigned business processes, best practices
adaptation, and the use of emerging technologies such as web-based technologies
and electronic commerce for high impact business process support systems and
knowledge management systems.
Nextera's flexible delivery model and its ability to leverage its knowledge
base enable it to provide timely and unbiased perspectives on clients'
enterprise-wide management problems and to cost-effectively implement
multi-disciplinary solutions. The Company's breadth of expertise enables it to
deliver services initially in any of its four practice areas and offers
opportunities to expand the scope of its engagements to include complementary or
follow-on services in other practice areas. The Company provides its services
across a broad spectrum of industries, including communications, consumer
products and services, entertainment, financial services, health care,
insurance, manufacturing, professional services, retail and technology.
Representative clients include The Chubb Corporation, International Business
Machines Corporation, Levi Strauss & Co., Mead Johnson & Company, National
Broadcasting Company, Inc. and SmithKline Beecham, PLC.
The Company was founded in February 1997 by executives with extensive
experience at major consulting firms and industry-leading companies. The Company
has focused on building its portfolio of practice areas through selective
acquisitions and internal growth to provide a balanced perspective on the
problems and issues facing its clients in today's competitive environment. As of
August 31, 1998, Nextera had 496 employees, including 355 consultants.
INDUSTRY BACKGROUND
Change is one of the most important factors driving demand for professional
consulting services. Increased competition, deregulation, globalization,
technological advances, and evolving organizational models are leading to
changes in the business environment. Traditional barriers to competition are
becoming less effective in protecting competitive positions. Regulatory changes
have led to increased competition both from within industries and from new
entrants from other market sectors. Commercial activity is becoming increasingly
global, requiring consideration of both domestic and international operations in
strategic decision-making and resource utilization. With the advent of the
Internet and electronic commerce, technology is increasingly being used in a
variety of innovative, strategic ways to create new products and services, open
new sales and marketing channels, and reduce costs and time-to-market for
products and services. Moreover, business and IT strategies continue to converge
as organizations recognize that technology can create new business opportunities
as well as support existing business. In response to these challenges and
opportunities,
26
<PAGE> 28
organizations are altering traditional approaches to overall strategy, business
processes, organizational design, and the use of IT.
Many organizations lack the skilled personnel, technical capabilities, and
time necessary to formulate strategies and implement changes needed to benefit
from these new challenges and opportunities. In addition, organizations must
continually keep pace with new technological and competitive developments, which
further strain internal resources. Moreover, organizations expect timely and
substantial economic returns from their investments in strategic initiatives and
organizational change. As a result, many organizations are increasingly
retaining third-party professionals for help and expertise.
Demand for professional consulting services is expected to grow rapidly.
According to an industry source, the worldwide market for professional
consulting services is estimated at $46.3 billion in 1997, and is projected to
increase to $88.5 billion in 2002. It is estimated that the worldwide market for
strategy and business consulting services will grow at an annual rate of 12%,
from $19.9 billion in 1997 to $34.9 billion in 2002. The worldwide market for IT
consulting is estimated to grow at an annual rate of 14%, from $12.7 billion in
1997 to $24.8 billion in 2002. It is estimated that the worldwide market for
custom application development and integration will grow at an annual rate of
15%, from $13.7 billion in 1997 to $28.8 billion in 2002. Moreover, the Company
believes that the professional consulting services industry is highly fragmented
and will experience consolidation as service providers seek to expand and
enhance service to clients.
Professional consulting services have traditionally been focused on issues
of business strategy, operations improvement, organizational design, and IT
consulting. Historically, consulting service providers have offered services
focusing on one or two of these issues and few providers have had the breadth of
expertise or balanced approach to providing services to address effectively
multi-disciplinary business problems. For example, service providers oriented
around strategy formulation and market assessment often provide some expertise
in addressing operational or organizational issues, but typically do not address
IT issues or opportunities.
Given the rapidly changing nature of today's business environment,
traditional approaches do not provide the broad perspective or range of
expertise required for a comprehensive examination of the causes of business
problems. Consequently, consulting service providers employing traditional
approaches do not offer the types of balanced and integrated solutions critical
to solving the multi-disciplinary problems that organizations currently face. In
order to solve such problems, organizations are demanding that third-party
service providers have experience in a breadth of practice areas. For example,
organizations increasingly seek assistance not only to formulate strategy, but
also to implement strategic processes that support ongoing strategic decision-
making. As a result, organizations now demand highly-participative, fact-driven
strategic management processes that focus on strategic objectives and explicitly
link business processes, human capital, and IT strategies.
NEXTERA ADVANTAGE
Through its portfolio of practice areas, Nextera offers a breadth and
balance of services that assist clients in achieving enhanced business
performance by anticipating and addressing their complex, multi-disciplinary
consulting needs. The Company helps organizations develop dynamic business
strategies and high performance business processes, and enhance organizational
effectiveness needed to achieve their visions and goals. The Company's flexible
delivery model, which combines expertise in business strategy, operations
improvement, organizational design, and IT consulting, along with its ability to
leverage its knowledge base, enables Nextera to solve its clients'
enterprise-wide management problems and deliver results which are timely and
cost-effective. The key elements of Nextera's advantage include:
Portfolio of Complementary Practice Areas. Through its portfolio of four
practice areas--Business Research Services, Strategic Management Services, Human
Capital Services, and Business Performance Solutions--the Company addresses its
clients' needs from varying perspectives and draws on its experience from each
to provide multi-disciplinary services to its clients. Nextera utilizes this
balanced perspective to help clients identify and examine business problems and
to develop and implement the strategic, operational, and organizational
responses needed to solve such problems and sustain performance improvement. As
a result,
27
<PAGE> 29
the Company, with its balanced perspective, offers objective and independent
services which are valued by organizations.
Experience and Expertise. Nextera's experience within industries and
practice areas enables its consultants to more fully and rapidly understand
their clients' businesses and the competitive industry environments in which
they operate. The Company's senior consulting executives average more than 20
years of consulting or industry experience and have all held senior level
positions in large organizations with management responsibility for large
numbers of consultants. Of the Company's consultants, 54% have more than 10
years of consulting, technical or industry experience and 52% have either
doctorate or master's degrees.
Long-term Client Relationships. The Company has established long-term
relationships with numerous clients, many of whom are Fortune 500 companies.
Through these relationships, the Company gains in-depth knowledge of its
clients' businesses and industries, which facilitates the Company's
identification of other complementary services and the ability to offer timely
services to these clients. As a result of these long-term relationships, the
Company has amassed significant expertise in a wide range of industries,
including the financial services, health care, utilities, and manufacturing
industries.
Flexible Delivery Model. Nextera's flexible delivery model enables it to
provide timely and unbiased perspectives on client problems and implement
multi-disciplinary solutions. Initially, the Company is able to deliver services
in any of its practice areas and then expand the scope of its engagements to
include complementary or follow-on services in other practice areas. Nextera
delivers its services through Client Service Teams with the support of Affinity
Groups. For each engagement, Nextera establishes a Client Service Team managed
by a senior-level client service director and comprised of consultants who are
selected to provide the appropriate combination of industry experience,
functional expertise, and geographic coverage. Client service teams enhance
overall client satisfaction by enabling the senior-level client service director
to provide a single point of contact for the client and the overall team to take
a multi-disciplinary approach to engagements. Client Service Teams are supported
by Affinity Groups, which are comprised of individuals from across the Company's
practice areas as well as third-party practitioners. Affinity Group members draw
from their respective client work, industry experience, and expertise to share
knowledge and experiences and develop methodologies and tools used in the
delivery of services.
Proprietary Information System and Scaleable Infrastructure. Nextera has
developed and is expanding its proprietary information system that facilitates
synergies across its practice areas and provides a scaleable infrastructure. The
foundation of the Company's IT infrastructure, Nextnet, provides the backbone
and architecture for a collection of integrated applications accessed through a
common, web-based user interface. Nextera's information system enables it to
share business information and knowledge among its consultants and to
effectively manage its corporate resources. Nextnet provides an interactive
environment through which defined groups, including Client Service Teams, can
collaborate to solve complex client problems. In addition to its information
system, Nextera's scaleable infrastructure incorporates recruiting, staff
development and deployment, collaborative marketing initiatives, sharing of
intellectual capital, and enterprise management systems.
Nextera Culture. The Company emphasizes professionalism, independence, and
objectivity among its consultants, and believes that these attributes are
reflected in the quality of the services it provides to its clients. Nextera
encourages teamwork and knowledge sharing to foster the professional growth of
its consultants and enhance the delivery of services to clients. The Company
seeks to sustain high retention rates for consultants achieved by the Acquired
Companies by retaining certain key cultural elements of each Acquired Company.
Toward this end, Nextera's compensation and incentive programs are designed to
give all consultants the ability to become equity participants in the Company.
Stability among the Company's consultants leads to consistency in the
composition of Client Service Teams and a reduced learning curve on new projects
for existing clients.
28
<PAGE> 30
GROWTH STRATEGY
The Company's objective is to be a leading provider of consulting services
in its four practice areas. The key elements of the Company's growth strategy
include:
Expand Service Offerings through Selective Acquisitions. Nextera intends to
continue to take advantage of the highly fragmented nature of the consulting
industry by acquiring select complementary consulting businesses. The Company is
developing its business around its practice areas and intends to broaden and
enhance its substantive expertise, service offerings, and geographic coverage
through strategic acquisitions. For example, to capitalize on the growth in
electronic commerce, the Company intends to evaluate potential acquisitions
designed to strengthen its capabilities in this area. From time to time, the
Company may also evaluate selective potential acquisitions outside these
practice areas if justified by client needs and market demand.
Leverage Cross-selling Opportunities. Nextera intends to provide additional
services and expand the scope of engagements during delivery to include
follow-on complementary activities. The Company believes that its integrated
approach to its portfolio of practice areas and its ability to cross-sell will
significantly enhance its ability to establish, sustain, and expand
relationships with clients. The Company's close working relationship with its
clients affords it the opportunity to become aware of, and to help define,
additional project opportunities and to market additional capabilities to its
clients. Client service opportunities are disseminated and coordinated in
real-time through Nextera's Business Development System, a proprietary Nextnet
application providing company-wide access and the identification and sharing of
sales, marketing, and other business data.
Attract and Retain Key Personnel. The Company intends to attract and retain
consultants who will enhance and complement the Company's service capabilities
by fostering a creative, innovative, collaborative work environment and through
competitive compensation and incentive programs. Nextera has a national
recruiting program aimed at hiring entry-level consultants as well as
consultants with experience at major management consulting firms, IT and process
consulting firms, technology companies, and from the industries that the Company
serves. Nextera's broad client base and flexible delivery model provide its
consultants diverse client experiences for professional growth. The Company
offers its consultants the opportunity to become equity participants in the
Company and has implemented policies and programs designed to accommodate
individual needs. For example, Nextera employs a "virtual office" concept to
provide travel and relocation flexibility where appropriate.
Market the Nextera Brand Name. Nextera intends to continue to build a
common identity for the services it provides under the Nextera brand name. The
Company actively promotes its name and capabilities through its sales and
marketing activities. The Company believes that using a common brand name for
its services enhances its visibility and recognition in the market and improves
its ability to compete for new and expanded business. Nextera also believes that
its association with Knowledge Enterprises and Knowledge Universe will increase
the Company's market exposure and provide prospective client contacts and other
business opportunities.
Expand International Presence. The Company intends to expand its
international presence through the growth of existing practices and selective
acquisitions of complementary consulting businesses in international markets.
The Company believes that clients will increasingly demand a global presence
from consulting service providers and Nextera intends to expand internationally
to participate in the market for global consulting services and to generate new
opportunities. Nextera's geographic priority is to expand its service offerings
in Europe within the Company's existing portfolio of practice areas.
SERVICE OFFERINGS
The Company's portfolio of practice areas enables it to provide a breadth
and balance of services to its clients. By offering clients a combination of
business strategy, operations improvement, organizational design, and IT
consulting services, Nextera helps clients identify and examine business
problems and develop and implement the strategic, organizational, and
operational initiatives needed to solve such problems and sustain
29
<PAGE> 31
performance improvement. Each of the Company's practice areas has a
well-articulated perspective that not only addresses its own particular service
offerings, but also promotes the logical flow of consulting services from
research to strategy to implementation and IT processes.
For example, the Business Research Services practice area provides analyses
which often demonstrate the need for organizations to develop a business
strategy to proactively respond to new competitive challenges. The Strategic
Management Services practice area assists organizations in developing such
business strategy that can be interactively managed throughout the organization.
In order to successfully implement such business strategy, the Human Capital
Services practice area provides innovative services to address the need for
flexible and leverageable organizational structures. Finally, the Business
Performance Solutions practice area develops the creative business processes and
technology-enabled solutions that are designed to yield the desired results.
The Company's four practice areas are as follows:
Business Research Services. The Company provides in-depth and
forward-looking analyses of business challenges, relevant business frameworks,
and innovative business practices. This analysis and commentary gives clients an
early understanding of innovative yet practical ways to increase their
competitive strengths. Nextera combines the expertise of its consultants with
that of clients, third-party practitioners, and academics to provide focused
research on issues of client concern, including strategic management, product
development, demand chain management, supply chain management, customer
relationship management, human capital development, and knowledge management. To
date, the Company has published two research reports and commenced its first
multi-client study. Nextera intends to expand its research services to include
additional publications, multi-client studies, conferences, and electronic
information services.
Strategic Management Services. The Company assists organizations in
developing, refining, and implementing successful business strategies. Nextera
works with the senior management of a client to develop multiple probable
scenarios based on external market conditions as well as current and potential
operational capabilities. Through the use of IT, the Company conducts analyses
of such information, assesses alternative strategies, and provides a basis for
consensus building. For example, a major regional bank, faced with significant
market discontinuity resulting from bank consolidations and the emergence of new
competitors, sought Nextera's assistance to determine strategies for future
growth. Through an analytically rigorous scenario planning process, the Company
helped its client decide to acquire a leading competitor and invest in emerging
business opportunities that could be critical to the client's future growth. As
a result of this new strategy, this client has strengthened its leading regional
market position.
Human Capital Services. Nextera helps clients invest in and gain leverage
from their human capital by identifying the impact on their workforce of various
strategies. The Company also assists in developing new organizational designs by
establishing programs for personnel selection, recruitment, development, and
succession, identifying the drivers of business performance, and helping
organizations achieve critical focus from their workforce through programs to
enhance "business literacy." The Company also helps clients communicate and
implement organizational changes designed to respond to new opportunities or
competitive threats and establish reward programs for broad employee groups,
managers and executives. For example, when a leading defense contractor
transitioned its market focus from government clients to commercial clients, it
experienced uneven earnings across diversified business units. Nextera assisted
in establishing corporate and business unit goals focused on sustaining
profitable growth and enhancing shareholder value. In addition, the Company
helped design short- and long-term incentives for the client's senior managers
that were based on the expected contribution of their individual areas of
responsibility.
Business Performance Solutions. Nextera helps organizations solve complex
operational issues through major business transformation programs, redesigned
business processes, best practices adaptation, and the use of emerging
technologies for high impact business process support systems and knowledge
management systems. The Company develops custom solutions that employ electronic
commerce and web-based technologies to redefine clients' processes for customer
service, new product development, and channel expansion. For example, Nextera
assisted a leading health care insurer in redesigning its process for developing
customized health care benefit plans in order to reduce operating costs while
maintaining or improving product quality and service delivery. As a result of
the Company's analysis, this client implemented Core Knowledge,
30
<PAGE> 32
Nextera's proprietary automated system, to capture, organize, and process health
care information and provide a framework for the development of new health care
plans customized to meet the specifications of the client's customers. Core
Knowledge uses object-oriented technology to facilitate the creation and reuse
of modules which can be easily accessed and modified in the development and
deployment of new health care plans. The Company believes that these Core
Knowledge applications will enable the client to improve accuracy, enhance
product delivery, and significantly reduce costs.
The following chart illustrates the Company's portfolio of practice areas:
Practice Areas
<TABLE>
<CAPTION>
BUSINESS STRATEGIC HUMAN BUSINESS
RESEARCH MANAGEMENT CAPITAL PERFORMANCE
SERVICES SERVICES SERVICES SOLUTIONS
<S> <C> <C> <C> <C>
Nextera Business Research............ O
Planning Technologies Group.......... O X
Sibson............................... X O X
Symmetrix Consulting Group........... X X O
SiGMA Consulting Group............... X X O
Pyramid Consulting Group............. X O
</TABLE>
O Primary Business Focus X Secondary Business Focus
[Practice Areas Chart]
ACQUISITIONS
Since inception, the Company has made the following acquisitions:
Symmetrix, Inc. Symmetrix was founded in 1985 and acquired by the
Company effective July 30, 1997. Through Symmetrix, the Company offers enhanced
services in acquisition due diligence, customer profitability, IT strategy
assessment, and the design, construction, and deployment of complete business
systems. Symmetrix primarily offers its services to the financial services,
health care, insurance, and utilities industries. Symmetrix is located in
Lexington, Massachusetts.
SiGMA Consulting, LLC. SiGMA commenced operations in 1991 and was
acquired by the Company effective January 5, 1998. Through SiGMA, the Company
offers consulting services focusing on change management and helping
organizations improve core business processes, including product development,
manufacturing and distribution, sales, and enterprise management. SiGMA
primarily offers its services to the manufacturing, high technology,
entertainment, and transportation industries. SiGMA, which employs a "virtual
office" concept for its consultants, maintains an office in Rochester, New York
and a development center in Boston, Massachusetts.
The Planning Technologies Group, Inc. PTG was founded in 1990 and
acquired by the Company effective March 31, 1998. Through PTG, the Company
offers strategy formulation, strategic planning process design, and business
process assessment and redesign services. PTG primarily offers its services to
the health care, insurance, financial services, consumer products,
manufacturing, and high technology industries. PTG is located in Lexington,
Massachusetts.
Pyramid Imaging, Inc. Pyramid was founded in 1993 and acquired by the
Company effective March 31, 1998. Through Pyramid, the Company offers consulting
services focused on providing technology-based solutions within the areas of
knowledge management, electronic commerce, customer management, and human
capital management. Pyramid primarily offers its services to the investment
banking and brokerage, investment management, commercial and retail banking,
insurance, utility, and high technology industries. Pyramid is located in San
Francisco, California and maintains an office in New York, New York.
31
<PAGE> 33
Sibson & Company, L.P. and Sibson Canada, Inc. Sibson & Company, L.P.
and Sibson Canada, Inc. were founded in 1959 and 1993, respectively, and
acquired by the Company effective August 31, 1998. Through Sibson, the Company
provides human capital consulting services offering human resource strategies,
outsourcing assessments, organizational designs, rewards and incentives
programs, performance management processes and systems, and executive coaching
services. The Company also serves sales and marketing organizations with sales
strategy, selling process, sales channel, and selling effectiveness consulting.
Sibson primarily offers its services to the health care, financial services,
professional services, consumer products, and high technology industries. Sibson
is located in Princeton, New Jersey, and Toronto, Canada and maintains offices
in New York, New York, Raleigh, North Carolina, Los Angeles, California,
Chicago, Illinois, and London, England.
CLIENTS AND REPRESENTATIVE ENGAGEMENTS
The Company's clients consist primarily of Fortune 500 and other
multinational companies. On a pro forma basis, the Company's ten largest clients
accounted for approximately 29% and 36% of its net revenues for the year ended
December 31, 1997 and the six months ended June 30, 1998, respectively, and no
clients in either such period accounted for 10% or more of the Company's pro
forma net revenues. Nextera has served a broad range of clients, including the
following:
<TABLE>
<S> <C> <C>
ENTERTAINMENT/TECHNOLOGY/ FINANCIAL SERVICES/INSURANCE PROFESSIONAL SERVICES
COMMUNICATIONS BancBoston Robertson Stephens Inc. Ernst & Young LLP
BellSouth Corporation The Chubb Corporation PricewaterhouseCoopers LLP
GTE Corporation Fleet Financial Group, Inc.
International Business ING Capital Corporation MANUFACTURING
Machines Massachusetts Mutual Life Insurance American Business Products
Corporation Company BE Aerospace
National Broadcasting Metropolitan Life Insurance Company Rockwell International
Company, Inc. NationsBanc Montgomery Securities LLC Corporation
Nelson Information, Inc. PaineWebber Group Inc.
Scientific-Atlanta, Inc. Wells Fargo & Company HEALTH CARE
RETAIL Olsten Corporation
CONSUMER PRODUCTS/SERVICES Levi Strauss & Co. Pfizer Inc
Mead Johnson & Company Polo Ralph Lauren Prudential HealthCare
Qualex, Inc. SmithKline Beecham, PLC
</TABLE>
Recent representative client engagements include the following:
Strategic Management Services. A major global insurance and financial
services company retained Nextera to develop a new corporate strategy for one of
its global businesses and to identify organizational and operational changes
needed to enable the client to pursue such new strategy. The Company's
consultants worked with the client's management team in a scenario based
planning process, which developed multiple probable future scenarios based on
external market factors as well as current and potential operational
capabilities, and then conducted simulations to test the effectiveness of
various strategies against each probable scenario. Using the results of these
simulations, the client's management team worked with Nextera to gain consensus
on their strategic direction. As a result of this process, the client decided to
pursue a strategy of focused growth and diversification, including selective
acquisitions. The client then worked closely with Nextera to conduct an
organizational alignment analysis, a highly structured process designed to
identify opportunities for work reduction and cost savings and to focus an
organization on the activities critical to providing the operational and
financial leverage necessary to execute the new strategy. The client has
estimated that the organizational alignment analysis identified annual cost
savings in excess of $100 million, which are expected to provide a financial
basis for the implementation of the client's new corporate strategy.
Human Capital Services. A leading consumer services company retained
Nextera to assist in addressing productivity and quality issues which the client
believed were hindering customer satisfaction and compressing margins.
Turn-around time demanded by customers had shortened and capital costs required
in this fast-
32
<PAGE> 34
evolving business made cost management critical. Resulting downward pressure on
employee compensation was causing higher employee turnover and the client's
management team believed that its ability to hire better qualified employees was
being undermined by its compensation structure. Nextera studied quality and
productivity performance at 50 of the client's sites and identified the critical
points where the workforce had the most leverage over the process. Nextera then
helped the client develop employee incentive programs tailored to each
facility's process and geared toward the leverage points that could drive
productivity, quality, and cost performance in that facility. In addition,
Nextera developed a comprehensive communication program to introduce and
implement the new programs. The Company believes that the introduction of these
programs contributed to improved quality and productivity, decreased employee
turnover and absenteeism, and reduced overtime costs.
Business Performance Solutions. A subsidiary of a Fortune 500 company
retained Nextera to redesign its finance function by addressing issues of
organizational effectiveness and technology support. Working closely with the
client's financial management, the Company clarified the goals and role of the
finance function and analyzed the organizational factors and systems critical to
achieving such redesign. Nextera initiated a comprehensive solution that
modified the finance processes and standardized the client's general ledger and
financial reporting requirements. These initiatives were followed by the
Company's examination and conversion of the chart of accounts used by various
financial subsystems to conform to the new standardized accounting and reporting
requirements. Nextera also assisted the client in a broad variety of finance
initiatives, including process reengineering and redesign of its enterprise-wide
IT architecture. The Company believes that its services have enabled the client
to realize efficiencies in the finance function's information collection,
analysis and reporting activities.
FLEXIBLE DELIVERY MODEL
Nextera's flexible delivery model provides clients with the full range of
the Company's expertise through a structured multi-disciplinary approach that
focuses on the needs and problems of each individual client. The Company's
breadth of expertise enables it to deliver services initially in any of its four
practice areas and expand the scope of its engagements to include complementary
or follow-on services in other practice areas. Nextera delivers its services
through Client Service Teams with the support of Affinity Groups. The key
elements of Nextera's flexible delivery model are as follows:
Client Service Teams. For each engagement, Nextera establishes a Client
Service Team managed by a senior-level client service director and comprised of
consultants who are selected to provide the appropriate combination of industry
experience, functional expertise, and geographic coverage. Client service teams
enhance overall client satisfaction by enabling the senior-level client service
director to provide a single point of contact for the client and the overall
team to take a multi-disciplinary approach to engagements. In addition, Client
Service Teams increase visibility of potential opportunities and enhance the
Company's ability to establish strong relationships with the client's senior
executives. As a result, the Client Service Team develops an in-depth
understanding of the client's needs and focuses the Company's various service
capabilities to meet such needs, providing substantial value to the client.
Client Service Teams emphasize the Company's diverse capabilities to clients and
regularly cross-market across its practice areas.
Affinity Groups. Client Service Teams are supported by Affinity Groups,
which are comprised of individuals from across the Company's practice areas and
third-party practitioners. Affinity Group members draw from their respective
client work, industry experience and expertise to share knowledge and best
practices and develop methodologies and tools used in the delivery of services
to clients and in the training of the Company's consultants. Affinity Groups
utilize Nextnet to facilitate the sharing of information and have formal and
informal meetings and discussions. The Company has established Affinity Groups
for the financial services, health care, and utilities industries and intends to
establish Affinity Groups for other key industry sectors and practice areas as
needed.
33
<PAGE> 35
SALES AND MARKETING
Nextera employs a variety of business development and marketing techniques
to reach prospective clients, including industry seminars featuring
presentations by Company personnel, trade press coverage, an Internet site, and
authoring of articles and other publications regarding market trends, emerging
business challenges and the Company's service offerings. Nextera's marketing
leadership team, with members from each of the Acquired Companies, sets the
Company's overall marketing priorities and provides oversight to key marketing
initiatives. The principal buyers of the Company's services are chief executive
officers and other senior executives with organizational policy-making
responsibilities.
Nextera also relies to a significant extent on the efforts of its
employees, particularly its senior consulting executives and consultants, to
market the Company's services. Nextera employs a "selling practitioner" model in
which the Company's senior consulting executives are responsible for identifying
and obtaining new business as well as managing client engagements and
relationships. Consultants are encouraged to generate business from both
existing and new clients and successful efforts are rewarded with increased
compensation and promotions. Nextera's close working relationships with many of
its clients enable the Company's consultants to become aware of, and to help
define, additional project opportunities, thereby facilitating the Company's
ability to market additional capabilities to its clients. In pursuing new
business, the Company's consultants emphasize Nextera's overall capabilities and
experience while also promoting the expertise of the particular employees who
will work on the project. In addition, Nextera's senior consulting executives
meet with prospective clients and senior managers in organizations where Nextera
has worked in the past to make them aware of the Company's capabilities.
MANAGEMENT INFORMATION SYSTEM
Nextera is investing in Nextnet to improve individual and organizational
performance through shared business information and knowledge. Nextnet provides
the backbone and architecture for a collection of integrated applications
accessed through a common web-based user interface. Nextnet facilitates rapid
delivery responsiveness by identifying the most qualified resources available
for each client engagement and encourages collaboration around resolution of
client problems, increasing quality, and expertise. The Company also utilizes
Nextnet to help integrate newly acquired companies into the Company's portfolio
of practice areas and rapidly adopt Nextera's business practices and procedures.
The initial Nextnet application areas are the Nextera Business Development
System, the NextHR Employee Management System, and an integrated financial
system. The Business Development System, which is updated weekly by engagement
managers of each Acquired Company, provides company-wide management of all sales
leads and business opportunities and enhances Nextera's ability to set
priorities and manage future business. The first release of the NextHR Employee
Management System will provide skills and expertise location, staffing requests,
and job posting information. A company-wide, third-party financial management
system is being implemented and will be integrated with other Nextnet
applications.
In addition to its application focus, Nextnet offers an interactive
environment through which user groups can share knowledge throughout the
Company. Using Nextnet, members of Client Service Teams and Affinity Groups
share timely information, tools, methodologies, and insights, which are
delivered to each consultant's personalized home page, creating a focused,
interactive environment.
Nextnet has been developed to have a flexible and scaleable application
architecture. A high-performance SQL database drives the data elements of
Nextnet, while a full-text search engine enables knowledge management services.
Application logic is built using the latest web-development tools, and the
applications are delivered through an integrated browser interface.
34
<PAGE> 36
HUMAN RESOURCES
Nextera's ability to attract and retain experienced consultants to work on
client engagements and to generate new business is a key factor to Nextera's
success. As of August 31, 1998, the Company had 496 employees, including 355
consultants.
Consulting Personnel. Nextera's senior consulting executives have an
average of 20 years of consulting or industry experience. Many of these senior
consulting executives are nationally recognized as experts in their respective
fields, having published articles and lectured extensively. Eight of the
Company's senior consulting executives have founded and managed successful
management and IT consulting firms. Of Nextera's consultants, 54% have more than
10 years of consulting, technical or industry experience and 52% have either
doctorate or master's degrees. This flexibility in staffing engagements enhances
Nextera's ability to apply its resources as needed to meet the demands of its
clients.
Recruiting. Nextera seeks to hire consultants who not only have strong
analytical skills but also are creative, intellectually curious, and driven to
develop expertise in new practice areas and industries. The Company has a
national recruiting program aimed at hiring entry-level consultants as well as
consultants with experience at major management consulting, IT and process
consulting firms, technology companies, and from the industries that Nextera
serves. Entry-level consultants are recruited from leading graduate business
administration programs and undergraduate IT programs. In connection with its
hiring efforts, Nextera employs internal recruiters, retains several executive
search firms, and relies on personal and business contacts to recruit
experienced consultants.
Compensation. In order to attract and retain consultants, Nextera offers
what it believes to be attractive compensation and benefits packages. Employee
compensation is a combination of base salary, bonus opportunity, and equity
participation. Consultant bonuses are paid out of bonus pools established for
each of the Acquired Companies through an annual operations planning process. A
consultant's bonus is based on the consultant's individual contributions and the
Acquired Company's performance. See "Management -- Bonus Plans."
Training and Career Development. The Company has a career enhancement
program that offers its consultants career enrichment opportunities and access
to individualized training. Career development programs are specific to the
needs of each Acquired Company and all employees receive a combination of
orientation training, skills enhancement training, mentoring, and periodic
briefings. Nextera's flexible staffing methods are supported by its NextHR
Employee Management System to provide the Company's consultants with diverse and
challenging client experiences.
Independent Contractors. When necessary, the Company supplements its
consultants on certain engagements with independent contractors. The Company
believes that its practice of retaining independent contractors on a
per-engagement basis provides it with greater flexibility in providing
specialized skills and adjusting consultant levels in response to changes in
demand for its services. Nextera's Business Research practice also employs
third-party practitioners and academics to conduct directed research on key
business performance topics.
COMPETITION
The consulting services industry includes a large number of competitors, is
subject to rapid change, and is highly competitive. Nextera believes that the
principal competitive factors in the consulting services industry are
reputation, industry expertise, analytical ability, service, and price. The
Company believes it competes favorably with respect to these factors. Nextera
also believes that its ability to compete depends in part on a number of factors
outside of its control, including the ability of its competitors to hire, retain
and compensate consultants, offer lower-priced services, respond to client
requirements, and develop advanced services or technology. Nextera's primary
competitors include participants from a variety of market segments, including
general management consulting companies, boutique management consulting firms
that provide specialized services or focus on certain industries, "Big Five" and
other accounting firms, systems consulting and implementation firms, application
software firms, service groups of computer equipment companies, outsourcing
companies, and systems integration companies. Many of these competitors have
significantly greater
35
<PAGE> 37
financial, technical, and marketing resources, and greater name recognition than
Nextera. In addition, many of these competitors have been operating for a
significantly longer period of time than the Company and have established
long-term client relationships. Nextera also competes with its clients' internal
resources, particularly where the resources represent a fixed cost to the
client. Such competition may impose additional pricing pressures on Nextera. In
addition, Nextera faces intense competition in its efforts to recruit and retain
qualified consultants. There can be no assurance that the Company will be able
to compete successfully with its existing competitors or any new competitors.
INTELLECTUAL PROPERTY RIGHTS
The Company's success has resulted, in part, from its analytical templates,
application frameworks, software objects and customizable applications. Nextera
relies upon a combination of nondisclosure, confidentiality, license and other
contractual arrangements and trade secret, copyright and trademark laws to
protect its proprietary rights and the proprietary rights of third parties from
whom the Company licenses intellectual property. In addition, Nextera generally
limits the distribution of its proprietary information. There can be no
assurance, however, that the steps taken by Nextera to protect its intellectual
property will be adequate to deter misappropriation of proprietary information
or that the Company will be able to detect unauthorized use and take appropriate
steps to enforce its intellectual property rights or that competitors will not
be able to develop similar or functionally equivalent methodologies.
Furthermore, effective copyright and trade secret protection may be unavailable
or limited in certain foreign countries, and no assurance can be given that
foreign copyright and trade secret laws will adequately protect the Company's
intellectual property rights. Although Nextera believes that its services do not
infringe on the intellectual property rights of others and that it has all
rights necessary to utilize the intellectual property employed in its business,
there can be no assurance that Nextera's employees will not misappropriate the
intellectual property of others. Accordingly, the Company is subject to the risk
of claims alleging infringement of third-party intellectual property rights. Any
such claims could require the Company to spend significant sums in litigation,
pay damages, develop non-infringing intellectual property or acquire licenses to
the intellectual property that is the subject of asserted infringement. The
Company presently holds no patents or registered copyrights.
FACILITIES
The Company's corporate headquarters is located in Lexington, Massachusetts
in a leased facility consisting of approximately 6,900 square feet, under a
four-year lease that expires in 2002. The Company also occupies leased office
space in Los Angeles, California; San Francisco, California; Chicago, Illinois;
Boston, Massachusetts; Lexington, Massachusetts; Princeton, New Jersey; New
York, New York; Rochester, New York; Raleigh, North Carolina; Toronto, Canada;
and London, England. The Company believes that its existing facilities are
adequate to meet its current requirements and that suitable space will be
available as needed on terms acceptable to the Company.
LEGAL PROCEEDINGS
From time to time the Company is involved in legal proceedings, claims and
litigation arising in the ordinary course of business, the outcome of which, in
the opinion of management, would not have a material adverse effect on the
Company.
36
<PAGE> 38
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND OTHER SENIOR MANAGERS
The directors, executive officers, and other senior managers of the Company
and their respective ages as of September 1, 1998, and positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Directors and Executive Officers
Gresham T. Brebach, Jr. ........................ 57 President, Chief Executive Officer,
and Chairman of the Board of Directors
Ronald K. Bohlin................................ 46 Chief Operating Officer and Director
Michael P. Muldowney............................ 34 Chief Financial Officer
Debra I. Bergevine.............................. 48 Vice President, Marketing
Robert F. Staley, Jr............................ 44 Chief Technology Officer
Roger Brossy.................................... 39 Director and Managing Director, Sibson
Ralph Finerman.................................. 62 Director
Steven B. Fink(1)(2)............................ 47 Director
Stanley E. Maron(2)............................. 50 Director
Richard V. Sandler(2)........................... 50 Director
Other Senior Managers
Dwight L. Gertz................................. 46 Managing Director, Symmetrix
Michael Martindale.............................. 54 Managing Director, SiGMA
Michael J. Shepherd............................. 35 Managing Director, Pyramid
Mason S. Tenaglia............................... 42 Managing Director, PTG
</TABLE>
- ------------------------------
(1) Member of the Compensation Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.
Gresham T. Brebach, Jr. currently serves as President, Chief Executive
Officer, and Chairman of the Board of Directors of the Company, positions he has
held since its inception. Prior to founding the Company, Mr. Brebach was
Executive Vice President of Renaissance Solutions, Inc. from January 1995 to
February 1997. Mr. Brebach was Senior Vice President of Digital Equipment
Corporation from March 1993 to August 1994 and a Director of McKinsey & Co., a
management consulting firm, from December 1989 to March 1993. In 1988, Mr.
Brebach founded ICG, Inc., an IT consulting firm, and operated such firm until
it was acquired by McKinsey & Co. in December 1989. Prior to such time, Mr.
Brebach was Managing Partner of Andersen Consulting, North America, a leading
systems integration and consulting firm, from 1986 to 1988. Mr. Brebach also
serves as a director of Aspen Technology.
Ronald K. Bohlin currently serves as Chief Operating Officer and a Director
of the Company, positions he has held since its inception. Prior to founding the
Company, Mr. Bohlin was Senior Vice President of Renaissance Solutions from
November 1994 to February 1997. Mr. Bohlin was Vice President, Strategic
Services of Digital Equipment Corporation from October 1993 to November 1994,
Vice President, Corporate Marketing of Analog Devices, Inc. from February 1992
to October 1993, and a Principal of McKinsey & Co. from 1981 to 1992.
Michael P. Muldowney joined the Company in May 1997 as Vice President,
Finance and currently serves as Chief Financial Officer, a position he has held
since May 1998. Mr. Muldowney is a certified public accountant and, prior to
joining the Company, Mr. Muldowney was Corporate Controller as well as a
Principal of Mercer Management Consulting, Inc., ("Mercer"), from 1992 to May
1997, and held various other financial management positions with Mercer from
1989 to 1992. Mr. Muldowney was a Senior Auditor of Marsh & McLennan Companies,
Inc. from 1986 to 1989.
37
<PAGE> 39
Debra I. Bergevine currently serves as Vice President, Marketing of the
Company, a position she has held since April 1997. Prior to joining Nextera, Ms.
Bergevine was Director of Marketing & Investor Relations of Renaissance
Solutions, Inc. from March 1995 to April 1997. Ms. Bergevine served as Director
of Marketing and in various other management capacities with Digital Equipment
Corporation from 1980 to 1995.
Robert F. Staley, Jr. currently serves as Chief Technology Officer of the
Company, a position he has held since April 1997. Prior to joining Nextera, Mr.
Staley was a Managing Consultant of Renaissance Solutions, Inc. from March 1995
to March 1997. Mr. Staley served as the head of the Database Technology Group
of, as well as holding various other managerial and technical positions with,
Lotus Development Corporation from 1986 to March 1995.
Roger Brossy currently serves as a Director of the Company, a position he
has held since August 1998. Mr. Brossy was elected as a Director of the Company
pursuant to a stockholders agreement. See "Certain Transactions--Stockholders
Agreement." Mr. Brossy also serves as Managing Director, Sibson, and has held
various management and consulting positions with Sibson since 1985. From 1981 to
1985, Mr. Brossy was a consultant with Hay Associates, a human resources
consulting firm.
Ralph Finerman currently serves as a Director of the Company, a position he
has held since August, 1998. Mr. Finerman is the President of RFG Financial
Group, Inc., a financial consulting firm, a position he has held since 1994.
From 1983 to 1994, Mr. Finerman was in private practice as a certified public
accountant and attorney.
Steven B. Fink currently serves as a Director of the Company, a position he
has held since its inception. Mr. Fink is Vice Chairman of Knowledge Universe, a
position he has held since January 1995, and serves as an officer or director of
other privately-held affiliates of Knowledge Universe. From December 1993 to
December 1996, Mr. Fink was Vice President of MC Group, an investment advisory
and business consulting firm. Mr. Fink was President of East West Capital, an
investment advisory firm, from 1989 to December 1993. Mr. Fink is a director of
Spring Group, PLC, a business consulting firm.
Stanley E. Maron currently serves as a Director of the Company, a position
he has held since its inception. Mr. Maron also currently serves as a Director
of Knowledge Universe. Mr. Maron is a senior partner in the law firm of Maron &
Sandler, a Professional Corporation, which was formed in September 1994. Mr.
Maron specializes in corporate and tax law. Prior to forming Maron & Sandler,
Mr. Maron was a senior partner of Buchalter, Nemer, Fields & Younger, a law
firm, which he joined as an associate in 1975.
Richard V. Sandler currently serves as a Director of the Company, a
position he has held since its inception. Mr. Sandler also currently serves as
President of EDU. Mr. Sandler is a senior partner in the law firm of Maron &
Sandler, a Professional Corporation, which was formed in September 1994. Mr.
Sandler specializes in general securities and business law. Prior to forming
Maron & Sandler, Mr. Sandler was a partner of Victor & Sandler, a law firm.
Dwight L. Gertz currently serves as Managing Director, Symmetrix and has
held various management positions with Symmetrix since October 1, 1996. Prior to
joining Symmetrix, Mr. Gertz served as Vice-President of Mercer from December
1993 through October 1996, where Mr. Gertz managed Mercer's Boston office. From
June 1993 through November 1993, Mr. Gertz was a sales and marketing consultant
to Kinetic Dispersion, Inc., an industrial machinery manufacturer.
Michael Martindale currently serves as Managing Director, SiGMA and has
held various management positions with SiGMA since 1991. Prior to co-founding
SiGMA, Mr. Martindale held various management positions with Rank Xerox and
Xerox Corporation from 1979 to 1991.
Michael J. Shepherd currently serves as Managing Director, Pyramid and has
held various management positions with Pyramid since January 1993. Prior to
co-founding Pyramid, Mr. Shepherd held various management positions with
Andersen Consulting and Booz Allen & Hamilton, a business consulting firm.
Mason S. Tenaglia currently serves as Managing Director, PTG and has held
various management positions with PTG since 1990. Prior to co-founding PTG, Mr.
Tenaglia was Sr. Vice President of MicroMentor, Inc., a consulting and executive
development firm, from 1986 to 1989.
38
<PAGE> 40
BOARD OF DIRECTORS
The Company's Certificate of Incorporation and its Bylaws provide that the
Company's Board of Directors will consist of not less than seven nor more than
thirteen members, the exact number to be fixed from time to time by resolution
adopted by the directors of the Company. The Board of Directors currently
consists of seven directors. Directors will be elected by the holders of Class A
Common Stock and Class B Common Stock voting together as a class with the
holders of Class A Common Stock entitled to one vote per share and the holders
of the Class B Common Stock entitled to ten votes per share. See "Risk Factors--
Control by Knowledge Enterprises, Inc.; Effect of Class B Common Stock" and
"Description of Capital Stock." Pursuant to the Stockholders Agreement, dated as
of August 31, 1998 (the "Stockholders Agreement"), the stockholders of the
Company prior to the Offering (including Knowledge Enterprises) agreed to vote
their shares of Common Stock to elect Sibson's manager or senior managing
principal to the Board of Directors. Mr. Brossy was elected to the Board of
Directors pursuant to the Stockholders Agreement.
BOARD COMMITTEES
Audit Committee. The Board of Directors has established an audit committee
(the "Audit Committee") consisting of Messrs. Fink, Maron, and Sandler. The
Audit Committee makes recommendations concerning the engagement of independent
public accountants, reviews with the independent public accountants the plans
and results of the audit engagement, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees, and reviews
the adequacy of the Company's internal accounting controls.
Compensation Committee. The Board of Directors has established a
compensation committee (the "Compensation Committee"), currently consisting of
Mr. Fink. Prior to the consummation of the Offering, the Company intends to
identify and elect an additional director who will serve as a member of the
Compensation Committee. The Compensation Committee determines compensation for
the Company's senior executive officers and administers the 1998 Equity
Participation Plan.
The Company may from time to time form other committees as circumstances
warrant. Such committees will have authority and responsibility as delegated by
the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current member of the Compensation Committee of the Board of Directors
is Mr. Fink. Prior to the consummation of the Offering, the Company intends to
identify and elect an additional director who will serve as a member of the
Compensation Committee. There are no Compensation Committee interlocks.
DIRECTOR COMPENSATION
Directors are reimbursed for all expenses incurred in connection with
attendance at Board of Directors and Committee meetings, but do not otherwise
receive any compensation for services as a director. Following the Offering,
Nextera intends to evaluate director compensation and may implement a more
extensive program for directors who are not employed by the Company.
39
<PAGE> 41
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or accrued for the
period from February 26, 1997 through December 31, 1997 for the Company's Chief
Executive Officer and its four other most highly compensated executive officers
whose compensation exceeded $100,000 (collectively, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL SECURITIES
COMPENSATION UNDERLYING
-------------------- OPTIONS
SALARY BONUS (# OF SHARES)(1)
<S> <C> <C> <C>
Gresham T. Brebach, Jr................................... $611,837(2) $100,000 --
Chief Executive Officer
Ronald K. Bohlin......................................... 362,509(3) 65,000 --
Chief Operating Officer
Michael P. Muldowney..................................... 116,666 24,000 --
Chief Financial Officer
Debra I. Bergevine....................................... 113,333 18,000 --
Vice President, Marketing
Robert F. Staley, Jr..................................... 124,924 20,000 60,000
Chief Technology Officer
</TABLE>
- ------------------------------
(1) All options are for Class A Common Stock.
(2) Includes $ consisting of guaranteed bonus amounts earned in 1997.
(3) Includes $ consisting of guaranteed bonus amounts earned in 1997.
BONUS PLANS
As a key component of the annual compensation program, the Company has
implemented a bonus plan designed to recognize individual and Acquired Company
performance. The bonus plan is funded by the performance of each Acquired
Company (other than Sibson) and is intended to complement base compensation
while providing incentive and recognition for exceptional individual and team
efforts in meeting and exceeding such Acquired Company's operating targets. All
employees with three months or more of service are eligible to participate.
Employee target bonus percentages range from 10% to 50% of the individual's base
salary, dependent on their classification. Bonus calculations are dependent upon
an employee's target bonus percentage, individual performance rating, annualized
service as well as the final performance of the applicable Acquired Company.
Sibson & Company, LLC, a subsidiary of the Company ("Sibson LLC") has
established an Annual Incentive Plan, the principal purpose of which is to
attract and motivate the principals and certain employees of Sibson LLC by
providing them with the opportunity to participate in Sibson LLC's success.
Bonus awards under the plan are distributed semi-annually to the participants
from an award pool based upon the performance of the individual participant and
Sibson LLC during such six-month period and the target bonus award for the
participant as established by Sibson LLC management. This plan provides for an
annual award pool based on Sibson LLC's financial performance and is
administered by Sibson LLC management, subject to the Company's approval with
respect to the establishment of performance criteria for the individual
participants and Sibson LLC.
40
<PAGE> 42
OPTION GRANTS
The following table summarizes individual grants of options to purchase
Class A Common Stock granted during the period from February 26, 1997 through
December 31, 1997 to the Named Executive Officers.
STOCK OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL 1997 ($/SH) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Gresham T. Brebach, Jr.... -- -- -- -- -- --
Ronald K. Bohlin.......... -- -- -- -- -- --
Michael P. Muldowney...... -- -- -- -- -- --
Debra I. Bergevine........ -- -- -- -- -- --
Robert F. Staley, Jr......
</TABLE>
- ------------------------------
(1) The potential realizable values are based on an assumption that the stock
price of the Company's Class A Common Stock will appreciate at the annual
rate shown (compounded annually) from the date of grant until the end of the
option term. The Board of Directors has determined that the fair market
value of the Company's Class A Common Stock on the date of grant was $0.20
per share. These values do not take into account amounts required to be paid
as income taxes under the Internal Revenue Code and any applicable state
laws or option provisions providing for termination of an option following
termination of employment, non-transferability or vesting. These amounts are
calculated based on the requirements promulgated by the Commission and do
not reflect the Company's estimate of future stock price growth of the
shares of the Class A Common Stock, nor do they give effect to any actual
appreciation in the Class A Common Stock. Actual gains, if any, on stock
option exercises are dependent on the future performance of the Class A
Common Stock and overall stock market conditions.
FISCAL YEAR-END OPTION VALUE TABLE
None of the Named Executive Officers exercised any Company options during
the period from February 26, 1997 to December 31, 1997. The following table sets
forth certain information with respect to the value of the options as of
December 31, 1997 held by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS(#) AT FISCAL YEAR END($)(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Gresham T. Brebach, Jr......................... -- -- -- --
Ronald K. Bohlin............................... -- -- -- --
Michael P. Muldowney........................... -- -- -- --
Debra I. Bergevine............................. -- -- -- --
Robert F. Staley, Jr...........................
</TABLE>
- ------------------------------
(1) Options are in-the-money if the market value of the shares covered thereby
is greater than the option exercise price. This calculation is based on the
fair market value at December 31, 1997 of $0.25 as determined by the Board
of Directors.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Gresham T. Brebach, Jr. dated
March 3, 1997 (the "Brebach Agreement"). The Brebach Agreement provides for a
term of three years. Such term may be extended for an additional period of two
years with 90 days written notice prior to the expiration of the initial term.
Pursuant to the Brebach Agreement, Mr. Brebach is employed as the Company's
Chief Executive
41
<PAGE> 43
Officer and receives an annual base salary of $500,000, a guaranteed annual
bonus of $150,000, and an additional annual bonus of up to one-third of his base
salary, in an amount to be determined by the Board of Directors of the Company,
as well as benefits under the Company's benefit plans. Pursuant to the Brebach
Agreement, Mr. Brebach purchased Class A Common Units of NEH at an aggregate
purchase price of $40,000 (which units were ultimately converted into
shares of Class A Common Stock and shares of Class B Common Stock),
subject to the Company's right to repurchase at original cost up to (i) 80% of
such interests in the event Mr. Brebach is terminated or leaves the employ of
the Company prior to one year after commencement of employment, (ii) 60% of such
interests in the event Mr. Brebach is terminated or leaves the employ of the
Company after one year but prior to two years after commencement of employment,
(iii) 40% of such interests in the event Mr. Brebach is terminated or leaves the
employ of the Company after two years but prior to three years after
commencement of employment, and (iv) 20% of such interests in the event Mr.
Brebach is terminated or leaves the employ of the Company after three years but
prior to four years after commencement of employment. The Company's right to
repurchase any portion of Mr. Brebach's interests in the Company shall terminate
if Mr. Brebach leaves the employ of the Company prior to March 3, 2000 for any
reason other than death, disability, cause, voluntary termination, or if the
Company elects not to extend the term past March 3, 2000. The Brebach Agreement
also provides that in the event the Company terminates Mr. Brebach's employment,
other than for cause, retirement, disability or death, the Company shall (i) pay
Mr. Brebach the balance of his base salary to which he would have been entitled
to receive through the end of the then applicable term and (ii) continue to
provide benefits upon the same terms and conditions then in effect on the date
of termination through the then applicable term or until Mr. Brebach is employed
elsewhere. The Brebach Agreement provides that a change of control of the
Company shall have no effect on Mr. Brebach's financial interests pursuant to
the Brebach Agreement. Mr. Brebach is also subject to noncompetition,
nondisclosure, post-employment cooperation, and nonsolicitation covenants.
The Company has an employment agreement with Ronald K. Bohlin dated April
1, 1997 (the "Bohlin Agreement"). The Bohlin Agreement provides for an initial
term of three years. Such initial term may be extended for an additional period
of two years with 90 days written notice prior to the expiration of the initial
term. Pursuant to the Bohlin Agreement, Mr. Bohlin is employed as the Company's
Chief Operating Officer and receives an annual base salary of $350,000, a
guaranteed annual bonus of $100,000, and an additional annual bonus of up to 25%
of his base salary, in an amount to be determined by the Board of Directors of
the Company, as well as benefits under the Company's benefit plans. Pursuant to
the Bohlin Agreement, Mr. Bohlin purchased Class A Common Units of NEH at an
aggregate purchase price of $20,000 (which units were ultimately converted into
shares of Class A Common Stock and shares of Class B Common
Stock), subject to the Company's right to repurchase at original cost up to (i)
80% of such interests in the event Mr. Bohlin is terminated or leaves the employ
of the Company prior to one year after commencement of employment, (ii) 60% of
such interests in the event Mr. Bohlin is terminated or leaves the employ of the
Company after one year but prior to two years after commencement of employment,
(iii) 40% of such interests in the event Mr. Bohlin is terminated or leaves the
employ of the Company after two years but prior to three years after
commencement of employment, and (iv) 20% of such interests in the event Mr.
Bohlin is terminated or leaves the employ of the Company after three years but
prior to four years after commencement of employment. The Company's right to
repurchase any portion of Mr. Bohlin's interests in the Company shall terminate
if Mr. Bohlin leaves the employ of the Company prior to April 1, 2000 for any
reason other than death, disability, cause, voluntary termination, or if the
Company elects not to extend the term past April 1, 2000. The Bohlin Agreement
also provides that in the event the Company terminates Mr. Bohlin's employment
prior to April 1, 2000, other than for cause, retirement, disability or death,
the Company shall (i) pay Mr. Bohlin the balance of his base salary to which he
would have been entitled to receive through the end of the then applicable term
and (ii) continue to provide benefits upon the same terms and conditions then in
effect on the date of termination through the then applicable term or until Mr.
Bohlin is employed elsewhere. The Bohlin Agreement provides that a change of
control of the Company shall have no effect on Mr. Bohlin's financial interests
pursuant to the Bohlin Agreement. Mr. Bohlin is also subject to noncompetition,
nondisclosure, post-employment cooperation, and nonsolicitation covenants.
The Company entered into an employment agreement with Michael P. Muldowney
dated April 25, 1997 (the "Muldowney Agreement"). The Muldowney Agreement
provides for a term of one year, renewable by
42
<PAGE> 44
the Company for additional periods of one year each upon at least 90 days prior
notice to Mr. Muldowney. The Company has renewed the Muldowney Agreement for an
additional one year period. Pursuant to the Muldowney Agreement, Mr. Muldowney
is employed as the Company's Chief Financial Officer and receives an annual base
salary of $182,000 and an annual bonus of up to 30% of his base salary, in an
amount to be determined by the Board of Directors of the Company, as well as
benefits under the Company's benefit plans. Pursuant to the Muldowney Agreement,
Mr. Muldowney purchased Class A Common Units of NEH at an aggregate purchase
price of $5,000 (which units were ultimately converted into shares of
Class A Common Stock and shares of Class B Common Stock), subject to the
Company's right to repurchase such shares at fair market value, provided that in
the event Mr. Muldowney voluntarily terminates his employment or is dismissed
for cause prior to April 25, 2000, the Company has the right to repurchase such
shares at cost. Mr. Muldowney is also subject to noncompetition, nondisclosure,
and nonsolicitation covenants.
The Company entered into an at-will employment agreement with Debra I.
Bergevine dated March 25, 1997 (the "Bergevine Agreement"). Pursuant to the
Bergevine Agreement, Ms. Bergevine is employed as the Company's Vice President,
Marketing and receives an annual base salary of $170,000 and an annual bonus of
up to 20% of her base salary, in an amount to be determined by the Board of
Directors of the Company, as well as benefits under the Company's benefit plans.
Pursuant to the Bergevine Agreement, Ms. Bergevine purchased Class A Common
Units of NEH at an aggregate purchase price of $5,000 (which units were
ultimately converted into shares of Class A Common Stock and shares
of Class B Common Stock), subject to the Company's right to repurchase such
shares at its then fair market value, provided that in the event Ms. Bergevine
voluntarily terminates her employment or is dismissed for cause prior to March
25, 2000, the Company has the right to repurchase such shares at cost. Ms.
Bergevine is also subject to noncompetition, nondisclosure, and nonsolicitation
covenants.
The Company entered into an at-will employment agreement with Robert F.
Staley, Jr. dated March 25, 1997 (the "Staley Agreement"). Pursuant to the
Staley Agreement, Mr. Staley is employed as the Company's Chief Technology
Officer and receives an annual base salary of $170,000 and an annual bonus of up
to 15% of his base salary, in an amount to be determined by the Board of
Directors of the Company, as well as benefits under the Company's benefit plans.
Pursuant to the Staley Agreement, Mr. Staley received options to purchase
shares Class A Common Stock at an exercise price of per share. These
options vest in equal annual installments over four years. Mr. Staley is also
subject to noncompetition, nondisclosure, and nonsolicitation covenants.
Sibson LLC entered into an employment agreement with Roger Brossy dated
August 31, 1998 (the "Brossy Agreement"). The Brossy Agreement provides for a
term of two years, as well as automatic renewal on each subsequent anniversary
for subsequent one-year terms unless either Mr. Brossy or Sibson LLC gives
written notice to the other not less than sixty days prior to such anniversary.
Pursuant to the Brossy Agreement, Mr. Brossy receives an annual base salary of
$250,000, an initial annual target bonus equal to 60% of his annual base salary
pursuant to Sibson LLC's Annual Incentive Plan, as well as benefits under Sibson
LLC's benefit plans. Pursuant to the Brossy Agreement, Mr. Brossy purchased
1,554 shares of Class A Common Stock at a price of $0.14 per share. The Brossy
Agreement also provides that upon Sibson LLC's termination of Mr. Brossy's
employment, other than for cause, retirement, disability or death, Sibson LLC
shall (i) pay Mr. Brossy the balance of his base salary and a pro-rata share of
the applicable bonus to which he would have been entitled to receive through the
end of the then applicable term and (ii) continue to provide benefits upon the
same terms and conditions then in effect on the date of termination through the
then applicable term. Mr. Brossy is also subject to a Noncompete,
Non-Solicitation, Proprietary Information, Confidentiality and Inventions
Agreement.
EMPLOYEE BENEFIT PLANS
1998 Equity Participation Plan. Nextera's 1998 Equity Participation Plan
provides incentives for officers, key employees and consultants of the Company
and its subsidiaries through granting of options, restricted stock and other
awards ("Awards"). In addition to Awards made to officers, key employees or
consultants, the 1998 Equity Participation Plan permits the granting of options
("Director Options") to the Company's independent non-employee directors.
43
<PAGE> 45
Under the 1998 Equity Participation Plan, not more than
shares of Class A Common Stock (or the equivalent in other equity securities)
are authorized for issuance upon exercise of options, stock appreciation rights
("SARs"), and other Awards, or upon vesting of restricted or deferred stock
awards. The maximum number of shares which may be subject to options or stock
appreciation rights granted under the 1998 Equity Participation Plan to any
individual in any calendar year cannot exceed . As of September
1, 1998, options to purchase shares of Class A Common Stock were
outstanding under the 1998 Equity Participation Plan.
Prior to the closing of the Offering, the Board of Directors of the Company
will administer the 1998 Equity Participation Plan. After the closing of the
Offering, the Compensation Committee of the Board or another committee thereof
(the "Committee") will administer the 1998 Equity Participation Plan with
respect to grants to key employees or consultants of the Company and the full
Board of Directors will administer the 1998 Equity Participation Plan with
respect to Director Options. The Committee will consist of at least two members
of the Board of Directors, each of whom is a "non-employee director" for
purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
("Rule 16b-3") and, with respect to options and SARs which are intended to
constitute performance-based compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), an "outside director" for the
purposes of Section 162(m) of the Code. Subject to the terms and conditions of
the 1998 Equity Participation Plan, the Board of Directors or Committee has the
authority to select the persons to whom Awards are to be made, to determine the
number of shares to be subject thereto and the terms and conditions thereof, and
to make all other determinations and to take all other actions necessary or
advisable for the administration of the 1998 Equity Participation Plan. The
Board of Directors or Committee may delegate to certain officers of the Company
its authority to select the persons to whom Awards are to be made, to determine
the number of shares to be subject thereto and the terms and conditions thereof.
In addition, the Board of Directors has discretion to determine the terms and
conditions of Director Options and to interpret and administer the 1998 Equity
Participation Plan with respect to Director Options. The Committee (and the
Board of Directors) are also authorized to adopt, amend and rescind rules
relating to the administration of the 1998 Equity Participation Plan.
Options, SARs, restricted stock and other Awards under the 1998 Equity
Participation Plan may be granted to individuals who are then officers or other
key employees of the Company or any of its present or future subsidiaries. Such
Awards also may be granted to consultants of the Company selected by the Board
of Directors or Committee for participation in the 1998 Equity Participation
Plan. Non-employee directors of the Company may be granted NQSOs (as defined
herein) by the Board of Directors. The Committee may grant or issue stock
options, SARs, restricted stock, deferred stock, dividend equivalents,
performance awards, stock payments and other stock related benefits, or any
combination thereof to key employees and consultants. Each Award will be set
forth in a separate agreement with the person receiving the Award and will
indicate the type, terms and conditions of the Award.
Nonqualified Stock Options ("NQSOs") will provide for the right to purchase
Class A Common Stock at a specified price which, except with respect to NQSOs
intended to qualify as performance-based compensation under Section 162(m) of
the Code, may be less than fair market value on the date of grant (but not less
than par value), and usually will become exercisable (in the discretion of the
Board of Directors) in one or more installments after the grant date, subject to
the participant's continued employment with the Company and/or subject to the
satisfaction of individual or Company performance targets established by the
Board of Directors and/or the Company. NQSOs may be granted for a term of up to
ten (10) years, as specified by the Board of Directors.
Incentive Stock Options ("ISOs"), will be designed to comply with the
provisions of the Code and will be subject to certain restrictions contained in
the Code. Among such restrictions, ISOs must have an exercise price not less
than the fair market value of a share of Class A Common Stock on the date of
grant, may only be granted to key employees, must expire within a specified
period of time following the Optionee's termination of employment, and must be
exercised within the ten years after the date of grant; but may be subsequently
modified to disqualify them from treatment as ISOs. In the case of an ISO
granted to an individual who owns (or is deemed to own) at least 10% of the
total combined voting power of all classes of
44
<PAGE> 46
stock of the Company, the 1998 Equity Participation Plan provides that the
exercise price must be at least 110% of the fair market value of a share of
Class A Common Stock on the date of grant and the ISO must expire upon the fifth
anniversary of the date of its grant.
Restricted Stock may be sold to any key employee or consultant at various
prices (but not below par value) and made subject to such restrictions as may be
determined by the Committee. Restricted stock, typically, may be repurchased by
the Company at the original purchase price if the conditions or restrictions are
not met. In general, restricted stock may not be sold, or otherwise transferred
or hypothecated, until restrictions are removed or expire. Purchasers of
restricted stock, unlike recipients of options, will have voting rights and will
receive dividends prior to the time when the restrictions lapse.
Deferred Stock may be awarded to any key employee or consultant, typically
without payment of consideration, but subject to vesting conditions based on
continued employment or on performance criteria established by the Committee.
Like restricted stock, deferred stock may not be sold, or otherwise transferred
or hypothecated, until vesting conditions are removed or expire. Unlike
restricted stock, deferred stock will not be issued until the deferred stock
award has vested, and recipients of deferred stock generally will have no voting
or dividend rights prior to the time when vesting conditions are satisfied.
SARs may be granted to any key employee or consultant in connection with
stock options or other Awards, or separately. SARs granted by the Committee in
connection with stock options or other Awards will provide for payments to the
holder based upon increases in the price of the Company's Class A Common Stock
over the exercise price of the related option or other Awards. Except as
required by Section 162(m) of the Code with respect to an SAR intended to
qualify as performance-based compensation as described in Section 162(m) of the
Code, there are no restrictions specified in the 1998 Equity Participation Plan
on the exercise of SARs or the amount of gain realizable therefrom, although
restrictions may be imposed by the Board of Directors or Committee in the SAR
agreements. The Committee may elect to pay SARs in cash or in Class A Common
Stock or in a combination of both.
Dividend Equivalents may be granted to any key employee or consultant by
the Board of Directors or the Committee. The amount of the Dividend Equivalents
represent the value of the dividends per share paid by the Company, calculated
with reference to the number of shares covered by the stock options, Deferred
Stock, Performance Awards, SARs or other Awards held by the participant.
Performance Awards may be granted to any key employee or consultant by the
Committee. Generally, these Awards will be based upon specific performance
targets and may be paid in cash or in Class A Common Stock or in a combination
of both. Performance Awards may also include bonuses which may be granted by the
Committee which may be payable in cash or in Class A Common Stock or in a
combination of both.
Stock Payments may be received by any key employee or consultant selected
by the Committee in the manner determined from time to time by the Committee.
The number of shares of Class A Common Stock or an option or other right to
purchase Class A Common Stock shall be determined by the Committee, and may be
based upon performance criteria as determined by the Committee.
The 1998 Equity Participation Plan prohibits any participant in the plan
from, without the prior written consent of the representatives of the
Underwriters and subject to certain exceptions, selling or otherwise disposing
of any shares of Class A Common Stock or options to acquire shares of Class A
Common Stock during the 180-day period following the date of this Prospectus.
Retirement Plans. Nextera and certain subsidiaries sponsor retirement
savings plans (the "Retirement Plans") under Section 401(k) of the Code for the
benefit of employees meeting certain minimum service requirements. Eligible
employees may elect to contribute to the plan subject to limitations established
by the Code. The trustees of the Retirement Plans select investment
opportunities from which participants may choose to contribute. The Company
matches up to 25% of the first 4% of eligible participant contributions for
employees of PTG, Pyramid, SiGMA and the Company's Executive Officers and
administrative personnel. The Company has agreed to match 25% of total
contributions (subject to the limitations of the Code) for individuals who are
active employees of Symmetrix as of December 31, 1998. Other contributions are
made at
45
<PAGE> 47
the discretion of the Company. On a pro forma basis, the Company made
contributions to the Retirement Plans of $139,000 for the year ended December
31, 1997.
Sibson LLC maintains a defined contribution profit-sharing plan (the
"Profit-Sharing Plan") providing retirement benefits to eligible employees of
Sibson LLC. Contributions by the Company to the Profit-Sharing Plan are at the
discretion of the management of Sibson LLC, subject to overall budgetary control
by Nextera. Participants are eligible to make elective deferral contributions,
without matching by Sibson LLC. Sibson LLC may also make qualified non-elective
contributions. For the year ended December 31, 1997 on a pro forma basis, Sibson
LLC contributed $1.5 million to the Profit-Sharing Plan. Sibson LLC intends to
make additional contributions to the Profit-Sharing Plan in the future as
determined by Sibson management.
Other. The Company maintains customary health and benefit plans for its
employees. In addition, Sibson LLC currently provides post-retirement medical
benefits for Sibson LLC employees who retire after age 50 with at least 15 years
of service. Any such Sibson retiree may elect to receive medical coverage under
Sibson LLC's medical program until the earlier of age 65 or the retiree's death.
Sibson LLC pays 75% of the annual cost of the comprehensive medical coverage and
the retiree pays the remaining 25%. In connection with the Sibson Acquisitions,
the Company committed to maintain this post-retirement medical coverage (and all
other Sibson employee benefit programs) through December 31, 1999, subject to
certain limited exceptions, and the termination of applicable employment
agreements.
46
<PAGE> 48
CERTAIN TRANSACTIONS
Loans to Certain Officers. NEH made loans to Gresham T. Brebach, Jr., the
Company's Chief Executive Officer, Michael P. Muldowney, the Company's Chief
Financial Officer and Debra I. Bergevine, the Company's Vice President,
Marketing, the proceeds of which were used to purchase from NEH Preferred Units
of NEH. These loans were evidenced by promissory notes, dated January 2, 1998,
executed by the respective individuals in favor of NEH, and secured by a
security interest in the respective membership units purchased by these
individuals. All of the foregoing promissory notes bear interest at 10% per
annum and mature on January 2, 2003, subject to mandatory prepayment upon the
happening of certain events. The principal amounts of the promissory notes
executed by Messrs. Brebach and Muldowney and Ms. Bergevine are $576,000,
$72,000 and $62,000, respectively. All of the foregoing promissory notes and
security documents were contributed to, and are now held by, the Company. The
foregoing Preferred Units purchased by Messrs. Brebach and Muldowney and Ms.
Bergevine were ultimately converted to a 1.2%, 0.1% and 0.1% interest,
respectively, in the Debentures.
Management Agreement. Effective March 1, 1997, Nextera entered into an oral
agreement with Knowledge Universe whereby Knowledge Universe provided certain
management and advisory services to the Company, for which the Company agreed to
pay a management fee of $10,000 per month to Knowledge Universe. Accrued
management fees of approximately $ will be paid from the proceeds of the
Offering. See "Use of Proceeds." Said agreement was terminated effective as of
the date of this Prospectus.
Engagement of the Company by Knowledge Universe or its Affiliates. The
Company was engaged by Knowledge Universe to perform certain reviews and render
advice in connection with a potential acquisition of a third-party by Knowledge
Universe. The total amount billed to Knowledge Universe by the Company in
connection with this engagement amounted to approximately $100,000 in 1998. In
addition, the Company was engaged by Knowledge Universe at various times to
provide advice relating to general business strategy and human resources. The
amount billed to Knowledge Universe by the Company in connection with these
engagements amounted to approximately $269,000 in 1997 and 1998.
The Company was engaged at various times by Productivity Point
International, LLC ("PPI"), an affiliate of Knowledge Universe, to provide
strategy, business operations and IT advice. The total amount billed to PPI by
the Company in connection with these engagements amounted to approximately
$439,000 from June 1997 to August 1998. In addition, the Company was engaged at
various times by TEC Worldwide, Inc. ("TEC"), an affiliate of Knowledge
Universe, to provide strategy, business operations and IT advice. The total
amount billed to TEC by the Company in connection with these engagements
amounted to approximately $152,000 from January 1998 to August 1998.
Knowledge Universe, PPI, TEC and other affiliates of Knowledge Universe may
engage the Company to provide various consulting services in the future. Such
future transactions will be entered into on an arm's-length basis in accordance
with Delaware law.
Investments in the Company. From February 26, 1997 through April 30, 1998,
Knowledge Universe purchased Class A Common Units of NEH for aggregate
consideration of $ (net of a subsequent redemption), which were ultimately
converted into shares of Class A Common Stock and shares of
Class B Common Stock. Also during this period, EDU purchased Class A Common
Units of NEH for aggregate consideration of $ , which were ultimately
converted into shares of Class A Common Stock and shares of Class B
Common Stock. Pursuant to the KE Transaction, ownership of the Class A Common
Stock and Class B Common Stock arising out of the foregoing transactions was
transferred to Knowledge Enterprises. See "The Company--Transfer to Knowledge
Enterprises." During the same period, Knowledge Universe purchased Class B
Preferred Units of NEH for aggregate consideration of $47.1 million, which were
ultimately converted into a 98.1% interest in the Debentures.
Between January 2, 1998 and April 30, 1998, Messrs. Brebach, Bohlin, and
Muldowney and Ms. Bergevine purchased Class A Common Units of NEH, which
purchases were in addition to the Common Stock purchased pursuant to their
respective employment agreements. Mr. Brebach purchased Class A Common Units of
NEH for aggregate consideration of $ , which units were ultimately
converted into
47
<PAGE> 49
shares of Class A Common Stock and shares of Class B Common Stock.
Mr. Bohlin purchased Class A Common Units of NEH for aggregate consideration of
$ , which units were ultimately converted into shares of Class A
Common Stock and shares of Class B Common Stock. Mr. Muldowney purchased
Class A Common Units of NEH for aggregate consideration of $ , which units
were ultimately converted into shares of Class A Common Stock and
shares of Class B Common Stock. Ms. Bergevine purchased Class A Common
Units of NEH for aggregate consideration of $ , which units were
ultimately converted into shares of Class A Common Stock and
shares of Class B Common Stock.
On , EDU contributed $25,000 to Nextera LLC in exchange for
Class A Common Units of Nextera LLC, which were subsequently redeemed for
$25,000.
On December 31, 1997, Nextera LLC issued a warrant to NEH (the "Warrant")
to purchase Class A Common Units at an exercise price of per unit.
Effective April 30, 1998, the Warrant was amended to provide for the issuance of
Class B Common Units. The Warrant was exchanged for Class B Common
Units which were ultimately converted into shares of Class B Common
Stock.
On August 31, 1998, Messrs. Brebach, Bohlin, and Muldowney and Ms.
Bergevine purchased additional Class A Common Units and Class B Common Units of
Nextera LLC. Mr. Brebach purchased units for aggregate consideration of
$ , which units were ultimately converted into shares of Class A
Common Stock and shares of Class B Common Stock. Mr. Bohlin purchased
units for aggregate consideration of $ , which units were ultimately
converted into shares of Class A Common Stock and shares of Class
B Common Stock. Mr. Muldowney purchased units for aggregate consideration of
$ , which units were ultimately converted into shares of Class A
Common Stock and shares of Class B Common Stock. Ms. Bergevine purchased
units for aggregate consideration of $ , which units were ultimately
converted into shares of Class A Common Stock and shares of Class
B Common Stock.
Upon the consummation of the Exchange Transaction, Mr. Brossy will receive
shares of Class A Common Stock in exchange for his equity
interest in the Sibson Entities.
Stockholders Agreement. In connection with the Sibson Acquisitions, the
Company, Nextera LLC and the stockholders of the Company prior to the Offering
entered into the Stockholders Agreement to set forth various agreements among
the stockholders and the Company. The Stockholders Agreement provides that the
stockholders are required to vote their shares of Common Stock to elect Sibson's
manager/senior managing principal to the Company's Board of Directors. This
requirement continues until such time that (i) the Company's consolidated net
revenues generated by Sibson LLC fall below 15% of the Company's total
consolidated net revenues for any fiscal year and (ii) the earnings before
interest, taxes, depreciation and amortization ("EBITDA") generated by Sibson
LLC falls below 15% of the Company's total consolidated EBITDA less corporate
headquarters expense for such fiscal year. Pursuant to this provision, Roger
Brossy was appointed to the Board of Directors.
The Stockholders Agreement also provides that the Company will not enter
into related transactions in excess of $2 million with any affiliate of the
Company without the prior approval of a majority of the Company's Board of
Directors who are not and, within the past five years, have not been directly or
indirectly affiliated with such affiliate and do not receive any compensation
from, or own any equity interest in, such affiliate. The Stockholders Agreement
also provides that Knowledge Enterprises, Messrs. Brebach, Bohlin and Muldowney,
Ms. Bergevine, and certain other individuals will not sell or otherwise dispose
of their shares for a six-month period following the Offering, and that
subsequent to such six-month period, those stockholders will not sell or
otherwise dispose of more than one-third of such shares in the subsequent
12-month period and more than two-thirds of such shares in the subsequent
24-month period. , , , , and shares of
Common Stock held by Knowledge Enterprises, Messrs. Brebach, Bohlin, and
Muldowney and Ms. Bergevine, respectively, are subject to this provision. In
addition, the Stockholders Agreement provides certain registration rights. See
"Shares Eligible for Future Sale--Registration Rights."
48
<PAGE> 50
Retention of Maron & Sandler. The law firm of Maron & Sandler has served as
the Company's general counsel since the Company's inception. Stanley E. Maron
and Richard V. Sandler, Directors of the Company, are partners of Maron &
Sandler.
Retention of RFG Financial Group, Inc. Since June 1997, the Company has
retained RFG Financial Group, Inc. to provide accounting and financial services.
Ralph Finerman, a Director of the Company, is President of RFG Financial Group,
Inc.
49
<PAGE> 51
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of September 1, 1998, after giving effect to
the Exchange Transaction, by (i) each person known to the Company to
beneficially own more than five percent of any class of the outstanding Common
Stock, (ii) each director of the Company, (iii) each Named Executive Officer of
the Company, and (iv) all directors and executive officers of the Company as a
group. Unless otherwise indicated, all shares are owned directly and the
indicated person has sole voting and investment power. Unless otherwise
indicated, the address of the persons named below is care of Nextera
Enterprises, Inc., One Cranberry Hill, Lexington, MA 02421.
<TABLE>
<CAPTION>
CLASS B BENEFICIAL OWNERSHIP
CLASS A COMMON STOCK COMMON STOCK(1) AFTER THE OFFERING(2)(3)
------------------------------------------ ------------------------- --------------------------
SHARES PERCENT PERCENT OF
BENEFICIALLY OWNED PERCENT SHARES COMMON
NAME OF OWNED PRIOR TO PRIOR TO OWNED AFTER BENEFICIALLY PERCENT OF PERCENT OF STOCK
BENEFICIAL OWNER OFFERING(2) OFFERING(3) OFFERING(3) OWNED CLASS VOTING POWER OUTSTANDING
<S> <C> <C> <C> <C> <C> <C> <C>
Gresham T. Brebach,
Jr................... 3.2% 4.5%
Ronald K Bohlin........ 1.4 2.0
Michael P. Muldowney... * *
Debra I. Bergevine..... * *
Robert F. Staley,
Jr.(4)............... * -- --
Roger Brossy........... 1.4
Ralph Finerman......... -- --
Steven B. Fink......... -- -- -- --
Stanley E. Maron....... -- -- -- --
Richard V. Sandler..... -- -- -- --
Knowledge Enterprises,
Inc.(5).............. 62.0 89.4
All directors and
executive officers as
a group (10
persons)............. 6.9% 7.7% % %
</TABLE>
- ------------------------------
* Indicates beneficial ownership of less than 1.0% of the outstanding Class A
or Class B Common Stock, as applicable.
(1) No shares of Class B Common Stock will be sold in the Offering.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power
with respect to securities. Shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days hereof are deemed
outstanding and to be beneficially owned by the person holding such option
for purposes of computing such person's percentage ownership, but are not
deemed outstanding for the purposes of computing the percentage ownership of
any other person. Except for shares held jointly with a person's spouse or
subject to applicable community property laws, or as indicated in the
footnotes to this table, each stockholder identified in the table possesses
the sole voting and disposition power with respect to all shares of Common
Stock shown as beneficially owned by such stockholder.
(3) Based on (i) shares of Class A Common Stock outstanding prior
to the Offering and shares of Class A Common Stock
outstanding after the Offering, (ii) shares of Class B Common Stock
outstanding both prior to and after the Offering, and (iii) in each case,
includes shares of Class A Common Stock issuable upon the exchange of
the Exchangeable Shares.
(4) Represents shares of Class A Common Stock issuable pursuant to
options that were exercisable as of September 1, 1998 or within 60 days of
such date.
(5) The Company believes that through ownership or voting control of various
intermediate entities, Lawrence J. Ellison, Michael R. Milken, and Lowell J.
Milken may each be deemed to have the power to direct the voting and
disposition of, and to share beneficial ownership of, any shares of Common
Stock owned by Knowledge Enterprises. The Company believes that Lawrence J.
Ellison, Michael R. Milken, and Lowell J. Milken may be deemed to be a group
within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). Lawrence J. Ellison is Chairman
50
<PAGE> 52
and Chief Executive Officer of Oracle Corporation. Michael R. Milken is a
director of Knowledge Universe and the brother of Lowell J. Milken. On
February 24, 1998, without admitting or denying any liability, Michael R.
Milken consented to the entry of a final judgment in the U.S. District Court
for the Southern District of New York in Securities and Exchange Commission
v. Michael R. Milken et al., which judgment was entered on February 26,
1998, restraining and enjoining Michael R. Milken from associating with any
broker, dealer, investment advisor, investment company, or municipal
securities dealer and from violating Section 15(a) of the Exchange Act. On
March 11, 1991, in the action entitled In the Matter of Michael R. Milken,
the Securities and Exchange Commission instituted a proceeding pursuant to
Section 15(b)(6) of the Exchange Act and ordered that Michael R. Milken be
barred from association with any broker, dealer, investment advisor,
investment company, or municipal securities dealer. On April 24, 1990,
Michael R. Milken consented to the entry of a final judgment in the U.S.
District Court for the Southern District of New York in Securities and
Exchange Commission v. Drexel Burnham Lambert Incorporated, et al.,
restraining and enjoining Michael R. Milken from engaging in transactions,
acts, practices and courses of business which constitute or would constitute
violations of, or which aid and abet or would aid and abet violations of
Sections 7(c), 7(f), 9(a)(2), 10(b), 13(d), 14(e), 15(c)(3), and 17(a)(1) of
the Exchange Act, and Regulations T and X and Rules 10b-5, 10b-6, 13d-1,
13d-2, 14c-3, 15c3-1, 17a-3, and 17a-4 promulgated thereunder and Section
17(a) of the Securities Act of 1933, as amended. Lowell J. Milken is a
director of Knowledge Universe.
51
<PAGE> 53
DESCRIPTION OF CAPITAL STOCK
Upon the consummation of the Offering, the authorized capital stock of the
Company will consist of 50,000,000 shares of Class A Common Stock, par value
$0.001 per share, 4,300,000 shares of Class B Common Stock, par value $0.001 per
share, and 10,000,000 shares of Preferred Stock, par value $0.001 per share. As
of September 1, 1998, there were shares of Class A Common Stock issued
and outstanding (including the Exchangeable Shares) which were held by 45
shareholders (including the holders of Exchangeable Shares), of Class B
Common Stock issued and outstanding which were held by 18 shareholders and no
shares of Preferred Stock issued and outstanding. In addition, there were 470
holders of options to acquire an aggregate of shares of Class A Common
Stock. All outstanding shares of Common Stock are, and the shares of Class A
Common Stock offered hereby will be, upon payment therefor, fully paid and
nonassessable.
COMMON STOCK
Voting Rights. The Class A Common Stock entitles its holders to one vote
per share and the Class B Common Stock entitles its holders to ten votes per
share on all matters submitted to a vote of the Company's stockholders,
including in connection with the election of the Board of Directors. Holders of
Class A Common Stock and Class B Common Stock vote together as a single class on
all matters presented to the stockholders for their vote or approval, except as
may be required by Delaware law or as otherwise expressly specified in the
Certificate of Incorporation. The Company, by action of its Board of Directors
and the affirmative vote of the holders of a majority of the voting power of the
Class A Common Stock and Class B Common Stock, voting together as a class, may
increase or decrease the number of authorized shares of Class A Common Stock or
Preferred Stock. The Company, by action of its Board of Directors and the
affirmative vote of both (i) the holders of a majority of the voting power of
the Class A Common Stock and Class B Common Stock, voting together as a class,
and (ii) the holders of a majority of the voting power of the Class B Common
Stock, voting as a separate class, may increase or decrease the number of
authorized shares of Class B Common Stock.
Dividends. Holders of Class A Common Stock and Class B Common Stock are
entitled to receive dividends at the same rate, when and if declared by the
Board of Directors, out of legally available funds. The Company may not make any
dividend or distribution with respect to any class of Common Stock unless at the
same time the Company makes a ratable dividend or distribution with respect to
each outstanding share of Common Stock regardless of class. In the case of a
stock dividend or other distribution payable in shares of a class of Common
Stock, only shares of Class A Common Stock may be distributed with respect to
Class A Common Stock and only shares of Class B Common Stock may be distributed
with respect to Class B Common Stock, and the number of shares of Common Stock
payable per share will be equal for each class.
Split, Subdivision or Combination. None of the Class A Common Stock or the
Class B Common Stock may be subdivided, consolidated, reclassified or otherwise
changed in any manner unless the other class is subdivided, consolidated,
reclassified or otherwise changed in the same proportion.
Conversion Rights. The Class A Common Stock has no conversion rights. Each
share of Class B Common Stock is convertible at any time, at the option of the
holder, into one share of Class A Common Stock. Each share of Class B Common
Stock shall convert automatically into one share of Class A Common Stock upon
its sale, assignment, pledge, gift or other transfer (an "Assignment" or to
"Assign"), other than (a) to a Controlled Affiliate of the transferor; or (b)
pursuant to a Qualified Transfer (as defined below). The term "Controlled
Affiliate" means, with respect to a transferor, any individual or entity that is
controlled directly or indirectly (by ownership of voting securities, contract
or otherwise) by such transferor. "Qualified Transfer" means (i) any transfer of
shares of Class B Common Stock by will or pursuant to the laws of descent and
distribution to any member or members of a stockholder's Family, (ii) any
transfer of shares of Class B Common Stock by a stockholder to a domestic trust
created for the sole benefit of one or more of the stockholder or any member or
members of the stockholder's Family, (iii) any transfer of shares of Class B
Common Stock from a trust described in clause (ii) above to the stockholder (or
former stockholder) who transferred shares of Class B Common Stock to such
trust, (iv) any transfer to a domestic limited partnership or a domestic limited
liability company if there are no partners or members of such limited
partnership or
52
<PAGE> 54
limited liability company other than a stockholder and members of a
stockholder's Family; (v) any transfer of Class B Common Stock from a limited
partnership or limited liability company described in clause (iv) above to a
stockholder (or former stockholder) who transferred Class B Common Stock to such
limited partnership or limited liability company; and (vi) any transfer of
shares of Class B Common Stock from one holder of Class B Common Stock to
another holder of Class B Common Stock as of August 31, 1998. "Family" means a
person's spouse, lineal descendants, parents, siblings, and lineal descendants
of siblings. Any such relationship by legal adoption shall be included.
Upon any Assignment of Class B Common Stock by Knowledge Enterprises, other
than to a Controlled Affiliate or pursuant to a Qualified Transfer, a
proportionate amount of the Class B Common Stock held by the other holders of
Class B Common Stock will also automatically convert into Class A Common Stock.
For example, if Knowledge Enterprises Assigns 25% of its Class B Common Stock to
a third party who is not an Affiliate and not pursuant to a Qualified Transfer,
then those shares of Class B Common Stock will automatically convert into Class
A Common Stock on a one-to-one basis and 25% of the Class B Common Stock held by
each other holder of Class B Common Stock will automatically convert into Class
A Common Stock on a one-to-one basis.
In the event that a group comprised of one or more of Michael R. Milken,
Lawrence J. Ellison or Lowell J. Milken cease to control, directly or indirectly
(through the ownership of voting securities, contract or otherwise), Knowledge
Enterprises or any other person or entity that owns any or all of the shares of
Class B Common Stock owned by Knowledge Enterprises on the date hereof, then all
shares of Class B Common Stock shall automatically convert into shares of Class
A Common Stock.
Notwithstanding the foregoing, (i) these automatic conversion provisions
shall not apply in the case of a merger or similar transaction by the Company in
which all the outstanding shares of Common Stock of the Company regardless of
class are purchased by the acquiror, and (ii) any holder of Class B Common Stock
may pledge his shares of Class B Common Stock to a financial institution (the
"Pledgee") pursuant to a bona fide pledge of such shares as collateral security
for indebtedness due to the Pledgee, and, if the Pledgee forecloses or takes
similar action, such pledged shares of Class B Common Stock shall be converted
automatically into shares of Class A Common Stock.
Merger. Upon the merger or consolidation of the Company, holders of each
class of Common Stock will be entitled to receive equal per share payments or
distributions, except that in any transaction in which shares of capital stock
are distributed, such shares may differ only to the extent that the Class A
Common Stock and the Class B Common Stock differ as provided in the Company's
Certificate of Incorporation.
Liquidation Rights. Upon any dissolution or liquidation of the Company, the
holders of the Class A Common Stock and Class B Common Stock will be entitled to
receive ratably all assets of the Company available for distribution to
stockholders, subject to any preferential rights of any then outstanding shares
of Preferred Stock.
Other Provisions. The holders of the Class A Common Stock and Class B
Common Stock are not entitled to preemptive rights. The rights of holders of
Class A Common Stock and Class B Common Stock are subject to the rights of
holders of shares of any series of Preferred Stock that the Company may
designate and issue in the future.
The Certificate of Incorporation provides that each holder of shares of
Common Stock, other than shares of Common Stock acquired in the Offering,
agrees, subject to certain exceptions, not to (i) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (ii) enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise) for a period of 180 days after the date of this Prospectus
without the prior written consent of DLJ. In addition, during such period, each
holder of shares of Common Stock, other than shares of Common Stock
53
<PAGE> 55
acquired in the Offering, agrees, subject to certain exceptions, not to make any
demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock without DLJ's prior written consent.
PREFERRED STOCK
The Company's Certificate of Incorporation allows the Company to issue
without stockholder approval Preferred Stock having rights senior to those of
the Common Stock. As of the date of this Prospectus, no shares of Preferred
Stock will be outstanding. Therefore, the Board of Directors has the authority,
without further action by the stockholders, to issue up to 10,000,000 shares of
Preferred Stock from time to time in one or more series. Each series of
Preferred Stock will have the number of shares, designations, powers,
preferences, and special or relative rights and privileges as may be determined
by the Board of Directors, which may include dividend rights, voting rights,
redemption and sinking fund provisions, liquidation preferences, and conversion
rights. The authority of the Board of Directors to issue Preferred Stock without
further action by the stockholders provides flexibility in connection with
possible acquisitions and other corporate purposes, but may also result in the
issuance of Preferred Stock with voting, conversion or other rights that could
adversely affect the voting power and other rights of the holders of Common
Stock.
The issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company. The issuance of Preferred Stock
could decrease the amount of earnings and assets available for distribution to
the holders of Common Stock and in some circumstances have the effect of
decreasing the market price of the Common Stock. The Company currently has no
plans to issue any shares of Preferred Stock.
EXCHANGEABLE SHARES
In connection with the Sibson Acquisitions, Nextera LLC formed Sibson
Acquisition Co., a wholly owned Canadian subsidiary, which issued Exchangeable
Shares to the holders of capital stock of Sibson Canada, Inc. The holders of
Exchangeable Shares may exchange such shares at any time for an aggregate of
shares of Class A Common Stock. The Exchangeable Shares are designed
to provide an opportunity for the shareholders of Sibson Canada, Inc. to achieve
a Canadian tax deferral in certain circumstances. The holders of Exchangeable
Shares are entitled to dividend and other rights equivalent to shares of Class A
Common Stock but are not entitled to vote on matters submitted to the holders of
Class A Common Stock until such time as the holders of Exchangeable Shares
exchange such shares for Class A Common Stock.
CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S CERTIFICATE INCORPORATION
The following is a description of certain provisions of the Delaware
General Corporation Law (the "DGCL") and the Company's Certificate of
Incorporation and Bylaws. This summary does not purport to be complete and is
qualified in its entirety by reference to the DGCL, the Certificate of
Incorporation and the Bylaws.
Certain provisions of the Certificate of Incorporation and the Bylaws could
have anti-takeover effects. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the policies
formulated by the Board of Directors. In addition, these provisions are intended
to ensure that the Board will have sufficient time to act in what the Board of
Directors believes to be the best interests of the Company and its stockholders.
These provisions also are designed to reduce the vulnerability of the Company to
an unsolicited proposal for a takeover of the Company that does not contemplate
the acquisition of all of its outstanding shares or an unsolicited proposal for
the restructuring or sale of all or part of the Company. The provisions are also
intended to discourage certain tactics that may be used in proxy fights.
Delaware Anti-Takeover Law. The Company is a Delaware corporation that is
subject to Section 203 of the DGCL. Under Section 203, certain "business
combinations" between a Delaware corporation whose stock generally is publicly
traded or held of record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the date that such
stockholder became an interested stockholder, unless (i) the corporation has
elected in its Certificate of Incorporation or Bylaws not to be
54
<PAGE> 56
governed by Section 203 (the Company has not made such an election), (ii) the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder was approved by the board of directors of the
corporation before such stockholder became an interested stockholder, (iii) upon
consummation of the transaction that made such stockholder an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the commencement of the transaction (excluding
voting stock owned by directors who are also officers or held in employee
benefit plans in which the employees do not have a confidential right to tender
stock held by the plan in a tender or exchange offer) or (iv) the business
combination is approved by the board of directors of the corporation and
authorized at a meeting by two-thirds of the voting stock which the interested
stockholder does not own. The three-year prohibition also does not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of certain extraordinary transactions involving
the corporation and a person who had not been an interested stockholder during
the previous three years or who became an interested stockholder with the
approval of a majority of the corporation's directors. The term "business
combination" is defined generally to include mergers or consolidations between a
Delaware corporation and an interested stockholder, transactions with an
interested stockholder involving the assets or stock of the corporation or its
majority-owned subsidiaries, and transactions which increase an interested
stockholder's percentage ownership of stock. The term "interested stockholder"
is defined generally as (i) those stockholders who become beneficial owners of
15% or more of a Delaware corporation's voting stock, (ii) those affiliates or
associates of a Delaware corporation who were owners of 15% or more of such
corporation's voting stock within the three-year period prior to the date on
which it is sought to be determined whether such person is an interested
stockholder, and (iii) the affiliates or associates of such stockholders. The
Company believes that Knowledge Enterprises, which will have % of the combined
voting power of the outstanding Common Stock upon consummation of the Offering,
is not such an "interested stockholder."
No Stockholder Action by Written Consent; Special Meetings. The Certificate
of Incorporation provides that stockholder action can only be taken at an annual
or special meeting of stockholders and prohibits stockholder action by written
consent in lieu of a meeting. The Bylaws provide that special meetings of
stockholders may be called only by the Board of Directors, its Chairman or the
President of the Company. Stockholders are not permitted to call a special
meeting of stockholders or to require that the Board of Directors call a special
meeting.
Advance Notice Requirements for Stockholder Proposals and Director
Nominees. The Bylaws establish an advance notice procedure for stockholders to
make nominations of candidates for election as directors or to bring other
business before an annual meeting of stockholders of the Company (the
"Stockholder Notice Procedure"). The Stockholder Notice Procedure provides that
only persons who are nominated by, or at the direction of, the Company's Notice
of Meeting, the Board of Directors or by a stockholder who has given timely
written notice to the Secretary of the Company prior to the meeting at which
directors are to be elected, will be eligible for election as directors of the
Company. The Stockholder Notice Procedure also provides that at an annual
meeting only such business may be conducted as has been brought before the
meeting by, or at the direction of, the Company's Notice of Meeting, the Board
of Directors or by a stockholder who has given timely written notice to the
Secretary of the Company of such stockholder's intention to bring such business
before such meeting. Under the Stockholder Notice Procedure, if a stockholder
desires to submit a proposal or nominate persons for election as directors at an
annual meeting, the stockholder must submit written notice to the Company not
less than 60 days nor more than 90 days prior to the first anniversary of the
previous year's annual meeting (or if the date of the annual meeting is not
within 30 days before or after such anniversary date, then, to be timely, notice
must be delivered not more than 90 nor less than 60 days prior to such annual
meeting or the 10th day after the earlier of (i) the date notice of the meeting
was mailed or (ii) the date a public announcement of the date of such meeting is
first made). In addition, under the Stockholder Notice Procedure, a
stockholder's notice to the Company proposing to nominate a person for election
as a director or relating to the conduct of business other than the nomination
of directors must contain, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the nomination or proposal is made. If
the chairman of a meeting
55
<PAGE> 57
determines that business was not properly brought before the meeting, in
accordance with the Stockholder Notice Procedure, such business shall not be
discussed or transacted.
Number of Directors; Removal; Filling Vacancies. The Bylaws provide that
the Company's Board of Directors will consist of between seven and thirteen
members, the exact number to be fixed from time to time by resolution adopted by
the affirmative vote of a majority of the directors of the Company. The Board of
Directors currently consists of seven directors. Further, subject to the rights
of the holders of any series of Preferred Stock then outstanding and the
Stockholders Agreement, the Bylaws authorize the Board of Directors to fill
newly created directorships. A director so elected by the Board of Directors
holds office until his successor is elected and qualified. Subject to the rights
of the holders of any series of Preferred Stock then outstanding, the Bylaws
also provide that directors may be removed only for cause and only by the
affirmative vote of holders of 66 2/3% of the outstanding shares of voting
securities then entitled to vote generally in the election of directors, voting
together as a single class. The effect of these provisions is to preclude a
stockholder from removing incumbent directors without cause and simultaneously
gaining control of the Company's Board of Directors by filling the vacancies
created by such removal with its own nominees.
Limitation of Officer and Director Liability and Indemnification
Arrangements. The Company's Certificate of Incorporation provides that an
officer or director of the Company will not be personally liable to the Company
or its stockholders for monetary damages for any breach of his fiduciary duty as
an officer or director, except in certain cases where liability is mandated by
the DGCL. The provision has no effect on any non-monetary remedies that may be
available to the Company or its stockholders, nor does it relieve the Company or
its officers or directors from compliance with federal or state securities laws.
The Bylaws also generally provide that the Company shall indemnify, to the
fullest extent permitted by law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, investigation, administrative hearing or any other proceeding (each, a
"Proceeding") by reason of the fact that he is or was a director or officer of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another entity, against expenses incurred by him
in connection with such Proceeding. An officer or director shall not be entitled
to indemnification by the Company if (i) the officer or director did not act in
good faith and in a manner reasonably believed to be in, or not opposed to, the
best interests of the Company, or (ii) with respect to any criminal action or
proceeding, the officer or director had no reasonable cause to believe his
conduct was unlawful.
Bylaws. The Bylaws are subject to adoption, amendment, alteration, repeal
or rescission either by (a) the Board of Directors or (b) the affirmative vote
of the holders of not less than 66 2/3% of the total voting power of all
outstanding securities of the Company then entitled to vote generally in the
election of directors, voting together as a single class, at any regular meeting
of the Board of Directors or of the stockholders or at any special meeting of
the Board of Directors or of the stockholders if notice of such adoption,
amendment, alteration, repeal or rescission is contained in the notice of such
special meeting.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Class A Common Stock will be
ChaseMellon Shareholder Services, L.L.C.
56
<PAGE> 58
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of the Offering, the Company will have
shares of Class A Common Stock and shares of Class B Common Stock
outstanding, assuming no exercise of the Underwriters' over-allotment option and
no exercise of outstanding options to purchase Class A Common Stock. Of these
shares, the shares of Class A Common Stock sold in the Offering
are freely tradable without restriction or further registration under the
Securities Act, except that any shares held by "affiliates" of the Company, as
that term is defined in Rule 144 under the Securities Act ("Rule 144"), may
generally be sold only in compliance with the limitations of Rule 144 described
below.
SALE OF RESTRICTED SHARES
The remaining shares of Common Stock (including Class A Common Stock
issuable upon exchange of the Exchangeable Shares) are "restricted securities"
as defined under Rule 144. Restricted Securities may be sold in the public
market only if registered or if they qualify for an exemption from registration
under the Securities Act. Additionally, Nextera's Certificate of Incorporation
provides that each holder of Common Stock, other than the holders of the shares
of Common Stock acquired in the Offering, agrees not to sell, directly or
indirectly, any Common Stock, subject to certain exceptions, without the prior
consent of DLJ for a period of 180 days from the date of this Prospectus.
Subject to the Lock-up Agreements described below and the foregoing provisions
of the Company's Certificate of Incorporation, additional shares of Class A
Common Stock (including Class A Common Stock issuable upon conversion of Class B
Common Stock and the exchange of the Exchangeable Shares) will be available for
sale in the public market (subject in certain circumstances to compliance with
certain volume and other restrictions under Rule 144) as follows: (i)
shares will be eligible for sale 180 days after the date of this
Prospectus; and (ii) shares will become eligible thereafter for
sale under Rule 144 upon the expiration of the applicable one-year holding
periods. In addition, if the restrictions of the Lock-up Agreements described
below and the foregoing provisions of the Company's Certificate of Incorporation
were waived in full on the date hereof: (i) shares of Common
Stock would be eligible for sale in the public market from and after the date of
this Prospectus, and (ii) shares of Common Stock would be
eligible for sale in the public market 90 days after the date of this
Prospectus.
In general, under Rule 144, a person (or persons whose shares are
aggregated) including an affiliate, who has beneficially owned shares for at
least one year is entitled to sell, within any three-month period commencing 90
days after the date of this Prospectus, a number of shares of Common Stock that
does not exceed the greater of (i) 1% of the then outstanding shares of Class A
Common Stock (approximately shares as of the date of this
Prospectus) or (ii) the average weekly trading volume in the Class A Common
Stock during the four calendar weeks preceding the date on which notice of such
sale is filed, subject to certain restrictions. In addition, a person who is not
deemed to have been an affiliate of the Company at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years, would be entitled to sell such shares under Rule 144(k)
without regard to the volume limitations described above.
An employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
is entitled to rely on the resale provisions of Rule 701 under the Securities
Act, which permits non-affiliates to sell their Rule 701 shares without having
to comply with the public information, holding period, volume limitation or
notice provisions of Rule 144 and permits affiliates to sell their Rule 701
shares without having to comply with Rule 144's holding period restrictions, in
each case commencing 90 days after the date of this Prospectus.
OPTIONS
Upon consummation of the Offering, the Company will have outstanding
options for shares of Class A Common Stock, of which
are exercisable. Following the Offering, the Company intends to
file a Registration Statement on Form S-8 under the Securities Act to register
the shares of Class A Common Stock that are issuable upon the
exercise of stock options either
57
<PAGE> 59
outstanding or available for grant pursuant to the 1998 Equity Participation
Plan. Such Registration Statement will become effective immediately upon filing;
however, consistent with the terms of the 1998 Equity Participation Plan,
holders of options will be unable to sell any shares of Class A Common Stock
received upon the exercise of options granted thereunder until the expiration of
180 days after the date of this Prospectus without the prior written consent of
DLJ. Shares covered by such Registration Statement will be eligible for sale in
the public market after the effective date of such Registration, subject to Rule
144 limitations applicable to affiliates as well as to the limitations on sale
and vesting described above.
REGISTRATION RIGHTS
Stockholders holding an aggregate of shares of Class A
Common Stock (including shares of Class A Common Stock issuable upon conversion
of Class B Common Stock and exchange of the Exchangeable Shares) ("Holders") are
entitled to certain registration rights under the Stockholders Agreement.
Commencing 180 days after the Offering, Knowledge Enterprises or an affiliate
that then owns an equity interest in the Company may make a one-time written
request of the Company for registration with the Securities and Exchange
Commission (a "Demand Registration") of all or part of its Class A Common Stock
of the Company, provided, however, that the Company need not effect a Demand
Registration unless it includes at least 10% of the Company's issued and
outstanding Common Stock. The Company may defer such Demand Registration for a
single period not to exceed 180 days, if the Board of Directors determines in
the exercise of its reasonable judgment that effecting such Demand Registration
at such time would have a material adverse effect on the Company. In addition,
Holders who together hold at least 10% of the issued and outstanding Common
Stock of the Company may make a one-time written request of the Company for a
Demand Registration on the same terms as those applicable to Knowledge
Enterprises as set forth above.
The Stockholders Agreement also provides piggyback registration rights to
Holders for their shares of Class A Common Stock ("Registrable Securities"). The
Company must provide prior written notice to those Holders whenever it proposes
to register any Common Stock (or securities convertible into or exchangeable
for, or options to purchase, Common Stock) with the Securities and Exchange
Commission on a form that would permit the registration of Registrable
Securities. The Company will register in such registration all Registrable
Securities requested to be included, provided that if, in the opinion of the
applicable underwriter, the number of securities proposed to be included is
greater that what could be sold without having a material impact on the
offering, the Company will include securities in the following priority: (i)
first, the Common Stock the Company proposes to sell, and (ii) second, the
Registrable Securities requested to be included in such registration by the
holders of Registrable Securities pro rata based on the number of Registrable
Securities that each such stockholder shall have requested to include therein.
The Stockholders Agreement further provides that the Company will bear all
expenses incident to the Company's performance of its registration obligations,
other than the costs or expenses of any selling stockholders for underwriters'
commissions, brokerage fees or transfer taxes, or the fees and expenses of any
counsel, accountants or other representative retained by any selling
stockholder. The Company is obligated, however, to reimburse the selling
stockholders in each Demand Registration for the reasonable fees of one counsel
up to $25,000.
EFFECT OF SALES OF SHARES
Prior to the Offering, there has been no public market for the Class A
Common Stock, and no precise prediction can be made as to the effect, if any,
that market sales of shares of Class A Common Stock or the availability of
shares of Class A Common Stock for sale will have on the market price of the
Class A Common Stock prevailing from time to time. Nevertheless, the sale of
substantial amounts of the Class A Common Stock in the public market could
adversely affect prevailing market prices and could impair the Company's future
ability to raise capital through the sale of its equity securities.
58
<PAGE> 60
LOCK-UP AGREEMENTS
All directors, officers and stockholders of the Company have agreed that
they will not, without the prior written consent of DLJ and subject to certain
exceptions, sell or otherwise dispose of any shares of Common Stock or options
to acquire shares of Common Stock during the 180-day period following the date
of this Prospectus. The Company has agreed not to sell or otherwise dispose of
any shares of Class A Common Stock during the 180-day period following the date
of this Prospectus without the prior written consent of DLJ, except the Company
may (i) issue, and grant options to purchase, shares of Class A Common Stock
under the 1998 Equity Participation Plan and (ii) issue shares of Class A Common
Stock in connection with acquisitions, if the terms of such issuance provide
that such Class A Common Stock shall not be resold prior to the expiration of
such 180-day period. DLJ may release any or all shares from Lock-Up Agreements
at any time or from time to time without notice.
59
<PAGE> 61
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement, dated
, 1998 (the "Underwriting Agreement"), the Underwriters named below,
who are represented by Donaldson, Lufkin & Jenrette Securities Corporation,
BancBoston Robertson Stephens Inc., BT Alex. Brown Incorporated, and NationsBanc
Montgomery Securities LLC (collectively, the "Representatives"), have severally
agreed to purchase from the Company the respective number of shares of Class A
Common Stock set forth opposite their names below.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
BancBoston Robertson Stephens Inc...........................
BT Alex. Brown Incorporated.................................
NationsBanc Montgomery Securities LLC.......................
Total.............................................
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Class A Common
Stock offered hereby are subject to approval by their counsel of certain legal
matters and to certain other conditions. The Underwriters are obligated to
purchase and accept delivery of all the shares of Class A Common Stock offered
hereby (other than those shares covered by the over-allotment option described
below) if any are purchased.
The Underwriters initially propose to offer the shares of Class A Common
Stock in part directly to the public at the initial public offering price set
forth on the cover page of this Prospectus and in part to certain dealers
(including the Underwriters) at such price less a concession not in excess of
$ per share. The Underwriters may allow, and such dealers may re-allow, to
certain other dealers a concession not in excess of $ per share. After the
initial offering of the Class A Common Stock, the public offering price and
other selling terms may be changed by the Representatives at any time without
notice. The Underwriters do not intend to confirm sales to any accounts over
which they exercise discretionary authority.
The Company has granted to the Underwriters an option, exercisable within
30 days after the date of this Prospectus, to purchase, from time to time, in
whole or in part, up to an aggregate of additional shares of
Class A Common Stock at the initial public offering price less underwriting
discounts and commissions. The Underwriters may exercise such option solely to
cover over-allotments, if any, made in connection with the Offering. To the
extent that the Underwriters exercise such option, each Underwriter will become
obligated, subject to certain conditions, to purchase its pro rata portion of
such additional shares proportionate to such Underwriter's underwriting
commitment as indicated in the preceding table.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
Effective August 31, 1998, the Company and Nextera Funding, Inc., an
affiliate of DLJ, entered into the Bridge Loan, which provides for a $40 million
revolving credit facility which bears interest at the rate of LIBOR plus 450
basis points (10.2% on August 31, 1998) per annum, and matures on February 28,
1999. The Company borrowed $38.0 million under the Bridge Loan to finance the
Sibson Acquisitions. The indebtedness incurred under the Bridge Loan will be
repaid with a portion of the net proceeds from the Offering. As a result of such
arrangements, the Conduct Rules of the National Association of Securities
Dealers, Inc. require that the initial public offering price of the Class A
Common Stock be no higher than that recommended by a qualified independent
underwriter, as defined in Rule 2720 of the Conduct Rules. BT Alex. Brown
60
<PAGE> 62
Incorporated, one of the Representatives of the Underwriters, will serve as the
qualified independent underwriter and has assumed the responsibilities of acting
as qualified independent underwriter in pricing the Class A Common Stock offered
hereby and conducting "due diligence" in respect thereto. BT Alex. Brown
Incorporated will receive a fee of $5,000 from the Company as compensation to
act as qualified independent underwriter.
DLJ and the Company are parties to a letter agreement dated August 31, 1998
(the "Engagement Letter"). Pursuant to the Engagement Letter, DLJ has the right
to act as the Company's lead placement agent, lead initial purchaser or lead
managing underwriter in the event that the Company determines to sell its
securities with the services of an outside financial advisor or investment bank
during the period ending August 31, 1999.
Each of the Company, its executive officers and directors and shareholders
of the Company has agreed, subject to certain exceptions, not to (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any shares
of Class A Common Stock or any securities convertible into or exercisable or
exchangeable for Class A Common Stock or (ii) enter into any swap or other
arrangement that transfers all or a portion of the economic consequences
associated with the ownership of any Class A Common Stock (regardless of whether
any of the transactions described in clause (i) or (ii) is to be settled by the
delivery of Class A Common Stock, or such other securities, in cash or
otherwise) for a period of 180 days after the date of this Prospectus without
the prior written consent of DLJ. In addition, during such period, the Company
has also agreed not to file any registration statement with respect to, and each
of its executive officers, directors and certain shareholders of the Company has
agreed not to make any demand for, or exercise any right with respect to, the
registration of any shares of Class A Common Stock or any securities convertible
into or exercisable or exchangeable for Class A Common Stock without DLJ's prior
written consent.
Prior to the Offering, there has been no established trading market for the
Class A Common Stock. The initial public offering price for the shares of Class
A Common Stock offered hereby will be determined by negotiation among the
Company and the Representatives. The factors to be considered in determining the
initial public offering price include the history of and the prospects for the
industry in which the Company competes, the prospects for future earnings of the
Company, the recent market prices of securities of generally comparable
companies and the general condition of the securities markets at the time of the
Offering.
Other than in the United States, no action has been taken by the Company or
the Underwriters that would permit a public offering of the shares of Class A
Common Stock offered hereby in any jurisdiction where action for that purpose is
required. The shares of Class A Common Stock offered hereby may not be offered
or sold, directly or indirectly, nor may this Prospectus or any other offering
material or advertisements in connection with the offer and sale of any such
shares of Class A Common Stock be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with the applicable
rules and regulations of such jurisdiction. Persons into whose possession this
Prospectus comes are advised to inform themselves about and to observe any
restrictions relating to the Offering and the distribution of this Prospectus.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any shares of Class A Common Stock offered hereby in any
jurisdiction in which such an offer or a solicitation is unlawful.
In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the Class
A Common Stock. Specifically, the Underwriters may overallot the Offering,
creating a syndicate short position. The Underwriters may bid for and purchase
shares of Class A Common Stock in the open market to cover such syndicate short
position or to stabilize the price of the Class A Common Stock. In addition, the
underwriting syndicate may reclaim selling concessions from syndicate members
and selected dealers if they repurchase previously distributed Class A Common
Stock in syndicate covering transactions, in stabilizing transactions or
otherwise. These activities may stabilize or maintain the market price of the
Class A Common Stock above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
61
<PAGE> 63
LEGAL MATTERS
The legality of the issuance of the Class A Common Stock offered hereby
will be passed upon for the Company by Latham & Watkins, San Diego, California
and certain other matters will be passed upon for the Company by Maron &
Sandler, Los Angeles, California. Certain legal matters in connection with the
Offering will be passed upon for the Underwriters by Testa, Hurwitz & Thibeault,
LLP, Boston, Massachusetts.
EXPERTS
The Consolidated Financial Statements and schedules of Nextera Enterprises,
L.L.C. at December 31, 1997 and for the period from February 26, 1997 to
December 31, 1997, the Consolidated Financial Statements of Symmetrix, Inc. and
Subsidiaries at May 31, 1997, and for the year ended May 31, 1997, and for the
period from June 1, 1997 to July 30, 1997 and the Financial Statements of SiGMA
Consulting, LLC at December 31, 1996 and 1997 appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon, and are included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
The Consolidated Financial Statements of Symmetrix, Inc. and Subsidiaries
at May 31, 1996 and for the year then ended appearing in this Prospectus and the
Registration Statement have been audited by BDO Seidman, LLP, independent
auditors, as indicated in their reports with respect thereto, and are included
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
The Consolidated Financial Statements of Symmetrix, Inc. and Subsidiaries
for the year ended May 31, 1995 appearing in this Prospectus and the
Registration Statement have been so included in reliance on the report of
Pricewaterhouse LLP, independent accountants given upon the authority of such
firm as experts in auditing and accounting.
The Financial Statements of PTG at December 31, 1996 and 1997 and the years
then ended appearing in this Prospectus and the Registration Statement have been
audited by Harte Carucci & Driscoll, P.C., independent auditors, as indicated in
their reports with respect thereto, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
The Consolidated Financial Statements of Sibson & Company, L.P. and
Subsidiaries at December 31, 1995, 1996 and 1997 and for each of the three years
in the period ended December 31, 1997 appearing in this Prospectus and the
Registration Statement have been audited by Farkouh, Furman & Faccio,
independent auditors, as indicated in their reports with respect thereto, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
The Financial Statements of Sibson Canada, Inc. at December 31, 1997 and
for the year then ended appearing in this Prospectus and the Registration
Statement have been audited by Grant Thorton, independent auditors, as indicated
in their reports with respect thereto, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement (of
which this Prospectus is a part and which term shall encompass any amendments
thereto) on Form S-1 pursuant to the Securities Act with respect to the Class A
Common Stock being offered in the Offering. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the Class A
Common Stock, reference is made to the Registration Statement, including the
exhibits and schedules thereto. Statements made in this Prospectus as to the
contents of any contract, agreement or any other document referred to herein are
not necessarily complete; with respect to each such contract, agreement or
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference to
the Registration Statement exhibits filed as a part thereof. The
62
<PAGE> 64
Registration Statement, including the exhibits and schedules thereto, may be
inspected without charge at the Commission's principle office at 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of either of them or any part
thereof may be obtained from such office upon payment of fees prescribed by the
Commission. The Registration Statement, including the exhibits and schedules
thereto, are also available on the Commission's Web Site at http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by an independent accounting firm and
will make available copies of quarterly reports containing unaudited financial
information for the first three quarters of each fiscal year.
63
<PAGE> 65
NEXTERA ENTERPRISES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
HISTORICAL FINANCIAL STATEMENTS:
Consolidated Financial Statements of Nextera Enterprises,
L.L.C.
Report of Ernst & Young LLP, Independent Auditors...... F-3
Consolidated Balance Sheets -- December 31, 1997 and
June 30, 1998 (unaudited)............................. F-4
Consolidated Statements of Operations -- For the period
February 26, 1997 (date of inception) through December
31, 1997, for the period February 26, 1997 through
June 30, 1997 (unaudited) and for the six months ended
June 30, 1998 (unaudited)............................. F-5
Consolidated Statements of Members' Equity
(Deficit) -- For the period February 26, 1997 (date of
inception) through December 31, 1997 and for the six
months ended June 30, 1998 (unaudited)................ F-6
Consolidated Statements of Cash Flows -- For the period
February 26, 1997 (date of inception) through December
31, 1997, for the period February 26, 1997 through
June 30, 1997 (unaudited) and for the six months ended
June 30, 1998 (unaudited)............................. F-7
Notes to Consolidated Financial Statements............. F-8
HISTORICAL FINANCIAL STATEMENTS OF ACQUIRED COMPANIES:
Consolidated Financial Statements of Symmetrix, Inc.
Report of Ernst & Young LLP, Independent Auditors...... F-17
Consolidated Balance Sheets -- May 31, 1997 and July
30, 1997.............................................. F-18
Consolidated Statements of Operations and Accumulated
Deficit -- For the year ended May 31, 1997 and for the
period June 1, 1997 through July 30, 1997............. F-19
Consolidated Statements of Cash Flows -- For the year
ended May 31, 1997 and for the period June 1, 1997
through July 30, 1997................................. F-20
Notes to Consolidated Financial Statements............. F-21
Consolidated Financial Statements of Symmetrix, Inc.
Independent Auditors' Report........................... F-27
Consolidated Balance Sheet -- May 31, 1996............. F-28
Consolidated Statement of Operations -- For the year
ended May 31, 1996.................................... F-29
Consolidated Statement of Changes in Stockholders'
Equity -- For the year ended May 31, 1996............. F-30
Consolidated Statement of Cash Flows -- For the year
ended May 31, 1996.................................... F-31
Notes to Consolidated Financial Statements............. F-32
Consolidated Financial Statements of Symmetrix, Inc.
Report of PricewaterhouseCoopers LLP, Independent
Accountants........................................... F-39
Consolidated Statement of Operations -- For the year
ended May 31, 1995.................................... F-40
Consolidated Statement of Stockholders' Equity -- For
the year ended May 31, 1995........................... F-41
Consolidated Statement of Cash Flows -- For the year
ended May 31, 1995.................................... F-42
Notes to Consolidated Financial Statements............. F-43
Financial Statements of SiGMA Consulting, LLC
Report of Ernst & Young LLP, Independent Auditors...... F-48
Balance Sheets -- December 31, 1996 and 1997........... F-49
Statements of Operations -- For the years ended
December 31, 1995, 1996 and 1997...................... F-50
Statements of Equity -- For the years ended December
31, 1995, 1996 and 1997............................... F-51
Statements of Cash Flows -- For the years ended
December 31, 1995, 1996 and 1997...................... F-52
Notes to Financial Statements.......................... F-53
</TABLE>
F-1
<PAGE> 66
NEXTERA ENTERPRISES, INC.
INDEX TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
HISTORICAL FINANCIAL STATEMENTS OF ACQUIRED COMPANIES
(CONTINUED):
Financial Statements of The Planning Technologies Group,
Inc.
Report of Independent Auditors......................... F-56
Balance Sheets -- December 31, 1996 and 1997 and March
31, 1998 (unaudited).................................. F-57
Statements of Income and Retained Earnings -- For the
years ended December 31, 1996 and 1997 and for the
three months ended March 31, 1997 and 1998
(unaudited)........................................... F-58
Statements of Cash Flows -- For the years ended
December 31, 1996 and 1997 and for the three months
ended March 31, 1997 and 1998 (unaudited)............. F-59
Notes to Financial Statements.......................... F-60
Financial Statements of Sibson & Company, L.P. and
Subsidiaries
Report of Independent Auditors......................... F-63
Consolidated Balance Sheets -- December 31, 1996 and
1997 and June 30, 1998 (unaudited).................... F-64
Consolidated Statements of Operations and Partners'
Capital -- For the years ended December 31, 1995, 1996
and 1997 and for the six months ended June 30, 1997
and 1998 (unaudited).................................. F-65
Consolidated Statements of Cash Flows -- For the years
ended December 31, 1995, 1996 and 1997 and for the six
months ended June 30, 1997 and 1998 (unaudited)....... F-66
Notes to Consolidated Financial Statements............. F-67
Financial Statements of Sibson Canada, Inc.
Report of Independent Auditors......................... F-73
Balance Sheets -- December 31, 1997 and June 30,
1998.................................................. F-74
Statements of Operations and Retained Earnings -- For
the year ended December 31, 1997 and for the six
months ended June 30, 1997 and 1998 (unaudited)....... F-75
Statements of Changes in Financial Position -- For the
year ended December 31, 1997 and for the six months
ended June 30, 1997 and 1998 (unaudited).............. F-76
Notes to Financial Statements.......................... F-77
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS:
Basis of Presentation.................................. PF-1
Unaudited Pro Forma Combined Balance Sheet -- June 30,
1998.................................................. PF-2
Unaudited Pro Forma Combined Statement of
Operations -- For the period February 26, 1997 (date
of inception) through December 31, 1997............... PF-3
Unaudited Pro Forma Combined Statement of
Operations -- For the six months ended June 30,
1998.................................................. PF-4
Notes to Unaudited Pro Forma Combined Statement of
Operations............................................ PF-5
</TABLE>
F-2
<PAGE> 67
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Nextera Enterprises, L.L.C.
We have audited the accompanying consolidated balance sheet of Nextera
Enterprises, L.L.C. (the Company) as of December 31, 1997, and the related
consolidated statements of operations, members' equity and cash flows for the
period from February 26, 1997 (date of inception) through December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Nextera
Enterprises, L.L.C. at December 31, 1997, and the results of its operations and
its cash flows for the period from February 26, 1997 (date of inception) through
December 31, 1997 in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
April 30, 1998, except for Note 12,
as to which the date is August 31, 1998
F-3
<PAGE> 68
NEXTERA ENTERPRISES, L.L.C.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1997 JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 554 $ 2,921
Accounts receivable, net of allowance for doubtful
accounts of $100 at December 31, 1997 and $617 at June
30, 1998............................................... 2,202 10,434
Costs and estimated earnings in excess of billings........ 856 172
Due from affiliate........................................ 225 135
Due from officers......................................... -- 849
Prepaid expenses and other current assets................. 368 420
Income tax receivable..................................... 414 --
------- -------
Total current assets................................. 4,619 14,931
Long-term receivable........................................ 532 --
Property and equipment, net................................. 1,181 2,049
Intangible assets, net of accumulated amortization of $255
at December 31, 1997 and $823 at June 30, 1998............ 15,762 39,041
Other assets................................................ 561 1,477
------- -------
Total assets......................................... $22,655 $57,498
======= =======
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses..................... $ 2,284 $ 6,936
Notes payable to bank..................................... 1,687 1,390
Deferred revenue.......................................... 747 1,262
Due to affiliate.......................................... 90 150
Current portion of long-term debt......................... 146 86
------- -------
Total current liabilities............................ 4,954 9,824
Long-term debt.............................................. 969 994
Debentures due to affiliates, including accrued interest
thereon................................................... -- 50,585
Class B Preferred Units, no par value, 25,000,000 units
authorized, no units issued and outstanding............... -- --
Members' equity (deficit):
Class A Common Units, no par value, 15,000,000 units
authorized, 7,898,800 and 11,469,667 units issued and
outstanding at December 31, 1997 and June 30, 1998,
respectively........................................... 19,747 2,688
Class B Common Units, no par value, zero and 4,300,000
units authorized, issued and outstanding at December
31, 1997 and June 30, 1998, respectively............... -- --
Retained earnings (deficit)............................... (3,015) (6,593)
------- -------
Total members' equity (deficit)...................... 16,732 (3,905)
------- -------
Total liabilities and members' equity (deficit)...... $22,655 $57,498
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 69
NEXTERA ENTERPRISES, L.L.C.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
FEBRUARY 26, 1997 FEBRUARY 26, 1997 FOR THE
(DATE OF INCEPTION) (DATE OF INCEPTION) SIX MONTHS
THROUGH THROUGH ENDED
DECEMBER 31, 1997 JUNE 30, 1997 JUNE 30, 1998
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER COMMON UNIT DATA)
<S> <C> <C> <C>
Net revenues...................................... $ 7,998 $ -- $22,095
Cost of revenues.................................. 4,718 -- 14,938
------- ------- -------
Gross profit................................. 3,280 -- 7,157
Selling, general and administrative expenses...... 5,306 987 7,296
Amortization expense.............................. 255 -- 568
------- ------- -------
Loss from operations......................... (2,281) (987) (707)
Interest income................................... 37 3 --
Interest expense.................................. (69) -- (2,671)
------- ------- -------
Loss before provision for income taxes....... (2,313) (984) (3,378)
Provision for income taxes........................ 702 -- 200
------- ------- -------
Net loss..................................... $(3,015) $ (984) $(3,578)
======= ======= =======
Net loss per common unit, basic and diluted....... $ (0.74) $ (2.60) $ (0.29)
======= ======= =======
Weighted average common units outstanding, basic
and diluted..................................... 4,061 379 12,550
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 70
NEXTERA ENTERPRISES, L.L.C.
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS B TOTAL
COMMON UNITS COMMON UNITS PREFERRED UNITS RETAINED MEMBERS'
---------------------- ---------------------- ---------------------- EARNINGS EQUITY
UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT (DEFICIT) (DEFICIT)
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Class A Common
Units..................... 7,898,800 $ 19,747 -- $ -- -- $ -- $ -- $ 19,747
Net loss.................... -- -- -- -- -- -- (3,015) (3,015)
----------- -------- ----------- -------- ----------- -------- -------- --------
Balance at December 31,
1997...................... 7,898,800 19,747 -- -- -- -- (3,015) 16,732
Issuance of Class A Common
Units..................... 2,101,200 5,230 -- -- -- -- -- 5,230
Issuance of Class A Common
Units in connection with
acquired businesses....... 1,469,667 688 -- -- -- -- -- 688
Recapitalization of Units... -- (22,977) -- -- 22,977,000 22,977 -- --
Exchange of warrant for
Class B Common Units...... -- -- 4,300,000 -- -- -- -- --
Issuance of Class B
Preferred Units........... -- -- -- -- 24,993,000 24,993 -- 24,993
Redemption of Class B
Preferred Units in
exchange for 10%
Debentures................ -- -- -- -- (47,970,000) (47,970) -- (47,970)
Net loss.................... -- -- -- -- -- -- (3,578) (3,578)
----------- -------- ----------- -------- ----------- -------- -------- --------
Balance at June 30, 1998
(unaudited)............... 11,469,667 $ 2,688 4,300,000 $ -- -- $ -- $ (6,593) $ (3,905)
=========== ======== =========== ======== =========== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 71
NEXTERA ENTERPRISES, L.L.C.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
FEBRUARY 26, 1997 FEBRUARY 26, 1997 FOR THE
(DATE OF INCEPTION) (DATE OF INCEPTION) SIX MONTHS
THROUGH THROUGH ENDED
DECEMBER 31, 1997 JUNE 30, 1997 JUNE 30, 1998
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $ (3,015) $(1,015) $ (3,578)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................. 417 9 931
Deferred income taxes......................... 702 -- --
Change in operating assets and liabilities,
net of effect of acquired businesses:
Accounts receivable......................... 425 -- (1,877)
Due from affiliate.......................... (225) -- 138
Due to affiliate............................ 90 30 60
Prepaid expenses and other current assets... (272) (213) 111
Income tax receivable....................... -- -- 414
Accounts payable and accrued expenses....... 517 162 3,683
Costs and estimated earnings in excess of
billings................................. (761) -- 726
Deferred revenue............................ (2,403) -- 126
Other....................................... 45 -- (790)
-------- ------- --------
Net cash used in operating
activities.......................... (4,480) (1,027) (56)
-------- ------- --------
Cash flows from investing activities:
Purchase of property and equipment............... (955) (162) (426)
Acquisition of businesses, net of cash
acquired...................................... (15,321) -- (25,756)
-------- ------- --------
Net cash used in investing
activities.......................... (16,276) (162) (26,182)
-------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of Class A Common Units... 19,747 1,650 5,230
Proceeds from issuance of Class B Preferred
Units......................................... -- -- 24,993
Due from officers................................ -- -- (849)
Borrowings (repayments) under note payable to
bank.......................................... 1,606 -- (639)
Repayments of long-term debt..................... (43) -- (60)
Other............................................ -- 29 (70)
-------- ------- --------
Net cash provided by financing
activities.......................... 21,310 1,679 28,605
-------- ------- --------
Net increase in cash and cash equivalents........ 554 490 2,367
Cash and cash equivalents at beginning of
period........................................ -- -- 554
-------- ------- --------
Cash and cash equivalents at end of period....... $ 554 $ 490 $ 2,921
======== ======= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest......... $ 113 $ -- $ 134
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 72
NEXTERA ENTERPRISES, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Nextera Enterprises, L.L.C. ("Nextera" or the "Company") provides
leading-edge business strategy, operations improvement, organizational design,
and information technology ("IT") consulting services primarily to Fortune 500
and other multinational companies. The Company provides services in four
practice areas, which enables it to offer a breadth and balance of services that
assist clients in achieving enhanced business performance by anticipating and
addressing their complex, multi-disciplinary consulting needs.
Nextera was formed on February 26, 1997. The Company shall continue to
exist until December 31, 2020, unless earlier dissolved pursuant to Nextera's
Operating Agreement. As of April 30, 1998, the majority member of the Company is
Knowledge Universe, L.L.C.
Acquisitions
Effective July 30, 1997, the Company acquired Symmetrix, Inc.
("Symmetrix"), a management consulting and information technology consulting
company, for cash of approximately $15,500,000. The acquisition was accounted
for under the purchase method of accounting; accordingly, the purchase price was
allocated to the underlying assets and liabilities based on their respective
estimated fair values at the date of the acquisition. Correspondingly,
Symmetrix' results of operations subsequent to the acquisition have been
included in the Company's results of operations.
The following information presents the unaudited pro forma condensed
results of operations for the year ended December 31, 1997 as if the Symmetrix
acquisition had occurred on January 1, 1997. The pro forma adjustments include
additional amortization expense of approximately $357,000. The pro forma results
are presented for information purposes only and are not necessarily indicative
of the future results of operations of the Company or the results of operations
of the Company had the acquisition occurred on January 1, 1997.
<TABLE>
<CAPTION>
(IN THOUSANDS,
EXCEPT PER COMMON UNIT DATA)
<S> <C>
Net revenues........................ $12,328
Net loss............................ (7,529)
Net loss per common unit............ $ (1.85)
</TABLE>
Subsequent to December 31, 1997, the Company acquired the assets or stock
of the following businesses:
<TABLE>
<CAPTION>
EFFECTIVE DATE
ACQUIRED COMPANY OF ACQUISITION
<S> <C>
SiGMA Consulting, LLC....................... January 5, 1998
Pyramid Imaging, Inc. ...................... March 31, 1998
The Planning Technologies Group, Inc. ...... March 31, 1998
</TABLE>
The aggregate purchase price was $26,565,000, which consisted of
$25,877,000 in cash and the issuance of 1,469,667 Class A Common Units, as well
as the assumption of certain liabilities. One of the acquisition agreements
contains an earn-out provision providing for the payment of up to an additional
$800,000 in cash and 53,333 Class A Common Units of the Company upon the
achievement of certain revenue and pretax profit targets. The Company's goodwill
will be adjusted for any additional consideration earned.
The acquisitions have been accounted for under the purchase method of
accounting. Accordingly, the purchase price was allocated to the underlying
assets and liabilities based on their respective estimated fair values at the
date of the acquisition.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
F-8
<PAGE> 73
NEXTERA ENTERPRISES, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interim Financial Statements (Unaudited)
The balance sheet at June 30, 1998, and the statements of operations,
members' equity (deficit) and cash flows for the period from February 26, 1997
(inception) to June 30, 1997 and the six months ended June 30, 1998 are
unaudited, and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the Company's consolidated financial position, results of
operations and cash flows.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Revenue Recognition
The Company derives its revenues from consulting services under time and
materials, capped-fee and fixed-price billing arrangements. Under time and
materials arrangements, revenues are recognized as the services are provided.
Revenues on fixed-price and capped-fee contracts are recognized using the
percentage of completion method of accounting and are adjusted monthly for the
cumulative impact of any revision in estimates. The Company determines the
percentage of completion of its contracts by comparing costs incurred to date to
total estimated costs. Contract costs include all direct labor and expenses
related to the contract performance. Costs and estimated earnings in excess of
billings represents revenues recognized in excess of amounts billed. Deferred
revenue represents billings in excess of revenues recognized. Net revenues
exclude reimbursable expenses charged to clients.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and demand deposits
accounts. The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Cash equivalents are
stated at cost, which approximates market value.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets as
follows:
<TABLE>
<S> <C>
Furniture and fixtures............................ 5-7 years
Equipment......................................... 3-5 years
Software.......................................... 3 years
</TABLE>
Leasehold improvements are amortized over the lesser of the lease term or
the useful life of the property.
Intangible Assets
Intangible assets consist principally of the cost in excess of assets
acquired resulting from acquisitions and are being amortized on a straight-line
basis over 5 years for intangibles relating to personnel and over 40 years for
all other intangibles. The Company periodically evaluates the carrying value of
intangible assets for impairment. Any impairment is charged to expense in the
period in which the impairment is incurred.
F-9
<PAGE> 74
NEXTERA ENTERPRISES, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Financial Instruments
The carrying value of financial instruments such as cash equivalents,
accounts receivable, accounts payable and accrued expenses approximate their
fair values based on the short-term maturities of these instruments. The
carrying value of long-term debt approximates its fair value based on references
to similar instruments.
Concentration of Credit Risk
The Company provides its services to customers in diversified industries,
primarily in the United States. The Company performs ongoing credit evaluations
of its customers and generally does not require collateral. The Company
maintains reserves for potential credit losses and such losses have been within
management's expectations. Sales to three significant customers accounted for
36%, 20% and 10% of net revenues during 1997. Two significant customers
accounted for 51% and 21% of receivables, net of related deferred revenue, at
December 31, 1997, respectively.
Basic and Diluted Earnings Per Common Unit
On December 31, 1997, the Company adopted Statement of Financial Accounting
Standard No. 128, Earnings Per Share ("SFAS No. 128"). SFAS No. 128 requires the
presentation of two amounts, basic earnings per common unit and diluted earnings
per common unit. Earnings per common unit excludes any dilutive effects of
options, warrants and convertible securities. For the period ended December 31,
1997, basic and diluted earnings per common unit are the same due to the
antidilutive effect of potential common units outstanding.
Income Taxes
Nextera is treated as a partnership for federal and state income tax
purposes. Therefore, all items of income, expense, and tax credit are passed
through to the individual unit holders. Accordingly, no provision for income
taxes is required for Nextera. Symmetrix, the Company's wholly owned subsidiary,
is subject to income taxes and reports its income tax provision using the
liability method in accordance with Financial Accounting Standards Board
Statement 109, Accounting for Income Taxes ("Statement 109"). Under Statement
109, deferred income taxes are provided for differences between the financial
reporting and tax bases of assets and liabilities at income tax rates expected
to be in effect when the taxes are actually paid or recovered.
Effect of Recent Accounting Pronouncements
During 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income ("Statement 130"). The Company will adopt
the provisions of Statement 130 during fiscal year 1998. At that time, the
Company will be required to disclose comprehensive income. Comprehensive income
is generally defined as all changes in members' equity (deficit) exclusive of
transactions with owners such as capital investments and dividends. Management
of the Company does not expect the adoption of Statement 130 will have a
material impact on the Company's financial statement disclosures.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, Disclosures About Segments of an Enterprise and Related Information
("Statement 131"), which is required to be adopted for years beginning after
December 15, 1997. Management of the Company believes that they operate in only
one segment and accordingly does not expect the adoption of Statement 131 will
have a material impact on the Company's financial statement disclosures.
F-10
<PAGE> 75
NEXTERA ENTERPRISES, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997
(IN THOUSANDS)
<S> <C>
Equipment............................................ $ 663
Software............................................. 55
Furniture and fixtures............................... 371
Leasehold improvements............................... 222
------
1,311
Less: accumulated depreciation....................... 130
------
Property and equipment, net.......................... $1,181
======
</TABLE>
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997
(IN THOUSANDS)
<S> <C>
Trade accounts payable............................... $ 720
Accrued payroll...................................... 837
Accrued medical...................................... 94
Compensated absences................................. 156
Other................................................ 477
------
$2,284
======
</TABLE>
5. FINANCING ARRANGEMENTS
Notes Payable to Bank
The Company has a $1,800,000 unsecured line of credit with a bank that
expires on November 30, 1998. Borrowings under the line bear interest at the
bank's prime rate plus 1.0% (9.5% at December 31, 1997) and are limited to a
percentage of specified trade receivables. The agreement provides for an annual
commitment fee of 0.5% of the unused line. At December 31, 1997, the Company had
$1,637,000 outstanding under the line and an additional $163,000 available. On
January 1, 1998, the Company increased its unsecured line of credit with the
bank to $2,000,000. The line contains restrictive covenants relating to
maintenance of financial ratios, operating restrictions and restrictions on the
payment of dividends.
Symmetrix has a $150,000 unsecured line of credit with a bank that expires
on August 31, 1998. Borrowings under the line bear interest at the bank's prime
rate plus 1.0% (9.5% at December 31, 1997). The agreement provides for drawdowns
through August 31, 1998 with the line declining by $6,250 per month beginning on
September 1, 1996. As of December 31, 1997, the Company had borrowings
outstanding of $50,000 under the line of credit.
F-11
<PAGE> 76
NEXTERA ENTERPRISES, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997
(IN THOUSANDS)
<S> <C>
Unsecured notes payable to former stockholders and employees
of Symmetrix, issued in connection with the acquisition of
common stock of Symmetrix. Interest accrues at the lower
of 10.0% or prime (8.5% at December 31, 1997), payable in
bi-annual installments with principal ranging from $1,152
to $7,560, through July 2002.............................. $ 172
Unsecured note payable to a former stockholder of Symmetrix
issued in connection with a non-compete agreement. Annual
payments of $120,000 are due through May 2010. Interest
accrues annually at 8.7%.................................. 915
Other....................................................... 28
------
1,115
Less: current portion....................................... 146
------
Long-term debt.............................................. $ 969
======
</TABLE>
Annual maturities of long-term debt for the years ending after December 31,
1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998......................................... $ 146
1999......................................... 100
2000......................................... 79
2001......................................... 57
2002 and thereafter.......................... 733
------
$1,115
======
</TABLE>
6. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 26, 1997
(DATE OF INCEPTION)
THROUGH
DECEMBER 31, 1997
(IN THOUSANDS)
<S> <C>
Deferred:
Federal................................... $596
State..................................... 106
----
Total deferred tax provision...... $702
====
</TABLE>
F-12
<PAGE> 77
NEXTERA ENTERPRISES, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax assets reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997
(IN THOUSANDS)
<S> <C>
Deferred tax asset:
Reserves........................................... $ 60
Other accrued liabilities.......................... 363
Net operating loss carryforwards................... 2,327
------
Deferred tax asset.............................. 2,750
Valuation allowance................................ 2,716
------
Net deferred tax asset............................. 34
Deferred tax liability: depreciation............... (34)
------
Total deferred tax asset................... $ 0
======
</TABLE>
Symmetrix has approximately $5,819,000 of pre-acquisition net operating
loss carryforwards which expire through the year 2012. The net operating loss
carryforwards arose principally as a result of disqualifying dispositions of
Symmetrix' previously outstanding stock options. As a result of ownership
changes, these net operating losses are subject to limitations under the
Internal Revenue Code.
The reconciliation of the consolidated effective tax rate of the Company is
as follows:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 26, 1997
(DATE OF INCEPTION)
THROUGH
DECEMBER 31, 1997
<S> <C>
Tax (benefit) at statutory rate...................... (34)%
State taxes (benefit), net of federal benefit........ (6)
Permanent differences................................ 3
Loss treated as partnership flow-through for tax
purposes........................................... 54
Other................................................ 13
---
Income tax provision................................. 30%
===
</TABLE>
7. RELATED PARTY TRANSACTIONS
During 1997, the Company entered into a professional services contract with
Product Point International, Inc. ("PPI"), a subsidiary of Knowledge Universe,
L.L.C. Revenues from PPI were $225,000 through December 31, 1997. At December
31, 1997, $225,000 was due from PPI.
On July 31, 1995, Symmetrix entered into a four year non-compete agreement
("Agreement") with its then majority stockholder ("Stockholder") in conjunction
with the Stockholder's sale of his holdings in Symmetrix' common stock to a
non-affiliated third party. Symmetrix capitalized the value of the Agreement,
$986,000, and is amortizing the amount on a straight-line basis over the life of
the Agreement. At December 31, 1997, the carrying amount was $390,000 and was
included in other assets on the consolidated balance sheet.
In connection with an equity recapitalization, $47,970,000 was recorded as
debentures due to affiliates (see Note 9).
Management fees of $90,000 and $60,000 due to Knowledge Universe, L.L.C.
were incurred, but remain unpaid, for the period ended December 31, 1997 and the
six months ended June 30, 1998, respectively.
F-13
<PAGE> 78
NEXTERA ENTERPRISES, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. LEASES
The Company leases its office facility under an operating lease which
expires in April 2002 and has a 5-year renewal option. The lease requires
payments for additional expenses such as taxes, maintenance and utilities. Total
facility rent expense for the period from February 26, 1997 (date of inception)
through December 31, 1997 was approximately $449,000.
Future minimum lease payments under noncancelable operating leases
consisted of the following (in thousands):
<TABLE>
<S> <C>
Year ending December 31:
1998.............................................. $ 887
1999.............................................. 887
2000.............................................. 887
2001.............................................. 887
2002 and thereafter............................... 296
------
Total minimum lease payments.............. $3,844
======
</TABLE>
9. MEMBERS' EQUITY
The accompanying financial statements reflect the Company's historical
equity structure which is described below. As of April 30, 1998, the Company
amended and restated its capital structure (see Recapitalization below).
Historical
As of December 31, 1997, the Company was authorized to issue two classes of
Units: Class A Common Units and Class B Preferred Units, to be owned by unit
holders of the limited liability company ("Members"). Each Class A Common Member
had one vote per Class A Common Unit owned by such Member. The Class B Preferred
Units were non-voting. At December 31, 1997, the Company had a warrant
outstanding to purchase 5,000,000 Class A Common Units at an exercise price of
$2.50 per unit, with an expiration date of August 1, 2002 (the "Warrant"). At
any time after May 1, 2002, or upon the exercise of the Warrant, the Class B
Preferred Members have the right to require the Company to redeem all of their
Class B Preferred Units for an amount equal to their adjusted capital balances.
The Class B Preferred Units also had a liquidation preference equal to their
Undistributed Return, as defined in the amended and restated Nextera operating
agreement. The Company had a right to approve or disapprove any proposed
transfer of Units.
Recapitalization
During the period from January 1, 1998 through April 30, 1998, $30,223,000
of additional capital was contributed, bringing the total contributed capital to
$49,970,000. As of April 30, 1998, the Company undertook a recapitalization,
which was unanimously approved by all of the Members of the Company. The net
result of the recapitalization was the redesignation of $47,970,000 of capital
as debentures. As a result of the recapitalization transactions, the Company
issued two debentures with principal amounts of $24,970,000 and $23,000,000,
respectively. Both debentures are due on May 1, 2002. The debentures accrue
interest at a rate of 10% retroactive to the date the initial capital was
funded. Accordingly, for the six months ended June 30, 1998, the Company
incurred approximately $793,000 of interest expense pursuant to the
recapitalization related to the period ended December 31, 1997. The stated value
of the 10,000,000 Class A Common Units was reduced to $0.20 per unit from $2.50
per unit.
In addition, pursuant to the recapitalization, the warrant to acquire
5,000,000 Class A Common Units was amended to provide that the units subject to
the warrant were changed to a new class of authorized Class B Common Units. The
Class B Common Units have the same economic characteristics as the Class A
Common Units, except that each Class B Common Member has ten votes per Class B
Common Unit owned
F-14
<PAGE> 79
NEXTERA ENTERPRISES, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
by such member. The warrant was contributed to the Company in exchange for
4,300,000 Class B Common Units on April 30, 1998.
Employee Equity Participation Plan
In 1997, the Company established its Employee Equity Participation Plan
("EPP"), whereby the Board of Directors may make discretionary awards of stock
appreciation rights ("SAR") to employees of the Company. At the exercise date,
the Company may settle its SAR obligations by making either cash payments or
issuing Class A Common Units equal to the amount of the underlying appreciated
value of the Company's Class A Common Unit from the initial grant date. The
exercise of the SAR is limited by the provisions of each applicable employee
agreement, however, the exercise period cannot exceed seven years. For the
period ended December 31, 1997, 450,000 SARs were granted under the EPP, at an
initial price of $5.00. The Company recognized no compensation expense relating
to the SARs during the period ended December 31, 1997. Pursuant to the EPP,
4,500,000 SARs have been reserved for issuance.
Subsequent to December 31, 1997, the Board of Directors approved the
conversion of all existing SARs into options pursuant to the provisions of the
EPP. The exercise price of the options was $5.00, which was equal to or exceeded
the fair value on the date of the conversion.
10. BASIC AND DILUTED EARNINGS PER COMMON UNIT
The following table sets forth the reconciliation of the numerator and
denominator of the net loss per common unit computation:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 26, 1997
(DATE OF INCEPTION) FOR THE
THROUGH SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER COMMON UNIT DATA)
<S> <C> <C>
Net loss................................. $(3,015) $(3,578)
Weighted average common units
outstanding............................ 4,061 12,550
Net loss per common unit................. $ (0.74) (0.29)
======= =======
</TABLE>
11. RETIREMENT SAVINGS PLAN
The Company's subsidiary sponsors a Retirement Savings Plan (the
"Retirement Plan") under Section 401(k) of the Internal Revenue Code for the
benefit all of its employees meeting certain minimum service requirements.
Eligible employees may elect to contribute to the Retirement Plan subject to
limitations established by the Internal Revenue Code. The trustees of the plan
select investment opportunities from which participants may choose to
contribute. Matching contributions are made at the discretion of the Company.
There were no contributions to the Retirement Plan by the Company for the period
from February 26, 1997 (date of inception) through December 31, 1997.
12. SUBSEQUENT EVENTS
Effective August 31, 1998, the Company acquired the assets and assumed
certain liabilities of Sibson & Company, L.P. and Sibson Canada, Inc.
(collectively, "Sibson") for cash of $37,375,000 and 2,810,900 Class A Common
Units (including the Exchangeable Shares, defined below). The acquisition of
Sibson was accounted for under the purchase method of accounting; accordingly,
the purchase price was allocated to the underlying assets and liabilities based
on their respective estimated fair values at the date of the acquisition.
In connection with the acquisition of Sibson, the Company formed a wholly
owned Canadian subsidiary, Sibson Acquisition Co., which issued 197,813
Exchangeable Preference Shares ("Exchangeable Shares") to the holders of capital
stock of Sibson Canada, Inc. The Exchangeable Shares are exchangeable at any
time by the holders thereof for Class A Common Units. The holders of
Exchangeable Shares are entitled to dividend
F-15
<PAGE> 80
NEXTERA ENTERPRISES, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and other rights equivalent to holders of Class A Common Units but are not
entitled to vote on matters submitted to the holders of Class A Common Units
until such time as the holders of Exchangeable Shares exchange such shares for
Class A Common Units.
Also, in connection with the acquisition of Sibson, the Company secured a
$40,000,000 revolving credit facility (the "Bridge Loan"), which bears interest
at the rate of LIBOR plus 450 basis points per annum (10.2% at August 31, 1998)
and matures on February 28, 1999. The Bridge Loan is secured by substantially
all of the Company's assets and contains certain restrictive covenants. As of
August 31, 1998, $38,000,000 was outstanding under the Bridge Loan.
F-16
<PAGE> 81
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Symmetrix, Inc.
We have audited the accompanying consolidated balance sheets of Symmetrix,
Inc. and subsidiaries as of May 31, 1997 and July 30, 1997, and the related
consolidated statements of operations and accumulated deficit and cash flows for
the year ended May 31, 1997 and for the period from June 1, 1997 through July
30, 1997. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Symmetrix,
Inc. and subsidiaries at May 31, 1997 and July 30, 1997, and the results of
their operations and their cash flows for the year ended May 31, 1997 and for
the period from June 1, 1997 through July 30, 1997 in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
April 30, 1998
F-17
<PAGE> 82
SYMMETRIX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF AS OF
MAY 31, 1997 JULY 30, 1997
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 838 $ 543
Accounts receivable, net of allowance for doubtful
accounts of $100 at May 31, 1997 and July 30, 1997..... 2,919 2,560
Costs and estimated earnings in excess of billings........ 471 95
Prepaid expenses and other current assets................. 174 97
Refundable income taxes................................... 416 416
------- -------
Total current assets.............................. 4,818 3,711
Long-term receivable........................................ 600 600
Property and equipment, net................................. 411 387
Other assets................................................ 654 607
------- -------
Total assets...................................... $ 6,483 $ 5,305
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses..................... $ 2,595 $ 6,773
Notes payable to bank..................................... 114 81
Due to affiliate.......................................... 1 3
Deferred revenue.......................................... 3,802 3,150
Current portion of long-term debt......................... 128 128
------- -------
Total current liabilities......................... 6,640 10,135
Long-term debt.............................................. 1,048 1,030
Stockholders' equity (deficit):
Common stock, no par value, 10,000,000 shares authorized,
1,216,921 shares issued and outstanding................ 12 12
Additional paid-in capital................................ 995 995
Accumulated deficit....................................... (2,212) (6,867)
------- -------
Total stockholders' equity (deficit).............. (1,205) (5,860)
------- -------
Total liabilities and stockholders' equity
deficit......................................... $ 6,483 $ 5,305
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE> 83
SYMMETRIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
YEAR ENDED JUNE 1, 1997
MAY 31, THROUGH
1997 JULY 30, 1997
(IN THOUSANDS)
<S> <C> <C>
Net revenues................................................ $15,052 $ 2,381
Cost of revenues............................................ 13,529 1,994
------- -------
Gross profit........................................... 1,523 387
Selling, general and administrative expenses................ 6,584 887
Compensation expense--repurchase of stock options........... -- (4,126)
------- -------
Loss from operations................................... (5,061) (4,626)
Gain on sale of investment.................................. 1,884 --
Interest income............................................. 53 8
Interest expense............................................ (116) (37)
------- -------
Net loss............................................... (3,240) (4,655)
Accumulated deficit at beginning of period.................. 1,028 (2,212)
------- -------
Accumulated deficit at end of period........................ $(2,212) $(6,867)
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE> 84
SYMMETRIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
FOR THE JUNE 1, 1997
YEAR ENDED THROUGH
MAY 31, 1997 JULY 30, 1997
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(3,240) $(4,655)
Adjustments to reconcile net loss to net cash
used in operating activities:
Gain on sale of investment............................. (1,884) --
Depreciation........................................... 261 38
Amortization........................................... 246 53
Change in operating assets and liabilities:
Accounts receivable.................................. (541) 359
Costs and estimated earnings in excess of billings... (13) 376
Long-term receivable................................. (600) --
Due to affiliate..................................... 1 2
Prepaid expenses and other current assets............ 210 77
Refundable taxes..................................... (14) --
Accounts payable and accrued expenses................ 720 4,178
Deferred revenue..................................... 3,541 (652)
Other................................................ (60) (6)
------- -------
Net cash used in operating activities............. (1,373) (230)
------- -------
Cash flows from investing activities:
Purchase of property and equipment........................ (245) (14)
Proceeds from sale of investment.......................... 2,259 --
------- -------
Net cash provided by (used in) investing
activities...................................... 2,014 (14)
------- -------
Cash flows from financing activities:
Borrowings under line of credit........................... 114 --
Repayments of long-term debt.............................. (100) (18)
Repayments under line of credit........................... (164) (33)
------- -------
Net cash used in financing activities............. (150) (51)
------- -------
Net increase (decrease) in cash and cash equivalents...... 491 (295)
Cash and cash equivalents at beginning of period.......... 347 838
------- -------
Cash and cash equivalents at end of period................ $ 838 $ 543
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest............................................... $ 118 $ 23
======= =======
Income taxes........................................... $ 314 $ --
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 85
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997 AND JULY 30, 1997
1. THE COMPANY
Symmetrix, Inc. ("Symmetrix" or the "Company") offers enhanced services in
acquisition due diligence, customer profitability, information technology
strategy assessment and design, construction, and deployment of complete
business systems. Symmetrix primarily offers its services to the financial
services, health care and insurance industries.
On May 26, 1994, Symmetrix Capital Partners I Limited Partnership ("the
Partnership") was formed for the purpose of making investments in entities that
could benefit from the Company's management services. In the absence of any
dissolution events, as defined in the Partnership agreement, the Partnership
shall continue in existence until December 31, 2009, unless otherwise extended.
The Company is the general partner and a Class B Limited Partner. As of May 31,
1996, the Company had provided 74% of the Partnership's capital. During the year
ended May 31, 1995, certain Class B Limited Partners were admitted in place of a
portion of the Company's investment as a Class B Limited Partner. A total of
$125,000 was paid to the Company in return for this portion of the Company's
Class B Limited Partnership interest. To date, the Partnership has not generated
any revenues or expenses. Management intends to dissolve the Partnership.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Revenue Recognition
The Company derives its revenues from consulting services under time and
materials, capped-fee, and fixed-price billing arrangements. Under time and
materials arrangements, revenues are recognized as the services are provided.
Revenues on fixed-price and capped-fee contracts are recognized using the
percentage of completion method of accounting and are adjusted monthly for the
cumulative impact of any revision in estimates. The Company determines the
percentage of completion of its contracts by comparing costs incurred to date to
total estimated costs. Contract costs include all direct labor and expenses
related to the contract performance. Costs and estimated earnings in excess of
billings represents revenues recognized in excess of amounts billed. Deferred
revenue represents billings in excess of revenues recognized. Net revenues
exclude reimbursable expenses charged to clients.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and demand deposits
accounts. The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Cash equivalents are
stated at cost which approximates market value.
F-21
<PAGE> 86
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1997 AND JULY 30, 1997
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Furniture and fixtures............................ 5-7 years
Equipment......................................... 3-5 years
Software.......................................... 3 years
</TABLE>
Leasehold improvements are amortized over the lesser of the lease term or
the useful life of the property.
Financial Instruments
The carrying value of financial instruments such as cash equivalents,
accounts receivable, accounts payable and accrued expenses approximates their
fair values based on the short-term maturities of these instruments. The
carrying value of long-term debt approximates its fair value based on references
to similar instruments.
Concentration of Credit Risk
The Company provides its services to customers in diversified industries,
primarily in the United States. The Company performs ongoing credit evaluations
of its customers and generally does not require collateral. The Company
maintains reserves for potential credit losses and such losses have been within
management's expectations. For the year ended May 31, 1997, revenues to three
significant customers accounted for 69% of net revenues. Three customers
accounted for 84% of receivables, net of related deferred revenue at May 31,
1997.
Stock Compensation
The Company grants stock options for a fixed number of shares to employees
with an exercise price not less than the fair value of the shares at the date of
grant and accounts for stock options granted to employees in accordance with the
provisions of Accounting Principle Board Opinion No. 25, Accounting for Stock
Issued to Employees.
Income Taxes
The Company utilizes the liability method of accounting for income taxes,
as set forth in Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Under this method, deferred tax liabilities and assets are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities.
Deferred tax assets are recognized, net of any valuation allowance, for
deductible temporary differences and net operating loss and tax credit
carryforwards. Deferred tax expense represents the change in the deferred tax
asset or liability balances.
3. INVESTMENT
The Company held an investment in Olympic Manufacturing Group, Inc.
("Olympic"), a privately-held manufacturing company. The Company did not have a
controlling interest in Olympic and the investment was valued at cost. The
investment was sold during the year ended May 31, 1997 at a gain of $1,883,927.
F-22
<PAGE> 87
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1997 AND JULY 30, 1997
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
AS OF AS OF
MAY 31, 1997 JULY 30, 1997
(IN THOUSANDS)
<S> <C> <C>
Equipment.......................................... $1,319 $1,321
Software........................................... 250 262
Furniture and fixtures............................. 230 230
Leasehold improvements............................. 69 69
------ ------
1,868 1,882
Less: accumulated depreciation..................... 1,457 1,495
------ ------
Property and equipment, net........................ $ 411 $ 387
====== ======
</TABLE>
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
AS OF AS OF
MAY 31, 1997 JULY 30, 1997
(IN THOUSANDS)
<S> <C> <C>
Trade accounts payable............................. $ 365 $ 175
Accrued payroll.................................... 320 463
Compensated absences............................... 220 258
Accrued compensation............................... -- 4,126
Profit sharing..................................... 1,234 1,234
Other.............................................. 456 517
------ ------
$2,595 $6,773
====== ======
</TABLE>
6. FINANCING ARRANGEMENTS
Notes Payable to Bank
The Company has a $1,800,000 unsecured line of credit with a bank that
expires on November 30, 1998. Borrowings under the line bear interest at the
bank's prime rate plus 1.0% (9.5% at July 30, 1997) and are limited to a
percentage of specified trade receivables. The agreement provides for an annual
commitment fee of 0.5% of the unused line. The Company had $1,000,000 available
under the line of credit at May 31, 1997 and July 30, 1997. On January 1, 1998,
the Company increased its unsecured line of credit with the bank to $2,000,000.
The line contains restrictive covenants relating to maintenance of financial
ratios, operating restrictions and restrictions on the payment of dividends.
The Company had a $220,000 unsecured declining demand line that expired on
July 1, 1997. The Company also has a $150,000 unsecured line of credit with a
bank that expires on August 31, 1998. Borrowings under the lines bear interest
at the bank's prime rate plus 1.0% (9.5% at May 31, 1997 and July 30, 1997). The
agreement provides for drawdowns through August 31, 1998, with the line
declining by $6,250 per month beginning on September 1, 1996.
F-23
<PAGE> 88
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1997 AND JULY 30, 1997
Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
AS OF AS OF
MAY 31, 1997 JULY 30, 1997
(IN THOUSANDS)
<S> <C> <C>
Unsecured notes payable to former stockholders and
employees, issued in connection with the repurchase of the
Company's stock. Interest accrues at the lower of 10.0% or
prime (8.5% at May 31, 1997 and July 31, 1997), payable in
bi-annual installments with principal ranging from $1,152
to $8,960, through July 2002.............................. $ 191 $ 175
Unsecured note payable to a former stockholder issued in
connection with a non-competition agreement. Annual
payments of $120,000 are due through May 2010. Interest
accrues annually at 8.7%.................................. 951 951
Other....................................................... 34 32
------ ------
1,176 1,158
Less: current portion....................................... 128 128
------ ------
Long-term debt.............................................. $1,048 $1,030
====== ======
</TABLE>
Annual maturities of long-term debt for the fiscal years ending after July
30, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $128
1999........................................................ 135
2000........................................................ 85
2001........................................................ 72
2002 and thereafter......................................... 738
------
$1,158
======
</TABLE>
7. INCOME TAXES
Deferred tax assets reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred tax asset are as follows:
<TABLE>
<CAPTION>
AS OF AS OF
MAY 31, 1997 JULY 30, 1997
(IN THOUSANDS)
<S> <C> <C>
Reserves................................... $ 180 $ 40
Other accrued liabilities.................. 1,000 1,107
Net operating loss carryforwards........... 120 1,996
------- -------
Total............................ 1,300 3,143
Valuation allowance........................ (1,252) (3,114)
------- -------
Net deferred tax asset..................... 48 29
Deferred liability: depreciation........... (48) (29)
------- -------
Total net deferred tax asset..... $ 0 $ 0
======= =======
</TABLE>
The Company has approximately $5,819,000 of net operating loss
carryforwards which expire through the year 2012. The net operating loss
carryforwards arose principally as a result of disqualifying dispositions of the
Company's previously outstanding stock options. As a result of ownership
changes, these net operating losses are subject to limitations under the
Internal Revenue Code.
F-24
<PAGE> 89
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1997 AND JULY 30, 1997
8. RELATED PARTY TRANSACTIONS
On July 31, 1995, the Company entered into a non-compete agreement
("Agreement") with the then majority stockholder ("Stockholder") in conjunction
with the Stockholder's sale of his holdings in the Company's common stock to a
non-affiliated third party. The Company capitalized the value of the Agreement,
$986,000, and is amortizing the amount on a straight-line basis over the life of
the Agreement. At May 31, 1997 and July 30, 1997, the carrying amounts were
$546,000 and $493,000, respectively, and were included in other assets on the
balance sheet.
9. LEASES
The Company leases its office facility under an operating lease which
expires in April 2002 and has a 5-year renewal option. The lease requires
payments for additional expenses such as taxes, maintenance and utilities. Total
facility rent expense for the year ended May 31, 1997 and for the period June 1,
1997 through July 30, 1997 was approximately $751,000 and $148,000,
respectively.
Future minimum lease payments under noncancelable operating leases, for the
fiscal years ending after July 30, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998................................................ $887
1999................................................ 887
2000................................................ 887
2001................................................ 887
2002 and thereafter................................. 665
------
Total minimum lease payments................. $4,213
======
</TABLE>
10. STOCKHOLDERS' EQUITY
Stock Option Plan
The Company established the 1988 Stock Option Plan (the "Plan"), which
provided for the granting of incentive stock options and non-qualified stock
options to employees. The Plan provided for a maximum of 1,415,298 shares of
common stock of the Company to be granted over ten years from the date the Plan
was adopted.
Incentive stock options may be issued under the Plan at an option price not
less than the fair market value at the date of grant as determined by the Board
of Directors (110% of fair market value in the case of stockholders having
ownership in excess of 10%). Non-qualified stock options may be issued under the
Plan at an option price as determined by the Board of Directors at the date of
the grant.
The incentive stock options are exercisable for a period not to exceed ten
years from the date of grant (five years in the case of incentive stock options
for the stockholders having ownership in excess of 10%). The non-qualified
options are exercisable in accordance with the terms agreed for each option
granted.
During the year ended May 31, 1997, the Company granted 112,000 options
with exercise prices equal to or exceeding the fair market value at the date of
grant of the Company's common stock, ranging from $2.55 to $5.05. There were
1,025,558 stock options outstanding at May 31, 1997. No stock options were
granted during the two months ended July 30, 1997.
In July 1997, the Board of Directors approved a stock option repurchase
plan whereby all of the outstanding stock options were canceled. The repurchase
amount was accrued at July 30, 1997 at a cost of $4,126,000, which was charged
to operations in the two months ended July 30, 1997. As a result, no stock
F-25
<PAGE> 90
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1997 AND JULY 30, 1997
options were outstanding at July 30, 1997. Accordingly, the disclosure of pro
forma net loss required by Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation has not been presented because such
information is not deemed to be meaningful. The Plan will expire by its own
terms on September 20, 1998.
11. RETIREMENT SAVINGS PLAN
The Company sponsors a Retirement Savings Plan (the "Retirement Plan")
under Section 401(k) of the Internal Revenue Code for the benefit of all
employees meeting certain minimum service requirements. Eligible employees may
elect to contribute to the Retirement Plan subject to limitations established by
the Internal Revenue Code. The trustees of the Retirement Plan select investment
opportunities from which participants may choose to contribute. Matching
contributions are made at the discretion of the Company. The Company made
contributions to the Retirement Plan of $139,000 for the year ended May 31,
1997. There were no contributions to the Retirement Plan by the Company for the
period from June 1, 1997 through July 30, 1997.
12. SUBSEQUENT EVENT
Effective July 30, 1997, all of the outstanding stock of the Company was
acquired by Nextera Enterprises, L.L.C. for cash of $15,500,000.
F-26
<PAGE> 91
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Symmetrix, Inc.
Lexington, Massachusetts
We have audited the accompanying consolidated balance sheet of Symmetrix,
Inc. and subsidiaries as of May 31, 1996, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Symmetrix, Inc.
and subsidiaries at May 31, 1996, and the consolidated results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ BDO SEIDMAN
Boston, Massachusetts
July 19, 1996
F-27
<PAGE> 92
SYMMETRIX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF
MAY 31, 1996
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 347
Accounts receivable, net of allowance for doubtful
accounts of $62........................................ 2,837
Refundable income taxes................................... 402
Other receivables......................................... 198
Prepaid expenses.......................................... 186
Investment................................................ 500
Deferred income taxes..................................... 44
------
Total current assets.............................. 4,514
Property and equipment, net................................. 427
Covenant not to compete, net of accumulated amortization of
$192...................................................... 794
Deposits.................................................... 47
------
Total assets...................................... $5,782
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank..................................... $ 164
Accounts payable.......................................... 341
Accrued expenses.......................................... 1,550
Deferred revenue.......................................... 261
Current maturities of long-term debt...................... 122
------
Total current liabilities......................... 2,438
Long-term debt, less current maturities..................... 1,152
Deferred income taxes....................................... 32
------
Total liabilities................................. 3,622
Minority interest in consolidated subsidiary................ 125
Commitments (Notes 9 and 11)
Stockholders' equity:
Common stock, $0.01 par value, 10,000,000 shares
authorized,
1,216,921 shares outstanding........................... 12
Additional paid-in capital................................ 995
Retained earnings......................................... 1,028
------
Total stockholders' equity........................ 2,035
------
Total liabilities and stockholders' equity........ $5,782
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 93
SYMMETRIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
MAY 31, 1996
(IN THOUSANDS)
<S> <C>
Net revenues................................................ $19,237
Cost of revenues............................................ 9,015
-------
Gross profit........................................... 10,222
Selling, general and administrative expenses................ 10,547
-------
Loss from operations................................... (325)
Interest income............................................. 46
Interest expense............................................ (102)
-------
Net loss before income tax benefit..................... (381)
Income tax benefit.......................................... 247
-------
Net loss............................................... $ (134)
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE> 94
SYMMETRIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK FOREIGN
---------------------- CAPITAL IN CURRENCY TOTAL
NUMBER OF EXCESS OF RETAINED TREASURY TRANSLATION STOCKHOLDERS'
SHARES PAR VALUE PAR EARNINGS STOCK ADJUSTMENT EQUITY
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1995... 1,877,215 $ 18 $ 1,345 $1,162 $(318) $ 12 $2,219
Shares contributed by
shareholder............. (595,294) (6) 6 -- -- -- 0
Purchase and retirement of
shares.................. (15,000) -- (38) -- -- -- (38)
Retirement of treasury
stock................... (50,000) -- (318) -- 318 -- --
Foreign currency
translation
adjustment.............. -- -- -- -- -- (12) (12)
Net loss.................. -- -- -- (134) -- -- (134)
---------- ---- ------- ------ ----- ---- ------
Balance at May 31, 1996... 1,216,921 $ 12 $ 995 $1,028 -- -- $2,035
========== ==== ======= ====== ===== ==== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE> 95
SYMMETRIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
MAY 31, 1996
(IN THOUSANDS)
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (134)
Adjustments to reconcile net loss to net cash used in
operating activities:
Gain on disposal of property and equipment............. (48)
Provision for doubtful accounts........................ 214
Depreciation and amortization.......................... 153
Deferred income taxes.................................. 225
Changes in operating assets and liabilities:
Accounts receivables................................. (1,003)
Refundable income taxes.............................. (381)
Other receivables.................................... (83)
Prepaid expenses..................................... (140)
Other assets......................................... 14
Accounts payable..................................... 78
Accrued expenses..................................... (183)
Deferred revenue..................................... (45)
--------
Net cash used in operating activities............. (1,333)
--------
Cash flows from investing activities:
Proceeds from disposal of property and equipment.......... 69
Purchase of property and equipment........................ (227)
--------
Net cash used in investing activities............. (158)
--------
Cash flows from financing activities
Repayment of obligations under capital lease.............. (16)
Borrowings under line of credit........................... 589
Repayments of line of credit.............................. (425)
Proceeds from issuance of notes payable................... 94
Repayments of notes payable............................... (73)
Purchase of treasury stock................................ (7)
--------
Net cash provided by financing activities......... 162
Effect of exchange rate fluctuations on cash and cash
equivalents............................................ (12)
--------
Net decrease in cash and cash equivalents................. (1,341)
Cash and cash equivalents at beginning of year............ 1,688
--------
Cash and cash equivalents at end of year.................. $ 347
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE> 96
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1996
1. THE COMPANY
Symmetrix, Inc. ("Symmetrix" or the "Company") offers enhanced services in
acquisition due diligence, customer profitability, information technology
strategy assessment and design construction, and deployment of complete business
systems. Symmetrix primarily offers its services to the financial services,
health care and insurance industries.
On May 26, 1994, Symmetrix Capital Partners I Limited Partnership ("the
Partnership") was formed for the purpose of making investments in entities that
could benefit from the Company's management services. In the absence of any
dissolution events, as defined in the Partnership agreement, the Partnership
shall continue in existence until December 31, 2009, unless otherwise extended.
The Company is the general partner and a Class B Limited Partner. As of May 31,
1996, the Company had provided 74% of the Partnership's capital. During the year
ended May 31, 1995, certain Class B Limited Partners were admitted in place of a
portion of the Company's investment as a Class B Limited Partner. A total of
$125,000 was paid to the Company in return for this portion of the Company's
Class B Limited Partnership interest. To date, the Partnership has not generated
any revenues or expenses.
On January 1, 1995, Symmetrix European Holdings, Inc. ("Symmetrix
Holdings") (a Delaware corporation) and Symmetrix Europe, SA ("Symmetrix
Europe") (a French corporation) were formed for the purpose of conducting
business in Europe. The Company holds 80% of the outstanding stock of Symmetrix
Holdings, which holds 99.9% of the outstanding stock of Symmetrix Europe.
Activity for these subsidiaries has been consolidated into the Company's
financial statements for the year ended May 31, 1996. In November 1995, the
Board of Directors approved the abandonment of the operating activities of
Symmetrix Holdings and Symmetrix Europe.
The Partnership, Symmetrix Holdings and Symmetrix Europe have calendar
year-ends and thus for purposes of consolidation, the accounts of these
subsidiaries are based on a period which corresponds with the fiscal period of
the Company.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates and assumptions.
Foreign Currency Translation and Transaction Gains and Losses
Assets and liabilities of the Company's foreign operation are translated
into U.S. dollars at the exchange rate in effect as of the balance sheet date
and revenue and expenses are translated at average exchange rates during the
period. The resultant translation adjustment is reflected as a separate
component of stockholders' equity. Transaction gains and losses are reflected in
the consolidated statement of operations.
F-32
<PAGE> 97
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1996
Revenue Recognition
The Company derives its revenues from consulting services under time and
materials, capped-fee and fixed-price billing arrangements. Under time and
materials arrangements, revenues are recognized as the services are provided.
Revenues on fixed-price and capped-fee contracts are recognized using the
percentage of completion method of accounting and are adjusted monthly for the
cumulative impact of any revision in estimates. The Company determines the
percentage of completion of its contracts by comparing costs incurred to date to
total estimated costs. Contract costs include all direct labor and expenses
related to the contract performance. Costs and estimated earnings in excess of
billings represents revenues recognized in excess of amounts billed from
fixed-price contracts. Deferred revenue represents billings in excess of
revenues earned. Revenues include reimbursable expenses charged to clients.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and demand deposit
accounts. The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Cash equivalents are
stated at cost which approximates market value. The Company's cash equivalents
consist of an overnight repurchase agreement that is managed by a financial
institution with a strong credit rating. Accordingly, management believes the
investment is subject to minimal credit and market risk.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Furniture and fixtures........................... 5-7 years
Equipment........................................ 3-5 years
Software......................................... 3 years
</TABLE>
Leasehold improvements are amortized over the lesser of the lease term or
the useful life of the property.
Financial Instruments
The carrying value of financial instruments such as cash equivalents,
accounts receivable, accounts payable and accrued expenses approximates their
fair values based on short-term maturities of these instruments. The carrying
value of long-term debt approximates its fair value based on references to
similar instruments.
Concentration of Significant Customers
The Company provides its services to customers in diversified industries,
primarily in the United States. The Company performs ongoing credit evaluations
of its customers and generally does not require collateral. The Company
maintains reserves for potential credit losses and such losses have been within
management's expectations. Sales to four significant customers accounted for
14%, 14%, 13% and 13%, respectively, of revenues for the year ended May 31,
1996.
Income Taxes
The Company utilizes the liability method of accounting for income taxes,
as set forth in Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Under this method, deferred tax liabilities and assets are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities.
Deferred tax assets are recognized, net of any valuation allowance, for
deductible temporary differences and net operating loss and tax credit
carryforwards. Deferred tax expense represents the change in the deferred tax
asset or liability balances.
F-33
<PAGE> 98
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1996
3. INVESTMENT
The Partnership has an investment in Olympic Manufacturing Group, Inc.
("Olympic"), a privately held manufacturing company. The Company does not have a
controlling interest in Olympic and the investment is carried at cost. The value
of $499,966 does not necessarily represent an amount which would be realized
upon the sale or other disposition of the investment.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
AS OF
MAY 31, 1996
(IN THOUSANDS)
<S> <C>
Equipment...................................... $ 1,083
Computer software.............................. 248
Furniture and fixtures......................... 223
Leasehold improvements......................... 68
--------------
1,622
Less: accumulated depreciation and
amortization................................. 1,195
--------------
Property and equipment, net.................... $ 427
==============
</TABLE>
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
AS OF
MAY 31, 1996
(IN THOUSANDS)
<S> <C>
Accrued profit sharing......................... $ 710
Accrued compensation........................... 380
Other.......................................... 460
------
$1,550
======
</TABLE>
For the year ended May 31, 1996, the Company made distributions to
employees under a discretionary profit-sharing plan amounting to $723,499.
6. FINANCING ARRANGEMENTS
Short-term Borrowings -- Lines of Credit
The Company has a $220,000 unsecured declining demand line of credit that
expires on July 1, 1997. Borrowing under the line bear interest at the bank's
prime rate plus 1% (9.25% at May 31, 1996). The agreement provides for drawdowns
through September 30, 1995 with the line declining by $10,000 per month
beginning on October 1, 1995. As of May 31, 1996, the Company had borrowings
outstanding of $164,025.
In addition, the Company has a $1,000,000 unsecured line of credit with a
bank. Borrowing under the line bear interest at the bank's prime rate plus 1%
(9.25% at May 31, 1996) and are limited to an advance rate of specified trade
receivables. The agreement provides for a commitment fee of 0.5% of unused line.
The maximum borrowings outstanding during the year were $374,129. There were no
borrowings outstanding at May 31, 1996.
F-34
<PAGE> 99
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1996
Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
AS OF
MAY 31, 1996
(IN THOUSANDS)
<S> <C>
Secured installment note, interest at 8.69%. Principal and
interest payments are payable in equal annual installments
of $120,000 through August 2010. As security, the Company
pledged and granted the stockholder a security interest in
all of its rights, title and interest in all the shares of
capital stock of another entity in which the stockholder
has an equity interest (See Note 12)...................... $ 985
Secured installment note, interest at 13.3%. Principal and
interest payments are payable in equal monthly
installments of $1,106 through March, 2000. The note is
secured by a copier with a net book value of $55,638 at
May 31, 1996.............................................. 42
Unsecured note payable to a former stockholders issued in
connection with the repurchase of the Company's stock.
Principal payments range from $3,600 to $7,560 bi-annually
and are payable through July, 2000. Interest accrues at
the lower of 10% or prime (8.25% at May 31, 1996)......... 148
Unsecured note payable to a former employee issued in
connection with a bonus. Principal of $8,960 plus accrued
interest is payable semi-annually in January and July with
final payment due in January, 1999. Interest accrues at
the lower of 10 percent or prime (8.25% at May 31,
1996)..................................................... 54
Unsecured note payable to a former employee issued in
connection with a non-compete agreement. Semi-annual
principal payments of $5,000 are due through July, 2000.
Interest accrues at the lower of 10 percent or prime
(8.25% at May 31, 1996)................................... 45
------
1,274
Less: current maturities.................................... 122
------
Long-term debt.............................................. $1,152
======
</TABLE>
Annual maturities of long-term debt for the fiscal years ending after May
31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997........................................... $ 122
1998........................................... 127
1999........................................... 116
2000........................................... 72
2001........................................... 56
Thereafter..................................... 781
------
$1,274
======
</TABLE>
F-35
<PAGE> 100
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1996
7. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
MAY 31, 1996
(IN THOUSANDS)
<S> <C>
CURRENT:
Federal...................................... $ (434)
State........................................ (38)
------
(472)
------
DEFERRED:
Federal...................................... 172
State........................................ 53
------
225
------
Income tax benefit............................. $ (247)
======
</TABLE>
The difference between the effective tax rate and the statutory tax rate of
34% relates primarily to the worthlessness of Symmetrix Europe stock.
Deferred tax assets relate to receivable and liability reserves. The
deferred tax liability relates to the basis difference of property and
equipment.
8. RELATED PARTY TRANSACTION
The Company entered into a contract with Olympic and provided services
through February 1996. The Company bills Olympic on a monthly basis at cost for
the time and materials incurred on the project. The total costs reimbursed on
the project were approximately $95,000 for the year ended May 31, 1996.
9. LEASES
The Company leases its office facility under an operating lease which
expires in April 2002 and has a 5-year renewal option. The lease requires
payments for additional expenses such as taxes, maintenance and utilities. Total
facility rent expense for the year ended May 31, 1996 was approximately
$783,000. Future minimum lease payments under this noncancelable operating lease
for the fiscal years ending after May 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997........................................... $ 824
1998........................................... 824
1999........................................... 824
2000........................................... 824
2001........................................... 824
Thereafter..................................... 755
------
Total minimum lease payments......... $4,875
======
</TABLE>
10. STOCKHOLDERS' EQUITY
On July 31, 1995, a stockholder contributed 595,294 shares of common stock
in conjunction with his sale of an equivalent number of shares of capital stock.
In addition, on July 31, 1995, the Board of Directors authorized an increase in
the authorized shares of common stock from 2,352,020 shares to 10,000,000
shares.
F-36
<PAGE> 101
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1996
During the year ended May 31, 1996, the Company purchased 15,000 shares of
its common stock from a former employee for $38,250. Notes payable in the amount
of $30,600 were issued in connection with the purchase of the shares. In
addition, during the year ended May 31, 1996 the 15,000 shares purchased above,
and the 50,000 shares of common stock held as treasury stock at May 31, 1995, as
well as the 595,294 shares contributed above, were canceled and common stock and
additional paid-in capital were accordingly reduced by $6,604 and $349,439,
respectively.
Stock Option Plan
The Company established the 1988 Stock Option Plan (the "Plan"), which
provided for the granting of incentive stock options and non-qualified stock
options to employees. The plan provided for a maximum of 1,415,298 shares of
common stock of the Company to be granted over ten years from the date the Plan
was adopted.
Incentive stock options may be issued under the Plan at an option price not
less than the fair market value at the date of grant as determined by the Board
of Directors (110% of fair market value in the case of stockholders having
ownership in excess of 10%). Non-qualified stock options may be issued under the
Plan at an option price as determined by the Board of Directors at the date of
the grant.
The incentive stock options are exercisable for a period not to exceed ten
years from the date of grant (five years in the case of incentive stock options
for the stockholders having ownership in excess of 10%). The non-qualified
options are exercisable in accordance with the terms agreed for each option
granted.
During the year ended May 31, 1996, the Company amended the Plan. Stock
option activity is summarized as follows:
<TABLE>
<CAPTION>
OPTION PRICE PER
SHARES SHARE
<S> <C> <C> <C> <C>
Outstanding, May 31, 1995................. 311,600 $2.80 - $6.85
Granted................................... 1,010,408 2.55
Canceled.................................. (251,600) 2.80-6.85
Redeemed.................................. (77,350) 2.55
------------- ---------------
Outstanding, May 31, 1996................. 993,058 $2.80 - $2.90
============= ===============
</TABLE>
With respect to the redemption of 77,350 stock options during the year
ended May 31, 1996, the Company recognized $197,243 of compensation expense.
At May 31, 1996, 473,379 options were exercisable and 142,041 shares were
available for future grant. In addition, an additional 280,199 shares are
available for grant if the Company meets certain growth targets in accordance
with a Preemptive Rights Agreement.
11. RETIREMENT SAVINGS PLAN
The Company sponsors a Retirement Savings Plan (the "Retirement Plan")
under Section 401(k) of the Internal Revenue Code for the benefit of all
employees meeting certain minimum service requirements. Eligible employees may
elect to contribute to the Retirement Plan subject to limitations established by
the Internal Revenue Code. The trustees of the Retirement Plan select investment
opportunities from which participants may choose to contribute. Matching
contributions are made at the discretion of the Company. There were no
contributions to the plan by the Company during the year ended May 31, 1996.
F-37
<PAGE> 102
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1996
12. COVENANT NOT TO COMPETE
On July 31, 1995, the Company entered into a noncompete agreement (the
"Noncompete Agreement") with the then majority stockholder (the "Stockholder")
in conjunction with the Stockholder selling a portion of his holdings of the
Company's common stock to a non-affiliated third party. The Noncompete Agreement
provides for, among other things, that the Stockholder not compete, as defined
with the Company through August 22, 1999. In consideration of the covenants and
agreements contained within the Noncompete Agreement, the Company agreed to pay
an aggregate of $1,800,000 in equal annual installments of $120,000 through May
2010. The Company capitalized the value of the Noncompete Agreement at $985,000
and is amortizing the amount on a straight-line basis over the life of the
Noncompete Agreement. As security for the payment and performance of all payment
obligations under the Noncompete Agreement, the Company pledged and granted the
Stockholder a security interest in all of its rights, title and interest in all
of its shares of capital stock of another entity in which the Stockholder has an
equity interest.
13. SUPPLEMENTAL CASH FLOW INFORMATION
Payments for interest and income taxes amounted to $31,526 and $21,484,
respectively, for the year ended May 31, 1996.
During the year ended May 31, 1996, the Company issued notes payable in
exchange for the purchase of treasury stock for $30,600.
14. SUBSEQUENT EVENTS
On July 1, 1996, the Company obtained a $150,000 unsecured declining demand
line of credit for acquiring equipment that expires on August 31, 1998.
Borrowings under the line bear interest at the bank's prime rate plus 1%. The
agreement provides for drawdowns through August 31, 1996 with the line declining
by $6,250 per month beginning on September 1, 1996.
F-38
<PAGE> 103
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Symmetrix, Inc.
In our opinion, the accompanying consolidated statements of operations, of
stockholders' equity and of cash flows present fairly, in all material respects,
the results of operations and the cash flows of Symmetrix, Inc. and Subsidiaries
for the year ended May 31, 1995 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
July 21, 1995
F-39
<PAGE> 104
SYMMETRIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
MAY 31, 1995
(IN THOUSANDS,
EXCEPT PER
SHARE DATA)
<S> <C>
Revenues.................................................... $20,080
Cost of revenues............................................ 9,942
-------
Gross profit.............................................. 10,138
Selling, general and administrative expenses................ 10,115
-------
Income from operations................................. 23
Interest expense............................................ (24)
Interest income............................................. 51
-------
Income before provision for income taxes............... 50
Provision for income taxes.................................. 222
-------
Net loss............................................... $ (172)
=======
Net loss per share, basic and diluted....................... $ (0.10)
=======
Weighted average shares outstanding, basic and diluted...... 1,785
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE> 105
SYMMETRIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK FOREIGN
-------------------- CAPITAL IN CURRENCY TOTAL
NUMBER PAR EXCESS OF RETAINED TREASURY TRANSLATION STOCKHOLDERS'
OF SHARES VALUE OF PAR EARNINGS STOCK ADJUSTMENT EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1994.......... 1,832,215 $ 19 $ 1,344 $ 1,334 $ (284) $ -- $ 2,413
Acquisition of treasury
stock........................ -- -- -- -- (34) -- (34)
Foreign currency translation... -- -- -- -- -- 12 12
Net loss....................... -- -- -- (172) -- -- (172)
--------- -------- ---------- ---------- --------- -------- ----------
Balance at May 31, 1995.......... 1,832,215 $ 19 $ 1,344 $ 1,162 $ (318) $ 12 $ 2,219
========= ======== ========== ========== ========= ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE> 106
SYMMETRIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
MAY 31, 1995
(IN THOUSANDS)
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (172)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 206
Deferred income taxes.................................. (4)
Change in operating assets and liabilities:
Accounts receivable.................................. 116
Other current assets................................. 52
Income taxes receivable.............................. 123
Other assets......................................... (14)
Accounts payable and accrued expenses................ 197
Deferred revenue..................................... (287)
------
Net cash provided by operating activities......... 217
Cash flows from investing activities:
Purchase of fixed assets.................................. (64)
------
Net cash used in investing activities............. (64)
Cash flows from financing activities:
Repayments under capital leases........................... (46)
Repayments of notes payable............................... (63)
Purchase of treasury stock................................ (34)
Proceeds from transfer of partnership interests........... 125
------
Net cash used in financing activities............. (18)
Effect of exchange rate fluctuations on cash and cash
equivalents............................................... 12
------
Net increase in cash and cash equivalents......... 147
Cash and cash equivalents, beginning of year.............. 1,541
------
Cash and cash equivalents, end of year.................... $1,688
======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest............................................... $ 39
======
Taxes.................................................. $ 104
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE> 107
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995
1. THE COMPANY
Symmetrix, Inc. ("Symmetrix" or the "Company"), offers enhanced services in
acquisition due diligence, customer profitability, information technology
strategy assessment and design, construction, and deployment of complete
business systems. Symmetrix primarily offers its services to the financial
services, health care and insurance industries.
On May 26, 1994, Symmetrix Capital Partners I Limited Partnership (the
"Partnership") was formed for the purpose of making investments in entities that
could benefit from the Company's management services. In the absence of any
dissolution events, as defined in the partnership agreement, the Partnership
shall continue in existence until December 31, 2009, unless otherwise extended.
The Company is the general partner and a Class B Limited Partner. As of May 31,
1995, the Company had provided 74% of the Partnership's capital. During fiscal
year 1995, certain Class B Limited Partners were admitted in place of a portion
of the Company's investment as a Class B Limited Partner. A total of $125,000
was paid to the Company in return for this portion of the Company's Class B
Limited Partnership interest. To date, the Partnership has not generated any
income, loss or expenses.
On January 1, 1995, Symmetrix European Holdings, Inc. ("Symmetrix
Holdings") (a Delaware corporation company) and Symmetrix Europe, SA ("Symmetrix
Europe") (a French corporation) were formed for the purpose of conducting
business in Europe. The Company holds 80% of the outstanding stock of Symmetrix
Holdings, which holds 99.9% of the outstanding stock of Symmetrix Europe.
Activity for these subsidiaries has been consolidated into the Company's
financial statements for the year ended May 31, 1995.
The Partnership, Symmetrix Holdings and Symmetrix Europe have calendar
year-ends and thus for purposes of consolidation, the accounts of these
subsidiaries are based on a period which corresponds with the fiscal period of
the Company.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Foreign Currency Translation and Transaction Gains and Losses
Assets and liabilities of the Company's foreign operation are translated
into U.S. dollars at the exchange rate in effect as of the balance sheet date
and revenues and expenses are translated at average exchange rates during the
period. The resultant translation adjustment is reflected as a separate
component of stockholders' equity on the balance sheet. Transaction gains and
losses are reflected in the consolidated statement of operations.
F-43
<PAGE> 108
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1995
Revenue Recognition
The Company derives its revenues from consulting services under time and
materials, capped-fee and fixed-price billing arrangements. Under time and
materials arrangements, revenues are recognized as the services are provided.
Revenues on fixed-price and capped-fee contracts are recognized using the
percentage of completion method of accounting and are adjusted monthly for the
cumulative impact of any revision in estimates. The Company determines the
percentage of completion of its contracts by comparing costs incurred to date to
total estimated costs. Contract costs include all direct labor and expenses
related to the contract performance. Costs and estimated earnings in excess of
billings represents revenues recognized in excess of amounts billed from
fixed-price contracts. Deferred revenue represents billings in excess of
revenues recognized. Revenues include reimbursable expenses charged to clients.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and demand deposit
accounts. The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Cash equivalents are
stated at cost which approximates market value. The Company's investments
consist of an overnight repurchase agreement that is managed by a financial
institution with a strong credit rating. Accordingly, the investment is subject
to minimal credit and market risk.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Furniture and fixtures...................................... 5-7 years
Equipment................................................... 3-5 years
Software.................................................... 3 years
</TABLE>
Amortization expense related to equipment under capital leases was $18,934
for the year ended May 31, 1995.
Concentration of Credit Risk and Significant Customers
The Company provides its services to customers in diversified industries,
primarily in the United States. The Company performs ongoing credit evaluations
of its customers and generally does not require collateral. The Company
maintains reserves for potential credit losses and such losses have been within
management's expectations. Sales to two significant customers accounted for 26%
and 12%, respectively, of revenues for the year ended May 31, 1995.
Income Taxes
The Company utilizes the liability method of accounting for income taxes,
as set forth in Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Under this method, deferred tax liabilities and assets are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities.
Deferred tax assets are recognized, net of any valuation allowance, for
deductible temporary differences and net operating loss and tax credit
carryforwards. Deferred tax expense represents the change in the deferred tax
asset or liability balances.
F-44
<PAGE> 109
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1995
3. PROFIT SHARING PLAN
Commencing in 1990, the Company made distributions to employees under a
discretionary profit sharing plan. Profit sharing expense was $396,716 in 1995.
4. TREASURY STOCK
During 1995, the Company purchased 5,000 shares of its common stock from a
former employee for $34,262. During 1994, the Company purchased 45,000 shares of
its common stock from three former employees (the "1994 shares") for $283,500.
Notes payable in the amount of $226,800 were issued in connection with the
purchase of the 1994 shares. The shares have been held in treasury at cost and
it is the Company's intention that these shares be available for issuance under
the 1988 Stock Option Plan.
5. STOCK OPTIONS
The Company established the 1988 Stock Option Plan (the "Plan"), which
provided for the granting of incentive stock options and non-qualified stock
options to employees of the Company. The Plan currently provides for a maximum
of 516,800 shares of common stock of the Company to be granted over ten years
from the date the Plan was adopted.
Incentive stock options may be issued under the Plan at an option price not
less than the fair market value at the date of grant as determined by the Board
of Directors (110% of fair market value in the case of stockholders having
ownership in excess of 10%). Non-qualified stock options may be issued under the
Plan at an option price as determined by the Board of Directors at the date of
the grant.
The incentive stock options are exercisable for a period not to exceed ten
years from the date of grant (five years in the case of incentive stock options
for stockholders having ownership in excess of 10%). The non-qualified options
are exercisable in accordance with the terms agreed for each option granted.
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
OPTION PRICE PER
SHARES SHARE
<S> <C> <C>
Outstanding, May 31, 1994.................... 318,700 $2.80-$6.80
Granted.................................... 4,000 6.85
Forfeited.................................. (11,100) 6.30
------- -----------
Outstanding, May 31, 1995.................... 311,600 $2.80-$6.85
======= ===========
</TABLE>
At May 31, 1995, 205,000 options were exercisable and 205,200 shares were
available for future grant.
F-45
<PAGE> 110
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1995
6. INCOME TAXES
The provision (benefit) for federal and state income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
MAY 31, 1995
(IN THOUSANDS)
<S> <C>
Current:
Federal.............................................. $173
State................................................ 53
Deferred:
Federal.............................................. (3)
State................................................ (1)
----
$222
====
</TABLE>
The Company has gross deferred tax assets at May 31, 1995 of approximately
$401,000, net of a valuation reserve of $156,500 described below. The Company
has gross deferred tax liabilities at May 31, 1995 of approximately $8,000.
Deferred income taxes reflect the effect of temporary differences between
the tax basis of assets and liabilities and the reported amounts of assets and
liabilities for financial reporting purposes net of any valuation allowances.
The components of deferred taxes consist primarily of temporary differences
arising from accrued expenses and deferred revenue that are deductible or
taxable in future tax reporting periods.
The following is a reconciliation between the amount of reported income tax
expense and the amount computed using the statutory rate of 35% for fiscal 1995:
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
MAY 31, 1995
(IN THOUSANDS)
<S> <C>
Statutory federal rate................................. $ 18
State taxes, net of federal benefit.................... 34
Valuation allowance.................................... 156
Permanent differences.................................. 14
----
$222
====
</TABLE>
Symmetrix Europe reported a net operating loss of approximately $447,000
which expires in the year 2000. The Company has recorded a full valuation
allowance at May 31, 1995 on the deferred tax asset, and therefore no benefit
for the loss carryforward has been recognized since realization of these future
benefits is not sufficiently assured.
7. RELATED PARTY TRANSACTIONS
The Company entered into a contract with Olympic Manufacturing Group, Inc.
("Olympic"), in which the Company has an investment as of May 31, 1995. The
Company bills Olympic on a monthly basis at cost for the time and materials
incurred on the project. The total costs reimbursed on the project were
approximately $80,000 for the year ended May 31, 1995.
Interest expense of $24,215 was related to loans from former shareholders.
F-46
<PAGE> 111
SYMMETRIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 31, 1995
8. LEASES
The Company leases office space under a noncancelable operating lease. The
Company amended the lease on January 11, 1994 for additional space. The lease
expired in 1995 and the Company exercised an option to extend the lease for two
years. The lease requires the Company to pay a proportionate share of the
building operating costs and real estate taxes that exceed a base amount as
additional rent. Rental expense under the operating leases was approximately
$734,300 for the year ended May 31, 1995. Future minimum lease payments under
the operating lease as of May 31, 1995 consist of approximately $778,000 due in
fiscal year 1996 and approximately $713,000 due in fiscal year 1997.
Additionally, the Company leases certain office and computer equipment under
capital leases. At May 31, 1995, capital lease obligations, including interest,
are $17,591.
F-47
<PAGE> 112
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
SiGMA Consulting, LLC
We have audited the accompanying balance sheets of SiGMA Consulting, LLC
(the Company) as of December 31, 1996 and 1997, and the related statements of
income, members' equity and cash flows for each of the three years in the period
ended December 31, 1997. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SiGMA Consulting, LLC at
December 31, 1996 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
August 31, 1998
F-48
<PAGE> 113
SIGMA CONSULTING, LLC
BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------
1996 1997
(IN THOUSANDS, EXCEPT
UNIT DATA)
<S> <C> <C>
ASSETS
Current assets:
Accounts receivable, net of allowance for doubtful
accounts of $0 and $314 at December 31, 1996 and 1997,
respectively........................................... $1,831 $2,931
Costs and estimated earnings in excess of billings........ 25 42
Due from affiliates....................................... 34 48
------ ------
Total current assets.............................. 1,890 3,021
Property and equipment, net................................. 55 164
Other assets................................................ 13 40
------ ------
Total assets...................................... $1,958 $3,225
====== ======
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Overdraft liability....................................... $ 212 $ 267
Accounts payable and accrued expenses..................... 192 1,091
Note payable to bank...................................... 375 --
Due to affiliates......................................... 130 --
Deferred revenue.......................................... -- 389
Distributions payable..................................... -- 114
------ ------
Total current liabilities......................... 909 1,861
Other liabilities........................................... -- 98
Members' equity:
Member units, no par value, 100,503 units authorized,
100,503 and 88,137 units issued and outstanding at
December 31, 1996 and 1997, respectively............... 206 207
Retained earnings......................................... 843 1,059
------ ------
Total members' equity............................. 1,049 1,266
------ ------
Total liabilities and members' equity............. $1,958 $3,225
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-49
<PAGE> 114
SIGMA CONSULTING, LLC
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues................................................ $5,617 $7,455 $10,051
Cost of revenues............................................ 4,946 5,431 7,552
------ ------ -------
Gross profit...................................... 671 2,024 2,499
Selling, general and administrative expenses................ 780 1,092 1,151
------ ------ -------
Income (loss) from operations..................... (109) 932 1,348
Interest income............................................. (2) (4) (7)
Interest expense............................................ 19 37 34
------ ------ -------
Net income (loss)................................. $ (126) $ 899 $ 1,321
====== ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE> 115
SIGMA CONSULTING, LLC
STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
COMMON STOCK MEMBER UNITS
---------------- ----------------- RETAINED TOTAL
SHARES AMOUNT UNITS AMOUNT EARNINGS EQUITY
(IN THOUSANDS, EXCEPT SHARE AND UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994....... 9,500 $ 1 -- $ -- $ 326 $ 327
Net loss......................... -- -- -- -- (121) (121)
------ --- ------- ---- ------ ------
Balance at December 31, 1995....... 9,500 1 -- -- 205 206
Reorganization as an LLC......... (9,500) (1) 100,503 206 (205) --
Dividends........................ -- -- -- -- (56) (56)
Net income....................... -- -- -- -- 899 899
------ --- ------- ---- ------ ------
Balance at December 31, 1996....... -- -- 100,503 206 843 1,049
Redemption of member units....... -- -- (12,366) (2) (312) (314)
Dividends........................ -- -- -- -- (790) (790)
Net income....................... -- -- -- -- 1,321 1,321
------ --- ------- ---- ------ ------
Balance at December 31, 1997....... 0 $ 0 88,137 $204 $1,062 $1,266
====== === ======= ==== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE> 116
SIGMA CONSULTING, LLC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income......................................... $(126) $ 899 $ 1,321
Adjustments to reconcile net (loss) income to net cash
provided by
(used in) operating activities:
Depreciation........................................... 17 21 43
Change in operating assets and liabilities:
Accounts receivable.................................. (392) (607) (1,100)
Costs and estimated earnings in excess of billings... 36 48 (17)
Overdraft liability.................................. (231) 102 55
Accounts payable and accrued expenses................ 172 (149) 899
Due from affiliate................................... (48) 14 (14)
Deferred revenue..................................... 218 (368) 389
Other................................................ (13) 7 (27)
----- ----- -------
Net cash provided by (used in) operating
activities...................................... (367) (33) 1,549
----- ----- -------
Cash flows from investing activities:
Purchase of property and equipment........................ (33) (15) (53)
----- ----- -------
Net cash used in investing activities............. (33) (15) (53)
----- ----- -------
Cash flows from financing activities:
Redemption of members' units.............................. -- -- (315)
Due to affiliate.......................................... -- 130 (130)
Proceeds from (repayments of) note payable................ 400 (26) (375)
Dividends................................................. -- (56) (676)
----- ----- -------
Net cash provided by (used in) financing
activities...................................... 400 48 (1,496)
----- ----- -------
Net change in cash........................................ -- -- --
Cash at beginning of year................................. -- -- --
----- ----- -------
Cash at end of year....................................... $ -- $ -- $ --
===== ===== =======
Non-cash transactions:
Capital lease obligations................................. $ -- $ -- $ 98
===== ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-52
<PAGE> 117
SIGMA CONSULTING, LLC
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
SiGMA Consulting, LLC ("SiGMA" or the "Company") offers consulting services
focusing on change management and helping organizations improve core business
processes, including product development, manufacturing and distribution, sales,
and enterprise management. SiGMA primarily offers its services to the
manufacturing, high technology, entertainment, and transportation industries.
Effective January 1, 1996, SiGMA was formed as a successor company to SiGMA
Consulting, Inc. The results of operations for the twelve month period ended
December 31, 1995 are for SiGMA Consulting, Inc. Upon formation, the assets and
liabilities previously held by SiGMA Consulting, Inc. were assumed by SiGMA.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Revenue Recognition
The Company primarily derives its revenues from consulting services under
time and materials, capped-fee and fixed-price billing arrangements. Under time
and material arrangements, revenues are recognized as the services are provided.
Revenues on fixed-price and capped-fee contracts are recognized using the
percentage of completion method of accounting and are adjusted monthly for the
cumulative impact of any revision in estimates. The Company determines the
percentage of completion of its contracts by comparing costs incurred to date to
total estimated costs. Contract costs include all direct labor and expenses
related to the contract performance. Costs and estimated earnings in excess of
billings represents revenue recognized in excess of amounts billed from
fixed-price contracts. Deferred revenue represents billings in excess of
revenues recognized. Net revenues exclude reimbursable expenses charged to
clients.
Property and Equipment
Property and equipment are stated at cost. Depreciation has been provided
using the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Furniture and fixtures........................... 5-7 years
Equipment........................................ 3-5 years
</TABLE>
Leasehold improvements are amortized over the lesser of the lease term or
the useful life of the property, whichever is shorter.
Financial Instruments
The carrying value of financial instruments such as accounts receivable,
accounts payable and accrued expenses and notes payable to bank approximate
their fair values based on the short-term maturities of these instruments.
F-53
<PAGE> 118
SIGMA CONSULTING, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Concentration of Credit Risk
The Company provides its services to customers in diversified industries,
primarily in the United States. The Company performs ongoing credit evaluations
of its customers and generally does not require collateral. The Company
maintains reserves for potential credit losses and such losses have been within
management's expectations. Revenues from three significant customers accounted
for 62%, 49% and 49% of net revenues for the years ended December 31, 1995, 1996
and 1997, respectively. Two customers accounted for 31% and 52% of total
receivables, as of December 31, 1996 and 1997, respectively.
Income Taxes
The Company is treated as a partnership for federal and state income tax
purposes. Therefore, all items of income, expense, and tax credit are passed
through to the individual unit holders. Accordingly, no provision for income
taxes is required. No tax provision was recorded for the year ended December 31,
1995 for SiGMA Consulting, Inc. as the Company was in a net loss position.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1996 1997
(IN THOUSANDS)
<S> <C> <C>
Equipment.................................................. $101 $ 250
Furniture and fixtures..................................... 9 12
Leasehold improvements..................................... 2 2
---- -----
112 264
Less: accumulated depreciation............................. 57 100
---- -----
Property and equipment, net................................ $ 55 $ 164
==== =====
</TABLE>
Equipment includes an asset acquired under a capital lease for $98,000 in
1997.
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1996 1997
(IN THOUSANDS)
<S> <C> <C>
Trade accounts payable.................................... $ 49 $ 37
Accrued pension........................................... 125 162
Accrued bonuses........................................... -- 664
Accrued contractor fees................................... 10 201
Other..................................................... 8 27
---- ------
$192 $1,091
==== ======
</TABLE>
5. FINANCING ARRANGEMENTS
Note Payable to Bank
The Company had a line of credit with a bank, providing the lesser of
$1,000,000 or 75% of eligible trade receivables. The line of credit was secured
by substantially all of the assets of the Company and expired in
F-54
<PAGE> 119
SIGMA CONSULTING, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
February 1998. Borrowings under the line bear interest at the bank's prime rate
plus 0.75% (9.25% at December 31, 1996 and 1997).
In February 1998, the Company renewed its line of credit with the bank
("New Line"), which will provide the lesser of $1,000,000 or 65% of eligible
trade receivables. The New Line is secured by substantially all of the assets of
the Company and has no expiration date. Borrowings under the line bear interest
at the bank's prime rate plus 0.75%.
6. EMPLOYEE BENEFITS
The Company sponsors a Retirement Savings Plan (the "Retirement Plan")
under Section 401(k) of the Internal Revenue Code for the benefit all employees
meeting certain minimum service requirements. Eligible employees may elect to
contribute to the Retirement Plan subject to limitations established by the
Internal Revenue Code. The trustees of the Retirement Plan select investment
opportunities from which participants may choose to contribute. Matching
contributions are made at the discretion of the Company. The total cost
recognized under the Retirement Plan during the years ended December 31, 1995,
1996 and 1997 amounted to approximately $177,000, $224,000 and $303,000,
respectively.
7. RELATED PARTY TRANSACTIONS
During 1997, the Company paid legal fees totaling $34,000 on the behalf of
certain members of the Company. At December 31, 1997, this amount was included
on the balance sheet as due from affiliate.
During 1996, the Company received advances totaling $130,000 from certain
members of the Company. At December 31, 1996, this amount was included on the
balance sheet as a due to affiliate. The advances were non-interest bearing and
were repaid in 1997.
During 1995, the Company made a non-interest bearing $40,000 loan to a
shareholder. At December 31, 1996, $34,000 was outstanding, which was repaid in
1997.
8. SUBSEQUENT EVENT
Effective January 5, 1998, the Company agreed to be acquired by Nextera
Enterprises, L.L.C. for cash of $10,000,000 and 669,000 Class A Common Units, as
well as the assumption of certain liabilities.
F-55
<PAGE> 120
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
The Planning Technologies Group, Inc.
Lexington, Massachusetts
We have audited the accompanying balance sheets of The Planning
Technologies Group, Inc. as of December 31, 1996 and 1997 and the related
statements of income and retained earnings, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Planning Technologies
Group, Inc. at December 31, 1996 and 1997, and the results of its operations and
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
HARTE CARUCCI & DRISCOLL, P.C.
Woburn, Massachusetts
February 19, 1998, except for Note 8,
which is April 4, 1998.
F-56
<PAGE> 121
THE PLANNING TECHNOLOGIES GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, MARCH 31,
------------------ -----------
1996 1997 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 262 $ 92 $ 959
Accounts receivable....................................... 662 1,663 855
Accounts receivable-other................................. -- 78 36
Interest receivable....................................... -- 1 3
Prepaid expenses.......................................... 34 29 25
------ ------ ------
Total current assets.............................. 958 1,863 1,878
Property and equipment, net................................. 225 226 230
Security deposits........................................... 108 78 78
------ ------ ------
Total assets...................................... $1,291 $2,167 $2,186
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1 $ 6 $ 150
Accrued expenses.......................................... 196 564 775
Deferred revenue.......................................... 209 506 143
------ ------ ------
Total current liabilities......................... 406 1,076 1,068
Commitments and contingencies............................... -- -- --
Stockholders' equity:
Common stock, no par value, $1.00 stated value, 200,000
shares authorized, 126, 136 and 136 shares issued and
126, 136 and 126 shares outstanding at December 31,
1996, December 31, 1997 and March 31, 1998,
respectively........................................... 0 0 0
Additional paid-in-capital................................ 86 140 140
Retained earnings......................................... 799 951 1,278
Less: 10 shares held in treasury, at cost................. -- -- (300)
------ ------ ------
Total stockholders' equity........................ 885 1,091 1,118
------ ------ ------
Total liabilities and stockholders' equity........ $1,291 $2,167 $2,186
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-57
<PAGE> 122
THE PLANNING TECHNOLOGIES GROUP, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- ------------------
1996 1997 1997 1998
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues............................................ $4,534 $5,244 $1,398 $1,700
Cost of revenues........................................ 3,579 4,036 1,029 1,125
------ ------ ------ ------
Gross profit.................................. 955 1,208 369 575
General and administrative expense...................... 887 941 231 259
------ ------ ------ ------
Income from operations........................ 68 267 138 316
Loss on disposal of equipment........................... (3) (21) -- (1)
Interest income......................................... 36 42 4 12
------ ------ ------ ------
Net income.................................... 101 288 142 327
Retained earnings, beginning of period.................. 698 799 799 951
Distributions to stockholders........................... -- (136) (136) --
------ ------ ------ ------
Retained earnings, end of period........................ $ 799 $ 951 $ 805 $1,278
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-58
<PAGE> 123
THE PLANNING TECHNOLOGIES GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- ------------------
1996 1997 1997 1998
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 101 $ 288 $ 142 $ 327
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on disposal of equipment..................... 3 21 -- 1
Depreciation...................................... 58 69 15 19
Changes in operating assets and liabilities:
Accounts receivable............................... 402 (1,001) (672) 808
Accounts receivable-other......................... -- (78) -- 42
Interest receivable............................... -- (2) -- (1)
Advance to employees and shareholders............. 15 -- -- --
Prepaid expenses.................................. (15) 5 15 4
Security deposits................................. -- 30 -- --
Accounts payable.................................. (53) 6 130 143
Accrued expense................................... (211) 368 411 211
Deferred revenue.................................. 40 297 (54) (363)
----- ------- ----- ------
Net cash provided by (used in) operating
activities................................. 340 3 (13) 1,191
----- ------- ----- ------
Cash flows from investing activities:
Proceeds from disposition of equipment............... -- 2 -- 1
Purchase of property and equipment................... (96) (93) (16) (25)
----- ------- ----- ------
Net cash used in investing activities........ (96) (91) (16) (24)
----- ------- ----- ------
Cash flows from financing activities:
Distributions to stockholders........................ -- (136) (126) --
Proceeds from issuance of stock...................... -- 54 54 --
Purchase of treasury stock........................... -- -- -- (300)
----- ------- ----- ------
Net cash used in financing activities........ -- (82) (72) (300)
----- ------- ----- ------
Net (decrease) increase in cash and cash equivalents... 244 (170) (101) 867
Cash and cash equivalents at beginning of period....... 18 262 262 92
----- ------- ----- ------
Cash and cash equivalents at end of period............. $ 262 $ 92 $ 161 $ 959
===== ======= ===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-59
<PAGE> 124
THE PLANNING TECHNOLOGIES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY
The Planning Technologies Group, Inc. ("PTG" or the "Company") offers
strategy formulation, strategic planning process design, and business process
assessment and redesign services. PTG primarily offers its services to the
health care, insurance, financial services, consumer products, manufacturing and
high technology industries.
2. SIGNIFICANT ACCOUNTING POLICIES
Reclassification
Certain prior year amounts have been reclassified to conform to the current
year presentation.
Interim Financial Statements (Unaudited)
The balance sheet at March 31, 1998 and the statements of income and
retained earnings, and cash flows for the three months ended March 31, 1997 and
1998 are unaudited, and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the Company's consolidated financial position, results of
operations and cash flows.
Use of Estimates
The preparation of financial statements, in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Revenue Recognition
The Company derives its revenues from consulting services under time and
materials billing arrangements. Revenues are recognized as the services are
provided. Deferred revenue represents billings in excess of revenues recognized.
Net revenues exclude reimbursable expenses charged to clients.
Cash and Cash Equivalents
The Company considers all highly liquid investments and other short-term
investments with a maturity of three months or less when purchased to be cash
equivalents. Cash equivalents are stated at cost which approximates market
value.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the following estimated useful lives of the assets
as follows:
<TABLE>
<S> <C>
Equipment........................................... 5 years
Furniture and fixtures.............................. 7 years
</TABLE>
Leasehold improvements are amortized over the lesser of the lease term or
the useful life of the property, whichever is shorter.
F-60
<PAGE> 125
THE PLANNING TECHNOLOGIES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Financial Instruments
The carrying value of financial instruments such as cash equivalents,
accounts receivable, accounts payable and accrued expenses approximate their
fair values based on the short-term maturities of these instruments.
Concentration of Significant Customers
The Company provides its services to customers in diversified industries,
primarily in the United States. The Company performs ongoing credit evaluations
of its customers and generally does not require collateral. Sales to three
significant customers accounted for 32%, 29% and 20%, respectively, of net
revenues for the year ended December 31, 1997.
Income Taxes
The Company has elected to be taxed under the provisions of Subchapter "S"
of the Internal Revenue Code. Accordingly, no provision for federal income taxes
has been provided in the financial statements as all income of the Company is
taxed directly to the shareholders.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
--------------
1996 1997
(IN THOUSANDS)
<S> <C> <C>
Equipment................................................... $240 $291
Furniture and fixtures...................................... 89 90
---- ----
329 381
Less: accumulated depreciation.............................. 104 155
---- ----
Property and equipment, net................................. $225 $226
==== ====
</TABLE>
4. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1996 1997
(IN THOUSANDS)
<S> <C> <C>
Accrued profit sharing contribution......................... $ 100 $ 116
Accrued bonuses............................................. 92 441
Other....................................................... 4 7
----- -----
$ 196 $ 564
===== =====
</TABLE>
5. COMMITMENTS
The Company leases its facilities under an operating lease, which expires
in the year 2001. Rent expense charged to operations for the years ended
December 31, 1996 and 1997 was $163,264 and $176,618, respectively.
The Company is currently leasing vehicles under operating leases expiring
September 2000. Lease expense charged to operations for the years ended December
31, 1996 and 1997 was $18,950 and $21,843, respectively. Also, the Company has
an operating lease for certain equipment. Lease expense for this
F-61
<PAGE> 126
THE PLANNING TECHNOLOGIES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
equipment charged to operations for the years ended December 31, 1996 and 1997,
was $0 and $2,500, respectively.
Minimum future payments under the operating leases having remaining terms
in excess of one year as of December 31, 1997 for each of the next five years
and in the aggregate are (in thousands):
<TABLE>
<S> <C>
Year ended December 31:
1998............................................ $ 194
1999............................................ 191
2000............................................ 183
2001............................................ 148
2002............................................ --
--------
$ 716
========
</TABLE>
6. STOCKHOLDER'S EQUITY
During 1997, the Company issued ten shares of common stock to an employee
of the company. Accordingly, common stock has been increased by $10.00 per share
and additional paid-in-capital has been increased by $53,600, representing the
excess of the cost over the stated value of the common stock issued.
At December 31, 1996 and 1997, the Company had 126 and 136 shares of no par
value common stock issued and outstanding, respectively. Common shares are
voting and dividends are paid at the discretion of the Board of Directors. All
common shares are restricted from transfer with the Company being offered the
first right to repurchase all of the shares proposed, but not less than all, at
the book value per share, as defined by the Company. Within one (1) year of
termination, the stockholder may elect to require the Company to purchase all
(but not less than all) of the shares of the stock.
7. PROFIT SHARING PLAN
The Company sponsors a combination profit sharing 401(k) plan that covers
all eligible employees. The 401(k) provision allows the employee to make
contributions to the plan based on the percent of pre-tax earnings chosen by the
employee up to a maximum of 15% of gross wages. Any Company contributions to the
profit sharing plan are at the discretion of the Board of Directors. The Company
contributed $99,607 and $116,854 to the profit sharing plan in 1996 and 1997,
respectively.
8. SUBSEQUENT EVENTS
Effective March 31, 1998, the Company sold substantially all of its assets
to and certain liabilities were assumed by Nextera Enterprises, L.L.C.
("Nextera") in exchange for cash of $6,710,000 and 214,000 Class A Common Units
of Nextera.
F-62
<PAGE> 127
INDEPENDENT AUDITOR'S REPORT
To the Partners of
Sibson & Company, L.P.
We have audited the accompanying consolidated balance sheets of Sibson &
Company, L.P. and Subsidiaries as of December 31, 1996 and 1997 and the related
consolidated statements of operations and partners' capital and cash flows for
each of the three years in the period ended December 31, 1997. These
consolidated 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sibson &
Company, L.P. and Subsidiaries as at December 31, 1996 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ FARKOUH, FURMAN & FACCIO
New York, New York
February 10, 1998, except for Note 13,
which is August 31, 1998
F-63
<PAGE> 128
SIBSON & COMPANY, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------ JUNE 30,
1996 1997 1998
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 1,030 $ 1,633 $ 474
Accounts receivable (less allowance for doubtful accounts
of $194 in 1996 and $483 in 1997)...................... 9,166 9,610 12,537
Notes receivable from affiliates.......................... 315 464 280
Prepaid expenses and other current assets................. 545 344 634
------- ------- -------
Total current assets.............................. 11,056 12,051 13,925
Fixed assets, at cost (less depreciation of $790 in 1996 and
$1,168 in 1997)........................................... 961 1,607 2,783
Notes receivable from affiliates, less current portion...... 13 -- --
Other assets, net of amortization of $359 in 1996 and $413
in 1997................................................... 268 313 376
------- ------- -------
Total assets...................................... $12,298 $13,971 $17,084
======= ======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Cash overdraft............................................ $ 738 $ 14 $ 468
Accounts payable, accrued expenses and taxes.............. 306 626 648
Commissions payable....................................... 387 139 211
Fee advances payable...................................... 1,293 1,302 726
Profit sharing plan payable............................... 1,399 1,552 1,239
Accrued compensation...................................... 2,478 3,597 4,309
Other current liabilities................................. 222 421 504
------- ------- -------
Total current liabilities......................... 6,823 7,651 8,105
Loans payable--bank......................................... -- -- 2,250
Accrued compensation and benefits........................... 1,110 951 436
Other long-term liabilities................................. 226 288 645
------- ------- -------
Total liabilities................................. 8,159 8,890 11,436
------- ------- -------
Partners' capital........................................... 4,139 5,082 5,652
Minority interest........................................... -- (1) (4)
------- ------- -------
Total partners' capital........................... 4,139 5,081 5,648
------- ------- -------
Total liabilities and partners' capital........... $12,298 $13,971 $17,084
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE> 129
SIBSON & COMPANY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------------- --------------------------
1995 1996 1997 1997 1998
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues................................ $24,833 $29,178 $34,650 $16,102 $21,179
Cost of revenues........................ 18,569 21,674 25,629 11,818 15,310
------- ------- ------- ------- -------
Gross profit.................. 6,264 7,504 9,021 4,284 5,869
Selling, general and administrative
expenses.............................. 5,444 6,769 7,575 3,599 4,237
------- ------- ------- ------- -------
Income from operations........ 820 735 1,446 685 1,632
Interest income......................... 68 65 95 32 46
Interest expense........................ (133) (94) (86) (52) (84)
Post retirement healthcare cost......... (137) (135) (140) (70) (75)
Other income (expense).................. 8 33 8 4 (10)
------- ------- ------- ------- -------
Net income.................... 626 604 1,323 599 1,509
Partners' capital at beginning of
period................................ 2,774 3,650 4,139 4,139 5,082
Partners' capital contributions......... 294 118 334 334 93
Partners' capital withdrawals........... (44) (233) (714) (668) (1,032)
------- ------- ------- ------- -------
Partners' capital at end of period...... $ 3,650 $ 4,139 $ 5,082 $ 4,404 $ 5,652
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-65
<PAGE> 130
SIBSON & COMPANY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEARS ENDED ENDED
DECEMBER 31, JUNE 30,
--------------------------------------- ---------------------------
1995 1996 1997 1997 1998
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 626 $ 604 $1,323 $ 599 $1,509
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................ 366 470 505 210 376
Minority interest in net (loss) of
consolidated subsidiary................... -- -- (1) -- (3)
(Gain) or loss on sale of furniture, fixtures
and equipment............................. (8) (53) (8) (4) 10
Changes in operating assets and liabilities:
Accounts receivable....................... (809) (2,178) (444) 498 (2,927)
Prepaid expenses and other current
assets.................................. 164 155 206 110 (310)
Accounts payable, accrued expenses and
taxes................................... (40) 36 320 (9) 22
Commissions payable....................... 85 32 (628) (652) (9)
Accrued postretirement healthcare
benefit................................. 134 128 131 70 75
Fee advances payable...................... 241 709 9 (150) (576)
Profit sharing plan payable............... 294 205 153 (555) (313)
Accrued compensation...................... 3 1,013 1,212 (300) 207
Other current liabilities................. (110) 4 (4) (1) --
------- ------- ------ ----- ------
Net cash provided by (used in) operating
activities............................ 946 1,125 2,774 (184) (1,939)
------- ------- ------ ----- ------
Cash flows from investing activities:
Purchase of fixed assets......................... (193) (409) (704) (405) (852)
Proceeds from sale of furniture, fixtures and
equipment...................................... 8 53 8 4 75
Other............................................ -- (47) (104) (52) (71)
------- ------- ------ ----- ------
Net cash used in investing activities... (185) (403) (800) (453) (848)
------- ------- ------ ----- ------
Cash flows from financing activities:
(Decrease) or increase in cash overdraft......... $ 278 $ 172 $ (724) $(204) $ 454
Notes receivable from affiliates, net............ 199 246 (36) (10) 79
Proceeds from limited partners' capital
contributions.................................. 20 -- -- -- --
Proceeds from general partner capital
contributions.................................. 165 -- 109 109 93
Partners' capital withdrawals.................... (44) (233) (513) (297) (1,032)
Payment of capitalized lease obligations......... (170) (203) (207) (89) (216)
Proceeds from revolving line of credit........... 3,100 3,850 2,350 950 4,150
Repayment of revolving line of credit............ (4,100) (3,850) (2,350) (750) (1,900)
------- ------- ------ ----- ------
Net cash provided by (used in) financing
activities............................ (552) (18) (1,371) (291) 1,628
------- ------- ------ ----- ------
Net increase (decrease) in cash and cash
equivalents...................................... 209 704 603 (928) (1,159)
Cash and cash equivalents, at beginning of
period........................................... 117 326 1,030 1,030 1,633
------- ------- ------ ----- ------
Cash and cash equivalents, at end of period........ $ 326 $ 1,030 $1,633 $ 102 $ 474
======= ======= ====== ===== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest........... $ 133 $ 92 $ 79 $ 52 $ 84
======= ======= ====== ===== ======
Supplemental schedule of noncash investing and
financing activities:
Employees purchase of limited partnership interests
funded through notes receivable.................. $ 19 $ 66 $ 24 $ 24 $ --
======= ======= ====== ===== ======
General partners' capital contributions funded
through note receivable.......................... $ 90 $ 52 $ 201 $ 201 $ --
======= ======= ====== ===== ======
Capital lease obligations incurred for fixed
assets........................................... $ 327 $ 116 $ 393 $ -- $ 757
======= ======= ====== ======
Note payable on redemption of general partners'
partnership interest............................. $ -- $ -- $ 201 $ 371 $ --
======= ======= ====== ===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-66
<PAGE> 131
SIBSON & COMPANY, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
Sibson & Company, L.P. (the "Company"), a limited partnership, provides
human capital consulting services offering human resource strategies,
outsourcing assessments, organizational designs, rewards/incentives programs,
performance management processes and systems, and executive coaching services.
The Company also serves sales and marketing organizations with sales strategy,
selling process, sales channel and selling effectiveness consulting.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Sibson &
Company, L.P. and its 99% owned subsidiary, Sibson Europe, LLC and its 100%
owned subsidiary Sibson UK Limited. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Interim Financial Statements (Unaudited)
The balance sheet at June 30, 1998, and the statements of operations and
partners' capital, and cash flows for the six months ended June 30, 1997 and
1998 are unaudited, and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the Company's consolidated financial position, results of
operations and cash flows.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Revenue Recognition
The Company derives its revenues from consulting services primarily under
time and materials billing arrangements. Under time and materials arrangements,
revenues are recognized as the services are provided. Revenues exclude
reimbursable expenses charged to clients.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity
of three months or less when purchased to be cash equivalents.
Fixed Assets
Fixed assets are stated at cost. Depreciation is provided using the
accelerated methods over estimated useful lives of five to seven years.
Leasehold improvements are amortized over the lesser of the lease term or the
estimated life of the improvements, whichever is shorter.
Financial Instruments
The carrying value of financial instruments such as cash equivalents,
accounts receivable, accounts payable and accrued expenses approximate their
fair values based on the short-term maturities of these instruments. The
carrying value of long-term debt approximates its fair value based on references
to similar instruments.
F-67
<PAGE> 132
SIBSON & COMPANY, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
Since the partnership is not subject to income taxes, the results of
partnership operations are included in the income tax returns of the partners.
Taxes, if any, are payable directly by the partners, accordingly, no provision
for income taxes is included in the attached financial statements. The
partnership files its tax returns on the cash basis of accounting.
3. ESCROW ACCOUNT
In accordance with an employment agreement with a partner, the Company is
required to escrow unpaid commissions totaling $139,039 as of December 31, 1997.
The funded escrow amount is not available for use by the Company other than for
the payment of these commissions.
4. NOTES RECEIVABLE FROM AFFILIATES
Notes receivable from affiliates consist of:
Limited Partners
The notes receivable from limited partners ($123,000 and $111,000 at
December 31, 1996 and 1997, respectively) bear interest at rates ranging from
8.75% to 10% and are due in 1998.
Shareholder of Sibson Canada, Inc.
The note receivable from a shareholder of Sibson Canada, Inc. ($15,000 at
December 31, 1996 and 1997) bears interest at 10% and is due April 1, 1998.
Sibson Canada, Inc. (a Licensee Company)
The note receivable from Sibson Canada, Inc. ($60,000 at December 31, 1996)
was repaid in 1997.
Sibson South Africa (a Licensee Company)
The note receivable from Sibson South Africa ($50,000 at December 31, 1997)
bears interest at 10.5% and is due on demand.
General Partner
The notes receivable from the general partner ($130,000 and $288,000 at
December 31, 1996 and 1997, respectively) bear interest at rates ranging from
8.75% to 10% and are due in 1998.
F-68
<PAGE> 133
SIBSON & COMPANY, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. FIXED ASSETS
Fixed assets consisted of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1996 1997
(IN THOUSANDS)
<S> <C> <C>
Furniture and office equipment........................... $ 572 $1,030
Telephone equipment...................................... 195 253
Computer equipment....................................... 742 1,094
Leasehold improvements................................... 227 379
Artwork.................................................. 15 19
------ ------
1,751 2,775
Less: accumulated depreciation........................... 790 1,168
------ ------
Fixed assets, net........................................ $ 961 $1,607
====== ======
</TABLE>
6. NOTE PAYABLE TO BANK
As of December 31, 1997, the Company had a revolving $3,000,000 line of
credit with a bank with interest at the prime rate. In addition, the Company
shall pay a fee equal to 0.25% per annum on the amount of the unused line of
credit, if any. The agreement expires on August 31, 1998. All tangible and
intangible property of the Company has been pledged to secure any outstanding
bank debt, which is also guaranteed by the general partner. The line of credit
contains covenants regarding various financial statement amounts, ratios and
activities of the Company. Advances under the revolving credit agreement are
subject to adequate collateral.
As part of the revolving line of credit, the bank has made available a
maximum of $1,500,000, which the Company may utilize in the form of letters of
credit or to finance leases. Outstanding letters of credit or lease obligations
under the agreement will proportionately reduce the maximum revolving line
available. As of December 31, 1997, letters of credit outstanding were
$1,164,558.
7. CAPITALIZED LEASE OBLIGATIONS
The Company leases certain equipment under capital leases expiring in
various years through September 20, 1999. Obligations under capital leases have
been recorded in the accompanying financial statements at the present value of
future minimum lease payments, discounted at interest rates ranging from 8.5% to
15.5%.
Obligations under capital leases consisted of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1996 1997
(IN THOUSANDS)
<S> <C> <C>
Current portion............................................. $178 $275
Long-term portion........................................... 199 288
---- ----
Total............................................. $377 $563
==== ====
</TABLE>
F-69
<PAGE> 134
SIBSON & COMPANY, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The future minimum lease payments under the capital leases and the net
present value of the future minimum lease payments are as follows (in
thousands):
<TABLE>
<S> <C>
Years ending December 31:
1998........................................................ $313
1999........................................................ 198
2000........................................................ 112
----
Total future minimum lease payments......................... 623
Less amount representing interest........................... 60
----
Present value of future minimum lease payments.............. $563
====
</TABLE>
8. EMPLOYEE BENEFIT PLANS
Profit Sharing Plan
The Company maintains a Profit Sharing and Salary Reduction Plan (the
"Plan") which covers all eligible employees. Employees may defer a portion of
their annual compensation up to the maximum amount permitted under the Internal
Revenue Code.
Under the terms of the Plan, the Company may contribute an amount equal to
the maximum amount, which is deductible for federal income tax purposes.
Employer contributions to the Plan were $1,210,306, $1,390,965, and $1,546,641
for the years ended December 31, 1995, 1996 and 1997, respectively. In addition,
the Company pays a supplemental profit sharing contribution, as wages, to those
employees whose compensation is in excess of the maximum amount permitted under
the Internal Revenue Code.
Post-retirement Healthcare Benefit
The Company presently provides a post-retirement healthcare benefits plan
which provides for 75% of the annual cost of medical coverage for a retiree with
at least 15 years of service and who is between 50 and 64 years of age. Coverage
ceases once the retiree reaches age 65.
Effective January 1, 1995, the Company adopted SFAS No. 106, Employers
Accounting for Post-retirement Benefits Other Than Pensions ("SFAS No. 106").
This statement requires the Company to accrue, during the employee's years of
service, the expected cost of providing benefits. The cost of providing these
benefits was previously recognized in the period in which the benefits were
paid.
The Company adopted SFAS No. 106 on a prospective basis. The net transition
obligation represents the difference between the Company's January 1, 1995
accrued post-retirement healthcare costs prior to the adoption of SFAS No. 106
and the unfunded liability for these costs as of that date. The Company does not
fund these costs. The net transition liability at January 1, 1995 was $684,766
and will be amortized over 20 years.
The components of net periodic post-retirement healthcare benefit cost are
as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost.......................................... $ 46 $ 47 $ 46
Interest cost......................................... 57 54 59
Amortization of net transition liability over 20
years............................................... 34 34 35
---- ---- ----
Net post-retirement healthcare benefit cost........... $137 $135 $140
==== ==== ====
</TABLE>
F-70
<PAGE> 135
SIBSON & COMPANY, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the accumulated post-retirement healthcare benefit
obligation to the accrued post-retirement healthcare benefit liability
recognized in the balance sheet is as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1996 1997
(IN THOUSANDS)
<S> <C> <C>
Accumulated post-retirement healthcare benefit obligations:
Active participants....................................... $ 395 $ 414
Fully eligible participants............................... 86 60
Retirees.................................................. 321 299
----- -----
802 773
Unrecognized transition obligation........................ (616) (582)
----- -----
186 191
Unrecognized net gain..................................... 76 202
----- -----
Accrued post-retirement healthcare benefit liability...... $ 262 $ 393
===== =====
</TABLE>
The assumed healthcare cost trend rate used in measuring the accumulated
post-retirement obligation was 7% with subsequent annual decrements of 0.15% to
an ultimate trend rate of 3.5%. A 1.0% increase in the assumed healthcare cost
trend rate for each year would increase the accumulated post-retirement
healthcare benefit obligation by approximately 11% and the net post-retirement
cost by approximately 15%. The discount rate used in determining the accumulated
post-retirement healthcare benefit liability was 7%.
9. EMPLOYMENT AGREEMENT
The Company has an employment agreement with a partner under which the
partner is entitled to compensation based upon the collections from business
specifically generated by the partner. In addition, the partner is entitled to
compensation based upon certain other business. The employment agreement expires
April 30, 2000.
10. OPERATING LEASES
The Company leases office space in six locations under leases expiring at
various times through August 2007. The leases provide for escalations based upon
increases in real estate taxes, operating expenses and cost of living increases.
The future minimum annual lease payments are as follows (in thousands):
<TABLE>
<S> <C>
Year ending December 31:
1998......................................... $1,211
1999......................................... 1,474
2000......................................... 1,411
2001......................................... 1,002
2002......................................... 796
Thereafter................................... 3,539
------
$9,433
======
</TABLE>
Total minimum future annual lease payments have not been reduced by $55,620
of sublease rentals to be received in the future under non-cancelable subleases.
Rent expense included in the attached statement of operations was
$1,576,053 net of sublease income of $37,830 in 1997 and $1,654,229 net of
sublease income of $180,123 in 1996.
F-71
<PAGE> 136
SIBSON & COMPANY, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's obligation under two of the leases is secured by letters of
credit totaling $650,000.
The Company leases various equipment on operating leases with terms through
2002. Monthly rental payments on these leases is approximately $21,717.
11. LICENSING AGREEMENTS
The Company has granted licenses to companies in South Africa, Canada,
Australia, New Zealand and the United Kingdom to use the name "Sibson &
Company". These licenses provide for royalties payable to the Company equal to
5% of their respective revenues.
12. UNINSURED CASH BALANCES
The Company maintains its cash in several banks. The bank balances on
deposit which are in excess of the FDIC insurance limits was approximately
$2,300,000 at December 31, 1997.
13. SUBSEQUENT EVENT
Effective August 31, 1998, the Company sold substantially all of its assets
and certain liabilities were assumed by Sibson & Co., LLC for cash of
$34,764,000 and 2,613,087 Class A Common Units of Nextera Enterprises, L.L.C.
F-72
<PAGE> 137
AUDITORS' REPORT
To the Directors of
Sibson Canada, Inc.
We have audited the balance sheet of Sibson Canada, Inc. as at December 31,
1997 and the statements of operations and retained earnings and changes in
financial position for the year then ended. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1997 and the
results of its operations and changes in its financial position for the year
then ended in accordance with accounting principles generally accepted in Canada
which differ in certain respects from accounting principles generally accepted
in the United States (See Note 10).
/s/ GRANT THORNTON
Toronto, Canada
September 1, 1998
F-73
<PAGE> 138
SIBSON CANADA, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1997 JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 63 $ --
Receivables............................................... 1,145 1,314
Prepaids.................................................. 26 105
------ ------
Total current assets.............................. 1,234 1,419
Equipment, net.............................................. 46 51
------ ------
Total assets...................................... $1,280 $1,470
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness......................................... $ -- $ 302
Payables and accruals..................................... 80 336
Bonus payable............................................. 506 91
License fee payable....................................... 160 10
Income taxes payable...................................... 30 61
Deferred income........................................... 51 51
------ ------
Total current liabilities......................... 827 851
Due to shareholders......................................... 93 93
Shareholders' equity:
Capital stock............................................. 137 137
Retained earnings......................................... 223 389
------ ------
Total shareholders' equity........................ 360 526
------ ------
Total liabilities and shareholders' equity........ $1,280 $1,470
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-74
<PAGE> 139
SIBSON CANADA, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE FOR THE SIX MONTHS ENDED JUNE 30,
YEAR ENDED ------------------------------------
DECEMBER 31, 1997 1997 1998
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Net revenues.............................. $4,077 $2,025 $2,045
Cost of revenues.......................... 2,864 1,131 1,213
------ ------ ------
Gross profit......................... 1,213 894 832
Selling, general and administrative....... 1,054 524 582
------ ------ ------
Income before income taxes........... 159 370 250
Income taxes.............................. 51 120 84
------ ------ ------
Net income........................... $ 108 $ 250 $ 166
====== ====== ======
Retained earnings, beginning of period.... $ 115 $ 115 $ 223
Retained earnings, end of period.......... $ 223 $ 365 $ 389
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-75
<PAGE> 140
SIBSON CANADA, INC.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED FOR THE SIX MONTHS ENDED JUNE 30,
DECEMBER 31, 1997 1997 1998
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................. $ 108 $ 250 $ 166
Depreciation........................... 16 9 7
Change in operating assets and
liabilities:
Trade receivables.................... (385) (594) (7)
Shareholders receivables............. (61) -- (25)
Other receivables.................... (26) -- (137)
Prepaids............................. 3 (13) (80)
Payables and accruals................ (98) 107 256
Bonus payable........................ 506 232 (415)
License fee payable.................. 84 89 (150)
Income taxes payable................. 51 91 32
Deferred income...................... 51 -- --
----- ----- -----
Net cash provided by (used in)
operating activities............ 249 171 (353)
----- ----- -----
Cash flows from investing activities:
Purchase of equipment.................. (9) (5) (12)
----- ----- -----
Net cash used in investing
activities...................... (9) (5) (12)
----- ----- -----
Net increase (decrease) in cash............. 240 166 (365)
Cash (bank indebtedness), beginning of
period.................................... (177) (177) 63
----- ----- -----
Cash (bank indebtedness), end of period..... $ 63 $ (11) $(302)
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-76
<PAGE> 141
SIBSON CANADA, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. THE COMPANY
Sibson Canada, Inc. (the "Company") provides human capital consulting
services including human resource strategies, outsourcing assessments,
organizational designs, rewards and incentives programs, performance management
processes and systems, and executive coaching services. The Company also serves
sales and marketing organizations with sales strategy, selling process, sales
channel and selling effectiveness consulting.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements have been prepared by management in accordance
with accounting principles generally accepted in Canada. See Note 10 for
differences between these principles and those generally accepted in the United
States. All amounts in the financial statements are expressed in Canadian
dollars.
Interim Financial Statements (Unaudited)
The balance sheet at June 30, 1998, and the statements of operations and
retained earnings and changes in financial position for the six months ended
June 30, 1998 and 1997 are unaudited, and, in the opinion of management, include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the Company's financial position, results of operations
and cash flows.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Revenue Recognition
The company derives its revenues from consulting services under time and
materials billing arrangements. Revenues are recognized as services are
provided. Deferred income relates to funds received from clients for future
projects.
Depreciation
Rates and bases of depreciation applied to write-off the cost less
estimated salvage value of property and equipment over their estimated lives are
as follows:
<TABLE>
<S> <C>
Furniture and
fixtures.............. 20%, declining balance
Office equipment........ 20%, declining balance
Computer hardware....... 30%, declining balance
Computer software....... 30%, declining balance
</TABLE>
Translation of Foreign Currencies
Monetary assets and liabilities denominated in foreign currencies are
translated at year-end exchange rates and revenue and expenses are translated at
average rates. Translation gains and losses are included in earnings.
F-77
<PAGE> 142
SIBSON CANADA, INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Financial Instruments
The carrying values of the financial assets and liabilities approximate
their fair values based on the short-term maturities of these instruments.
3. RECEIVABLES
Receivables consist of the following:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997
----------------------------------
(IN THOUSANDS OF
CANADIAN DOLLARS)
<S> <C>
Trade.................................................... $ 1,039
Shareholders............................................. 74
Income taxes............................................. --
Other.................................................... 32
--------
$ 1,145
========
</TABLE>
4. EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997
----------------------------------
(IN THOUSANDS OF
CANADIAN DOLLARS)
<S> <C>
Furniture and fixtures................................. $ 8
Office equipment....................................... 14
Computer hardware...................................... 89
Computer software...................................... 32
-------
143
Less: accumulated depreciation......................... 97
-------
Property and equipment, net............................ $ 46
=======
</TABLE>
5. BANK INDEBTEDNESS
As of December 31, 1997, the Company has an authorized bank line of credit
of $289,000 of which there have been no drawdowns. Any loan balance outstanding
bears interest at the bank prime rate plus 1% per annum and is payable on
demand. As security, the Company has provided a registered general assignment of
book debts, a registered general security agreement, an assignment of fire
insurance and key man life insurance.
6. LICENSE FEE
The Company has entered into an agreement with Sibson & Co., L.P., to pay
5% of its revenues in exchange for support services and the right to use the
name. The agreement is automatically renewed on an annual basis unless written
notice is provided by either party indicating they wish to terminate the
agreement. The license fee expense for the year ended December 31, 1997 is
$175,892 of which $160,410 remains payable at year-end.
F-78
<PAGE> 143
SIBSON CANADA, INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
7. DUE TO SHAREHOLDERS
Amounts due to shareholders are non-interest bearing and due on demand. The
amounts are classified as long-term as it is not the intention of the
shareholders to demand repayment in the upcoming year.
8. CAPITAL STOCK
Common shares, unlimited number authorized, 1,307 issued for proceeds of
$104,001; Class A common shares, unlimited number authorized, 230 issued for
proceeds of $32,890.
Holders of Class A common shares are entitled to a dividend per share equal
to the amount of any declared common share dividend per share, convertible to
common shares at the option of the holder upon approval by the Board of
Directors and upon payment to the company of additional amounts of money, if
any, as specified in the resolution approving the conversion.
9. COMMITMENTS
The Company has entered into agreements to lease its premises and various
pieces of office and computer equipment. The current premises lease expires
October 1998, and a new lease has been entered into subsequent to year end for a
further 10 year period. The equipment leases are for various periods to 2001.
Minimum commitments for each of the next five years and thereafter are as
follows (in thousands of Canadian dollars):
<TABLE>
<S> <C>
1998........................................... $249
1999........................................... 181
2000........................................... 180
2001........................................... 149
2002........................................... 119
Thereafter..................................... 708
</TABLE>
10. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
The accounting principles utilized in the preparation of these financial
statements conform in all material respects with those generally accepted in the
United States ("US GAAP"), except as indicated below.
The statement of changes in financial position included herein was prepared
in accordance with Canadian generally accepted accounting principles. Under US
GAAP, the bank indebtedness position would be reported as a financing item
rather than being included in the cash position. The 1997 statement of changes
in financial position would disclose a decrease in financing of $177,391, and
cash at the beginning of the year at $0.
11. SUBSEQUENT EVENTS
On August 17, 1998, the Company and one of its corporate shareholders
continued as Nova Scotia corporations. Subsequently, the Company, the corporate
shareholder and a newly incorporated unlimited liability company, were
amalgamated under the laws of Nova Scotia and continued operating as Sibson
Canada Co.
Effective August 31, 1998, all of the Company's Shareholders sold all of
their stock to Nextera Enterprises, L.L.C. in exchange for cash of US$2,611,000
and 197,813 Exchangeable Preference Shares. The Exchangeable Preference Shares
are exchangeable at any time by the holders thereof for Class A Common Stock of
Nextera Enterprises, L.L.C.
F-79
<PAGE> 144
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following Unaudited Pro Forma Combined Financial Statements assume the
exchange of (the "Exchange Transaction") Class A Common Units and Class B Common
Units of Nextera Enterprises, L.L.C. ("Nextera LLC") and certain other
securities for shares of Class A Common Stock and Class B Common Stock of
Nextera Enterprises, Inc. ("Nextera" or the "Company"). After the Exchange
Transaction, the Company will hold, directly or indirectly, all of the
membership interests in Nextera LLC. See "The Company -- Exchange Transaction."
The following Unaudited Pro Forma Combined Financial Statements give effect
to the Company's acquisitions of (i) Symmetrix, Inc. ("Symmetrix") effective
July 30, 1997, (ii) SiGMA Consulting, LLC ("SiGMA") effective January 5, 1998,
(iii) The Planning Technologies Group, Inc. ("PTG") effective March 31, 1998,
(iv) Pyramid Imaging, Inc. ("Pyramid") effective March 31, 1998, and (v) Sibson
& Company, L.P. and Sibson Canada, Inc. (collectively, "Sibson") effective
August 31, 1998 (the "Sibson Acquisitions"). Symmetrix, SiGMA, PTG, Pyramid and
Sibson are referred to collectively as the "Acquired Companies." Each of these
acquisitions is being accounted for under the purchase method of accounting.
Each of the Acquired Companies other than Symmetrix, which had a May 31 fiscal
year end for periods prior to its acquisition by the Company, has a December 31
fiscal year end.
The following Unaudited Pro Forma Combined Balance Sheet of the Company at
June 30, 1998 has been prepared to give effect to the Sibson Acquisitions as if
they had occurred on June 30, 1998. The Unaudited Pro Forma Combined Balance
Sheet is also adjusted to reflect the Offering and the application of the
estimated net proceeds therefrom, including the repayment of certain
indebtedness, as if the Offering had occurred on June 30, 1998.
The following Unaudited Pro Forma Combined Statements of Operations of the
Company for the year ended December 31, 1997 and the six months ended June 30,
1998 have been prepared to give effect to (i) the acquisitions of the Acquired
Companies and (ii) the Offering and the application of the estimated net
proceeds therefrom, including the repayment of certain indebtedness, as if such
transactions had occurred as of the first date of each period presented.
The Unaudited Pro Forma Combined Financial Statements may not be indicative
of the results that would have been obtained if the transactions reflected
therein had occurred on the dates indicated or which may be realized in the
future. The Unaudited Pro Forma Combined Financial Statements should be read in
conjunction with the Historical Financial Statements of Nextera LLC and the
Acquired Companies included elsewhere in this Prospectus.
PF-1
<PAGE> 145
NEXTERA ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1998
ASSETS
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------- ---------------------------------------------------
ACQUISITION
COMPANY ACQUISITIONS ADJUSTMENTS PRO FORMA OFFERING PRO FORMA
(A) (B) (C) COMBINED ADJUSTMENTS AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................... $ 2,921 $ 474 $ (315) $ 3,080 $ (D) $
Accounts receivable, net.................... 10,434 13,432 23,866
Costs and estimated earnings in excess of
billings . . 172 -- 172
Due from affiliates......................... 135 280 415
Due from officers........................... 849 -- 849
Prepaid expenses and other current assets... 420 706 1,126
------- ------- ------- -------- -------- --------
Total current assets..................... 14,931 14,892 (315) 29,508
Property and equipment, net................... 2,049 2,818 4,867
Intangible assets, net of accumulated
amortization................................ 39,041 -- 42,164 81,205
Other assets.................................. 1,477 376 1,853
------- ------- ------- -------- -------- --------
Total assets............................. $57,498 $18,086 $41,849 $117,433 $ $
======= ======= ======= ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses....... $ 6,936 $ 8,012 $ $ 14,948 $ $
Notes payable to bank....................... 1,390 674 38,000 40,064 (D)
Deferred revenue............................ 1,262 -- 1,262
Due to affiliate............................ 150 -- 150 (D)
Current portion of long-term debt........... 86 -- 86
------- ------- ------- -------- -------- --------
Total current liabilities................ 9,824 8,686 38,000 56,510
Long-term debt................................ 994 2,250 3,244
Other long-term liabilities................... -- 1,081 1,081
Affiliated long-term payables................. -- 63 63
Debentures due to affiliates, including
accrued interest thereon.................... 50,585 -- 50,585 (D)
Stockholders' equity:
Equity...................................... 2,688 4,232 5,623 12,543 (D)
Retained earnings (deficit)................. (6,593) 1,774 (1,774) (6,593)
------- ------- ------- -------- -------- --------
Total stockholders' equity (deficit)..... (3,905) 6,006 3,849 5,950
------- ------- ------- -------- -------- --------
Total liabilities and stockholders'
equity (deficit)....................... $57,498 $18,086 $41,849 $117,433 $ $
======= ======= ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
PF-2
<PAGE> 146
NEXTERA ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- ----------------------------------------------------
PRO FORMA
COMPANY ACQUISITIONS ACQUISITION PRO FORMA OFFERING AS ADJUSTED
(E) (F) ADJUSTMENTS COMBINED ADJUSTMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net revenues............... $ 7,998 $68,455 $ $76,453 $ $
Cost of revenues........... 4,718 52,343 (2,961)(G) 54,100
------- ------- ------- ------- --- -------
Gross profit.......... 3,280 16,112 2,961 22,353
------- ------- ------- ------- --- -------
Selling, general and
administrative
expenses................. 5,306 13,026 18,332
Compensation expense --
repurchase of stock
options.................. -- 4,126(H) 4,126
Amortization expense....... 255 -- 2,604(I) 2,859
------- ------- ------- ------- --- -------
Loss from
operations.......... (2,281) (1,040) 357 (2,964)
------- ------- ------- ------- --- -------
Interest income (expense),
net...................... (32) (100) (3,876)(J) (4,008) (K)
------- ------- ------- ------- --- -------
Loss before income tax
expense (benefit)... (2,313) (1,140) (3,519) (6,972)
------- ------- ------- ------- --- -------
Income tax expense
(benefit)................ 702(L) (247)(L) 455
------- ------- ------- ------- --- -------
Net loss.............. $(3,015) $ (893) $(3,519) $(7,427) $ $
======= ======= ======= ======= === =======
Net loss per common share,
basic and diluted........ $ -- $ -- $ -- $
======= ======= ======= =======
Weighted average common
shares outstanding, basic
and diluted..............
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
PF-3
<PAGE> 147
NEXTERA ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------ ----------------------------------------------------
ACQUISITION PRO FORMA OFFERING PRO FORMA
COMPANY ACQUISITIONS ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
(M) (N)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net revenues.............. $22,095 $26,407 $ $48,502 $ $
Cost of revenues.......... 14,938 18,676 (1,261)(G) 32,353
------- ------- ------- ------- ------- -------
Gross profit......... 7,157 7,731 1,261 16,149
------- ------- ------- ------- ------- -------
Selling, general and
administrative
expenses................ 7,296 5,820 -- 13,116
Amortization expense...... 568 -- 851(O) 1,419
------- ------- ------- ------- ------- -------
Income (loss) from
operations......... (707) 1,911 410 1,614
------- ------- ------- ------- ------- -------
Interest income (expense),
net..................... (2,671) (37) (1,938)(J) (4,646) (K)
------- ------- ------- ------- ------- -------
Income (loss) before
income tax expense
(benefit).......... (3,378) 1,874 (1,528) (3,032)
------- ------- ------- ------- ------- -------
Income tax expense
(benefit)............... 200(L) (58)(L) 142
------- ------- ------- ------- ------- -------
Net income (loss).... $(3,578) $ 1,932 $(1,528) $(3,174) $ $
======= ======= ======= ======= ======= =======
Net income (loss) per
common share, basic and
diluted................. $ $ $ $
======= ======= ======= =======
Weighted average common
shares outstanding,
basic and diluted.......
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
PF-4
<PAGE> 148
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(A) Represents the historical consolidated balance sheet of the Company as
of June 30, 1998.
(B) Represents the historical consolidated balance sheets of Sibson as of
June 30, 1998. Assets and liabilities of Sibson Canada, Inc. have been
translated from Canadian dollars into U.S. dollars at the exchange rate in
effect as of June 30, 1998.
(C) Represents the adjustments to record the purchase price of the Sibson
Acquisitions. The purchase price consisted of $37,375,000 in cash,
shares of common stock at an assumed value of $9,855,650, and $940,000 in
related acquisition costs.
(D) Represents the adjustments to record the Offering and the application
of the estimated net proceeds therefrom, including the repayment of certain
indebtedness. See "Use of Proceeds."
(E) Represents the historical consolidated statement of operations of the
Company for the period from February 26, 1997 (date of inception) through
December 31, 1997.
(F) Represents historical statement of operations data of Symmetrix from
January 1, 1997 until the Company's acquisition of Symmetrix was completed
effective July 30, 1997, and the historical statements of operations of SiGMA,
Pyramid, PTG, and Sibson for the year ended December 31, 1997. The Company's
statement of operations for the period ended December 31, 1997 reflects the
results of operations of Symmetrix for periods after July 30, 1997. Revenues and
expenses of Sibson Canada, Inc. have been translated from Canadian dollars to
U.S. dollars at the average exchange rate in effect for the period.
(G) Represents the effects of changes in existing compensation practices
related to the principals of Sibson and PTG.
(H) Compensation expense -- repurchase of stock options resulted from the
cancellation and repurchase of all of outstanding options to purchase Symmetrix
stock in connection with its acquisition by the Company.
(I) Represents the adjustments to amortization expense to reflect the
allocation of the purchase price for the Symmetrix acquisition for the seven
months ended July 30, 1997 and the acquisitions of the other Acquired Companies
for the year ended December 31, 1997, in each case using 5 years for intangibles
related to personnel and 40 years for all other intangibles, including goodwill.
(J) Represents the adjustments to record the interest expense resulting
from the indebtedness incurred in connection with the Sibson Acquisitions.
(K) Represents the adjustments to eliminate the interest expense for the
indebtedness repaid with a portion of the estimated net proceeds from the
Offering.
(L) The pro forma tax provisions for the year ended December 31, 1997 and
the six months ended June 30, 1998 are based upon taxable income of those
Acquired Companies which are taxable entities.
(M) Represents the historical consolidated statement of operations of the
Company for the six months ended June 30, 1998.
(N) Represents the historical statements of operations of Pyramid and PTG
for the three months ended March 31, 1998 and the historical consolidated
statements of operations of Sibson for the six months ended June 30, 1998. The
Company's statement of operations for the six months ended June 30, 1998
reflects the results of operations of Symmetrix and SIGMA for the entire period
and of Pyramid and PTG for periods after March 31, 1998, the effective date of
their acquisition by the Company. Revenues and expenses of Sibson Canada, Inc.
have been translated from Canadian dollars to U.S. dollars at the average
exchange rate in effect for the period.
(O) Represents the adjustments to amortization expense to reflect the
allocation of the purchase price for the PTG and Pyramid acquisitions for the
three months ended March 31, 1998 and the Sibson Acquisitions for the six months
ended June 30, 1998, in each case using 5 years for intangibles related to
personnel and 40 years for all other intangibles, including goodwill.
PF-5
<PAGE> 149
- ------------------------------------------------------------
- ------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY OF THE
UNDERWRITERS OR BY ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN
THE SHARES OF CLASS A COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY, TO ANY PERSON IN ANY JURISDICTION WHICH IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 6
The Company................................ 14
Use of Proceeds............................ 15
Dividend Policy............................ 15
Capitalization............................. 16
Dilution................................... 17
Selected Consolidated and Pro Forma
Combined Financial Data.................. 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 19
Business................................... 26
Management................................. 37
Certain Transactions....................... 47
Principal Stockholders..................... 50
Description of Capital Stock............... 52
Shares Eligible for Future Sale............ 57
Underwriting............................... 60
Legal Matters.............................. 62
Experts.................................... 62
Additional Information..................... 62
Index to Financial Statements.............. F-1
</TABLE>
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
SHARES
NEXTERA ENTERPRISES, INC. LOGO
CLASS A COMMON STOCK
---------------------
PROSPECTUS
---------------------
DONALDSON, LUFKIN & JENRETTE
BANCBOSTON ROBERTSON STEPHENS
BT ALEX. BROWN
NATIONSBANC MONTGOMERY
SECURITIES LLC
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 150
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is list of estimated expenses to be incurred by the Company
in connection with the issuance and distribution of the Class A Common Stock.
All such expenses will be paid by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $
NASD filing fee.............................................
Nasdaq National Market listing fee..........................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Printing and engraving expenses.............................
Blue Sky fees and expenses..................................
Transfer agent and registrar fees...........................
Miscellaneous...............................................
--------
TOTAL............................................. $
========
</TABLE>
- ------------------------------
All of the above items are estimates, except the Securities and Exchange
Commission registration fee and the NASD filing fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law, the Company has
broad powers to indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act.
The Company's Certificate of Incorporation and Bylaws provide that the
Company will indemnify its directors and officers to the fullest extent
permitted by Delaware law. Delaware law permits, but does not require, a
corporation to indemnify officers, directors, employees or agents and expressly
provides that the indemnification provided for under Delaware law shall not be
deemed exclusive of any indemnification right under any bylaw, vote of
stockholders or disinterested directors, or otherwise. Delaware law permits
indemnification against expenses and certain other liabilities arising out of
legal actions brought or threatened against such persons for their conduct on
behalf of the Company, provided that each such person acted in good faith and in
a manner that he or she reasonably believed was in or not opposed to the
Company's best interests and in the case of a criminal proceeding, had no
reasonable cause to believe his or her conduct was unlawful. Delaware law does
not allow indemnification of directors in the case of an action by or in the
right of the Company (including stockholder derivative suits) unless the
directors successfully defend the action or indemnification is ordered by the
court.
The Company is a party to indemnification agreements with each of its
directors and officers. In addition, the form of Underwriting Agreement filed as
Exhibit 1.1 hereto provides for the indemnification of the Company and its
directors and officers against certain liabilities, including liabilities under
the Securities Act.
The Company maintains directors' and officers' liability insurance covering
its executive officers and directors. The policies have limits of up to
$ in the aggregate, subject to retentions of up to $ in the
aggregate.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
No securities of the Company, which were not registered under the
Securities Act, have been issued or sold by the Company within the past three
years, except as follows:
(a) From March 20, 1997 through April 30, 1998, NEH issued to Knowledge
Universe Class A Common Units for aggregate consideration of $ and
Class B Preferred Units for
II-1
<PAGE> 151
aggregate consideration of $ . These transactions were undertaken in
reliance upon the exemption from the registration requirements of the Securities
Act afforded by Section 4(2) of the Securities Act.
(b) From March 20, 1997 through April 30, 1998, NEH issued Class
A Common Units to EDU, L.L.C. for aggregate consideration of $ . This
transaction was undertaken in reliance upon the exemption from the registration
requirements of the Securities Act afforded by Section 4(2) of the Securities
Act.
(c) From March 20, 1997 through April 30, 1998, NEH issued to Gresham T.
Brebach, Jr. Class A Common Units for aggregate consideration of
$ and Class B Preferred Units for aggregate consideration of
$ in the form of a promissory note and security agreement. These
transactions were undertaken in reliance upon the exemption from the
registration requirements of the Securities Act afforded by Section 4(2) of the
Securities Act.
(d) From March 20, 1997 through April 30, 1998, NEH issued to Ronald K.
Bohlin Class A Common Units for aggregate consideration of $
and Class B Preferred Units for aggregate consideration of
$ . These transactions were undertaken in reliance upon the exemption
from the registration requirements of the Securities Act afforded by Section
4(2) of the Securities Act.
(e) From March 20, 1997 through April 30, 1998, NEH issued to Michael P.
Muldowney Class A Common Units for aggregate consideration of
$ and Class B Preferred Units for aggregate consideration of
$ in the form of a promissory note and security agreement. These
transactions were undertaken in reliance upon the exemption from the
registration requirements of the Securities Act afforded by Section 4(2) of the
Securities Act.
(f) From March 20, 1997 through April 30, 1998, NEH issued to Debra I.
Bergevine Class A Common Units for aggregate consideration of
$ and Class B Preferred Units for aggregate consideration of
$ in the form of a promissory note and security agreement and
$ in cash. These transactions were undertaken in reliance upon the
exemption from the registration requirements of the Securities Act afforded by
Section 4(2) of the Securities Act.
(g) From March 20, 1997 through April 30, 1998, NEH issued to David Fritts
Class A Common Units for aggregate consideration of $ and
Class B Preferred Units for aggregate consideration of $ in
the form of a promissory note and security agreement. These transactions were
undertaken in reliance upon the exemption from the registration requirements of
the Securities Act afforded by Section 4(2) of the Securities Act.
(h) From March 20, 1997 through April 30, 1998, NEH issued to Belden Menkus
Class A Common Units for aggregate consideration of $ and
Class B Preferred Units for aggregate consideration of $ in
the form of a promissory note and security agreement and $ in cash.
These transactions were undertaken in reliance upon the exemption from the
registration requirements of the Securities Act afforded by Section 4(2) of the
Securities Act.
(i) On July 30, 1997, NEH issued an aggregate of Class A Common
Units to certain employees pursuant to employment agreements between Symmetrix
and such employees, each of the same date, for aggregate consideration of
$ . These transactions were undertaken in reliance upon the exemption
from the registration requirements of the Securities Act afforded by Section
4(2) of the Securities Act.
(j) On January 5, 1998, NEH issued aggregate of Class A Common
Units to certain employees pursuant to employment agreements between SiGMA and
such employees, each of the same date, for aggregate consideration of
$ . These transactions were undertaken in reliance upon the exemption
from the registration requirements of the Securities Act afforded by Rule 506 of
Regulation D under the Securities Act.
II-2
<PAGE> 152
(k) On March 31, 1998, NEH issued Class A Common Units to Mason
S. Tenaglia pursuant to the employment agreement between PTG and Mr. Tenaglia
dated as of March 31, 1998 for consideration of $ . This transaction
was undertaken in reliance upon the exemption from the registration requirements
of the Securities Act afforded by Rule 506 of Regulation D under the Securities
Act.
(l) On March 31, 1998, NEH issued an aggregate of Class A Common
Units to certain employees pursuant to certain employment agreements between
Pyramid and such employees, each dated as of March 31, 1998, for aggregate
consideration of $ . These transactions were undertaken in reliance
upon the exemption from the registration requirements of the Securities Act
afforded by Rule 506 of Regulation D under the Securities Act.
(m) From March 20, 1997 to June 17, 1997, Nextera LLC issued
Class A Common Units to NEH for consideration of $ . These transactions
were undertaken in reliance upon the exemption from the registration
requirements of the Securities Act afforded by Section 4(2) of the Securities
Act.
(n) On March 1, 1997, Nextera LLC issued Class A Common Units to
EDU for consideration of $ . These transactions were undertaken in
reliance upon the exemption from the registration requirements of the Securities
Act afforded by Section 4(2) of the Securities Act.
(o) From July 23, 1997 to April 30, 1998, Nextera LLC issued to NEH
Class A Common Units for consideration of $ and
Class B Preferred Units for consideration of $ . These transactions
were undertaken in reliance upon the exemption from the registration
requirements of the Securities Act afforded by Section 4(2) of the Securities
Act.
(p) On April 9, 1997, Nextera LLC issued a warrant to NEH (the "Warrant")
to purchase Class A Common Units of Nextera, LLC at an exercise price
of $ per unit. The Warrant had an expiration date of August 1, 2002. On
April 30, 1998, Nextera LLC amended the Warrant to provide for the issuance of
Class B Common Units upon exercise of the Warrant rather than Class A Common
Units. On April 30, 1998, the Warrant was exchanged for Class B Common
Units. These transactions were undertaken in reliance upon the exemption from
the registration requirements of the Securities Act afforded by Section 4(2) of
the Securities Act.
(q) On January 5, 1998, Nextera issued Class A Common Units to
SiGMA Consulting, LLC as a part of the purchase price for the assets of SiGMA
Consulting, LLC. This transaction was undertaken in reliance upon the exemption
from the registration requirements of the Securities Act afforded by Rule 506 of
Regulation D promulgated under the Securities Act.
(r) On March 31, 1998, Nextera issued Class A Common Units to The
Planning Technologies Group, Inc. as a part of the purchase price for the assets
of The Planning Technologies Group, Inc. This transaction was undertaken in
reliance upon the exemption from the registration requirements of the Securities
Act afforded by Rule 506 of Regulation D under the Securities Act.
(s) On March 31, 1998, Nextera issued an aggregate of Class A
Common Units to the former stockholders of Pyramid Imaging, Inc. as a part of
the purchase price for all of the issued and outstanding capital stock of
Pyramid Imaging, Inc. This transaction was undertaken in reliance upon the
exemption from the registration requirements of the Securities Act afforded by
Section 4(2) of the Securities Act.
(t) Effective August 31, 1998, Nextera issued an aggregate of
Class A Common Units to Sibson & Company, Inc. and SC2, Inc. as a part of the
purchase price for the assets of Sibson & Company, L.P. Also effective August
31, 1998, Nextera issued an aggregate of Class A Common Units to
certain employees pursuant to employment agreements between SC/NE, LLC and such
employees, each dated as of August 31, 1998, for aggregate consideration of
$ . These transactions were undertaken in reliance upon the exemption
from the registration requirements of the Securities Act afforded by Rule 506 of
Regulation D under the Securities Act.
(u) On August 31, 1998, Nextera LLC issued to Gresham T. Brebach, Jr.
Class A Common Units and Class B Common Units for an
aggregate consideration of $ . This transaction was undertaken in
reliance upon the exemption from the registration requirements of the Securities
Act afforded by Section 4(2) of the Securities Act.
II-3
<PAGE> 153
(v) On August 31, 1998, Nextera LLC issued to Ronald K. Bohlin Class
A Common Units and Class B Common Units for an aggregate consideration of
$ . This transaction was undertaken in reliance upon the exemption from
the registration requirements of the Securities Act afforded by Section 4(2) of
the Securities Act.
(w) On August 31, 1998, Nextera LLC issued to Michael P. Muldowney
Class A Common Units and Class B Common Units for a consideration of
$ . This transaction was undertaken in reliance upon the exemption from
the registration requirements of the Securities Act afforded by Section 4(2) of
the Securities Act.
(x) On August 31, 1998, Nextera LLC issued to Debra I. Bergevine
Class A Common Units and Class B Common Units for a consideration of
$ . This transaction was undertaken in reliance upon the exemption from
the registration requirements of the Securities Act afforded by Section 4(2) of
the Securities Act.
(y) On August 31, 1998, Nextera LLC issued to David Fritts Class A
Common Units and Class B Common Units for a consideration of $ .
This transaction was undertaken in reliance upon the exemption from the
registration requirements of the Securities Act afforded by Section 4(2) of the
Securities Act.
(z) On August 31, 1998, Nextera LLC issued to Belden Menkus Class A
Common Units and Class B Common Units for a consideration of $ .
This transaction was undertaken in reliance upon the exemption from the
registration requirements of the Securities Act afforded by Section 4(2) of the
Securities Act.
(aa) From April 1, 1997 through June 1, 1998, Nextera LLC granted to
certain employees options to purchase Class A Common Units at an exercise
price of $ per unit under the Amended and Restated Employee Equity
Participation Plan of Nextera LLC (the "Equity Participation Plan"). From
January 7, 1998 through September 14, 1998, Nextera LLC granted to certain
employees options to purchase Class A Common Units at an exercise price
of $ per unit under the Equity Participation Plan. Each of the options
vest 25% each year over a four-year period. These transactions were undertaken
in reliance upon the exemptions from registration requirements of the Securities
Act afforded by Rule 701 under the Securities Act and Section 4(2) of the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation.
3.2 Form of Amended and Restated Bylaws.
4.1* Form of Class A Common Stock Certificate.
4.2* Form of Class B Common Stock Certificate.
4.3 Stockholders Agreement dated as of August 31, 1998 by and
among Nextera Enterprises, L.L.C., Nextera Enterprises, Inc.
and individuals and other parties listed on the Table of
Stockholders attached thereto as Schedule A.
5.1* Opinion of Latham & Watkins.
10.1 Form of 1998 Equity Participation Plan.
10.2 Stock Purchase Agreement dated as of July 30, 1997 by and
among Nextera Enterprises, L.L.C., Symmetrix, Inc. and the
stockholders and certain option holders of Symmetrix, Inc.
listed on the signature pages thereto.
10.3 Escrow Agreement dated as of July 30, 1997 by and among
Nextera Enterprises, L.L.C., Symmetrix, Inc., the
stockholders and certain option holders of Symmetrix, Inc.
listed on the signature pages thereto and State Street Bank
and Trust Company.
</TABLE>
II-4
<PAGE> 154
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<S> <C>
10.4 Purchase Agreement dated as of January 5, 1998 by and among
SGM Consulting, L.L.C., Nextera Enterprises, L.L.C., Nextera
Enterprises Holdings, L.L.C., SiGMA Consulting, LLC, and the
members of SiGMA Consulting, LLC listed on the signature
pages thereto.
10.5 Escrow Agreement dated as of January 5, 1998 by and among
SGM Consulting, L.L.C., Nextera Enterprises, L.L.C., Nextera
Enterprises Holdings, L.L.C., SiGMA Consulting, LLC, the
members of SiGMA Consulting, LLC listed on the signature
pages thereto and Chase Manhattan Trust Company.
10.6 Purchase Agreement dated as of March 31, 1998 by and among
Nextera Enterprises, L.L.C., Pyramid Imaging, Inc. and the
stockholders of Pyramid Imaging, Inc. listed on the
signature pages thereto.
10.7 Escrow Agreement dated as of March 31, 1998 by and among
Nextera Enterprises, L.L.C., Pyramid Imaging, Inc., the
stockholders of Pyramid Imaging, Inc. listed on the
signature pages thereto and Chase Manhattan Trust Company.
10.8 Asset Purchase Agreement dated as of March 31, 1998 by and
among The Planning Technologies Group, Inc., the
shareholders of The Planning Technologies Group, Inc. listed
on the signature pages thereto, The Planning Technologies
Group, L.L.C., Nextera Enterprises, L.L.C. and Nextera
Enterprises Holdings, L.L.C.
10.9 Escrow Agreement dated as of March 31, 1998 by and among The
Planning Technologies Group, LLC, Nextera Enterprises,
L.L.C., Nextera Enterprises Holdings, L.L.C., The Planning
Technologies Group, Inc., the shareholders of The Planning
Technologies Group, Inc. listed on the signature pages
thereto and Chase Manhattan Trust Company.
10.10 Asset Purchase Agreement dated as of August 31, 1998 by and
among SC/NE, LLC, Nextera Enterprises, L.L.C., Sibson &
Company, L.P., Sibson & Company, Inc., SC2, Inc., and the
shareholders of Sibson & Company, Inc. and SC2, Inc. listed
on the signature pages thereto.
10.11 First Amendment to Asset Purchase Agreement dated as of
August 31, 1998 by and among SC/NE, LLC, Nextera
Enterprises, L.L.C., Sibson & Company, L.P., Sibson &
Company, Inc. and SC2, Inc.
10.12 Escrow Agreement dated as of August 31, 1998 by and among
SC/NE, LLC, Nextera Enterprises, L.L.C., Sibson & Company,
L.P., Sibson & Company, Inc., SC2, Inc., the shareholders of
Sibson & Company, Inc. and SC2, Inc. listed on the signature
pages thereto and Chase Manhattan Trust Company.
10.13 Share Purchase Agreement dated as of August 31, 1998 by and
among Nextera Enterprises, L.L.C., Sibson Acquisition Co.
and the shareholders of Sibson Canada Inc. listed on the
signature pages thereto.
10.14 Escrow Agreement dated as of August 31, 1998 by an among
Nextera Enterprises, L.L.C., Sibson Acquisition Co., the
shareholders of Sibson Canada Inc. listed on the signature
pages thereto and Chase Manhattan Trust Company.
10.15 Share Exchange Agreement dated as of August 31, 1998 by and
among Nextera Enterprises, L.L.C., and the shareholders of
Sibson & Company, Inc., SC2, Inc. and Sibson Canada, Inc.
listed on the signature pages thereto.
10.16 Securities Purchase Agreement dated as of August 31, 1998
between Nextera Enterprises, L.L.C. and Nextera Funding,
Inc.
10.17 Senior Secured Note dated September 1, 1998 of Nextera
Enterprises, L.L.C. in favor of Nextera Funding, Inc.
10.18 Employment Agreement dated as of March 3, 1997 by and
between Education Technology Consulting Holdings, L.L.C. and
Gresham T. Brebach, Jr.
10.19 Employment Agreement dated as of April 1, 1997 by and
between Nextera Enterprises Holdings, L.L.C. and Ronald K.
Bohlin.
10.20 Employment Agreement dated as of April 15, 1997 by and
between Nextera Enterprises, L.L.C. and Michael P.
Muldowney.
</TABLE>
II-5
<PAGE> 155
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<S> <C>
10.21 Employment Agreement dated as of April 25, 1997 by and
between Debra Bergevine and Education Technology Consulting,
L.L.C.
10.22 Employment Agreement dated as of March 25, 1997 by and
between Robert F. Staley and Education Technology
Consulting, L.L.C.
10.23 Employment Agreement dated as of August 31, 1998 by and
between Roger Brossy and SC/NE, LLC.
10.24 Noncompete, Non-solicitation, Proprietary Information,
Confidentiality and Inventions Agreement dated as of August
31, 1998 between Roger Brossy and Nextera Enterprises,
L.L.C.
10.25 Promissory Note of Gresham Brebach, Jr. dated January 2,
1998 in the principal amount of $576,000 in favor of Nextera
Enterprises Holdings, L.L.C.
10.26 Promissory Note of Michael Muldowney dated January 2, 1998
in the principal amount of $72,000 in favor of Nextera
Enterprises Holdings, L.L.C.
10.27 Promissory Note of Debra Bergevine dated January 2, 1998 in
the principal amount of $62,000 in favor of Nextera
Enterprises Holdings, L.L.C.
23.1.1 Consent of Ernst & Young LLP, Independent Auditors.
23.1.2 Consent of Ernst & Young LLP, Independent Auditors.
23.1.3 Consent of BDO Seidman, LLP, Independent Auditors.
23.1.4 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.1.5 Consent of Ernst & Young LLP, Independent Auditors.
23.1.6 Consent of Harte Carucci & Driscoll, P.C., Independent
Auditors.
23.1.7 Consent of Farkouh, Furman & Faccio, Independent Auditors.
23.1.8 Consent of Grant Thornton.
23.2* Consent of Latham & Watkins (contained in Exhibit 5.1).
24.1 Power of Attorney (included in signature page to
Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------------
* To be filed by amendment.
(b) Financial Statements.
All required Financial Statements are included in the Prospectus.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the Closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-6
<PAGE> 156
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the Offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 157
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Lexington, State of
Massachusetts, on September 18, 1998.
NEXTERA ENTERPRISES, INC.
By: /s/ GRESHAM T. BREBACH, JR.
------------------------------------
Gresham T. Brebach, Jr.
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Gresham T. Brebach, Jr. his true and
lawful attorney-in-fact, acting alone, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments including post-effective amendments
and any registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933 to this registration statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact or his substitute, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
/s/ GRESHAM T. BREBACH, JR. President, Chief Executive September 18, 1998
- ----------------------------------------------------- Officer and Chairman of the
Gresham T. Brebach, Jr. Board of Directors
(Principal Executive
Officer)
/s/ MICHAEL P. MULDOWNEY Chief Financial Officer September 18, 1998
- ----------------------------------------------------- (Principal Financial and
Michael P. Muldowney Accounting Officer)
/s/ RONALD K. BOHLIN Chief Operating Officer and September 18, 1998
- ----------------------------------------------------- Director
Ronald K. Bohlin
/s/ ROGER BROSSY Director September 18, 1998
- -----------------------------------------------------
Roger Brossy
/s/ RALPH FINERMAN Director September 18, 1998
- -----------------------------------------------------
Ralph Finerman
/s/ STEVEN B. FINK Director September 18, 1998
- -----------------------------------------------------
Steven B. Fink
/s/ STANLEY E. MARON Director September 18, 1998
- -----------------------------------------------------
Stanley E. Maron
/s/ RICHARD V. SANDLER Director September 18, 1998
- -----------------------------------------------------
Richard V. Sandler
</TABLE>
II-8
<PAGE> 158
SCHEDULE II
NEXTERA ENTERPRISES, L.L.C.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF CHARGED TO BALANCE AT
DESCRIPTION PERIOD OPERATIONS DEDUCTIONS END OF PERIOD
----------- ------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
Period ended December 31, 1997
Reserves and allowances deducted from asset
accounts..................................
Allowance for uncollectible accounts... $ -- $100,000 $ -- $100,000
</TABLE>
S-1
<PAGE> 159
EXHIBIT INDEX
The following exhibits are filed as part of this Form S-1 Registration
Statement.
<TABLE>
<CAPTION>
PAGINATION
BY
SEQUENTIAL
EXHIBIT NUMBERING
NUMBER DESCRIPTION OF DOCUMENT SYSTEM
<S> <C> <C>
1.1* Form of Underwriting Agreement. ............................
3.1 Form of Amended and Restated Certificate of
Incorporation. .............................................
3.2 Form of Amended and Restated Bylaws. .......................
4.1* Form of Class A Common Stock Certificate. ..................
4.2* Form of Class B Common Stock Certificate. ..................
4.3 Stockholders Agreement dated as of August 31, 1998 by and
among Nextera Enterprises, L.L.C., Nextera Enterprises, Inc.
and individuals and other parties listed on the Table of
Stockholders attached thereto as Schedule A. ...............
5.1* Opinion of Latham & Watkins. ...............................
10.1 Form of 1998 Equity Participation Plan. ....................
10.2 Stock Purchase Agreement dated as of July 30, 1997 by and
among Nextera Enterprises, L.L.C., Symmetrix, Inc. and the
stockholders and certain option holders of Symmetrix, Inc.
listed on the signature pages thereto. .....................
10.3 Escrow Agreement dated as of July 30, 1997 by and among
Nextera Enterprises, L.L.C., Symmetrix, Inc., the
stockholders and certain option holders of Symmetrix, Inc.
listed on the signature pages thereto and State Street Bank
and Trust Company. .........................................
10.4 Purchase Agreement dated as of January 5, 1998 by and among
SGM Consulting, L.L.C., Nextera Enterprises, L.L.C., Nextera
Enterprises Holdings, L.L.C., SiGMA Consulting, LLC, and the
members of SiGMA Consulting, LLC listed on the signature
pages thereto. .............................................
10.5 Escrow Agreement dated as of January 5, 1998 by and among
SGM Consulting, L.L.C., Nextera Enterprises, L.L.C., Nextera
Enterprises Holdings, L.L.C., SiGMA Consulting, LLC, the
members of SiGMA Consulting, LLC listed on the signature
pages thereto and Chase Manhattan Trust Company. ...........
10.6 Purchase Agreement dated as of March 31, 1998 by and among
Nextera Enterprises, L.L.C., Pyramid Imaging, Inc. and the
stockholders of Pyramid Imaging, Inc. listed on the
signature pages thereto. ...................................
10.7 Escrow Agreement dated as of March 31, 1998 by and among
Nextera Enterprises, L.L.C., Pyramid Imaging, Inc., the
stockholders of Pyramid Imaging, Inc. listed on the
signature pages thereto and Chase Manhattan Trust
Company. ...................................................
10.8 Asset Purchase Agreement dated as of March 31, 1998 by and
among The Planning Technologies Group, Inc., the
shareholders of The Planning Technologies Group, Inc. listed
on the signature pages thereto, The Planning Technologies
Group, L.L.C., Nextera Enterprises, L.L.C. and Nextera
Enterprises Holdings, L.L.C. ...............................
10.9 Escrow Agreement dated as of March 31, 1998 by and among The
Planning Technologies Group, LLC, Nextera Enterprises,
L.L.C., Nextera Enterprises Holdings, L.L.C., The Planning
Technologies Group, Inc., the shareholders of The Planning
Technologies Group, Inc. listed on the signature pages
thereto and Chase Manhattan Trust Company. .................
</TABLE>
<PAGE> 160
<TABLE>
<CAPTION>
PAGINATION
BY
SEQUENTIAL
EXHIBIT NUMBERING
NUMBER DESCRIPTION OF DOCUMENT SYSTEM
<S> <C> <C>
10.10 Asset Purchase Agreement dated as of August 31, 1998 by and
among SC/NE, LLC, Nextera Enterprises, L.L.C., Sibson &
Company, L.P., Sibson & Company, Inc., SC2, Inc., and the
shareholders of Sibson & Company, Inc. and SC2, Inc. listed
on the signature pages thereto. ............................
10.11 First Amendment to Asset Purchase Agreement dated as of
August 31, 1998 by and among SC/NE, LLC, Nextera
Enterprises, L.L.C., Sibson & Company, L.P., Sibson &
Company, Inc. and SC2, Inc. ................................
10.12 Escrow Agreement dated as of August 31, 1998 by and among
SC/NE, LLC, Nextera Enterprises, L.L.C., Sibson & Company,
L.P., Sibson & Company, Inc., SC2, Inc., the shareholders of
Sibson & Company, Inc. and SC2, Inc. listed on the signature
pages thereto and Chase Manhattan Trust Company. ...........
10.13 Share Purchase Agreement dated as of August 31, 1998 by and
among Nextera Enterprises, L.L.C., Sibson Acquisition Co.
and the shareholders of Sibson Canada Inc. listed on the
signature pages thereto. ...................................
10.14 Escrow Agreement dated as of August 31, 1998 by an among
Nextera Enterprises, L.L.C., Sibson Acquisition Co., the
shareholders of Sibson Canada Inc. listed on the signature
pages thereto and Chase Manhattan Trust Company. ...........
10.15 Share Exchange Agreement dated as of August 31, 1998 by and
among Nextera Enterprises, L.L.C., and the shareholders of
Sibson & Company, Inc., SC2, Inc. and Sibson Canada, Inc.
listed on the signature pages thereto. .....................
10.16 Securities Purchase Agreement dated as of August 31, 1998
between Nextera Enterprises, L.L.C. and Nextera Funding,
Inc. .......................................................
10.17 Senior Secured Note dated September 1, 1998 of Nextera
Enterprises, L.L.C. in favor of Nextera Funding, Inc. ......
10.18 Employment Agreement dated as of March 3, 1997 by and
between Education Technology Consulting Holdings, L.L.C. and
Gresham T. Brebach, Jr. ....................................
10.19 Employment Agreement dated as of April 1, 1997 by and
between Nextera Enterprises Holdings, L.L.C. and Ronald K.
Bohlin. ....................................................
10.20 Employment Agreement dated as of April 15, 1997 by and
between Nextera Enterprises, L.L.C. and Michael P.
Muldowney. .................................................
10.21 Employment Agreement dated as of April 25, 1997 by and
between Debra Bergevine and Education Technology Consulting,
L.L.C. .....................................................
10.22 Employment Agreement dated as of March 25, 1997 by and
between Robert F. Staley and Education Technology
Consulting, L.L.C. .........................................
10.23 Employment Agreement dated as of August 31, 1998 by and
between Roger Brossy and SC/NE, LLC. .......................
10.24 Noncompete, Non-solicitation, Proprietary Information,
Confidentiality and Inventions Agreement dated as of August
31, 1998 between Roger Brossy and Nextera Enterprises,
L.L.C. .....................................................
10.25 Promissory Note of Gresham Brebach, Jr. dated January 2,
1998 in the principal amount of $576,000 in favor of Nextera
Enterprises Holdings, L.L.C. ...............................
10.26 Promissory Note of Michael Muldowney dated January 2, 1998
in the principal amount of $72,000 in favor of Nextera
Enterprises Holdings, L.L.C. ...............................
</TABLE>
<PAGE> 161
<TABLE>
<CAPTION>
PAGINATION
BY
SEQUENTIAL
EXHIBIT NUMBERING
NUMBER DESCRIPTION OF DOCUMENT SYSTEM
<S> <C> <C>
10.27 Promissory Note of Debra Bergevine dated January 2, 1998 in
the principal amount of $62,000 in favor of Nextera
Enterprises Holdings, L.L.C.................................
23.1.1 Consent of Ernst & Young LLP, Independent Auditors. ........
23.1.2 Consent of Ernst & Young LLP, Independent Auditors. ........
23.1.3 Consent of BDO Seidman, LLP, Independent Auditors. .........
23.1.4 Consent of PricewaterhouseCoopers LLP, Independent
Accountants. ...............................................
23.1.5 Consent of Ernst & Young LLP, Independent Auditors. ........
23.1.6 Consent of Harte Carucci & Driscoll, P.C., Independent
Auditors. ..................................................
23.1.7 Consent of Farkouh, Furman & Faccio, Independent
Auditors. ..................................................
23.1.8 Consent of Grant Thornton. .................................
23.2* Consent of Latham & Watkins(contained in Exhibit 5.1). .....
24.1 Power of Attorney (included in signature page to
Registration Statement). ...................................
27.1 Financial Data Schedule. ...................................
</TABLE>
- ------------------------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NEXTERA ENTERPRISES, INC.
NEXTERA ENTERPRISES, INC., a corporation organized and existing under
the laws of the State of Delaware (hereinafter called the "Corporation"), hereby
certifies pursuant to Sections 241 and 245 of the General Corporation Law of the
State of Delaware (the "General Corporation Law") as follows:
FIRST: The Corporation's name is Nextera Enterprises, Inc. and it was
originally incorporated under such name.
SECOND: The original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on _________ ___,
1998.
THIRD: This Amended and Restated Certificate of Incorporation amends
and restates the Certificate of Incorporation of the Corporation, as now in
effect. This Amended and Restated Certificate of Incorporation was adopted by
the Board of Directors in the manner and by the vote prescribed by Sections 241
and 245 of the General Corporation Law to read as follows:
"ARTICLE ONE
NAME
The name of the corporation (hereinafter the "Corporation") is
NEXTERA ENTERPRISES, INC.
ARTICLE TWO
REGISTERED OFFICE
The address, including street, number, city and county, of the
registered office of the Corporation in the State of Delaware is c/o The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle, 19801; and the name of the registered
agent of the Corporation in the State of Delaware is The Corporation Trust
Company.
ARTICLE THREE
PURPOSE
The nature of the business and of the purposes to be conducted and
promoted by the Corporation shall be to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law. The
Corporation shall possess and exercise all the powers and privileges granted by
the General Corporation Law, by any other law or by this Amended and Restated
Certificate of
<PAGE> 2
Incorporation, together with any powers incidental thereto as far as such powers
and privileges are necessary or convenient to the conduct, promotion or
attainment of the purposes of the Corporation.
ARTICLE FOUR
CAPITAL STRUCTURE
The total number of shares of capital stock which the Corporation
shall have the authority to issue is [64,300,000] shares, consisting of three
classes of capital stock:
(a) [50,000,000] shares of Class A Common Stock, par value
[$0.001] per share (the "Class A Common Stock");
(b) [4,300,000] shares of Class B Common Stock, par value
[$0.001] per share (the "Class B Common Stock," and together with the
Class A Common Stock, the "Common Stock"); and
(c) [10,000,000] shares of Preferred Stock, par value [$0.001]
per share (the "Preferred Stock").
ARTICLE FIVE
COMMON STOCK
5.1 Identical Rights. Except as otherwise set forth in this ARTICLE
FIVE, the rights and privileges of the Common Stock shall be identical,
including, without limitation, the right to participate ratably in dividends and
other distributions (including distributions upon liquidation, dissolution or
other winding up of the Corporation), payable in cash, stock or property, except
that in the case of dividends or distributions payable in shares of a class of
Common Stock, only shares of Class A Common Stock may be distributed with
respect to Class A Common Stock and only shares of Class B Common Stock may be
distributed with respect to Class B Common Stock, and the number of shares of
Common Stock payable per share will be equal for each class. In addition,
neither the shares of Class A Common Stock nor the shares of Class B Common
Stock may be subdivided, consolidated, reclassified or otherwise changed unless
concurrently the shares of the other class of Common Stock are subdivided,
consolidated, reclassified or otherwise changed in the same proportion and the
same manner. The Corporation may not make any dividend or distribution with
respect to any class of Common Stock unless at the same time the Corporation
makes a ratable dividend or distribution with respect to each outstanding share
of Common Stock regardless of class. The rights of holders of Class A Common
Stock and Class B Common Stock are subject to the rights of holders of shares of
any series of Preferred Stock that the Corporation may designate and issue from
time to time.
5.2 Voting Rights. The holders of the Common Stock shall vote as a
single class on all matters submitted to a vote of the stockholders to which the
holders of Common Stock are entitled to vote, except as may be required by
Delaware law or as otherwise expressly specified in this Amended and Restated
Certificate of Incorporation. Each share of Class A Common Stock shall be
entitled to one vote and each share of Class B Common Stock shall be entitled to
ten votes. The Corporation, by action of its Board of Directors and the
affirmative vote of the holders of a majority of the voting power of the capital
stock of the Corporation entitled to vote, may increase or decrease the number
of authorized shares of Common Stock or Preferred Stock of the Corporation (but
not below the number
2
<PAGE> 3
of shares of Common Stock or Preferred Stock, respectively, then outstanding)
irrespective of the provisions of Section 242(b)(2) of the General Corporation
Law; provided, however, that any increase or decrease the number of authorized
shares of Class B Common Stock shall in addition to the foregoing, require the
affirmative vote of the holders of a majority of the voting power of the Class B
Common Stock, voting as a separate class.
5.3 Conversion Rights.
(a) Voluntary Conversion. Each share of Class B Common Stock is
convertible into one fully paid and non-assessable share of Class A
Common Stock at any time at the option of the holder. In order to
exercise the conversion privilege, the holder of any shares of Class B
Common Stock to be converted shall present and surrender the
certificate or certificates representing such shares during usual
business hours at the principal executive offices of the Corporation,
or if any agent for the registration of transfer of shares of Class B
Common Stock is then duly appointed and acting (said agent being
hereinafter called the "Transfer Agent"), then at the office of the
Transfer Agent, accompanied by written notice that the holder elects
to convert the shares of Class B Common Stock represented by such
certificate or certificates, to the extent specified in such notice.
Such notice shall also state the name or names (with addresses) in
which the certificate or certificates for shares of Class A Common
Stock which shall be issuable on such conversion shall be issued. If
required by the Corporation, any certificate for shares of Class B
Common Stock surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation and
the Transfer Agent, duly executed by the holder of such shares or his
or her duly authorized representative. As promptly as practicable
after the receipt of such notice and the surrender of the certificate
or certificates representing such shares of Class B Common Stock as
aforesaid, the Corporation shall issue and deliver at such office to
such holder, or on his or her written order, a certificate or
certificates for the number of full shares of Class A Common Stock
issuable upon the conversion of such shares. Each conversion of shares
of Class B Common Stock shall be deemed to have been effected on the
date on which such notice shall have been received by the Corporation
or the Transfer Agent, as applicable, and the certificate or
certificates representing such shares shall have been surrendered
(subject to receipt by the Corporation or the Transfer Agent, as
applicable, within thirty (30) days thereafter of any required
instruments of transfer as aforesaid), and the person or persons in
whose name or names any certificate or certificates for shares of
Class A Common Stock shall be issuable upon such conversion shall be
deemed to have become on said date the holder or holders of record of
the shares represented thereby.
(b) Automatic Conversion.
(i) Each share of Class B Common Stock shall convert
automatically into one fully paid and non-assessable share of Class A
Common Stock immediately prior to its sale, assignment, pledge, gift
or other transfer (an "Assignment" or to "Assign"), other than (a) to
a Controlled Affiliate of the transferor; or (b) pursuant to a
Qualified Transfer (as defined below). For purposes of this Section
5.3(b), the term "Controlled Affiliate" shall mean, with respect to a
transferor, any individual or entity that is controlled directly or
indirectly (by ownership of voting securities, contract or otherwise)
by such transferor. "Qualified Transfer" means (i) any transfer of
shares of Class B Common Stock by will or pursuant to the laws of
descent and distribution to any member or members of a stockholder's
Family, (ii) any transfer of shares of Class B Common Stock by a
stockholder to a domestic trust created for the sole benefit of one or
more of the stockholder or any member or members of the stockholder's
Family, (iii) any transfer of shares of
3
<PAGE> 4
Class B Common Stock from a trust described in clause (ii) above to
the stockholder (or former stockholder) who transferred shares of
Class B Common Stock to such trust, (iv) any transfer to a domestic
limited partnership or a domestic limited liability company if there
are no partners or members of such limited partnership or limited
liability company other than a stockholder and members of a
stockholder's Family; (v) any transfer of Class B Common Stock from a
limited partnership or limited liability company described in clause
(iv) above to a stockholder (or former stockholder) who transferred
Class B Common Stock to such limited partnership or limited liability
company; and (vi) any transfer of shares of Class B Common Stock from
one holder of Class B Common Stock to another holder of Class B Common
Stock as of August 31, 1998. "Family" means a person's spouse, lineal
descendants, parents, siblings, and lineal descendants of siblings.
Any such relationship by legal adoption shall be included.
(ii) Upon any Assignment of Class B Common Stock by
Knowledge Enterprises, Inc. ("KE"), other than to a Controlled
Affiliate or pursuant to a Qualified Transfer, a proportionate amount
of the Class B Common Stock held by the other holders of Class B
Common Stock will also automatically convert into fully paid and
non-assessable shares of Class A Common Stock. For example, if KE
Assigns 25% of its Class B Common Stock to a third party who is not a
Controlled Affiliate and not pursuant to a Qualified Transfer, then
those shares of Class B Common Stock will automatically convert into
Class A Common Stock on a one to one basis and 25% of the Class B
Common Stock held by each other holder of Class B Common Stock will
automatically convert into Class A Common Stock on a one to one basis.
(iii) In the event that a group comprised of one or more of
Michael R. Milken, Lawrence J. Ellison or Lowell J. Milken ceases to
control, directly or indirectly (through the ownership of voting
securities, contract or otherwise), KE or any other Person that owns
any or all of the shares of Class B Common Stock owned by KE on the
date hereof, then all Class B Common Stock shall automatically convert
into fully paid and non-assessable shares of Class A Common Stock.
Notwithstanding the foregoing, any holder of Class B Common Stock
may pledge his shares of Class B Common Stock to a financial
institution (the "Pledgee") pursuant to a bona fide pledge of such
shares as collateral security for indebtedness due to the Pledgee,
and, if the Pledgee forecloses or takes similar action, such pledged
shares of Class B Common Stock shall be converted automatically into
fully paid and non-assessable shares of Class A Common Stock
immediately prior to such foreclosure or similar action.
(c) Unconverted Shares. If less than all of the shares of Class B
Common Stock evidenced by a certificate or certificates surrendered to
the Corporation (in accordance with such procedures as the Board of
Directors may determine) are converted, the Corporation shall execute
and deliver to or upon the written order of the holder of such
certificate or certificates a new certificate or certificates
evidencing the number of shares of Class B Common Stock which are not
converted without charge to the holder.
(d) Converted Shares. Any share of Class B Common Stock converted
pursuant to this Article Five shall thereupon be retired and may not
be reissued.
(e) Class A Common Stock. The Class A Common Stock has no
conversion rights.
4
<PAGE> 5
5.4 Reservation. The Corporation hereby reserves, and shall at all
times reserve and keep available, out of its authorized and unissued shares of
Class A Common Stock, for the purposes of effecting conversions, such number of
duly authorized shares of Class A Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Class B Common
Stock. The Corporation covenants that all the shares of Class A Common Stock so
issuable shall, when so issued, be duly and validly issued, fully paid and
non-assessable. The Corporation shall take all such action as may be necessary
to assure that all such shares of Class A Common Stock may be so issued without
violation of any applicable law or regulation.
5.5 Merger. Upon the merger or consolidation of the Corporation,
holders of each class of Common Stock will be entitled to receive equal per
share payments or distributions, except that in any transaction in which shares
of capital stock are distributed, such shares may differ to the extent that the
Class A Common Stock and the Class B Common Stock differ as provided in this
Amended and Restated Certificate of Incorporation.
5.6 Liquidation. Upon any dissolution or liquidation of the
Corporation, the holders of the Class A Common Stock and Class B Common Stock
will be entitled to receive ratably all assets of the Corporation available for
distribution to stockholders, subject to any preferential rights of any then
outstanding shares of Preferred Stock.
ARTICLE SIX
PREFERRED STOCK
Shares of Preferred Stock may be issued from time to time in one or
more series, each of such series to have such terms as stated in the resolution
or resolutions providing for the establishment of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Except as
otherwise expressly stated in the resolution or resolutions providing for the
establishment of a series of Preferred Stock, any shares of Preferred Stock
which may be redeemed, purchased or acquired by the Corporation may be reissued
except as otherwise expressly provided by law.
Authority is hereby expressly granted to the Board of Directors of the
Corporation to issue, from time to time, shares of Preferred Stock in one or
more series, and, in connection with the establishment of any such series by
resolution or resolutions, to determine and fix such voting powers, full or
limited, or no voting powers, and such other powers, designations, preferences
and relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof, if any including, without
limitation, dividend rights, conversion rights, redemption and sinking fund
privileges, and liquidation preferences, as shall be stated in such resolution
or resolutions, all to the fullest extent permitted by the General Corporation
Law. Without limiting the generality of the foregoing, the resolution or
resolutions providing for the establishment of any series of Preferred Stock
may, to the extent permitted by law, provide that such series shall be superior
to, rank equally with or be junior to the Preferred Stock of any other series.
Except as otherwise expressly provided in the resolution or resolutions
providing for the establishment of any series of Preferred Stock, no vote of the
holders of shares of Preferred Stock or Common Stock shall be a prerequisite to
the issuance of any shares of any series of the Preferred Stock authorized by
and complying with the conditions of this Amended and Restated Certificate of
Incorporation.
5
<PAGE> 6
ARTICLE SEVEN
BOARD OF DIRECTORS
7.1 Number of Directors. The business and affairs of the Corporation
shall be managed by or under the direction of a Board of Directors consisting of
not less than seven nor more than thirteen directors, the exact number of
directors to be determined from time to time solely by resolution adopted by the
affirmative vote of a majority of the entire Board of Directors.
7.2 Removal. No director (other than directors elected by one or more
series of Preferred Stock) may be removed from office by the stockholders except
for cause and, in addition to any other vote required by law, upon the
affirmative vote of the holders of not less than 66 2/3% of the total voting
power of all outstanding securities of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class.
7.3 Limitation of Liability. No director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director; provided that this provision shall
not eliminate or limit the liability of a director (a) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under section 174 of the General Corporation Law
or (d) for any transaction from which the director derived any improper personal
benefits.
If the General Corporation Law is amended after approval by the
stockholders of this ARTICLE SEVEN to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law, as so amended. No amendment to
or repeal of this provision shall apply to or have any effect on the liability
or alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment.
ARTICLE EIGHT
CORPORATE GOVERNANCE
The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation and for the further
definition of the powers of the Corporation and its directors and stockholders:
1. The Board of Directors shall have the power to adopt, amend or
repeal the by-laws of the Corporation.
2. The stockholders may adopt, amend, alter, repeal or rescind
the by-laws of the Corporation only with, in addition to any other
vote required by law, the affirmative vote of the holders of not less
than 66 2/3% of the total voting power of all outstanding securities
of the Corporation then entitled to vote generally in the election of
directors, voting together as a single class.
3. Elections of directors need not be by written ballot unless
the by-laws of the Corporation so provide.
6
<PAGE> 7
4. Any action required or permitted to be taken at any annual or
special meeting of stockholders may be taken only upon the vote of
stockholders at an annual or special meeting duly noticed and called
in accordance with the General Corporation Law, and may not be taken
by written consent of stockholders without a meeting.
5. Special meetings of stockholders may be called by the Board of
Directors, the Chairman of the Board of Directors or the President of
the Corporation and may not be called by any other person.
Notwithstanding the foregoing, whenever holders of one or more series
of Preferred Stock shall have the right, voting separately as a
series, to elect directors, such holders may call special meetings of
such holders pursuant to the certificate of designation for such
series.
ARTICLE NINE
STOCKHOLDER LOCK-UP
Until the date that is 180 days after the date of the final prospectus
relating to the Corporation's initial public offering of equity securities (the
"Initial Public Offering"), each holder of shares of Common Stock, other than
shares of Common Stock acquired in such Initial Public Offering, hereby:
(a) agrees not to (x) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (including, without limitation, shares
of Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock which may be deemed to be beneficially
owned by such holder in accordance with the rules and regulations of
the Securities and Exchange Commission) or (y) enter into any swap or
other arrangement that transfers all or a portion of the economic
consequences associated with the ownership of Common Stock (regardless
of whether any of the transactions described in clause (x) or (y) is
to be settled by the delivery of Common Stock, or such other
securities, in cash or otherwise), without the prior written consent
of the lead managing underwriter of such Initial Public Offering;
(b) agrees not to make any demand for, or exercise any right with
respect to, the registration of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common
Stock, without the prior written consent of the lead managing
underwriter of such Initial Public Offering; and
(c) authorizes the Corporation to cause the transfer agent to
decline to transfer and/or to note stop transfer restrictions on the
transfer books and records of the Corporation with respect to any
shares of Common Stock and any securities convertible into or
exercisable or exchangeable for Common Stock for which the holder is
the record holder and, in the case of any shares or securities for
which the holder if the beneficial but not the record holder, agrees
to cause the transfer agent to decline to transfer and/or to note stop
transfer restrictions on such books and records with respect to such
shares or securities.
Notwithstanding the foregoing, the restrictions set forth in clauses (a), (b),
and (c) above shall not apply to any Assignment to a Controlled Affiliate or any
Qualified Transfer; provided that in connection with any such transfer the
transferee agrees to be bound by the terms of the lock-up restrictions set forth
in clauses (a), (b) and (c) above for the remainder of the 180 day period
described above.
7
<PAGE> 8
ARTICLE TEN
AMENDMENT
The Corporation reserves the right at any time, and from time to time,
to amend, alter, change or repeal any provision contained in this Amended and
Restated Certificate of Incorporation, and other provisions authorized by the
laws of the State of Delaware at the time in force may be added or inserted, in
the manner now or hereafter prescribed by law; and all rights, preferences and
privileges of whatsoever nature conferred upon stockholders, directors or any
other persons whomsoever by and pursuant to this Amended and Restated
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the rights reserved in this ARTICLE TEN."
8
<PAGE> 9
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation, which restates and amends the provisions of the Certificate of
Incorporation of the Corporation, and which has been duly adopted in accordance
with Sections 241 and 245 of the General Corporation Law, has been executed by
its duly authorized officer this __ day of ________ , 1998.
NEXTERA ENTERPRISES, INC.
By:_________________________________
Name:____________________________
Title:___________________________
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
NEXTERA ENTERPRISES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I OFFICES................................................................................................1
Section 1. REGISTERED OFFICES................................................................................1
Section 2. OTHER OFFICES.....................................................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS..............................................................................1
Section 1. PLACE OF MEETINGS.................................................................................1
Section 2. ANNUAL MEETING OF STOCKHOLDERS....................................................................1
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF.....................................................1
Section 4. VOTING............................................................................................2
Section 5. PROXIES...........................................................................................2
Section 6. SPECIAL MEETINGS..................................................................................2
Section 7. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS....................................................3
Section 8. MAINTENANCE AND INSPECTION OF STOCKHOLDER LIST....................................................4
ARTICLE III DIRECTORS............................................................................................5
Section 1. THE NUMBER OF DIRECTORS...........................................................................5
Section 2. VACANCIES.........................................................................................5
Section 3. REMOVAL...........................................................................................5
Section 4. POWERS............................................................................................6
Section 5. PLACE OF DIRECTORS' MEETINGS......................................................................6
Section 6. REGULAR MEETINGS..................................................................................6
Section 7. SPECIAL MEETINGS..................................................................................6
Section 8. QUORUM............................................................................................6
Section 9. ACTION WITHOUT MEETING............................................................................6
Section 10. TELEPHONIC MEETINGS..............................................................................7
Section 11. COMMITTEES OF DIRECTORS..........................................................................7
Section 12. MINUTES OF COMMITTEE MEETINGS....................................................................8
Section 13. COMPENSATION OF DIRECTORS........................................................................8
ARTICLE IV OFFICERS..............................................................................................8
Section 1. OFFICERS..........................................................................................8
Section 2. ELECTION OF OFFICERS..............................................................................9
Section 3. SUBORDINATE OFFICERS..............................................................................9
Section 4. COMPENSATION OF OFFICERS..........................................................................9
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES.............................................................9
Section 6. CHAIRMAN OF THE BOARD.............................................................................9
Section 7. PRESIDENT.........................................................................................9
Section 8. VICE PRESIDENTS..................................................................................10
Section 9. SECRETARY........................................................................................10
Section 10. ASSISTANT SECRETARY.............................................................................10
Section 11. CHIEF FINANCIAL OFFICER OR TREASURER............................................................10
Section 12. ASSISTANT CHIEF FINANCIAL OFFICER OR TREASURER..................................................11
ARTICLE V INDEMNIFICATION OF DIRECTORS AND OFFICERS.............................................................11
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI INDEMNIFICATION OF EMPLOYEES AND AGENTS..............................................................15
ARTICLE VII CERTIFICATES OF STOCK...............................................................................15
Section 1. CERTIFICATES.....................................................................................15
Section 2. SIGNATURES ON CERTIFICATES.......................................................................15
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES, PRIVILEGES...............................................16
Section 4. LOST CERTIFICATES................................................................................16
Section 5. TRANSFERS OF STOCK...............................................................................16
Section 6. FIXED RECORD DATE................................................................................17
Section 7. REGISTERED STOCKHOLDERS..........................................................................17
ARTICLE VIII GENERAL PROVISIONS.................................................................................17
Section 1. DIVIDENDS........................................................................................17
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES..........................................................17
Section 3. CHECKS...........................................................................................18
Section 4. FISCAL YEAR......................................................................................18
Section 5. CORPORATE SEAL...................................................................................18
Section 6. MANNER OF GIVING NOTICE..........................................................................18
Section 7. WAIVER OF NOTICE.................................................................................18
ARTICLE IX AMENDMENTS...........................................................................................19
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS...........................................................19
</TABLE>
ii
<PAGE> 4
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICES. The registered office of the
corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. OTHER OFFICES. The corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of stockholders shall
be held at any place within or outside the State of Delaware designated by the
Board of Directors. In the absence of any such designation, stockholders'
meetings shall be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING OF STOCKHOLDERS. The annual meeting
of stockholders shall be held each year on a date and a time designated by the
Board of Directors.
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF. A
majority of the voting power of the shares of capital stock of the corporation
issued and outstanding and entitled to vote at any meeting of stockholders, the
holders of which are present in person or represented by proxy, shall constitute
a quorum for the transaction of business except as otherwise provided by law, by
the Amended and Restated Certificate of Incorporation, or by these Bylaws. A
quorum, once established, shall not be broken by the withdrawal of enough votes
to leave less than a quorum and the votes present may continue to transact
business until adjournment. If, however, such quorum shall not be present or
1
<PAGE> 5
represented at any meeting of the stockholders, a majority of the voting power
of the shares of capital stock represented in person or by proxy at such meeting
may adjourn the meeting from time to time, without notice other than
announcement at the meeting of the time and place of the adjourned meeting,
until a quorum shall be present or represented. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote thereat.
Section 4. VOTING. When a quorum is present at any meeting, in
all matters other than the election of directors, the vote of the holders of
stock representing a majority of the voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the Amended and
Restated Certificate of Incorporation, or these Bylaws, or any rule, regulation
or statutory provision applicable to the corporation, a different vote is
required in which case such express provision shall govern and control the
decision of such question. Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors.
Section 5. PROXIES. At each meeting of the stockholders, each
stockholder having the right to vote may vote in person or may authorize another
person or persons to act for him/her by proxy appointed by an instrument in
writing subscribed by such stockholder and bearing a date not more than three
years prior to said meeting, unless said instrument provides for a longer
period. All proxies must be filed with the Secretary of the corporation at the
beginning of each meeting in order to be counted in any vote at the meeting.
Section 6. SPECIAL MEETINGS. Special meetings of the
stockholders, for any purpose, or purposes, unless otherwise prescribed by
statute or by the Amended and Restated Certificate of Incorporation, may be
called by the Chairman of the Board or the President and shall be called by the
President or the Secretary at the request in writing of the Board of Directors.
Business transacted at any special meeting of stockholders shall be limited to
the purposes stated in the notice.
2
<PAGE> 6
Section 7. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(1) Nominations of persons for election to the Board of
Directors of the corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders (a) pursuant
to the corporation's notice of meeting, (b) by or at the direction of the Board
of Directors or (c) by any stockholder of the corporation who was a stockholder
of record at the time of giving of notice provided for in this By-Law, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this By-Law.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(1) of this By-Law, the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the corporation not later than the close of business on the
60th day nor earlier than the close of business on the 90th day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is not within 30 days
before or after such anniversary date, notice by the stockholder to be timely
must be so delivered not earlier than the close of business on the 90th day
prior to such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the 10th day following the
earlier of (i) the day on which notice of the meeting was mailed or (ii) the
date public announcement of the date of such meeting is first made by the
corporation. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or
re-election as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors
in an election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities
3
<PAGE> 7
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14A-11
thereunder (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (b) as to any
other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the nomination or proposal is made; and (c) as to the stockholder giving
the notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such stockholder and of such
beneficial owner, as they appear on the corporation's books, and (ii) the class
and number of shares of the corporation which are owned beneficially and of
record by such stockholder and such beneficial owner.
Section 8. MAINTENANCE AND INSPECTION OF STOCKHOLDER LIST. The
officer who has charge of the stock ledger of the corporation shall prepare and
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
4
<PAGE> 8
ARTICLE III
DIRECTORS
Section 1. THE NUMBER OF DIRECTORS.
The number of directors (other than directors elected by one
or more series of Preferred Stock) which shall constitute the entire Board shall
be not less than seven nor more than thirteen directors, the exact number of
directors to be determined from time to time solely by resolution adopted by the
affirmative vote of a majority of the directors. The directors need not be
stockholders. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his/her successor is duly elected and qualified.
Section 2. VACANCIES. Vacancies on the Board of Directors by
reason of death, resignation, removal, or otherwise, and newly created
directorships resulting from any increase in the number of directors may be
filled (other than directors elected by one or more series of Preferred Stock)
solely by a majority of the directors then in office (although less than a
quorum) or by a sole remaining director. Each director so chosen shall hold
office until such director's successor shall have been duly elected and
qualified or until such director's earlier death, resignation, disqualification
or removal. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the entire Board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office.
Section 3. REMOVAL. No director may be removed from office by
the stockholders except for cause with the affirmative vote of the holders of
two-thirds (66 2/3%) of all outstanding securities of the corporation then
entitled to vote generally in the election of directors, voting together as a
single class.
5
<PAGE> 9
Section 4. POWERS. The property and business of the
corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these Bylaws expressly
conferred upon them, the Board may exercise all such powers of the corporation
and do all such lawful acts and things as are not directed or required by
statute, by the Amended and Restated Certificate of Incorporation or by these
Bylaws to be exercised or done by the stockholders.
Section 5. PLACE OF DIRECTORS' MEETINGS. The directors may
hold their meetings and have one or more offices, and keep the books of the
corporation outside of the State of Delaware.
Section 6. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board of Directors.
Section 7. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the President on
forty-eight hours' notice to each director, either personally or by mail,
telecopier, or other means of electronic transmission at the address of such
director on the books and records of the corporation; special meetings shall be
called by the President or the Secretary in like manner and on like notice on
the written request of two directors.
Section 8. QUORUM. At all meetings of the Board of Directors a
majority of the then authorized number of directors shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the vote
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, by the Amended and Restated Certificate of
Incorporation or by these Bylaws. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. ACTION WITHOUT MEETING. Unless otherwise restricted
by the Amended and Restated Certificate of Incorporation or these Bylaws, any
action required or permitted to be taken at
6
<PAGE> 10
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board of Directors or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee.
Section 10. TELEPHONIC MEETINGS. Unless otherwise restricted
by the Amended and Restated Certificate of Incorporation or these Bylaws,
members of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors, or any
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at such
meeting.
Section 11. COMMITTEES OF DIRECTORS. The Board of Directors
may, by resolution passed by a majority of the entire Board of Directors,
designate one or more committees, each such committee to consist of one or more
of the directors of the corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he/she
or they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Amended and Restated Certificate
of Incorporation, adopting an agreement of merger or consolidation, recommending
to the stockholders the sale, lease or exchange of all or substantially all of
the corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
Bylaws of the corporation; and, unless the resolution or the Amended and
Restated
7
<PAGE> 11
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
Section 12. MINUTES OF COMMITTEE MEETINGS. Each committee
shall keep regular minutes of its meetings and report the same to the Board of
Directors when required.
Section 13. COMPENSATION OF DIRECTORS. Unless otherwise
restricted by the Amended and Restated Certificate of Incorporation or these
Bylaws, the Board of Directors shall have the authority to fix the compensation
of directors. The directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
OFFICERS
Section 1. OFFICERS. The officers of this corporation shall be
chosen by the Board of Directors and shall include a Chairman of the Board of
Directors or a President, or both, and a Secretary. The corporation may also
have at the discretion of the Board of Directors such other officers as are
desired, including a Vice-Chairman of the Board of Directors, a Chief Executive
Officer, a Chief Financial Officer or Treasurer, one or more Vice Presidents,
one or more Assistant Secretaries and Assistant Chief Financial Officers or
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 3 hereof. In the event there are two or more Vice
Presidents, then one or more may be designated as an Executive Vice President,
Senior Vice President or other similar or dissimilar title. At the time of the
election of officers, the directors may by resolution determine the order of
their rank. Any number of offices may be held by the same person, unless the
Amended and Restated Certificate of Incorporation or these Bylaws otherwise
provide.
8
<PAGE> 12
Section 2. ELECTION OF OFFICERS. The Board of Directors, at
its first meeting after each annual meeting of stockholders, shall choose the
officers of the corporation.
Section 3. SUBORDINATE OFFICERS. The Board of Directors may
appoint such other officers and agents as it shall deem necessary who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board.
Section 4. COMPENSATION OF OFFICERS. The salaries of all
officers and agents of the corporation shall be fixed by the Board of Directors.
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES. The officers
of the corporation shall hold office until their successors are chosen and
qualify in their stead. Any officer elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the members of the Board of Directors. If the office of any officer or officers
becomes vacant for any reason, the vacancy shall be filled by the Board of
Directors.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board,
if such an officer be elected, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
be from time to time assigned to him/her by the Board of Directors or prescribed
by these Bylaws. If there is no President, the Chairman of the Board shall in
addition be the Chief Executive Officer of the corporation and shall have the
powers and duties prescribed in Section 7 of this Article IV.
Section 7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the Board of Directors to the Chairman of the Board, if
there be such an officer, the President shall be the Chief Executive Officer of
the corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and officers of
the corporation. He/she shall preside at all meetings of the stockholders and,
in the absence of the Chairman of the Board, or if there be none, at all
meetings of the Board of Directors. He/she shall be an ex-officio member of all
committees and shall have the general powers and duties of management usually
vested in the office of President and Chief
9
<PAGE> 13
Executive Officer of corporations, and shall have such other powers and duties
as may be prescribed by the Board of Directors or these Bylaws.
Section 8. VICE PRESIDENTS. In the absence or disability of
the President, the Vice Presidents in order of their rank as fixed by the Board
of Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall have such other duties as from time to time
may be prescribed for them, respectively, by the Board of Directors.
Section 9. SECRETARY. The Secretary shall attend all sessions
of the Board of Directors and all meetings of the stockholders 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 by the
Board of Directors. He/she shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or these
Bylaws. He/she shall keep in safe custody the seal of the corporation, and when
authorized by the Board, affix the same to any instrument requiring it, and when
so affixed it shall be attested by his/her signature or by the signature of an
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
his/her signature.
Section 10. ASSISTANT SECRETARY. The Assistant Secretary, or
if there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors, or if there be no such determination, the Assistant
Secretary designated by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 11. CHIEF FINANCIAL OFFICER OR TREASURER. The Chief
Financial Officer or Treasurer shall have the custody of the corporate funds and
securities and shall keep full and
10
<PAGE> 14
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 of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his/her
transactions as Chief Financial Officer or Treasurer and of the financial
condition of the corporation. If required by the Board of Directors, he/she
shall give the corporation a bond, in such sum and with such surety or sureties
as shall be satisfactory to the Board of Directors, for the faithful performance
of the duties of his/her office and for the restoration to the corporation, in
case of his/her death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his/her
possession or under his/her control belonging to the corporation.
Section 12. ASSISTANT CHIEF FINANCIAL OFFICER OR TREASURER.
The Assistant Chief Financial Officer or Treasurer, or if there shall be more
than one, the Assistant Chief Financial Officers or Treasurers in the order
determined by the Board of Directors, or if there be no such determination, the
Assistant Chief Financial Officer or Treasurer designated by the Board of
Directors, shall, in the absence or disability of the Chief Financial Officer or
Treasurer, perform the duties and exercise the powers of the Chief Financial
Officer or Treasurer and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he/she is or was a director, officer, employee or agent
of the corporation, or is or was serving at
11
<PAGE> 15
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him/her in connection with
such action or suit or proceeding if he/she acted in good faith and in a manner
he/she reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his/her conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he/she reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his/her conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he/she 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, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him/her
in connection with the defense or settlement of such action or suit if he/she
acted in good faith and in a manner he/she reasonably believed in or not opposed
to the best interests of the corporation except that no such indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such Court of Chancery or such other court shall deem proper.
12
<PAGE> 16
(c) To the extent that a director, officer, employee or agent
of the corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in paragraphs (a) and (b), or in
defense of any claim, issue or matter therein, he/she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him/her in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless
ordered by a court) shall made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he/she has met
the applicable standard of conduct set forth in paragraphs (a) and (b). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending
any civil or criminal, administrative or investigative action, suit or
proceeding shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he/she is not entitled to be indemnified by the corporation
as authorized in this Article V. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Article V shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
his/her official capacity and as to action in another capacity while holding
such office.
13
<PAGE> 17
(g) The Board of Directors may authorize, by a vote of a
majority of a quorum of the Board of Directors, the corporation to purchase and
maintain insurance on behalf of any person who 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,
partnership, joint venture, trust or other enterprise against any liability
asserted against him/her and incurred by him/her in any such capacity, or
arising out of his/her status as such, whether or not the corporation would have
the power to indemnify him/her against such liability under the provisions of
this Article V.
(h) For the purposes of this Article V, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued would
have had power and authority to indemnify its directors, officers and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article V with
respect to the resulting or surviving corporation as he/she would have with
respect to such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; references to serving at the request of the "corporation" shall
include service as a director, officer, employee or agent of the corporation
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he/she
reasonably believed to be in the best interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner not opposed to the best interests of the "corporation" as referred to in
this section.
14
<PAGE> 18
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article V shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE VI
INDEMNIFICATION OF EMPLOYEES AND AGENTS
The corporation may, at its option, indemnify every person who
was or is a party or is or was threatened to be made a party to any action,
suit, or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he/she is or was an employee or agent of the
corporation or, while an employee or agent of the corporation, is or was serving
at the request of the corporation as an employee or agent or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him/her in
connection with such action, suit or proceeding, to the extent permitted by
applicable law.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. CERTIFICATES. Every holder of stock of the
corporation shall be entitled to have a certificate signed by, or in the name of
the corporation by, the Chairman or Vice Chairman of the Board of Directors, or
the President or a Vice President, and by the Secretary or an Assistant
Secretary, or the Chief Financial Officer or Treasurer or an Assistant Chief
Financial Officer or Treasurer of the corporation, certifying the number of
shares represented by the certificate owned by such stockholder in the
corporation.
Section 2. SIGNATURES ON CERTIFICATES. Any or all of the
signatures on the certificate may be a facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent,
15
<PAGE> 19
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he/she were such officer, transfer agent,
or registrar at the date of issue.
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES, PRIVILEGES.
If the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock; provided that, except as otherwise provided in section
202 of the General Corporation Law of the State of Delaware, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or series
of stock, a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 4. LOST CERTIFICATES. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his/her legal representative, to advertise the
same in such manner as it shall require and/or to give the corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 5. TRANSFERS OF STOCK. 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
16
<PAGE> 20
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 6. FIXED RECORD DATE. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of the stockholders, or any adjournment thereof, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than 60 nor less than ten days before the
date of such meeting, nor more than 60 days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 7. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, save as
expressly provided by the laws of the State of Delaware.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the Amended and Restated Certificate
of Incorporation, if any, may be declared by the Board of Directors at any
regular or special meeting, pursuant to law. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Amended and Restated Certificate of Incorporation.
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES. Before
payment of any dividend there may be set aside out of any funds of the
corporation available for dividends such sum or
17
<PAGE> 21
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.
Section 3. CHECKS. 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.
Section 4. FISCAL YEAR. The fiscal year of the corporation
shall be fixed by resolution of the Board of Directors.
Section 5. CORPORATE SEAL. The corporate seal shall have
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 6. MANNER OF GIVING NOTICE. Whenever, under the
provisions of the Amended and Restated Certificate of Incorporation, or of these
Bylaws, or any rule, regulation or statutory provision applicable to the
corporation, notice is required to be given to any director or stockholder, it
shall not be construed to mean personal notice, but such notice may be given
(unless otherwise provided) in writing, by mail, addressed to such director or
stockholder, at his/her address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by mail, telecopier, or other means of electronic
transmission at the address of such director on the books and records of the
corporation.
Section 7. WAIVER OF NOTICE. Whenever any notice is required
to be given under the provisions of the Amended and Restated Certificate of
Incorporation or of these Bylaws, or any rule, regulation or statutory provision
applicable to the corporation, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
18
<PAGE> 22
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS. These
Bylaws may be altered, amended or repealed or new Bylaws may be adopted by the
Board of Directors, when such power is conferred upon the Board of Directors by
the Amended and Restated Certificate of Incorporation, or by the affirmative
vote of not less than 66 2/3% of the total voting power of all outstanding
securities of the corporation then entitled to vote generally in the election of
directors, voting together as a single class, at any regular meeting of the
Board of Directors or of the stockholders or at any special meeting of the Board
of Directors or of the stockholders if notice of such alteration, amendment,
repeal or adoption of new Bylaws be contained in the notice of such special
meeting.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE> 23
CERTIFICATE OF SECRETARY
I, _______________, do hereby certify:
(1) That I am the duly elected and acting Secretary of Nextera
Enterprises, Inc., a Delaware corporation (the "Corporation"); and
(2) That the foregoing Amended and Restated Bylaws constitute
the bylaws of the Corporation as duly adopted by the unanimous written consent
of the Board of Directors of the Corporation as of _____________ ___, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name this
_____ day of _____________ 1998.
____________________________________
____________________________
Secretary
20
<PAGE> 1
EXHIBIT NO. 4.3
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (the "Agreement"), dated as of August 31,
1998, is entered into by and among NEXTERA ENTERPRISES, L.L.C., a Delaware
limited liability company ("Nextera"), NEXTERA ENTERPRISES, INC., a Delaware
corporation (the "Company"), and the individuals and other parties listed on the
Table of Stockholders attached hereto as Schedule A and their permitted
successors and assigns (each a "Stockholder" and collectively, the
"Stockholders").
WHEREAS, from its inception in February 1997 through the date hereof,
Nextera has operated as a Delaware limited liability company;
WHEREAS, pursuant to a Share Exchange Agreement (the "Exchange
Agreement") dated as of the date hereof, by and among Nextera, and other parties
named therein, Nextera and Knowledge Enterprises, Inc., ("KE"), Nextera's
controlling member, have agreed to cause the business of Nextera to be
incorporated;
WHEREAS, pursuant to the Exchange Agreement and the Second Amended and
Restated Limited Liability Company Agreement of Nextera, as amended through the
date hereof (the "Nextera Operating Agreement") the incorporation of the Nextera
business into the Company, shall be accomplished as follows (the "Incorporation
Transaction"): (i) all of the Members of Nextera other than the transferees of
Sibson & Company, L.P. (which will be Sibson & Company, Inc. and SC2, Inc.)
shall contribute and assign their Class A and Class B Common Units of Nextera to
the Company in exchange for stock of the Company and (ii) the shareholders of
Sibson & Company, Inc. and SC2, Inc. shall contribute and assign the stock of
Sibson & Company, Inc. and SC2, Inc. to the Company in exchange for stock of the
Company;
WHEREAS, as a result of the Incorporation Transaction, each
Stockholder will own the number of shares of Class A Common stock of the Company
(the "Class A Common Stock") and Class B Common Stock of the Company (the "Class
B Common Stock," and together with the Class A Common Stock, the "Common Stock")
set forth opposite his or its name on Schedule A attached hereto which will be
completed and updated prior to completion of the Incorporation Transaction as
provided herein (such shares of Common Stock, together with any other shares of
capital stock of the Company acquired by such Stockholder after the date hereof
and during the term of this Agreement (including through the exercise of any
stock options, warrants or similar instruments), being collectively referred to
herein as the "Subject Shares");
WHEREAS, the Nextera Operating Agreement contains various provisions
which are to be included in a stockholders agreement at the time that the
Nextera business is incorporated; and
WHEREAS, Nextera, the Company and the Stockholders desire to enter
into this Agreement to set forth these agreements among the Stockholders and the
Company which shall become effective upon completion of the Incorporation
Transaction (the "Incorporation Date");
<PAGE> 2
NOW, THEREFORE, to induce each other to proceed with, and in
consideration of their consummation of, the Incorporation Transaction, and in
consideration of the promises and the representations, warranties and agreements
contained herein, the parties agree as follows:
1. Definitions.
1.1 "Affiliate" means, with respect to any Person, (a) any Person
ten percent (10%) or more of whose outstanding voting securities are directly or
indirectly owned, controlled, or held with power to vote, by such Person; or (b)
any Person directly or indirectly controlling, controlled by, or under common
control with such Person.
1.2 "Family" means a person's spouse, lineal descendants,
parents, siblings, and lineal descendants of siblings. Any such relationship by
legal adoption shall be included.
1.3 "Founders' Interests" means any equity interests in the
Company or a successor entity which were received by Stockholders in respect of
membership interests in Nextera which membership interests were received by
Stockholders other than KE's assignors upon the liquidation and dissolution of
Nextera Enterprises Holdings, L.L.C., a Delaware limited liability company, and
in the case of Gresham T. Brebach, Jr., Ronald Bohlin, Michael Muldowney, Debra
Bergevine, David Fritts, and Belden Menkus includes the Class A and Class B
Common Units purchased pursuant to Section 9 of the First Amendment to the
Nextera Operating Agreement". Founders' Interests do not include any equity
interests owned by Sibson Persons (as defined in Section 6.2 below).
1.4 "Person" means any natural person, partnership, corporation,
limited liability company, trust, association, or other legal entity.
1.5 "Qualified Initial Public Offering" means the Company's (or a
successor's to the Company's business) first underwritten initial public
offering of common equity interests under the Securities Act of 1933, as amended
(the "Securities Act") after the date hereof, that results in such common equity
interests being listed for trading on a national securities exchange or being
authorized for trading on the Nasdaq National Market System at such time.
1.6 "Qualified Transfer" means (i) any transfer of shares of
Common Stock by will or pursuant to the laws of descent and distribution to any
member or members of a Stockholder's Family, (ii) any transfer of shares of
Common Stock by a Stockholder to a domestic trust created for the sole benefit
of one or more of the Stockholder or any member or members of the Stockholder's
Family, (iii) any transfer of shares of Common Stock from a trust described in
clause (ii) above to the Stockholder (or former Stockholder) who transferred
shares of Common Stock to such trust, and (iv) any transfer to a domestic
limited partnership or a domestic limited liability company if there are no
partners or members of such limited partnership or limited liability company
other than the Stockholder and members of the Stockholder's Family; (v) any
transfer of Common Stock from a limited partnership or limited liability company
described in clause (iv) above to the Stockholder (or former Stockholder) who
transferred Common Stock to such limited partnership or limited liability
company; and (vii) any transfer of
2
<PAGE> 3
shares of Common Stock from one Stockholder to another Stockholder; provided
that none of the above transfers shall constitute a "Qualified Transfer" unless
(a) the transferee agrees in writing to be bound by the terms and provisions of
this Agreement as a Stockholder, and specifically, without limiting the
generality of the foregoing, agrees that (i) the repurchase option provision of
Section 4.4 hereof (and if and to the extent such provision is modified by an
employment agreement, then as so modified) shall continue to apply to such
Common Stock as if they had not been transferred, (ii) to the extent the Common
Stock was Founders' Interests in the hands of the transferor, the restrictions
contained in Section 4.5 hereof shall continue to apply to such as Common Stock
as if they had not been transferred, (iii) to the extent that such Common Stock
was received by the transferor pursuant to the Company's 1998 Equity
Participation Plan, all provisions of the Company's 1998 Equity Participation
Plan, the Equity Participation Agreement by which such Common Stock was awarded,
the transferor's employment agreement with the Company or a subsidiary, if any,
and all relevant provisions of this Agreement shall continue to apply to such
shares of Common Stock as if they had not been transferred, and (iv) to the
extent the ownership of any shares of Common Stock which are held in an escrow
are so transferred, such shares of Common Stock shall remain subject to the
provisions of such escrow agreement as if they had not been transferred, and (b)
the Company receives an opinion of counsel reasonably acceptable to the Company
that such transfer does not violate federal or state securities laws (if the
Stockholder represents to the Company in writing that the transfer was made as a
bona fide gift without payment of consideration, no securities law opinion is
required), and further provided that if the transfer is to a limited
partnership, limited liability company, or trust of which the Stockholder (or
former Stockholder) is not the trustee, then such transfer will not constitute a
"Qualified Transfer" unless the limited partnership, limited liability company,
or trustee, as the case may be, gives a proxy to vote such shares of Common
Stock to a person acceptable to the Company. Any Stockholder or any person or
entity designated as a "Shareholder Representative" pursuant to the Exchange
Agreement or an escrow agreement to which the Company or Nextera is a party
shall be deemed acceptable to the Company. Any such proxy shall be deemed to be
terminated upon a Qualified Initial Public Offering. Qualified Transfer shall
also mean (i) any transfer or sale of shares of Common Stock between a
Stockholder and the Company or Nextera to satisfy an indemnification claim and
(ii) any pledge of shares of Common Stock pursuant to an escrow agreement to
which the Company or Nextera is a party.
2. Representations and Warranties of each Stockholder. Each
Stockholder hereby, severally and not jointly, represents and warrants to
Nextera as of the date hereof in respect of himself or itself that such
Stockholder has all requisite power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly authorized, executed and delivered by the Stockholder and constitutes a
valid and binding obligation of the Stockholder enforceable against the
Stockholder in accordance with its terms (assuming the due authorization,
execution and delivery by the other parties hereto), subject to the effect of
any applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject to the effect of general
principles of equity, including, without limitation, the possible unavailability
of specific performance or injunctive relief, regardless of whether considered
in a proceeding in equity or at law.
3
<PAGE> 4
3. Representations and Warranties of Nextera and the Company. Nextera
hereby represents and warrants to each Stockholder that Nextera has all
requisite limited liability company power and authority, and that the Company
hereby represents and warrants that it has all requisite corporate power and
authority, to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by Nextera and the Company, and constitutes a valid and binding
obligation of Nextera and the Company, enforceable against Nextera and the
Company in accordance with its terms (assuming the due authorization, execution
and delivery by the other parties hereto), subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject to the effect of general
principles of equity, including, without limitation, the possible unavailability
of specific performance or injunctive relief, regardless of whether considered
in a proceeding in equity or at law.
4. Transfers of Interests.
4.1 General. Except as otherwise provided in Sections 4.2 and
4.4, a Stockholder may not sell, assign, pledge, hypothecate, transfer, exchange
or otherwise dispose of (collectively "Assign") or offer to Assign, in whole or
in part, his or its Common Stock unless Stockholders holding a majority of the
Common Stock subject to the Agreement approve of such Assignment; provided,
however, that, Sections 4.1, 4.2, 4.3 and 4.4 hereof shall no longer apply if a
Stockholder desires to Assign his or its Common Stock following a Qualified
Initial Public Offering.
4.2 Qualified Transfer. A Stockholder may, without consent,
transfer some or all of his or its shares of Common Stock pursuant to a
Qualified Transfer.
4.3 Transferee Not A Stockholder. If a Stockholder attempts to
Assign, in whole or in part, his or its Common Stock in violation of Section
4.1, such assignment shall be void ab initio and of no effect and the purported
transferee shall not be recognized as a Stockholder and shall have no right to
participate in the business and affairs of the Company.
4.4 Repurchase Option. Prior to a Qualified Initial Public
Offering, the Company shall have the right, but not an obligation, to repurchase
the shares of Common Stock of any Stockholder who is employed by or similarly
associated with the Company or any other entity controlled by or affiliated with
the Company at such time as such Stockholder is no longer employed by or so
associated with the Company or such other entity for any reason. For a six month
period (the "Repurchase Option Period") following such termination, the Company
shall have an option (the "Repurchase Option") to repurchase all or any portion
of the shares of Common Stock held by such Stockholder. If the Company so elects
to exercise the Repurchase Option in whole or in part, it shall give written
notice of such (the "Repurchase Notice") to such Stockholder (or his estate or
legal representative, as the case may be) during the Repurchase Option Period.
The fair market value of such Stockholder's shares of Common Stock being
repurchased shall be determined by the Board of Directors of the Company (the
"Board") and the Board shall give notice (the "Valuation Notice") of such
determination to such Stockholder (or his estate or legal representative, as the
case may be) within thirty (30) days of the Repurchase
4
<PAGE> 5
Notice. If such Stockholder (or his estate or legal representative, as the case
may be) does not dispute the fair market value of the shares of Common Stock
being repurchased within the time period specified below for giving the
Appraisal Notice, then the Company shall pay to such Stockholder (or his estate
or legal representative, as the case may be), in cash and within thirty days of
the date of the Valuation Notice, the fair market value of the shares of Common
Stock being repurchased. If such Stockholder (or his estate or legal
representative, as the case may be) disputes the fair market value of the shares
of Common Stock being repurchased as set forth in the Valuation Notice, then
such Stockholder (or his estate or legal representative, as the case may be)
shall so notify the Board in writing (the "Appraisal Notice") within five (5)
business days of receipt of the Valuation Notice. Within fifteen (15) business
days of the receipt of the Appraisal Notice, the Board and such Stockholder (or
his estate or legal representative, as the case may be) shall each appoint a
professional appraiser to determine the fair market value of the shares of
Common Stock being repurchased. Each appraiser shall have at least five (5)
years experience in appraising companies similar to the Company. The two
appraisers shall within the succeeding twenty (20) day period after their
selection, attempt to reach agreement on the fair market value. If the
appraisers reach such agreement, their agreement shall be final and binding on
the Company and such Stockholder (or his estate or legal representative, as the
case may be). If the appraisers fail to agree, they shall within ten (10) days
thereafter select a third appraiser with the same qualification requirements,
and the three (3) appraisers shall establish the fair market value by majority
vote within the succeeding twenty (20) day period and such determination of the
fair market value shall be final and binding on the Company and such Stockholder
(or his estate or legal representative, as the case may be). In all events, the
appraisers selected shall be unaffiliated with and otherwise independent of the
Company, the Board, such Stockholder and their affiliates. If the fair market
value of the shares of Common Stock being repurchased, as determined by the
appraisers, is less than or no more than five percent (5%) greater than the
value as determined by the Board, then such Stockholder (or his estate or legal
representative, as the case may be) shall pay all costs associated with the
appraisers, and such costs shall be deducted from the amount owed by the
Company. If the fair market value as determined by the appraisers is more than
five percent (5%) greater than the value as determined by the Board, then the
Company shall pay for all costs associated with the appraisers. Notwithstanding
the provisions of this Section 4.4, if such a Stockholder has an employment
contract with the Company or an entity controlled by or affiliated with the
Company and such employment contract provides for the repurchase of shares of
Common Stock being repurchased upon such Stockholder's termination of
employment, then to the extent there is any conflict between the terms of this
Section 4.4 and the terms of the employment contract, the terms of the
employment contract shall govern.
4.5 Restrictions on Sale or Transfer After a Qualified Initial
Public Offering. If there is a Qualified Initial Public Offering of the Company
or a successor to the Company's business, then, subject to all applicable market
and legal restrictions, each Stockholder that holds Founders' Interests hereby
agrees and covenants that such Stockholder will not Assign any of such
Stockholder's Founders' Interests for a six month period following the Qualified
Initial Public Offering, and that subsequent to such six month period, such
Stockholder: (A) will not Assign more than one-third of such Founders' Interests
in the twelve calendar month period following such six month period; and (B)
will not Assign more than a total of two-thirds of such Founders' Interests in
the twenty-four calendar month period following such six month period.
5
<PAGE> 6
4.6 Compliance with Securities Laws. Each Stockholder agrees and
covenants that such Stockholder will not Assign any of his or its Common Stock
except in compliance with all applicable securities laws.
5. Registration Rights. The Stockholders shall have registration
rights as specified in this Section 5.
5.1 Piggyback Registration Rights.
5.1.1 Right to Piggyback. Whenever the Company proposes to
register any Common Stock (or securities convertible into or
exchangeable for, or options to purchase, Common Stock) with the
Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act") and the
registration form to be used may be used for the registration of the
"Registrable Securities," as defined in Section 5.9 hereof (a
"Piggyback Registration"), the Company (i) will give written notice to
all Stockholders who hold Registrable Securities (collectively,
"Holders") and each holder of an option to purchase Registrable
Securities, no later than the later of (a) 45 days prior to the
anticipated filing date or (b) promptly following its decision to
file, of its intention to effect such a registration, which notice
will specify the proposed offering price (or reasonable range
thereof), the kind and number of securities proposed to be registered,
the distribution arrangements and such other information that at the
time would be appropriate to include in such notice, and (ii) will,
subject to Section 5.1.2 below, include in such Piggyback Registration
all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 20 days after
the date of the Company's notice. Notwithstanding the foregoing, the
rights provided in this Section 5.1 shall not apply to the Qualified
Initial Public Offering as long as no Stockholder is allowed to sell
any Common Stock in such Qualified Initial Public Offering. The
Company shall reasonably cooperate with the holders of options to
purchase Registrable Securities in connection with such holders'
desire, if any, to exercise such options contemporaneously with the
sale of the underlying Registrable Securities.
5.1.2 Priority on Piggyback Registrations. If the managing
underwriter or underwriters, if any, advise the selling Holders in
writing that in its or their reasonable opinion or, in the case of a
Piggyback Registration not being underwritten, the Company shall
reasonably determine (and notify the selling Holders of such
determination), based upon the written advice of an independent
investment banker of nationally recognized standing, a copy of which
advice shall also be delivered to the selling Holders, that the number
or kind of securities proposed to be sold in such registration
(including Registrable Securities to be included pursuant to Section
5.1.1 above) is inconsistent with that which can be sold in such
registration without having a material adverse effect on the success
of the offering (including, without limitation, an impact on the
selling price or the number of securities that any participant may
sell), the Company will include in such registration the number of
securities, if any, which, in the opinion of such underwriter or
underwriters, or the Company, based upon the advice of an independent
investment banker of nationally recognized standing, as the case may
be, can be sold as follows: (i) first, the Common
6
<PAGE> 7
Stock the Company proposes to sell and (ii) second, the Registrable
Securities requested to be included in such registration by the
Holders. To the extent that the privilege of including Registrable
Securities in any Piggyback Registration must be allocated among the
selling Holders pursuant to clause (ii) above, the allocation shall be
made pro rata based on the number of Registrable Securities that each
such Holder shall have requested to include therein.
5.1.3 Selection of Underwriters. If any Piggyback
Registration is an underwritten offering, the Company will (i) select
a managing underwriter or underwriters to administer the offering,
which managing underwriter or underwriters will be of nationally
recognized standing and (ii) determine the terms under which such
underwriting shall take place.
5.1.4 Withdrawal. A request for Piggyback Registration may
be withdrawn by any Holder making such a request provided that such
Holder reimburses the Company for all expenses reasonably incurred by
the Company in connection with the request.
5.2 Demand Registration Rights.
5.2.1 Right to Demand. After 180 days after a Qualified
Initial Public Offering, Knowledge Enterprises, Inc. or an affiliate
thereof that then owns an equity interest in the Company may make a
one time written request of the Company for registration with the
Commission, under and in accordance with the provisions of the
Securities Act, of all or part of its Registrable Securities (a
"Demand Registration"); provided, however, that (x) the Company need
not effect a Demand Registration unless such Demand Registration shall
include at least 10% of the issued and outstanding Common Stock of the
Company and (y) the Company may, if the Board determines in the
exercise of its reasonable judgment that effecting such Demand
Registration at such time would have a material adverse effect on the
Company, defer such Demand Registration for a single period not to
exceed 180 days. Within 10 days after receipt of the request for a
Demand Registration, the Company will send written notice (the
"Notice") of such registration request and its intention to comply
therewith to each of the other Holders and each holder of an option to
purchase Registrable Securities and, subject to Section 5.2.3 below,
the Company will include in such registration all Registrable
Securities of the Holders with respect to which the Company has
received written requests for inclusion therein within 20 business
days after the effectiveness of the Notice. All requests made pursuant
to this Section 5.2.1 will specify the aggregate number of Registrable
Securities requested to be registered and will also specify the
intended methods of disposition thereof. The Company shall reasonably
cooperate with the holders of options to purchase Registrable
Securities in connection with such holders' desire, if any, to
exercise such options contemporaneously with the sale of the
underlying Registrable Securities.
7
<PAGE> 8
After 180 days after a Qualified Initial Public Offering,
Holders who together hold at least 10% of the issued and outstanding
Common Stock of the Company may make a one time written request of the
Company for a Demand Registration on the terms set forth above.
5.2.2 Expenses; Number of Demand Registrations; Withdrawal.
The expenses of each Demand Registration (including the fees and
expenses of a total of one counsel for the selling Holders in
accordance with Section 5.5.2 below) shall be borne by the Company. A
Demand Registration shall not be counted as a Demand Registration
hereunder until such Demand Registration has been declared effective
by the Commission and maintained continuously effective for a period
of at least six months or such shorter period when all Registrable
Securities included therein have been sold in accordance with such
Demand Registration. A Demand Registration may be withdrawn by the
Holders making the demand without the demand counting as a Demand
Registration hereunder provided that the Holders making the demand
reimburse the Company for all reasonable expenses incurred by the
Company in connection with the demand.
If the Company elects to issue and sell any equity
securities pursuant to any Registration Statement filed in connection
with a Demand Registration, then such Registration shall be deemed not
to be a Demand Registration solely for purposes of determining the
number of Demand Registrations granted by this Section 5.2.2.
5.2.3 Priority on Demand Registrations. If in any Demand
Registration the managing underwriter or underwriters thereof advise
the Company in writing that in its or their reasonable opinion (or in
the case of a Demand Registration not being underwritten, the Company
shall reasonably determine (and notify the selling Holders of such
determination)), based upon the written advice of an independent
investment banker of nationally recognized standing, a copy of which
advice shall also be delivered to the selling Holders, that the number
of securities proposed to be sold in such Demand Registration is
inconsistent with that which can be sold in such offering without
having a material adverse effect on the success of the offering
(including, without limitation, an impact on the selling price or the
number of Registrable Securities that any participating Holder may
sell), the Company will include in such registration only the number
of securities that, in the reasonable opinion of such underwriter or
underwriters (or the Company, based upon the advice of an independent
investment banker of nationally recognized standing, as the case may
be) can be sold without having a material adverse effect on the
success of the offering as follows: (i) first, the Registrable
Securities requested to be included in such Demand Registration by
Holders pro rata on the basis of the number of Registrable Securities
requested to be included and (ii) second, any securities held by
persons other than the Holders and requested to be included in such
Demand Registration.
5.2.4 Selection of Underwriters. The Company shall have the
right to determine whether any Demand Registration shall be
underwritten or not underwritten. If any Demand Registration is an
underwritten offering, the Company will (i) select a managing
underwriter or underwriters to administer the offering, which managing
8
<PAGE> 9
underwriter or underwriters shall be of nationally recognized standing
and (ii) determine the terms under which such underwriting shall take
place.
5.3 Registration Procedures. With respect to any Piggyback
Registration or Demand Registration (generically, a "Registration"),
the Company will, subject to Sections 5.1.2 and 5.2.3, as
expeditiously as practicable:
5.3.1 Prepare and file with the Commission, within 90 days
after mailing the applicable Notice, a registration statement or
registration statements (the "Registration Statement") relating to the
applicable Registration on any appropriate form under the Securities
Act, which form shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods of
distribution thereof; provided, however, that the Company will include
in any Registration Statement on a form other than Form S-1 all
information that the selling Holders shall reasonably request and
shall include all financial statements required by the Commission to
be filed therewith, cooperate and assist in any filings required to be
made with the National Association of Securities Dealers, Inc.
("NASD") and use its best efforts to cause such Registration Statement
to become effective; provided further, that before filing a
Registration Statement or prospectus related thereto (a "Prospectus")
or any amendments or supplements thereto, the Company will furnish to
the Holders covered by such Registration Statement and the
underwriters, if any, copies of all such documents proposed to be
filed, which documents will be subject to the reasonable review of
such Holders and underwriters and their respective counsel, and the
Company will not file any Registration Statement or amendment thereto
or any Prospectus or any supplement thereto to which the holders of a
majority of the Registrable Securities covered by such Registration
Statement or the underwriters, if any, shall reasonably object;
5.3.2 Prepare and file with the Commission such amendments
and post-effective amendments to the Registration Statement as may be
necessary to keep each Registration Statement effective for the
applicable period, or such shorter period which will terminate when
all Registrable Securities covered by such Registration Statement have
been sold; cause each Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act; and comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus. The Company shall not be deemed to have used its
best efforts to keep a Registration Statement effective during the
applicable period if it voluntarily takes any action that would result
in selling Holders covered thereby not being able to sell such
Registrable Securities during that period unless such action is
required under applicable law, provided that the foregoing shall not
apply to actions taken by the Company in good faith and for valid
business reasons, including, without limitation, the acquisition or
divestiture of assets, so long as the Company promptly thereafter
complies with the requirements of Section 5.3.11 below, if applicable;
9
<PAGE> 10
5.3.3 Notify the selling Holders and the managing
underwriters, if any, promptly, and (if requested by any such person
or entity) confirm such advice in writing, (A) when the Prospectus or
any Prospectus supplement or post-effective amendment has been filed,
and, with respect to the Registration Statement or any post-effective
amendment, when the same has become effective, (B) of any request by
the Commission for amendments or supplements to the Registration
Statement or the Prospectus or for additional information, (C) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose, (D) if at any time the representations
and warranties of the Company contemplated by Section 5.3.14 below
cease to be true and correct, (E) of the receipt by the Company of any
notification with respect to the suspension of the qualification of
the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose and (F)
of the happening of any event which makes any statement made in the
Registration Statement, the Prospectus or any document incorporated
therein by reference untrue or which requires the making of any
changes in the Registration Statement, the Prospectus or any document
incorporated therein by reference in order to make the statements
therein not misleading;
5.3.4 Make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the Registration
Statement at the earliest possible moment;
5.3.5 If requested by the managing underwriter or
underwriters or a holder of Registrable Securities being sold in
connection with an underwritten offering, promptly incorporate in a
Prospectus supplement or post-effective amendment such information as
the managing underwriters and the holders of a majority of the
Registrable Securities being sold agree should be included therein
relating to the plan of distribution with respect to such Registrable
Securities, including, without limitation, information with respect to
the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and with
respect to any other terms of the underwritten offering of the
Registrable Securities to be sold in such offering; and make all
required filings of such Prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated in
such Prospectus supplement or post-effective amendment;
5.3.6 Furnish to each managing underwriter and, if requested
by the holders of a majority of the Registrable Securities being sold,
to each selling Holder, without charge, at least one signed copy of
the Registration Statement and any amendment thereto, including
financial statements and schedules, all documents incorporated therein
by reference and all exhibits (including those incorporated by
reference);
5.3.7 Deliver to each selling Holder and the underwriters,
if any, without charge, as many copies of the Prospectus (including
each preliminary prospectus) and any amendment or supplement thereto
as such Holder and underwriters may reasonably request. The Company
consents to the use of each Prospectus or any amendment or supplement
thereto by each of the selling Holders and the underwriters, if any,
in
10
<PAGE> 11
connection with the offering and sale of the Registrable Securities
covered by such Prospectus or any amendment or supplement thereto;
5.3.8 Prior to any public offering of Registrable
Securities, register or qualify or cooperate with the selling Holders,
the underwriters, if any, and their respective counsel in connection
with the registration or qualification of such Registrable Securities
for offer and sale under the securities or "Blue Sky" laws of such
jurisdictions as any seller or underwriter reasonably requests in
writing, considering the amount of Registrable Securities proposed to
be sold in each such jurisdiction, and do any and all other acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the
Registration Statement; provided, however, that the Company will not
be required to qualify generally to do business in any jurisdiction
where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction
where it is not then so subject;
5.3.9 Cooperate with the selling Holders and the managing
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be
sold and not bearing any restrictive legends and in such denominations
and registered in such names as the managing underwriters may request
at least two business days prior to any sale of Registrable Securities
to the underwriters;
5.3.10 Use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers
thereof or the underwriters, if any, to consummate the disposition of
such Registrable Securities;
5.3.11 Upon the occurrence of any event contemplated by
Section 5.3.3(F) above, prepare a supplement or post-effective
amendment to the Registration Statement or the related Prospectus or
any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers
of the Registrable Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
5.3.12 Cause all Registrable Securities covered by any
Registration Statement to be listed on each securities exchange on
which similar securities issued by the Company are then listed or
cause such Registrable Securities to be authorized for trading on the
Nasdaq National Market System if any similar securities issued by the
Company are then so authorized, if requested by the holders of a
majority of such Registrable Securities or the managing underwriters,
if any;
5.3.13 Provide a CUSIP number for all Registrable
Securities, not later than the effective date of the applicable
Registration Statement;
11
<PAGE> 12
5.3.14 Enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith in
order to facilitate the disposition of such Registrable Securities as
shall be reasonably necessary, and in connection therewith: (A) make
such representations and warranties to the selling Holders and the
underwriters, if any, in form, substance and scope as are customarily
made by issuers to underwriters in primary underwritten offerings; (B)
obtain opinions of counsel to the Company and updates thereof (which
counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and the
holders of a majority of the Registrable Securities being sold)
addressed to each selling Holder and the underwriters, if any,
covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters; (C) obtain "cold comfort"
letters and updates thereof from the Company's independent certified
public accountants addressed to the underwriters, if any, such letters
to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters by underwriters in connection with
primary underwritten offerings; (D) if an underwriting agreement is
entered into, the same shall set forth in full the indemnification
provisions and procedures set forth in Section 5.6 below with respect
to all parties to be indemnified pursuant to said Section; and (E) the
Company shall deliver such documents and certificates as may be
requested by the holders of a majority of the Registrable Securities
being sold and the managing underwriters, if any, to evidence
compliance with Section 5.3.3(F) above and with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company. The above shall be done at each closing
under such underwriting or similar agreement or as and to the extent
required thereunder;
5.3.15 Make available for inspection during normal business
hours by a representative of each seller of Registrable Securities,
any underwriter participating in any disposition pursuant to such
Registration and any attorney or accountant retained by the
representative or underwriter, all financial and other records and
pertinent corporate documents of the Company and its subsidiaries and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with such
Registration Statement; provided, however, that any records,
information or documents that are designated by the Company in writing
as confidential shall be kept confidential by such persons unless
disclosure of such records, information or documents is required by
court or administrative order or any regulatory body having
jurisdiction;
5.3.16 Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act generally available to its security holders no later
than 45 days after the end of any 12-month period (or 90 days, if such
period is a fiscal year) (A) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in a
firm or best efforts underwritten offering or (B) if not sold to
underwriters in such an offering, beginning with the first month of
the Company's first fiscal quarter commencing after the effective date
of the Registration Statement, which statements shall cover said
12-month periods;
12
<PAGE> 13
5.3.17 Promptly prior to the filing of any document that is
to be incorporated by reference into any Registration Statement or
Prospectus (after initial filing of the Registration Statement),
provide copies of such document to counsel to the selling Holders and
to the managing underwriters, if any, make the Company's
representatives available for discussion of such document and make
such changes in such document prior to the filing thereof as counsel
for such selling Holders or underwriters may reasonably request; and
5.3.18 Keep each seller of Registrable Securities advised in
writing as to the initiation and progress of any Registration
hereunder.
The Company may require each seller of Registrable Securities as
to which any Registration is being effected to furnish to the Company such
information regarding the proposed distribution of such securities as the
Company may from time to time reasonably request in writing.
Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 5.3.3(F), such
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to the Registration Statement until such Holder (i) has received copies of the
supplemented or amended Prospectus as contemplated by Section 5.3.11 above or
until such Holder is advised in writing (the "Advice") by the Company that the
use of the Prospectus may be resumed and (ii) has received copies of any
additional or supplemental filings that are incorporated by reference in the
Prospectus, and, if so directed by the Company, such Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Registrable
Securities. In the event the Company shall give any such notice, the six-month
time period referred to in Section 5.2.2 shall be extended by the number of days
during the period from and including the date of the giving of such notice to
and including the date when each seller of Registrable Securities covered by
such Registration Statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 5.3.3(F) or the Advice.
5.4 Restrictions on Public Sale.
5.4.1 Public Sale by Holders. To the extent not inconsistent
with applicable law, each Holder (i) agrees not to effect any public
sale or distribution of Common Stock, including a sale pursuant to
Rule 144 (or any similar provision then in force) under the Securities
Act, during the 180-day period (or such shorter period as may be
agreed to by the managing underwriter or underwriters) following a
Qualified Initial Public Offering and (ii) whose Registrable
Securities are included in a Registration Statement hereunder, if
requested by the managing underwriter or underwriters for such
Registration, agrees not to effect any public sale or distribution of
Registrable Securities, including a sale pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act, during the
15 business days prior to, and during the 90-day period (or such
shorter period as may be agreed to by such underwriter or
underwriters) beginning on, the
13
<PAGE> 14
effective date of a Registration Statement pursuant to such Piggyback
Registration or Demand Registration (except as part of such Piggyback
or Demand Registration).
5.4.2 Public Sale by the Company. If requested by the
managing underwriter or underwriters for any underwritten Registration
or by the holders of a majority of the Registrable Securities being
registered in a Demand Registration that is not being underwritten,
(i) the Company will not effect any public sale or distribution of
Common Stock (or securities convertible into or exchangeable or
exercisable for Common Stock) for its own account during the 15
business days prior to, and during the 90-day period beginning on, the
effective date of such Registration and (ii) the Company will use its
best efforts to cause each other holder of Common Stock (or securities
convertible into or exchangeable for, or options to purchase, Common
Stock) purchased from the Company at any time after the date hereof
(other than in a registered public offering) to agree not to effect
any public sale or distribution of any such securities during the
period described in (i) above (except as part of such Registration, if
otherwise permitted).
5.4.3 Other Registrations. If the Company has previously
filed a Registration Statement with respect to Registrable Securities,
and if such previous Registration has not been withdrawn or abandoned,
the Company will not file or cause to be effected any other
registration of any of its Common Stock (or securities convertible
into or exchangeable for, or options to purchase, Common Stock) under
the Securities Act (except on Form S-4 or S-8 or any similar successor
forms), whether on its own behalf or at the request of any holder or
holders of Common Stock (or securities convertible into or
exchangeable or exercisable for Common Stock), until a period of at
least six months has elapsed from the effective date of such previous
Registration; provided, however, that if the holders of 50% or more of
the aggregate number of Registrable Securities included in such
previous Registration shall agree in writing, such period may be
shortened by the Company but not to a period shorter than three
months.
5.5 Registration Expenses.
5.5.1 All expenses incident to the Company's performance of
or compliance with this Section 5 will be borne by the Company,
including, without limitation, all registration and filing fees, the
fees and expenses of the counsel and accountants for the Company
(including the expenses of any "cold comfort" letters and special
audits required by or incident to the performance of such persons),
all other costs and expenses of the Company incident to the
preparation, printing and filing under the Securities Act of the
Registration Statement (and all amendments and supplements thereto)
and furnishing copies thereof and of the Prospectus included therein,
the costs and expenses incurred by the Company in connection with the
qualification of the Registrable Securities under the state securities
or "Blue Sky" laws of various jurisdictions, the costs and expenses
associated with filings required to be made with the NASD (including,
if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel as may be required by the rules and
regulations of the NASD), the costs and expenses of listing the
Registrable Securities for trading on a national securities exchange
or authorizing them for trading on the Nasdaq National
14
<PAGE> 15
Market System and all other costs and expenses incurred by the Company
in connection with any Registration hereunder; provided, however,
that, except as otherwise provided in Section 5.5.2 below, the Company
shall not bear the costs and expenses of any selling Holder for
underwriters' commissions, brokerage fees or transfer taxes, or the
fees and expenses of any counsel, accountants or other representative
retained by any selling Holder.
5.5.2 Notwithstanding the foregoing, in connection with each
Demand Registration hereunder, the Company will reimburse the selling
Holders for the reasonable fees and disbursements of not more than one
counsel (up to a maximum of $25,000). Such counsel shall be chosen by
the holders of a majority of the Registrable Securities covered by the
Registration, subject to the approval of the Company (which approval
shall not unreasonably be withheld).
5.6 Indemnification.
5.6.1 Indemnification by the Company. The Company agrees to
indemnify, to the full extent permitted by law, each Holder, its
officers, directors and agents and each person who controls such
Holder within the meaning of the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (each, an
"Indemnified Holder"), against all losses, claims, damages,
liabilities and expenses caused by any untrue or alleged untrue
statement of a material fact contained in any Registration Statement,
Prospectus or preliminary Prospectus or any omission or alleged
omission to state therein a material fact necessary to make the
statements therein (in the case of a Prospectus or any preliminary
Prospectus, in light of the circumstances under which they were made)
not misleading, except to the extent that such untrue statement or
omission is caused by any information with respect to such Indemnified
Holder furnished in writing to the Company by such Indemnified Holder
or its representative expressly for use therein. The Company will also
indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution,
their officers and directors and each person who controls such persons
(within the meaning of the Securities Act) to the same extent as
provided above with respect to Indemnified Holders; provided, however,
that if pursuant to an underwritten public offering of Registrable
Securities, the Company and any underwriters enter into an
underwriting or purchase agreement relating to such offering that
contains provisions relating to indemnification and contribution
between the Company and such underwriters, such provisions shall be
deemed to govern indemnification and contribution as between the
Company and such underwriters.
5.6.2 Indemnification by Holders of Registrable Securities.
In connection with any Registration, each Holder participating therein
will furnish to the Company in writing such information with respect
to the Holder as the Company reasonably requests for use in connection
with any Registration Statement, Prospectus or preliminary Prospectus
and agrees to indemnify, to the full extent permitted by law, the
Company, the directors and officers of the Company signing the
Registration Statement and each person who controls the Company
(within the meaning of the Securities Act and the Exchange Act)
against any losses, claims, damages, liabilities and expenses
resulting from any untrue
15
<PAGE> 16
statement of a material fact or any omission to state a material fact
required to be stated therein or necessary to make the statements in
the Registration Statement, Prospectus or preliminary Prospectus (in
the case of the Prospectus or any preliminary Prospectus, in light of
the circumstances under which they were made) not misleading, to the
extent, and only to the extent, that such untrue statement or omission
is caused by any information with respect to the Holder so furnished
in writing by the Holder or its representative specifically for
inclusion therein. In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the
proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation. The Company
shall be entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided
above with respect to information with respect to such persons or
entities so furnished in writing by such persons or entities or their
representatives specifically for inclusion in any Registration
Statement, Prospectus or preliminary Prospectus.
5.6.3 Conduct of Indemnification Proceedings. Any person or
entity entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party after the receipt by the
indemnified party of a written notice of the commencement of any
action, suit, proceeding or investigation or threat thereof made in
writing for which such indemnified party will claim indemnification or
contribution pursuant to this Agreement; provided, however, that the
failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under the
preceding Section 5.6.1 or 5.6.2, as applicable, except to the extent
that the indemnifying party is actually prejudiced by such failure to
give notice and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest may exist between such indemnified and
indemnifying parties with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. Whether or not such
defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without
its consent (but such consent will not be unreasonably withheld). No
indemnifying party will be required to consent to the entry of any
judgment or to enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff of
a release from all liability in respect of such claim or litigation.
An indemnifying party who is not entitled to, or elects not to, assume
the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel in any one jurisdiction for all
parties indemnified by such indemnifying party with respect to such
claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim, in which
event the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels.
5.6.4 Contribution. If for any reason the indemnification
provided for in the preceding Section 5.6.1 or 5.6.2, as applicable,
is unavailable to an indemnified party as contemplated by such
Section, then the indemnifying party, in lieu of indemnification,
shall contribute to the amount paid or payable by the indemnified
party as a result of such
16
<PAGE> 17
loss, claim, damage, liability or expense in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnified party and the indemnifying party, but also the relative
fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations; provided, however, that
no selling Holder shall be required to contribute in an amount greater
than the difference between the net proceeds received by the Holder
with respect to the sale of Registrable Securities and all amounts
already contributed by the Holder with respect to such claims,
including amounts paid for any legal or other fees or expenses
incurred by the Holder.
5.7 Rule 144. The Company agrees that at all times after it has
filed a registration statement pursuant to the requirements of the Securities
Act relating to any class of equity securities of the Company, it will file in a
timely manner all reports required to be filed by it pursuant to the Securities
Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
will take such further action as any Holder may reasonably request in order that
such Holder may effect sales of Registrable Securities pursuant to Rule 144. At
any reasonable time and upon request of a Stockholder, the Company will furnish
such Stockholder and others with such information as may be necessary to enable
the Stockholder to effect sales of Common Stock pursuant to Rule 144 under the
Securities Act and will deliver to such Stockholder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
the Company may deregister any class of its equity securities under Section 12
of the Exchange Act or suspend its duty to file reports with respect to any
class of its securities pursuant to Section 15(d) of the Exchange Act if it is
then permitted to do so pursuant to the Exchange Act and the rules and
regulations thereunder.
5.8 Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (i)
agrees to sell its Registrable Securities on the basis provided in any
underwriting arrangements approved by the Company and (ii) accurately completes
in a timely manner and executes all questionnaires, powers of attorney,
underwriting agreements and other documents customarily required under the terms
of such underwriting arrangements.
5.9 Registrable Securities. The term Registrable Securities shall
mean the Class A Common Stock of the Company; provided, however, that a
Registrable Security shall cease to be a Registrable Security at such time that
(i) the Registrable Security has been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering it or (ii) has been sold to the public pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act.
6. Tag-Along Right.
6.1 General Tag-Along Right. Prior to a Qualified Initial Public
Offering, and notwithstanding the fact that the Stockholders have approved an
Assignment pursuant to Section 4.1, a Stockholder (the "proposed transferor")
shall not transfer, sell, or otherwise dispose of more than 5% of its Class A
Common Stock or Class B Common Stock (collectively a "proposed tag-along
transfer") to a person (a "proposed tag-along purchaser") other than pursuant to
a Qualified Transfer or, in the case of KE, other than pursuant to a transfer to
an entity controlled
17
<PAGE> 18
by KE, in one transaction or a related series of transactions, unless the
proposed tag-along purchaser shall offer to each of the Stockholders that hold
Common Stock, whether or not of the same class, (a "Tag-Along Offer") the
opportunity to include in the proposed tag-along transfer the same percentage of
his or its Common Stock as that percentage of Common Stock proposed to be
transferred by the proposed transferor (based upon all outstanding Common Stock)
upon the same terms and conditions, and with the same price per share of Common
Stock, form of consideration and terms of payment offered by the proposed
tag-along purchaser to the proposed transferor (it being understood that Class A
Common Stock and Class B Common Stock shall be treated alike for purposes of
this Section 6.1). The proposed transferor shall, not less than 45 nor more than
90 days prior to the proposed tag-along transfer, notify, or cause to be
notified, each other Stockholder (the "Other Stockholder" or "Other
Stockholders") in writing of such proposed tag-along transfer (the "Tag-Along
Notice"). The Tag-Along Notice shall set forth: (i) the name of the proposed
transferor, the number and class or classes of Common Stock that the proposed
transferor proposes to transfer, and the percentage of his or its Common Stock
of that class or classes that the proposed transferor proposes to transfer and
the percentage of all outstanding Common Stock represented thereby; (ii) the
name of the proposed tag-along purchaser; (iii) the proposed amount and form of
consideration and terms and conditions of payment offered by the proposed
tag-along purchaser; and (iv) that the proposed tag-along purchaser has been
informed of the tag-along right provided for in this Section 6.1 and has agreed
to purchase such Common Stock in accordance with the terms hereof. The Tag-Along
Offer may be accepted by any Other Stockholder holding Common Stock, whether or
not of the same class as is subject to the proposed transfer, by delivery of a
written notice (the "Exercise Notice") to the proposed transferor within 15 days
following the date the Tag-Along Notice is given (the "Exercise Period"). The
Exercise Notice shall state the maximum number of shares of Common Stock that
such Other Stockholder proposes to include in the transfer to the proposed
tag-along purchaser, as determined herein. In the event the total number of
shares of Common Stock proposed to be sold to the proposed tag-along purchaser
by the proposed transferor and the Other Stockholders exceeds the number of
shares of Common Stock which the proposed tag-along purchaser is willing to
purchase, the number of shares of Common Stock to be sold by the proposed
transferor and the Other Stockholders shall be reduced pro rata based on the
total number of shares of Common Stock offered for sale by the proposed
transferor and each Other Stockholder. At the closing of the transfer to the
proposed tag-along purchaser (of which the proposed transferor shall give each
selling Other Stockholder at least 10 business days prior written notice), each
selling Other Stockholder shall (i) execute any documents or instruments,
including, without limitation, representations and warranties, reasonably
requested by the proposed tag-along purchaser (if any selling Other Stockholder
is unwilling to make such representations and warranties and/or related
indemnification as may be required by the proposed tag-along purchaser, such
Other Stockholder shall not have the tag-along right provided for in this
Section 6.1) and (ii) deliver certificates for the shares of Common Stock being
sold, duly endorsed or accompanied by duly executed Common Stock assignments
separate from certificate, free and clear of all claims and encumbrances,
against delivery by the proposed tag-along purchaser of the consideration for
the total sales price of the Common Stock of such Other Stockholders being sold
pursuant to this Section 6.1.
18
<PAGE> 19
6.2 Special Tag-Along Right. If, prior to a Qualified Initial
Public Offering, equity securities of any entity which is a "Controlled
Affiliate" of the "KU Control Group" (in each case as defined below) and which,
directly, or indirectly through its Controlled Affiliates, owns Common Stock (a
"Common Stock Owning KU Affiliate") are sold to any Person (other than a
Controlled Affiliate of the KU Control Group) and the total aggregate sales
price of such transfer, sale or other disposition of such equity securities in
such transaction or in a series of related transactions exceeds $10,000,000,
then the "Sibson Persons" (as that term is defined below) shall have the right
(the "Special Tag-Along Right") to have KE purchase a portion of their Common
Stock as set forth herein. If the $10,000,000 threshold is exceeded, then KE
shall within 10 days thereafter notify the Sibson Persons in writing (the
"Threshold Notice") of the details of such transaction and the percentage of
Common Stock (the "Applicable Percentage") indirectly transferred as a result of
such sale (based upon the percentage of equity ownership of the Common Stock
Owning KU Affiliate sold in the transaction and the number of shares of Common
Stock held, directly, or indirectly through one or more intermediaries, by such
Common Stock Owning KU Affiliate). The Sibson Persons shall have 30 days from
receipt of the Threshold Notice (which notice shall contain the calculation of
the Applicable Percentage and the details of how it was determined) to notify KE
in writing (the "Special Tag-Along Notice") that they desire to invoke the
Special Tag-Along Right. If any Sibson Person invokes the Special Tag-Along
Right, then such Sibson Person shall have the right to require KE and KE hereby
agrees to purchase a percentage of such Sibson Person's Common Stock in the
Company equal to the Applicable Percentage multiplied by the total percentage of
Common Stock in the Company held by such Sibson Person (with respect to any
Sibson Person, the "Sibson Percentage"). In determining the Sibson Percentage
the total number of shares of Common Stock held by such Sibson Person (including
for this purpose the number of shares of Common Stock for which there are
outstanding vested options held by such Sibson Person) shall be divided by the
total number of outstanding shares of Common Stock of the Company (including for
this purpose the number of shares of Common Stock for which there are
outstanding vested options held by all persons). For example, if the Applicable
Percentage is 20% and the Sibson Percentage is 5%, then the Special Tag-Along
Right shall apply to a number of shares of Common Stock (and shares of Common
Stock for which there are vested options) equal to 1.0% of the shares of Common
Stock (and for which there are vested options) of the Company, and such Sibson
Person shall have the right to require KE and, if the Special Tag-Along Right is
exercised, KE shall be obligated to purchase from him or it a number of shares
of Common Stock (and vested options) equal to 1.0% of the total number of shares
of Common Stock and vested options. The purchase price of shares of Common Stock
to be sold pursuant to the Special Tag-Along Right shall be determined in the
same manner as provided in Section 4.4. The purchase price of a vested option
(on a per share of Common Stock basis) shall be the purchase price of a share of
Common Stock, as determined above, less the strike price of such vested option.
For purposes of this provision, the term "Sibson Persons" shall mean any and all
of the following: those persons who received shares of Common Stock pursuant to
the Exchange Agreement, those persons who received shares of Common Stock
pursuant to their employment agreements with SC/NE, LLC or any subsidiary of
SC/NE, LLC, those persons who received options to purchase shares of Common
Stock of the Company pursuant to their employment with SC/NE, LLC, or any
subsidiary of SC/NE LLC, those persons who received Common Stock pursuant to
rights granted in that certain Share Purchase Agreement dated as of the date
hereof by and among Nextera, Sibson Acquisition Co.
19
<PAGE> 20
and the holders of all of the shares of Sibson Canada, Inc. and transferees of
such persons if pursuant to a Qualified Transfer. For purposes hereof, the "KU
Control Group" shall mean a group comprised of one or more of the three natural
persons who as of the date hereof beneficially own directly or indirectly the
majority of the capital stock of KE, and a "Controlled Affiliate" shall mean,
with respect to any Person, any Person controlled, directly or indirectly, by
such Person by ownership of voting securities, contract or otherwise.
7. Sibson Board Representative. Until such time as both (i) the
percentage of the Company's consolidated net revenue generated by SC/NE, LLC
falls below 15% of the Company's total consolidated net revenue for any fiscal
year and (ii) the earnings before interest, taxes, depreciation and amortization
("EBITDA") generated by of SC/NE, LLC falls below 15% of the Company's total
consolidated EBITDA less corporate headquarters expense for any such fiscal year
(such event being the "Board Representation Termination Event"), the
Stockholders shall be required to elect the "Manager/SMP" of SC/NE, LLC, as that
term is defined in the Limited Liability Company Agreement of SC/NE, LLC dated
as of the date hereof, to the Board of Directors of the Company and each
Stockholder agrees to vote his Subject Shares to effectuate the same. Following
the Board Representation Termination Event, the Stockholders shall have no
obligation to elect the Manager/SMP of SC/NE, LLC to the Board.
8. Certain Transactions. The Company shall not enter into any "Covered
Transaction" (as hereinafter defined) with any Affiliate without the prior
approval of a majority of the members of the Board of Directors of the Company
who are not (and have not been within the past five years) directly or
indirectly affiliated with such Affiliate, do not receive (and have not received
during the past five years) directly or indirectly any compensation from such
Affiliate (except for service as a director of the Company) and do not own (and
have not owned within the past five years) directly or indirectly any equity
interest in such Affiliate or any Affiliate of such Affiliate (other than the
Company). A "Covered Transaction" shall mean (i) any transaction or related
series of transactions between the Company or any subsidiary of the Company and
an Affiliate (including Affiliates of such Affiliate) which involves, in the
aggregate, a transaction sum in excess of $2,000,000 or (ii) any transaction
between the Company or any subsidiary of the Company and an Affiliate (including
Affiliates of such Affiliate) if such transaction, when taken together with all
other transactions between the Company and such Affiliate (including all
Affiliates of such Affiliate) during any period of 24 consecutive months,
involves, in the aggregate, a total transaction sum or value in excess of
$2,000,000.
9. Further Assurances. Each Stockholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as the Company may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
10. Certain Events. Each Stockholder agrees that this Agreement and
the obligations hereunder shall attach to such Stockholder's Subject Shares and
shall be binding upon any person or entity to which legal or beneficial
ownership of such Subject Shares shall pass, whether by operation of law or
otherwise, including such Stockholder's heirs, guardians, administrators or
successors. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure of the
Company affecting the Common
20
<PAGE> 21
Stock, or the acquisition of additional shares of Common Stock or other voting
securities of the Company by any Stockholder, the number of Subject Shares
listed in Schedule A beside the name of such Stockholder shall be adjusted
appropriately and this Agreement and the obligations hereunder shall attach to
any additional shares of Common Stock or other voting securities of the Company
issued to or acquired by such Stockholder.
11. Assignment. Except in connection with an Assignment specifically
permitted by Section 4, neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any Stockholder without the prior
written consent of the Company. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
12. General Provisions.
12.1 Amendments. This Agreement may not be amended except by an
instrument in writing signed by Nextera or the Company, Stockholders holding a
majority of the Subject Shares and Stockholders holding a majority of the
Subject Shares held by Sibson Persons.
12.2 Notice. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to Nextera or the Company, One
Cranberry Hill, Lexington, Massachusetts, Attention: President and to the
Stockholders at their respective addresses set forth on the records of the
Company, until such time as Schedule A is attached hereto when completed as
described in Section 16 below, and thereafter to the Stockholders at their
respective addresses set forth thereon (or at such other address for a party as
shall be specified in like notice).
12.3 Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
12.4 Counterparts. This 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 of the counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
each party need not sign the same counterpart.
12.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
21
<PAGE> 22
12.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof.
13. Enforceable. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement this being in addition to any other
remedy to which they are entitled at law or in equity.
14. Public Announcements. Except as otherwise specifically provided in
that certain Asset Purchase Agreement dated as of the date hereof by and among
Nextera, SC/NE, LLC, Sibson & Company, L.P., Sibson & Company, Inc., SC2, Inc.
and the shareholders of Sibson & Company, Inc. and SC2, Inc., no Stockholder
shall issue any press release or other public statement with respect to the
transactions contemplated by this Agreement and the documents implementing the
Incorporation Transaction without the prior written consent of Nextera, except
as required by law.
15. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule or law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
16. Schedule A. As soon as practical, but in no event later than ten
business days prior to the completion of the Incorporation Transaction (subject
to further updates through the Incorporation Transaction), Nextera agrees to
update and complete Schedule A hereto, including the number of shares of Class A
Common Stock and Class B Common Stock held by, and the address of, each
Stockholder and cause a copy thereof certified as being true and correct by
officers of each of the Company and Nextera to be delivered to the Stockholders
for attachment to this Agreement.
17. Company Charter. The Company agrees that prior to consummation of
the Incorporation Transaction it shall adopt the Amended and Restated
Certificate of Incorporation and By-laws in substantially the forms attached as
Exhibit A-1 and Exhibit A-2 hereto, with any changes thereto as will not
materially adversely affect the rights of the Stockholders hereunder and
thereunder (collectively the "Constituent Documents"). From and after the
Incorporation Transaction, the Company and the Stockholders shall take all steps
reasonably necessary and appropriate from time to time to assure that the
Constituent Documents, to the extent permitted under applicable law, do not
conflict with the terms and provisions of this Agreement and that the rights of
holders of Class A Common Stock are identical to rights of holders of Class B
Common Stock (except for (i) holders of shares of Class A Common Stock being
entitled to ten votes per
22
<PAGE> 23
share and (ii) that shares of Class B Common Stock will convert into shares of
Class A Common Stock as set forth on Schedule 3.2 to the Exchange Agreement).
[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY]
23
<PAGE> 24
IN WITNESS WHEREOF, Nextera has caused this Agreement to be signed by
its officer thereunto duly authorized and each Stockholder has signed this
Agreement, all as of the date first written above.
"NEXTERA":
NEXTERA ENTERPRISES, L.L.C.,
a Delaware limited liability company
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------
Name: Michael P. Muldowney
Title: Chief Financial Officer
NEXTERA ENTERPRISES, INC.,
a Delaware corporation
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------
Name: Michael P. Muldowney
Title: Vice President
24
<PAGE> 25
"STOCKHOLDERS"
KNOWLEDGE ENTERPRISES, INC.,
a Delaware corporation
By: /s/ RALPH FINERMAN
-----------------------
Ralph Finerman
Its Secretary
/s/ GRESHAM BREBACH, JR. /s/ DEBRA BERGEVINE
- ---------------------------------- ------------------------------------
Gresham Brebach, Jr. Debra Bergevine
/s/ RONALD BOHLIN /s/ DAVID FRITTS
- ---------------------------------- ------------------------------------
Ronald Bohlin David Fritts
/s/ MICHAEL MULDOWNEY /s/ BELDEN MENKUS
- ---------------------------------- ------------------------------------
Michael Muldowney Belden Menkus
/s/ DWIGHT GERTZ /s/ PATRICK FLYNN
- ---------------------------------- ------------------------------------
Dwight Gertz Patrick Flynn
/s/ JACOB H. BROOKS /s/ CHARLES BLACKBURN
- ---------------------------------- ------------------------------------
Jacob H. Brooks Charles Blackburn
/s/ MARTIN G. GLAVIN /s/ DOUGLAS STEIN
- ---------------------------------- ------------------------------------
Martin G. Glavin Douglas Stein
/s/ HERBERT J. GUCK /s/ GLENN VAN STRAATUM
- ---------------------------------- ------------------------------------
Herbert J. Guck lenn Van Straatum
/s/ MICHAEL MARTINDALE /s/ IAIN McNEIL
- ---------------------------------- ------------------------------------
Michael Martindale Iain McNeil
/s/ JOHN ROBOSSON /s/ DION C. SMITH
- ---------------------------------- ------------------------------------
John Robosson Dion C. Smith
25
<PAGE> 26
/s/ RAVINDER BHASKARAN /s/ MICHAEL J. SHEPHERD
- ---------------------------------- ------------------------------------
Ravinder Bhaskaran Michael J. Shepherd
/s/ RAMESH VASUDEVAN /s/ PADMINI VASUDEVAN
- ---------------------------------- ------------------------------------
Ramesh Vasudevan Padmini Vasudevan
/s/ MASON S. TENAGLIA /s/ DANIEL GILMORE
- ---------------------------------- ------------------------------------
Mason S. Tenaglia Daniel Gilmore
/s/ DOUGLAS FERGUSON /s/ JOSEPH AXELROD
- ---------------------------------- ------------------------------------
Douglas Ferguson Joseph Axelrod
/s/ JOHN BALKCOM /s/ MARK BLESSINGTON
- ---------------------------------- ------------------------------------
John Balkcom Mark Blessington
/s/ FREDERICK BRIGGS /s/ ROGER BROSSY
- ---------------------------------- ------------------------------------
Frederick (Ted) Briggs Roger Brossy
/s/ SEYMOUR BURCHMAN /s/ PAMELA COHEN
- ---------------------------------- ------------------------------------
Seymour Burchman Pamela Cohen
/s/ GLENN DALTON /s/ BARBARA DEWEY
- ---------------------------------- ------------------------------------
Glenn Dalton Barbara Dewey
/s/ DONALD GALLO /s/ DONALD GOUGH
- ---------------------------------- ------------------------------------
Donald Gallo Donald Gough
/s/ ELIZABETH HAWK /s/ MYRNA HELLERMAN
- ---------------------------------- ------------------------------------
Elizabeth Hawk Myrna Hellerman
/s/ JAMES KOCHANSKI /s/ STEVEN LANDBERG
- --------------------------------- ------------------------------------
James Kochanski Steven Landberg
/s/ PETER LeBLANC /s/ WILLIAM O'CONNELL
- ---------------------------------- ------------------------------------
Peter LeBlanc William O'Connell
/s/ VINCENT PERRO /s/ JUDE RICH
- ---------------------------------- ------------------------------------
Vincent Perro Jude Rich
26
<PAGE> 27
/s/ KAREN ROCHE /s/ ANNE SAUNIER
- ---------------------------------- ------------------------------------
Karen Roche Anne Saunier
/s/ RICHARD SEMLER /s/ STEPHEN STRELSIN
- ---------------------------------- ------------------------------------
Richard Semler Stephen Strelsin
/s/ GERARD THOMAS /s/ DOUGLAS TORMEY
- ---------------------------------- ------------------------------------
Gerard (Chip) Thomas Douglas Tormey
/s/ SUSAN ANNUNZIO TYNAN
- ----------------------------------
Susan Annunzio Tynan
27
<PAGE> 28
/s/ MICHAEL McINERNEY
- ----------------------------------
Michael McInerney
28
<PAGE> 29
/s/ FRED MENDELSOHN
- ----------------------------------
Fred Mendelsohn
29
<PAGE> 30
SCHEDULE A
TABLE OF STOCKHOLDERS
<TABLE>
<CAPTION>
NUMBER OF SHARES OF CLASS A NUMBER OF SHARES OF CLASS B
NAME OF STOCKHOLDER COMMON STOCK OWNED OF RECORD COMMON STOCK OWNED OF RECORD ADDRESS
<S> <C> <C> <C>
Knowledge Enterprises, Inc.
Brebach, Gresham Jr.
Bohlin, Ronald
Muldowney, Michael
Bergevine, Debra
Fritts, David
Menkus, Belden
Gertz, Dwight
Flynn, Patrick
Brooks, Jacob H.
Glavin, Martin G.
Guck, Herbert J.
Martindale, Michael
Robosson, John
Smith, Dion C.
Tenaglia, Mason S.
Bhaskaran, Ravinder
Shepherd, Michael J.
Gilmore, Daniel
Ferguson, Douglas
Axelrod, Joseph
Vasudevan, Ramesh
Vasudevan, Padmini
Blackburn, Charles
Stein, Douglas
Van Straatum, Glenn
McNeil, Ian
Balkcom, John
Blessington, Mark
Briggs, Frederick (Ted)
Brossy, Roger
Burchman, Seymour
Cohen, Pamela
Dalton, Glenn
Dewey, Barbara
Gallo, Donald
Gough, Donald
Hawk, Elizabeth
Hellerman, Myrna
Kochanski, James
Landberg, Steven
LeBlanc, Peter
O'Connell, William
Perro, Vincent
Rich, Jude
Roche, Karen
Saunier, Anne
Semler, Richard
Strelsin, Stephen
Thomas, Gerard (Chip)
Tormey, Douglas
Tynan, Susan Annunzio
McInerney, Michael
Fred Mendelsohn
</TABLE>
<PAGE> 1
EXHIBIT 10.1
THE 1998 EQUITY PARTICIPATION PLAN
OF
NEXTERA ENTERPRISES, INC.
Nextera Enterprises, Inc., a Delaware corporation, has adopted The
1998 Equity Participation Plan of Nextera Enterprises, Inc. (the "Plan"),
effective ___________ ___, 1998, for the benefit of its eligible employees,
consultants and directors.
The purposes of the Plan are as follows:
(1) To provide an additional incentive for directors, key Employees
and Consultants (as such terms are defined below) to further the growth,
development and financial success of the Company by personally benefiting
through the ownership of Company stock and/or rights which recognize such
growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, key Employees and Consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and financial
success of the Company.
ARTICLE I.
DEFINITIONS
1.1. General. Wherever the following terms are used in the Plan they
shall have the meanings specified below, unless the context clearly indicates
otherwise.
1.2. Administrator. "Administrator" shall mean the entity that
conducts the general administration of the Plan as provided herein. With
reference to the administration of the Plan with respect to Options granted to
Independent Directors, the term "Administrator" shall refer to the Board. With
reference to the administration of the Plan with respect to any other Award, the
term "Administrator" shall refer to the Committee (or a delegate of the
Committee under Section 10.5) unless the Board has assumed the authority for
administration of the Plan generally as provided in Section 10.1.
1.3. Award. "Award" shall mean an Option, a Restricted Stock award, a
Performance Award, a Dividend Equivalents award, a Deferred Stock award, a Stock
Payment award or a Stock Appreciation Right which may be awarded or granted
under the Plan (collectively, "Awards").
1.4. Award Agreement. "Award Agreement" shall mean a written agreement
executed by an authorized officer of the Company and the Holder which shall
contain such terms and conditions with respect to an Award as the Administrator
shall determine, consistent with the Plan.
<PAGE> 2
1.5. Award Limit. "Award Limit" shall mean shares of Class A
Common Stock, as adjusted pursuant to Section 11.3 of the Plan.
1.6. Board. "Board" shall mean the Board of Directors of the Company.
1.7. Change in Control. "Change in Control" shall mean a change in
ownership or control of the Company effected through any of the following
transactions:
(a) any person or related group of persons (other than the
Company or a person that, prior to such transaction, directly or
indirectly controls, is controlled by, or is under common control
with, the Company) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant
to a tender or exchange offer made directly to the Company's
stockholders which the Board does not recommend such stockholders to
accept;
(b) there is a change in the composition of the Board over a
period of thirty-six (36) consecutive months (or less) such that a
majority of the Board members (rounded up to the nearest whole number)
ceases, by reason of one or more proxy contests for the election of
Board members, to be comprised of individuals who either (i) have been
Board members continuously since the beginning of such period or (ii)
have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (i) who were still in office at the time such election or
nomination was approved by the Board;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation (or other
entity), other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more
than 66-2/3% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided, however, that a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no person acquires more than 25% of
the combined voting power of the Company's then outstanding securities
shall not constitute a Change in Control; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
1.8. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.9. Committee. "Committee" shall mean the Compensation Committee of
the Board, or another committee or subcommittee of the Board, appointed as
provided in Section 10.1.
2
<PAGE> 3
1.10. Class A Common Stock. "Class A Common Stock" shall mean the
Class A Common Stock of the Company, par value $0.001 per share, and any equity
security of the Company issued or authorized to be issued in the future, but
excluding any preferred stock and any warrants, options or other rights to
purchase Class A Common Stock.
1.11. Common Stock. "Common Stock" shall mean the Class A Common Stock
of the Company, par value $0.001 per share, and the Class B Common Stock of the
Company, par value $0.001 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any preferred
stock and any warrants, options or other rights to purchase Common Stock.
1.12. Company. "Company" shall mean Nextera Enterprises, Inc., a
Delaware corporation.
1.13. Consultant. "Consultant" shall mean any consultant or adviser
if:
(a) the consultant or adviser renders bona fide services to the
Company;
(b) the services rendered by the consultant or adviser are not in
connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a
market for the Company's securities; and
(c) the consultant or adviser is a natural person who has
contracted directly with the Company to render such services.
1.14. Deferred Stock. "Deferred Stock" shall mean Class A Common Stock
awarded under Article VIII of the Plan.
1.15. Director. "Director" shall mean a member of the Board.
1.16. Dividend Equivalent. "Dividend Equivalent" shall mean a right to
receive the equivalent value (in cash or Class A Common Stock) of dividends paid
on Class A Common Stock, awarded under Article VIII of the Plan.
1.17. Disability. "Disability" shall mean, with respect to any
Optionee, (i) the suffering of any mental or physical illness, disability or
incapacity that shall in all material aspects preclude such Optionee from
performing his or her employment or consultant duties, or (ii) the absence of
such Optionee from his or her employment or consultant duties by reason of any
mental or physical illness, disability or incapacity for a period of ninety (90)
days during any one hundred twenty (120) day period; provided, however, in
either case, that such illness, disability or incapacity shall be reasonably
determined to be of a permanent nature by a licensed, board certified physician.
1.18. DRO. "DRO" shall mean a domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.
3
<PAGE> 4
1.19. Employee. "Employee" shall mean any officer or other employee
(as defined in accordance with Section 3401(c) of the Code) of the Company, or
of any corporation which is a Subsidiary.
1.20. Exchange Act. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.21. Fair Market Value. "Fair Market Value" of a share of Class A
Common Stock as of a given date shall be (a) the average closing price of a
share of Class A Common Stock on the principal exchange on which shares of Class
A Common Stock are then trading, if any (or as reported on any composite index
which includes such principal exchange), on the ten most current trading days
immediately prior to such date, or (b) if Class A Common Stock is not traded on
an exchange but is quoted on NASDAQ or a successor quotation system, the average
mean between the closing representative bid and asked prices for the Class A
Common Stock on ten (10) most recent trading days immediately prior to such date
as reported by NASDAQ or such successor quotation system; or (c) if Class A
Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the Fair Market Value of a share of Class A Common
Stock as established by the Administrator acting in good faith. The
Administrator shall determine the Fair Market Value at least once each calendar
quarter and such determination shall apply until the Administrator has made
another determination of Fair Market Value.
1.22. Holder. "Holder" shall mean a person who has been granted or
awarded an Award.
1.23. Incentive Stock Option. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Administrator.
1.24. Independent Director. "Independent Director" shall mean a member
of the Board who is not an Employee of the Company.
1.25. Non-Qualified Stock Option. "Non-Qualified Stock Option" shall
mean an Option which is not designated as an Incentive Stock Option by the
Administrator.
1.26. Option. "Option" shall mean a stock option granted under Article
IV of the Plan. An Option granted under the Plan shall, as determined by the
Administrator, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to Independent Directors and
Consultants shall be Non-Qualified Stock Options.
1.27. Performance Award. "Performance Award" shall mean a cash bonus,
stock bonus or other performance or incentive award that is paid in cash, Class
A Common Stock or a combination of both, awarded under Article VIII of the Plan.
1.28. Performance Criteria. "Performance Criteria" shall mean the
following business criteria with respect to the Company, any Subsidiary or any
division or operating unit: (a) net income, (b) pre-tax income, (c) operating
income, (d) cash flow, (e) earnings per share, (f)
4
<PAGE> 5
return on equity, (g) return on invested capital or assets, (h) cost reductions
or savings, (i) funds from operations, (j) appreciation in the fair market value
of Class A Common Stock and (k) earnings before any one or more of the following
items: interest, taxes, depreciation or amortization.
1.29. Plan. "Plan" shall mean The 1998 Equity Participation Plan of
Nextera Enterprises, Inc.
1.30. Restricted Stock. "Restricted Stock" shall mean Class A Common
Stock awarded under Article VII of the Plan.
1.31. Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to time.
1.32. Section 162(m) Participant. "Section 162(m) Participant" shall
mean any key Employee designated by the Administrator as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated or a
future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.
1.33. Securities Act. "Securities Act" shall mean the Securities Act
of 1933, as amended.
1.34. Stock Appreciation Right. "Stock Appreciation Right" shall mean
a stock appreciation right granted under Article IX of the Plan.
1.35. Stock Payment. "Stock Payment" shall mean (a) a payment in the
form of shares of Class A Common Stock, or (b) an option or other right to
purchase shares of Class A Common Stock, as part of a deferred compensation
arrangement, made in lieu of all or any portion of the compensation, including
without limitation, salary, bonuses and commissions, that would otherwise become
payable to a key Employee or Consultant in cash, awarded under Article VIII of
the Plan.
1.36. Subsidiary. "Subsidiary" shall mean (a) any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain, (b) any partnership in
which the Company is a general partner, (c) any limited liability company in
which the Company is a managing member, or (d) any partnership or limited
liability company in which the Company possesses a 50% or greater interest in
the total capital or total income of such partnership.
1.37. Substitute Award. "Substitute Award" shall mean an Option
granted under this Plan upon the assumption of, or in substitution for,
outstanding equity awards previously granted by a company or other entity in
connection with a corporate transaction, such as a merger, combination,
consolidation or acquisition of property or stock; provided, however, that in no
event shall the term "Substitute Award" be construed to refer to an award made
in connection with the cancellation and repricing of an Option.
5
<PAGE> 6
1.38. Termination for Cause. "Termination for Cause" shall mean the
time when the employee-employer or Consultant-employer relationship between an
Optionee and the Company or any Subsidiary is terminated for cause, as
termination for cause is defined in the Optionee's employment or consultancy
agreement; provided however, that if termination for cause is not therein
defined, the following shall constitute "Cause" for the termination of the
Optionee's employee-employer or Consultant-client relationship:
(a) material dishonest statements or acts of the Optionee with
respect to the Company or any affiliate of the Company;
(b) indictment of the Optionee for (i) a felony or (ii) any
misdemeanor involving moral turpitude, deceit, dishonesty or fraud
("indictment," for these purposes, meaning an indictment, probable
cause hearing or any other procedure pursuant to which an initial
determination of probable or reasonable cause with respect to such
offense is made);
(c) willful misconduct by the Optionee after three (3) days
written notice and an opportunity to cure;
(d) gross negligence, or willful failure or refusal of the
Optionee to comply with explicit directions of the Board after fifteen
(15) days written notice and an opportunity to cure.
In making any determination under this Section 1.38 the Board shall
act fairly and in good faith and shall give the Optionee an opportunity to
appear and be heard at a meeting of the Board or any committee thereof and
present evidence on his behalf.
1.39. Termination of Consultancy. "Termination of Consultancy" shall
mean the time when the engagement of a Holder as a Consultant to the Company or
a Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death or retirement; but
excluding terminations where there is a simultaneous commencement of employment
with the Company or any Subsidiary. The Administrator, in its absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Consultancy, including, but not by way of limitation, the
question of whether a Termination of Consultancy resulted from a discharge for
good cause, and all questions of whether a particular leave of absence
constitutes a Termination of Consultancy. Notwithstanding any other provision of
the Plan, the Company or any Subsidiary has an absolute and unrestricted right
to terminate a Consultant's service at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.
1.40. Termination of Directorship. "Termination of Directorship" shall
mean the time when a Holder who is an Independent Director ceases to be a
Director for any reason, including, but not by way of limitation, a termination
by resignation, failure to be elected, death or retirement. The Board, in its
sole and absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Directorship with respect to Independent
Directors.
6
<PAGE> 7
1.41. Termination of Employment. "Termination of Employment" shall
mean the time when the employee-employer relationship between a Holder and the
Company or any Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death, Disability or retirement; but excluding (a) terminations where
there is a simultaneous reemployment or continuing employment of a Holder by the
Company or any Subsidiary, (b) at the discretion of the Administrator,
terminations which result in a temporary severance of the employee-employer
relationship, and (c) at the discretion of the Administrator, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a Subsidiary with the former employee. The Administrator, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether a particular leave of absence
constitutes a Termination of Employment; provided, however, that, with respect
to Incentive Stock Options, unless otherwise determined by the Administrator in
its discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1. Shares Subject to Plan.
(a) The shares of stock subject to Awards shall be Class A Common
Stock, initially shares of the Company's Class A Common Stock, par
value $ 0.001 per share. The aggregate number of such shares which may
be issued upon exercise of such Options or rights or upon any such
awards under the Plan shall not exceed _______________ (___________).
The shares of Class A Common Stock issuable upon exercise of such
Options or rights or upon any such awards may be either previously
authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to Awards,
granted under the Plan to any individual in any calendar year shall
not exceed the Award Limit. To the extent required by Section 162(m)
of the Code, shares subject to Options which are canceled continue to
be counted against the Award Limit.
2.2. Add-back of Options and Other Rights. If any Option, or other
right to acquire shares of Class A Common Stock under any other Award under the
Plan, expires or is canceled without having been fully exercised, or is
exercised in whole or in part for cash as permitted by the Plan, the number of
shares subject to such Option or other right but as to which such Option or
other right was not exercised prior to its expiration, cancellation or exercise
may again be optioned, granted or awarded hereunder, subject to the limitations
of Section 2.1. Furthermore, any shares subject to Awards which are adjusted
pursuant to Section 11.3 and
7
<PAGE> 8
become exercisable with respect to shares of stock of another corporation shall
be considered canceled and may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. Shares of Class A Common Stock which
are delivered by the Holder or withheld by the Company upon the exercise of any
Award under the Plan, in payment of the exercise price thereof or tax
withholding thereon, may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. If any shares of Restricted Stock are
surrendered by the Holder or repurchased by the Company pursuant to Section 7.4
or 7.5 hereof, such shares may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. Notwithstanding the provisions of
this Section 2.2, no shares of Class A Common Stock may again be optioned,
granted or awarded if such action would cause an Incentive Stock Option to fail
to qualify as an incentive stock option under Section 422 of the Code.
ARTICLE III.
GRANTING OF AWARDS
3.1. Award Agreement. Each Award shall be evidenced by an Award
Agreement. Award Agreements evidencing Awards intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code. Award Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 422 of the Code.
3.2. Provisions Applicable to Section 162(m) Participants.
(a) The Committee, in its discretion, may determine whether an
Award is to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code.
(b) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any Award to a Section 162(m) Participant,
including Restricted Stock the restrictions with respect to which
lapse upon the attainment of performance goals which are related to
one or more of the Performance Criteria and any performance or
incentive award described in Article VIII that vests or becomes
exercisable or payable upon the attainment of performance goals which
are related to one or more of the Performance Criteria.
(c) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with
respect to any Award granted under Articles VII and VIII which may be
granted to one or more Section 162(m) Participants, no later than
ninety (90) days following the commencement of any fiscal year in
question or any other designated fiscal period or period of service
(or such other time as may be required or permitted by Section 162(m)
of the Code), the Committee shall, in writing, (i) designate one or
more Section 162(m) Participants, (ii) select the Performance Criteria
applicable to the fiscal year or other designated fiscal period or
period of service, (iii) establish the various performance targets, in
terms of an
8
<PAGE> 9
objective formula or standard, and amounts of such Awards, as
applicable, which may be earned for such fiscal year or other
designated fiscal period or period of service and (iv) specify the
relationship between Performance Criteria and the performance targets
and the amounts of such Awards, as applicable, to be earned by each
Section 162(m) Participant for such fiscal year or other designated
fiscal period or period of service. Following the completion of each
fiscal year or other designated fiscal period or period of service,
the Committee shall certify in writing whether the applicable
performance targets have been achieved for such fiscal year or other
designated fiscal period or period of service. In determining the
amount earned by a Section 162(m) Participant, the Committee shall
have the right to reduce (but not to increase) the amount payable at a
given level of performance to take into account additional factors
that the Committee may deem relevant to the assessment of individual
or corporate performance for the fiscal year or other designated
fiscal period or period of service.
(d) Furthermore, notwithstanding any other provision of the Plan
or any Award which is granted to a Section 162(m) Participant and is
intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall be subject to any additional
limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as
performance-based compensation as described in Section 162(m)(4)(C) of
the Code, and the Plan shall be deemed amended to the extent necessary
to conform to such requirements.
3.3. Limitations Applicable to Section 16 Persons. Notwithstanding any
other provision of the Plan, the Plan, and any Award granted or awarded to any
individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.
3.4. Consideration. In consideration of the granting of an Award under
the Plan, the Holder shall agree, in the Award Agreement, to render faithful and
efficient services to the Company or a Subsidiary.
3.5. At-Will Employment. Nothing in the Plan or in any Award Agreement
hereunder shall confer upon any Holder any right to continue in the employ of,
or as a Consultant for, the Company or any Subsidiary, or as a director of the
Company, or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Holder at any time for any reason whatsoever, with or without cause, except
to the extent expressly provided otherwise in a written employment agreement
between the Holder and the Company and any Subsidiary.
ARTICLE IV.
9
<PAGE> 10
GRANTING OF OPTIONS TO EMPLOYEES,
CONSULTANTS AND INDEPENDENT DIRECTORS
4.1. Eligibility. Any Employee or Consultant selected by the Committee
pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option. Each
Independent Director of the Company shall be eligible to be granted Options at
the times and in the manner set forth in Section 4.5.
4.2. Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under the Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary or parent corporation (within the meaning of Section
422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.
4.3. Qualification of Incentive Stock Options. No Incentive Stock
Option shall be granted to any person who is not an Employee.
4.4. Granting of Options to Employees and Consultants.
(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of the Plan:
(i) Determine which Employees are key Employees and select
from among the key Employees or Consultants (including Employees or
Consultants who have previously received Awards under the Plan) such
of them as in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the selected key
Employees or Consultants;
(iii) Subject to Section 4.3, determine whether such Options
are to be Incentive Stock Options or Non-Qualified Stock Options and
whether such Options are to qualify as performance-based compensation
as described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with the Plan; provided, however, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.
(a) Upon the selection of a key Employee or Consultant to be
granted an Option, the Committee shall instruct the Secretary of the
Company to issue the Option and may impose such conditions on the
grant of the Option as it deems appropriate.
10
<PAGE> 11
(b) Any Incentive Stock Option granted under the Plan may be
modified by the Committee, with the consent of the Holder, to
disqualify such Option from treatment as an "incentive stock option"
under Section 422 of the Code.
4.5. Granting of Options to Independent Directors.
The Board shall from time to time, in its absolute discretion,
and subject to applicable limitations of the Plan:
(a) Select from among the Independent Directors (including
Independent Directors who have previously received Options under the
Plan) such of them as in its opinion should be granted Options;
(b) Subject to the Award Limit, determine the number of shares to
be subject to such Options granted to the selected Independent
Directors;
(c) Subject to the provisions of Article 5, determine the terms
and conditions of such Options, consistent with the Plan.
All the foregoing Option grants authorized by this Section 4.5 are
subject to stockholder approval of the Plan.
ARTICLE V.
TERMS OF OPTIONS
5.1. Option Price. The price per share of the shares subject to each
Option granted to Employees and Consultants shall be set by the Committee;
provided, however, that such price shall be no less than the par value of a
share of Class A Common Stock, unless otherwise permitted by applicable state
law and:
(a) in the case of Options intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of
the Code, such price shall not be less than 100% of the Fair Market
Value of a share of Class A Common Stock on the date the Option is
granted;
(b) in the case of Incentive Stock Options such price shall not
be less than 100% of the Fair Market Value of a share of Class A
Common Stock on the date the Option is granted (or the date the Option
is modified, extended or renewed for purposes of Section 424(h) of the
Code);
(c) in the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes
of stock of the Company or any Subsidiary or parent corporation
thereof (within the meaning of Section 422 of the Code), such price
shall not be less than 110% of the Fair Market Value of a share of
Class A Common Stock on the
11
<PAGE> 12
date the Option is granted (or the date the Option is modified,
extended or renewed for purposes of Section 424(h) of the Code).
5.2. Option Term. The term of an Option granted to an Employee or
Consultant shall be set by the Committee in its discretion; provided, however,
that:
(a) No Option may have a term that extends beyond the expiration
of ten (10) years from the date the Option was granted;
(b) In the case of Incentive Stock Options, the term shall not be
more than ten (10) years from the date the Incentive Stock Option is
granted, or five (5) years from such date if the Incentive Stock
Option is granted to an individual then owning (within the meaning of
Section 424(d) of the Code) more than ten percent (10%) of the total
combined voting power of all classes of equity of the Company or any
Subsidiary;
(c) Except as limited by requirements of Section 422 of the Code
and regulations and rulings thereunder applicable to Incentive Stock
Options, the Committee (or the Board in the case of Options granted to
Independent Directors) may extend the term of any outstanding Option
in connection with any Termination of Directorship, Termination of
Employment or Termination of Consultancy of the Optionee, or amend any
other term or condition of such Option relating to such a termination;
and
(d) Unless otherwise permitted by applicable securities laws, in
the event of an Optionee's Termination of Directorship, Termination of
Employment or Termination of Consultancy for any reason except death,
Disability or Termination for Cause, the Optionee shall have at least
ninety (90) days from the date of such Termination of Directorship,
Termination of Employment or Termination of Consultancy to exercise
the Option, and in the event of an Optionee's Termination of
Directorship, Termination of Employment or Termination of Consultancy
due to the Optionee's death or Disability, the Optionee shall have at
least one hundred eighty (180) days from the date of such Termination
of Directorship, Termination of Employment or Termination of
Consultancy to exercise the Option. Notwithstanding the forgoing, if
an Optionee's Termination of Directorship, Termination of Employment
or Termination of Consultancy also qualifies as a Termination for
Cause, the Company, in its discretion, may terminate the Optionee's
right to exercise his or her Options on the date of such termination
or such other time as the Committee (or the Board in the case of
Options granted to Independent Directors), in its discretion, shall
deem appropriate.
5.3. Option Vesting
(a) The period during which the right to exercise, in whole or in
part, an Option granted to an Employee or a Consultant vests in the
Holder shall be set by the Committee and the Committee may determine
that an Option may not be exercised in whole or in part for a
specified period after it is granted; provided, however, that, unless
the Committee otherwise provides in the terms of the Award Agreement
or otherwise, no Option shall be exercisable by any Holder who is then
subject to Section 16 of the
12
<PAGE> 13
Exchange Act within the period ending six months and one day after the
date the Option is granted. At any time after grant of an Option, the
Committee may, in its sole and absolute discretion and subject to
whatever terms and conditions it selects, accelerate the period during
which an Option granted to an Employee or Consultant vests.
(b) No portion of an Option granted to an Employee or Consultant
which is unexercisable at Termination of Employment or Termination of
Constancy, as applicable, shall thereafter become exercisable, except
as may be otherwise provided by the Committee either in the Award
Agreement or by action of the Committee following the grant of the
Option; provided, however that if an Optionee's employment, in the
case of an Employee, or provision of services, in the case of a
Consultant, terminated by reason of death or Disability, the Option
shall become exercisable with respect to one-hundred percent (100% of
the Class A Common Units subject to such Option.
(c) To the extent that the aggregate Fair Market Value of stock
with respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the
Code) are exercisable for the first time by a Holder during any
calendar year (under the Plan and all other incentive stock option
plans of the Company and any parent or subsidiary corporation, within
the meaning of Section 422 of the Code) of the Company, exceeds
$100,000, such Options shall be treated as Non-Qualified Options to
the extent required by Section 422 of the Code. The rule set forth in
the preceding sentence shall be applied by taking Options into account
in the order in which they were granted. For purposes of this Section
5.3(c), the Fair Market Value of stock shall be determined as of the
time the Option with respect to such stock is granted.
5.4. Terms of Options Granted to Independent Directors. The price per
share of the shares subject to each Option granted to an Independent Director
shall equal 100% of the Fair Market Value of a share of Class A Common Stock on
the date the Option is granted. Options granted to Independent Directors shall
become exercisable in cumulative annual installments of 25% on each of the
first, second, third and fourth anniversaries of the date of Option grant and,
subject to Section 6.6, the term of each Option granted to an Independent
Director shall be ten (10) years from the date the Option is granted. No portion
of an Option which is unexercisable at Termination of Directorship shall
thereafter become exercisable.
5.5. Substitute Awards. Notwithstanding the foregoing provisions of
this Article V to the contrary, in the case of an Option that is a Substitute
Award, the price per share of the shares subject to such Option may be less than
the Fair Market Value per share on the date of grant, provided, that the excess
of:
(a) the aggregate Fair Market Value (as of the date such
Substitute Award is granted) of the shares subject to the Substitute
Award; over
(b) the aggregate exercise price thereof; does not exceed the
excess of;
13
<PAGE> 14
(c) the aggregate fair market value (as of the time immediately
preceding the transaction giving rise to the Substitute Award, such
fair market value to be determined by the Committee) of the shares of
the predecessor entity that were subject to the grant assumed or
substituted for by the Company; over
(d) the aggregate exercise price of such shares.
ARTICLE VI.
EXERCISE OF OPTIONS
6.1. Partial Exercise. An exercisable Option may be exercised in whole
or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Administrator may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.
6.2. Manner of Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company or his office:
(a) A written notice complying with the applicable rules
established by the Administrator stating that the Option, or a portion
thereof, is exercised. The notice shall be signed by the Holder or
other person then entitled to exercise the Option or such portion of
the Option;
(b) Such representations and documents as the Administrator, in
its absolute discretion, deems necessary or advisable to effect
compliance with all applicable provisions of the Securities Act and
any other federal or state securities laws or regulations. The
Administrator may, in its absolute discretion, also take whatever
additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates
and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 11.1 by any person or persons other than the Holder,
appropriate proof of the right of such person or persons to exercise
the Option; and
(d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is
exercised. However, the Administrator, may in its discretion (i) allow
a delay in payment up to thirty (30) days from the date the Option, or
portion thereof, is exercised; (ii) allow payment, in whole or in
part, through the delivery of shares of Class A Common Stock which
have been owned by the Holder for at least six months, duly endorsed
for transfer to the Company with a Fair Market Value on the date of
delivery equal to the aggregate exercise price of the Option or
exercised portion thereof; (iii) allow payment, in whole or in part,
through the surrender of shares of Class A Common Stock then issuable
upon exercise of the Option having a Fair Market Value on the date of
Option exercise equal to the aggregate exercise
14
<PAGE> 15
price of the Option or exercised portion thereof; (iv) allow payment,
in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall
then preclude the imputation of interest under the Code) and payable
upon such terms as may be prescribed by the Administrator; (v) allow
payment, in whole or in part, through the delivery of a notice that
the Holder has placed a market sell order with a broker with respect
to shares of Class A Common Stock then issuable upon exercise of the
Option, and that the broker has been directed to pay a sufficient
portion of the net proceeds of the sale to the Company in satisfaction
of the Option exercise price, provided that payment of such proceeds
is then made to the Company upon settlement of such sale; or (vii)
allow payment through any combination of the consideration provided in
the foregoing subparagraphs (ii), (iii), (iv), and (v). In the case of
a promissory note, the Administrator may also prescribe the form of
such note and the security to be given for such note. The Option may
not be exercised, however, by delivery of a promissory note or by a
loan from the Company when or where such loan or other extension of
credit is prohibited by law.
6.3. Conditions to Issuance of Stock Certificates. The Company shall
not be required to issue or deliver any certificate or certificates for shares
of stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Administrator shall, in its
absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Administrator shall, in
its absolute discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may establish from time to
time for reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax, which in the
discretion of the Administrator may be in the form of consideration
used by the Holder to pay for such shares under Section 6.2(d).
6.4. Rights as Stockholders. Holders shall not be, nor have any of the
rights or privileges of, stockholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
Holders.
15
<PAGE> 16
6.5. Ownership and Transfer Restrictions. The Administrator, in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate. Any such restriction shall be set forth in the respective
Award Agreement and may be referred to on the certificates evidencing such
shares. The Holder shall give the Company prompt notice of any disposition of
shares of Class A Common Stock acquired by exercise of an Incentive Stock Option
within (a) two years from the date of granting (including the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Holder or (b) one year after the transfer of such shares to such
Holder.
6.6. Limitations on Exercise of Options Granted to Independent
Directors. No Option granted to an Independent Director may be exercised to any
extent by anyone after the first to occur of the following events:
(a) the expiration of twelve (12) months from the date of the
Holder's death;
(b) the expiration of twelve (12) months from the date of the
Holder's Termination of Directorship by reason of his Disability;
(c) the expiration of three (3) months from the date of the
Holder's Termination of Directorship for any reason other than such
Holder's death or his Disability, unless the Holder dies within said
three-month period; or
(d) the expiration of ten (10) years from the date the Option was
granted.
6.7. Additional Limitations on Exercise of Options. Holders may be
required to comply with any timing or other restrictions with respect to the
settlement or exercise of an Option, including a window-period limitation, as
may be imposed in the discretion of the Administrator.
ARTICLE VII.
AWARD OF RESTRICTED STOCK
7.1. Eligibility. Subject to the Award Limit, Restricted Stock may be
awarded to any Employee who the Committee determines is a key Employee or any
Consultant who the Committee determines should receive such an Award.
7.2. Award of Restricted Stock
(a) The Committee may from time to time, in its absolute
discretion:
(i) Determine which Employees are key Employees and select
from among the key Employees or Consultants (including Employees
16
<PAGE> 17
or Consultants who have previously received other awards under the
Plan) such of them as in its opinion should be awarded Restricted
Stock; and
(ii) Determine the purchase price, if any, and other terms
and conditions applicable to such Restricted Stock, consistent with
the Plan.
(b) The Committee shall establish the purchase price, if any, and
form of payment for Restricted Stock; provided, however, that such
purchase price shall be no less than the par value of the Class A
Common Stock to be purchased, unless otherwise permitted by applicable
state law. In all cases, legal consideration shall be required for
each issuance of Restricted Stock.
(c) Upon the selection of a key Employee or Consultant to be
awarded Restricted Stock, the Committee shall instruct the Secretary
of the Company to issue such Restricted Stock and may impose such
conditions on the issuance of such Restricted Stock as it deems
appropriate.
7.3. Rights as Stockholders. Subject to Section 7.4, upon delivery of
the shares of Restricted Stock to the escrow holder pursuant to Section 7.6, the
Holder shall have, unless otherwise provided by the Committee, all the rights of
a stockholder with respect to said shares, subject to the restrictions in his
Award Agreement, including the right to receive all dividends and other
distributions paid or made with respect to the shares; provided, however, that
in the discretion of the Committee, any extraordinary distributions with respect
to the Class A Common Stock shall be subject to the restrictions set forth in
Section 7.4.
7.4. Restriction. All shares of Restricted Stock issued under the Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Committee shall provide, which restrictions
may include, without limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of employment with the
Company, Company performance and individual performance; provided, however,
that, unless the Committee otherwise provides in the terms of the Award
Agreement or otherwise, no share of Restricted Stock granted to a person subject
to Section 16 of the Exchange Act shall be sold, assigned or otherwise
transferred until at least six months and one day have elapsed from the date on
which the Restricted Stock was issued, and provided, further,] that, except with
respect to shares of Restricted Stock granted to Section 162(m) Participants, by
action taken after the Restricted Stock is issued, the Committee may, on such
terms and conditions as it may determine to be appropriate, remove any or all of
the restrictions imposed by the terms of the Award Agreement. Restricted Stock
may not be sold or encumbered until all restrictions are terminated or expire.
If no consideration was paid by the Holder upon issuance, a Holder's rights in
unvested Restricted Stock shall lapse, and such Restricted Stock shall be
surrendered to the Company without consideration, upon Termination of
Employment or, if applicable, upon Termination of Consultancy with the Company;
provided, however, that the Committee in its sole and absolute discretion may
provide that such rights shall not lapse in the event of a Termination of
17
<PAGE> 18
Employment following a "change of ownership or control" (within the meaning of
Treasury Regulation Section 1.162-27(e)(2)(v) or any successor regulation
thereto) of the Company or because of the Holder's death or Disability;
provided, further, except with respect to shares of Restricted Stock granted to
Section 162(m) Participants, the Committee in its sole and absolute discretion
may provide that no such lapse or surrender shall occur in the event of a
Termination of Employment, or a Termination of Consultancy, without cause or
following any Change in Control of the Company or because of the Holder's
retirement, or otherwise.
7.5. Repurchase of Restricted Stock. The Committee shall provide in
the terms of each individual Award Agreement that the Company shall have the
right to repurchase from the Holder the Restricted Stock then subject to
restrictions under the Award Agreement immediately upon a Termination of
Employment or, if applicable, upon a Termination of Consultancy between the
Holder and the Company, at a cash price per share equal to the price paid by the
Holder for such Restricted Stock; provided, however, that the Committee in its
sole and absolute discretion may provide that no such right of repurchase shall
exist in the event of a Termination of Employment following a "change of
ownership or control" (within the meaning of Treasury Regulation Section
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or because
of the Holder's death or Disability; provided, further, that, except with
respect to shares of Restricted Stock granted to Section 162(m) Participants,
the Committee in its sole and absolute discretion may provide that no such right
of repurchase shall exist in the event of a Termination of Employment or a
Termination of Consultancy without cause or following any Change in Control of
the Company or because of the Holder's retirement, or otherwise.
7.6. Escrow. The Secretary of the Company or such other escrow holder
as the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Award Agreement with respect to the shares evidenced by such certificate expire
or shall have been removed.
7.7. Legend. In order to enforce the restrictions imposed upon shares
of Restricted Stock hereunder, the Committee shall cause a legend or legends to
be placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Award Agreements, which legend or legends
shall make appropriate reference to the conditions imposed thereby.
7.8. Section 83(b) Election. If a Holder makes an election under
Section 83(b) of the Code, or any successor section thereto, to be taxed with
respect to the Restricted Stock as of the date of transfer of the Restricted
Stock rather than as of the date or dates upon which the Holder would otherwise
be taxable under Section 83(a) of the Code, the Holder shall deliver a copy of
such election to the Company immediately after filing such election with the
Internal Revenue Service.
ARTICLE VIII.
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK,
STOCK PAYMENTS
18
<PAGE> 19
8.1. Eligibility. Subject to the Award Limit, one or more Performance
Awards, Dividend Equivalents, awards of Deferred Stock, and/or Stock Payments
may be granted to any Employee whom the Committee determines is a key Employee
or any Consultant whom the Committee determines should receive such an Award.
8.2. Performance Awards. Any key Employee or Consultant selected by
the Committee may be granted one or more Performance Awards. The value of such
Performance Awards may be linked to any one or more of the Performance Criteria
or other specific performance criteria determined appropriate by the Committee,
in each case on a specified date or dates or over any period or periods
determined by the Committee. In making such determinations, the Committee shall
consider (among such other factors as it deems relevant in light of the specific
type of award) the contributions, responsibilities and other compensation of the
particular key Employee or Consultant.
8.3. Dividend Equivalents.
(a) Any key Employee or Consultant selected by the Committee may
be granted Dividend Equivalents based on the dividends declared on
Class A Common Stock, to be credited as of dividend payment dates,
during the period between the date a Stock Appreciation Right,
Deferred Stock or Performance Award is granted, and the date such
Stock Appreciation Right, Deferred Stock or Performance Award is
exercised, vests or expires, as determined by the Committee. Such
Dividend Equivalents shall be converted to cash or additional shares
of Class A Common Stock by such formula and at such time and subject
to such limitations as may be determined by the Committee.
(b) Any Holder of an Option who is an Employee or Consultant
selected by the Committee may be granted Dividend Equivalents based on
the dividends declared on Class A Common Stock, to be credited as of
dividend payment dates, during the period between the date an Option
is granted, and the date such Option is exercised, vests or expires,
as determined by the Committee. Such Dividend Equivalents shall be
converted to cash or additional shares of Class A Common Stock by such
formula and at such time and subject to such limitations as may be
determined by the Committee.
(c) Any Holder of an Option who is an Independent Director
selected by the Board may be granted Dividend Equivalents based on the
dividends declared on Class A Common Stock, to be credited as of
dividend payment dates, during the period between the date an Option
is granted, and the date such Option is exercised, vests or expires,
as determined by the Board. Such Dividend Equivalents shall be
converted to cash or additional shares of Class A Common Stock by such
formula and at such time and subject to such limitations as may be
determined by the Board.
(d) Dividend Equivalents granted with respect to Options intended
to be qualified performance-based compensation for purposes of Section
162(m) of the Code shall be payable, with respect to pre-exercise
periods, regardless of whether such Option is subsequently exercised.
19
<PAGE> 20
8.4. Stock Payments. Any key Employee or Consultant selected by the
Committee may receive Stock Payments in the manner determined from time to time
by the Committee. The number of shares shall be determined by the Committee and
may be based upon the Performance Criteria or other specific performance
criteria determined appropriate by the Committee, determined on the date such
Stock Payment is made or on any date thereafter.
8.5. Deferred Stock. Any key Employee or Consultant selected by the
Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock shall
be determined by the Committee and may be linked to the Performance Criteria or
other specific performance criteria determined to be appropriate by the
Committee, in each case on a specified date or dates or over any period or
periods determined by the Committee. Class A Common Stock underlying a Deferred
Stock award will not be issued until the Deferred Stock award has vested,
pursuant to a vesting schedule or performance criteria set by the Committee.
Unless otherwise provided by the Committee, a Holder of Deferred Stock shall
have no rights as a Company stockholder with respect to such Deferred Stock
until such time as the Award has vested and the Class A Common Stock underlying
the Award has been issued.
8.6. Term. The term of a Performance Award, Dividend Equivalent, award
of Deferred Stock and/or Stock Payment shall be set by the Committee in its
discretion.
8.7. Exercise or Purchase Price. The Committee may establish the
exercise or purchase price of a Performance Award, shares of Deferred Stock, or
shares received as a Stock Payment; provided, however, that such price shall not
be less than the par value for a share of Class A Common Stock, unless otherwise
permitted by applicable state law.
8.8. Exercise Upon Termination of Employment, Termination of
Consultancy or Termination of Directorship. A Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment is exercisable or
payable only while the Holder is an Employee, Consultant or Independent
Director, as applicable; provided, however, that the Administrator in its sole
and absolute discretion may provide that the Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment may be exercised or
paid subsequent to a Termination of Employment following a "change of control or
ownership" (within the meaning of Section 1.162-27(e)(2)(v) or any successor
regulation thereto) of the Company; provided, further, that except with respect
to Performance Awards granted to Section 162(m) Participants, the Administrator
in its sole and absolute discretion may provide that Performance Awards may be
exercised or paid following a Termination of Employment or a Termination of
Consultancy without cause, or following a Change in Control of the Company, or
because of the Holder's retirement, death or Disability, or otherwise.
8.9. Form of Payment. Payment of the amount determined under Section
8.2 or 8.3 above shall be in cash, in Class A Common Stock or a combination of
both, as determined by the Committee. To the extent any payment under this
Article VIII is effected in Class A Common Stock, it shall be made subject to
satisfaction of all provisions of Section 6.3.
20
<PAGE> 21
ARTICLE IX.
STOCK APPRECIATION RIGHTS
9.1. Grant of Stock Appreciation Rights. A Stock Appreciation Right
may be granted to any key Employee or Consultant selected by the Committee. A
Stock Appreciation Right may be granted (a) in connection and simultaneously
with the grant of an Option, (b) with respect to a previously granted Option, or
(c) independent of an Option. A Stock Appreciation Right shall be subject to
such terms and conditions not inconsistent with the Plan as the Committee shall
impose and shall be evidenced by an Award Agreement.
9.2. Coupled Stock Appreciation Rights.
(a) A Coupled Stock Appreciation Right ("CSAR") shall be related
to a particular Option and shall be exercisable only when and to the
extent the related Option is exercisable.
(b) A CSAR may be granted to the Holder for no more than the
number of shares subject to the simultaneously or previously granted
Option to which it is coupled.
(c) A CSAR shall entitle the Holder (or other person entitled to
exercise the Option pursuant to the Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the
extent then exercisable pursuant to its terms) and to receive from the
Company in exchange therefor an amount determined by multiplying the
difference obtained by subtracting the Option exercise price from the
Fair Market Value of a share of Class A Common Stock on the date of
exercise of the CSAR by the number of shares of Class A Common Stock
with respect to which the CSAR shall have been exercised, subject to
any limitations the Committee may impose.
9.3. Independent Stock Appreciation Rights.
(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An
ISAR shall be exercisable in such installments as the Committee may
determine. An ISAR shall cover such number of shares of Class A Common
Stock as the Committee may determine; provided, however, that unless
the Committee otherwise provides in the terms of the ISAR or
otherwise, no ISAR granted to a person subject to Section 16 of the
Exchange Act shall be exercisable until at least six months have
elapsed from (but excluding) the date on which the Option was granted.
The exercise price per share of Class A Common Stock subject to each
ISAR shall be set by the Committee. An ISAR is exercisable only while
the Holder is an Employee or Consultant; provided that the Committee
may determine that the ISAR may be exercised subsequent to Termination
of Employment or Termination of Consultancy without cause, or
following a Change in Control of the Company, or because of the
Holder's retirement, death or Disability, or otherwise.
21
<PAGE> 22
(b) An ISAR shall entitle the Holder (or other person entitled to
exercise the ISAR pursuant to the Plan) to exercise all or a specified
portion of the ISAR (to the extent then exercisable pursuant to its
terms) and to receive from the Company an amount determined by
multiplying the difference obtained by subtracting the exercise price
per share of the ISAR from the Fair Market Value of a share of Class A
Common Stock on the date of exercise of the ISAR by the number of
shares of Class A Common Stock with respect to which the ISAR shall
have been exercised, subject to any limitations the Committee may
impose.
9.4. Payment and Limitations on Exercise.
(a) Payment of the amounts determined under Section 9.2(c) and
9.3(b) above shall be in cash, in Class A Common Stock (based on its
Fair Market Value as of the date the Stock Appreciation Right is
exercised) or a combination of both, as determined by the Committee.
To the extent such payment is effected in Class A Common Stock it
shall be made subject to satisfaction of all provisions of Section 6.3
above pertaining to Options.
(b) Holders of Stock Appreciation Rights may be required to
comply with any timing or other restrictions with respect to the
settlement or exercise of a Stock Appreciation Right, including a
window-period limitation, as may be imposed in the discretion of the
Committee.
ARTICLE X.
ADMINISTRATION
10.1. Compensation Committee. Prior to the Company's initial
registration of Class A Common Stock under Section 12 of the Exchange Act, the
Compensation Committee shall consist of the entire Board. Following such
registration, The Compensation Committee (or another committee or a subcommittee
of the Board assuming the functions of the Committee under the Plan) shall
consist solely of two or more Independent Directors appointed by and holding
office at the pleasure of the Board, each of whom is both a "non-employee
director" as defined by Rule 16b-3 and an "outside director" for purposes of
Section 162(m) of the Code. Appointment of Committee members shall be effective
upon acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee may be filled
by the Board.
10.2. Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of the Plan in accordance with
its provisions. The Committee shall have the power to interpret the Plan and the
Award Agreements, and to adopt such rules for the administration,
interpretation, and application of the Plan as are consistent therewith, to
interpret, amend or revoke any such rules and to amend any Award Agreement
provided that the rights or obligations of the Holder of the Award that is the
subject of any such Award Agreement are not affected adversely. Any such grant
or award under the Plan need not be the same with respect to each Holder. Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
22
<PAGE> 23
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan except with respect to matters
which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or
rules issued thereunder, are required to be determined in the sole discretion of
the Committee. Notwithstanding the foregoing, the full Board, acting by a
majority of its members in office, shall conduct the general administration of
the Plan with respect to Options and Dividend Equivalents granted to Independent
Directors.
10.3. Majority Rule; Unanimous Written Consent. The Committee shall
act by a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.
10.4. Compensation; Professional Assistance; Good Faith Actions.
Members of the Committee shall receive such compensation, if any, for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Holders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or Awards, and all members of the Committee and the Board
shall be fully protected by the Company in respect of any such action,
determination or interpretation.
10.5. Delegation of Authority to Grant Awards. The Committee may, but
need not, delegate from time to time some or all of its authority to grant
Awards under the Plan to a committee consisting of one or more members of the
Committee or of one or more officers of the Company; provided, however, that the
Committee may not delegate its authority to grant Awards to individuals (i) who
are subject on the date of the grant to the reporting rules under Section 16(a)
of the Exchange Act, (ii) who are Section 162(m) Participants or (iii) who are
officers of the Company who are delegated authority by the Committee hereunder.
Any delegation hereunder shall be subject to the restrictions and limits that
the Committee specifies at the time of such delegation of authority and may be
rescinded at any time by the Committee. At all times, any committee appointed
under this Section 10.5 shall serve in such capacity at the pleasure of the
Committee.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
11.1. Not Transferable. No Award under the Plan may be sold, pledged,
assigned or transferred in any manner other than by will or the laws of descent
and distribution or, subject to the consent of the Administrator, pursuant to a
DRO, unless and until such Award has been exercised, or the shares underlying
such Award have been issued, and all restrictions applicable to such shares have
lapsed. No Award or interest or right therein shall be liable for the
23
<PAGE> 24
debts, contracts or engagements of the Holder or his successors in interest or
shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
During the lifetime of the Holder, only he may exercise an Option or
other Award (or any portion thereof) granted to him under the Plan, unless it
has been disposed of with the consent of the Administrator pursuant to a DRO.
After the death of the Holder, any exercisable portion of an Option or other
Award may, prior to the time when such portion becomes unexercisable under the
Plan or the applicable Award Agreement, be exercised by his personal
representative or by any person empowered to do so under the deceased Holder's
will or under the then applicable laws of descent and distribution.
11.2. Amendment, Suspension or Termination of the Plan. Except as
otherwise provided in this Section 11.2, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Administrator. However, without approval of the Company's
stockholders given within twelve months before or after the action by the
Administrator, no action of the Administrator may, except as provided in Section
11.3, increase the limits imposed in Section 2.1 on the maximum number of shares
which may be issued under the Plan. No amendment, suspension or termination of
the Plan shall, without the consent of the Holder alter or impair any rights or
obligations under any Award theretofore granted or awarded, unless the Award
itself otherwise expressly so provides. No Awards may be granted or awarded
during any period of suspension or after termination of the Plan, and in no
event may any Incentive Stock Option be granted under the Plan after the first
to occur of the following events:
(a) The expiration of ten (10) years from the date the Plan is
adopted by the Board; or
(b) The expiration of ten (10) years from the date the Plan is
approved by the Company's stockholders under Section 11.4.
11.3. Changes in Class A Common Stock or Assets of the Company,
Acquisition or Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 11.3 (d), in the event that the
Administrator determines that any dividend or other distribution
(whether in the form of cash, Class A Common Stock, other securities,
or other property), recapitalization, reclassification, stock split,
reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, liquidation, dissolution, or sale,
transfer, exchange or other disposition of all or substantially all of
the assets of the Company, or exchange of Class A Common Stock or
other securities of the Company, issuance of warrants or other rights
to purchase Class A Common Stock or other securities of the Company,
or other similar
24
<PAGE> 25
corporate transaction or event, in the Administrator's sole
discretion, affects the Class A Common Stock such that an adjustment
is determined by the Administrator to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to an
Award, then the Administrator shall, in such manner as it may deem
equitable, adjust any or all of
(i) the number and kind of shares of Class A Common Stock
(or other securities or property) with respect to which Awards may be
granted or awarded (including, but not limited to, adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares
which may be issued and adjustments of the Award Limit),
(ii) the number and kind of shares of Class A Common Stock
(or other securities or property) subject to outstanding Awards, and
(iii) the grant or exercise price with respect to any Award.
(b) Subject to Section 11.3(d), in the event of any transaction
or event described in Section 11.3(a) or any unusual or nonrecurring
transactions or events affecting the Company, any affiliate of the
Company, or the financial statements of the Company or any affiliate,
or of changes in applicable laws, regulations, or accounting
principles, the Administrator, in its sole and absolute discretion,
and on such terms and conditions as it deems appropriate, either by
the terms of the Award or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the
Holder's request, is hereby authorized to take any one or more of the
following actions whenever the Administrator determines that such
action is appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under
the Plan or with respect to any Award under the Plan, to facilitate
such transactions or events or to give effect to such changes in laws,
regulations or principles:
(i) To provide for either the purchase of any such Award for
an amount of cash equal to the amount that could have been attained
upon the exercise of such Award or realization of the Holder's rights
had such Award been currently exercisable or payable or fully vested
or the replacement of such Award with other rights or property
selected by the Administrator in its sole discretion;
(ii) To provide that the Award cannot vest, be exercised or
become payable after such event;
(iii) To provide that such Award shall be exercisable as to
all shares covered thereby, notwithstanding anything to the contrary
in Section 5.3 or 5.4 or the provisions of such Award;
(iv) To provide that such Award be assumed by the successor
or survivor corporation, or a parent or subsidiary thereof, or
25
<PAGE> 26
shall be substituted for by similar options, rights or awards covering
the stock of the successor or survivor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and
kind of shares and prices; and
(v) To make adjustments in the number and type of shares of
Class A Common Stock (or other securities or property) subject to
outstanding Awards, and in the number and kind of outstanding
Restricted Stock or Deferred Stock and/or in the terms and conditions
of (including the grant or exercise price), and the criteria included
in, outstanding options, rights and awards and options, rights and
awards which may be granted in the future.
(vi) To provide that, for a specified period of time prior
to such event, the restrictions imposed under an Award Agreement upon
some or all shares of Restricted Stock or Deferred Stock may be
terminated, and, in the case of Restricted Stock, some or all shares
of such Restricted Stock may cease to be subject to repurchase under
Section 7.5 or forfeiture under Section 7.4 after such event.
(c) Subject to Sections 11.3(d), 3.2 and 3.3, the Administrator
may, in its discretion, include such further provisions and
limitations in any Award, agreement or certificate, as it may deem
equitable and in the best interests of the Company.
(d) With respect to Awards which are granted to Section 162(m)
Participants and are intended to qualify as performance-based
compensation under Section 162(m)(4)(C), no adjustment or action
described in this Section 11.3 or in any other provision of the Plan
shall be authorized to the extent that such adjustment or action would
cause such Award to fail to so qualify under Section 162(m)(4)(C), or
any successor provisions thereto. No adjustment or action described in
this Section 11.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause
the Plan to violate Section 422(b)(1) of the Code. Furthermore, no
such adjustment or action shall be authorized to the extent such
adjustment or action would result in short-swing profits liability
under Section 16 or violate the exemptive conditions of Rule 16b-3
unless the Administrator determines that the Award is not to comply
with such exemptive conditions. The number of shares of Class A Common
Stock subject to any Award shall always be rounded to the next whole
number.
(e) Notwithstanding the foregoing, in the event that the Company
becomes a party to a transaction that is intended to qualify for
"pooling of interests" accounting treatment and, but for one or more
of the provisions of this Plan or any Award Agreement would so
qualify, then this Plan and any Award Agreement shall be interpreted
so as to preserve such accounting treatment, and to the extent that
any provision of the Plan or any Award Agreement would disqualify the
transaction from pooling of interests accounting treatment (including,
if applicable, an entire Award Agreement), then such provision shall
be null and void. All determinations to be made in connection with the
26
<PAGE> 27
preceding sentence shall be made by the independent accounting firm
whose opinion with respect to "pooling of interests" treatment is
required as a condition to the Company's consummation of such
transaction.
(f) The existence of the Plan, the Award Agreement and the Awards
granted hereunder shall not affect or restrict in any way the right or
power of the Company or the shareholders of the Company to make or
authorize any adjustment, recapitalization, reorganization or other
change in the Company's capital structure or its business, any merger
or consolidation of the Company, any issue of stock or of options,
warrants or rights to purchase stock or of bonds, debentures,
preferred or prior preference stocks whose rights are superior to or
affect the Class A Common Stock or the rights thereof or which are
convertible into or exchangeable for Class A Common Stock, or the
dissolution or liquidation of the company, or any sale or transfer of
all or any part of its assets or business, or any other corporate act
or proceeding, whether of a similar character or otherwise.
11.4. Approval of Plan by Stockholders. The Plan will be submitted for
the approval of the Company's stockholders (by a majority of the outstanding
common stock entitled to vote thereon with the voting rights set forth in the
Company's Amended and Restated Certificate of Incorporation) within twelve
months after the date of the Board's initial adoption of the Plan. Awards may be
granted or awarded prior to such stockholder approval, provided that such Awards
shall not be exercisable nor shall such Awards vest prior to the time when the
Plan is approved by the stockholders, and provided further that if such approval
has not been obtained at the end of said twelve-month period, all Awards
previously granted or awarded under the Plan shall thereupon be canceled and
become null and void. In addition, if the Board determines that Awards other
than Options or Stock Appreciation Rights which may be granted to Section 162(m)
Participants should continue to be eligible to qualify as performance-based
compensation under Section 162(m)(4)(C) of the Code, the Performance Criteria
must be disclosed to and approved by the Company's stockholders no later than
the first stockholder meeting that occurs in the fifth year following the year
in which the Company's stockholders previously approved the Performance
Criteria.
11.5. Tax Withholding. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each Holder of
any sums required by federal, state or local tax law to be withheld with respect
to the issuance, vesting, exercise or payment of any Award. The Administrator
may in its discretion and in satisfaction of the foregoing requirement allow
such Holder to elect to have the Company withhold shares of Class A Common Stock
otherwise issuable under such Award (or allow the return of shares of Class A
Common Stock) having a Fair Market Value equal to the sums required to be
withheld.
11.6. Loans. The Committee may, in its discretion, extend one or more
loans to key Employees in connection with the exercise or receipt of an Award
granted or awarded under the Plan, or the issuance of Restricted Stock or
Deferred Stock awarded under the Plan. The terms and conditions of any such loan
shall be set by the Committee.
27
<PAGE> 28
11.7. Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to Awards under the Plan, the
Administrator shall have the right to provide, in the terms of Awards made under
the Plan, or to require a Holder to agree by separate written instrument, that
(a) (i) any proceeds, gains or other economic benefit actually or constructively
received by the Holder upon any receipt or exercise of the Award, or upon the
receipt or resale of any Class A Common Stock underlying the Award, must be paid
to the Company, and (ii) the Award shall terminate and any unexercised portion
of the Award (whether or not vested) shall be forfeited, if (b)(i) a Termination
of Employment, Termination of Consultancy or Termination of Directorship occurs
prior to a specified date, or within a specified time period following receipt
or exercise of the Award, or (ii) the Holder at any time, or during a specified
time period, engages in any activity in competition with the Company, or which
is inimical, contrary or harmful to the interests of the Company, as further
defined by the Administrator.
11.8. Effect of Plan Upon Options and Compensation Plans.
(a) The adoption of the Plan shall not affect any other
compensation or incentive plans in effect for the Company or any
Subsidiary, other than superseding the Amended and Restated Employee
Equity Participation Plan of Nextera Enterprises, L.L.C., a Delaware
limited liability company ("Nextera LLC"). Nothing in the Plan shall
be construed to limit the right of the Company (i) to establish any
other forms of incentives or compensation for Employees, Directors or
Consultants of the Company or any Subsidiary or (ii) to grant or
assume options or other rights or awards otherwise than under the Plan
in connection with any proper corporate purpose including but not by
way of limitation, the grant or assumption of options in connection
with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation,
partnership, limited liability company, firm or association.
(b) Options granted under this Plan to replace options granted
to the employees of Nextera LLC, shall have the aggregate option
exercise price, the vesting schedule and term as set forth in the
Equity Participation Agreements granted by Nextera LLC to the
optionees thereunder.
11.9. Lock-Up in Connection with Initial Public Offering. Each Award
Agreement issued pursuant to this Plan prior to the initial public offering of
the Company's Common Stock shall include provisions substantially similar to
the following:
"To induce the underwriters that may participate in an initial
public offering (the "Initial Public Offering") of the Company's
Common Stock to continue their efforts in connection with the Initial
Public Offering, the undersigned, during the period commencing on the
date hereof and ending 180 days after the date of the final prospectus
relating to the Initial Public Offering:
(i) agrees not to (x) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or
28
<PAGE> 29
exercisable or exchangeable for Common Stock (including, without
limitation, shares of Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations of the Securities and Exchange Commission) or (y) enter
into any swap or other arrangement that transfers all or a portion of
the economic consequences associated with the ownership of any Common
Stock (regardless of whether any of the transactions described in
clause (x) or (y) is to be settled by the delivery of Common Stock, or
such other securities, in cash or otherwise), without the prior
written consent of the lead managing underwriter of such Initial
Public Offering;
(ii) agrees not to make any demand for, or exercise any
right with respect to, the registration of any shares of Common Stock
or any securities convertible into or exercisable or exchangeable for
Common Stock, without the prior written consent of the managing lead
underwriter of such Initial Public Offering; and
(iii) authorizes the Company to cause the transfer agent to
decline to transfer and/or to note stop transfer restrictions on the
transfer books and records of the Company with respect to any shares
of Common Stock and any securities convertible into or exercisable or
exchangeable for Common Stock for which the undersigned is the record
holder and, in the case of any such shares or securities for which the
undersigned is the beneficial but not the record holder, agrees to
cause the record holder to cause the transfer agent to decline to
transfer and/or to note stop transfer restrictions on such books and
records with respect to such shares or securities.
Notwithstanding the foregoing, the restrictions set forth in clauses (i),
(ii) and (iii) above shall not apply to any transfer of Common Stock to a
"Controlled Affiliate" or pursuant to a "Qualified Transfer" (as each such
term is defined in the Company's Amended and Restated Certificate of
Incorporation); provided that prior to any such transfer the transferee
agrees in writing to be bound by the provisions of this Section ___.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into the agreements set forth in this
Section, and that, upon request, the undersigned will execute any
additional documents necessary or desirable in connection with the
enforcement hereof. All authority herein conferred or agreed to be
conferred shall survive the death or incapacity of the undersigned and any
obligations of the undersigned shall be binding upon the heirs, personal
representatives, successors, and assigns of the undersigned."
11.10. Compliance with Laws. The Plan, the granting and vesting of
Awards under the Plan and the issuance and delivery of shares of Class A Common
Stock and the payment of money under the Plan or under Awards granted or awarded
hereunder are subject to compliance with all applicable federal and state laws,
rules and regulations (including but not limited to state and federal securities
law and federal margin requirements) and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for the
Company, be necessary or advisable in connection therewith. Any securities
delivered under the Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as the Company may deem necessary
or desirable to assure compliance with all applicable legal requirements. To the
extent permitted by applicable law, the Plan and Awards granted or
29
<PAGE> 30
awarded hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
11.11. Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of the Plan.
11.12. Governing Law. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by the Board
of Directors of Nextera Enterprises, Inc. on ____________, 1998.
Executed on this ____ day of _______________, 1998.
____________________________________
Secretary
30
<PAGE> 1
EXHIBIT NO. 10.2
STOCK PURCHASE AGREEMENT
by and among
NEXTERA ENTERPRISES, L.L.C.
(Buyer)
SYMMETRIX, INC.
(the Company)
The Stockholders of the Company
and
Certain Optionholders of the Company
July 30, 1997
<PAGE> 2
STOCK PURCHASE AGREEMENT
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. SALE OF SHARES, CANCELLATION OF OPTIONS AND PURCHASE PRICE.................................................... 1
1.1. CANCELLATION OF OPTIONS............................................................................................. 1
1.2. TRANSFER OF COMPANY SHARES.......................................................................................... 1
1.3. PURCHASE PRICE AND PAYMENT.......................................................................................... 2
1.4. TIME AND PLACE OF CLOSING........................................................................................... 2
1.5. FURTHER ASSURANCES.................................................................................................. 2
1.6. TRANSFER TAXES...................................................................................................... 2
1.7. EXCLUDED LIABILITIES................................................................................................ 2
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE REPRESENTING
PARTIES.................................................................................................................. 3
2.1. MAKING OF REPRESENTATIONS AND WARRANTIES............................................................................ 3
2.2. ORGANIZATION AND QUALIFICATIONS OF THE COMPANY...................................................................... 3
2.3. CAPITAL STOCK OF THE COMPANY; BENEFICIAL OWNERSHIP.................................................................. 3
2.4. SUBSIDIARIES........................................................................................................ 4
2.5. AUTHORITY OF THE COMPANY............................................................................................ 4
2.6. REAL AND PERSONAL PROPERTY.......................................................................................... 5
2.7. FINANCIAL STATEMENTS................................................................................................ 7
2.8. TAXES............................................................................................................... 8
2.9. ACCOUNTS RECEIVABLE................................................................................................. 9
2.10. INTENTIONALLY OMITTED.............................................................................................. 9
2.11. ABSENCE OF CERTAIN CHANGES......................................................................................... 9
2.12. ORDINARY COURSE.................................................................................................... 11
2.13. BANKING RELATIONS.................................................................................................. 11
2.14. INTELLECTUAL PROPERTY.............................................................................................. 11
2.15. CONTRACTS.......................................................................................................... 13
2.16. LITIGATION......................................................................................................... 14
2.17. COMPLIANCE WITH LAWS............................................................................................... 14
2.18. INSURANCE.......................................................................................................... 15
2.19. WARRANTY OR OTHER CLAIMS........................................................................................... 15
2.20. POWERS OF ATTORNEY................................................................................................. 15
2.21. FINDER'S FEE....................................................................................................... 15
2.22. PERMITS: BURDENSOME AGREEMENTS..................................................................................... 15
2.23. CORPORATE RECORDS; COPIES OF DOCUMENTS............................................................................. 15
2.24. TRANSACTIONS WITH INTERESTED PERSONS............................................................................... 16
2.25. EMPLOYEE BENEFIT PROGRAMS.......................................................................................... 16
2.26. ENVIRONMENTAL MATTERS.............................................................................................. 18
2.27. LIST OF DIRECTORS AND OFFICERS..................................................................................... 19
2.28. DISCLOSURE......................................................................................................... 19
2.29. NON-FOREIGN STATUS................................................................................................. 20
2.30. BACKLOG............................................................................................................ 20
2.31. EMPLOYEES; LABOR MATTERS........................................................................................... 20
2.32. CUSTOMERS, DISTRIBUTORS AND SUPPLIERS.............................................................................. 21
2.33. TRANSFER OF SHARES................................................................................................. 21
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
2.34. STOCK REPURCHASE................................................................................................... 21
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE HOLDERS................................................................. 21
3.1. COMPANY SHARES AND OPTIONS.......................................................................................... 21
3.2. AUTHORITY........................................................................................................... 21
3.3. FINDER'S FEE........................................................................................................ 22
3.4. AGREEMENTS.......................................................................................................... 22
SECTION 4. COVENANTS OF THE COMPANY AND THE REPRESENTING PARTIES......................................................... 23
4.1. MAKING OF COVENANTS AND AGREEMENTS.................................................................................. 23
4.2. CONDUCT OF BUSINESS................................................................................................. 23
4.3. AUTHORIZATION FROM OTHERS........................................................................................... 24
4.4. NOTICE OF DEFAULT................................................................................................... 24
4.5. CONSUMMATION OF AGREEMENT........................................................................................... 25
4.6. COOPERATION OF THE COMPANY AND HOLDERS.............................................................................. 25
4.7. NON-SOLICITATION.................................................................................................... 25
4.8. NO SOLICITATION OF OTHER OFFERS..................................................................................... 25
4.9. CONFIDENTIALITY..................................................................................................... 26
4.10. TAX RETURNS........................................................................................................ 26
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER....................................................................... 26
5.1. MAKING OF REPRESENTATIONS AND WARRANTIES............................................................................ 26
5.2. ORGANIZATION OF BUYER............................................................................................... 26
5.3. AUTHORITY OF BUYER.................................................................................................. 26
5.4. LITIGATION.......................................................................................................... 27
5.5. FINDER'S FEE........................................................................................................ 27
5.6. AVAILABLE FUNDS..................................................................................................... 27
SECTION 6. COVENANTS OF BUYER............................................................................................ 27
6.1. MAKING OF COVENANTS AND AGREEMENT................................................................................... 27
6.2. CONFIDENTIALITY..................................................................................................... 27
6.3. CONSUMMATION OF AGREEMENT........................................................................................... 28
SECTION 7. CONDITIONS.................................................................................................... 28
7.1. CONDITIONS TO THE OBLIGATIONS OF BUYER.............................................................................. 28
7.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE HOLDERS............................................................ 30
SECTION 8. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED................................................................... 31
8.1. TERMINATION......................................................................................................... 31
8.2. EFFECT OF TERMINATION............................................................................................... 32
SECTION 9. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.................................................................. 32
9.1. SURVIVAL OF WARRANTIES.............................................................................................. 32
9.2. RETENTION BONUS POOL................................................................................................ 32
9.3. RIGHTS OF FIRST REFUSAL............................................................................................. 32
9.4. INVESTMENT ENTITIES................................................................................................. 32
9.5. RELEASE............................................................................................................. 33
9.6. INDEMNIFICATION INSURANCE........................................................................................... 35
SECTION 10. INDEMNIFICATION.............................................................................................. 35
10.1. INDEMNIFICATION BY THE HOLDERS..................................................................................... 35
10.2. LIMITATIONS ON INDEMNIFICATION BY THE HOLDERS...................................................................... 36
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
10.3. INDEMNIFICATION BY BUYER........................................................................................... 39
10.4. LIMITATION ON INDEMNIFICATION BY BUYER............................................................................. 39
10.5. NOTICE; DEFENSE OF CLAIMS.......................................................................................... 39
10.6. SATISFACTION OF HOLDER INDEMNIFICATION OBLIGATIONS................................................................. 40
SECTION 11. MISCELLANEOUS................................................................................................ 40
11.1. FEES AND EXPENSES.................................................................................................. 40
11.2. GOVERNING LAW...................................................................................................... 41
11.3. NOTICES............................................................................................................ 41
11.4. AFFIRMATION OF AGREEMENTS.......................................................................................... 42
11.5. ENTIRE AGREEMENT................................................................................................... 42
11.6. ASSIGNABILITY; BINDING EFFECT...................................................................................... 42
11.7. CAPTIONS AND GENDER................................................................................................ 42
11.8. EXECUTION IN COUNTERPARTS.......................................................................................... 43
11.9. AMENDMENTS......................................................................................................... 43
11.10. PUBLICITY AND DISCLOSURES......................................................................................... 43
11.11. CONSENT TO JURISDICTION........................................................................................... 43
11.12. SPECIFIC PERFORMANCE.............................................................................................. 43
11.13. CONFLICT WITH OPTION CANCELLATION AGREEMENT....................................................................... 43
</TABLE>
iii
<PAGE> 5
STOCK PURCHASE AGREEMENT
AGREEMENT entered into as of July 30, 1997 by and among Nextera
Enterprises, L.L.C., a Delaware limited liability company ("Buyer"), Symmetrix,
Inc., a Massachusetts corporation (the "Company"), the holders of the Company's
capital stock listed on Exhibit A (herein collectively referred to as the
"Stockholders" and individually as a "Stockholder") and certain holders of
options to purchase shares of the Company's capital stock listed on Exhibit B
(identified on Exhibit B as and herein collectively referred to as the
"Optionholders" and individually as an "Optionholder"). The Stockholders and the
Optionholders are herein collectively referred to as the "Holders" and
individually as a "Holder."
W I T N E S S E T H
WHEREAS, the Stockholders own of record and beneficially all of the
issued and outstanding capital stock of the Company, consisting of 1,216,921
shares (said shares referred to herein as the "Company Shares") of the Company's
common stock, $.01 par value per share (the "Common Stock"); and
WHEREAS, the Optionholders hold 846,558 options (the "Options") to
purchase equity securities of the Company of which 827,258 Options shall, as of
the Closing (as hereinafter defined) be fully exercisable; and
WHEREAS, the Holders desire to sell all of the Company Shares to
Buyer, and Buyer desires to acquire all of the Company Shares; and
WHEREAS, all other holders of options to purchase equity securities of
the Company (identified on Exhibit B as and referred to herein as "Excluded
Optionholders") shall enter into an agreement (the "Option Cancellation
Agreement") with the Company whereby each such optionholder shall agree to have
the Company cancel all options held by such optionholder in exchange for the
consideration set forth in the Option Cancellation Agreement.
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECTION 1. SALE OF SHARES, CANCELLATION OF OPTIONS AND PURCHASE PRICE.
1.1. Cancellation of Options. At the Closing (as hereinafter defined),
each Optionholder shall cause to be delivered to the Company all documentation
necessary, if any, for the Company to cancel the Options held by such
Optionholder.
1.2. Transfer of Company Shares. At the Closing (as hereinafter
defined), each Stockholder shall deliver or cause to be delivered to Buyer
certificates representing all of the Company Shares owned by such Stockholder,
as set forth in Exhibit A. Such stock certificates shall be presented with stock
powers duly executed in blank (or the equivalent), with such signature
guarantees and such other documents as may be reasonably required by Buyer to
effect
<PAGE> 6
a valid transfer of such Company Shares by such Stockholder, free and clear of
any and all liens, encumbrances, charges or claims.
1.3. Purchase Price and Payment. In consideration of the sale by the
Stockholders to Buyer of the Company Shares and the cancellation by the Company
of the Options held by the Optionholders and in reliance upon the
representations and warranties of the Company and the Holders herein contained
and made at the Closing and subject to the satisfaction of all of the conditions
contained herein, Buyer agrees that at the Closing, it will (a) deliver to each
Holder the amount specified in Exhibit A and/or Exhibit B, as applicable, by
bank cashier check in Boston Clearing House Funds or by wire transfer of
immediately available funds and (b) deliver to the Escrow Agent ONE MILLION
SEVEN HUNDRED AND FIFTY THOUSAND DOLLARS ($1,750,000) (such amount, the "Escrow
Amount") to be held by the Escrow Agent pursuant to and in accordance with the
terms of the Escrow Agreement to be executed substantially in the form attached
hereto as Exhibit C; provided, however, that the deposit of each Holder's pro
rata portion of the Escrow Amount (as set forth in section 10.2(f)) shall be
taken first, from the consideration to be paid to such Holder upon the
cancellation of such Holder's Options and second, from the consideration to be
paid to such Holder upon the sale of such Holder's shares of Common Stock, if
any.
1.4. Time and Place of Closing. The closing of the purchase and sale
provided for in this Agreement (herein called the "Closing") shall be held at a
mutually agreeable location on July 30, 1997 or at such other date as may be
mutually agreed upon by the parties.
1.5. Further Assurances. The Holders from time to time after the
Closing at the request of Buyer and without further consideration shall execute
and deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably require to more effectively transfer and assign
to, and vest in, Buyer the Company Shares and all rights thereto, and to fully
implement the provisions of this Agreement.
1.6. Transfer Taxes. All transfer taxes, fees and duties under
applicable law incurred in connection with the sale and transfer of the Company
Shares under this Agreement, if any, will be borne and paid by the Company.
1.7. Excluded Liabilities. It is the understanding of the Buyer that
the Company and/or its Subsidiaries (as hereinafter defined) prior to the date
hereof owned certain interests in the following entities: Fairview Medical
Services Corporation, a Delaware corporation, Optex, Inc., a Delaware
corporation, Olympic Manufacturing, Inc., a Delaware corporation and Conceptions
UnLtd., a Vermont corporation (such entities hereinafter referred to
collectively as the "Investment Entities"). Prior to the Closing, all interests
in the Investment Entities will be transferred by the Company to Cranberry Hill
Capital L.L.C. ("Investment Subsidiary"), a Subsidiary of the Company.
Notwithstanding the purchase by Buyer of the Company Shares, the Company and the
Holders acknowledge that Buyer will not assume any liabilities (hereinafter
referred to as the "Excluded Liabilities") of the Company or its Subsidiaries or
of the Holders associated with or related to such entities, including without
limitation, relating to (i) the ownership by the Company or its Subsidiaries of
any interest in the Investment Entities or (ii) the
2
<PAGE> 7
transfer of the interests in the Investment Entities to Investment Subsidiary.
Buyer acknowledges that following the Closing the interests of the Investment
Entities held by Investment Subsidiary shall be distributed, or the interests in
Investment Subsidiary shall be distributed to certain current and/or former
employees of the Company in the discretion of Dwight L. Gertz and Pat Flynn,
with prior consultation with Gresham Brebach.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE REPRESENTING
PARTIES.
2.1. Making of Representations and Warranties. As a material
inducement to Buyer to enter into this Agreement and consummate the transactions
contemplated hereby, the Company and each of the Holders other than Science
Application International Corporation ("SAIC"), Fairview Medical Services
Corporation ("Fairview") and George Bennett (individually, a "Representing
Party" and collectively, the "Representing Parties") jointly and severally
hereby make to Buyer the representations and warranties contained in this
Section 2; provided, however, that all references to any particular Schedule
shall be deemed to include material referred to in other Schedules; and provided
further, that no Representing Party shall have any right of indemnity or
contribution from the Company with respect to any breach of representation or
warranty hereunder.
2.2. Organization and Qualifications of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts with full corporate power and authority to
own or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is currently
conducted or proposed to be conducted. The copies of the Company's Articles of
Organization as amended to date, certified by the Massachusetts Secretary of
State, and of the Company's by-laws, as amended to date, certified by the
Company's Secretary, and heretofore delivered to Buyer's counsel, are complete
and correct, and no amendments thereto are pending. The Company is not in
violation of any term of its Articles of Organization or By-laws. The Company is
duly qualified to do business as a foreign corporation in California,
Connecticut, Florida, Kansas, Maine, Minnesota, New Hampshire, New York, Ohio,
Pennsylvania, Rhode Island, Vermont and Virginia and it is not required to be
licensed or qualified to conduct its business or own its property in any other
jurisdiction in which failure to be so licensed or qualified would have a
material adverse effect on the Company.
2.3. Capital Stock of the Company; Beneficial Ownership.
(a) The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock, $.01 per share, of which 1,216,921 shares are
duly and validly issued, outstanding, fully paid and non-assessable and of which
8,783,079 shares are authorized but unissued. Other than as set forth on Exhibit
B, there are no outstanding options, warrants, rights, commitments, preemptive
rights or agreements of any kind for the issuance or sale of, or outstanding
securities convertible into, any additional shares of capital stock of any class
of the Company. None of the Company's capital stock has been issued in violation
of any federal or state law. Except as set forth in
3
<PAGE> 8
Schedule 2.3 attached hereto, there are no voting trusts, voting agreements,
proxies or other agreements, instruments or undertakings with respect to the
voting of the Company Shares to which the Company or any of the Holders is a
party. No person, together with any entity controlled by such person,
controlling such person or under common control with such person, owns more than
fifty percent (50%) of the capital stock of the Company.
(b) The Company has adopted the Symmetrix, Inc. 1988 Stock Option
Plan (the "Option Plan") which provides for the issuance of up to 1,415,298
shares of Common Stock. As of the date hereof, options to purchase 1,025,558
shares of Common Stock have been granted and are outstanding under the Option
Plan to the persons, in the amounts and at the exercise prices set forth in
Exhibit B and no options have been exercised.
2.4. Subsidiaries. The Company's subsidiaries and investments in any
other corporation or business organization are listed in Schedule 2.4
(collectively, the "Subsidiaries" or individually, a "Subsidiary," however, for
purposes of this Agreement, the Investment Entities shall not be considered to
be Subsidiaries of the Company). Except as set forth in Schedule 2.4, each
Subsidiary of the Company is a duly organized, validly existing corporation in
good standing under the laws of the state of its incorporation with full
corporate power and authority to own or lease its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is currently conducted or proposed to be conducted.
Except as disclosed in Schedule 2.4, all of the outstanding shares of capital
stock of each Subsidiary are owned beneficially and of record by the Company
free of any lien, restriction or encumbrance and said shares have been duly and
validly issued and are outstanding, fully paid and non-assessable. The copies of
each of the Subsidiaries' Articles of Organization (or comparable document) as
amended to date, certified by the Secretaries of State of each jurisdiction in
which such Subsidiaries are organized and of each of the Subsidiaries' by-laws,
as amended to date, certified by the Company's Secretary, and heretofore
delivered to Buyer's counsel, are complete and correct, and no amendments
thereto are pending. None of the Subsidiaries is in violation of any term of its
Articles of Organization (or comparable document) or by-laws. Except as set
forth on Schedule 2.4, each Subsidiary is duly qualified to do business as a
foreign corporation in each jurisdiction where such qualification is required
and it is not required to be licensed or qualified to conduct its business or
own its property in any other jurisdiction. Except as disclosed in Schedule 2.4,
there are no outstanding warrants, options or other rights to purchase or
acquire any of the shares of capital stock of any Subsidiary, or any outstanding
securities convertible into such shares or outstanding warrants, options or
other rights to acquire any such convertible securities. To the knowledge of the
Representing Parties, the operations of each of the Investment Entities and the
interest of the Company in the Investment Entities is as set forth on Exhibit D.
2.5. Authority of the Company. The Company has full right, authority
and power to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by the Company pursuant to this
Agreement and to carry out the transactions contemplated hereby. The execution,
delivery and performance by the Company of this
4
<PAGE> 9
Agreement and each such other agreement, document and instrument have been duly
authorized by all necessary action of the Company and no other action on the
part of the Company or the Holders is required in connection therewith.
This Agreement and each agreement, document and instrument executed
and delivered by the Company pursuant to this Agreement constitutes, or when
executed and delivered will constitute, valid and binding obligations of the
Company enforceable in accordance with their terms. The execution, delivery and
performance by the Company of this Agreement and each such agreement, document
and instrument:
(i) does not and will not violate any provision of the
Articles of Organization or by-laws of the Company;
(ii) does not and will not violate any laws of the United
States, or any state or other jurisdiction applicable to the Company
or require the Company to obtain any approval, consent or waiver of,
or make any filing with, any person or entity (governmental or
otherwise) that has not been obtained or made; and
(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage,
lien, lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award to which the Company is a
party or by which the property of the Company is bound or affected, or
result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any of the
Company's assets or the Company Shares, except as specifically
identified on Schedule 2.5.
2.6. Real and Personal Property.
(a) Real Property. Neither the Company nor any of its
Subsidiaries owns any real property. All of the real property leased by the
Company or any of its Subsidiaries is identified on Schedule 2.6(a) (herein
referred to as the "Leased Real Property").
(i) Leases. All leases of Leased Real Property are
identified on Schedule 2.6(a), and true and complete copies thereof
have been delivered to Buyer. Each of said leases has been duly
authorized and executed by the parties and is in full force and effect
and binding and enforceable against the parties thereto. Neither the
Company nor any of its Subsidiaries is in default under any of said
leases, nor has any event occurred which, with notice or the passage
of time, or both, would give rise to such a default. To the Company's
knowledge, the other party to each of said leases is not in default
under any of said leases and there is no
5
<PAGE> 10
event which, with notice or the passage of time, or both, would give
rise to such a default.
(ii) Consents. To the knowledge of the Company and the
Representing Parties, except as set forth in Schedule 2.6(a), no
consent or approval is required with respect to the transactions
contemplated by this Agreement from the other parties to any lease of
Leased Real Property or from any regulatory authority, no filing with
any regulatory authority is required in connection therewith, and to
the extent that any such consents, approvals or filings are required,
the Company or the Holders will obtain or complete them before the
Closing.
(iii) Condition of Leased Real Property. Except as set forth
in Schedule 2.6(a), to the actual knowledge of the Company there are
no material defects in the physical condition of any portion of the
Leased Real Property and all such Leased Real Property is in good
operating condition and repair, has been well maintained and is free
from infestation by rodents or insects.
(iv) Compliance with the Law. Neither the Company nor any
Subsidiary has received any notice from any governmental authority of
any violation of any law, ordinance, regulation, license, permit or
authorization issued with respect to the Leased Real Property that has
not been heretofore corrected. Neither the Company nor any Subsidiary
has received any notice of any real estate tax deficiency or
assessment or is aware of any proposed deficiency, claim or assessment
with respect to any of the Leased Real Property, or any pending or
threatened condemnation thereof.
(b) Personal Property. A complete description of the machinery
and equipment of the Company and each of its Subsidiaries is contained in
Schedule 2.6(b) hereto. Except as specifically disclosed in said Schedule or in
the Base Balance Sheet (as hereinafter defined), the Company and each of its
Subsidiaries has good and marketable title to all of its personal property. None
of such personal property or assets is subject to any mortgage, pledge, lien,
conditional sale agreement, security title, encumbrance or other charge except
as specifically disclosed in said Schedule or in the Base Balance Sheet. The
personal property register included in Schedule 2.6(b) reflects all significant
personal property of the Company and each of its Subsidiaries. Except as
otherwise specified in Schedule 2.6(b) hereto, all leasehold improvements,
furnishings, machinery and equipment of the Company and each of its Subsidiaries
presently necessary to the conduct of the business of the Company and its
Subsidiaries as such business is currently being conducted are in good repair,
have been well maintained, and substantially comply with all applicable laws,
ordinances and regulations, and such machinery and equipment is in good working
order. None of the Representing Parties has received notice of any such law,
ordinance or regulation which could adversely affect the Company, any of its
Subsidiaries or any of their businesses.
6
<PAGE> 11
2.7. Financial Statements.
(a) The Company has delivered to Buyer the following financial
statements, copies of which are attached hereto as Schedule 2.7: consolidated
balance sheets of the Company and its Subsidiaries for its fiscal years ending
on May 31, 1994, 1995 and 1996 and statements of income, retained earnings and
cash flows for the three years then ended, of which the consolidated statements
for fiscal years 1994 and 1995 are certified by Price Waterhouse and the
consolidated statements for fiscal year 1996 are certified by BDO Seidman, LLP,
independent public accountants. The Company has also delivered to Buyer a
consolidated balance sheet of the Company and its Subsidiaries for the interim
period ending March 31, 1997 (a copy of which is included in Schedule 2.7) which
is hereinafter referred to as the "Base Balance Sheet." Said financial
statements, and the pro forma balance sheet and income statement prepared by the
Company as of July 23, 1997, have been prepared in accordance with generally
accepted accounting principles applied consistently during the periods covered
thereby, and said financial statements, present fairly in all material respects
the financial condition of the Company and each of its Subsidiaries at the dates
of said statements and the results of its operations for the periods covered
thereby, and all other unaudited financial information provided by the Company
to Buyer since the date of the Base Balance Sheet presents fairly and completely
the information purported to be shown thereon.
(b) As of the date of the Base Balance Sheet, neither the Company
nor any Subsidiary had any liabilities of any nature, whether accrued, absolute
or contingent (including without limitation, liabilities as guarantor or
otherwise with respect to obligations of others, liabilities for taxes due or
then accrued or to become due, or contingent or potential liabilities relating
to activities of the Company or any Subsidiary or the conduct of their business
prior to the date of the Base Balance Sheet), except liabilities stated or
adequately reserved against on the Base Balance Sheet, or reflected in Schedules
furnished to Buyer hereunder as of the date hereof.
(c) All projected operating results for fiscal year 1997 which
have previously been supplied by the Company to Buyer have been prepared in good
faith on the basis of assumptions by the Company which the Company believed were
reasonable at the time of the preparation of such projections.
(d) As of the date hereof and as of the Closing, neither the
Company nor any Subsidiary has had and will have any liabilities of any nature,
whether accrued, absolute or contingent (including without limitation,
liabilities as guarantor or otherwise with respect to obligations of others, or
liabilities for taxes due or then accrued or to become due or contingent or
potential liabilities relating to activities of the Company or any Subsidiary or
the conduct of their business prior to the date hereof or the Closing, as the
case may be, regardless of whether claims in respect thereof had been asserted
as of such date), except liabilities (i) stated or adequately reserved against
on the Base Balance Sheet or the notes thereto, (ii) reflected in Schedules
furnished to Buyer hereunder on the
7
<PAGE> 12
date hereof, or (iii) incurred in the ordinary course of business of the Company
or any Subsidiary consistent with the terms of this Agreement.
2.8. Taxes.
(a) The Company and each of its Subsidiaries has paid or caused
to be paid all federal, state, local, foreign, and other taxes, including
without limitation, income taxes, estimated taxes, alternative minimum taxes,
excise taxes, sales taxes, use taxes, value-added taxes, gross receipts taxes,
franchise taxes, capital stock taxes, employment and payroll-related taxes,
withholding taxes, stamp taxes, transfer taxes, windfall profit taxes,
environmental taxes and property taxes, whether or not measured in whole or in
part by net income, and all deficiencies, or other additions to tax, interest,
fines and penalties owed by it (collectively, "Taxes"), required to be paid by
it through the date hereof whether disputed or not.
(b) The Company and each of its Subsidiaries has in accordance
with applicable law filed all federal, state, local and foreign tax returns
required to be filed by it through the date hereof, and all such returns
correctly and accurately set forth the amount of any Taxes relating to the
applicable period. A list of all federal, state, local and foreign income tax
returns filed with respect to the Company and its Subsidiaries for taxable
periods ended on or after May 31, 1992 is set forth in Schedule 2.8 attached
hereto, and said Schedule indicates those returns that have been audited or
currently are the subject of an audit. For each taxable period of the Company
and its Subsidiaries ended on or after May 31, 1992, the Company has delivered
to Buyer correct and complete copies of all federal, state, local and foreign
income tax returns, examination reports and statements of deficiencies assessed
against or agreed to by the Company or any of its Subsidiaries.
(c) Neither the Internal Revenue Service nor any other
governmental authority is now asserting or, to the knowledge of any Representing
Party, threatening to assert against the Company or any Subsidiary any
deficiency or claim for additional Taxes. No claim has ever been made by an
authority in a jurisdiction where the Company or any Subsidiary does not file
reports and returns that the Company or such Subsidiary is or may be subject to
taxation by that jurisdiction. There are no security interests on any of the
assets of the Company or any Subsidiary that arose in connection with any
failure (or alleged failure) to pay any Taxes. Neither the Company nor any
Subsidiary has ever entered into a closing agreement pursuant to Section 7121 of
the Internal Revenue Code of 1986, as amended (the "Code").
(d) Except as set forth in Schedule 2.8 attached hereto, there
has not been any audit of any tax return filed by the Company or any Subsidiary,
no such audit is in progress, and neither the Company nor any Subsidiary has
been notified by any tax authority that any such audit is contemplated or
pending. Except as set forth in Schedule 2.8, no extension of time with respect
to any date on which a tax return was or is to be filed by the Company or any
Subsidiary is in force, and no waiver or agreement by the
8
<PAGE> 13
Company or any Subsidiary is in force for the extension of time for the
assessment or payment of any Taxes.
(e) Neither the Company nor any Subsidiary has ever been (or has
ever had any liability for unpaid Taxes because it once was) a member of an
"affiliated group" (as defined in Section 1504(a) of the Code). Except as set
forth in Schedule 2.8, neither the Company nor any Subsidiary has ever filed,
and has ever been required to file, a consolidated, combined or unitary tax
return with any other entity. Except as set forth in Schedule 2.8, neither the
Company nor any Subsidiary owns and has ever owned a direct or indirect interest
in any trust, partnership, corporation or other entity. Except as set forth in
Schedule 2.8 attached hereto, neither the Company nor any Subsidiary is a party
to any tax sharing agreement.
(f) The Company has never made any payments and is not obligated
to make any payments that would be deemed to an excess parachute payment under
section 280G of the Code.
(g) For purposes of this Agreement, all references to Sections of
the Code shall include any predecessor provisions to such Sections and any
similar provisions of federal, state, local or foreign law.
2.9. Accounts Receivable. All of the accounts receivable of the
Company or any Subsidiary shown or reflected on the Base Balance Sheet or
existing at the date hereof (less the reserve for bad debts set forth on the
Base Balance Sheet) are or will be at the Closing valid and enforceable claims,
fully collectible and subject to no set off or counterclaim. Neither the Company
nor any Subsidiary has any accounts or loans receivable from any person, firm or
corporation which is affiliated with the Company or any Subsidiary or from any
director, officer or employee of the Company or any Subsidiary, except as
disclosed on Schedule 2.9 hereto, and all accounts and loans receivable from any
such person, firm or corporation shall be paid in cash prior to the Closing,
except as disclosed on Schedule 2.9.
2.10. Intentionally Omitted.
2.11. Absence of Certain Changes. Except as disclosed in Schedule 2.11
attached hereto, since the date of the Base Balance Sheet there has not been:
(a) Any change in the business, properties, assets, results of
operations, financial condition, liabilities, or prospects of the Company or any
of its Subsidiaries, which change by itself or in conjunction with all other
such changes, whether or not arising in the ordinary course of business, has
been materially adverse with respect to the Company or any of its Subsidiaries;
(b) Any contingent liability incurred by the Company or any of
its Subsidiaries as guarantor or otherwise with respect to the obligations of
others or any cancellation of any material debt or claim owing to, or waiver of
any material right of, the Company or any of its Subsidiaries;
9
<PAGE> 14
(c) Any mortgage, encumbrance or lien placed on any of the
properties of the Company or any of its Subsidiaries which remains in existence
on the date hereof or will remain on the date of the Closing;
(d) Any obligation or liability of any nature, whether accrued,
absolute or contingent (including without limitation liabilities for Taxes due
or to become due or contingent or potential liabilities relating to products or
services provided by the Company or any of its Subsidiaries or the conduct of
the business of the Company or any of its Subsidiaries since the date of the
Base Balance Sheet regardless of whether claims in respect thereof have been
asserted), incurred by the Company or any of its Subsidiaries other than
obligations and liabilities incurred in the ordinary course of business
consistent with the terms of this Agreement (it being understood that product or
service liability claims shall not be deemed to be incurred in the ordinary
course of business);
(e) Any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company or any of its Subsidiaries other than in the
ordinary course of business;
(f) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of the Company or any of its Subsidiaries;
(g) Any declaration, setting aside or payment of any dividend by
the Company or any of its Subsidiaries, or the making of any other distribution
in respect of the capital stock of the Company or any of its Subsidiaries, or
any direct or indirect redemption, purchase or other acquisition by the Company
or any of its Subsidiaries of its own capital stock;
(h) Any labor trouble or claim of unfair labor practices
involving the Company or any of its Subsidiaries; any change in the compensation
payable or to become payable by the Company or any of its Subsidiaries to any of
its officers, employees, agents or independent contractors other than normal
merit increases in accordance with its usual practices; or any bonus payment or
arrangement made to or with any of such officers, employees, agents or
independent contractors;
(i) Any change with respect to the officers or management of the
Company or any of its Subsidiaries;
(j) Any payment or discharge of a material lien or liability of
the Company or any of its Subsidiaries which was not shown on the Base Balance
Sheet or incurred in the ordinary course of business thereafter;
(k) Any obligation or liability incurred by the Company or any of
its Subsidiaries to any of its officers, directors, stockholders or employees,
or any loans or advances made by the Company or any of its Subsidiaries to any
of its officers, directors,
10
<PAGE> 15
stockholders or employees, except normal compensation and expense allowances
payable to officers or employees, other than as set forth on Schedule 2.9;
(l) Any change in accounting methods or practices, credit
practices or collection policies used by the Company or any of its Subsidiaries;
(m) Any other transaction entered into by the Company or any of
its Subsidiaries other than transactions in the ordinary course of business; or
(n) Any agreement or understanding whether in writing or
otherwise, for the Company or any of its Subsidiaries to take any of the actions
specified in paragraphs (a) through (m) above.
2.12. Ordinary Course. Since the date of the Base Balance Sheet, the
Company and each of its Subsidiaries has conducted its business only in the
ordinary course and consistently with its prior practices, except as set forth
on Schedule 2.12.
2.13. Banking Relations. All of the arrangements which the Company or
any of its Subsidiaries has with any banking institution are completely and
accurately described in Schedule 2.13 attached hereto, indicating with respect
to each of such arrangements the type of arrangement maintained (such as
checking account, borrowing arrangements, safe deposit box, etc.) and the person
or persons authorized in respect thereof.
2.14. Intellectual Property.
(a) Except as described in Schedule 2.14, the Company and each of
its Subsidiaries has exclusive ownership of, or exclusive license to use, all
patent, copyright, trade secret, trademark, or other proprietary rights
(collectively, "Intellectual Property") used or to be used in the business of
the Company or such Subsidiary as presently conducted or contemplated. All of
the rights of the Company and each Subsidiary in such Intellectual Property are
freely transferable. There are no claims or demands of any other person
pertaining to any of such Intellectual Property and no proceedings have been
instituted, or are pending or threatened, which challenge the rights of the
Company or any Subsidiary in respect thereof. The Company and each of its
Subsidiaries has the right to use, free and clear of claims or rights of other
persons, all customer lists, designs, manufacturing or other processes, computer
software, systems, data compilations, research results and other information
required for or incident to its products or its business as presently conducted
or contemplated.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to the Company or any of its Subsidiaries or used or to be used by the
Company or any of its Subsidiaries in their businesses as presently conducted or
contemplated, and all other items of Intellectual Property which are material to
the business or operations of the Company or any of its Subsidiaries, are listed
in Schedule 2.14. All of such patents, patent applications, trademark
registrations, trademark applications and registered copyrights
11
<PAGE> 16
have been duly registered in, filed in or issued by the United States Patent and
Trademark Office, the United States Register of Copyrights, or the corresponding
offices of other jurisdictions as identified on said Schedule, and have been
properly maintained and renewed in accordance with all applicable provisions of
law and administrative regulations of the United States and each such
jurisdiction.
(c) All licenses or other agreements under which the Company or
any of its Subsidiaries is granted rights in Intellectual Property are listed in
Schedule 2.14. All said licenses or other agreements are in full force and
effect, there is no material default by any party thereto, and, except as set
forth on Schedule 2.14, all of the rights of the Company or any Subsidiary
thereunder are freely assignable. To the knowledge of Company, the licensors
under said licenses and other agreements have and had all requisite power and
authority to grant the rights purported to be conferred thereby. True and
complete copies of all such licenses or other agreements, and any amendments
thereto, have been provided to Buyer.
(d) All licenses or other agreements under which the Company or
any of its Subsidiaries has granted rights to others in Intellectual Property
owned or licensed by the Company or such Subsidiary are listed in Schedule 2.14.
All of said licenses or other agreements are in full force and effect, there is
no material default by any party thereto, and, except as set forth on Schedule
2.14, all of the rights of Company or any Subsidiary thereunder are freely
assignable. True and complete copies of all such licenses or other agreements,
and any amendments thereto, have been provided to Buyer.
(e) The Company and each of its Subsidiaries has taken all steps
required in accordance with sound business practice to establish and preserve
its ownership of all Intellectual Property rights with respect to its products,
services and technology. The Company and each of its Subsidiaries has required
all professional and technical employees and other employees having access to
valuable non-public information of Company and its Subsidiaries, to execute
agreements under which such employees are required to convey to the Company or a
Subsidiary ownership of all inventions and developments conceived or created by
them in the course of their employment and to maintain the confidentiality of
all such information of Company and its Subsidiaries. Neither the Company nor
any of its Subsidiaries has made any such information available to any person
other than employees of Company and its Subsidiaries except pursuant to written
agreements requiring the recipients to maintain the confidentiality of such
information and appropriately restricting the use thereof. The Company has no
knowledge of any infringement by others of any Intellectual Property rights of
the Company or any Subsidiary.
(f) The present and contemplated business, activities and
products of the Company and its Subsidiaries do not infringe any Intellectual
Property of any other person. No proceeding charging the Company or any of its
Subsidiaries with infringement of any adversely held Intellectual Property has
been filed or is threatened to be filed. To the Company's knowledge, there
exists no unexpired patent or patent application which
12
<PAGE> 17
includes claims that would be infringed by or otherwise adversely affect the
products, activities or business of the Company or any Subsidiary. Neither the
Company nor any of its Subsidiaries is making unauthorized use of any
confidential information or trade secrets of any person, including without
limitation, any former employer of any past or present employee of Company or
any of its Subsidiaries. Except as set forth in Schedule 2.14, neither the
Company or any Subsidiary nor, to the knowledge of any Representing Party, any
of their employees have any agreements or arrangements with any persons other
than the Company or its Subsidiaries related to confidential information or
trade secrets of such persons or restricting any such employee's ability to
engage in business activities of any nature. The activities of their employees
on behalf of the Company or any Subsidiary do not violate any such agreements or
arrangements known to the Company.
2.15. Contracts. Except for contracts, commitments, plans, agreements
and licenses described in Schedule 2.15 (true and complete copies of which have
been delivered to Buyer), neither the Company nor any of its Subsidiaries is a
party to or subject to:
(a) any plan or contract providing for bonuses, pensions,
options, stock purchases, deferred compensation, retirement payments, profit
sharing, collective bargaining or the like, or any contract or agreement with
any labor union;
(b) any employment contract or contract for services which
requires the payment of more than $25,000 annually or which is not terminable
within 30 days by the Company or a Subsidiary without liability for any penalty
or severance payment;
(c) any contract or agreement for the purchase of any commodity,
material or equipment except purchase orders in the ordinary course for less
than $25,000 each;
(d) any contract or agreement with a client or customer of the
Company or any of its Subsidiaries providing for an aggregate payment by such
client or customer of more than $25,000;
(e) any other contracts or agreements creating any obligations of
the Company or any of its Subsidiaries of $25,000 or more with respect to any
such contract or agreement not specifically disclosed elsewhere under this
Agreement;
(f) any contract or agreement providing for the purchase of all
or substantially all of its requirements of a particular product from a
supplier;
(g) any contract or agreement which by its terms does not
terminate or is not terminable without penalty by the Company or a Subsidiary or
their successors within one year after the date hereof;
(h) any contract or agreement for the sale or lease of its
products not made in the ordinary course of business;
13
<PAGE> 18
(i) any contract with any sales agent or distributor of products
of the Company or any of its Subsidiaries;
(j) any contract containing covenants limiting the freedom of the
Company or any of its Subsidiaries to compete in any line of business or with
any person or entity;
(k) any contract or agreement for the purchase of any fixed asset
for a price in excess of $25,000 whether or not such purchase is in the ordinary
course of business;
(l) any license agreement (as licensor or licensee);
(m) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money; or
(n) any contract or agreement with any officer, employee,
director or stockholder of the Company or any of its Subsidiaries or with any
persons or organizations controlled by or affiliated with any of them.
Neither the Company nor any of its Subsidiaries is in default under
any such contracts, commitments, plans, agreements or licenses described in said
Schedule or has any knowledge of conditions or facts which with notice or
passage of time, or both, would constitute a default.
2.16. Litigation. Schedule 2.16 hereto lists all currently pending
litigation and governmental or administrative proceedings or investigations to
which the Company or any of its Subsidiaries is a party. Except for matters
described in Schedule 2.16, there is no litigation or governmental or
administrative proceeding or investigation pending or, to the knowledge of any
Representing Party, threatened against the Company or any of its Subsidiaries or
their affiliates which may have any adverse effect on the properties, assets,
prospects, financial condition or business of the Company or any Subsidiary or
which would prevent or hinder the consummation of the transactions contemplated
by this Agreement. Except as described in Schedule 2.16, there have been no
claims made or threatened by a client or customer of the Company or any of its
Subsidiaries nor to the knowledge of any Representing Party, are there any such
claims that may be asserted. With respect to each matter set forth therein,
Schedule 2.16 sets forth a description of the matter, the forum (if any) in
which it is being conducted, the parties thereto and the type and amount of
relief sought.
2.17. Compliance with Laws. Except as set forth in Schedule 2.17
hereto, the Company and each of its Subsidiaries is in compliance with all
applicable statutes, ordinances, orders, judgements, decrees, rules and
regulations promulgated by any federal, state, municipal entity, agency, court
or other governmental authority which apply to the Company or any Subsidiary or
to the conduct of its business, except where noncompliance with such statue,
ordinance, order, judgement, decree, rule or regulation would not have a
material adverse effect on the Company, and neither the Company nor any of its
Subsidiaries has received notice of a violation or alleged violation of any such
statute, ordinance, order, rule or regulation.
14
<PAGE> 19
2.18. Insurance. The physical properties and assets of the Company and
each of its Subsidiaries are insured to the extent disclosed in Schedule 2.18
attached hereto and all such insurance policies and arrangements are disclosed
in said Schedule. Said insurance policies and arrangements are in full force and
effect, all premiums with respect thereto are currently paid, and the Company
and each of its Subsidiaries is in compliance in all material respects with the
terms thereof. Said insurance is adequate and customary for the business engaged
in by the Company and each Subsidiary and is sufficient for compliance by the
Company and each Subsidiary with all requirements of law and all agreements and
leases to which the Company or any Subsidiary is a party.
2.19. Warranty or Other Claims. There are no existing or threatened
product liability, warranty or other similar claims, or any facts upon which a
material claim of such nature could be based, against the Company or any of its
Subsidiaries for products or services which are defective or fail to meet any
product or service warranties except as disclosed in Schedule 2.19 hereto. No
claim has been asserted against the Company or any of its Subsidiaries for
renegotiation or price redetermination of any business transaction, and there
are no facts upon which any such claim could be based.
2.20. Powers of Attorney. Neither the Company, any Subsidiary or, to
the knowledge of any Representing Party, no Holder has any outstanding power of
attorney with respect to or affecting any transaction contemplated by this
Agreement.
2.21. Finder's Fee. Neither the Company nor any of its Subsidiaries
has incurred or become liable for any broker's commission or finder's fee
relating to or in connection with the transactions contemplated by this
Agreement.
2.22. Permits: Burdensome Agreements. Schedule 2.22 lists all permits,
registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state or local
authorities in order for the Company and each of its Subsidiaries to conduct its
business. The Company and each of its Subsidiaries has obtained all such
Approvals, which are valid and in full force and effect, and is operating in
compliance therewith. Such Approvals include, but are not limited to, those
required under federal, state or local statutes, ordinances, orders,
requirements, rules, regulations, or laws pertaining to environmental
protection, public health and safety, worker health and safety, buildings,
highways or zoning. Except as disclosed in Schedule 2.22 or in any other
Schedule hereto, neither the Company nor any of its Subsidiaries is subject to
or bound by any agreement, judgment, decree or order which may materially and
adversely affect its business or prospects, its condition, financial or
otherwise, or any of its assets or properties.
2.23. Corporate Records; Copies of Documents. The corporate record
books of the Company and each of its Subsidiaries accurately record all
corporate action taken by their respective stockholders and board of directors
and committees. The copies of the corporate records of the Company and each of
its Subsidiaries, as made available to Buyer for review, are true and complete
copies of the originals of such documents. The Company has made available
15
<PAGE> 20
for inspection and copying by Buyer and its counsel true and correct copies of
all documents referred to in this Section or in the Schedules delivered to Buyer
pursuant to this Agreement.
2.24. Transactions with Interested Persons. Except as set forth in
Schedule 2.24 hereto, neither the Company, any of its Subsidiaries, any Holder,
officer, supervisory employee or director of the Company or any of its
Subsidiaries owns directly or indirectly on an individual or joint basis any
material interest in, or serves as an officer or director or in another similar
capacity of, any competitor or supplier of Company or any of its Subsidiaries,
or any organization which has a material contract or arrangement with the
Company or any of its Subsidiaries.
2.25. Employee Benefit Programs.
(a) Schedule 2.25 lists every Employee Program (as defined below)
that has been maintained (as defined below) by the Company or any of its
Subsidiaries at any time during the three-year period ending on the date of the
Closing.
(b) Each Employee Program which has ever been maintained by the
Company or any of its Subsidiaries and which has at any time been intended to
qualify under Section 401 (a) or 501(c)(9) of the Code has received a favorable
determination or approval letter from the Internal Revenue Service ("IRS")
regarding its qualification under such section and has, in fact, been qualified
under the applicable section of the Code from the effective date of such
Employee Program through and including the Closing (or, if earlier, the date
that all of such Employee Program's assets were distributed). No event or
omission has occurred which would cause any such Employee Program to lose its
qualification under the applicable Code section.
(c) The Company does not know and has no reason to know, of any
failure of any party to comply with any laws applicable to the Employee Programs
that have been maintained by the Company or any of its Subsidiaries. With
respect to any Employee Program ever maintained by the Company or any of its
Subsidiaries, there has occurred no "prohibited transaction," as defined in
Section 406 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or Section 4975 of the Code, or breach of any duty under ERISA or
other applicable law (including, without limitation, any health care
continuation requirements or any other tax law requirements, or conditions to
favorable tax treatment, applicable to such plan), which could result, directly
or indirectly, in any taxes, penalties or other liability to the Company, any
Subsidiary, or Buyer. No litigation, arbitration, or governmental administrative
proceeding (or investigation) or other proceeding (other than those relating to
routine claims for benefits) is pending or threatened with respect to any such
Employee Program.
(d) Neither the Company, any Subsidiary or any Affiliate (as
defined below) has ever maintained any Employee Program which has been subject
to title IV of ERISA (including, but not limited to, any Multiemployer Plan (as
defined below)) or (ii) has ever provided health care or any other non-pension
benefits to any employees after
16
<PAGE> 21
their employment is terminated (other than as required by part 6 of subtitle B
of title I of ERISA) or has ever promised to provide such post-termination
benefits.
(e) With respect to each Employee Program maintained by the
Company or any Subsidiary within the three years preceding the Closing, complete
and correct copies of the following documents (if applicable to such Employee
Program) have previously been delivered to Buyer: (i) all documents embodying or
governing such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Program under Code Sections 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided to employees)
and all modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy) related to such Employee Program; (vi) any documents
evidencing any loan to an Employee Program that is a leveraged employee stock
ownership plan; and (vii) all other materials reasonably necessary for Buyer to
perform any of its responsibilities with respect to any Employee Program
subsequent to the Closing (including, without limitation, health care
continuation requirements).
(f) Each Employee Plan listed on Schedule 2.25 may be amended,
terminated, modified or otherwise revised prospectively by the Company including
the elimination of any and all future benefit accruals under any Employee Plan.
(g) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited
to, multiple employer welfare arrangements (within the meaning of
ERISA Section 3(4)), plans to which more than one unaffiliated
employer contributes and employee benefit plans (such as foreign or
excess benefit plans) which are not subject to ERISA; and (B) all
stock option plans, bonus or incentive award plans, severance pay
policies or agreements, deferred compensation agreements, supplemental
income arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements not described in (A) above. In the
case of an Employee Program funded through an organization described
in Code Section 501(c)(9), each reference to such Employee Program
shall include a reference to such organization.
(ii) An entity "maintains" an Employee Program if such
entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or provide
benefits under such Employee Program, or if such
17
<PAGE> 22
Employee Program provides benefits to or otherwise covers employees of
such entity, or their spouses, dependents, or beneficiaries.
(iii) An entity is an "Affiliate" of the Company or a
Subsidiary if it would have ever been considered a single employer
with the Company or any of its Subsidiaries under ERISA Section
4001(b) or part of the same "controlled group" as the Company or any
of its Subsidiaries for purposes of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and
which is maintained pursuant to one or more collective bargaining
agreements.
2.26. Environmental Matters.
(a) Except as set forth in Schedule 2.26 hereto, (i) neither the
Company nor any of its Subsidiaries has ever generated, transported, used,
stored, treated, disposed of, or managed any Hazardous Waste (as defined below);
(ii) to the knowledge of the Representing Parties, no Hazardous Material (as
defined below) has ever been or is threatened to be spilled, released, or
disposed of at any site presently or formerly owned, operated, leased, or used
by the Company or any of its Subsidiaries, or has ever been located in the soil
or groundwater at any such site; (iii) to the knowledge of the Representing
Parties, no Hazardous Material has ever been transported from any site presently
or formerly owned, operated, leased, or used by the Company or any of its
Subsidiaries for treatment, storage, or disposal at any other place; (iv) to the
knowledge of the Representing Parties, neither the Company nor any of its
Subsidiaries presently owns, operates, leases, or uses, nor has it previously
owned, operated, leased, or used any site on which underground storage tanks are
or were located; and (v) no lien has ever been imposed by any governmental
agency on any property, facility, machinery, or equipment owned, operated,
leased, or used by the Company or any of its Subsidiaries in connection with the
presence of any Hazardous Material.
(b) Except as set forth in Schedule 2.26 hereto, (i) to the
knowledge of the Representing Parties, neither the Company nor any of its
Subsidiaries has any liability under, nor has it ever violated, any
Environmental Law (as defined below); (ii) to the knowledge of the Representing
Parties, the Company and each of its Subsidiaries, any property owned, operated,
leased, or used by any of them, and any facilities and operations thereon, are
presently in compliance with all applicable Environmental Laws; (iii) neither
the Company or any of its Subsidiaries has ever entered into or been subject to
any judgment, consent decree, compliance order, or administrative order with
respect to any environmental or health and safety matter or received any request
for information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law; and (iv) neither the
Company nor any of its Subsidiaries has any
18
<PAGE> 23
reason to believe that any of the items enumerated in clause of this
subsection will be forthcoming.
(c) Except as set forth in Schedule 2.26 hereto, to the knowledge
of the Representing Parties, no site owned, operated, leased, or used by the
Company or any of its Subsidiaries contains any asbestos or asbestos-containing
material, any polychlorinated biphenyls (PCBs) or equipment containing PCBs; or
any urea formaldehyde foam insulation.
(d) The Company has provided to Buyer copies of all documents,
records, and information available to the Company or any of its Subsidiaries
concerning any environmental or health and safety matter relevant to the Company
or any of its Subsidiaries, whether generated by the Company, its Subsidiaries,
or others, including without limitation, environmental audits, environmental
risk assessments, site assessments, documentation regarding off-site disposal of
Hazardous Materials, spill control plans, and reports, correspondence, permits,
licenses, approvals, consents, and other authorizations related to environmental
or health and safety matters issued by any governmental agency.
(e) For purposes of this Section 2.26, (i) "Hazardous Material"
shall mean and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, contaminant, or
other substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental
or health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Company" shall mean and
include Company, each of its Subsidiaries and all other entities for whose
conduct the Company or any of its Subsidiaries is or may be held responsible
under any Environmental Law.
2.27. List of Directors and Officers. Schedule 2.27 hereto contains a
true and complete list of all current directors and officers of the Company and
each of its Subsidiaries. In addition, Schedule 2.27 hereto contains a list of
all managers, employees and consultants of the Company and any Subsidiary who,
individually, have received or are scheduled to receive compensation from the
Company or any of its Subsidiaries for the fiscal year ending May 31, 1996 or
May 31, 1997, in excess of $20,000. In each case such Schedule includes the
current job title and aggregate annual compensation of each such individual.
2.28. Disclosure. The representations, warranties and statements
contained in this Agreement and in the certificates, exhibits and schedules
delivered by the Company pursuant to this Agreement to Buyer do not contain any
untrue statement of a material fact, and, when taken together, do not omit to
state a material fact required to be stated therein or necessary in order to
make such representations, warranties or statements not misleading in light of
the circumstances under which they were made. There are no facts which presently
or may in the
19
<PAGE> 24
future have a material adverse affect on the business, properties, prospects,
operations or condition of the Company or any of its Subsidiaries which have not
been specifically disclosed herein or in a Schedule furnished herewith, other
than general economic conditions affecting the industries in which the Company
and each of its Subsidiaries operate.
2.29. Non-Foreign Status. Neither the Company nor any of its
Subsidiaries is a "foreign person" within the meaning of Section 1445 of the
Code and Treasury Regulations Section 1.1445-2.
2.30. Backlog. As of the date hereof, the Company and each of its
Subsidiaries has a backlog of firm orders for the sale or lease of products or
services, for which revenues have not been recognized by the Company or any
Subsidiary, as set forth in Schedule 2.30.
2.31. Employees; Labor Matters. The Company and its Subsidiaries
employ a total of approximately one hundred and four (104) full-time employees
and four (4) part-time employees and generally enjoy good employer-employee
relationships. Neither the Company nor any of its Subsidiaries is delinquent in
payments to any of its employees for any wages, salaries, commissions, bonuses
or other direct compensation for any services performed for it to the date
hereof or amounts required to be reimbursed to such employees. Upon termination
of the employment of any of said employees, neither the Company, any Subsidiary
nor Buyer will by reason of the transactions contemplated under this Agreement
or anything done prior to the Closing be liable to any of said employees for
so-called "severance pay" or any other payments, except as set forth in Schedule
2.31. Neither the Company nor any Subsidiary has any policy, practice, plan or
program of paying severance pay or any form of severance compensation in
connection with the termination of employment, except as set forth in said
Schedule. The Company and each of its Subsidiaries is in compliance with all
applicable laws and regulations respecting labor, employment, fair employment
practices, work place safety and health, terms and conditions of employment, and
wages and hours. There are no charges of employment discrimination or unfair
labor practices, nor are there any strikes, slowdowns, stoppages of work, or any
other concerted interference with normal operations which are existing, pending
or threatened against or involving the Company or any of its Subsidiaries. No
question concerning representation exists respecting any employees of the
Company or any of its Subsidiaries. There are no grievances, complaints or
charges that have been filed against the Company or any of its Subsidiaries
under any dispute resolution procedure (including, but not limited to, any
proceedings under any dispute resolution procedure under any collective
bargaining agreement) that might have an adverse effect on the Company or any of
its Subsidiaries or the conduct of their respective businesses, and there is no
arbitration or similar proceeding pending and no claim therefor has been
asserted. No collective bargaining agreement is in effect or is currently being
or is about to be negotiated by the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries has received any information indicating
that any of its employment policies or practices is currently being audited or
investigated by any federal, state or local government agency. The Company and
each of its Subsidiaries is, and at all times since November 6, 1986 has been,
in compliance with the requirements of the Immigration Reform Control Act of
1986.
20
<PAGE> 25
2.32. Customers, Distributors and Suppliers. Schedule 2.32(a) sets
forth any customer, sales representative or distributor (whether pursuant to a
commission, royalty or other arrangement) which accounts for more than $25,000
in revenue for the Company and its Subsidiaries on a consolidated basis for each
of the twelve months ended May 31, 1995, May 31, 1996 and May 31, 1997
(collectively, the "Customers and Distributors"). Schedule 2.32(b) lists all of
the suppliers of the Company and each of its Subsidiaries to whom during each of
the fiscal years ended May 31, 1996 and May 31, 1997 the Company or any of its
Subsidiaries made payments aggregating $25,000 or more showing, with respect to
each, the name, address and dollar volume involved (the "Suppliers"). The
relationships of the Company and each of its Subsidiaries with its Customers,
Distributors and Suppliers are good commercial working relationships. No
Customer, Distributor or Supplier has canceled, materially modified, or
otherwise terminated (other than in accordance with the terms of a valid
contract) its relationship with the Company or any Subsidiary, or has during the
last twelve months decreased materially its services, supplies or materials to
the Company or any such Subsidiary or its usage or purchase of the services or
products of the Company or any Subsidiary, nor to the knowledge of Company, does
any Customer, Distributor or Supplier have any plan or intention to do any of
the foregoing.
2.33. Transfer of Shares. Other than as set forth in Schedule 2.33, no
holder of stock of the Company or any Subsidiary has at any time transferred any
of such stock to any employee of the Company or any Subsidiary, which transfer
constituted or could be viewed as compensation for services rendered to the
Company or any Subsidiary by said employee.
2.34. Stock Repurchase. Other than as set forth in Schedule 2.34,
neither the Company nor any Subsidiary has redeemed or repurchased any of its
capital stock.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE HOLDERS.
As a material inducement to Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, each Holder hereby severally,
but not jointly, makes to Buyer each of the representations and warranties set
forth in this Section 3 with respect to such Holder. No Holder shall have any
right of indemnity or contribution from the Company or any Subsidiary with
respect to the breach of any representation or warranty hereunder.
3.1. Company Shares and Options. If such Holder is a Stockholder, such
Holder owns of record and beneficially the number of the Company Shares set
forth opposite such Holder's name in Exhibit A. Such Company Shares are or will
be, and when delivered by such Stockholder to Buyer pursuant to this Agreement
will be, free and clear of any and all liens, encumbrances, charges or claims.
If such Holder is an Optionholder, such Holder owns the number of Options set
forth opposite such Holder's name in Exhibit B. Such Options are or will be, and
when canceled by the Company pursuant to this Agreement will be, free and clear
of any and all liens, encumbrances, charges or claims.
3.2. Authority. Such Holder has full right, authority, power and
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of such Holder pursuant
to this Agreement and to carry out the
21
<PAGE> 26
transactions contemplated hereby and thereby. This Agreement and each agreement,
document and instrument executed and delivered by such Holder pursuant to this
Agreement constitutes a valid and binding obligation of such Holder, enforceable
in accordance with their respective terms, and has been duly authorized by all
necessary corporate action of each Holder which is a corporation, and such
Holder has full power and authority to transfer, sell and deliver the Company
Shares to Buyer pursuant to this Agreement. The execution, delivery and
performance of this Agreement and each such agreement, document and instrument:
(i) does not and will not violate any provision of the
organizational documents of any Holder which is not a natural person,
or any laws of the United States or any state or other jurisdiction
applicable to such Holder, or require such Holder to obtain any
approval, consent or waiver from, or make any filing with, any person
or entity (governmental or otherwise) that has not been obtained or
made; and
(ii) does not and will not result in a breach of, constitute
a default under, accelerate any obligation under, or give rise to a
right of termination of, any indenture or loan or credit agreement or
any other agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Holder is a party or
by which the property of such Holder is bound or affected, or result
in the creation or imposition of any mortgage, pledge, lien, security
interest or other charge or encumbrance on any assets of the Company
or any Subsidiary or on Company Shares owned by such Holder.
3.3. Finder's Fee. Such Holder has not incurred or become liable for
any broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
3.4. Agreements. Other than as set forth on Schedule 3.4, each such
Holder who is employed by the Company or any Subsidiary is not a party to any
non-competition, trade secret or confidentiality agreement with any party other
than the Company or a Subsidiary, other than any such agreement that may be
entered into in connection with such Holder's employment by the Company or such
Subsidiary. There are no agreements or arrangements not contained herein or
disclosed in a Schedule hereto, to which such Holder is a party relating to the
business of the Company or any Subsidiary or to such Holder's rights and
obligations as a stockholder, optionholder, director or officer of the Company
or any Subsidiary. Other than as set forth on Schedule 3.4, such Holder does not
own, directly or indirectly, on an individual or joint basis, any material
interest in, or serve as an officer or director of, any customer, competitor or
supplier of the Company or any Subsidiary, or any organization which has a
contract or arrangement with the Company or any Subsidiary. Other than as set
forth on Schedule 3.4, such Holder has not at any time transferred any of the
stock of the Company or any Subsidiary held by or for such holder to any
employee of the Company or any Subsidiary, which transfer constituted or could
be viewed as compensation for services rendered to the Company or any Subsidiary
by said employee. The execution, delivery and performance of this Agreement will
not violate or result in a default or acceleration of any obligation under any
contract, agreement, indenture or other instrument involving the Company or any
Subsidiary to which such Holder is a party.
22
<PAGE> 27
SECTION 4. COVENANTS OF THE COMPANY AND THE REPRESENTING PARTIES.
4.1. Making of Covenants and Agreements. The Representing Parties
jointly and severally hereby make the covenants and agreements set forth in this
Section 4 and the Holders who are Representing Parties agree to cause the
Company and its Subsidiaries to comply with such agreements and covenants. No
Representing Party shall have any right of indemnity or contribution from the
Company or any Subsidiary with respect to the breach of any covenant or
agreement hereunder.
4.2. Conduct of Business. Between the date of this Agreement and the
date of the Closing, the Company and each of its Subsidiaries will:
(a) Use reasonable efforts to conduct its business only in the
ordinary course consistent with past operations and refrain from changing or
introducing any method of management or operations except in the ordinary course
of business and consistent with prior practices;
(b) Refrain from making any purchase, sale or disposition of any
asset or property other than in the ordinary course of business, from purchasing
any capital asset costing more than $25,000 and from mortgaging, pledging,
subjecting to a lien or otherwise encumbering any of its properties or assets
other than in the ordinary course of business;
(c) Refrain from incurring any contingent liability as a
guarantor or otherwise with respect to the obligations of others, and from
incurring any other contingent or fixed obligations or liabilities except in the
ordinary course of business;
(d) Refrain from making any change or incurring any obligation to
make a change in its Articles of Organization, by-laws or authorized or issued
capital stock (other than upon the exercise of Options as contemplated by this
Agreement);
(e) Refrain from declaring, setting aside or paying any dividend,
making any other distribution in respect of its capital stock or making any
direct or indirect redemption, purchase or other acquisition of its stock;
(f) Refrain from making any change in the compensation (whether
salary or bonus) payable or to become payable to any of its executive officers
other than changes made in the ordinary course of business consistent with past
practice pursuant to compensation plans or agreements existing as of April 27,
1997 and use all reasonable efforts in the ordinary course of business to
maintain the Company's workforce at its current level and make no material
adjustment in wages or hours of work, nor enter into any amendments to any
material employment agreement, or adopt any new Employee Program or other
benefit or severance plan (other than as set forth on Schedule 4.2);
23
<PAGE> 28
(g) Refrain from entering into any arrangement or amending any
existing arrangement between the Company and any officer, director or Holder (or
any entity affiliated with such persons);
(h) Refrain from prepaying any loans (if any) from its
stockholders, officers or directors, borrowing any funds or making any other
change in its borrowing arrangements;
(i) Use its commercially reasonable efforts to prevent any change
with respect to its management and supervisory personnel and banking
arrangements;
(j) Use its commercially reasonable efforts to keep intact its
business organization, to keep available its present officers and employees and
to preserve the goodwill of all suppliers, customers, independent contractors
and others having business relations with it;
(k) Have in effect and maintain at all times all insurance of the
kind, in the amount and with the insurers set forth in the Schedule 2.18 hereto
or equivalent insurance with any substitute insurers approved in writing by
Buyer;
(l) Maintain the Working Capital of the Company in the ordinary
course of business at levels consistent with past operations;
(m) Furnish Buyer with unaudited monthly balance sheets and
statements of income and retained earnings and cash flows of the Company and
each of its Subsidiaries on a consolidated and consolidating basis within
fifteen (15) days after each month end for each month ending more than fifteen
(15) days before the Closing;
(n) Permit Buyer and its authorized representatives to have full
access to all its properties, assets, records, tax returns, contracts and
documents and furnish to Buyer or its authorized representatives such financial
and other information with respect to its business or properties as Buyer may
from time to time reasonably request.
4.3. Authorization from Others. Prior to the date of the Closing, the
Holders, the Company and each Subsidiary will use its commercially reasonable
efforts to obtain all authorizations, consents and permits of others required to
permit the consummation by the Holders, the Company and its Subsidiaries of the
transactions contemplated by this Agreement.
4.4. Notice of Default. Promptly upon the occurrence of, or promptly
upon the Company or a Representing Party becoming aware of the impending or
threatened occurrence of, any event which would cause or constitute a breach or
default of any of the representations, warranties or covenants of the Company or
the Representing Parties contained in or referred to in this Agreement or in any
Schedule or Exhibit referred to in this Agreement, the Company or the
Representing Parties shall give detailed written notice thereof to Buyer and the
Company and the Representing Parties shall use their commercially reasonable
efforts to prevent or promptly remedy the same.
24
<PAGE> 29
4.5. Consummation of Agreement. The Company and each of the Holders
shall use their commercially reasonable efforts to perform and fulfill all
conditions and obligations on their parts to be performed and fulfilled under
this Agreement, to the end that the transactions contemplated by this Agreement
shall be fully carried out. To this end, the Company will obtain prior to the
Closing all necessary authorizations or approvals of its stockholders and Board
of Directors.
4.6. Cooperation of the Company and Holders. The Company and each of
the Holders shall cooperate with all reasonable requests of Buyer and Buyer's
counsel in connection with the consummation of the transactions contemplated
hereby.
4.7. Non-Solicitation.
(a) Each Holder, subject to the qualification set forth in
subsection (b) of this Section, shall refrain, for a period of two (2) years
from the date of the termination of the employment of the Holder, from
soliciting or encouraging any employee of Buyer, the Company or any Subsidiary
to terminate his or her employment by Buyer, the Company or any Subsidiary and
to become employed by such Holder, or any business or entity with which such
Holder is affiliated as an owner, investor, lender or in any other capacity. In
addition, for a period of two (2) years from the date of the termination of the
employment of the Holder, each Holder, subject to the qualification set forth in
subsection (b) of this Section, shall refrain from soliciting (i) any client of
Buyer, the Company or any Subsidiary, or (ii) any prospective client of Buyer,
the Company or any Subsidiary with whom such Holder had contact while employed
by Buyer, the Company or any Subsidiary for consulting services such as those
rendered by the Company prior to the Closing.
(b) Anything herein contained to the contrary notwithstanding, it
is expressly understood and agreed that George Bennett and the Company shall be
bound by the terms of the Non-Competition and Endorsement Agreement presently
existing between the Company and George Bennett and, further, that such
Non-Competition and Endorsement Agreement shall be the sole and exclusive
limitation on any activities of George Bennett with respect to such
non-solicitation and non-competition matters as are contemplated by subsection
(a) of this Section.
4.8. No Solicitation of Other Offers. Neither the Company, the
Subsidiaries, the Holders, nor any of their officers, directors, agents,
employees or representatives will, directly or indirectly, solicit, encourage,
assist, initiate discussions or engage in negotiations with, provide any
information concerning the operations, properties or assets of the Company to,
entertain or enter into any agreement or transaction with, any person, other
than Buyer, relating to the possible acquisition of the Company Shares, the
Company, any Subsidiary or any of their assets, except for the sale of assets in
the ordinary course of business of the Company and its Subsidiaries consistent
with the terms of this Agreement. If such a proposal is received, the Company
and its Board of Directors will promptly notify Buyer of the terms of such
proposal and the identity of the party making the proposal.
25
<PAGE> 30
4.9. Confidentiality. The Company and the Holders agree that, unless
and until the Closing has been consummated, each of the Company, its
Subsidiaries, the Holders and their officers, directors, agents, employees and
representatives will hold in strict confidence, and will not use, any
confidential or proprietary data or information obtained from Buyer with respect
to its business or financial condition except for the purpose of evaluating,
negotiating and completing the transaction contemplated hereby. Information
generally known in Buyer's industry or which has been disclosed to the Company,
any Subsidiary or the Holders by third parties which have a right to do so shall
not be deemed confidential or proprietary information for purposes of this
agreement. If the transaction contemplated by this Agreement is not consummated,
the Company, its Subsidiaries and the Holders will return to Buyer (or certify
that they have destroyed) all copies of such data and information, including but
not limited to financial information, customer lists, business and corporate
records, worksheets, test reports, tax returns, lists, memoranda, and other
documents prepared by or made available to the Company, its Subsidiaries or the
Holders in connection with the transaction.
4.10. Tax Returns. The parties shall cooperate with each other to
permit the Company and its Subsidiaries in accordance with applicable law to
promptly prepare and file on or before the due date or any extension thereof all
federal, state and local tax returns required to be filed by the Company and its
Subsidiaries and shall cooperate with respect to all tax matters, including, but
not limited to, any federal or state tax audit.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
5.1. Making of Representations and Warranties. As a material
inducement to the Company and the Holders to enter into this Agreement and
consummate the transactions contemplated hereby, Buyer hereby makes the
representations and warranties to the Company and the Holders contained in this
Section 5.
5.2. Organization of Buyer. Buyer is a limited liability company
organized, validly existing and in good standing under the laws of the State of
Delaware with full corporate power to own or lease its properties and to conduct
its business in the manner and in the places where such properties are owned or
leased or such business is conducted by it.
5.3. Authority of Buyer. Buyer has full right, authority and power to
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by Buyer pursuant to this Agreement and to carry out the
transactions contemplated hereby. The execution, delivery and performance by
Buyer of this Agreement and each such other agreement, document and instrument
have been duly authorized by all necessary corporate action of Buyer and no
other action on the part of Buyer is required in connection therewith. This
Agreement and each other agreement, document and instrument executed and
delivered by Buyer pursuant to this Agreement constitute, or when executed and
delivered will constitute, valid and binding obligations of Buyer enforceable in
accordance with their terms. The execution, delivery and performance by Buyer of
this Agreement and each such agreement, document and instrument:
26
<PAGE> 31
(i) does not and will not violate any provision of the
certificate of formation or operating agreement of Buyer;
(ii) does not and will not violate any laws of the United
States or of any state or any other jurisdiction applicable to Buyer
or require Buyer to obtain any approval, consent or waiver of, or make
any filing with, any person or entity (governmental or otherwise)
which has not been obtained or made; and
(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture, loan or credit
agreement, or other agreement mortgage, lease, permit, order, judgment
or decree to which Buyer is a party and which is material to the
business and financial condition of Buyer and its parent and
affiliated organizations on a consolidated basis.
5.4. Litigation. There is no litigation pending or, to its knowledge,
threatened against Buyer which would prevent or hinder the consummation of the
transactions contemplated by this Agreement.
5.5. Finder's Fee. Buyer has not incurred or become liable for any
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
5.6. Available Funds. Buyer has sufficient capital available to
consummate the transactions contemplated by this Agreement and is not relying on
obtaining additional financing in connection with such transactions.
SECTION 6. COVENANTS OF BUYER.
6.1. Making of Covenants and Agreement. Buyer hereby makes the
covenants and agreements set forth in this Section 6.
6.2. Confidentiality. Buyer agrees that, unless and until the Closing
has been consummated, Buyer and its officers, directors, agents, employees and
representatives will hold in strict confidence, and will not use any
confidential or proprietary data or information obtained from the Company or the
Holders with respect to the business or financial condition of the Company and
its Subsidiaries except for the purpose of evaluating, negotiating and
completing the transaction contemplated hereby. Information generally known in
the industries of the Company or its Subsidiaries or which has been disclosed to
Buyer by third parties which have a right to do so shall not be deemed
confidential or proprietary information for purposes of this agreement. If the
transaction contemplated by this Agreement is not consummated, Buyer will return
to the Company (or certify that it has destroyed) all copies of such data and
information, including but not limited to financial information, customer lists,
business and corporate records, worksheets, test reports, tax returns, lists,
memoranda, and other documents prepared by or made available to Buyer in
connection with the transaction.
27
<PAGE> 32
6.3. Consummation of Agreement. Buyer shall use its commercially
reasonable efforts to perform and fulfill all conditions and obligations on its
part to be performed and fulfilled under this agreement, to the end that the
transactions contemplated by this agreement shall be fully carried out. To this
end, Buyer will obtain prior to the Closing all necessary authorizations or
approvals of its Board of Directors.
SECTION 7. CONDITIONS.
7.1. Conditions to the Obligations of Buyer. The obligation of Buyer
to consummate this Agreement and the transactions contemplated hereby are
subject to the fulfillment, prior to or at the Closing, of the following
conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of the Company and the Representing Parties
contained in Section 2 shall be true and correct in all material respects as of
the date of this Agreement and as of the date of the Closing as though made on
and as of the Closing; and the Company and each of the Holders shall, on or
before the Closing, have performed all of their obligations hereunder which by
the terms hereof are to be performed on or before the Closing.
(b) No Material Change. There shall have been no material adverse
change in the business, properties, assets, results of operations, financial
condition, liabilities, or prospects of the Company or any Subsidiary since the
date hereof, whether or not in the ordinary course of business.
(c) Certificate from Officers. The Holders shall have delivered
to Buyer a certificate of the Company's President and Chief Financial Officer
dated as of the Closing to the effect that the statements set forth in paragraph
(a) and (b) above in this Section 7.1 are true and correct.
(d) Approval of Buyer's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by Goodwin, Procter & Hoar LLP as
counsel for Buyer, and such counsel shall have received on behalf of Buyer such
other certificates, opinions, and documents in form satisfactory to such
counsel, as Buyer may reasonably require from the Company and the Holders to
evidence compliance with the terms and conditions hereof as of the Closing and
the correctness as of the Closing of the representations and warranties of the
Holders and the Company and the fulfillment of their respective covenants.
(e) Approval of Schedules. The Company and the Holders shall have
delivered and Buyer shall have approved all Schedules to this Agreement.
(f) Escrow Agreement. Each of the Company, Buyer, the Holders and
the Escrow Agent shall have executed and delivered the Escrow Agreement,
substantially in the form attached hereto as Exhibit C.
28
<PAGE> 33
(g) Opinion of Counsel. On the date of the Closing, Buyer shall
have received from McDermott, Will and Emery as special counsel for the Company,
an opinion as of said date, in form attached hereto as Exhibit E.
(h) No Litigation. There shall have been no determination by
Buyer, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become inadvisable or impracticable by reason
of the institution or threat by any person or any federal, state or other
governmental authority of litigation, proceedings or other action against Buyer,
the Company or any Subsidiary or Holder or any material adverse change in the
laws or regulations applicable to the Company or any Subsidiary.
(i) Consents. The Company or the Holders shall have made all
filings with and notifications of governmental authorities, regulatory agencies
and other entities required to be made by the Company, its Subsidiaries or the
Holders in connection with the execution and delivery of this Agreement, the
performance of the transactions contemplated hereby and the continued operation
of the business of the Company and its Subsidiaries by Buyer subsequent to the
Closing; and the Company, the Holders and Buyer shall have received all
authorizations, waivers, consents and permits, in form and substance reasonably
satisfactory to Buyer, from all third parties, including, without limitation,
applicable governmental authorities, regulatory agencies, lessors, lenders and
contract parties, required to permit the continuation of the business of the
Company and each Subsidiary and the consummation of the transactions
contemplated by this Agreement, and to avoid a breach, default, termination,
acceleration or modification of any material indenture, loan or credit agreement
or any other material agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award as a result of, or in connection with, the execution and
performance of this Agreement.
(j) Employment Agreements. Each of Dwight L. Gertz and Pat Flynn
shall have executed and delivered to Buyer an Employment Agreement in
substantially the form of Exhibit F attached hereto.
(k) FIRPTA Withholding. At or prior to the Closing, Buyer shall
have received from the Company an affidavit as provided in Section 1445(b)(3) of
the Code and Section 1.1445-2(c) of the Treasury Regulations in the form
attached hereto as Exhibit G attached hereto.
(l) Transfer of Investments. The Company shall have transferred
all interests held by the Company or any of its Subsidiaries in any of the
Investment Entities to Investment Subsidiary in a manner acceptable to Buyer.
(m) Business Relations. Buyer shall be reasonably satisfied with
the Company's business relations based on personal interviews with the
Customers, Distributors and Suppliers.
29
<PAGE> 34
(n) Massachusetts Tax Certificate. At or prior to the Closing,
Buyer shall have received from the Company a certificate of payment/good
standing from the Commissioner of Revenue as provided in Massachusetts General
Laws Chapter 62C, Section 44(a).
(o) Employee Programs. The Company shall have taken all steps
necessary under the relevant documents and applicable law to maintain the
qualification of each Employee Program identified on Schedule 2.25 not
withstanding the purchase of the Company Shares by Buyer.
(p) Resignations. The Company shall have delivered to Buyer the
resignations of all of the Directors of the Company and each Subsidiary and of
such officers of the Company and any Subsidiary as may be requested by Buyer at
least five days prior to the Closing, such resignations to be effective at the
Closing.
(q) Termination of Agreements. The following agreements shall
have been terminated in accordance with their terms: the Symmetrix, Inc.
Shareholders Agreement dated as of August 22, 1995, the Preemptive Rights
Agreement dated as of August 22, 1995, the Stock Pledge Agreement dated as of
August 22, 1995 by and between George Bennett and SAIC, the Stock Pledge
Agreement dated as of August 22, 1995 by and between Fairview Medical Services
Corporation and SAIC and any employment agreements entered into by the Company.
(r) Mass Mutual Agreement. The Company and Massachusetts Mutual
Life Insurance Company shall have executed an agreement in substantially the
form attached hereto as Exhibit H.
(s) Options. The Option Cancellation Agreement shall have been
executed by each Excluded Optionholder.
(t) Landlord Consent and Estoppel. The Company shall have
received from the landlord of the Company's office space located at One
Cranberry Hill, Lexington, Massachusetts a Landlord Consent and Estoppel in a
form reasonably satisfactory to Buyer.
(u) Indemnification Insurance. Buyer shall have obtained
insurance (the "Indemnification Insurance") for certain indemnification
liabilities under Section 10 of this Agreement, such insurance to list certain
parties as beneficiaries as chosen by Buyer and to be in current form and
substance satisfactory to Buyer. The Company and the Holders shall cooperate as
reasonably requested by Buyer in connection with obtaining such Indemnification
Insurance. The cost of the premiums for the Indemnification Insurance has been
deducted from the amount payable by Buyer to the Holders pursuant to Section 1.3
and such deduction is reflected on Exhibit A and Exhibit B attached hereto.
7.2. Conditions to Obligations of the Company and the Holders. The
obligation of the Company and the Holders to consummate this Agreement and the
transactions
30
<PAGE> 35
contemplated hereby is subject to the fulfillment, prior to or at the Closing,
of the following conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of Buyer contained in Section 5 shall be true and
correct in all material respects as though made on and as of the Closing; Buyer
shall, on or before the Closing, have performed all of its obligations hereunder
which by the terms hereof are to be performed on or before the Closing; and
Buyer shall have delivered to the Company and the Holders a certificate of the
President or any Vice President of Buyer dated on the Closing to such effect.
(b) Approval of the Company's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this agreement shall have been approved by Peter Kelman as General Counsel to
the Company and the Holders, and such counsel shall have received on behalf of
the Company and the Holders such other certificates, opinions and documents in
form satisfactory to such counsel as the Company may reasonably require from
Buyer to evidence compliance with the terms and conditions hereof as of the
Closing and the correctness as of the Closing of the representations and
warranties of Buyer and the fulfillment of its covenants.
(c) No Litigation. There shall have been no determination by the
Company, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become inadvisable or impracticable by reason
of the institution or threat by any person or any federal, state or other
governmental authority of material litigation, proceedings or other action
against Buyer, the Company, any Subsidiary or any Holder.
(d) Opinion of Counsel. On the date of the Closing, the Company
and the Holders shall have received from Goodwin, Procter & Hoar LLP counsel for
Buyer, an opinion as of said date, in form attached hereto as Exhibit I.
SECTION 8. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
8.1. Termination. At any time prior to the Closing, this Agreement may
be terminated as follows:
(i) by mutual written consent of all of the parties to this
Agreement;
(ii) by Buyer, pursuant to written notice by Buyer to the
Company and the Holders, if any of the conditions set forth in Section
7.1 of this Agreement have not been satisfied at or prior to the
Closing, or if it has become reasonably and objectively certain that
any of such conditions, other than a condition within the control of
the Company, any Subsidiary or any Holder, will
31
<PAGE> 36
not be satisfied at or prior to the Closing, such written notice to
set forth such conditions which have not been or will not be so
satisfied; and
(iii) by the Company and the Holders, pursuant to written
notice by the Company and the Holders to Buyer, if any of the
conditions set forth in Section 7.2 of this Agreement have not been
satisfied at or prior to the Closing, or if it has become reasonably
and objectively certain that any of such conditions, other than a
condition within the control of Buyer, will not be satisfied at or
prior to the Closing, such written notice to set forth such conditions
which have not been or will not be so satisfied.
8.2. Effect of Termination. All obligations of the parties hereunder
shall cease upon any termination pursuant to Section 8.1, provided, however,
that the provisions of this Section 8, Section 4.9. Section 6.2, Section 11.1
and Section 11.10 hereof shall survive any termination of this Agreement.
SECTION 9. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
9.1. Survival of Warranties. Each of the representations, warranties,
agreements, covenants and obligations herein or in any schedule, exhibit,
certificate or financial statement delivered by any party to the other party
incident to the transactions contemplated hereby are material, shall be deemed
to have been relied upon by the other party and shall survive the Closing
regardless of any investigation and shall not merge in the performance of any
obligation by either party hereto; provided, however, that such representations
and warranties shall expire on the same dates as and to the extent that the
rights to indemnification with respect thereto under Section 10 shall expire.
9.2. Retention Bonus Pool. In the event that the Company has, on
August 1, 1997, an insufficient amount of cash on hand to fund the retention
bonus pool of $1,000,000 accrued in respect of the fiscal year ended May 31,
1997 and payable to participants therein on August 1, 1997 (the "Retention Bonus
Pool"), Buyer agrees to provide to the Company an amount in cash equal to the
Retention Bonus Pool; provided, however, that such amount to be provided by
Buyer shall not exceed $1,000,000.
9.3. Rights of First Refusal. The Company and each Holder hereby
waives any rights of first refusal that such party may have with respect to the
capital stock of the Company under the Symmetrix, Inc. Shareholders Agreement or
any other agreement.
9.4. Investment Entities. The parties acknowledge that subsequent to
the Closing, the interests in the Investment Entities held by Investment
Subsidiary as of the Closing shall be distributed, or the interests in
Investment Subsidiary shall be distributed, to certain current and/or former
employees of the Company. The method and timing of such distribution will be in
the discretion of Dwight L. Gertz and Pat Flynn, with prior consultation with
Gresham Brebach; provided, however, that Investment Subsidiary and any party to
whom such distribution is made shall agree to indemnify the Company and Buyer
for any liabilities relating to the Investment
32
<PAGE> 37
Entities, including, but not limited to, liabilities relating to such
distribution, in a form and in a manner acceptable to the Board of Directors of
the Company. Each Holder acknowledges that the parties to whom such
distribution, if any, will be made are in the discretion of the Company and such
distributees may or may not include such Holder. Each Holder acknowledges that
such Holder has no claim against Buyer or the Company relating to the interests
in the Investment Entities. Buyer acknowledges that it has no claim or interest
in or to all or any portion of the Investment Entities or Investment Subsidiary.
9.5. Release. Each Holder hereby releases and discharges
(i) the Company and Buyer and any and all affiliates of the
Company and Buyer and any of their respective successors and
assigns, of and from any and all commitments, indebtedness,
suits, demands, obligations and liabilities of every kind
and nature, including claims and causes of action both in
law and in equity, and
(ii) each of the present and former stockholders, directors,
officers, employees, attorneys and agents of the Company,
and any of their respective successors and assigns (each,
together with the Company and Buyer, a "Released Party"), of
and from any and all commitments, indebtedness, suits,
demands, obligations and liabilities relating to the
business of the Company and Buyer and relating to this
transaction, including claims and causes of action both in
law and in equity,
which such Holder and/or his heirs, executors, administrators, successors or
assigns ever had, now has or, to the extent arising from or in connection with
any action, omission or state of facts taken or existing on or prior to the date
hereof or prior to the Closing, or may have after the date hereof or after the
Closing, against any Released Party, whether asserted, unasserted, absolute,
contingent, known or unknown, including without limitation commitments,
obligations, liabilities and claims arising under or pursuant to (1) the
articles of incorporation and by-laws or similar organizational documents, as
amended through the date hereof and through the date of the Closing of the
Company, (2) any contracts to which such Holder and any Released Party are
parties, including, without limitation, the Symmetrix, Inc. Shareholders
Agreement, dated as of August 22, 1995, as amended (the "Shareholders
Agreement") and the agreement, if any, between such Holder and the Company, with
respect to the employment of such Holder prior to the date of the Closing, (3)
the interests of the Company in the Investment Entities; provided, however, that
such Holder does not release any Released Party from (A) commitments,
obligations, liabilities and claims arising under or pursuant to the following
provisions of this Agreement: Section 1 (Sale of Shares and Purchase Price),
Section 5 (Representations and Warranties of Buyer), Sections 9.2 and 9.4,
Section 10 (Indemnification) and Section 11 (Miscellaneous), (B) commitments,
obligations, liabilities and claims arising under or pursuant to the employment
agreement, if any, entered into by such Holder and Buyer or the Company pursuant
to the Stock Purchase Agreement, (C) commitments, obligations, liabilities and
claims arising under or pursuant to agreements entered into after the date
33
<PAGE> 38
hereof with the written consent of the Company, (D) any claims for accrued
vacation benefits and claims for compensation earned prior to the date of the
Closing, (E) any claims relating to the right of such Holder to participate in
the gainsharing payments or payments made in lieu thereof made by Massachusetts
Mutual as contemplated by Exhibit H, (F) any claims relating to a purchase order
for services to be rendered by or for the Company or any other Holder, (G) any
claims relating to that certain letter agreement dated as of the date hereof
between the Company and Buyer relating to certain tax matters, (H) commitments,
obligations, liabilities and claims arising under or pursuant to the
Non-Competition and Endorsement Agreement dated as of August 25, 1995 by and
between the Company and George Bennett, (I) commitments, obligations,
liabilities and claims arising under or pursuant to the Fairview Stockholders
Agreement dated as of May 8, 1997 and (J) any claims against another Holder
relating to any obligation, understanding or agreement with such other Holder
which obligation, understanding or agreement is not related to the transaction
contemplated by this Agreement.
Such Holder represents and warrants to each Released Party that he
(i) has received such information as he has deemed relevant regarding the
properties, assets, business, condition (financial or otherwise), results of
operations or prospects of the Company and its affiliates, (ii) has such
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of his or her sale of equity interests in the
Company hereunder and/or has engaged and consulted with one or more advisers
with such capabilities, (iii) has been afforded the opportunity to ask questions
and receive answers from management of the Company and its advisers regarding
the transactions contemplated by this Agreement and the properties, assets,
business, condition (financial and otherwise), results of operations and
prospects of the Company, (iv) understands and acknowledges that certain members
of management of the Company as selected by the Buyer in its sole discretion,
(each, a "Manager"), may be offered incentive compensation and/or other
interests in the Company and/or its affiliates to which such Holder will not be
entitled unless he is selected as a Manager and that certain Managers may enter
into employment agreements with the Buyer and/or the Company, (v) understands
and acknowledges that he has received no guarantee, promise or assurance, and
has no understanding or expectation, that he will be named as a Manager, and
(vi) understands that the prospects of the Company and its affiliates and the
value of the Company and its affiliates may improve significantly and that he
may not participate in any such improvement after the date hereof, although
there is no assurance that such improvement will occur. In furtherance and not
in limitation of the foregoing, such Holder represents that he has read
carefully, fully understood, and if appropriate, discussed with his legal and
financial advisers, (A) materials described in clause (i) above and, (B) the
financial statements and projections set forth in Schedule 2.7 to this Agreement
and such Holder hereby represents that he has not relied upon any
representations, warranties or agreements of any person other than those set
forth in this Agreement. Such Holder hereby acknowledges that he has been
informed that from time-to-time the Company has discussed or received
indications of interest from third parties regarding possible acquisitions,
joint ventures or additional types of financing, including a possible public
offering, for the Company ("Financing Transactions"). Such Holder acknowledges
that (x) the Company internally considers Financing Transactions on an ongoing
basis as part of its strategic planning process and its obligation to consider
the financial impact of any such proposal on its stockholders; and (y)
34
<PAGE> 39
that the Company in the future may enter into one or more Financing Transactions
which could result in a valuation for the Company Shares being sold by such
Holder which is higher or lower than the purchase price being paid by the Buyer
for the Shares and that such Holder will not participate in any such Financing
Transactions, although there is no assurance that any such Financing Transaction
will occur. Such Holder understands and acknowledges that certain Managers may
acquire equity in the Company and may be entitled to participate in any
improvements in the value and prospects of the Company and its affiliates and in
Financing Transactions, if any.
Such Holder acknowledges and agrees that the provisions hereof are
reasonable in context and scope, are a material condition to the Company's
willingness to enter into and effect this Agreement and effect the transactions
contemplated hereby and are intended to be and shall be enforced to the full
extent set forth herein.
9.6. Indemnification Insurance. The Holders shall cooperate as
reasonably requested in connection with maintaining the Indemnification
Insurance in full force and effect until the date which is the later of (i) the
date on which any outstanding claim for indemnification made prior to the date
that is three (3) years from the date of the Closing by the Buyer Indemnified
Parties is finally and completely resolved and (ii) three (3) years from the
date of the Closing.
SECTION 10. INDEMNIFICATION.
10.1. Indemnification by the Holders. The Holders jointly and
severally agree subsequent to the Closing to indemnify and hold the Company, the
Subsidiaries, Buyer and their respective subsidiaries and affiliates and persons
serving as officers, directors, partners or employees thereof (other than the
Holders, except to the extent of liabilities incurred in their capacities as
such an officer, director, partner or employee) (individually a "Buyer
Indemnified Party" and collectively the "Buyer Indemnified Parties") harmless
from and against any damages, liabilities, losses, taxes, fines, penalties,
costs, and expenses (including, without limitation, reasonable fees of counsel)
of any kind or nature whatsoever (whether or not arising out of third-party
claims and including all amounts paid in investigation, defense or settlement of
the foregoing) which may be sustained or suffered by any of them arising out of
or based upon any of the following matters:
(a) fraud, intentional misrepresentation or the cause or
knowledge of a deliberate or willful breach by the Representing Parties of any
of their representations, warranties or covenants under this Agreement or in any
certificate, schedule or exhibit delivered pursuant hereto (collectively, "Fraud
Claims");
(b) any breach of any representation or warranty of the
Representing Parties set forth in Section 2.2, 2.3, 2.4 or 2.5 of this Agreement
(collectively, "Ownership and Authority Claims");
35
<PAGE> 40
(c) any liability of the Company or any Subsidiary for Taxes
arising from an event or transaction prior to the Closing which have not been
paid or provided for or reserved against by the Company or a Subsidiary and any
breach of the representations and warranties set forth in Section 2.8 hereof and
any covenant with respect to Taxes or tax related matters, including without
limitation, any increase in net Taxes due to the unavailability of any loss or
deduction claimed by the Company or a Subsidiary prior to the Closing, but not
including liabilities for Taxes related to the Excluded Liabilities
(collectively, "Tax Claims");
(d) any liability of the Company, any Subsidiary or Buyer with
respect to the Excluded Liabilities (collectively, "Excluded Liability Claims");
and
(e) other than Fraud Claims, Ownership and Authority Claims, Tax
Claims or Excluded Liability Claims, any other breach of any representation,
warranty or covenant of the Representing Parties under this Agreement or in any
certificate, schedule or exhibit delivered pursuant hereto, or by reason of any
claim, action or proceeding asserted or instituted growing out of any matter or
thing constituting a breach of such representations, warranties or covenants
(collectively, "General Claims").
Each Holder severally, but not jointly, agrees subsequent to the
Closing to indemnify and hold all Buyer Indemnified Parties harmless from and
against any damages, liabilities, losses, taxes, fines, penalties, costs, and
expenses (including, without limitation, reasonable fees of counsel) of any kind
or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based upon fraud, intentional misrepresentation or any breach (whether or not
deliberate or willful) of any representation or warranty of such Holder
contained in Section 3, or by reason of any claim, action or proceeding asserted
or instituted growing out of any matter or thing constituting a breach of such
representation or warranty (collectively, "Individual Claims").
10.2. Limitations on Indemnification by the Holders. Anything
contained in this Agreement to the contrary notwithstanding, the liability of
the Holders to provide any indemnification to any Buyer Indemnified Party and
right of Buyer Indemnified Parties to indemnification under Section 10.1 (or
otherwise) shall be subject to the following provisions:
(a) No claims for indemnification shall be made under this
Agreement against any Holder, and no indemnification shall be payable to any
Buyer Indemnified Party, with respect to General Claims after the date which is
one year following the Closing.
(b) No claims for indemnification shall be made under this
Agreement against any Holder, and no indemnification shall be payable to any
Buyer Indemnified Party, with respect to Tax Claims after the later of (i) the
date which is three (3) years following the filing of the Company's fiscal 1996
federal income tax return or (ii) November 30, 1999.
36
<PAGE> 41
(c) Anything contained in this Agreement to the contrary
notwithstanding, (i) no claims for indemnification shall be made under this
Agreement against SAIC or Fairview, and no indemnification shall be payable by
SAIC or Fairview, with respect to Excluded Liability Claims if all of the facts
and circumstances giving rise to any such claim for indemnification arose on or
after the date of Closing and (ii) no claims for indemnification shall be made
under this Agreement against SAIC or Fairview, and no indemnification shall be
payable by SAIC or Fairview, with respect to Excluded Liability Claims on or
after the date that is two (2) years after the Closing; provided, however, that
nothing in this Section 10.2(c) shall be deemed to amend or modify the
provisions of Section 10.1 (other than Section 10.1(d)), Section 10.2(b),
10.2(d)(i) or 10.2(d)(ii) as such provisions relate to Tax Claims.
(d) The aggregate amount to be payable to all Buyer Indemnified
Parties for claims for indemnification shall be limited as follows:
(i) For claims for indemnification made prior to the date
one year following the Closing pursuant to Tax Claims and General
Claims, the aggregate amount to be payable to all Buyer Indemnified
Parties shall in no event exceed the Escrow Amount plus the sum of ONE
MILLION SEVEN HUNDRED AND FIFTY THOUSAND DOLLARS ($1,750,000);
provided, however, (in addition to the foregoing overall aggregate
limit for all such Tax Claims and General Claims) that (A) the
aggregate amount to be payable to all Buyer Indemnified Parties for
such claims for indemnification pursuant to General Claims shall not
exceed the Escrow Amount (and a Buyer Indemnified Party's sole and
exclusive remedy and recourse for all General Claims shall be limited
to the Escrow Amount pursuant to the terms of the Escrow Agreement)
and (B) the aggregate amount to be payable to all Buyer Indemnified
Parties for such claims for indemnification pursuant to Tax Claims
shall not exceed THREE MILLION DOLLARS ($3,000,000);
(ii) For claims for indemnification made on or following the
date one year following the Closing pursuant to Tax Claims, the
aggregate amount to be payable to all Buyer Indemnified Parties shall
in no event exceed the lesser of (a) THREE MILLION DOLLARS
($3,000,000) minus the aggregate amount payable or paid in respect of
claims for indemnification pursuant to Tax Claims made prior to the
date one year following the Closing or (b) the sum of ONE MILLION
SEVEN HUNDRED AND FIFTY THOUSAND DOLLARS ($1,750,000) plus any amounts
distributed or distributable out of the Escrow Amount by the Escrow
Agent to the Holders under the Escrow Agreement as of the date which
is one year following the Closing minus the aggregate amount payable
or paid in respect of claims for indemnification pursuant to Tax
Claims made prior to the date one year following the Closing (other
than any such amount paid out of the Escrow Amount); and
37
<PAGE> 42
(iii) The aggregate amount payable to all Buyer Indemnified
Parties for claims for indemnification pursuant to Non-Attributable
Fraud Claims (as such term is defined below) by (i) SAIC or (ii) a
Holder who receives aggregate proceeds (including any amounts
deposited with the Escrow Agent pursuant to the terms of the Escrow
Agreement) for such Holder's Company Shares and Options of less than
TWO HUNDRED THOUSAND DOLLARS ($200,000), shall not exceed the
aggregate proceeds received by such Holder whether or not such Holder
obtains any reimbursement or recovery for such amount from any other
party or entity. As used in this Section 10.2(d)(iii), a
"Non-Attributable Fraud Claim" as it relates to a Holder is any Fraud
Claim related to which a court of competent jurisdiction (or an
arbitrator if such Fraud Claim is made against the Escrow Amount and
is disputed pursuant to Section 4 of the Escrow Agreement) determines
that such Holder did not personally commit fraud or intentional
misrepresentation or cause or have knowledge of a deliberate or
willful breach of any representation, warranty or covenant under this
Agreement or in any certificate, schedule or exhibit delivered
pursuant hereto.
(e) Claims for indemnification with respect to covenants to be
performed post-Closing, Fraud Claims (other than as provided in Section
10.2(d)(iii)), Ownership and Authority Claims or Excluded Liability Claims
(other than as provided in Section 10.2(c)) made under this Agreement by any
Buyer Indemnified Party shall not be subject to the limitations set forth in
this Section 10.2.
(f) The amount to be payable by a Holder to all Buyer Indemnified
Parties for claims for indemnification for General Claims shall in no event
exceed such Holder's pro rata share of the Escrow Amount and the amount to be
payable by a Holder (whether payable from the Escrow Account or otherwise) to
all Buyer Indemnified Parties for claims for indemnification pursuant to Tax
Claims shall in no event exceed such Holder's pro rata share of the total amount
to be paid to all Buyer Indemnified Parties for claims for indemnification
pursuant to Tax Claims. Amounts paid to Buyer Indemnified Parties from the
Escrow Amount shall be treated for purposes of the foregoing as paid pro rata by
each Holder. The pro rata shares of the Holders for the purposes of this Section
10.2(f) are as follows:
<TABLE>
<S> <C>
SAIC 28.76%
Fairview 14.77%
George Bennett 6.14%
Patrick Flynn 14.39%
John Neal 3.67%
Stewart Davis 1.22%
Dwight Gertz 2.45%
Don C. Hawley 14.39%
Douglas Beaven 11.51%
Chesley Chen 0.94%
John Dove 0.51%
Jeff Mehlman 1.25%
</TABLE>
38
<PAGE> 43
(g) Anything contained in this Agreement to the contrary
notwithstanding, the aggregate amount payable by SAIC to all Buyer Indemnified
Parties for any claims for indemnification pursuant to Section 10.1, other than
claims for indemnification pursuant to an Individual Claim or Fraud Claims
(unless it is a Non-Attributable Fraud Claim, in which case Section 10.2 (d)
(iii) shall govern) shall not exceed the aggregate proceeds received by SAIC,
including any amounts received from the Escrow Agent pursuant to the terms of
the Escrow Agreement. After SAIC has paid the aggregate proceeds received by
SAIC to the Buyer Indemnified Parties, including any amounts received from the
Escrow Agent pursuant to the terms of the Escrow Agreement, whether or not SAIC
obtains any reimbursement or recovery for such amounts from any other party or
entity, SAIC shall have no liability or obligation to provide any
indemnification to any Buyer Indemnified party (other than to provide
indemnification for claims pursuant to an Individual Claim or Fraud Claims
(unless it is a Non-Attributable Fraud Claim, in which case Section 10.2 (d)
(iii) shall govern)) and no Buyer Indemnified Parties shall have any right to
indemnification under Section 10.1 against SAIC, except for claims pursuant to
an Individual Claim or Fraud Claims (unless it is a Non-Attributable Fraud
Claim, in which case Section 10.2 (d) (iii) shall govern).
10.3. Indemnification by Buyer. Buyer agrees to indemnify and hold the
Holders (individually a "Holder Indemnified Party" and collectively the "Holder
Indemnified Parties") harmless from and against any damages, liabilities, losses
and expenses (including, without limitation, reasonable fees of counsel) of any
kind or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based upon any breach of any representation, warranty or covenant made by Buyer
in this Agreement or in any certificate delivered by Buyer hereunder, or by
reason of any claim, action or proceeding asserted or instituted growing out of
any matter or thing constituting such a breach.
10.4. Limitation on Indemnification by Buyer. Notwithstanding the
foregoing, no indemnification shall be payable to the Holders with respect to
claims asserted pursuant to Section 10.3 above after the date which is six (6)
months after the Closing and the aggregate amount to be payable to Holders
pursuant to Section 10.3 shall not exceed ONE MILLION SEVEN HUNDRED AND FIFTY
THOUSAND DOLLARS ($1,750,000); provided, however, that the limitations set forth
herein shall not apply to a claim for indemnification based upon a breach of
Section 5.2 or 5.3 or covenants to be performed post-Closing.
10.5. Notice; Defense of Claims. An indemnified party shall make
claims for indemnification hereunder by giving written notice thereof to the
indemnifying party within the period in which indemnification claims can be made
hereunder. If indemnification is sought for a claim or liability asserted by a
third party, the indemnified party shall also give written notice thereof to the
indemnifying party promptly after it receives notice of the claim or liability
being asserted, but the failure to do so shall not relieve the indemnifying
party from any liability except to the extent that it is prejudiced by the
failure or delay in giving such notice. Such notice shall summarize the bases
for the claim for indemnification and any claim or liability being asserted by a
third party. Within 20 days after receiving such notice the indemnifying party
shall give written
39
<PAGE> 44
notice to the indemnified party stating whether it disputes the claim for
indemnification and whether it will defend against any third party claim or
liability at its own cost and expense. If the indemnifying party fails to give
notice that it disputes an indemnification claim within 20 days after receipt of
notice thereof, it shall be deemed to have accepted and agreed to the claim,
which shall become immediately due and payable. The indemnifying party shall be
entitled to direct the defense against a third party claim or liability with
counsel selected by it (subject to the consent of the indemnified party, which
consent shall not be unreasonably withheld) as long as the indemnifying party is
conducting a good faith and diligent defense. The indemnified party shall at all
times have the right to fully participate in the defense of a third party claim
or liability at its own expense directly or through counsel; provided, however,
that if the named parties to the action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party is
advised that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
indemnified party may engage separate counsel at the expense of the indemnifying
party. If no such notice of intent to dispute and defend a third party claim or
liability is given by the indemnifying party, or if such good faith and diligent
defense is not being or ceases to be conducted by the indemnifying party, the
indemnified party shall have the right, at the expense of the indemnifying
party, to undertake the defense of such claim or liability (with counsel
selected by the indemnified party), and to compromise or settle it, exercising
reasonable business judgment. If the third party claim or liability is one that
by its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, at the expense of the indemnifying party.
10.6. Satisfaction of Holder Indemnification Obligations. In order to
satisfy the indemnification obligations of the Holders for General Claims, a
Buyer Indemnified Party shall have the sole right to proceed directly against
the Escrow Amount as further set forth in the Escrow Agreement. In order to
satisfy any other indemnification obligation of the Holders, a Buyer Indemnified
Party shall have the right to (i) proceed directly against the Escrow Amount as
further set forth in the Escrow Agreement; (ii) proceed directly against the
Holders (in the case of Tax Claims, subject to Section 10.2(f)); (iii) if such
obligation is covered by the Indemnification Insurance, make a claim against the
Indemnification Insurance; or (iv) exercise all of such remedies. Anything
herein contained to the contrary notwithstanding, if a Buyer Indemnified Party
shall receive payment for a claim, or a portion thereof, under the
Indemnification Insurance, such Buyer Indemnified Party shall have no right to
receive payment from the Escrow Amount or directly from any Holder for the
portion, if any, of the claim that is satisfied by payment to such Buyer
Indemnified Party under the Indemnification Insurance.
SECTION 11. MISCELLANEOUS.
11.1. Fees and Expenses.
(a) Each of the parties will bear its own expenses in connection
with the negotiation and the consummation of the transactions contemplated by
this Agreement; provided, however, that the Company shall pay expenses, not to
exceed
40
<PAGE> 45
$150,000, incurred by the Holders in connection with the transfer of the Company
Shares to Buyer, but not including taxes or the costs or expenses, if any,
incurred by the Optionholders in connection with the cancellation of the
Options.
11.2. Governing Law. This Agreement shall be construed under and
governed by the internal laws of the Commonwealth of Massachusetts without
regard to its conflict of laws provisions.
11.3. Notices. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail, upon the sooner of the date on which
receipt is acknowledged or the expiration of three days after deposit in United
States post office facilities properly addressed with postage prepaid. All
notices to a party will be sent to the addresses set forth below or to such
other address or person as such party may designate by notice to each other
party hereunder:
TO BUYER: Nextera Enterprises, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Facsimile: (617) 523-1231
Attention: Kevin M. Dennis, Esq.
TO COMPANY: Symmetrix, Inc.
One Cranberry Hill
Lexington, MA 02173
Facsimile: (617) 674-1300
Attention: Dwight L. Gertz
With a copy to: Peter Kehnan, Esq.
General Counsel
Symnietrix, Inc.
One Cranberry Hill
Lexington, MA 02173
Facsimile: (617) 674-1300
and a copy to: James Marcellino
McDermott, Will & Emery
75 State Street
Boston, MA 02109
41
<PAGE> 46
TO SAIC: Science Applications International
Corporation
10260 Campus Point Drive
San Diego, CA 92121
Attention: Aloma Avery, Esq.
TO ANY OTHER HOLDER: To the address last by provided by
such Holder to the Company
With a copy to: Peter Kelman, Esq.
General Counsel
Symmetrix, Inc.
One Cranberry Hill
Lexington, MA 02173
Facsimile: (617) 674-1300
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
11.4. Affirmation of Agreements. Buyer hereby agrees to be bound by
the terms of the Company's agreement with Massachusetts Mutual Life Insurance
Company executed in the form of Exhibit H, as required by Section 14 of such
agreement. Buyer also hereby acknowledges the Non-Competition and Endorsement
Agreement dated as of August 25, 1995 by and between the Company and George
Bennett and Buyer agrees to cause the Company to perform the obligations of the
Company under such agreement.
11.5. Entire Agreement. This Agreement, including the Schedules and
Exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as referred to herein or in such Schedules and Exhibits or in such
other writings; and all inducements to the making of this Agreement relied upon
by either party hereto have been expressed herein or in such Schedules or
Exhibits or in such other writings.
11.6. Assignability; Binding Effect. This Agreement shall only be
assignable by Buyer to a corporation or partnership controlling, controlled by
or under common control with Buyer upon written notice to the Company and the
Holders. This Agreement may not be assigned by any Holders or the Company
without the prior written consent of Buyer. This Agreement shall be binding upon
and enforceable by, and shall inure to the benefit of, the parties hereto and
their respective successors and permitted assigns.
11.7. Captions and Gender. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The
42
<PAGE> 47
use in this Agreement of the masculine pronoun in reference to a party hereto
shall be deemed to include the feminine or neuter, as the context may require.
11.8. Execution in Counterparts. For the convenience of the parties
and to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
11.9. Amendments. This Agreement may not be amended or modified, nor
may compliance with any condition or covenant set forth herein be waived, except
by a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
11.10. Publicity and Disclosures. No press releases or public
disclosure, either written or oral, of the transactions contemplated by this
Agreement, shall be made by a party to this Agreement without the prior
knowledge and written consent of Buyer and the Company.
11.11. Consent to Jurisdiction. Each of the parties hereby consents to
personal jurisdiction, service of process and venue in the federal or state
courts of Massachusetts for any claim, suit or proceeding arising under this
Agreement, or in the case of a third party claim subject to indemnification
hereunder, in the court where such claim is brought.
11.12. Specific Performance. The parties agree that it would be
difficult to measure damages which might result from a breach of this Agreement
by the Company or the Holders and that money damages would be an inadequate
remedy for such a breach. Accordingly, if there is a breach or proposed breach
of any provision of this Agreement by the Company or the Holders, and Buyer does
not elect to terminate under Section 8, Buyer shall be entitled, in addition to
any other remedies which it may have, to an injunction or other appropriate
equitable relief to restrain such breach without having to show or prove actual
damage to Buyer.
11.13. Conflict with Option Cancellation Agreement. The Holders agree
that, in the event the amount payable to a Holder pursuant to the documents
canceling the Options held by such Holder is less than the amount payable to
such Holder as set forth on Exhibit B attached hereto, the amount payable to
such Holder for the cancellation of such Holder's Options shall be the amount
set forth on Exhibit B attached hereto.
43
<PAGE> 48
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to
be executed by their duly authorized representatives, as of the date first
written above.
BUYER:
NEXTERA ENTERPRISES, L.L.C.
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------
Name: Michael P. Muldowney
Title: Treasurer
THE COMPANY:
SYMMETRIX, INC.
By: /s/ PATRICK JOHN FLYNN
---------------------------------
Name: Patrick John Flynn
Title: Chief Operating Officer
HOLDERS:
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
By: /s/ PAUL SAYER
---------------------------------
Name: Paul Sayer
Title: Senior Vice President
FAIRVIEW MEDICAL SERVICES
CORPORATION
By: /s/ GEORGE B. BENNETT
---------------------------------
Name: George B. Bennett
Title: Chairman
44
<PAGE> 49
/s/ DOUG BEAVEN
------------------------------------
Doug Beaven
/s/ GEORGE BENNETT
------------------------------------
George Bennett
/s/ CHESLEY CHEN
------------------------------------
Chesley Chen
/s/ STEWART DAVIS
------------------------------------
Stewart Davis
/s/ JOHN DOVE
------------------------------------
John Dove
/s/ PAT FLYNN
------------------------------------
Pat Flynn
/s/ DWIGHT L. GERTZ
------------------------------------
Dwight L. Gertz
/s/ DON HAWLEY
------------------------------------
Don Hawley
/s/ JEFF MEHLMAN
------------------------------------
Jeff Mehlman
/s/ JOHN NEAL
------------------------------------
John Neal
45
<PAGE> 1
EXHIBIT NO. 10.3
ESCROW AGREEMENT
AGREEMENT made as of July 30, 1997 by and among Nextera Enterprises,
L.L.C., a Delaware limited liability company ("Buyer"), Symmetrix, Inc., a
Massachusetts corporation (the "Company"), the holders of the Company's capital
stock set forth on Exhibit A attached hereto (herein collectively referred to as
the "Stockholders" and individually as a "Stockholder") and certain holders of
options to purchase shares of the Company's capital stock set forth on Exhibit B
attached hereto (herein collectively referred to as the "Optionholders " and
individually as an "Optionholder;" the Stockholders and the Optionholders are
collectively referred to as the "Holders" and individually as a "Holder") and
State Street Bank and Trust Company, as escrow agent (the "Escrow Agent").
WHEREAS, pursuant to a Stock Purchase Agreement (the "Stock Purchase
Agreement") dated as of July 30, 1997 by and among Buyer, the Company and the
Holders, Buyer is acquiring the all outstanding shares of the Company's capital
stock from the Stockholders and the Company is canceling the options to purchase
capital stock of the Company held by the Optionholders; and
WHEREAS, the Holders have agreed to indemnify Buyer against breaches
of the representations, warranties and covenants made by the Company and certain
of the Holders in the Stock Purchase Agreement and against certain other matters
as specified in Section 10 of the Stock Purchase Agreement; and
WHEREAS, to secure payment of certain of the Holders' indemnification
obligations, ONE MILLION SEVEN HUNDRED AND FIFTY THOUSAND DOLLARS ($1,750,000)
(such amount, the "Escrow Amount") is being deposited, pursuant to Section 1.3
of the Stock Purchase Agreement, in escrow to be held as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises of the parties herein contained, and other good and valuable
consideration, receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Establishment of Escrow: Investment. Buyer has herewith deposited
the Escrow Amount with the Escrow Agent on the date of the Closing. The
consideration deposited hereunder, including any additions to or earnings on the
same, shall be referred to as the "Escrow Fund." The Escrow Fund shall be held
in escrow in an account designated as the Symmetrix, Inc. Escrow Account or an
account having such other similar designation, subject to the terms and
conditions set forth herein. Patrick Flynn shall serve as the exclusive
representative of the Holders with respect to the Escrow Fund and this Agreement
(the "Escrow Representative"). If, for any reason, the Escrow Representative
shall be either unable or unwilling to serve, a successor Escrow Representative
shall be appointed by written consent of all Holders and all references to the
Escrow Representative shall be deemed to include such successor. Unless
otherwise directed in writing by the Escrow Representative and Buyer, the Escrow
Agent shall invest the cash held in the Escrow Fund in any State Street Insured
Money Market Account, U.S. Government obligations, bank certificates of deposit
(up to the maximum insured amount of any such deposit) or repurchase agreements
secured by U.S. Government obligations, (individually, an "Investment"
<PAGE> 2
and collectively, the "Investments"), and the Escrow Agent shall not be
responsible for any loss incurred upon any such investment made in good faith.
Unless otherwise directed in writing by the Escrow Representative and Buyer, the
Escrow Agent shall not invest all or any portion of the Escrow Fund in any
Investment if the maturity date of such Investment is later than the Termination
Date (as defined below).
2. Amounts Earned on Escrow Fund: Tax Matters. All amounts earned,
paid or distributed with respect to the Escrow Fund (whether interest, dividends
or otherwise) shall become a part of the Escrow Fund, shall be held hereunder
upon the same terms as the original Escrow Fund and shall be distributed
together with the underlying portion of the original Escrow Fund pursuant to the
terms of this Agreement. The parties agree that to the extent permitted by
applicable law, including Section 46813(g) of the Internal Revenue Code of 1986,
as amended, the Buyer will include all amounts earned on the Escrow Fund in its
gross income for federal, state and local income tax (collectively, "income
tax") purposes and pay any income tax resulting therefrom.
3. Claims Against Escrow Fund. At any time or times prior to the
expiration of this Agreement, Buyer may make claims against the Escrow Fund for
indemnification pursuant to and in accordance with Section 10 of the Stock
Purchase Agreement. Buyer shall notify the Escrow Representative and the Escrow
Agent in writing prior to the expiration of this Agreement of each such claim,
including a summary of the amount of and bases for such claim. If the Escrow
Representative shall dispute such claim, the Escrow Representative shall give
written notice thereof to Buyer and to the Escrow Agent within thirty (30) days
after receipt of notice of Buyer's claim, in which case the Escrow Agent shall
continue to hold the Escrow Fund in accordance with the terms of this Agreement;
otherwise, such claim shall be deemed to have been acknowledged to be payable
out of the Escrow Fund in the full amount thereof and the Escrow Agent shall use
its best efforts to pay such claim in immediately available funds to Buyer
within three (3) business days after expiration of said thirty day period or as
soon thereafter as possible. If the amount of the claim exceeds the value of the
Escrow Fund, the Escrow Agent shall have no liability or responsibility for any
deficiency.
4. Disputed Claims.
(a) If the Escrow Representative shall dispute an indemnification
claim of Buyer as above provided, the Escrow Agent shall set aside a portion of
the Escrow Fund sufficient to pay said claim in full (the "Set Aside Amount").
If Buyer notifies the Escrow Agent in writing that it has made out-of-pocket
expenditures in connection with any such disputed claim, and provides paid
receipts for such expenditures, in addition to expenditures included in the Set
Aside Amount, an amount equal to such additional expenditures shall be added to
the Set Aside Amount.
(b) If the disputed indemnification claim has not been resolved
or compromised within sixty (60) days after the Escrow Representative sends
notice of dispute of the same, or in the event of a third-party claim or suit,
within fifteen (15) days after its resolution or compromise, said
indemnification claim shall be referred to the American Arbitration Association,
to be settled
2
<PAGE> 3
by binding arbitration in Boston, Massachusetts, in accordance with the
commercial arbitration rules of the Association. The fees and expenses of the
arbitrator shall, as between the Holders and Buyer, be borne by them in such
proportions as shall be determined by the arbitrator, or if there is no such
determination, then such fees and expenses shall be borne equally by the Holders
and Buyer. In no event shall the Escrow Agent be responsible for any fee or
expense of any party to any arbitration proceeding. The determination of the
arbitrator as to the amount, if any, of the indemnification claim which is
properly allowable shall be conclusive and binding upon the parties hereto and
judgment may be entered thereon in any court having jurisdiction thereof,
including, without limitation, any Superior Court in the Commonwealth of
Massachusetts. The Escrow Agent shall use its best efforts to make payment of
such claim, as and to the extent allowed, to Buyer out of the Set Aside Amount
(or if insufficient, out of the Escrow Fund) within three (3) business days
following said determination or as soon thereafter as possible.
(c) Notwithstanding Section 4(b), if a disputed indemnification
claim has not been resolved or compromised as of the Termination Date (as
hereinafter defined), and such claim does not involve a third-party claim or
suit, Buyer and the Escrow Representative shall continue to negotiate in good
faith a settlement of such claims for a period of ten (10) days. If, after the
expiration of such ten-day period, such indemnification claim still has not been
resolved or compromised, such claim shall be settled in accordance with the
arbitration provisions set forth in Section 4(b).
(d) It is understood and agreed that should any dispute arise
under this Section 4, the Escrow Agent, upon receipt of written notice of such
dispute or claim by the Escrow Representative, is authorized and directed to
retain in its possession without liability to anyone, the Set Aside Amount
relating to such dispute plus any expenditures of Buyer made pursuant to Section
4(a) until such dispute shall have been settled pursuant to this Section 4. The
Escrow Agent may, but shall be under no duty whatsoever to, institute or defend
any legal proceedings which relate to the Escrow Fund.
5. Termination. This Agreement shall terminate on the date that the
Escrow Fund is reduced to zero as the result of payments by the Escrow Agent to
Buyer in accordance with the provisions of Section 3 or Section 4. If, however,
the Escrow Fund has not been reduced to zero as of the date that is one (1) year
following the date of this Agreement (the "Termination Date") and there are no
outstanding indemnification claims on the Termination Date, this Agreement shall
terminate and the Escrow Agent shall distribute the amount remaining in the
Escrow Fund to the Holders in accordance with their pro rata interest in the
Escrow Fund as set forth in Exhibit C attached hereto; otherwise this Agreement
shall continue in effect until all indemnification claims Buyer has made
pursuant to Section 3 hereof on or prior to the Termination Date shall have been
disposed of. As of the Termination Date, an amount of the Escrow Fund adequate
to cover all disputed and undisputed claims made by Buyer pursuant to Section 3
hereof, plus an additional twenty percent (20%) of any such amount to cover
expenses of Buyer associated with such claims, will be held by the Escrow Agent,
and the Escrow Agent shall distribute on the Termination Date the balance, if
any, of the Escrow Fund to the Holders in accordance with their pro rata
interest in the Escrow Fund as set forth in Exhibit C attached hereto. At such
time as all remaining indemnification claims hereunder have been resolved and
the Escrow Agent has
3
<PAGE> 4
received a written notice executed by Buyer and the Escrow Representative, or
notification of a determination of an arbitrator pursuant to Section 4(b), to
that effect and any amounts to be distributed to Buyer in connection therewith
have been so distributed, the Escrow Agent shall distribute the remaining Escrow
Fund, if any, to the Holders in accordance with their pro rata interest in the
Escrow Fund.
6. The Escrow Agent. Notwithstanding anything herein to the contrary,
the Escrow Agent shall promptly dispose of all or any part of the Escrow Fund as
directed by a writing signed by the Escrow Representative and Buyer. The
reasonable fees and expenses of the Escrow Agent, including legal fees incurred
in connection with the preparation of this Agreement and including the fees and
disbursements of its counsel, if any, in connection with its performance of this
Agreement shall be paid from the income on the Escrow Fund and, if and to the
extent not so paid, shall be borne equally by the Holders and Buyer. The Escrow
Agent shall be entitled to reimbursement on demand for all expenses incurred in
connection with the administration of this Agreement or the escrow created
hereby which are in excess of its compensation for normal services hereunder,
including without limitation, payment of any legal fees and expenses incurred by
the Escrow Agent in connection with resolution of any dispute hereunder. The
Escrow Agent, its directors, officers and employees shall not be liable for any
act or omission to act under this Escrow Agreement except for its own gross
negligence or willful misconduct. The Escrow Agent shall not be liable for, and
Buyer, the Company and the Holders shall jointly and severally indemnify the
Escrow Agent against, any losses or claims arising out of or any action taken or
omitted in good faith hereunder and upon the advice of counsel, including
in-house counsel. The Escrow Agent may decline to act and shall not be liable
for failure to act if in doubt as to its duties under this Agreement. The Escrow
Agent may act upon any instrument or signature believed by it to be genuine and
shall have no responsibility for determining the accuracy thereof, and may
assume that any person purporting to give any notice or instruction hereunder,
reasonably believed by it to be authorized, has been duly authorized to do so.
The Escrow Agent's duties shall be determined only with reference to this Escrow
Agreement and applicable laws, and the Escrow Agent is not charged with
knowledge of or any duties or responsibilities in connection with any other
document or agreement, including the Stock Purchase Agreement. The Escrow Agent
shall not be obligated to take any legal or other action hereunder which might
in its judgment involve any expense or liability unless it shall have been
furnished with acceptable indemnification. In no event shall the Escrow Agent be
liable for indirect, punitive, special or consequential damages.
Buyer, the Company and the Holders jointly and severally, agree to
assume any and all obligations imposed now or hereafter by any applicable tax
law with respect to the payment of Escrow Funds under this Agreement, and to
indemnify and hold the Escrow Agent harmless from and against any taxes,
additions for late payment, interest, penalties and other expenses, that may be
assessed against the Escrow Agent in any such payment or other activities under
this Agreement. Buyer, the Company and the Holders undertake to instruct the
Escrow Agent in writing with respect to the Escrow Agent's responsibility for
withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting in connection with its acting as
Escrow Agent under this Agreement. Buyer, the Company and the Holders, jointly
and severally, agree to indemnify and hold the Escrow Agent harmless from any
4
<PAGE> 5
liability on account of taxes, assessments or other governmental charges,
including without limitation the withholding or deduction or the failure to
withhold or deduct the same, and any liability for failure to obtain proper
certifications or to properly report to governmental authorities, to which the
Escrow Agent may be or become subject in connection with or which arises out of
this Agreement, including costs and expenses (including reasonable legal fees
and expenses), interest and penalties.
The Escrow Agent shall have the right at any time to resign hereunder
by giving written notice of its resignation to the parties hereto, at the
addresses set forth herein or at such other address as the parties shall
provide, at least thirty (30) business days prior to the date specified for such
resignation to take effect. If the parties hereto do not designate a successor
escrow agent within said thirty (30) business days, the Escrow Agent may apply
to a court of competent jurisdiction for appointment of a successor escrow
agent. The provisions of paragraph 6 shall survive termination of this
Agreement. Upon the effective date of such resignation, all cash and other
payments and all other property then held by the Escrow Agent hereunder shall be
delivered by it to such successor escrow agent or as otherwise shall be
designated in writing by the parties hereto.
In the event that the Escrow Agent should at any time be confronted
with inconsistent or conflicting claims or demands by the parties hereto, the
Escrow Agent shall have the right but not the duty to interplead said parties in
any court of competent jurisdiction and request that such court determine such
respective rights of the parties with respect to this Escrow Agreement, and upon
doing so, the Escrow Agent shall be released from any obligations or liability
to either party as a consequence of any such claims or demands.
The Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any rights hereunder, either directly or by or through
its agents or attorneys including in-house counsel. Nothing in this Escrow
Agreement shall be deemed to impose upon the Escrow Agent any duty to qualify to
do business or to act as fiduciary or otherwise in any jurisdiction other than
the State of Massachusetts. The Escrow Agent shall not be responsible for and
shall not be under a duty to examine into or pass upon the validity, binding
effect, execution or sufficiency of this Escrow Agreement or of any agreement
amendatory or supplemental hereto.
7. Miscellaneous. This Agreement shall be construed under and governed
by the laws of the Commonwealth of Massachusetts and shall inure to the benefit
of and be binding upon the successors, assigns, heirs and personal
representatives of the parties hereto.
8. Counterparts. This Escrow Agreement may be executed in one or more
counterparts, all of which documents shall be considered one and the same
document.
9. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given when
received, if personally delivered or sent by facsimile transmission, or three
(3) days after deposited in the U.S. mails for delivery by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
5
<PAGE> 6
TO BUYER: Nextera Enterprises, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place, Boston, MA 02109
Facsimile: (617) 523-1231
Attention: Kevin M. Dennis
TO THE COMPANY: Symmetrix, Inc.
One Cranberry Hill
Lexington, MA 02173
Facsimile: (617) 674-1300
Attention: Dwight Gertz
With a copy to: Peter Kelman, Esq.
General Counsel
Symmetrix, Inc.
One Cranberry Hill
Lexington, MA 02173
Facsimile: (617) 674-1300
and a copy to: Michael S. Fawcett
Dorman & Fawcett
P.O. Box 214
Hamilton, MA 01936
Facsimile: (508) 468-7423
TO ANY HOLDER: Dwight L. Gertz
Symmetrix, Inc.
One Cranberry Hill
Lexington, MA 02173
Facsimile: (617) 674-1300
TO ESCROW AGENT: State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Attn: Corporate Trust Department,
Fifth Floor
Symmetrix, Inc. Escrow Account
Facsimile: (617) 664-5365
6
<PAGE> 7
Addresses may be changed by written notice given pursuant to this Section. Any
notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
10. Certification of Tax Identification Number. The parties hereto
agree to provide the Escrow Agent with a certified tax identification number by
signing and returning a Form W-9 (or Form W-8, in the case of non-U.S. persons)
to the Escrow Agent prior to the date on which any income earned on the
investment of the Escrow Funds is credited to such Escrow Funds. The parties
hereto understand that, in the event their tax identification numbers are not
certified to the Escrow Agent, the Internal Revenue Code, as amended from time
to time, may require withholding of a portion of any interest or other income
earned on the investment of the Escrow Fund.
11. Consent to Jurisdiction and Service. Buyer, the Company and the
Holders hereby absolutely and irrevocably consent and submit to the jurisdiction
of the courts in the Commonwealth of Massachusetts and of any Federal court
located in said Commonwealth in connection with any actions or proceedings
brought against Buyer, the Company and the Holders by the Escrow Agent arising
out of or relating to this Escrow Agreement. In any such action or proceeding,
Buyer, the Company and the Holders hereby absolutely and irrevocably waive
personal service of any summons, complaint, declaration or other process and
hereby absolutely and irrevocably agree that the service thereof may be made by
certified or registered first-class mail directed to Buyer, the Company and the
Holders, as the case may be, at their respective addresses in accordance with
Section 9 hereof.
12. Force Majeure. Neither Buyer, the Company, the Holders nor Escrow
Agent shall be responsible for delays or failures in performance resulting from
acts beyond its control. Such acts shall include but not be limited to acts of
God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations
superimposed after the fact, fire, communication line failures, computer
viruses, power failures, earthquakes or other disasters.
13. Modifications. This Agreement may not be altered or modified
without the express written consent of the parties hereto. No course of conduct
shall constitute a waiver of any of the terms and conditions of this Escrow
Agreement, unless such waiver is specified in writing, and then only to the
extent so specified. A waiver of any of the terms and conditions of this Escrow
Agreement on one occasion shall not constitute a waiver of the other terms of
this Escrow Agreement, or of such terms and conditions on any other occasion.
14. Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by a
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
7
<PAGE> 8
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to
be executed by their duly authorized representatives, as of the date first
written above.
BUYER:
NEXTERA ENTERPRISES, L.L.C.
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------
Name: Michael P. Muldowney
Title: Treasurer
THE COMPANY:
SYMMETRIX, INC.
By: /s/ PATRICK JOHN FLYNN
---------------------------------
Name: Patrick John Flynn
Title: Chief Operating Officer
HOLDERS:
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
By: /s/ PAUL SAYER
---------------------------------
Name: Paul Sayer
Title: Senior Vice President
FAIRVIEW MEDICAL SERVICES
CORPORATION
By: /s/ GEORGE P. BENNETT
---------------------------------
Name: George P. Bennett
Title: Chairman
8
<PAGE> 9
/s/ DOUG BEAVEN
------------------------------------
Doug Beaven
/s/ GEORGE BENNETT
------------------------------------
George Bennett
/s/ CHESLEY CHEN
------------------------------------
Chesley Chen
/s/ STEWART DAVIS
------------------------------------
Stewart Davis
/s/ JOHN DOVE
------------------------------------
John Dove
/s/ PAT FLYNN
------------------------------------
Pat Flynn
/s/ DWIGHT L. GERTZ
------------------------------------
Dwight L. Gertz
/s/ DON HAWLEY
------------------------------------
Don Hawley
/s/ JEFF MEHLMAN
------------------------------------
Jeff Mehlman
/s/ JOHN NEAL
------------------------------------
John Neal
ESCROW AGENT:
STATE STREET BANK AND TRUST
COMPANY, as Escrow Agent
By: /s/ JAMES E. MOGAVERO
---------------------------------
Name: James E. Mogavero
Title: Vice President
9
<PAGE> 1
EXHIBIT NO. 10.4
PURCHASE AGREEMENT
by and among
SGM CONSULTING, L.L.C.
(Buyer)
NEXTERA ENTERPRISES, L.L.C.
(Nextera)
NEXTERA ENTERPRISES HOLDINGS, L.L.C.
(Holdings)
SIGMA CONSULTING, LLC
(the Company)
and
The Members of the Company
January 5, 1998
<PAGE> 2
STOCK PURCHASE AGREEMENT
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. SALE OF THE COMPANY'S ASSETS, TRANSFER OF THE MEMBERS' SHARES AND
PURCHASE PRICE.......................................................................1
1.1. SALE OF ASSETS..................................................................1
1.2. CONTRIBUTION OF COMPANY SHARES..................................................2
1.3. TIME AND PLACE OF CLOSING.......................................................3
1.4. FURTHER ASSURANCES..............................................................3
1.5. TRANSFER TAXES..................................................................3
1.6. EXCLUDED INTERESTS..............................................................3
1.7. HOLDBACK AMOUNT.................................................................3
1.8. WORKING CAPITAL.................................................................4
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MEMBERS.............5
2.1. MAKING OF REPRESENTATIONS AND WARRANTIES........................................5
2.2. ORGANIZATION AND QUALIFICATIONS OF THE COMPANY..................................5
2.3. MEMBERSHIP INTERESTS OF THE COMPANY; BENEFICIAL OWNERSHIP.......................5
2.4. NO SUBSIDIARIES.................................................................6
2.5. AUTHORITY OF THE COMPANY........................................................6
2.6. REAL AND PERSONAL PROPERTY......................................................7
2.7. FINANCIAL STATEMENTS............................................................8
2.8. TAXES...........................................................................9
2.9. ACCOUNTS RECEIVABLE............................................................11
2.10. ABSENCE OF CERTAIN CHANGES....................................................12
2.11. ORDINARY COURSE...............................................................13
2.12. BANKING RELATIONS.............................................................13
2.13. INTELLECTUAL PROPERTY.........................................................14
2.14. CONTRACTS.....................................................................15
2.15. LITIGATION....................................................................16
2.16. COMPLIANCE WITH LAWS..........................................................17
2.17. INSURANCE.....................................................................17
2.18. WARRANTY OR OTHER CLAIMS......................................................17
2.19. POWERS OF ATTORNEY............................................................17
2.20. FINDER'S FEE..................................................................17
2.21. PERMITS: BURDENSOME AGREEMENTS...............................................17
2.22. COMPANY RECORDS; COPIES OF DOCUMENTS..........................................18
2.23. TRANSACTIONS WITH INTERESTED PERSONS..........................................18
2.24. EMPLOYEE BENEFIT PROGRAMS.....................................................18
2.25. ENVIRONMENTAL MATTERS.........................................................21
2.26. LIST OF MANAGEMENT COMMITTEE..................................................22
2.27. BACKLOG.......................................................................22
2.28. EMPLOYEES; LABOR MATTERS......................................................22
2.29. CUSTOMERS, DISTRIBUTORS AND SUPPLIERS.........................................23
2.30. EQUITY REPURCHASE.............................................................23
2.31. DISCLOSURE....................................................................24
2.32. ASSETS........................................................................24
2.33. NO ADDITIONAL REPRESENTATIONS AND WARRANTIES..................................24
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE MEMBERS............................24
3.1. OWNERSHIP OF SHARES............................................................24
3.2. AUTHORITY......................................................................24
3.3. FINDER'S FEE...................................................................25
3.4. AGREEMENTS.....................................................................25
3.5. EXPERIENCE; ACCREDITED INVESTOR................................................25
3.6. INVESTMENT.....................................................................26
3.7. NO PUBLIC MARKET...............................................................26
3.8. ACCESS TO DATA.................................................................26
3.9. RESIDENCE......................................................................26
SECTION 4. COVENANTS OF THE COMPANY AND THE MEMBERS.................................26
4.1. MAKING OF COVENANTS AND AGREEMENTS.............................................26
4.2. CONDUCT OF BUSINESS............................................................26
4.3. AUTHORIZATION FROM OTHERS......................................................28
4.4. NOTICE OF DEFAULT..............................................................28
4.5. CONSUMMATION OF AGREEMENT......................................................28
4.6. COOPERATION OF THE COMPANY AND MEMBERS.........................................28
4.7. NO SOLICITATION OF OTHER OFFERS................................................28
4.8. TAX RETURNS....................................................................29
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER, NEXTERA AND HOLDINGS............29
5.1. MAKING OF REPRESENTATIONS AND WARRANTIES.......................................29
5.2. ORGANIZATION...................................................................29
5.3. AUTHORITY......................................................................29
5.4. LITIGATION.....................................................................30
5.5. FINDER'S FEE...................................................................30
5.6. AVAILABLE FUNDS................................................................30
5.7. MEMBERSHIP INTERESTS OF NEXTERA AND HOLDINGS...................................30
5.8. FINANCIAL STATEMENTS...........................................................30
5.9. TAXES..........................................................................31
5.10. ABSENCE OF CERTAIN CHANGES....................................................33
5.11. COMPLIANCE WITH LAWS..........................................................34
5.12. OPERATING AGREEMENTS..........................................................35
SECTION 6. COVENANTS OF BUYER, NEXTERA AND HOLDINGS.................................35
6.1. CONSUMMATION OF AGREEMENT......................................................35
6.2. 1997 BONUS POOL................................................................35
6.3. OPTION POOL....................................................................35
6.4. HOLDINGS CLASS A UNITS.........................................................35
HOLDINGS AGREES THAT, IN CONNECTION WITH, AND PURSUANT TO THE TERMS AND CONDITIONS
OF, THE EMPLOYMENT AGREEMENTS TO BE ENTERED INTO BY EACH MEMBER AND BUYER AS CONTEMPLATED BY
SECTION 7.1(J), IT SHALL ISSUE CLASS A COMMON UNITS OF HOLDINGS ("HOLDINGS CLASS A UNITS")
PURSUANT TO THE LIMITED LIABILITY COMPANY AGREEMENT OF NEXTERA ENTERPRISES HOLDINGS, L.L.C.
DATED AS OF APRIL 9, 1997 (THE "HOLDINGS OPERATING AGREEMENT"), IN THE AMOUNTS SET FORTH
OPPOSITE THE NAMES OF THE MEMBERS ON EXHIBIT A-2. THE VALUE OF A HOLDINGS CLASS A UNIT AS
OF THE DATE HEREOF IS $0.10 PER UNIT........................................................36
6.5. BOOKS AND RECORDS; TAX MATTERS.................................................36
SECTION 7. CONDITIONS...............................................................36
7.1. CONDITIONS TO THE OBLIGATIONS OF BUYER, NEXTERA AND HOLDINGS...................36
7.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE MEMBERS.......................39
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
SECTION 8. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED..............................40
8.1. TERMINATION....................................................................40
8.2. EFFECT OF TERMINATION..........................................................40
SECTION 9. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.............................40
9.1. SURVIVAL OF WARRANTIES.........................................................40
9.2. RELEASE........................................................................41
SECTION 10. INDEMNIFICATION.........................................................42
10.1. INDEMNIFICATION BY THE MEMBERS................................................42
10.2. LIMITATIONS ON INDEMNIFICATION BY THE MEMBERS.................................44
10.3. INDEMNIFICATION BY NEXTERA....................................................44
10.4. LIMITATION ON INDEMNIFICATION BY NEXTERA......................................45
10.5. NOTICE; DEFENSE OF CLAIMS.....................................................45
10.6. SATISFACTION OF MEMBER INDEMNIFICATION OBLIGATIONS............................46
SECTION 11. MISCELLANEOUS...........................................................46
11.1. FEES AND EXPENSES.............................................................46
11.2. GOVERNING LAW.................................................................46
11.3. NOTICES.......................................................................46
11.4. ENTIRE AGREEMENT..............................................................48
11.5. ASSIGNABILITY; BINDING EFFECT.................................................48
11.6. CAPTIONS AND GENDER...........................................................49
11.7. EXECUTION IN COUNTERPARTS.....................................................49
11.8. AMENDMENTS....................................................................49
11.9. PUBLICITY AND DISCLOSURES.....................................................49
11.10. SPECIFIC PERFORMANCE.........................................................49
</TABLE>
iii
<PAGE> 5
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is entered into as of January
5, 1998 by and among SGM Consulting, L.L.C., a Delaware limited liability
company ("Buyer"), Nextera Enterprises, L.L.C., a Delaware limited liability
company and the controlling member of Buyer ("Nextera"), Nextera Enterprises
Holdings, L.L.C., a Delaware limited liability company and the controlling
member of Nextera ("Holdings"), SiGMA Consulting, LLC, a New York limited
liability company (the "Company"), and the holders of the Company's membership
interests listed on Exhibit A-1 (herein collectively referred to as the
"Members" and individually as a "Member").
W I T N E S S E T H
WHEREAS, the Members own of record and beneficially all of the issued
and outstanding membership interests of the Company, consisting of 88,137
ownership units (said units referred to herein as the "Shares");
WHEREAS, the Company and the Members desire to sell to Buyer certain
assets of the Company as listed on Exhibit B hereto (the "Purchased Assets"),
and Buyer desires to acquire the Purchased Assets upon the terms and subject to
the conditions of this Agreement;
WHEREAS, immediately following the purchase and sale of the Purchased
Assets the Members desire to contribute all of the Shares to Buyer in return for
membership interests in Nextera;
WHEREAS, Nextera as the controlling member of Buyer, desires to issue
membership interests pursuant to, and subject to the terms and conditions of,
this Agreement; and
WHEREAS, Holdings, as the controlling member of Nextera, desires to
issue membership interests pursuant to, and subject to the terms and conditions
of, employment agreements to be entered into by the Members and Buyer, as
further specified herein.
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECTION 1. SALE OF THE COMPANY'S ASSETS, TRANSFER OF THE MEMBERS' SHARES AND
PURCHASE PRICE.
1.1. Sale of Assets.
(a) Transfer of Assets. Upon the terms and subject to the
conditions contained herein, at the Closing (as hereinafter defined), the
Company shall sell, convey, transfer, assign and deliver to Buyer, and Buyer
will acquire from the Company, the Purchased Assets.
(b) Purchase Price of Assets and Payment Therefor. In
consideration of the sale, transfer, assignment, conveyance and delivery by the
Company to Buyer of the Purchased Assets and in reliance upon the
representations and warranties of the Company and the
<PAGE> 6
Members herein contained and made at the Closing and subject to the satisfaction
of all of the conditions contained herein, Buyer agrees that at the Closing, it
will (a) deliver to the Company the aggregate amount of $7,650,000 in cash,
subject to reduction as provided in Section 1.8 (together with the Holdback
Amount and the Escrowed Cash as defined below, "the Asset Purchase Price") (the
cash payment to be made by bank cashier's check in Boston Clearing House Funds
or by wire transfer of immediately available funds), (b) deposit into an
interest bearing account One Million Five Hundred Thousand Dollars ($1,500,000)
(such amount, the "Holdback Amount") to be held and distributed pursuant to
Section 1.7 hereof and (c) deliver to the Escrow Agent Eight Hundred Fifty
Thousand Dollars ($850,000) in cash (the "Escrowed Cash") to be held by the
Escrow Agent pursuant to and in accordance with the terms of the Escrow
Agreement to be executed substantially in the form attached hereto as Exhibit C.
The Asset Purchase Price shall be allocated among the Purchased Assets in the
manner required by Section 1060 of the Internal Revenue Code and regulations
thereunder. Exhibit B attached hereto sets forth the amount of the Asset
Purchase Price allocable to the various Purchased Assets. Buyer and the Company
each agree to prepare and file on a timely basis with the Internal Revenue
Service substantially identical initial and supplemental Internal Revenue
Service Forms 8594 "Asset Acquisitions Statements Under Section 1060" consistent
with Exhibit B.
(c) Distribution to Members. Immediately upon receipt of the
funds representing the Asset Purchase Price, the Company shall distribute such
funds not subject to the Holdback Amount or the Escrowed Cash to its Members in
accordance with the Operating Agreement of SiGMA Consulting, LLC dated January
31, 1997, as amended (the "Company Operating Agreement").
1.2. Contribution of Company Shares.
(a) Transfer of Shares. At the Closing, but subsequent to the
sale of the Purchased Assets as described in Section 1.1, each Member shall
deliver or cause to be delivered to Buyer all of the assignments duly executed
in blank (or the equivalent), to effect a valid transfer of Shares owned by such
Member, as set forth on Exhibit A-1, free and clear of any and all liens,
encumbrances, charges or claims. In addition, the Company and each Member shall
execute and deliver to Buyer a consent and waiver in the form attached hereto as
Exhibit D to the sale and transfer to Buyer of Shares owned by the other Members
pursuant to the Company Operating Agreement.
(b) Contribution of Shares and Exchange of Nextera Interest. In
return for the contribution from the Members to Buyer of the Shares and in
reliance upon the representations and warranties of the Company and the Members
herein contained and made at the Closing and subject to the satisfaction of all
of the conditions contained herein, Buyer agrees that at the Closing, it will
(a) deliver to the Members, 469,000 Class A Common Units of Nextera ("Nextera
Class A Units") issued pursuant to the Limited Liability Company Agreement of
Nextera Enterprises, L.L.C. dated as of April 9, 1997 (the "Nextera Operating
Agreement"), which shall be distributed in the amounts set forth opposite the
name of each Member on Exhibit A-1, and (b) deliver to the Escrow Agent 200,000
Nextera Class A Units (the "Escrowed Units," together with the Escrowed Cash,
2
<PAGE> 7
the "Escrow Deposit") to be held by the Escrow Agent pursuant to and in
accordance with the terms of the Escrow Agreement to be executed substantially
in the form attached hereto as Exhibit C. The Members acknowledge that the value
of the Nextera Class A Common Units is $2.50 per unit.
1.3. Time and Place of Closing.
The closing of the purchase and sale provided for in this Agreement
(herein called the "Closing") shall be held at a mutually agreeable location on
January 5, 1998 or at such other date as may be mutually agreed upon by the
parties.
1.4. Further Assurances.
The Members from time to time after the Closing at the request of
Buyer and without further consideration shall execute and deliver further
instruments of transfer and assignment and take such other action as Buyer may
reasonably require to more effectively transfer and assign to, and vest in,
Buyer the Shares and all rights thereto, and to fully implement the provisions
of this Agreement.
1.5. Transfer Taxes.
All transfer taxes, fees and duties under applicable law incurred in
connection with the sale and transfer of the Purchased Assets and/or Shares
under this Agreement, if any, will be borne and paid by the Company.
1.6. Excluded Interests.
It is the understanding of Buyer and Nextera that the Company prior to
the date hereof had held equity interests in New Med Corporation, Screening
Technologies, Inc. and ReCall Services, Inc. (such equity interests, together
with the contracts and agreements between the Company and such entities,
hereinafter referred to collectively as the "Excluded Interests"). Prior to the
Closing, all Excluded Interests and all related contracts and agreements will be
transferred by the Company to an entity to be formed by the Company (the
"Excluded Entity"). Notwithstanding the purchase by Buyer of the Purchased
Assets and the Shares, the Company and the Members acknowledge and agree that
Buyer and Nextera will not acquire any assets or assume any liabilities
(hereinafter referred to as the "Excluded Liabilities") of the Company or of the
Members associated with or related to the Excluded Interests, including, without
limitation, any liabilities or obligations relating to work performed or to be
performed by the Company. The Members further represent and warrant (i) that the
sole purpose of the Excluded Entity is and shall continue to be holding the
Excluded Interests and to complete existing obligations related to work
performed for the Excluded Interests, (ii) that the Members will not devote any
time to the Excluded Entity other than Michael Martindale who may serve in a
passive oversight role as a director of the Excluded Entity, and (iii) that the
Excluded Entity will not compete directly or indirectly with the business of
Buyer or Nextera.
1.7. Holdback Amount.
(a) Schedule of 1997 Revenue. As soon as practicable following
completion of the audit of the Company's financial statements for the fiscal
year ending December 31, 1997 ("Fiscal 1997"), the Company shall prepare, in
accordance with generally accepted accounting principles, consistent with those
used in the preparation of the Company's Financial Statements (as hereinafter
defined), a schedule of the Company's revenue for Fiscal 1997 (the "Revenue
Schedule") which shall include revenues generated
3
<PAGE> 8
from the Excluded Interests. The aggregate Company revenues shown on the Revenue
Schedule shall be the "1997 Revenue." The Revenue Schedule shall be itemized by
customer and otherwise be in reasonably sufficient detail to identify and
analyze the Company services provided to generate the revenues. The Company
shall deliver the Revenue Schedule to Buyer and the Members promptly following
its completion.
(b) Distribution of Holdback Amount. In the event that the 1997
Revenue exceeds Nine Million Two Hundred Fifty Thousand Dollars ($9,250,000)
(the "Base Amount"), Buyer shall pay to the Members from the Holdback Amount an
aggregate amount equal to (i) Two Dollars ($2.00), multiplied by (ii) the amount
by which 1997 Revenue exceeds the Base Amount, together with the interest earned
on such amount from the Closing. Any such amounts paid to the Members shall be
allocated among the Members in accordance with their respective interest in the
Holdback Amount as shown on Exhibit A-1 hereto. In no event shall any amounts
payable to the Members under this Section 1.7 exceed the Holdback Amount, plus
interest earned thereon. The amount of the Holdback Amount not so allocated to
the Members, together with interest earned thereon from the Closing, shall be
retained by Buyer. If the 1997 Revenue is less than or equal to the Base Amount,
the Company shall retain the entire Holdback Amount, together with interest
earned thereon.
(c) Disputes. If Nextera or the Members shall disagree with the
amount of 1997 Revenues shown on the Revenue Schedule, it shall notify the other
in writing of such disagreement within fifteen (15) business days of its receipt
of the Revenue Schedule. If no notice of disagreement is so provided, the
Holdback Amount shall be distributed in accordance with Section 1.7(b) above. If
a disagreement exists, Nextera and the Members shall use their best efforts for
a period of thirty days following the notice of disagreement to resolve any
disagreement. If at the end of such period, Nextera and the Members are unable
to resolve the disagreement, a mutually agreed upon independent public
accounting firm (the "Arbitrator") shall be retained to make a final and binding
determination of 1997 Revenue. The fees and expenses of the Arbitrator shall be
borne equally by Nextera and the Members.
1.8. Working Capital. The amount of the cash payments to be
made by Buyer to the Company for the Purchased Assets at the Closing is premised
upon the Company having at least One Million Two Hundred Thousand Dollars
($1,200,000) of working capital, determined in accordance with generally
accepted accounting principles, at the Closing, taking into account all fees and
expenses of the Company related to the transactions contemplated by this
Agreement, accruals for year-end bonuses to the Members and accruals related to
amounts to be paid pursuant to Section 6.2 hereof and without taking into
account items related to the Excluded Investments (such amount being the
"Closing Working Capital"). No later than two business days prior to the
Closing, the Company shall advise Buyer and Nextera of its estimate of Closing
Working Capital. Without limiting other rights that Buyer and Nextera may have
under this Agreement, if the amount so estimated is less than One Million Two
4
<PAGE> 9
Hundred Thousand ($1,200,000), the cash payment to the Company for the Purchased
Assets at Closing shall be reduced by the amount of such shortfall. If the
Closing Working Capital is One Million Two Hundred Thousand Dollars ($1,200,000)
or more, such excess shall become an account payable by the Buyer to the
Members, pro rata among the Members based on their respective ownership interest
in the Company as set forth in Exhibit A-1 (the "Working Capital Payable"). Such
account payable shall be made, without interest, at such time as payment can be
funded from the Company's operations without borrowing under the Company's line
of credit as determined in good faith by Nextera's Board of Directors and in no
event shall payment be made later than June 30, 1998. Within thirty (30) days
following the Closing, the Company shall determine the actual Closing Working
Capital and promptly notify Buyer, Nextera and the Members of such amount. If
such actual Closing Working Capital would have resulted in a different cash
payment to the Company for the Purchased Assets at the Closing or a different
account payable to the Members, Nextera and the Members shall reconcile the
payment discrepancy unless either Nextera or the Members disputes the
determination of actual Closing Working Capital. All such disputes shall be
governed by the same procedures as set forth in Section 1.7(c).
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MEMBERS.
2.1. Making of Representations and Warranties. As a material
inducement to Buyer, Nextera and Holdings to enter into this Agreement and
consummate the transactions contemplated hereby, the Company and each of the
Members jointly and severally hereby make to Buyer, Nextera and Holdings the
representations and warranties contained in this Section 2; provided, however,
that no Member shall have any right of indemnity or contribution from the
Company with respect to any breach of representation or warranty hereunder.
2.2. Organization and Qualifications of the Company. The Company is a
limited liability company organized, validly existing and in good standing under
the laws of the State of New York with full limited liability company power and
authority to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or such
business is currently conducted or proposed to be conducted. The copies of the
Company Operating Agreement, heretofore delivered to Buyer's counsel, are
complete and correct, and, except as set forth in Schedule 2.2, no amendments
thereto are pending. The Company is not in violation of any term of the Company
Operating Agreement. The Company is duly qualified to do business in New York
and, except as set forth in Schedule 2.2, it is not required to be licensed or
qualified to conduct its business or own its property in any other jurisdiction
in which failure to be so licensed or qualified would have a material adverse
effect on the Company.
2.3. Membership Interests of the Company; Beneficial Ownership. The
Shares (i) have been duly issued under the Company Operating Agreement, (ii)
represent all of the issued and outstanding membership interests in the Company,
and (iii) are owned of record by the Members as set forth on Exhibit A-1 hereto.
The Shares are not certificated securities. There are no outstanding options,
warrants, rights, commitments, preemptive rights or agreements of any kind for
the issuance or sale of, or outstanding securities convertible into, any
additional membership interests of any class of the Company. None of the
Company's membership interests have been issued in violation of any federal or
5
<PAGE> 10
state law. Other than as provided in the Company Operating Agreement, there are
no voting trusts, voting agreements, proxies or other agreements, instruments or
undertakings with respect to the voting of the Shares to which the Company or
any of the Members is a party.
2.4. No Subsidiaries. The Company has no subsidiaries or, other than
the Excluded Interests, investments in any other corporation or business
organization.
2.5. Authority of the Company. The Company has full right, authority
and power to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by the Company pursuant to this
Agreement and to carry out the transactions contemplated hereby. The execution,
delivery and performance by the Company of this Agreement and each such other
agreement, document and instrument have been duly authorized by all necessary
action of the Company and no other action on the part of the Company or the
Members is required in connection therewith.
This Agreement and each agreement, document and instrument executed
and delivered by the Company pursuant to this Agreement constitutes, or when
executed and delivered will constitute, valid and binding obligations of the
Company enforceable in accordance with their terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject to the effect of general
principles of equity, including, without limitation, the possible unavailability
of specific performance or injunctive relief, regardless of whether considered
in a proceeding in equity or at law. The execution, delivery and performance by
the Company of this Agreement and each such agreement, document and instrument:
(i) does not and will not violate any provision of the
Company Operating Agreement;
(ii) does not and will not violate any laws of the United
States, or any state or other jurisdiction applicable to the Company
or require the Company to obtain any approval, consent or waiver of,
or make any filing with, any person or entity (governmental or
otherwise) that has not been obtained or made; and
(iii) except as set forth in Schedule 2.5, does not and will
not result in a breach of, constitute a default under, accelerate any
obligation under, or give rise to a right of termination of any
indenture or loan or credit agreement or any other agreement,
contract, instrument, mortgage, lien, lease, permit, authorization,
order, writ, judgment, injunction, decree, determination or
arbitration award to which the Company is a party or by which the
property of the Company is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security
interest or other charge or encumbrance on any of the Company's assets
or the Shares.
6
<PAGE> 11
2.6. Real and Personal Property.
(a) Real Property. The Company does not own any real property.
All of the real property leased by the Company is identified on Schedule 2.6(a)
(herein referred to as the "Leased Real Property").
(i) Leases. All leases of Leased Real Property are
identified on Schedule 2.6(a), and true and complete copies thereof
have been delivered to Nextera. Each of said leases has been duly
authorized and executed by the parties and is in full force and effect
and binding and enforceable against the parties thereto. The Company
is not in default under any of said leases, nor to the knowledge of
the Company has any event occurred which, with notice or the passage
of time, or both, would give rise to such a default. To the Company's
knowledge, the other party to each of said leases is not in default
under any of said leases and there is no event which, with notice or
the passage of time, or both, would give rise to such a default.
(ii) Consents. Except as set forth in Schedule 2.6(a), no
consent or approval is required with respect to the transactions
contemplated by this Agreement from the other parties to any lease of
Leased Real Property or, to the Company's knowledge, from any
regulatory authority, no filing with any regulatory authority is
required in connection therewith, and to the extent that any such
consents, approvals or filings are required, the Company or the
Members will obtain or complete them before the Closing.
(iii) Condition of Leased Real Property. Except as set forth
in Schedule 2.6(a), to the knowledge of the Company and the Members
(1) there are no material defects in the physical condition of any
portion of the Leased Real Property and (2) all such Leased Real
Property is in good operating condition and repair, has been well
maintained.
(iv) Compliance with the Law. The Company has not received
any notice from any governmental authority of any violation of any
law, ordinance, regulation, license, permit or authorization issued
with respect to the Leased Real Property that has not been heretofore
corrected. The Company has not received any notice of any real estate
tax deficiency or assessment and is not aware of any proposed
deficiency, claim or assessment with respect to any of the Leased Real
Property, or any pending or threatened condemnation thereof.
(b) Personal Property. A list of the machinery and equipment of
the Company is contained in Schedule 2.6(b) hereto. Except as specifically
disclosed in said Schedule or in the Base Balance Sheet (as hereinafter
defined), the Company owns all of its personal property free of all liens and
claims. None of such personal property or assets is subject to any mortgage,
pledge, lien, conditional sale agreement, security title, encumbrance or other
charge except as specifically disclosed in said Schedule or in the
7
<PAGE> 12
Base Balance Sheet. The personal property listed in Schedule 2.6(b) reflects all
material personal property of the Company. Except as otherwise specified in
Schedule 2.6(b) hereto, all leasehold improvements, furnishings, machinery and
equipment of the Company presently necessary to the conduct of the business of
the Company as such business is currently being conducted are in good repair,
have been well maintained, and comply in all material respects with all
applicable laws, ordinances and regulations, and such machinery and equipment is
in good working order. Neither the Company nor any of the Members has received
notice of any such law, ordinance or regulation which could adversely affect the
Company or its business.
2.7. Financial Statements.
(a) The Company has delivered to Nextera the following financial
statements, copies of which are attached hereto as Schedule 2.7: balance sheets
of the Company for its fiscal years ended December 31, 1995 and 1996 and
statements of income, retained earnings and cash flows for the years then ended
(with the exception of a statement of cash flow for the year ended December 31,
1995), and a balance sheet of the Company for the interim period ended September
30, 1997 and a statement of income, retained earnings and cash flows for the
nine months then ended (the "Financial Statements"). The September 30, 1997
balance sheet is hereinafter referred to as the "Base Balance Sheet." The
Financial Statements, have been prepared in accordance with generally accepted
accounting principles applied consistently during the periods covered thereby,
and said Financial Statements, present fairly in all material respects the
financial condition of the Company at the dates of said statements and the
results of its operations for the periods covered thereby, and all other
unaudited financial information provided by the Company to Nextera since the
date of the Base Balance Sheet presents fairly and completely in all material
respects the information purported to be shown thereon.
(b) As of the date of the Base Balance Sheet, the Company did not
have any liabilities of any nature, whether accrued, absolute or contingent
(including without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, liabilities for taxes due or then accrued or
to become due, or contingent or potential liabilities relating to activities of
the Company or the conduct of its business prior to the date of the Base Balance
Sheet), except liabilities stated or adequately reserved against on the Base
Balance Sheet.
(c) The projected operating results for fiscal year 1997 and the
Company's fiscal year 1998 operating budget which have previously been supplied
by the Company to Nextera have been prepared in good faith on the basis of
assumptions by the Company which the Company believed were reasonable at the
time of the preparation of such projections. It being recognized, however,
without affecting or limiting any other representation or warranty in this
Agreement, that such projections do not constitute any warranty as to the
Company's future performance and that some assumptions may not materialize and
unanticipated events and circumstances may occur subsequent to the date
8
<PAGE> 13
hereof and that therefore actual results may vary materially from projected
results and such variations may be adverse.
(d) Except as set forth on Schedule 2.7, as of the date hereof
and as of the Closing, the Company has not had and will not have any liabilities
of any nature, whether accrued, absolute or contingent (including without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others, or liabilities for taxes due or then accrued or to become due or
contingent or potential liabilities relating to activities of the Company or the
conduct of its business prior to the date hereof or the Closing, as the case may
be, regardless of whether claims in respect thereof had been asserted as of such
date), except liabilities (i) stated or adequately reserved against on the Base
Balance Sheet or the notes thereto, or (ii) incurred in the ordinary course of
business of the Company consistent with the terms of this Agreement.
2.8. Taxes.
(a) As used in this Section 2.8, the term "Taxes" means all
taxes, charges, fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, VAT,
service, service use, ad valorem, transfer, franchise, profits, license, lease,
withholding, social security, payroll, employment, excise, estimated, severance,
stamp, recording, occupation, real and personal property, gift, windfall profits
or other taxes, customs duties, fees, assessments or charges of any kind
whatsoever, whether computed on a separate, consolidated, unitary, combined or
other basis, together with any interest, fines, penalties, additions to tax or
other additional amounts imposed thereon or with respect thereto imposed by any
taxing authority (domestic or foreign).
(b) Except as otherwise set forth on Schedule 2.8, all returns,
declarations, reports, estimates, statements, schedules or other information or
documents with respect to Taxes (collectively, "Tax Returns") required to be
filed by the Company have been timely filed (giving effect to extensions granted
with respect thereto), and all such Tax Returns are true, correct, and complete
in all material respects.
(c) Except as otherwise set forth on Schedule 2.8, the Company
and each of the Members has timely paid all Taxes due from it or claimed to be
due from it by any federal, state, local, foreign or other taxing authority.
(d) There are no liens for Taxes upon any of the assets of the
Company, except liens for taxes not yet due and payable.
(e) No Tax Returns of the Company have been examined by the
relevant taxing authority. No deficiency for any Taxes has been proposed,
asserted or assessed against the Company that has not been resolved and paid in
full. There are no outstanding waivers, extensions, or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns that have been given by the
9
<PAGE> 14
Company (including the time for filing of Tax Returns or paying Taxes) and the
Company has no pending requests for any such waivers, extensions, or comparable
consents.
(f) No audit or other proceeding by any federal, state, local or
foreign court, governmental, regulatory, administrative or similar authority is
presently pending with respect to any Taxes or Tax Return of the Company, and
the Company has not received written notice of any pending audits or
proceedings.
(g) The Company has established adequate reserves in accordance
with generally accepted accounting principles for all Taxes not yet due and
payable, which reserves are set forth in Schedule 2.8.
(h) The Company uses the cash method of accounting for income tax
purposes and has not made any change in accounting methods, received a ruling
from any taxing authority or signed an agreement with any taxing authority that
could reasonably be expected to have a material adverse effect on the Company.
(i) Except as otherwise set forth on Schedule 2.8, the Company
and each Member has complied in all respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441, 1442, 1445 and 1446
of the Code or similar provisions under any applicable state and foreign laws)
and has, within the time and the manner prescribed by law, paid over to the
proper governmental authorities all amounts so withheld.
(j) The Company is not a party to and is not bound by or has any
obligation under any Tax sharing allocation or indemnity agreement or similar
contract or arrangement.
(k) The Company is, and has been at all times since its
formation, properly characterized as a partnership for federal and applicable
state and local income tax purposes.
(l) No power of attorney granted by the Company with respect to
any Taxes is currently in force.
(m) Other than its own operating agreement, the Company is not
subject to any joint venture, partnership or other arrangement or contract that
is treated as a partnership for U.S. federal income tax purposes.
(n) Except as otherwise set forth in Schedule 2.8, there is no
expectation that any taxing authority may claim or assess any additional Taxes
payable by the Company for any period ending on or prior to the Closing Date and
there are no facts of which the Company or the Members are aware which would
constitute grounds for the assessment of any Taxes payable by the Company for
any period ending on or prior to the Closing Date.
10
<PAGE> 15
(o) Schedule 2.8 sets forth each state, local and foreign
jurisdiction in which the Company is required, or has been at any time required,
to file or be included in a Tax Return. No written claim has ever been received
by the Company from a taxing authority in a jurisdiction where the Company does
not pay Taxes or file Tax Returns that the Company is or may be subject to Taxes
assessed by such jurisdiction, and, to the knowledge of the Company, no such
claim has been threatened by a taxing authority.
(p) The Company has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial understatement
of federal income Taxes within the meaning of Section 6662 of the Code.
(q) The Company has not agreed, nor is it required, to make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise.
(r) No property of the Company is "tax exempt use property"
within the meaning of Section 168(h) of the Code.
(s) The Company has not entered into any installment sale
contract pursuant to Section 453 of the Code whereby the installments have not
been fully collected, nor has the Company entered into an interest rate swap,
currency swap, or similar transaction.
(t) The Company is not subject to liability as a transferee
pursuant to Code Section 6901 et seq or otherwise, nor will Buyer or Nextera be
subject to such liability as a direct or indirect result of Buyer's acquisition
of the Shares.
(u) Neither the Company nor any Member has received a notice of
tax lien with respect to a Member's share of the Company's assets or profits.
(v) The net benefits to the direct and indirect members of Buyer
(other than the Members) resulting from the tax basis of all assets acquired
pursuant to this Agreement will not be less than the benefits associated with
Buyer obtaining a cost basis for the Purchased Assets as set forth on Exhibit B
hereto and a carryover basis for other acquired assets, provided Buyer and its
said members shall not voluntarily adopt a reporting position inconsistent with
the foregoing.
2.9. Accounts Receivable. All of the accounts receivable of the
Company shown or reflected on the Base Balance Sheet or existing at the date
hereof (less the reserve for bad debts set forth on the Base Balance Sheet) are
or will be at the Closing valid and enforceable claims, fully collectible and
subject to no set off or counterclaim. All unbilled revenue recognized and not
yet billed to clients shown on the Base Balance Sheet or existing at the date
hereof has been recorded using the percentage of completion method and are or
will be valid and enforceable claims, fully collectible and subject to no set
off or counterclaim. Except as set forth on Schedule 2.9, the Company has no
accounts or loans receivable from any person, firm or corporation which
11
<PAGE> 16
is affiliated with the Company or from any Member, director, officer or employee
of the Company.
2.10. Absence of Certain Changes. Except as disclosed in Schedule 2.10
attached hereto, since September 30, 1997 there has not been:
(a) Any change in the business, properties, assets, results of
operations, financial condition, liabilities, or prospects of the Company, which
change by itself or in conjunction with all other such changes, whether or not
arising in the ordinary course of business, has been materially adverse with
respect to the Company;
(b) Any contingent liability incurred by the Company as guarantor
or otherwise with respect to the obligations of others or any cancellation of
any material debt or claim owing to, or waiver of any material right of, the
Company;
(c) Any mortgage, encumbrance or lien placed on any of the
properties of the Company which remains in existence on the date hereof or will
remain on the date of the Closing;
(d) Any obligation or liability of any nature, whether accrued,
absolute or contingent (including without limitation liabilities for Taxes due
or to become due or contingent or potential liabilities relating to products or
services provided by the Company or the conduct of the business of the Company
since the date of the Base Balance Sheet regardless of whether claims in respect
thereof have been asserted), incurred by the Company other than obligations and
liabilities incurred in the ordinary course of business consistent with the
terms of this Agreement (it being understood that product or service liability
claims shall not be deemed to be incurred in the ordinary course of business);
(e) Any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company other than in the ordinary course of
business;
(f) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of the Company;
(g) Except for the transfer of the Excluded Interests to the
Excluded Entity and the distribution of the equity interests in the Excluded
Entity to the Members, any declaration, setting aside or payment of any dividend
by the Company, or the making of any other distribution in respect of the
membership interests of the Company, or any direct or indirect redemption,
purchase or other acquisition by the Company of its membership interests;
(h) Any labor trouble or claim of unfair labor practices
involving the Company; any change in the compensation payable or to become
payable by the Company to any of its officers, employees, agents or independent
contractors other than normal
12
<PAGE> 17
merit increases in accordance with its usual practices; or any bonus payment or
arrangement made to or with any of such officers, employees, agents or
independent contractors;
(i) Any change with respect to the officers or management of the
Company;
(j) Any payment or discharge of a material lien or liability of
the Company which was not shown on the Base Balance Sheet or incurred in the
ordinary course of business thereafter;
(k) Any obligation or liability incurred by the Company to any of
its officers, directors, Members or employees, or any loans or advances made by
the Company to any of its officers, directors, Members or employees, except
normal compensation and expense allowances and advances payable to officers or
employees;
(l) Any change in accounting methods or practices, credit
practices or collection policies used by the Company;
(m) Any other transaction entered into by the Company other than
transactions in the ordinary course of business; or
(n) Any agreement or understanding whether in writing or
otherwise, for the Company to take any of the actions specified in paragraphs
(a) through (m) above.
2.11. Ordinary Course. Since September 30, 1997, the Company has
conducted its business only in the ordinary course and consistently with its
prior practices.
2.12. Banking Relations. All of the arrangements which the Company has
with any banking institution are completely and accurately described in Schedule
2.12 attached hereto, indicating with respect to each of such arrangements the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
13
<PAGE> 18
2.13. Intellectual Property.
(a) Except as described in Schedule 2.13, the Company has
exclusive ownership of, or exclusive license to use, all patent, copyright,
trade secret, trademark, or other proprietary rights (collectively,
"Intellectual Property") used or to be used in the business of the Company as
presently conducted or contemplated and all of the rights of the Company in such
Intellectual Property are freely transferable. There are no claims or demands of
any other person pertaining to any of such Intellectual Property and no
proceedings have been instituted, or, to the knowledge of the Company or any of
the Members, are pending or threatened, which challenge the rights of the
Company in respect thereof. The Company has the right to use, free and clear of
claims or rights of other persons, all customer lists, designs, manufacturing or
other processes, computer software, systems, data compilations, research results
and other information required for or incident to its products or its business
as presently conducted or contemplated.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to the Company or used or to be used by the Company in its business as
presently conducted or contemplated, and all other items of Intellectual
Property which are material to the business or operations of the Company, are
listed in Schedule 2.13. All of such patents, patent applications, trademark
registrations, trademark applications and registered copyrights have been duly
registered in, filed in or issued by the United States Patent and Trademark
Office, the United States Register of Copyrights, or the corresponding offices
of other jurisdictions as identified on said Schedule, and have been properly
maintained and renewed in accordance with all applicable provisions of law and
administrative regulations of the United States and each such jurisdiction.
(c) All licenses or other agreements under which the Company is
granted rights in Intellectual Property are listed in Schedule 2.13. All said
licenses or other agreements are in full force and effect, there is no material
default by any party thereto, and, except as set forth on Schedule 2.13, all of
the rights of the Company thereunder are freely assignable. To the knowledge of
Company, the licensors under said licenses and other agreements have and had all
requisite power and authority to grant the rights purported to be conferred
thereby. True and complete copies of all such licenses or other agreements, and
any amendments thereto, have been provided to Nextera.
(d) All licenses or other agreements under which the Company has
granted rights to others in Intellectual Property owned or licensed by the
Company are listed in Schedule 2.13. All of said licenses or other agreements
are in full force and effect, there is no material default by any party thereto,
and, except as set forth on Schedule 2.13, all of the rights of Company
thereunder are freely assignable. True and complete copies of all such licenses
or other agreements, and any amendments thereto, have been provided to Nextera.
14
<PAGE> 19
(e) The Company has taken all steps required in accordance with
sound business practice to establish and preserve its ownership of all
Intellectual Property rights with respect to its products, services and
technology. The Company has required all professional and technical employees
and other employees having access to valuable non-public information of Company,
to execute agreements under which such employees are required to convey to the
Company ownership of all inventions and developments conceived or created by
them in the course of their employment and to maintain the confidentiality of
all such information of Company. The Company has not made any such information
available to any person other than employees of Company except pursuant to
written agreements requiring the recipients to maintain the confidentiality of
such information and appropriately restricting the use thereof. The Company has
no knowledge of any infringement by others of any Intellectual Property rights
of the Company.
(f) To the knowledge of the Company and each of the Members, the
present and contemplated business, activities and products of the Company do not
infringe any Intellectual Property of any other person. No proceeding charging
the Company with infringement of any adversely held Intellectual Property has
been filed or, to the knowledge of the Company or any of the Members, is
threatened to be filed. To the Company's knowledge, there exists no unexpired
patent or patent application which includes claims that would be infringed by or
otherwise adversely affect the products, activities or business of the Company.
The Company is not making unauthorized use of any confidential information or
trade secrets of any person, including without limitation, any former employer
of any past or present employee of Company. Except as set forth in Schedule
2.13, neither the Company nor, to the knowledge of the Company and the Members,
any of the Company's employees have any agreements or arrangements with any
persons other than the Company related to confidential information or trade
secrets of such persons or restricting any such employee's ability to engage in
business activities of any nature. The activities of the Company's employees on
behalf of the Company do not violate any such agreements or arrangements known
to the Company.
2.14. Contracts. Except for contracts, commitments, plans, agreements
and licenses described in Schedule 2.14 (true and complete copies of which have
been delivered to Nextera), the Company is not a party to or subject to:
(a) any plan or contract providing for bonuses, pensions,
options, stock purchases, deferred compensation, retirement payments, profit
sharing, collective bargaining or the like, or any contract or agreement with
any labor union;
(b) any employment contract or contract for services which
requires the payment of more than $25,000 annually or which is not terminable
within 30 days by the Company without liability for any penalty or severance
payment;
(c) any contract or agreement for the purchase of any commodity,
material or equipment except purchase orders in the ordinary course for less
than $25,000 each;
15
<PAGE> 20
(d) any contract or agreement with a client or customer of the
Company providing for an aggregate payment by such client or customer of more
than $25,000;
(e) any other contracts or agreements creating any obligations of
the Company of $25,000 or more with respect to any such contract or agreement
not specifically disclosed elsewhere under this Agreement;
(f) any contract or agreement providing for the purchase of all
or substantially all of its requirements of a particular product from a
supplier;
(g) any contract or agreement which by its terms does not
terminate or is not terminable without penalty by the Company or its successors
within one year after the date hereof;
(h) any contract or agreement for the sale or lease of its
products not made in the ordinary course of business;
(i) any contract with any sales agent or distributor of products
of the Company;
(j) any contract containing covenants limiting the freedom of the
Company to compete in any line of business or with any person or entity;
(k) any contract or agreement for the purchase of any fixed asset
for a price in excess of $25,000 whether or not such purchase is in the ordinary
course of business;
(l) any license agreement (as licensor or licensee);
(m) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money; or
(n) any contract or agreement with any officer, employee,
director or Member of the Company or with any persons or organizations
controlled by or affiliated with any of them.
The Company is not in default under any such contracts, commitments,
plans, agreements or licenses described in said Schedule or has any knowledge of
conditions or facts which with notice or passage of time, or both, would
constitute a default.
2.15. Litigation. There is no litigation or governmental or
administrative proceeding or investigation pending or, to the knowledge of the
Company or any of the Members, threatened against the Company or its affiliates.
There have been no claims made or threatened by a client or customer of the
Company nor, to the knowledge of the Company or any of the Members, are there
any such claims that may be asserted.
16
<PAGE> 21
2.16. Compliance with Laws. The Company is in compliance with all
applicable statutes, ordinances, orders, judgments, decrees, rules and
regulations promulgated by any federal, state, municipal entity, agency, court
or other governmental authority which apply to the Company or to the conduct of
its business, except where noncompliance with such statute, ordinance, order,
judgment, decree, rule or regulation would not have a material adverse effect on
the Company, and the Company has not received notice of a violation or alleged
violation of any such statute, ordinance, order, rule or regulation.
2.17. Insurance. The physical properties, assets and business of the
Company are insured to the extent disclosed in Schedule 2.17 attached hereto and
all such insurance policies and arrangements are disclosed in said Schedule.
Said insurance policies and arrangements are in full force and effect, all
premiums with respect thereto are currently paid, and the Company is in
compliance in all material respects with the terms thereof. Said insurance is
adequate and customary for the business engaged in by the Company and is
sufficient for compliance by the Company with all requirements of law and all
agreements and leases to which the Company is a party.
2.18. Warranty or Other Claims. There are no existing or threatened
product or service liability, warranty or other similar claims, or any facts
upon which a material claim of such nature could be based, against the Company
for products or services which are defective or fail to meet any product or
service warranties. No claim has been asserted against the Company for
renegotiation or price redetermination of any business transaction, and to the
knowledge of the Company and each of the Members there are no facts upon which
any such claim could be based.
2.19. Powers of Attorney. Neither the Company or any of the Members
has any outstanding power of attorney with respect to or affecting any
transaction contemplated by this Agreement.
2.20. Finder's Fee. The Company has not incurred or become liable for
any broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement, other than fees to Hambrecht &
Quist which shall be paid by the Members.
2.21. Permits: Burdensome Agreements. Schedule 2.21 lists all permits,
registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state or local
authorities in order for the Company to conduct its business. The Company has
obtained all such Approvals, which are valid and in full force and effect, and
is operating in compliance therewith. Such Approvals include, but are not
limited to, those required under federal, state or local statutes, ordinances,
orders, requirements, rules, regulations, or laws pertaining to environmental
protection, public health and safety, worker health and safety, buildings,
highways or zoning. Except as disclosed in Schedule 2.21 or in any other
Schedule hereto, the Company is not subject to or bound by any agreement,
judgment, decree or order which may materially and adversely affect its business
or prospects, its condition, financial or otherwise, or any of its assets or
properties.
17
<PAGE> 22
2.22. Company Records; Copies of Documents. The record books of the
Company accurately record all action taken by its Members and Management
Committee and committees. The copies of the records of the Company, as made
available to Nextera for review, are true and complete copies of the originals
of such documents. The Company has made available for inspection and copying by
Nextera and its counsel true and correct copies of all documents referred to in
this Section or in the Schedules delivered to Nextera pursuant to this
Agreement.
2.23. Transactions with Interested Persons. Neither the Company, any
of its Subsidiaries, any Member, officer, supervisory employee or director of
the Company or any of its Subsidiaries owns directly or indirectly on an
individual or joint basis any material interest in, or serves as an officer or
director or in another similar capacity of, any competitor or supplier of
Company or any of its Subsidiaries, or any organization which has a material
contract or arrangement with the Company or any of its Subsidiaries.
2.24. Employee Benefit Programs.
(a) Schedule 2.24 lists every Employee Program (as defined
below) that has been maintained (as defined below) by the Company at any time
during the three-year period ending on the date of the Closing.
(b) Each Employee Program which has ever been maintained by the
Company and which has at any time been intended to qualify under Section 401(a)
of the Code, and each associated trust which at any time has been intended to be
exempt from taxation pursuant to Section 501(a) of the Code is the subject of a
favorable determination, opinion or approval letter from the Internal Revenue
Service ("IRS") regarding its qualification or exemption from taxation, as
applicable, under such section and has, in fact, been qualified or tax exempt,
as applicable, under the applicable section of the Code for all periods for
which the applicable statute of limitations has not expired through and
including the Closing (or, if earlier, the date that all of such Employee
Program's assets were distributed). No event or omission has occurred which
would cause any such Employee Program to lose its qualification under the
applicable Code section.
(c) The Company does not know and has no reason to know, of any
failure of any party to comply in any material respect with any laws applicable
to the Employee Programs that have been maintained by the Company. With respect
to any Employee Program ever maintained by the Company for all periods for which
the applicable statute of limitations has not expired, there has occurred no
"prohibited transaction," as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code,
or any material violation of, or material breach of any duty under, ERISA or
other applicable law (including, without limitation, any health care
continuation requirements (under part 6 of subtitle B of Title I or ERISA, or
otherwise) or any other tax law requirements, or conditions to favorable tax
treatment, applicable to such plan), which could result, directly or indirectly,
in any taxes,
18
<PAGE> 23
penalties or other liability to the Company, Buyer or Nextera. No litigation,
arbitration, or governmental administrative proceeding (or investigation) or
other proceeding (other than those relating to routine claims for benefits) is
pending or, to the knowledge of the Company, threatened with respect to any
Employee Program.
(d) Neither the Company nor any Affiliate (as defined below) has
ever (i) maintained any Employee Program which has been subject to Title IV of
ERISA; (ii) maintained any Multiemployer Plan (as defined below); or (iii)
provided health care or any other non-pension benefits to any employees after
their employment is terminated (other than as required by part 6 of subtitle B
of title I of ERISA or benefits that continue for a brief period of time after
termination of employment, for example for the balance of the month in which an
employee terminates, or has ever promised to provide such post-termination
benefits).
(e) With respect to each Employee Program maintained by the
Company within the three years preceding the Closing, complete and correct
copies of the following documents (if applicable to such Employee Program) have
previously been delivered to Nextera: (i) all documents embodying or governing
such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended;
(ii) the most recent IRS determination, opinion or approval letter with respect
to such Employee Program under Code Sections 401 and 501(a), and any
applications for determination or approval subsequently filed with the IRS;
(iii) the three most recently filed IRS Forms 5500, with all applicable
schedules and accountants' opinions attached thereto; (iv) the summary plan
description for such Employee Program (or other descriptions of such Employee
Program provided to employees) and all modifications thereto; (v) any insurance
policy (including any fiduciary liability insurance policy) related to such
Employee Program; (vi) any documents evidencing any loan to an Employee Program
that is a leveraged employee stock ownership plan; and (vii) all other materials
reasonably necessary for Buyer to perform any of its responsibilities with
respect to any Employee Program subsequent to the Closing (including, without
limitation, health care continuation requirements).
(f) Neither the Company nor any Affiliate has any announced plan
or legally binding commitment to create any additional Employee Program which is
intended to cover employees or former employees of the Company or any Affiliate
(with respect to their relationship with such entities) or to amend or modify
any existing Employee Program which covers or has covered employees or former
employees of the Company or any Affiliate (with respect to their relationship
with such entities).]
(g) Each Employee Plan listed on Schedule 2.24 may be amended,
terminated, modified or otherwise revised prospectively by the Company including
the elimination of any and all future benefit accruals under any Employee Plan.
(h) No event has occurred in connection with which the Company,
any Affiliate or any Employee Program, directly or indirectly, could be subject
to any material
19
<PAGE> 24
liability (A) under any statute, regulation or governmental order relating to
any Employee Programs or (B) pursuant to any obligation of the Company or any
Affiliate to indemnify any person against liability incurred under any such
statute, regulation or order as they relate to the Employee Programs.
(i) Neither the execution and delivery of this Agreement by the
Company nor the consummation of the transactions contemplated hereby will result
in the acceleration or creation of any rights of any person to benefits under
any Employee Program (including, without limitation, the acceleration of the
vesting or exercisability of any stock options, the acceleration of the vesting
of any restricted stock, or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
(j) Each Employee Program and related trust agreement or other
funding instrument, as applicable, which covers or has covered employees or
former employees of the Company or any Affiliate (with respect to their
relationship with such entities) is legally valid and binding and in full force
and effect.
(k) There is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company or any Affiliate (with
respect to its relationship with such entities) that, individually or
collectively, provides for the payment by the Company or any Affiliate of any
amount (i) that is not deductible under Section 162(a)(1) or 404 of the Code or
(ii) that is an "excess parachute payment" pursuant to Section 280G of the Code.
(l) All contributions required to be made by the Company or any
Affiliate with respect to any Employee Program due as of any date through and
including the Closing Date have been made when due.
(m) For purposes of this section:
(i) "Employee Program" means (A) any employee benefit plan
within the meaning of ERISA Section 3(3), including, but not limited
to, any multiple employer welfare arrangement (within the meaning of
ERISA Section 3(4)), plan to which more than one unaffiliated employer
contributes and any employee benefit plan (such as a foreign or excess
benefit plan) which is not subject to ERISA; and (B) any employment,
consulting, severance or other similar contract, arrangement or
policy, any stock option plan, bonus or incentive award plan, deferred
compensation agreement, supplemental income arrangement, vacation
plan, any employee benefit arrangement described in Code Section
501(c)(9), and any other employee benefit plan, agreement, and
arrangement not described in (A) above. In the case of an Employee
Program funded through a trust described in Code Section 501(a), each
reference to such Employee Program shall include a reference to such
trust.
20
<PAGE> 25
(ii) An entity "maintains" an Employee Program if such
entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or provide
benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity, or
their spouses, dependents, or beneficiaries.
(iii) An entity is an "Affiliate" of the Company if it would
have ever been considered a single employer with the Company under
ERISA Section 4001(b) or part of the same "controlled group" as the
Company or any of its Subsidiaries for purposes of ERISA Section
302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and
which is maintained pursuant to one or more collective bargaining
agreements as defined in Section 3(37) of ERISA.
2.25. Environmental Matters.
(a) (i) The Company has never generated, transported, used,
stored, treated, disposed of, or managed any Hazardous Waste (as defined below);
(ii) to the knowledge of the Company and each of the Members, no Hazardous
Material (as defined below) has ever been or is threatened to be spilled,
released, or disposed of at any site presently or formerly owned, operated,
leased, or used by the Company, or has ever been located in the soil or
groundwater at any such site; (iii) to the knowledge of the Company and each of
the Members, no Hazardous Material has ever been transported from any site
presently or formerly owned, operated, leased, or used by the Company for
treatment, storage, or disposal at any other place; (iv) to the knowledge of the
Company and each of the Members, the Company does not presently own, operate,
lease, or use, nor has it previously owned, operated, leased, or used any site
on which underground storage tanks are or were located; and (v) no lien has ever
been imposed by any governmental agency on any property, facility, machinery, or
equipment owned, operated, leased, or used by the Company in connection with the
presence of any Hazardous Material.
(b) (i) To the knowledge of the Company and each of the Members,
the Company has no liability under, nor has it ever violated, any Environmental
Law (as defined below); (ii) to the knowledge of the Company and each of the
Members, the Company, any property owned, operated, leased, or used by any of
it, and any facilities and operations thereon, are presently in compliance with
all applicable Environmental Laws; (iii) the Company has never entered into or
been subject to any judgment, consent decree, compliance order, or
administrative order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law;
21
<PAGE> 26
and (iv) the Company has no reason to believe that any of the items enumerated
in clause of this subsection will be forthcoming.
(c) To the knowledge of the Company and each of the Members, no
site owned, operated, leased, or used by the Company contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls (PCBs) or equipment
containing PCBs; or any urea formaldehyde foam insulation.
(d) The Company has provided to Nextera copies of all documents,
records, and information available to the Company concerning any environmental
or health and safety matter relevant to the Company or any of its Subsidiaries,
whether generated by the Company or others, including without limitation,
environmental audits, environmental risk assessments, site assessments,
documentation regarding off-site disposal of Hazardous Materials, spill control
plans, and reports, correspondence, permits, licenses, approvals, consents, and
other authorizations related to environmental or health and safety matters
issued by any governmental agency.
(e) For purposes of this Section 2.25, (i) "Hazardous Material"
shall mean and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, contaminant, or
other substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Company" shall mean and
include Company and all other entities for whose conduct the Company is or may
be held responsible under any Environmental Law.
2.26. List of Management Committee. Schedule 2.26 hereto contains a
true and complete list of all current members of the Management Committee of the
Company. In addition, Schedule 2.26 hereto contains a list of all managers,
employees and consultants of the Company who, individually, have received or are
scheduled to receive compensation from the Company for the fiscal year ending
December 31, 1997, in excess of $20,000. In each case such Schedule includes the
current job title and aggregate annual compensation of each such individual.
2.27. Backlog. As of the date hereof, the Company has a backlog of
firm orders for the sale or lease of products or services, for which revenues
have not been recognized by the Company, as set forth in Schedule 2.27.
2.28. Employees; Labor Matters. The Company employs a total of
approximately forty-two (42) full-time employees and one (1) part-time employee.
Except as set forth in Schedule 2.28(a), neither the Company nor any Member has
received any notice that any employee intends to terminate his or her employment
with the Company following the Closing. The Company is not delinquent in
payments to any of its employees for any wages, salaries,
22
<PAGE> 27
commissions, bonuses or other direct compensation for any services performed for
it to the date hereof or amounts required to be reimbursed to such employees.
Upon termination of the employment of any of said employees, none of the
Company, Buyer or Holdings will by reason of the transactions contemplated under
this Agreement or anything done prior to the Closing be liable to any of said
employees for so-called "severance pay" or any other payments. The Company has
no policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection with the termination of employment, except
as set forth in Schedule 2.28(b). The Company is in compliance in all material
respects with all applicable laws and regulations respecting labor, employment,
fair employment practices, work place safety and health, terms and conditions of
employment, and wages and hours. There are no charges of employment
discrimination or unfair labor practices, nor are there any strikes, slowdowns,
stoppages of work, or any other concerted interference with normal operations
which are existing, pending or threatened against or involving the Company. No
question concerning union representation exists respecting any employees of the
Company. There are no grievances, complaints or charges that have been filed
against the Company under any dispute resolution procedure (including, but not
limited to, any proceedings under any dispute resolution procedure under any
collective bargaining agreement) that might have an adverse effect on the
Company or the conduct of its business, and there is no arbitration or similar
proceeding pending and no claim therefor has been asserted. No collective
bargaining agreement is in effect or is currently being or is about to be
negotiated by the Company. The Company has not received any information
indicating that any of its employment policies or practices is currently being
audited or investigated by any federal, state or local government agency. The
Company is, and at all times has been, in compliance in all material respects
with the requirements of the Immigration Reform Control Act of 1986.
2.29. Customers, Distributors and Suppliers. Schedule 2.29(a) sets
forth any customer, sales representative or distributor (whether pursuant to a
commission, royalty or other arrangement) which will account for more than
$50,000 in revenue for the Company for the twelve months ending December 31,
1997 (collectively, the "Customers and Distributors"). Schedule 2.29(b) lists
all of the suppliers of the Company to whom during the fiscal year ending
December 31, 1997 the Company will make payments aggregating $50,000 or more
showing, with respect to each, the name, address and dollar volume involved (the
"Suppliers"). The relationships of the Company with its Customers, Distributors
and Suppliers are good commercial working relationships. No Customer,
Distributor or Supplier has canceled, materially modified, or otherwise
terminated (other than in accordance with the terms of a valid contract) its
relationship with the Company, or has during the last twelve months decreased
materially its services, supplies or materials to the Company or its usage or
purchase of the services or products of the Company, nor to the knowledge of
Company, does any Customer, Distributor or Supplier have any plan or intention
to do any of the foregoing.
2.30. Equity Repurchase. Other than as set forth in Schedule 2.30, the
Company has not redeemed or repurchased any of its membership interests. The
Company has no remaining obligations or liabilities, whether absolute,
contingent or otherwise, related to or arising out of any such redemption or
repurchase of its membership interests.
23
<PAGE> 28
2.31. Disclosure. The representations, warranties and statements
contained in this Agreement and in the exhibits and schedules hereto do not
contain any untrue statement of a material fact, and, when taken together, to
the Company's knowledge do not omit to state a material fact required to be
stated therein or necessary in order to make such representations, warranties or
statements not misleading in light of the circumstances under which they were
made. To the Company's knowledge, there are no facts which presently or may in
the future have a material adverse affect on the business, properties,
prospects, operations or condition of the Company which have not been
specifically disclosed herein or in a Schedule furnished herewith, other than
general economic conditions affecting the industries in which the Company
operates.
2.32. Assets. Except as set forth on Schedule 2.32, the Company has
and will transfer good and marketable fee simple title to the Purchased Assets
and upon the consummation of the transactions contemplated hereby, Buyer will
acquire good title to all of the Purchased Assets free of any claim, lien,
pledge, option charge, security interest, deed of trust, mortgage, encumbrance
or other right of third parties, whether voluntarily incurred or arising by
operation of law.
2.33. No Additional Representations and Warranties. Except as set
forth in this Agreement, the Company and the Members make no other
representations and warranties.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE MEMBERS.
As a material inducement to Buyer, Nextera and Holdings to enter into
this Agreement and consummate the transactions contemplated hereby, each Member
hereby severally, but not jointly, makes to Buyer, Nextera and Holdings each of
the representations and warranties set forth in this Section 3 with respect to
such Member. No Member shall have any right of indemnity or contribution from
the Company with respect to the breach of any representation or warranty
hereunder.
3.1. Ownership of Shares. Such Member owns of record and beneficially
the number of the Shares set forth opposite such Member's name in Exhibit A-1.
Such Shares are, and when delivered by such Member to Buyer pursuant to this
Agreement will be, free and clear of any and all liens, encumbrances, charges or
claims.
3.2. Authority. Such Member has full right, authority, power and
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of such Member pursuant
to this Agreement and to carry out the transactions contemplated hereby and
thereby. This Agreement and each agreement, document and instrument executed and
delivered by such Member pursuant to this Agreement constitutes a valid and
binding obligation of such Member, enforceable in accordance with their
respective terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject to the effect of general principles of equity,
including, without limitation, the possible unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law, and such Member has full power and authority to
transfer, sell and deliver the Shares to Buyer pursuant to
24
<PAGE> 29
this Agreement. The execution, delivery and performance of this Agreement and
each such agreement, document and instrument:
(i) does not and will not violate any provision of any laws
of the United States or any state or other jurisdiction applicable to
such Member, or require such Member to obtain any approval, consent or
waiver from, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made; and
(ii) does not and will not result in a breach of, constitute
a default under, accelerate any obligation under, or give rise to a
right of termination of, any indenture or loan or credit agreement or
any other agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Member is a party or
by which the property of such Member is bound or affected, or result
in the creation or imposition of any mortgage, pledge, lien, security
interest or other charge or encumbrance on any assets of the Company
or on Shares owned by such Member.
3.3. Finder's Fee. Such Member has not incurred or become liable for
any broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
3.4. Agreements. Other than as set forth on Schedule 3.4, each such
Member is not a party to any non-competition, trade secret or confidentiality
agreement with any party other than the Company, other than any such agreement
that may be entered into in connection with such Member's employment by the
Company. There are no agreements or arrangements not contained herein or
disclosed in a Schedule hereto, to which such Member is a party relating to the
business of the Company or to such Member's rights and obligations as a Member,
director or officer of the Company. Except as set forth on Schedule 3.4, such
Member does not own, directly or indirectly, on an individual or joint basis,
any material interest in, or serve as an officer or director of, any customer,
competitor or supplier of the Company, or any organization which has a contract
or arrangement with the Company.
3.5. Experience; Accredited Investor. Such Member has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Buyer, Nextera and Holdings so that it is
capable of evaluating the merits and risks of acquiring the Nextera Class A
Units as partial consideration for sale of the Shares and Holdings Class A Units
(as hereinafter defined) pursuant to his employment agreement as provided in
Sections 6.4 and 7.1(j) and has the capacity to protect its own interests. Such
Member must bear the economic risk of holding the Nextera Class A Units and
Holdings Class A Units indefinitely unless such securities are registered
pursuant to the Securities Act, or an exemption from registration is available
for the disposition thereof. Such Member understands that there is no assurance
that any exemption from registration under the Securities Act will be available.
Member is an "accredited investor" as defined in Rule 501 under the Securities
Act.
25
<PAGE> 30
3.6. Investment. Such Member is acquiring the Nextera Class A Units
and Holdings Class A Units for such Member's own account for investment only,
and not with the view to, or for resale in connection with, any distribution
thereof. It understands that the Nextera Class A Units and Holdings Class A
Units acquired have not been, and will not be, registered under the Securities
Act by reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the Member's
representations as express herein.
3.7. No Public Market. Purchaser understands that no public market now
exists for any of the securities issued by Nextera or Holdings and that neither
Nextera nor Holdings has made any assurances that a public market will ever
exist for such securities.
3.8. Access to Data. Such Member has received and read the Nextera
Operating Agreement, Holdings Operating Agreement, Nextera business plan and
financial statements and has had an opportunity to discuss Nextera's business,
management and financial affairs with its management. Such Member has also had
an opportunity to ask questions of and receive answers from officers of Nextera
regarding the terms and conditions of acquiring the Nextera Class A Units and
Holdings Class A Units, which questions were answered to such Member's
satisfaction.
3.9. Residence. The residence of the Member in which its investment
decision was made is located at the address of the Member set forth on the
signature page hereto.
SECTION 4. COVENANTS OF THE COMPANY AND THE MEMBERS.
4.1. Making of Covenants and Agreements. The Members jointly and
severally hereby make the covenants and agreements set forth in this Section 4
and the Members agree to cause the Company to comply with such agreements and
covenants. No Member shall have any right of indemnity or contribution from the
Company with respect to the breach of any covenant or agreement hereunder.
4.2. Conduct of Business. Between the date of this Agreement and the
date of the Closing, the Company will:
(a) Use reasonable efforts to conduct its business only in the
ordinary course consistent with past operations and refrain from changing or
introducing any method of management or operations except in the ordinary course
of business and consistent with prior practices;
(b) Refrain from making any purchase, sale or disposition of any
asset or property other than in the Excluded Interests or the ordinary course of
business, from purchasing any capital asset costing more than $25,000 and from
mortgaging, pledging, subjecting to a lien or otherwise encumbering any of its
properties or assets other than in the ordinary course of business;
26
<PAGE> 31
(c) Refrain from incurring any contingent liability as a
guarantor or otherwise with respect to the obligations of others, and from
incurring any other contingent or fixed obligations or liabilities except in the
ordinary course of business;
(d) Except as expressly contemplated by this Agreement, refrain
from making any change or incurring any obligation to make a change in the
Company Operating Agreement or its outstanding membership interests other than
accruing for the Working Capital Payable pursuant to Section 1.8 hereto;
(e) Except as expressly contemplated by this Agreement, refrain
from declaring, setting aside or paying any dividend, making any other
distribution in respect of its membership interests or making any direct or
indirect redemption, purchase or other acquisition of its membership interests
other than accruing for the Working Capital Payable pursuant to Section 1.8
hereto;
(f) Refrain from making any change in the compensation (whether
salary or bonus) payable or to become payable to any of its employees and use
all reasonable efforts in the ordinary course of business to maintain the
Company's workforce at its current level and make no material adjustment in
wages or hours of work, nor enter into any employment agreement, or adopt any
new Employee Program or other benefit or severance plan or amend or otherwise
modify any existing employment agreement, Employee Program or other benefit or
severance plan except for the customary and usual year end employee raises to be
awarded consistent with past practices and a bonus obligation to David Marshall
in the approximate amount of $50,000;
(g) Refrain from entering into any arrangement or amending any
existing arrangement between the Company and any officer, director or Member (or
any entity affiliated with such persons);
(h) Refrain from prepaying any loans (if any) from its Members,
officers or directors, borrowing any funds or making any other change in its
borrowing arrangements;
(i) Use its commercially reasonable efforts to prevent any
change with respect to its management and supervisory personnel and banking
arrangements;
(j) Use its commercially reasonable efforts to keep intact its
business organization, to keep available its present officers and employees and
to preserve the goodwill of all suppliers, customers, independent contractors
and others having business relations with it;
(k) Have in effect and maintain at all times all insurance of
the kind, in the amount and with the insurers set forth in the Schedule 2.19
hereto or equivalent insurance with any substitute insurers approved in writing
by Nextera;
27
<PAGE> 32
(l) Maintain the working capital of the Company in the ordinary
course of business at levels consistent with past operations;
(m) Furnish Nextera with unaudited monthly balance sheets and
statements of income and retained earnings and cash flows of the Company within
fifteen (15) days after each month end for each month ending more than fifteen
(15) days before the Closing;
(n) Permit Nextera and its authorized representatives to have
full access to all its properties, assets, records, tax returns, contracts and
documents and furnish to Nextera or its authorized representatives such
financial and other information with respect to its business or properties as
Nextera may from time to time reasonably request provided that Nextera shall
keep such information confidential in accordance with the terms of the
Confidentiality and Non-Disclosure Agreement between the Company and Nextera
dated August 4, 1997 (the "Confidentiality Agreement").
4.3. Authorization from Others. Prior to the date of the Closing, the
Members and the Company will use commercially reasonable efforts to obtain all
authorizations, consents and permits of others required to permit the
consummation by the Members and the Company of the transactions contemplated by
this Agreement (including, without limitation, the consent of KIS Imaging
Services, Inc., a Danka company, and confirmation of the outstanding balance
from Manufacturers and Traders Trust Company).
4.4. Notice of Default. Promptly upon the occurrence of, or promptly
upon the Company or a Member becoming aware of the impending or threatened
occurrence of, any event which would cause or constitute a breach or default of
any of the representations, warranties or covenants of the Company or the
Members contained in or referred to in this Agreement or in any Schedule or
Exhibit referred to in this Agreement, the Company shall give detailed written
notice thereof to Nextera and the Company and the Members shall use their
commercially reasonable efforts to prevent or promptly remedy the same.
4.5. Consummation of Agreement. The Company and each of the Members
shall use their commercially reasonable efforts to perform and fulfill all
conditions and obligations on their parts to be performed and fulfilled under
this Agreement, to the end that the transactions contemplated by this Agreement
shall be fully carried out. To this end, the Company will obtain prior to the
Closing all necessary authorizations or approvals of its Members and Management
Committee.
4.6. Cooperation of the Company and Members. The Company and each of
the Members shall cooperate with all reasonable requests of Nextera and
Nextera's counsel in connection with the consummation of the transactions
contemplated hereby.
4.7. No Solicitation of Other Offers. Neither the Company, the
Members, nor any of their officers, directors, agents, employees or
representatives will, directly or indirectly, solicit, encourage, assist,
initiate discussions or engage in negotiations with, provide any
28
<PAGE> 33
information concerning the operations, properties or assets of the Company to,
entertain or enter into any agreement or transaction with, any person, other
than Nextera , relating to the possible acquisition of the Shares, the Company
or any of its assets, except for the sale of assets in the ordinary course of
business of the Company consistent with the terms of this Agreement. If such a
proposal is received, the Company will promptly notify Nextera of the terms of
such proposal and the identity of the party making the proposal.
4.8. Tax Returns. The parties shall cooperate in all reasonable
respects with each other to permit the Company in accordance with applicable law
to promptly prepare and file on or before the due date or any extension thereof
all federal, state and local tax returns required to be filed by the Company and
shall cooperate with respect to all tax matters, including, but not limited to,
any federal or state tax audit.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER, NEXTERA AND HOLDINGS.
5.1. Making of Representations and Warranties. As a material
inducement to the Company and the Members to enter into this Agreement and
consummate the transactions contemplated hereby, each of Buyer, Nextera and
Holdings hereby makes the representations and warranties to the Company and the
Members contained in this Section 5.
5.2. Organization. Each of Buyer, Nextera and Holdings is a limited
liability company organized, validly existing and in good standing under the
laws of the State of Delaware with full limited liability company to own or
lease its properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is conducted by it.
5.3. Authority. Each of Buyer, Nextera and Holdings has full right,
authority and power to enter into this Agreement and each agreement, document
and instrument to be executed and delivered by Buyer, Nextera and Holdings
pursuant to this Agreement and, subject to the representation of the Company and
the Members in Section 2.2 hereto, to carry out the transactions contemplated
hereby. The execution, delivery and performance by Buyer, Nextera and Holdings
of this Agreement and each such other agreement, document and instrument have
been duly authorized by all necessary corporate action of Buyer, Nextera and
Holdings and no other action on the part of Buyer, Nextera or Holdings is
required in connection therewith. This Agreement and each other agreement,
document and instrument executed and delivered by Buyer, Nextera and Holdings
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, valid and binding obligations of Buyer, Nextera and Holdings, as
applicable, enforceable in accordance with their terms, subject to the effect of
any applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject to the effect of general
principles of equity, including, without limitation, the possible unavailability
of specific performance or injunctive relief, regardless of whether considered
in a proceeding in equity or at law. The execution, delivery and performance by
Buyer, Nextera and Holdings of this Agreement and each such agreement, document
and instrument:
29
<PAGE> 34
(i) does not and will not violate any provision of the
certificate of formation of Buyer, the Limited Liability Company
Agreement of Buyer (the "Buyer Operating Agreement"), the certificate
of formation of Nextera, the Nextera Operating Agreement, the
certificate of formation of Holdings or the Holdings Operating
Agreement;
(ii) does not and will not violate any laws of the United
States or of any state or any other jurisdiction applicable to Buyer,
Nextera or Holdings or require Buyer, Nextera or Holdings to obtain
any approval, consent or waiver of, or make any filing with, any
person or entity (governmental or otherwise) which has not been
obtained or made; and
(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture, loan or credit
agreement, or other agreement mortgage, lease, permit, order, judgment
or decree to which Buyer, Nextera or Holdings is a party and which is
material to the business and financial condition of Buyer, Nextera or
Holdings on a consolidated basis.
5.4. Litigation. There is no litigation pending or, to its knowledge,
threatened against Buyer, Nextera or Holdings which would prevent or hinder the
consummation of the transactions contemplated by this Agreement.
5.5. Finder's Fee. Neither Buyer, Nextera nor Holdings has incurred or
become liable for any broker's commission or finder's fee relating to or in
connection with the transactions contemplated by this Agreement.
5.6. Available Funds. Nextera has sufficient capital available to
consummate the transactions contemplated by this Agreement and is not relying on
obtaining additional financing in connection with such transactions.
5.7. Membership Interests of Nextera and Holdings. Schedule 5.7 sets
forth all of the issued and outstanding membership interests of Nextera and
Holdings. Except as set forth on Schedule 5.7, there are no outstanding options,
warrants, rights, commitments, preemptive rights or agreements of any kind for
the issuance and sale of, or outstanding securities convertible into, any
additional membership interests of any class of Nextera or Holdings. All of the
Nextera Class A Units to be issued to the Members as partial consideration for
sale of the Shares and all Holdings Class A Units (as hereinafter defined) to be
issued pursuant to employment agreements as contemplated by Section 6.4 will be
duly issued under the Nextera Operating Agreement and the Holdings Operating
Agreement (as hereinafter defined), as applicable.
5.8. Financial Statements.
(a) Nextera has delivered to the Company the following financial
statements, copies of which are attached hereto as Schedule 5.8: a balance sheet
of Nextera and a statement of profit and loss of Nextera as of September 30,
1997 (the "Nextera Financial Statements"). The
30
<PAGE> 35
September 30, 1997 balance sheet is hereinafter referred to as the "Nextera
Balance Sheet." The Financial Statements, have been prepared in accordance with
generally accepted accounting principles applied consistently during the period
covered thereby, and said Financial Statements, present fairly in all material
respects the financial condition of Nextera at the date of said statements and
the results of its operations for the period covered thereby.
(b) As of the date of the Nextera Balance Sheet, Nextera did not
have any liabilities of any nature, whether accrued, absolute or contingent
(including without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, liabilities for taxes due or then accrued or
to become due, or contingent or potential liabilities relating to activities of
Nextera or the conduct of its business prior to the date of the Nextera Balance
Sheet), except liabilities stated or adequately reserved against on the Nextera
Balance Sheet.
(c) As of the date hereof and as of the Closing, Nextera has not
had and will not have any liabilities of any nature, whether accrued, absolute
or contingent (including without limitation, liabilities as guarantor or
otherwise with respect to obligations of others, or liabilities for taxes due or
then accrued or to become due or contingent or potential liabilities relating to
activities of Nextera or the conduct of its business prior to the date hereof or
the Closing, as the case may be, regardless of whether claims in respect thereof
had been asserted as of such date), except liabilities (i) stated or adequately
reserved against on the Nextera Balance Sheet or the notes thereto, or (ii)
incurred in the ordinary course of business of Nextera.
5.9. Taxes.
(a) As used in this Section 5.9, the term "Taxes" means all
taxes, charges, fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, VAT,
service, service use, ad valorem, transfer, franchise, profits, license, lease,
withholding, social security, payroll, employment, excise, estimated, severance,
stamp, recording, occupation, real and personal property, gift, windfall profits
or other taxes, customs duties, fees, assessments or charges of any kind
whatsoever, whether computed on a separate, consolidated, unitary, combined or
other basis, together with any interest, fines, penalties, additions to tax or
other additional amounts imposed thereon or with respect thereto imposed by any
taxing authority (domestic or foreign).
(b) All returns, declarations, reports, estimates, statements,
schedules or other information or documents with respect to Taxes (collectively,
"Tax Returns") required to be filed by Nextera and Holdings have been timely
filed (giving effect to extensions granted with respect thereto), and all such
Tax Returns are true, correct, and complete in all material respects.
(c) Nextera and Holdings have timely paid all Taxes due from them
or claimed to be due from then by any federal, state, local, foreign or other
taxing authority.
(d) There are no liens for Taxes upon any of the assets of
Nextera or Holdings, except liens for taxes not yet due and payable.
31
<PAGE> 36
(e) No Tax Returns of Nextera or Holdings have been examined by
the relevant taxing authority. No deficiency for any Taxes has been proposed,
asserted or assessed against Nextera or Holdings that has not been resolved and
paid in full. There are no outstanding waivers, extensions, or comparable
consents regarding the application of the statute of limitations with respect to
any Taxes or Tax Returns that have been given by Nextera (including the time for
filing of Tax Returns or paying Taxes) and neither Nextera nor Holdings has
pending requests for any such waivers, extensions, or comparable consents.
(f) No audit or other proceeding by any federal, state, local or
foreign court, governmental, regulatory, administrative or similar authority is
presently pending with respect to any Taxes or Tax Return of Nextera or
Holdings, and neither Nextera nor Holdings have received written notice of any
pending audits or proceedings.
(g) Nextera and Holdings have established adequate reserves in
accordance with generally accepted accounting principles for all Taxes not yet
due and payable, which reserves are set forth in Schedule 5.9.
(h) Nextera and Holdings have complied in all respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes (including, without limitation, withholding of Taxes pursuant to
Sections 1441, 1442, 1445 and 1446 of the Code or similar provisions under any
applicable state and foreign laws) and has, within the time and the manner
prescribed by law, paid over to the proper governmental authorities all amounts
so withheld.
(i) Neither Nextera nor Holdings is a party to or is bound by or
has any obligation under any Tax sharing allocation or indemnity agreement or
similar contract or arrangement.
(j) Nextera and Holdings are, and have been at all times since
their formation, properly characterized as partnerships for federal and
applicable state and local income tax purposes.
(k) No power of attorney granted by Nextera or Holdings with
respect to any Taxes is currently in force.
(l) Other than its own operating agreement, neither Nextera nor
Holdings is subject to any joint venture, partnership or other arrangement or
contract that is treated as a partnership for U.S. federal income tax purposes.
(m) There is no expectation that any taxing authority may claim
or assess any additional Taxes payable by Nextera or Holdings for any period
ending on or prior to the Closing Date and there are no facts of which Nextera
or Holdings is aware which would constitute grounds for the assessment of any
Taxes payable by Nextera or Holdings for any period ending on or prior to the
Closing Date.
32
<PAGE> 37
(n) Schedule 5.9 sets forth each state, local and foreign
jurisdiction in which Nextera is required, or has been at any time required, to
file or be included in a Tax Return. No written claim has ever been received by
Nextera or Holdings from a taxing authority in a jurisdiction where neither
Nextera nor Holdings pays Taxes or files Tax Returns that Nextera or Holdings is
or may be subject to Taxes assessed by such jurisdiction, and, to the knowledge
of Nextera and Holdings, no such claim has been threatened by a taxing
authority.
(o) Nextera and Holdings have disclosed on their federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Taxes within the meaning of Section 6662 of the
Code.
(p) Neither Nextera nor Holdings has agreed, or is required, to
make any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise.
(q) No property of Nextera or Holdings is "tax exempt use
property" within the meaning of Section 168(h) of the Code.
(r) Neither Nextera nor Holdings has entered into any installment
sale contract pursuant to Section 453 of the Code whereby the installments have
not been fully collected, and neither Nextera nor Holdings has entered into an
interest rate swap, currency swap, or similar transaction.
5.10. Absence of Certain Changes.
Except as disclosed in Schedule 5.10 attached hereto, since September
30, 1997 there has not been:
(a) Any change in the business, properties, assets, results of
operations, financial condition, liabilities, or prospects of Nextera or
Holdings, which change by itself or in conjunction with all other such changes,
whether or not arising in the ordinary course of business, has been materially
adverse with respect to Nextera or Holdings;
(b) Any contingent liability incurred by Nextera or Holdings as
guarantor or otherwise with respect to the obligations of others or any
cancellation of any material debt or claim owing to, or waiver of any material
right of, Nextera or Holdings;
(c) Any mortgage, encumbrance or lien placed on any of the
properties of Nextera or Holdings which remains in existence on the date hereof
or will remain on the date of the Closing;
(d) Any obligation or liability of any nature, whether accrued,
absolute or contingent (including without limitation liabilities for Taxes due
or to become due or contingent or potential liabilities relating to products or
services provided by Nextera or Holdings or the conduct of the business of
Nextera or Holdings since the date of the Nextera Balance Sheet regardless of
whether claims in respect thereof have been asserted), incurred by Nextera other
than obligations and liabilities incurred in the ordinary course of business (it
being understood that
33
<PAGE> 38
product or service liability claims shall not be deemed to be incurred in the
ordinary course of business);
(e) Any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of Nextera or Holdings other than in the ordinary course of
business;
(f) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of Nextera or Holdings;
(g) Any declaration, setting aside or payment of any dividend by
Nextera or Holdings, or the making of any other distribution in respect of the
membership interests of Nextera or Holdings, or any direct or indirect
redemption, purchase or other acquisition by Nextera or Holdings of its
respective membership interests;
(h) Any labor trouble or claim of unfair labor practices
involving Nextera or Holdings; any change in the compensation payable or to
become payable by Nextera or Holdings to any of its officers, employees, agents
or independent contractors other than normal merit increases in accordance with
its usual practices; or any bonus payment or arrangement made to or with any of
such officers, employees, agents or independent contractors;
(i) Any change with respect to the officers or management of
Nextera or Holdings;
(j) Any payment or discharge of a material lien or liability of
Nextera which was not shown on the Nextera Balance Sheet or incurred in the
ordinary course of business thereafter;
(k) Any obligation or liability incurred by Nextera or Holdings
to any of its officers, directors, members or employees, or any loans or
advances made by Nextera or Holdings to any of its officers, directors, members
or employees, except normal compensation and expense allowances and advances
payable to officers or employees;
(l) Any change in accounting methods or practices, credit
practices or collection policies used by Nextera or Holdings;
(m) Any other transaction entered into by Nextera or Holdings
other than transactions in the ordinary course of business; or
(n) Any agreement or understanding whether in writing or
otherwise, for Nextera or Holdings to take any of the actions specified in
paragraphs (a) through (m) above.
5.11. Compliance with Laws. Each of Nextera and Holdings is in
compliance with all applicable statutes, ordinances, orders, judgments, decrees,
rules and regulations promulgated by any federal, state, municipal entity,
agency, court or other governmental authority which apply to Nextera or Holdings
or to the conduct of its business, except where noncompliance with such
34
<PAGE> 39
statute, ordinance, order, judgment, decree, rule or regulation would not have a
material adverse effect on Nextera or Holdings, and neither Nextera nor Holdings
has received notice of a violation or alleged violation of any such statute,
ordinance, order, rule or regulation.
5.12. Operating Agreements. The Nextera Operating Agreement attached
as Schedule 5.12(a) and the Holdings Operating Agreement attached as Schedule
5.12(b) are in full force and effect and shall be amended as provided in Section
7.2 prior to closing.
SECTION 6. COVENANTS OF BUYER, NEXTERA AND HOLDINGS.
6.1. Consummation of Agreement. Buyer, Nextera and Holdings shall each
use its commercially reasonable efforts to perform and fulfill all conditions
and obligations on its part to be performed and fulfilled under this agreement,
to the end that the transactions contemplated by this agreement shall be fully
carried out. To this end, Buyer, Nextera and Holdings will each obtain prior to
the Closing all necessary authorizations or approvals of its Board of Directors.
6.2. 1997 Bonus Pool. Buyer agrees that it will allow each of the
Members to participate in a one-time bonus pool to be based upon the Company's
net income (determined in accordance with generally accepted accounting
principles, but computed before the bonuses to Members set forth on Schedule 6.2
and excluding any revenue recognized in 1997 with respect to the Excluded
Interests)for the year ending December 31, 1997. The aggregate amount of such
bonus pool shall equal fifty percent (50%) of the amount by which the Company's
net income (determined in accordance with generally accepted accounting
principles, but computed before the bonuses to Members set forth on Schedule 6.2
and excluding any revenue recognized in 1997 with respect to the Excluded
Interests) for the year ending December 31, 1997 exceeds Two Million Two Hundred
Thousand Dollars ($2,200,000). The bonus pool distribution shall be determined
by Messrs. Glavin, Martindale and Brooks, subject to the approval of Nextera
which shall not be unreasonably withheld, and the bonuses shall be paid within
thirty (30) days after completion of the audit of the Company's financial
statements for the year ending December 31, 1997.
6.3. Option Pool. Nextera agrees to make available for distribution to
Company employees and new hires a pool of options to purchase two hundred twenty
thousand (220,000) Nextera Class A Units or stock appreciation rights with
respect to Nextera Class A Units (the "Nextera SARs"). The options shall have an
exercise price of $5.00 per share and shall vest at the rate of 25% per year
over four years. The Members acknowledge that (a) under the Nextera Operating
Agreement, the Board of Directors of Holdings will have the authority to
determine the remaining terms and conditions of such options and stock
appreciation rights, including making amendments to the Nextera Operating
Agreement, and (b) the tax consequences of the options and stock appreciation
rights are materially different in a limited liability company as compared to a
corporate structure. The distribution of the Nextera SARs shall be determined by
Messrs. Glavin, Martindale and Brooks, subject to the approval of Nextera which
shall not be unreasonably withheld.
6.4. Holdings Class A Units.
35
<PAGE> 40
Holdings agrees that, in connection with, and pursuant to the terms
and conditions of, the employment agreements to be entered into by each Member
and Buyer as contemplated by Section 7.1(j), it shall issue Class A Common Units
of Holdings ("Holdings Class A Units") pursuant to the Limited Liability Company
Agreement of Nextera Enterprises Holdings, L.L.C. dated as of April 9, 1997 (the
"Holdings Operating Agreement"), in the amounts set forth opposite the names of
the Members on Exhibit A-2. The value of a Holdings Class A Unit as of the date
hereof is $0.10 per unit.
6.5. Books and Records; Tax Matters.
(a) Books and Records. Each Party agrees that it will cooperate
with and make available to the other parties, during normal business hours, all
books and records, information and employees (without substantial disruption of
employment) which are necessary or useful in connection with any tax inquiry,
audit, investigation or dispute, any litigation or investigation or any other
matter requiring any such books and records, information or employees for any
reasonable business purpose. The party requesting any such books and records,
information or employees shall bear all of the out-of-pocket costs and expenses
(including, without limitation, reasonable attorneys' fees, but excluding
reimbursement for salaries and employee benefits) reasonably incurred in
connection with providing such books and records, information or employees. All
information received pursuant to this Section 6.5(a) shall be subject to the
terms of the Confidentiality Agreement.
(b) Cooperation and Records Retention. The Members and Nextera
shall (i) each provide the other with such assistance as may reasonably be
requested in connection with the preparation of any return, audit, or other
examination by any taxing authority or judicial or administrative proceedings
relating to liability for Taxes, (ii) each retain and provide the others with
any records or other information that may be relevant to such return, audit or
examination, proceeding or determination, and (iii) each provide the others with
any final determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any tax return of
the others for any period. Without limiting the generality of the foregoing, the
Members and Nextera shall each retain, until the applicable statutes of
limitations (including any extensions) have expired, copies of all tax returns,
supporting work schedules, and other records or information that may be relevant
to such returns for all tax periods or portions thereof ending on or before the
Closing Date and shall not destroy or otherwise dispose of any such records
without first providing the other parties with a reasonable opportunity to
review and copy the same.
SECTION 7. CONDITIONS.
7.1. Conditions to the Obligations of Buyer, Nextera and Holdings. The
obligation of Buyer, Nextera and Holdings to consummate this Agreement and the
transactions contemplated hereby are subject to the fulfillment, prior to or at
the Closing, of the following conditions precedent:
36
<PAGE> 41
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of the Company and the Members contained in
Section 2 shall be true and correct in all material respects as of the date of
this Agreement and as of the date of the Closing as though made on and as of the
Closing; and the Company and each of the Members shall, on or before the
Closing, have performed all of their obligations hereunder which by the terms
hereof are to be performed on or before the Closing.
(b) No Material Change. There shall have been no material adverse
change in the business, properties, assets, results of operations, financial
condition, liabilities, or prospects of the Company since the date hereof,
whether or not in the ordinary course of business.
(c) Certificate from Officers. The Members shall have delivered
to Nextera a certificate of the Company's Chief Operating Officer dated as of
the Closing to the effect that the statements set forth in paragraph (a) and (b)
above in this Section 7.1 are true and correct.
(d) Approval of Nextera's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by Latham & Watkins as counsel for
Nextera, and such counsel shall have received on behalf of Nextera such other
certificates, opinions, and documents in form satisfactory to such counsel, as
Nextera may reasonably require from the Company and the Members to evidence
compliance with the terms and conditions hereof as of the Closing and the
correctness as of the Closing of the representations and warranties of the
Members and the Company and the fulfillment of their respective covenants.
(e) Approval of Schedules. The Company and the Members shall have
delivered and Nextera shall have approved all Schedules to this Agreement.
(f) Escrow Agreement. Each of the Company, Buyer, Nextera, the
Members and the Escrow Agent shall have executed and delivered the Escrow
Agreement, substantially in the form attached hereto as Exhibit C.
(g) Opinion of Counsel. On the date of the Closing, Nextera shall
have received from Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. as
counsel for the Company and the Members, an opinion as of said date, in the form
attached hereto as Exhibit E.
(h) No Litigation. There shall have been no determination by
Nextera, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become inadvisable or impracticable by reason
of the institution or threat by any person or any federal, state or other
governmental authority of litigation.
37
<PAGE> 42
(i) Consents. The Company or the Members shall have made all
filings with and notifications of governmental authorities, regulatory agencies
and other entities required to be made by the Company or the Members in
connection with the execution and delivery of this Agreement, the performance of
the transactions contemplated hereby and the continued operation of the business
of the Company by Buyer subsequent to the Closing; and the Company, the Members
and Buyer and Nextera shall have received all authorizations, waivers, consents
and permits, in form and substance reasonably satisfactory to Nextera, from all
third parties, including, without limitation, applicable governmental
authorities, regulatory agencies, lessors, lenders and contract parties
(including, without limitation, KIS Imaging Services, Inc., a Danka company),
required to permit the continuation of the business of the Company and the
consummation of the transactions contemplated by this Agreement, and to avoid a
breach, default, termination, acceleration or modification of any material
indenture, loan or credit agreement or any other material agreement, contract,
instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award as a result of, or in
connection with, the execution and performance of this Agreement.
(j) Employment Agreements. Each of Messrs. Glavin, Martindale,
Brooks, Guck, Smith, Robosson and Marshall shall have executed and delivered to
Buyer an Employment Agreement in substantially the form of Exhibit F-1 through
F-7, respectively, attached hereto; provided, however, that the employment
agreement for Mr. Marshall shall not include the right to purchase Holdings
Class A Units.
(k) Transfer of Investments. The Company shall have transferred
all the Excluded Interests held by the Company to the Excluded Entity in a
manner acceptable to Nextera and shall have obtained a consent to assignment and
release of the Company from each of New Med Corporation, Screening Technologies,
Inc. and ReCall Services, Inc.
(l) Working Capital. At the Closing, the Company shall have at
least One Million Two Hundred Thousand Dollars ($1,200,000) of working capital,
determined in accordance with generally accepted accounting principles.
(m) Payment of Indebtedness; Lien Release. The Company shall have
obtained written confirmation in form and substance satisfactory to Nextera of
the outstanding balance under that certain Grid Note dated as of April 8, 1997,
as amended, between the Company and Manufacturers and Traders Trust Company and
confirmation that upon payment of such balance all liens under such Grid Note
and related security agreement shall be released.
(n) Bill of Sale. The Company shall have executed and delivered
to Buyer a Bill of Sale, in the form attached hereto as Exhibit G, conveying in
the aggregate all of the Company's owned personal property included in the
Purchased Assets to Buyer.
38
<PAGE> 43
(o) Urbanus Noncompete, Nonsolicitation and Confidentiality
Agreement. David Urbanus shall have executed a Noncompete, Nonsolicitation and
Confidentiality Agreement, in the form attached hereto as Exhibit H.
(p) Excluded Entity Noncompete, Nonsolicitation and
Confidentiality Agreement. The Excluded Entity shall have executed a Noncompete,
Nonsolicitation and Confidentiality Agreement, in the form attached hereto as
Exhibit I.
(q) Amendment of Operating Agreement. Prior to the date of the
Closing, the Company Operating Agreement shall be amended to provide for the
allocation of membership interests in the Company as indicated on Exhibit A-1
hereto.
7.2. Conditions to Obligations of the Company and the Members. The
obligation of the Company and the Members to consummate this Agreement and the
transactions contemplated hereby is subject to the fulfillment, prior to or at
the Closing, of the following conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of Buyer, Nextera and Holdings contained in
Section 5 shall be true and correct in all material respects as though made on
and as of the Closing; Buyer, Nextera and Holdings shall, on or before the
Closing, each have performed all of its obligations hereunder which by the terms
hereof are to be performed on or before the Closing; and Buyer, Nextera and
Holdings each shall have delivered to the Company and the Members a certificate
of its President or any Vice President dated on the Closing to such effect.
(b) Approval of the Company's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this agreement shall have been approved by Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C. counsel to the Company and the Members, and such counsel shall
have received on behalf of the Company and the Members such other certificates,
opinions and documents in form satisfactory to such counsel as the Company may
reasonably require from Buyer, Nextera and Holdings to evidence compliance with
the terms and conditions hereof as of the Closing and the correctness as of the
Closing of the representations and warranties of Buyer, Nextera and Holdings and
the fulfillment of its covenants.
(c) No Litigation. There shall have been no determination by the
Company, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become inadvisable or impracticable by reason
of the institution or threat by any person or any federal, state or other
governmental authority of material litigation, proceedings or other action
against Buyer, Nextera, Holdings, the Company or any Member.
39
<PAGE> 44
(d) Opinion of Counsel. On the date of the Closing, the Company
and the Members shall have received from Maron & Sandler, counsel for Buyer,
Nextera and Holdings, an opinion as of said date, in form attached hereto as
Exhibit J.
(e) Amendment of Operating Agreements. Prior to the date of the
Closing, (i) the Nextera Operating Agreement shall be amended and restated to
provide for certificated membership units and allow for the issuance of options
and stock appreciation rights as contemplated herein and (ii) the Holdings
Operating Agreement shall be amended and restated to make certain changes to
reflect the transactions contemplated by this Agreement.
SECTION 8. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
8.1. Termination. At any time prior to the Closing, this Agreement may
be terminated as follows:
(i) by mutual written consent of all of the parties to this
Agreement;
(ii) by Nextera, pursuant to written notice by Nextera to
the Company and the Members, if any of the conditions set forth in
Section 7.1 of this Agreement have not been satisfied at or prior to
the Closing, or if it has become reasonably and objectively certain
that any of such conditions, other than a condition within the control
of the Company or any Member, will not be satisfied at or prior to the
Closing, such written notice to set forth such conditions which have
not been or will not be so satisfied; and
(iii) by the Company and the Members, pursuant to written
notice by the Company and the Members to Nextera, if any of the
conditions set forth in Section 7.2 of this Agreement have not been
satisfied at or prior to the Closing, or if it has become reasonably
and objectively certain that any of such conditions, other than a
condition within the control of Nextera, will not be satisfied at or
prior to the Closing, such written notice to set forth such conditions
which have not been or will not be so satisfied.
8.2. Effect of Termination.
All obligations of the parties hereunder shall cease upon any
termination pursuant to Section 8.1, provided, however, that the provisions of
this Section 8, Section 11.1 and Section 11.10 hereof shall survive any
termination of this Agreement.
SECTION 9. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
9.1. Survival of Warranties.
Each of the representations, warranties, agreements, covenants and
obligations herein are material, shall be deemed to have been relied upon by the
other party and shall survive the Closing regardless of any investigation and
shall not merge in the performance of any obligation by either party hereto;
provided, however, that such
40
<PAGE> 45
representations and warranties shall expire on the same dates as and to the
extent that the rights to indemnification with respect thereto under Section 10
shall expire.
9.2. Release. Each Member hereby releases and discharges
(i) the Company, Buyer and Nextera and any and all
affiliates of the Company, Buyer and Nextera and any of their
respective successors and assigns, of and from any and all
commitments, indebtedness, suits, demands, obligations and liabilities
of every kind and nature, including claims and causes of action both
in law and in equity, and
(ii) each of the present and former Members, directors,
officers, employees, attorneys and agents of the Company, and any of
their respective successors and assigns (each, together with the
Company, Buyer and Nextera, a "Released Party"), of and from any and
all commitments, indebtedness, suits, demands, obligations and
liabilities relating to the business of the Company, Buyer and Nextera
and relating to this transaction, including claims and causes of
action both in law and in equity,
which such Holder and/or his heirs, executors, administrators, successors or
assigns ever had, now has, to the extent arising from or in connection with any
action, omission or state of facts taken or existing on or prior to the date
hereof or prior to the Closing, against any Released Party, whether asserted,
unasserted, absolute, contingent, known or unknown, including without limitation
commitments, obligations, liabilities and claims arising under or pursuant to
(1) the Company Operating Agreement, as amended through the date hereof and
through the date of the Closing of the Company, (2) any contracts to which such
Member and any Released Party are parties, including, without limitation, the
Company Operating Agreement and any agreement between such Member and the
Company, with respect to the employment of such Member prior to the date of the
Closing, (3) the Excluded Interests; provided, however, that such Member does
not release any Released Party from (A) commitments, obligations, liabilities
and claims arising under or pursuant to the following provisions of this
Agreement: Section 1 (Sale of Shares and Purchase Price), Section 5
(Representations and Warranties of Buyer, Nextera and Holdings), Section 10
(Indemnification) and Section 11 (Miscellaneous), (B) commitments, obligations,
liabilities and claims, if any, arising under or pursuant to the employment
agreement, entered into by such Member and Buyer or the Company pursuant to the
Agreement, (C) commitments, obligations, liabilities and claims arising under or
pursuant to agreements entered into after the date hereof with the written
consent of the Company, and (D) any claims for accrued vacation benefits and
claims for compensation earned prior to the date of the Closing.
Such Member represents and warrants to each Released Party that he (i)
has received such information as he has deemed relevant regarding the
properties, assets, business, condition (financial or otherwise), results of
operations or prospects of the Company and its affiliates, (ii) has such
knowledge and experience in financial and business matters so as to be capable
of
41
<PAGE> 46
evaluating the merits and risks of his or her sale of equity interests in the
Company hereunder and/or has engaged and consulted with one or more advisers
with such capabilities, and (iii) has been afforded the opportunity to ask
questions and receive answers from management of the Company and its advisers
regarding the transactions contemplated by this Agreement and the properties,
assets, business, condition (financial and otherwise), results of operations and
prospects of the Company. In furtherance and not in limitation of the foregoing,
such Member represents that he has read carefully, fully understood, and if
appropriate, discussed with his legal and financial advisers, (A) materials
described in clause (i) above and, (B) the financial statements and projections
set forth in Schedule 2.7 to this Agreement and such Member hereby represents
that he has not relied upon any representations, warranties or agreements of any
person other than those set forth in this Agreement.
Such Member acknowledges and agrees that the provisions hereof are
reasonable in context and scope, are a material condition to the Company's
willingness to enter into and effect this Agreement and effect the transactions
contemplated hereby and are intended to be and shall be enforced to the full
extent set forth herein.
SECTION 10. INDEMNIFICATION.
10.1. Indemnification by the Members.
The Members jointly and severally agree subsequent to the Closing to
indemnify and hold the Company, Buyer, Nextera, Holdings, and their respective
subsidiaries and affiliates and persons serving as officers, directors,
partners, managers, stockholders, members, employees and agents thereof (other
than the Members, except to the extent of liabilities incurred in their
capacities as such an officer, director or employee after the Closing)
(individually a "Buyer Indemnified Party" and collectively the "Buyer
Indemnified Parties") harmless from and against any damages, liabilities,
losses, taxes, fines, penalties, costs, and expenses (including, without
limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) which may be sustained
or suffered by any of them arising out of or based upon any of the following
matters:
(a) fraud, intentional misrepresentation or the cause or
knowledge of a deliberate or willful breach of any representations, warranties
or covenants of the Company or the Members under this Agreement or in any
certificate, schedule or exhibit delivered pursuant hereto (collectively, "Fraud
Claims");
(b) any breach of any representation or warranty of the Members
set forth in Section 2.3 of this Agreement (collectively, "Ownership Claims");
(c) any liability of the Company or the Members for Taxes arising
from the activities of the Company and all events and transactions on or prior
to the Closing and any breach of the representations and warranties set forth in
Section 2.8 hereof and any covenant with respect to Taxes or tax related matters
(collectively, "Tax Claims");
42
<PAGE> 47
(d) any liability of the Company, Buyer or Nextera with respect
to the Excluded Interests (collectively, "Excluded Liability Claims"); and
(e) other than Fraud Claims, Ownership Claims, Tax Claims or
Excluded Liability Claims, any other breach of any representation, warranty or
covenant of the Members under this Agreement or in any schedule or exhibit
delivered pursuant hereto, or by reason of any claim, action or proceeding
asserted or instituted growing out of any matter or thing constituting a breach
of such representations, warranties or covenants (collectively, "General
Claims").
Each Member severally, but not jointly, agrees subsequent to the
Closing to indemnify and hold all Buyer Indemnified Parties harmless from and
against any damages, liabilities, losses, taxes, fines, penalties, costs, and
expenses (including, without limitation, reasonable fees of counsel) of any kind
or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based upon fraud, intentional misrepresentation or any breach (whether or not
deliberate or willful) of any representation or warranty of such Member
contained in Section 3, or by reason of any claim, action or proceeding asserted
or instituted growing out of any matter or thing constituting a breach of such
representation or warranty (collectively, "Individual Claims").
In the event that an indemnification claim is payable with respect to
a breach of a representation or warranty of the Members under Section 2.9 that
relates to a receivable or unbilled revenue not being enforceable or collectible
or which is subject to set off or counterclaim, the amount payable by the
Members to the Buyer Indemnified Party with respect to such claim shall be
determined as follows:
(i) any claim with respect to a receivable or unbilled
revenues related to Company revenue for 1997 in excess of $10 million
shall not be the basis for any recovery for breach of Section 2.9;
provided, however, that such events may still be subject to
indemnification by the Members to the Buyer Indemnified Party to the
extent that such event resulted in an overpayment to the Members under
Section 1.8 or Section 6.2;
(ii) for any claim not covered by (i) above, the amount
payable by the Members to the Buyer Indemnified Party with respect to
up to $750,000 of such receivables or unbilled revenues shall be twice
the amount of the receivable or unbilled revenue which is not
enforceable or collectible or subject to set off or counterclaim,
together with all other items otherwise subject to indemnification
under this Section 10.1; and
(iii) for any claim not covered by (i) or (ii) above, the
standard provisions for indemnification set forth in Section 10 shall
apply.
43
<PAGE> 48
10.2. Limitations on Indemnification by the Members.
Anything contained in this Agreement to the contrary notwithstanding,
the liability of the Members to provide any indemnification to any Buyer
Indemnified Party and right of Buyer Indemnified Parties to indemnification
under Section 10.1 shall be subject to the following provisions:
(a) No claims for indemnification shall be made under this
Agreement against any Member, and no indemnification shall be payable to any
Buyer Indemnified Party, with respect to General Claims after the date which is
eighteen (18) months following the Closing.
(b) No claims for indemnification shall be made under this
Agreement against any Member, and no indemnification shall be payable to any
Buyer Indemnified Party, with respect to any Tax Claim after expiration of all
applicable statute of limitations with respect to the Tax that is the subject of
the indemnification claim and the expiration of all applicable statutes of
limitation with respect to collection of the Tax.
(c) The aggregate amount to be payable to all Buyer Indemnified
Parties for claims for indemnification with respect to General Claims shall in
no event exceed Five Million Dollars ($5,000,000).
(d) The amount to be payable by a Member to all Buyer Indemnified
Parties for claims for indemnification hereunder shall in no event exceed such
Member's pro rata share of the total amount to be paid to all Buyer Indemnified
Parties for claims for indemnification hereunder. The pro rata shares of the
Members for this purpose shall be the same percentages as the Members respective
ownership interests in the Company as set forth on Exhibit A-1.
(e) In the event that any claim for indemnification arises from a
breach of representation, warranty or covenant which was made or undertaken by a
Member, by the express terms of this Agreement severally and not jointly, the
Members shall be severally, but not jointly, liable for indemnification in
respect of such a claim.
(f) The Members shall have no obligation for indemnification with
respect to General Claims hereunder until aggregate claims for indemnification
with respect to General Claims hereunder exceed $50,000, in which case the
Members shall be obligated for indemnification of all General Claims including
the initial $50,000 of such claims.
(g) Claims for indemnification with respect to Fraud Claims,
Ownership Claims, Tax Claims or Excluded Liability Claims made under this
Agreement by any Buyer Indemnified Party shall not be subject to any of the
limitations set forth in this Section 10.2 other than Section 10.2(b).
10.3. Indemnification by Nextera. Nextera agrees to indemnify and hold
the Members (individually a "Member Indemnified Party" and collectively the
"Member Indemnified Parties") harmless from and against any damages,
liabilities, losses and expenses (including,
44
<PAGE> 49
without limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) which may be sustained
or suffered by any of them arising out of or based upon any breach of any
representation, warranty or covenant made by Nextera in this Agreement or in any
certificate delivered by Nextera hereunder, or by reason of any claim, action or
proceeding asserted or instituted growing out of any matter or thing
constituting such a breach.
10.4. Limitation on Indemnification by Nextera. Notwithstanding the
foregoing, (a) no indemnification shall be payable to the Members with respect
to claims asserted pursuant to Section 10.3 above after the date which is
eighteen (18) months after the Closing and the aggregate amount to be payable to
Members pursuant to Section 10.3 shall not exceed Five Million Dollars
($5,000,000) and (b) Nextera shall have no obligation for indemnification
hereunder until aggregate claims for indemnification hereunder exceed $50,000,
in which case Nextera shall be obligated for indemnification of all claims,
including the initial $50,000 of such claims; provided, however, that the
limitations set forth herein shall not apply to a claim for indemnification
based upon a breach of Section 5.2 or 5.3 or covenants to be performed
post-Closing. Claims for indemnification with respect to fraud, intentional
misrepresentation or the cause or knowledge of a deliberate or willful breach of
any representations, warranties or covenants of Nextera under this Agreement or
in any certificate, schedule or exhibit delivered pursuant hereto made under
this Agreement by any Member Indemnified Party shall not be subject to any of
the limitations set forth in this Section 10.4.
10.5. Notice; Defense of Claims. An indemnified party shall make
claims for indemnification hereunder by giving written notice thereof to the
indemnifying party within the period in which indemnification claims can be made
hereunder. If indemnification is sought for a claim or liability asserted by a
third party, the indemnified party shall also give written notice thereof to the
indemnifying party promptly after it receives notice of the claim or liability
being asserted, but the failure to do so shall not relieve the indemnifying
party from any liability except to the extent that it is prejudiced by the
failure or delay in giving such notice. Such notice shall summarize the bases
for the claim for indemnification and any claim or liability being asserted by a
third party. Within 20 days after receiving such notice the indemnifying party
shall give written notice to the indemnified party stating whether it disputes
the claim for indemnification and whether it will defend against any third party
claim or liability at its own cost and expense. If the indemnifying party fails
to give notice that it disputes an indemnification claim within 20 days after
receipt of notice thereof, it shall be deemed to have accepted and agreed to the
claim, which shall become immediately due and payable. The indemnifying party
shall be entitled to direct the defense against a third party claim or liability
with counsel selected by it (subject to the consent of the indemnified party,
which consent shall not be unreasonably withheld) as long as the indemnifying
party is conducting a good faith and diligent defense. The indemnified party
shall at all times have the right to fully participate in the defense of a third
party claim or liability at its own expense directly or through counsel;
provided, however, that if the named parties to the action or proceeding include
both the indemnifying party and the indemnified party and the indemnified party
is advised that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
indemnified party may engage separate counsel at the expense of the indemnifying
party. If no such notice of intent to
45
<PAGE> 50
dispute and defend a third party claim or liability is given by the indemnifying
party, or if such good faith and diligent defense is not being or ceases to be
conducted by the indemnifying party, the indemnified party shall have the right,
at the expense of the indemnifying party, to undertake the defense of such claim
or liability (with counsel selected by the indemnified party), and to compromise
or settle it, exercising reasonable business judgment. If the third party claim
or liability is one that by its nature cannot be defended solely by the
indemnifying party, then the indemnified party shall make available such
information and assistance as the indemnifying party may reasonably request and
shall cooperate with the indemnifying party in such defense, at the expense of
the indemnifying party.
10.6. Satisfaction of Member Indemnification Obligations. In order to
satisfy the indemnification obligations of the Members hereunder, a Buyer
Indemnified Party shall proceed first directly against the Escrow Deposit as
further set forth in the Escrow Agreement and then directly against the Members,
subject to the limitations set forth in Section 10.2(c) and (d), as applicable.
As further set forth in the Escrow Agreement, all claims against the Escrow
Amount shall be satisfied first against the cash portion thereof and then
against the Nextera Class A Units.
SECTION 11. MISCELLANEOUS.
11.1. Fees and Expenses.
Each of the parties will bear its own expenses in connection with the
negotiation and the consummation of the transactions contemplated by this
Agreement.
11.2. Governing Law.
This Agreement shall be construed under and governed by the internal
laws of the Commonwealth of Massachusetts without regard to its conflict of laws
provisions.
11.3. Notices.
Any notice, request, demand or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been given
if delivered or sent by facsimile transmission, upon receipt, or if sent by
registered or certified mail, upon the sooner of the date on which receipt is
acknowledged or the expiration of three days after deposit in United States post
office facilities properly addressed with postage prepaid. All notices to a
party will be sent to the addresses set forth below or to such other address or
person as such party may designate by notice to each other party hereunder:
46
<PAGE> 51
TO BUYER: SGM Consulting, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (781) 778-4500
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO NEXTERA: Nextera Enterprises, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (781) 778-4500
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO HOLDINGS: Nextera Enterprises Holdings, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (781) 778-4500
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
47
<PAGE> 52
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO COMPANY: SiGMA Consulting, LLC
150 WillowBrook Office Park
Fairport, NY 14450-4220
Attention: Michael Martindale
Fax: (716) 383-4111
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: Steven P. Rosenthal
Fax: (617) 542-2241
TO ANY MEMBER: To the address last by provided by such
Member to the Company
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: Steven P. Rosenthal
Fax: (617) 542-2241
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
11.4. Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, reflects the entire agreement of the parties with respect to
its subject matter, and supersedes all previous written or oral negotiations,
commitments and writings. No promises, representations, understandings,
warranties and agreements have been made by any of the parties hereto except as
referred to herein or in such Schedules and Exhibits; and all inducements to the
making of this Agreement relied upon by either party hereto have been expressed
herein or in such Schedules or Exhibits.
11.5. Assignability; Binding Effect. This Agreement shall only be
assignable by Buyer and Nextera to a corporation or partnership controlling,
controlled by or under common control with Buyer or Nextera upon written notice
to the Company and the Members. This Agreement may not be assigned by any
Members or the Company without the prior written consent of Nextera. This
Agreement shall be binding upon and enforceable by, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
48
<PAGE> 53
11.6. Captions and Gender. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
11.7. Execution in Counterparts. For the convenience of the parties
and to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
11.8. Amendments. This Agreement may not be amended or modified, nor
may compliance with any condition or covenant set forth herein be waived, except
by a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
11.9. Publicity and Disclosures. No press releases or public
disclosure, either written or oral, of the transactions contemplated by this
Agreement, shall be made by a party to this Agreement without the prior
knowledge and written consent of Nextera and the Company.
11.10. Specific Performance. The parties agree that it would be
difficult to measure damages which might result from a breach of this Agreement
by the Company or the Members and that money damages would be an inadequate
remedy for such a breach. Accordingly, if there is a breach or proposed breach
of any provision of this Agreement by the Company or the Members, and Nextera
does not elect to terminate under Section 8, Nextera shall be entitled, in
addition to any other remedies which it may have, to an injunction or other
appropriate equitable relief to restrain such breach without having to show or
prove actual damage to Nextera.
49
<PAGE> 54
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives, as of the date first written
above.
BUYER:
SGM CONSULTING, L.L.C., a Delaware limited
liability company
By: /s/ MICHAEL P. MULDOWNEY
----------------------------------------------
Name: Michael P. Muldowney
----------------------------------------
Title: Treasurer
---------------------------------------
NEXTERA:
NEXTERA ENTERPRISES, L.L.C., a Delaware limited
liability company
By: /s/ MICHAEL P. MULDOWNEY
----------------------------------------------
Name: Michael P. Muldowney
----------------------------------------
Title: Treasurer
---------------------------------------
HOLDINGS:
NEXTERA ENTERPRISES HOLDINGS, L.L.C., a Delaware
limited liability company
By: /s/ MICHAEL P. MULDOWNEY
----------------------------------------------
Name: Michael P. Muldowney
----------------------------------------
Title: Treasurer
---------------------------------------
HOLDINGS:
NEXTERA ENTERPRISES HOLDINGS, L.L.C., a Delaware
limited liability company
By: /s/ MICHAEL P. MULDOWNEY
----------------------------------------------
Name: Michael P. Muldowney
----------------------------------------
Title: Treasurer
---------------------------------------
50
<PAGE> 55
COMPANY:
SIGMA CONSULTING, LLC, a New York limited
liability company
By: /s/ MICHAEL MARTINDALE
----------------------------------------------
Name: Michael Martindale
----------------------------------------
Title: Chief Operating Officer
---------------------------------------
MEMBERS:
/s/ JACOB H. BROOKS
-------------------------------------------------
Jacob H. Brooks
/s/ MARTIN G. GLAVIN
-------------------------------------------------
Martin G. Glavin
/s/ HERBERT J. GUCK
-------------------------------------------------
Herbert J. Guck
/s/ MICHAEL MARTINDALE
-------------------------------------------------
Michael Martindale
/s/ JOHN ROBOSSON
-------------------------------------------------
John Robosson
/s/ DION C. SMITH
-------------------------------------------------
Dion C. Smith
51
<PAGE> 1
EXHIBIT NO. 10.5
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is entered into as of January
5, 1998 by and among SGM Consulting, L.L.C., a Delaware limited liability
company ("Buyer"), Nextera Enterprises, L.L.C., a Delaware limited liability
company and the controlling member of Buyer ("Nextera"), Nextera Enterprises
Holdings, L.L.C., a Delaware limited liability company and the controlling
member of Nextera ("Holdings"), SiGMA Consulting, LLC, a New York limited
liability company (the "Company"), the holders of the Company's membership
interests listed on Exhibit A attached hereto (herein collectively referred to
as the "Members" and individually as a "Member") and Chase Manhattan Trust
Company, National Association, as escrow agent (the "Escrow Agent").
WHEREAS, pursuant to a Purchase Agreement (the "Purchase Agreement")
dated as of January 5, 1998 by and among Buyer, Nextera, Holdings, the Company
and the Members, Buyer is purchasing certain assets from the Company and
acquiring all of the issued and outstanding membership interests of the Company
from the Members; and
WHEREAS, the Members have agreed to indemnify Buyer and Nextera
against certain breaches of the representations, warranties and covenants made
by the Company and the Members in the Purchase Agreement and against certain
other matters as specified in Section 10 of the Purchase Agreement; and
WHEREAS, to secure payment of the Members' indemnification
obligations, EIGHT HUNDRED FIFTY THOUSAND DOLLARS ($850,000) in cash (the
"Escrowed Cash") and 200,000 Nextera Class A Units (the "Escrowed Units")
(together, the Escrowed Cash and the Escrowed Units and additions to or earnings
on the same, the "Escrow Deposit") are being deposited, pursuant to Section 1.2
of the Purchase Agreement, in escrow to be held as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises of the parties herein contained, and other good and valuable
consideration, receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Establishment of Escrow: Investment. Buyer has herewith deposited
the Escrow Deposit with the Escrow Agent on the date of the Closing. The
Escrowed Units have been issued in the names of the Members who, subject to the
provisions herein, have the right to receive such shares, as set forth on
Exhibit A attached hereto, and shall be accompanied by stock powers or similar
instruments duly signed in blank by the appropriate Member. The Escrow Deposit
shall be held in escrow in an account designated as the SiGMA Consulting, LLC
Escrow Account or an account having such other similar designation, subject to
the terms and conditions set forth herein. Jacob H. Brooks shall serve as the
exclusive representative of the Members with respect to the Escrow Deposit and
this Agreement (the "Escrow Representative"). If, for any reason, the Escrow
Representative shall be either unable or unwilling to serve, a successor Escrow
Representative shall be appointed by written consent of all Members and all
references to the Escrow Representative shall be deemed to include such
successor. The Escrow Agent shall
<PAGE> 2
invest all cash held as part of the Escrow Deposit only in such specific
investments as Buyer and the Escrow Representative shall from time to time
jointly direct in writing to the Escrow Agent; provided, however, that such
investments shall be limited to:
(a) time deposits, certificates of deposit and acceptances,
maturing within ninety (90) days from the date of
acquisition thereof, issued by national banks located in
the United States of America, including the Escrow Agent
or any of its affiliates, and having capital, surplus and
profits aggregating at least one hundred million dollars
($100,000,000);
(b) securities or other obligations of, or guarantee by, the
United States of America or any agency thereof having
maturities of not greater than one (1) year;
(c) commercial paper rated A-1 or P-1 by Standard & Poor's or
Moody's Investors Service;
(d) repurchase agreements fully collateralized by obligations
described in clauses 1(a), 1(b) or 1(c) hereof;
(e) shares of investment companies registered under the
Investment Company Act of 1940 which invest in any
obligation described herein, or shares of the Dreyfus Cash
Management Plus Money Market Fund, including those for
which the Escrow Agent or any of its affiliates provide
services for a fee, whether as an investment advisor,
custodian, transfer agent, registrar, sponsor,
distributor, manage or otherwise.
Until further written notice, cash in the Escrow Deposit shall be
invested in Dreyfus Cash Management Plus. Unless otherwise directed in writing
by the Escrow Representative and Buyer, the Escrow Agent shall not invest all or
any portion of the Escrow Deposit in any investment if the maturity date of such
investment is later than the Termination Date (as defined below).
2. Amounts Earned on Escrow Deposit: Tax Matters. All amounts earned,
paid or distributed with respect to the Escrow Deposit (whether interest,
dividends, distributions from Nextera with respect to the Escrowed Units or
otherwise) shall become a part of the Escrow Deposit, shall be held hereunder
upon the same terms as the original Escrow Deposit and shall be distributed
together with the underlying portion of the original Escrow Deposit pursuant to
the terms of this Agreement. The parties agree that to the extent permitted by
applicable law, including Section 468B(g) of the Internal Revenue Code of 1986,
as amended, the Members will include all amounts earned on the Escrow Deposit in
their gross income for federal, state and local income tax (collectively,
"income tax") purposes and pay any income tax resulting therefrom.
3. Claims Against Escrow Deposit.
2
<PAGE> 3
(a) At any time or times prior to the expiration of this
Agreement, Buyer may make claims against the Escrow Deposit for indemnification
pursuant to and in accordance with Section 10 of the Purchase Agreement. Buyer
shall notify the Escrow Representative and the Escrow Agent in writing prior to
the expiration of this Agreement of each such claim, including a summary of the
amount of and bases for such claim. If the Escrow Representative shall dispute
such claim, the Escrow Representative shall give written notice thereof to Buyer
and to the Escrow Agent within twenty (20) days after receipt of notice of
Buyer's claim, in which case the Escrow Agent shall continue to hold the Escrow
Deposit in accordance with the terms of this Agreement; otherwise, such claim
shall be deemed to have been acknowledged to be payable out of the Escrow
Deposit in the full amount thereof and the Escrow Agent shall use its best
efforts to pay such claim to Holdings within three (3) business days after
expiration of said twenty day period or as soon thereafter as possible. If the
amount of the claim exceeds the value of the Escrow Deposit, the Escrow Agent
shall have no liability or responsibility for any deficiency.
(b) The Escrow Agent shall follow the procedure below in making
any payment in satisfaction of a claim against the Escrow Deposit:
(i) The Escrow Agent shall make such payment first from the
Escrowed Cash and any additions to or earnings on the Escrowed Cash until all
cash in the Escrow Deposit has been exhausted.
(ii) To the extent that any claim exceeds the amount of
Escrowed Cash or other cash in the Escrow Deposit, the Escrow Agent shall make
payment from the Escrowed Units in such number of Escrowed Units (computed to
the nearest whole unit) having a value equal to the value of the claim not
satisfied by cash payment. Any payment of Escrowed Units by the Escrow Agent to
Holdings shall be treated as a sale by the Members of such Escrowed Units for
the value described herein. The value of an Escrowed Unit for purposes of the
Section shall be the fair market value of such unit on the date of the claim as
determined by the Board of Directors of Nextera (the "Board"). The fair market
value shall be determined in good faith by the Board and the Board shall notify
the Escrow Representative and Escrow Agent in writing of its determination (the
"Valuation Notice"). If the Escrow Representative disputes the fair market value
of the Escrowed Units as determined by the Board, then the Escrow Representative
shall so notify the Board and Escrow Agent in writing (the "Appraisal Notice")
within five (5) business days of receipt of the Valuation Notice. Within fifteen
(15) business days of the receipt of the Appraisal Notice, the Board and the
Escrow Representative shall each appoint a professional appraiser to determine
the fair market value of the Escrowed Units. Each appraiser shall have at least
five (5) years experience in appraising companies similar to Nextera. The two
appraisers shall within the succeeding twenty (20) day period after their
selection, attempt to reach agreement on the fair market value. If the
appraisers reach such agreement they shall so notify the Escrow Agent and their
agreement shall be final and binding on Buyer, Nextera, Holdings, the Board, the
Company, the Escrow Representative, the Members,
3
<PAGE> 4
and their affiliates. If the appraisers fail to agree, they shall within ten
(10) days thereafter select a third appraiser with the same qualification
requirements, and the three (3) appraisers shall establish the fair market value
by majority vote within the succeeding twenty (20) day period and shall notify
the Escrow Agent of their determination. Such determination of the fair market
value shall be final and binding on Buyer, Nextera, Holdings, the Board, the
Company, the Escrow Representative, the Members, and their affiliates. In all
events, the appraisers selected shall be unaffiliated with and otherwise
independent of Buyer, Nextera, Holdings, the Board, the Company, the Escrow
Representative, the Members, and their affiliates. If the fair market value of
the Escrowed Units, as determined by the appraisers, is less than or no more
than five percent (5%) greater than the value as determined by the Board, then
the Members shall pay all costs associated with the appraisers. If the fair
market value as determined by the appraisers is more than five percent (5%)
greater than the value as determined by the Board, then Buyer shall pay for all
costs associated with the appraisers. The Escrowed Units delivered to Holdings
in satisfaction of a claim shall be allocated among the Members so as to reduce
each Member's interest in the remaining Escrowed Units by an equal proportion.
In the event that the Escrow Agent must make payment with a number of units less
than or different from the number of units represented by a certificate in the
Escrow Deposit, the Escrow Agent shall surrender such certificate to Nextera and
Nextera shall issue to the Escrow Agent certificates of Nextera Class A Units
identical in form but for the number of units as necessary to allow for proper
payment of the claim so long as the number of units of the new certificates plus
the amount of units used to satisfy such claim shall be equivalent to the total
number of units covered by the surrendered certificate.
4. Disputed Claims.
(a) If the Escrow Representative shall dispute an indemnification
claim of Buyer as above provided, the Escrow Agent shall set aside a portion of
the Escrow Deposit sufficient to pay said claim in full (the "Set Aside
Amount"). If Buyer notifies the Escrow Agent in writing that it has made
out-of-pocket expenditures in connection with any such disputed claim, and
provides paid receipts for such expenditures, in addition to expenditures
included in the Set Aside Amount, an amount equal to such additional
expenditures shall be added to the Set Aside Amount.
(b) If the disputed indemnification claim has not been resolved
or compromised within sixty (60) days after the Escrow Representative sends
notice of dispute of the same, or in the event of a third-party claim or suit,
within fifteen (15) days after its resolution or compromise, said
indemnification claim shall be referred to the American Arbitration Association,
to be settled by binding arbitration in Boston, Massachusetts, in accordance
with the commercial arbitration rules of the Association. The fees and expenses
of the arbitrator shall be borne equally by the Members and Buyer. In no event
shall the Escrow Agent be responsible for any fee or expense of any party to any
arbitration proceeding. The determination of the arbitrator as to the amount, if
any, of the indemnification claim which is properly allowable shall be
conclusive and binding upon the parties hereto and judgment may be entered
thereon in any court having jurisdiction thereof, including, without limitation,
any Superior Court in the Commonwealth of Massachusetts. The arbitrator shall
have the authority to award to the prevailing party reasonable costs and
expenses including attorney's fees and the cost of arbitration. The Escrow Agent
shall use its best efforts to make payment of such claim, as and to the extent
allowed, to Buyer out of the Set Aside Amount (or if insufficient, out of the
Escrow Deposit) within three (3) business days following said determination or
as soon thereafter as possible.
(c) Notwithstanding Section 4(b), if a disputed indemnification
claim has not been resolved or compromised as of the Termination Date (as
hereinafter defined), and such claim
4
<PAGE> 5
does not involve a third-party claim or suit, Buyer and the Escrow
Representative shall continue to negotiate in good faith a settlement of such
claims for a period of ten (10) days. If, after the expiration of such ten-day
period, such indemnification claim still has not been resolved or compromised,
such claim shall be settled in accordance with the arbitration provisions set
forth in Section 4(b).
(d) It is understood and agreed that should any dispute arise
under this Section 4, the Escrow Agent, upon receipt of written notice of such
dispute or claim by the Escrow Representative, is authorized and directed to
retain in its possession without liability to anyone, the Set Aside Amount
relating to such dispute plus any expenditures of Buyer made pursuant to Section
4(a) until such dispute shall have been settled pursuant to this Section 4. The
Escrow Agent may, but shall be under no duty whatsoever to, institute or defend
any legal proceedings which relate to the Escrow Deposit.
5. Termination.
(a) If the Escrowed Cash has not been reduced to zero as of the
date that is eighteen (18) months following the date of this Agreement and there
are no outstanding indemnification claims as of such date, the Escrow Agent
shall distribute the Escrowed Cash to the Members in accordance with their pro
rata interest therein as set forth on Exhibit A attached hereto; otherwise, the
Escrow Agent shall distribute the Escrowed Cash to the Members when all
indemnification claims made by Buyer or Nextera before the date that is eighteen
(18) months following the date of this Agreement pending as of such date have
been resolved.
(b) This Agreement shall terminate on the date that the Escrow
Deposit is reduced to zero as the result of payments by the Escrow Agent to
Holdings in accordance with the provisions of Section 3 or Section 4. If,
however, the Escrow Deposit has not been reduced to zero as of the date that is
three (3) years following the date of this Agreement (the "Termination Date")
and there are no outstanding indemnification claims on the Termination Date,
this Agreement shall terminate and the Escrow Agent shall distribute the amount
remaining in the Escrow Deposit to the Members in accordance with their pro rata
interest in the Escrow Deposit as set forth in Exhibit A attached hereto;
otherwise this Agreement shall continue in effect until all indemnification
claims Buyer has made pursuant to Section 3 hereof on or prior to the
Termination Date shall have been disposed of. As of the Termination Date, an
amount of the Escrow Deposit adequate to cover all disputed and undisputed
claims made by Buyer pursuant to Section 3 hereof, plus an additional twenty
percent (20%) of any such amount to cover expenses of Buyer associated with such
claims, will be held by the Escrow Agent, and the Escrow Agent shall distribute
on the Termination Date the balance, if any, of the Escrow Deposit to the
Members in accordance with their pro rata interest in the Escrow Deposit as set
forth in Exhibit A attached hereto. At such time as all remaining
indemnification claims hereunder have been resolved and the Escrow Agent has
received a written notice executed by Buyer and the Escrow Representative, or
notification of a determination of an arbitrator pursuant to Section 4(b), to
that effect and any amounts to be distributed to Holdings in connection
therewith have been so distributed, the Escrow Agent shall distribute the
remaining Escrow Deposit, if any, to the Members in accordance with their pro
rata interest in the Escrow Deposit as set forth in Exhibit A attached hereto.
5
<PAGE> 6
6. The Escrow Agent.
(a) Direction from Buyer and Escrow Representative.
Notwithstanding anything herein to the contrary, the Escrow Agent shall promptly
dispose of all or any part of the Escrow Deposit as directed by a writing signed
by Buyer and Escrow Representative.
(b) Reliance by Escrow Agent; Liability of Escrow Agent. The
Escrow Agent shall be protected in acting upon any written notice, request,
waiver, consent, certificate, receipt, authorization or other paper or document
that the Escrow Agent believes to be genuine and what it purports to be. The
Escrow Agent may confer with its own corporate or outside legal counsel in the
event of any dispute or question as to the construction of any of the provisions
hereof, or its duties hereunder, and shall incur no liability and shall be fully
protected in acting in accordance with the written opinions of such counsel. The
duties of the Escrow Agent hereunder will be limited to the observance of the
express provisions of this Agreement. Except with respect to capitalized terms
used herein and defined in the Purchase Agreement, the Escrow Agent will not be
subject to, or be obliged to recognize, any other agreement between the parties
hereto or directions or instructions not specifically set forth as provided for
herein. The Escrow Agent will not make any payment or disbursement from or out
of the Escrow Deposit that is not expressly authorized pursuant to this
Agreement. The Escrow Agent may rely upon and act upon any instrument received
by it pursuant to the provisions of this Agreement that it reasonably believes
to be genuine and in conformity with the requirement of this Agreement. The
Escrow Agent undertakes to use the same degree of care and skill in performing
its services hereunder as an ordinary prudent person would do or use under the
circumstances in the conduct of his or her own affairs. The Escrow Agent will
not be liable for any action taken or not taken by it under the terms hereof in
the absence of breach of its obligations hereunder or gross negligence or
willful misconduct on its part.
(c) Indemnification of Escrow Agent. Buyer and the Members will
jointly and severally indemnify and hold the Escrow Agent harmless from and
against any and all losses, costs, damages or expenses (including, but not
limited to, reasonable attorneys' fees) it may sustain by reason of its service
as Escrow Agent hereunder, except such losses, costs, damages or expenses
(including, but not limited to, reasonably attorneys' fees) incurred by reason
of acts or omissions for which the Escrow Agent is liable or responsible under
the last sentence of Section 6(b) hereof.
(d) Fees and Expenses of the Escrow Agent. All fees of the Escrow
Agent for its services hereunder, together with any expenses reasonably incurred
by the Escrow Agent in connection with this Agreement, shall be shared equally
by Buyer on the one hand and the Members on the other. The fees to be paid by
the Members shall be reduced pro rata from the Members' individual interest in
the Escrow Deposit.
(e) Resignation and Removal of Escrow Agent. Successor Escrow
Agent.
(i) The Escrow Agent may resign from its duties hereunder by
giving each of the parties hereto not less than thirty (30) days prior written
notice of the effective date of such resignation (which effective date shall be
at least thirty (30) days after the date such notice is
6
<PAGE> 7
given). In addition, the Escrow Agent may be removed and replaced on a date
designated in a written instrument signed by Buyer and the Members and delivered
to the Escrow Agent. The parties hereto intend that a successor escrow agent
mutually acceptable to the Escrow Representative and Buyer will be appointed to
fulfill the duties of the Escrow Agent hereunder for the remaining term of this
Agreement in the event of the Escrow Agent's resignation or removal. Upon the
effective date of such resignation or removal, the Escrow Agent shall deliver
the property comprising the Escrow Deposit to such successor escrow agent,
together with an accounting of the investments held by it and all transactions
related to this Agreement, including any distributions made and such records
maintained by the Escrow Agent in connection with its duties hereunder and other
information with respect to the Escrow Deposit as such successor may reasonably
request. If on or before the effective date of such resignation or removal, a
successor escrow agent has not been appointed, the Escrow Agent will thereupon
deposit the Escrow Deposit into the registry of a court of competent
jurisdiction.
Upon written acknowledgment by a successor escrow
agent appointed in accordance with this Section 6(e)(i) of its agreement to
serve as escrow agent hereunder and the receipt of the property then comprising
the Escrow Deposit, the Escrow Agent shall be fully released and relieved of all
duties, responsibilities and obligations under this Agreement, except for those
arising under the last sentence of Section 6(b) of this Agreement, and such
successor escrow agent shall for all purposes hereof be the Escrow Agent.
(ii) Any corporation, association or other entity into which
the Escrow Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or otherwise transfer all or substantially
all of its corporate trust business, or any corporation, association or other
entity resulting from any such merger, conversion, consolidation, sale or other
transfer, shall, ipso facto, be and become successor Escrow Agent hereunder,
vested with all of the powers, discretions, immunities, privileges and all other
matters as was its predecessor, without the execution or filing of any
instrument or any further act on the part or any of the parties hereto, anything
herein to the contrary notwithstanding.
7. Voting of Escrowed Units. So long as any Escrowed Units are
retained by the Escrow Agent, each Member shall be entitled to exercise the
voting power, if any, with respect to that Member's proportional ownership of
the Escrowed Units.
8. Governing Law. IT IS THE PARTIES' INTENT THAT THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW).
9. Counterparts. This Escrow Agreement may be executed in one or more
counterparts, all of which documents shall be considered one and the same
document.
10. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given when
received, if personally delivered or sent by facsimile transmission, or three
(3) days after deposited in the U.S. mails for
7
<PAGE> 8
delivery by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
TO BUYER: SGM Consulting, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (617) 778-4508
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO NEXTERA: Nextera Enterprises, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (617) 778-4508
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO HOLDINGS: Nextera Enterprises Holdings, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (617) 778-4508
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
8
<PAGE> 9
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO THE COMPANY: SiGMA Consulting, LLC
150 WillowBrook Office Park
Fairport, NY 14450-4220
Attention: Jacob H. Brooks
Fax: (716) 383-4111
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky &
Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: Steven P. Rosenthal
Fax: (617) 542-2241
TO ANY MEMBER: To the address last provided by such
Member to the Company.
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky &
Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: Steven P. Rosenthal
Fax: (617) 542-2241
TO ESCROW AGENT: Chase Manhattan Trust Company, National
Association
Union Trust Building
501 Grant Street, Room 325
Pittsburg, PA 15219
Attention: Bruce J. Karhu
Fax: (412) 234-2975
Addresses may be changed by written notice given pursuant to this
Section. Any notice given hereunder may be given on behalf of any party by his
counsel or other authorized representatives.
11. Certification of Tax Identification Number. The parties hereto
agree to provide the Escrow Agent with a certified tax identification number by
signing and returning a Form W-9 (or Form W-8, in the case of non-U.S. persons)
to the Escrow Agent prior to the date on which any income earned on the
investment of the Escrow Deposits is credited to such Escrow Deposits. The
parties hereto understand that, in the event their tax identification numbers
are not certified to the Escrow Agent, the Internal Revenue Code, as amended
from time to time, may require withholding of a portion of any interest or other
income earned on the investment of the Escrow Deposit.
12. Force Majeure. Neither Buyer, Nextera, the Company, the Members
nor the Escrow Agent shall be responsible for delays or failures in performance
under this Agreement resulting from acts beyond its control. Such acts shall
include but not be limited to acts of God,
9
<PAGE> 10
strikes, lockouts, riots, acts of war, epidemics, governmental regulations
superimposed after the fact, fire, communication line failures, computer
viruses, power failures, earthquakes or other disasters.
13. Modifications. This Agreement may not be altered or modified
without the express written consent of the parties hereto. No course of conduct
shall constitute a waiver of any of the terms and conditions of this Escrow
Agreement, unless such waiver is specified in writing, and then only to the
extent so specified. A waiver of any of the terms and conditions of this Escrow
Agreement on one occasion shall not constitute a waiver of the other terms of
this Escrow Agreement, or of such terms and conditions on any other occasion.
14. Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by a
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to
be executed by their duly authorized representatives, as of the date first
written above.
BUYER:
SGM CONSULTING, L.L.C.
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------------
Name: Michael P. Muldowney
Title: Vice President
NEXTERA:
NEXTERA ENTERPRISES, L.L.C.
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------------
Name: Michael P. Muldowney
Title: Treasurer
HOLDINGS:
NEXTERA ENTERPRISES HOLDINGS, L.L.C.
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------------
Name: Michael P. Muldowney
Title: Treasurer
10
<PAGE> 11
THE COMPANY:
SiGMA CONSULTING, LLC
By: /s/ MICHAEL MARTINDALE
---------------------------------------
Name: Michael Martindale
Title: Chief Operating Officer
ESCROW AGENT:
CHASE MANHATTAN TRUST COMPANY, NATIONAL
ASSOCIATION, as Escrow Agent
By: /s/ BRUCE J. KARHU
---------------------------------------
Name: Bruce J. Karhu
Title: Vice President
11
<PAGE> 12
MEMBERS:
/s/ JACOB H. BROOKS
-------------------------------------------
Jacob H. Brooks
/s/ MARTIN G. GLAVIN
-------------------------------------------
Martin G. Glavin
/s/ HERBERT J. GUCK
-------------------------------------------
Herbert J. Guck
/s/ MICHAEL MARTINDALE
-------------------------------------------
Michael Martindale
/s/ JOHN ROBOSSON
-------------------------------------------
John Robosson
/s/ DION C. SMITH
-------------------------------------------
Dion C. Smith
12
<PAGE> 1
EXHIBIT NO. 10.6
PURCHASE AGREEMENT
by and among
NEXTERA ENTERPRISES, L.L.C.
(Buyer)
PYRAMID IMAGING, INC.
(the Company)
The Holders of the Company
and
Certain Optionholders of the Company
March 31, 1998
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. SALE OF SHARES, CANCELLATION OF OPTIONS AND PURCHASE PRICE................1
1.1. CANCELLATION OF OPTIONS.........................................................1
1.2. CONTRIBUTION OF COMPANY SHARES..................................................2
1.3. TIME AND PLACE OF CLOSING.......................................................2
1.4. FURTHER ASSURANCES..............................................................2
1.5. TRANSFER TAXES..................................................................3
1.6. WORKING CAPITAL.................................................................3
1.7 ADDITIONAL CONSIDERATION.........................................................4
1.8 NET WORTH........................................................................5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE HOLDERS.............6
2.1. MAKING OF REPRESENTATIONS AND WARRANTIES........................................6
2.2. ORGANIZATION AND QUALIFICATIONS OF THE COMPANY..................................6
2.3. SHARES OF THE COMPANY; BENEFICIAL OWNERSHIP.....................................6
2.4. NO SUBSIDIARIES.................................................................7
2.5. AUTHORITY OF THE COMPANY........................................................7
2.6. REAL AND PERSONAL PROPERTY......................................................8
2.7. FINANCIAL STATEMENTS............................................................9
2.8. TAXES..........................................................................11
2.9. ACCOUNTS RECEIVABLE............................................................14
2.10. ABSENCE OF CERTAIN CHANGES....................................................14
2.11. ORDINARY COURSE...............................................................16
2.12. BANKING RELATIONS.............................................................16
2.13. INTELLECTUAL PROPERTY.........................................................16
2.14. CONTRACTS.....................................................................18
2.15. LITIGATION....................................................................19
2.16. COMPLIANCE WITH LAWS..........................................................19
2.17. INSURANCE.....................................................................20
2.18. WARRANTY OR OTHER CLAIMS......................................................20
2.19. POWERS OF ATTORNEY............................................................20
2.20. FINDER'S FEE..................................................................20
2.21. PERMITS: BURDENSOME AGREEMENTS...............................................20
2.22. COMPANY RECORDS; COPIES OF DOCUMENTS..........................................21
2.23. TRANSACTIONS WITH INTERESTED PERSONS..........................................21
2.24. EMPLOYEE BENEFIT PROGRAMS.....................................................21
2.25. ENVIRONMENTAL MATTERS.........................................................24
2.26. DIRECTORS AND OFFICERS........................................................25
2.27. CUSTOMER REVENUES.............................................................26
2.28. EMPLOYEES; LABOR MATTERS......................................................26
2.29. CUSTOMERS, DISTRIBUTORS AND SUPPLIERS.........................................26
2.30. EQUITY REPURCHASE.............................................................27
2.31. DISCLOSURE....................................................................27
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE HOLDERS............................27
3.1. OWNERSHIP OF SHARES AND OPTIONS................................................27
3.2. AUTHORITY......................................................................28
3.3. FINDER'S FEE...................................................................28
3.4. AGREEMENTS.....................................................................28
3.5. EXPERIENCE; ACCREDITED INVESTOR................................................29
3.6. INVESTMENT.....................................................................29
3.7. NO PUBLIC MARKET...............................................................29
3.8. ACCESS TO DATA.................................................................29
3.9. RESIDENCE......................................................................29
SECTION 4. COVENANTS OF THE COMPANY AND THE HOLDERS.................................30
4.1. MAKING OF COVENANTS AND AGREEMENTS.............................................30
4.2. AUTHORIZATION FROM OTHERS......................................................30
4.3. NOTICE OF DEFAULT..............................................................30
4.4. CONSUMMATION OF AGREEMENT......................................................30
4.5. COOPERATION OF THE COMPANY AND HOLDERS.........................................30
4.6. NO SOLICITATION OF OTHER OFFERS................................................30
4.7. TAX RETURNS....................................................................31
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER..................................31
5.1. MAKING OF REPRESENTATIONS AND WARRANTIES.......................................31
5.2. ORGANIZATION...................................................................31
5.3. AUTHORITY......................................................................31
5.4. LITIGATION.....................................................................32
5.5. FINDER'S FEE...................................................................32
5.6. AVAILABLE FUNDS................................................................32
5.7. MEMBERSHIP INTERESTS OF BUYER..................................................32
5.8. FINANCIAL STATEMENTS...........................................................33
5.9. TAXES..........................................................................33
5.10. ABSENCE OF CERTAIN CHANGES....................................................35
5.11. COMPLIANCE WITH LAWS..........................................................37
5.12. OPERATING AGREEMENTS..........................................................37
SECTION 6. COVENANTS OF BUYER.......................................................37
6.1. CONSUMMATION OF AGREEMENT......................................................37
6.2. OPTION POOL....................................................................37
6.3. BOOKS AND RECORDS; TAX MATTERS.................................................38
6.4. RELEASE OF PERSONAL GUARANTEES.................................................38
6.5. RIGHT OF FIRST OFFER ON DISPOSITIONS OF HOLDERS................................38
SECTION 7. CONDITIONS...............................................................40
7.1. CONDITIONS TO THE OBLIGATIONS OF BUYER.........................................40
7.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE HOLDERS.......................42
SECTION 8. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.............................42
8.1. SURVIVAL OF WARRANTIES.........................................................42
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
8.2. RELEASE........................................................................42
SECTION 9. INDEMNIFICATION..........................................................44
9.1. INDEMNIFICATION BY THE HOLDERS.................................................44
9.2. LIMITATIONS ON INDEMNIFICATION BY THE HOLDERS..................................45
9.3. INDEMNIFICATION BY BUYER.......................................................46
9.4. LIMITATION ON INDEMNIFICATION BY BUYER.........................................46
9.5. NOTICE; DEFENSE OF CLAIMS......................................................47
9.6. SATISFACTION OF HOLDER INDEMNIFICATION OBLIGATIONS.............................47
9.7. VALUATION OF BUYER CLASS A UNITS...............................................48
SECTION 10. MISCELLANEOUS...........................................................48
10.1. RECAPITALIZATION OF BUYER AND HOLDINGS........................................48
10.2. FEES AND EXPENSES.............................................................48
10.3. GOVERNING LAW.................................................................49
10.4. NOTICES.......................................................................49
10.5. ENTIRE AGREEMENT..............................................................50
10.6. ASSIGNABILITY; BINDING EFFECT.................................................50
10.7. CAPTIONS AND GENDER...........................................................50
10.8. EXECUTION IN COUNTERPARTS.....................................................50
10.9. AMENDMENTS....................................................................51
10.10. PUBLICITY AND DISCLOSURES....................................................51
10.11. SPECIFIC PERFORMANCE.........................................................51
</TABLE>
iii
<PAGE> 5
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is entered into as of March
31, 1998 by and among Nextera Enterprises, L.L.C., a Delaware limited liability
company ("Buyer"), Pyramid Imaging, Inc., a California corporation (the
"Company"), the holders of the Company's capital stock (identified on Exhibit A
as and herein collectively referred to as the "Holders" and individually as a
"Holder").
W I T N E S S E T H
WHEREAS, the Holders own of record and beneficially all of the issued
and outstanding capital stock of the Company, consisting of 4,009,971 shares of
Common Stock (said shares referred to herein as the "Shares");
WHEREAS, the Excluded Optionholders (as hereinafter defined) and Charles
Blackburn hold options to purchase shares of Common Stock of the Company, as
more fully described in Section 2.3(b);
WHEREAS, the Holders desire to sell all of the Shares to Buyer, and
Buyer desires to acquire all of the Shares;
WHEREAS, Buyer desires to issue membership interests pursuant to, and
subject to the terms and conditions of, this Agreement; and
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECTION 1. SALE OF SHARES, CANCELLATION OF OPTIONS AND PURCHASE PRICE.
1.1. Cancellation of Options. At the Closing (as hereinafter defined),
all outstanding options to purchase Common Stock of the Company shall be
canceled. Charles Blackburn and all other holders of options to purchase equity
securities of the Company (such other holders of options are identified on
Exhibit B as and referred to herein as "Excluded Optionholders") shall enter
into an Option Cancellation Agreement in the form attached hereto as Exhibit B
with the Company whereby each such optionholder shall agree to have the Company
cancel all options held by such optionholder.
<PAGE> 6
1.2. Contribution of Company Shares.
(a) Transfer of Shares. At the Closing (as hereinafter defined),
each Holder shall deliver or cause to be delivered to Buyer certificates
representing all of the Shares owned by such Holder, as set forth on Exhibit A.
Such certificates shall be presented with assignments duly executed in blank (or
the equivalent), with such other documents as may reasonably be required by
Buyer to effect a valid transfer of such Shares by such Holder, free and clear
of any and all liens, encumbrances, charges or claims.
(b) Contribution of Shares and Exchange of Buyer Interest. In
return for the contribution from the Holders to Buyer of the Shares and the
cancellation by the Company of the outstanding options to purchase Common Stock
of the Company and in reliance upon the representations and warranties of the
Company and the Holders herein contained and made at the Closing and subject to
the satisfaction of all of the conditions contained herein, Buyer agrees that at
the Closing, it will (a) deliver to the Holders Eight Million Ninety-One
Thousand Six Hundred Sixty Seven Dollars ($8,091,667) in cash and 520,667 Class
A Common Units of Buyer ("Buyer Class A Units") issued pursuant to the Limited
Liability Company Agreement of Nextera Enterprises, L.L.C. dated as of April 9,
1997, as amended on January 6, 1998 (the "Buyer Operating Agreement"), which
shall be distributed in the amounts set forth opposite the name of each Holder
on Exhibit A subject to reductions as provided in Section 1.6 and reductions for
requirements with respect to withholdings under tax or employment laws (the cash
payment to be made by bank cashier's check in Boston Clearing House funds or by
wire transfer of immediately available funds), and (b) deliver to the Escrow
Agent Eight Hundred Twenty Five Thousand Dollars ($825,000) in cash and 66,000
Buyer Class A Units (the "Escrowed Units," together with the Escrowed Cash, the
"Escrow Deposit") to be held by the Escrow Agent pursuant to and in accordance
with the terms of the Escrow Agreement to be executed substantially in the form
attached hereto as Exhibit C.
1.3. Time and Place of Closing. The closing of the purchase and sale
provided for in this Agreement (herein called the "Closing") shall be held at a
mutually agreeable location in San Francisco, California on April 7, 1998 or at
such other date and location as may be mutually agreed upon by the parties. The
Agreement shall be effective as of March 31, 1998 for all purposes.
1.4. Further Assurances. The Holders from time to time after the Closing
at the request of Buyer and without further consideration shall execute and
deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably require to more effectively transfer and assign
to, and vest in, Buyer the Shares and all rights thereto, and to fully implement
the provisions of this Agreement. From time to time after the Closing, Buyer
shall
<PAGE> 7
execute and deliver further instruments and take such other action as the
Holders may reasonably request to confirm or perfect or otherwise to carry out
the transactions contemplated hereby.
1.5. Transfer Taxes. All transfer taxes, fees and duties under
applicable law incurred in connection with the sale and transfer of the Shares
under this Agreement, if any, will be borne and paid by the Holders.
1.6. Working Capital.
(a) Working Capital Payable. The amount of the cash payments to
be made by Buyer to the Company at the Closing is premised upon the Company
having at least Five Hundred Fifty Thousand Dollars ($550,000) of net working
capital (current assets less current liabilities), determined in accordance with
generally accepted accounting principles, at the Closing (such amount being the
"Minimum Working Capital"), provided, however, that such calculation of $550,000
of working capital shall not take into account any accruals by the Company as of
the Closing of any payroll taxes and similar charges paid by the Company
relating to the compensation deemed to be received as a result of cancellation
of outstanding options to purchase Common Stock of the Company. No later than
two business days prior to the Closing, the Company shall advise Buyer of its
estimate of working capital at the Closing. Without limiting other rights that
Buyer may have under this Agreement, if the amount so estimated is less than the
Minimum Working Capital, the cash payment to the Holders for the transfer of the
Shares at the Closing shall be reduced by the amount of such shortfall.
Within thirty (30) days following the Closing, the Holders and the
Company shall determine the actual working capital as of the Closing Date (the
"Closing Working Capital") and promptly notify Buyer of such amount. If the
Closing Working Capital is less than the lower of the Minimum Working Capital or
the estimated working capital as described in the preceding paragraph, as such
would have resulted in a reduced cash payment to the Holders for the Shares at
the Closing (such shortfall being the "Adjustment Amount"), the Holders shall
pay to Buyer the Adjustment Amount in cash.
(b) Disputed Adjustment Amount. If Buyer shall disagree with the amount
determined to be the Closing Working Capital, it shall notify the Holders in
writing of such disagreement within fifteen (15) business days of its receipt of
the determination of Closing Working Capital. Buyer and the Holders shall use
their best efforts for a period of thirty (30) days following the notice of
disagreement to resolve any disagreement. If at the end of such period, Buyer
and the Holders are unable to resolve the disagreement, KPMG Peat Marwick LLP
(the "Arbitrator") shall be retained to make a final and binding determination
of the actual Closing Working Capital. The determination of the Arbitrator shall
be final, binding and conclusive on the parties. The fees and expenses of the
Arbitrator shall be borne equally by Buyer and the Holders.
<PAGE> 8
1.7 Additional Consideration.
(a) Revenue Earn-Out. As additional consideration, Buyer shall
pay to the Holders an amount not to exceed $833,333 and 53,333 Buyer Class A
Units, calculated as set forth in the Earn-Out Schedule (such amount is referred
to herein as the "Additional Consideration") and subject to the terms set forth
in this Section 1.7; provided, however, that no Additional Consideration shall
be paid unless (a) the Company's earnings before interest, taxes and
depreciation ("EBITDA"), determined in accordance with generally accepted
accounting principles ("GAAP"), as a percentage of revenue is at least 14.8% for
the Earn-Out Period (as hereinafter defined) and (b) the Company's Qualified
Revenue (as hereinafter defined) for the Earn-Out Period is equal to or greater
than the amount that is 128.0% of the Company's 1997 Qualified Revenue. For
purposes of this Section 1.7, the term "Earn Out Period" shall mean the twelve
month period ended March 31, 1999 and the term "Qualified Revenue" shall mean
all revenue earned by the Company (including, without limitation, all payments,
reimbursements, fees or penalties received by the Company after March 31, 1998,
whether or not deemed to be earned by the Company prior to such date, in
connection with the termination, winding down of the system or final settling of
accounts of that certain Consulting & Systems Management Agreement between the
Company and Nelson Information, Inc. (the "Nelson Agreement"), or that are
intended to pay the company for services performed under such agreement at rates
higher than the earlier invoiced rates of $80.00 per hour, excluding amounts
billed for services through March 31, 1998, and reimbursable expenses incurred
prior to March 31, 1998), less the Company's actual cost of any resold third
party hardware and/or resold third party software. For purposes of this Section
1.7, EBITDA shall not take into account any payments by the Company of any
payroll taxes and similar charges paid by the Company relating to the
compensation deemed to be received by Charles Blackburn or the Excluded
Optionholders as a result of cancellation of outstanding options to purchase
Common Stock of the Company.
(b) Earn-Out Statement. Not later than ten (10) days following
the completion of the financial statements of Buyer and the Company for the
period ended March 31, 1999, Buyer shall prepare and deliver to the Holders a
statement setting forth the EBITDA margin of the Company for the Earn-Out
Period, the Qualified Revenue of the Company for the Earn-Out Period, the
percentage growth in Qualified Revenue from 1997 to the end of the Earn-Out
Period and the amount of the Additional Consideration, if any, payable to the
Holders (the "Earn-Out Statement"). The amount of the Additional Consideration
reflected on the Earn-Out Statement shall be paid by Buyer not later than the
thirtieth (30th) business day following the date the Earn-Out Statement is
required to be delivered to the Holders. Notwithstanding the foregoing, the
amount of Additional Consideration, if any, shall be paid to the individuals
listed on Exhibit D (or their heirs or
<PAGE> 9
estates) not later than July 31, 1999. Any objections made to the calculation of
Additional Consideration shall be resolved in accordance with Section 1.7(d).
(c) Form of Additional Consideration. The Additional
Consideration described on the Earn-Out Schedule shall be paid to the Holders in
accordance with their percentage interests set forth on Exhibit D and in the
form of cash until a total of $833,333 has been paid to such individuals as set
forth on Exhibit D. If the Additional Consideration shall exceed $833,333, Buyer
shall pay such additional amount to the Holders in accordance with their
percentage interests and in the form of Buyer Class A Units to the extent of
53,333 units as set forth on Exhibit D.
Except as set forth in this Section 1, no additional consideration
will be paid to the Holders pursuant to this Agreement.
(d) Disputed Additional Consideration. If the Holders shall
disagree with the amount determined to be the Additional Consideration, the 1998
Qualified Revenue or the EBITDA determination in Section 1.7, it shall notify
Buyer in writing of such disagreement within ten (10) business days of its
receipt of the Earn-Out Statement. Buyer shall pay any undisputed Additional
Consideration in accordance with Section 1.7(b). The parties acknowledge that
the Company's 1997 Qualified Revenue is equal to $6,640,000 and may not dispute
such amount. Buyer and the Holders shall use their best efforts for a period of
thirty (30) days following the notice of disagreement to resolve any
disagreement. If at the end of such period, Buyer and the Holders are unable to
resolve the disagreement, KPMG Peat Marwick LLP (the "Earn-Out Arbitrator")
shall be retained to make a final and binding determination of the Additional
Consideration, if any. The determination of the Earn-Out Arbitrator shall be
final, binding and conclusive on the parties. The fees and expenses of the
Earn-Out Arbitrator shall be borne equally by Buyer and the Holders.
(e) Operation of the Company During the Earn-Out Period. Buyer
shall act in good faith with respect to the operation of the Company during the
Earn-Out Period and shall not take any actions with the aim of diminishing the
ability of the Company to earn Additional Consideration pursuant to this Section
1.7
1.8 Net Worth
As of March 31, 1998, the total shareholders equity of the
Company (as determined in accordance with GAAP and consistent with past
accounting practices of the Company) is at least $1,700,000. No later than
forty-five (45) days following the Closing, the Company shall provide Buyer with
a balance sheet as of March 31, 1998 (the "March Balance Sheet"). If the total
shareholders equity of the Company is determined to be less
<PAGE> 10
than $1,700,000, the Holders and Buyer shall direct the Escrow Agent to pay to
Buyer the amount of such shortfall from the Escrowed Cash (as such term is
defined in the Escrow agreement). If Buyer or the Holders shall disagree with
the amount of the total shareholders equity set forth on the March Balance
Sheet, such party shall notify the Company of such disagreement within fifteen
(15) days of the receipt of the March Balance Sheet and such dispute shall be
resolved in accordance with Section 1.6(d). This Section 1.8 shall be subject to
the limitations of Section 9.2(b) but none of the other limitations of Section
9.2.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE HOLDERS.
2.1. Making of Representations and Warranties. As a material
inducement to Buyer to enter into this Agreement and consummate the transactions
contemplated hereby and except as set forth on the disclosure schedule delivered
to Buyer, the Company and each of the Holders jointly and severally hereby make
to Buyer the representations and warranties contained in this Section 2;
provided, however, that no Holder shall have any right of indemnity or
contribution from the Company with respect to any breach of representation or
warranty hereunder.
2.2. Organization and Qualifications of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California with corporate power and authority to own or lease
its properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is currently conducted or
proposed to be conducted. The copies of the Company's Articles of Organization,
as amended to date, certified by the California Secretary of State (the "Company
Articles"), and of the Company's Bylaws, as amended to date, certified by the
Company's Secretary (together with the Company Articles, the "Company
Organizational Documents"), and heretofore delivered to Buyer's counsel, are
complete and correct, and, except as set forth in Schedule 2.2, no amendments
thereto are pending. The Company is not in violation of any term of the Company
Organizational Documents. The Company is duly qualified to do business as a
foreign corporation in the State of New York and, except as set forth in
Schedule 2.2, it is not required to be licensed or qualified to conduct its
business or own its property in any other jurisdiction in which failure to be so
licensed or qualified would have a Material Adverse Effect. "Material Adverse
Effect" shall mean any change or effect that has a material adverse effect on
the financial condition, business or operation of the Company.
2.3. Shares of the Company; Beneficial Ownership.
(a) The authorized capital stock of the Company consists of ten
million (10,000,000) shares of Common Stock, of which four million, nine
thousand, nine
<PAGE> 11
hundred seventy-one (4,009,971) shares are duly and validly issued, outstanding,
fully paid and non-assessable. Other than as set forth on Exhibit A, there are
no outstanding options, warrants, rights, commitments, preemptive rights or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into, any additional shares of capital stock of any class of the
Company. None of the Company's capital stock has been issued in violation of any
federal or state law. There are no voting trusts, voting agreements, proxies or
other agreements, instruments or undertakings with respect to the voting of the
Shares to which the Company or any of the Holders is a party.
(b) The Company has adopted the Pyramid Imaging, Inc. Equity
Incentive Plan (the "1997 Equity Incentive Plan") which provides for the
issuance of options to purchase up to three million (3,000,000) shares of Common
Stock of the Company. As of the date hereof, options to purchase 1,086,999
shares of Common Stock have been granted and are outstanding under the Equity
Incentive Plan to the persons, in the amounts and at the exercise prices set
forth in Schedule 2.3. Options to purchase 454,001 shares were exercisable as of
the date of this Agreement.
2.4. No Subsidiaries. The Company has no subsidiaries or investments
in any other corporation or business organization.
2.5. Authority of the Company. The Company has full right, authority
and power to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by the Company pursuant to this
Agreement and, subject to the representations of Buyer in Section 5.2 hereto, to
carry out the transactions contemplated hereby. The execution, delivery and
performance by the Company of this Agreement and each such other agreement,
document and instrument to which the Company is a party have been duly
authorized by all necessary action of the Company and no other action on the
part of the Company or the Holders is required in connection therewith.
This Agreement and each agreement, document and instrument executed
and delivered by the Company pursuant to this Agreement constitutes, or when
executed and delivered will constitute, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, subject
to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject to
the effect of general principles of equity, including, without limitation, the
possible unavailability of specific performance or injunctive relief, regardless
of whether considered in a proceeding in equity or at law. The execution,
delivery and performance by the Company of this Agreement and each such
agreement, document and instrument:
(i) does not and will not violate any provision of the
Company Organizational Documents;
<PAGE> 12
(ii) does not and will not violate any laws of the United
States, or any state or other jurisdiction applicable to the Company
or require the Company to obtain any approval, consent or waiver of,
or, subject to Sections 2.6 or 2.14, make any filing with, any person
or entity (governmental or otherwise) that has not been obtained or
made; and
(iii) to the knowledge of the Company or the Holders, except
as set forth in Schedule 2.5, does not and will not result in a breach
of, constitute a default under, accelerate any obligation under, or
give rise to a right of termination of any indenture or loan or credit
agreement or any other material agreement, contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Company is a party or by which the property of the Company is bound or
affected, or result in the creation or imposition of any mortgage,
pledge, lien, security interest or other charge or encumbrance on any
of the Company's assets or the Shares.
2.6. Real and Personal Property.
(a) Real Property. The Company does not own any real property.
All of the real property leased by the Company is identified on Schedule 2.6(a)
(herein referred to as the "Leased Real Property").
(i) Leases. All leases of Leased Real Property are
identified on Schedule 2.6(a), and true and complete copies
thereof have been delivered to Buyer. Each of said leases has
been duly authorized and executed by the Company and is in full
force and effect and binding and enforceable against the parties
thereto. The Company is not in default under any of said leases,
nor has any event occurred which, with notice or the passage of
time, or both, would give rise to such a default. To the
knowledge of the Company or the Holders, the other party to each
of said leases is not in default under any of said leases and
there is no event which, with notice or the passage of time, or
both, would give rise to such a default.
(ii) Consents. Except as set forth in Schedule
2.6(a), no consent or approval is required with respect to the
transactions contemplated by this Agreement from the other
parties to any lease of Leased Real Property or from any
regulatory authority, no filing with any regulatory authority is
required in connection therewith.
<PAGE> 13
(iii) Condition of Leased Real Property. Except as
set forth in Schedule 2.6(a), to the knowledge of the Company or
the Holders (1) there are no material defects in the physical
condition of any portion of the Leased Real Property and (2) all
such Leased Real Property is in good operating condition and
repair, has been well maintained.
(iv) Compliance with the Law. The Company has not
received any notice from any governmental authority of any
violation of any law, ordinance, regulation, license, permit or
authorization issued with respect to the Leased Real Property
that has not been heretofore corrected. The Company has not
received any notice of any real estate tax deficiency or
assessment and is not aware of any proposed deficiency, claim or
assessment with respect to any of the Leased Real Property, or
any pending or threatened condemnation thereof.
(b) Personal Property. A list of the machinery and
equipment of the Company is contained in Schedule 2.6(b) hereto.
Except as specifically disclosed in said Schedule or in the
Company Balance Sheet (as hereinafter defined), and except for
Permitted Encumbrances (as hereinafter defined), the Company owns
all of its personal property free of all liens and claims. Except
as otherwise specified in Schedule 2.6(b) hereto, none of such
personal property or assets is subject to any mortgage, pledge,
lien, conditional sale agreement, security title, encumbrance or
other charge except as specifically disclosed in said Schedule or
in the Company Balance Sheet. Except as otherwise specified in
Schedule 2.6(b) hereto, all leasehold improvements, furnishings,
machinery and equipment of the Company presently necessary to the
conduct of the business of the Company as such business is
currently being conducted are in good repair (ordinary wear and
tear excepted), have been well maintained, and comply in all
material respects with all applicable laws, ordinances and
regulations, and such machinery and equipment is in good working
order. Neither the Company nor any of the Holders has received
notice of any such law, ordinance or regulation which could
adversely affect the Company or its business. "Permitted
Encumbrances" shall mean (a) liens for current taxes or other
governmental assessments or charges not yet due and payable, (b)
materialmen's, mechanics, workmen's, repairmen's, employees',
carriers', warehousemen's and other like liens incurred in the
ordinary course of business, so long as such liens do not
individually or in the aggregate, materially impair the value of
the assets or property subject thereto, and (c) other incidental
liens, claims, charges, security interests, mortgages or other
encumbrances.
2.7. Financial Statements.
(a) The Company has delivered to Buyer the following financial
statements, copies of which are attached hereto as Schedule 2.7: balance sheets
of the
<PAGE> 14
Company for its fiscal year ended December 31, 1997, and statements of income
and retained earnings for the year then ended and a balance sheet of the Company
for the interim period ended January 31, 1998 and a statement of income and
retained earnings for the interim period ended January 31, 1998 (the "Financial
Statements"). The December 31, 1997 balance sheet is hereinafter referred to as
the "Company Balance Sheet." Except as set forth on Schedule 2.7, the Financial
Statements, have been prepared in accordance with GAAP applied consistently
during the periods covered thereby, and said Financial Statements, present
fairly in all material respects the financial condition of the Company at the
dates of said statements and the results of its operations for the periods
covered thereby, and all other unaudited financial information provided by the
Company to Buyer since the date of the Company Balance Sheet presents fairly and
completely in all material respects the information purported to be shown
thereon subject to (i) such exceptions as may be indicated in the notes thereto,
(ii) normal year-end adjustments and (iii) the omission of footnotes and other
presentational items that may be required by GAAP.
(b) As of the date of the Company Balance Sheet, the Company did
not have any liabilities of any nature, whether accrued, absolute or contingent
(including without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, liabilities for taxes due or then accrued or
to become due, or contingent or potential liabilities relating to activities of
the Company or the conduct of its business prior to the date of the Company
Balance Sheet), except liabilities stated or adequately reserved against on the
Company Balance Sheet.
(c) The operating results for fiscal year 1997 and the Company's
fiscal year 1998 operating budget which have previously been supplied by the
Company to Buyer have been prepared in good faith on the basis of assumptions by
the Company which the Company believed were reasonable at the time of the
preparation of such projections.
(d) Except as set forth on Schedule 2.7, as of the date hereof
and as of the Closing, the Company has not had and will not have any liabilities
of any nature, whether accrued, absolute or contingent (including without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others, or liabilities for taxes due or then accrued or to become due or
contingent or potential liabilities relating to activities of the Company or the
conduct of its business prior to the date hereof or the Closing, as the case may
be, regardless of whether claims in respect thereof had been asserted as of such
date), except liabilities (i) stated or adequately reserved against on the
Company Balance Sheet or the notes thereto, or (ii) incurred in the ordinary
course of business of the Company consistent with the terms of this Agreement.
<PAGE> 15
2.8. Taxes.
(a) As used in this Section 2.8, the term "Taxes" means all
taxes, charges, fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, VAT,
service, service use, ad valorem, transfer, franchise, profits, license, lease,
withholding, social security, payroll, employment, excise, estimated, severance,
stamp, recording, occupation, real and personal property, gift, windfall profits
or other taxes, customs duties, fees, assessments or charges of any kind
whatsoever, whether computed on a separate, consolidated, unitary, combined or
other basis, together with any interest, fines, penalties, additions to tax or
other additional amounts imposed thereon or with respect thereto imposed by any
taxing authority (domestic or foreign). The term "Taxes" includes any liability
of the Company or any current or former subsidiary of the Company ("Subsidiary")
for the payment of any amounts of any of the foregoing types as a result of
being a member of an affiliated, consolidated, combined or unitary group, or
being a party to any agreement or arrangement whereby liability of the Company
or any Subsidiary for payment of such amounts was determined or taken into
account with reference to the liability of any other person.
(b) All returns, declarations, reports, estimates, statements,
schedules or other information or documents with respect to Taxes (collectively,
"Tax Returns") required to be filed by the Company and each Subsidiary have been
timely filed (giving effect to extensions granted with respect thereto), and all
such Tax Returns are true, correct, and complete in all material respects.
(c) The Company and each Subsidiary have timely paid all Taxes
due or claimed to be due by any federal, state, local, foreign or other taxing
authority.
(d) There are no liens for Taxes upon any of the assets of the
Company or any Subsidiary, except liens for taxes not yet due and payable.
(e) No Tax Returns of the Company or any Subsidiary have been
examined by the relevant taxing authority. No deficiency for any Taxes has been
proposed, asserted or assessed against the Company or any Subsidiary that has
not been resolved and paid in full. There are no outstanding waivers,
extensions, or comparable consents regarding the application of the statute of
limitations with respect to any Taxes or Tax Returns that have been given by the
Company or any Subsidiary (including the time for filing of Tax Returns or
paying Taxes) and neither the Company nor any Subsidiary has pending requests
for any such waivers, extensions, or comparable consents.
<PAGE> 16
(f) No audit or other proceeding by any federal, state, local or
foreign court, governmental, regulatory, administrative or similar authority is
presently pending with respect to any Taxes or Tax Return of the Company or any
Subsidiary, and neither the Company nor any Subsidiary has received written
notice of any pending audits or proceedings.
(g) The Company and each Subsidiary has established adequate
reserves in accordance with generally accepted accounting principles for all
Taxes not yet due and payable, which reserves are set forth in Schedule 2.8.
(h) The Company and each Subsidiary uses the accrual method of
accounting for income tax purposes and neither the Company nor any Subsidiary
has made any change in accounting methods, received a ruling from any taxing
authority or signed an agreement with any taxing authority that could reasonably
be expected to have a Material Adverse Effect.
(i) The Company, each Subsidiary, and each Holder has complied in
all respects with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes (including, without limitation, withholding of
Taxes pursuant to Sections 1441, 1442, 1445 and 1446 of the Code or similar
provisions under any applicable state and foreign laws) and has, within the time
and the manner prescribed by law, paid over to the proper governmental
authorities all amounts so withheld.
(j) Neither the Company nor any Subsidiary is a party to or bound
by or has any obligation under any Tax sharing allocation or indemnity agreement
or similar contract or arrangement.
(k) No power of attorney granted by the Company with respect to
any Taxes is currently in force.
(l) The Company is not subject to any joint venture, partnership
or other arrangement or contract that is treated as a partnership for U.S.
federal income tax purposes.
(m) There is no expectation that any taxing authority may claim
or assess any additional Taxes payable by the Company or any Subsidiary or any
material amount of Taxes payable by the Holders for any period ending on or
prior to the Closing Date and there are no facts of which the Company or the
Holders are aware which would constitute grounds for the assessment of any Taxes
payable by the Company or any Subsidiary for any period ending on or prior to
the Closing Date.
<PAGE> 17
(n) Schedule 2.8 sets forth each state, local and foreign
jurisdiction in which the Company and each Subsidiary is required, or has been
at any time required, to file or be included in a Tax Return. No written claim
has ever been received by the Company or any Subsidiary from a taxing authority
in a jurisdiction where the Company or any of its Subsidiaries does not pay
Taxes or file Tax Returns that the Company or any Subsidiary is or may be
subject to Taxes assessed by such jurisdiction, and, to the knowledge of the
Company, no such claim has been threatened by a taxing authority.
(o) The Company and each Subsidiary have disclosed on their
respective federal income Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal income Taxes within the
meaning of Section 6662 of the Code.
(p) Other than proposed or directed by Buyer, neither the Company
nor any Subsidiary have agreed, nor is it (or will it be immediately following
the Closing) required, to make any adjustment under Section 481 of the Code by
reason of a change in accounting method or otherwise.
(q) No property of the Company or any Subsidiary is "tax exempt
use property" within the meaning of Section 168(h) of the Code.
(r) Neither the Company nor any Subsidiary has entered into any
installment sale contract pursuant to Section 453 of the Code whereby the
installments have not been fully collected, nor has the Company entered into an
interest rate swap, currency swap, or similar transaction.
(s) Neither the Company, any Subsidiary or any Holder is subject
to liability as a transferee pursuant to Code Section 6901 et seq. or otherwise,
nor will Buyer be subject to such liability as a direct or indirect result of
Buyer's acquisition of the Shares.
(t) Neither the Company nor any Holder has received a notice of
tax lien with respect to a Holder's shares or options.
(u) Neither the Company nor any Subsidiary owns any interest in
real property in any jurisdiction in which a Tax is imposed on the transfer of
the controlling interest in an entity that owns any interest in real property.
(v) Neither the Company, any Subsidiary nor any other person on
behalf of the Company or any Subsidiary has entered into an agreement or consent
pursuant to Section 341(f) of the Code.
<PAGE> 18
(w) Neither the Company nor any Subsidiary has been a member of
an affiliated, consolidated, combined or unitary group or participated in any
other arrangement whereby any income, revenues, receipts, gain or loss of the
Company or any Subsidiary was determined or taken into account for Tax purposes
with reference to or in conjunction with any income, revenues, receipts, gain,
loss, asset or liability of any other person.
2.9. Accounts Receivable. Except as set forth on Schedule 2.9 attached
hereto, the accounts receivable of the Company shown or reflected on the Company
Balance Sheet or existing at the date hereof (less the reserve for bad debts set
forth on the Company Balance Sheet) are or will be at the Closing valid and
enforceable claims, fully collectible and subject to no set off or counterclaim
and reflect amounts due or owing to the Company for services performed prior to
such date in the ordinary course of business. The Company has no unbilled
revenue recognized and not yet billed to clients. Except as set forth on
Schedule 2.9, the Company has no accounts or loans receivable from any person,
firm or corporation which is affiliated with the Company or from any
Shareholder, director, officer or employee of the Company.
2.10. Absence of Certain Changes. Except as disclosed in Schedule 2.10
attached hereto, since December 31, 1997, there has not been:
(a) Any change in the business, properties, assets, results of
operations, financial condition, liabilities, or prospects of the Company, which
change by itself or in conjunction with all other such changes, whether or not
arising in the ordinary course of business, has been materially adverse with
respect to the Company;
(b) Any contingent liability incurred by the Company as guarantor
or otherwise with respect to the obligations of others or any cancellation of
any material debt or claim owing to, or waiver of any material right of, the
Company;
(c) Any mortgage, encumbrance or lien (other than Permitted
Encumbrances) placed on any of the properties of the Company which remains in
existence on the date hereof or will remain on the date of the Closing;
(d) Any obligation or liability of any nature, whether accrued,
absolute or contingent (including without limitation liabilities for Taxes due
or to become due or contingent or potential liabilities relating to products or
services provided by the Company or the conduct of the business of the Company
since the date of the Company Balance Sheet regardless of whether claims in
respect thereof have been asserted), incurred by the Company other than
obligations and liabilities incurred in the ordinary course of business
consistent with the obligations under this Agreement (it being understood that
product or
<PAGE> 19
service liability claims shall not be deemed to be incurred in the ordinary
course of business);
(e) Any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of the
properties or assets to the Company other than in the ordinary course of
business;
(f) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of the Company;
(g) Any declaration, setting aside or payment of any dividend by
the Company, or the making of any other distribution in respect of the equity
interests of the Company, or any direct or indirect redemption, purchase or
other acquisition by the Company of its equity interests;
(h) Any labor trouble or claim of unfair labor practices
involving the Company; any change in the compensation payable or to become
payable by the Company to any of its officers, employees, agents or independent
contractors other than normal merit increases in accordance with its usual
practices; or any bonus payment or arrangement made to or with any of such
officers, employees, agents or independent contractors;
(i) Any change with respect to the officers or management of the
Company;
(j) Any payment or discharge of a material lien or liability of
the Company which was not shown on the Company Balance Sheet or incurred in the
ordinary course of business thereafter;
(k) Any obligation or liability incurred by the Company to any of
its officers, directors, shareholders or employees, or any loans or advances
made by the Company to any of its officers, directors, Shareholders or
employees, except normal compensation and expense allowances and advances
payable to officers or employees;
(l) Any change in accounting methods or practices, credit
practices or collection policies used by the Company;
(m) Any other transaction entered into by the Company other than
transactions in the ordinary course of business; or
<PAGE> 20
(n) Any agreement or understanding whether in writing or
otherwise, for the Company to take any of the actions specified in paragraphs
(a) through (m) above.
2.11. Ordinary Course. Since December 31, 1997, except for matters
described in the Schedules to this Agreement and the negotiation of this
Agreement, the Company has conducted its business only in the ordinary course
and consistently with its prior practices.
2.12. Banking Relations. All of the arrangements which the Company has
with any banking institution are completely and accurately described in Schedule
2.12 attached hereto, indicating with respect to each of such arrangements the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
2.13. Intellectual Property.
(a) Except as described in Schedule 2.13, the Company has
ownership of, or license to use, all patent, copyright, trade secret, trademark,
or other proprietary rights (collectively, "Intellectual Property") used or to
be used in the business of the Company as presently conducted or contemplated by
the Company and all of the rights of the Company in any material Intellectual
Property are freely transferable to a successor of the Company. There are no
claims or demands of any other person pertaining to any of such Intellectual
Property and no proceedings have been instituted, or are pending or, to the
knowledge of the Company or the Holders, threatened, which challenge the rights
of the Company in respect thereof. The Company has the right to use, free and
clear of claims or rights of other persons, all customer lists, designs,
manufacturing or other processes, computer software, systems, data compilations,
research results and other information required for or incident to its products
or its business as presently conducted or contemplated.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to the Company or used or to be used by the Company in its business as
presently conducted or contemplated, and all other items of Intellectual
Property which are material to the business or operations of the Company, are
listed in Schedule 2.13. Except as set forth on Schedule 2.13, all of such
patents, patent applications, trademark registrations, trademark applications
and registered copyrights have been duly registered in, filed in or issued by
the United States Patent and Trademark Office, the United States Register of
Copyrights, or the corresponding offices of other jurisdictions as identified on
said Schedule, and have been properly maintained and renewed in accordance with
all applicable provisions of law and administrative regulations of the United
States and each such jurisdiction.
<PAGE> 21
(c) All licenses or other agreements under which the Company is
granted rights in Intellectual Property are listed in Schedule 2.13 other than
generally commercially available third party software, that has not been
materially modified by the Company, for which the Company can freely assign its
rights to a successor of the Company that is either: (i) only subject to a
shrink wrap license agreement, or (ii) is immaterial to the Company's business.
All said licenses or other agreements are in full force and effect, there is no
material default by the Company or, to the knowledge of the Company or the
Holders, any other party thereto, and, except as set forth on Schedule 2.13, all
of the rights of the Company thereunder are freely assignable. To the knowledge
of Company, the licensors under said licenses and other agreements have and had
all requisite power and authority to grant the rights purported to be conferred
thereby. True and complete copies of all such licenses or other agreements, and
any amendments thereto, have been provided to Buyer.
(d) All material licenses or other material agreements under
which the Company has granted rights to others in Intellectual Property owned or
licensed by the Company are listed in Schedule 2.13. All of said licenses or
other agreements are in full force and effect, there is no material default by
the Company or, to the knowledge of the Company or the Holders, any other party
thereto, and, except as set forth on Schedule 2.13, all of the rights of Company
thereunder are freely assignable to a successor of the Company. True and
complete copies of all such licenses or other agreements, and any amendments
thereto, have been provided to Buyer.
(e) The Company has taken all steps required in accordance with
sound business practice to establish and preserve its ownership of all
Intellectual Property rights with respect to its products, services and
technology except where failure to take such steps would not have a Material
Adverse Effect. The Company has required all professional and technical
employees and other employees having access to valuable non-public information
of Company, to execute agreements under which such employees are required to
convey to the Company ownership of all inventions and developments conceived or
created by them in the course of their employment and to maintain the
confidentiality of all such information of Company. The Company has not made any
such information available to any person other than employees of Company except
pursuant to written agreements requiring the recipients to maintain the
confidentiality of such information and appropriately restricting the use
thereof. The Company has no knowledge of any infringement by others of any
Intellectual Property rights of the Company.
(f) The present and contemplated business, activities and
products of the Company do not infringe any Intellectual Property of any other
person. To the knowledge of the Company or the Holders, no proceeding charging
the Company with
<PAGE> 22
infringement of any adversely held Intellectual Property has been filed or is
threatened to be filed. To the knowledge of the Company or the Holders, there
exists no unexpired patent or patent application which includes claims that
would be infringed by or otherwise adversely affect the products, activities or
business of the Company. The Company is not making unauthorized use of any
confidential information or trade secrets of any person, including without
limitation, any former employer of any past or present employee of Company.
Neither the Company nor, to the knowledge of the Company or the Holders, any of
the Company's employees have any agreements or arrangements with any persons
other than the Company related to confidential information or trade secrets of
such persons or restricting any such employee's ability to engage in business
activities of any nature. The activities of the Company's employees on behalf of
the Company do not violate any such agreements or arrangements known to the
Company or the Holders.
2.14. Contracts. Except for contracts, commitments, plans, agreements
and licenses described in Schedule 2.14 (true and complete copies of which have
been delivered to Buyer), the Company is not a party to or subject to:
(a) any plan or contract providing for bonuses, pensions,
options, stock purchases, deferred compensation, retirement payments, profit
sharing, collective bargaining or the like, or any contract or agreement with
any labor union;
(b) any employment contract or contract for services which
requires the payment of more than $25,000 annually or which is not terminable
within 30 days by the Company without liability for any penalty or severance
payment;
(c) any contract or agreement for the purchase of any commodity,
material or equipment with a purchase price or commitment in excess of $25,000;
(d) any contract or agreement with a client or customer of the
Company providing for an aggregate payment by such client or customer of more
than $25,000;
(e) any other contracts or agreements creating any obligations of
the Company of $25,000 or more with respect to any such contract or agreement
not specifically disclosed elsewhere under this Agreement;
(f) any contract or agreement providing for the purchase of all
or substantially all of its requirements of a particular product from a
supplier;
<PAGE> 23
(g) any contract or agreement that requires obligations of the
Company for more than one year other than insignificant contracts or contracts
otherwise listed on Schedule 2.14;
(h) any contract or agreement for the sale or lease of its
products not made in the ordinary course of business;
(i) any contract with any sales agent or distributor of products
of the Company;
(j) any contract containing covenants limiting the freedom of the
Company to compete in any line of business or with any person or entity;
(k) any contract or agreement for the purchase of any fixed asset
for a price in excess of $25,000 whether or not such purchase is in the ordinary
course of business;
(l) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money; or
(m) any contract or agreement with any officer, employee,
director or Holder of the Company or with any persons or organizations
controlled by or affiliated with any of them.
The Company is not in default under any such contracts, commitments,
plans, agreements or licenses described in said Schedule or has any knowledge of
conditions or facts which with notice or passage of time, or both, would
constitute a default.
2.15. Litigation. There is no litigation or governmental or
administrative proceeding or investigation pending or, to the knowledge of the
Company or any of the Holders, threatened against the Company or its affiliates.
There have been no claims made or, to the knowledge of the Company or any of the
Holders, threatened by a client or customer of the Company nor, to the knowledge
of the Company or any of the Holders, are there any such claims that may be
asserted.
2.16. Compliance with Laws. The Company is in compliance with all
applicable statutes, ordinances, orders, judgments, decrees, rules and
regulations promulgated by any federal, state, municipal entity, agency, court
or other governmental authority which apply to the Company or to the conduct of
its business, except where noncompliance with such statute, ordinance, order,
judgment, decree, rule or regulation would not have a Material Adverse Effect,
<PAGE> 24
and the Company has not received notice of a violation or alleged violation of
any such statute, ordinance, order, rule or regulation.
2.17. Insurance. The physical properties, assets and business of the
Company are insured to the extent disclosed in Schedule 2.17 attached hereto and
all such insurance policies and arrangements are disclosed in said Schedule.
Said insurance policies and arrangements are in full force and effect, all
premiums with respect thereto are currently paid, and the Company is in
compliance in all material respects with the terms thereof. To the knowledge of
the Company and the Holders, said insurance is adequate and customary for the
business engaged in by the Company and is sufficient for compliance by the
Company with all requirements of law and all agreements and leases to which the
Company is a party.
2.18. Warranty or Other Claims. Except as set forth in Schedule 2.18
hereto, there are no existing or threatened product or service liability,
warranty or other similar claims, or any facts upon which a material claim of
such nature could be based, against the Company for products or services which
are defective or fail to meet any product or service warranties. No request has
been made to the Company to lower the previously agreed to price for the same
services or product with respect to any business understanding, and to the
knowledge of the Company and each of the Holders there are no facts upon which
any such claim could be based.
2.19. Powers of Attorney. Neither the Company or any of the Holders
has any outstanding power of attorney with respect to or affecting any
transaction contemplated by this Agreement.
2.20. Finder's Fee. Except pursuant to a letter agreement dated May
16, 1997 with Alliant Partners, the Company has not incurred or become liable
for any broker's commission or finder's fee relating to or in connection with
the transactions contemplated by this Agreement. The Holders shall be
responsible for any fee due Alliant Partners from the Company.
2.21. Permits: Burdensome Agreements. Schedule 2.21 lists all material
permits, registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state or local
authorities in order for the Company to conduct its business. The Company has
obtained all such Approvals, which are valid and in full force and effect, and
is operating in compliance therewith. Such Approvals include, but are not
limited to, those required under federal, state or local statutes, ordinances,
orders, requirements, rules, regulations, or laws pertaining to environmental
protection, public health and safety, worker health and safety, buildings,
highways or zoning. Except as disclosed in Schedule 2.21 or in any other
Schedule hereto, the Company is not subject to or bound by any agreement with a
regulatory body or court, judgment, decree or order which may materially and
adversely affect its business or prospects, its condition, financial or
otherwise, or any of its assets or properties.
<PAGE> 25
2.22. Company Records; Copies of Documents. The record books of the
Company accurately record all action taken by its shareholders and Board of
Directors and committees. The copies of the records of the Company, as made
available to Buyer for review, are true and complete copies of the originals of
such documents. The Company has made available for inspection and copying by
Buyer and its counsel true and correct copies of all documents referred to in
this Section or in the Schedules delivered to Buyer pursuant to this Agreement.
2.23. Transactions with Interested Persons. Neither the Company, any
of its Subsidiaries, any Shareholder, officer, supervisory employee or director
of the Company or any of its Subsidiaries owns directly or indirectly on an
individual or joint basis any material interest in, or serves as an officer or
director or in another similar capacity of, any competitor or supplier of
Company or any of its Subsidiaries, or any organization which has a material
contract or arrangement with the Company or any of its Subsidiaries.
2.24. Employee Benefit Programs.
(a) Schedule 2.24 lists every Employee Program (as defined below)
that has been maintained (as defined below) by the Company at any time during
the three-year period ending on the date of the Closing.
(b) Each Employee Program which has ever been maintained by the
Company and which has at any time been intended to qualify under Section 401(a)
of the Code, and each associated trust which at any time has been intended to be
exempt from taxation pursuant to Section 501(a) of the Code is the subject of a
favorable determination, opinion or approval letter from the Internal Revenue
Service ("IRS") regarding its qualification or exemption from taxation, as
applicable, under such section and has, in fact, been qualified or tax exempt,
as applicable, under the applicable section of the Code through and including
the Closing (or, if earlier, the date that all of such Employee Program's assets
were distributed). No event or omission has occurred which would cause any such
Employee Program to lose its qualification under the applicable Code section.
(c) The Company does not know and has no reason to know, of any
failure of any party to comply with any laws applicable to the Employee Programs
that have been maintained by the Company. No litigation, arbitration, or
governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or
threatened with respect to any Employee Program.
<PAGE> 26
(d) Neither the Company nor any Affiliate (as defined below) has
ever (i) maintained any Employee Program which has been subject to Title IV of
ERISA; (ii) maintained any Multiemployer Plan (as defined below); or (iii)
provided health care or any other non-pension benefits to any employees after
their employment is terminated (other than as required by part 6 of subtitle B
of title I of ERISA or benefits that continue for a brief period of time after
termination of employment, for example for the balance of the month in which an
employee terminates, or has ever promised to provide such post-termination
benefits).
(e) With respect to each Employee Program maintained by the
Company within the three years preceding the Closing, complete and correct
copies of the following documents (if applicable to such Employee Program) have
previously been delivered to Buyer: (i) all documents embodying or governing
such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended;
(ii) the most recent IRS determination, opinion or approval letter with respect
to such Employee Program under Code Sections 401 and 501(a), and any
applications for determination or approval subsequently filed with the IRS;
(iii) the three most recently filed IRS Forms 5500, with all applicable
schedules and accountants' opinions attached thereto; (iv) the summary plan
description for such Employee Program (or other descriptions of such Employee
Program provided to employees) and all modifications thereto; (v) any insurance
policy (including any fiduciary liability insurance policy) related to such
Employee Program; (vi) any documents evidencing any loan to an Employee Program
that is a leveraged employee stock ownership plan; and (vii) all other materials
reasonably necessary for Buyer to perform any of its responsibilities with
respect to any Employee Program subsequent to the Closing (including, without
limitation, health care continuation requirements).
(f) Neither the Company nor any Affiliate has any announced plan
or legally binding commitment to create any additional Employee Program which is
intended to cover employees or former employees of the Company or any Affiliate
(with respect to their relationship with such entities) or to amend or modify
any existing Employee Program which covers or has covered employees or former
employees of the Company or any Affiliate (with respect to their relationship
with such entities).
(g) Each Employee Plan listed on Schedule 2.24 may be amended,
terminated, modified or otherwise revised prospectively by the Company including
the elimination of any and all future benefit accruals under any Employee Plan.
(h) No event has occurred in connection with which the Company,
any Affiliate or any Employee Program, directly or indirectly, could be subject
to any material liability (A) under any statute, regulation or governmental
order relating to any Employee
<PAGE> 27
Programs or (B) pursuant to any obligation of the Company or any Affiliate to
indemnify any person against liability incurred under any such statute,
regulation or order as they relate to the Employee Programs.
(i) Neither the execution and delivery of this Agreement by the
Company nor the consummation of the transactions contemplated hereby will result
in the acceleration or creation of any rights of any person to benefits under
any Employee Program (including, without limitation, the acceleration of the
vesting or exercisability of any stock options, the acceleration of the vesting
of any restricted stock, or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
(j) Each Employee Program and related trust agreement or other
funding instrument, as applicable, which covers or has covered employees or
former employees of the Company or any Affiliate (with respect to their
relationship with such entities) is legally valid and binding and in full force
and effect.
(k) There is no contract, agreement, plan or arrangement covering
any employee or former employee of the Company or any Affiliate (with respect to
its relationship with such entities) that, individually or collectively,
provides for the payment by the Company or any Affiliate of any amount (i) that
is not deductible under Section 162(a)(1) or 404 of the Code or (ii) that is an
"excess parachute payment" pursuant to Section 280G of the Code.
(l) All contributions required to be made by the Company or any
Affiliate with respect to any Employee Program due as of any date through and
including the Closing Date have been made when due.
(m) For purposes of this section:
(i) "Employee Program" means (A) any employee benefit plan
within the meaning of ERISA Section 3(3), including, but not limited
to, any multiple employer welfare arrangement (within the meaning of
ERISA Section 3(4)), plan to which more than one unaffiliated employer
contributes and any employee benefit plan (such as a foreign or excess
benefit plan) which is not subject to ERISA; and (B) any employment,
consulting, severance or other similar contract, arrangement or
policy, any stock option plan, bonus or incentive award plan, deferred
compensation agreement, supplemental income arrangement, vacation
plan, any employee benefit arrangement described in Code Section
501(c)(9), and any other employee benefit plan, agreement, and
arrangement not described in (A) above. In the case of an Employee
Program funded through a
<PAGE> 28
trust described in Code Section 501(a), each reference to such
Employee Program shall include a reference to such trust.
(ii) An entity "maintains" an Employee Program if such
entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or provide
benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity, or
their spouses, dependents, or beneficiaries.
(iii) An entity is an "Affiliate" of the Company if it would
have ever been considered a single employer with the Company under
ERISA Section 4001(b) or part of the same "controlled group" as the
Company or any of its Subsidiaries for purposes of ERISA Section
302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and
which is maintained pursuant to one or more collective bargaining
agreements as defined in Section 3(37) of ERISA.
2.25. Environmental Matters.
(a) (i) The Company has never generated, transported, used,
stored, treated, disposed of, or managed any Hazardous Waste (as defined below);
(ii) to the knowledge of the Company and each of the Holders, no Hazardous
Material (as defined below) has ever been or is threatened to be spilled,
released, or disposed of at any site presently or formerly owned, operated,
leased, or used by the Company, or has ever been located in the soil or
groundwater at any such site; (iii) to the knowledge of the Company and each of
the Holders, no Hazardous Material has ever been transported from any site
presently or formerly owned, operated, leased, or used by the Company for
treatment, storage, or disposal at any other place; (iv) to the knowledge of the
Company and each of the Holders, the Company does not presently own, operate,
lease, or use, nor has it previously owned, operated, leased, or used any site
on which underground storage tanks are or were located; and (v) to the knowledge
of the Company or the Holders, no lien has ever been imposed by any governmental
agency on any property, facility, machinery, or equipment owned, operated,
leased, or used by the Company in connection with the presence of any Hazardous
Material.
(b) (i) The Company has no liability under, nor has it ever
violated, any Environmental Law (as defined below); (ii) the Company, any
property owned, operated, leased, or used by any of it, and any facilities and
operations thereon, are presently in
<PAGE> 29
compliance with all applicable Environmental Laws; (iii) the Company has never
entered into or been subject to any judgment, consent decree, compliance order,
or administrative order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law; and (iv) the Company has no reason to believe that any of the
items enumerated in clause of this subsection will be forthcoming.
(c) To the knowledge of the Company and each of the Holders, no
site owned, operated, leased, or used by the Company contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls ("PCBs") or
equipment containing PCBs; or any urea formaldehyde foam insulation.
(d) The Company has provided to Buyer copies of all documents,
records, and information of the Company concerning any environmental or health
and safety matter relevant to the Company or any of its Subsidiaries, whether
generated by the Company or others, including without limitation, environmental
audits, environmental risk assessments, site assessments, documentation
regarding off-site disposal of Hazardous Materials, spill control plans, and
reports, correspondence, permits, licenses, approvals, consents, and other
authorizations related to environmental or health and safety matters issued by
any governmental agency.
(e) For purposes of this Section 2.25, (i) "Hazardous Material"
shall mean and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, contaminant, or
other substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Company" shall mean and
include Company and all other entities for whose conduct the Company is or may
be held responsible under any Environmental Law.
2.26. Directors and Officers. Schedule 2.26 hereto contains a true and
complete list of all current members of the Board of Directors and each of the
officers of the Company. In addition, Schedule 2.26 hereto contains a list of
all managers, employees and consultants of the Company who, individually, have
received or are scheduled to receive compensation from the Company for the
fiscal years ending December 31, 1997 and December 31, 1998, in excess of
$25,000. In each case such Schedule includes the current job title and aggregate
annual compensation of each such individual.
<PAGE> 30
2.27. Customer Revenues. Schedule 2.27 sets forth, as of the date
hereof, a list of the customers from which the Company has agreements for the
provision of services and the dollar amount of such obligations and remaining
fees on the contract or agreement with such customers.
2.28. Employees; Labor Matters. As of March 1, 1998, the Company
employed a total of approximately fifty-six (56) full-time employees and one (1)
part-time employee. Except as set forth in Schedule 2.28(a), neither the Company
nor any Holder has received any notice that any employee intends to terminate
his or her employment with the Company following the Closing. The Company is not
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed for
it to the date hereof or amounts required to be reimbursed to such employees.
Upon termination of the employment of any of said employees, neither the Company
nor Buyer will by reason of the transactions contemplated under this Agreement
or anything done prior to the Closing be liable to any of said employees for
so-called "severance pay" or any other payments. The Company has no policy,
practice, plan or program of paying severance pay or any form of severance
compensation in connection with the termination of employment, except as set
forth in Schedule 2.28(b). The Company is in material compliance with all
applicable laws and regulations respecting labor, employment, fair employment
practices, work place safety and health, terms and conditions of employment, and
wages and hours. There are no charges of employment discrimination or unfair
labor practices, nor are there any strikes, slowdowns, stoppages of work, or any
other concerted interference with normal operations which are existing, pending
or, to the knowledge of the Company or the Holders, threatened against or
involving the Company. To the knowledge of the Company or any of the Holders, no
question concerning union representation exists respecting any employees of the
Company. There are no grievances, complaints or charges that have been filed
against the Company under any dispute resolution procedure (including, but not
limited to, any proceedings under any dispute resolution procedure under any
collective bargaining agreement) that might have an adverse effect on the
Company or the conduct of its business, and there is no arbitration or similar
proceeding pending and, to the knowledge of the Company or any of the Holders,
no claim therefor has been asserted. No collective bargaining agreement is in
effect or is currently being or is about to be negotiated by the Company. The
Company has not received any information indicating that any of its employment
policies or practices is currently being audited or investigated by any federal,
state or local government agency. The Company is, and at all times has been, in
compliance with the requirements of the Immigration Reform Control Act of 1986.
2.29. Customers, Distributors and Suppliers. Schedule 2.29(a) sets
forth any customer, sales representative or distributor (whether pursuant to a
commission, royalty or other arrangement) which will account for more than
$25,000 in revenue for the Company for the twelve months ending December 31,
1997 (collectively, the "Customers and Distributors").
<PAGE> 31
Schedule 2.29(b) lists all of the suppliers of the Company to whom during the
fiscal year ending December 31, 1997 the Company will make payments aggregating
$25,000 or more showing, with respect to each, the name and dollar volume
involved (the "Suppliers"). Except as set forth in Schedule 2.29(a), the
relationships of the Company with its Customers, Distributors and Suppliers are
good commercial working relationships. Except as set forth on Schedule 2.29(c),
no Customer, Distributor or Supplier has canceled, materially modified, or
otherwise terminated (other than in accordance with the terms of a valid
contract) its relationship with the Company, or has during the last twelve
months decreased materially its services, supplies or materials to the Company
or its usage or purchase of the services or products of the Company, nor to the
knowledge of Company, does any Customer, Distributor or Supplier have any plan
or intention to do any of the foregoing.
2.30. Equity Repurchase. The Company has not redeemed or repurchased
any of its shares. The Company has no remaining obligations or liabilities,
whether absolute, contingent or otherwise, related to or arising out of any such
redemption or repurchase of its shares.
2.31. Disclosure. The representations, warranties and statements
contained in this Agreement and in the exhibits and schedules hereto do not
contain any untrue statement of a material fact, and, when taken together, do
not omit to state a material fact required to be stated therein or necessary in
order to make such representations, warranties or statements not misleading in
light of the circumstances under which they were made. There are no facts,
including any contract, which presently or, to the knowledge of the Company or
any of the Holders, are reasonably likely in the future to have a material
adverse effect on the business, properties, prospects, operations or condition
of the Company which have not been specifically disclosed herein or in a
Schedule furnished herewith, other than general economic conditions affecting
the industries in which the Company operates.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE HOLDERS.
As a material inducement to Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, each Holder hereby severally,
but not jointly, makes to Buyer each of the representations and warranties set
forth in this Section 3 with respect to such Holder. No Holder shall have any
right of indemnity or contribution from the Company with respect to the breach
of any representation or warranty hereunder.
3.1. Ownership of Shares and Options. If such Holder is a Shareholder,
such Holder owns of record and beneficially the number of the Shares set forth
opposite such Holder's name in Exhibit A. Such Shares are or will be, and when
delivered by such Shareholder to Buyer pursuant to this Agreement will be, free
and clear of any and all liens, encumbrances, charges or claims. If such Holder
is an Optionholder, such Holder owns the number of options set forth opposite
such Holder's name in Exhibit A. Such options are or will be, and when canceled
by the
<PAGE> 32
Company pursuant to this Agreement will be, free and clear of any and all liens,
encumbrances, charges or claims.
3.2. Authority. Such Holder has full right, authority, power and
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of such Holder pursuant
to this Agreement and to carry out the transactions contemplated hereby and
thereby. This Agreement and each agreement, document and instrument executed and
delivered by such Holder pursuant to this Agreement constitutes a valid and
binding obligation of such Holder, enforceable in accordance with their
respective terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject to the effect of general principles of equity,
including, without limitation, the possible unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law, and such Holder has full power and authority to
transfer, sell and deliver the Shares to Buyer pursuant to this Agreement. The
execution, delivery and performance of this Agreement and each such agreement,
document and instrument:
(i) does not and will not violate any provision of any laws
of the United States or any state or other jurisdiction applicable to
such Holder, or require such Holder to obtain any approval, consent or
waiver from, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made; and
(ii) does not and will not result in a breach of, constitute
a default under, accelerate any obligation under, or give rise to a
right of termination of, any indenture or loan or credit agreement or
any other material agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award to which such Holder is a
party or by which the property of such Holder is bound or affected, or
result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any assets of the
Company or on Shares owned by such Holder.
3.3. Finder's Fee. Except as disclosed in Section 2.20, such Holder
has not incurred or become liable for any broker's commission or finder's fee
relating to or in connection with the transactions contemplated by this
Agreement.
3.4. Agreements. Other than as set forth on Schedule 3.4 and except
for agreements unrelated to the business of the Company (so long as any such
agreements could not be deemed to have an adverse effect on the Company), each
such Holder is not a party to any non-competition, trade secret or
confidentiality agreement with any party other than the
<PAGE> 33
Company, other than any such agreement that may be entered into in connection
with such Holder's employment by the Company. There are no agreements or
arrangements not contained herein or disclosed in a Schedule hereto, to which
such Holder is a party relating to the business of the Company or to such
Holder's rights and obligations as a shareholder, director or officer of the
Company. Except as set forth on Schedule 3.4, such Holder does not own, directly
or indirectly, on an individual or joint basis, any material interest in, or
serve as an officer or director of, any customer, competitor or supplier of the
Company, or any organization which has a contract or arrangement with the
Company.
3.5. Experience; Accredited Investor. Each Holder has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Buyer so that he is capable of evaluating
the merits and risks of acquiring the Buyer Class A Units as partial
consideration for sale of the Shares and has the capacity to protect his own
interests. Each Holder must bear the economic risk of holding the Buyer Class A
Units indefinitely unless such securities are registered pursuant to the
Securities Act, or an exemption from registration is available for the
disposition thereof. Each Holder understands that there is no assurance that any
exemption from registration under the Securities Act will be available. Except
as set forth on Schedule 3.5, each Holder is an "accredited investor" as defined
in Rule 501 under the Securities Act.
3.6. Investment. Such Holder is acquiring the Buyer Class A Units for
such Holder's own account for investment only, and not with the view to, or for
resale in connection with, any distribution thereof. It understands that the
Buyer Class A Units acquired have not been, and will not be, registered under
the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
the Holder's representations as express herein.
3.7. No Public Market. Such Holder understands that no public market
now exists for any of the securities issued by Buyer has not made any assurances
that a public market will ever exist for such securities.
3.8. Access to Data. Such Holder has received and read the Buyer
Operating Agreement, the Buyer business plan and financial statements and has
had an opportunity to discuss Buyer's business, management and financial affairs
with its management. Such Holder has also had an opportunity to ask questions of
and receive answers from officers of Buyer regarding the terms and conditions of
acquiring the Buyer Class A Units, which questions were answered to such
Holder's satisfaction.
3.9. Residence. The residence of the Holder in which its investment
decision was made is located at the address of the Holder set forth on the
signature page hereto.
<PAGE> 34
SECTION 4. COVENANTS OF THE COMPANY AND THE HOLDERS.
4.1. Making of Covenants and Agreements. The Holders jointly and
severally hereby make the covenants and agreements set forth in this Section 4
and the Holders agree to cause the Company to comply with such agreements and
covenants. No Holder shall have any right of indemnity or contribution from the
Company with respect to the breach of any covenant or agreement hereunder.
4.2. Authorization from Others. Prior to the date of the Closing, the
Holders and the Company will use commercially reasonable efforts to obtain all
authorizations, consents and permits of others required to permit the
consummation by the Holders and the Company of the transactions contemplated by
this Agreement (including, without limitation, the consent of Merrill Lynch
Business Financial Services, Inc. and Informix Software, Inc.).
4.3. Notice of Default. Promptly upon the occurrence of, or promptly
upon the Company or a Holder becoming aware of the impending or threatened
occurrence of, any event which would cause or constitute a breach or default of
any of the representations, warranties or covenants of the Company or the
Holders contained in or referred to in this Agreement or in any Schedule or
Exhibit referred to in this Agreement, the Holders shall give detailed written
notice thereof to Buyer and the Company and the Holders shall use their
commercially reasonable efforts to prevent or promptly remedy the same.
4.4. Consummation of Agreement. The Company and each of the Holders
shall use their commercially reasonable efforts to perform and fulfill all
conditions and obligations on their parts to be performed and fulfilled under
this Agreement, to the end that the transactions contemplated by this Agreement
shall be fully carried out. To this end, the Company will obtain prior to the
Closing all necessary authorizations or approvals of its shareholders and Board
of Directors.
4.5. Cooperation of the Company and Holders. The Company and each of
the Holders shall cooperate with all reasonable requests of Buyer and Buyer's
counsel in connection with the consummation of the transactions contemplated
hereby.
4.6. No Solicitation of Other Offers. Neither the Company, the
Holders, nor any of their officers, directors, agents, employees or
representatives will, directly or indirectly, solicit, encourage, assist,
initiate discussions or engage in negotiations with, provide any information
concerning the operations, properties or assets of the Company to, entertain or
enter into any agreement or transaction with, any person, other than Buyer,
relating to the possible acquisition of the Shares, the Company or any of its
assets, except for the sale of assets in the ordinary course of business of the
Company consistent with the terms of this Agreement. If such
<PAGE> 35
a proposal is received, the Holders will promptly notify Buyer of the terms of
such proposal and the identity of the party making the proposal.
4.7. Tax Returns. The parties shall cooperate in all reasonable
respects with each other to permit the Company in accordance with applicable law
to promptly prepare and file on or before the due date or any extension thereof
all federal, state and local tax returns relating to the Company required to be
filed by the Company and shall cooperate with respect to all tax matters,
including, but not limited to, any federal or state tax audit.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
5.1. Making of Representations and Warranties. As a material
inducement to the Company and the Holders to enter into this Agreement and
consummate the transactions contemplated hereby, Buyer hereby makes the
representations and warranties to the Company and the Holders contained in this
Section 5.
5.2. Organization. Buyer is a limited liability company organized,
validly existing and in good standing under the laws of the State of Delaware
with full limited liability company power to own or lease its properties and to
conduct its business in the manner and in the places where such properties are
owned or leased or such business is conducted by it. Buyer is duly qualified to
do business as a foreign corporation and in good standing to do business in each
jurisdiction in which the nature or leasing of its properties makes such
qualification necessary, other than where the failure to be duly qualified or
have such good standing, as the case may be, would not have a material adverse
effect on the financial condition, business or operation of Buyer.
5.3. Authority. Buyer has full right, authority and power to enter
into this Agreement and each agreement, document and instrument to be executed
and delivered by Buyer pursuant to this Agreement and, subject to the
representation of the Company and the Holders in Section 2.2 hereto, to carry
out the transactions contemplated hereby. The execution, delivery and
performance by Buyer of this Agreement and each such other agreement, document
and instrument have been duly authorized by all necessary organizational action
of Buyer and no other action on the part of Buyer is required in connection
therewith. This Agreement and each other agreement, document and instrument
executed and delivered by Buyer pursuant to this Agreement constitutes, or when
executed and delivered will constitute, valid and binding obligations of Buyer,
as applicable, enforceable in accordance with their terms, subject to the effect
of any applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject to the effect of general
principles of equity, including, without limitation, the possible unavailability
of specific performance or injunctive relief, regardless of whether considered
in a proceeding in equity or at law. The execution, delivery and performance by
Buyer of this Agreement and each such agreement, document and instrument:
<PAGE> 36
(i) does not and will not violate any provision of the
certificate of formation of Buyer or the Buyer Operating Agreement;
(ii) does not and will not violate any laws of the United
States or of any state or any other jurisdiction applicable to Buyer
or require Buyer to obtain any approval, consent or waiver of, or make
any filing with, any person or entity (governmental or otherwise)
which has not been obtained or made; and
(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture, loan or credit
agreement, or other agreement mortgage, lease, permit, order, judgment
or decree to which Buyer is a party and which is material to the
business and financial condition of Buyer.
5.4. Litigation. There is no litigation pending or, to its knowledge,
threatened against Buyer which would prevent or hinder the consummation of the
transactions contemplated by this Agreement which could reasonably be expected
to have a material adverse effect on Buyer. There have been no claims made or
threatened by a client or customer of Buyer nor, to the knowledge of Buyer, are
there any such claims that may be asserted which could reasonably be expected to
have a material adverse effect on Buyer.
5.5. Finder's Fee. Buyer has not incurred or become liable for any
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
5.6. Available Funds. Buyer has sufficient capital available to
consummate the transactions contemplated by this Agreement and is not relying on
obtaining additional financing in connection with such transactions.
5.7. Membership Interests of Buyer. Schedule 5.7 sets forth all of the
issued and outstanding membership interests of Buyer and the capital
contributions for each member of Buyer. Except as set forth on Schedule 5.7,
there are no outstanding options, warrants, rights, commitments, preemptive
rights or agreements of any kind for the issuance and sale of, or outstanding
securities convertible into, any additional membership interests of any class of
Buyer. All of the Buyer Class A Units to be issued to the Holders as partial
consideration for sale of the Shares will be duly issued under the Buyer
Operating Agreement.
<PAGE> 37
5.8. Financial Statements.
(a) Buyer has delivered to the Company the following financial
statements, copies of which are attached hereto as Schedule 5.8: a balance sheet
of Buyer and a statement of profit and loss of Buyer as of December 31, 1997
(the "Buyer Financial Statements"). The December 31, 1997, balance sheet is
hereinafter referred to as the "Buyer Balance Sheet." The Buyer Financial
Statements have been prepared in accordance with GAAP applied consistently
during the period covered thereby, and the Buyer Financial Statements present
fairly in all material respects the financial condition of Buyer at the date of
said statements and the results of its operations for the period covered thereby
subject to (i) such exceptions as may be indicated in the notes thereto, (ii)
normal year-end adjustments, and (iii) the omission of footnotes and other
presentational items that may be required by GAAP.
(b) As of the date of the Buyer Balance Sheet, Buyer did not have
any liabilities of any nature, whether accrued, absolute or contingent
(including without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, liabilities for taxes due or then accrued or
to become due, or contingent or potential liabilities relating to activities of
Buyer or the conduct of its business prior to the date of the Buyer Balance
Sheet), except liabilities stated or adequately reserved against on the Buyer
Balance Sheet.
(c) As of the date hereof and as of the Closing, Buyer has not
had and will not have any liabilities of any nature, whether accrued, absolute
or contingent (including without limitation, liabilities as guarantor or
otherwise with respect to obligations of others, or liabilities for taxes due or
then accrued or to become due or contingent or potential liabilities relating to
activities of Buyer or the conduct of its business prior to the date hereof or
the Closing, as the case may be, regardless of whether claims in respect thereof
had been asserted as of such date), except liabilities (i) stated or adequately
reserved against on the Buyer Balance Sheet or the notes thereto, or (ii)
incurred in the ordinary course of business of Buyer.
5.9. Taxes.
(a) As used in this Section 5.9, the term "Taxes" means all
taxes, charges, fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, VAT,
service, service use, ad valorem, transfer, franchise, profits, license, lease,
withholding, social security, payroll, employment, excise, estimated, severance,
stamp, recording, occupation, real and personal property, gift, windfall profits
or other taxes, customs duties, fees, assessments or charges of any kind
whatsoever, whether computed on a separate, consolidated, unitary, combined or
other basis, together with any interest, fines, penalties, additions to tax or
other additional amounts imposed thereon or with respect thereto imposed by any
taxing authority (domestic or foreign).
<PAGE> 38
(b) All returns, declarations, reports, estimates, statements,
schedules or other information or documents with respect to Taxes (collectively,
"Tax Returns") required to be filed by Buyer have been timely filed (giving
effect to extensions granted with respect thereto), and all such Tax Returns are
true, correct, and complete in all material respects.
(c) Buyer has timely paid all Taxes due from them or claimed to
be due from then by any federal, state, local, foreign or other taxing
authority.
(d) There are no liens for Taxes upon any of the assets of Buyer,
except liens for taxes not yet due and payable.
(e) No Tax Returns of Buyer have been examined by the relevant
taxing authority. No deficiency for any Taxes has been proposed, asserted or
assessed against Buyer that has not been resolved and paid in full. There are no
outstanding waivers, extensions, or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns that have been given by Buyer (including the time for filing of Tax
Returns or paying Taxes) and Buyer does not have pending requests for any such
waivers, extensions, or comparable consents.
(f) No audit or other proceeding by any federal, state, local or
foreign court, governmental, regulatory, administrative or similar authority is
presently pending with respect to any Taxes or Tax Return of Buyer, and Buyer
has not received written notice of any pending audits or proceedings.
(g) Buyer has established adequate reserves in accordance with
generally accepted accounting principles for all Taxes not yet due and payable,
which reserves are set forth in Schedule 5.9.
(h) Buyer has complied in all respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to Sections 1441,
1442, 1445 and 1446 of the Code or similar provisions under any applicable state
and foreign laws) and has, within the time and the manner prescribed by law,
paid over to the proper governmental authorities all amounts so withheld.
(i) Buyer is not a party to or is bound by or has any obligation
under any Tax sharing allocation or indemnity agreement or similar contract or
arrangement.
(j) Buyer is, and has been at all times since its formation,
properly characterized as partnerships for federal and applicable state and
local income tax purposes and has filed all appropriate elections to be taxed as
such.
<PAGE> 39
(k) No power of attorney granted by Buyer with respect to any
Taxes is currently in force.
(l) Other than its own operating agreement, Buyer is not subject
to any joint venture, partnership or other arrangement or contract that is
treated as a partnership for U.S. federal income tax purposes.
(m) There is no expectation that any taxing authority may claim
or assess any additional Taxes payable by Buyer for any period ending on or
prior to the Closing Date and there are no facts of which Buyer is aware which
would constitute grounds for the assessment of any Taxes payable by Buyer for
any period ending on or prior to the Closing Date.
(n) Schedule 5.9 sets forth each state, local and foreign
jurisdiction in which Buyer is required, or has been at any time required, to
file or be included in a Tax Return. No written claim has ever been received by
Buyer from a taxing authority in a jurisdiction where Buyer does not pay Taxes
or files Tax Returns that Buyer is or may be subject to Taxes assessed by such
jurisdiction, and, to the knowledge of Buyer, no such claim has been threatened
by a taxing authority.
(o) Buyer has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Taxes within the meaning of Section 6662 of the Code.
(p) Buyer has not agreed, or is required, to make any adjustment
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise.
(q) No property of Buyer is "tax exempt use property" within the
meaning of Section 168(h) of the Code.
(r) Buyer has not entered into any installment sale contract
pursuant to Section 453 of the Code whereby the installments have not been fully
collected, and Buyer has not entered into an interest rate swap, currency swap,
or similar transaction.
5.10. Absence of Certain Changes.
Except as disclosed in Schedule 5.10 attached hereto, since December
31, 1997, there has not been:
(a) Any change in the business, properties, assets, results of
operations, financial condition, liabilities, or prospects of Buyer, which
change by itself or in conjunction with all other such changes, whether or not
arising in the ordinary course of business, has been materially adverse with
respect to Buyer;
<PAGE> 40
(b) Any contingent liability incurred by Buyer as guarantor or
otherwise with respect to the obligations of others or any cancellation of any
material debt or claim owing to, or waiver of any material right of, Buyer;
(c) Any mortgage, encumbrance or lien placed on any of the
properties of Buyer which remains in existence on the date hereof or will remain
on the date of the Closing;
(d) Any obligation or liability of any nature, whether accrued,
absolute or contingent (including without limitation liabilities for Taxes due
or to become due or contingent or potential liabilities relating to products or
services provided by Buyer or the conduct of the business of Buyer since the
date of the Buyer Balance Sheet regardless of whether claims in respect thereof
have been asserted), incurred by Buyer other than obligations and liabilities
incurred in the ordinary course of business (it being understood that product or
service liability claims shall not be deemed to be incurred in the ordinary
course of business);
(e) Any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of Buyer other than in the ordinary course of business;
(f) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of Buyer;
(g) Any declaration, setting aside or payment of any dividend by
Buyer, or the making of any other distribution in respect of the membership
interests of Buyer, or any direct or indirect redemption, purchase or other
acquisition by Buyer of its respective membership interests;
(h) Any labor trouble or claim of unfair labor practices
involving Buyer; any change in the compensation payable or to become payable by
Buyer to any of its officers, employees, agents or independent contractors other
than normal merit increases in accordance with its usual practices; or any bonus
payment or arrangement made to or with any of such officers, employees, agents
or independent contractors;
(i) Any change with respect to the officers or management of
Buyer;
(j) Any payment or discharge of a material lien or liability of
Buyer which was not shown on the Buyer Balance Sheet or incurred in the ordinary
course of business thereafter;
(k) Any obligation or liability incurred by Buyer to any of its
officers, directors,
<PAGE> 41
members or employees, or any loans or advances made by Buyer to any of its
officers, directors, members or employees, except normal compensation and
expense allowances and advances payable to officers or employees;
(l) Any change in accounting methods or practices, credit
practices or collection policies used by Buyer;
(m) Any other transaction entered into by Buyer other than
transactions in the ordinary course of business; or
(n) Any agreement or understanding whether in writing or
otherwise, for Buyer to take any of the actions specified in paragraphs (a)
through (m) above.
5.11. Compliance with Laws. Buyer is in compliance with all applicable
statutes, ordinances, orders, judgments, decrees, rules and regulations
promulgated by any federal, state, municipal entity, agency, court or other
governmental authority which apply to Buyer or to the conduct of its business,
except where noncompliance with such statute, ordinance, order, judgment,
decree, rule or regulation would not have a material adverse effect on Buyer,
and Buyer has not received notice of a violation or alleged violation of any
such statute, ordinance, order, rule or regulation.
5.12. Operating Agreements. The Buyer Operating Agreement attached as
Schedule 5.12 is in full force and effect.
SECTION 6. COVENANTS OF BUYER.
6.1. Consummation of Agreement. Buyer shall use its commercially
reasonable efforts to perform and fulfill all conditions and obligations on its
part to be performed and fulfilled under this agreement, to the end that the
transactions contemplated by this agreement shall be fully carried out.
6.2. Option Pool. Buyer agrees to make available for distribution to
Company employees and new hires a pool of options to purchase 168,000 Buyer
Class A Units or stock appreciation rights with respect to Buyer Class A Units
(the "SARs"). The allocation of such options or SARs is set forth on Schedule
6.2 attached hereto. The options or SARs shall have an exercise price of $5.00
per share and shall vest at the rate of twenty-five percent (25%) per year over
four (4) years. The Holders acknowledge that (a) under the Buyer Operating
Agreement, the Board of Directors of Nextera Enterprises Holdings, L.L.C., a
Delaware limited liability company, will have the authority to determine the
remaining terms and conditions of such options and stock appreciation rights,
including making amendments to the Buyer Operating Agreement, and (b) the tax
consequences of the options and stock appreciation rights are materially
different in a limited liability company as compared to a corporate structure.
<PAGE> 42
6.3. Books and Records; Tax Matters.
(a) Books and Records. Each party agrees that it will cooperate
with and make available to the other parties, during normal business hours, all
books and records, information and employees (without substantial disruption of
employment) which are necessary or useful in connection with any tax inquiry,
audit, investigation or dispute, any litigation or investigation or any other
matter requiring any such books and records, information or employees for any
reasonable business purpose. The party requesting any such books and records,
information or employees shall bear all of the out-of-pocket costs and expenses
(including, without limitation, reasonable attorneys' fees, but excluding
reimbursement for salaries and employee benefits) reasonably incurred in
connection with providing such books and records, information or employees. All
information received pursuant to this Section 6.4(a) shall be subject to the
terms of the Confidentiality Agreement.
(b) Cooperation and Records Retention. The Holders and Buyer
shall (i) each provide the other with such assistance as may reasonably be
requested in connection with the preparation of any return, audit, or other
examination by any taxing authority or judicial or administrative proceedings
relating to liability for Taxes, (ii) each retain and provide the others with
any records or other information that may be relevant to such return, audit or
examination, proceeding or determination, and (iii) each provide the others with
any final determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any tax return of
the others for any period. Without limiting the generality of the foregoing, the
Holders and Buyer shall each retain, until the applicable statutes of
limitations (including any extensions) have expired, copies of all tax returns,
supporting work schedules, and other records or information that may be relevant
to such returns for all tax periods or portions thereof ending on or before the
Closing Date and shall not destroy or otherwise dispose of any such records
without first providing the other parties with a reasonable opportunity to
review and copy the same.
6.4. Release of Personal Guarantees. Buyer agrees to use its
commercially reasonable efforts to have Messrs. Bhaskaran and Shepherd released
from those guarantees listed on Schedule 6.4 hereto (the "Guarantees"),
including the offer by Buyer to substitute Buyer for Messrs. Bhaskaran and
Shepherd on each such guaranty. To the extent that Buyer has not obtained all
such releases on or prior to the Closing, then Buyer shall indemnify and hold
harmless Messrs. Bhaskaran and Shepherd for any losses, costs, claims and
liabilities and expenses (including reasonable attorney's fees) resulting from
any of the obligations of Messrs. Bhaskaran and Shepherd under the Guarantees.
6.5. Right of First Offer on Dispositions of Holders.
<PAGE> 43
(a) Termination of Employment for other than Cause.
Notwithstanding Section 6.4 of the Buyer Operating Agreement, in the event a
Holder's employment with the Company is terminated by the Company for other than
Cause (as hereinafter defined), Buyer shall not have the right to repurchase the
Buyer Class A Units issued to such Holder in connection with this Agreement as
provided by Section 6.4 of the Buyer Operating Agreement; provided, however,
that Buyer shall have the right of first offer to purchase any such Buyer Class
A Units which such Holder, from time to time, proposes to sell or transfer as
set forth in Section 6.5(c) below (the "Right of First Offer"). Each Holder
acknowledges that in the event such Holder terminates such Holder's employment
with the Company, Buyer shall have the right, but not the obligation, to
repurchase such Holder's Buyer Class A Units as set forth in Section 6.4 of the
Buyer Operating Agreement. For purposes of this Section 6.5, Cause shall have
the meaning ascribed to such term in the Holder's written employment agreement
with the Company, if any. If the Holder has not entered into a written
employment agreement with the Company, Cause shall have the meaning ascribed to
such term in Buyer's form of Employee Equity Participation Agreement (which
definition is set forth on Schedule 6.5 hereto).
(b) Sale by Ramesh Vasudevan, Padmini Vasudevan and Glenn Van
Straatum. Notwithstanding the foregoing and Section 6.4 of the Buyer Operating
Agreement, Buyer shall not have the right to repurchase the Buyer Class A Units
issued to Ramesh Vasudevan, Padmini Vasudevan and Glenn Van Straatum in
connection with this Agreement as provided by Section 6.4 of the Buyer Operating
Agreement, provided, however, that Buyer shall have the Right of First Offer to
purchase any such Buyer Class A Units which Ramesh Vasudevan, Padmini Vasudevan
and Glenn Van Straatum, from time to time, propose to sell or transfer as set
forth in Section 6.5(c) below.
(c) Right of First Offer. If at any time the Holder wishes to
sell, assign, transfer or otherwise dispose of any or all of the Buyer Class A
Units owned by him, the Holder shall give a written notice (the "Transfer
Notice") to Buyer, describing fully the proposed transfer, including the number
of the Buyer Class A Units proposed to be transferred, the proposed transfer
price, other terms and conditions, if any, and the name and address of the
proposed transferee (the "Proposed Transferee"). The Transfer Notice shall be
signed both by the Holder and the Proposed Transferee and must constitute a
binding commitment of both such parties for the transfer of such Buyer Class A
Units. Buyer shall have the right to purchase the Buyer Class A Units subject to
the Transfer Notice at a price per share equal to the proposed per unit transfer
price and upon such other terms and conditions as are stated in the Transfer
Notice, by delivery of a notice of exercise of Buyer's Right of First Offer
within thirty (30) days after the date the Transfer Notice
<PAGE> 44
is delivered to Buyer. Buyer's rights under this Section 6.5 shall be freely
assignable, in whole or in part.
SECTION 7. CONDITIONS.
7.1. Conditions to the Obligations of Buyer.
The obligation of Buyer to consummate this Agreement and the
transactions contemplated hereby are subject to the fulfillment, prior to or at
the Closing, of the following conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of the Company and the Holders contained in
Section 2 shall be true and correct in all material respects as of the date of
this Agreement and as of the date of the Closing as though made on and as of the
Closing; and the Company and each of the Holders shall, on or before the
Closing, have performed all of their obligations hereunder which by the terms
hereof are to be performed on or before the Closing.
(b) No Material Change. There shall have been no material adverse
change in the business, properties, assets, results of operations, financial
condition, liabilities, or prospects of the Company since the date hereof,
whether or not in the ordinary course of business.
(c) Certificate from Officers. The Holders shall have delivered
to Buyer a certificate of the Company's Chief Executive Officer dated as of the
Closing to the effect that the statements set forth in paragraph (a) and (b)
above in this Section 7.1 are true and correct.
(d) Escrow Agreement. Each of the Company, Buyer, the Holders and
the Escrow Agent shall have executed and delivered the Escrow Agreement,
substantially in the form attached hereto as Exhibit C.
(e) Opinion of Counsel. On the date of the Closing, Buyer shall
have received from Pillsbury Madison & Sutro LLP, as counsel for the Company and
the Holders, an opinion as of said date, in the form attached hereto as Exhibit
E.
(f) No Litigation. There shall be no temporary or permanent
injunction or other order issued by any court of competent jurisdiction
prohibiting the transactions contemplated hereunder.
(g) Consents. The Company or the Holders shall have made all
filings with and notifications of governmental authorities, regulatory agencies
and other entities required to be made by the Company or the Holders in
connection with the execution and
<PAGE> 45
delivery of this Agreement, the performance of the transactions contemplated
hereby and the continued operation of the business of the Company by Buyer
subsequent to the Closing; and the Company, the Holders and Buyer shall have
received all authorizations, waivers, consents and permits, in form and
substance reasonably satisfactory to Buyer, from all third parties, including,
without limitation, applicable governmental authorities, regulatory agencies,
lessors, lenders and contract parties, required to permit the continuation of
the business of the Company and the consummation of the transactions
contemplated by this Agreement, and to avoid a breach, default, termination,
acceleration or modification of any material indenture, loan or credit agreement
or any other material agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award as a result of, or in connection with, the execution and
performance of this Agreement.
(h) Employment Agreements. Each of Messrs. Bhaskaran and Shepherd
shall have executed and delivered to Buyer an Employment Agreement in
substantially the form of Exhibit F-1 and F-2, respectively.
(i) Payment of Indebtedness; Lien Release. The Company shall have
obtained written confirmation in form and substance satisfactory to Buyer of the
outstanding balance under that certain WCMA Note, Loan and Security Agreement
between the Company and Merrill Lynch business Financial Systems, dated as of
April 21, 1997 (the "Credit Agreement") and confirmation that upon payment of
such balance all liens under such Credit Agreement shall be released.
(j) Noncompetition, Non-Solicitation, Proprietary Information,
Confidentiality and Inventions Agreement. Each of the Ravinder Bhaskaran,
Michael Shepherd, Ramesh Vasudevan and Padmini Vasudevan shall have executed and
delivered to Buyer a Noncompetition, Non-Solicitation, Proprietary Information,
Confidentiality and Inventions Agreement in substantially the form of Exhibit G,
respectively.
(k) All holders of options to purchase common stock of the
Company shall have agreed to the cancellation of such options and entered into a
form of Option Cancellation Agreement attached hereto as Exhibit B.
(l) The Company shall have caused its 401(k) plan to terminate.
(m) Consent to Recapitalization. Each of the members of Buyer
shall have delivered to Buyer a signed letter of consent acknowledging his
agreement and consent to the Recapitalization (as defined in Section 10.1).
<PAGE> 46
7.2. Conditions to Obligations of the Company and the Holders. The
obligation of the Company and the Holders to consummate this Agreement and the
transactions contemplated hereby is subject to the fulfillment, prior to or at
the Closing, of the following conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of Buyer contained in Section 5 shall be true and
correct in all material respects as though made on and as of the Closing; Buyer
shall, on or before the Closing, each have performed all of its obligations
hereunder which by the terms hereof are to be performed on or before the
Closing.
(b) No Material Change. There shall have been no material adverse
change in the business, properties, assets, results of operations, financial
condition, liabilities, or prospects of the Company since the date hereof,
whether or not in the ordinary course of business.
(c) No Litigation. There shall be no temporary or permanent
injunction or other order issued by any court of competent jurisdiction
prohibiting the transactions contemplated hereunder.
(d) Employment Agreements. Buyer shall have executed and
delivered to Messrs. Bhaskaran and Shepherd Employment Agreements in
substantially the forms of Exhibit F-1 and F-2.
(e) Opinion of Counsel. On the date of the Closing, the Company
and the Holders shall have received from Maron & Sandler, counsel for Buyer, an
opinion as of said date, in form attached hereto as Exhibit G.
SECTION 8. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
8.1. Survival of Warranties. Each of the representations, warranties,
agreements, covenants and obligations herein are material, shall be deemed to
have been relied upon by the other party and shall survive the Closing
regardless of any investigation and shall not merge in the performance of any
obligation by either party hereto; provided, however, that such representations
and warranties shall expire on the same dates as and to the extent that the
rights to indemnification with respect thereto under Section 9 shall expire.
8.2. Release. Each Holder hereby releases and discharges
(i) the Company, Buyer and any and all affiliates of the
Company, Buyer and any of their respective successors and assigns, of
and from
<PAGE> 47
any and all commitments, indebtedness, suits, demands, obligations and
liabilities of every kind and nature, including claims and causes of
action both in law and in equity, and
(ii) each of the present and former shareholders, directors,
officers, employees, attorneys and agents of the Company, and any of
their respective successors and assigns (each, together with the
Company and Buyer, a "Released Party"), of and from any and all
commitments, indebtedness, suits, demands, obligations and liabilities
relating to the business of the Company, Buyer and relating to this
transaction, including claims and causes of action both in law and in
equity,
which such Holder and/or his heirs, executors, administrators, successors or
assigns ever had, now has, to the extent arising from or in connection with any
action, omission or state of facts taken or existing on or prior to the date
hereof or prior to the Closing, against any Released Party, whether asserted,
unasserted, absolute, contingent, known or unknown, including without limitation
commitments, obligations, liabilities and claims arising under or pursuant to
(1) the Company Organizational Documents, as amended through the date hereof and
through the date of the Closing of the Company and (2) any contracts to which
such Holder and any Released Party are parties, including, without limitation,
the Company Organizational Documents and any agreement between such Holder and
the Company, with respect to the employment of such Holder prior to the date of
the Closing; provided, however, that such Holder does not release any Released
Party from (A) commitments, obligations, liabilities and claims arising under or
pursuant to the following provisions of this Agreement: Section 1 (Sale of
Shares and Purchase Price), Section 5 (Representations and Warranties of Buyer),
Section 10 (Indemnification) and Section 11 (Miscellaneous), (B) commitments,
obligations, liabilities and claims, if any, arising under or pursuant to the
employment agreement, entered into by such Holder and Buyer or the Company
pursuant to the Agreement, (C) commitments, obligations, liabilities and claims
arising under or pursuant to agreements entered into after the date hereof with
the written consent of the Company, and (D) any claims for accrued vacation
benefits and claims for compensation earned prior to the date of the Closing.
Such Holder represents and warrants to each Released Party that he (i)
has received such information as he has deemed relevant regarding the
properties, assets, business, condition (financial or otherwise), results of
operations or prospects of the Company and its affiliates, (ii) has such
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of his or her sale of equity interests in the
Company hereunder and/or has engaged and consulted with one or more advisers
with such capabilities, and (iii) has been afforded the opportunity to ask
questions and receive answers from management of the
<PAGE> 48
Company and its advisers regarding the transactions contemplated by this
Agreement and the properties, assets, business, condition (financial and
otherwise), results of operations and prospects of the Company. In furtherance
and not in limitation of the foregoing, such Holder represents that he has read
carefully, fully understood, and if appropriate, discussed with his legal and
financial advisers, (A) materials described in clause (i) above and, (B) the
financial statements and projections set forth in Schedule 2.7 to this Agreement
and such Holder hereby represents that he has not relied upon any
representations, warranties or agreements of any person other than those set
forth in this Agreement.
Such Holder acknowledges and agrees that the provisions hereof are
reasonable in context and scope, are a material condition to the Company's
willingness to enter into and effect this Agreement and effect the transactions
contemplated hereby and are intended to be and shall be enforced to the full
extent set forth herein.
SECTION 9. INDEMNIFICATION.
9.1. Indemnification by the Holders. The Holders jointly and severally
agree subsequent to the Closing to indemnify and hold the Company, Buyer and
their respective subsidiaries and affiliates and persons serving as officers,
directors, partners, managers, stockholders, members, employees and agents
thereof (other than the Holders, except to the extent of liabilities incurred in
their capacities as such an officer, director or employee after the Closing)
(individually a "Buyer Indemnified Party" and collectively the "Buyer
Indemnified Parties") harmless from and against any damages, liabilities,
losses, taxes, fines, penalties, costs, and expenses (including, without
limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) which may be sustained
or suffered by any of them arising out of or based upon any of the following
matters:
(a) fraud, intentional misrepresentation or the cause or
knowledge of a deliberate or willful breach of any representations, warranties
or covenants of the Company or the Holders under this Agreement or in any
certificate, schedule or exhibit delivered pursuant hereto (collectively, "Fraud
Claims");
(b) any breach of any representation or warranty of the Holders
set forth in Section 2.3 of this Agreement (collectively, "Ownership Claims");
(c) any liability of the Company or the Holders for Taxes arising
from the activities of the Company and all events and transactions on or prior
to the Closing and any breach of the representations and warranties set forth in
Section 2.8 hereof and any covenant with respect to Taxes or tax related matters
(collectively, "Tax Claims"); and
<PAGE> 49
(d) other than Fraud Claims, Ownership Claims or Tax Claims, any
other breach of any representation, warranty or covenant of the Holders under
this Agreement or in any schedule or exhibit delivered pursuant hereto, or by
reason of any claim, action or proceeding asserted or instituted growing out of
any matter or thing constituting a breach of such representations, warranties or
covenants (collectively, "General Claims").
In addition, each Holder severally, but not jointly, agrees subsequent
to the Closing to indemnify and hold all Buyer Indemnified Parties harmless from
and against any damages, liabilities, losses, taxes, fines, penalties, costs,
and expenses (including, without limitation, reasonable fees of counsel) of any
kind or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based upon fraud, intentional misrepresentation or any breach (whether or not
deliberate or willful) of any representation or warranty of such Holder
contained in Section 3, or by reason of any claim, action or proceeding asserted
or instituted growing out of any matter or thing constituting a breach of such
representation or warranty (collectively, "Individual Claims").
9.2. Limitations on Indemnification by the Holders. Anything contained
in this Agreement to the contrary notwithstanding, the liability of the Holders
to provide any indemnification to any Buyer Indemnified Party and right of Buyer
Indemnified Parties to indemnification under Section 9.1 shall be subject to the
following provisions:
(a) Other than any claim for breach of any representation or
warranty of the Company or the Holders set forth in Section 2.24 of this
Agreement, no claims for indemnification shall be made under this Agreement
against any Holder, and no indemnification shall be payable to any Buyer
Indemnified Party, with respect to General Claims after the date which is
eighteen (18) months following the Closing.
(b) The amount to be payable by a Holder to all Buyer Indemnified
Parties for claims for indemnification hereunder shall in no event exceed such
Holder's pro rata share of the total amount to be paid to all Buyer Indemnified
Parties for claims for indemnification hereunder. The pro rata shares of the
Holders for this purpose shall be the same percentages as the Holders'
respective interests in the Additional Consideration as set forth on Exhibit D.
(c) The aggregate amount to be payable to all Buyer Indemnified
Parties by each Holder for claims for indemnification with respect to General
Claims shall in no event exceed such Holder's pro rata portion of $4,583,333 and
293,333 Buyer Class A Units and one half of the amount determined to be the
Additional Consideration pursuant to Section 1.7.
<PAGE> 50
(d) In the event that any claim for indemnification arises from a
breach of representation, warranty or covenant which was made or undertaken by a
Holder, by the express terms of this Agreement severally and not jointly, the
Holders shall be severally, but not jointly, liable for indemnification in
respect of such a claim.
(e) The Holders shall have no obligation for indemnification with
respect to General Claims hereunder until aggregate claims for indemnification
with respect to General Claims hereunder exceed $50,000, in which case the
Holders shall be obligated for indemnification of all General Claims including
the initial $50,000 of such claims.
(f) Claims for indemnification with respect to Fraud Claims,
Ownership Claims, Individual Claims, or Tax Claims made under this Agreement by
any Buyer Indemnified Party shall not be subject to any of the limitations set
forth in this Section 9.2.
9.3. Indemnification by Buyer. Buyer agrees to indemnify and hold the
Holders (individually a "Holder Indemnified Party" and collectively the "Holder
Indemnified Parties") harmless from and against any damages, liabilities, losses
and expenses (including, without limitation, reasonable fees of counsel) of any
kind or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based upon any breach of any representation, warranty or covenant made by Buyer
in this Agreement or in any certificate delivered by Buyer hereunder, or by
reason of any claim, action or proceeding asserted or instituted growing out of
any matter or thing constituting such a breach.
9.4. Limitation on Indemnification by Buyer. Notwithstanding the
foregoing, (a) no indemnification shall be payable to the Holders with respect
to claims asserted pursuant to Section 9.3 above after the date which is
eighteen (18) months after the Closing, and the aggregate amount to be payable
to Holders pursuant to Section 9.3 shall not exceed $4,583,333 and 293,333 Buyer
Class A Units and one half of the amount determined to be the Additional
Consideration pursuant to Section 1.7 and (b) Buyer shall have no obligation for
indemnification hereunder until aggregate claims for indemnification hereunder
exceed $50,000, in which case Buyer shall be obligated for indemnification of
all claims, including the initial $50,000 of such claims; provided, however,
that the limitations set forth herein shall not apply to a claim for
indemnification based upon a breach of Section 5.2 or 5.3 or covenants to be
performed post-Closing. Claims for indemnification with respect to fraud,
intentional misrepresentation or the cause or knowledge of a deliberate or
willful breach of any representations, warranties or covenants of Buyer under
this Agreement or in any certificate, schedule or exhibit delivered pursuant
hereto made under this Agreement by any Holder Indemnified Party shall not be
subject to any of the limitations set forth in this Section 9.4.
<PAGE> 51
9.5. Notice; Defense of Claims. An indemnified party shall make claims
for indemnification hereunder by giving written notice thereof to the
indemnifying party within the period in which indemnification claims can be made
hereunder. If indemnification is sought for a claim or liability asserted by a
third party, the indemnified party shall also give written notice thereof to the
indemnifying party promptly after it receives notice of the claim or liability
being asserted, but the failure to do so shall not relieve the indemnifying
party from any liability except to the extent that it is prejudiced by the
failure or delay in giving such notice. Such notice shall summarize the bases
for the claim for indemnification and any claim or liability being asserted by a
third party. Within 20 days after receiving such notice the indemnifying party
shall give written notice to the indemnified party stating whether it disputes
the claim for indemnification and whether it will defend against any third party
claim or liability at its own cost and expense. If the indemnifying party fails
to give notice that it disputes an indemnification claim within 20 days after
receipt of notice thereof, it shall be deemed to have accepted and agreed to the
claim, which shall become immediately due and payable. The indemnifying party
shall be entitled to direct the defense against a third party claim or liability
with counsel selected by it (subject to the consent of the indemnified party,
which consent shall not be unreasonably withheld) as long as the indemnifying
party is conducting a good faith and diligent defense. The indemnified party
shall at all times have the right to fully participate in the defense of a third
party claim or liability at its own expense directly or through counsel;
provided, however, that if the named parties to the action or proceeding include
both the indemnifying party and the indemnified party and the indemnified party
is advised that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
indemnified party may engage separate counsel at the expense of the indemnifying
party. If no such notice of intent to dispute and defend a third party claim or
liability is given by the indemnifying party, or if such good faith and diligent
defense is not being or ceases to be conducted by the indemnifying party, the
indemnified party shall have the right, at the expense of the indemnifying
party, to undertake the defense of such claim or liability (with counsel
selected by the indemnified party), and to compromise or settle it, exercising
reasonable business judgment. If the third party claim or liability is one that
by its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, at the expense of the indemnifying party.
9.6. Satisfaction of Holder Indemnification Obligations. In order to
satisfy the indemnification obligations of the Holders hereunder, a Buyer
Indemnified Party shall proceed first directly against the Escrow Deposit as
further set forth in the Escrow Agreement and then directly against the Holders,
subject to the limitations set forth in Section 9.2, as applicable. As further
set forth in the Escrow Agreement, all claims against the Escrow Deposit shall
be satisfied first against the cash portion thereof and then against the Buyer
Class A Units.
<PAGE> 52
9.7. Valuation of Buyer Class A Units. Except as provided in the
Escrow Agreement, the Holders may, at their option, elect to satisfy any
indemnification claims under this Agreement by delivering Buyer Class A Units to
the Buyer Indemnified Parties up to a maximum of 293,333 Buyer Class A Units. To
the extent that Buyer Class A Units are used to satisfy indemnification claims
under this Agreement, such units shall be valued in accordance with the terms of
the Escrow Agreement.
SECTION 10. MISCELLANEOUS.
10.1. Recapitalization of Buyer and Holdings. The Company and each of
the Holders hereby agree and acknowledge that they have been informed that Buyer
and Holdings have adopted a recapitalization plan (the "Recapitalization") which
has not yet been effectuated. It is the intention of Buyer, Holdings, and their
members to effectuate the Recapitalization as soon as practicable following the
Closing. The Company and each of the Holders hereby consents and agrees to each
and every element of the Recapitalization which is set forth on Schedule 10.1
attached hereto; the results of the Recapitalization are shown on Exhibit I
attached hereto in the form of a structure chart. Buyer and each Holder agree
and acknowledge that the terms of the Recapitalization as set forth on Schedule
10.1 and illustrated in Exhibit I do not incorporate or reflect the fact that
there are employee equity participation rights (" Buyer SARs") in Buyer which
may be converted into Class A Common Units of Buyer. There are currently 944,000
Buyer SARs outstanding with an equivalent strike price of $5.00 per unit and
927,010 Buyer SARs outstanding with an equivalent strike price of $7.50 per unit
and additional Buyer SARs may be issued. Additional Class A Common Units of
Buyer may be issued in future acquisitions. In addition, the terms of the
Recapitalization as set forth on Schedule 10.1 and illustrated on Exhibit I have
been prepared on the assumption that both this transaction and the so-called
"PTG" transaction will be consummated; in the event that the "PTG" transaction
does not close either prior to or after the Recapitalization, then the terms of
the Recapitalization will be adjusted accordingly. The Company and each Holder
further agree and acknowledge that no further consents need be obtained from
them to effectuate the Recapitalization after the Closing Date and that they
agree and consent to the necessary steps that will be taken and to the
documentation that will be prepared and executed to complete the
Recapitalization.
10.2. Fees and Expenses. The Company will pay the reasonable fees and
out-of-pocket expenses of Pillsbury Madison & Sutro LLP for services as counsel
to the Company and the Holders in connection with the transactions contemplated
herein up to a maximum of $60,000 after submission of a reasonably detailed
invoice. At the Closing and for administrative convenience, Nextera will make a
payment by wire transfer on behalf of the Holders of $250,000 from the proceeds
otherwise due the Holders in full satisfaction of the investment banking fees of
Alliant Partners with respect to this transaction. The Holders shall bear all
other fees,
<PAGE> 53
commissions and expenses of the Company and the Holders incurred in connection
with the negotiation and the consummation of the transactions contemplated by
this Agreement.
10.3. Governing Law. This Agreement shall be construed under and
governed by the internal laws of the Commonwealth of Massachusetts without
regard to its conflict of laws provisions.
10.4. Notices. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail, upon the sooner of the date on which
receipt is acknowledged or the expiration of three days after deposit in United
States post office facilities properly addressed with postage prepaid. All
notices to a party will be sent to the addresses set forth below or to such
other address or person as such party may designate by notice to each other
party hereunder:
TO BUYER: Nextera Enterprises, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (781) 778-4500
With a copy to: Latham & Watkins
75 Willow Road
Menlo Park, CA 94025
Attention: Christopher L. Kaufman, Esq.
Fax: (650) 463-2600
Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attention: Cheston J. Larson, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO COMPANY: Pyramid Imaging, Inc.
545 Mission Street, 3rd Floor
San Francisco, CA 94105
Attention: Michael J. Shepherd
Fax: (415) 882-4848
<PAGE> 54
With a copy to: Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attention: Karen A. Dempsey, Esq.
Fax: (415) 983-1200
TO ANY HOLDER: To the address last provided by such
Holder to the Company
With a copy to: Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attention: Karen A. Dempsey, Esq.
Fax: (415) 983-1200
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
10.5. Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, reflects the entire agreement of the parties with respect to
its subject matter, and supersedes all previous written or oral negotiations,
commitments and writings. No promises, representations, understandings,
warranties and agreements have been made by any of the parties hereto except as
referred to herein or in such Schedules and Exhibits; and all inducements to the
making of this Agreement relied upon by either party hereto have been expressed
herein or in such Schedules or Exhibits.
10.6. Assignability; Binding Effect. This Agreement (including any
obligation of Buyer to pay Additional Consideration to the Holders) shall only
be assignable by Buyer to a corporation or partnership controlling, controlled
by or under common control with Buyer upon written notice to the Company and the
Holders. This Agreement may not be assigned by any Holder or the Company without
the prior written consent of Buyer. This Agreement shall be binding upon and
enforceable by, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
10.7. Captions and Gender. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
10.8. Execution in Counterparts. For the convenience of the parties
and to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
<PAGE> 55
10.9. Amendments. This Agreement may not be amended or modified, nor
may compliance with any condition or covenant set forth herein be waived, except
by a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
10.10. Publicity and Disclosures. No press releases or public
disclosure, either written or oral, of the transactions contemplated by this
Agreement, shall be made by a party to this Agreement without the prior
knowledge and written consent of Buyer and the Company.
10.11. Specific Performance. The parties agree that it would be
difficult to measure damages which might result from a breach of this Agreement
by the Company or the Holders and that money damages would be an inadequate
remedy for such a breach. Accordingly, if there is a breach or proposed breach
of any provision of this Agreement by the Company or the Holders, and Buyer does
not elect to terminate under Section 8, Buyer shall be entitled, in addition to
any other remedies which it may have, to an injunction or other appropriate
equitable relief to restrain such breach without having to show or prove actual
damage to Buyer.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 56
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives, as of the date first written
above.
BUYER:
NEXTERA ENTERPRISES, L.L.C., a Delaware limited
liability company
By: /s/ MICHAEL P. MULDOWNEY
-------------------------------------------
Name: Michael P. Muldowney
--------------------------------------
Title:
-------------------------------------
COMPANY:
PYRAMID IMAGING, INC., a California corporation
By: /s/ MICHAEL J. SHEPHERD
-------------------------------------------
Name: Michael J. Shepherd
--------------------------------------
Title: President
-------------------------------------
HOLDERS:
/s/ RAVINDER BHASKARAN
-----------------------------------------------
Ravinder Bhaskaran
Residence: California
/s/ MICHAEL SHEPHERD
-----------------------------------------------
Michael J. Shepherd
Residence: California
<PAGE> 57
/s/ RAMESH VASUDEVAN
-----------------------------------------------
Ramesh Vasudevan
Residence: Vancouver, Canada
/s/ PADMINI VASUDEVAN
-----------------------------------------------
Padmini Vasudevan
Residence: Vancouver, Canada
/s/ CHARLES BLACKBURN
-----------------------------------------------
Charles J. Blackburn
Residence: California
/s/ DOUGLAS F. STEIN
-----------------------------------------------
Douglas F. Stein
Residence: California
/s/ GLENN F. VAN STRAATUM
-----------------------------------------------
Glenn F. Van Straatum
Residence: California
/s/ IAIN R. McNEIL
-----------------------------------------------
Iain R. McNeil
Residence: California
<PAGE> 1
EXHIBIT NO. 10.7
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is entered into as of
March 31, 1998 by and among, Nextera Enterprises, L.L.C., a Delaware limited
liability company ("Buyer"), Nextera Enterprises Holdings, L.L.C., a Delaware
limited liability company and the controlling member of Nextera ("Holdings"),
Pyramid Imaging, Inc., a California corporation (the "Company"), the holders of
the Company's common stock listed on Exhibit A attached hereto (herein
collectively referred to as the "Holders" and individually as a "Holder") and
Chase Manhattan Trust Company, National Association, as escrow agent (the
"Escrow Agent").
WHEREAS, pursuant to a Purchase Agreement (the "Purchase
Agreement") dated as of March 31, 1998 by and among Buyer, Holdings, the Company
and the Holders, Buyer is acquiring all of the issued and outstanding common
stock of the Company from the Holders;
WHEREAS, the Holders have agreed to indemnify Buyer against
certain breaches of the representations, warranties and covenants made by the
Company and the Holders in the Purchase Agreement and against certain other
matters as specified in Section 9 of the Purchase Agreement; and
WHEREAS, to secure payment of the Holders' indemnification
obligations, Eight Hundred Twenty-Five Thousand ($825,000) in cash (the
"Escrowed Cash") and 66,000 Buyer Class A Units (the "Escrowed Units")
(together, the Escrowed Cash and the Escrowed Units and additions to or earnings
on the same, the "Escrow Deposit") are being deposited, pursuant to Section
1.2(b) of the Purchase Agreement, in escrow to be held as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises of the parties herein contained, and other good and valuable
consideration, receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Establishment of Escrow: Investment. Buyer has herewith
deposited the Escrow Deposit with the Escrow Agent on the date of the Closing.
The Escrowed Units have been issued in the names of the Holders who, subject to
the provisions herein, have the right to receive such shares as set forth on
Exhibit A attached hereto, and shall be accompanied by stock powers or similar
instruments duly signed in blank by the appropriate Holder. The Escrow Deposit
shall be held in escrow in an account designated as The Pyramid Imaging Escrow
Account or an account having such other similar designation, subject to the
terms and conditions set forth herein Ravinder Bhaskaran shall serve as the
exclusive representative of the Holders with respect to the Escrow Deposit and
this Agreement (the "Escrow Representative"). If, for any reason, the Escrow
Representative shall be either unable or unwilling to serve, a successor Escrow
Representative shall be appointed by written consent of all Holders and all
references to the Escrow Representative shall be deemed to include such
successor. The Escrow Agent shall invest all cash held as part of the Escrow
Deposit only in such specific investments as Buyer and the Escrow Representative
shall from time to time jointly direct in writing to the Escrow Agent; provided,
however, that such investments shall be limited to:
<PAGE> 2
(a) time and demand deposits, certificates of deposit and
acceptances, maturing within ninety (90) days from
the date of acquisition thereof, issued by state and
national banks located in the United States of
America, including the Escrow Agent or any of its
affiliates, and having capital, surplus and profits
aggregating at least one hundred million dollars
($100,000,000);
(b) securities or other obligations of, or guaranteed by,
the United States of America or any agency thereof
having maturities of not greater than one (1) year;
(c) commercial paper, maturing within ninety (90) days
from the date of acquisition thereof, rated A-1 or
P-1 by Standard & Poor's or Moody's Investors
Service;
(d) repurchase agreements fully collateralized by
obligations described in clauses 1(a), 1(b) or 1(c)
hereof;
(e) shares of investment companies registered under the
Investment Company Act of 1940 which invest in any
obligation described herein, or shares of the Vista
Prime Money Market Fund, including those for which
the Escrow Agent or any of its affiliates provide
services for a fee, whether as an investment advisor,
custodian, transfer agent, registrar, sponsor,
distributor, manager, or otherwise.
Until further written notice, cash in the Escrow Deposit shall
be invested in Vista Prime. Unless otherwise directed in writing by the Escrow
Representative and Buyer, the Escrow Agent shall not invest all or any portion
of the Escrow Deposit in any investment if the maturity date of such investment
is later than the Termination Date (as defined below).
2. Amounts Earned on Escrow Deposit: Tax Matters. All amounts
earned, paid or distributed with respect to the Escrow Deposit (whether
interest, dividends, distributions from Buyer with respect to the Escrowed Units
or otherwise) shall become a part of the Escrow Deposit, shall be held hereunder
upon the same terms as the original Escrow Deposit and shall be distributed
together with the underlying portion of the original Escrow Deposit pursuant to
the terms of this Agreement. The parties agree that to the extent permitted by
applicable law, including Section 468B(g) of the Internal Revenue Code of 1986,
as amended, the Holders will include all amounts earned on the Escrow Deposit in
accordance with their respective percentage interests in their gross income for
federal, state and local income tax (collectively, "income tax") purposes and
pay any income tax resulting therefrom.
2
<PAGE> 3
3. Claims Against Escrow Deposit.
(a) At any time or times prior to the expiration of this
Agreement, Buyer may make claims against the Escrow Deposit for indemnification
pursuant to and in accordance with Article XII of the Purchase Agreement . Buyer
shall notify the Escrow Representative and the Escrow Agent in writing prior to
the expiration of this Agreement of each such claim, including a summary of the
amount of and bases for such claim. If the Escrow Representative shall dispute
such claim, the Escrow Representative shall give written notice thereof to Buyer
and to the Escrow Agent within thirty (30) days after receipt of notice of
Buyer's claim, in which case the Escrow Agent shall continue to hold the Escrow
Deposit in accordance with the terms of this Agreement; otherwise, such claim
shall be deemed to have been acknowledged to be payable out of the Escrow
Deposit in the full amount thereof and the Escrow Agent shall use its best
efforts to pay such claim to Holdings within three (3) business days after
expiration of said thirty day period or as soon thereafter as possible. If the
amount of the claim exceeds the value of the Escrow Deposit, the Escrow Agent
shall have no liability or responsibility for any deficiency.
(b) The Escrow Agent shall follow the procedure below in
making any payment in satisfaction of a claim against the Escrow Deposit:
(i) The Escrow Agent shall make such payment first
from the Escrowed Cash and any cash additions to or earnings on the Escrow
Deposit until all cash in the Escrow Deposit has been exhausted.
(ii) To the extent that any claim exceeds the amount
of Escrowed Cash or other cash in the Escrow Deposit, the Escrow Agent shall
make payment from the Escrowed Units in such number of Escrowed Units (computed
to the nearest whole unit) having a value equal to the value of the claim not
satisfied by cash payment. Any payment of Escrowed Units by the Escrow Agent to
Holdings shall be treated as a sale by the Holders of such Escrowed Units for
the value described herein. The value of an Escrowed Unit for purposes of this
Section shall be the fair market value of such unit on the date of the claim as
determined by the Board of Directors of Buyer (the "Board"). The fair market
value shall be determined in good faith by the Board and the Board shall notify
the Escrow Representative and Escrow Agent in writing of its determination (the
"Valuation Notice"). If the Escrow Representative disputes the fair market value
of the Escrowed Units as determined by the Board, then the Escrow Representative
shall so notify the Board and Escrow Agent in writing (the "Appraisal Notice")
within five (5) business days of receipt of the Valuation Notice. Within fifteen
(15) business days of the receipt of the Appraisal Notice, the Board and the
Escrow Representative shall each appoint a professional appraiser to determine
the fair market value of the Escrowed Units. Each appraiser shall have at least
five (5) years experience in appraising companies similar to Buyer. The two
appraisers shall within the succeeding twenty (20) day period after their
selection, attempt to reach agreement on the fair market value. If the
appraisers reach such agreement they shall so notify the Escrow Agent and their
agreement shall be final and binding on Buyer, Holdings, the Board, the Escrow
Representative, the Company, the Holders, and their affiliates. If the
appraisers fail to agree, they shall within ten (10) days thereafter select a
third appraiser with the same qualification requirements, and the three (3)
appraisers shall establish the fair market value by majority vote within the
succeeding twenty (20) day period and shall notify the Escrow Agent of their
3
<PAGE> 4
determination. Such determination of the fair market value shall be final and
binding on Buyer, Holdings, the Board, the Escrow Representative, the Holders,
the Company, and their affiliates. In all events, the appraisers selected shall
be unaffiliated with and otherwise independent of Buyer, Holdings, the Board,
the Company, the Escrow Representative, the Company, the Holders, and their
affiliates. If the fair market value of the Escrowed Units, as determined by the
appraisers, is less than or no more than five percent (5%) greater than the
value as determined by the Board, then the Holders shall pay all costs
associated with the appraisers. If the fair market value as determined by the
appraisers is more than five percent (5%) greater than the value as determined
by the Board, then Buyer shall pay for all costs associated with the appraisers.
The Escrowed Units delivered to Holdings in satisfaction of a claim shall be
allocated among the Holders so as to reduce each Holder's interest in the
remaining Escrowed Units by the pro rata interests shown in Exhibit A. In the
event that the Escrow Agent must make payment with a number of units less than
or different from the number of units represented by a certificate in the Escrow
Deposit, the Escrow Agent shall surrender such certificate to Buyer and Buyer
shall issue to the Escrow Agent certificates of Buyer Class A Units identical in
form but for the number of units as necessary to allow for proper payment of the
claim so long as the number of units of the new certificates plus the amount of
units used to satisfy such claim shall be equivalent to the total number of
units covered by the surrendered certificate.
4. Disputed Claims.
(a) If the Escrow Representative shall dispute an
indemnification claim of Buyer as above provided, the Escrow Agent shall set
aside a portion of the Escrow Deposit sufficient to pay said claim in full (the
"Set Aside Amount"). If Buyer notifies the Escrow Agent in writing that it has
made out-of-pocket expenditures in connection with any such disputed claim, and
provides paid receipts for such expenditures, in addition to expenditures
included in the Set Aside Amount, an amount equal to such additional
expenditures shall be added to the Set Aside Amount. If the Set Aside Amount
exceeds the amount of the Escrowed Cash, the Escrow Agent shall set aside an
appropriate number of Escrowed Units as determined by the procedure described in
Section 3(b)(ii) above.
(b) If the disputed indemnification claim has not been
resolved or compromised within sixty (60) days after the Escrow Representative
sends notice of dispute of the same, or in the event of a third-party claim or
suit, within fifteen (15) days after its resolution or compromise, said
indemnification claim shall be referred to the American Arbitration Association,
to be settled by binding arbitration in Boston, Massachusetts, in accordance
with the commercial arbitration rules of the Association. The fees and expenses
of the arbitrator shall be borne equally by the Holders and Buyer. In no event
shall the Escrow Agent be responsible for any fee or expense of any party to any
arbitration proceeding. The determination of the arbitrator as to the amount, if
any, of the indemnification claim which is properly allowable shall be
conclusive and binding upon the parties hereto and judgment may be entered
thereon in any court having jurisdiction thereof, including, without limitation,
any Superior Court in the Commonwealth of Massachusetts. The arbitrator shall
have the authority to award to the prevailing party reasonable costs and
expenses including attorney's fees and the cost of arbitration. The Escrow Agent
shall use its best efforts to make payment of such claim, as and to the extent
allowed, to Buyer out of the Set Aside
4
<PAGE> 5
Amount (or if insufficient, out of the Escrow Deposit) within three (3) business
days following the Escrow Agent's receipt of said determination or as soon
thereafter as possible.
(c) Notwithstanding Section 4(b), if a disputed
indemnification claim has not been resolved or compromised as of the Termination
Date (as hereinafter defined), and such claim does not involve a third-party
claim or suit, Buyer and the Escrow Representative shall continue to negotiate
in good faith a settlement of such claims for a period of ten (10) days. If,
after the expiration of such ten-day period, such indemnification claim still
has not been resolved or compromised, such claim shall be settled in accordance
with the arbitration provisions set forth in Section 4(b).
(d) It is understood and agreed that should any dispute arise
under this Section 4, the Escrow Agent, upon receipt of written notice of such
dispute or claim by the Escrow Representative, is authorized and directed to
retain in its possession without liability to anyone, the Set Aside Amount
relating to such dispute plus any expenditures of Buyer made pursuant to Section
4(a) until such dispute shall have been settled pursuant to this Section 4. The
Escrow Agent may, but shall be under no duty whatsoever to, institute or defend
any legal proceedings which relate to the Escrow Deposit.
5. Termination. This Agreement shall terminate on the date
that the Escrow Deposit is reduced to zero as the result of payments by the
Escrow Agent to Holdings in accordance with the provisions of Section 3 or
Section 4. If, however, the Escrow Deposit has not been reduced to zero as of
the date that is eighteen (18) months following the date of this Agreement (the
"Termination Date") and there are no outstanding indemnification claims on the
Termination Date, this Agreement shall terminate and the Escrow Agent shall
distribute the amount remaining in the Escrow Deposit to the Holders in
accordance with their pro rata interest in the Escrow Deposit as set forth in
Exhibit A attached hereto; otherwise this Agreement shall continue in effect
until all indemnification claims Buyer has made pursuant to Section 3 hereof on
or prior to the Termination Date shall have been disposed of. As of the
Termination Date, an amount of the Escrow Deposit adequate to cover all disputed
and undisputed claims made by Buyer pursuant to Section 3 hereof, plus an
additional ten percent (10%) of any such amount to cover potential expenses of
Buyer associated with such claims, will be held by the Escrow Agent, and the
Escrow Agent shall distribute on the Termination Date the balance, if any, of
the Escrow Deposit to the Holders in accordance with their pro rata interest in
the Escrow Deposit as set forth in Exhibit A attached hereto. At such time as
all remaining indemnification claims hereunder have been resolved and the Escrow
Agent has received a written notice executed by Buyer and the Escrow
Representative, or notification of a determination of an arbitrator pursuant to
Section 4(b), to that effect and any amounts to be distributed to Holdings in
connection therewith have been so distributed, the Escrow Agent shall distribute
the remaining Escrow Deposit, if any, to the Holders in accordance with their
pro rata interest in the Escrow Deposit as set forth in Exhibit A attached
hereto.
5
<PAGE> 6
6. The Escrow Agent.
(a) Direction from Buyer and Escrow Representative.
Notwithstanding anything herein to the contrary, the Escrow Agent shall promptly
dispose of all or any part of the Escrow Deposit as directed by a writing signed
by Buyer and Escrow Representative.
(b) Reliance by Escrow Agent; Liability of Escrow Agent.
Except with respect to capitalized terms used herein and defined in the Purchase
Agreement, the Escrow Agent will not be subject to, or be obliged to recognize,
any other agreement between the parties hereto or directions or instructions not
specifically set forth as provided for herein. The Escrow Agent will not make
any payment or disbursement from or out of the Escrow Deposit that is not
expressly authorized pursuant to this Agreement. The Escrow Agent undertakes to
perform only such duties as are expressly set forth herein. The Escrow Agent may
rely and shall be protected in acting or refraining from acting upon any written
notice, instruction or request furnished to it hereunder and believed by it to
be genuine and to have been signed or presented by the proper party or parties.
The Escrow Agent shall be under no duty to inquire into or investigate the
validity, accuracy or content of any such document. The Escrow Agent shall have
no duty to solicit any payment which may be due it hereunder. The Escrow Agent
shall not be liable for any action taken or omitted by it in good faith unless a
court of competent jurisdiction determines that the Escrow Agent's gross
negligence or willful misconduct was the primary cause of any loss to the Buyer,
Holdings, the Company or the Holders. In the administration of the Escrow
Deposit hereunder, the Escrow Agent may execute any of its powers and perform
its duties hereunder directly or through agents or attorneys and may consult
with counsel, accountants and other skilled persons to be selected and retained
by it. The Escrow Agent shall not be liable for anything done, suffered or
omitted in good faith by it in accordance with the advice or opinion of any such
counsel, accountants or other skilled persons. The Buyer and the Holders jointly
and severally hereby agree to indemnify and hold the Escrow Agent and its
directors, officers, agents and employees (collectively, the "Indemnitees")
harmless from and against any and all claims, liabilities, losses, damages,
fines, penalties, and expenses, including out-of-pocket and incidental expenses
and legal fees and expenses ("Losses") that may be imposed on, incurred by, or
asserted against the Indemnitees or any of them for following any instructions
or other directions upon which the Escrow Agent is authorized to rely pursuant
to the terms of this Agreement. In addition to and not in limitation of the
immediately preceding sentence, the Buyer and the Holders also agree to
indemnify and hold the Indemnitees and each of them harmless from and against
any and all Losses that may be imposed on, incurred by, or asserted against the
Indemnitees or any of them in connection with or arising out of Escrow Agent's
performance under this Agreement, provided the Indemnitees have not acted with
gross negligence or engaged in willful misconduct. Anything in this Agreement to
the contrary notwithstanding, in no event shall the Escrow Agent be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits). The provisions of this Section 6(b)
shall survive the termination of this Agreement and the resignation or removal
of the Escrow Agent for any reason.
(c) Fees and Expenses of the Escrow Agent. All fees of the
Escrow Agent for its services hereunder, together with any expenses reasonably
incurred by the Escrow Agent in connection with this Agreement, shall be shared
equally by Buyer on the one hand and the
6
<PAGE> 7
Holders on the other. The fees to be paid by the Holders shall be deducted from
the Escrow Deposit.
(d) Resignation and Removal of Escrow Agent. Successor Escrow
Agent.
(i) The Escrow Agent may resign from its duties
hereunder by giving each of the parties hereto not less than thirty (30) days
prior written notice of the effective date of such resignation (which effective
date shall be at least thirty (30) days after the date such notice is given). In
addition, the Escrow Agent may be removed and replaced on a date designated in a
written instrument signed by Buyer and the Escrow Representative and delivered
to the Escrow Agent. The parties hereto intend that a successor escrow agent
mutually acceptable to the Escrow Representative and Buyer will be appointed to
fulfill the duties of the Escrow Agent hereunder for the remaining term of this
Agreement in the event of the Escrow Agent's resignation or removal. Upon the
effective date of such resignation or removal, the Escrow Agent shall deliver
the property comprising the Escrow Deposit to such successor escrow agent,
together with an accounting of the investments held by it and all transactions
related to this Agreement, including any distributions made and such records
maintained by the Escrow Agent in connection with its duties hereunder and other
information with respect to the Escrow Deposit as such successor may reasonably
request. If on or before the effective date of such resignation or removal, a
successor escrow agent has not been appointed, the Escrow Agent will thereupon
deposit the Escrow Deposit into the registry of a court of competent
jurisdiction.
Upon written acknowledgment by a successor
escrow agent appointed in accordance with this Section 6(d)(i) of its agreement
to serve as escrow agent hereunder and the receipt of the property then
comprising the Escrow Deposit, the Escrow Agent shall be fully released and
relieved of all duties, responsibilities and obligations under this Agreement,
except for those arising under Section 6(b) of this Agreement, and such
successor escrow agent shall for all purposes hereof be the Escrow Agent.
(ii) Any corporation, association or other entity
into which the Escrow Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or otherwise transfer all or substantially
all of its corporate trust business, or any corporation, association or other
entity resulting from any such merger, conversion, consolidation, sale or other
transfer, shall, ipso facto, be and become successor Escrow Agent hereunder,
vested with all of the powers, discretions, immunities, privileges and all other
matters as was its predecessor, without the execution or filing of any
instrument or any further act on the part or any of the parties hereto, anything
herein to the contrary notwithstanding.
7. Voting of Escrowed Units. So long as any Escrowed Units are
retained by the Escrow Agent, the Holders shall not be entitled to exercise the
voting power, if any, with respect to that Holder's proportional interest in the
Escrowed Units as set forth in Exhibit A hereto.
8. Governing Law. IT IS THE PARTIES' INTENT THAT THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
7
<PAGE> 8
THE INTERNAL LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW).
9. Counterparts. This Escrow Agreement may be executed in one
or more counterparts, all of which documents shall be considered one and the
same document.
10. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been given
when received, if personally delivered or sent by facsimile transmission, or
three (3) days after deposited in the U.S. mails for delivery by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
TO BUYER OR HOLDINGS: Nextera Enterprises, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (781) 778-4500
Nextera Enterprises Holdings, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (781) 778-4500
With a copy to: Latham & Watkins
75 Willow Road
Menlo Park, CA 94025
Attention: Christopher L. Kaufman, Esq.
Fax: (650) 463-2600
Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attention: Cheston J. Larson, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO COMPANY: Pyramid Imaging, Inc.
545 Mission Street, 3rd Floor
San Francisco, CA 94105
Attention: Michael J. Shepherd
Fax: (415) 882-4848
8
<PAGE> 9
With a copy to: Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attention: Karen A. Dempsey, Esq.
Fax: (415) 983-1200
TO ANY HOLDER: To the address last by provided by such
Holder to the Company
With a copy to: Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attention: Karen A. Dempsey, Esq.
Fax: (415) 983-1200
TO ESCROW AGENT: Chase Manhattan Trust Company, National
Association
Union Trust Building
501 Grant Street, Room 325
Pittsburg, PA 15219
Attention: Bruce J. Karhu
Fax: (412) 234-9196
Addresses may be changed by written notice given pursuant to
this Section. Any notice given hereunder may be given on behalf of any party by
his counsel or other authorized representatives.
11. Certification of Tax Identification Number. The parties
hereto agree to provide the Escrow Agent with a certified tax identification
number by signing and returning a Form W-9 (or Form W-8, in the case of non-U.S.
persons) to the Escrow Agent prior to the date on which any income earned on the
investment of the Escrow Deposit is credited to the Escrow Deposit. The parties
hereto understand that, in the event their tax identification numbers are not
certified to the Escrow Agent, the Internal Revenue Code, as amended from time
to time, may require withholding of a portion of any interest or other income
earned on the investment of the Escrow Deposit.
12. Force Majeure. Neither Buyer, Holdings, the Company, the
Holders nor the Escrow Agent shall be responsible for delays or failures in
performance under this Agreement resulting from acts beyond its control. Such
acts shall include but not be limited to acts of God, strikes, lockouts, riots,
acts of war, epidemics, governmental regulations superimposed after the fact,
fire, communication line failures, computer viruses, power failures, earthquakes
or other disasters.
13. Modifications. This Agreement may not be altered or
modified without the express written consent of the parties hereto. No course of
conduct shall constitute a waiver of any of the terms and conditions of this
Escrow Agreement, unless such waiver is specified in writing, and then only to
the extent so specified. A waiver of any of the terms and conditions of this
Escrow Agreement on one occasion shall not constitute a waiver of the other
terms of this Escrow Agreement, or of such terms and conditions on any other
occasion.
9
<PAGE> 10
14. Reproduction of Documents. This Agreement and all
documents relating thereto, including, without limitation, (a) consents, waivers
and modifications which may hereafter be executed, and (b) certificates and
other information previously or hereafter furnished, may be reproduced by a
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties have caused this Escrow
Agreement to be executed by their duly authorized representatives, as of the
date first written above.
BUYER:
NEXTERA ENTERPRISES, L.L.C.
By: /s/ MICHAEL P. MULDOWNEY
-------------------------------------
Name: Michael P. Muldowney
------------------------------
Title:
------------------------------
HOLDINGS:
NEXTERA ENTERPRISES HOLDINGS, L.L.C.
By: /s/ MICHAEL P. MULDOWNEY
-------------------------------------
Name: Michael P. Muldowney
------------------------------
Title:
------------------------------
SELLER:
PYRAMID IMAGING, INC.
By: /s/ MICHAEL J. SHEPHERD
-------------------------------------
Name: Michael J. Shepherd
------------------------------
Title: President
------------------------------
ESCROW AGENT:
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION, as Escrow Agent
By: /s/ BRUCE J. KARHU
-------------------------------------
Name: Bruce J. Karhu
------------------------------
Title: Vice President
------------------------------
11
<PAGE> 12
HOLDERS:
/s/ RAVI BHASKARAN
--------------------------------------------
Ravi Bhaskaran
Tax Identification Number:__________________
/s/ MICHAEL J. SHEPHERD
--------------------------------------------
Michael J. Shepherd
Tax Identification Number:__________________
/s/ RAMESH VASUDEVAN
--------------------------------------------
Ramesh Vasudevan
Tax Identification Number:__________________
/s/ PADMINI VASUDEVAN
--------------------------------------------
Padmini Vasudevan
Tax Identification Number:__________________
/s/ CHARLIE BLACKBURN
--------------------------------------------
Charlie Blackburn
Tax Identification Number:__________________
/s/ DOUGLAS STEIN
--------------------------------------------
Douglas Stein
Tax Identification Number:__________________
/s/ GLENN VAN STRAATUM
--------------------------------------------
Glenn Van Straatum
Tax Identification Number:__________________
/s/ IAIN McNEIL
--------------------------------------------
Iain McNeil
Tax Identification Number:__________________
12
<PAGE> 1
EXHIBIT NO. 10.8
ASSET PURCHASE AGREEMENT
by and between
THE PLANNING TECHNOLOGIES GROUP, INC.
as "Seller,"
THE SHAREHOLDERS OF SELLER,
as "Shareholders,"
THE PLANNING TECHNOLOGIES GROUP, L.L.C.
as "Buyer,"
NEXTERA ENTERPRISES, L.L.C.
as "Nextera,"
and
NEXTERA ENTERPRISES HOLDINGS, L.L.C.
as "Holdings"
Dated: March 31, 1998
<PAGE> 2
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS....................................................................................2
1.1. Defined Terms................................................................................2
1.2. Other Defined Terms..........................................................................7
ARTICLE II. PURCHASE AND SALE OF ASSETS...................................................................9
2.1. Transfer of Assets...........................................................................9
2.2. Assumption of Liabilities....................................................................9
2.3. Excluded Liabilities.........................................................................9
2.4. Purchase Price..............................................................................10
2.5. Working Capital.............................................................................10
2.6. Closing Costs; Transfer Taxes and Fees......................................................11
ARTICLE III. CLOSING.....................................................................................12
3.1. Closing.....................................................................................12
3.2. Conveyances at Closing......................................................................12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDERS................................13
4.1. Organization and Qualification of Seller....................................................13
4.2. Shares of Seller; Beneficial Ownership......................................................13
4.3. No Subsidiaries.............................................................................13
4.4. Authority...................................................................................13
4.5. Assets......................................................................................14
4.6. Real Property...............................................................................14
4.7. Financial Statements........................................................................15
4.8. Absence of Certain Changes or Events........................................................16
4.9. Contracts and Commitments...................................................................18
4.10. Permits....................................................................................20
4.11. Litigation.................................................................................20
4.12. Compliance with Law........................................................................21
4.13. Ordinary Course............................................................................21
4.14. Directors and Officers.....................................................................21
4.15. Employees; Labor Matters...................................................................21
4.16. Banking Relations..........................................................................22
4.17. No Brokers.................................................................................22
4.18. No Other Agreements to Sell the Assets.....................................................22
4.19. Customers, Distributors and Suppliers......................................................22
4.20. Backlog....................................................................................23
4.21. Proprietary Rights.........................................................................23
4.22. Taxes......................................................................................23
4.23. Employee Benefit Programs..................................................................25
4.24. Insurance..................................................................................28
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
4.25. Accounts Receivable........................................................................28
4.26. Payments...................................................................................28
4.27. Environmental Matters......................................................................28
4.28. Warranty or Other Claims...................................................................29
4.29. Seller Records; Copies of Documents........................................................30
4.30. Powers of Attorney.........................................................................30
4.31. Disclosure.................................................................................30
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS................................................30
5.1. Ownership of Shares.........................................................................30
5.2. Authority...................................................................................31
5.3. No Brokers..................................................................................31
5.4. Agreements..................................................................................31
5.5. Experience; Accredited Investor.............................................................32
5.6. Investment..................................................................................32
5.7. No Public Market............................................................................32
5.8. Access to Data..............................................................................32
5.9. Residence...................................................................................32
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF BUYER, NEXTERA AND HOLDINGS................................32
6.1. Organization................................................................................33
6.2. Authority...................................................................................33
6.3. Litigation..................................................................................34
6.4. No Brokers..................................................................................34
6.5. Available Funds.............................................................................34
6.6. Membership Interests of Nextera and Holdings................................................34
6.7. Operating Agreements........................................................................35
6.8. Financial Statements........................................................................35
6.9. Taxes.......................................................................................35
6.10. Absence of Certain Changes or Events.......................................................37
6.11. Holdings...................................................................................38
6.12. Compliance with Laws.......................................................................38
6.13. Recapitalization...........................................................................38
ARTICLE VII. COVENANTS...................................................................................39
7.1. Further Assurances..........................................................................39
7.2. Conduct of Business.........................................................................39
7.3. Authorization from Others...................................................................40
7.4. Consummation of Agreement...................................................................41
7.5. No Solicitation of Other Offers.............................................................41
7.6. Notification of Certain Matters.............................................................41
7.7. Employee Matters............................................................................41
7.8. Option Pool.................................................................................42
7.9. Holdings Class A Units......................................................................42
7.10. Preservation of Confidentiality............................................................43
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII. CONDITIONS TO SELLER'S OBLIGATIONS.........................................................43
8.1. Representations, Warranties and Covenants...................................................43
8.2. No Actions or Court Orders..................................................................43
8.3. Consents....................................................................................44
8.4. Material Changes............................................................................44
8.5. Approval of Seller's Counsel................................................................44
8.6. Opinion of Counsel..........................................................................44
8.7. Assumption Document.........................................................................44
8.8. Escrow Agreement............................................................................44
8.9. Employment Agreements.......................................................................44
8.10. Transfer of Nextera Class A Units..........................................................45
ARTICLE IX. CONDITIONS TO BUYER'S, NEXTERA'S AND HOLDINGS' OBLIGATIONS...................................45
9.1. Representations, Warranties and Covenants...................................................45
9.2. Consents; Regulatory Compliance and Approval................................................45
9.3. No Actions or Court Orders..................................................................45
9.4. Approval of Nextera's Counsel...............................................................46
9.5. Opinion of Counsel..........................................................................46
9.6. Material Changes............................................................................46
9.7. Corporate Documents.........................................................................46
9.8. Conveyancing Documents; Release of Encumbrances.............................................46
9.9. Name Change.................................................................................46
9.10. Permits....................................................................................46
9.11. Escrow Agreement...........................................................................46
9.12. Employment Agreements......................................................................46
9.13. Consent to Recapitalization................................................................47
ARTICLE X. CONSENTS TO ASSIGNMENT........................................................................47
10.1. Consents to Assignment.....................................................................47
ARTICLE XI. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.................................................48
11.1. Collection of Accounts Receivable and Letters of Credit....................................48
11.2. Books and Records; Tax Matters.............................................................48
11.3. Survival of Representations, Etc...........................................................49
ARTICLE XII. INDEMNIFICATION.............................................................................50
12.1. Indemnification by Seller and the Shareholders.............................................50
12.2. Limitations on Indemnification by Seller and the Shareholders..............................51
12.3. Indemnification by Nextera.................................................................52
12.4. Limitation on Indemnification by Nextera...................................................52
12.5. Notice; Defense of Claims..................................................................52
12.6. Satisfaction of Seller and Shareholder Indemnification Obligations.........................53
12.7. Bulk Sales.................................................................................53
12.8. Valuation of Buyer Class A Units...........................................................53
12.9. Exclusive Remedy...........................................................................54
ARTICLE XIII. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED................................................54
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
13.1. Termination................................................................................54
13.2. Effect of Termination......................................................................54
ARTICLE XIV. MISCELLANEOUS...............................................................................54
14.1. Recapitalization...........................................................................54
14.2. Fees and Expenses..........................................................................55
14.3. Governing Law..............................................................................55
14.4. Notices....................................................................................55
14.5. Entire Agreement...........................................................................58
14.6. Assignability; Binding Effect..............................................................58
14.7. Captions and Gender........................................................................58
14.8. Execution in Counterparts..................................................................58
14.9. Amendments.................................................................................58
14.10. Publicity and Disclosures.................................................................58
14.11. Specific Performance......................................................................58
14.12. Obligations...............................................................................58
14.13. Agent of Sellers..........................................................................59
</TABLE>
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of March 31, 1998, is by and
among The Planning Technologies Group, L.L.C., a Delaware limited liability
company ("Buyer"), Nextera Enterprises, L.L.C., a Delaware limited liability
company and the controlling member of Buyer ("Nextera"), Nextera Enterprises
Holdings, L.L.C., a Delaware limited liability company and the controlling
member of Nextera ("Holdings"), The Planning Technologies Group, Inc., a
Massachusetts corporation (the "Seller"), and the holders of Seller's capital
stock (identified on Exhibit A-1 and herein collectively referred to as the
"Shareholders" and individually as a "Shareholder").
W I T N E S S E T H
WHEREAS, Seller owns certain assets which it uses in the conduct of the
Business (as defined below);
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, such assets upon the terms and subject to the conditions of this
Agreement;
WHEREAS, the Shareholders own of record and beneficially all of the
issued and outstanding capital stock of Seller, consisting of 126 shares of
Common Stock (said shares referred to herein as the "Shares") and desire to have
Seller sell such assets to Buyer upon the terms and subject to the conditions of
this Agreement;
WHEREAS, Nextera as the controlling member of Buyer, desires to issue
membership interests pursuant to, and subject to the terms and conditions of,
this Agreement; and
WHEREAS, Holdings, as the controlling member of Nextera, desires to
issue membership interests pursuant to, and subject to the terms and conditions
of, employment agreements to be entered into by the Shareholders and Buyer, as
further specified herein.
NOW THEREFORE, in consideration of the respective covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
<PAGE> 7
ARTICLE I.
DEFINITIONS
1.1. Defined Terms. As used herein, the terms below shall have the
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending upon the reference.
"Action" shall mean any action, claim, suit, litigation,
proceeding, arbitral action, governmental audit, criminal prosecution,
governmental investigation or unfair labor practice charge or complaint.
"affiliate" shall have the meaning set forth in the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
"Assets" shall mean all of Seller's right, title and interest in
and to the business, properties, assets and rights of any kind, whether tangible
or intangible, real or personal and constituting, or used or useful in
connection with, or related to, the Business owned by Seller or in which Seller
has any interest, including without limitation all of Seller's right, title and
interest in the following:
(a) all accounts and notes receivable (whether
current or noncurrent), refunds, deposits, prepayments or prepaid expenses
(including without limitation any prepaid insurance premiums) of Seller;
(b) all cash and cash equivalents held by Seller,
provided the amount under this clause (b) shall in no event exceed $400,000
(c) all Contract Rights, to the extent transferable;
(d) all Leases;
(e) all Owned Real Property;
(f) all Leasehold Estates;
(g) all Leasehold Improvements;
(h) all Fixtures and Equipment;
(i) all Inventory;
(j) all Books and Records;
(k) all Proprietary Rights relating to the Business;
(l) all Permits, to the extent transferable;
<PAGE> 8
(m) all computers and software;
(n) all Insurance Policies, to the extent
assignable;
(o) all available supplies, sales literature,
promotional literature, customer, supplier and distributor lists, art work,
display units, telephone and fax numbers and purchasing records related to the
Business;
(p) all rights under or pursuant to all warranties,
representations and guarantees made by suppliers in connection with the Assets
or services furnished to Seller pertaining to the Business or affecting the
Assets, to the extent such warranties, representations and guarantees are
assignable;
(q) all deposits and prepaid expenses of Seller; and
(r) all claims, causes of action, choses in action,
rights of recovery and rights of set-off of any kind, against any person or
entity, including without limitation any liens, security interests, pledges or
other rights to payment or to enforce payment in connection with service
performed or products delivered by Seller on or prior to the Closing Date;
but excluding therefrom the Excluded Assets.
"Books and Records" shall mean (a) all records and lists of
Seller pertaining to the Assets, (b) all records and lists pertaining to the
Business, customers, suppliers or personnel of Seller, (c) all product, business
and marketing plans of Seller and (d) all books, ledgers, files, reports, plans,
drawings and operating records of every kind maintained by Seller, but excluding
the originals of Seller's minute books, stock books and tax returns.
"Business" shall mean all of Seller's current operations
including its business of management consulting and information technology
support.
"Closing Date" shall mean March 31, 1998, or such other date as
Buyer and Seller shall mutually agree upon.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder.
"Contract" shall mean any agreement, contract, note, loan,
evidence of indebtedness, purchase order, letter of credit, indenture, security
or pledge agreement, franchise agreement, undertaking, covenant not to compete,
employment agreement, license, instrument, obligation or commitment to which
Seller is a party or is bound and which relates to the Business or the Assets,
whether oral or written, but excluding all Leases.
"Contract Rights" shall mean all of Seller's rights and
obligations under the Contracts listed on Schedule 4.6 and Schedule 4.9 and all
Contracts entered into in the ordinary course of business which are not required
to be listed, provided that Contract Rights shall not include rights and
obligations with respect to existing employment agreements of Seller, the
<PAGE> 9
Seller's Stock Restriction Agreements with Mr. Douglas Ferguson, Mr. Daniel
Gilmore and Mr. Joseph Axelrod and that certain Stockholder's Agreement dated
March 31, 1998 by and among the Shareholders and/or any other agreement which is
identified on Schedule 4.9 as not being assigned.
"Copyrights" shall mean registered copyrights, copyright
applications and unregistered copyrights.
"Court Order" shall mean any judgment, decision, consent decree,
injunction, ruling or order of any federal, state or local court or governmental
agency, department or authority that is binding on any person or its property
under applicable law.
"Damages" shall mean damages, Liabilities, losses, taxes, fines,
penalties, costs, and expenses (including, without limitation, reasonable fees
of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) provided, however, that such Damages shall be net
of any Associated Tax Benefit (as defined below) and net of any insurance
proceeds received by an indemnified party from a non-affiliated insurance
company on account of such loss (after taking into account any cost, including
deductibles, incurred in obtaining such proceeds and any increase in insurance
premiums as a direct result of a claim relating to such proceeds) and provided
further that Damages shall not include an allocation of internal overhead costs
of the party seeking indemnification. As used herein, the term "Associated Tax
Benefit" means the cumulative reduction, if any, in taxes enjoyed by an
indemnified party in any taxable year or years as a result of the tax treatment
of Damages, such reduction to be reduced (but not below zero) by any incremental
taxes paid by the indemnified party by reason of the inclusion of the
indemnification payment in income if and to the extent required by applicable
law. The amount of the Associated Tax Benefit shall be computed by the
indemnified party on such reasonable assumptions as it may select.
"Default" shall mean (1) a breach of or default under any
Contract or Lease, (2) the occurrence of an event that with the passage of time
or the giving of notice or both would constitute a breach of or default under
any Contract or Lease, or (3) the occurrence of an event that with or without
the passage of time or the giving of notice or both would give rise to a right
of termination, renegotiation or acceleration under any Contract or Lease.
"Disclosure Schedule" shall mean a schedule executed and
delivered by Seller and the Shareholders to Buyer as of the date hereof which
sets forth the exceptions to the representations and warranties contained in
Article IV hereof and certain other information called for by this Agreement.
Unless otherwise specified, each reference in this Agreement to any numbered
schedule is a reference to that numbered schedule which is included in the
Disclosure Schedule.
"Encumbrance" shall mean any claim, lien, pledge, option,
charge, easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give
<PAGE> 10
any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Escrow Agent" shall have the meaning assigned to such term in
the Escrow Agreement attached hereto as Exhibit B.
"Excluded Assets," notwithstanding any other provision of this
Agreement, shall mean the following assets of Seller which are not to be
acquired by Buyer hereunder:
(a) all Contracts and Permits, to the extent not
transferable;
(b) all claims, causes of action, choses in action,
rights of recovery and rights of set-off of any kind against any person or
entity arising out of or relating to the Assets to the extent related to the
Excluded Liabilities;
(c) all rights under this Agreement and the Escrow
Agreement and other agreements related to this Agreement;
(d) all rights to tax refunds;
(e) minute books and other corporate records;
(f) all rights under existing employment agreements;
and
(g) all rights under the Seller's Stock Restriction
Agreements with Mr. Douglas M. Ferguson, Mr. Daniel R. Gilmore and Mr. Joseph
Axelrod and that certain Stockholder's Agreement dated March 31, 1998 by and
among the Shareholders.
"Facility Leases" shall mean all of the leases described on
Schedule 4.6.
"Fixtures and Equipment" shall mean all of the furniture,
fixtures, furnishings, machinery, automobiles, trucks, spare parts, supplies,
equipment, tooling, molds, patterns, dies and other tangible personal property
owned by Seller and used in connection with the Business, wherever located and
including any such Fixtures and Equipment in the possession of any of Seller's
suppliers, including all warranty rights with respect thereto.
"Former Facility" shall mean each plant, office, manufacturing
facility, store, warehouse, improvement, administrative building and all real
property and related facilities that was owned, leased or operated by Seller at
any time prior to the date hereof.
"Insurance Policies" shall mean the insurance policies related
to the Assets listed on Schedule 4.24.
"Inventory" shall mean all of Seller's inventory held for resale
and all of Seller's raw materials, work in process, finished products, wrapping,
supply and packaging items and similar items with respect to the Business, in
each case wherever the same may be located.
<PAGE> 11
"Leased Real Property" shall mean all leased plants, offices,
manufacturing facilities, stores, warehouses, improvements, administration
buildings, and all real property and related facilities which are identified or
listed on Schedule 4.6 attached hereto.
"Leasehold Estates" shall mean all of Seller's rights and
obligations as lessee under the Leases.
"Leasehold Improvements" shall mean all leasehold improvements
situated in or on the Leased Real Property and owned by Seller.
"Leases" shall mean all of the existing leases with respect to
the personal or real property of Seller listed on Schedule 4.6 and/or Schedule
4.9 or entered into in the ordinary course of business and not required to be
listed.
"Liabilities" shall mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, guaranty or endorsement of
or by any person of any type, whether accrued, absolute, contingent, matured,
unmatured or other.
"material adverse effect" or "material adverse change" shall
mean with respect to the Business or the Assets any material adverse effect or
change in the condition (financial or other), business, results of operations,
prospects, assets, Liabilities or operations of the Business and/or the Assets
or on the ability of Seller to consummate the transactions contemplated hereby,
or any event or condition which would, with the passage of time, constitute a
"material adverse effect" or "material adverse change."
"Nextera Operating Agreement" shall mean the Amended and
Restated Limited Liability Company Agreement of Nextera Enterprises, L.L.C.
dated as of April 9, 1997, as amended on January 6, 1988.
"ordinary course of business" or "ordinary course" or any
similar phrase shall mean the ordinary course of the Business and consistent
with Seller's past practice.
"Patents" shall mean all patents and patent applications and
registered design and registered design applications.
"Permits" shall mean all licenses, permits, franchises,
approvals, authorizations, consents or orders of, or filings with, any
governmental authority, whether foreign, federal, state or local, or any other
person, necessary or desirable for the past, present or anticipated conduct of,
or relating to the operation of the Business.
"Permitted Lien" shall mean: (i) materialmen's, mechanics',
carriers', workmen's, repairmen's or other like liens arising in the ordinary
course of business for amounts not yet due or which are being contested in good
faith by appropriate proceedings, (ii) liens for current taxes not yet due or
any taxes being contested in good faith by appropriate proceedings, (iii) liens
to secure performance of statutory obligations, (iv) any lien securing any
purchase money indebtedness incurred in the ordinary course of business and
reflected in Seller's financial statements, (v) liens of lessors under Leases,
(vi) rights of third parties under the terms of Seller's
<PAGE> 12
Contracts and (vii) advance payments in respect of services to be rendered by
Seller in the future, to the extent the services have not yet been rendered.
"Proprietary Rights" shall mean all of Seller's Copyrights,
Patents, Trademarks, technology rights and licenses, computer software
(including without limitation any source or object codes therefor or
documentation relating thereto), trade secrets, franchises, know-how,
inventions, designs, specifications, plans, drawings and intellectual property
rights.
"Regulations" shall mean any laws, statutes, ordinances,
regulations, rules, court decisions, agency guidelines, principles of law and
orders of any foreign, federal, state or local government and any other
governmental department or agency, including without limitation Environmental
Laws, energy, motor vehicle safety, public utility, zoning, building and health
codes, occupational safety and health and laws respecting employment practices,
employee documentation, terms and conditions of employment and wages and hours.
"Representative" shall mean any officer, director, principal,
attorney, agent, employee or other representative.
"Shareholders" shall mean Mr. Joseph Axelrod, Mr. Douglas M.
Ferguson, Mr. Daniel R. Gilmore and Mr. Mason S. Tenaglia (as listed on Exhibit
A-1 hereto).
"Subsidiary" shall mean (a) any corporation in an unbroken chain
of corporations beginning with Seller if each of the corporations other than the
last corporation in the unbroken chain then owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain, (b) any partnership in which Seller is a general
partner, or (c) any partnership in which Seller possesses a 50% or greater
interest in the total capital or total income of such partnership.
"Tax" shall mean all governmental taxes, charges, fees, levies
or other assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, VAT, service, service use, ad valorem,
transfer, franchise, profits, license, lease, withholding, social security,
payroll, employment, excise, estimated, severance, stamp, recording, occupation,
real and personal property, gift, windfall profits or other taxes, customs
duties, fees, assessments or charges of any kind whatsoever, whether computed on
a separate, consolidated, unitary, combined or other basis, together with any
interest, fines, penalties, additions to tax or other additional amounts imposed
thereon or with respect thereto imposed by any taxing authority (domestic or
foreign).
"Trademarks" shall mean registered trademarks, registered
service marks, trademark and service mark applications and unregistered
trademarks and service marks.
1.2. Other Defined Terms. The following terms shall have the meanings
defined for such terms in the Sections set forth below:
<PAGE> 13
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Adjustment Amount 2.5
Arbitrator 2.5
Assumed Liabilities 2.2
Assumption Document 3.2(b)
Base Balance Sheet 4.7(a)
Base Balance Sheet Date 4.7(a)
Bulk Sales Act 12.8
Closing 3.1
Closing Working Capital 2.5
Customers 4.19
Distributors 4.19
Employee Program 4.23
Environmental Law 4.27(e)
ERISA 4.23
ERISA Affiliate 4.23
Escrow Amount 2.4
Escrowed Cash 2.4
Escrowed Units 2.4
Escrow Agreement 2.4(a)
Estimated Working Capital 2.5
Excluded Liabilities 2.3
Excluded Liability Claims 12.1
Facility Lease 4.6(a)
Financial Statements 4.7(a)
Fraud Claims 12.1
General Claims 12.1
Hazardous Material 4.27(e)
Hazardous Waste 4.30(e)
Holdings Operating Agreement 5.8
Individual Claims 12.1
Nextera SARs 14.1
Ownership Claims 12.1
Purchase Price 2.4(a)
Recapitalization 14.1
Rehired Employee 7.7
Suppliers 4.21
SARs 7.8
Tax Claims 12.1
Tax Return 4.24
</TABLE>
<PAGE> 14
ARTICLE II.
PURCHASE AND SALE OF ASSETS
2.1. Transfer of Assets. Upon the terms and subject to the conditions
contained herein, at the Closing, Seller will sell, convey, transfer, assign and
deliver to Buyer, and Buyer will purchase and acquire from Seller, the Assets,
free and clear of all Encumbrances other than the Permitted Liens.
2.2. Assumption of Liabilities. Upon the terms and subject to the
conditions contained herein, at the Closing, Buyer shall assume and agree to pay
when due, perform and discharge in accordance with the terms thereof the
following, and only the following, Liabilities of Seller (the "Assumed
Liabilities"):
(a) All Liabilities accruing, arising out of, or
relating to events or occurrences happening after the Closing Date under the
Contracts and Leases listed on Schedule 4.6 and/or Schedule 4.9 (including,
without limitation all obligations under that certain Indenture of Lease dated
September 5, 1996 between Seller and Mortimer B. Zuckerman and Edward H. Linde,
trustees of 92 Hayden Avenue Trust), or under Contracts or Leases which are not
listed on Schedule 4.6 and/or Schedule 4.9 but which are entered into in the
ordinary course of business after the date hereof, but not including any
Liability for any Default under any such Contract occurring on or prior to the
Closing Date;
(b) All of Seller's accounts payable and accrued
liabilities set forth on the Base Balance Sheet or incurred after the Base
Balance Sheet Date (i) in the ordinary course of business and (ii) in compliance
with the terms of this Agreement;
(c) All of Seller's accrued liabilities for employee
salaries and bonuses due Seller's employees; and
(d) The Liability of Seller for that certain
dividend payable to the Shareholders by Seller in connection with this Agreement
as stated on the March 31, 1998 interim balance sheet of Seller.
2.3. Excluded Liabilities. Notwithstanding any other provision of
this Agreement, except for the Assumed Liabilities expressly specified in
Section 2.2, Buyer shall not assume, or otherwise be responsible for, any
Liabilities of Seller, whether liquidated or unliquidated, or known or unknown,
whether arising out of occurrences prior to, at or after the date hereof
("Excluded Liabilities"), which Excluded Liabilities include, without
limitation:
(a) Any Liability to or in respect of any employees
or former employees of Seller including without limitation (i) any employment
agreement, whether or not written, between Seller and any person, (ii) any
Liability under any Employee Program at any time maintained, contributed to or
required to be contributed to by or with respect to Seller or under which Seller
may incur Liability, or any contributions, benefits or Liabilities therefor, or
any Liability with respect to Seller's withdrawal or partial withdrawal from or
termination of any
<PAGE> 15
Employee Program and (iii) any claim of an unfair labor practice, or any claim
under any state unemployment compensation or worker's compensation law or
regulation or under any federal or state employment discrimination law or
regulation, which shall have been asserted on or prior to the Closing Date or is
based on acts or omissions which occurred on or prior to the Closing Date;
(b) Any Liability of Seller in respect of any Tax;
(c) Any Liability arising from services performed by
or on behalf of Seller or any other person or entity on or prior to the Closing
Date;
(d) Any Liability of Seller arising out of or
related to any Action against Seller and which shall have been asserted on or
prior to the Closing Date or to the extent the basis of which shall have arisen
on or prior to the Closing Date;
(e) Any Liability of Seller resulting from entering
into, performing its obligations pursuant to or consummating the transactions
contemplated by, this Agreement;
(f) Any Liability related to any Former Facility;
and
(g) Any Liability with respect to Seller's 401(k)
plan.
2.4. Purchase Price. In consideration of the sale, transfer,
assignment, conveyance and delivery of the Assets by Seller to Buyer and in
reliance upon the representations and warranties of Seller herein contained and
made at the Closing and upon the terms and subject to the satisfaction of all of
the conditions set forth herein, Buyer agrees that at the Closing, it will (i)
pay to Seller the aggregate amount of (A) Five Million Seven Hundred Three
Thousand Five Hundred Dollars ($5,703,500) and (B) 181,900 Class A Common Units
of Nextera issued pursuant to the Nextera Operating Agreement (collectively with
the Escrow Amount as defined below, the "Purchase Price") (the cash payment to
be made by bank cashier's check in Boston Clearing House Funds or by wire
transfer of immediately available funds) and shall assume the Assumed
Liabilities pursuant to this Agreement and (ii) deliver to the Escrow Agent One
Million Six Thousand Five Hundred Dollars ($1,006,500) (the "Escrowed Cash") and
32,100 Class A Common Units of Nextera (the "Escrowed Units" and together with
the Escrowed Cash the "Escrow Amount") pursuant to and in accordance with the
terms of the Escrow Agreement to be executed in substantially the form attached
hereto as Exhibit B. The Purchase Price shall be allocated among the Assets in
the manner required by Section 1060 of the Code and regulations thereunder.
Exhibit C attached hereto sets forth the amount of the Purchase Price allocable
to the various Assets. Buyer and Seller agree to each prepare and file on a
timely basis with the Internal Revenue Service substantially identical initial
and supplemental Internal Revenue Service Forms 8594 "Asset Acquisition
Statements Under Section 1060" consistent with Exhibit C and which gives effect
to any Adjustment Amount determined in accordance with Section 2.5 hereof and to
file all relevant Tax Returns in a manner consistent therewith. Seller and the
Shareholders acknowledge that the value of the Nextera Class A Common Units is
$2.50 per unit.
2.5. Working Capital.
<PAGE> 16
(a) Working Capital Adjustment. The amount of the
cash payment to be made by Buyer for the Assets at the Closing is premised upon
Seller delivering to Buyer at least Five Hundred Fifty Thousand Dollars
($550,000) of working capital of which Four Hundred Thousand Dollars ($400,000)
shall be cash, determined in accordance with generally accepted accounting
principles, at the Closing, (such amount being the "Minimum Working Capital").
No later than two (2) business days prior to the Closing Date, Seller shall
advise Buyer and Nextera of its estimate of working capital to be delivered at
the Closing. Without limiting other rights that Buyer and Nextera may have under
this Agreement, if the amount so estimated is less than the Minimum Working
Capital, the cash payment to Seller for the Assets at the Closing shall be
reduced by the amount of such shortfall. If the amount so estimated is greater
than the Minimum Working Capital, the cash payment to Seller for the Assets at
the Closing shall be increased by the amount of such surplus.
Within thirty (30) days following the Closing, Seller
shall determine the actual working capital as of the Closing Date (the "Closing
Working Capital") and promptly notify Buyer of such amount. If the Closing
Working Capital is less than the estimated working capital as described in the
preceding paragraph, and would have resulted in a reduced cash payment to Seller
for the Assets at the Closing, Seller and the Shareholders shall pay to Buyer
the amount of such shortfall in cash. If the Closing Working Capital is greater
than the estimated working capital as described in the preceding paragraph, and
would have resulted in an increased cash payment to Seller for the Assets at the
Closing, Buyer shall pay to Seller the amount of such surplus in cash.
(b) Disputed Closing Working Capital. If Buyer shall
disagree with the amount determined to be the Closing Working Capital, it shall
notify Seller and the Shareholders in writing of such disagreement within
fifteen (15) business days of its receipt of the determination of Closing
Working Capital. Buyer, Seller and the Shareholders shall use their commercially
reasonable efforts for a period of thirty (30) days following the notice of
disagreement to resolve any disagreement. If at the end of such period, Buyer,
Seller and the Shareholders are unable to resolve the disagreement, a mutually
agreed upon independent public accounting firm (the "Arbitrator") shall be
retained to make a final and binding determination of the actual Closing Working
Capital. The determination of the Arbitrator shall be final, binding and
conclusive on the parties. The fees and expenses of the Arbitrator shall be
borne equally by Buyer and the Shareholders.
2.6. Closing Costs; Transfer Taxes and Fees. Seller shall be
responsible for any documentary and transfer taxes and any sales, use or other
taxes imposed by reason of the transfers of Assets provided hereunder and any
deficiency, interest or penalty asserted with respect thereto. Seller shall pay
the fees and costs of recording or filing all applicable conveyancing
instruments described in Section 3.2(a). Seller shall pay all costs of applying
for new Permits and obtaining the transfer of existing Permits which may be
lawfully transferred.
<PAGE> 17
ARTICLE III.
CLOSING
3.1. Closing. The Closing of the transactions contemplated herein
(the "Closing") shall be held at a mutually agreeable location in Boston,
Massachusetts on 31, 1998 or at such other date and location as may be mutually
agreed upon by the parties.
3.2. Conveyances at Closing.
(a) Instruments and Possession. To effect the sale
and transfer referred to in Section 2.1 hereof, Seller will, at the Closing,
execute and deliver to Buyer:
(i) one or more bills of sale, in the form
attached hereto as Exhibit D, conveying in the aggregate all of Seller's owned
personal property included in the Assets;
(ii) subject to Section 10.1, Assignments of
Lease in the form attached hereto as Exhibit E with respect to the Leases;
(iii) subject to Section 10.1, Assignments of
Contract Rights, each in the form of Exhibit F attached hereto, with respect to
the Contract Rights;
(iv) a check in the amount of $400,000; and
(v) such other instruments as shall be
reasonably requested by Buyer to vest in Buyer title in and to the Assets in
accordance with the provisions hereof.
(b) Assumption Document. Upon the terms and subject
to the conditions contained herein, at the Closing Buyer shall deliver to Seller
an instrument of assumption substantially in the form attached hereto as Exhibit
G, evidencing Buyer's assumption, pursuant to Section 2.2, of the Assumed
Liabilities (the "Assumption Document").
(c) Form of Instruments. To the extent that a form
of any document to be delivered hereunder is not attached as an Exhibit hereto,
such documents shall be in form and substance, and shall be executed and
delivered in a manner, reasonably satisfactory to Buyer and Seller.
(d) Purchase Price and Escrow Amount. Subject to the
terms of this Agreement, Buyer shall deliver the Purchase Price to the Seller
and the Escrow Amount to the Escrow Agent.
(e) Certificates; Opinions. Buyer, Seller and the
Shareholders shall deliver the certificates, opinions of counsel and other
matters described in Articles VIII and IX.
<PAGE> 18
(f) Consents. Subject to Section 10.1, Seller shall
deliver all Permits and any other third party consents required for the valid
transfer of the Assets as contemplated by this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDERS
As a material inducement to Buyer, Nextera and Holdings to enter
into this Agreement and consummate the transactions contemplated hereby, Seller
and each of the Shareholders jointly and severally hereby represent and warrant
to Buyer, Nextera and Holdings as follows, which representations and warranties
are, as of the date hereof, and will be, as of the Closing Date, true and
correct:
4.1. Organization and Qualification of Seller. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts with corporate power and authority to own
or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business as currently
conducted or proposed to be conducted. Copies of the Articles of Organization
and Bylaws of Seller, and all amendments thereto, heretofore delivered to Buyer
are accurate and complete as of the date hereof. Seller is not in violation of
any term of the Articles of Organization or Bylaws of Seller. Seller is not
required to be licensed or qualified to conduct its business or own its property
in any other jurisdiction in which failure to be so licensed or qualified would
have a material adverse effect on Seller.
4.2. Shares of Seller; Beneficial Ownership. The authorized capital
stock of Seller consists of 200,000 shares of Common Stock, no par value, of
which 126 shares are duly and validly issued, outstanding, fully paid and
non-assessable and of which 199,874 shares are authorized but unissued (after
giving effect to Seller's repurchase of shares from Patrick S. Noonan) . Other
than as set forth on Exhibit A-1, there are no outstanding options, warrants,
rights, commitments, preemptive rights or agreements of any kind for the
issuance or sale of, or outstanding securities convertible into, any additional
shares of capital stock of any class of Seller. None of Seller's capital stock
has been issued in violation of any federal or state law. There are no voting
trusts, voting agreements, proxies or other agreements, instruments or
undertakings with respect to the voting of the Shares to which Seller or any of
the Holders is a party.
4.3. No Subsidiaries. Seller has no subsidiaries or investments in
any other corporation or business organization.
4.4. Authority. Seller has full right, authority and power to enter
into this Agreement and each agreement, document and instrument to be executed
and delivered by Seller pursuant to this Agreement and to carry out the
transactions contemplated hereby. The execution, delivery and performance by
Seller of this Agreement and each such other agreement, document and instrument
have been duly authorized by all necessary action of Seller and no other action
on the part of Seller or Shareholders is required in connection therewith.
<PAGE> 19
This Agreement and each agreement, document and instrument
executed and delivered by Seller and each of the Shareholders pursuant to this
Agreement constitutes, or when executed and delivered will constitute, valid and
binding obligations of Seller and each of the Shareholders enforceable in
accordance with their terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject to the effect of general principles of equity,
including, without limitation, the possible unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law. The execution, delivery and performance by
Seller of this Agreement and each such agreement, document and instrument:
(i) does not and will not violate any
provision of the Articles of Organization and Bylaws of Seller;
(ii) does not and will not violate any laws
of the United States, or any state or other jurisdiction applicable to Seller or
require Seller to obtain any approval, consent or waiver of, or make any filing
with, any person or entity (governmental or otherwise) that has not been
obtained or made; and
(iii) except as set forth in Schedule 4.4,
does not and will not result in a breach of, constitute a default under,
accelerate any obligation under, or give rise to a right of termination of any
indenture or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which Seller is a
party or by which the property of Seller is bound or affected and which is
material to the Seller, the Assets or the Business, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge or
encumbrance on any of Seller's capital stock.
4.5. Assets. Excluding the Leased Real Property, Seller has and will
transfer good and marketable title to the Assets and upon the consummation of
the transactions contemplated hereby, Buyer will acquire good and marketable
title to all of the Assets, free and clear of any Encumbrances other than the
Permitted Liens. The Assets include all assets necessary for the conduct of the
Business as currently conducted and proposed to be conducted. Schedule 4.5
contains accurate lists and summary descriptions of all tangible Assets where
the value of an individual item exceeds $5,000 or where an aggregate of similar
items exceeds $20,000. All tangible assets and properties which are part of the
Assets are in good operating condition and repair (normal wear and tear
excepted)and are usable in the ordinary course of business and conform in all
material respects to all applicable Regulations (including Environmental Laws)
relating to their construction, use and operation.
4.6. Real Property.
Seller does not own any real property. All of the real property
leased by Seller is identified on Schedule 4.6 (herein referred to as the
"Leased Real Property").
(a) Leases. All leases of Leased Real Property are
identified on Schedule 4.6 (each such lease is herein referred to as a "Facility
Lease"), and true and complete
<PAGE> 20
copies thereof have been delivered to Nextera. Each Facility Lease has been duly
authorized and executed by the parties and is in full force and effect and
binding and enforceable against the parties thereto. Seller is not in default
under any Facility Lease, nor has any event occurred which, with notice or the
passage of time, or both, would give rise to such a default. To Seller's
knowledge, the other party to each Facility Lease is not in default under such
Facility Lease and there is no event which, with notice or the passage of time,
or both, would give rise to such a default.
(b) Leases or Other Agreements. Except for Facility
Leases listed on Schedule 4.6, there are no leases, subleases, licenses,
occupancy agreements, options, rights, concessions or other agreements or
arrangements, written or oral, granting to any person the right to purchase, use
or occupy any real property in connection with the Business or any portion
thereof or interest in any such real property.
(c) Facility Leases and Leased Real Property. With
respect to each Facility Lease, Seller has and will transfer to Buyer at the
Closing an unencumbered interest in the Leasehold Estate subject to the
Permitted Liens. Seller enjoys peaceful and undisturbed possession of all the
Leased Real Property.
(d) Condition of Leased Real Property. To the
knowledge of Seller there are no material defects in the physical condition of
any portion of the Leased Real Property and all such Leased Real Property is in
good operating condition and repair (normal wear and tear excepted), and has
been well maintained.
(e) Compliance with the Law. Seller has not received
any notice from any governmental authority of any violation of any law,
ordinance, regulation, license, permit or authorization issued with respect to
the Leased Real Property that has not been heretofore corrected. Seller has not
received any notice of any real estate tax deficiency or assessment and is not
aware of any proposed deficiency, claim or assessment with respect to any of the
Leased Real Property, or any pending or threatened condemnation thereof.
4.7. Financial Statements.
(a) Seller has delivered to Nextera the following
financial statements, copies of which are attached hereto as Schedule 4.7:
balance sheets of Seller as of December 31, 1997 and as of January 31, 1998 and
February 28, 1998, and statements of income, retained earnings and cash flows
for its fiscal year ended December 31, 1997, as audited by Harte, Carucci &
Driscoll, and balance sheets of Seller as of January 31, 1998 and February 28,
1998 and statements of income, retained earnings and cash flows for the interim
periods ended January 31, 1998 and February 28, 1998 (the "Financial
Statements"). The December 31, 1997 balance sheet is hereinafter referred to as
the "Base Balance Sheet" and December 31, 1997 is hereafter referred to as the
"Base Balance Sheet Date." The Financial Statements, have been prepared in
accordance with generally accepted accounting principles applied consistently
during the periods covered thereby, and said Financial Statements, present
fairly in all material respects the financial condition of Seller at the dates
of said statements and the results of its operations for the periods covered
thereby, and the unaudited balance sheet and statements of income, retained
earnings and
<PAGE> 21
cash flows for the interim periods ended January 31, 1998 and February 28, 1998
provided by Seller to Nextera since the date of the Base Balance Sheet present
fairly and completely in all material respects the information purported to be
shown thereon. It is understood that the financial statements and results of the
interim periods do not include notes, may be subject to adjustments and are not
necessarily indicative of results that may be expected for the entire year or
other interim periods.
(b) As of the date of the Base Balance Sheet, Seller
did not have any Liabilities of any nature, whether accrued, absolute or
contingent (including without limitation, Liabilities as guarantor or otherwise
with respect to obligations of others, Liabilities for taxes due or then accrued
or to become due, or contingent or potential Liabilities relating to activities
of Seller or the conduct of its business prior to the date of the Base Balance
Sheet), except Liabilities stated or adequately reserved against on the Base
Balance Sheet or reflected in Disclosure Schedule and future performance
obligations under Contracts other than as a result of a default existing as of
the Closing.
(c) Seller's fiscal year 1998 operating budget dated
March 6, 1998 which has previously been supplied by Seller to Nextera has been
prepared in good faith on the basis of assumptions by Seller which Seller
believed were reasonable at the time of the preparation of such projections. It
is recognized and understood, however, without affecting or limiting any other
representation or warranty in this Agreement, that such projections do not
constitute any representation or warranty as to the future performance of the
Business and that some assumptions may not materialize and unanticipated events
and circumstances may occur subsequent to the date of the projections and that
therefore actual results may vary materially from projected results and such
variations may be adverse.
(d) Except as set forth on Schedule 4.7 and for the
Excluded Liabilities, as of the date hereof and as of the Closing, Seller has
not had and will not have any Liabilities of any nature, whether accrued,
absolute or contingent (including without limitation Liabilities as guarantor or
otherwise with respect to obligations of others, or Liabilities for taxes due or
then accrued or to become due or contingent or potential Liabilities relating to
activities of Seller or the conduct of its business prior to the date hereof or
the Closing, as the case may be, regardless of whether claims in respect thereof
had been asserted as of such date), except Liabilities (i) stated or adequately
reserved against on the Base Balance Sheet or the notes thereto, (ii) incurred
or arising in the ordinary course of business under Contracts, Leases, Permits
and other business arrangements described in the Disclosure Schedule (and under
those Contracts, Leases and Permits which are not required to be disclosed on
the Disclosure Schedule) or (iii) incurred or arising in the ordinary course of
business of Seller consistent with the terms of this Agreement (none of which
relates to any Default under any Contract or Lease, breach of warranty, tort
infringement or violation of any Regulation or Court Order or arose out of any
Action) and none of which, individually or in the aggregate, has or would have a
material adverse effect on the Business or the Assets.
4.8. Absence of Certain Changes or Events. Except as disclosed in
Schedule 4.8, since the Base Balance Sheet Date, there has not been any:
<PAGE> 22
(a) actual or threatened material adverse change in
the financial condition, working capital, shareholders' equity, assets,
Liabilities, reserves, revenues, income earnings, prospects or Business of
Seller;
(b) change in accounting methods, principles or
practices by Seller affecting the Assets, its Liabilities or the Business;
(c) revaluation by Seller of any of the Assets,
including without limitation writing down the value of inventory or writing off
notes or accounts receivable;
(d) damage, destruction or loss (whether or not
covered by insurance) which has had or will have a material adverse affect on
the Assets or the Business;
(e) cancellation of any indebtedness or waiver or
release of any right or claim of Seller relating to its activities or properties
which had or will have a material adverse effect on the Assets or the Business;
(f) declaration, setting aside, or payment of
dividends or distributions by Seller in respect of the Shares or any redemption,
purchase or other acquisition of any of Seller's securities;
(g) increase in the rate of compensation payable or
to become payable to any director, officer or other employee of Seller or any
consultant, Representative or agent of Seller, including without limitation the
making of any loan to, or the payment, grant or accrual of any bonus, incentive
compensation, service award or other similar benefit to, any such person, or the
addition to, modification of, or contribution to any Employee Program,
arrangement, or practice described in the Disclosure Schedule;
(h) adverse change in employee relations which has
or is reasonably likely to have a material adverse effect on the productivity,
the financial condition, results of operations or Business of Seller or the
relationships between the employees of Seller and the management of Seller;
(i) amendment, cancellation or termination of any
Contract, commitment, agreement, Lease, transaction or Permit relating to the
Assets or the Business or, except for this Agreement and the other agreements
entered into in connection herewith, entry into any Contract, commitment,
agreement, Lease, transaction or Permit which is not in the ordinary course of
business, including without limitation any employment or consulting agreements;
(j) mortgage, pledge or other encumbrance of any
Assets, except purchase money mortgages arising in the ordinary course of
business and Permitted Liens;
(k) sale, assignment or transfer of any of the
Assets, other than in the ordinary course of business;
<PAGE> 23
(l) incurrence of indebtedness by Seller for
borrowed money or commitment to borrow money entered into by Seller, or loans
made or agreed to be made by Seller, or indebtedness guaranteed by Seller,
except for employee advances in the ordinary course of business and endorsements
for collection or deposit in the ordinary course of business;
(m) except as provided in this Agreement, incurrence
by Seller of Liabilities, except Liabilities incurred in the ordinary course of
business, or increase or change in any assumptions underlying or methods of
calculating, any doubtful account contingency or other reserves of Seller;
(n) payment, discharge or satisfaction of any
Liabilities of Seller other than the payment, discharge or satisfaction in the
ordinary course of business of Liabilities set forth or reserved for on the Base
Balance Sheet or incurred in the ordinary course of business;
(o) capital expenditure by Seller (other than
capital expenditures for less than $10,000 in the ordinary course of business),
the execution of any Lease by Seller or the incurring of any obligation by
Seller to make any such capital expenditures or execute any Lease;
(p) failure to pay or satisfy when due any Liability
of Seller, except where the failure would not have a material adverse effect on
the Assets or the Business;
(q) failure of Seller to use commercially reasonable
efforts to carry on diligently the Business in the ordinary course so as to keep
available to Buyer the services of Seller's employees, and to preserve for Buyer
the Assets and the Business and the goodwill of Seller's suppliers, customers,
distributors and others having business relations with it;
(r) disposition or lapsing of any Proprietary Rights
or any disposition or disclosure to any person of any Proprietary Rights not
theretofore a matter of public knowledge; or
(s) agreement by Seller or any Shareholder to do any
of the things described in the preceding clauses (a) through (r) other than as
expressly provided for herein.
4.9. Contracts and Commitments.
(a) Contracts. Except for Contracts, commitments,
plans, agreements and licenses described in Schedule 4.9 (true and complete
copies of which have been delivered to Nextera), Seller is not a party to or
subject to:
(i) Contracts not made in the ordinary
course of business;
(ii) Employment contracts and severance
agreements, including without limitation Contracts (A) to employ or terminate
executive officers or other personnel and other contracts with present or former
officers, directors or shareholders of Seller or (B) that will result in the
payment by, or the creation of any Liability to pay on behalf of Buyer or Seller
any severance, termination, "golden parachute," or other similar payments to any
present or former
<PAGE> 24
personnel following termination of employment or otherwise as a result of the
consummation of the transactions contemplated by this Agreement;
(iii) Labor or union contracts;
(iv) Distribution, franchise, license,
technical assistance, sales, commission, consulting, agency or advertising
contracts related to the Assets or the Business;
(v) Options with respect to any property,
real or personal, whether Seller shall be the grantor or grantee thereunder;
(vi) Contracts involving future expenditures
or Liabilities, actual or potential, in excess of $25,000 or otherwise material
to the Business or the Assets;
(vii) Contracts or commitments relating to
commission arrangements with others;
(viii) Promissory notes, loans, agreements,
indentures, evidences of indebtedness, letters of credit, guarantees, or other
instruments relating to an obligation to pay money, individually in excess of or
in the aggregate in excess of $25,000, whether Seller shall be the borrower,
lender or guarantor thereunder or whereby any Assets are pledged (excluding
credit provided by Seller in the ordinary course of business to purchasers of
its products);
(ix) Contracts containing covenants limiting
the freedom of Seller or any officer, director, shareholder or affiliate of
Seller, to engage in any line of business or compete with any person;
(x) Any Contract to supply services to the
United States, state or local government or any agency or department thereof;
(xi) Leases of real property;
(xii) Leases of personal property not
cancelable (without Liability) within 30 calendar days.
Seller has delivered to Buyer true, correct and
complete copies of all of the Contracts listed on Schedule 4.9, including all
amendments and supplements thereto. Schedule 4.9 contains a true, correct and
complete (in all material respects) description of Seller's obligations under
all material oral Contracts. Seller represents that none of its "exclusive
focus" agreements (including without limitation Seller's agreements with The
Chubb Corporation, Mead Johnson Nutritionals U.S., and SmithKline Beecham) will
affect the rights of Nextera or any affiliate of Nextera, other than Buyer and
the Shareholders and the former employees of Seller, from engaging in any
business subsequent to the Closing, provided that the foregoing assumes that all
confidential and propriety information of any client subject to an "exclusive
focus" agreement of Seller shall not be disclosed or available to or in any way
used by Nextera or any affiliates of Nextera, other than Buyer, and Buyer will
operate as a separate and distinct business from Nextera's other operations.
<PAGE> 25
(b) Absence of Defaults. Seller has fulfilled, or
taken all action necessary to enable it to fulfill when due, all of its material
obligations under each of such Contracts and Leases. To Seller's knowledge, all
other parties to such Contracts and Leases are currently in compliance in all
material respects with the provisions thereof, no party is in Default thereunder
and no notice of any claim of Default has been given to Seller. Seller has no
reason to believe that the products and services called for by any unfinished
Contract cannot be supplied in accordance with the terms of such Contract,
including time specifications, and has no reason to believe that any unfinished
Contract will upon performance by Seller result in a loss to Seller. With
respect to any Leases, Seller has not received any notice of cancellation or
termination under any option or right reserved to the lessor, or any notice of
Default, thereunder, except for those which have been waived or cured.
(c) Warranty. Seller has committed no act, and there
has been no omission, which may result in, and there has been no occurrence
which may give rise to, Liability for breach of warranty (whether covered by
insurance or not) on the part of Seller, with respect to services rendered prior
to or on the Closing Date.
4.10. Permits.
(a) Schedule 4.10 sets forth a complete list of all
Permits used in the operation of the Business or otherwise held by Seller.
Seller has, and at all times has had, all Permits required under any Regulation
(including Environmental Laws) in the operation of its Business or in the
ownership of the Assets (except where the failure to have any Permit has not had
and will not have a material adverse effect on Seller or the Business), and owns
or possesses such Permits free and clear of all Encumbrances other than the
Permitted Liens. Seller is not in Default, nor has it received any notice of any
claim of Default, with respect to any such Permit. Except as otherwise governed
by law, all such Permits are renewable by their terms or in the ordinary course
of business without the need to comply with any special qualification procedures
or to pay any amounts other than routine filing fees and will not be adversely
affected by the completion of the transactions contemplated by this Agreement.
To Seller's knowledge, no present or former Shareholder, director, officer or
employee of Seller or any affiliate thereof, or any other person, firm,
corporation or other entity, owns or has any proprietary, financial or other
interest (direct or indirect) in any Permit which Seller owns, possesses or
uses.
(b) Except as disclosed on Schedule 4.10 hereto, no
notice to, declaration, filing or registration with, or Permit from, any
domestic or foreign governmental or regulatory body or authority, or any other
person or entity, is required to be made or obtained by Seller in connection
with the execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby.
4.11. Litigation. Except as set forth on Schedule 4.11, there are no
Actions pending or to the knowledge of Seller, threatened or anticipated (a)
against, related to or affecting (i) Seller, the Business or the Assets
(including with respect to Environmental Laws), (ii) any officers or directors
of Seller as such, or (iii) any Shareholder in such Shareholder's capacity as a
shareholder of Seller, (b) seeking to delay, limit or enjoin the transactions
contemplated by this Agreement (c) that involve the risk of criminal liability
on Seller or any of its officers or directors, or (d) in which
<PAGE> 26
Seller is a plaintiff, including any derivative suits brought by or on behalf of
Seller. Seller is not in Default with respect to or subject to any Court Order,
and there are no unsatisfied judgments against Seller, any Shareholder in such
Shareholder's capacity as a shareholder of Seller, the Business or the Assets.
There is not a reasonable likelihood of an adverse determination of any pending
Actions. There are no Court Orders or agreements with, or liens by, any
governmental authority or quasi-governmental entity relating to any
Environmental Law which regulate, obligate, bind or in any way affect Seller.
4.12. Compliance with Law. Except as set forth on Schedule 4.12 Seller
and the conduct of the Business have not violated and are in compliance with all
Regulations and Court Orders relating to the Assets or the Business or
operations of Seller, except where noncompliance would not have a material
adverse effect on the Assets, the Business or Seller. Seller has not received
any notice to the effect that, or otherwise been advised that, it is not in
compliance with any such Regulations or Court Orders, and Seller has no reason
to anticipate that any existing circumstances are likely to result in violations
of any of the foregoing.
4.13. Ordinary Course. Except for the transactions contemplated by
this Agreement and as set forth on Schedule 4.13 or the other schedules hereto,
since December 31, 1997, Seller has conducted its business only in the ordinary
course and consistently with its prior practices.
4.14. Directors and Officers. Schedule 4.14 hereto contains a true and
complete list of all current members of the Board of Directors and each of the
officers of Seller. In addition, Schedule 4.14 hereto contains a list of all
managers, employees and consultants of Seller who, individually, have received
or are scheduled to receive compensation from Seller for the fiscal years ending
December 31, 1997 and December 31, 1998, in excess of $25,000. In each case such
Schedule includes the current job title and aggregate annual compensation of
each such individual.
4.15. Employees; Labor Matters. As of the date of this Agreement
Seller employs a total of approximately nineteen (19) full-time employees.
Except for certain bonuses to be paid to the Shareholders as set forth on
Schedule 4.15(b), Seller is not delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Upon termination of the employment of any of said
employees by Seller (assuming Buyer has offered employment to all of said
employees), none of Buyer, Nextera or Holdings will by reason of the
transactions contemplated under this Agreement or anything done prior to the
Closing be liable to any of said employees for so-called "severance pay" or any
other payments. Seller has no policy, practice, plan or program of paying
severance pay or any form of severance compensation in connection with the
termination of employment, except as set forth in Schedule 4.15(c). Seller is in
compliance with all applicable laws and regulations respecting labor,
employment, fair employment practices, work place safety and health, terms and
conditions of employment, and wages and hours. There are no charges of
employment discrimination or unfair labor practices, nor are there any strikes,
slowdowns, stoppages of work, or any other concerted interference with normal
operations which are existing, pending or to Seller's knowledge threatened
against or involving Seller. No question concerning union representation exists
respecting any employees of Seller. There are no grievances, complaints or
charges that have
<PAGE> 27
been filed against Seller under any dispute resolution procedure (including, but
not limited to, any proceedings under any dispute resolution procedure under any
collective bargaining agreement) that might have an adverse effect on Seller or
the conduct of its business, and there is no arbitration or similar proceeding
pending and no claim therefor has been asserted. No collective bargaining
agreement is in effect or is currently being or is about to be negotiated by
Seller. Seller has not received any information indicating that any of its
employment policies or practices is currently being audited or investigated by
any federal, state or local government agency. Seller is, and at all times has
been, in compliance with the requirements of the Immigration Reform Control Act
of 1986.
4.16. Banking Relations. All of the arrangements which Seller has with
any banking institution are completely and accurately described in Schedule 4.16
attached hereto, indicating with respect to each of such arrangements the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect thereof.
4.17. No Brokers. Neither Seller, the Shareholders nor any of their
respective officers, directors, employees, or affiliates has employed or made
any agreement with any broker, finder or similar agent or any person or firm
which will result in the obligation of Buyer, Nextera, Holdings or any of their
affiliates to pay any finder's fee, brokerage fees or commission or similar
payment in connection with the transactions contemplated hereby.
4.18. No Other Agreements to Sell the Assets. Neither Seller, the
Shareholders nor any of their respective officers, directors, employees or
affiliates have any commitment or legal obligation, absolute or contingent, to
any other person or firm other than Buyer to sell, assign, transfer or effect a
sale of any of the Assets (other than inventory or services in the ordinary
course of business), to sell or effect a sale of the capital stock of Seller, to
effect any merger, consolidation, liquidation, dissolution or other
reorganization of Seller, or to enter into any agreement or cause the entering
into of an agreement with respect to any of the foregoing.
4.19. Customers, Distributors and Suppliers. Schedule 4.19(a) sets
forth any customer, sales representative or distributor (whether pursuant to a
commission, royalty or other arrangement) which will account for more than
$25,000 in revenue for Seller for the twelve months ending December 31, 1997
(collectively, the "Customers and Distributors"). Schedule 4.19(b) lists all of
the suppliers of Seller to whom during the fiscal year ending December 31, 1997
Seller will make payments aggregating $25,000 or more showing, with respect to
each, the name, address and dollar volume involved (the "Suppliers"). To
Seller's knowledge, the relationships of Seller with its Customers, Distributors
and Suppliers are good commercial working relationships. Except for arrangements
reflected in Seller's financial statements, no Customer, Distributor or Supplier
has canceled, materially modified, or otherwise terminated (other than in
accordance with the terms of a valid contract) its relationship with Seller, or
has during the last twelve months decreased materially its services, supplies or
materials to Seller or its usage or purchase of the services or products of
Seller, nor to the knowledge of Seller, does any Customer, Distributor or
Supplier have any plan or intention to do any of the foregoing, it being
understood that Seller is a management consulting firm and that, at any given
time, Seller is
<PAGE> 28
in a different stage of its engagement (i.e., some engagements are increasing
while others are winding down).
4.20. Backlog. As of the date hereof, Seller has a backlog of firm
orders for the sale or lease of products or services, for which revenues have
not been recognized by Seller, as set forth in Schedule 4.20.
4.21. Proprietary Rights.
(a) Proprietary Rights. Schedule 4.21 lists all of
Seller's Proprietary Rights. The Proprietary Rights listed in the Disclosure
Schedule are all those used by Seller in connection with the Business.
(b) Royalties and Licenses. Except as set forth on
Schedule 4.21 Seller, does not have any obligation to compensate any person for
the use of any such Proprietary Rights nor has Seller granted to any person any
license, option or other rights to use in any manner any of its Proprietary
Rights, whether requiring the payment of royalties or not.
(c) Ownership and Protection of Proprietary Rights.
Except as set forth on Schedule 4.21, Seller owns or has a valid right to use
each of the Proprietary Rights, and the Proprietary Rights will not cease to be
valid rights of Seller by reason of the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby.
Seller has taken commercially reasonable and prudent steps to protect the
Proprietary Rights from infringement by any other person. Except as set forth on
Schedule 4.21, no other person (i) has notified Seller that it is claiming any
ownership of or right to use such Proprietary Rights, or (ii) to Seller's
knowledge, is infringing upon any such Proprietary Rights in any way. To
Seller's knowledge, except as set forth on Schedule 4.21, Seller's use of the
Proprietary Rights does not and will not conflict with, infringe upon or
otherwise violate the valid rights of any third party in or to such Proprietary
Rights, and no Action has been instituted against or notices received by Seller
that are presently outstanding alleging that Seller's use of the Proprietary
Rights infringes upon or otherwise violates any rights of a third party in or to
such Proprietary Rights.
4.22. Taxes.
(a) Except as otherwise set forth on Schedule 4.22,
all returns, declarations, reports, estimates, statements, schedules or other
information or documents with respect to Taxes (collectively, "Tax Returns")
required to be filed by Seller have been timely filed (giving effect to
extensions granted with respect thereto), and all such Tax Returns are true,
correct, and complete in all material respects.
(b) Seller has timely paid all Taxes due from it or
claimed to be due from it by any federal, state, local, foreign or other taxing
authority.
(c) There are no liens for Taxes upon any of the
assets of, or interest in Seller, except liens for taxes not yet due and
payable.
<PAGE> 29
(d) No Tax Returns of Seller have been audited by
the relevant taxing authority. No deficiency for any Taxes has been proposed,
asserted or assessed against Seller that has not been resolved and paid in full.
There are no outstanding waivers, extensions, or comparable consents regarding
the application of the statute of limitations with respect to any Taxes or Tax
Returns that have been given by Seller (including the time for filing of Tax
Returns or paying Taxes) and Seller has no pending requests for any such
waivers, extensions, or comparable consents.
(e) No audit or other proceeding by any federal,
state, local or foreign court, governmental, regulatory, administrative or
similar authority is presently pending with respect to any Taxes or Tax Return
of Seller, and Seller has not received written notice of any pending audits or
proceedings.
(f) Seller has established adequate reserves in
accordance with generally accepted accounting principles for all Taxes not yet
due and payable, which reserves are set forth in Schedule 4.22.
(g) Seller has not received a ruling from any taxing
authority or signed an agreement with any taxing authority that could reasonably
be expected to have a material adverse effect on Seller or its assets.
(h) Except as otherwise set forth on Schedule 4.22,
Seller has complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441, 1442, 1445 and 1446
of the Code or similar provisions under any applicable state and foreign laws)
and has, within the time and the manner prescribed by law, paid over to the
proper governmental authorities all amounts so withheld.
(i) Seller is not a party to and is not bound by or
has any obligation under any Tax sharing allocation or indemnity agreement or
similar contract or arrangement.
(j) Seller is, and has been at all times since its
formation, properly characterized as an "S Corporation" for federal and
applicable state and local income tax purposes.
(k) No power of attorney granted by Seller with
respect to any Taxes is currently in force.
(l) Seller is not subject to any joint venture,
partnership or other arrangement or contract that is treated as a partnership
for U.S. federal income tax purposes.
(m) Except as otherwise set forth in Schedule 4.22,
there is no expectation that any taxing authority may claim or assess any
material amount of Taxes payable by Seller for any period ending on or prior to
the Closing Date and there are no facts of which Seller or the Shareholders are
aware which would constitute grounds for the assessment of any material amount
of Taxes payable by Seller for any period ending on or prior to the Closing
Date.
<PAGE> 30
(n) Seller is not subject to liability as a
transferee pursuant to Code Section 6901 et seq. or otherwise, nor will Buyer,
Nextera or Holdings be subject to such liability as a direct or indirect result
of Buyer's acquisition of the Assets.
(o) None of the Assets is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(p) Seller is not a person other than a United
States person within the meaning of the Code.
(q) The transaction contemplated herein is not
subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
4.23. Employee Benefit Programs
(a) Schedule 4.23 lists every Employee Program (as
defined below) that has been maintained (as defined below) by Seller at any time
during the three-year period ending on the date of the Closing.
(b) Each Employee Program which has ever been
maintained by Seller and which has at any time been intended to qualify under
Section 401(a) of the Code, and each associated trust which at any time has been
intended to be exempt from taxation pursuant to Section 501(a) of the Code is
the subject of a favorable determination, opinion or approval letter from the
Internal Revenue Service ("IRS") regarding its qualification or exemption from
taxation, as applicable, under such section and has, in fact, been qualified or
tax exempt, as applicable, under the applicable section of the Code for all
periods for which the applicable statute of limitations has not expired through
and including the Closing (or, if earlier, the date that all of such Employee
Program's assets were distributed). No event or omission has occurred which
would cause any such Employee Program to lose its qualification under the
applicable Code section.
(c) Seller does not know and has no reason to know,
of any failure of any party to comply in any material respect with any laws
applicable to the Employee Programs that have been maintained by Seller. With
respect to any Employee Program ever maintained by Seller for all periods for
which the applicable statute of limitations has not expired, there has occurred
no "prohibited transaction," as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975 of
the Code, or any material violation of, or material breach of any duty under,
ERISA or other applicable law (including, without limitation, any health care
continuation requirements (under part 6 of subtitle B of Title I or ERISA, or
otherwise) or any other tax law requirements, or conditions to favorable tax
treatment, applicable to such plan), which could result, directly or indirectly,
in any taxes, penalties or other liability to Seller, Buyer or Nextera. No
litigation, arbitration, or governmental administrative proceeding (or
investigation) or other proceeding (other than those relating to routine claims
for benefits) is pending or, to the knowledge of Seller, threatened with respect
to any Employee Program.
<PAGE> 31
(d) Neither Seller nor any ERISA Affiliate (as
defined below) has ever (i) maintained any Employee Program which has been
subject to Title IV of ERISA; (ii) maintained any Multiemployer Plan (as defined
below); or (iii) provided health care or any other non-pension benefits to any
employees after their employment is terminated (other than as required by part 6
of subtitle B of title I of ERISA or benefits that continue for a brief period
of time after termination of employment, for example for the balance of the
month in which an employee terminates, or has ever promised to provide such
post-termination benefits).
(e) With respect to each Employee Program maintained
by Seller within the three years preceding the Closing, complete and correct
copies of the following documents (if applicable to such Employee Program) have
previously been delivered to Nextera: (i) all documents embodying or governing
such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended;
(ii) the most recent IRS determination, opinion or approval letter with respect
to such Employee Program under Code Sections 401 and 501(a), and any
applications for determination or approval subsequently filed with the IRS;
(iii) the three most recently filed IRS Forms 5500, with all applicable
schedules and accountants' opinions attached thereto; (iv) the summary plan
description for such Employee Program (or other descriptions of such Employee
Program provided to employees) and all modifications thereto; (v) any insurance
policy (including any fiduciary liability insurance policy) related to such
Employee Program; (vi) any documents evidencing any loan to an Employee Program
that is a leveraged employee stock ownership plan; and (vii) all other materials
reasonably necessary for Buyer to perform any of its responsibilities with
respect to any Employee Program subsequent to the Closing (including, without
limitation, health care continuation requirements).
(f) Neither Seller nor any ERISA Affiliate has any
announced plan or legally binding commitment to create any additional Employee
Program which is intended to cover employees or former employees of Seller or
any ERISA Affiliate (with respect to their relationship with such entities) or
to amend or modify any existing Employee Program which covers or has covered
employees or former employees of Seller or any ERISA Affiliate (with respect to
their relationship with such entities).
(g) Each Employee Plan listed on Schedule 4.23 may
be amended, terminated, modified or otherwise revised prospectively by Seller
including the elimination of any and all future benefit accruals under any
Employee Plan.
(h) No event has occurred in connection with which
Seller, any ERISA Affiliate or any Employee Program, directly or indirectly,
could be subject to any material liability (A) under any statute, regulation or
governmental order relating to any Employee Programs or (B) pursuant to any
obligation of Seller or any ERISA Affiliate to indemnify any person against
liability incurred under any such statute, regulation or order as they relate to
the Employee Programs.
(i) Except as described on Schedule 4.23, neither
the execution and delivery of this Agreement by Seller nor the consummation of
the transactions contemplated hereby will result in the acceleration or creation
of any rights of any person to benefits under any
<PAGE> 32
Employee Program (including, without limitation, the acceleration of the vesting
or exercisability of any stock options, the acceleration of the vesting of any
restricted stock, or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
(j) Each Employee Program and related trust
agreement or other funding instrument, as applicable, which covers or has
covered employees or former employees of Seller or any ERISA Affiliate (with
respect to their relationship with such entities) is legally valid and binding
and in full force and effect.
(k) There is no contract, agreement, plan or
arrangement covering any employee or former employee of Seller or any ERISA
Affiliate (with respect to its relationship with such entities) that,
individually or collectively, provides for the payment by Seller or any ERISA
Affiliate of any amount (i) that is not deductible under Section 162(a)(1) or
404 of the Code or (ii) that is an "excess parachute payment" pursuant to
Section 280G of the Code.
(l) All contributions required to be made by Seller
or any ERISA Affiliate with respect to any Employee Program due as of any date
through and including the Closing Date have been made when due.
(m) For purposes of this section:
(i) "Employee Program" means (A) any
employee benefit plan within the meaning of ERISA Section 3(3), including, but
not limited to, any multiple employer welfare arrangement (within the meaning of
ERISA Section 3(4)), plan to which more than one unaffiliated employer
contributes and any employee benefit plan (such as a foreign or excess benefit
plan) which is not subject to ERISA; and (B) any employment, consulting,
severance or other similar contract, arrangement or policy, any stock option
plan, bonus or incentive award plan, deferred compensation agreement,
supplemental income arrangement, vacation plan, any employee benefit arrangement
described in Code Section 501(c)(9), and any other employee benefit plan,
agreement, and arrangement not described in (A) above. In the case of an
Employee Program funded through a trust described in Code Section 501(a), each
reference to such Employee Program shall include a reference to such trust.
(ii) An entity "maintains" an Employee
Program if such entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation (by
agreement or under applicable law) to contribute to or provide benefits under
such Employee Program, or if such Employee Program provides benefits to or
otherwise covers employees of such entity, or their spouses, dependents, or
beneficiaries.
(iii) An entity is an "ERISA Affiliate" of
Seller if it would have ever been considered a single employer with Seller under
ERISA Section 4001(b) or part of the same "controlled group" as Seller or any of
its Subsidiaries for purposes of ERISA Section 302(d)(8)(C).
<PAGE> 33
(iv) "Multiemployer Plan" means a (pension or
non-pension) employee benefit plan to which more than one employer contributes
and which is maintained pursuant to one or more collective bargaining agreements
as defined in Section 3(37) of ERISA.
4.24. Insurance. Schedule 4.24 contains a complete and accurate list
of all policies or binders of fire, liability, title, worker's compensation,
product liability and other forms of insurance (showing as to each policy or
binder the carrier, policy number, coverage limits, expiration dates, annual
premiums, a general description of the type of coverage provided, loss
experience history by line of coverage) maintained by Seller on the Business,
the Assets or its employees. All insurance coverage applicable to Seller, the
Business and the Assets is in full force and effect, provides coverage as may be
required by applicable Regulation and by any and all Contracts to which Seller
is a party. There is no Default under any such coverage nor has there been any
failure to give notice or present any claim under any such coverage in a due and
timely fashion. There are no outstanding unpaid premiums except in the ordinary
course of business and no notice of cancellation or nonrenewal of any such
coverage has been received. No insurer has advised Seller that it intends to
reduce coverage, increase premiums or fail to renew existing policy or binder.
4.25. Accounts Receivable. The accounts receivable set forth on the
Base Balance Sheet, and all accounts receivable arising since the Base Balance
Sheet Date, represent bona fide claims of Seller against debtors for sales,
services performed or other charges arising on or before the date hereof, and
all the goods delivered and services performed which gave rise to said accounts
were delivered or performed in all material respects in accordance with the
applicable orders, Contracts or customer requirements. Said accounts receivable
are subject to no defenses, counterclaims or rights of setoff and are fully
collectible in the ordinary course of business, except to the extent of the
appropriate reserves for bad debts on accounts receivable as set forth on the
Base Balance Sheet and, in the case of accounts receivable arising since the
Base Balance Sheet Date, to the extent of a reasonable reserve rate for bad
debts on accounts receivable which is not greater than the rate reflected by the
reserve for bad debts on the Base Balance Sheet.
4.26. Payments. Seller has not, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other party, in the United States or any other country, which is in
any manner related to the Business, Assets or operations of Seller, which is, or
may be with the passage of time or discovery, illegal under any federal, state
or local laws of the United States (including without limitation the U.S.
Foreign Corrupt Practices' Act) or any other country having jurisdiction; and
Seller has not participated, directly or indirectly, in any boycotts or other
similar practices affecting any of its actual or potential customers.
4.27. Environmental Matters.
(a) (i) Seller has never generated, transported,
used, stored, treated, disposed of, or managed any Hazardous Waste (as defined
below); (ii) to the knowledge of Seller, no Hazardous Material (as defined
below) has ever been or is threatened to be spilled, released, or disposed of at
any site presently or formerly owned, operated, leased, or used by Seller, or
has ever been located in the soil or groundwater at any such site; (iii) to the
knowledge of Seller, no
<PAGE> 34
Hazardous Material has ever been transported from any site presently or formerly
owned, operated, leased, or used by Seller for treatment, storage, or disposal
at any other place; (iv) to the knowledge of Seller, Seller does not presently
own, operate, lease, or use, nor has it previously owned, operated, leased, or
used any site on which underground storage tanks are or were located; and (v) no
lien has ever been imposed by any governmental agency on any property, facility,
machinery, or equipment owned, operated, leased, or used by Seller in connection
with the presence of any Hazardous Material.
(b) (i) To the knowledge of Seller, Seller has no
liability under, nor has it ever violated, any Environmental Law (as defined
below); (ii) to the knowledge of Seller, Seller, any property owned, operated,
leased, or used by any of it, and any facilities and operations of Seller
thereon, are presently in compliance with all applicable Environmental Laws;
(iii) Seller has never entered into or been subject to any judgment, consent
decree, compliance order, or administrative order with respect to any
environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law; and (iv) Seller has
no reason to believe that any of the items enumerated in clause of this
subsection will be forthcoming.
(c) To the knowledge of Seller, no site owned,
operated, leased, or used by Seller contains any asbestos or asbestos-containing
material, any polychlorinated biphenyls ("PCBs") or equipment containing PCBs;
or any urea formaldehyde foam insulation.
(d) Seller has provided to Nextera copies of all
documents, records, and information available to Seller concerning any
environmental or health and safety matter relevant to Seller or any of its
Subsidiaries, whether generated by Seller or others, including without
limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
(e) For purposes of this Section 4.27, (i)
"Hazardous Material" shall mean and include any hazardous waste, hazardous
material, hazardous substance, petroleum product, oil, toxic substance,
pollutant, contaminant, or other substance which may pose a threat to the
environment or to human health or safety, as defined or regulated under any
Environmental Law; (ii) "Hazardous Waste" shall mean and include any hazardous
waste as defined or regulated under any Environmental Law; (iii) "Environmental
Law" shall mean any environmental or health and safety-related law, regulation,
rule, ordinance, or by-law at the foreign, federal, state, or local level,
whether existing as of the date hereof, previously enforced, or subsequently
enacted; and (iv) "Seller" shall mean and include Seller and all other entities
for whose conduct Seller is or may be held responsible under any Environmental
Law.
4.28. Warranty or Other Claims. There are no existing to Seller's
knowledge or threatened product or service liability, warranty or other similar
claims, or any facts upon which a material claim of such nature could be based,
against Seller for products or services which are defective or fail to meet any
product or service warranties. No claim has been asserted against
<PAGE> 35
Seller for renegotiation or price redetermination of any business transaction,
there are no facts known to Seller upon which any such claim could be based.
4.29. Seller Records; Copies of Documents. The record books of Seller
accurately record all material action taken by its shareholders and Board of
Directors and committees. The copies of the records of Seller, as made available
to Nextera for review, are true and complete copies of the originals of such
documents. Seller has made available for inspection and copying by Nextera and
its counsel true and correct copies of all documents referred to in this Section
or in the Schedules delivered to Nextera pursuant to this Agreement.
4.30. Powers of Attorney. Neither Seller or any of the Shareholders
has any outstanding power of attorney with respect to or affecting any
transaction contemplated by this Agreement.
4.31. Disclosure. The representations, warranties and statements
contained in this Agreement and in the exhibits and schedules hereto do not
contain any untrue statement of a material fact, and, when taken together, do
not omit to state a material fact required to be stated therein or necessary in
order to make such representations, warranties or statements not misleading in
light of the circumstances under which they were made. To Seller's knowledge,
there are no facts which presently or may in the future have a material adverse
affect on the business, properties, prospects, operations or condition of Seller
which have not been specifically disclosed herein or in a Schedule furnished
herewith, other than general economic conditions affecting the industries in
which Seller operates and it being understood that Seller does not have and has
never had long-term contracts with its clients.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
As a material inducement to Buyer, Nextera and Holdings to enter
into this Agreement and consummate the transactions contemplated hereby, each
Shareholder hereby severally, but not jointly, makes to Buyer, Nextera and
Holdings each of the representations and warranties set forth in this Article V
with respect to such Shareholder.
5.1. Ownership of Shares. Shareholder owns of record and beneficially
the number of the Shares set forth opposite such Shareholder's name in Exhibit
A-1.
<PAGE> 36
5.2. Authority. Such Shareholder has full right, authority, power and
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of such Shareholder
pursuant to this Agreement and to carry out the transactions contemplated hereby
and thereby. This Agreement and each agreement, document and instrument executed
and delivered by such Shareholder pursuant to this Agreement constitutes a valid
and binding obligation of such Shareholder, enforceable in accordance with their
respective terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject to the effect of general principles of equity,
including, without limitation, the possible unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law. The execution, delivery and performance of this
Agreement and each such agreement, document and instrument:
(i) does not and will not violate any
provision of any laws of the United States or any state or other
jurisdiction applicable to such Shareholder, or require such Shareholder
to obtain any approval, consent or waiver from, or make any filing with,
any person or entity (governmental or otherwise) that has not been
obtained or made; and
(ii) does not and will not result in a breach
of, constitute a default under, accelerate any obligation under, or give
rise to a right of termination of, any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Shareholder is a party
or by which the property of such Shareholder is bound or affected, or
result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any assets of Seller
or on Shares owned by such Shareholder.
5.3. No Brokers. Such Shareholder has not employed or made any
agreement with any broker, finder or similar agent or any person or firm which
will result in the obligation of Buyer, Nextera, Holdings or any of their
affiliates to pay any finder's fee, brokerage fees or commission or similar
payment in connection with the transactions contemplated hereby.
5.4. Agreements. Other than as set forth on Schedule 5.4, such
Shareholder is not a party to any non-competition, trade secret or
confidentiality agreement with any party other than Seller, other than any such
agreement that may be entered into in connection with such Shareholder's
employment by Buyer. There are no agreements or arrangements not contained
herein or disclosed in a Schedule hereto, to which such Shareholder is a party
relating to the business of Seller or to such Shareholder's rights and
obligations as a Shareholder, director or officer of Seller. Except as set forth
on Schedule 5.4, such Shareholder does not own, directly or indirectly, on an
individual or joint basis, any material interest in, or serve as an officer or
director of, any customer, competitor or supplier of Seller, or any organization
which has a contract or arrangement with Seller.
<PAGE> 37
5.5. Experience; Accredited Investor. Such Shareholder has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to Buyer, Nextera and Holdings
so that he is capable of evaluating the merits and risks of acquiring the
Nextera Class A Units to be delivered to Seller and distributed by Seller to the
Shareholders and the Holdings Class A Units (as hereinafter defined) pursuant to
his employment agreement as provided in Section 9.12 and has the capacity to
protect his own interests. Each Shareholder must bear the economic risk of
holding the Nextera Class A Units (when distributed) and Holdings Class A Units
indefinitely unless such securities are registered pursuant to the Securities
Act, or an exemption from registration is available for the disposition thereof.
Each Shareholder understands that there is no assurance that any exemption from
registration under the Securities Act will be available. Each Shareholder is an
"accredited investor" as defined in Rule 501 under the Securities Act.
5.6. Investment. Such Shareholder is acquiring the Nextera Class A
Units and Holdings Class A Units for his own account for investment only, and
not with the view to, or for resale in connection with, any distribution thereof
in violation of any applicable securities laws. It understands that the Nextera
Class A Units and Holdings Class A Units acquired have not been, and will not
be, registered under the Securities Act by reason of a specific exemption from
the registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Shareholder's representations as express herein.
5.7. No Public Market. Such Shareholder understands that no public
market now exists for any of the securities issued by Nextera or Holdings and
that neither Nextera nor Holdings has made any assurances that a public market
will ever exist for such securities.
5.8. Access to Data. Such Shareholder has received and read the
Nextera Operating Agreement, the Amended and Restated Limited Liability Company
Agreement of Nextera Enterprises Holdings, L.L.C. dated as of December 31, 1997,
as amended on January 6, 1998 (the "Holdings Operating Agreement"), Nextera
business plan and financial statements and has had an opportunity to discuss
Nextera's business, management and financial affairs with its management. Such
Shareholder has also had an opportunity to ask questions of and receive answers
from officers of Nextera regarding the terms and conditions of acquiring the
Nextera Class A Units and Holdings Class A Units, which questions were answered
to such Shareholder's satisfaction.
5.9. Residence. The residence of the Shareholder in which its
investment decision was made is located at the address of the Shareholder set
forth on the signature page hereto.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF BUYER, NEXTERA AND HOLDINGS
As a material inducement to Seller and the Shareholders to enter
into this Agreement and consummate the transactions contemplated hereby, Buyer,
Nextera and Holdings, jointly and severally hereby make the representations and
warranties to Seller as follows, which
<PAGE> 38
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct:
6.1. Organization. Each of Buyer, Nextera and Holdings is a limited
liability company organized, validly existing and in good standing under the
laws of the State of Delaware with full limited liability company power to own
or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business as conducted
by it. None of Buyer, Nextera or Holdings is required to be licensed or
qualified to conduct its business or own its property in any other jurisdiction
in which failure to be so licensed or qualified would have a material adverse
effect on the business or financial condition of Buyer, Nextera or Holdings on a
consolidated basis.
6.2. Authority. Each of Buyer, Nextera and Holdings has full right,
authority and power to enter into this Agreement and each agreement, document
and instrument to be executed and delivered by Buyer, Nextera and/or Holdings
pursuant to this Agreement and to carry out the transactions contemplated
hereby. The execution, delivery and performance by Buyer, Nextera and Holdings
of this Agreement and each such other agreement, document and instrument have
been duly authorized by all necessary organizational action of Buyer, Nextera
and Holdings and no other action on the part of Buyer, Nextera or Holdings is
required in connection therewith.
This Agreement and each other agreement, document and instrument
executed and delivered by Buyer, Nextera and/or Holdings pursuant to this
Agreement constitutes, or when executed and delivered will constitute, valid and
binding obligations of Buyer, Nextera and/or Holdings, as applicable,
enforceable in accordance with their terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject to the effect of general
principles of equity, including, without limitation, the possible unavailability
of specific performance or injunctive relief, regardless of whether considered
in a proceeding in equity or at law. The execution, delivery and performance by
Buyer, Nextera and Holdings of this Agreement and each such agreement, document
and instrument:
(i) does not and will not violate any
provision of the certificate of formation of Buyer, the Amended and
Restated Limited Liability Company Agreement of Buyer, the certificate
of formation of Nextera, the Nextera Operating Agreement, the
certificate of formation of Holdings or the Holdings Operating
Agreement;
(ii) does not and will not violate any laws
of the United States or of any state or any other jurisdiction
applicable to Buyer, Nextera or Holdings or require Buyer, Nextera or
Holdings to obtain any approval, consent or waiver of, or make any
filing with, any person or entity (governmental or otherwise) which has
not been obtained or made; and
(iii) does not and will not result in a breach
of, constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture, loan or credit
agreement, or other agreement mortgage, lease,
<PAGE> 39
permit, order, judgment or decree to which Buyer, Nextera or Holdings is
bound or affected, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance
on any of the assets or capital stock of Buyer, Nextera or Holdings and
which is material to the business and financial condition of Buyer,
Nextera or Holdings on a consolidated basis.
6.3. Litigation. There are no Actions pending or to the knowledge of
Buyer, Nextera or Holdings threatened or anticipated (a) against, related to or
affecting (i) Buyer, Nextera or Holdings on a consolidated basis (including with
respect to Environmental Laws) or (ii) any officers or directors of Buyer,
Nextera or Holdings as such, (b) seeking to delay, limit or enjoin the
transactions contemplated by this Agreement (c) that involve the risk of
criminal liability on Buyer, Nextera or Holdings or any of its officers or
directors, or (d) in which Buyer, Nextera or Holdings is a plaintiff, including
any derivative suits brought by or on behalf of Buyer, Nextera or Holdings.
Buyer, Nextera or Holdings is not in Default with respect to or subject to any
Court Order, and there are no unsatisfied judgments against Buyer, Nextera or
Holdings. There is not a reasonable likelihood of an adverse determination of
any pending Actions. There are no Court Orders or agreements with, or liens by,
any governmental authority or quasi-governmental entity relating to any
Environmental Law which regulate, obligate, bind or in any way affect Buyer,
Nextera or Holdings .
6.4. No Brokers. Neither Buyer, Nextera, Holdings nor any of their
officers, directors, employees, shareholders or affiliates has employed or made
any agreement with any broker, finder or similar agent or any person or firm
which will result in the obligation of Seller or any of their respective
affiliates to pay any finder's fee, brokerage fees or commission or similar
payment in connection with the transactions contemplated hereby.
6.5. Available Funds. Buyer, Nextera and Holdings have sufficient
capital available to consummate the transactions contemplated by this Agreement
and are not relying on obtaining additional financing in connection with such
transactions.
6.6. Membership Interests of Nextera and Holdings. Schedule 6.6 sets
forth all of the issued and outstanding membership interests of Nextera and
Holdings. The amount of preferred capital (including the return on preferred
capital) of Nextera and Holdings is as set forth on Schedule 6.6. Except as set
forth on Schedule 6.6, there are no outstanding options, warrants, rights,
commitments, preemptive rights or agreements of any kind for the issuance and
sale of, or outstanding securities convertible into, any additional membership
interests of any class of Nextera or Holdings. Schedule 6.6 sets forth a list of
all agreements, if any, relating to the voting, transfer, registration,
repurchase or any similar right with respect to the issued and outstanding
equity interests of Nextera or Holdings. None of the equity interests of Nextera
or Holdings were issued in violation of any federal or state law. All of the
Nextera Class A Units to be issued as partial consideration for sale of the
Assets and all Holdings Class A Units (as hereinafter defined) to be issued
pursuant to employment agreements as contemplated by Section 9.12 will be duly
issued under the Nextera Operating Agreement and the Holdings Operating
Agreement, as applicable.
<PAGE> 40
6.7. Operating Agreements.
The Nextera Operating Agreement attached as Schedule 6.7(a), the
Holdings Operating Agreement attached as Schedule 6.7(b), and the Employee
Equity Participation Agreement attached as Schedule 6.7(c) are in full force and
effect. A copy of Nextera's form of Employee Equity Participation Agreement is
attached as Schedule 6.7(d).
6.8. Financial Statements.
(a) Nextera has delivered to the Seller the
following financial statements, copies of which are attached hereto as Schedule
6.8: a balance sheet of Nextera and a statement of profit and loss of Nextera as
of December 31, 1997 (the "Nextera Financial Statements"). The December 31, 1997
balance sheet is hereinafter referred to as the "Nextera Balance Sheet." The
Financial Statements, have been prepared in accordance with generally accepted
accounting principles applied consistently during the period covered thereby,
and said Financial Statements, present fairly in all material respects the
financial condition of Nextera at the date of said statements and the results of
its operations for the period covered thereby.
(b) As of the date of the Nextera Balance Sheet,
Nextera did not have any Liabilities of any nature, whether accrued, absolute or
contingent (including without limitation, Liabilities as guarantor or otherwise
with respect to obligations of others, Liabilities for taxes due or then accrued
or to become due, or contingent or potential Liabilities relating to activities
of Nextera or the conduct of its business prior to the date of the Nextera
Balance Sheet), except Liabilities stated or adequately reserved against on the
Nextera Balance Sheet or reflected in the schedules delivered by Buyer, Nextera
and/or Holdings to Seller hereunder.
(c) Except as set forth on Schedule 6.8, as of the
date hereof and as of the Closing, Nextera has not had and will not have any
Liabilities of any nature, whether accrued, absolute or contingent (including
without limitation, Liabilities as guarantor or otherwise with respect to
obligations of others, or Liabilities for taxes due or then accrued or to become
due or contingent or potential Liabilities relating to activities of Nextera or
the conduct of its business prior to the date hereof or the Closing, as the case
may be, regardless of whether claims in respect thereof had been asserted as of
such date), except Liabilities (i) stated or adequately reserved against on the
Nextera Balance Sheet or the notes thereto, or (ii) incurred or arising in the
ordinary course of business of Nextera.
6.9. Taxes.
(a) All returns, declarations, reports, estimates,
statements, schedules or other information or documents with respect to Taxes
(collectively, "Tax Returns") required to be filed by Nextera and Holdings have
been timely filed (giving effect to extensions granted with respect thereto),
and all such Tax Returns are true, correct, and complete in all material
respects.
(b) Nextera and Holdings have timely paid all Taxes
due from them or claimed to be due from then by any federal, state, local,
foreign or other taxing authority.
(c) There are no liens for Taxes upon any of the
assets of Nextera or Holdings, except liens for taxes not yet due and payable.
<PAGE> 41
(d) No Tax Returns of Nextera or Holdings have been
examined by the relevant taxing authority. No deficiency for any Taxes has been
proposed, asserted or assessed against Nextera or Holdings that has not been
resolved and paid in full. There are no outstanding waivers, extensions, or
comparable consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns that have been given by Nextera or Holdings
(including the time for filing of Tax Returns or paying Taxes) and neither
Nextera nor Holdings has any pending requests for any such waivers, extensions,
or comparable consents.
(e) No audit or other proceeding by any federal,
state, local or foreign court, governmental, regulatory, administrative or
similar authority is presently pending with respect to any Taxes or Tax Return
of Nextera or Holdings, and neither Nextera nor Holdings has received written
notice of any pending audits or proceedings.
(f) Nextera and Holdings have established adequate
reserves in accordance with generally accepted accounting principles for all
Taxes not yet due and payable, which reserves are set forth in Schedule 6.9.
(g) Nextera and Holdings have complied in all
material respects with all applicable laws, rules and regulations relating to
the payment and withholding of Taxes (including, without limitation, withholding
of Taxes pursuant to Sections 1441, 1442, 1445 and 1446 of the Code or similar
provisions under any applicable state and foreign laws) and have, within the
time and the manner prescribed by law, paid over to the proper governmental
authorities all amounts so withheld.
(h) Neither Nextera nor Holdings is a party to or is
bound by or has any obligation under any Tax sharing allocation or indemnity
agreement or similar contract or arrangement.
(i) Nextera and Holdings are, and have been at all
times since their formation, properly characterized as partnerships for federal
and applicable state and local income tax purposes.
(j) No power of attorney granted by Nextera or
Holdings with respect to any Taxes is currently in force.
(k) Other than its own operating agreement and with
respect to Holdings, other than the Nextera Operating Agreement, neither Nextera
nor Holdings is subject to any joint venture, partnership or other arrangement
or contract that is treated as a partnership for U.S. federal income tax
purposes.
(l) There is no expectation that any taxing
authority may claim or assess any material amount of Taxes payable by Nextera or
Holdings for any period ending on or prior to the Closing Date and there are no
facts of which Nextera or Holdings is aware which would constitute grounds for
the assessment of any material amount of Taxes payable by Nextera or Holdings
for any period ending on or prior to the Closing Date.
<PAGE> 42
(m) Schedule 6.9 sets forth each state, local and
foreign jurisdiction in which Nextera is required, or has been at any time
required, to file or be included in a Tax Return. No written claim has ever been
received by Nextera or Holdings from a taxing authority in a jurisdiction where
neither Nextera nor Holdings pays Taxes or files Tax Returns that Nextera or
Holdings is or may be subject to Taxes assessed by such jurisdiction, and, to
the knowledge of Nextera and Holdings, no such claim has been threatened by a
taxing authority.
6.10. Absence of Certain Changes or Events. Except as disclosed in
Schedule 6.10, since the December 31, 1998, there has not been any:
(a) actual or threatened material adverse change in
the financial condition, working capital, shareholders' equity, assets,
Liabilities, reserves, revenues, income earnings, prospects or Nextera or
Holdings;
(b) change in accounting methods, principles or
practices by Nextera or Holdings affecting their assets, Liabilities or
business;
(c) revaluation by Nextera or Holdings of any of
their assets, including without limitation writing down the value of inventory
or writing off notes or accounts receivable;
(d) damage, destruction or loss (whether or not
covered by insurance) which has had or will have a material adverse affect on
the assets or the business of Nextera or Holdings;
(e) cancellation of any indebtedness or waiver or
release of any right or claim of Nextera or Holdings relating to its activities
or properties which had or will have a material adverse effect on their assets
or business;
(f) declaration, setting aside, or payment of
dividends or distributions by Nextera or Holdings in respect of their equity
securities or any redemption, purchase or other acquisition of any of Seller's
securities;
(g) adverse change in employee relations which has
or is reasonably likely to have a material adverse effect on the productivity,
the financial condition, results of operations of Nextera or Holdings or the
relationships between the employees of Nextera or Holdings and the management of
Nextera or Holdings;
(h) incurrence of indebtedness by Nextera or
Holdings for borrowed money or commitment to borrow money entered into by
Nextera or Holdings, or loans made or agreed to be made by Nextera or Holdings,
or indebtedness guaranteed by Nextera or Holdings, except for employee advances
in the ordinary course of business and endorsements for collection or deposit in
the ordinary course of business;
(i) payment, discharge or satisfaction of any
Liabilities of Nextera other than the payment, discharge or satisfaction in the
ordinary course of business of Liabilities set forth or reserved for on the
Nextera Balance Sheet or incurred in the ordinary course of business;
<PAGE> 43
(j) failure to pay or satisfy when due any Liability
of Nextera or Holdings, except where the failure would not have a material
adverse effect on Nextera or Holdings;
(k) disposition or lapsing of any Copyrights,
Patents, Trademarks, technology rights and licenses, computer software
(including without limitation any source or object codes therefor or
documentation relating thereto), trade secrets, franchises, know-how,
inventions, designs, specifications, plans, drawings and intellectual property
rights, or any disposition or disclosure to any person of any of the foregoing
not theretofore a matter of public knowledge; or
(l) agreement by Nextera or Holdings to do any of
the things described in the preceding clauses (a) through (l) other than as
expressly provided for herein.
6.11. Holdings. Holdings has no business other than ownership of
equity interests in Nextera.
6.12. Compliance with Laws. Each of Nextera and Holdings is in
compliance with all applicable statutes, ordinances, orders, judgments, decrees,
rules and regulations promulgated by any federal, state, municipal entity,
agency, court or other governmental authority which apply to Nextera or Holdings
or to the conduct of its business, except where noncompliance with such statute,
ordinance, order, judgment, decree, rule or regulation would not have a material
adverse effect on Nextera or Holdings. Neither Nextera nor Holdings has received
any notice to the effect that, or otherwise been advised that, it is not in
compliance with any such Regulations or Court Orders, and Nextera and Holdings
have no reason to anticipate that any existing circumstances are likely to
result in violations of any of the foregoing.
6.13. Recapitalization. Following the Closing Date, Seller's
percentage ownership of Nextera Class A Units (or, following a distribution of
the Nextera Class A Units by Seller to the Shareholders, the Shareholders'
collective percentage ownership thereof) and Mason Tenaglia's percentage
ownership of Holdings Class A Units will not be affected in a manner which is
other than pro rata with the other holders of Nextera Class A Units and Holdings
Class A Units respectively, on the Closing Date, except as follows:
(a) The redemption of Nextera Class A Units of EDU,
L.L.C. and the purchase of an equivalent number of Nextera Class A Units by
Holdings described in paragraphs A.1. and A.3. of Schedule 14.1 hereto;
(b) The purchase of Holdings Class A Units by
Knowledge Universe, L.L.C. and, following the Recapitalization as defined in
Section 14.1 hereof, the potential sale by Knowledge Universe, L.L.C. of the
corresponding Class A Common Units and Class B Preferred Units of Nextera
Enterprises, as described in paragraph A.5. of Schedule 14.1 hereto; and
(c) The application of the provisions of this
Section 6.13 shall be applied on an aggregate basis to the 236,000 Stock
Appreciation Rights ("SARs") issued to Seller
<PAGE> 44
at the Closing (and to any options to acquire Class A Units of Nextera into
which the SARs may be converted pursuant to the Employee Equity Participation
Plan of Nextera).
ARTICLE VII.
COVENANTS
7.1. Further Assurances. Upon the terms and subject to the conditions
contained herein, the parties agree, both before and after the Closing, (a) to
use all reasonable efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement, (b) to execute
any documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the transactions contemplated
hereunder, and (c) to cooperate with each other in connection with the
foregoing. Without limiting the foregoing, the parties agree to use their
respective commercially reasonable efforts (i) to obtain all necessary waivers,
consents and approvals from other parties to the Contracts and Leases to be
assumed by Buyer; provided, however that Buyer shall not be required to make any
payments, commence litigation or agree to modifications of the terms thereof in
order to obtain any such waivers, consents or approvals, (ii) to obtain all
necessary Permits as are required to be obtained under any Regulations, (iii) to
give all notices to, and make all registrations and filings with third parties,
including without limitation submissions of information requested by
governmental authorities, and (iv) to fulfill all conditions to this Agreement.
7.2. Conduct of Business. Between the date of this Agreement and the
date of the Closing, Seller will:
(a) Use reasonable efforts to conduct its business
only in the ordinary course consistent with past operations and refrain from
changing or introducing any method of management or operations except in the
ordinary course of business;
(b) Not enter into, extend, materially modify,
terminate or renew any Contract or Lease, except in the ordinary course of
business;
(c) Not sell, assign, transfer, convey, lease,
mortgage, pledge or otherwise dispose of or encumber any of the Assets, or any
interests therein, except in the ordinary course of business and for the
Permitted Liens;
(d) Not incur any Liability for long-term interest
bearing indebtedness, guarantee the obligations of others, indemnify others or,
except in the ordinary course of business and endorsements for collection of
deposits in the ordinary course of business, incur any other Liability;
(e) Refrain from making any change or incurring any
obligation to make a change in the Articles of Organization and Bylaws of
Seller;
<PAGE> 45
(f) Refrain from declaring, setting aside or paying
any dividend, making any other distribution in respect of its capital stock or
making any direct or indirect redemption, purchase or other acquisition of its
capital stock;
(g) Refrain from making any change in the method of
determining compensation (whether salary or bonus) payable or to become payable
to any of its employees and use all reasonable efforts in the ordinary course of
business to maintain Seller's workforce at its current level and make no
material adjustment in wages or hours of work, nor enter into any employment
agreement, or adopt any new Employee Programs or other benefit or severance plan
or amend or otherwise modify any existing employment agreement, Employee
Programs or other benefit or severance plan;
(h) Refrain from entering into any arrangement or
amending any existing arrangement between Seller and any officer, director or
Shareholder (or any entity affiliated with such persons), except for
arrangements contemplated by this Agreement or the Disclosure Schedule;
(i) Refrain from prepaying any loans (if any) from
its shareholders, officers or directors, borrowing any funds or making any other
change in its borrowing arrangements;
(j) Use its commercially reasonable efforts to
prevent any change with respect to its management and supervisory personnel and
banking arrangements;
(k) Use its commercially reasonable efforts to keep
intact its business organization, to keep available its present officers and
employees and to preserve the goodwill of all suppliers, customers, independent
contractors and others having business relations with it;
(l) Have in effect and maintain at all times all
insurance of the kind, in the amount and with the insurers set forth in the
Schedule 4.24 hereto or equivalent insurance with any substitute insurers
approved in writing by Nextera;
(m) Maintain the working capital of Seller in the
ordinary course of business at levels consistent with past operations;
(n) Furnish Nextera with unaudited monthly balance
sheets and statements of income and retained earnings and cash flows of Seller
within fifteen (15) days after each month end for each month ending more than
fifteen (15) days before the Closing;
(o) Permit Nextera and its authorized
representatives to have full access to all its properties, assets, records, tax
returns, contracts and documents and furnish to Nextera or its authorized
representatives such financial and other information with respect to its
business or properties as Nextera may from time to time reasonably request.
7.3. Authorization from Others. Prior to the date of the Closing, the
Shareholders and Seller agree to use their commercially reasonable efforts to
obtain all necessary waivers, consents and approvals from other parties to the
Contracts and Leases to be assumed by Buyer and to
<PAGE> 46
obtain all authorizations, consents and permits of others required to permit the
consummation of the transactions contemplated by this Agreement (including,
without limitation, the consent of Arbor Software Corporation with respect to
that certain Consulting Partner Agreement dated December 23, 1996, and Mortimer
B. Zuckerman and Edward H. Linde, trustees of 92 Hayden Avenue Trust, with
respect to that certain Indenture of Lease dated September 5, 1996).
7.4. Consummation of Agreement. Each of the parties shall use its
commercially reasonable efforts to perform and fulfill all conditions and
obligations on their parts to be performed and fulfilled under this Agreement,
to the end that the transactions contemplated by this Agreement shall be fully
carried out.
7.5. No Solicitation of Other Offers. Neither Seller, the
Shareholders, nor any of their officers, directors, agents, or employees or
Representatives will, directly or indirectly, solicit, encourage, assist,
initiate discussions or engage in negotiations with, provide any information
concerning the operations, properties or assets of Seller to, entertain or enter
into any agreement or transaction with, any person, other than Nextera, relating
to the possible acquisition of the capital stock of Seller or any of its assets,
except for the sale of assets in the ordinary course of business of Seller
consistent with the terms of this Agreement. If such a proposal is received,
Seller and the Shareholders will promptly notify Nextera of the terms of such
proposal and the identity of the party making the proposal.
7.6. Notification of Certain Matters. From the date hereof through
the Closing, Seller and each of the Shareholders shall give prompt notice to
Nextera of (a) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement or in any exhibit or schedule hereto to be untrue or
inaccurate in any respect and (b) any failure of Seller, the Shareholders, or
any of their respective affiliates or Representatives, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement or any exhibit or schedule hereto; provided, however, that
such disclosure shall not be deemed to cure any breach of a representation,
warranty, covenant or agreement or to satisfy any condition. Seller and the
Shareholders shall promptly notify Nextera of any Default, the threat or
commencement of any Action, or any development that occurs before the Closing
that could in any way materially affect Seller, the Assets or the Business.
7.7. Employee Matters.
(a) In addition to the Employment Agreements
described in Section 9.12, Buyer shall extend offers of employment to all of
Seller's employees (such employees are hereinafter referred to as the "Rehired
Employees") effective as of the Closing, which offers shall be on terms and
conditions which Buyer shall determine, provided that the terms shall be
substantially similar to those currently provided by Seller to such employees
and the service of the Rehired Employees with Seller shall be taken into account
by Buyer and Nextera for purposes of eligibility and participation in employee
benefits plans maintained by them and for purposes of vesting in any 401(k) plan
maintained by them. Seller shall terminate the employment of all Rehired
Employees immediately prior to the Closing and shall cooperate with and use its
<PAGE> 47
commercially reasonable efforts to assist Buyer in its efforts to secure
satisfactory employment arrangements with those employees of Seller to whom
Buyer makes offers of employment.
(b) Seller shall be solely responsible for all of
the Employee Programs and all obligations and Liabilities thereunder. Buyer
shall not assume any of the Employee Programs or any obligation or liability
thereunder.
(c) Nothing contained in this Agreement shall confer
upon any Rehired Employee any right with respect to continuance of employment by
Buyer, nor shall anything herein interfere with the right of Buyer to terminate
the employment of any of the Rehired Employees at any time, with or without
cause, or restrict Buyer in the exercise of its independent business judgment in
modifying any of the terms and conditions of the employment of the Rehired
Employees.
(d) No provision of this Agreement shall create any
third party beneficiary rights in any Rehired Employee, any beneficiary or
dependents thereof, or any collective bargaining representative thereof, with
respect to the compensation, terms and conditions of employment and benefits
that may be provided to any Rehired Employee by Buyer or under any benefit plan
which Buyer may maintain.
(e) Seller shall not, directly or indirectly, hire
or offer employment to or seek to hire or offer employment to any employee of
Seller whose employment is continued by Buyer after the Closing Date or any
employee of Buyer or any successor or affiliate of Buyer which is engaged in the
Business, unless Buyer first terminates the employment of such employee or gives
its written consent to such employment or offer of employment.
7.8. Option Pool. Buyer and Nextera agree to make available for
distribution to the Shareholders, the Rehired Employees and the new hires of
Buyer who are involved in the Business a pool of options to purchase 236,000
Nextera Class A Units or stock appreciation rights with respect to Nextera Class
A Units (the "SARs") as provided for by the Employee Equity Participation Plan
of Nextera to be allocated as set forth on Schedule 7.8 attached hereto. The
options or SARs shall have an exercise price of $5.00 per share and shall vest
at the rate of twenty-five percent (25%) per year over four (4) years. Each of
the Shareholders acknowledges that (a) under the Nextera Operating Agreement,
the Board of Directors of Holdings will have the authority to determine the
remaining terms and conditions of such options and/or SARs, including making
amendments to the Nextera Operating Agreement and Employee Equity Participation
Plan of Nextera, and (b) the tax consequences of the options and stock
appreciation rights are materially different in a limited liability company as
compared to a corporate structure. The distribution of the options and/or SARs
as provided by this Section 7.8 shall be determined by Mr. Tenaglia, subject to
the approval of Nextera which shall not be unreasonably withheld.
7.9. Holdings Class A Units. Holdings agrees that, in connection
with, and pursuant to the terms and conditions of, the employment agreements to
be entered into by the Shareholders and Buyer as contemplated by Section 9.12,
it shall issue Class A Common Units of Holdings ("Holdings Class A Units")
pursuant to the Holdings Operating Agreement, in the amounts set
<PAGE> 48
forth opposite the names of the Shareholders on Exhibit A-2. The value of a
Holdings Class A Unit as of the date hereof is $0.10 per unit.
7.10. Preservation of Confidentiality. In connection with the
negotiation of this Agreement and the preparation for the consummation of the
transactions contemplated hereby, the parties acknowledge that have had access
to confidential information relating to each other, including technical or
marketing information, ideas, methods, developments, inventions, improvements,
business plans, trade secrets, scientific or statistical data, diagrams,
drawings, specifications or other proprietary information relating thereto,
together with all analyses, compilations, studies or other documents, records or
data prepared by Seller, the Shareholders, Buyer or their respective
Representatives which contain or otherwise reflect or are generated from such
information ("Confidential Information"). Prior to the date of the Closing, each
of the parties shall treat all Confidential Information as confidential,
preserve the confidentiality thereof and not disclose any Confidential
Information, except to their Representatives and affiliates who need to know
such Confidential Information in connection with the transactions contemplated
hereby. The parties shall use all reasonable efforts to cause their
Representatives to treat all Confidential Information as confidential, preserve
the confidentiality thereof and not disclose any Confidential Information. Each
party shall be responsible for any breach of this Agreement by any of its
Representatives.
ARTICLE VIII.
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions
provided for hereby are subject, in the discretion of Seller, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Seller:
8.1. Representations, Warranties and Covenants. All representations
and warranties of Buyer, Nextera and Holdings contained in this Agreement shall
be true and correct at and as of the date of this Agreement and at and as of the
Closing Date, except as and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof, and each of Buyer, Nextera and
Holdings shall have performed and satisfied all agreements and covenants
required hereby to be performed by them prior to or on the Closing Date.
8.2. No Actions or Court Orders. No Action by any governmental
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to (a) materially affect the right or ability
of Buyer to own operate possess or transfer the Assets after the Closing, (b)
materially damage Seller or the Shareholders if the transactions contemplated
hereunder are consummated or (c) materially damage the business or financial
condition of Buyer, Nextera and/or Holdings on a consolidated basis if the
transactions contemplated hereunder are consummated. There shall have been no
determination by Seller or the Shareholders, acting in
<PAGE> 49
good faith, that the consummation of the transactions contemplated by this
Agreement has become inadvisable or impracticable by reason of the institution
or threat by any person or any federal, state or other governmental authority of
litigation. There shall not be any Regulation or Court Order that makes the
purchase and sale of the Business or the Assets contemplated hereby illegal or
otherwise prohibited.
8.3. Consents. All Permits, consents, approvals and waivers from
governmental authorities and other parties necessary to the consummation of the
transactions contemplated hereby and for the operation of the Business by Buyer
(including, without limitation, all required third party consents to the
assignment of the Leases and Contracts to be assumed by Buyer) shall have been
obtained. .
8.4. Material Changes. Since December 31, 1997, there shall not have
been any material adverse change with respect to the financial or business
condition of Nextera or Holdings on a consolidated basis.
8.5. Approval of Seller's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this agreement shall have been approved by Choate, Hall & Stewart, counsel to
Seller, and such counsel shall have received on behalf of Seller such other
certificates, opinions and documents in form satisfactory to such counsel as
Seller may reasonably require from Buyer, Nextera and Holdings to evidence
compliance with the terms and conditions hereof as of the Closing and the
correctness as of the Closing of the representations and warranties of Buyer,
Nextera and Holdings and the fulfillment of its covenants.
8.6. Opinion of Counsel. Buyer shall have delivered to Seller an
opinion of Maron & Sandler, counsel to Buyer, Nextera and Holdings, dated as of
the Closing Date, in the form attached hereto as Exhibit H;
8.7. Assumption Document. Buyer shall have executed the Assumption
Document in substantially the form attached hereto as Exhibit G.
8.8. Escrow Agreement. Buyer, Nextera and Holdings shall have
executed and delivered the Escrow Agreement in substantially the form attached
hereto as Exhibit B.
8.9. Employment Agreements. Buyer shall have executed and delivered
to each of the Shareholders the Employment Agreements in substantially the forms
attached hereto as Exhibit J. Buyer shall have offered employment to all of the
employees of Seller.
<PAGE> 50
8.10. Transfer of Nextera Class A Units. A majority of the members of
Nextera shall have consented to the transfer by the Seller to the Shareholders
of the Nextera Class A Units to be issued to Seller at the Closing and to be
deposited pursuant to the Escrow Agreement in Seller's name.
ARTICLE IX.
CONDITIONS TO BUYER'S, NEXTERA'S AND HOLDINGS' OBLIGATIONS
The obligations of Buyer, Nextera and Holdings to consummate the
transactions provided for hereby are subject, in the discretion of Buyer,
Nextera and Holdings, to the satisfaction, on or prior to the Closing Date, of
each of the following conditions, any of which may be waived by Buyer, Nextera
and Holdings:
9.1. Representations, Warranties and Covenants. All representations
and warranties of Seller and each of the Shareholders contained in this
Agreement shall be true and correct in all material respects at and as of the
date of this Agreement and at and as of the Closing Date, except as and to the
extent that the facts and conditions upon which such representations and
warranties are based are expressly required or permitted to be changed by the
terms hereof, and Seller and each of the Shareholders shall have performed and
satisfied in all material respects all agreements and covenants required hereby
to be performed by them prior to or on the Closing Date.
9.2. Consents; Regulatory Compliance and Approval. Other than the
consents of Pass & Weisz, Inc. with respect to that certain Lease Agreement
dated April 25, 1996 and Greentree Vender Services Corporation with respect to
that certain Rental Agreement dated April 14, 1997, all Permits, consents,
approvals and waivers from governmental authorities and other parties necessary
to the consummation of the transactions contemplated hereby and for the
operation of the Business by Buyer (including, without limitation, all required
third party consents to the assignment of the Leases and Contracts to be assumed
by Buyer) shall have been obtained. Buyer shall be satisfied that all approvals
required under any Regulations to carry out the transactions contemplated by
this Agreement shall have been obtained and that the parties shall have complied
with all Regulations applicable to this Agreement and the transactions
contemplated hereby.
9.3. No Actions or Court Orders. No Action by any governmental
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected (a) to damage Buyer, (b) to damage the Assets
or the Business materially if the transactions contemplated hereby are
consummated, including without limitation any material adverse effect on the
right or ability of Buyer, Nextera or Holdings to own, operate, possess or
transfer the Assets after the Closing or (c) materially damage the business or
financial condition of Buyer, Nextera and/or Holdings on a consolidated basis if
the transactions contemplated hereunder are consummated. There shall have been
no determination by Buyer, Nextera or Holdings, acting in good faith, that the
consummation of the transactions contemplated by this Agreement has become
inadvisable or impracticable by reason of the institution or threat by any
person or any federal, state or other governmental authority of litigation.
There shall not be any Regulation or Court Order that
<PAGE> 51
makes the purchase and sale of the Business or the Assets contemplated hereby
illegal or otherwise prohibited.
9.4. Approval of Nextera's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by Latham & Watkins as counsel for
Nextera, and such counsel shall have received on behalf of Nextera such other
certificates, opinions, and documents in form satisfactory to such counsel as
Nextera may reasonably require from Seller or the Shareholders to evidence
compliance with the terms and conditions hereof as of the Closing and the
correctness as of the Closing of the representations and warranties of Seller
and the Shareholders and the fulfillment of their respective covenants.
9.5. Opinion of Counsel. Seller and the Shareholders shall have
delivered to Buyer an opinion of Choate, Hall & Stewart, counsel to Seller,
dated as of the Closing Date, in the form attached hereto as Exhibit I.
9.6. Material Changes. Since the Base Balance Sheet Date, there shall
not have been any material adverse change with respect to the Business or the
Assets.
9.7. Corporate Documents. Buyer, Nextera and Holdings shall have
received from Seller resolutions adopted by the board of directors of Seller,
approving this Agreement and the agreements and the transactions contemplated
hereby and thereby, certified by Seller's corporate secretary.
9.8. Conveyancing Documents; Release of Encumbrances. Seller shall
have executed and delivered each of the documents described in Section 3.2
hereof so as to effect the transfer and assignment to Buyer of all right, title
and interest in and to the Assets and Seller shall have filed (where necessary)
and delivered to Buyer all documents necessary to release the Assets from all
Encumbrances other than the Permitted Liens, which documents shall be in a form
reasonably satisfactory to Buyer's counsel.
9.9. Name Change. Seller shall have filed an amendment to its
Articles of Organization to change its corporate name so as not to include the
words "The Planning Technology Group, Inc." or any other name or mark that has
such a near resemblance thereto as may be likely to cause confusion or mistake
to the public, or to otherwise deceive the public. Such amendment shall be in a
form acceptable for filing with the Secretary of State of the Commonwealth of
Massachusetts.
9.10. Permits. Buyer shall have obtained or been granted the right to
use all Permits necessary to its operation of the Business.
9.11. Escrow Agreement. Seller and the Shareholders shall have
executed and delivered the Escrow Agreement in substantially the form attached
hereto as Exhibit B.
9.12. Employment Agreements. Each Shareholder shall have executed and
delivered to Buyer an Employment Agreement in substantially the form attached
hereto as Exhibit J.
<PAGE> 52
9.13. Consent to Recapitalization. Each of the members of Nextera
shall have delivered to Nextera a signed letter of consent acknowledging his
agreement and consent to the Recapitalization (as defined in Section 14.1).
ARTICLE X.
CONSENTS TO ASSIGNMENT
10.1. Consents to Assignment. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any Contract, Lease, Permit or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment thereof, without
the consent of a third party thereto, would constitute a Default thereof or in
any way adversely affect the rights of Buyer thereunder. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
affect the rights thereunder so that Buyer would not receive all such rights,
Seller
<PAGE> 53
will cooperate with Buyer, in all reasonable respects, to provide to Buyer the
benefits under any such Contract, Lease, Permit or any claim or right, including
without limitation enforcement for the benefit of Buyer of any and all rights of
Seller and the Shareholders against a third party thereto arising out of the
Default or cancellation by such third party or otherwise. Nothing in this
Section 10.1 shall affect Buyer's right to terminate this Agreement under
Sections 9.2 and 13.1 in the event that any consent or approval to the transfer
of any Asset is not obtained. Any election by Buyer to proceed to the Closing
despite the failure to obtain any such consent, other than the consents of Pass
& Weisz, Inc. with respect to that certain Lease Agreement dated April 25, 1996
and Greentree Vender Services Corporation with respect to that certain Rental
Agreement dated April 14, 1997, shall constitute a waiver of any and all rights
of Seller, Nextera and/or Holdings with respect to the failure.
ARTICLE XI.
RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING
11.1. Collection of Accounts Receivable and Letters of Credit. At the
Closing, Buyer will acquire hereunder, and thereafter Buyer or its designee
shall have the right and authority to collect for Buyer's or its designee's
account, all receivables, letters of credit and other items which constitute a
part of the Assets, and Seller and the Shareholders shall within promptly after
receipt of any payment in respect of any of the foregoing, properly endorse and
deliver to Buyer any letters of credit, documents, cash or checks received on
account of or otherwise relating to any such receivables, letters of credit or
other items. Seller and the Shareholders shall promptly transfer or deliver to
Buyer or its designee any cash or other property that Seller or any Shareholders
may receive in respect of any deposit, prepaid expense, claim, contract,
license, lease, commitment, sales order, purchase order, letter of credit or
receivable of any character, or any other item, constituting a part of the
Assets.
11.2. Books and Records; Tax Matters.
(a) Books and Records. Each party agrees that it
will cooperate with and make available to the other party, during normal
business hours, all Books and Records, information and employees (without
substantial disruption of employment) retained and remaining in existence after
the Closing which are necessary or useful in connection with any tax inquiry,
audit, investigation or dispute, any litigation or investigation or any other
matter requiring any such Books and Records, information or employees for any
reasonable business purpose. The party requesting any such Books and Records,
information or employees shall bear all of the out-of-pocket costs and expenses
(including without limitation attorneys' fees, but excluding reimbursement for
salaries and employee benefits) reasonably incurred in connection with providing
such Books and Records, information or employees.
(b) Cooperation and Records Retention. Seller, the
Shareholders and Buyer shall (i) each provide the others with such assistance as
may reasonably be requested by any of them in connection with the preparation of
any Tax Return, audit, or other examination by any taxing authority or judicial
or administrative proceedings relating to Liability for Taxes, (ii) each retain
and provide the others with any records or other information that may be
relevant
<PAGE> 54
to such Tax Return, audit or examination, proceeding or determination, and (iii)
each provide the others with any final determination of any such audit or
examination, proceeding, or determination that affects any amount required to be
shown on any Tax Return of the other for any period. Without limiting the
generality of the foregoing, Seller, the Shareholders and Buyer shall each
retain, until the applicable statutes of limitations (including any extensions)
have expired, copies of all Tax Returns, supporting work schedules, and other
records or information that may be relevant to such Tax Returns for all tax
periods or portions thereof ending on or before the Closing Date and shall not
destroy or otherwise dispose of any such records without first providing the
other party with a reasonable opportunity to review and copy the same.
(c) Preparation of Form W-2's. Pursuant to Revenue
Procedure 84-77 (1984-2 C.B. 753), provided that Seller provides Buyer with all
necessary payroll records for the calendar year which includes the Closing Date,
Buyer shall furnish a Form W-2 to each employee employed by Buyer who had been
employed by Seller disclosing all wages and other compensation paid for such
calendar year, and taxes withheld therefrom, and Seller shall be relieved of the
responsibility to do so.
(d) Payment of Liabilities. Following the Closing
Date, Seller and the Shareholders shall pay promptly when due all of the debts
and Liabilities of Seller, including any Liability for Taxes, other than Assumed
Liabilities; provided, however, this covenant shall not apply to that portion
(or all) of any debt that Seller is contesting in good faith. Following the
Closing Date, Buyer shall pay promptly when due all of the Assumed Liabilities;
provided, however, this covenant shall not apply to that portion (or all) of any
Liability that Buyer is contesting in good faith.
11.3. Survival of Representations, Etc. Each of the representations,
warranties, agreements, covenants and obligations herein are material, shall be
deemed to have been relied upon by the other party and shall survive the Closing
regardless of any investigation and shall not merge in the performance of any
obligation by either party hereto; provided, however, that such representations
and warranties shall expire on the same dates as and to the extent that the
rights to indemnification with respect thereto under Article XII shall expire.
<PAGE> 55
ARTICLE XII.
INDEMNIFICATION
12.1. Indemnification by Seller and the Shareholders. Seller and each
of the Shareholders agrees subsequent to the Closing to indemnify and hold
Buyer, Nextera, Holdings, and their respective subsidiaries and affiliates and
persons serving as officers, directors, partners, managers, shareholders,
members, employees and agents thereof (other than the Shareholders, except to
the extent of Liabilities incurred in their capacities as an officer, director
or employee of Buyer after the Closing) (individually a "Buyer Indemnified
Party" and collectively the "Buyer Indemnified Parties") harmless from and
against any Damages which may be sustained or suffered by any of them arising
out of or based upon any of the following matters:
(a) fraud, intentional misrepresentation or the
cause or knowledge of a deliberate or willful breach of any representations,
warranties or covenants of Seller or any of the Shareholders under this
Agreement or in any certificate, schedule or exhibit delivered pursuant hereto
(collectively, "Fraud Claims");
(b) any breach of any representation or warranty of
the Shareholders set forth in Section 5.1 of this Agreement (collectively,
"Ownership Claims");
(c) except for the Assumed Liabilities, any
liability of Seller or the Shareholders for Taxes arising from the activities of
Seller and all events and transactions on or prior to the Closing and any breach
of the representations and warranties set forth in Section 4.22 hereof and any
covenant with respect to Taxes or tax related matters (collectively, "Tax
Claims");
(d) except for the Assumed Liabilities, any Excluded
Liability and any Liability imposed upon Buyer by reason of Buyer's status as
transferee of the Business or the Assets (collectively, "Excluded Liability
Claims");
(e) other than Fraud Claims, Ownership Claims, Tax
Claims or Excluded Liability Claims, any other breach of any representation,
warranty or covenant of Seller or the Shareholders under this Agreement or in
any schedule or exhibit delivered pursuant hereto, or by reason of any claim,
action or proceeding asserted or instituted growing out of any matter or thing
constituting a breach of such representations, warranties or covenants
(collectively, "General Claims").
In addition, each Shareholder severally, but not jointly, agrees
subsequent to the Closing to indemnify and hold all Buyer Indemnified Parties
harmless from and against any damages, liabilities, losses, taxes, fines,
penalties, costs, and expenses (including, without limitation, reasonable fees
of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) which may be sustained or suffered by any of them
arising out of or based upon fraud, intentional misrepresentation or any breach
(whether or not deliberate or willful) of any representation or warranty of such
Shareholder contained in Section 5, or by reason of any claim,
<PAGE> 56
action or proceeding asserted or instituted growing out of any matter or thing
constituting a breach of such representation or warranty (collectively,
"Individual Claims").
12.2. Limitations on Indemnification by Seller and the Shareholders.
Anything contained in this Agreement to the contrary notwithstanding, the
liability of Seller and the Shareholders to provide any indemnification to any
Buyer Indemnified Party and right of Buyer Indemnified Parties to
indemnification under Section 12.1 (or otherwise) shall be subject to the
following provisions:
(a) No claims for indemnification shall be made
under this Agreement against Seller or any Shareholder, and no indemnification
shall be payable to any Buyer Indemnified Party, with respect to General Claims
after the date which is eighteen (18) months following the Closing.
(b) No claims for indemnification shall be made
under this Agreement against Seller or any Shareholder, and no indemnification
shall be payable to any Buyer Indemnified Party, with respect to any Tax Claim
after expiration of all applicable statutes of limitation with respect to the
Tax that is the subject of the indemnification claim and the expiration of all
applicable statutes of limitation taking into account any extensions thereof
with respect to collection of the Tax.
(c) The aggregate amount to be payable by Seller and
the Shareholders to all Buyer Indemnified Parties for claims for indemnification
with respect to General Claims (including amounts subject to the Escrow
Agreement and any Nextera Class A Units delivered to Nextera in satisfaction of
an indemnification claim) shall in no event exceed Four Million Four Hundred
Seventy-three Thousand Seven Hundred Fifty Dollars ($4,473,750).
(d) The amount payable by a Shareholder to all Buyer
Indemnified Parties for claims for indemnification hereunder (or otherwise)
shall in no event exceed such Shareholder's pro rata share of the total amount
to be paid to all Buyer Indemnified Parties for claims for indemnification
hereunder (or otherwise). The pro rata shares of the Shareholders for purposes
of this paragraph shall be the same percentages as the Shareholders' respective
ownership interests in Seller.
(e) In the event that any claim for indemnification
arises from a breach of representation, warranty or covenant which was made or
undertaken by a Shareholder, by the express terms of this Agreement severally
and not jointly, the Shareholder shall be severally, but not jointly, liable for
indemnification in respect of such a claim.
(f) Seller and the Shareholders shall have no
obligation for indemnification with respect to General Claims hereunder until
aggregate claims for indemnification with respect to General Claims hereunder
exceed $50,000, in which case Seller shall be obligated for indemnification of
all General Claims including the initial $50,000 of such claims.
<PAGE> 57
(g) Claims for indemnification with respect to Fraud
Claims, Ownership Claims, Tax Claims, Excluded Liability Claims and Individual
Claims made under this Agreement by any Buyer Indemnified Party shall not be
subject to any of the limitations set forth in this Section 12.2.
(h) Claims with respect to Damages resulting from
the Seller's election to proceed to the Closing without the waivers, consents
and approvals of Pass & Weisz, Inc. with respect to that certain Lease Agreement
dated April 25, 1996 and Greentree Vender Services Corporation with respect to
that certain Rental Agreement dated April 14, 1997 shall not be subject to the
limitations set forth in this Section 12.2.
12.3. Indemnification by Nextera. Buyer, Nextera and Holdings, jointly
and severally agree to indemnify and hold Seller, the Shareholders and their
affiliates and persons serving as officers, directors, partners, managers,
shareholders, members, employees and agents thereof (individually a "Seller
Indemnified Party" and collectively the "Seller Indemnified Parties") harmless
from and against any Damages which may be sustained or suffered by any of them
arising out of or based upon any breach of any representation, warranty or
covenant made by Buyer, Nextera and/or Holdings in this Agreement or in any
certificate delivered by Nextera, Buyer and/or Holdings hereunder, or by reason
of any claim, action or proceeding asserted or instituted growing out of any
matter or thing constituting such a breach.
12.4. Limitation on Indemnification by Nextera. Notwithstanding the
foregoing, (a) no indemnification shall be payable to Seller with respect to
claims asserted pursuant to Section 12.3 above after the date which is eighteen
months after the Closing and the aggregate amount to be payable to Seller
pursuant to Section 12.3 shall not exceed Four Million Four Hundred
Seventy-three Thousand Seven Hundred Fifty Dollars ($4,473,750) and (b) Buyer,
Nextera and Holdings shall have no obligation for indemnification hereunder
until aggregate claims for indemnification hereunder exceed $50,000, in which
case Buyer, Nextera and/or Holdings shall be obligated for indemnification of
all claims, including the initial $50,000 of such claims. Claims for
indemnification with respect to fraud, intentional misrepresentation or the
cause or knowledge of a deliberate or willful breach of any representations,
warranties or covenants of Buyer, Nextera and/or Holdings under this Agreement
or in any certificate, schedule or exhibit delivered pursuant hereto shall not
be subject to any of the limitations set forth in this Section 12.4. Claims with
respect to Damages resulting from any failure by Buyer to pay any Assumed
Liabilities pursuant to Section 2.2 or failure by Buyer, Nextera and/or Holdings
to perform any covenants required to be performed after the Closing shall not be
subject to the limitations set forth in this Section 12.4.
12.5. Notice; Defense of Claims. An indemnified party shall make
claims for indemnification hereunder by giving written notice thereof to the
indemnifying party promptly on discovery and in any event within the period in
which indemnification claims can be made hereunder. If indemnification is sought
for a claim or liability asserted by a third party, the indemnified party shall
also give written notice thereof to the indemnifying party promptly after it
receives notice of the claim or liability being asserted, but the failure to do
so shall not relieve the indemnifying party from any liability except to the
extent that it is prejudiced by the failure or delay in giving such notice. Such
notice shall summarize the bases for the claim for
<PAGE> 58
indemnification and any claim or liability being asserted by a third party.
Within 20 days after receiving such notice the indemnifying party shall give
written notice to the indemnified party stating whether it disputes the claim
for indemnification and whether it will defend against any third party claim or
liability at its own cost and expense. If the indemnifying party fails to give
notice that it disputes an indemnification claim within 20 days after receipt of
notice thereof, it shall be deemed to have accepted and agreed to the claim,
which shall become immediately due and payable. The indemnifying party shall be
entitled to direct the defense against a third party claim or liability with
counsel selected by it (subject to the consent of the indemnified party, which
consent shall not be unreasonably withheld) as long as the indemnifying party is
conducting a good faith and diligent defense. The indemnified party shall at all
times have the right to fully participate in the defense of a third party claim
or liability at its own expense directly or through counsel; provided, however,
that if the named parties to the action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party is
advised that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
indemnified party may engage separate counsel at the expense of the indemnifying
party. If no such notice of intent to dispute and defend a third party claim or
liability is given by the indemnifying party, or if such good faith and diligent
defense is not being or ceases to be conducted by the indemnifying party, the
indemnified party shall have the right, at the expense of the indemnifying
party, to undertake the defense of such claim or liability (with counsel
selected by the indemnified party), and to compromise or settle it, exercising
reasonable business judgment. If the third party claim or liability is one that
by its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, at the expense of the indemnifying party.
12.6. Satisfaction of Seller and Shareholder Indemnification
Obligations. In order to satisfy the indemnification obligations of Seller and
the Shareholders hereunder, a Buyer Indemnified Party shall proceed first
directly against the Escrow Deposit as further set forth in the Escrow Agreement
and then directly against Seller and each Shareholder subject to the limitations
set forth herein. As further set forth in the Escrow Agreement, all claims
against the Escrow Deposit shall be satisfied first against the cash portion
thereof and then against the Nextera Class A Units.
12.7. Bulk Sales. It may not be practicable to comply or attempt to
comply with the procedures of the "Bulk Sales Act" or similar law of any or all
of the states in which the Assets are situated or of any other state which may
be asserted to be applicable to the transactions contemplated hereby.
Accordingly, to induce Buyer to waive any requirements for compliance with any
or all of such laws, Seller and each of the Shareholders hereby agree that the
indemnity provisions of Article XII hereof shall apply to any Damages of Buyer
arising out of or resulting from the failure of Seller or Buyer to comply with
any such laws.
12.8. Valuation of Buyer Class A Units. Except as provided in the
Escrow Agreement, Seller and the Shareholders may, at their option, elect to
satisfy any indemnification claims under this Agreement by delivering Nextera
Class A Units to the Buyer Indemnified Parties. To the
<PAGE> 59
extent that Nextera Class A Units are used to satisfy indemnification
obligations under this Agreement, such units shall be valued in accordance with
the terms of the Escrow Agreement.
12.9. Exclusive Remedy. Other than Fraud Claims, the foregoing
indemnification provisions in this Article XII shall be the exclusive remedy for
any breach of the representations and warranties of the Seller and the
Shareholders in Articles IV and V and of Buyer, Nextera and Holdings in Article
VI above.
ARTICLE XIII.
TERMINATION OF AGREEMENT; RIGHTS TO PROCEED
13.1. Termination. At any time prior to the Closing, this Agreement
may be terminated as follows:
(i) by mutual written consent of all of the
parties to this Agreement;
(ii) by Buyer, Nextera or Holdings, pursuant
to written notice by Nextera to Seller, if any of the conditions set forth in
Article IX of this Agreement have not been satisfied at or prior to the Closing,
or if it has become reasonably and objectively certain that any of such
conditions, other than a condition within the control of Seller or the
Shareholders, will not be satisfied at or prior to the Closing, such written
notice to set forth such conditions which have not been or will not be so
satisfied; and
(iii) by Seller or the Shareholders, pursuant
to written notice by Seller or the Shareholders to Buyer, Nextera and Holdings,
if any of the conditions set forth in Article VIII of this Agreement have not
been satisfied at or prior to the Closing, or if it has become reasonably and
objectively certain that any of such conditions, other than a condition within
the control of Buyer, Nextera and Holdings, will not be satisfied at or prior to
the Closing, such written notice to set forth such conditions which have not
been or will not be so satisfied.
13.2. Effect of Termination. All obligations of the parties hereunder
shall cease upon any termination pursuant to Section 13.1, provided, however,
that the provisions of this Article XIII, Section 14.2 and Section 14.11 hereof
shall survive any termination of this Agreement.
ARTICLE XIV.
MISCELLANEOUS
14.1. Recapitalization. Seller and each of the Shareholders hereby
agree and acknowledge that they have been informed that Nextera and Holdings
have adopted a recapitalization plan (the "Recapitalization") which has not yet
been effectuated. It is the intention of Nextera, Holdings, and their members to
effectuate the Recapitalization as soon as practicable following the Closing.
Seller and each of the Shareholders hereby consents and agrees to each and every
element of the Recapitalization which is set forth on Schedule 14.1 attached
<PAGE> 60
hereto; the results of the Recapitalization are shown on Exhibit K attached
hereto in the form of a structure chart. Nextera and each Shareholder agree and
acknowledge that the terms of the Recapitalization as set forth on Schedule 14.1
and illustrated in Exhibit K do not incorporate or reflect the fact that there
are employee equity participation rights (" Nextera SARs") in Nextera which may
be converted into Class A Common Units of Nextera. There are currently 944,000
Nextera SARs outstanding with an equivalent strike price of $5.00 per unit and
927,010 Nextera SARs outstanding with an equivalent strike price of $7.50 per
unit and additional Nextera SARs may be issued. Additional Class A Common Units
of Nextera may be issued in future acquisitions. In addition, the terms of the
Recapitalization as set forth on Schedule 14.1 and illustrated on Exhibit K have
been prepared on the assumption that both this transaction and the so-called
"Pyramid" Transaction will be consummate; in the event that the "Pyramid"
Transaction does not close either prior to or after the Recapitalization, then
the terms of the Recapitalization will be adjusted accordingly. Seller and each
Shareholder further agree and acknowledge that no further consents need be
obtained from them to effectuate the Recapitalization after the Closing Date and
that they agree and consent to the necessary steps that will be taken and to the
documentation that will be prepared and executed to complete the
Recapitalization.
14.2. Fees and Expenses. Except as otherwise specified in this
Agreement, each party hereto shall pay its own legal, accounting, out-of-pocket
and other expenses incident to this Agreement and to any action taken by such
party in preparation for carrying this Agreement into effect.
14.3. Governing Law. This Agreement shall be construed under and
governed by the internal laws of the Commonwealth of Massachusetts without
regard to its conflict of laws provisions.
14.4. Notices. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail, upon the sooner of the date on which
receipt is acknowledged or the expiration of three days after deposit in United
States post office facilities properly addressed with postage prepaid. All
notices to a party will be sent to the addresses set forth below or to such
other address or person as such party may designate by notice to each other
party hereunder:
TO BUYER: The Planning Technologies Group, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (781) 778-4500
With a copy to: Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
<PAGE> 61
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO NEXTERA: Nextera Enterprises, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (781) 778-4500
With a copy to: Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
<PAGE> 62
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO HOLDINGS: Nextera Enterprises Holdings, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (781) 778-4500
With a copy to: Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO SELLER: The Planning Technologies Group, Inc.
95 Hayden Avenue
Lexington, MA 02173
Attention: Mason Tenaglia
Fax: (781) 861-1099
With a copy to: Choate, Hall & Stewart
53 State Street
Boston, MA 02109
Attention: William P. Gelnaw, Jr., Esq.
Fax: (617) 248-4000
TO SHAREHOLDERS: To the address last furnished by such
Shareholder to Seller
With a copy to: Choate, Hall & Stewart
53 State Street
Boston, MA 02109
Attention: William P. Gelnaw, Jr., Esq.
Fax: (617) 248-4000
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
<PAGE> 63
14.5. Entire Agreement. This Agreement, including the schedules and
exhibits hereto, reflects the entire agreement of the parties with respect to
its subject matter, and supersedes all previous written or oral negotiations,
commitments and writings. No promises, representations, understandings,
warranties and agreements have been made by any of the parties hereto except as
referred to herein or in such schedules and exhibits; and all inducements to the
making of this Agreement relied upon by either party hereto have been expressed
herein or in such schedules or exhibits.
14.6. Assignability; Binding Effect. This Agreement shall only be
assignable by Buyer, Nextera or Holdings to an entity controlling, controlled by
or under common control with Buyer, Nextera or Holdings upon written notice to
Seller. This Agreement may not be assigned by Seller without the prior written
consent of Nextera. This Agreement shall be binding upon and enforceable by, and
shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. Assignment of this Agreement by any party
shall not relieve such party from its obligations hereunder.
14.7. Captions and Gender. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
14.8. Execution in Counterparts. For the convenience of the parties
and to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
14.9. Amendments. This Agreement may not be amended or modified, nor
may compliance with any condition or covenant set forth herein be waived, except
by a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
14.10. Publicity and Disclosures. No press releases or public
disclosure, either written or oral, of the transactions contemplated by this
Agreement, shall be made by a party to this Agreement without the prior
knowledge and written consent of Nextera and Seller.
14.11. Specific Performance. The parties agree that it would be
difficult to measure damages which might result from a breach of this Agreement
by Seller or any of the Shareholders and that money damages would be an
inadequate remedy for such a breach. Accordingly, if there is a breach or
proposed breach of any provision of this Agreement by Seller or any of the
Shareholders, and Buyer, Nextera or Holdings do not elect to terminate under
Article XIII, Buyer, Nextera and Holdings shall be entitled, in addition to any
other remedies which it may have, to an injunction or other appropriate
equitable relief to restrain such breach without having to show or prove actual
damage to Buyer, Nextera or Holdings.
14.12. Obligations. All obligations of Buyer, Nextera and Holdings
hereunder or under any agreement executed in connection herewith shall be joint
and several obligations of Buyer, Nextera and Holdings.
<PAGE> 64
14.13. Agent of Sellers. The Shareholders hereby appoint Mason Tenaglia
as their sole and exclusive agent (the "Agent") with respect to this Agreement
and the Escrow Agreement. In his capacity as agent, the Agent shall be
authorized, in his discretion, to consent to such amendments, modifications,
waivers and revisions to this Agreement on behalf of the Shareholders as are
approved by the Agent, and to take any and all actions on behalf of the
Stockholders, including without limitation executing closing certificates and
documents, and his signature shall be sufficient to evidence the approval of the
Shareholders thereto. No Shareholder shall take any action with respect to this
Agreement or the matters contemplated hereby without the approval of the Agent.
The Agent shall not be liable to any Shareholder for any action taken by him in
good faith pursuant to this Agreement, and the Shareholders shall jointly and
severally indemnify the Agent from any losses, claims, damages and expenses
arising out of his service as agent hereunder. The Agent may resign at any time
on 20 days prior notice.
<PAGE> 65
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives, as of the date first written above.
BUYER:
THE PLANNING TECHNOLOGIES GROUP, L.L.C., a
Delaware limited liability company
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------------------
Name: Michael P. Muldowney
--------------------------------
Title: Treasurer
--------------------------------
NEXTERA:
NEXTERA ENTERPRISES, L.L.C., a Delaware limited
liability company
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------------------
Name: Michael P. Muldowney
--------------------------------
Title: Treasurer
--------------------------------
HOLDINGS:
NEXTERA ENTERPRISES HOLDINGS, L.L.C., a Delaware
limited liability company
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------------------
Name: Michael P. Muldowney
--------------------------------
Title: Treasurer
--------------------------------
SELLER:
THE PLANNING TECHNOLOGIES GROUP, INC., a
Massachusetts corporation
By: /s/ MASON TENAGLIA
---------------------------------------------
Name: Mason Tenaglia
--------------------------------
Title: President
--------------------------------
<PAGE> 66
SHAREHOLDERS:
By: /s/ JOSEPH AXELROD
---------------------------------------------
Name: Joseph Axelrod
--------------------------------
State of Residence: MA
--------------------
By: /s/ DOUGLAS M. FERGUSON
---------------------------------------------
Name: Douglas M. Ferguson
--------------------------------
State of Residence: MA
--------------------
By: /s/ DANIEL R. GILMORE
---------------------------------------------
Name: Daniel R. Gilmore
--------------------------------
State of Residence: MA
--------------------
By: /s/ MASON S. TENAGLIA
---------------------------------------------
Name: Mason S. Tenaglia
--------------------------------
State of Residence: MA
--------------------
<PAGE> 1
EXHIBIT NO. 10.9
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is entered into as of
March 31, 1998 by and among The Planning Technologies Group, L.L.C., a Delaware
limited liability company ("Buyer"), Nextera Enterprises, L.L.C., a Delaware
limited liability company and the controlling member of Buyer ("Nextera"),
Nextera Enterprises Holdings, L.L.C., a Delaware limited liability company and
the controlling member of Nextera ("Holdings"), The Planning Technologies Group,
Inc., a Massachusetts corporation ("Seller"), the holders of Seller's common
stock listed on Exhibit A attached hereto (herein collectively referred to as
the "Shareholders" and individually as a "Shareholder") and Chase Manhattan
Trust Company, National Association, as escrow agent (the "Escrow Agent").
WHEREAS, pursuant to an Asset Purchase Agreement (the
"Purchase Agreement") dated as of March 31, 1998 by and among Buyer, Nextera,
Holdings, Seller and the Shareholders, Buyer is purchasing certain assets and
assuming certain liabilities from Seller;
WHEREAS, Seller and the Shareholders have agreed to indemnify
Buyer, Nextera and Holdings against certain breaches of the representations,
warranties and covenants made by Seller and the Shareholders in the Purchase
Agreement and against certain other matters as specified in Article XII of the
Purchase Agreement; and
WHEREAS, to secure payment of the Shareholders'
indemnification obligations, ONE MILLION SIX THOUSAND FIVE HUNDRED DOLLARS
($1,006,500) in cash (the "Escrowed Cash") and 32,100 Nextera Class A Units (the
"Escrowed Units") (together, the Escrowed Cash and the Escrowed Units and
additions to or earnings on the same, the "Escrow Deposit") are being deposited,
pursuant to Section 2.4 of the Purchase Agreement, in escrow to be held as
hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises of the parties herein contained, and other good and valuable
consideration, receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Establishment of Escrow: Investment. Buyer has herewith
deposited the Escrow Deposit with the Escrow Agent on the date of the Closing.
The Escrowed Units have been issued in the name of Seller, or at the direction
of Seller, the names of the Shareholders, and shall be accompanied by stock
powers or similar instruments duly signed in blank by Seller or the
Shareholders, as appropriate. The Escrow Deposit shall be held in escrow in an
account designated as The Planning Technologies Group Escrow Account or an
account having such other similar designation, subject to the terms and
conditions set forth herein. Mason Tenaglia shall serve as the exclusive
representative of Seller and the Shareholders with respect to the Escrow Deposit
and this Agreement (the "Escrow Representative"). If, for any reason, the Escrow
Representative shall be either unable or unwilling to serve, a successor Escrow
Representative shall be appointed by written consent of Seller and the
Shareholders and all references to the Escrow Representative shall be deemed to
include such successor. The Escrow Agent shall invest all cash held as part of
the Escrow Deposit only in such specific investments as
<PAGE> 2
Buyer and the Escrow Representative shall from time to time jointly direct in
writing to the Escrow Agent; provided, however, that such investments shall be
limited to:
(a) time and demand deposits, certificates of deposit and
acceptances, maturing within ninety (90) days from
the date of acquisition thereof, issued by state and
national banks located in the United States of
America, including the Escrow Agent or any of its
affiliates, and having capital, surplus and profits
aggregating at least one hundred million dollars
($100,000,000);
(b) securities or other obligations of, or guaranteed by,
the United States of America or any agency thereof
having maturities of not greater than one (1) year;
(c) commercial paper, maturing within ninety (90) days
from the date of acquisition thereof, rated A-1 or
P-1 by Standard & Poor's or Moody's Investors
Service;
(d) repurchase agreements fully collateralized by
obligations described in clauses 1(a), 1(b) or 1(c)
hereof;
(e) shares of investment companies registered under the
Investment Company Act of 1940 which invest in any
obligation described herein, or shares of the Vista
Prime Money Market Fund, including those for which
the Escrow Agent or any of its affiliates provide
services for a fee, whether as an investment advisor,
custodian, transfer agent, registrar, sponsor,
distributor, manager or otherwise.
Until further written notice, cash in the Escrow Deposit shall
be invested in Vista Prime. Unless otherwise directed in writing by the Escrow
Representative and Buyer, the Escrow Agent shall not invest all or any portion
of the Escrow Deposit in any investment if the maturity date of such investment
is later than the Termination Date (as defined below).
2. Amounts Earned on Escrow Deposit: Tax Matters. All amounts
earned, paid or distributed with respect to the Escrow Deposit (whether
interest, dividends, distributions from Nextera with respect to the Escrowed
Units or otherwise) shall become a part of the Escrow Deposit, shall be held
hereunder upon the same terms as the original Escrow Deposit and shall be
distributed together with the underlying portion of the original Escrow Deposit
pursuant to the terms of this Agreement. The parties agree that to the extent
permitted by applicable law, including Section 468B(g) of the Internal Revenue
Code of 1986, as amended, Seller or the Shareholders, as applicable, will
include all amounts earned on the Escrow Deposit in its/their gross income for
federal, state and local income tax (collectively, "income tax") purposes and
pay any income tax resulting therefrom.
2
<PAGE> 3
3. Claims Against Escrow Deposit.
(a) At any time or times prior to the Termination Date (as
hereinafter defined), Buyer may make claims against the Escrow Deposit for
indemnification pursuant to and in accordance with Article XII of the Purchase
Agreement. Buyer shall notify the Escrow Representative and the Escrow Agent in
writing promptly upon determination to make a claim and in any event prior to
the expiration of this Agreement of each such claim, including a summary of the
amount of and bases for such claim. If the Escrow Representative shall dispute
such claim, the Escrow Representative shall give written notice thereof to Buyer
and to the Escrow Agent within thirty (30) days after receipt of notice of
Buyer's claim, in which case the Escrow Agent shall continue to hold the Escrow
Deposit in accordance with the terms of this Agreement; otherwise, such claim
shall be deemed to have been acknowledged to be payable out of the Escrow
Deposit in the full amount thereof and the Escrow Agent shall use its best
efforts to pay such claim to Holdings within three (3) business days after
expiration of said thirty (30) day period or as soon thereafter as possible. If
the amount of the claim exceeds the value of the Escrow Deposit, the Escrow
Agent shall have no liability or responsibility for any deficiency.
(b) The Escrow Agent shall follow the procedure below in
making any payment in satisfaction of a claim against the Escrow Deposit:
(i) The Escrow Agent shall make such payment first
from the Escrowed Cash and any additions to or earnings on the Escrowed Cash
until all cash in the Escrow Deposit has been exhausted.
(ii) To the extent that any claim exceeds the amount
of Escrowed Cash or other cash in the Escrow Deposit, the Escrow Agent shall
make payment from the Escrowed Units in such number of Escrowed Units (computed
to the nearest whole unit) having a value equal to the value of the claim not
satisfied by cash payment. Any payment of Escrowed Units by the Escrow Agent to
Holdings shall be treated as a sale by Seller or the Shareholders, as
applicable, of such Escrowed Units for the value described herein. The value of
an Escrowed Unit for purposes of this Section shall be the fair market value of
such unit on the date of the claim as determined by the Board of Directors of
Nextera (the "Board"). The fair market value shall be determined in good faith
by the Board and the Board shall notify the Escrow Representative and Escrow
Agent in writing of its determination, together with an explanation of how the
value was determined and such supporting data as the Escrow Representative shall
reasonably require (the "Valuation Notice"). If the Escrow Representative
disputes the fair market value of the Escrowed Units as determined by the Board,
then the Escrow Representative shall so notify the Board and Escrow Agent in
writing (the "Appraisal Notice") within ten (10) business days of receipt of the
Valuation Notice. Within twenty (20) business days of the receipt of the
Appraisal Notice, the Board and the Escrow Representative shall each appoint a
professional appraiser to determine the fair market value of the Escrowed Units.
Each appraiser shall have at least five (5) years experience in appraising
companies similar to Nextera. The two appraisers shall within the succeeding
twenty (20) day period after their selection, attempt to reach agreement on the
fair market value. If the appraisers reach such agreement they shall so notify
the Escrow Agent and their agreement shall be final and binding on Buyer,
Nextera, Holdings, the Board, the Escrow Representative, Seller, the
Shareholders, and their affiliates. If
3
<PAGE> 4
the appraisers fail to agree, they shall within ten (10) days thereafter select
a third appraiser with the same qualification requirements, and the three (3)
appraisers shall establish the fair market value by majority vote within the
succeeding twenty (20) day period and shall notify the Escrow Agent of their
determination. Such determination of the fair market value shall be final and
binding on Buyer, Nextera, Holdings, the Board, the Escrow Representative,
Seller, the Shareholders, and their affiliates. In all events, the appraisers
selected shall be unaffiliated with and otherwise independent of Buyer, Nextera,
Holdings, the Board, the Escrow Representative, Seller, the Shareholders, and
their affiliates. If the fair market value of the Escrowed Units, as determined
by the appraisers, is less than or no more than five percent (5%) greater than
the value as determined by the Board, then the Shareholders shall pay all costs
associated with the appraisers, provided that the Board shall have provided
substantially similar information to the appraisers as that delivered to the
Escrow Representative in the Valuation Notice. If the fair market value as
determined by the appraisers is more than five percent (5%) greater than the
value as determined by the Board, then Buyer shall pay for all costs associated
with the appraisers. To the extent Seller has transferred its rights to the
Escrowed Units to the Shareholders, the Escrowed Units delivered to Holdings in
satisfaction of a claim shall be allocated among the Shareholders so as to
reduce each Shareholder's interest in the remaining Escrowed Units by an equal
proportion. In the event that the Escrow Agent must make payment with a number
of units less than or different from the number of units represented by a
certificate in the Escrow Deposit, the Escrow Agent shall surrender such
certificate to Nextera and Nextera shall issue to the Escrow Agent certificates
of Nextera Class A Units identical in form but for the number of units as
necessary to allow for proper payment of the claim so long as the number of
units of the new certificates plus the amount of units used to satisfy such
claim shall be equivalent to the total number of units covered by the
surrendered certificate.
4. Disputed Claims.
(a) If the Escrow Representative shall dispute an
indemnification claim of Buyer as above provided, the Escrow Agent shall set
aside a portion of the Escrow Deposit sufficient to pay said claim in full as
reasonably determined by Buyer in good faith (the "Set Aside Amount"). If Buyer
notifies the Escrow Agent in writing that it has made out-of-pocket expenditures
in connection with any such disputed claim, and provides paid receipts for such
expenditures, in addition to expenditures included in the Set Aside Amount, an
amount equal to such additional expenditures shall be added to the Set Aside
Amount. If the Set Aside Amount exceeds the amount of the Escrowed Cash, the
Escrow Agent shall set aside an appropriate number of Escrowed Units as
determined by the procedure described in Section 3(b)(ii) above.
(b) If the disputed indemnification claim has not been
resolved or compromised within sixty (60) days after the Escrow Representative
sends notice of dispute of the same, or in the event of a third-party claim or
suit, within fifteen (15) days after its resolution or compromise, said
indemnification claim shall be referred to the American Arbitration Association,
to be settled by binding arbitration in Boston, Massachusetts, in accordance
with the commercial arbitration rules of the Association. The fees and expenses
of the arbitrator shall be borne equally by Seller and the Shareholders on the
one hand and Buyer on the other. In no event shall the Escrow Agent be
responsible for any fee or expense of any party to any arbitration proceeding.
The determination of the arbitrator as to the amount, if any, of the
indemnification claim which is
4
<PAGE> 5
properly allowable shall be conclusive and binding upon the parties hereto and
judgment may be entered thereon in any court having jurisdiction thereof,
including, without limitation, any Superior Court in the Commonwealth of
Massachusetts. The arbitrator shall have the authority in its discretion to
award to the prevailing party reasonable costs and expenses including attorney's
fees and the cost of arbitration. The Escrow Agent shall use its best efforts to
make payment of such claim, as and to the extent allowed, to Buyer out of the
Set Aside Amount (or if insufficient, out of the Escrow Deposit) within three
(3) business days following the Escrow Agent's receipt of said determination or
as soon thereafter as possible.
(c) Notwithstanding Section 4(b), if a disputed
indemnification claim has not been resolved or compromised as of the Termination
Date (as hereinafter defined), and such claim does not involve a third-party
claim or suit, Buyer and the Escrow Representative shall continue to negotiate
in good faith a settlement of such claims for a period of ten (10) days after
the Termination Date. If, after the expiration of such ten-day period, such
indemnification claim still has not been resolved or compromised, such claim
shall be settled in accordance with the arbitration provisions set forth in
Section 4(b).
(d) It is understood and agreed that should any dispute arise
under this Section 4, the Escrow Agent, upon receipt of written notice of such
dispute or claim by the Escrow Representative, is authorized and directed to
retain in its possession without liability to anyone, the Set Aside Amount
relating to such dispute plus any expenditures of Buyer made pursuant to Section
4(a) until such dispute shall have been settled pursuant to this Section 4. The
Escrow Agent may, but shall be under no duty whatsoever to, institute or defend
any legal proceedings which relate to the Escrow Deposit.
5. Termination. This Agreement shall terminate on the date
that the Escrow Deposit is reduced to zero as the result of payments by the
Escrow Agent to Holdings in accordance with the provisions of Section 3 or
Section 4. If, however, the Escrow Deposit has not been reduced to zero as of
the date that is eighteen (18) months following the date of this Agreement (the
"Termination Date") and there are no outstanding indemnification claims on the
Termination Date, the Escrow Agent shall distribute the amount remaining in the
Escrow Deposit to the Seller or, to the extent Seller has transferred to the
Shareholders its rights to the Escrow Deposit, the Shareholders and after such
payment this Agreement shall terminate; otherwise this Agreement shall continue
in effect until all indemnification claims Buyer has made pursuant to Section 3
hereof on or prior to the Termination Date shall have been disposed of. As of
the Termination Date, an amount of the Escrow Deposit adequate to cover all
disputed and undisputed claims made by Buyer pursuant to Section 3 hereof, plus
an additional ten percent (10%) of any such amount to cover potential expenses
to be incurred by Buyer associated with such claims, will be held by the Escrow
Agent, and the Escrow Agent shall distribute on the Termination Date the
balance, if any, of the Escrow Deposit to Seller or, to the extent Seller has
transferred to the Shareholders its rights to the Escrow Deposit, the
Shareholders. At such time as all remaining indemnification claims hereunder
have been resolved and the Escrow Agent has received a written notice executed
by Buyer and the Escrow Representative, or notification of a determination of an
arbitrator pursuant to Section 4(b), to that effect and any amounts to be
distributed to Holdings in connection therewith have been so distributed, the
Escrow Agent shall
5
<PAGE> 6
distribute the remaining Escrow Deposit, if any, to Seller or, to the extent
Seller has transferred to the Shareholders its rights to the Escrow Deposit, the
Shareholders.
6. The Escrow Agent.
(a) Direction from Buyer and Escrow Representative.
Notwithstanding anything herein to the contrary, the Escrow Agent shall promptly
dispose of all or any part of the Escrow Deposit as directed by a writing signed
by Buyer and Escrow Representative.
(b) Reliance by Escrow Agent; Liability of Escrow Agent.
Except with respect to capitalized terms used herein and defined in the Purchase
Agreement, the Escrow Agent will not be subject to, or be obliged to recognize,
any other agreement between the parties hereto or directions or instructions not
specifically set forth as provided for herein. The Escrow Agent will not make
any payment or disbursement from or out of the Escrow Deposit that is not
expressly authorized pursuant to this Agreement. The Escrow Agent undertakes to
perform only such duties as are expressly set forth herein. The Escrow Agent may
rely and shall be protected in acting or refraining from acting upon any written
notice, instruction or request furnished to it hereunder and believed by it to
be genuine and to have been signed or presented by the proper party or parties.
The Escrow Agent shall be under no duty to inquire into or investigate the
validity, accuracy or content of any such document. The Escrow Agent shall have
no duty to solicit any payment which may be due it hereunder. The Escrow Agent
shall not be liable for any action taken or omitted by it in good faith unless a
court of competent jurisdiction determines that the Escrow Agent's gross
negligence and willful misconduct was the primary cause of any loss to Buyer,
Nextera, Holdings, Seller or the Shareholders. In the administration of the
Escrow Deposit hereunder, the Escrow Agent may execute any of its powers and
perform its duties hereunder directly or through agents or attorneys and may
consult with counsel, accountants and other skilled persons to be selected and
retained by it. The Escrow Agent shall not be liable for anything done, suffered
or omitted in good faith by it in accordance with the advice or opinion of any
such counsel, accountants or other skilled persons. Buyer, Nextera, Holdings,
Seller and the Shareholders jointly and severally hereby agree to indemnify and
hold the Escrow Agent and its directors, officers, agents and employees
(collectively, the "Indemnitees") harmless from and against any and all claims,
liabilities, losses, damages, fines, penalties, and expenses, including
out-of-pocket and incidental expenses and legal fees and expenses ("Losses")
that may be imposed on, incurred by, or asserted against the Indemnitees or any
of them for following any instructions or other directions upon which the Escrow
Agent is authorized to rely pursuant to the terms of this Agreement. In addition
to and not in limitation of the immediately preceding sentence, the Buyer,
Nextera, Holdings, Seller and the Shareholders also agree to indemnify and hold
the Indemnitees and each of them harmless from and against any and all Losses
that may be imposed on, incurred by, or asserted against the Indemnitees or any
of them in connection with or arising out of Escrow Agent's performance under
this Agreement, provided the Indemnitees have not acted with gross negligence or
engaged in willful misconduct. Anything in this Agreement to the contrary
notwithstanding, in no event shall the Escrow Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits). As between Buyer, Nextera and Holdings on the one
hand and Seller and the Shareholders on the other, each shall bear equally the
indemnification obligations set forth in this Section 6(b). The provisions of
this Section 6(b) shall survive the termination of this Agreement and the
resignation or removal of
6
<PAGE> 7
the Escrow Agent for any reason.
(c) Fees and Expenses of the Escrow Agent. All fees of the
Escrow Agent for its services hereunder, together with any expenses reasonably
incurred by the Escrow Agent in connection with this Agreement, shall be shared
equally by Buyer on the one hand and Seller and the Shareholders on the other.
The fees to be paid by Seller and the Shareholders shall be deducted from the
Escrow Deposit.
(d) Resignation and Removal of Escrow Agent. Successor
Escrow Agent.
(i) The Escrow Agent may resign from its duties
hereunder by giving each of the parties hereto not less than thirty (30) days
prior written notice of the effective date of such resignation (which effective
date shall be at least thirty (30) days after the date such notice is given). In
addition, the Escrow Agent may be removed and replaced on a date designated in a
written instrument signed by Buyer and the Escrow Representative and delivered
to the Escrow Agent. The parties hereto intend that a successor escrow agent
mutually acceptable to the Escrow Representative and Buyer will be appointed to
fulfill the duties of the Escrow Agent hereunder for the remaining term of this
Agreement in the event of the Escrow Agent's resignation or removal. Upon the
effective date of such resignation or removal, the Escrow Agent shall deliver
the property comprising the Escrow Deposit to such successor escrow agent,
together with an accounting of the investments held by it and all transactions
related to this Agreement, including any distributions made and such records
maintained by the Escrow Agent in connection with its duties hereunder and other
information with respect to the Escrow Deposit as such successor may reasonably
request. If on or before the effective date of such resignation or removal, a
successor escrow agent has not been appointed, the Escrow Agent will thereupon
deposit the Escrow Deposit into the registry of a court of competent
jurisdiction.
Upon written acknowledgment by a successor escrow
agent appointed in accordance with this Section 6(d)(i) of its agreement to
serve as escrow agent hereunder and the receipt of the property then comprising
the Escrow Deposit, the Escrow Agent shall be fully released and relieved of all
duties, responsibilities and obligations under this Agreement, except for those
arising under the last sentence of Section 6(b) of this Agreement, and such
successor escrow agent shall for all purposes hereof be the Escrow Agent.
(ii) Any corporation, association or other entity
into which the Escrow Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or otherwise transfer all or substantially
all of its corporate trust business, or any corporation, association or other
entity resulting from any such merger, conversion, consolidation, sale or other
transfer, shall, ipso facto, be and become successor Escrow Agent hereunder,
vested with all of the powers, discretions, immunities, privileges and all other
matters as was its predecessor, without the execution or filing of any
instrument or any further act on the part or any of the parties hereto, anything
herein to the contrary notwithstanding.
7. Voting of Escrowed Units. So long as any Escrowed Units are
retained by the Escrow Agent, Seller or, to the extent Seller has transferred to
the Shareholders its rights to
7
<PAGE> 8
the Escrowed Units, the Shareholders shall be entitled to exercise the voting
power, if any, with respect to in the Escrowed Units.
8. Governing Law. IT IS THE PARTIES' INTENT THAT THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW).
9. Counterparts. This Escrow Agreement may be executed in one
or more counterparts, all of which documents shall be considered one and the
same document.
10. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been given
when received, if personally delivered or sent by facsimile transmission, or
three (3) days after deposited in the U.S. mails for delivery by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
TO BUYER: The Planning Technologies Group, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (617) 778-4508
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO NEXTERA: Nextera Enterprises, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (617) 778-4508
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
8
<PAGE> 9
Fax: (310) 440-3690
TO HOLDINGS: Nextera Enterprises Holdings, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (617) 778-4508
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO SELLER: The Planning Technologies Group, Inc.
95 Hayden Avenue
Lexington, MA 02173-7951
Attention: Mason Tenaglia
Fax: (781) 861-1099
With a copy to: Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109-2891
Attention: William P. Gelnaw, Esq.
Fax: (617) 248-4000
TO ANY SHAREHOLDER: To the address last provided by such
Shareholder to the Company.
With a copy to: Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109-2891
Attention: William P. Gelnaw, Esq.
Fax: (617) 248-4000
TO ESCROW AGENT: Chase Manhattan Trust Company, National
Association
Union Trust Building
501 Grant Street, Room 325
Pittsburg, PA 15219
Attention: Bruce J. Karhu
Fax: (412) 234-2975
9
<PAGE> 10
Addresses may be changed by written notice given pursuant to
this Section. Any notice given hereunder may be given on behalf of any party by
his counsel or other authorized representatives.
11. Certification of Tax Identification Number. The parties
hereto agree to provide the Escrow Agent with a certified tax identification
number by signing and returning a Form W-9 (or Form W-8, in the case of non-U.S.
persons) to the Escrow Agent prior to the date on which any income earned on the
investment of the Escrow Deposit is credited to the Escrow Deposit. The parties
hereto understand that, in the event their tax identification numbers are not
certified to the Escrow Agent, the Internal Revenue Code, as amended from time
to time, may require withholding of a portion of any interest or other income
earned on the investment of the Escrow Deposit.
12. Force Majeure. Neither Buyer, Nextera, Holdings, Seller,
the Shareholders nor the Escrow Agent shall be responsible for delays or
failures in performance under this Agreement resulting from acts beyond its
control. Such acts shall include but not be limited to acts of God, strikes,
lockouts, riots, acts of war, epidemics, governmental regulations superimposed
after the fact, fire, communication line failures, computer viruses, power
failures, earthquakes or other disasters.
13. Modifications. This Agreement may not be altered or
modified without the express written consent of the parties hereto, provided
that the Escrow Representative shall be authorized to agree to any amendment,
modification or waiver on behalf of the Shareholders. No course of conduct shall
constitute a waiver of any of the terms and conditions of this Escrow Agreement,
unless such waiver is specified in writing, and then only to the extent so
specified. A waiver of any of the terms and conditions of this Escrow Agreement
on one occasion shall not constitute a waiver of the other terms of this Escrow
Agreement, or of such terms and conditions on any other occasion.
14. Reproduction of Documents. This Agreement and all
documents relating thereto, including, without limitation, (a) consents, waivers
and modifications which may hereafter be executed, and (b) certificates and
other information previously or hereafter furnished, may be reproduced by a
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
15. Obligations of Buyer. All obligations of Buyer hereunder
shall be joint and several obligations of Buyer, Nextera and Holdings.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties have caused this Escrow
Agreement to be executed by their duly authorized representatives, as of the
date first written above.
BUYER:
THE PLANNING TECHNOLOGIES GROUP, L.L.C.
By: /s/ MICHAEL P. MULDOWNEY
------------------------------------
Name: Michael P. Muldowney
Title: Treasurer
NEXTERA:
NEXTERA ENTERPRISES, L.L.C.
By: /s/ MICHAEL P. MULDOWNEY
------------------------------------
Name: Michael P. Muldowney
Title: Treasurer
HOLDINGS:
NEXTERA ENTERPRISES HOLDINGS, L.L.C.
By: /s/ MICHAEL P. MULDOWNEY
------------------------------------
Name: Michael P. Muldowney
Title: Treasurer
SELLER:
THE PLANNING TECHNOLOGIES GROUP, INC.
By: /s/ MASON TENAGLIA
------------------------------------
Name: Mason Tenaglia
Title: President
Tax Identification Number:
-----------------------------------
11
<PAGE> 12
ESCROW AGENT:
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION, as Escrow Agent
By: /s/ BRUCE J. KARHU
------------------------------------
Name: Bruce J. Karhu
Title: Vice President
12
<PAGE> 1
EXHIBIT NO. 10.10
ASSET PURCHASE AGREEMENT
by and among
SC/NE, LLC
as "Buyer,"
NEXTERA ENTERPRISES, L.L.C.
as "Nextera,"
SIBSON & COMPANY, L.P.
as "Seller,"
SIBSON & COMPANY, INC.
as "General Partner,"
SC2, INC.
as "Limited Partner"
and
THE SHAREHOLDERS OF THE GENERAL
PARTNER AND THE LIMITED PARTNER
as the "Shareholders"
Dated as of August 31, 1998
<PAGE> 2
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS .......................................................... 2
1.1. Defined Terms ....................................................... 2
1.2. Other Defined Terms ................................................. 8
ARTICLE II. PURCHASE AND SALE OF ASSETS ......................................... 9
2.1. Sale of Assets ...................................................... 9
2.2. Assumption of Liabilities ........................................... 9
2.3. Excluded Liabilities ................................................ 10
2.4. Purchase Price ...................................................... 10
2.5. Working Capital ..................................................... 11
2.6. Closing Costs; Transfer Taxes and Fees .............................. 11
ARTICLE III. CLOSING ............................................................ 12
3.1. Closing ............................................................. 12
3.2. Conveyances at Closing .............................................. 12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE SELLER ........................ 13
4.1. Organization and Qualification ...................................... 14
4.2. Capitalization; Beneficial Ownership ................................ 14
4.3. Subsidiaries ........................................................ 15
4.4. Authority ........................................................... 15
4.5. Assets .............................................................. 16
4.6. Real Property ....................................................... 17
4.7. Financial Statements ................................................ 18
4.8. Absence of Certain Changes or Events ................................ 19
4.9. Contracts and Commitments ........................................... 21
4.10. Permits ............................................................ 23
4.11. Litigation ......................................................... 23
4.12. Compliance with Law ................................................ 24
4.13. Ordinary Course .................................................... 24
4.14. Officers and Compensation .......................................... 24
4.15. Employees; Labor Matters ........................................... 24
4.16. Banking Relations .................................................. 25
4.17. No Brokers ......................................................... 25
4.18. No Other Agreements to Sell the Assets ............................. 25
4.19. Clients ............................................................ 26
4.20. Backlog ............................................................ 26
4.21. Proprietary Rights ................................................. 26
4.22. Taxes .............................................................. 26
4.23. Employee Benefit Programs .......................................... 28
4.24. Insurance .......................................................... 31
4.25. Accounts Receivable ................................................ 32
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.26. Payments ........................................................... 32
4.27. Environmental Matters .............................................. 32
4.28. Warranty or Other Claims ........................................... 34
4.29. Records; Copies of Documents ....................................... 34
4.30. Powers of Attorney ................................................. 34
4.31. Business of General Partner and Limited Partner .................... 34
4.32. Accredited Investor ................................................ 34
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF GENERAL PARTNER, LIMITED PARTNER
AND THE SHAREHOLDERS ................................................. 34
5.1. Authority ........................................................... 35
5.2. No Brokers .......................................................... 35
5.3. Agreements .......................................................... 35
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF BUYER AND NEXTERA ................. 36
6.1. Organization ........................................................ 36
6.2. Subsidiaries ........................................................ 36
6.3. Authority ........................................................... 37
6.4. Litigation .......................................................... 38
6.5. No Brokers .......................................................... 38
6.6. Membership Interests of Nextera ..................................... 38
6.7. Operating Agreements ................................................ 38
6.8. Financial Statements ................................................ 38
6.9. Taxes ............................................................... 39
6.10. Absence of Certain Changes or Events ............................... 41
6.11. Insurance .......................................................... 42
6.12. Compliance with Laws ............................................... 43
6.13. Proprietary Rights ................................................. 43
6.14. Indebtedness ....................................................... 44
ARTICLE VII. COVENANTS .......................................................... 44
7.1. Further Assurances .................................................. 44
7.2. Conduct of Business ................................................. 44
7.3. No Solicitation of Other Offers ..................................... 46
7.4. Notification of Certain Matters ..................................... 47
7.5. Employee Matters .................................................... 47
7.6. Option Pool ......................................................... 49
7.7. Additional Units .................................................... 50
7.8. Conduct of the Business Following the Closing ....................... 50
7.9. Permitted Distribution .............................................. 50
7.10. Preservation of Confidentiality .................................... 50
7.11. No Distribution of Nextera Class A Units ........................... 51
7.12. Buyer Efforts on Financing and Qualifications ...................... 51
7.13. Annual Incentive Plan .............................................. 51
7.14. Senior Leadership Team of Nextera .................................. 51
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII. CONDITIONS TO SELLER'S OBLIGATIONS ................................ 51
8.1. Representations, Warranties and Covenants ........................... 52
8.2. No Actions or Court Orders .......................................... 52
8.3. Consents ............................................................ 52
8.4. Material Changes .................................................... 52
8.5. Approval of Seller's Counsel ........................................ 52
8.6. Opinions of Counsel ................................................. 52
8.7. Assumption Document ................................................. 53
8.8. Escrow Agreement .................................................... 53
8.9. Employment Agreements ............................................... 53
8.10. Corporate Documents ................................................ 53
8.11. Operating Agreement of Nextera ..................................... 53
8.12. Operating Agreement of Buyer ....................................... 53
8.13. Deliveries ......................................................... 53
8.14. Exchange Agreement ................................................. 53
8.15. Annual Incentive Plan .............................................. 53
8.16. Sibson Canada ...................................................... 53
8.17. PNC Bank ........................................................... 54
ARTICLE IX. CONDITIONS TO BUYER'S AND NEXTERA'S OBLIGATIONS ..................... 54
9.1. Representations, Warranties and Covenants ........................... 54
9.2. Consents; Regulatory Compliance and Approval ........................ 54
9.3. No Actions or Court Orders .......................................... 54
9.4. Approval of Nextera's Counsel ....................................... 55
9.5. Opinions of Counsel ................................................. 55
9.6. Material Changes .................................................... 55
9.7. Partnership Documents ............................................... 55
9.8. Corporate Documents ................................................. 55
9.9. Conveyancing Documents; Release of Encumbrances ..................... 55
9.10. Name Change ........................................................ 55
9.11. Permits ............................................................ 55
9.12. Escrow Agreement ................................................... 56
9.13. Employment Agreements .............................................. 56
9.14. Third-Party Financing .............................................. 56
9.15. Payment of Employee Promissory Notes ............................... 56
9.16. Deliveries ......................................................... 56
9.17. Exchange Agreement ................................................. 56
9.18. Sibson Canada ...................................................... 56
9.19. PNC Bank ........................................................... 56
ARTICLE X. CONSENTS TO ASSIGNMENT ............................................... 56
10.1. Consents to Assignment ............................................. 56
ARTICLE XI. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING ........................ 57
11.1. Collection of Accounts Receivable and Letters of Credit ............ 57
11.2. Books and Records; Tax Matters ..................................... 57
11.3. Survival of Representations, Etc ................................... 58
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XII. INDEMNIFICATION .................................................... 58
12.1. Indemnification by the Selling Parties ............................. 58
12.2. Limitations on Indemnification by the Selling Parties .............. 59
12.3. Indemnification by Buyer and Nextera ............................... 60
12.4. Limitation on Indemnification by Buyer and Nextera ................. 60
12.5. Notice; Defense of Claims .......................................... 61
12.6. Satisfaction of Selling Party Indemnification Obligations .......... 61
12.7. Use of Nextera Class A Units ....................................... 62
12.8. Bulk Sales ......................................................... 62
12.9. Exclusive Remedy ................................................... 62
ARTICLE XIII. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED ....................... 62
13.1. Termination ........................................................ 62
13.2. Effect of Termination .............................................. 63
ARTICLE XIV. MISCELLANEOUS ...................................................... 63
14.1. Fees and Expenses .................................................. 63
14.2. Governing Law ...................................................... 63
14.3. Notices ............................................................ 63
14.4. Entire Agreement ................................................... 67
14.5. Assignability; Binding Effect ...................................... 68
14.6. Captions and Gender ................................................ 68
14.7. Execution in Counterparts .......................................... 68
14.8. Amendments ......................................................... 68
14.9. Publicity and Disclosures .......................................... 68
14.10. Specific Performance .............................................. 68
</TABLE>
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of August 31, 1998, is
by and among SC/NE, LLC, a newly formed Delaware limited liability company and a
wholly owned subsidiary of Nextera ("Buyer"), Nextera Enterprises, L.L.C., a
Delaware limited liability company and the sole member of Buyer ("Nextera"),
Sibson & Company, L.P., a Delaware limited partnership (the "Seller"), Sibson &
Company, Inc., a Delaware corporation and the sole general partner of Seller
(the "General Partner"), SC2, Inc., a Delaware corporation and the sole limited
partner of Seller (the "Limited Partner"), the holders of the capital stock of
General Partner identified on Exhibit A as such (the "GP Shareholders"), the
holders of the capital stock of Limited Partner identified on Exhibit A as such
(the "LP Shareholders") (the GP Shareholders and LP Shareholders are
collectively referred to herein as the "Shareholders").
W I T N E S S E T H
WHEREAS, Seller owns certain assets which it uses in the conduct
of the Business (as defined below);
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, the Assets (as defined below), upon the terms and
subject to the conditions of this Agreement;
WHEREAS, General Partner and Limited Partner own of record and
beneficially all of the issued and outstanding general and limited partnership
interests of Seller, respectively, and desire to have Seller sell the Assets to
Buyer, upon the terms and subject to the conditions of this Agreement;
WHEREAS, the GP Shareholders own of record and beneficially all
of the issued and outstanding capital stock of General Partner and desire to
have General Partner direct Seller to sell the Assets to Buyer upon the terms
and subject to the conditions of this Agreement;
WHEREAS, the LP Shareholders own of record and beneficially all
of the issued and outstanding capital stock of Limited Partner and desire to
have the Limited Partner consent to the sale of the Assets by Seller to Buyer
upon the terms and subject to the conditions of this Agreement;
WHEREAS, Nextera as the sole member of Buyer, desires to issue
membership interests consisting of Nextera Units (as defined below) pursuant to,
and subject to the terms and conditions of, this Agreement; and
NOW THEREFORE, in consideration of the respective covenants and
promises contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
<PAGE> 7
ARTICLE I.
DEFINITIONS
1.1. Defined Terms. As used herein, the terms below shall have
the following meanings. Any of such terms, unless the context otherwise
requires, may be used in the singular or plural, depending upon the reference.
"Action" shall mean any action, claim, suit, litigation,
proceeding, arbitral action, governmental audit, criminal prosecution,
governmental investigation or unfair labor practice charge or complaint.
"affiliate" shall have the meaning set forth in the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
"Assets" shall mean all of Seller's right, title and interest in
and to the business, properties, assets and rights of any kind, whether tangible
or intangible, real or personal and constituting, or used or useful in
connection with, or related to, the Business owned by Seller or in which Seller
has any interest, including without limitation all of Seller's right, title and
interest in the following:
(a) all accounts and notes receivable (whether current or
noncurrent), refunds, deposits, prepayments or prepaid expenses (including
without limitation any prepaid insurance premiums) of Seller;
(b) all cash and cash equivalents held by Seller;
(c) all equity interests in other entities held by Seller
(including, without limitation, Seller's interest in Sibson Europe (as
hereinafter defined), Sibson UK (as hereinafter defined) and Sibson & Company
(Pty.) Ltd., a Republic of South Africa corporation);
(d) all Contract Rights (including, without limitation, rights
with respect to (i) the split-dollar life insurance policies described on
Schedule 4.23, (ii) the Sibson & Company, L.P. Profit Sharing Plan and the trust
maintained in connection therewith and (iii) license agreements between Seller
and Sibson Canada Inc., Sibson UK, Morgan & Banks Reward Consulting (PTY), and
Sibson & Company Limited), to the extent transferable;
(e) all Leases;
(f) all Owned Real Property;
(g) all Leasehold Estates;
(h) all Leasehold Improvements;
(i) all Fixtures and Equipment;
<PAGE> 8
(j) all Books and Records;
(k) all Proprietary Rights relating to the Business;
(l) all Permits, to the extent transferable;
(m) all Insurance Policies, to the extent assignable;
(n) all available supplies, sales literature, promotional
literature, customer, supplier and distributor lists, art work, display units,
telephone and fax numbers and purchasing records related to the Business;
(o) all rights under or pursuant to all warranties,
representations and guarantees made by suppliers in connection with the Assets
or services furnished to Seller pertaining to the Business or affecting the
Assets, to the extent such warranties, representations and guarantees are
assignable;
(p) all deposits and prepaid expenses of Seller;
(q) all claims, causes of action, causes in action, rights of
recovery and rights of set-off of any kind, against any person or entity,
including without limitation any liens, security interests, pledges or other
rights to payment or to enforce payment in connection with service performed or
products delivered by Seller on or prior to the Closing Date; and
(r) all of the goodwill of Seller;
but excluding therefrom the Excluded Assets.
"Books and Records" shall mean, to the extent in Seller's
possession, (a) all records and lists of Seller pertaining to the Assets, (b)
all records and lists pertaining to the Business, customers, suppliers or
personnel of Seller, (c) all product, business and marketing plans of Seller and
(d) all books, ledgers, files, reports, plans, drawings and operating records of
every kind maintained by Seller, but excluding the originals of Seller's minute
books, stock or partnership interest books and tax returns.
"Business" shall mean all of Seller's and its Subsidiaries'
current operations including its business of management and human resources
consulting.
"Buyer Operating Agreement" shall mean the Limited Liability
Company Agreement of SC/NE, LLC of even date herewith, a true and correct copy
of which is attached as Exhibit L hereto.
"Closing Date" shall mean August __, 1998, or such other date as
Buyer and Seller shall mutually agree upon.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder.
<PAGE> 9
"Contract" shall mean any agreement, contract, note, loan,
evidence of indebtedness, purchase order, letter of credit, indenture, security
or pledge agreement, franchise agreement, undertaking, covenant not to compete,
employment agreement, license agreement, instrument, obligation or commitment to
which Seller is a party or is bound and which relates to the Business or the
Assets, whether oral or written, but excluding all Leases.
"Contract Rights" shall mean all of Seller's rights and
obligations under the Contracts including, without limitation, those Contracts
listed on Schedule 4.9.
"Copyrights" shall mean registered copyrights, copyright
applications and unregistered copyrights.
"Court Order" shall mean any judgment, decision, consent decree,
injunction, ruling or order of any federal, state or local court or governmental
agency, department or authority that is binding on any person or its property
under applicable law.
"Damages" shall mean damages, Liabilities, losses, Taxes, fines,
penalties, costs, and expenses (including, without limitation, reasonable fees
of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) but excluding consequential or special damages.
"Default" shall mean (1) a breach of or default under any
Contract or Lease, (2) the occurrence of an event that with the passage of time
or the giving of notice or both would constitute a breach of or default under
any Contract or Lease, or (3) the occurrence of an event that with or without
the passage of time or the giving of notice or both would give rise to a right
of termination, renegotiation or acceleration under any Contract or Lease.
"Disclosure Schedule" shall mean a schedule and letters executed
and delivered by the Seller to Buyer as of the date hereof which sets forth the
exceptions to the representations and warranties contained in Article IV hereof
and certain other information called for by this Agreement. Unless otherwise
specified or the context otherwise requires, each reference in this Agreement to
any numbered schedule is a reference to that numbered schedule which is included
in the Disclosure Schedule.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, conditional sales
agreement, or other similar right of third parties, whether voluntarily incurred
or arising by operation of law, and includes, without limitation, any agreement
to give any of the foregoing in the future, and any contingent sale or other
title retention agreement or lease in the nature thereof.
"Escrow Agent" shall have the meaning assigned to such term in
the Escrow Agreement attached hereto as Exhibit B.
"Excluded Assets," notwithstanding any other provision of this
Agreement, shall mean the following assets of Seller which are not to be
acquired by Buyer hereunder:
<PAGE> 10
(a) all Permits, to the extent not transferable;
(b) all claims, causes of action, chooses in action, rights of
recovery and rights of set-off of any kind against any person or entity arising
out of or relating to the Excluded Liabilities;
(c) all rights under this Agreement and the Escrow Agreement and
other agreements related to this Agreement; and
(d) minute books and other partnership records.
"Facility Leases" shall mean all of the leases described on
Schedule 4.6.
"Fixtures and Equipment" shall mean all of the furniture,
fixtures, furnishings, machinery, spare parts, supplies, equipment and other
tangible personal property owned by Seller and used in connection with the
Business, wherever located and including any such Fixtures and Equipment in the
possession of any of Seller's suppliers, including all warranty rights with
respect thereto.
"Former Facility" shall mean each plant, office, manufacturing
facility, store, warehouse, improvement, administrative building and all real
property and related facilities that was owned, leased or operated by Seller at
any time prior to the date hereof.
"GP Shareholders" shall mean those individuals identified as such
on Exhibit A hereto.
"Insurance Policies" shall mean the insurance policies related to
the Assets listed on Schedule 4.24.
"IRS" shall mean the Internal Revenue Service.
"knowledge of Nextera" shall mean the actual knowledge of Gresham
T. Brebach, Jr., Ronald Bohlin, Stanley E. Maron, Steven Fink, Richard V.
Sandler, or Michael Muldowney or that which could be learned by any such
individual upon reasonable investigation.
"knowledge of Seller" shall mean the actual knowledge of Stephen
Strelsin, Roger Brossy, Vincent Perro, Richard Semler, Mark Blessington, Ira
Marks, or Douglas Tormey or that which could be learned by any such individual
upon reasonable investigation.
"Leased Real Property" shall mean all leased plants, offices,
manufacturing facilities, stores, warehouses, improvements, administration
buildings, and all real property and related facilities which are identified or
listed on Schedule 4.6 attached hereto.
"Leasehold Estates" shall mean all of Seller's rights and
obligations as lessee under the Leases.
<PAGE> 11
"Leasehold Improvements" shall mean all leasehold improvements
situated in or on the Leased Real Property and owned by Seller.
"Leases" shall mean all of the existing leases with respect to
the personal or real property of Seller including, without limitation, those
Leases listed on Schedule 4.6 and/or Schedule 4.9.
"Liabilities" shall mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, guaranty or endorsement of
or by any person of any type, whether accrued, absolute, contingent, matured,
unmatured or other.
"LP Shareholders" shall mean those individuals identified as such
on Exhibit A hereto.
"material adverse effect" or "material adverse change" shall mean
with respect to Seller, the Business or the Assets any material adverse effect
or change in the condition (financial or other), business, results of
operations, prospects, assets, Liabilities or operations of the Seller, the
Business and/or the Assets taken as a whole or on the ability of Seller to
consummate the transactions contemplated hereby, or any event or condition which
would, with the passage of time, constitute a "material adverse effect" or
"material adverse change." "Material adverse effect" or "material adverse
change" shall mean with respect to Nextera any material adverse effect or change
in the condition (financial or other), business, results of operations,
prospects, assets, liabilities or operations of Nextera and its Subsidiaries
taken as a whole or on the ability of Nextera or Buyer to consummate the
transactions contemplated hereby, or any event or condition which would, with
the passage of time, constitute a "material adverse effect" or "material adverse
change."
"Nextera Class A Units" shall mean the Class A Common Units of
Nextera, representing membership interests in Nextera.
"Nextera Disclosure Schedule" shall mean a schedule and letters
executed and delivered by Nextera and Buyer to the Selling Parties as of the
date hereof which sets forth the exceptions to the representations and
warranties contained in Article VI hereof and certain other information called
for by this Agreement. Unless otherwise specified or the context otherwise
requires, each reference in this Agreement to any numbered schedule is a
reference to that numbered schedule which is included in the Nextera Disclosure
Schedule.
"Nextera Operating Agreement" shall mean the Second Amended and
Restated Limited Liability Company Agreement of Nextera Enterprises, L.L.C.
dated as of May 1, 1998, as amended, a true and correct copy of which is
attached as Exhibit M hereto.
"ordinary course of business" or "ordinary course" or any similar
phrase shall mean the ordinary course of the Business and consistent with
Seller's past practice.
"Permits" shall mean all licenses, permits, franchises,
approvals, authorizations, consents or orders of, or filings with, any
governmental authority, whether foreign, federal, state or local, necessary for
the past or present conduct of, or relating to the operation of the Business.
<PAGE> 12
"Permitted Lien" shall mean: (i) materialmen's, mechanics',
carriers', workmen's, repairmen's or other like liens arising in the ordinary
course of business for amounts not yet due or which are being contested in good
faith by appropriate proceedings, (ii) liens for current taxes not yet due or
any taxes being contested in good faith by appropriate proceedings, (iii) liens
to secure performance of statutory obligations, (iv) any lien securing any
purchase money indebtedness incurred in the ordinary course of business and
reflected in Seller's financial statements, (v) liens of lessors under Leases,
(vi) pledges or deposits securing obligations under workmen's compensation,
unemployment insurance, social security or public liability laws or similar
legislation; (vii) pledges or deposits securing bids, tenders, contracts (other
than contracts for the payment of money) or leases to which Seller or any of its
Subsidiaries is a party as lessee made in the ordinary course of business;
(viii) deposits securing public or statutory obligations of Seller or any of its
Subsidiaries; (ix) deposits securing, or in lieu of, surety, appeal or customs
bonds in proceedings to which Seller or any of its Subsidiaries is a party; (x)
zoning restrictions on the use of real property or other minor irregularities in
title (including leasehold title) thereto, so long as the same do not materially
impair the use of leases or leasehold estates; (xi) any requirement that consent
be obtained or notice be given in connection with the assignment of contracts to
Buyer hereunder and the consummation of the other transactions contemplated
hereby; and (xii) liens under Seller's revolving credit facility.
"Proprietary Rights" shall mean all Copyrights, Trademarks,
patents, technology rights and licenses, computer software (including without
limitation any source or object codes therefor or documentation relating
thereto), trade secrets, franchises, know-how, inventions, designs,
specifications, plans, drawings and intellectual property rights.
"Regulations" shall mean any laws, statutes, ordinances,
regulations, rules, court decisions, agency guidelines, principles of law and
orders of any foreign, federal, state or local government and any other
governmental department or agency, including without limitation Environmental
Laws, energy, motor vehicle safety, public utility, zoning, building and health
codes, and occupational safety and health and laws respecting employment
practices, employee documentation, terms and conditions of employment and wages
and hours.
"Representative" shall mean any officer, director, principal,
attorney, agent, employee or other representative.
"Selling Party" shall mean any of Seller, General Partner,
Limited Partner and the Shareholders (collectively, Seller, General Partner,
Limited Partner and the Shareholders are referred to herein as the "Selling
Parties")
"Shareholders" shall mean the GP Shareholders and the LP
Shareholders.
"Subsidiary" shall mean (a) any corporation in an unbroken chain
of corporations beginning with Seller or Nextera, as applicable, if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain, (b) any partnership in
which Seller or Nextera, as applicable, is a general partner, (c) any limited
liability company in which Seller or Nextera, as applicable, is a managing
member, or (d) any partnership
<PAGE> 13
or limited liability company in which Seller or Nextera, as applicable,
possesses a 50% or greater interest in the total capital or total income of such
partnership.
"Tax" shall mean all governmental taxes, charges, fees, levies or
other assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, VAT, service, service use, ad valorem, transfer,
franchise, profits, license, lease, withholding, social security, payroll,
employment, excise, estimated, severance, stamp, recording, occupation, real and
personal property, gift, windfall profits or other taxes, customs duties, fees,
assessments or charges of any kind whatsoever, whether computed on a separate,
consolidated, unitary, combined or other basis, together with any interest,
fines, penalties, additions to tax or other additional amounts imposed thereon
or with respect thereto imposed by any taxing authority (domestic or foreign).
"Trademarks" shall mean registered trademarks, registered service
marks, trademark and service mark applications and unregistered trademarks and
service marks.
1.2. Other Defined Terms. The following terms shall have the
meanings defined for such terms in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Arbitrator 2.5(b)
Assumed Liabilities 2.2
Assumption Document 3.2(c)
Audited Financial Statements 6.8(a)
Base Balance Sheet 4.7(a)
Base Balance Sheet Date 4.7(a)
Clients 4.19
Closing 3.1
Closing Working Capital 2.5(a)
Customers 4.19
Employee Program 4.23(l)
Employment Agreement 9.13
Environmental Law 4.27(e)
Equity Participation Plan 7.6
ERISA 4.23(c)
ERISA Affiliate 4.23(l)
Escrow Amount 2.4(b)
Escrow Agreement 2.4(b)
Estimated Working Capital 2.5(a)
Exchange Agreement 4.18
Excluded Liabilities 2.3
Excluded Liability Claims 12.1
Facility Lease 4.6(a)
Financial Statements 4.7(a)
Fraud Claims 12.1(a)
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
GAAP 2.5
General Claims 12.1(e)
GP Shareholders' Agreement 5.4
Hazardous Material 4.27(e)
Hazardous Waste 4.27(e)
Individual Fraud Claims 12.1
Individual General Claims 12.1
IRS 4.23(b)
LP Shareholders' Agreement 5.4
Minimum Working Capital 2.5(a)
Nextera Balance Sheet 6.8
Nextera Financial Statements 6.8(c)
Ownership Claims 12.1(b)
Partnership Agreement 4.1(a)
Permitted Distribution 7.9
Pro Forma Financial Statements 6.8(a)
Purchase Price 2.4(a)
Principals 8.9
Rehired Employee 7.5(a)
Shareholder Representative 14.8
Sibson Canada 8.16
Sibson Europe 2.4(c)
Sibson UK 4.3
Tax Claims 12.1(c)
Tax Return 4.22(a)
Working Capital Retention 2.5(a)
</TABLE>
ARTICLE II.
PURCHASE AND SALE OF ASSETS
2.1. Sale of Assets. Upon the terms and subject to the conditions
contained herein, at the Closing, Seller will sell, convey, transfer, assign and
deliver to Buyer, and Buyer will purchase and acquire from Seller, the Assets,
free and clear of all Encumbrances other than the Permitted Liens.
2.2. Assumption of Liabilities. Upon the terms and subject to the
conditions contained herein, at the Closing, Buyer shall assume and agree to pay
when due, perform and discharge in accordance with the terms thereof (a) all
Liabilities of Seller arising out of occurrences or circumstances prior to the
Closing, other than the Excluded Liabilities, (b) any Liabilities arising after
the Closing related to the Business, the Assets, the Contracts and/or the
Leases, other than the Excluded Liabilities and (c) Liabilities arising from the
failure to obtain necessary waivers, consents or approvals with respect to the
Contracts and Leases, including without limitation, consents with respect to the
items described on Schedule 7.1 (collectively, the "Assumed Liabilities").
<PAGE> 15
2.3. Excluded Liabilities. Notwithstanding any other provision of
this Agreement, Buyer shall not assume, or otherwise be responsible for, (a) any
Liabilities of any Selling Party under this Agreement, the Exchange Agreement,
the Escrow Agreement and the other agreements and transactions contemplated
hereby and (b) any Liabilities of Seller or any Subsidiary of Seller in respect
of any Tax, whether liquidated or unliquidated, or known or unknown, whether
arising out of occurrences, in the case of Seller, prior to, at or after the
date hereof and, in the case of any Subsidiary, prior to, at or after the date
hereof until the Closing Date (the "Excluded Liabilities").
2.4. Purchase Price.
(a) Purchase Price of Assets. In consideration of the sale,
transfer, assignment, conveyance and delivery of an undivided eighty-five
percent (85%) interest in the Assets by Seller to Buyer and in reliance upon the
representations and warranties of Seller herein contained and made at the
Closing and upon the terms and subject to the satisfaction or waiver by the
party entitled thereto of all of the conditions set forth herein, Buyer agrees
that at the Closing, it will pay to Seller the aggregate amount of Thirty Four
Million Seven Hundred Sixty Three Thousand Nine Hundred Dollars ($34,763,900)
(the "Purchase Price") (to be paid by wire transfer of immediately available
funds) and shall assume the Assumed Liabilities pursuant to this Agreement.
The Purchase Price shall be allocated among the Assets in the
manner required by Section 1060 of the Code and regulations thereunder. Exhibit
C attached hereto sets forth the amount and form of the Purchase Price allocable
to the various Assets. Buyer and Seller (or General Partner and Limited Partner
on behalf of Seller) agree to each prepare and file on a timely basis with the
Internal Revenue Service substantially identical initial and supplemental
Internal Revenue Service Forms 8594 "Asset Acquisition Statements Under Section
1060" consistent with Exhibit C and which gives effect to any working capital
adjustment determined in accordance with Section 2.5 hereof and to file all
relevant Tax Returns in a manner consistent therewith.
(b) Contribution of Assets. In consideration of the contribution
of an undivided fifteen percent (15%) interest in the Assets by Seller to Buyer
and in reliance upon the representations and warranties of Seller herein
contained and made at the Closing and upon the terms and subject to the
satisfaction or waiver of all of the conditions set forth herein, Buyer agrees
that at the Closing, it will (i) deliver to Seller the aggregate amount of
1,828,539 Nextera Class A Units issued by Nextera in Seller's name pursuant to
the Nextera Operating Agreement and (ii) deliver to the Escrow Agent 784,548
Nextera Class A Units (the "Escrow Amount") issued by Nextera in Seller's name
pursuant to and in accordance with the terms of the Nextera Operating Agreement
and to be held in the manner described in the Escrow Agreement to be executed in
substantially the form attached hereto as Exhibit B. The parties acknowledge
that the value of the Nextera Class A Units is $2.50 per unit.
(c) Purchase Price of Sibson Europe. In consideration of the
sale, transfer, assignment, conveyance and delivery of the one percent (1%)
membership interest in Sibson Europe LLC, a Delaware limited liability company
("Sibson Europe") by General Partner to Buyer and in reliance on the
representations and warranties of General Partner herein contained and made at
the Closing and upon the terms and subject to the satisfaction of all of the
conditions
<PAGE> 16
set forth herein, Buyer agrees that at the Closing, it will pay to General
Partner the aggregate amount of One Hundred Dollars ($100).
2.5. Working Capital.
(a) Working Capital Adjustment. The amount of the cash payment to
be made by Buyer for the Assets at the Closing is premised upon Seller
delivering to Buyer at least Three Million One Hundred Thousand Dollars
($3,100,000) of working capital determined in accordance with generally accepted
accounting principles ("GAAP") consistently applied (except as separately agreed
in writing by the parties), at the Closing (such amount being the "Minimum
Working Capital"). No later than two (2) business days prior to the Closing
Date, Seller shall advise Buyer and Nextera of its estimate of working capital
to be delivered at the Closing (the "Estimated Working Capital"). Without
limiting other rights that Buyer and Nextera may have under this Agreement, if
the Estimated Working Capital is less than the Minimum Working Capital, the cash
payment to Seller for the Assets at the Closing shall be reduced by the amount
of such shortfall. Seller shall retain from the Purchase Price, and not
distribute to its General Partner or Limited Partner, the sum of Three Hundred
Thousand Dollars ($300,000) (the "Working Capital Retention") until such time as
the Closing Working Capital (as defined below) has been determined and
reconciled pursuant to this Section 2.5. Within thirty (30) days following the
Closing, Seller shall determine the actual working capital as of the Closing
Date (the "Closing Working Capital") and promptly notify Buyer of such amount.
If the Closing Working Capital is less than the Estimated Working Capital, and
would have resulted in a reduced or further reduced cash payment, as applicable,
to Seller for the Assets at the Closing, Seller shall promptly pay to Buyer the
difference (the "Working Capital Adjustment").
(b) Disputed Closing Working Capital. If Buyer shall disagree
with the amount determined to be the Closing Working Capital, it shall notify
Seller in writing of such disagreement within fifteen (15) business days of its
receipt of the determination of Closing Working Capital. Buyer and Seller shall
use their commercially reasonable efforts for a period of thirty (30) days
following the notice of disagreement to resolve any disagreement. If at the end
of such period, Buyer and Seller are unable to resolve the disagreement, a
mutually agreed upon independent public accounting firm (the "Arbitrator") shall
be retained to make a final and binding determination of the actual Closing
Working Capital, at which time Seller shall promptly pay to Buyer the Working
Capital Adjustment, if any. The determination of the Arbitrator shall be final,
binding and conclusive on the parties. The fees and expenses of the Arbitrator
shall be borne equally by Buyer and Seller.
2.6. Closing Costs; Transfer Taxes and Fees. Seller and Nextera
shall each be responsible for one-half of any documentary and transfer taxes and
any sales, use or other taxes imposed by reason of the transfers of the Assets
provided hereunder and any deficiency, interest or penalty asserted with respect
thereto. Seller and Nextera shall each pay one-half of the fees and costs of
recording or filing all applicable conveyancing instruments described in Section
3.2(a). Nextera shall pay all costs of applying for new Permits and obtaining
the transfer of existing Permits which may be lawfully transferred.
<PAGE> 17
ARTICLE III.
CLOSING
3.1. Closing. The Closing of the transactions contemplated herein
(the "Closing") shall be held at a mutually agreeable location in New York, New
York on August __, 1998 or at such other date and location as may be mutually
agreed upon by the parties.
3.2. Conveyances at Closing.
(a) Instruments and Possession. Subject to the terms and
conditions contained herein, to effect the sale and transfer referred to in
Section 2.1 hereof, Seller will, at the Closing, execute and deliver or cause to
be executed and delivered to Buyer:
(i) one or more bills of sale, in the form attached hereto
as Exhibit D, conveying in the aggregate all of Seller's owned personal property
included in the Assets;
(ii) subject to Section 10.1, Assignments and Assumptions
of Facility Leases in the form attached hereto as Exhibit E with respect to the
Facility Leases or in such other form as may be required by the lessor or
sublessor thereunder and which is reasonably acceptable to Nextera;
(iii) subject to Section 10.1, Assignments and Assumptions
of Contracts and Leases (other than Facility Leases), each in the form of
Exhibit F attached hereto, with respect to the Contracts and Leases (other than
any Facility Lease);
(iv) letters from each of Seller and General Partner to
the Delaware Secretary of State giving permission to use the names "Sibson" and
"Sibson & Company" to SC/NE, LLC in the forms attached hereto as Exhibit K;
(v) assignment to, and assumption by, Buyer with respect
to the one percent (1%) membership interest in Sibson Europe owned by General
Partner; and all other required documents or actions to have Buyer admitted as
the sole member of Sibson Europe;
(vi) such other instruments as shall be reasonably
requested by Buyer to vest in Buyer title in and to the Assets in accordance
with the provisions hereof.
(b) Transfer of Cash and Cash Equivalents. Subject to the terms
and conditions contained herein, Seller will, as the Closing, transfer and
deliver to Buyer all cash and cash equivalents of the Business.
(c) Assumption Documents. Upon the terms and subject to the
conditions contained herein, Buyer will, at the Closing, execute and deliver or
cause to be delivered to Seller;
(i) an instrument of assumption substantially in the form
attached hereto as Exhibit G, evidencing Buyer's assumption, pursuant to Section
2.2, of the Assumed Liabilities (the "Assumption Document");
<PAGE> 18
(ii) subject to Section 10.1, Assignments and Assumptions
of Lease in the form attached hereto as Exhibit E with respect to each Facility
Lease, or such other form as may be required by the lessor or sublessor
thereunder and which is reasonably acceptable to Nextera;
(iii) subject to Section 10.1, Assignments and Assumptions
of Contracts and Leases (other than Facility Leases), each in the form of
Exhibit F attached hereto, with respect to such Contracts and Leases;
(iv) assignment to, and assumption by, Buyer with respect
to the one percent (1%) membership interest in Sibson Europe owned by General
Partner and such other required documents or actions to have Buyer admitted as
the sole member of Sibson Europe;
(v) an assignment to, and assumption by, Buyer of Seller's
Revolving Credit Facility with PNC Bank, National Association, and all
indebtedness thereunder (which shall include a release of Seller and its
Subsidiaries from all obligations thereunder), in the form of Exhibit S attached
hereto; and
(vi) such other instruments as shall be reasonably
requested by Seller to effectuate the assumption of Assumed Liabilities by Buyer
in accordance with the provisions hereof.
(d) Form of Instruments. To the extent that a form of any
document to be delivered hereunder is not attached as an Exhibit hereto, such
documents shall be in form and substance, and shall be executed and delivered in
a manner, reasonably satisfactory to Buyer and Seller.
(e) Purchase Price and Escrow Amount. Subject to the terms of
this Agreement, Buyer shall deliver (i) the Purchase Price and Nextera Class A
Units described in Section 2.4 less the Escrow Amount to the Seller and (ii) the
Escrow Amount to the Escrow Agent.
(f) Certificates; Opinions. Seller and Buyer shall deliver or
cause to be delivered the certificates, opinions of counsel and other matters
described in Articles VIII and IX.
(g) Consents. Subject to Section 10.1, Seller shall deliver all
third party consents described on Schedule 7.1 hereto.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As a material inducement to Buyer and Nextera to enter into this
Agreement and consummate the transactions contemplated hereby, Seller hereby
represents and warrants to Buyer and Nextera as follows:
<PAGE> 19
4.1. Organization and Qualification.
(a) Seller is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware with
partnership power and authority to own or lease its properties and to conduct
its business in the manner and in the places where such properties are owned or
leased or such business is currently conducted or proposed to be conducted.
Copies of the Certificate of Limited Partnership and Agreement of Limited
Partnership of Seller, and all amendments thereto, heretofore delivered to
Nextera are accurate and complete as of the date hereof. Seller is not in
violation of any term of the Certificate of Limited Partnership and Agreement of
Limited Partnership of Seller (the "Partnership Agreement"). Except as set forth
on Schedule 4.1. Seller is duly qualified or authorized to do business as a
foreign limited partnership and is in good standing under the laws of each
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization, except where the
failure to be so qualified or authorized would not have a material adverse
effect.
(b) General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with
corporate power and authority to own or lease its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is currently conducted or proposed to be conducted.
Copies of the Certificate of Incorporation and Bylaws of General Partner, and
all amendments thereto, heretofore delivered to Nextera are accurate and
complete as of the date hereof. General Partner is not in violation of any term
of its Certificate of Incorporation or Bylaws. Except as set forth on Schedule
4.1, General Partner is duly qualified or authorized to do business as a foreign
corporation under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification or
authorization, except where the failure to be so qualified or authorized would
not have a material adverse effect.
(c) Limited Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with
corporate power and authority to own or lease its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is currently conducted or proposed to be conducted.
Copies of the Certificate of Incorporation and Bylaws of Limited Partner, and
all amendments thereto, heretofore delivered to Nextera are accurate and
complete as of the date hereof. Limited Partner is not in violation of any term
of its Certificate of Incorporation or Bylaws. Limited Partner is duly qualified
or authorized to do business as a foreign corporation under the laws of each
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization, except where the
failure to be so qualified or authorized would not have a material adverse
effect.
4.2. Capitalization; Beneficial Ownership.
(a) The authorized equity of Seller consists solely of
partnership interests issued to General Partner and Limited Partner and, other
than as set forth on Schedule 4.2, there are no outstanding options, warrants,
rights, commitments, preemptive rights or agreements of any kind for the
issuance or sale of, or outstanding securities convertible into, any additional
<PAGE> 20
equity of any class of Seller. Except as set forth on Schedule 4.2, there are no
voting trusts, voting agreements, proxies or other agreements, instruments or
undertakings with respect to the voting of the equity interests of Seller.
(b) The authorized capital stock of General Partner consists of
30,000 shares of common stock of which 13,788 shares are duly and validly
issued, and outstanding, and are fully paid and non-assessable. Each GP
Shareholder is the record owner of the amount of shares of common stock of
General Partner set forth opposite such GP Shareholder's name on Schedule 4.2
hereto. Other than as set forth on Schedule 4.2, there are no outstanding
options, warrants, rights, commitments, preemptive rights or agreements of any
kind for the issuance or sale of, or outstanding securities convertible into,
any additional equity of any class of General Partner. Except as set forth on
Schedule 4.2, there are no voting trusts, voting agreements, proxies or other
agreements, instruments or undertakings with respect to the voting of the
capital stock of General Partner.
(c) The authorized capital stock of Limited Partner consists of
30,000 shares of common stock of which 3,167 shares are duly and validly issued,
and outstanding, and are fully paid and non-assessable. Each LP Shareholder is
the record owner of the amount of shares of common stock of Limited Partner set
forth opposite such GP Shareholder's name on Schedule 4.2 hereto. Other than as
set forth on Schedule 4.2, there are no outstanding options, warrants, rights,
commitments, preemptive rights or agreements of any kind for the issuance or
sale of, or outstanding securities convertible into, any additional equity of
any class of Limited Partner. Except as set forth on Schedule 4.2, there are no
voting trusts, voting agreements, proxies or other agreements, instruments or
undertakings with respect to the voting of the capital stock of Limited Partner.
4.3. Subsidiaries. Except as set forth on Schedule 4.3, other
than Sibson Europe and Sibson UK Limited, a private limited company organized
and existing under the laws of England and Wales ("Sibson UK"), Seller has no
Subsidiaries and does not own an equity interest in any other corporation or
business organization. Together, Seller and General Partner own 100% of the
membership interests of Sibson Europe, with Seller owning 99% and General
Partner owning 1% of the membership interests of Sibson Europe, respectively.
Sibson Europe owns 100% of the outstanding capital stock of Sibson UK. Other
than as set forth on Schedule 4.3, there are no outstanding options, warrants,
rights, commitments, preemptive rights or agreements of any kind for the
issuance or sale of, or outstanding securities convertible into, any additional
equity of any class of Sibson Europe or Sibson UK.
4.4. Authority. Each of Seller, General Partner and Limited
Partner has full partnership or corporate, as the case may be, right, authority
and power to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by Seller, General Partner and/or
Limited Partner, respectively, pursuant to this Agreement and to carry out the
transactions contemplated hereby or thereby. The execution, delivery and
performance by each of Seller, General Partner and Limited Partner of this
Agreement and each such other agreement, document and instrument have been duly
authorized by all necessary partnership or corporate, as the case may be, action
of each of Seller, General Partner and Limited Partner.
<PAGE> 21
This Agreement and each agreement, document and instrument
executed and delivered by any of Seller, General Partner and/or Limited Partner
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, valid and binding obligations of each of them that is a party
thereto enforceable in accordance with their terms (assuming the due
authorization, execution and delivery by the other parties thereto), subject to
the effect of any applicable bankruptcy, reorganization, insolvency, moratorium
or similar laws affecting creditors' rights generally and subject to the effect
of general principles of equity, including, without limitation, the possible
unavailability of specific performance or injunctive relief, regardless of
whether considered in a proceeding in equity or at law.
The execution, delivery and performance by Seller, General
Partner and Limited Partner of this Agreement and each such other agreement,
document and instrument:
(i) with respect to Seller, does not and will not violate
any provision of the Certificate of Limited Partnership or Agreement of Limited
Partnership of Seller;
(ii) with respect to General Partner, does not and will
not violate any provision of the Certificate of Incorporation or Bylaws of
General Partner;
(iii) with respect to Limited Partner, does not and will
not violate any provision of the Certificate of Incorporation or Bylaws of
Limited Partner;
(iv) except as set forth in Schedule 4.4, and except for
non-compliance with any bulk sales law of any jurisdiction, does not and will
not violate any laws of the United States, or any state or other jurisdiction
applicable to any of Seller, General Partner and/or Limited Partner, or, except
as set forth on Schedule 4.4, require Seller, General Partner and/or Limited
Partner to obtain any approval, consent or waiver of, or make any filing with,
any person or entity (governmental or otherwise) that will not be obtained or
made on or prior to the Closing other than any such approval, consent or waiver
of or filing with respect to which the failure to so obtain will not have a
material adverse effect; and
(v) except as set forth in Schedule 4.4, does not and will
not result in (i) a breach of, constitute a default under, accelerate any
obligation under, or give rise to a right of termination of any indenture or
loan or credit agreement or any other agreement, contract, instrument, mortgage,
lien, lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which any of Seller, General Partner,
Limited Partner or any Subsidiary of Seller is a party or by which the property
of any of Seller, General Partner, Limited Partner or any Subsidiary of Seller
is bound or affected, or (ii) result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or similar encumbrance
on any equity interest in Seller, General Partner, Limited Partner or any
Subsidiary of Seller except, in the case of clause (i), for such breaches,
defaults, accelerations or terminations as would not, individually or in the
aggregate, have a material adverse effect.
4.5. Assets. Seller has and will transfer title to the Assets and
upon the consummation of the transactions contemplated hereby, Buyer will
acquire title to all of the Assets, free and clear of any Encumbrances other
than the Permitted Liens. The Assets include all
<PAGE> 22
assets necessary for the conduct of the Business as currently conducted (except
for Contracts and Leases subject to Section 10.1). Schedule 4.5 contains an
accurate list by general category of all tangible Assets where the value of an
individual item exceeds $25,000 or where an aggregate of similar items exceeds
$50,000 except for tangible Assets that have been fully depreciated for tax
purposes. All tangible assets and properties which are part of the Assets and
are material to the operation of the Business are in good operating condition
and repair (normal wear and tear excepted) and are usable in the ordinary course
of business.
4.6. Real Property.
(a) Owned Real Property. Neither Seller nor any Subsidiary of
Seller owns any real property.
(b) Leases. All of the real property leased by Seller or any
Subsidiary of Seller is identified on Schedule 4.6 (herein referred to as the
"Leased Real Property" and each such lease is herein referred to as a "Facility
Lease"). True and complete copies of each Facility Lease have been delivered to
Nextera. Except as set forth on Schedule 4.6, each Facility Lease has been duly
authorized and executed by Seller or a Subsidiary of Seller, as applicable, and,
to the knowledge of Seller, the other parties thereto and is in full force and
effect and binding and enforceable against the parties thereto (assuming due
authorization, execution and delivery by the other parties thereto), subject to
the effect of any applicable bankruptcy, reorganization, insolvency, moratorium
or similar laws affecting creditors' rights generally and subject to the effect
of general principles of equity, including, without limitation, the possible
unavailability of specific performance or injunctive relief, regardless of
whether considered in a proceeding in equity or at law. Except as set forth on
Schedule 4.6, neither Seller nor any Subsidiary of Seller is in default under
any Facility Lease, nor to the knowledge of Seller, has any event occurred
which, with notice or the passage of time, or both, would give rise to such a
default. Except as set forth on Schedule 4.6, to the knowledge of Seller, none
of the other parties to each Facility Lease is in default under such Facility
Lease and there is no event which, with notice or the passage of time, or both,
would give rise to such a default.
(c) Leases or Other Agreements. Except for Facility Leases listed
on Schedule 4.6, neither Seller nor any of its Subsidiaries holds, or is
obligated under or a party to, any leases, subleases, licenses, occupancy
agreements, options, rights, concessions or other agreements or arrangements,
written or oral, granting to any person the right to purchase, use or occupy any
real property in connection with the Business or any portion thereof or interest
in any such real property.
(d) Facility Leases and Leased Real Property. Except as set forth
on Schedule 4.6, with respect to each Facility Lease to which Seller is a party,
as lessee or sublessee, Seller has and will transfer, subject to the obtaining
on or prior to the Closing of any required consent of the lessor or sublessor,
as applicable listed on Schedule 7.1 to Buyer at the Closing an unencumbered
leasehold interest as lessee or lessor, as applicable, in the Leasehold Estate
subject to the Permitted Liens and the terms and conditions of each such
Facility Lease. With respect to any Facility Lease to which any Subsidiary of
Seller is a party, as lessee or sublessee, the actions contemplated by this
Agreement do not violate the terms or result in the termination of, or create
<PAGE> 23
a right to terminate, such Facility Lease. To the knowledge of Seller, Seller
and each Subsidiary of Seller enjoys peaceful and undisturbed possession of all
the Leased Real Property, as applicable.
(e) Condition of Leased Real Property. To the knowledge of Seller
there are no material defects in the physical condition of any portion of the
Leased Real Property and all such Leased Real Property is in good operating
condition and repair (reasonable wear and tear excepted).
(f) Compliance with the Law. Neither Seller nor any Subsidiary of
Seller has received any written notice from any governmental authority of any
violation of any law, ordinance, regulation, license, permit or authorization
issued with respect to the Leased Real Property that has not been heretofore
corrected. Neither Seller nor any Subsidiary of Seller has received any notice
of any real estate tax deficiency or assessment nor is aware of any proposed
deficiency, claim or assessment with respect to any of the Leased Real Property,
or any pending or threatened condemnation thereof.
4.7. Financial Statements.
(a) Seller has delivered to Nextera the following financial
statements, copies of which are attached hereto as Schedule 4.7: consolidated
balance sheets of Seller as of December 31, 1996 and December 31, 1997,
consolidated statements of operations and partners' capital for its fiscal years
ended December 31, 1996 and December 31, 1997, and consolidated statements of
cash flows for its fiscal years ended December 31, 1996 and December 31, 1997,
as audited by Farkouh, Furman & Faccio, unaudited consolidated balance sheets of
Seller as of June 30, 1998 and unaudited consolidated statement of operations
and partners' capital for the interim period ended June 30, 1998 and unaudited
consolidated statement of cash flows for the interim period ended June 30, 1998
(collectively, the "Financial Statements"). The December 31, 1997 consolidated
balance sheet is hereinafter referred to as the "Base Balance Sheet" and
December 31, 1997 is hereafter referred to as the "Base Balance Sheet Date." The
Financial Statements, have been prepared in accordance with GAAP (subject to
normal year-end adjustments in the case of the unaudited Financial Statements)
applied consistently during the periods covered thereby, and said Financial
Statements in the case of the audited statements, present fairly in all material
respects the consolidated financial condition of Seller at the dates of said
statements and the consolidated results of its operations for the periods
covered thereby, and the unaudited balance sheet and statements of income,
retained earnings and cash flows for the interim period ended June 30, 1998
provided by Seller to Nextera present fairly and completely in all material
respects the information purported to be shown thereon.
(b) Seller's fiscal year 1998 operating budget dated June 4, 1998
attached hereto as Schedule 4.7 which has previously been supplied by Seller to
Nextera has been prepared in good faith on the basis of assumptions by Seller
which Seller believed were reasonable at the time of the preparation of such
budget.
(c) Except as set forth on Schedule 4.7 and for the Excluded
Liabilities, as of the date hereof, Seller and its Subsidiaries do not have any
Liabilities of any nature, whether
<PAGE> 24
accrued, absolute or contingent (including without limitation Liabilities as
guarantor or otherwise with respect to obligations of others, or Liabilities for
any Tax due or then accrued or to become due or contingent or potential
Liabilities relating to activities of Seller or any Subsidiary of Seller or the
conduct of the Business prior to the date hereof or the Closing, as the case may
be, regardless of whether claims in respect thereof had been asserted as of such
date), except Liabilities (i) stated or adequately reserved against on the Base
Balance Sheet or the notes thereto, (ii) incurred or arising in the ordinary
course of business under Contracts, Leases, Permits and other business
arrangements described in the Disclosure Schedule (and under those Contracts,
Leases and Permits which are not required to be disclosed on the Disclosure
Schedule) none of which relates to any Default under any Contract or Lease,
breach of warranty, tort infringement or violation of any Regulation or Court
Order or arose out of any Action and none of which, individually or in the
aggregate, has or would have a material adverse effect, (iii) incurred or
arising in the ordinary course of the Business subsequent to the Base Balance
Sheet Date consistent with the terms of this Agreement (none of which relates to
any Default under any Contract or Lease, breach of warranty, tort infringement
or violation of any Regulation or Court Order or arose out of any Action) and
none of which, individually or in the aggregate, has or would have a material
adverse effect, (iv) disclosed in this Article IV or on the Disclosure Schedule
or (v) future performance obligations under Contracts and Leases, none of which
relates to any default, breach of warranty, tort infringement, or violation of
any Regulation or Court Order or arose out of any action and none of which,
individually or in the aggregate, has or would have a material adverse effect.
4.8. Absence of Certain Changes or Events. Except as provided in
this Agreement or as disclosed in Schedule 4.8, since the Base Balance Sheet
Date, there has not been any:
(a) actual or, to the knowledge of Seller, threatened material
adverse change;
(b) change in accounting methods, principles or practices of
Seller affecting the Assets, its Liabilities or the Business;
(c) revaluation by Seller or any Subsidiary of Seller of any of
the Assets, including without limitation writing down the value of inventory or
writing off of notes or accounts receivable;
(d) damage, destruction or loss (whether or not covered by
insurance) which has had or will have a material adverse effect;
(e) cancellation of any indebtedness or waiver or release of any
right or claim of Seller or any Subsidiary of Seller relating to its activities
or properties which had or will have a material adverse effect;
(f) declaration, setting aside, or payment of dividends or
distributions by Seller or any Subsidiary of Seller in respect of the
partnership interests of Seller or any redemption, purchase or other acquisition
of any of the securities of Seller or any Subsidiary of Seller;
<PAGE> 25
(g) increase in the rate of compensation payable or to become
payable to any director, officer or other employee of Seller or any Subsidiary
of Seller or any consultant earning in excess of $100,000 per year,
Representative or agent of Seller or any Subsidiary of Seller, including without
limitation the making of any loan to, or the payment, grant or accrual of any
bonus, incentive compensation, service award or other similar benefit to, any
such person, or the addition to, modification of, or contribution to any
Employee Program, arrangement, or practice described in the Disclosure Schedule
(except for normal increases, payments, grants and accruals in the ordinary
course of business consistent with past practices and that in the aggregate have
not resulted in material increase in benefits or compensation expense of the
Seller and its Subsidiaries, taken as a whole);
(h) adverse change in employee relations which has or is
reasonably likely to have a material adverse effect on the productivity, the
financial condition, results of operations or Business of Seller or any
Subsidiary of Seller or the relationships between the employees of Seller or any
Subsidiary of Seller and the management of Seller or any Subsidiary of Seller;
(i) (x) amendment, cancellation or termination of any Contract,
commitment, agreement, Lease, transaction or Permit relating to the Assets or
the Business or (y), except for this Agreement and the other agreements entered
into in connection herewith, entry into any Contract, Lease, transaction or
Permit which is not in the ordinary course of business, including without
limitation any employment or consulting agreements, except in the cases of the
forgoing clauses (x) and (y), the amendment, cancellation or termination or the
entering into, of Contracts or commitments for the provision of consulting
services in the ordinary course of business consistent with past practices;
(j) mortgage, pledge or other encumbrance of any Assets, except
purchase money mortgages arising in the ordinary course of business and
Permitted Liens;
(k) sale, assignment or transfer of any of the Assets, except to
the extent Assets are sold or disposed of in the ordinary course of business;
(l) incurrence of indebtedness by Seller or any Subsidiary of
Seller for borrowed money or commitment to borrow money entered into by Seller
or any Subsidiary of Seller, or loans made or agreed to be made by Seller or any
Subsidiary of Seller, or indebtedness guaranteed by Seller or any Subsidiary of
Seller, except for employee advances in the ordinary course of business,
endorsements for collection or deposit in the ordinary course of business and
borrowings under Seller's existing credit facilities in the ordinary course of
business;
(m) except as provided in this Agreement or the other agreements
contemplated hereby or as described in the Disclosure Schedules, incurrence by
Seller or any of its Subsidiaries of Liabilities, except Liabilities incurred in
the ordinary course of business, or increase or change in any assumptions
underlying or methods of calculating, any doubtful account contingency or other
reserves of Seller or any of its Subsidiaries;
(n) payment, discharge or satisfaction of any Liabilities of
Seller or any Subsidiary of Seller other than the payment, discharge or
satisfaction in the ordinary course of
<PAGE> 26
business of Liabilities set forth or reserved for on the Base Balance Sheet or
incurred in the ordinary course of business;
(o) capital expenditure by Seller or any Subsidiary of Seller in
excess of $25,000 individually or $50,000 in the aggregate, the execution of any
Lease by Seller or any Subsidiary of Seller or the incurring of any obligation
by Seller or any Subsidiary of Seller to make any capital expenditures or
execute any Lease;
(p) failure to pay or satisfy when due any Liability of Seller or
any Subsidiary of Seller, except where the failure would not have a material
adverse effect;
(q) failure of Seller or any Subsidiary of Seller to use
commercially reasonable efforts to carry on diligently the Business in the
ordinary course;
(r) disposition or lapsing of any Proprietary Rights or any
disposition or disclosure to any person of any Proprietary Rights of Seller or
any Subsidiary of Seller not theretofore a matter of public knowledge, other
than as would not have a material adverse effect; or
(s) agreement by Seller, any Subsidiary of Seller, General
Partner, Limited Partner, or, to the knowledge of Seller, any Shareholder to do
any of the things described in the preceding clauses (a) through (r) other than
as expressly provided for herein.
4.9. Contracts and Commitments.
(a) Contracts. Schedule 4.9 sets forth the following Contracts
(or descriptions thereof, in the case of oral Contracts) to which Seller, any of
its Subsidiaries, General Partner or Limited Partner is a party or by which any
of them is bound (collectively, the "Material Contracts"):
(i) Contracts not made in the ordinary course of business;
(ii) (A) Employment contracts and severance agreements to
employ or terminate present executive officers or other personnel and other
contracts with present officers, directors or shareholders of Seller or (B)
employment contracts and severance agreements that will result in the payment
by, or the creation of any Liability to pay on behalf of Buyer, Seller or any
Subsidiary of Seller any severance, termination, "golden parachute," or other
similar payments to any present or former personnel following termination of
employment or otherwise as a result of the consummation of the transactions
contemplated by this Agreement. It being understood that no such contract or
agreement needs to be listed with respect to clause (B) if no payment is to be
made or Liability exists thereunder following the Closing;
(iii) Labor or union contracts;
(iv) Distribution, franchise, license, technical
assistance, sales, commission, agency or advertising contracts in respect of the
Assets or the Business, or consultant contracts (where a third party is
providing services to Seller or any of its Subsidiaries),
<PAGE> 27
excluding (A) software licenses that are not material to the Business and (B)
such consultant contracts involving aggregate fees of less than $25,000 per
annum and that are terminable by Seller on no more than three months notice;
(v) Contracts or agreements with a client or customer of
Seller providing for an aggregate payment by such client or customer in excess
of $75,000 which, to the knowledge of Seller, obligate Seller or one of its
Subsidiaries to indemnify such client or customer or which are in the possession
of Douglas Tormey;
(vi) Options with respect to any property, real or
personal, where Seller is the grantor thereunder;
(vii) Contracts (excluding real property leases) involving
actual future expenditures in excess of $150,000 in the aggregate (excluding
Liabilities for indirect expenditures such as salaries and overhead expenses and
any contingent or potential Liability) related to the Business or the Assets;
(viii) Contracts or commitments relating to commission
arrangements with others;
(ix) Promissory notes, loans, agreements, indentures,
evidences of indebtedness, letters of credit, guarantees, or other instruments
relating to an obligation to in respect of borrowed money, individually in
excess of or in the aggregate in excess of $75,000, whether Seller shall be the
borrower, lender or guarantor thereunder or whereby any Assets are pledged
(excluding credit provided by Seller or any Subsidiary of Seller in the ordinary
course of business to purchasers of its services);
(x) Contracts containing covenants limiting the freedom of
Seller or any Subsidiary of Seller or any of their respective officers,
directors, shareholders or other affiliates, to engage in any line of business
or compete with any person;
(xi) Other than Contracts with colleges, universities and
other institutions of higher learning, any Contract to supply services to the
United States federal, state or local government or any agency or department
thereof;
(xii) Leases of real property;
(xiii) Leases of personal property not cancelable (without
Liability) within 30 calendar days, excluding leases of personal property
involving the expenditure of less than $25,000 in the aggregate annually.
Seller has delivered to Buyer true, correct and complete
copies (or descriptions thereof with respect to oral Material Contracts) of all
of the Material Contracts, including all amendments and supplements thereto.
Other than the Material Contracts, Seller and its Subsidiaries have no other
Contracts of the type described in clauses (i) through (xiii) above.
<PAGE> 28
(b) Absence of Defaults. Seller and each of its Subsidiaries have
fulfilled, or taken all action necessary to enable it to fulfill when due, all
of their respective material obligations under each such Material Contract. To
the knowledge of Seller, all other parties to such Material Contract are
currently in compliance in all material respects with the provisions thereof, no
party is in Default in any material respect thereunder and no notice of any such
claim of Default relating thereto has been given to Seller, General Partner or
Limited Partner other than as disclosed on Schedule 4.6 and Schedule 4.11 and
non-compliance and Defaults relating to the failure to obtain consents or give
notices with respect to the transfer of any Material Contract as a result of the
transactions contemplated hereby. To the knowledge of Seller, there is no reason
to believe that the services called for by any Material Contract between Seller
and a client of Seller cannot be supplied substantially in accordance with the
terms of such Material Contract, including time specifications, and Seller has
no reason to believe that any such Material Contract will upon performance by
Seller or any Subsidiary of Seller result in a net loss to Seller or such
Subsidiary of Seller.
4.10. Permits.
(a) Except as set forth on Schedule 4.10, each of Seller, its
Subsidiaries, General Partner, and Limited Partner has, and at all times has
had, all Permits required under any Regulation (including Environmental Laws) in
the operation of its Business or in the ownership of the Assets except for those
Permits the absence of which would not individually or in the aggregate have a
material adverse effect. A complete list of such Permits is set forth in
Schedule 4.10. Except for the audit of certain tax returns disclosed on Schedule
4.22, none of Seller, its Subsidiaries, General Partner or Limited Partner is in
Default, nor has it received any notice of any claim of Default, with respect to
any such Permit. To the knowledge of Seller, no present or former shareholder,
director, officer or employee of Seller, any Subsidiary of Seller, or any
affiliate thereof, or any other person, firm, corporation or other entity, owns
or has any proprietary, financial or other interest (direct or indirect) in any
such Permit.
(b) Except as disclosed on Schedule 4.10 hereto, no notice to,
declaration, filing or registration with, or Permit from, any domestic or
foreign governmental or regulatory body or authority is required to be made or
obtained by Seller or any Subsidiary of Seller in connection with the execution,
delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby.
4.11. Litigation. Except as set forth on Schedule 4.11, there are
no Actions pending or, to the knowledge of Seller, threatened (a) against (i)
Seller, any Subsidiary of Seller, General Partner, Limited Partner, the Business
or the Assets (including with respect to Environmental Laws), (ii) to the
knowledge of Seller, any officers or directors of Seller or any Subsidiary of
Seller as such, or (iii) to the knowledge of Seller, any Shareholder in such
Shareholder's capacity as a shareholder of General Partner or Limited Partner or
as an employee of Seller, (b) against Seller seeking to delay, limit or enjoin
the transactions contemplated by this Agreement, (c) against Seller, any
Subsidiary of Seller, General Partner, Limited Partner or any of their officers
or directors in their capacity as such that involves the risk of criminal
liability to any such entity or person, or (d) in which any of Seller, any
Subsidiary of Seller, General Partner or Limited Partner is a plaintiff,
including any derivative suits brought by
<PAGE> 29
or on behalf of Seller, any Subsidiary of Seller, General Partner or Limited
Partner nor, to the knowledge of Seller, is there any reasonable basis for any
such Action. None of Seller, its Subsidiaries, General Partner and Limited
Partner is in Default with respect to or subject to any Court Order, and there
are no unsatisfied judgments against Seller, any Subsidiary of Seller, General
Partner, Limited Partner, the Business or the Assets. Except as set forth on
Schedule 4.11, there is not a reasonable likelihood of an adverse determination
of any pending Actions that could have a material adverse effect. There are no
Court Orders or agreements with, or liens by, any governmental authority or
quasi-governmental entity relating to any Environmental Law which regulate,
obligate, bind or in any way affect Seller, the Assets or the Business, other
than the Permitted Liens.
4.12. Compliance with Law. Except as set forth on Schedule 4.12,
Seller, each Subsidiary of Seller, General Partner and Limited Partner and the
conduct of the Business have been and are in substantial compliance with all
Regulations and Court Orders relating to the Assets or the Business or
operations of Seller, each of its Subsidiaries, General Partner or Limited
Partner except in each case for such non-compliance as would not, individually
or in the aggregate, have a material adverse effect. Within the last five years,
none of Seller, its Subsidiaries, General Partner or Limited Partner has
received any written notice to the effect that, it is not in compliance with any
such Regulations or Court Orders.
4.13. Ordinary Course. Except for the transactions contemplated
by this Agreement and as set forth on Schedule 4.13, since December 31, 1997,
Seller has conducted its business only in the ordinary course and consistently
with its prior practices.
4.14. Officers and Compensation. Schedule 4.14 hereto contains a
true and complete list of all current officers and directors of Seller, General
Partner, Limited Partner and each Subsidiary of Seller. In addition, Schedule
4.14 hereto contains a list of all managers, employees and consultants of Seller
and any Subsidiary of Seller who, individually, have received or are scheduled
to receive compensation from Seller for the fiscal year ended December 31, 1997,
in excess of $100,000. Seller has heretofore provided Nextera with a true and
complete list setting forth the current job title and aggregate annual
compensation of each such individual.
4.15. Employees; Labor Matters.
(a) As of the date of this Agreement, Seller employs a total of
approximately one hundred seventy one (171) full-time employees and eight (8)
part-time employees, Sibson Europe employs one (1) full-time employee and Sibson
UK Limited employs approximately three (3) full-time employees and three (3)
part-time employees. Except as set forth in Schedule 4.15, Seller has not
received any written notice that any employee does not intend to accept
employment with Buyer following the Closing. Neither Seller nor any Subsidiary
of Seller is delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed for it to the date hereof or amounts required to be reimbursed to such
employees. Upon termination of the employment of any of the employees of Seller
(assuming acceptance of Buyer's offer of substantially comparable employment to
all of said employees), Buyer and Nextera will not by reason of such termination
or anything done prior to the Closing be liable to any of said employees for
so-called "severance
<PAGE> 30
pay" or any other similar payments. Neither Seller nor any Subsidiary of Seller
has a policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection with the termination of employment, except
as set forth in Schedule 4.15. Each of Seller and its Subsidiaries is in
compliance in all material respects with all applicable laws and regulations
respecting labor, employment, fair employment practices, work place safety and
health, terms and conditions of employment, and wages and hours. There are no
charges of employment discrimination or unfair labor practices pending or, to
the knowledge of Seller, threatened and there exists no basis for any such
claim, nor are there any strikes, slowdowns, stoppages of work, or any other
concerted interference with normal operations which are existing, pending or to
the knowledge of Seller threatened against or involving Seller or any Subsidiary
of Seller. No question concerning union representation exists respecting any
employees of Seller or any Subsidiary of Seller. There are no pending
grievances, complaints or charges that have been filed against Seller or any
Subsidiary of Seller under any dispute resolution procedure (including, but not
limited to, any arbitration or similar proceedings of which Seller has received
written notice. No collective bargaining agreement is in effect or is currently
being or is about to be negotiated by Seller or any Subsidiary of Seller.
Neither Seller nor any Subsidiary of Seller has received any written notice
indicating that any of its employment policies or practices is currently being
audited or investigated by any federal, state or local government agency. Each
of Seller and its Subsidiaries doing business in the United States is, and at
all times has been, in compliance in all material respects with the requirements
of the Immigration Reform Control Act of 1986.
(b) Neither General Partner nor Limited Partner employ any
individual other than their respective officers and directors. Neither General
Partner nor Limited Partner have paid or currently pay compensation to any
individual.
4.16. Banking Relations. Schedule 4.16 contains a complete and
correct list of the names and locations of all banks in which Seller or any of
its Subsidiaries has accounts or safe deposit boxes and the names of all persons
authorized to draw thereon or to have access thereto.
4.17. No Brokers. Neither Seller, its Subsidiaries, General
Partner, Limited Partner, or, to the knowledge of Seller, the Shareholders nor,
to the knowledge of Seller any of their respective officers, directors,
employees, or affiliates has employed or made any agreement with any broker,
finder or similar agent or any person or firm which will result in the
obligation of Buyer, Nextera or any of their affiliates to pay any finder's fee,
brokerage fees or commission or similar payment in connection with the
transactions contemplated hereby.
4.18. No Other Agreements to Sell the Assets. Other than as
described on Schedule 4.18 or as contemplated by the Exchange Agreement attached
hereto as Exhibit N, neither Seller, its Subsidiaries, General Partner, Limited
Partner, or, to the knowledge of Seller, the Shareholders nor, to the knowledge
of Seller any of their respective officers, directors, employees or affiliates
have any commitment or legal obligation, absolute or contingent, to any other
person or firm other than Buyer and Nextera to sell, assign, transfer or effect
a sale of any of the Assets (other than inventory or services in the ordinary
course of business), to sell or effect a sale of the equity of Seller, any
<PAGE> 31
Subsidiary of Seller, General Partner or Limited Partner, to effect any merger,
consolidation, liquidation, dissolution or other reorganization of Seller, any
Subsidiary of Seller, General Partner or Limited Partner, or to enter into any
agreement or cause the entering into of an agreement with respect to any of the
foregoing.
4.19. Clients. Schedule 4.19 sets forth any client, which (i)
accounted for more than $75,000 in revenue for Seller for the six months ended
June 30, 1998 and or (ii) accounted for more than $150,000 in revenue for Seller
in the twelve months ended December 31, 1997 (collectively, the "Clients"). To
the knowledge of Seller, the relationships of Seller and its Subsidiaries with
their respective Clients are good commercial working relationships.
4.20. Backlog. As of July 31, 1998, Seller and its Subsidiaries
have a backlog of firm orders for the sale or lease of services, for which
revenues have not been recognized by Seller or its Subsidiaries, as set forth in
Schedule 4.20.
4.21. Proprietary Rights.
(a) Proprietary Rights. Schedule 4.21 lists: (i) for each
registered Trademark of Seller or any Subsidiary of Seller, the application
serial number or registration number and the class of goods covered and (ii) for
each registered Copyright of Seller or any Subsidiary of Seller, the number and
date of filing for each country in which a Copyright has been filed. Other than
the items set forth on Schedule 4.21 and other than the unregistered
service/trade name "Sibson" and variations thereof, there are no Proprietary
Rights used by Seller that are material to the conduct of the Business. Seller
has no patents or registered designs and has not filed any patent applications
or registered design applications.
(b) Royalties and Licenses. Except as set forth on Schedule 4.21
neither Seller nor any Subsidiary of Seller, has any obligation to compensate
any person for the use of any such Proprietary Rights nor has Seller or any
Subsidiary of Seller granted to any person any license, option or other rights
to use in any manner any of such Proprietary Rights, whether requiring the
payment of royalties or not.
(c) Ownership and Protection of Proprietary Rights. Except as set
forth on Schedule 4.21, Seller and/or its Subsidiaries own or have a valid right
to use each of such Proprietary Rights. No other person (i) has notified Seller
or any Subsidiary of Seller that it is claiming any ownership of or right to use
any such Proprietary Rights, or (ii) to the knowledge of Seller, is infringing
upon any such Proprietary Right in any way. To the knowledge of Seller, except
as set forth on Schedule 4.21, use of such Proprietary Rights by Seller or any
Subsidiary of Seller does not and will not conflict with, infringe upon or
otherwise violate the valid rights of any third party in or to such Proprietary
Rights, and no Action has been instituted against or notices received by Seller
that are presently outstanding alleging that use of the Proprietary Rights by
Seller or any Subsidiary of Seller infringes upon or otherwise violates any
rights of a third party in or to such Proprietary Rights.
4.22. Taxes. Except as otherwise set forth on Schedule 4.22:
(a) All returns, declarations, reports, estimates, statements,
schedules or other information or documents with respect to Taxes (collectively,
"Tax Returns") required to be filed
<PAGE> 32
by or with respect to Seller and each Subsidiary of Seller have been timely
filed (giving effect to extensions granted with respect thereto) with the
appropriate taxing authorities, and all such Tax Returns are true, correct, and
complete in all material respects.
(b) Seller and each Subsidiary of Seller have timely paid all
Taxes due from it or claimed to be due from it by any federal, state, local,
foreign or other taxing authority.
(c) There are no liens for Taxes upon any of the assets of, or
interests in Seller, General Partner, Limited Partner or any Subsidiary of
Seller, except liens for Taxes not yet due and payable.
(d) No Tax Returns of Seller or any Subsidiary of Seller have
been audited by the relevant taxing authority. No deficiency for any Taxes has
been proposed, asserted or assessed against Seller or any Subsidiary of Seller
that has not been paid in full. There are no outstanding waivers, extensions, or
comparable consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns of Seller or any Subsidiary of Seller
(including the time for filing of Tax Returns or paying Taxes) and neither
Seller nor any Subsidiary of Seller has pending requests for any such waivers,
extensions, or comparable consents.
(e) No audit or other proceeding by any federal, state, local or
foreign court, governmental, regulatory, administrative or similar authority is
presently pending with respect to any Taxes or Tax Return of Seller or any
Subsidiary of Seller, and neither Seller nor any Subsidiary of Seller has
received written notice of any pending audits or proceedings.
(f) Neither Seller nor any Subsidiary of Seller has received a
ruling from any taxing authority or signed an agreement with any taxing
authority that could reasonably be expected to have a material adverse effect on
Seller, General Partner, Limited Partner, any Subsidiary of Seller or the assets
of Seller or any Subsidiary of Seller.
(g) Seller and each Subsidiary of Seller have complied in all
material respects with all applicable laws, rules and regulations relating to
the payment and withholding of Taxes (including, without limitation, withholding
of Taxes pursuant to Sections 1441, 1442, 1445 and 1446 of the Code or similar
provisions under any applicable state and foreign laws) and has, within the time
and the manner prescribed by law, paid over to the proper governmental
authorities all amounts so withheld.
(h) Neither Seller nor any Subsidiary of Seller is a party to or
bound by or has any obligation under any Tax sharing allocation or indemnity
agreement or similar contract or arrangement (whether or not written).
(i) No power of attorney granted by Seller or any Subsidiary of
Seller with respect to any Taxes is currently in force.
(j) There is no expectation that any taxing authority may claim
or assess any material amount of Taxes payable by Seller or any Subsidiary of
Seller for any period ending on or prior to the Closing Date and there are no
facts of which Seller is aware which would constitute
<PAGE> 33
grounds for the assessment of any material amount of Taxes payable by Seller or
any Subsidiary of Seller for any period ending on or prior to the Closing Date.
(k) No issue has been raised by a federal, state, local or
foreign taxing authority in any examination relating to Seller or any Subsidiary
of Seller which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for any subsequent
taxable period.
(l) Neither Seller nor any Subsidiary of Seller is subject to
liability as a transferee pursuant to Code Section 6901 et seq. or otherwise.
(m) Schedule 4.22 sets forth each state, local and foreign
jurisdiction in which Seller, General Partner, Limited Partner and each
Subsidiary of Seller has filed a Tax Return during the last five years. No
written claim has ever been received by Seller, General Partner, Limited Partner
or any Subsidiary of Seller from a taxing authority in a jurisdiction where
Seller or such Subsidiary of Seller does not pay Taxes or file Tax Returns that
Seller or such Subsidiary of Seller is or may be subject to Taxes assessed by
such jurisdiction, and, to the knowledge of Seller, no such claim has been
threatened by a taxing authority.
(n) Seller is a United States person within the meaning of the
Code.
4.23. Employee Benefit Programs
(a) Schedule 4.23 lists every Employee Program (as defined below)
that has been maintained (as defined below) by Seller or any Subsidiary of
Seller at any time during the past three-years (collectively, "Seller Employee
Programs"). General Partner and Limited Partner have not maintained any Employee
Program during the three-year period ending on the date of the Closing.
(b) Except as set forth on Schedule 4.23, each Employee Program
which has ever been maintained by Seller or any Subsidiary of Seller and which
has at any time been intended to qualify under Section 401(a) of the Code, and
each associated trust which at any time has been intended to be exempt from
taxation pursuant to Section 501(a) of the Code is the subject of a favorable
determination, opinion or approval letter from the Internal Revenue Service
("IRS") regarding its qualification or exemption from taxation, as applicable,
under such section and has, in fact, been qualified or tax exempt, as
applicable, under the applicable section of the Code for all periods for which
the applicable statute of limitations has not expired through and including the
Closing (or, if earlier, the date that all of such Employee Program's assets
were distributed). No event or omission has occurred which would cause any such
Employee Program to lose its qualification under the applicable Code section.
(c) Except as set forth on Schedule 4.23, Seller does not know
and has no reason to know, of any failure of any party to comply in any material
respect with any laws applicable to the Employee Programs that have been
maintained by Seller or any Subsidiary of Seller. With respect to any Employee
Program ever maintained by Seller or any Subsidiary of Seller for all periods
for which the applicable statute of limitations has not expired, there has
<PAGE> 34
occurred no "prohibited transaction," as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975 of
the Code, or any material violation of, or material breach of any duty under,
ERISA or other applicable law (including, without limitation, any health care
continuation requirements (under part 6 of subtitle B of Title I or ERISA, or
otherwise) or any other tax law requirements, or conditions to favorable tax
treatment, applicable to such plan), which could result, directly or indirectly,
in any taxes, penalties or other liability to Seller, or any Subsidiary of
Seller, Buyer or Nextera. No litigation, arbitration, or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or, to the knowledge
of Seller, threatened with respect to any Employee Program.
(d) Except as disclosed on Schedule 4.23, neither Seller nor any
ERISA Affiliate (as defined below) has ever (i) maintained any Employee Program
which has been subject to Title IV of ERISA; (ii) maintained any Multiemployer
Plan (as defined below); or (iii) provided health care or any other non-pension
benefits to any employees after their employment is terminated (other than as
required by part 6 of subtitle B of title I of ERISA or benefits that continue
for a brief period of time after termination of employment, for example for the
balance of the month in which an employee terminates, or has ever promised to
provide such post-termination benefits).
(e) Except as set forth on Schedule 4.23, with respect to each
Seller Employee Program maintained by Seller or any Subsidiary of Seller within
the three years preceding the Closing, complete and correct copies of the
following documents (if applicable to such Seller Employee Program) have
previously been delivered to Nextera: (i) all documents embodying or governing
such Seller Employee Program, and any funding medium for the Seller Employee
Program (including, without limitation, trust agreements) as they may have been
amended; (ii) the most recent IRS determination, opinion or approval letter with
respect to such Seller Employee Program under Code Sections 401 and 501(a), and
any applications for determination or approval subsequently filed with the IRS;
(iii) the three most recently filed IRS Forms 5500, with all applicable
schedules and accountants' opinions attached thereto; (iv) the summary plan
description for such Seller Employee Program (or other descriptions of such
Seller Employee Program provided to employees) and all modifications thereto;
(v) any insurance policy (including any fiduciary liability insurance policy)
related to such Seller Employee Program; (vi) any documents evidencing any loan
to a Seller Employee Program that is a leveraged employee stock ownership plan;
and (vii) all other materials reasonably necessary for Buyer to perform any of
its responsibilities with respect to any Seller Employee Program subsequent to
the Closing (including, without limitation, health care continuation
requirements).
(f) Neither Seller nor any ERISA Affiliate has any announced plan
or legally binding commitment to create any additional Employee Program which is
intended to cover employees or former employees of Seller or any ERISA Affiliate
(with respect to their relationship with such entities) or to amend or modify
any existing Employee Program which covers or has covered employees or former
employees of Seller or any ERISA Affiliate (with respect to their relationship
with such entities).
<PAGE> 35
(g) Schedule 4.23(g) sets forth (i) all plans, policies,
contracts, agreements or similar arrangements that impose any obligation on
Seller (including any Liability assumed from a predecessor of Seller) or any
ERISA Affiliate to provide any retiree medical benefits or any other "welfare
plan" (as defined in Section 3(1) of ERISA) benefits for retirees (collectively,
"Retiree Welfare Benefit Plans"). Except as set forth on Schedule 4.23(g) no
representative of Seller (or any representative of any predecessor of Seller to
the extent enforceable against Seller) or any ERISA Affiliate, or, to the
knowledge of Seller, any Retiree Welfare Benefit Plan, has made any commitment
(whether written or oral) to any employee or former employee of Seller or any
ERISA Affiliate to maintain any such Retiree Welfare Benefit Plan or any
benefits thereunder.
(h) No event has occurred in connection with which Seller, any
ERISA Affiliate or any Employee Program, directly or indirectly, could be
subject to any material liability (A) under any statute, regulation or
governmental order relating to any Employee Programs or (B) pursuant to any
obligation of Seller or any ERISA Affiliate to indemnify any person against
liability incurred under any such statute, regulation or order as they relate to
the Employee Programs.
(i) Except as described on Schedule 4.23, neither the execution
and delivery of this Agreement by Seller or any Subsidiary of Seller nor the
consummation of the transactions contemplated hereby will result in the
acceleration or creation of any rights of any person to benefits under any
Employee Program (including, without limitation, the acceleration of the vesting
or exercisability of any stock options, the acceleration of the vesting of any
restricted stock, or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
(j) There is no contract, agreement, plan or arrangement covering
any employee or former employee of Seller or any ERISA Affiliate (with respect
to its relationship with such entities) that, individually or collectively,
provides for the payment by Seller or any ERISA Affiliate of any amount (i) that
is not deductible under Section 162(a)(1) or 404 of the Code or (ii) that is an
"excess parachute payment" pursuant to Section 280G of the Code.
(k) All contributions required to be made by Seller or any ERISA
Affiliate with respect to any Employee Program due as of any date through and
including the Closing Date have been made when due.
<PAGE> 36
(l) For purposes of this section:
(i) "Employee Program" means (A) any employee benefit plan
within the meaning of ERISA Section 3(3), including, but not limited to, any
multiple employer welfare arrangement (within the meaning of ERISA Section 3(4))
and any plan to which more than one unaffiliated employer contributes and any
employee benefit plan (such as a foreign or excess benefit plan) which is not
subject to ERISA; and (B) any employment, consulting, severance or other similar
contract, arrangement or policy, any stock option plan, bonus or incentive award
plan, deferred compensation agreement, supplemental income arrangement, vacation
plan, any employee benefit arrangement described in Code Section 501(c)(9), and
any other employee benefit plan, agreement, and arrangement not described in (A)
above. In the case of an Employee Program funded through a trust described in
Code Section 501(a), each reference to such Employee Program shall include a
reference to such trust.
(ii) An entity "maintains" an Employee Program if such
entity sponsors, contributes to, or provides (or has promised to provide)
benefits under such Employee Program, or has any obligation (by agreement or
under applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise covers
employees of such entity, or their spouses, dependents, or beneficiaries.
(iii) An entity is an "ERISA Affiliate" of Seller if it
would have ever been considered a single employer with Seller under ERISA
Section 4001(b) or part of the same "controlled group" as Seller or any of its
Subsidiaries for purposes of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and which is
maintained pursuant to one or more collective bargaining agreements as defined
in Section 3(37) of ERISA.
4.24. Insurance. Schedule 4.24 contains a complete and accurate
list of all policies or binders of fire, liability, title, worker's
compensation, product liability and other forms of insurance maintained by
Seller or any Subsidiary of Seller on the Business, the Assets or its employees.
All such insurance coverage applicable to Seller or any Subsidiary of Seller,
the Business and the Assets is in full force and effect and provides coverage as
may be required by applicable Regulation and to the knowledge of Seller by any
and all Contracts to which Seller or any Subsidiary of Seller is a party. To the
knowledge of Seller, there is no Default under any such coverage nor is there
presently any failure to give notice or present any claim under any such
coverage in a due and timely fashion, except for such Defaults and any such
failure to give notice or present any claim as would not, individually or in the
aggregate, have a material adverse effect. There are no outstanding unpaid
premiums except in the ordinary course of business and no notice of cancellation
or nonrenewal of any such coverage has been received. There are no provisions in
such insurance policies for retroactive or retrospective premium adjustments.
All products liability, general liability and workers' compensation insurance
policies maintained by Seller or any Subsidiary of Seller are presently
occurrence policies and not claims made policies, except for Seller's
professional liability (error and omissions), fiduciary liability and employment
practices policies. There are no outstanding performance bonds covering or
issued for the benefit
<PAGE> 37
of Seller or any Subsidiary of Seller. To the knowledge of Seller, no insurer
has advised Seller or any Subsidiary of Seller that it intends to reduce
coverage, materially increase premiums or fail to renew existing policy or
binder.
4.25. Accounts Receivable. To the knowledge of Seller, the
accounts receivable set forth on the Base Balance Sheet, and all accounts
receivable arising since the Base Balance Sheet Date, arose from bona fide
transactions, and all the goods delivered and services performed which gave rise
to said accounts were delivered or performed in all material respects in
accordance with past practice. To the knowledge of Seller, said accounts
receivable are subject to no defenses, counterclaims or rights of setoff and are
fully collectible in the ordinary course of business without cost in collection
efforts therefor, except to the extent of the appropriate reserves for bad debts
on accounts receivable as set forth on the Base Balance Sheet and, in the case
of accounts receivable arising since the Base Balance Sheet Date, to the extent
of a reasonable reserve rate for bad debts on accounts receivable which is not
greater than the rate reflected by the reserve for bad debts on the Base Balance
Sheet.
4.26. Payments. Neither Seller, General Partner, Limited Partner,
nor any Subsidiary of Seller has violated the U.S. Foreign Corrupt Practices Act
or, to the knowledge of Seller, has directly or indirectly, paid or delivered
any fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other party, in the United States or any other country, which is in
any manner related to the Business, Assets or operations of Seller, General
Partner, Limited Partner, or any Subsidiary of Seller, which is, or may be with
the passage of time or discovery, illegal under any other federal, state or
local laws of the United States or any other country having jurisdiction; and to
the knowledge of Seller neither Seller, General Partner, Limited Partner, or any
Subsidiary of Seller has participated, directly or indirectly, in any boycotts
or other similar practices affecting any of its actual or potential customers.
4.27. Environmental Matters.
(a) Except for Hazardous Material contained in cleaning and other
office products used in the ordinary course of Seller's business, (i) neither
Seller, General Partner, Limited Partner nor any Subsidiary of Seller has ever
generated, transported, used, stored, treated, disposed of, or managed any
Hazardous Waste (as defined below); (ii) to the knowledge of Seller, no
Hazardous Material (as defined below) has ever been or is threatened to be
spilled, released, or disposed of at any site presently or formerly owned,
operated, leased, or used by Seller, General Partner, Limited Partner, or any
Subsidiary of Seller, or has ever been located in the soil or groundwater at any
such site; (iii) to the knowledge of Seller, no Hazardous Material has ever been
transported from any site presently or formerly owned, operated, leased, or used
by Seller, General Partner, Limited Partner or any Subsidiary of Seller for
treatment, storage, or disposal at any other place; (iv) to the knowledge of
Seller, neither Seller, General Partner, Limited Partner, nor any Subsidiary of
Seller presently owns, operates, leases, or uses, nor has any of them previously
owned, operated, leased, or used any site on which underground storage tanks are
or were located; and (v) no lien has ever been imposed by any governmental
agency on any property, facility, machinery, or equipment owned, operated,
leased, or used by Seller,
<PAGE> 38
General Partner, Limited Partner or any Subsidiary of Seller in connection with
the presence of any Hazardous Material.
(b) (i) To the knowledge of Seller, neither Seller, General
Partner, Limited Partner nor any Subsidiary of Seller has liability under, or
has ever violated in any material respect, any Environmental Law (as defined
below); (ii) to the knowledge of Seller, Seller, General Partner, Limited
Partner, each Subsidiary of Seller, any property owned, operated, leased, or
used by any of them, and any facilities and operations of Seller, General
Partner, Limited Partner or any Subsidiary of Seller thereon, are presently in
compliance in all material respects with all applicable Environmental Laws;
(iii) neither Seller, General Partner, Limited Partner nor any Subsidiary of
Seller has ever entered into or been subject to any judgment, consent decree,
compliance order, or administrative order with respect to any environmental or
health and safety matter or received any request for information, notice, demand
letter, administrative inquiry, or formal or informal complaint or claim with
respect to any environmental or health and safety matter or the enforcement of
any Environmental Law; and (iv) neither Seller, General Partner, or Limited
Partner nor any Subsidiary of Seller has reason to believe that any of the items
enumerated in clause (iii) of this subsection will be forthcoming.
(c) To the knowledge of Seller without investigation, no site
operated, leased, or used by Seller (or any other entity for whose conduct
Seller is or may be held responsible under any Environmental Law), General
Partner, Limited Partner or any Subsidiary of Seller contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls ("PCBs") or
equipment containing PCBs; or any urea formaldehyde foam insulation.
(d) Seller has made available to Nextera copies of all documents
and records, and information in Seller's possession concerning any environmental
or health and safety matter relevant to Seller, General Partner, Limited Partner
or any Subsidiary of Seller, whether generated by Seller or others, including
without limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
(e) For purposes of this Section 4.27, (i) "Hazardous Material"
shall mean and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, contaminant, or
other substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law except for any such
Hazardous Material contained in cleaning and other office products used in the
ordinary course of Seller's business; (ii) "Hazardous Waste" shall mean and
include any hazardous waste as defined or regulated under any Environmental Law;
(iii) "Environmental Law" shall mean any environmental or health and
safety-related law, regulation, rule, ordinance, or by-law at the foreign,
federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; (iv) "General Partner" shall mean
and include General Partner and all other entities for whose conduct General
Partner is or may be held responsible under any Environmental Law; (v) "Limited
Partner" shall mean and include Limited Partner and all other entities for whose
conduct Limited Partner is or may be held responsible under any Environmental
<PAGE> 39
Law; and (vi) "Subsidiary" shall mean and include such Subsidiary and all other
entities for whose conduct such Subsidiary is or may be held responsible under
any Environmental Law.
4.28. Warranty or Other Claims. To the knowledge of Seller, there
are no existing or, to the knowledge of Seller, threatened service liability,
warranty or other similar claims, or any reasonable basis upon which a material
claim of such nature could be based, against Seller for services which are
defective or fail to meet any service warranties. Since the Balance Sheet Date,
no claim has been asserted against Seller for renegotiation or price
redetermination of any business transaction, and, to the knowledge of Seller,
there are no facts known to Seller upon which any such claim could be based.
4.29. Records; Copies of Documents. The actions recorded in the
record books of Seller and each Subsidiary of Seller accurately reflect all
action taken by their partners, committees and, in the case of Seller, the
Senior Managing Principal as the case may be. The record books of General
Partner and Limited Partner accurately reflect all action taken by their
shareholders and Boards of Directors and committees. The copies of the records
of Seller, General Partner, Limited Partner, and each Subsidiary of Seller as
made available to Nextera for review, are true and complete copies of the
originals or conformed copies of originals of such documents. Seller has made
available for inspection and copying by Nextera and its counsel true and correct
copies of all documents referred to in this Section or in the Schedules
delivered to Nextera pursuant to this Agreement.
4.30. Powers of Attorney. Neither Seller, the Subsidiaries of
Seller, General Partner, Limited Partner nor, to the knowledge of Seller, any of
the Shareholders has any outstanding power of attorney with respect to or
affecting any transaction contemplated by this Agreement.
4.31. Business of General Partner and Limited Partner. General
Partner was formed for the sole purpose of serving as the general partner of
Seller and a member of Sibson Europe and has conducted no other business since
its formation. Limited Partner was formed for the sole purpose of serving as the
limited partner of Seller and has conducted no other business since its
formation.
4.32. Accredited Investor. Seller is an "accredited investor" as
defined in Rule 501 under the Securities Act.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF GENERAL PARTNER,
LIMITED PARTNER AND THE SHAREHOLDERS
As a material inducement to Buyer and Nextera to enter into this
Agreement and consummate the transactions contemplated hereby, each of General
Partner and Limited Partner and each of the Shareholders hereby severally, but
not jointly, makes to Buyer and Nextera each of the representations and
warranties set forth in this Article V with respect to itself or himself only as
applicable.
<PAGE> 40
5.1. Authority. Such Shareholder has full right, authority, power
and capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by such Shareholder pursuant to this
Agreement and to carry out the transactions contemplated hereby and thereby.
This Agreement and each agreement, document and instrument executed and
delivered by such Shareholder pursuant to this Agreement constitutes a valid and
binding obligation of such Shareholder, enforceable in accordance with their
respective terms (assuming the due authorization, execution and delivery by the
other parties thereto), subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject to the effect of general principles of equity,
including, without limitation, the possible unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law. The execution, delivery and performance of this
Agreement by such Shareholder and each such agreement, document and instrument:
(i) does not and will not violate any provision of any laws of
the United States or any state or other jurisdiction applicable to such
Shareholder, or require such Shareholder to obtain any approval, consent
or waiver from, or make any filing with, any person or entity
(governmental or otherwise) that will not have been obtained or made on
or prior to the Closing; and
(ii) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right
of termination of, any indenture or loan or credit agreement or any
other agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which such Shareholder is a party or by which
the property of such Shareholder is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security interest
or other charge or similar encumbrance on the capital stock of General
Partner and/or Limited Partner owned by such Shareholder.
5.2. No Brokers. Such Shareholder has not employed or made any
agreement with any broker, finder or similar agent or any person or firm which
will result in the obligation of Buyer, Nextera or any of Seller's their
affiliates to pay any finder's fee, brokerage fees or commission or similar
payment in connection with the transactions contemplated hereby
5.3. Agreements. Except for this Agreement and agreements
contemplated hereby and that certain Agreement of Limited Partnership of Seller
dated November 5, 1993, as amended, that certain Shareholders' Agreement of
General Partner dated October 31, 1993, as amended, and that certain
Shareholders' Agreement of Limited Partner dated January 1, 1998, as amended,
there are no agreements or arrangements not contained herein or disclosed in a
Schedule hereto, to which General Partner, Limited Partner or such Shareholder
is a party relating to the business of Seller or to the rights and obligations
of General Partner, Limited Partner or such Shareholder as a partner or officer
of Seller. Except as set forth on Schedule 5.3, General Partner, Limited Partner
or such Shareholder does not own, directly or indirectly, on an individual or
joint basis, any material interest in, or serve as an officer or director of,
any customer,
<PAGE> 41
competitor or supplier of Seller, or any organization which has a contract or
arrangement with Seller.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF BUYER AND NEXTERA
As a material inducement to the Selling Parties to enter into
this Agreement and consummate the transactions contemplated hereby, Buyer and
Nextera, jointly and severally hereby make the representations and warranties to
the Selling Parties as follows, which representations and warranties are, as of
the date hereof, and will be, as of the Closing Date, true and correct:
6.1. Organization. Each of Buyer and Nextera is a limited
liability company organized, validly existing and in good standing under the
laws of the State of Delaware with full limited liability company power and
authority to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or such
business is conducted by it. Copies of the Certificate of Formation of each of
Buyer and Nextera, and all amendments thereto, heretofore delivered to Seller
and the Buyer Operating Agreement attached hereto as Exhibit L and the Nextera
Operating Agreement attached hereto as Exhibit M are accurate and complete as of
the date hereof. Neither Buyer nor Nextera is in violation of any term of its
respective Certificate of Formation or the Buyer Operating Agreement or Nextera
Operating Agreement, as applicable. Each of Nextera's Subsidiaries is duly
organized or incorporated (as applicable) and in good standing under the laws of
the state of its organization or incorporation (as applicable) with full limited
liability company power and authority or corporate power and authority (as
applicable) to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or such
business is conducted by it. Each of Nextera and its Subsidiaries is duly
qualified or authorized to do business as a foreign limited liability company or
corporation, as applicable, and is in good standing under the laws of each
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization, except where the
failure to be so licensed or so qualified or authorized would not have a
material adverse effect.
6.2. Subsidiaries. Other than Symmetrix, Inc., SGM Consulting,
L.L.C. (d/b/a "Sigma Consulting"), The Planning Technologies Group, L.L.C.,
Pyramid Imaging, Inc., Symmetrix European Holdings, Inc., Symmetrix Europe,
S.A., Cranberry Hill Capital, LLC, Scanada, Inc., Sibson Acquisition Co. and
Buyer, Nextera has no Subsidiaries and does not own an equity interest in any
other corporation or business organization. Buyer was founded solely for the
purpose of consummating the transactions contemplated by this Agreement and
prior to the Closing will not have transacted any business or have any
Liabilities except as provided hereunder or under that certain Subsidiary
Guaranty dated as of the date hereof and that certain Security and Pledge
Agreement dated as of the date hereof to be entered into by Buyer in connection
with that certain Securities Purchase Agreement dated as of the date hereof
between Nextera and Nextera Funding, Inc. Buyer has no Subsidiaries and does not
own an equity interest in any other corporation or business organization except
that, at the Closing Date, Buyer will own Sibson Europe and Sibson UK Limited.
<PAGE> 42
6.3. Authority. Each of Buyer and Nextera has full right,
authority and power to enter into this Agreement and each agreement, document
and instrument to be executed and delivered by Buyer and/or Nextera,
respectively, pursuant to this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance by Buyer and
Nextera of this Agreement and each such other agreement, document and instrument
have been duly authorized by all necessary organizational action of Buyer and
Nextera.
This Agreement and each other agreement, document and instrument
executed and delivered by Buyer and/or Nextera pursuant to this Agreement
constitutes, or when executed and delivered will constitute, valid and binding
obligations of Buyer and/or Nextera, as applicable, enforceable in accordance
with their terms (assuming due authorization, execution and delivery by the
other parties thereto), subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject to the effect of general principles of equity,
including, without limitation, the possible unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law.
The execution, delivery and performance by Buyer and Nextera of
this Agreement and each such agreement, document and instrument:
(i) does not and will not violate any provision of the
certificate of formation of Buyer, the Buyer Operating Agreement, the
certificate of formation of Nextera or the Nextera Operating Agreement;
(ii) except for noncompliance with any bulk sales law of any
jurisdiction, does not and will not violate any laws of the United
States or of any state or any other jurisdiction applicable to Buyer or
Nextera or require Buyer or Nextera to obtain any approval, consent or
waiver of, or make any filing with, any person or entity (governmental
or otherwise) that will not be obtained or made on or prior to the
Closing other than (x) any such approval, consent or waiver of or filing
with respect to which the failure to so obtain will not have a material
adverse effect and (y) any approvals, consents, waivers or filings in
connection with Contracts and Leases as a result of the transactions
contemplated hereby; and
(iii) does not and will not result in (i) a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture, loan or credit
agreement, or other agreement, mortgage, lease, permit, order, judgment
or decree to which Buyer or Nextera or any of their Subsidiaries is
bound or affected, or (ii) result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or similar
encumbrance on any of the assets or capital stock of Buyer or Nextera
and which is material to the business and financial condition of Nextera
or its Subsidiaries on a consolidated basis except, in the case of
clause (i), for such breaches, defaults, accelerations or terminations
as would not, individually or in the aggregate, have a material adverse
effect..
<PAGE> 43
6.4. Litigation. Except as set forth on Schedule 6.4, there are
no Actions pending or, to the knowledge, of Nextera threatened (a) against (i)
Nextera or its Subsidiaries (including with respect to Environmental Laws) or
(ii) to the knowledge of Nextera, any officers, directors or managers of Nextera
or its Subsidiaries as such, (b) against Nextera or Buyer seeking to delay,
limit or enjoin the transactions contemplated by this Agreement, (c) against
Nextera, any Subsidiary of Nextera or any of its officers, directors or managers
in their capacity as such that involves the risk of criminal liability to any
such entity or person, or (d) in which Nextera or any Subsidiary of Nextera is a
plaintiff, including any derivative suits brought by or on behalf of any of
Nextera or its Subsidiaries. Neither Nextera nor any Subsidiary of Nextera is in
default with respect to or subject to any Court Order, and there are no
unsatisfied judgments against Nextera or any Subsidiary of Nextera. There is not
a reasonable likelihood of an adverse determination of any pending Actions that
could have a material adverse effect. There are no Court Orders or agreements
with, or liens by, any governmental authority or quasi-governmental entity
relating to any Environmental Law which regulate, obligate, bind or in any way
affect Nextera or its Subsidiaries.
6.5. No Brokers. Neither Buyer, Nextera nor, to the knowledge of
Nextera, any of their officers, directors, managers, employees, shareholders,
members or affiliates has employed or made any agreement with any broker, finder
or similar agent or any person or firm which will result in the obligation of
Buyer, Seller or any of Seller's affiliates to pay any finder's fee, brokerage
fees or commission or similar payment in connection with the transactions
contemplated hereby.
6.6. Membership Interests of Nextera.
Schedule 6.6 sets forth all of the issued and outstanding
membership interests of Nextera and Buyer on the date hereof and on the Closing
Date (assuming consummation of the transactions contemplated hereby, including,
in the case of Nextera, the issuance of Nextera Class A Units under the
Employment Agreements). Except as set forth on Schedule 6.6, there are no
outstanding options, warrants, rights, commitments, preemptive rights or
agreements of any kind for the issuance and sale of, or outstanding securities
convertible into, any additional membership interests of any class of Nextera or
Buyer. Schedule 6.6 sets forth a list of all agreements, instruments and
undertakings, if any, relating to the voting, transfer, registration, repurchase
or any similar right with respect to the issued and outstanding equity interests
of Nextera or Buyer. None of the equity interests of Nextera were issued in
violation of any federal or state law. All of the Nextera Class A Units to be
issued as consideration for the sale of the Assets will be duly issued under the
Nextera Operating Agreement free and clear of all liens or other encumbrances.
6.7. Operating Agreements. The Nextera Operating Agreement
attached as Exhibit M is in full force and effect, as amended through the
Closing Date. The Buyer Operating Agreement attached as Exhibit L is in full
force and effect, as amended through the Closing Date.
6.8. Financial Statements.
(a) Nextera has delivered to the Seller the following financial
statements, copies of which are attached hereto as Schedule 6.8: a consolidated
balance sheet of Nextera and its Subsidiaries and a consolidated statement of
profit and loss of Nextera as of December 31,
<PAGE> 44
1997 as audited by Ernst & Young LLP (the "Audited Financial Statements"), an
unaudited balance sheet of Nextera and its Subsidiaries as of June 30, 1998 and
an unaudited statement of profit and loss of Nextera for the six months ended
June 30, 1998 (the "Interim Financial Statements") and together with the Audited
Financial Statements, the "Nextera Financial Statements"). The December 31, 1997
balance sheet is hereinafter referred to as the "Nextera Balance Sheet" and
December 31, 1997 is hereinafter referred to as the "Nextera Balance Sheet
Date." The Nextera Financial Statements have been prepared in accordance with
GAAP (subject to normal year-end adjustments in the case of the Interim
Financial Statements) applied consistently during the period covered thereby,
and said Audited Financial Statements present fairly in all material respects
the consolidated financial condition of Nextera at the date of said statements
and the consolidated results of its operations for the period covered thereby
and the Interim Financial Statements present fairly and completely in all
material respects the information purported to be shown thereon.
(b) Except as set forth on Schedule 6.8, as of the date hereof,
Nextera and its Subsidiaries do not have any Liabilities of any nature, whether
accrued, absolute or contingent (including without limitation, Liabilities as
guarantor or otherwise with respect to obligations of others, or Liabilities for
any Tax due or then accrued or to become due or contingent or potential
Liabilities relating to activities of Nextera or any Subsidiary of Nextera or
the conduct of their respective business prior to the date hereof or the
Closing, as the case may be, regardless of whether claims in respect thereof had
been asserted as of such date), except Liabilities (i) stated or adequately
reserved against on the Nextera Balance Sheet or the notes thereto, (ii)
incurred or arising in the ordinary course of business of Nextera or any
Subsidiary of Nextera after the Nextera Balance Sheet Date, (iii) disclosed in
this Article VI or on the Nextera Disclosure Schedule or (iv) future performance
obligations under contracts and leases, none of which relates to any default,
breach of warranty, tort infringement, or violation of any Regulation or Court
Order or arose out of any action.
(c) Nextera has delivered to Seller the following unaudited pro
forma financial statements, copies of which are attached hereto as Schedule 6.8:
a consolidated balance sheet of Nextera and its Subsidiaries as of June 30, 1998
and a consolidated statement of profit and loss of Nextera for the six months
ended June 30, 1998 (the "Pro Forma Statements"). The Pro Forma Statements have
been prepared giving effect to the consummation of each acquisition made by
Nextera subsequent to January 1, 1998 (including pursuant to this Agreement and
the acquisition of Sibson Canada). The Pro Forma Statements have been prepared
based on information Nextera believes to be reasonable as of the date of
delivery thereof, and present fairly in all material respects on a pro forma
basis the estimated financial position of Nextera as of June 30, 1998 and
results of operations for the six months then ended, assuming that the events
specified in the preceding sentence had actually occurred; provided, however,
that Nextera makes no representation with respect to the financial statements of
Seller or Sibson Canada reflected therein. The Pro Forma Statements are not
necessarily indicative of the financial position or results of operations that
would have been obtained had the pro forma events actually occurred and should
be read in conjunction with the Nextera Financial Statements provided to Seller.
6.9. Taxes. Except as otherwise set forth on Schedule 6.9:
<PAGE> 45
(a) Each of Nextera and its Subsidiaries that are limited
liability companies is, and has been at all times since its formation, properly
characterized as a partnership for federal income Tax purposes and those
jurisdictions where Nextera and its Subsidiaries that are limited liability
companies file income Tax Returns which recognize such status.
(b) All Tax Returns required to be filed by Nextera, each
Subsidiary that is a limited liability company and, to the knowledge of Nextera,
each corporate Subsidiary that is a corporation have been timely filed (giving
effect to extensions granted with respect thereto) with the appropriate taxing
authorities, and all such Tax Returns are true, correct, and complete in all
material respects.
(c) Nextera, each Subsidiary that is a limited liability company
and, to the knowledge of Nextera, each Subsidiary that is a corporation has
timely paid all Taxes due from them or claimed to be due from them by any
federal, state, local, foreign or other taxing authority.
(d) There are no liens for Taxes upon any of the assets of
Nextera, any Subsidiary that is a limited liability company or, to the knowledge
of Nextera, any Subsidiary that is a corporation, except liens for Taxes not yet
due and payable.
(e) No Tax Returns of Nextera, any Subsidiary that is a limited
liability company or, to the knowledge of Nextera, any Subsidiary that is a
corporation have been audited by the relevant taxing authority. No deficiency
for any Taxes has been proposed, asserted or assessed against Nextera, any
Subsidiary that is a limited liability company or, to the knowledge of Nextera,
any Subsidiary that is a corporation that has not been paid in full. There are
no outstanding waivers, extensions, or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns that have been given by Nextera, any Subsidiary that is a limited
liability company or, to the knowledge of Nextera, any Subsidiary that is a
corporation (including the time for filing of Tax Returns or paying Taxes) and
neither, Nextera, any Subsidiary that is a limited liability company nor, to the
knowledge of Nextera, any Subsidiary that is a corporation has any pending
requests for any such waivers, extensions, or comparable consents.
(f) No audit or other proceeding by any federal, state, local or
foreign court, governmental, regulatory, administrative or similar authority is
presently pending with respect to any Taxes or Tax Return of Nextera, any
Subsidiary that is a limited liability company or, to the knowledge of Nextera,
any Subsidiary that is a corporation, and neither, Nextera, any Subsidiary that
is a limited liability company nor, to the knowledge of Nextera, any Subsidiary
that is a corporation has received written notice of any pending audits or
proceedings.
(g) Nextera, each Subsidiary that is a limited liability company
and, to the knowledge of Nextera, each Subsidiary that is a corporation have
complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441, 1442, 1445 and 1446
of the Code or similar provisions under any applicable state and foreign laws)
and have, within the time and the manner prescribed by law, paid over to the
proper governmental authorities all amounts so withheld.
<PAGE> 46
(h) Neither Nextera, any Subsidiary that is a limited liability
company nor, to the knowledge of Nextera, any Subsidiary that is a corporation
is a party to, is not bound by and does not have any obligation under any Tax
sharing allocation or indemnity agreement or similar contract or arrangement.
(i) No power of attorney granted by Nextera, any Subsidiary that
is a limited liability company or, to the knowledge of Nextera, any Subsidiary
that is a corporation with respect to any Taxes is currently in force.
(j) There is no expectation that any taxing authority may claim
or assess any material amount of Taxes payable by Nextera, any Subsidiary that
is a limited liability company or, to the knowledge of Nextera, any Subsidiary
that is a corporation for any period ending on or prior to the Closing Date and
there are no facts of which Nextera is aware which would constitute grounds for
the assessment of any material amount of Taxes payable by Nextera, any
Subsidiary that is a limited liability company or, to the knowledge of Nextera,
any Subsidiary that is a corporation for any period ending on or prior to the
Closing Date.
(k) No claim has been made by a taxing authority in a
jurisdiction where Nextera or any of its Subsidiaries does not file Tax Returns
such that it is or may be subject to taxation by that jurisdiction.
(l) No issue has been raised by a federal, state, local or
foreign taxing authority in any examination relating to Nextera or any of its
Subsidiaries which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for any subsequent
taxable period. Neither Nextera nor any of its Subsidiaries is subject to any
private letter ruling of the IRS or comparable rulings of other taxing
authorities.
(m) Neither Nextera nor any of its Subsidiaries or any Person on
behalf of Nextera or any of its Subsidiaries has (i) agreed to or is required to
make any adjustments pursuant to Section 481(a) of the Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method (except for conversions from cash basis accounting to accrual basis
accounting) initiated by Nextera or any of its Subsidiaries or has any knowledge
that the IRS has proposed any such adjustment or change in accounting method, or
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or operations of
Nextera and or any of its Subsidiaries, (ii) executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor provision
thereof or any similar provision of state, local or foreign law with respect to
Nextera or any of it Subsidiaries, or (iii) extended the time within which to
file any Tax Return, which Tax Return has since not been filed or the assessment
or collection of Taxes, which Taxes have not since been paid.
6.10. Absence of Certain Changes or Events. Except as disclosed
in Schedule 6.10, since the Base Balance Sheet Date, there has not been any:
(a) actual or threatened material adverse change;
<PAGE> 47
(b) change in accounting methods, principles or practices by
Nextera or any Subsidiary of Nextera affecting Nextera's assets, Liabilities or
business;
(c) revaluation by Nextera or any Subsidiary of Nextera of any of
their assets, including without limitation writing down the value of inventory
or writing off notes or accounts receivable;
(d) damage, destruction or loss (whether or not covered by
insurance) which has had or will have a material adverse affect;
(e) cancellation of any indebtedness or waiver or release of any
right or claim of Nextera or any Subsidiary of Nextera relating to its
activities or properties which had or will have a material adverse effect;
(f) declaration, setting aside, or payment of dividends or
distributions by Nextera or any Subsidiary of Nextera in respect of its equity
securities or any redemption, purchase or other acquisition of any of the
securities of Nextera or any Subsidiary of Nextera;
(g) adverse change in employee relations which has or is
reasonably likely to have a material adverse effect on the productivity, the
financial condition, results of operations of Nextera and its Subsidiaries on a
consolidated basis or the relationships between the employees of Nextera and its
Subsidiaries and the management of Nextera and its Subsidiaries;
(h) payment, discharge or satisfaction of any Liabilities of
Nextera or any Subsidiary of Nextera other than the payment, discharge or
satisfaction in the ordinary course of business of Liabilities set forth or
reserved for on the Nextera Balance Sheet or incurred in the ordinary course of
business;
(i) failure to pay or satisfy when due any Liability of Nextera
or any Subsidiary of Nextera, except where the failure would not have a material
adverse effect on Nextera and its Subsidiaries on a consolidated basis;
(j) disposition or lapsing of any Proprietary Rights, or any
disposition or disclosure to any person of any of Proprietary Rights of Nextera
or any Subsidiary of Nextera not therefore a matter of public knowledge other
than as would not have a material adverse effect; or
(k) agreement by Nextera to do any of the things described in the
preceding clauses (a) through (j) other than as expressly provided for herein.
6.11. Insurance. Schedule 6.11 contains a complete and accurate
list of all policies or binders of fire, liability, title, worker's
compensation, product liability and other forms of insurance maintained by
Nextera or any Subsidiary of Nextera on its business, assets or employees. All
such insurance coverage applicable to Nextera or any Subsidiary of Nextera is in
full force and effect and provides coverage as may be required by applicable
Regulation and to the knowledge of Nextera by any and all contracts to which
Nextera or any Subsidiary of Nextera is a party. To the knowledge of Nextera,
there is no Default under any such coverage nor is there presently any failure
to give notice or present any claim under any such coverage in a due and
<PAGE> 48
timely fashion, except for such Defaults and any such failure to give notice or
present any claim as would not, individually or in the aggregate, have a
material adverse effect. There are no outstanding unpaid premiums except in the
ordinary course of business and no notice of cancellation or nonrenewal of any
such coverage has been received. There are no provisions in such insurance
policies for retroactive or retrospective premium adjustments. All products
liability, general liability and workers' compensation insurance policies
maintained by Nextera or any Subsidiary of Nextera are presently occurrence
policies and not claims made policies. There are no outstanding performance
bonds covering or issued for the benefit of Nextera or any Subsidiary of
Nextera. To the knowledge of Nextera, no insurer has advised Nextera or any
Subsidiary of Nextera that it intends to reduce coverage, materially increase
premiums or fail to renew existing policy or binder. As of the Closing Date,
Buyer shall have insurance in place that is substantially similar to the type
and level of insurance maintained by Seller immediately prior to the Closing.
6.12. Compliance with Laws. Nextera and each of its Subsidiaries
has been and are in substantial compliance with all Regulations and Court Orders
relating to the operations of Nextera and each of its Subsidiaries except in
each case for such non-compliance as would not, individually or in the
aggregate, have a material adverse effect. Within the last five years, none of
Nextera or its Subsidiaries has received any written notice to the effect that,
it is not in compliance with any such Regulations or Court Orders.
6.13. Proprietary Rights.
(a) Proprietary Rights. Schedule 6.13 lists: (i) for each
registered Trademark of Nextera or any Subsidiary of Nextera, the application
serial number or registration number, the class of goods covered and the
expiration date for each country in which a Trademark has been registered and
(ii) for each registered Copyright of Nextera or any Subsidiary of Nextera, the
number and date of filing for each country in which a Copyright has been filed.
Other than the items set forth on Schedule 6.13 and other than the unregistered
service/trade name "Nextera Enterprises" and variations thereof, there are no
Proprietary Rights used by Nextera or any Subsidiary of Nextera that are
material to the conduct of its business. Neither Nextera nor any Subsidiary of
Nextera has any patents or registered designs nor has it filed any patent
applications or registered design applications.
(b) Royalties and Licenses. Except as set forth on Schedule 6.13
neither Nextera nor any Subsidiary of Nextera has any obligation to compensate
any person for the use of any such Proprietary Rights nor has Nextera or any
Subsidiary of Nextera granted to any person any license, option or other rights
to use in any manner any of such Proprietary Rights, whether requiring the
payment of royalties or not.
(c) Ownership and Protection of Proprietary Rights. Except as set
forth on Schedule 6.13, Nextera and/or its Subsidiaries own or have a valid
right to use each of such Proprietary Rights. Except as set forth on Schedule
6.13, no other person (i) has notified Nextera or any Subsidiary of Nextera that
it is claiming any ownership of or right to use any such Proprietary Rights, or
(ii) to the knowledge of Seller, is infringing upon any such Proprietary Right
in any way. To the knowledge of Seller, except as set forth on Schedule 6.13,
use of such
<PAGE> 49
Proprietary Rights by Nextera or any Subsidiary of Nextera does not and will not
conflict with, infringe upon or otherwise violate the valid rights of any third
party in or to such Proprietary Rights, and no Action has been instituted
against or notices received by Nextera or any Subsidiary of Nextera that are
presently outstanding alleging that use of the Proprietary Rights by Nextera or
any Subsidiary of Nextera infringes upon or otherwise violates any rights of a
third party in or to such Proprietary Rights.
6.14. Indebtedness. Other than as set forth on Schedule 6.14,
neither Nextera nor its Subsidiaries has any indebtedness for borrowed money or
has guaranteed the obligations of any Person with respect to indebtedness for
borrowed money.
ARTICLE VII.
COVENANTS
7.1. Further Assurances. Upon the terms and subject to the
conditions contained herein, Seller, General Partner and Limited Partner on the
one hand, and Buyer and Nextera on the other hand, agree, both before and after
the Closing, (a) to use all reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (b) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (c) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, Seller, General
Partner and Limited Partner on the one hand, and Buyer and Nextera on the other
hand, agree to use their respective commercially reasonable efforts (i) to
obtain all necessary waivers, consents and approvals from other parties to the
Contracts and Leases to be assumed by Buyer as listed on Schedule 7.1; provided,
however, that to the extent Buyer fails to cooperate (i) by providing on a
timely basis any financial or similar information reasonably requested by the
party whose consent is sought, including, without limitation, any pro forma
financial statements with respect to Buyer reflecting the consummation of the
transactions contemplated hereby, or (ii) executing and delivering any
assumption agreement or similar instrument requested by any lessor or sublessor
and which is reasonably acceptable to Buyer in connection with the obtaining of
any consent with respect to a Contract or Facility Lease listed on Schedule 7.1,
Seller shall not be required to obtain said consent hereunder and the obtaining
of said consent shall no longer be deemed a condition to Closing under Article
IX hereof; provided, further that no party shall be required to make any
payments, commence litigation or agree to modifications of the terms thereof in
order (i) to obtain any such waivers, consents or approvals, (ii) to obtain all
necessary Permits as are required to be obtained under any Regulations, (iii) to
give all notices to, and make all registrations and filings with third parties,
including without limitation submissions of information requested by
governmental authorities, and (iv) to fulfill all conditions to this Agreement.
7.2. Conduct of Business. Except as contemplated hereby and as
set forth on Schedule 7.2, between the date of this Agreement and the date of
the Closing, Seller will:
<PAGE> 50
(a) Use reasonable efforts to conduct its business only in the
ordinary course consistent with past operations and refrain from changing or
introducing any method of management or operations except in the ordinary course
of business;
(b) Not enter into, extend, materially modify, terminate or renew
any Contract or Lease, except in the ordinary course of business;
(c) Not sell, assign, transfer, convey, lease, mortgage, pledge
or otherwise dispose of or encumber any of the Assets, or any interests therein,
except in the ordinary course of business and for the Permitted Liens;
(d) Not incur any Liability for long-term interest bearing
indebtedness, guarantee the obligations of others, indemnify others or, except
in the ordinary course of business (including borrowings in the ordinary course
of business under Seller's revolving credit facility) and endorsements for
collection of deposits in the ordinary course of business, incur any other
Liability;
(e) Refrain from making any change or incurring any obligation to
make a change in the Certificate of Limited Partnership and Agreement of Limited
Partnership of Seller;
(f) Refrain from declaring, setting aside or paying any dividend,
making any other distribution in respect of its capital stock or making any
direct or indirect redemption, purchase or other acquisition of its capital
stock;
(g) Refrain from making any material change in the method of
determining compensation (whether salary or bonus) payable or to become payable
to any of its employees and use all reasonable efforts in the ordinary course of
business to maintain Seller's workforce at its current level and make no
material adjustment in wages or hours of work, nor enter into any employment
agreement, or adopt any new Employee Programs or other benefit or severance plan
or amend or otherwise modify in any material respect any existing employment
agreement, Employee Programs or other benefit or severance plan;
(h) Refrain from entering into any arrangement or amending any
existing arrangement between Seller and any officer, director, partner or
Shareholder (or any entity affiliated with such persons), except for
arrangements contemplated by this Agreement or the Disclosure Schedule;
(i) Refrain from prepaying any loans (if any) from its partners,
officers or directors, borrowing any funds (other than borrowings in the
ordinary course of business under Seller's revolving credit facility) or making
any other change in its borrowing arrangements;
(j) Use its commercially reasonable efforts to prevent any change
with respect to its management and supervisory personnel and banking
arrangements;
(k) Use its commercially reasonable efforts to keep intact its
business organization, to keep available its present officers and employees and
to preserve the goodwill of all suppliers, customers, independent contractors
and others having business relations with it;
<PAGE> 51
(l) Have in effect and maintain at all times all insurance of the
kind, in the amount and with the insurers set forth in the Schedule 4.24 hereto
or equivalent insurance with any substitute insurers approved in writing by
Nextera;
(m) Maintain the working capital of Seller in the ordinary course
of business at levels consistent with past operations;
(n) Furnish Nextera with unaudited monthly balance sheets and
statements of income and retained earnings and cash flows of Seller within
fifteen (15) days after each month end for each month ending more than fifteen
(15) days before the Closing;
(o) Permit Nextera and its authorized representatives during
normal business hours to have full access to all its properties, assets,
records, tax returns, contracts and documents and furnish to Nextera or its
authorized representatives such financial and other information with respect to
its business or properties as Nextera may from time to time reasonably request.
Between the date of this Agreement and the Closing, Nextera shall
provide Seller with prior written notice of (a) any material actions,
transactions or developments outside the ordinary course of Nextera's and its
Subsidiaries' respective businesses, (b) failure of Nextera or any of its
Subsidiaries to use all reasonable efforts to conduct their respective business
only in the ordinary course consistent with past operations; (c) failure of
Nextera or any of its Subsidiaries to use all reasonable efforts in the ordinary
course of business to maintain their respective workforces at current levels and
not make any material adjustment in wages or hours of work, nor enter into any
amendments to any material employment agreement, or adopt any new pension,
benefit or severance plan; (d) other than the issuance of equity interests upon
the exercise of options as set forth on Schedule 6.6, any issuance or sale of
any additional equity interests by any of Nextera or its Subsidiaries or any
securities convertible into such equity interests; (e) any amendment by Nextera
or any of its Subsidiaries of its respective operating agreement in the case of
a limited liability company or constituent documents in the case of a
corporation so as to effect the value of such person or the ability of such
person to consummate the transactions contemplated hereby; and (f) any material
capital expenditures by Nextera or any of its Subsidiaries.
Between the date of this Agreement and the date of the Closing,
Nextera shall permit Seller and its authorized representatives during normal
business hours to have full access to all its properties, assets, records, tax
returns, contracts and documents and furnish to Seller or its authorized
representatives such financial and other information with respect to its
business or properties as Seller may from time to time reasonably request.
7.3. No Solicitation of Other Offers. Neither Seller, General
Partner, Limited Partner, nor any of their officers, directors, agents, or
employees or Representatives will, directly or indirectly, solicit, encourage,
assist, initiate discussions or engage in negotiations with, provide any
information concerning the operations, properties or assets of Seller, or
entertain or enter into any agreement or transaction with, any person, other
than Nextera, relating to the possible acquisition of the equity of Seller or
any of its assets, except for the sale of assets in the ordinary course of
business of Seller consistent with the terms of this Agreement. If such a
proposal is
<PAGE> 52
received, Seller will promptly notify Nextera of the terms of such proposal and
the identity of the party making the proposal.
7.4. Notification of Certain Matters.
(a) From the date hereof through the Closing, Seller, General
Partner, Limited Partner and the Shareholders on the one hand, and Buyer and
Nextera on the other hand, shall give prompt notice to the other of (i) the
occurrence, or failure to occur, of any event which occurrence or failure would
be likely to cause any representation or warranty made by such person and
contained in this Agreement or in any exhibit or schedule hereto to be untrue or
inaccurate in any respect and (ii) any failure of such party, or any of its
respective affiliates or Representatives, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or any exhibit or schedule hereto; provided, however, that such
disclosure shall not be deemed to cure any breach of a representation, warranty,
covenant or agreement or to satisfy any condition except as otherwise provided
in Section 7.4(b) hereof. The Seller shall promptly notify Nextera of any
Default, the threat or commencement of any Action, or any development that
occurs before the Closing that could in any way materially affect Seller, the
Assets or the Business. The Buyer and Nextera shall promptly notify the Selling
Parties of any default, the threat or commencement of any action, or any
development that occurs before the Closing that could in any way materially
affect the Buyer or Nextera, individually, or their respective businesses and
operations.
(b) Anything in Section 7.4(a) to the contrary notwithstanding,
if any event not expressly contemplated by this Agreement occurs at any time
between the date hereof and the Closing Date that would result in any
representation or warranty made by the Selling Parties, on the one hand, and
Buyer and Nextera, on the other hand, not being true in any material respect on
the Closing Date, such parties shall promptly give written notice of such event
to such other parties. Following receipt of such notice, the parties receiving
notice shall have no obligation to consummate the transactions contemplated
hereby and the Selling Parties, on the one hand, or Buyer and Nextera, on the
other hand, may terminate this Agreement pursuant to Article XIII hereof;
provided, however, that if such parties consummate the transactions contemplated
hereby, such parties shall not have any indemnification rights hereunder
relating to or arising out of, the subject matter of the event described in any
written notice validly given pursuant to this Section 7.4(b) and; provided,
further, that the giving of any notice by a party pursuant to this Section
7.4(b) shall not relieve such party of any liability for breach of any covenant
hereunder or the failure of any representation or warranty of such party
hereunder to be true and correct as of the date hereof.
7.5. Employee Matters.
(a) In addition to the Employment Agreements described in Section
9.13, Buyer shall extend offers of employment to all of the employees of Seller
and its Subsidiaries (such employees are hereinafter referred to as the "Rehired
Employees") effective as of the Closing, which offers shall be on terms and
conditions substantially similar to the current terms and conditions of
employment by Seller and its Subsidiaries. Seller shall cooperate with and use
<PAGE> 53
its commercially reasonable efforts to assist Buyer in its efforts to secure
satisfactory employment arrangements with the employees of Seller.
(b) Effective as of the Closing Date, Buyer shall adopt, assume
sponsorship of and substitute itself as employer under each of the Seller
Employee Programs listed on Schedule 4.23. Seller shall take all actions within
its authority to enable and use its best efforts to assist Buyer in adopting and
assuming such programs, including obtaining resignations effective as of the
Closing Date of any and all fiduciaries (including trustees, committee members
and plan administrators) with respect to such programs whose resignation is
requested by Buyer. In connection with the assumption of the Seller Employee
Programs, Buyer shall assume all liabilities and obligations relating thereto,
including those incurred prior to, on or after the Closing Date with respect to
all participants thereunder.
(c) Buyer agrees that, with respect to all of its employee
benefit programs and arrangements covering or otherwise benefiting any of the
Rehired Employees on or after the Closing Date, service with Seller and its
affiliates shall be counted for purposes of determining any period of
eligibility to participate or to vest in benefits to the same extent such
service was counted under the Seller Employee Programs.
(d) Subject to Section 10.1, Seller shall use its best efforts to
cause to be transferred to the Buyer all life and other insurance policies used
in connection with the Seller Employee Programs.
(e) Except to the extent required by law, Seller shall not pay
Rehired Employees their accrued and unused vacation, and Buyer shall provide,
without duplication of benefits, all Rehired Employees with vacation time rather
than cash in lieu of vacation time for all vacation earned and unpaid through
the Closing Date.
(f) Buyer shall provide a medical plan as of the Closing Date so
as to ensure uninterrupted coverage of all Rehired Employees. Such medical plan
shall grant credit for amounts paid by employees during the applicable plan year
beginning prior to the Closing Date, shall not exclude pre-existing conditions
and shall provide for medical benefits substantially consistent with the
Seller's (and its Subsidiaries') medical plan in effect prior to the Closing
Date.
(g) From and after the Closing Date until December 31, 1999,
Buyer shall, and shall cause its Subsidiaries, to provide employee benefits and
compensation to the Rehired Employees which are substantially similar to those
provided by Seller and its Subsidiaries immediately prior to the Closing Date,
provided, however, that at any time (i) Nextera may in its sole discretion cause
Buyer or Buyer's Subsidiaries (A) to modify or terminate any employee benefits
provided to such Rehired Employees as Nextera deems necessary to provide that
any employee benefit plan and related trust intended to be qualified and exempt
under Code Sections 401(a) and 501(a), respectively, shall be so qualified and
exempt, or (B) to otherwise comply with the applicable requirements of ERISA (or
other applicable law) and (ii) the Leadership Council (as defined in the Buyer
Operating Agreement) may terminate such employee benefits in its discretion. In
the event that any employee benefits are terminated or materially reduced
pursuant to subsection (g)(i), Buyer (or a Subsidiary thereof) shall provide
each applicable Rehired
<PAGE> 54
Employee with other benefits or one or more cash payments which in the aggregate
on an after-tax basis are equal to the value of such terminated or
materially-reduced benefits through the earlier of December 31, 1999 or the date
of the Rehired Employee's termination of employment.
(h) Except as provided in the Employment Agreements described in
Section 9.13, nothing contained in this Agreement shall confer upon any Rehired
Employee any right with respect to continuance of employment by Buyer, nor shall
anything herein interfere with the right of Buyer to terminate the employment of
any of the Rehired Employees at any time, with or without cause, or restrict
Buyer in the exercise of its independent business judgment in modifying any of
the terms and conditions of the employment of the Rehired Employees.
(i) Except as provided in the Employment Agreements described in
Section 9.13, no provision of this Agreement shall create any third party
beneficiary rights in any Rehired Employee, any beneficiary or dependents
thereof, or any collective bargaining representative thereof, with respect to
the compensation, terms and conditions of employment and benefits that may be
provided to any Rehired Employee by Buyer or under any benefit plan which Buyer
may maintain.
(j) Seller shall not, directly or indirectly, hire or offer
employment to or seek to hire or offer employment to any employee of Seller
whose employment is continued by Buyer after the Closing Date or any employee of
Buyer or any successor or affiliate of Buyer which is engaged in the Business,
unless Buyer first terminates the employment of such employee or gives its
written consent to such employment or offer of employment.
7.6. Option Pool. At the Closing, Nextera agrees to grant to the
Rehired Employees and the new hires of Buyer who are involved in the Business
options under the Amended and Restated Equity Participation Plan effective as of
July 28, 1998 (the "Equity Participation Plan"), a true and correct copy of
which is attached hereto as Exhibit P and in the forms of related agreements
attached hereto as Exhibit Q-1 for those Rehired Employees who are also
Principals and Exhibit Q-2 for the those Rehired Employees or new hires who are
not also Principals, which grants shall consist of an aggregate pool of options
to purchase 815,000 Nextera Class A Units to be distributed and allocated as set
forth in a letter of even date herewith from Seller to Buyer and Nextera which
letter makes specific reference to this Section 7.6. Such options shall have an
exercise price of $7.50 per share and shall vest at the rate of twenty-five
percent (25%) per year over four (4) years. Buyer and Nextera also agree to make
available an additional pool of options to purchase 100,000 Nextera Class A
Units for hiring purposes and performance recognition in calendar year 1998
subject to Nextera's review and approval and with such terms and conditions as
may be determined by Nextera, of which options to purchase 30,000 Nextera Class
A Units have been allocated as set forth on in the letter referred to in the
preceding sentence.
Nextera has duly adopted the Equity Participation Plan in the
form attached as Exhibit P and form of related agreement in the forms attached
as Exhibit Q-1 and Exhibit Q-2 hereto. The Shareholders acknowledge that (a) the
terms of the options are governed by such Equity Participation Plan attached as
Exhibit P and related agreements in the forms attached as Exhibit Q-1 and
Exhibit Q-2, and (b) the tax consequences of the options are materially
different
<PAGE> 55
in a limited liability company as compared to a corporate structure, and the
Shareholders have had the opportunity to consult their own tax advisors of such
tax consequences.
7.7. Additional Units. The Employment Agreements referred to in
Section 9.13 (other than those in the form of Exhibit J-5) shall provide for the
sale by Nextera of Nextera Class A Units to the individuals whose names are set
forth in a letter of even date herewith from Seller to Buyer and Nextera which
letter makes specific reference to this Section 7.7.
7.8. Conduct of the Business Following the Closing.
(a) Buyer and Nextera agree to maintain the consulting service
offerings of Seller in substantially the same form as such service offerings
existed immediately prior to the Closing; provided, however, that Buyer and
Nextera (or the entity controlled by Nextera which provides such service
offerings) (i) may make available additional service offerings and (ii) may
eliminate existing service offerings if the gross revenues and/or net profits
derived from such offerings are determined by Nextera to be inadequate to
maintain such service offerings.
(b) Buyer and Nextera hereby confirm that as of the date hereof
they intend (i) to use the "Sibson & Company, L.L.C., a Nextera Company" name in
its worldwide operations, (ii) to cause Buyer (or some other entity controlled
by Nextera) to conduct the Business for the foreseeable future and (iii) to
cause Buyer or such other entity that conducts the Business to lead human
capital consulting for Nextera and its Subsidiaries. The parties acknowledge
that the intention of Buyer and Nextera with respect to this Section 7.8(b) is
not a binding commitment on the part of Buyer or Nextera.
7.9. Permitted Distribution. Prior to the Closing, Seller shall
be permitted to accrue and declare a distribution (the "Permitted Distribution")
to General Partner and Limited Partner provided that at the Closing, taking into
account the Permitted Distribution, Seller shall have an amount of working
capital greater than or equal to the Minimum Working Capital. Effective as of
the Closing, Buyer hereby agrees to assume the liability to pay the Permitted
Distribution and shall pay the Permitted Distribution within 15 days after
resolution of the Working Capital Adjustment under Section 2.5 provided that at
such time Buyer has sufficient cash or availability under its revolving credit
facility to make the Permitted Distribution; provided further, however, that in
no event shall Buyer pay the Permitted Distribution later than December 31,
1998. In the event that the Permitted Distribution is to be paid after the
Incorporation Transaction (as defined in the Exchange Agreement), Buyer shall
make such payment to the Shareholder Representative for distribution to the
Shareholders.
7.10. Preservation of Confidentiality. In connection with the
negotiation of this Agreement and the preparation for the consummation of the
transactions contemplated hereby, the parties acknowledge that each has had
access to confidential information relating to each other, including technical
or marketing information, ideas, methods, developments, inventions,
improvements, business plans, trade secrets, scientific or statistical data,
diagrams, drawings, specifications or other proprietary information relating
thereto, together with all analyses, compilations, studies or other documents,
records or data prepared by Seller, General Partner, Limited Partner, the
Shareholders, Buyer, Nextera or their respective Representatives which
<PAGE> 56
contain or otherwise reflect or are generated from such information
("Confidential Information"). Prior to the date of the Closing, each of the
parties shall treat all Confidential Information as confidential, preserve the
confidentiality thereof and not disclose any Confidential Information, except to
their Representatives and affiliates who need to know such Confidential
Information in connection with the transactions contemplated hereby. The parties
shall use all reasonable efforts to cause their Representatives to treat all
Confidential Information as confidential, preserve the confidentiality thereof
and not disclose any Confidential Information. Each party shall be responsible
for any breach of this Agreement by any of its Representatives.
7.11. No Distribution of Nextera Class A Units. Except following
a breach by Nextera of its obligation to effect the Incorporation Transaction
(as defined in the Exchange Agreement), Seller, General Partner and Limited
Partner agree to retain the Nextera Class A Units and to not distribute such
units to the Shareholders, provided that Seller may distribute the Nextera Class
A Units it receives pursuant to this Agreement to General Partner and Limited
Partner. It being understood that the capital stock of General Partner and
Limited Partner will be exchanged pursuant to the Exchange Agreement.
7.12. Buyer Efforts on Financing and Qualifications. Buyer agrees
to use commercially reasonable efforts to (i) consummate the third party
financing to fund the Purchase Price pursuant to the commitment letter attached
hereto Exhibit O, (ii) qualify itself to do business in each jurisdiction in
which Seller does business within thirty days following the Closing Date, and
(iii) obtain insurance substantially similar to the insurance maintained by the
Seller immediately prior to the Closing Date.
7.13. Annual Incentive Plan. On or prior to the Closing, Buyer
shall adopt the Annual Incentive Plan attached hereto as Exhibit R.
7.14. Senior Leadership Team of Nextera. Following the Closing,
the Leadership Council of Buyer shall designate two individuals who shall serve
from time to time as members of the Senior Leadership Team of Nextera and/or
Newco (as defined in the Exchange Agreement) or other similar team comprised of
representatives of Nextera's Subsidiaries or the Subsidiaries of Newco, subject
to the approval of such designees by Nextera (which approval shall not be
unreasonably withheld). The Leadership Council of Buyer shall have the right to
remove and designate replacements for such designees to the Senior Leadership
Team of Nextera and/or Newco or such other similar teams subject to Nextera's
approval (which approval shall not be unreasonably withheld).
ARTICLE VIII.
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions provided
for hereby are subject, in the discretion of Seller, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions, any of which may
be waived by Seller:
<PAGE> 57
8.1. Representations, Warranties and Covenants. All
representations and warranties of Buyer and Nextera contained in this Agreement
shall be true and correct at and as of the date of this Agreement and at and as
of the Closing Date, except as and to the extent that the facts and conditions
upon which such representations and warranties are based are expressly required
or permitted to be changed by the terms hereof, and Buyer and Nextera shall have
performed and satisfied all agreements and covenants required hereby to be
performed by them prior to or on the Closing Date.
8.2. No Actions or Court Orders. No Action by any governmental
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to (a) materially affect the right or ability
of Buyer to own operate possess or transfer the Assets after the Closing, (b)
materially damage the Selling Parties if the transactions contemplated hereunder
are consummated or (c) materially damage the business or financial condition of
Buyer and/or Nextera on a consolidated basis if the transactions contemplated
hereunder are consummated. There shall have been no determination by the Selling
Parties, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become inadvisable or impracticable by reason
of the institution or threat by any person or any federal, state or other
governmental authority of litigation. There shall not be any Regulation or Court
Order that makes the purchase and sale of the Business or the Assets
contemplated hereby illegal or otherwise prohibited.
8.3. Consents. All Permits, consents, approvals and waivers from
governmental authorities and other parties necessary to the consummation of the
transactions contemplated hereby and for the operation of the Business by Buyer
(including, without limitation, the termination of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act) shall have been
obtained.
8.4. Material Changes. Since December 31, 1997, there shall not
have been any material adverse change with respect to the financial or business
condition of Nextera and its Subsidiaries except as disclosed on the schedules
hereto provided by Nextera to Seller.
8.5. Approval of Seller's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this agreement shall have been approved by Weil, Gotshal & Manges LLP, special
counsel to Seller and such counsel shall have received on behalf of Seller such
other certificates, opinions and documents in form satisfactory to such counsel
as Seller may reasonably require from Buyer and Nextera to evidence compliance
with the terms and conditions hereof as of the Closing and the correctness as of
the Closing of the representations and warranties of Buyer and Nextera and the
fulfillment of its covenants.
8.6. Opinions of Counsel. Buyer shall have delivered to Seller
opinions of Maron & Sandler, counsel to Buyer and Nextera, and Latham & Watkins,
special counsel to Buyer and Nextera, each dated as of the Closing Date, in the
forms attached hereto as Exhibit H-1 and Exhibit H-2;
<PAGE> 58
8.7. Assumption Document. Buyer shall have executed the
Assumption Document in substantially the form attached hereto as Exhibit G and
the other assumption documents identified in Section 3.2(c).
8.8. Escrow Agreement. Buyer, Nextera and the Escrow Agent shall
have executed and delivered the Escrow Agreement in substantially the form
attached hereto as Exhibit B.
8.9. Employment Agreements. Buyer shall have executed and
delivered to each of the individuals (the "Principals") listed in a letter of
even date herewith from Seller to Buyer and Nextera which letter makes specific
reference to this Section 8.9 the Employment Agreements in substantially the
forms attached hereto as Exhibits J-1, J-2, J-3, J-4 and J-5, as applicable,
with the salaries, non-solicitation and severance periods as set forth on such
letter. Buyer shall have offered employment to all of the employees of Seller as
provided hereunder.
8.10. Corporate Documents. Seller shall have received from Buyer
and Nextera resolutions adopted by the board of directors of Nextera and the
member of Buyer, approving this Agreement and the agreements and the
transactions contemplated hereby and thereby, certified by an officer of Nextera
and the manager of Buyer, respectively.
8.11. Operating Agreement of Nextera. A majority of the
membership interests of Nextera shall have adopted that certain First Amendment
to the Nextera Operating Agreement which, among other things, admits Seller and
certain Shareholders as members of Nextera. Seller shall have received from
Nextera (a) a copy of the Nextera Operating Agreement including the First
Amendment thereto attached hereto as Exhibit M and (b) resolutions adopted by
the Board of Directors of Nextera, approving this Agreement and the agreements
and the transactions contemplated hereby and thereby, certified by an officer of
Nextera.
8.12. Operating Agreement of Buyer. Nextera, as the single member
of Buyer, shall have adopted the form of Limited Liability Company Agreement
attached hereto as Exhibit L. Seller shall have received from Buyer (a) a copy
of the Buyer Operating Agreement and (b) resolutions adopted by the member of
Buyer, approving this Agreement and the agreements and the transactions
contemplated hereby and thereby, certified by the manager of Buyer.
8.13. Deliveries. Buyer shall have made all deliveries to Seller
required by Section 3.2.
8.14. Exchange Agreement. Buyer and the other parties thereto
shall have executed the Exchange Agreement in substantially the form attached
hereto as Exhibit N.
8.15. Annual Incentive Plan. Buyer shall have adopted the Annual
Incentive Plan attached hereto as Exhibit R.
8.16. Sibson Canada. Nextera and the shareholders of Sibson
Canada, Inc. ("Sibson Canada") shall have entered into a definitive agreement
regarding the purchase of Sibson Canada, or its successor, by Nextera or a
Subsidiary of Nextera.
<PAGE> 59
8.17. PNC Bank. PNC Bank, National Association, shall have
consented to the assignment to and assumption by Buyer of Seller's Revolving
Credit Facility with PNC Bank, National Association, and the existing
indebtedness thereunder and any and all related loan documents and Buyer shall
have assumed all of Seller's and its subsidiaries' obligations with respect to
such Revolving Credit Facility and any and all related loan documents and Seller
and its Subsidiaries shall have been released from all obligations thereunder.
ARTICLE IX.
CONDITIONS TO BUYER'S AND NEXTERA'S OBLIGATIONS
The obligations of Buyer and Nextera to consummate the
transactions provided for hereby are subject, in the discretion of Buyer and
Nextera, to the satisfaction, on or prior to the Closing Date, of each of the
following conditions, any of which may be waived by Buyer and Nextera:
9.1. Representations, Warranties and Covenants. All
representations and warranties of the Selling Parties contained in this
Agreement shall be true and correct in all material respects at and as of the
date of this Agreement and at and as of the Closing Date, except as and to the
extent that the facts and conditions upon which such representations and
warranties are based are expressly required or permitted to be changed by the
terms hereof, and each Selling Party shall have performed and satisfied in all
material respects all agreements and covenants required hereby to be performed
by it prior to or on the Closing Date.
9.2. Consents; Regulatory Compliance and Approval. All Permits,
consents, approvals and waivers from governmental authorities and other parties
listed on Schedule 7.1 shall have been obtained. Buyer shall be satisfied that
all approvals required under any Regulations to carry out the transactions
contemplated by this Agreement shall have been obtained and that the parties
shall have complied with all Regulations applicable to this Agreement and the
transactions contemplated hereby.
9.3. No Actions or Court Orders. No Action by any governmental
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected (a) to materially damage Buyer or Nextera,
(b) to materially damage the Assets or the Business if the transactions
contemplated hereunder are consummated, including without limitation any
material adverse effect on the right or ability of Buyer or Nextera to own,
operate, possess or transfer the Assets after the Closing or (c) to materially
damage the business or financial condition of Buyer and Nextera on a
consolidated basis if the transactions contemplated hereunder are consummated.
There shall have been no determination by Buyer or Nextera, acting in good
faith, that the consummation of the transactions contemplated by this Agreement
has become inadvisable or impracticable by reason of the institution or threat
by any person or any federal, state or other governmental authority of
litigation. There shall not be any Regulation or Court Order that makes the
purchase and sale of the Business or the Assets contemplated hereby illegal or
otherwise prohibited.
<PAGE> 60
9.4. Approval of Nextera's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by Latham & Watkins, as counsel for
Nextera, and such counsel shall have received on behalf of Nextera such other
certificates, opinions, and documents in form satisfactory to such counsel as
Nextera may reasonably require from Seller or the Shareholders to evidence
compliance with the terms and conditions hereof as of the Closing and the
correctness as of the Closing of the representations and warranties of the
Selling Parties and the fulfillment of their respective covenants.
9.5. Opinions of Counsel. Seller shall have delivered to Buyer
opinions of Weil, Gotshal & Manges LLP, special counsel to Seller, and Douglas
Tormey, counsel to Seller, each dated as of the Closing Date, in the forms
attached hereto as Exhibit I-1 and Exhibit I-2.
9.6. Material Changes. Since the Base Balance Sheet Date, there
shall not have been any material adverse change with respect to the Business or
the Assets except as disclosed on the Disclosure Schedule.
9.7. Partnership Documents. Buyer and Nextera shall have received
from Seller resolutions adopted by its General Partner, approving this Agreement
and the agreements and transactions contemplated hereby and thereby, certified
by Seller's Senior Managing Principal.
9.8. Corporate Documents. Buyer and Nextera shall have received
from Seller resolutions adopted by the boards of directors of General Partner
and Limited Partner, approving this Agreement and the agreements and the
transactions contemplated hereby and thereby, certified by an officer of General
Partner and Limited Partner, respectively.
9.9. Conveyancing Documents; Release of Encumbrances. Seller
shall have executed and delivered the documents described in Section 3.2 hereof
so as to effect the transfer and assignment to Buyer of all right, title and
interest in and to the Assets and Seller shall have filed (where necessary) and
delivered to Buyer all documents necessary to release the Assets from all
Encumbrances other than the Permitted Liens, which documents shall be in a form
reasonably satisfactory to Buyer's counsel.
9.10. Name Change. Each of Seller and General Partner shall have
filed amendments to its Certificate of Limited Partnership or Articles of
Incorporation or similar documents, as appropriate, to change its organization
name so as not to include the words "Sibson & Company" or any other name or mark
that has such a near resemblance thereto as may be likely to cause confusion or
mistake to the public, or to otherwise deceive the public. Such amendment shall
be in a form acceptable for filing with the Secretary of State of the State of
Delaware, if applicable.
9.11. Permits. Buyer shall have obtained or been granted the
right to use all Permits necessary to its operation of the Business except for
qualifications to do business to be obtained within thirty (30) days after the
Closing.
<PAGE> 61
9.12. Escrow Agreement. The Selling Parties and the Escrow Agent
shall have executed and delivered the Escrow Agreement in substantially the form
attached hereto as Exhibit B.
9.13. Employment Agreements. Each of the individuals listed on
Schedule 8.9 shall have executed and delivered to Buyer an employment agreement
in substantially the form indicated opposite such individual's names on Schedule
8.9 and in the forms attached hereto as Exhibits J-1, J-2, J-3, J-4, or J-5 as
applicable (individually, an "Employment Agreement" and collectively, the
"Employment Agreements").
9.14. Third-Party Financing. Nextera and Buyer shall have
received third party financing in an amount sufficient to fund the Purchase
Price under the commitment letter attached hereto as Exhibit N.
9.15. Payment of Employee Promissory Notes. The borrowers under
the promissory notes listed on Schedule 4.9 shall have repaid the principal
balance and any accrued interest on such promissory notes.
9.16. Deliveries. Seller shall have made all deliveries to Buyer
required by Section 3.2.
9.17. Exchange Agreement. The Shareholders shall have executed
the Exchange Agreement in substantially the form attached hereto as Exhibit O.
9.18. Sibson Canada. Nextera and the shareholders of Sibson
Canada, Inc. ("Sibson Canada") shall have entered into a definitive agreement
regarding the purchase of Sibson Canada, or its successor, by Nextera or a
Subsidiary of Nextera.
9.19. PNC Bank. PNC Bank, National Association, shall have
consented to the assignment to and assumption by Buyer of Seller's Revolving
Credit Facility with PNC Bank, National Association, and the existing
indebtedness thereunder.
ARTICLE X.
CONSENTS TO ASSIGNMENT
10.1. Consents to Assignment. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any Contract, Lease, Permit or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment thereof, without
the consent of a third party thereto, would constitute a Default thereof or in
any way adversely affect the rights of Buyer thereunder. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
affect the rights thereunder so that Buyer would not receive all such rights,
Seller will cooperate with Buyer, in all reasonable respects, to provide to
Buyer at the Buyer's sole cost and expense the benefits under any such Contract,
Lease, Permit or any claim or right, including without limitation enforcement
for the benefit of Buyer of any and all rights of Seller against a third party
thereto arising out of the Default or cancellation by such third party or
otherwise. In addition, Seller agrees to cancel
<PAGE> 62
any life or other insurance policy used in connection with Seller Employee
Programs as directed by Nextera at or after the Closing. Nothing in this Section
10.1 shall affect Buyer's right to terminate this Agreement under Sections 9.2
and 13.1 in the event that any consent or approval set forth on Schedule 7.1 is
not obtained. Anything in this Agreement to the contrary notwithstanding Seller
shall have no liability whatsoever for failure to assign any such Contract or
Lease or obtain consent to transfer same.
ARTICLE XI.
RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING
11.1. Collection of Accounts Receivable and Letters of Credit. At
the Closing, Buyer will acquire hereunder, and thereafter Buyer or its designee
shall have the right and authority to collect for Buyer's or its designee's
account, all receivables, letters of credit and other items which constitute a
part of the Assets, and Seller shall promptly after receipt of any payment in
respect of any of the foregoing, properly endorse and deliver to Buyer any
letters of credit, documents, cash or checks received on account of or otherwise
relating to any such receivables, letters of credit or other items. Seller shall
promptly transfer or deliver to Buyer or its designee any cash or other property
that the Seller may receive in respect of any deposit, prepaid expense, claim,
contract, license, lease, commitment, sales order, purchase order, letter of
credit or receivable of any character, or any other item, constituting a part of
the Assets.
11.2. Books and Records; Tax Matters.
(a) Books and Records. Each of Seller and General Partner, on the
one hand, and Buyer and Nextera, on the other hand, agrees that it will
cooperate with and make available to the other party, during normal business
hours, all Books and Records, information and employees (without substantial
disruption of employment) retained and remaining in existence after the Closing
which are necessary or useful in connection with any tax inquiry, audit,
investigation or dispute, any litigation or investigation or any other matter
requiring any such Books and Records, information or employees for any
reasonable business purpose. The party requesting any such Books and Records,
information or employees shall bear all of the out-of-pocket costs and expenses
(including without limitation attorneys' fees, but excluding reimbursement for
salaries and employee benefits) reasonably incurred in connection with providing
such Books and Records, information or employees.
(b) Cooperation and Records Retention. Seller, General Partner,
Limited Partner, Buyer and Nextera shall (i) each provide the others with such
assistance as may reasonably be requested by any of them in connection with the
preparation of any Tax Return, audit, or other examination by any taxing
authority or judicial or administrative proceedings relating to Liability for
Taxes, (ii) each provide the others with any records or other information that
may be relevant to such Tax Return, audit or examination, proceeding or
determination subject to the last sentence of this subsection (b), and (iii)
each provide the others with any final determination of any such audit or
examination, proceeding, or determination that affects any amount required to be
shown on any Tax Return of the other for any period. Without limiting the
generality of the foregoing, Seller, General Partner, Limited Partner, Buyer and
Nextera shall
<PAGE> 63
each retain, until the applicable statutes of limitations (including any
extensions) have expired, copies of all Tax Returns, supporting work schedules,
and other records or information that may be relevant to such Tax Returns for
all tax periods or portions thereof ending on or before the Closing Date and
shall not destroy or otherwise dispose of any such records without first
providing the other party with a reasonable opportunity to review and copy the
same.
(c) Preparation of Form W-2's. Pursuant to Revenue Procedure
84-77 (1984-2 C.B. 753), provided that Seller provides Buyer with all necessary
payroll records for the calendar year which includes the Closing Date, Buyer
shall furnish a Form W-2 to each employee employed by Buyer who had been
employed by Seller disclosing all wages and other compensation paid for such
calendar year, and taxes withheld therefrom, and Seller shall be relieved of the
responsibility to do so.
(d) Payment of Liabilities. Following the Closing Date, Seller
shall pay promptly when due all of the debts and Liabilities of Seller for
Taxes; provided, however, this covenant shall not apply to that portion (or all)
of any Tax that Seller is contesting in good faith. Following the Closing Date,
Buyer shall pay promptly when due all of the Assumed Liabilities; provided,
however, this covenant shall not apply to that portion (or all) of any Liability
that Buyer is contesting in good faith.
11.3. Survival of Representations, Etc. Each of the
representations, warranties, agreements, covenants and obligations herein are
material, shall be deemed to have been relied upon by the other party and shall
survive the Closing regardless of any investigation and shall not merge in the
performance of any obligation by either party hereto; provided, however, that
such representations and warranties shall expire on the same dates as and to the
extent that the rights to indemnification with respect thereto under Article XII
shall expire.
ARTICLE XII.
INDEMNIFICATION
12.1. Indemnification by the Selling Parties. Each Selling Party
agrees subsequent to the Closing to indemnify and hold Buyer and Nextera and
their respective subsidiaries, affiliates, successors and assigns and persons
serving as officers, directors, partners, managers, shareholders, members,
employees and agents thereof (other than the Shareholders, except to the extent
of Liabilities incurred in their capacities as an officer, director or employee
of Buyer after the Closing) (individually a "Buyer Indemnified Party" and
collectively the "Buyer Indemnified Parties") harmless from and against any
Damages which may be sustained or suffered by any of them attributable to,
arising out of or based upon any of the following matters:
(a) the commission of common law fraud by any of the Seller,
General Partner or Limited Partner in connection with the transactions
contemplated by this Agreement (collectively, "Fraud Claims");
(b) any failure to convey title to the Assets free and clear of
any Encumbrances other than Permitted Liens (collectively, "Ownership Claims");
<PAGE> 64
(c) except for the Assumed Liabilities, any liability of Seller,
General Partner, Limited Partner and each Subsidiary of Seller for Taxes arising
from their respective activities, assets and all events and transactions on or
prior to the Closing and any breach of the representations and warranties set
forth in Section 4.22 hereof and any covenant with respect to Taxes or tax
related matters set forth herein or in any related agreement (collectively, "Tax
Claims");
(d) any Excluded Liability (collectively, "Excluded Liability
Claims");
(e) other than Fraud Claims, Ownership Claims, Tax Claims or
Excluded Liability Claims, any other breach of any representation, warranty or
covenant of Seller under this Agreement or in any certificate or schedule
delivered pursuant hereto by Seller (collectively, "General Claims").
In addition, each Shareholder severally, but not jointly, agrees
subsequent to the Closing to indemnify and hold all Buyer Indemnified Parties
harmless from and against any Damages attributable to, arising out of or based
upon common law fraud by such Shareholder in connection with the transactions
completed by this Agreement (collectively, "Individual Fraud Claims") or any
breach (whether or not deliberate or willful) of any representation or warranty
of such Shareholder contained in Article V (collectively, "Individual General
Claims" and together with Individual Fraud Claims, "Individual Claims").
12.2. Limitations on Indemnification by the Selling Parties.
Anything contained in this Agreement to the contrary notwithstanding, the
liability of Seller, General Partner, Limited Partner and the Shareholders to
provide any indemnification to any Buyer Indemnified Party and right of Buyer
Indemnified Parties to indemnification under Section 12.1 (or otherwise) shall
be subject to the following provisions:
(a) No claims for indemnification shall be made under this
Agreement against the Seller, the General Partner, the Limited Partner or any
Shareholder, and no indemnification shall be payable to any Buyer Indemnified
Party, with respect to General Claims and Individual General Claims after the
date which is eighteen (18) months following the Closing.
(b) No claims for indemnification shall be made under this
Agreement against the Seller, the General Partner, the Limited Partner or any
Shareholder, and no indemnification shall be payable to any Buyer Indemnified
Party, with respect to any Tax Claim (including any Excluded Liability in
respect of any Tax) after expiration of all applicable statutes of limitation
with respect to the Tax that is the subject of the indemnification claim taking
into account any extensions thereof with respect to collection of the Tax.
(c) The aggregate amount to be payable by the Selling Parties to
all Buyer Indemnified Parties for claims for indemnification with respect to
General Claims and Individual General Claims (including any amounts subject to
the Escrow Agreement and any Nextera Class A Units delivered to Nextera in
satisfaction of an indemnification claim) shall in no event exceed $26,551,000.
<PAGE> 65
(d) With respect to General Claims, the amount payable by a
Shareholder to all Buyer Indemnified Parties for claims for indemnification
hereunder shall in no event exceed such Shareholder's pro rata share of the
total amount to be paid to all Buyer Indemnified Parties for claims for
indemnification hereunder. The pro rata shares of the Shareholders for purposes
of this paragraph shall be the same percentages as the Shareholders' respective
ownership interests listed on Schedule 4.2
(e) With respect to Individual Claims, the Shareholder who makes
the representation, warranty or covenant from which the claim arose shall be
severally liable for indemnification in respect of such a claim and the other
Selling Parties shall not be jointly liable therefor.
(f) Seller, General Partner, Limited Partner, and the
Shareholders shall have no obligation for indemnification with respect to
General Claims hereunder until aggregate claims for indemnification with respect
to General Claims hereunder exceed $200,000, in which case Seller, General
Partner, Limited Partner and the Shareholders shall be obligated for
indemnification of all General Claims including the initial $200,000 of such
claims.
(g) Claims for indemnification with respect to Fraud Claims,
Ownership Claims, Tax Claims (except with respect to subsection (b) above),
Excluded Liability Claims (except with respect to subsection (b) above),
Individual Fraud Claims made under this Agreement by any Buyer Indemnified Party
and breach by Seller, General Partner or Limited Partner of Section 7.11 shall
not be subject to any of the limitations set forth in this Section 12.2.
12.3. Indemnification by Buyer and Nextera. Buyer and Nextera
jointly and severally agree to indemnify and hold Seller, General Partner,
Limited Partner, the Shareholders and their affiliates and persons serving as
officers, directors, partners, managers, shareholders, members, employees and
agents thereof (individually a "Seller Indemnified Party" and collectively the
"Seller Indemnified Parties") harmless from and against any Damages which may be
sustained or suffered by any of them attributable to, arising out of or based
upon any of the following matters:
(a) common law fraud committed by Buyer or Nextera with respect
to this Agreement in connection with the transactions contemplated by this
Agreement;
(b) failure to pay, perform or discharge, as applicable, any of
the Assumed Liabilities; and
(c) any breach of any representation, warranty or covenant made
by Buyer and/or Nextera in this Agreement or in any certificate or schedule
delivered by Nextera and/or Buyer hereunder.
12.4. Limitation on Indemnification by Buyer and Nextera.
Notwithstanding the foregoing, (a) no indemnification shall be payable to the
Seller Indemnified Parties with respect to claims asserted pursuant to
<PAGE> 66
Section 12.3 above after the date which is eighteen (18) months after the
Closing, (b) the aggregate amount to be payable to all Seller Indemnified
Parties pursuant to Section 12.3 shall not exceed $26,551,000 and (c) Buyer and
Nextera shall have no obligation for indemnification hereunder until aggregate
claims for indemnification hereunder exceed $200,000, in which case Buyer and/or
Nextera shall be obligated for indemnification of all claims, including the
initial $200,000 of such claims. Claims for indemnification with respect to
Sections 12.3(a) and 12.3(b) and breach by Buyer and/or Nextera of Sections 7.5
through 7.9, Section 7.14 and Section 10.1 shall not be subject to any of the
limitations set forth in this Section 12.4.
12.5. Notice; Defense of Claims. An indemnified party shall make
claims for indemnification hereunder by giving written notice thereof to the
indemnifying party promptly on discovery and in any event within the period in
which indemnification claims can be made hereunder. If indemnification is sought
for a claim or liability asserted by a third party, the indemnified party shall
also give written notice thereof to the indemnifying party promptly after it
receives notice of the claim or liability being asserted, but the failure to do
so shall not relieve the indemnifying party from any liability except to the
extent that it is prejudiced by the failure or delay in giving such notice. Such
notice shall summarize the basis for the claim for indemnification and any claim
or liability being asserted by a third party. Within 20 days after receiving
such notice the indemnifying party shall give written notice to the indemnified
party stating whether it disputes the claim for indemnification and whether it
will defend against any third party claim or liability at its own cost and
expense. If the indemnifying party fails to give notice that it disputes an
indemnification claim within 20 days after receipt of notice thereof, it shall
be deemed to have accepted and agreed to the claim, which shall become
immediately due and payable. The indemnifying party shall be entitled to direct
the defense against a third party claim or liability with counsel selected by it
(subject to the consent of the indemnified party, which consent shall not be
unreasonably withheld) as long as the indemnifying party is conducting a good
faith and diligent defense and to compromise or settle it with consent of the
indemnified party, which consent shall not be unreasonably withheld. The
indemnified party shall at all times have the right to fully participate at its
own expense in the defense of a third party claim or liability, directly or
through counsel; provided, however, that if the named parties to the action or
proceeding include both the indemnifying party and the indemnified party and the
indemnified party is advised that representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct, the indemnified party may engage separate counsel at the expense of the
indemnifying party. If no such notice of intent to dispute and defend a third
party claim or liability is given by the indemnifying party, or if such good
faith and diligent defense is not being or ceases to be conducted by the
indemnifying party, the indemnified party shall have the right, at the expense
of the indemnifying party, to undertake the defense of such claim or liability
(with counsel selected by the indemnified party), and to compromise or settle
it, with consent of the indemnifying party, which consent shall not be
unreasonably withheld. If the third party claim or liability is one that by its
nature cannot be defended solely by the indemnifying party, then the indemnified
party shall make available such information and assistance as the indemnifying
party may reasonably request and shall cooperate with the indemnifying party in
such defense, at the expense of the indemnifying party.
12.6. Satisfaction of Selling Party Indemnification Obligations.
Nextera shall bring and control all indemnification claims hereunder and under
the Exchange Agreement on behalf of the Buyer Indemnified Parties, including
without limitation Buyer. In order to satisfy the indemnification obligations of
the Selling Parties hereunder and under the Exchange Agreement,
<PAGE> 67
Nextera shall proceed first directly against the Escrow Deposit as further set
forth and defined in the Escrow Agreement and then may proceed directly against
the Selling Parties subject to the limitations set forth herein. Nextera may
proceed against the Selling Party of its choosing and may proceed directly
against any Shareholder without proceeding against Seller, General Partner
and/or Limited Partner. Any Shareholder called upon to satisfy indemnification
obligations in connection with this Agreement may not seek any right of
contribution against (a) General Partner or Limited Partner following completion
of the Incorporation Transaction (as defined in the Exchange Agreement) or (b)
Seller following completion of the Incorporation Transaction unless Seller has
been converted to a limited liability company the membership interests of which
are not owned by General Partner or Limited Partner.
12.7. Use of Nextera Class A Units. To the extent indemnification
claims exceed the Escrow Deposit (as defined in the Escrow Agreement), the
parties may, at their option, elect to satisfy any indemnification claims under
this Agreement by delivering Nextera Class A Units issued pursuant to Section
2.4 or any securities into or for which they may be converted or exchanged. To
the extent that Nextera Class A Units (or such other securities) are used to
satisfy indemnification obligations under this Agreement, such units shall be
valued in accordance with the terms of the Escrow Agreement. No statement of
value in this Agreement shall affect such valuation under the Escrow Agreement.
12.8. Bulk Sales. Buyer hereby waives any requirements for
compliance with the procedures of the "Bulk Sales Act" or similar laws of any or
all of the states in which the Assets are situated or of any other state which
may be asserted to be applicable to the transactions contemplated hereby and
agrees that the Selling Parties shall have no indemnity obligations under
Article XII hereof arising solely out of or resulting solely from the failure of
Seller or Buyer to comply with any such laws.
12.9. Exclusive Remedy. Other than Fraud Claims and claims
pursuant to Section 12.3(a), the foregoing indemnification provisions in this
Article XII shall be the exclusive remedy for any breach of the representations
and warranties of the Selling Parties in Articles IV and V and of Buyer and
Nextera in Article VI above.
ARTICLE XIII.
TERMINATION OF AGREEMENT; RIGHTS TO PROCEED
13.1. Termination. At any time prior to the Closing, this
Agreement may be terminated as follows:
(i) by mutual written consent of Nextera and the
Shareholder Representative;
(ii) by Buyer or Nextera, pursuant to written notice to
Seller, if any of the conditions set forth in Article IX of this Agreement have
not been satisfied at or prior to the Closing, or if it has become reasonably
and objectively certain that any of such conditions, other than a condition
within the control of the Selling Parties, will not be satisfied at or prior to
<PAGE> 68
the Closing, such written notice to set forth such conditions which have not
been or will not be so satisfied;
(iii) by the Seller, pursuant to written notice to Buyer
and Nextera, if any of the conditions set forth in Article VIII of this
Agreement have not been satisfied at or prior to the Closing, or if it has
become reasonably and objectively certain that any of such conditions, other
than a condition within the control of Buyer and Nextera, will not be satisfied
at or prior to the Closing, such written notice to set forth such conditions
which have not been or will not be so satisfied;
(iv) by the Selling Parties, on the one hand, or by
Nextera and Buyer, on the other, pursuant to Section 7.4(b); and
(v) by Nextera or the Shareholder Representative if the
Closing shall not have occurred on or before September 30, 1998.
13.2. Effect of Termination. All obligations of the parties
hereunder shall cease upon any termination pursuant to Section 13.1, provided,
however, that the provisions of Section 7.10, Article XIII, Section 14.1 and
Section 14.9 hereof shall survive any termination of this Agreement. No
termination shall relieve any party of any liability for breach of this
Agreement prior to termination except as otherwise provided herein.
ARTICLE XIV.
MISCELLANEOUS
14.1. Fees and Expenses. Except as otherwise specified in this
Agreement and the Buyer Operating Agreement, each party hereto shall pay its own
legal, accounting, out-of-pocket and other expenses incident to this Agreement
and to any action taken by such party in preparation for carrying this Agreement
into effect. With respect to any payment by Seller for fees and expenses
incurred by the Selling Parties, such payment shall reduce the amount of Closing
Working Capital for purposes of Section 2.5 hereto. Notwithstanding the
foregoing, in the event the transaction does not close solely as a result of
Nextera's failure to obtain third party financing for the Purchase Price,
Nextera shall reimburse Seller for its actual out-of-pocket expenses incurred in
connection herewith, up to a maximum of $250,000, upon the submission of
reasonably detailed invoices for such expenses.
14.2. Governing Law. This Agreement shall be construed under and
governed by the internal laws of the State of New York without regard to its
conflict of laws provisions.
14.3. Notices. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail, upon the sooner of the date on which
receipt is acknowledged or the expiration of three days after deposit in United
States post office facilities properly addressed with postage prepaid. All
notices to a party
<PAGE> 69
will be sent to the addresses set forth below or to such other address or person
as such party may designate by notice to each other party hereunder:
TO BUYER: SC/NE, LLC
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (781) 778-4500
With a copy to: Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO NEXTERA: Nextera Enterprises, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (781) 778-4500
With a copy to: Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
<PAGE> 70
TO GENERAL PARTNER,
LIMITED PARTNER,
OR SELLER: Sibson & Company, L.P.
830 Third Avenue, 7th Floor
New York, NY 10022
Attention: Vincent C. Perro
Fax: (212) 935-6489
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: David E. Zeltner, Esq.
Fax: (212) 310-8007
TO THE
SHAREHOLDERS: John Balkcom
2811 Harrison Street
Evanston, IL 60201-1217
Fax: (847) 733-9203
Mark Blessington
1083 Elm Street
Winnetka, IL 60096
Fax: (847) 501-4036
Frederick (Ted) Briggs
3346 East First Street
Long Beach, CA 90803
Fax: (862) 434-5348
Roger Brossy
2828 Dumfries Road
Los Angeles, CA 90064-4416
Fax: (310) 559-0911
Seymour Burchman
198 Savage Drive
Holland, PA 18966
Fax: (215) 860-0340
Pamela Cohen
525 Glendale Circle
Ann Arbor, MI 48103
Fax: (313) 665-6972
Glenn Dalton
1952 Farm Valley Drive
Chesterfield, MO 63017
Fax: (314) 532-4730
<PAGE> 71
Barbara Dewey
27 Westcott Road
Princeton, NJ 08540
Donald Gallo
48 Bogart Court
Princeton, NJ 08540-7544
Fax: (609) 252-9682
Donald Gough
35 Little Harbor Road
P.O. Box 2053 (Use for regular mail)
Newcastle, NH 03854
Fax: (603) 430-9379
Elizabeth Hawk
12916 Walnutway Terrace
St. Louis, MO 63146
Fax: (314) 542-0892
Myrna Hellerman
2408 Saranac Lane
Glenview, IL 60025
James Kochanski
212 Kilbreck Drive
Cary, NC 27511
Fax: (919) 362-6547
Steven Landberg
1735 York Avenue, Apt. 30G
New York, NY 10128
Peter LeBlanc
105 Avenue of the Estates
Cary, NC 27511
Fax: (919) 468-0648
William O'Connell
12 Tomlyn Drive
Princeton, NJ 08540
Fax: (609) 279-9335
Vincent Perro
78 West 12th Street
New York, NY 10011
Fax: (212) 807-6180
Jude Rich
15 Benedek Road
Princeton, NJ 08540
Fax: (609) 921-7336
Karen Roche
<PAGE> 72
3845 Trinity Road
P.O. Box 879 (For regular mail)
Glen Ellen, CA 95422
Anne Saunier
121 Madison Avenue, Apt 11B
New York, NY 10016
Fax: (212) 779-3682
Richard Semler
277 St. Katherine Drive
La Canada, CA 91011
Fax: (818) 790-4643
Stephen Strelsin
1053 Skokie Ridge Drive
Glencoe, IL 60022
Fax: (847) 835-8974
Gerard (Chip) Thomas
106 Citreon Court
Cary, NC 27511
Fax: (919) 319-3151
Douglas Tormey
42 Lake Drive
Darien, CT 06820
Susan Annunzio Tynan
1401 West Berteau Unit C
Chicago, IL 60613
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: David E. Zeltner, Esq.
Fax: (212) 310-8297
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
14.4. Entire Agreement. This Agreement, including the Escrow
Agreement, Employment Agreements, Exchange Agreement and schedules and exhibits
hereto and thereto, is the entire agreement of the parties with respect to its
subject matter, and supersedes all previous written or oral negotiations,
commitments and writings. No promises, representations, understandings,
warranties and agreements have been made by any of the parties hereto except as
referred to herein or in such schedules and exhibits; and all inducements to the
making of this Agreement relied upon by either party hereto have been expressed
herein or in such schedules or exhibits.
<PAGE> 73
14.5. Assignability; Binding Effect. This Agreement shall only be
assignable by Buyer or Nextera to an entity controlling, controlled by or under
common control with Buyer or Nextera upon written notice to Seller; provided,
however, that Buyer and Nextera shall remain liable for all obligations
hereunder to the extent such obligations are not satisfied by the transferee.
This Agreement may not be assigned by Seller without the prior written consent
of Nextera. This Agreement shall be binding upon and enforceable by, and shall
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns. Assignment of this Agreement by any party shall not relieve
such party from its obligations hereunder.
14.6. Captions and Gender. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
14.7. Execution in Counterparts. For the convenience of the
parties and to facilitate execution, this Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same document.
14.8. Amendments. This Agreement may not be amended or modified,
nor may compliance with any condition or covenant set forth herein be waived,
except by a writing duly and validly executed by each party hereto, or in the
case of a waiver, the party waiving compliance; provided that the Shareholder
Representative (as defined below) may consent to any such amendment or
modification or waiver on behalf of the Shareholders; provided further that the
Shareholder Representative may not enter into any such amendment or modification
or waive any condition or covenant that materially and adversely affects any
Shareholder differently than all other Shareholders affected thereby without the
consent of such Shareholder. Each of the Shareholders hereby designate the
Seller and, upon conversion of Seller to a limited liability company as provided
in Section 4.4 of the Exchange Agreement, such limited liability company (in
each instance and in such capacity, the "Shareholder Representative") to act for
and represent them in those matters with respect to which this Agreement
specifies that the Shareholder Representative shall so act, including, without
limitation, entering into any amendment to this Agreement, and Seller, on behalf
of itself and its successors and assigns, hereby accepts such designation.
Anything herein to the contrary notwithstanding, any amendment, modification or
waiver to be given by the Shareholders may be given by the Shareholder
Representative.
14.9. Publicity and Disclosures. No press releases or public
disclosure (other than disclosure to Seller's clients regarding the closing of
this transaction as is reasonably deemed necessary by the parties to promote
Buyer's provision of service to such clients and in connection with the transfer
of Assets as contemplated hereunder), either written or oral, of the
transactions contemplated by this Agreement, shall be made by a party to this
Agreement without the prior knowledge and written consent of Nextera and Seller.
14.10. Specific Performance. The parties agree that it would be
difficult to measure damages which might result from a breach of this Agreement
by the Selling Parties and that money damages would be an inadequate remedy for
such a breach. Accordingly, if there is a breach or proposed breach of any
provision of this Agreement by any Selling Party, and Buyer or
<PAGE> 74
Nextera do not elect to terminate under Article XIII, Buyer or Nextera shall be
entitled, in addition to any other remedies which it may have, to an injunction
or other appropriate equitable relief to restrain such breach without having to
show or prove actual damage to Buyer or Nextera.
The parties agree that it would be difficult to measure damages
which might result from a breach of this Agreement by the Buyer or Nextera and
that money damages would be an inadequate remedy for such a breach. Accordingly,
if there is a breach or proposed breach of any provision of this Agreement by
Buyer or Nextera, and Selling Parties do not elect to terminate under Article
XIII, Selling Parties shall be entitled, in addition to any other remedies which
they may have, to an injunction or other appropriate equitable relief to
restrain such breach without having to show or prove actual damage to Selling
Parties.
<PAGE> 75
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives, as of the date first written above.
BUYER:
SC/NE, LLC, a Delaware limited liability company
By: NEXTERA ENTERPRISES, L.L.C.
Its: Sole Member
By: /s/ MICHAEL P. MULDOWNEY
------------------------------------------
Name: Michael P. Muldowney
------------------------------------
Title: Chief Financial Officer
------------------------------------
NEXTERA:
NEXTERA ENTERPRISES, L.L.C., a Delaware
limited liability company
By: /s/ MICHAEL P. MULDOWNEY
------------------------------------------
Name: Michael P. Muldowney
------------------------------------
Title: Chief Financial Officer
------------------------------------
<PAGE> 76
SELLER:
SIBSON & COMPANY, L.P., a Delaware limited
partnership
By: Sibson & Company, Inc., its General Partner
By: /s/ DOUGLAS J. TORMEY
------------------------------------------
Name: Douglas J. Tormey
------------------------------------
Title: Vice President
------------------------------------
GENERAL PARTNER:
SIBSON & COMPANY, INC. a Delaware corporation
By: /s/ DOUGLAS J. TORMEY
------------------------------------------
Name: Douglas J. Tormey
------------------------------------
Title: Vice President
------------------------------------
LIMITED PARTNER:
SC2, Inc., a Delaware corporation
By: /s/ DOUGLAS J. TORMEY
------------------------------------------
Name: Douglas J. Tormey
------------------------------------
Title: Vice President
------------------------------------
<PAGE> 77
SHAREHOLDERS:
By: /s/ JOHN BALKCOM
------------------------------------------
Name: John Balkcom
-------------------------------------
State of Residence: Illinois
-----------------------
By: /s/ MARK BLESSINGTON
------------------------------------------
Name: Mark Blessington
-------------------------------------
State of Residence: Illinois
-----------------------
By: /s/ FREDERICK BRIGGS
------------------------------------------
Name: Frederick (Ted) Briggs
-------------------------------------
State of Residence: California
-----------------------
By: /s/ ROGER BROSSY
------------------------------------------
Name: Roger Brossy
-------------------------------------
State of Residence: California
-----------------------
By: /s/ SEYMOUR BURCHMAN
------------------------------------------
Name: Seymour Burchman
-------------------------------------
State of Residence: Pennsylvania
-----------------------
By: /s/ PAMELA COHEN
------------------------------------------
Name: Pamela Cohen
-------------------------------------
State of Residence: Michigan
-----------------------
By: /s/ GLENN DALTON
------------------------------------------
Name: Glenn Dalton
-------------------------------------
State of Residence: Missouri
-----------------------
By: /s/ BARBARA DEWEY
------------------------------------------
Name: Barbara Dewey
-------------------------------------
State of Residence: New Jersey
-----------------------
<PAGE> 78
By: /s/ DONALD GALLO
------------------------------------------
Name: Donald Gallo
-------------------------------------
State of Residence: New Jersey
-----------------------
By: /s/ DONALD GOUGH
------------------------------------------
Name: Donald Gough
-------------------------------------
State of Residence: New Hampshire
-----------------------
By: /s/ ELIZABETH HAWK
------------------------------------------
Name: Elizabeth Hawk
-------------------------------------
State of Residence: Missouri
-----------------------
By: /s/ MYRNA HELLERMAN
------------------------------------------
Name: Myrna Hellerman
-------------------------------------
State of Residence: Illinois
-----------------------
By: /s/ JAMES KOCHANSKI
------------------------------------------
Name: James Kochanski
-------------------------------------
State of Residence: North Carolina
-----------------------
By: /s/ STEVEN LANDBERG
------------------------------------------
Name: Steven Landberg
-------------------------------------
State of Residence: New York
-----------------------
By: /s/ PETER LeBLANC
------------------------------------------
Name: Peter LeBlanc
-------------------------------------
State of Residence: North Carolina
-----------------------
By: /s/ WILLIAM O'CONNELL
------------------------------------------
Name: William O'Connell
-------------------------------------
State of Residence: New Jersey
-----------------------
By: /s/ VINCENT PERRO
------------------------------------------
Name: Vincent Perro
-------------------------------------
State of Residence: New York
-----------------------
<PAGE> 79
By: /s/ JUDE RICH
------------------------------------------
Name: Jude Rich
-------------------------------------
State of Residence: New Jersey
-----------------------
By: /s/ KAREN ROCHE
------------------------------------------
Name: Karen Roche
-------------------------------------
State of Residence: California
-----------------------
By: /s/ ANNE SAUNIER
------------------------------------------
Name: Anne Saunier
-------------------------------------
State of Residence: New York
-----------------------
By: /s/ RICHARD SEMLER
------------------------------------------
Name: Richard Semler
-------------------------------------
State of Residence: California
-----------------------
By: /s/ STEPHEN STRELSIN
------------------------------------------
Name: Stephen Strelsin
-------------------------------------
State of Residence: Illinois
-----------------------
By: /s/ GERARD THOMAS
------------------------------------------
Name: Gerard (Chip) Thomas
-------------------------------------
State of Residence: North Carolina
-----------------------
By: /s/ DOUGLAS TORMEY
------------------------------------------
Name: Douglas Tormey
-------------------------------------
State of Residence: Connecticut
-----------------------
By: /s/ SUSAN ANNUNZIO TYNAN
------------------------------------------
Name: Susan Annunzio Tynan
-------------------------------------
State of Residence: Illinois
-----------------------
<PAGE> 1
EXHIBIT NO. 10.11
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This First Amendment to Asset Purchase Agreement dated as of
August 31, 1998, is by and among SC/NE, LLC, a Delaware limited liability
company ("Buyer"), Nextera Enterprises, L.L.C., a Delaware limited liability
company, ("Nextera"), Sibson & Company, L.P., a Delaware limited partnership
(the "Seller") on behalf of itself and as the Shareholder Representative of the
Shareholders (as defined in the Purchase Agreement as hereinafter defined),
Sibson & Company, Inc., a Delaware corporation ("General Partner") and SC2,
Inc., a Delaware corporation ("Limited Partner").
W I T N E S S E T H
WHEREAS, by that Asset Purchase Agreement, dated as of August 31,
1998 (the "Purchase Agreement"), the parties thereto have agreed, among other
things, that Seller shall sell substantially all of its assets to Buyer, Buyer
shall assume certain liabilities of Seller and Nextera shall provide certain
consideration to Seller as more particularly described in the Purchase
Agreement;
WHEREAS, Buyer, Nextera, the Seller, on behalf of itself and the
Shareholders, General Partner and Limited Partner desire to modify and amend the
Purchase Agreement and certain exhibits to the Purchase Agreement as provided
herein; and
WHEREAS, Seller was appointed by the Shareholders to serve as the
Shareholder Representative for purposes of amending the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and in the Purchase Agreement, and of other good and valuable
consideration, the mutual receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto, for themselves and their respective successors
and assigns, hereby agree as follows:
1. Definitions. Unless otherwise defined herein, all capitalized
terms used herein shall have the meanings ascribed to them in the Purchase
Agreement.
2. Purchase Price. The provisions of Section 2.4 of the Purchase
Agreement are modified as follows:
(a) The first sentence of Section 2.4(a) is hereby deleted
and the following is inserted in lieu thereof:
In consideration of the sale, transfer, assignment,
conveyance and delivery of an undivided 84.18% interest in
the Assets by Seller to Buyer and in reliance upon the
representations and warranties of Seller herein contained
and made at the Closing and upon the terms
<PAGE> 2
and subject to the satisfaction or waiver by the party
entitled thereto of all of the conditions set forth herein,
Buyer agrees that at the Closing, it will pay to Seller the
aggregate amount of Thirty Four Million Seven Hundred Sixty
Three Thousand Nine Hundred Dollars ($34,763,900) (the
"Purchase Price") (to be paid by wire transfer of
immediately available funds) and shall assume the Assumed
Liabilities pursuant to this Agreement.
(b) The first sentence of Section 2.4(b) is hereby deleted
and the following is inserted in lieu thereof:
In consideration of the contribution of an undivided 15.82%
interest in the Assets by Seller to Buyer and in reliance
upon the representations and warranties of Seller herein
contained and made at the Closing and upon the terms and
subject to the satisfaction or waiver of all of the
conditions set forth herein, Buyer agrees that at the
Closing, it will (i) deliver to Seller the aggregate amount
of 1,828,539 Nextera Class A Units issued by Nextera in
Seller's name pursuant to the Nextera Operating Agreement
and (ii) deliver to the Escrow Agent 784,548 Nextera Class A
Units (the "Escrow Amount") issued by Nextera in Seller's
name pursuant to and in accordance with the terms of the
Nextera Operating Agreement and to be held in the manner
described in the Escrow Agreement to be executed in
substantially the form attached hereto as Exhibit B
2. Notices. The provision of Section 14.3 of the Purchase Agreement
listing the address of "Steven Landberg" under the heading "TO THE SHAREHOLDERS"
is hereby deleted in its entirety and the following is inserted in lieu thereof:
Steven Landberg
9 Tuthill Avenue
Rowayton, CT 06853
Notwithstanding anything to the contrary in the Purchase Agreement or
other agreements related thereto, the parties acknowledge that Steven Landberg's
state of residence is Connecticut.
3. Exhibit A to Purchase Agreement; Shareholders. Exhibit A to the
Purchase Agreement is hereby deleted and replaced in its entirety and in lieu
thereof with the "Amended Exhibit A to Purchase Agreement" attached hereto.
4. Exhibit C to Purchase Agreement; Shareholders. Exhibit C to the
Purchase Agreement is hereby deleted and replaced in its entirety and in lieu
thereof with the "Amended Exhibit C to Purchase Agreement" attached hereto.
<PAGE> 3
5. Exhibit L to Purchase Agreement; Business Plan. Exhibit L to the
Purchase Agreement is hereby modified by adding after the Buyer Operating
Agreement the "Business Plan" attached hereto as "Amended Exhibit L to Purchase
Agreement."
6. Exhibit N to Purchase Agreement. The Stockholders Agreement
attached as Exhibit C to the Exchange Agreement attached as Exhibit N to the
Purchase Agreement is hereby modified as follows: (a) "Fred Mendelsohn" is
hereby added as a party to the Stockholders Agreement and a signature block is
hereby added for such individual; (b) the name "Fred Mendelsohn" is hereby added
to the Table of Stockholders attached as Schedule A to the Stockholders
Agreement; (c) the names "Paul Britton," "Michael Hogan," "David Rainville" and
signature blocks for such individuals are hereby removed from the signature
pages to the Stockholders Agreement; and (d) "Paul Britton," "Michael Hogan,"
"Barbara McInerney" and "McInerney Children's Trust" are hereby removed from the
Table of Stockholders attached as Schedule A to the Stockholders Agreement.
7. Exhibit S to Purchase Agreement; PNC Bank. The attached "Exhibit S
to Purchase Agreement" regarding the assignment to, and assumption by, Buyer of
Seller's Revolving Credit Facility with PNC Bank, National Association, and all
indebtedness thereunder (which includes a release of Seller and its Subsidiaries
from all obligations thereunder) shall be appended to the Purchase Agreement as
Exhibit S thereto.
8. Exhibit A to Escrow Agreement; Shareholders. Exhibit A to the form
of Escrow Agreement attached as Exhibit B to the Purchase Agreement is hereby
deleted and replaced in its entirety and in lieu thereof with the "Amended
Exhibit A to Escrow Agreement" attached hereto.
9. Exhibit A to Exchange Agreement; Shareholders. Exhibit A to the
form of Exchange Agreement attached as Exhibit N to the Purchase Agreement is
hereby deleted and replaced in its entirety and in lieu thereof with the
"Amended Exhibit A to Exchange Agreement" attached hereto.
10. Full Force and Effect of Agreement. As modified and amended by
this First Amendment, all of the terms, covenants and conditions of the Purchase
Agreement are hereby ratified and confirmed and shall continue to be and remain
in full force and effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the day and year first above written.
BUYER:
SC/NE, LLC, a Delaware limited
liability company
By: NEXTERA ENTERPRISES, L.L.C.
Its: Sole Member
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------------
Name: Michael P. Muldowney
--------------------------------
Title: Chief Financial Officer
-------------------------------
NEXTERA:
NEXTERA ENTERPRISES, L.L.C., a Delaware
limited liability company
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------------
Name: Michael P. Muldowney
--------------------------------
Title: Chief Financial Officer
-------------------------------
<PAGE> 5
SELLER:
SIBSON & COMPANY, L.P., a Delaware
limited partnership
By: Sibson & Company, Inc.,
its General Partner
By: /s/ DOUGLAS J. TORMEY
---------------------------------------
Name: Douglas J. Tormey
--------------------------------
Title: Vice President
-------------------------------
GENERAL PARTNER:
SIBSON & COMPANY, INC.,
a Delaware corporation
By: /s/ DOUGLAS J. TORMEY
---------------------------------------
Name: Douglas J. Tormey
--------------------------------
Title: Vice President
-------------------------------
LIMITED PARTNER:
SC2, Inc., a Delaware corporation
By: /s/ DOUGLAS J. TORMEY
---------------------------------------
Name: Douglas J. Tormey
--------------------------------
Title: Vice President
-------------------------------
<PAGE> 6
SHAREHOLDER REPRESENTATIVE:
SIBSON & COMPANY, L.P.,
a Delaware limited partnership
By: Sibson & Company, Inc.,
its General Partner
By: /s/ DOUGLAS J. TORMEY
---------------------------------------
Name: Douglas J. Tormey
--------------------------------
Title: Vice President
-------------------------------
<PAGE> 1
EXHIBIT NO. 10.12
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is entered into as of
August 31, 1998 by and among SC/NE, LLC, a Delaware limited liability company
("Buyer"), Nextera Enterprises, L.L.C., a Delaware limited liability company and
the controlling member of Buyer ("Nextera"), Sibson & Company, L.P., a Delaware
limited partnership ("Seller"), Sibson & Company, Inc., a Delaware corporation
("General Partner"), SC2, Inc., a Delaware corporation ("Limited Partner"), the
holders of capital stock of the General Partner and the Limited Partner (the
"Shareholders"), and Chase Manhattan Trust Company, National Association, as
escrow agent (the "Escrow Agent").
WHEREAS, pursuant to an Asset Purchase Agreement (the "Purchase
Agreement") dated as of the date hereof, by and among Buyer, Nextera, Seller,
General Partner, Limited Partner and the Shareholders, Buyer is purchasing
certain assets and assuming certain liabilities from Seller;
WHEREAS, Seller, General Partner, Limited Partner and the
Shareholders have agreed to indemnify Buyer and Nextera against certain breaches
of the representations, warranties and covenants made by Seller, General
Partner, Limited Partner and the Shareholders in the Purchase Agreement and
against certain other matters as specified in Article XII of the Purchase
Agreement; and
WHEREAS, to secure payment of the Shareholders' indemnification
obligations, 784,548 Class A Common Units of Nextera (the "Escrow Units" and
together with additions to or earnings on the same, the "Escrow Deposit") are
being deposited, pursuant to Section 2.4 of the Purchase Agreement, in escrow to
be held as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises of the parties herein contained, and other good and valuable
consideration, receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Establishment of Escrow: Investment.
(a) Buyer and Nextera have herewith deposited the Escrow Units
with the Escrow Agent contemporaneously herewith. The Escrow Units have been
issued in the name of Seller, and shall be accompanied by stock powers or
similar instruments duly signed in blank by Seller. Seller may transfer and
assign its right to the Escrow Units to General Partner and Limited Partner by
providing written notice to the Escrow Agent and Nextera and by furnishing to
Nextera such documents as may be required to effect such transfer as set forth
in the last sentence of Section 6 hereof. The Escrow Deposit shall be held in
escrow in an account designated as the Sibson & Company Escrow Account or an
account having such other similar designation, subject to the terms and
conditions set forth herein. The Escrow Agent shall invest all cash, if any,
held as part of the Escrow Deposit only in such specific investments as Nextera
and the Escrow
<PAGE> 2
Representative (as hereinafter defined) shall from time to time jointly direct
in writing to the Escrow Agent; provided, however, that such investments shall
be limited to:
(1) time and demand deposits, certificates of deposit and
acceptances, maturing within ninety (90) days from
the date of acquisition thereof, issued by state and
national banks located in the United States of
America, including the Escrow Agent or any of its
affiliates, and having capital, surplus and profits
aggregating at least one hundred million dollars
($100,000,000);
(2) securities or other obligations of, or guaranteed by,
the United States of America or any agency thereof
having maturities of not greater than one (1) year;
(3) commercial paper, maturing within ninety (90) days
from the date of acquisition thereof, rated A-1 or
P-1 by Standard & Poor's or Moody's Investors
Service;
(4) repurchase agreements fully collateralized by
obligations described in clauses 1(a)(1), 1(a)(2) or
1(a)(3) hereof;
(5) shares of investment companies registered under the
Investment Company Act of 1940 which invest in any
obligation described herein, or shares of the Chase
Vistasm Money Market Mutual Funds or any other mutual
fund for which the Escrow Agent or an affiliate of
the Escrow Agent serves as investment manager,
administrator, shareholder servicing agent, and/or
custodian or subcustodian, notwithstanding that (i)
the Escrow Agent or an affiliate of the Escrow Agent
receives fees from such funds for services rendered
or (ii) services performed for such funds and
pursuant to this Agreement may at times duplicate
those provided to such funds by the Escrow Agent or
its affiliates.
Until further written notice, cash in the Escrow Deposit shall be
invested in Chase Vistasm Prime Money Market Fund. Unless otherwise directed in
writing by the Escrow Representative and Nextera, the Escrow Agent shall not
invest all or any portion of the Escrow Deposit in any investment if the
maturity date of such investment is later than the Termination Date (as defined
below).
(b) Seller, General Partner, Limited Partner and the Shareholders
(collectively, the "Selling Parties" and each, individually, a "Selling Party")
hereby appoint Seller and, upon conversion of Seller to a limited liability
company, such limited liability company, to serve as the exclusive
representative of the Selling Parties with respect to this Agreement (the
"Escrow Representative"). and Seller, on behalf of itself and its successors and
assigns, hereby accepts such appointment. If, for any reason, the Escrow
Representative shall be either unable or unwilling to serve, a successor Escrow
Representative shall be appointed by written consent of the Shareholders and all
references to the Escrow Representative shall be deemed to include such
2
<PAGE> 3
successor. Each Selling Party whose signature appears below expressly agrees
that this Agreement may be amended or modified, and compliance with any
condition or covenant may be waived without the consent of, or execution thereof
by, such Selling Party if the Escrow Representative agrees to such amendment or
modification or grants such waiver, in each case by a writing duly and validly
executed by the Escrow Representative as provided in Section 13; provided,
however, that the Escrow Representative will not enter into any such amendment
or modification or waive any condition or covenant that materially and adversely
affects any Shareholder differently than all other Shareholders affected thereby
without the consent of such Shareholder.
2. Amounts Earned on Escrow Deposit: Tax Matters. All amounts
earned, paid or distributed with respect to the Escrow Deposit, if any, (whether
interest, dividends, distributions from Nextera with respect to the Escrow Units
or otherwise) shall become a part of the Escrow Deposit, shall be held hereunder
upon the same terms as the original Escrow Deposit and shall be distributed
together with the underlying portion of the original Escrow Deposit pursuant to
the terms of this Agreement. The parties agree that, prior to the consummation
of the transactions contemplated by the Exchange Agreement (as defined in
Section 5 below), the Partnership or the General Partner and the Limited
Partner, as the case may be, will include all amounts earned on the Escrow
Deposit (or allocated or distributed with respect thereto) in their gross income
for federal, state and local income tax (collectively, "income tax") purposes
and pay any income tax resulting therefrom. The parties agree that, after the
consummation of the transactions contemplated by the Exchange Agreement, the
Shareholders shall include all amounts earned on the Escrow Deposit in their
gross income for income tax purposes and pay any income tax resulting therefrom,
pro rata in accordance with their combined ownership percentage as set forth on
Exhibit A.
3
<PAGE> 4
3. Claims Against Escrow Deposit.
(a) At any time or times prior to the Termination Date (as
hereinafter defined), Nextera, or any successor of Nextera, may make claims
against the Escrow Deposit for indemnification pursuant to and in accordance
with Article XII of the Purchase Agreement or Article VI of the Exchange
Agreement. Nextera shall notify the Escrow Representative and the Escrow Agent
in writing promptly upon determination to make a claim and in any event prior to
the expiration of this Agreement of each such claim, including a summary of the
amount of and bases for such claim. If the Escrow Representative shall dispute
such claim, the Escrow Representative shall give written notice thereof to
Nextera and to the Escrow Agent within thirty (30) days after receipt of notice
of Nextera's claim, in which case the Escrow Agent shall continue to hold the
Escrow Deposit in accordance with the terms of this Agreement; otherwise, such
claim shall be deemed to have been acknowledged to be payable out of the Escrow
Deposit in the full amount thereof and the Escrow Agent shall use its best
efforts to pay such claim to Nextera within three (3) business days after
expiration of said thirty (30) day period or as soon thereafter as possible
following the determination of the fair market value of the Escrow Units
pursuant to Section 3(b)(ii) below. If the amount of the claim exceeds the value
of the Escrow Deposit, the Escrow Agent shall have no liability or
responsibility for any deficiency.
(b) The Escrow Agent shall follow the procedure below in making
any payment in satisfaction of a claim against the Escrow Deposit:
(i) The Escrow Agent shall make such payment first from cash
additions to or earnings on the Escrow Units, if any, until all cash in the
Escrow Deposit has been exhausted.
(ii) To the extent that any claim exceeds the amount of cash
in the Escrow Deposit, the Escrow Agent shall make payment from the Escrow Units
in such number of Escrow Units (computed to the nearest whole unit) having a
value equal to the value of the claim not satisfied by cash payment. Any payment
of Escrow Units by the Escrow Agent to Nextera shall be treated as an adjustment
to the number of Class A Common Units of Nextera received as consideration under
the Purchase Agreement by Seller or, following consummation of the transactions
contemplated by the Exchange Agreement as an adjustment to the consideration
received by the Shareholders pursuant to the Exchange Agreement, as the case may
be. The value of an Escrow Unit for purposes of this Section shall be the fair
market value of such unit on the date of the claim as determined by the Board of
Directors of Nextera (the "Board"). The fair market value shall be determined in
good faith by the Board and the Board shall notify the Escrow Representative and
Escrow Agent in writing of its determination (the "Initial Valuation Notice").
If the Escrow Representative disputes the fair market value of the Escrow Units
as determined by the Board, then the Escrow Representative shall so notify the
Board and Escrow Agent in writing (the "Appraisal Notice") within ten (10)
business days of receipt of the Initial Valuation Notice. Within twenty (20)
business days of the receipt of the Appraisal Notice, the Board and the Escrow
Representative shall each appoint a professional appraiser to determine the fair
market value of the Escrow Units. Each appraiser shall have at least five (5)
years experience in appraising companies similar to Nextera. The two appraisers
shall within the succeeding twenty (20) day period after their selection,
attempt to reach agreement on the fair market value. If the
4
<PAGE> 5
appraisers reach such agreement they shall so notify the Escrow Agent and their
agreement shall be final and binding on Buyer, Nextera, the Board, the Escrow
Representative, Seller, General Partner, Limited Partner, the Shareholders, and
their affiliates. If the appraisers fail to agree, they shall within ten (10)
days thereafter select a third appraiser with the same qualification
requirements, and the three (3) appraisers shall establish the fair market value
by majority vote within the succeeding twenty (20) day period and shall notify
the Escrow Agent of their determination. Such determination of the fair market
value shall be final and binding on Buyer, Nextera, the Board, the Escrow
Representative, Seller, the Shareholders, and their affiliates. In all events,
the appraisers selected shall be unaffiliated with and otherwise independent of
Buyer, Nextera, the Board, the Escrow Representative, Seller, General Partner,
Limited Partner, the Shareholders, and their affiliates. If the fair market
value of the Escrow Units, as determined by the appraisers, is less than or no
more than five percent (5%) greater than the value as determined by the Board,
then the Shareholders shall pay all costs associated with the appraisers. If the
fair market value as determined by the appraisers is more than five percent (5%)
greater than the value as determined by the Board, then Nextera shall pay for
all costs associated with the appraisers. In determining fair market value,
neither the Board nor any appraiser shall take into account (x) the value
assigned to the Nextera Class A Units in connection with the Purchase Agreement
or (y) any discount for a minority interest.
To the extent Seller has transferred its rights to the Escrow
Units to General Partner and Limited Partner, the Escrow Units delivered to
Nextera in satisfaction of a claim shall be allocated among the General Partner
and Limited Partner so as to reduce each corporation's interest in the remaining
Escrow Units in proportion to their respective ownership percentages as set
forth on Exhibit A hereto. In the event that the Incorporation Transaction (as
defined in Section 5 below) has occurred, thereafter the Escrow Units delivered
to Nextera in satisfaction of a claim shall be allocated among the Shareholders
so as to reduce each Shareholder's interest in the remaining Escrow Units in
proportion to their respective ownership percentages as set forth on Exhibit A
hereto. Notwithstanding the foregoing, (i) any claim that is an Individual Claim
(as defined in the Purchase Agreement) shall be satisfied by reduction of the
interest in the Escrow Deposit of the Shareholder who committed fraud or who
made the representation, warranty or covenant from which the Individual Claim
arose and no other Shareholder shall have any liability therefor hereunder and
(ii) the satisfaction of one or more Individual Claims as describe in clause (i)
shall not increase the proportion of any subsequent claim for which any
Shareholder would have been responsible absent such prior satisfaction of such
Individual Claims. In the event that the Escrow Agent must make payment with a
number of units less than or different from the number of units represented by a
certificate in the Escrow Deposit, the Escrow Agent shall surrender such
certificate to Nextera and Nextera shall issue to the Escrow Agent certificates
of Nextera Class A Units identical in form but for the number of units as
necessary to allow for proper payment of the claim so long as the number of
units of the new certificates plus the amount of units used to satisfy such
claim shall be equivalent to the total number of units covered by the
surrendered certificate.
4. Disputed Claims.
5
<PAGE> 6
(a) If the Escrow Representative shall dispute an indemnification
claim of Nextera as above provided, the Escrow Agent shall set aside a portion
of the Escrow Deposit sufficient to pay said claim in full as reasonably
determined by Nextera in good faith (the "Set Aside Amount"). Nextera shall
notify the Escrow Agent in writing of the Set Aside Amount. If Nextera notifies
the Escrow Agent in writing that it has made out-of-pocket expenditures in
connection with any such disputed claim, and provides paid receipts for such
expenditures, in addition to expenditures included in the Set Aside Amount, an
amount equal to such additional expenditures shall be added to the Set Aside
Amount. The appropriate number of Escrow Units in the Set Aside Amount shall be
determined by the procedure described in Section 3(b)(ii) above.
(b) If the disputed indemnification claim has not been resolved
or compromised within sixty (60) days after the Escrow Agent's receipt of the
Escrow Representative's notice of dispute of the same, or in the event of a
third-party claim or suit, within fifteen (15) days after its resolution or
compromise, said indemnification claim shall be referred to the American
Arbitration Association, to be settled by binding arbitration in New York, New
York, in accordance with the commercial arbitration rules of the Association.
The fees and expenses of the arbitrator shall be borne equally by the
Shareholders on the one hand and Nextera on the other. In no event shall the
Escrow Agent be responsible for any fee or expense of any party to any
arbitration proceeding. The determination of the arbitrator as to the amount, if
any, of the indemnification claim which is properly allowable shall be
conclusive and binding upon the parties hereto and judgment may be entered
thereon in any court having jurisdiction thereof, including, without limitation,
any court in the State of New York. The arbitrator shall have the authority in
its discretion to award to the prevailing party reasonable costs and expenses
including attorney's fees and the cost of arbitration. The Escrow Agent shall
use its best efforts to make payment of such claim, as and to the extent
allowed, to Nextera out of the Set Aside Amount (or if insufficient, out of the
Escrow Deposit) within three (3) business days following the Escrow Agent's
receipt of said determination or as soon thereafter as possible.
(c) Notwithstanding Section 4(b), if a disputed indemnification
claim has not been resolved or compromised as of the Termination Date (as
hereinafter defined), and such claim does not involve a third-party claim or
suit, Nextera and the Escrow Representative shall continue to negotiate in good
faith a settlement of such claims for a period of ten (10) days after the
Termination Date. If, after the expiration of such ten-day period, such
indemnification claim still has not been resolved or compromised, such claim
shall be settled in accordance with the arbitration provisions set forth in
Section 4(b).
(d) It is understood and agreed that should any dispute arise
under this Section 4, the Escrow Agent, upon receipt of written notice of such
dispute or claim by the Escrow Representative, is authorized and directed to
retain in its possession without liability to anyone, the Set Aside Amount
relating to such dispute plus any expenditures of Nextera made pursuant to
Section 4(a) until such dispute shall have been settled pursuant to this Section
4. The Escrow Agent may, but shall be under no duty whatsoever to, institute or
defend any legal proceedings which relate to the Escrow Deposit.
(e) In connection with the resolution of a disputed
indemnification claim, the arbitrator may award, in its discretion, to the
Shareholders interest on the amount by which the
6
<PAGE> 7
Set Aside Amount exceeds the amount which the arbitrator determined would have
been a reasonable Set Aside Amount, computed from the Termination Date to the
date such Set Aside Amount is released from escrow if the arbitrator determines
that (i) Nextera had no reasonable basis for making the indemnification claim or
(ii) the Set Aside Amount as determined by Nextera had no reasonable relation to
the amount of the claim. The arbitrator may not award interest under this
Section 4(e) if Nextera's claim is occasioned by, or the Set Aside Amount
corresponds to the amount of, a third-party claim regardless of the merits of
such third-party claim.
5. Incorporation Transaction; Exchange of Escrow Units. Pursuant
to that certain Share Exchange Agreement (the "Exchange Agreement") dated as of
the date hereof by and among Buyer, Nextera, the Partnership, General Partner,
Limited Partner and the Shareholders, the Shareholders shall exchange their
shares of capital stock of General Partner and Limited Partner for Newco Class A
Stock (as defined in the Exchange Agreement) and the remaining Escrow Units at
the time of the Incorporation Transaction (as defined in the Exchange Agreement)
shall be released from escrow under this Agreement and an appropriate number of
shares of Newco Class A Stock (as defined in the Exchange Agreement) shall be
delivered to the Escrow Agent in substitution for the Escrow Units. Following
the Incorporation Transaction, all references to Escrow Units in this Agreement
shall be deemed to include such shares of Newco Class A Stock. The Escrow Agent
shall follow the joint written instruction of Nextera and the Escrow
Representative in carrying out the provisions of this Section 5.
6. Termination. This Agreement shall terminate on the date that
the Escrow Deposit is reduced to zero as the result of payments by the Escrow
Agent to Nextera in accordance with the provisions of Section 3 or Section 4.
If, however, the Escrow Deposit has not been reduced to zero as of the date that
is eighteen (18) months following the date of this Agreement (the "Termination
Date") and there are no outstanding indemnification claims on the Termination
Date of which Escrow Agent has received notice hereunder, the Escrow Agent shall
distribute the amount remaining in the Escrow Deposit to Seller or, to the
extent Seller has transferred to the General Partner and Limited Partner its
rights to the Escrow Deposit, the General Partner and Limited Partner in
accordance with their respective ownership percentages as set forth on Exhibit A
hereto, or, in the event that the Incorporation Transaction has occurred, to the
Escrow Representative for distribution to the Shareholders in accordance with
their respective ownership percentages as set forth on Exhibit A hereto. After
such payment this Agreement shall terminate; otherwise this Agreement shall
continue in effect until all indemnification claims Nextera has made pursuant to
Section 3 hereof on or prior to the Termination Date shall have been disposed
of. As of the Termination Date, an amount of the Escrow Deposit adequate to
cover all disputed and undisputed claims made by Nextera pursuant to Section 3
hereof will be held by the Escrow Agent (with the number of Escrow Units, if
any, to be retained determined in accordance with Section 3(b)(ii)), and the
Escrow Agent shall distribute on the Termination Date the balance, if any, of
the Escrow Deposit to Seller or, to the extent Seller has transferred to the
General Partner and Limited Partner its rights to the Escrow Deposit, the
General Partner and Limited Partner in accordance with their respective
ownership percentages as set forth on Exhibit A hereto, or, in the event that
the Incorporation Transaction has occurred, to the Escrow Representative for
distribution to the Shareholders in accordance with their respective ownership
percentages as set forth on Exhibit A hereto. At such time as all remaining
indemnification claims hereunder have been resolved and the Escrow Agent has
received a written notice executed by
7
<PAGE> 8
Nextera and the Escrow Representative, or notification of a determination of an
arbitrator pursuant to Section 4(b), to that effect and any amounts to be
distributed to Nextera in connection therewith have been so distributed, the
Escrow Agent shall distribute the remaining Escrow Deposit, if any, to Seller
or, to the extent Seller has transferred to the General Partner and Limited
Partner its rights to the Escrow Deposit, to the General Partner and Limited
Partner in accordance with their respective ownership percentages as set forth
on Exhibit A hereto, or in the event that the Incorporation Transaction has
occurred or if, following a breach of Nextera's obligation to effect the
Incorporation Transaction under the Exchange Agreement, the General Partner and
Limited Partner have transferred to the Shareholders their rights to Nextera
Class A Units, to the Escrow Representative for distribution to the
Shareholders, in accordance with their respective ownership percentages as set
forth on Exhibit A hereto. The Escrow Representative shall notify the Escrow
Agent in writing upon Seller's transfer of its rights hereunder to General
Partner and Limited Partner, and Nextera, the Escrow Representative, General
Partner and Limited Partner shall take all necessary action to cause (i) the
certificates representing the Escrow Units registered in the name of the Seller
and the related stock powers or similar instruments executed by the Seller and
deposited with the Escrow Agent to be released from escrow and transferred to
General Partner and Limited Partner and (ii) new certificates registered in the
name of General Partner and Limited Partner, together with stock powers or
similar instruments duly signed in blank by General Partner and Limited Partner,
to be deposited with the Escrow Agent in substitution for the certificates
registered in the name of the Seller and the stock powers or similar instruments
executed by Seller.
7. The Escrow Agent.
(a) Direction from Nextera and Escrow Representative.
Notwithstanding anything herein to the contrary, the Escrow Agent shall promptly
dispose of all or any part of the Escrow Deposit as directed by a writing signed
by Nextera and Escrow Representative.
(b) Reliance by Escrow Agent; Liability of Escrow Agent. Except
with respect to capitalized terms used herein and defined in the Purchase
Agreement or the Exchange Agreement, the Escrow Agent will not be subject to, or
be obliged to recognize, any other agreement between the parties hereto or
directions or instructions not specifically set forth as provided for herein.
The Escrow Agent will not make any payment or disbursement from or out of the
Escrow Deposit that is not expressly authorized pursuant to this Agreement. The
Escrow Agent undertakes to perform only such duties as are expressly set forth
herein. The Escrow Agent may rely and shall be protected in acting or refraining
from acting upon any written notice, instruction or request furnished to it
hereunder and believed by it to be genuine and to have been signed or presented
by the proper party or parties. The Escrow Agent shall be under no duty to
inquire into or investigate the validity, accuracy or content of any such
document. The Escrow Agent shall have no duty to solicit any payment which may
be due it hereunder. The Escrow Agent shall not be liable for any action taken
or omitted by it in good faith unless a court of competent jurisdiction
determines that the Escrow Agent's gross negligence and willful misconduct was
the primary cause of any loss to Buyer, Nextera, Seller, General Partner,
Limited Partner or the Shareholders. In the administration of the Escrow Deposit
hereunder, the Escrow Agent may execute any of its powers and perform its duties
hereunder directly or through agents or attorneys and may consult with counsel,
accountants and other skilled persons to be selected
8
<PAGE> 9
and retained by it. The Escrow Agent shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the advice or opinion
of any such counsel, accountants or other skilled persons. Buyer, Nextera,
Seller, General Partner, Limited Partner and the Shareholders jointly and
severally hereby agree to indemnify and hold the Escrow Agent and its directors,
officers, agents and employees (collectively, the "Indemnitees") harmless from
and against any and all claims, liabilities, losses, damages, fines, penalties,
and expenses, including out-of-pocket and incidental expenses and legal fees and
expenses ("Losses") that may be imposed on, incurred by, or asserted against the
Indemnitees or any of them for following any instructions or other directions
upon which the Escrow Agent is authorized to rely pursuant to the terms of this
Agreement. In addition to and not in limitation of the immediately preceding
sentence, the Buyer, Nextera, Seller, General Partner, Limited Partner and the
Shareholders also agree jointly and severally to indemnify and hold the
Indemnitees and each of them harmless from and against any and all Losses that
may be imposed on, incurred by, or asserted against the Indemnitees or any of
them in connection with or arising out of Escrow Agent's performance under this
Agreement, provided the Indemnitees have not acted with gross negligence or
engaged in willful misconduct. Anything in this Agreement to the contrary
notwithstanding, in no event shall the Escrow Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits). As between Buyer and Nextera on the one hand and
Seller, General Partner, Limited Partner and the Shareholders on the other, each
shall bear equally the indemnification obligations set forth in this Section
7(b). The provisions of this Section 7(b) shall survive the termination of this
Agreement and the resignation or removal of the Escrow Agent for any reason.
(c) Fees and Expenses of the Escrow Agent. All fees of the Escrow
Agent for its services hereunder, together with any expenses reasonably incurred
by the Escrow Agent in connection with this Agreement, shall be shared equally
by Buyer on the one hand and the Seller, General Partner, Limited Partner and
the Shareholders on the other. The initial fees due the Escrow Agent to be paid
by the Seller, General Partner, Limited Partner and the Shareholders (which are
expected to be approximately $1,100) shall be paid in cash at the Closing and
reduced from the cash portion of the Purchase Price (as defined in the Purchase
Agreement). All other fees of the Escrow Agent in connection herewith shall be
due from the parties upon receipt of an invoice from the Escrow Agent delivered
to Nextera and the Escrow Representative.
(d) Resignation and Removal of Escrow Agent; Successor Escrow
Agent.
(i) The Escrow Agent may resign from its duties hereunder by
giving each of the parties hereto not less than thirty (30) days prior written
notice of the effective date of such resignation (which effective date shall be
at least thirty (30) days after the date such notice is given). In addition, the
Escrow Agent may be removed and replaced on a date designated in a written
instrument signed by Nextera and the Escrow Representative and delivered to the
Escrow Agent. The parties hereto intend that a successor escrow agent mutually
acceptable to the Escrow Representative and Nextera will be appointed to fulfill
the duties of the Escrow Agent hereunder for the remaining term of this
Agreement in the event of the Escrow Agent's resignation or removal. Upon the
effective date of such resignation or removal, the Escrow Agent shall deliver
the property comprising the Escrow Deposit to such successor escrow agent,
together with an accounting of the investments held by it and all transactions
related to this
9
<PAGE> 10
Agreement, including any distributions made and such records maintained by the
Escrow Agent in connection with its duties hereunder and other information with
respect to the Escrow Deposit as such successor may reasonably request. If on or
before the effective date of such resignation or removal, a successor escrow
agent has not been appointed, the Escrow Agent will thereupon deposit the Escrow
Deposit into the registry of a court of competent jurisdiction.
Upon written acknowledgment by a successor escrow
agent appointed in accordance with this Section 7(d)(i) of its agreement to
serve as escrow agent hereunder and the receipt of the property then comprising
the Escrow Deposit, the Escrow Agent shall be fully released and relieved of all
duties, responsibilities and obligations under this Agreement, except for those
arising under the last sentence of Section 7(b) of this Agreement, and such
successor escrow agent shall for all purposes hereof be the Escrow Agent.
(ii) Any corporation, association or other entity into which
the Escrow Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or otherwise transfer all or substantially
all of its corporate trust business, or any corporation, association or other
entity resulting from any such merger, conversion, consolidation, sale or other
transfer, shall, ipso facto, be and become successor Escrow Agent hereunder,
vested with all of the powers, discretions, immunities, privileges and all other
matters as was its predecessor, without the execution or filing of any
instrument or any further act on the part or any of the parties hereto, anything
herein to the contrary notwithstanding.
8. Voting of Escrow Units. So long as any Escrow Units are
retained by the Escrow Agent, Seller or, to the extent Seller has transferred
its interest to General Partner and Limited Partner, General Partner and Limited
Partner in accordance with their respective ownership percentages as set forth
on Exhibit A hereto, or, in the event that the Incorporation Transaction has
occurred or if, following a breach of Nextera's obligation to effect the
Incorporation Transaction under the Exchange Agreement, the General Partner and
Limited Partner have transferred to the Shareholders their rights to Nextera
Class A Units, the Shareholders shall be entitled to exercise the voting power,
if any, with respect to in the Escrow Units, in accordance with their respective
ownership percentages as set forth on Exhibit A hereto.
9. Governing Law. IT IS THE PARTIES' INTENT THAT THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW).
10. Counterparts. This Escrow Agreement may be executed in one or
more counterparts, all of which documents shall be considered one and the same
document.
11. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been given
when received, if personally delivered or sent by facsimile transmission, or
three (3) days after deposited in the U.S. mails for delivery by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
10
<PAGE> 11
TO BUYER: SC/NE, LLC
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (617) 778-4508
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO NEXTERA: Nextera Enterprises, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (617) 778-4508
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO SELLER: Sibson & Company, L.P.
830 Third Avenue, 7th Floor
New York, New York 10022
Attention: Vincent C. Perro
Fax: (212) 935-6489
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York NY 10153
Attention: David E. Zeltner, Esq.
Fax: (212) 310-8007
11
<PAGE> 12
TO GENERAL PARTNER: Sibson & Company, Inc.
830 Third Avenue, 7th Floor
New York, New York 10022
Attention: Vincent C. Perro
Fax: (212) 935-6489
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York NY 10153
Attention: David E. Zeltner, Esq.
Fax: (212) 310-8007
TO LIMITED PARTNER: SC2, Inc.
830 Third Avenue, 7th Floor
New York, New York 10022
Attention: Vincent C. Perro
Fax: (212) 935-6489
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York NY 10153
Attention: David E. Zeltner, Esq.
Fax: (212) 310-8007
TO ANY SHAREHOLDER: To the address set forth in the
Purchase Agreement.
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York NY 10153
Attention: David E. Zeltner, Esq.
Fax: (212) 310-8007
TO ESCROW AGENT: Chase Manhattan Trust Company,
National Association
One Oxford Centre
301 Grant Street, Suite 1100
Pittsburgh Pennsylvania 15219
Attention: Bruce J. Karhu
Fax: (412) 456-5565
Addresses may be changed by written notice given pursuant to this
Section. Any notice given hereunder may be given on behalf of any party by his
counsel or other authorized representatives.
11. Certification of Tax Identification Number. The parties
hereto agree to provide the Escrow Agent with a certified tax identification
number by signing and returning a Form W-9 (or Form W-8, in the case of non-U.S.
persons) to the Escrow Agent prior to the date on which any income earned on the
investment of the Escrow
12
<PAGE> 13
Deposit is credited to the Escrow Deposit. The parties hereto understand that,
in the event their tax identification numbers are not certified to the Escrow
Agent, the Internal Revenue Code, as amended from time to time, may require
withholding of a portion of any interest or other income earned on the
investment of the Escrow Deposit.
12. Force Majeure. Neither Buyer, Nextera, Seller, General
Partner, Limited Partner, the Shareholders nor the Escrow Agent shall be
responsible for delays or failures in performance under this Agreement resulting
from acts beyond its control. Such acts shall include but not be limited to acts
of God, strikes, lockouts, riots, acts of war, epidemics, governmental
regulations superimposed after the fact, fire, communication line failures,
computer viruses, power failures, earthquakes or other disasters.
13. Modifications. This Agreement may not be altered, amended or
modified, nor may compliance with any condition or covenant set forth herein be
waived, except by a writing duly and validly executed by each party hereto, or
in the case of a waiver, the party waiving compliance; provided, however, that,
except as specifically provided by Section 1(b) above, no amendment or
modification of this Agreement or waiver of compliance with any condition or
covenant that has been duly and validly executed in writing by the Escrow
Representative shall require the consent of, or execution thereof, by any other
Selling Party and shall be valid and binding without such consent or execution.
No course of conduct shall constitute a waiver of any of the terms and
conditions of this Escrow Agreement, unless such waiver is specified in writing,
and then only to the extent so specified. A waiver of any of the terms and
conditions of this Escrow Agreement on one occasion shall not constitute a
waiver of the other terms of this Escrow Agreement, or of such terms and
conditions on any other occasion.
14. Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by a
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement
to be executed, as of the date first written above.
BUYER:
SC/NE, LLC, a Delaware limited liability company
By: NEXTERA ENTERPRISES, L.L.C.
Its: Sole Member
By: /s/ MICHAEL P. MULDOWNEY
--------------------------------------------
Name: Michael P. Muldowney
Title: Chief Financial Officer
NEXTERA:
NEXTERA ENTERPRISES, L.L.C.
By: /s/ MICHAEL P. MULDOWNEY
--------------------------------------------
Name: Michael P. Muldowney
Title: Chief Financial Officer
SELLER:
SIBSON & COMPANY, L.P.
By: Sibson & Company, Inc., its General Partner
By: /s/ DOUGLAS J. TORMEY
--------------------------------------------
Name: Douglas J. Tormey
Title: Vice President
Tax Identification Number:
----------------------
GENERAL PARTNER:
SIBSON & COMPANY, INC.
By: /s/ DOUGLAS J. TORMEY
--------------------------------------------
Name: Douglas J. Tormey
Title: Vice President
Tax Identification Number:
----------------------
14
<PAGE> 15
LIMITED PARTNER:
SC2, INC.
By: /s/ DOUGLAS J. TORMEY
--------------------------------------------
Name: Douglas J. Tormey
Title: Vice President
Tax Identification Number:
----------------------
ESCROW AGENT:
CHASE MANHATTAN TRUST COMPANY, NATIONAL
ASSOCIATION, as Escrow Agent
By: /s/ BRUCE J. KARHU
--------------------------------------------
Name: Bruce J. Karhu
Title: Vice President
SHAREHOLDERS:
/s/ JOHN BALKCOM
--------------------------------------------
John Balkcom
Tax Identification Number:
------------------
/s/ MARK BLESSINGTON
--------------------------------------------
Mark Blessington
Tax Identification Number:
------------------
/s/ FREDERICK BRIGGS
--------------------------------------------
Frederick (Ted) Briggs
Tax Identification Number:
------------------
/s/ ROGER BROSSY
--------------------------------------------
Roger Brossy
Tax Identification Number:
------------------
/s/ SEYMOUR BURCHMAN
--------------------------------------------
Seymour Burchman
Tax Identification Number:
------------------
15
<PAGE> 16
/s/ PAMELA COHEN
--------------------------------------------
Pamela Cohen
Tax Identification Number:
------------------
/s/ GLENN DALTON
--------------------------------------------
Glenn Dalton
Tax Identification Number:
------------------
/s/ BARBARA DEWEY
--------------------------------------------
Barbara Dewey
Tax Identification Number:
------------------
/s/ DONALD GALLO
--------------------------------------------
Donald Gallo
Tax Identification Number:
------------------
/s/ DONALD GOUGH
--------------------------------------------
Donald Gough
Tax Identification Number:
------------------
/s/ ELIZABETH HAWK
--------------------------------------------
Elizabeth Hawk
Tax Identification Number:
------------------
/s/ MYRNA HELLERMAN
--------------------------------------------
Myrna Hellerman
Tax Identification Number:
------------------
/s/ JAMES KOCHANSKI
--------------------------------------------
James Kochanski
Tax Identification Number:
------------------
/s/ STEVEN LANDBERG
--------------------------------------------
Steven Landberg
Tax Identification Number:
------------------
/s/ PETER LeBLANC
--------------------------------------------
Peter LeBlanc
Tax Identification Number:
------------------
/s/ WILLIAM O'CONNELL
--------------------------------------------
William O'Connell
Tax Identification Number:
------------------
16
<PAGE> 17
/s/ VINCENT PERRO
--------------------------------------------
Vincent Perro
Tax Identification Number:
------------------
/s/ JUDE RICH
--------------------------------------------
Jude Rich
Tax Identification Number:
------------------
/s/ KAREN ROCHE
--------------------------------------------
Karen Roche
Tax Identification Number:
------------------
/s/ ANNE SAUNIER
--------------------------------------------
Anne Saunier
Tax Identification Number:
------------------
/s/ RICHARD SEMLER
--------------------------------------------
Richard Semler
Tax Identification Number:
------------------
/s/ STEPHEN STRELSIN
--------------------------------------------
Stephen Strelsin
Tax Identification Number:
------------------
/s/ GERARD THOMAS
--------------------------------------------
Gerard (Chip) Thomas
Tax Identification Number:
------------------
/s/ DOUGLAS TORMEY
--------------------------------------------
Douglas Tormey
Tax Identification Number:
------------------
/s/ SUSAN ANNUNZIO TYNAN
--------------------------------------------
Susan Annunzio Tynan
Tax Identification Number:
------------------
17
<PAGE> 1
Exhibit 10.13
NEXTERA ENTERPRISES, L.L.C
as Nextera
and
SIBSON ACQUISITION, CO.
as Canadian Buyer
and
THE HOLDERS OF ALL OF THE SHARES
OF SIBSON CANADA INC.
as the SC Shareholders
SHARE PURCHASE AGREEMENT
AUGUST 31, 1998
STIKEMAN, ELLIOTT
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
Section 1.1 Defined Terms................................................1
Section 1.2 Other Defined Terms..........................................7
ARTICLE 2
PURCHASE AND SALE OF PURCHASED SHARES
Section 2.1 Pre-Closing Steps............................................9
Section 2.2 Purchase of Purchased Shares................................11
Section 2.3 Purchase Price of Purchased Shares..........................12
Section 2.4 Satisfaction of Purchase Price..............................12
ARTICLE 3
CLOSING
Section 3.1 Closing.....................................................12
Section 3.2 Closing Procedures..........................................12
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SC SHAREHOLDERS
Section 4.1 Organization and Qualification of SC Holdco.................13
Section 4.2 Capitalization; Beneficial Ownership of SC Holdco...........13
Section 4.3 Activities of SC Holdco.....................................13
Section 4.4 Organization and Qualification of Sibson Canada.............13
Section 4.5 Capitalization; Beneficial Ownership of Sibson Canada.......14
Section 4.6 Subsidiaries of Sibson Canada...............................14
Section 4.7 Authority...................................................14
Section 4.8 Canadian Assets.............................................15
Section 4.9 Real Property...............................................15
Section 4.10 Financial Statements......................................17
Section 4.11 Absence of Certain Changes or Events......................18
Section 4.12 Contracts and Commitments.................................20
Section 4.13 Permits...................................................22
Section 4.14 Litigation................................................22
Section 4.15 Compliance with Law.......................................23
Section 4.16 Ordinary Course...........................................23
Section 4.17 Officers and Compensation.................................23
Section 4.18 Employees; Labour Matters.................................23
Section 4.19 Banking Relations.........................................24
Section 4.20 No Brokers................................................24
Section 4.21 No Other Agreements to Sell the Purchased Shares..........24
Section 4.22 Clients...................................................24
Section 4.23 Backlog...................................................25
(i)
<PAGE> 3
Section 4.24 Proprietary Rights........................................25
Section 4.25 Taxes.....................................................25
Section 4.26 Employee Benefit Programs.................................27
Section 4.27 Insurance.................................................29
Section 4.28 Accounts Receivable.......................................30
Section 4.29 [Intentionally deleted.]..................................30
Section 4.30 Environmental Matters.....................................30
Section 4.31 Warranty or Other Claims..................................31
Section 4.32 Records; Copies of Documents..............................31
Section 4.33 Powers of Attorney........................................32
Section 4.34 Disclosure................................................32
Section 4.35 Offshore Investment Representations.......................32
Section 4.36 Amounts Owing to SC Shareholders..........................36
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF NEXTERA AND
CANADIAN BUYER
Section 5.1 Organization................................................36
Section 5.2 Authority...................................................37
Section 5.3 Litigation..................................................38
Section 5.4 No Brokers..................................................39
Section 5.5 Membership Interests of Nextera.............................39
Section 5.6 Operating Agreement.........................................39
Section 5.7 Financial Statements........................................39
Section 5.8 Taxes.......................................................41
Section 5.9 Absence of Certain Changes or Events........................42
Section 5.10 [Intentionally Deleted]...................................43
Section 5.11 Compliance with Laws......................................43
Section 5.12 Proprietary Rights........................................43
ARTICLE 6
COVENANTS
Section 6.1 Further Assurances..........................................44
Section 6.2 Exchangeable Documentation..................................45
Section 6.3 Conduct of Business.........................................45
Section 6.4 No Solicitation of Other Offers.............................47
Section 6.5 Notification of Certain Matters.............................47
Section 6.6 Option Pool.................................................48
Section 6.7 Additional Units............................................49
Section 6.8 Conduct of the Business Following the Closing...............49
Section 6.9 Preservation of Confidentiality.............................49
Section 6.10 Activities of Canadian Buyer..............................50
Section 6.11 Investment Canada Act.....................................50
Section 6.12 Annual Incentive Plan.....................................50
(ii)
<PAGE> 4
ARTICLE 7
CONDITIONS TO SC SHAREHOLDERS' OBLIGATIONS
Section 7.1 Representations, Warranties and Covenants of Nextera
and Canadian Buyer........................................50
Section 7.2 No Actions or Court Orders..................................50
Section 7.3 Completion of Transactions under the U.S. Purchase
Agreement.................................................51
Section 7.4 Consents....................................................51
Section 7.5 Material Changes............................................51
Section 7.6 Approval of SC Shareholder's Counsel........................51
Section 7.7 Opinions of Counsel.........................................51
Section 7.8 Escrow Agreement............................................52
Section 7.9 Employment Agreements.......................................52
Section 7.10 Corporate Documents.......................................52
Section 7.11 Operating Agreement of Nextera............................52
Section 7.12 Operating Agreement of SC Amalco..........................52
Section 7.13 Exchangeable Documentation................................52
Section 7.14 Equity Participation Plan.................................52
Section 7.15 Annual Incentive Plan.....................................52
Section 7.16 Share Exchange Agreement..................................53
Section 7.17 Shareholders Loans........................................53
ARTICLE 8
CONDITIONS TO CANADIAN BUYER'S AND NEXTERA'S OBLIGATIONS
Section 8.1 Representations, Warranties and Covenants...................53
Section 8.2 Consents; Regulatory Compliance and Approval................53
Section 8.3 No Actions or Court Orders..................................53
Section 8.4 Approval of Canadian Buyer's Counsel........................54
Section 8.5 Approval of Nextera's Counsel...............................54
Section 8.6 Opinions....................................................54
Section 8.7 Material Changes............................................54
Section 8.8 Corporate Documents.........................................54
Section 8.9 Permits.....................................................55
Section 8.10 Escrow Agreement..........................................55
Section 8.11 Employment Agreements.....................................55
Section 8.12 Third-Party Financing.....................................55
Section 8.13 Pre-Closing Steps.........................................55
Section 8.14 Exchangeable Documentation................................55
Section 8.15 Share Exchange Agreement..................................55
ARTICLE 9
INDEMNIFICATION
Section 9.1 Indemnification by the Selling Parties......................55
Section 9.2 Limitations on Indemnification by the SC Shareholders.......56
Section 9.3 Indemnification by Nextera and Canadian Buyer...............58
Section 9.4 Limitation on Indemnification by Nextera and Canadian Buyer.58
Section 9.5 Notice; Defense of Claims...................................58
(iii)
<PAGE> 5
Section 9.6 Satisfaction of SC Shareholders Indemnification Obligations.59
Section 9.7 Use of Nextera Class A Units................................59
Section 9.8 Exclusive Remedy............................................60
Section 9.9 Indemnity...................................................60
ARTICLE 10
TERMINATION OF AGREEMENT; RIGHTS TO PROCEED
Section 10.1 Termination...............................................60
Section 10.2 Effect of Termination.....................................60
ARTICLE 11
MISCELLANEOUS
Section 11.1 Fees and Expenses.........................................61
Section 11.2 Governing Law.............................................61
Section 11.3 Notices...................................................61
Section 11.4 Entire Agreement..........................................63
Section 11.5 Assignability; Binding Effect.............................63
Section 11.6 Captions and Gender.......................................64
Section 11.7 Execution in Counterparts.................................64
Section 11.8 Amendments................................................64
Section 11.9 Publicity and Disclosures.................................64
Section 11.10 Specific Performance......................................64
Section 11.11 U.S. Currency.............................................65
LIST OF EXHIBITS AND SCHEDULES
(iv)
<PAGE> 6
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement, dated as of August 31, 1998, is by and
among NEXTERA ENTERPRISES, L.L.C., a Delaware limited liability company
("NEXTERA"), SIBSON ACQUISITION, CO., a newly formed Nova Scotia unlimited
liability company ("CANADIAN BUYER") and an indirect wholly owned subsidiary of
Nextera and the holders, directly or indirectly, of all of the issued and
outstanding shares of SIBSON CANADA INC. ("SIBSON CANADA") identified on Exhibit
A hereto as such (collectively, the "SC SHAREHOLDERS").
RECITALS:
(a) Pursuant to the Asset Purchase Agreement of even date herewith
(the "U.S. Purchase Agreement") among SC/NE, LLC ("Buyer"),
Nextera, Sibson & Company, L.P. ("Seller"), Sibson & Company,
Inc., SC2, Inc. and the Shareholders (as such term is defined
in the U.S. Purchase Agreement), the parties thereto agreed
that contemporaneously with the transactions contemplated
under the U.S. Purchase Agreement all of the issued and
outstanding shares of Sibson Canada would be sold to Nextera
or a direct or indirect wholly-owned subsidiary of Nextera;
(b) The SC Shareholders own of record and beneficially directly or
indirectly all of the issued and outstanding shares in the
capital of Sibson Canada and desire to sell all of such shares
to the Canadian Buyer upon the terms and subject to the
conditions of this Agreement; and
(c) The Canadian Buyer is an indirect wholly-owned subsidiary of
Nextera;
In consideration of the respective covenants and promises contained
herein and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINED TERMS.
As used herein, the terms below shall have the following meanings. Any
of such terms, unless the context otherwise requires, may be used in the
singular or plural, depending upon the reference:
"ACTION" shall mean any action, claim, suit, litigation, proceeding,
arbitral action, governmental audit, criminal prosecution, governmental
investigation or unfair labour practice charge or complaint.
"AFFILIATE" shall have the meaning set forth in the Business
Corporations Act (Ontario), as amended, and the rules and regulations
thereunder.
<PAGE> 7
- 2 -
"BOOKS AND RECORDS" shall mean, (a) all records and lists of Sibson
Canada pertaining to Sibson Canada, the Canadian Business and the
Canadian Assets, (b) all records and lists pertaining to the Canadian
Business, or personnel of Sibson Canada, (c) all product, business and
marketing plans of Sibson Canada and (d) all books, ledgers, files,
reports, plans, tax returns, drawings and operating records of every
kind maintained by Sibson Canada, including the originals of Sibson
Canada's minute books.
"BUSINESS DAY" shall mean any day of the year, other than a Saturday,
Sunday or any day on which banks are authorized or required to close in
Toronto, Ontario.
"BUYER OPERATING AGREEMENT" shall mean the Limited Liability Company
Agreement of SC/NE, LLC dated as of August 31, 1998, a true and correct
copy of which is attached as Exhibit F.
"CANADIAN ASSETS" shall mean all of Sibson Canada's right, title and
interest in and to the business, properties, assets and rights of any
kind, whether tangible or intangible, real or personal and wherever
located and constituting, or used or useful in connection with, or
related to, the Canadian Business or in which Sibson Canada has any
interest, including without limitation all of Sibson Canada's right,
title and interest in the following: all accounts and notes receivable
(whether current or noncurrent), refunds, deposits, prepayments or
prepaid expenses (including without limitation any prepaid insurance
premiums) of Sibson Canada; all cash and cash equivalents held by
Sibson Canada; all equity interests in other entities held by Sibson
Canada; all Contract Rights; all Leases; all Owned Real Property, if
any; all Leasehold Estates; all Leasehold Improvements; all Fixtures
and Equipment; all Inventory; all Books and Records; all Proprietary
Rights relating to the Canadian Business; all Permits, all Insurance
Policies; all available supplies, sales literature, promotional
literature, customer, supplier and distributor lists, art work, display
units, telephone and fax numbers and purchasing records related to the
Canadian Business; all rights under or pursuant to all warranties,
representations and guarantees made by in connection with the Canadian
Assets or services furnished to Sibson Canada pertaining to the
Canadian Business or affecting the Canadian Assets; all deposits and
prepaid expenses of Sibson Canada; all claims, causes of action, causes
in action, rights of recovery and rights of set-off of any kind,
against any person or entity, including without limitation any liens,
security interests, pledges or other rights to payment or to enforce
payment in connection with service performed or products delivered by
Sibson Canada on or prior to the Closing Date; and the goodwill of
Sibson Canada and the Canadian Business.
"CANADIAN BUSINESS" shall mean all of Sibson Canada's current
operations, wherever carried on, including its business of management
and human resources consulting.
"CLOSING DATE" shall mean August 31, 1998, or such other date as
Canadian Buyer and SC Shareholders shall mutually agree upon in
writing.
<PAGE> 8
- 3 -
"CONTRACT" shall mean any agreement, contract, note, loan, evidence of
indebtedness, purchase order, letter of credit, indenture, security or
pledge agreement, franchise agreement, undertaking, covenant not to
compete, employment agreement, license agreement, instrument,
obligation or commitment to which Sibson Canada is a party or is bound
and which relates to the Canadian Business or the Canadian Assets,
whether oral or written, but excluding all Leases.
"CONTRACT RIGHTS" shall mean all of Sibson Canada's rights and
obligations under the Contracts including, without limitation, those
Contracts listed on Schedule 4.9 and Schedule 4.12.
"COPYRIGHTS" shall mean registered copyrights, copyright applications
and unregistered copyrights.
"COURT ORDER" shall mean any judgment, decision, consent decree,
injunction, ruling or order of any federal, provincial or local court
or governmental agency, department or authority that is binding on any
person or its property under applicable law.
"DAMAGES" shall mean damages, Liabilities, losses, Taxes, fines,
penalties, costs, and expenses (including, without limitation,
reasonable fees of counsel) of any kind or nature whatsoever (whether
or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) but excluding
consequential or special damages.
"DEFAULT" shall mean (1) a breach of or default under any Contract or
Lease, (2) the occurrence of an event that with the passage of time or
the giving of notice or both would constitute a breach of or default
under any Contract or Lease, or (3) the occurrence of an event that
with or without the passage of time or the giving of notice or both
would give rise to a right of termination, renegotiation or
acceleration under any Contract or Lease.
"DISCLOSURE SCHEDULE" shall mean a schedule executed and delivered by
the Canadian Shareholders to Canadian Buyer as of the date hereof which
sets forth the exceptions to the representations and warranties
contained in Article IV hereof and certain other information called for
by this Agreement. Unless otherwise specified or the context otherwise
requires, each reference in this Agreement to any numbered schedule is
a reference to that numbered schedule which is included in the
Disclosure Schedule.
"ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, conditional sales
agreement or other similar right of third parties, whether voluntarily
incurred or arising by operation of law, and includes, without
limitation, any agreement to give any of the foregoing in the future,
and any contingent sale or other title retention agreement or lease in
the nature thereof.
<PAGE> 9
- 4 -
"ESCROW AGENT" shall have the meaning assigned to such term in the
Escrow Agreement attached hereto as Exhibit B.
"EXCHANGEABLE SHARES" shall mean the exchangeable preference shares in
the capital of the Canadian Buyer having attached thereto the rights,
privileges, restrictions and conditions set forth in Exhibit O.
"FACILITY LEASES" shall mean all of the leases described on Schedule
4.9.
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery, spare parts, supplies, equipment and other
tangible personal property owned by Sibson Canada and used in
connection with the Canadian Business, wherever located and including
any such Fixtures and Equipment in the possession of any of Sibson
Canada's, including all warranty rights with respect thereto.
"FORMER FACILITY" shall mean each plant, office, manufacturing
facility, store, warehouse, improvement, administrative building and
all real property and related facilities that was owned, leased or
operated by Sibson Canada at any time prior to the date hereof.
"GAAP" shall mean generally accepted accounting principles.
"INSURANCE POLICIES" shall mean the insurance policies related to
Sibson Canada, the Canadian Assets and the Canadian Business listed on
Schedule 4.27.
"INVENTORY" shall mean all of Sibson Canada's inventory held for resale
and all of Sibson Canada's raw materials, work in process, finished
products, wrapping, supply and packaging items and similar items with
respect to the Canadian Business, in each case wherever the same may be
located.
"KNOWLEDGE OF NEXTERA" shall mean the actual knowledge of any member of
the Board of Directors, the Manager, or the Chief Financial Officer of
Nextera or that which could be learned by any such individual upon
reasonable investigation.
"KNOWLEDGE OF SC SHAREHOLDERS" shall mean the actual knowledge of Paul
Britton, David Rainville, Michael Hogan and Michael McInerney or that
which could be learned by any such individual upon reasonable
investigation.
"LEASED REAL PROPERTY" shall mean all leased plants, offices,
manufacturing facilities, stores, warehouses, improvements,
administration buildings, and all real property and related facilities
which are identified or listed on Schedule 4.9 attached hereto.
"LEASEHOLD ESTATES" shall mean all of Sibson Canada's rights and
obligations as lessee under the Leases.
"LEASEHOLD IMPROVEMENTS" shall mean all leasehold improvements situated
in or on the Leased Real Property and owned by Sibson Canada.
<PAGE> 10
- 5 -
"LEASES" shall mean all of the existing leases with respect to the
personal or real property of Sibson Canada, including, without
limitation, those leases listed on Schedule 4.9 and/or Schedule 4.12.
"LIABILITIES" shall mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, guaranty or
endorsement of or by any person of any type, whether accrued, absolute,
contingent, matured, unmatured or other.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" shall mean with
respect to Sibson Canada, the Canadian Business or the Canadian Assets,
any material adverse effect or change in the condition (financial or
other), business, results of operations, prospects, assets, Liabilities
or operations of Sibson Canada, the Canadian Business and/or the
Canadian Assets taken as a whole or on the ability of the SC
Shareholders to consummate the transactions contemplated hereby, or any
event or condition which would, with the passage of time, constitute a
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE." "MATERIAL
ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" shall mean with respect to
Nextera any material adverse effect or change in the condition
(financial or other), business, results of operations, prospects,
assets, liabilities or operations of Nextera and its Subsidiaries taken
as a whole or on the ability of Nextera to consummate the transactions
contemplated hereby, or any event or condition which would, with the
passage of time, constitute a "MATERIAL ADVERSE EFFECT" or "MATERIAL
ADVERSE CHANGE."
"NEXTERA CLASS A UNITS" shall mean the Class A Common Units of Nextera
representing membership interests in Nextera.
"NEXTERA DISCLOSURE SCHEDULE" shall mean a schedule and letters
executed and delivered by Nextera and Buyer to the Selling Parties as
of the date hereof which sets forth the exceptions to the
representations and warranties contained in Article 5 hereof and
certain other information called for by this Agreement. Unless
otherwise specified or the context otherwise requires, each reference
in this Agreement to any numbered schedule is a reference to that
numbered schedule which is included in the Nextera Disclosure Schedule.
"NEXTERA OPERATING AGREEMENT" shall mean the Second Amended and
Restated Limited Liability Company Agreement of Nextera Enterprises,
L.L.C. dated as of May 1, 1998, as amended, a true and correct copy of
which is attached as Exhibit G hereto.
"ORDINARY COURSE OF BUSINESS" or "ORDINARY COURSE" or any similar
phrase shall mean the ordinary course of the Canadian Business and
consistent with Sibson Canada's past practice.
"PERMITS" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any
governmental authority, whether foreign, federal, provincial or local,
or any other person, necessary or desirable for the past,
<PAGE> 11
- 6 -
present or anticipated conduct of, or relating to the operation of the
Canadian Business.
"PERMITTED LIEN" shall mean: (i) materialmen's, mechanics', carriers',
workmen's, repairmen's or other like liens arising in the ordinary
course of business for amounts not yet due or which are being contested
in good faith by appropriate proceedings, (ii) liens for current taxes
not yet due or any taxes being contested in good faith by appropriate
proceedings, (iii) liens to secure performance of statutory
obligations, (iv) any lien securing any purchase money indebtedness
incurred in the ordinary course of business and reflected in Sibson
Canada's financial statements and (v) liens of lessors under Leases.
"PROPRIETARY RIGHTS" shall mean all of Sibson Canada's Copyrights,
Trademarks, patents, technology rights and licenses, computer software
(including without limitation any source or object codes therefor or
documentation relating thereto), trade secrets, franchises, know-how,
inventions, designs, specifications, plans, drawings and intellectual
property rights.
"REGULATIONS" shall mean any laws, statutes, ordinances, regulations,
rules, court decisions, agency guidelines, principles of law and orders
of any foreign, federal, provincial or local government and any other
governmental department or agency, including without limitation all Tax
Acts (as defined herein), Environmental Laws, energy, motor vehicle
safety, public utility, zoning, building and health codes, and
occupational safety and health and laws respecting employment
practices, employee documentation, terms and conditions of employment
and wages and hours.
"REPRESENTATIVE" shall mean any officer, director, principal, attorney,
agent, employee or other representative.
"SC SHAREHOLDERS" shall mean those individuals and entities identified
as such on Exhibit A hereto.
"SUBSIDIARY" shall mean, with respect to Canadian Buyer a subsidiary
within the meaning of the Business Corporations Act (Ontario) and, with
respect to Nextera shall mean (a) any corporation in an unbroken chain
of corporations beginning with Nextera if the corporation other than
the last corporation in the unbroken chain then owns stock possessing
50% or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain and, for greater
certainty, shall include Canadian Buyer, (b) any partnership in which
Nextera is a general partner, (c) any limited liability company in
which Nextera is a managing member, or (d) any partnership or limited
liability company in which Nextera possesses a 50% or greater interest
in the total capital or total income of such partnership and "LLC
SUBSIDIARY" shall mean a Subsidiary of Nextera that is a limited
liability company.
"TAX" shall mean all governmental taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, VAT, service, service use, ad
valorem, transfer, franchise, profits, license, lease,
<PAGE> 12
- 7 -
withholding, social security, payroll, employment, excise, estimated,
severance, stamp, recording, occupation, real and personal property,
gift, windfall profits or other taxes, customs duties, fees,
assessments or charges of any kind whatsoever, whether computed on a
separate, consolidated, unitary, combined or other basis, together with
any interest, fines, penalties, additions to tax or other additional
amounts imposed thereon or with respect thereto imposed by any taxing
authority (domestic or foreign) and shall include any such or other
amounts payable to a person pursuant to any Regulation for failing to
withhold, deduct and remit to the proper authorities amounts in respect
of any such amounts imposed on any other person.
"TAX ACTS" shall mean the Canadian federal Income Tax Act, the Ontario
Income Tax Act and the Ontario Corporations Tax Act.
"TRADEMARKS" shall mean registered trademarks, registered service
marks, trademark and service mark applications and unregistered
trademarks and service marks.
SECTION 1.2 OTHER DEFINED TERMS.
The following terms shall have the meanings defined for such terms in
the Sections set forth below:
TERM SECTION
Amalgamation 2.1(1)(d)
Amalgamation Order 2.1(1)(c)
Audited Financial Statements 6.8
Base Balance Sheet 4.7(1)
Base Balance Sheet Date 4.7(1)
Buyer Indemnified Party 9.1
Buyer Indemnified Parties 9.1
Class A Units 4.35
Clients 4.18
Closing 3.1
Confidential Information 6.10
Employee Program 4.23(11)(a)
Employment Agreement 8.10
Environmental Law 4.27(5)
Escrow Amount 2.4(b)
Escrow Agreement 2.4(b)
Equity Participation Plan 6.6
Exchange Trust Agreement 6.3
Facility Lease 4.6(2)
Financial Statements 4.7(1)
Fraud Claims 9.1(a)
General Claims 9.1(e)
Hazardous Material 4.27(5)
<PAGE> 13
- 8 -
Hazardous Waste 4.27(5)
Individual Claims 9.1(f)
<PAGE> 14
- 9 -
TERM SECTION
---- -------
Individual Fraud Claims 9.1
Individual General Claims 9.1(f)
Interim Financial Statements 6.8
Leased Real Property 4.6(2)
Material Contracts 4.9(1)
NS Act 2.1(1)(a)
Newco 4.35
Newco Class A Stock 4.35
Nextera Balance Sheet 5.7(1)
Nextera Financial Statements 5.7(1)
Ownership Claims 9.1(b)
Principals 7.9
Pro Forma Financial Statements 5.7(3)
Purchased Shares 2.2
Restricted Period 4.35
SC Amalco 2.1(1)(d)
SC Holdco 2.1(1)(a)
SC Unlimco 2.1(1)(b)
Securities 4.35(d)
SC Shareholders Indemnified Party 9.3
Share Exchange Agreement 7.16
Sibson Canada 4.27(5)
Sigma Consulting 5.1(5)
Support Agreement 6.3
Tax Claims 9.1(c)
Tax Returns 4.22(a)
ARTICLE 2
PURCHASE AND SALE OF PURCHASED SHARES
SECTION 2.1 PRE-CLOSING STEPS.
(1) As soon as practicable after the date hereof, but in any event prior to
the Closing Date, the parties hereto shall have caused the following
actions to have occurred (the "Pre-Closing Steps"):
(a) Sibson Canada and 1053861 Ontario Limited ("SC HOLDCO") shall
each be continued under the Companies Act (Nova Scotia) ("NS
ACT") as a limited liability company;
(b) An unlimited liability company ("SC UNLIMCO") shall be
incorporated under the NS Act as a wholly-owned subsidiary of
Sibson Canada and the parties hereby agree that SC Unlimco
will have no assets or liabilities nor will it carry
<PAGE> 15
- 10 -
on any business on or prior to closing and the parties hereby
understand and agree that the Representations and Warranties
are based on that assumption;
(c) Immediately following the continuance and incorporation
described above, an order of the Supreme Court of Nova Scotia
shall have been applied for and obtained under Section 134 of
the NS Act (the "AMALGAMATION ORDER"), approving the
amalgamation of Sibson Canada, SC Holdco and SC Unlimco to
form an unlimited liability company under the name "SIBSON
CANADA CO"; and
(d) As the first step of Closing and prior to the acquisition
contemplated in Section 2.2 hereof, Sibson Canada, SC Holdco
and SC Unlimco will be amalgamated (the "AMALGAMATION") by way
of Amalgamation Agreement under the NS Act and the resulting
company ("SC AMALCO") will be an unlimited liability company
under the NS Act. SC Amalco will have an authorized capital
consisting of 10,000,000 common shares and 10,000,000 Class A
common shares with the rights, privileges, restrictions and
conditions attaching to the existing common shares and Class A
common shares in the capital of Sibson Canada at the date
hereof.
(2) Upon the Amalgamation, the shares of Sibson Canada, SC Holdco and SC
Unlimco will be converted into shares of SC Amalco or cancelled as
follows:
(a) The 10 voting shares of SC Holdco shall be converted into 210
common shares of SC Amalco, the 100 Class A shares of SC
Holdco shall be converted into 2,099 common shares of SC
Amalco, the 100 Class B shares of SC Holdco shall be converted
into 2,099 common shares of SC Amalco, the 100 Class C shares
of SC Holdco shall be converted into 2,099 common shares of SC
Amalco;
(b) All of the issued and outstanding common shares and Class A
common shares in the capital of Sibson Canada will be
converted into 3,494 common shares of SC Amalco on the basis
of 6.5065 common shares of SC Amalco for each common or Class
A common share of Sibson Canada, save and except the issued
and outstanding shares of Sibson Canada held by SC Holdco,
which will be cancelled without any repayment of capital in
respect thereof (fractions rounded as per Exhibit A); and
(c) All of the issued and outstanding shares in the capital of SC
Unlimco held by Sibson Canada will be cancelled without any
repayment of capital in respect thereof.
(3) The parties acknowledge and agree that the Representations and
Warranties of the SC Shareholders will be based upon the assumption
that:
(a) following the continuance of Sibson Canada and SC Holdco under
the NS Act all of the property rights, assets and liabilities
of such corporations continue to be the property rights,
assets and liabilities of the continued companies, and ;
<PAGE> 16
- 11 -
(b) upon the amalgamation of the continued Sibson Canada, the
continued SC Holdco and SC Unlimco (collectively, the
"Pre-Amalgamating Companies") all of the property of such
Pre-Amalgamating Companies shall become the property of SC
Amalco; Amalco becomes liable for all of the liabilities and
obligations of the Pre-Amalgamating Companies; the rights of
creditors and others against the property, rights and assets
of each of the Pre-Amalgamating Companies become rights
against the property, rights and assets of SC Amalco; and the
obligations, if any, of the Pre-Amalgamating Companies under
this agreement become the obligations of SC Amalco.
(c) The SC Shareholders shall have no liability with regard to any
warranty, breach of a representation or relating to the
Pre-Closing Steps.
(4) Except where the context otherwise requires, any reference herein to
"Sibson Canada" shall be deemed to include reference to Sibson Canada
Inc., as continued under the NS Act and to SC Amalco, following the
Amalgamation.
(5) Notwithstanding anything to the contrary, and in particular section
11.4, the parties acknowledge and agree that a certain letter agreement
from Nextera to the SC Shareholders dated August 11, 1998 regarding the
Pre-Closing Steps is in full force and effect in accordance with the
terms thereof.
(6) Intentionally Deleted
(7) Legal fees shall be payable on Closing, by Sibson Canada to Donahue in
the amount of CDN. $100,000.
(8) The Exchangeable Shares, by virtue of their terms, the Support
Agreement and the Exchange Trust Agreement, entitle the holders thereof
to acquire Nextera Class A Units, or Newco Class A Stock (as
hereinafter defined) on certain terms and conditions. Nextera shall
take all steps in the United States and Ontario to ensure that the SC
Shareholders are in no worse position than the sellers under the U.S.
Purchase Agreement as a result of failure to obtain any regulatory
approval that may be necessary recognizing (i) that the hold period
imposed upon the SC Shareholders with respect to the Nextera Class A
Units or Newco Class A Stock may, but not necessarily will, be greater
than the hold period imposed on the Shareholders under the U.S.
Purchase Agreement and (ii) that Nextera shall not be required to
obtain listing of the Nextera Class A Units or Newco Class A Stock in
Canada.
(9) The Exchangeable Shares are fully transferable between the SC
Shareholders.
SECTION 2.2 PURCHASE OF PURCHASED SHARES.
Upon the terms and subject to the conditions contained herein, at the
Closing, the SC Shareholders will sell and the Canadian Buyer will purchase all
of the issued and outstanding shares of SC Amalco consisting of 10,001 common
shares, (collectively, the "PURCHASED SHARES") free and clear of all
Encumbrances.
<PAGE> 17
- 12 -
SECTION 2.3 PURCHASE PRICE OF PURCHASED SHARES.
In consideration of the sale, and delivery of the Purchased Shares to
Canadian Buyer and in reliance upon the representations and warranties of the SC
Shareholders herein contained and made at the Closing and upon the terms and
subject to the satisfaction or waiver of the party entitled thereto of all of
the conditions set forth herein, Canadian Buyer agrees at the Closing to pay to
SC Shareholders for the Purchased Shares $3,105,532.50 which, together with
Nextera's/Canadian Buyer's performance of its other obligations pursuant to this
Agreement, shall constitute the entire consideration to be paid by Buyer
hereunder.
SECTION 2.4 SATISFACTION OF PURCHASE PRICE.
The Canadian Buyer shall satisfy the purchase consideration for the
Purchased Shares as follows:
(a) The sum of $2,611,000 to be paid to the SC Shareholders
allocated as set forth in Exhibit "A" by wire transfer of
immediately available funds, bank draft or certified cheque;
(b) In reliance upon the representations and warranties of SC
Shareholders herein contained and made at the Closing and upon
the terms and subject to the satisfaction or waiver of all of
the conditions set forth herein, Buyer agrees that at the
Closing, it will (i) deliver to the SC Shareholders as set out
in Exhibit A the aggregate amount of 138,761 Exchangeable
Shares and (ii) deliver to the Escrow Agent 59,052
Exchangeable Shares (the "Escrow Amount") in SC Shareholder's
name, or as the SC Shareholders may direct, as set out in
Exhibit B and to be held in the manner described in the Escrow
Agreement to be executed in substantially the form attached
hereto as Exhibit B. The parties acknowledge that the value of
the Exchangeable Shares is $2.50 per share.
ARTICLE 3
CLOSING
SECTION 3.1 CLOSING.
The Closing of the transactions contemplated herein (the "CLOSING")
shall be held at Stikeman, Elliott in Toronto on August 31, 1998 or at such
other date and location as may be mutually agreed upon by the parties.
SECTION 3.2 CLOSING PROCEDURES.
Subject to the satisfaction or waiver by the relevant party of the
conditions of closing in its favour, at the Closing, the SC Shareholders shall
deliver actual possession of the certificates evidencing the Purchased Shares to
the Canadian Buyer and record the Canadian Buyer or its nominee as the
registered owner and thereupon the Canadian Buyer shall pay or satisfy the
Purchase Price in accordance with Section 2.3.
<PAGE> 18
- 13 -
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SC SHAREHOLDERS
As a material inducement to Nextera and Canadian Buyer to enter into
this Agreement and consummate the transactions contemplated hereby, the SC
Shareholders hereby jointly and severally represent and warrant to Nextera and
Canadian Buyer with the exception of Sections 4.1, 4.2 and 4.3 for which the SC
Shareholder of SC Holdco, being Michael McInerney represents and warrants to
Nextera and Canadian Buyer that:
SECTION 4.1 ORGANIZATION AND QUALIFICATION OF SC HOLDCO.
Immediately prior to its continuance into Nova Scotia, SC Holdco was a
corporation duly organized, validly existing and in good standing under the laws
of the Province of Ontario with corporate power and authority to conduct its
business in the manner and in the places where such business is currently
conducted. Copies of the Certificate and Articles of Incorporation and Bylaws of
SC Holdco, and all amendments thereto, heretofore delivered to Canadian Buyer
are accurate and complete as of the date of continuance. SC Holdco was not in
violation of any term of its Certificate and Articles of Incorporation or
Bylaws. SC Holdco was not required to be licensed or qualified to conduct its
business in any other jurisdiction in which failure to be so licensed or
qualified would have a material adverse effect on Sibson Holdco, the Canadian
Assets or the Canadian Business.
SECTION 4.2 CAPITALIZATION; BENEFICIAL OWNERSHIP OF SC HOLDCO.
The authorized capital of SC Holdco consists of an unlimited number of
common shares, an unlimited number of Class A shares, an unlimited number of
Class B Shares and an unlimited number of Class C Shares of which 10 common
shares, 100 Class A shares, 100 Class B Shares and 100 Class C Shares are duly
and validly issued, and outstanding, and are fully paid and non-assessable.
Michael McInerney is the owner of record and beneficially of all of the above
shares. There are no outstanding options, warrants, rights, commitments,
pre-emptive rights or agreements of any kind for the issuance or sale of, or
outstanding securities convertible into, any additional equity of any class of
shares of SC Holdco. None of the shares in the capital of SC Holdco has been
issued in violation of any Regulation. There are no voting trusts, voting
agreements, proxies or other agreements, instruments or undertakings with
respect to the voting of the shares of SC Holdco.
SECTION 4.3 ACTIVITIES OF SC HOLDCO
SC Holdco has no assets or liabilities and has not engaged in any other
activities other than holding the shares of Sibson Canada. Michael McInerney, as
a SC Shareholder, represents and warrants that those matters set forth herein
under Sections 4.10, 411, 4.12, 4.14, 4.15, 4.16, 4.19, 4.20, 4.21, 4.25, 4.27,
4.30, 4.32, 4.33 and 4.34 apply to SC Holdco mutatis mutandis as if named
therein.
SECTION 4.4 ORGANIZATION AND QUALIFICATION OF SIBSON CANADA.
Immediately prior to its continuance into Nova Scotia, Sibson Canada
was a corporation duly organized, validly existing and in good standing under
the laws of the Province of Ontario with corporate power and authority to own or
lease its properties and to conduct its business in the manner and in the places
where such properties are owned or
<PAGE> 19
- 14 -
leased or such business is currently conducted or proposed to be conducted.
Copies of the Certificate and Articles of Incorporation and Bylaws of Sibson
Canada, and all amendments thereto, heretofore delivered to Canadian Buyer are
accurate and complete as of the date of continuance. Sibson Canada was not in
violation of any terms of its Certificate and Articles of Incorporation or
Bylaws. Sibson Canada was not required to be licensed or qualified to conduct
its business in any other jurisdiction in which failure to be so licensed or
qualified would have a material adverse effect on Sibson Canada, the Canadian
Assets or the Canadian Business.
SECTION 4.5 CAPITALIZATION; BENEFICIAL OWNERSHIP OF SIBSON CANADA.
The authorized capital of Sibson Canada consists of an unlimited number
of common shares and an unlimited number of Class A common shares of which 1,307
common shares and 230 Class A common shares are duly and validly issued, and
outstanding, and are fully paid and non-assessable. Each SC Shareholder is the
owner of record and beneficially of the number of common shares set forth
opposite such SC Shareholder's name on Schedule 4.5. There are no outstanding
options, warrants, rights, commitments, pre-emptive rights or agreements of any
kind for the issuance of sale of, or outstanding securities convertible into,
any additional equity of any class of Sibson Canada. None of the shares in the
capital of Sibson Canada has been issued in violation of any Regulation. There
are no voting trusts, voting agreements, proxies or other agreements,
instruments or undertakings with respect to the voting of the shares of Sibson
Canada except for the existing shareholders agreement between the SC
Shareholders as set out in Schedule 4.5.
SECTION 4.6 SUBSIDIARIES OF SIBSON CANADA.
Sibson Canada has no Subsidiaries, except as contemplated in this
Agreement, or investments in any other corporations or business organization.
SECTION 4.7 AUTHORITY.
(1) Each of the SC Shareholders has full, right, authority and power to
enter into this Agreement and each agreement, document and instrument
to be executed and delivered by SC Shareholders pursuant to this
Agreement and to carry out the transactions contemplated hereby or
thereby. The execution, delivery and performance by each SC Shareholder
of this Agreement and each such other agreement, document and
instrument have been duly authorized by all necessary action of each SC
Shareholder and no other action on the part of any of the SC
Shareholders is required in connection therewith.
(2) This Agreement and each agreement, document and instrument executed and
delivered by any of the SC Shareholders pursuant to this Agreement
constitutes, or when executed and delivered will constitute, valid and
binding obligations of each of them that is a party thereto enforceable
in accordance with their terms (assuming the due authorization,
execution and delivery by the other parties thereto), subject to the
effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject to the effect of general principles of equity, including,
without limitation, the possible unavailability of
<PAGE> 20
- 15 -
specific performance or injunctive relief, regardless of whether
considered in a proceeding in equity or at law.
(3) The execution, delivery and performance by the SC Shareholders of this
Agreement and each such other agreement, document and instrument:
(a) With respect to SC Holdco and Sibson Canada, does not and will
not violate any provision of the Certificate of Incorporations
(as amended) or the Bylaws of SC Holdco of Sibson Canada;
(b) Does not and will not violate any applicable laws or require
SC Shareholder to obtain any approval, consent or waiver of,
or make any filing with, any person or entity (governmental or
otherwise) that will not be obtained or made on or prior to
the Closing; and
(c) Does not and will not result in (a) a breach of, constitute a
default under, accelerate any obligation under, or give rise
to a right of termination of any indenture or loan or credit
agreement or any other agreement, contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration
award to which any of the SC Shareholders or Sibson Canada is
a party or by which the property of SC Shareholders or Sibson
Canada is bound or affected and which is material to any SC
Shareholder or Sibson Canada (as applicable), or the Canadian
Assets or the Canadian Business, taken as a whole, or (b)
result in the creation or imposition of any mortgage, pledge,
lien, security interest or other charge or encumbrance on any
equity interest in any SC Shareholder or Sibson Canada except,
in the case of clause (a), for such breaches , defaults,
accelerations or terminations as would not, individually or in
the aggregate, have a material adverse effect.
SECTION 4.8 CANADIAN ASSETS.
Excluding the Leased Real Property and any leases of personal property,
Sibson Canada has title to the Canadian Assets free and clear of any
Encumbrances other than the Permitted Liens. The Canadian Assets include all
assets necessary for the conduct of the Canadian Business as currently conducted
and proposed to be conducted. Schedule 4.8 contains an accurate list by general
category of all tangible Canadian Assets where the value of an individual item
exceeds $25,000 or where an aggregate of similar items exceeds $50,000 except
for tangible Assets that have been fully depreciated for tax purposes. All
tangible assets and properties which are part of the Canadian Assets and are
material to the operation of the Business are in good operating condition and
repair (normal wear and tear excepted) and are usable in the ordinary course of
business.
SECTION 4.9 REAL PROPERTY.
(1) OWNED REAL PROPERTY. Sibson Canada does not own any real property.
<PAGE> 21
-16-
(2) LEASES. All of the real property leased or sub-leased by Sibson Canada
is identified on Schedule 4.9 (herein referred to as the "LEASED REAL
PROPERTY" and such lease is herein referred to as the "FACILITY
LEASE").
(3) A true and complete copy of the Facility Lease has been delivered to
the Canadian Buyer. The Facility Lease has been duly authorized and
executed by Sibson Canada and, to the knowledge of the SC Shareholders,
the other parties thereto and is in full force and effect and binding
and enforceable against the parties thereto (assuming due
authorization, execution and delivery by the other parties thereto),
subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject to the effect of general principles of equity,
including, without limitation, the possible unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law. Sibson Canada is not in default under
any Facility Lease, nor to the knowledge of the SC Shareholders has any
event occurred which, with notice or the passage of time, or both,
would give rise to such a default. To the knowledge of the SC
Shareholders, none of the other parties to any Facility Lease is in
default under such Facility Lease and there is no event which, with
notice or the passage of time, or both, would give rise to such a
default. The SC Shareholders have no knowledge of the status of the
head-lease to the Facility Lease.
(4) LEASES OR OTHER AGREEMENTS. Except for the Facility Lease listed on
Schedule 4.9, neither Sibson Canada nor any of its Subsidiaries holds,
or is obligated under or a party to, any leases, subleases, licenses,
occupancy agreements, options, rights, concessions or other agreements
or arrangements, written or oral, granting to any person the right to
purchase, use or occupy any real property in connection with the
Canadian Business or any portion thereof or interest in any such real
property.
(5) FACILITY LEASES AND LEASED REAL PROPERTY. With respect to the Facility
Lease to which Sibson Canada is a party, as lessee or sublessee, Sibson
Canada has an unencumbered leasehold interest as a lessee or a
sub-lessee in the Leasehold Estate subject to the Permitted Liens. The
actions contemplated by this Agreement do not violate the terms or
result in the termination of, or create a right to terminate, such
Facility Lease. Sibson Canada enjoys peaceful and undisturbed
possession of all the Leased Real Property, as applicable.
(6) CONDITION OF LEASED REAL PROPERTY. To the knowledge of the SC
Shareholders, there are no material defects in the physical condition
of any portion of the Leased Real Property and all such Leased Real
Property is in good operating condition and repair (reasonable wear and
tear excepted).
(7) COMPLIANCE WITH THE LAW. None of the SC Shareholders nor Sibson Canada
has received any written notice from any governmental authority of any
violation of any law, ordinance, regulation, license, permit or
authorization issued with respect to the Leased Real Property that has
not been heretofore corrected. None of the SC Shareholders nor Sibson
Canada has received any written notice of any real estate tax
deficiency or assessment and is not aware of any proposed deficiency,
claim or
<PAGE> 22
-17-
assessment with respect to any of the Leased Real Property, or any
pending or threatened condemnation thereof.
SECTION 4.10 FINANCIAL STATEMENTS.
(1) The SC Shareholders have delivered to Nextera and the Canadian Buyer
the following financial statements of Sibson Canada, copies of which
are attached hereto as Schedule 4.10;unaudited balance sheets and
statements of earnings, retained earnings and changes in financial
position for its fiscal years ended December 31, 1995, 1996 and 1997,
and unaudited balance sheet as at April 30, 1998 and income statement
for the month ended April 30, 1998 (with comparison to budget) and
income statement for the month ended April 30, 1998 (with comparison to
prior year) (collectively, the "FINANCIAL STATEMENTS"). The December
31, 1997 balance sheet is hereinafter referred to as the "BASE BALANCE
SHEET" and December 31, 1997 is hereafter referred to as the "BASE
BALANCE SHEET DATE." The Financial Statements, have been prepared in
accordance with GAAP (subject to normal year-end adjustments in the
case of the unaudited Financial Statements for the interim period)
applied consistently during the periods covered thereby, and said
Financial Statements in the case of the unaudited Financial Statements
present fairly in all material respects the financial condition of
Sibson Canada at the dates of said statements and the results of its
operations for the periods covered thereby, and the unaudited balance
sheet as at April 30, 1998 and income statement for the month ended
April 30, 1998 (with comparison to budget) and income statement for the
month ended April 30, 1998 (with comparison to prior year) ended April
30, 1998 provided by the SC Shareholders to Canadian Buyer present
fairly and completely in all material respects the information
purported to be shown thereon.
(2) The SC Shareholder of SC Holdco has delivered the unaudited financial
statements of SC Holdco (copies of which are attached hereto as
Schedule 4.10) for its fiscal years ending December 31, 1995, 1996 and
1997.
(3) Sibson Canada's fiscal year 1998 operating budget attached hereto as
Schedule 4.10(2) which has previously been supplied by the SC
Shareholders to the Canadian Buyer has been prepared in good faith on
the basis of assumptions by Sibson Canada which Sibson Canada believed
were reasonable at the time of the preparation of such budget.
(4) Except as set forth on Schedule 4.10 as of the date hereof Sibson
Canada does not have any Liabilities of any nature, whether accrued,
absolute or contingent (including without limitation Liabilities as
guarantor or otherwise with respect to obligations of others, or
Liabilities for any Tax due or then accrued or to become due or
contingent or potential Liabilities relating to activities of Sibson
Canada or the conduct of the Canadian Business prior to the date hereof
or the Closing, as the case may be, regardless of whether claims in
respect thereof had been asserted as of such date), except Liabilities
(i) stated or adequately reserved against on the Base Balance Sheet or
the notes thereto, (ii) incurred or arising in the ordinary course of
business under Contracts, Leases, Permits and other business
arrangements described in the Disclosure Schedule (and under those
Contracts, Leases and Permits which are not
<PAGE> 23
-18-
required to be disclosed on the Disclosure Schedule) none of which
relates to any Default under any Contract or Lease, breach of warranty,
tort infringement or violation of any Regulation or Court Order or that
arose out of any Action and none of which, individually or in the
aggregate, has or would have a material adverse effect, (iii) incurred
or arising in the ordinary course of the Canadian Business subsequent
to the Base Balance Sheet Date consistent with the terms of this
Agreement (none of which relates to any Default under any Contract or
Lease, breach of warranty, tort infringement or violation of any
Regulation or Court Order or arose out of any Action) and none of
which, individually or in the aggregate, has or would have a material
adverse effect, (iv) disclosed in this Article IV or on the Disclosure
Schedule or (v) future performance under Contracts, none of which
relates to any default, breach of warranty, fort infringement or
violation of any Regulation or Court Order or arose out of any action
and none of which individually or in the aggregate has or would have a
material adverse effect.
SECTION 4.11 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as disclosed in Schedule 4.11, since the Base Balance Sheet
Date, there has not been any:
(a) Actual or, to the knowledge of the SC Shareholders, threatened
material adverse change;
(b) Change in accounting methods, principles or practices of
Sibson Canada affecting the Canadian Assets, its Liabilities
or the Canadian Business;
(c) Revaluation by Sibson Canada of any of the Canadian Assets,
including without limitation writing down the value of
inventory or writing off notes or accounts receivable;
(d) Damage, destruction or loss (whether or not covered by
insurance) which has had or will have a material adverse
effect;
(e) cancellation of any indebtedness or waiver or release of any
right or claim of Sibson Canada relating to its activities or
properties which had or will have a material adverse effect;
(f) Declaration, setting aside, or payment of dividends or
distributions by Sibson Canada or any redemption, purchase or
other acquisition of any of the securities of Sibson Canada;
(g) Increase in the rate of compensation payable or to become
payable to any director, officer or other employee of Sibson
Canada or any consultant earning in excess of $100,000 per
year, Representative or agent of Sibson Canada, including,
without limitation, the making of any loan to, or the payment,
grant or accrual of any bonus, incentive compensation, service
award or other similar benefit to, any such person, or the
addition to, modification of, or contribution to any Employee
Program, arrangement, or practice described in
<PAGE> 24
-19-
the Disclosure Schedule (except for normal increases,
payments, grants and accruals in the ordinary course of
business consistent with past practices and that in the
aggregate have not resulted in material increase in benefits
or compensation expense of Sibson Canada, taken as a whole);
(h) Adverse change in employee relations which has or is
reasonably likely to have a material adverse effect on the
productivity, the financial condition, results of operations
or Canadian Business of Sibson Canada or the relationships
between the employees of Sibson Canada and the management of
Sibson Canada;
(i) With the exception of notice of termination of the Facility
Lease in September, (x) amendment, cancellation or termination
of any Contract, commitment, agreement, Lease, transaction or
Permit relating to the Canadian Assets or the Canadian
Business, or (y) with the exception of this Agreement and the
other agreements entered into in connection herewith, and an
offer to lease on new premises, entry into any Contract,
Lease, transaction or Permit which is not in the ordinary
course of business, including without limitation any
employment or consulting agreements, except in the cases of
the foregoing clauses (x) and (y), the amendment, cancellation
or termination or the entering into, of Contracts or
commitments for the provision of consulting services in the
ordinary course of business consistent with past practices;
(j) Mortgage, pledge or other encumbrance of any Canadian Assets,
except purchase money mortgages arising in the ordinary course
of business and Permitted Liens;
(k) Sale, assignment or transfer of any of the Canadian Assets,
except to the extent Canadian Assets are sold or disposed of
in the ordinary course of business;
(l) Incurrence of indebtedness by Sibson Canada for borrowed money
or commitment to borrow money entered into by Sibson Canada,
or loans made or agreed to be made by Sibson Canada, or
indebtedness guaranteed by Sibson Canada, except for employee
advances in the ordinary course of business and endorsements
for collection or deposit in the ordinary course of business
and borrowings under Sibson Canada's existing credit
facilities in the ordinary course of business;
(m) Except as provided in this Agreement or the other agreements
contemplated hereby or as described in the Disclosure
Schedule, incurrence by Sibson Canada of Liabilities, except
Liabilities incurred in the ordinary course of business, or
increase or change in any assumptions underlying or methods of
calculating, any doubtful account contingency or other
reserves of Sibson Canada;
<PAGE> 25
-20-
(n) Payment, discharge or satisfaction of any Liabilities of
Sibson Canada other than the payment, discharge or
satisfaction in the ordinary course of business of Liabilities
set forth or reserved for on the Base Balance Sheet or
incurred in the ordinary course of business;
(o) Capital expenditure by Sibson Canada in excess of Cdn.$25,000
individually or Cdn.$50,000 in the aggregate, with the
exception of the Sun Life offer to lease, the execution of any
Lease by Sibson Canada or the incurring of any obligation by
Sibson Canada to make any capital expenditures or execute any
Lease;
(p) Failure to pay or satisfy when due any Liability of Sibson
Canada, except where the failure would not have a material
adverse effect;
(q) Failure of Sibson Canada to use commercially reasonable
efforts to carry on diligently the Canadian Business in the
ordinary course;
(r) Disposition or lapsing of any Proprietary Rights or any
disposition or disclosure to any person of any Proprietary
Rights not theretofore a matter of public knowledge other than
as would not have a material adverse effect; or
(s) Agreement by Sibson Canada or any SC Shareholder to do any of
the things described in the preceding clauses (a) through (r)
other than as expressly provided for herein.
SECTION 4.12 CONTRACTS AND COMMITMENTS.
(1) CONTRACTS. Schedule 4.12 sets forth the following Contracts (or
descriptions thereof, in the case of oral Contracts) to which Sibson
Canada is a party or by which it is bound (collectively, the "MATERIAL
CONTRACTS"):
(a) Contracts not made in the ordinary course of business;
(b) Employment contracts and severance agreements, to employ or
terminate present executive officers or other personnel and
other contracts with present officers, directors or
shareholders of Sibson Canada or (B) employment contracts and
severance agreements that will result in the payment by, or
the creation of any Liability to pay on behalf of Sibson
Canada or Canadian Buyer, any severance, termination, "golden
parachute", or other similar payments to any present or former
personnel following termination of employment or otherwise as
a result of the consummation of the transactions contemplated
by this Agreement it being understood that no such contracts
or agreements need to be listed by with respect to clause (B)
if no payment is to be made or liability exists following the
closing;
(c) Labour or union contracts;
<PAGE> 26
-21-
(d) Distribution, franchise, license, technical assistance, sales,
commission, agency or advertising contracts in respect of the
Canadian Assets or the Canadian Business, or consultant (where
a third party is providing services to Sibson Canada),
excluding (A) software license that are not material to the
Business and (B) consultant contracts involving aggregate fees
of less than $25,000 per annum and that are terminable by
Sibson Canada on no more than three months notice;
(e) Contracts or agreements with a client or customer of Sibson
Canada providing for an aggregate payment by such client or
customer in excess of $75,000 which, to the knowledge of SC
Shareholders, obligate Sibson Canada to indemnify such client
or customer;
(f) Options with respect to any property, real or personal,
whether Sibson Canada is the grantor thereunder;
(g) Contracts (excluding real property leases) involving actual
future expenditures or, to the knowledge of SC Shareholders,
other Liabilities (including without limitation, potential or
contingent Liabilities), in excess of $40,000 in the aggregate
(excluding Liabilities for indirect expenditures such as
salaries and overhead expenses and any contingent or potential
Liability) to the Canadian Business or the Canadian Assets;
(h) Contracts or commitments relating to commission arrangements
with others;
(i) Promissory notes, loans, agreements, indentures, evidences of
indebtedness, letters of credit, guarantees, or other
instruments relating to an obligation in respect of borrowed
money, individually in excess of or in the aggregate in excess
of $40,000, whether Sibson Canada shall be the borrower,
lender or guarantor thereunder or whereby any Canadian Assets
are pledged (excluding credit provided by Sibson Canada in the
ordinary course of business to purchasers of its services and
excluding the Shareholder Loans as defined herein);
(j) Contracts containing covenants limiting the freedom of Sibson
Canada or any of its respective officers, directors,
shareholders or affiliates, to engage in any line of business
or compete with any person;
(k) Any Contract to supply services to the Canadian federal,
provincial, or local government or any other foreign
government or any agency or department thereof;
(l) Leases of real property; or
(m) Leases of personal property not cancellable (without
Liability) within 30 calendar days, excluding leases of
personal property involving the expenditure of less than
$25,000 in the aggregate annually.
<PAGE> 27
-22-
(2) The SC Shareholders have delivered to Canadian Buyer true, correct and
complete copies (or descriptions thereof with respect to oral Material
Contracts) of all of the Material Contracts, including all amendments
and supplements thereto. Other than the Material Contracts, the SC
Shareholders have no other Contracts of the type described in clauses
(a) through (m) above.
(3) ABSENCE OF DEFAULTS. SC Canada has fulfilled, or taken all action
necessary to enable it to fulfill when due, all of its respective
material obligations under each such Material Contract. To the
knowledge of the SC Shareholders, all other parties to such Material
Contracts are currently in compliance in all material respects with the
provisions thereof, no party is in Default in any respect thereunder
and no notice of any such claim of Default relating thereto has been
given to Sibson Canada or the SC Shareholders. To the knowledge of the
SC Shareholders, there is no reason to believe that the services called
for by any Material Contract between SC Shareholders and a client of SC
Shareholders cannot be supplied substantially in accordance with the
terms of such Material Contract, including time specifications, and
Sibson Canada has no reason to believe that any Material Contract will
upon performance by Sibson Canada result in a net loss to Sibson
Canada.
SECTION 4.13 PERMITS.
(1) Sibson Canada has, and at all times has had, all Permits required under
any Regulation (including Environmental Laws) in the operation of its
Canadian Business or in the ownership of the Canadian Assets, except
for those Permits the absence of which would not individually or in the
aggregate have a material adverse effect. A complete list of such
Permits is set forth in Schedule 4.13. Sibson Canada is not in Default,
nor has it received any notice of any claim of Default, with respect to
any such Permit. To the knowledge of the SC Shareholders, no present or
former shareholder, director, officer or employee of Sibson Canada or
any affiliate thereof, or any other person, firm, corporation or other
entity, owns or has any proprietary, financial or other interest
(direct or indirect) in any such Permit.
(2) Except as disclosed on Schedule 4.13 hereto, no notice to, declaration,
filing or registration with, or Permit from, any domestic or foreign
governmental or regulatory body or authority, or any other person or
entity, is required to be made or obtained by Sibson Canada in
connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated hereby.
SECTION 4.14 LITIGATION.
Except as set forth on Schedule 4.14, there are no Actions pending or
to the knowledge of the SC Shareholders, threatened (a) against, (i) Sibson
Canada, the Canadian Business or the Canadian Assets (including with respect to
Environmental Laws), (ii) to the knowledge of the SC Shareholders, any officers
or directors of Sibson Canada, as such, or (iii) to the knowledge of the SC
Shareholders, any SC Shareholder in such SC Shareholder's capacity as a
shareholder of Sibson Canada or as an employee of SC Canada, (b) against Sibson
Canada seeking to delay, limit or enjoin the transactions contemplated by this
Agreement (c) against Sibson Canada, or any of its officers or directors or SC
Shareholders,
<PAGE> 28
-23-
in their capacity as such that involves the risk of criminal liability to any
such entity or person or (d) in which Sibson Canada is a plaintiff, including
any derivative suits brought by or on behalf of Sibson Canada nor, to the
knowledge of the SC Shareholders, is there any reasonable basis for any such
Action. Sibson Canada is not in Default with respect to or subject to any Court
Order, and there are no unsatisfied judgments against Sibson Canada, the
Canadian Business or the Canadian Assets. There is not a reasonable likelihood
of an adverse determination of any pending Actions that could have a material
adverse effect. There are no Court Orders or agreements with, or liens by, any
governmental authority or quasi-governmental entity relating to any
Environmental Law which regulate, obligate, bind or in any way affect the SC
Shareholders, the Canadian Assets or the Canadian Business, other than the
Permitted Liens.
SECTION 4.15 COMPLIANCE WITH LAW.
Except as set forth on Schedule 4.15, Sibson Canada and the conduct of
the Canadian Business have been and are in substantial compliance with all
Regulations and Court Orders relating to the Canadian Assets or the Canadian
Business or operations of Sibson Canada except in each case for such
non-compliance as would not, individually or in the aggregate, have a material
adverse effect. Within the last five years, Sibson Canada has not received any
written notice to the effect that, it is not in compliance with any such
Regulations or Court Orders.
SECTION 4.16 ORDINARY COURSE.
Except for the transactions contemplated by this Agreement and as set
forth on Schedule 4.16, since December 31, 1997, Sibson Canada has conducted its
business only in the ordinary course and consistently with its prior practices.
SECTION 4.17 OFFICERS AND COMPENSATION.
Schedule 4.17 hereto contains a true and complete list of all current
officers and directors of Sibson Canada. In addition, Schedule 4.17 hereto
contains a list of all managers, employees and consultants of Sibson Canada who,
individually, have received or are scheduled to receive compensation from Sibson
Canada for the fiscal year ended December 31, 1997, in excess of $50,000. In
each case Schedule 4.17 includes the current job title and aggregate annual
compensation of each such individual.
SECTION 4.18 EMPLOYEES; LABOUR MATTERS.
As of the date of this Agreement, Sibson Canada employs a total of
approximately 21 (twenty-one) full-time employees and no part-time employees.
Except as set forth in Schedule 4.18, Sibson Canada has not received any written
notice that any employee intends to terminate his or her employment with Sibson
Canada following the Closing. Sibson Canada is not delinquent in payments to any
of its employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for it to the date hereof or amounts
required to be reimbursed to such employees. Sibson Canada does not have a
policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection with the termination of employment, except
as set forth in Schedule 4.18 and all of its employees may be terminated with
notice or pay in lieu thereof as required by applicable law in the absence of a
written agreement. Sibson Canada
<PAGE> 29
-24-
is in compliance in all material respects with all applicable laws and
regulations respecting labour, employment, fair employment practices, work place
safety and health, terms and conditions of employment, and wages and hours.
There are no charges of employment discrimination or unfair labour practices
pending or, to the knowledge of SC Shareholders, threatened and there exists no
basis for any such claim, nor are there any strikes, slowdowns, stoppages of
work, or any other concerted interference with normal operations which are
existing, pending, or to the knowledge of the SC Shareholders, threatened
against or involving Sibson Canada. No question concerning union representation
exists respecting any employees of Sibson Canada. There are no pending
grievances, complaints or charges that have been filed against Sibson Canada
under any dispute resolution procedure (including, but not limited to, any
arbitration or similar proceedings) and no claim of which SC Shareholders has
received written notice. No collective bargaining agreement is in effect or is
currently being or is about to be negotiated by Sibson Canada. Sibson Canada has
not received any written notice indicating that any of its employment policies
or practices is currently being audited or investigated by any federal,
provincial or local government agency.
SECTION 4.19 BANKING RELATIONS.
Schedule 4.19 contains a complete and correct list of the names and
locations in which Sibson Canada has accounts or safe deposit boxes and the
names of all persons authorized to draw thereon or have access thereto.
SECTION 4.20 NO BROKERS.
Neither Sibson Canada nor any of the SC Shareholders nor any of their
respective officers, directors, employees, or affiliates has employed or made
any agreement with any broker, finder or similar agent or any person or firm
which will result in the obligation of Canadian Buyer, or any of its affiliates
to pay any finder's fee, brokerage fees or commission or similar payment in
connection with the transactions contemplated hereby.
SECTION 4.21 NO OTHER AGREEMENTS TO SELL THE PURCHASED SHARES.
Other than as described on Schedule 4.21 neither the SC Shareholders
nor Sibson Canada nor to the knowledge of the SC Shareholders, any of Sibson
Canada's officers, directors, employees or affiliates have any commitment or
legal obligation, absolute or contingent, to any other person or firm other than
Canadian Buyer and Nextera under this Agreement or the Letter Agreement signed
August 11, 1998 to sell, assign, transfer or effect a sale of any of the
Canadian Shares (other than inventory or services in the ordinary course of
business), to sell or effect a sale of the equity of Sibson Canada, to effect
any merger, consolidation, liquidation, dissolution or other reorganization of
Sibson Canada or to enter into any agreement or cause the entering into of an
agreement with respect to any of the foregoing.
SECTION 4.22 CLIENTS.
Schedule 4.22 sets forth all clients which (i) accounted for more than
$75,000 in revenue for Sibson Canada for the six months ended June 30, 1998 and
or (ii) accounted for more than $150,000 in revenue for Sibson Canada in the
twelve months ended December 31, 1997 (collectively, the "CLIENTS"). To the
knowledge of the SC Shareholders, the relationships of Sibson Canada with its
Clients are good commercial working relationships.
<PAGE> 30
-25-
SECTION 4.23 BACKLOG.
As of the date hereof, Sibson Canada has a backlog of orders for the
sale or lease of services, for which potential revenues have not been recognized
by Sibson Canada, as set forth in Schedule 4.23.
SECTION 4.24 PROPRIETARY RIGHTS.
(1) PROPRIETARY RIGHTS. Schedule 4.24 lists (i) for each registered
Trademark of Sibson Canada, the application serial number or
registration number, the class of goods or services covered and the
expiration date for each country in which a Trademark has been
registered and (ii) for each registered Copyright of Sibson Canada, the
number and date of filing for each country in which a Copyright has
been filed. Other than the items set forth or Schedule 4.24 there are
no Proprietary Rights used by Sibson Canada that are material to the
conduct of the Canadian Business. Sibson Canada owns no patents or
registered designs and has not filed any patent applications or
registered design applications.
(2) ROYALTIES AND LICENSES. Except as set forth on Schedule 4.24, Sibson
Canada has no obligation to compensate any person for the use of any
such Proprietary Rights nor has Sibson Canada granted to any person any
license, option or other rights to use in any manner any of such
Proprietary Rights, whether requiring the payment of royalties or not.
(3) OWNERSHIP AND PROTECTION OF PROPRIETARY RIGHTS. Except as set forth on
Schedule 4.24, Sibson Canada owns or has a valid right to use each of
such Proprietary Rights. No other person (i) has notified Sibson Canada
that it is claiming any ownership of or right to use any such
Proprietary Rights, or (ii) to the knowledge of the SC Shareholders, is
infringing upon any such Proprietary Right in any way. To the knowledge
of the SC Shareholders, except as set forth on Schedule 4.24, use of
such Proprietary Rights by Sibson Canada does not and will not conflict
with, infringe upon or otherwise violate the valid rights of any third
party in or to such Proprietary Rights, and no Action has been
instituted against or notices received by Sibson Canada that are
presently outstanding alleging that use of the Proprietary Rights by
Sibson Canada infringes upon or otherwise violates any rights of a
third party in or to such Proprietary Rights.
SECTION 4.25 TAXES.
Except as otherwise set forth on Schedule 4.25:
(a) All returns, declarations, reports, estimates, statements,
schedules or other information or documents with respect to
Taxes (collectively, "TAX RETURNS") required to be filed by or
with respect to Sibson Canada have been timely filed (giving
effect to extensions granted with respect thereto), with the
appropriate tax authorities and all such Tax Returns are true,
correct, and complete in all material respects;
<PAGE> 31
-26-
(b) Sibson Canada has timely paid all Taxes due from it or claimed
to be due from it by any federal, provincial, local, foreign
or other taxing authority;
(c) There are no liens for Taxes upon any of the assets of, or
interests in Sibson Canada, except liens for Taxes not yet due
and payable;
(d) No Tax Return of Sibson Canada has been audited by the
relevant taxing authority. No deficiency for any Taxes has
been proposed, asserted or assessed against Sibson Canada that
has not been resolved and paid in full. There are no
outstanding waivers, objections, extensions, or comparable
consents regarding the application of the statute of
limitations or period of reassessment with respect to any
Taxes or Tax Returns that have been given or made by Sibson
Canada (including the time for filing of Tax Returns or paying
Taxes) and Sibson Canada has no pending requests for any such
waivers, extensions, or comparable consents;
(e) No audit or other proceeding by any federal, provincial, local
or foreign court, governmental, regulatory, administrative or
similar authority is presently pending with respect to any
Taxes or Tax Return of Sibson Canada and Sibson Canada has not
received written notice of any pending audits or proceedings;
(f) Sibson Canada has not received a ruling from any taxing
authority or signed an agreement with any taxing authority
that could reasonably be expected to have a material adverse
effect on Sibson Canada or the Canadian Assets or the Canadian
Business;
(g) Sibson Canada has complied in all respects with all applicable
Regulations relating to the payment and withholding of Taxes
and has, within the time and the manner prescribed by law,
paid over to the proper governmental authorities all amounts
so withheld;
(h) Sibson Canada is not a party to or bound by or has any
obligation under any Tax sharing allocation or indemnity
agreement or similar contract or arrangement (whether or not
written);
(i) No power of attorney granted by Sibson Canada with respect to
any Taxes is currently in force;
(j) Sibson Canada is not subject to any joint venture, partnership
or other arrangement or contract that is treated as a
partnership for income tax purposes;
(k) There is no expectation or reason to suspect that any taxing
authority may claim or assess any material amount of Taxes
payable by Sibson Canada for any period ending on or prior to
the Closing Date and there are no facts of which Sibson Canada
or the SC Shareholders are aware which would constitute
grounds for the assessment of any material amount of Taxes
<PAGE> 32
-27-
payable by Sibson Canada for any period ending on or prior to
the Closing Date;
(l) Each of the SC Shareholders is a resident of Canada for
purposes of the Tax Acts;
(m) No issue has been raised by a federal, provincial, local or
foreign taxing authority in any examination relating to Sibson
Canada which could reasonably be expected to result in a
proposed deficiency for any subsequent taxable period;
(n) Each of Sibson Canada and Holdco is, and at all times prior to
the Closing Date was, a Canadian-controlled private
corporation for the purposes of the Tax Acts; and
(o) For the purposes of the Tax Acts, the fair market value on May
31, 1996 of the 307 common shares, the 115 Class A common
shares and the 115 Class A common shares in Sibson Canada's
share capital issued on that date to Paul Britton, David
Rainville and Michael Hogan, respectively, did not exceed one
hundred and forty-three Canadian dollars per share.
SECTION 4.26 EMPLOYEE BENEFIT PROGRAMS.
(1) Schedule 4.26 lists every Employee Program (as defined below) that has
been maintained (as defined below) by Sibson Canada at any time during
the three-year period ending on the date of the Closing.
(2) The SC Shareholders do not know and have no reason to know, of any
failure of any party to comply in any material respect with any laws
applicable to the Employee Programs that have been maintained by Sibson
Canada. With respect to any Employee Program ever maintained by Sibson
Canada, there has occurred no material violation of, or material breach
of any duty under applicable law or any Tax law requirements, or
conditions to favorable Tax treatment, applicable to such plan), which
could result, directly or indirectly, in any Taxes, penalties or other
liability to Sibson Canada. No litigation, arbitration, or governmental
administrative proceeding (or investigation) or other proceeding (other
than those relating to routine claims for benefits) is pending or, to
the knowledge of the SC Shareholders, threatened with respect to any
Employee Program.
(3) With respect to each Employee Program maintained by Sibson Canada
within the three years preceding the Closing, complete and correct
copies of the following documents (if applicable to such Employee
Program) have previously been delivered to Canadian Buyer: (i) all
documents embodying or governing such Employee Program, and any funding
medium for the Employee Program (including, without limitation, trust
agreements) as they may have been amended; (ii) the summary plan
description for such Employee Program (or other descriptions of such
Employee Program provided to employees) and all modifications thereto;
(iii) any insurance policy (including any fiduciary liability insurance
policy) related to such Employee
<PAGE> 33
-28-
Program; (iv) any documents evidencing any loan to an Employee Program
that is an employee stock ownership plan; and (v) all other materials
reasonably necessary for Canadian Buyer to perform any of its
responsibilities with respect to any Employee Program subsequent to the
Closing (including, without limitation, health care continuation
requirements).
(4) Sibson Canada has not announced any plan or legally binding commitment
to create any additional Employee Program which is intended to cover
employees or former employees of Sibson Canada or to amend or modify
any existing Employee Program which covers or has covered employees or
former employees of Sibson Canada.
(5) Each Employee Plan listed on Schedule 4.26 may be amended, terminated,
modified or otherwise revised prospectively by Sibson Canada including
the elimination of any and all future benefit accruals under any
Employee Plan.
(6) No event has occurred in connection with which Sibson Canada or any
Employee Program, directly or indirectly, could be subject to any
material liability (A) under any Regulation or governmental order
relating to any Employee Programs or (B) pursuant to any obligation of
Sibson Canada to indemnify any person against liability incurred under
any such Regulation or order as they relate to the Employee Programs.
(7) Except as described on Schedule 4.26, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will result in the acceleration or creation of any
rights of any person to benefits under any Employee Program (including,
without limitation, the acceleration of the vesting or exercisability
of any stock options, the acceleration of the vesting of any restricted
stock, or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
(8) Each Employee Program and related trust agreement or other funding
instrument, as applicable, which covers or has covered employees or
former employees of Sibson Canada (with respect to their relationship
with such entities) is legally valid and binding and in full force and
effect.
(9) There is no contract, agreement, plan or arrangement covering any
employee or former employee of Sibson Canada that, individually or
collectively, provides for the payment by Sibson Canada of any amount
that is not deductible under the Income Tax Act (Canada).
(10) All contributions required to be made by Sibson Canada with respect to
any Employee Program due as of any date through and including the
Closing Date have been made when due.
(11) For purposes of this SECTION:
(a) "EMPLOYEE PROGRAM" means (A) any employee benefit plan,
including, but not limited to, health, dental, insurance, and
similar plans and programs for the benefit of employees and
(B) any employment, consulting, severance or
<PAGE> 34
-29-
other similar contract, arrangement or policy, any stock
option plan, phantom stock plan, bonus or incentive award
plan, deferred compensation agreement, supplemental income
arrangement, and vacation plan, and any other employee benefit
plan, agreement, and arrangement not described in (A) above.
In the case of an Employee Program funded through a trust,
each reference to such Employee Program shall include a
reference to such trust; and
(b) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any
obligation (by agreement or under applicable law) to
contribute to or provide benefits under such Employee Program,
or if such Employee Program provides benefits to or otherwise
covers employees of such entity, or their spouses, dependants,
or beneficiaries.
(12) The only pension plans existing in respect of the employees of Sibson
Canada are the pension plans listed in Schedule 4.26. True, correct and
complete copies of all such pension plans and related documentation
(including pension plan summaries for participants, funding agreements,
actuarial reports and investment management agreements) have been
provided to Canadian Buyer and are accurately described in Schedule
4.26. All such pension plans are duly registered where required by, and
are in good standing under, all applicable laws, rules and Regulations
including the Income Tax Act (Canada) and the Pension Benefits Act
(Ontario) and to the knowledge of the SC Shareholders there are no
actions, claims, proceedings, pending or threatened (other than routine
claims for benefits) relating to any such pension plans. All required
employer contributions and premiums under such pension plans have been
made, all such plans are fully funded on both a going concern and
wind-up basis in accordance with applicable laws, rules and Regulations
and with the actuarial methods and assumptions used in the most recent
actuarial reports therefor, and there have been no surplus withdrawals
or contribution holidays.
SECTION 4.27 INSURANCE
Schedule 4.27 contains a complete and accurate list of all policies or
binders of fire, liability, title, worker's compensation, product liability and
other forms of insurance maintained by Sibson Canada or the Canadian Business,
the Canadian Assets or its employees. All such insurance coverage applicable to
Sibson Canada, the Canadian Business and the Canadian Assets is in full force
and effect and provides coverage as may be required by applicable Regulation and
by any and all Contracts to which Sibson Canada is a party. There is no Default
under any such coverage nor is there presently any failure to give notice or
present any claim under any such coverage in a due and timely fashion. There are
no outstanding unpaid premiums except in the ordinary course of business and no
notice of cancellation or nonrenewal of any such coverage has been received.
There are no provisions in such insurance policies for retroactive or
retrospective premium adjustments. All products liability, general liability and
workers' compensation insurance policies maintained by Sibson Canada are
presently occurrence policies and not claims made policies except for Sibson
Canada's professional liability (error and admissions), fiduciary liability and
employment practices policies. There are no outstanding performance bonds
covering or issued for the benefit of Sibson Canada. To the knowledge of the SC
Shareholders, no insurer has advised
<PAGE> 35
-30-
Sibson Canada that it intends to reduce coverage, increase premiums or fail to
renew existing policy or binder.
SECTION 4.28 ACCOUNTS RECEIVABLE.
To the knowledge of SC Shareholders, the accounts receivable set forth
on the Base Balance Sheet, and all accounts receivable arising since the Base
Balance Sheet Date, represent bona fide claims of Sibson Canada against debtors
for sales, services performed or other charges arising on or before the date
hereof, and all the goods delivered and services performed which gave rise to
said accounts where delivered or performed in all material respects in
accordance with the applicable orders, Contracts or customer requirements. Said
accounts receivable are subject to no defenses, counterclaims or rights of
setoff and are fully collectible in the ordinary course of business without cost
in collection efforts therefor, except to the extent of the appropriate reserves
for bad debts on accounts receivable as set forth on the Base Balance Sheet and,
in the case of accounts receivable arising since the Base Balance Sheet Date, to
the extent of a reasonable reserve rate for bad debts on accounts receivable
which is not greater than the rate reflected by the reserve for bad debts on the
Base Balance Sheet (or that of Sibson U.S. whichever is greater).
SECTION 4.29 [INTENTIONALLY DELETED.]
SECTION 4.30 ENVIRONMENTAL MATTERS.
(1) Except for Hazardous Materials contained in cleaning and other office
products used in the ordinary course of Sibson Canada's business (i)
Sibson Canada has not ever generated, transported, used, stored,
treated, disposed of, or managed any Hazardous Waste (as defined
below); (ii) to the knowledge of the SC Shareholders, no Hazardous
Material (as defined below) has ever been or is threatened to be
spilled, released, or disposed of at any site presently or formerly
owned, operated, leased, or used by Sibson Canada or has ever been
located in the soil or groundwater at any such site; (iii) to the
knowledge of the SC Shareholders, no Hazardous Material has ever been
transported from any site presently or formerly owned, operated,
leased, or used by Sibson Canada for treatment, storage, or disposal at
any other place; (iv) to the knowledge of the SC Shareholders, Sibson
Canada does not presently own, operate, lease, or use, nor has it
previously owned, operated, leased, or used any site on which
underground storage tanks are or were located; and (v) to the knowledge
of the SC Shareholders no lien has ever been imposed by any
governmental agency on any property, facility, machinery, or equipment
owned, operated, leased, or used by Sibson Canada in connection with
the presence of any Hazardous Material.
(2) To the knowledge of the SC Shareholders, Sibson Canada does not have
liability under, of has ever violated in any material respect, any
Environmental Law (as defined below); (ii) to the knowledge of the SC
Shareholders, Sibson Canada does not have any property owned, operated,
leased, or used by it, and any facilities and operations of Sibson
Canada thereon, are presently in compliance in all material respects
with all applicable Environmental Laws; (iii) Sibson Canada has not
ever entered into or been subject to any judgment, consent decree,
compliance order, or
<PAGE> 36
-31-
administrative order with respect to any environmental or health and
safety matter or received any request for information, notice, demand
letter, administrative inquiry, or formal or informal complaint or
claim with respect to any environmental or health and safety matter or
the enforcement of any Environmental Law; and (iv) the SC Shareholders
have no reason to believe that any of the items enumerated in clause of
this subSECTION will be forthcoming.
(3) [Intentionally deleted.]
(4) The SC Shareholders have made available to the Canadian Buyer copies of
all documents and records, and information in the possession of SC
Shareholders and Sibson Canada concerning any environmental or health
and safety matter relevant to Sibson Canada, whether generated by
Sibson Canada or others, including, without limitation, environmental
audits, environmental risk assessments, site assessments, documentation
regarding off-site disposal of Hazardous Materials, spill control
plans, and reports, correspondence, Permits, licenses, approvals,
consents, and other authorizations related to environmental or health
and safety matters issued by any governmental agency.
(5) For purposes of this SECTION 4.30, (i) "HAZARDOUS MATERIAL" shall mean
and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant,
contaminant, or other substance which may pose a threat to the
environment or to human health or safety, as defined or regulated under
any Environmental Law except for any Hazardous Material contained in
cleaning and other office products used in the ordinary course of
Sibson Canada's Business; (ii) "HAZARDOUS WASTE" shall mean and include
any contaminant or hazardous waste as defined or regulated under any
Environmental Law; (iii) "ENVIRONMENTAL LAW" shall mean any
environmental or health and safety-related Regulation, including,
without limitation, the Environmental Protection Act (Ontario) and the
Occupational Health and Safety Act (Ontario), whether existing as of
the date hereof, previously enforced, or subsequently enacted; (iv)
"SIBSON CANADA" shall mean and include Sibson Canada and all other
entities for whose conduct Sibson Canada is or may be held responsible
under any Environmental Law.
SECTION 4.31 WARRANTY OR OTHER CLAIMS.
To the knowledge of the SC Shareholders, there are no existing or
threatened service liability, warranty or other similar claims, or any
reasonable basis upon which a material claim of such nature could be based,
against Sibson Canada for services which are negligent, defective or fail to
meet any service warranties. Since the Balance Sheet Date, no claim has been
asserted against Sibson Canada for renegotiation or price redetermination of any
business transaction, and, to the knowledge of the SC Shareholders, there are no
facts known to the SC Shareholders upon which any such claim could be based.
SECTION 4.32 RECORDS; COPIES OF DOCUMENTS.
The actions recorded in the corporate records of Sibson Canada are
complete and accurate and all corporate proceedings and actions reflected in
such records have been conducted or taken in compliance with all applicable
Regulations and the articles and by-
<PAGE> 37
-32-
laws of Sibson Canada. Such corporate records contain complete and accurate
minutes of all meetings of the directors and shareholders held since
incorporation and all such meetings were properly called and held and contain
all resolutions passed by the directors and shareholders (and committees, if
any) and all such resolutions were properly passed and the share certificate
books, register of shareholders and registers of transfers are complete and
accurate. The SC Shareholders have made available for inspection and copying by
the Canadian Buyer and its counsel true and correct copies of all documents
referred to in this SECTION or in the Schedules delivered to the Canadian Buyer
pursuant to this Agreement.
SECTION 4.33 POWERS OF ATTORNEY.
Except for a power of attorney given by Michael Hogan in connection
with this Agreement and the documentation herewith, neither Sibson Canada nor
any of the SC Shareholders has any outstanding power of attorney with respect to
or affecting any transaction contemplated by this Agreement.
SECTION 4.34 DISCLOSURE.
The representations, warranties and statements contained in this
Agreement and in the exhibits and schedules hereto do not contain any untrue
statement of a material fact, and, when taken together, do not omit to state a
material fact required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made. To the knowledge of the SC
Shareholders, there are no current facts which presently or may in the future
have a material adverse affect on the business, properties, prospects,
operations or condition of Sibson Canada which have not been specifically
disclosed herein or in a Schedule furnished herewith, other than general
economic conditions affecting the industries in which Sibson Canada operates.
SECTION 4.35 OFFSHORE INVESTMENT REPRESENTATIONS.
Each SC Shareholder hereby represents, warrants and covenants as set
forth below, and all such representations and warranties shall be true and
correct as of the Closing Date as if then made and shall survive the Closing:
(a) Such SC Shareholder is not a U.S. Person (as defined in
Regulation S under the Securities Act of 1933 Act, as amended
(the "Securities Act")), is not an affiliate (as defined in
Rule 501(b) under the Securities Act) of Nextera and is not a
corporation that has been formed principally for the purpose
of investing in securities not registered under the Securities
Act.
(b) Such SC Shareholder is purchasing the Exchangeable Shares and
will exchange such Exchangeable Shares for Nextera Class A
Units of Nextera or Newco Class A Stock (the "Newco Class A
Stock") of Nextera Enterprises, Inc. ("Newco") for its own
account for the purpose of investment and not (A) with a view
to, or for sale in connection with, any distribution thereof
or (B) for the account of, as a nominee or agent for, or on
behalf of any U.S. Person.
<PAGE> 38
-33-
(c) At the time of the origination of contact concerning this
Agreement and the date of the execution and delivery of this
Agreement, (i) such SC Shareholder was outside the United
States.
(d) Such SC Shareholder:
(i) understands that the Nextera Class A Units or Newco
Class A Stock for which the Exchangeable Shares may
be exchanged (together the Nextera Class A Units and
Newco Class A Stock are referred to herein as the
"Securities") are distributed under Regulation S
under the 1933 Securities Act, as amended, and the SC
Shareholders will not, during the period commencing
on the date of the exchange of the Exchangeable
Shares into the Securities and ending on the first
anniversary of such date, or such shorter period as
may be permitted by Regulation S or other applicable
securities law, (the "Restricted Period"), offer,
sell, pledge or otherwise transfer the Securities in
the United States, or to a U.S. Person for the
account or benefit of a U.S. Person; the foregoing
restrictions shall not apply to the conversion of
Class A Units into Newco Class A Stock provided that
the balance of the Restricted Period shall apply;
(ii) understands that the Securities are being offered in
a transaction not involving any public offering
within the meaning of the Securities Act and that the
Securities have not been registered under the
Securities Act, and will, during the Restricted
Period, offer, sell, pledge or otherwise transfer the
Securities only in accordance with Rules 903 or 904
of Regulation S under the Securities Act, pursuant to
registration under the Securities Act or pursuant to
an available exemption from the registration
requirements of the Securities Act (and based upon an
opinion of counsel if the Company so requests, acting
reasonably), and in accordance with all applicable
state and foreign securities laws;
(iii) will, after expiration of the Restricted Period,
offer, sell, pledge or otherwise transfer the
Securities only pursuant to registration under the
Securities Act or an available exemption therefrom
(and based upon an opinion of counsel, acting
reasonably, if the Company so requests) and, in any
case, in accordance with all applicable state and
foreign securities laws; and
(iv) has not in the United States, engaged in, and prior
to the expiration of the Restricted Period will not
engage in, any short selling of any equity security
issued by Nextera, or Newco (including, without
limitation, the Class A Units and Newco Class A
Stock) or any hedging transaction with respect to any
such equity security, including without limitation,
put, call or other option transaction, option writing
and equity swaps.
<PAGE> 39
-34-
(e) None of the SC Shareholders, its affiliates or any person
acting on behalf of the SC Shareholder or any such affiliates
has engaged, or will engage, in any directed selling efforts
(within the meaning of Rule 901(b) of Regulation S under the
Securities Act) with respect to the Securities and them, their
affiliates and all persons acting on their behalf have
complied and will comply with the "offering restrictions"
requirements of Regulation S under the Securities Act.
(f) The transactions contemplated by this Agreement have not been
pre-arranged with a buyer (other than Nextera) located in the
United States or with a U.S. Person, and are not part of a
plan or scheme to evade the registration requirements of the
Securities Act.
(g) Neither such SC Shareholder, any affiliate of such SC
Shareholder, nor any person acting on their behalf has
undertaken or carried out any activity for the purpose of, or
that could reasonably be expected to have the effect of,
conditioning the market in the United States, its territories
or possessions, for any of the Securities. The SC Shareholder
agrees not to cause any advertisement of the Securities to be
published in any newspaper or periodical or posted in any
public place and not to issue any circular relating to the
Securities, except such advertisements that include the
statements required by Regulation S under the Securities Act.
(h) Such SC Shareholder understands that the Securities have not
been registered under the Securities Act by reason of a
specific exemption therefrom, and may not be transferred or
resold except pursuant to an effective registration statement
or exemption from registration (and based upon an opinion of
counsel, acting reasonably, if Nextera or Newco so requests)
and each certificate representing the Securities will be
endorsed with the following legends:
(i) THE SHARES ARE BEING OFFERED TO INVESTORS WHO ARE NOT
U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT OF 1933, AS AMENDED) AND WITHOUT
REGISTRATION WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT IN
RELIANCE UPON REGULATION S PROMULGATED UNDER THE
SECURITIES ACT.
(ii) SUBSCRIPTIONS MAY ONLY BE ACCEPTED FROM PROSPECTIVE
INVESTOR THAT, AT ANY TIME THE BUY ORDER FOR THE
SHARES IS ORIGINATED, IS OUTSIDE THE UNITED STATES,
ITS TERRITORIES AND POSSESSIONS, AND IS NOT A U.S.
PERSON (AS DEFINED IN REGULATION S), WAS NOT FORMED
UNDER THE LAWS OF ANY UNITED STATES JURISIDICTION,
WAS NOT FORMED FOR THE PURPOSE OF INVESTING IN
SECURITIES NOT REGISTERED
<PAGE> 40
-35-
UNDER THE SECURITIES ACT, AND IS NOT PURCHASING THE
SHARES FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON,
WITHIN THE MEANING OF REGULATION S UNDER THE ACT. BY
SIGNING THE SUBSCRIPTION AGREEMENT, A PROSPECTIVE
INVESTOR UNDER REGULATION S CERTIFIES TO THE COMPANY
THAT IT QUALIFIES AS A NON-U.S. PERSON AND IS
THEREFORE ELIGIBLE TO PURCHASE SHARES IN THE
OFFERING, THAT IT IS NOT PURCHASING THE SHARES AS A
RESULT OF OR IN CONNECTION WITH ANY ACTIVITY THAT
WOULD CONSTITUTE "DIRECTED SELLING EFFORTS" (WITHIN
THE MEANING GIVEN SUCH TERM IN REGULATION S) IN THE
UNITED STATES, THAT IT WILL NOT BECOME AN AFFILIATE
OF THE COMPANY AS A RESULT OF THE PURCHASE OF THE
SHARES, THAT NO OFFER OR SALE OF THE SHARES WAS MADE
TO THE INVESTOR IN THE UNITED STATES, AND THAT SUCH
INVESTOR IS NOT PURCHASING THE SHARES WITH A VIEW TO
THEIR DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT.
(iii) PROSPECTIVE INVESTORS UNDER REGULATION S ARE ALSO
ADVISED THAT DURING THE ONE-YEAR RESTRICTED PERIOD
PROVIDED FOR IN RULE 903 OF REGULATION S, NO OFFERS
OR SALES OF THE SHARES OFFERED HEREBY MAY BE MADE IN
THE UNITED STATES OR TO U.S. PERSONS. AFTER THE
EXPIRATION OF THE ONE-YEAR RESTRICTED PERIOD, RESALES
OF THE SHARES MAY ONLY BE MADE IN THE UNITED STATES
OR TO A U.S. PERSON IF THE SHARES HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT, OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
(iv) Any legend required to be placed thereon by
applicable federal or state securities laws.
(i) Such SC Shareholder has substantial experience in evaluating
and investing in private placement transactions of securities
in companies similar to Nextera and Newco so that he is
capable of evaluating the merits and risks of acquiring the
Securities to be issued to such SC Shareholder and has the
capacity to protect his own interests. Such SC Shareholder
must bear the economic risk of holding the Securities
indefinitely unless such securities are registered pursuant to
the Securities Act, or an exemption from registration is
available for the disposition thereof. Such SC Shareholder
understands that there is no assurance that any exemption from
registration under the Securities Act will be available.
(j) Such SC Shareholder is acquiring the Securities for his own
account for investment only, and not with the view to, or for
resale in connection with,
<PAGE> 41
-36-
any distribution thereof. It understands that the Securities
to be acquired has not been, and will not be, registered under
the Securities Act by reason of a specific exemption from
registration provisions of the Securities Act, the
availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of
such SC Shareholder's representations as expressed herein.
(k) Such SC Shareholder understands that no public market now
exists for any of the securities issued by Nextera or Newco
and that neither Nextera or Newco has made any assurances that
a public market will ever exist for such securities.
(l) Such SC Shareholder has received and read the Nextera business
plan and financial statements and has had an opportunity to
discuss Nextera's business, management and financial affairs
with its management. Such SC Shareholder has also had an
opportunity to ask questions of and receive answers from
officers of Nextera regarding the terms and conditions of
acquiring the Securities pursuant to this Agreement, which
questions were answered to such Shareholder's satisfaction.
SECTION 4.36 AMOUNTS OWING TO SC SHAREHOLDERS.
Both parties agree that there are shareholder loans owing to the SC
Shareholders by Sibson Canada (the "Shareholder Loans") as listed in Schedule
4.36. Such amounts will be evidenced in promissory notes delivered at Closing.
After closing the Principals of Sibson Canada can distribute cash flow
permitting in ordinary course.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF NEXTERA AND
CANADIAN BUYER
As a material inducement to the SC Shareholders to enter into this
Agreement and consummate the transactions contemplated hereby, Nextera and
Canadian Buyer jointly and severally hereby make the representations and
warranties to the SC Shareholders as follows, which representations and
warranties are, as of the date hereof, and will be, as of the Closing Date, true
and correct:
SECTION 5.1 ORGANIZATION.
(1) Nextera is a limited liability company organized, validly existing and
in good standing under the laws of the State of Delaware with full
limited liability company power to own or lease its properties and to
conduct its business in the manner and in the places where such
properties are owned or leased or such business is conducted by it.
Each of Nextera's Subsidiaries is duly organized or incorporated (as
applicable) and in good standing under the laws of the state of its
organization or incorporation (as applicable) with full limited
liability company power or corporate power (as applicable) to own or
lease its properties and to conduct its business in the manner and in
the places where such properties are owned or leased or such business
is
<PAGE> 42
-37-
conducted by it. Neither Nextera nor any of Nextera's Subsidiaries is
required to be licensed or qualified to conduct its business or own its
property in any other jurisdiction in which failure to be so licensed
or qualified would have a material adverse effect.
(2) Canadian Buyer is an unlimited liability company incorporated,
organized and in good standing under the NS Act with full corporate
power and authority to own or lease its properties and to conduct its
business in the manner and in the places where such properties are
owned or leased or such business is or is proposed to be conducted.
Canadian Buyer is a direct or indirect wholly-owned subsidiary of
Nextera.
(3) CAPITAL STRUCTURE. The authorized capital of Canadian Buyer consists of
100,000,000 Common Shares without par value and 250,000 Exchangeable
Shares. Immediately after Closing the issued capital of Canadian Buyer
will consist of 10,000,000 common shares and 197,813 Exchangeable
Shares.
(4) EXCHANGEABLE SHARES. On the Closing Date, all necessary corporate
action will have been taken by the Canadian Buyer to duly authorize the
issuance and delivery of the Exchangeable Shares to the SC Shareholders
pursuant to SECTION 2.3 and upon the satisfaction of the terms and
conditions hereof and the consummation of the transactions contemplated
hereby and the issue of such Exchangeable Shares, such Exchangeable
Shares will be issued as fully paid and non-assessable free and clear
of any and all Encumbrances, and Nextera and Canadian Buyer have no
knowledge of any reason why SC Shareholders should not be entitled to
acquire units of Nextera so as to be in the same position as the
Shareholders under the US Purchase Agreement.
(5) SUBSIDIARIES. Other than Symmetrix, Inc., SGM Consulting, L.L.C. (d/b/a
"SIGMA CONSULTING"), The Planning Technologies Group, L.L.C., Pyramid
Imaging, Inc., SC/NE, L.L.C. and the Canadian Buyer, Nextera has no
Subsidiaries or investments in any other corporation or business
organization. The Canadian Buyer was founded solely for the purpose of
consummating the transactions contemplated herein and prior to Closing
will not have transacted any business or have incurred any liabilities,
except as provided for herein and obtaining of funding for purposes of
payment of the cash portion of the Purchase Price. Canadian Buyer has
no Subsidiaries and does not own an equity interest in any other
corporation or business.
SECTION 5.2 AUTHORITY
(1) Nextera and Canadian Buyer have full right, authority and power to
enter into this Agreement and each agreement, document and instrument
to be executed and delivered by Nextera and Canadian Buyer pursuant to
this Agreement and to carry out the transactions contemplated hereby.
The execution, delivery and performance by Nextera and Canadian Buyer
of this Agreement and each such other agreement, document and
instrument have been duly authorized by all necessary organizational
action of Nextera and Canadian Buyer and no other action on the part of
Nextera and Canadian Buyer is required in connection therewith.
<PAGE> 43
-38-
(2) This Agreement and each other agreement, document and instrument
executed and delivered by Nextera and Canadian Buyer pursuant to this
Agreement constitutes, or when executed and delivered will constitute,
valid and binding obligations of Nextera and Canadian Buyer enforceable
in accordance with their terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject to the effect of
general principles of equity, including, without limitation, the
possible unavailability of specific performance or injunctive relief,
regardless of whether considered in a proceeding in equity or at law.
The execution, delivery and performance by Nextera and Canadian Buyer
of this Agreement and each such agreement, document and instrument:
(a) Does not and will not violate any provision of the Memorandum
and Articles of Association of Canadian Buyer;
(b) Does not and will not violate any provision of the certificate
of formation of Nextera and the Operating Agreement of
Nextera;
(c) Does not and will not violate any laws of Canada or of any
province or the laws of the United States or of any state or
any other jurisdiction applicable to Nextera and Canadian
Buyer or require Nextera and Canadian Buyer to obtain any
approval, consent or waiver of, or make any filing with, any
person or entity (governmental or otherwise) which has not
been obtained or made or opinion to Closing other than (x) any
such approval, consent or waiver of or filing with respect to
which the failure to so obtain will not have a material
adverse effect on the business and operation of Canadian
Buyer, individually, or Nextera and its Subsidiaries, taken as
a whole, following the Closing and (y) any approvals,
consents, waivers or filings in connection with Contracts and
Leases as a result of the transactions contemplated hereby;
and
(d) Does not and will not result in a breach of, constitute a
Default under, accelerate any obligation under, or give rise
to a right of termination of any indenture, loan or credit
agreement, or other agreement mortgage, lease, permit, order,
judgment or decree to which Nextera, its Subsidiaries or the
Canadian Buyer is bound or affected, or result in the creation
or imposition of any mortgage, pledge, lien, security interest
or other charge or similar encumbrance on any of the assets or
capital stock of Nextera or Canadian Buyer and which is
material to the business and financial condition of Nextera or
Canadian Buyer on a consolidated basis, except in the case of
clause (b), for such breaches, defaults, accelerations or
terminations as would not, individually or in the aggregate,
have a material adverse effect.
SECTION 5.3 LITIGATION.
Other than as set forth on Schedule 5.3, there are no Actions pending
or to the knowledge of Nextera, and Canadian Buyer, threatened or anticipated
(a) against, related to or affecting (i) Nextera and its Subsidiaries on a
consolidated basis (including with respect to Environmental Laws) or (ii) any
officers, directors or managers of Nextera or its Subsidiaries as such, (b)
seeking to delay, limit or enjoin the transactions contemplated by this
Agreement
<PAGE> 44
-39-
(c) that involve the risk of criminal liability on Nextera or its Subsidiaries
or any of their officers, directors or managers, or (d) in which Nextera or its
Subsidiaries are a plaintiff, including any derivative suits brought by or on
behalf of any of Nextera or its Subsidiaries. Neither Nextera nor any of its
Subsidiaries are in Default with respect to or subject to any Court Order, and
there are no unsatisfied judgments against Nextera or its Subsidiaries. There is
not a reasonable likelihood of an adverse determination of any pending Actions
that could have a materially adverse effect. There are no Court Orders or
agreements with, or liens by, any governmental authority or quasi-governmental
entity relating to any Environmental Law which regulates, obligates, binds or in
any way affects Nextera or its Subsidiaries.
SECTION 5.4 NO BROKERS.
Neither Nextera nor Canadian Buyer nor any of their officers,
directors, managers, employees, shareholders, members or affiliates has employed
or made any agreement with any broker, finder or similar agent or any person or
firm which will result in the obligation of Canadian Buyer or SC Shareholders to
pay any finder's fee, brokerage fees or commission or similar payment in
connection with the transactions contemplated hereby.
SECTION 5.5 MEMBERSHIP INTERESTS OF NEXTERA.
Schedule 5.5 sets forth all of the issued and outstanding membership
interests of Nextera and all of the issued and outstanding membership interests
of Canadian Buyer on the date hereof and on the Closing Date (assuming
consummation of the transaction contemplated hereby and under the U.S.
Agreement, including, in the case of Nextera, the issuance of Nextera Class A
Units under the Employment Agreements). Except as set forth on Schedule 5.5 and
the obligations under this Agreement, there are no outstanding options,
warrants, rights, commitments, pre-emptive rights or agreements of any kind for
the issuance and sale of, or outstanding securities convertible into, any
additional membership interests of any class of Nextera. Schedule 5.5 sets forth
a list of all agreements, if any, instruments and undertakings, relating to the
voting, transfer, registration, repurchase or any similar right with respect to
the issued and outstanding equity interests of Nextera. None of the equity
interests of Nextera or Canadian Buyer were issued in violation of any federal,
provincial or state law.
SECTION 5.6 OPERATING AGREEMENT.
The Nextera Operating Agreement attached as Exhibit G and the Buyer
Operating Agreement attached as Exhibit F are in full force and effect, as
amended through the Closing Date.
SECTION 5.7 FINANCIAL STATEMENTS.
(1) Nextera and Canadian Buyer have delivered or caused to be delivered
to the SC Shareholders, the following financial statements, copies
of which are attached hereto as Schedule 5.7: a consolidated balance
sheet of Nextera and a consolidated statement of profit and loss of
Nextera as of December 31, 1997 as audited by Ernst & Young LLP (the
"Audited Financial Statements") an unaudited balance sheet of
Nextera and its Subsidiaries as of June 30, 1998 and an unaudited
statement of profit and loss of Nextera for the six months ended
June 30, 1998 (the "INTERIM FINANCIAL STATEMENTS") and together with
the Audited Financial Statements (the "NEXTERA
<PAGE> 45
-40-
FINANCIAL STATEMENTS"). The December 31, 1997 balance sheet is
hereinafter referred to as the "NEXTERA BALANCE SHEET" and December 31,
1997 is hereinafter referred to as the "NEXTERA BALANCE SHEET DATE."
The Nextera Financial Statements have been prepared in accordance with
generally accepted accounting principles (subject to normal year-end
adjustments in the case of the Interim Financial Statements) applied
consistently during the period covered thereby, and said Audited
Financial Statements present fairly in all material respects the
consolidated financial condition of Nextera at the date of said
statements and the consolidated results of its operations for the
period covered thereby and the Interim Financial Statements present
fairly and completely in all material respects the information to be
shown thereon.
(2) Except as set forth on Schedule 5.7, as of the date hereof and as of
the Closing, Nextera and its Subsidiaries and Canadian Buyer do not
have any Liabilities of any nature, whether accrued, absolute or
contingent (including without limitation, Liabilities as guarantor or
otherwise with respect to obligations of others, or Liabilities for any
Tax due or then accrued or to become due or contingent or potential
Liabilities relating to activities of Nextera or any Subsidiary of
Nextera or Canadian Buyer or the conduct of any of the businesses prior
to the date hereof or the Closing, as the case may be, regardless of
whether claims in respect thereof had been asserted as of such date),
except Liabilities (i) stated or adequately reserved against on the
Nextera Balance Sheet or the notes thereto, or (ii) incurred or arising
in the ordinary course of business of Nextera or any Subsidiary of
Nextera after the Nextera Balance Sheet Date, (iii) disclosed in this
Article 5 or on the Nextera Disclosure Schedule or (iv) future
performance obligations under contracts and leases, none of which
relates to any default, breach of warranty, tort infringement, or
violation of any Regulation or Court Order or arose out of any action.
(3) Nextera has delivered to SC Shareholders the following unaudited pro
forma financial statements, copies of which are attached hereto as
Schedule 5.7: a consolidated balance sheet of Nextera and its
subsidiaries as of June 30, 1998 and a consolidated statement of profit
and loss of Nextera for the six months ended June 30, 1998 (the "Pro
Forma Statements"). The Pro Forma Statements have been prepared giving
effect to the consummation of each acquisition made by Nextera
subsequent to January 1, 1998 (including pursuant to this Agreement and
the acquisition of Sibson Canada). The Pro Forma Statements have been
prepared based on information Nextera believes to be reasonable as of
the date of delivery thereof, and present fairly in all material
respects on a pro forma basis the estimated financial position of
Nextera as of June 30, 1998 and results of operations for the six
months then ended, assuming that the events specified in the preceding
sentence had actually occurred. The Pro Forma Statements are not
necessarily indicative of the financial position or results of
operations that would have been obtained had the pro forma events
actually occurred and should be read in conjunction with the Nextera
Financial Statements provided to SC Shareholders.
<PAGE> 46
-41-
SECTION 5.8 TAXES.
(1) All Tax Returns required to be filed by Nextera, each L.L.C. Subsidiary
and each corporate Subsidiary have been timely filed (giving effect to
extensions granted with respect thereto), and all such Tax Returns are
true, correct, and complete in all material respects.
(2) Nextera, each L.L.C. Subsidiary and each corporate Subsidiary has
timely paid all Taxes due from them or claimed to be due from them by
any federal, state, local, foreign or other taxing authority.
(3) There are no liens for Taxes upon any of the assets of Nextera, any
L.L.C. Subsidiary or corporate Subsidiary, except liens for taxes not
yet due and payable.
(4) No Tax Returns of Nextera, any L.L.C. Subsidiary and any corporate
Subsidiary have been examined by the relevant taxing authority. No
deficiency for any Taxes has been proposed, asserted or assessed
against Nextera, any L.L.C. Subsidiary or any corporate Subsidiary that
has not been resolved and paid in full. There are no outstanding
waivers, extensions, or comparable consents regarding the application
of the statute of limitations with respect to any Taxes or Tax Returns
that have been given by Nextera, any L.L.C. Subsidiaries or any
corporate Subsidiary (including the time for filing of Tax Returns or
paying Taxes) and neither, Nextera, any L.L.C. Subsidiary or any
corporate Subsidiary has any pending requests for any such waivers,
extensions, or comparable consents.
(5) No audit or other proceeding by any federal, state, provincial, local
or foreign court, governmental, regulatory, administrative or similar
authority is presently pending with respect to any Taxes or Tax Return
of Nextera any L.L.C. Subsidiary or any corporate Subsidiary, and
neither, Nextera, any L.L.C. Subsidiary nor any corporate Subsidiary
has received written notice of any pending audits or proceedings.
(6) Nextera, each L.L.C. Subsidiary and each corporate Subsidiary have
established adequate reserves in accordance with generally accepted
accounting principles for all Taxes not yet due and payable, which
reserves are set forth in Schedule 5.8.
(7) Nextera, each L.L.C. Subsidiary and each corporate Subsidiary have
complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to
Sections 1441, 1442, 1445 and 1446 of the Internal Revenue Code or
similar provisions under any applicable state, provincial and foreign
laws) and have, within the time and the manner prescribed by law, paid
over to the proper governmental authorities all amounts so withheld.
(8) Neither Nextera, any L.L.C. Subsidiary nor any corporate Subsidiary is
a party to, is not bound by any obligation under any Tax sharing
allocation or indemnity agreement or similar contract or arrangement.
<PAGE> 47
-42-
(9) Nextera is, and has been at all times since its formation, properly
characterized as a partnership for federal and applicable state and
local income Tax purposes.
(10) No power of attorney granted by Nextera, any L.L.C. Subsidiary or any
corporate Subsidiary with respect to any Taxes is currently in force.
(11) Other than its own operating agreement, Nextera is not subject to any
joint venture, partnership or other arrangement or contract that is
treated as a partnership for U.S. federal income Tax purposes.
(12) There is no expectation that any taxing authority may claim or assess
any material amount of Taxes payable by Nextera, any L.L.C. Subsidiary
or any corporate Subsidiary for any period ending on or prior to the
Closing Date and there are no facts which would constitute grounds for
the assessment of any material amount of Taxes payable by Nextera, any
L.L.C. Subsidiary or any corporate Subsidiary for any period ending on
or prior to the Closing Date.
SECTION 5.9 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as disclosed in Schedule 5.9, since the date of the Nextera
Balance Sheet, there has not been any:
(a) Actual or threatened material adverse change in the financial
condition, working capital, shareholders' equity, assets,
Liabilities, reserves, revenues, income earnings, prospects of
Nextera and its Subsidiaries on a consolidated basis;
(b) Change in accounting methods, principles or practices by
Nextera or any Subsidiary of Nextera affecting Nextera's
assets, Liabilities or business;
(c) Revaluation by Nextera or any Subsidiary of Nextera of any of
their assets, including without limitation writing down the
value of inventory or writing off notes or accounts
receivable;
(d) Damage, destruction or loss (whether or not covered by
insurance) which has had or will have a material adverse
affect on the assets or the business of Nextera or its
Subsidiaries on a consolidated basis;
(e) Cancellation of any indebtedness or waiver or release of any
right or claim of Nextera or any Subsidiary of Nextera
relating to its activities or properties which had or will
have a material adverse effect on their assets or business;
(f) Declaration, setting aside, or payment of dividends or
distributions by Nextera or any Subsidiary of Nextera in
respect of its equity securities or any redemption, purchase
or other acquisition of any of the securities of Nextera or
any Subsidiary of Nextera;
(g) Adverse change in employee relations which has or is
reasonably likely to have a material adverse effect on the
productivity, the financial condition,
<PAGE> 48
-43-
results of operations of Nextera and its Subsidiaries on a
consolidated basis or the relationships between the employees
of Nextera and its Subsidiaries and the management of Nextera
and its Subsidiaries;
(h) Payment, discharge or satisfaction of any Liabilities of
Nextera or any Subsidiary of Nextera other than the payment,
discharge or satisfaction in the ordinary course of business
of Liabilities set forth or reserved for on the Nextera
Balance Sheet or incurred in the ordinary course of business;
(i) Failure to pay or satisfy when due any Liability of Nextera or
any Subsidiary of Nextera, except where the failure would not
have a material adverse effect on Nextera and its Subsidiaries
on a consolidated basis;
(j) Disposition or lapsing of any Proprietary Rights or any
disposition or disclosure to any person of any of the
Proprietary Rights of Nextera or its Subsidiaries or Canadian
Buyer not theretofore a matter of public knowledge other than
as would not have a material adverse effect; or
(k) Agreement by Nextera or any of its Subsidiaries to do any of
the things described in the preceding clauses (a) through (k)
other than as expressly provided for herein.
SECTION 5.10 [INTENTIONALLY DELETED].
SECTION 5.11 COMPLIANCE WITH LAWS.
Nextera and each of its Subsidiaries has been and are in substantial
compliance with all Regulations relating to the operation of Nextera and each of
its Subsidiaries except in each case where such non-compliance would not
individually or in the aggregate have a material adverse effect. Within the last
five years, neither Nextera or any of its Subsidiaries have received any notice
to the effect that, or otherwise been advised that, they are not in compliance
with any such Regulations or Court Orders, and Nextera and Canadian Buyer have
no reason to anticipate that any existing circumstances are likely to result in
violations of any of the foregoing.
SECTION 5.12 PROPRIETARY RIGHTS.
(a) Proprietary Rights. Schedule 6.13 lists: (i) for each
registered Trademark of Nextera or any Subsidiary, the
application serial number of registration number, the class of
goods covered and the expiration date for each country in
which a Trademark has been registered and (ii) for each
registered Copyright of Nextera or any Subsidiary, the number
and date of filing for each country in which a Copyright has
been filed. Other than the items set forth on Schedule 5.12
and other than the unregistered service/trade name "Nextera
Enterprises" and variations thereof, there are no Proprietary
Rights used by Nextera or any Subsidiary that are material to
the conduct of its business. Nextera or any Subsidiary has no
patents or registered designs nor has it filed any patent
applications or registered design applications.
<PAGE> 49
-44-
(b) Royalties and Licenses. Except as set forth on Schedule 6.13
neither Nextera nor any Subsidiary, has any obligation to
compensate any person for the use of any such Proprietary
Rights nor has Nextera or any Subsidiary granted to any person
any license, option or other rights to use in any manner any
of such Proprietary Rights, whether requiring the payment of
royalties or not.
(c) Ownership and Protection of Proprietary Rights. Except as set
forth on Schedule 5.12, Nextera and/or its Subsidiaries own or
have a valid right to use each of such Proprietary Rights.
Except as set forth in Schedule 5.12, no other person (i) has
notified Nextera or any Subsidiary that it is claiming any
ownership of or right to use such Proprietary Rights, or (ii)
to the knowledge of Nextera and its Subsidiaries, is
infringing upon any such Proprietary Right in any way. To the
knowledge of Nextera and its Subsidiaries, except as set forth
on Schedule 5.13, use of such Proprietary Rights by Nextera or
any Subsidiary does not and will not conflict with, infringe
upon or otherwise violate the valid rights of any third party
in or to such Proprietary Rights, and no Action has been
instituted against or notices received by Nextera or any
Subsidiary that are presently outstanding alleging that use of
the Proprietary Rights by Nextera or any Subsidiary infringes
upon or otherwise violates any rights of a third party in or
to such Proprietary Rights.
ARTICLE 6
COVENANTS
SECTION 6.1 FURTHER ASSURANCES.
Upon the terms and subject to the conditions contained herein,
Nextera and Canadian Buyer on the one hand, and the SC Shareholders on the other
hand, agree, both before and after the Closing, (a) to use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement, (b) to execute any documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the transactions contemplated hereunder, and (c)
to cooperate with each other in connection with the foregoing. Without limiting
the foregoing, the SC Shareholders, on the one hand, and Canadian Buyer on the
other hand, agree to use their respective commercially reasonable efforts (i) to
obtain the consents of each relevant party with respect to license agreements
between Sibson & Company, L.P. and Sibson Canada (as listed in Schedule 6.1) and
the consent from Toronto-Dominion Bank provided, however, that to the extent
Canadian Buyer fails to cooperate (i) by providing on a timely basis any
financial or similar information reasonably requested by the party whose consent
is sought, including, without limitation, any pro forma financial statements
with respect to Buyer reflecting the consummation of the transactions
contemplated hereby, or (ii) executing and delivering any assumption agreement
or similar instrument requested by any lessor or sublessor and which is
reasonably acceptable to Buyer in connection with the obtaining of any consent
with respect to a Contract or Facility Lease listed on Schedule 4.12, SC
Shareholders shall not be required to obtain said consent hereunder and the
obtaining of said consent shall no longer be deemed a condition to Closing under
Article IX hereof; provided, further that no party shall
<PAGE> 50
-45-
be required to make any payments, commence litigation or agree to modifications
of the terms thereof in order to obtain any such waivers, consents or approvals,
(ii) to obtain all necessary Permits as are required to be obtained under any
Regulations, (iii) to give all notices to, and make all registrations and
filings with third parties, including without limitation submissions of
information requested by governmental authorities, and (iv) to fulfill all
conditions to this Agreement.
For greater certainty, Nextera, the Canadian Buyer, and the SC
Shareholders agree to elect jointly under Section 85 of the Income Tax Act
(Canada) (the "ITA"), each in the prescribed form when presented in a timely
fashion, in connection with purchase and sale hereunder.
Each of the SC Shareholders and their Ontario holding companies
agree to elect jointly under Section 85 of the Income Tax Act (Canada) (the
"ITA"), each in the prescribed form, when presented in a timely fashion, in
connection with purchase and sale hereunder.
SECTION 6.2 EXCHANGEABLE DOCUMENTATION.
Nextera, Canadian Buyer and SC Shareholders hereto agree to execute
and deliver or cause to be executed and delivered on Closing (i) a support
agreement between Nextera and the Canadian Buyer in the form or substantially in
the form of Exhibit I (the "SUPPORT AGREEMENT") and (ii) an exchange trust
agreement among Nextera, Canadian Buyer and SC Shareholders and a trustee in the
form or substantially in the form of Exhibit H (the "EXCHANGE TRUST AGREEMENT")
SECTION 6.3 CONDUCT OF BUSINESS.
Except as set forth on Schedule 6.3, between the date of this
Agreement and the date of the Closing, the SC Shareholders will cause Sibson
Canada:
(a) Use reasonable efforts to conduct its business only in the
ordinary course consistent with past operations and refrain
from changing or introducing any method of management or
operations except in the ordinary course of business;
(b) With the exception of the termination of the Facility Lease
and an offer to lease of Sibson Canada, not enter into,
extend, materially modify, terminate or renew any Contract or
Lease, except in the ordinary course of business;
(c) Not sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any of the Canadian Assets,
or any interests therein, except in the ordinary course of
business and for the Permitted Liens;
(d) Not incur any Liability for long-term interest bearing
indebtedness, guarantee the obligations of others, indemnify
others or, except in the ordinary course of business
(including borrowings in the ordinary course of business under
Sibson Canada's revolving credit facility) and endorsements
for collection of deposits in the ordinary course of business,
incur any other Liability;
<PAGE> 51
-46-
(e) Refrain from making any change or incurring any obligation to
make a change in its charter document other than are required
to effect the steps referred to in Section 2.1 hereof;
(f) Refrain from declaring, setting aside or paying any dividend,
making any other distribution in respect of its capital stock
or making any direct or indirect redemption, purchase or other
acquisition of its capital stock;
(g) Refrain from making any material change in the method of
determining compensation (whether salary or bonus) payable or
to become payable to any of its employees and use all
reasonable efforts in the ordinary course of business to
maintain Sibson Canada's workforce at its current level and
make no material adjustment in wages or hours of work, nor
enter into any employment agreement, or adopt any new Employee
Programs or other benefit or severance plan or amend or
otherwise modify in any material respect any existing
employment agreement, Employee Programs or other benefit or
severance plan;
(h) Refrain from entering into any arrangement or amending any
existing arrangement between Sibson Canada and any officer,
director, or any of the SC Shareholders (or any entity
affiliated with such persons), except for arrangements
contemplated by this Agreement or the Disclosure Schedule;
(i) Refrain from prepaying any loans (if any) from its
shareholders, officers or directors, borrowing any funds
(other than borrowings in the ordinary course of business
under Sibson Canada's revolving credit facility) or making any
other change in its borrowing arrangements;
(j) Use its commercially reasonable efforts to prevent any change
with respect to its management and supervisory personnel and
banking arrangements;
(k) Use its commercially reasonable efforts to keep intact its
business organization, to keep available its present officers
and employees and to preserve the goodwill of all independent
contractors and others having business relations with it;
(l) Have in effect and maintain at all times all insurance of the
kind, in the amount and with the insurers set forth in the
Schedule 4.27 hereto or equivalent insurance with any
substitute insurers approved in writing by the Canadian Buyer;
(m) Maintain the working capital of Sibson Canada in the ordinary
course of business at levels consistent with past operations;
and
(n) Permit Canadian Buyer and its authorized representatives
during normal business hours to have full access to all its
properties, assets, records, tax returns, contracts and
documents and furnish to the Canadian Buyer or its authorized
representatives such financial and other information with
respect to
<PAGE> 52
-47-
its business or properties as Canadian Buyer may from time to
time reasonably request.
Between the date of this Agreement and the Closing, Nextera shall
provide SC Shareholders with prior written notice of (a) any material actions,
transactions or developments outside the ordinary course of Nextera's and its
Subsidiaries' respective businesses; (b) failure of Nextera or any of its
Subsidiaries to use all reasonable efforts to conduct their respective business
only in the ordinary course consistent with past operations; (c) failure of
Nextera or any Subsidiaries to use all reasonable efforts in the ordinary course
of business to maintain their respective workforces at current levels and not
make any material adjustment in wages or hours of work, nor enter into any
amendments to any material employment agreement, or adopt any new pension,
benefit or severance plan; (d) other than the issuance of equity interests upon
the exercise of options as set forth on Schedule 6.6, any issuance or sale of
any additional equity interests by any of Nextera or its Subsidiaries of its
respective operating agreement in the case of a limited liability company or
constituent documents in the case of a corporation so as to effect the value of
such person or the ability of such person.
SECTION 6.4 NO SOLICITATION OF OTHER OFFERS.
Neither Sibson Canada, SC Holdco, nor any of the SC Shareholders,
nor any of their officers, directors, agents, or employees or Representatives
will, directly or indirectly, solicit, encourage, assist, initiate discussions
or engage in negotiations with, provide any information concerning the
operations, properties or assets of Sibson Canada, or entertain or enter into
any agreement or transaction with, any person, other than Canadian Buyer or
Nextera, relating to the possible acquisition of the equity of Sibson Canada or
any of its assets, except for the sale of assets in the ordinary course of
business of Sibson Canada consistent with the terms of this Agreement. If such a
proposal is received, Sibson Canada will promptly notify Nextera of the terms of
such proposal and the identity of the party making the proposal.
SECTION 6.5 NOTIFICATION OF CERTAIN MATTERS.
(a) From the date hereof through the Closing, the SC
Shareholders on the one hand, and Nextera and
Canadian Buyer on the other hand, shall give prompt
notice to the other of (i) the occurrence, or failure
to occur, of any event which occurrence or failure
would be likely to cause any representation or
warranty contained in this Agreement or in any
exhibit or schedule hereto to be untrue or inaccurate
in any respect and (ii) any failure of such party, or
any of its respective affiliates or Representatives,
to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it
under this Agreement or any exhibit or schedule
hereto; provided, however, that such disclosure shall
not be deemed to cure any breach of a representation,
warranty, covenant or agreement or to satisfy any
condition except as otherwise provided in Section
6.5(b) hereof. The SC Shareholders shall promptly
notify Canadian Buyer of any Default, the threat or
commencement of any Action, or any development that
occurs before the Closing that could in any way
materially affect Sibson Canada, the Canadian Assets
or the Canadian Business. The Buyer and Nextera shall
promptly notify the SC
<PAGE> 53
-48-
Shareholders of any default, the threat or
commencement of any action, or any development that
occurs before the Closing that could in any way
materially affect the Canadian Buyer or Nextera,
individually, or their respective business and
operations.
(b) Anything in Section 6.5(a) to the contrary
notwithstanding, if any event not expressly
contemplated by this Agreement occurs at any time
between the date hereof and the Closing Date that
would result in any representation or warranty made
by the SC Shareholders, on the one hand, and Canadian
Buyer and Nextera, on the other hand, not being true
in any material respect on the Closing Date, such
parties shall promptly give written notice of such
event to such other parties. Following receipt of
such notice, the parties receiving notice shall have
no obligation to consummate the transactions
contemplated hereby and the SC Shareholders, on the
one hand, or Canadian Buyer and Nextera, on the other
hand, may terminate this Agreement pursuant to
Article XIII hereof; provided, however, that if such
parties consummate the transactions contemplated
hereby, such parties shall not have any
indemnification rights hereunder relating to or
arising out of, the subject matter of the event
described in any written notice validly given
pursuant to this Section 6.5(b) and; provided,
further, that the giving of any notice by a party
pursuant to this Section 6.5(b) shall not relieve
such party of any liability for breach of any
covenant hereunder or the failure of any
representation or warranty of such party hereunder to
be true and correct as of the date hereof.
SECTION 6.6 OPTION POOL.
(1) At the Closing Nextera agrees to grant to Employees of Sibson Canada
options under the Amended and Restated Equity Participation Plan
effective as of July 28, 1998 (the "Equity Participation Plan") a true
and correct copy of which is attached hereto as Exhibit K and in the
forms of related agreements attached hereto as Exhibit K-1 for
employees who are also Principals and Exhibit K-2 for employees who are
not Principals, which grants shall consist options to purchase 23,000
Nextera Class A Units to be distributed as set forth in a letter of
even date herewith from SC Shareholders to Nextera which letter makes
specific reference to this Section 6.6. Such options shall have an
exercise price of $7.50 per share and shall vest at the rate of
twenty-five percent (25%) per year over four (4) years. In connection
with the U.S. Purchase Agreement, Nextera has agreed to make available
to Buyer (as defined under the Buyer Operating Agreement) an additional
pool of options to purchase 100,000 Nextera Class A Units for hiring
purposes and performance recognition in calendar year 1998 subject to
Nextera's review and approval and with such terms and conditions as may
be determined by Nextera, of which options to purchase 30,000 Nextera
Class A Units have been allocated as set forth in the letter referred
to in the preceding sentence.
(2) Nextera has duly adopted the Equity Participation Plan attached as
Exhibit K and form of related agreement in the forms attached as
Exhibit K-1 and K-2 hereto. The SC Shareholders acknowledge that (a)
the terms of the options are governed by such
<PAGE> 54
-49-
Equity Participation Plan attached as Exhibit K and related agreements
in the forms attached as Exhibit K-1 and K-2; and (b) the Tax
consequences of the options are materially different in a limited
liability company as compared to a corporate structure, and the SC
Shareholders have been advised by their own Tax advisors of such Tax
consequences.
SECTION 6.7 ADDITIONAL UNITS.
The Employment Agreement of Michael McInerney shall provide for the
sale by Nextera of Nextera Class A Units to Michael McInerney.
SECTION 6.8 CONDUCT OF THE BUSINESS FOLLOWING THE CLOSING.
(1) Nextera and Canadian Buyer agree to maintain the consulting service
offerings of Sibson Canada in substantially the same form as such
service offerings existed immediately prior to the Closing; provided,
however, that Canadian Buyer (i) may make available additional service
offerings and (ii) may eliminate existing service offerings if the
gross revenues and/or net profits derived from such offerings are
determined by Nextera and Canadian Buyer to be inadequate to maintain
such service offerings.
(2) Canadian Buyer and Nextera hereby confirms that as of the date hereof
they intend (i) to use the "SIBSON & COMPANY, L.L.C., A NEXTERA
COMPANY" name in its worldwide operations, (ii) to cause Canadian Buyer
(or some other entity controlled by Nextera) to conduct the Business
for the foreseeable future under the present name of Business. The
parties acknowledge that the intention of Canadian Buyer and Nextera
with respect to this Section 6.6(b) is not a binding commitment on the
part of Canadian Buyer or Nextera.
SECTION 6.9 PRESERVATION OF CONFIDENTIALITY.
In connection with the negotiation of this Agreement and the
preparation for the consummation of the transactions contemplated hereby, the
parties acknowledge that each has had access to confidential information
relating to each other, including technical or marketing information, ideas,
methods, developments, inventions, improvements, business plans, trade secrets,
scientific or statistical data, diagrams, drawings, specifications or other
proprietary information relating thereto, together with all analyses,
compilations, studies or other documents, records or data prepared by Sibson
Canada and the SC Shareholders, on the one hand and Canadian Buyer, on the
other, or their respective Representatives which contain or otherwise reflect or
are generated from such information ("CONFIDENTIAL INFORMATION"). Prior to the
date of the Closing, each of the parties shall treat all Confidential
Information as confidential, preserve the confidentiality thereof and not
disclose any Confidential Information, except to their Representatives and
affiliates who need to know such Confidential Information in connection with the
transactions contemplated hereby. The parties shall use all reasonable efforts
to cause their Representatives to treat all Confidential Information as
confidential, preserve the confidentiality thereof and not disclose any
Confidential Information. Prior to and following the Closing, except as
otherwise contemplated in this Agreement, Canadian Buyer on the one hand and the
SC Shareholders on the other may not disclose the terms of this Agreement or
furnish copies of this
<PAGE> 55
-50-
Agreement to any other person without the prior written consent of each of the
other parties to this Agreement. Each party shall be responsible for any breach
of this Agreement by any of its Representatives.
SECTION 6.10 ACTIVITIES OF CANADIAN BUYER.
Nextera and Canadian Buyer agree that for so long as the SC
Shareholders are holders of Exchangeable Shares the Canadian Buyer will not
engage in any activities other than holding shares or other securities of Sibson
Canada and capital or loan transactions with Nextera or its Subsidiaries.
SECTION 6.11 INVESTMENT CANADA ACT.
Nextera and the Canadian Buyer, as promptly as practicable after the
execution of this agreement will make, or cause to be made, all such filings and
submissions applicable to it, as may be required for it to consummate the
purchase of Sibson Canada, including the filing of notice pursuant to the
Investment Canada Act. Each of the SC Shareholders and Nextera and Canadian
Buyer will coordinate and cooperate with one another in exchanging such
information and supplying such assistance as may be reasonably requested in
connection with the foregoing. Nextera and Canadian Buyer agree to provide
evidence of the Investment Canada Act notification to the SC Shareholders.
SECTION 6.12 ANNUAL INCENTIVE PLAN.
On or prior to the Closing, Buyer shall adopt the Annual Incentive
Plan attached hereto as Exhibit N.
ARTICLE 7
CONDITIONS TO SC SHAREHOLDERS' OBLIGATIONS
The obligations of SC Shareholders to consummate the transactions
provided for hereby are subject, in the discretion of the SC Shareholders, to
the satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by the SC Shareholders.
SECTION 7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS
OF NEXTERA AND CANADIAN BUYER.
All representations and warranties of Nextera and Canadian Buyer
contained in this Agreement shall be true and correct at and as of the date of
this Agreement and at and as of the Closing Date, except as and to the extent
that the facts and conditions upon which such representations and warranties are
based are expressly required or permitted to be changed by the terms hereof, and
Nextera and Canadian Buyer shall have performed and satisfied all agreements and
covenants required hereby to be performed by it prior to or on the Closing Date.
SECTION 7.2 NO ACTIONS OR COURT ORDERS.
No Action by any governmental authority or other person shall have
been instituted or threatened which questions the validity or legality of the
transactions contemplated hereby
<PAGE> 56
-51-
and which could reasonably be expected to (a) materially affect the right or
ability of Nextera or Canadian Buyer to purchase and own the Purchased Shares or
to permit Sibson Canada to operate, possess or transfer the Canadian Assets
after the Closing, (b) materially damage the SC Shareholders if the transactions
contemplated hereunder are consummated or (c) materially damage the business or
financial condition of Nextera or Canadian Buyer on a consolidated basis if the
transactions contemplated hereunder are consummated. There shall have been no
determination by the SC Shareholders, acting in good faith, that the
consummation of the transactions contemplated by this Agreement has become
inadvisable or impracticable by reason of the institution or threat by any
person or any federal, provincial or other governmental authority of litigation.
There shall not be any Regulation or Court Order that makes the purchase and
sale of the Purchased Shares contemplated hereby illegal or otherwise
prohibited.
SECTION 7.3 COMPLETION OF TRANSACTIONS UNDER THE U.S.
PURCHASE AGREEMENT.
All of the transactions contemplated under the U.S. Purchase
Agreement shall have been completed (or waived by the parties thereto)
contemporaneously with the Closing contemplated hereunder.
SECTION 7.4 CONSENTS.
All Permits, consents (consisting only of the consent of The Toronto
Dominion Bank), approvals and waivers from governmental authorities and other
parties necessary to the consummation of the transactions contemplated hereby
and for the continued operation of the Canadian Business by Sibson Canada shall
have been obtained.
SECTION 7.5 MATERIAL CHANGES.
Since December 31, 1997, there shall not have been any material
adverse change with respect to the financial or business condition of Nextera or
its Subsidiaries except as disclosed on the schedules hereto provided by Nextera
to SC Shareholders.
SECTION 7.6 APPROVAL OF SC SHAREHOLDER'S COUNSEL.
All actions, proceedings, instruments and documents required to
carry out this Agreement and the transactions contemplated hereby and all
related legal matters contemplated by this agreement shall have been approved by
Donahue & Partners, counsel to the SC Shareholders and such counsel shall have
received on behalf of the SC Shareholders such other certificates, opinions and
documents in form satisfactory to such counsel as the SC Shareholders may
reasonably require from Canadian Buyer to evidence compliance with the terms and
conditions hereof as of the Closing and the correctness as of the Closing of the
representations and warranties of Canadian Buyer and the fulfillment of its
covenants.
SECTION 7.7 OPINIONS OF COUNSEL.
Nextera and Canadian Buyer shall have delivered to the SC
Shareholders an opinion of Stikeman, Elliott and Stewart McKelvey Stirling
Scales, counsel to Canadian Buyer, dated as of the Closing Date, in the form
attached hereto as Exhibit C;
<PAGE> 57
-52-
Nextera shall have delivered to the SC Shareholders an opinion of
Latham & Watkins, and Maron & Sandler each counsel to Nextera, dated as of
Closing Date, in the form attached hereto as Exhibit C1.
SECTION 7.8 ESCROW AGREEMENT.
Canadian Buyer and Nextera and the Escrow Agent shall have executed
and delivered the Escrow Agreement in substantially the form attached hereto as
Exhibit B.
SECTION 7.9 EMPLOYMENT AGREEMENTS.
Canadian Buyer shall have executed and delivered to each of Paul
Britton and Michael McInerney (the "Principals") an Employment Agreement as
hereinafter defined in substantially the forms attached as Exhibit E-1 and E-2.
SECTION 7.10 CORPORATE DOCUMENTS.
The SC Shareholders shall have received from Canadian Buyer and
Nextera resolutions adopted by the boards of directors of Canadian Buyer and
Nextera, approving this Agreement and the agreements and the transactions
contemplated hereby and thereby, certified by an officer of Canadian Buyer and
Nextera, as applicable, respectively.
SECTION 7.11 OPERATING AGREEMENT OF NEXTERA.
A majority of the membership interests of Nextera shall have adopted
that certain First Amendment to the Nextera Operating Agreement which, among
other things, admits Michael McInerney as a member of Nextera. The SC
Shareholders shall have received from Nextera (a) a copy of the Nextera
Operating Agreement including the First Amendment thereto attached hereto as
Exhibit G and (b) resolutions adopted by the Board of Directors of Nextera,
approving this Agreement and the agreements and the transactions contemplated
hereby and thereby, certified by an officer of Nextera.
SECTION 7.12 OPERATING AGREEMENT OF SC AMALCO.
Nextera, as the indirect parent of Canadian Buyer and SC Amalco,
shall have adopted the form of Buyer Operating Agreement attached hereto as
Exhibit F. The SC Shareholders shall have received from Canadian Buyer (a) a
copy of the Buyer Operating Agreement and (b) resolutions adopted by the Board
of Directors of Canadian Buyer, approving this Agreement and the agreements and
the transactions contemplated hereby and thereby, certified by an officer of
Canadian Buyer.
SECTION 7.13 EXCHANGEABLE DOCUMENTATION.
The parties thereto shall have executed and delivered the Support
Agreement and the Exchange Trust Agreement.
SECTION 7.14 EQUITY PARTICIPATION PLAN.
The parties thereto shall have executed and delivered the Equity
Participation Plan.
SECTION 7.15 ANNUAL INCENTIVE PLAN.
Buyer shall have adopted the Annual Incentive Plan attached hereto
as Exhibit N.
<PAGE> 58
-53-
SECTION 7.16 SHARE EXCHANGE AGREEMENT.
The parties thereto shall have adopted the Share Exchange Agreement
attached hereto as Exhibit L.
SECTION 7.17 SHAREHOLDERS LOANS.
Nextera and Canadian Buyer shall have delivered promissory notes
evidencing the Shareholder Loans.
ARTICLE 8
CONDITIONS TO CANADIAN BUYER'S AND NEXTERA'S OBLIGATIONS
The obligations of Nextera and Canadian Buyer to consummate the
transactions provided for hereby are subject, in the discretion of Nextera and
Canadian Buyer to the satisfaction, on or prior to the Closing Date, of each of
the following conditions, any of which may be waived by Nextera and Canadian
Buyer.
SECTION 8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations and warranties of the SC Shareholders or SC
Shareholder contained in this Agreement shall be true and correct in all
material respects at and as of the date of this Agreement and at and as of the
Closing Date, except as and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof, and each SC Shareholder shall have
performed and satisfied in all material respects all agreements and covenants
required hereby to be performed by it prior to or on the Closing Date.
SECTION 8.2 CONSENTS; REGULATORY COMPLIANCE AND APPROVAL.
All Permits, consents, approvals and waivers from governmental
authorities necessary to the consummation of the transactions contemplated
hereby and for the operation of the Canadian Business by Canadian Buyer shall
have been obtained. The parties agree that the only consent to be obtained prior
to Closing is that of The Toronto-Dominion Bank. Canadian Buyer shall be
satisfied that all approvals required under any Regulations to carry out the
transactions contemplated by this Agreement shall have been obtained and that
the parties shall have complied with all Regulations applicable to this
Agreement and the transactions contemplated hereby.
SECTION 8.3 NO ACTIONS OR COURT ORDERS.
No Action by any governmental authority or other person shall have
been instituted or threatened which questions the validity or legality of the
transactions contemplated hereby and which could reasonably be expected (a) to
materially damage Canadian Buyer, (b) to materially damage the Canadian Assets
or the Canadian Business if the transactions contemplated hereunder are
consummated, including without limitation any material adverse effect on the
right or ability of Canadian Buyer to own, operate, possess or transfer the
Canadian Assets after the Closing or (c) to materially damage the business or
financial condition of Canadian Buyer on a consolidated basis if the
transactions contemplated hereunder are consummated. There shall have been no
determination by Canadian Buyer,
<PAGE> 59
-54-
acting in good faith, that the consummation of the transactions contemplated by
this Agreement has become inadvisable or impracticable by reason of the
institution or threat by any person or any federal, provincial or other
governmental authority of litigation. There shall not be any Regulation or Court
Order that makes the purchase and sale of the Purchased Shares contemplated
hereby illegal or otherwise prohibited.
SECTION 8.4 APPROVAL OF CANADIAN BUYER'S COUNSEL.
All actions, proceedings, instruments and documents required to
carry out this Agreement and the transactions contemplated hereby and all
related legal matters contemplated by this Agreement shall have been approved by
Stikeman, Elliott and Stewart McKelvey Stirling Scales, as counsel for Nextera
and Canadian Buyer, and such counsel shall have received on behalf of Nextera
and Canadian Buyer such other certificates, opinions, and documents in form
satisfactory to such counsel as Nextera and Canadian Buyer may reasonably
require from the SC Shareholders to evidence compliance with the terms and
conditions hereof as of the Closing and the correctness as of the Closing of the
representations and warranties of the SC Shareholders and the fulfillment of
their respective covenants.
SECTION 8.5 APPROVAL OF NEXTERA'S COUNSEL.
All actions, proceedings, instruments and documents required to
carry out this Agreement and the transactions contemplated hereby and all
related legal matters contemplated by this Agreement shall have been approved by
Latham & Watkins, as counsel for Nextera, and such counsel shall have received
on behalf of Nextera such other certificates, opinions, and documents in form
satisfactory to such counsel as Nextera reasonably require from SC Shareholders
to evidence compliance with the terms and conditions hereof as of the Closing
and the correctness of the Closing of the representations and warranties of the
SC Shareholders and the fulfilment of their respective covenants.
SECTION 8.6 OPINIONS.
SC Shareholders shall have delivered to the Canadian Buyer and
Nextera an opinion of Donahue & Partners, counsel to SC Shareholders, dated as
of the Closing Date, in the form attached hereto as Exhibit D.
SECTION 8.7 MATERIAL CHANGES.
Since the Base Balance Sheet Date, there shall not have been any
material adverse change with respect to Sibson Canada, the Canadian Business or
the Canadian Assets except as disclosed on the Disclosure Schedule.
SECTION 8.8 CORPORATE DOCUMENTS.
Canadian Buyer shall have received from the SC Shareholders
resolutions adopted by the board of directors of Sibson Canada and SC Holdco
approving this Agreement and the agreements and the transactions contemplated
hereby and thereby, certified by an officer of Sibson Canada.
<PAGE> 60
- 55 -
SECTION 8.9 PERMITS.
Sibson Canada shall continue to own or shall have obtained or been
granted the right to use all Permits necessary to its continued operation of the
Canadian Business.
SECTION 8.10 ESCROW AGREEMENT.
The SC Shareholders and the Escrow Agent shall have executed and
delivered the Escrow Agreement in substantially the form attached hereto as
Exhibit B.
SECTION 8.11 EMPLOYMENT AGREEMENTS.
Each of the individuals listed on Schedule 8.11 shall have executed and
delivered to Canadian Buyer and/or Sibson Canada an employment agreement in
substantially the form attached hereto as Exhibit E (individually, an
"Employment Agreement" and collectively, the "Employment Agreements").
SECTION 8.12 THIRD-PARTY FINANCING.
Canadian Buyer shall have received third party financing in an amount
sufficient to fund the Purchase Price for the Purchased Shares.
SECTION 8.13 PRE-CLOSING STEPS.
All the Pre-Closing Steps referred to in Section 2.1 hereof shall have
been completed to the satisfaction of Canadian Buyer and true copies of all
documents evidencing such steps, including the Certificate of Amalgamation and
the Amalgamation Agreement, shall have been delivered to Canadian Buyer.
SECTION 8.14 EXCHANGEABLE DOCUMENTATION.
The parties thereto shall have executed and delivered the Support
Agreement and the Exchange Trust Agreement in the form, or substantially in the
form, attached hereto as Exhibit I and H, respectively.
SECTION 8.15 SHARE EXCHANGE AGREEMENT.
The Shareholders shall have executed the Share Exchange Agreement in
substantially the form attached hereto as Exhibit M.
ARTICLE 9
INDEMNIFICATION
SECTION 9.1 INDEMNIFICATION BY THE SELLING PARTIES.
The SC Shareholders jointly and severally agree subsequent to the
Closing to indemnify and hold Nextera, Canadian Buyer and its Subsidiaries,
affiliates, successors and assigns and persons serving as officers, directors,
partners, managers, shareholders, members, employees and agents thereof (other
than the SC Shareholders, except to the extent of Liabilities incurred in their
capacities as an officer, director or employee of Canadian Buyer after the
Closing) (individually a "BUYER INDEMNIFIED PARTY" and collectively the "BUYER
INDEMNIFIED PARTIES") harmless from and against any Damages which may be
sustained or
<PAGE> 61
- 56 -
suffered by any of them attributable to, arising out of or based
upon any of the following matters:
(a) Any failure to convey title to the Purchased Shares free and
clear of any Encumbrances other than Permitted Liens
(collectively, "Ownership Claims");
(b) Any liability of Sibson Canada for Taxes arising from its
respective activities, assets and all events and transactions
on or prior to the Closing, including with respect to risks
and other matters disclosed in Schedule 4.25, (to the extent
there is no reserve contained in the Financial Statements) and
any breach of the representations and warranties set forth in
Section 4.25 hereof and any covenant with respect to Taxes or
tax related matters set forth herein or in any related
agreement (collectively, "Tax Claims");
(c) [Intentionally deleted.];
(d) Other than Ownership Claims, Tax Claims, any other material
breach of any representation, warranty or covenant of SC
Shareholders under this Agreement or in any certificate,
schedule or exhibit delivered pursuant hereto by SC
Shareholders (collectively, "General Claims"); and
(e) In addition, each SC Shareholder severally, but not jointly,
agrees subsequent to the Closing to indemnify and hold all
Buyer Indemnified Parties harmless from and against any
Damages attributable to, arising out of or based upon fraud,
or intentional misrepresentation by such SC Shareholder in
connection with the transactions completed by this Agreement
(collectively "Individual Fraud Claims") or any breach
(whether or not deliberate or wilful) of any representation or
warranty or covenant contained in Article 4 made by a
particular SC Shareholder (collectively, "Individual General
Claims" and together with Individual Fraud Claims, "Individual
Claims"). For greater certainty, the SC Shareholders shall be
jointly and severally liable for all representations and
warranties herein; however, any representation or warranty
made by an individual SC Shareholder as to matters solely
relating to such SC Shareholder shall be Individual Claims of
that SC Shareholder, and all representations and warranties
made regarding SC Holdco shall be Individual Claims of Michael
McInerney for which he will be severally liable.
SECTION 9.2 LIMITATIONS ON INDEMNIFICATION BY THE SC SHAREHOLDERS.
Anything contained in this Agreement to the contrary notwithstanding,
the liability of the SC Shareholders to provide any indemnification to any Buyer
Indemnified Party and right of Buyer Indemnified Parties to indemnification
under Section 9.1 (or otherwise) shall be subject to the following provisions:
(a) Subject to Section 9.2(b) and 9.2(g) no claims for
indemnification shall be made under this Agreement against any
SC Shareholder, and no indemnification shall be payable to any
Buyer Indemnified Party, with respect
<PAGE> 62
- 57 -
to General Claims and Individual General Claims asserted after
the date which is eighteen (18) months following the Closing;
(b) No claims for indemnification shall be made under this
Agreement against any SC Shareholder, and no indemnification
shall be payable to any Buyer Indemnified Party, with respect
to any Tax Claim asserted after expiration of all applicable
statutes of limitation or periods of reassessment with respect
to the Tax that is the subject of the indemnification claim
and the expiration of all applicable statutes of limitation or
periods of reassessment taking into account any actual or
effective extensions thereof with respect to the assessment or
collection of the Tax;
(c) The aggregate amount to be payable by the SC Shareholders to
all Buyer Indemnified Parties for claims for indemnification
with respect to General Claims and individual General Claims
(including any amounts subject to the Escrow Agreement and any
Nextera Class A Units or other shares or securities delivered
pursuant to the Share Exchange Agreement delivered to Nextera
in satisfaction of an indemnification claim) shall in no event
exceed $2,047,299;
(d) With respect to General Claims, the amount payable by an SC
Shareholder to all Buyer Indemnified Parties for claims for
indemnification hereunder shall in no event exceed such SC
Shareholder's pro rata share of the total amount to be paid to
all Buyer Indemnified Parties for claims for indemnification
hereunder. The pro rata shares of the SC Shareholders for
purposes of this paragraph shall be the same percentages as
the SC Shareholders' respective ownership interests listed on
Schedule 4.2;
(e) With respect to Individual Claims the SC Shareholder who makes
the representation, warranty or covenant, from which the claim
arose shall be severally liable for indemnification in respect
of such a claim, and the other SC Shareholders shall not be
jointly liable therefor to an amount as described in 9.2(d);
(f) The SC Shareholders shall have no obligation for
indemnification with respect to General Claims hereunder until
aggregate claims for indemnification with respect to General
Claims hereunder exceed $14,000, in which case the SC
Shareholders shall be obligated for indemnification of all
General Claims including the initial $14,000 of such claims;
(g) Claims for indemnification with respect to claims based on
fraud or intentional misrepresentation, Ownership Claims, Tax
Claims (except with respect to subsection (b) above) and
Individual Fraud Claims made under this Agreement by any Buyer
Indemnified Party shall not be subject to any of the
limitations set forth in this Section 9.2.
<PAGE> 63
- 58 -
SECTION 9.3 INDEMNIFICATION BY NEXTERA AND CANADIAN BUYER.
Nextera and Canadian Buyer agree to indemnify and hold the SC
Shareholders and their affiliates and persons serving as officers, directors,
partners, managers, shareholders, members, employees and agents thereof
(individually a "SC SHAREHOLDERS INDEMNIFIED PARTY" and collectively the "SC
SHAREHOLDERS INDEMNIFIED PARTIES") harmless from and against any Damages which
may be sustained or suffered by any of them attributable to arising out of or
based upon any of the following matters:
(a) Fraud, intentional misrepresentation or the cause or knowledge
of a deliberate or wilful breach of any representations,
warranties or covenants of Nextera and/or Canadian Buyer with
respect to this Agreement in connection with the transactions
contemplated by this Agreement; and
(b) Any breach of any representation, warranty or covenant made by
the Nextera and/or Canadian Buyer in this Agreement or in any
certificate or schedule delivered by Nextera and/or the
Canadian Buyer hereunder.
SECTION 9.4 LIMITATION ON INDEMNIFICATION BY NEXTERA AND CANADIAN BUYER.
Notwithstanding the foregoing, (a) no indemnification shall be
payable to the SC Shareholders Indemnified Parties with respect to claims
asserted pursuant to Section 9.3(b) above after the date which is eighteen (18)
months after the Closing, (b) and the aggregate amount to be payable to all SC
Shareholders Indemnified Parties pursuant to Section 12.3 shall not exceed
$2,047,299 and (c) Nextera and Canadian Buyer shall have no obligation for
indemnification hereunder until aggregate claims for indemnification hereunder
exceed $14,000, in which case Nextera and Canadian Buyer shall be obligated for
indemnification of all claims, including the initial $14,000 of such claims.
Claims for indemnification with respect to fraud, intentional misrepresentation
or the cause or knowledge of a deliberate or wilful breach of any
representations, warranties or covenants of Canadian Buyer under this Agreement
or in any certificate, schedule or exhibit delivered pursuant hereto or a breach
of Sections 6.6 through 6.8 shall not be subject to any of the limitations set
forth in this Section 9.4.
SECTION 9.5 NOTICE; DEFENSE OF CLAIMS.
An indemnified party shall make claims for indemnification hereunder by
giving written notice thereof to the indemnifying party promptly on discovery
and in any event within the period in which indemnification claims can be made
hereunder. If indemnification is sought for a claim or liability asserted by a
third party, the indemnified party shall also give written notice thereof to the
indemnifying party promptly after it receives notice of the claim or liability
being asserted, but the failure to do so shall not relieve the indemnifying
party from any liability except to the extent that it is prejudiced by the
failure or delay in giving such notice. Such notice shall summarize the basis
for the claim for indemnification and any claim or liability being asserted by a
third party. Within 20 days after receiving such notice the indemnifying party
shall give written notice to the indemnified party stating whether it disputes
the claim for indemnification and whether it will defend against any third party
claim or liability at its own cost and expense. If the indemnifying party fails
to give notice that it disputes an indemnification claim within 20 days after
receipt of notice thereof,
<PAGE> 64
- 59 -
it shall be deemed to have accepted and agreed to the claim, which shall become
immediately due and payable. The indemnifying party shall be entitled to direct
the defense against a third party claim or liability with counsel selected by it
(subject to the consent of the indemnified party, which consent shall not be
unreasonably withheld) as long as the indemnifying party is conducting a good
faith and diligent defense and to compromise or settle it with consent of the
indemnified party, which consent shall not be unreasonably withheld. The
indemnified party shall at all times have the right to fully participate at its
own expense in the defense of a third party claim or liability, directly or
through counsel; provided, however, that if the named parties to the action or
proceeding include both the indemnifying party and the indemnified party and the
indemnified party is advised that representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct, the indemnified party may engage separate counsel at the expense of the
indemnifying party. If no such notice of intent to dispute and defend a third
party claim or liability is given by the indemnifying party, or if such good
faith and diligent defense is not being or ceases to be conducted by the
indemnifying party, the indemnified party shall have the right, at the expense
of the indemnifying party, to undertake the defense of such claim or liability
(with counsel selected by the indemnified party), and to compromise or settle
it, with consent of the indemnifying party, which consent shall not be
unreasonably withheld. If the third party claim or liability is one that by its
nature cannot be defended solely by the indemnifying party, then the indemnified
party shall make available such information and assistance as the indemnifying
party may reasonably request and shall cooperate with the indemnifying party in
such defense, at the expense of the indemnifying party.
SECTION 9.6 SATISFACTION OF SC SHAREHOLDERS INDEMNIFICATION OBLIGATIONS.
Nextera shall bring and control all indemnification claims hereunder
and under the Share Exchange Agreement on behalf of the Buyer Indemnified
Parties, including without limitation Canadian Buyer. In order to satisfy the
indemnification obligations of the SC Shareholders hereunder and under the
Exchange Agreement, Nextera shall proceed first directly against the Escrow
Amount as further set forth in the Escrow Agreement and then may proceed
directly against the SC Shareholders subject to the limitations set forth
herein. A Buyer Indemnified Party may proceed against the SC Shareholder of its
choosing subject to the limitations set forth in the Agreement.
SECTION 9.7 USE OF NEXTERA CLASS A UNITS.
To the extent indemnification claims exceed the Escrow Deposit (as
defined in the Escrow Agreement), the SC Shareholders may, at their option,
elect to satisfy any indemnification claims under this Agreement by delivering
to the indemnified party Exchangeable Shares issued pursuant to Section 2.3 or
any securities into which such Exchangeable Shares may be converted into, or
exchanged for, including, without limitation Nextera Class A Units. To the
extent that Exchangeable Shares (or such other securities) are used to satisfy
indemnification obligations under this Agreement, such shares shall be valued in
accordance with the terms of the Escrow Agreement. No statement of value in this
Agreement shall affect such valuation under the Escrow Agreement.
<PAGE> 65
- 60 -
SECTION 9.8 EXCLUSIVE REMEDY.
Other than Fraud Claims, the foregoing indemnification provisions in
this Article 8 shall be the exclusive remedy for any breach of the
representations and warranties of the SC Shareholders in Articles 4 and of
Nextera and Canadian Buyer in Article 5 above.
SECTION 9.9 INDEMNITY.
For a period of one year from the Closing Date, Nextera and Canadian
Buyer shall jointly and severally indemnify the SC Shareholders, in the event
Sibson Canada Co. is wound up with in the meaning of the NS Act for their
liability to contribute to the assets of Sibson Canada as required by S.134 of
the NS Act to an amount sufficient for payment of Sibson Canada's debts and
liabilities and the costs, charges, and expenses of the winding up and for the
adjustments of the right of contributories among the SC Shareholders. For
greater certainty, Nextera and Canadian Buyer do not indemnify the SC
Shareholders for any breach of the representations and warranties.
ARTICLE 10
TERMINATION OF AGREEMENT; RIGHTS TO PROCEED
SECTION 10.1 TERMINATION.
At any time prior to the Closing, this Agreement may be terminated as
follows:
(a) By mutual written consent of all of the parties to this
Agreement;
(b) By Canadian Buyer, pursuant to written notice to the SC
Shareholders, if any of the conditions set forth in Article 7
of this Agreement have not been satisfied at or prior to the
Closing, or if it has become reasonably and objectively
certain that any of such conditions, other than a condition
within the control of the SC Shareholders, will not be
satisfied at or prior to the Closing, such written notice to
set forth such conditions which have not been or will not be
so satisfied;
(c) By the SC Shareholders, pursuant to written notice to Canadian
Buyer, if any of the conditions set forth in Article 6 of this
Agreement have not been satisfied at or prior to the Closing,
or if it has become reasonably and objectively certain that
any of such conditions, other than a condition within the
control of Canadian Buyer and Nextera, will not be satisfied
at or prior to the Closing, such written notice to set forth
such conditions which have not been or will not be so
satisfied; and
(d) By Canadian Buyer if the Closing shall not have occurred on or
before September 30, 1998.
SECTION 10.2 EFFECT OF TERMINATION.
All obligations of the parties hereunder shall cease upon any
termination pursuant to Section 10.1, provided, however, that the provisions of
Article 9 and Article 10, Section 4.35,
<PAGE> 66
- 61 -
Section 6.6 and Section 6.9, Section 11.1, and 11.9 hereof shall survive any
termination of this Agreement. No termination shall relieve any party of any
liability for breach of this Agreement prior to termination except as otherwise
provided for herein.
ARTICLE 11
MISCELLANEOUS
SECTION 11.1 FEES AND EXPENSES.
Except as otherwise specified in this Agreement, each party hereto
shall pay its own legal, accounting, out-of-pocket and other expenses incident
to this Agreement and to any action taken by such party in preparation for
carrying this Agreement into effect.
The fees and expenses incurred by Sibson Canada for the transactions
contemplated herein shall be paid by Sibson Canada on Closing. Notwithstanding
the foregoing, in the event that the transaction does not close solely as a
result of Canadian Buyer's and/or Nextera's failure to obtain third-party
financing for the Purchase Price, Nextera shall reimburse Sibson Canada for its
actual out-of-pocket expenses it incurred in connection herewith, up to a
maximum of CDN. $25,000 upon the submission of reasonably detailed invoices for
such expenses.
SECTION 11.2 GOVERNING LAW.
This Agreement shall be construed under and governed by the internal
laws of Province of Ontario without regard to its conflict of laws provisions.
SECTION 11.3 NOTICES.
Any notice, request, demand or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been given
if delivered or sent by facsimile transmission, upon receipt, or if sent by
registered or certified mail, upon the sooner of the date on which receipt is
acknowledged or the expiration of three days after deposit in their post office
facilities properly addressed with postage prepaid. All notices to a party will
be sent to the addresses set forth below or to such other address or person as
such party may designate by notice to each other party hereunder:
<PAGE> 67
- 62 -
TO NEXTERA: Nextera Enterprises, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Breback, Jr.
Fax: (617) 778-4508
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO CANADIAN BUYER: c/o SC/NE, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (781) 778-4500
With a copy to: Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
<PAGE> 68
- 63 -
With an additional copy to: Stikeman, Elliott
Suite 5300
Commerce Court West
Toronto, Ontario, M9L 1B9
Attention: Richard E. Clark, Esq.
Fax: (416) 947-0866
TO THE SC SHAREHOLDERS AND Michael McInerney
1053861 ONTARIO LIMITED:
29 Baby Point Crescent
Toronto, Ontario
M6S 2B7
With a copy to: Donahue & Partners
Ernst & Young Tower
Toronto-Dominion Centre
222 Bay Street
Suite 2900, Box 197
Toronto, Ontario
M5K 1H6
Attention: David Poynton, Esq.
Fax: (416) 943-2735
Any notice given hereunder may be given on behalf of any party by his
counsel or other authorized representatives.
SECTION 11.4 ENTIRE AGREEMENT.
This Agreement, including the Escrow Agreement, Employment Agreements,
Support Agreement, Exchange Trust Agreement, the Nextera Operating Agreement the
Buyer Operating Agreement, the Share Exchange Agreement, Letter Agreement and
all other documents delivered herewith, the entire agreement of the parties with
respect to its subject matter, and supersedes all previous written or oral
negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as referred to herein or in such schedules and exhibits; and all
inducements to the making of this Agreement relied upon by either party hereto
have been expressed herein or in such schedules or exhibits.
SECTION 11.5 ASSIGNABILITY; BINDING EFFECT.
This Agreement shall only be assignable by Canadian Buyer to an entity
controlling, controlled by or under common control with Canadian Buyer upon
written notice to the SC Shareholders; provided, however, that Canadian Buyer
shall remain liable for all obligations hereunder to the extent such obligations
are not satisfied by the transferee. This Agreement
<PAGE> 69
- 64 -
may not be assigned by the SC Shareholders without the prior written consent of
the Canadian Buyer. This Agreement shall be binding upon and enforceable by, and
shall inure to the benefit of, the parties hereto and their respective legal
personal representation successors and permitted assigns. Assignment of this
Agreement by any party shall not relieve such party from its obligations
hereunder.
SECTION 11.6 CAPTIONS AND GENDER.
The captions in this Agreement are for convenience only and shall not
affect the construction or interpretation of any term or provision hereof. The
use in this Agreement of the masculine pronoun in reference to a party hereto
shall be deemed to include the feminine or neuter, as the context may require.
SECTION 11.7 EXECUTION IN COUNTERPARTS.
For the convenience of the parties and to facilitate execution, this
Agreement, and any documents in connection herewith, may be executed by
facsimile, with originals to follow, in two or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
document.
SECTION 11.8 AMENDMENTS.
This Agreement may not be amended or modified, nor may compliance with
any condition or covenant set forth herein be waived, except by a writing duly
and validly executed by each party hereto, or in the case of a waiver, the party
waiving compliance, provided that Michael McInerney may consent to any such
amendment or modification or waiver on behalf of the SC Shareholders provided
further that the Shareholder Representative may not enter into any such
amendment or modification or waive any condition or covenant that materially and
adversely affects any SC Shareholder differently than all other SC Shareholders
affected thereby without the consent of such SC Shareholder.
SECTION 11.9 PUBLICITY AND DISCLOSURES.
No press releases or public disclosure, either written or oral, of the
transactions contemplated by this Agreement, shall be made by Nextera, a party
to this Agreement without the prior knowledge and written consent of Canadian
Buyer and the SC Shareholders.
SECTION 11.10 SPECIFIC PERFORMANCE.
The parties agree that it would be difficult to measure damages which
might result from a breach of this Agreement by the SC Shareholders and that
money damages would be an inadequate remedy for such a breach. Accordingly, if
there is a breach or proposed breach of any provision of this Agreement by any
SC Shareholder, and Canadian Buyer do not elect to terminate under Article 10,
Nextera and Canadian Buyer shall be entitled, in addition to any other remedies
which it may have, to an injunction or other appropriate equitable relief to
restrain such breach without having to show or prove actual damage to Nextera or
Canadian Buyer.
The parties agree that it would be difficult to measure damages which
might result from a breach of this Agreement by the Canadian Buyer or Nextera
and that money damages
<PAGE> 70
- 65 -
would be an inadequate remedy for such a breach. Accordingly, if there is a
breach or proposed breach of any provision of this Agreement by Canadian Buyer
or Nextera, and the SC Shareholders do not elect to terminate under Article 10,
the SC Shareholders shall be entitled, in addition to any other remedies which
it may have, to an injunction or other appropriate equitable relief to restrain
such breach without having to show or prove actual damage to Nextera or Canadian
Buyer.
SECTION 11.11 U.S. CURRENCY.
Any reference herein to dollar amounts shall refer to lawful currency
of the United States of America.
<PAGE> 71
- 66 -
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives, as of the date first written
above.
NEXTERA ENTERPRISES, L.L.C.
By: /s/ Michael P. Muldowney
----------------------------------
Name: Michael P. Muldowney
Title: Chief Financial Officer
CANADIAN BUYER:
SIBSON ACQUISITION CO
By: /s/ Richard E. Clark
----------------------------------
Name: Richard E. Clark
Title: Secretary
1053861 ONTARIO LIMITED
By: /s/ Michael McInerney
----------------------------------
Name: Michael McInerney
Title: President
SC SHAREHOLDERS:
/s/ PAUL BRITTON
----------------------------------
PAUL BRITTON
/s/ DAVID RAINVILLE
----------------------------------
DAVID RAINVILLE
/s/ MICHAEL HOGAN
----------------------------------
MICHAEL HOGAN
/s/ MICHAEL MCINERNEY
----------------------------------
MICHAEL MCINERNEY
<PAGE> 1
EXHIBIT 10.14
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is entered into as of August
31, 1998 by and among NEXTERA ENTERPRISES, L.L.C. ("Nextera"), SIBSON
ACQUISITION, CO., a newly formed Nova Scotia unlimited liability company
("Canadian Buyer") and an indirect wholly-owned subsidiary of Nextera, the
holders of all of the issued and outstanding shares of SIBSON CANADA INC.
("Sibson Canada") identified on Exhibit A hereto as such (collectively, the "SC
Shareholders"), and CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION, as
escrow agent (the "Escrow Agent").
WHEREAS, pursuant to a Share Purchase Agreement (the "Purchase
Agreement") dated as of the date hereof, by and among Nextera, Canadian Buyer,
and the SC Shareholders, Canadian Buyer is purchasing all of the issued and
outstanding shares in Sibson Canada;
WHEREAS, the SC Shareholders have agreed to indemnify Canadian Buyer
and Nextera against certain breaches of the representations, warranties and
covenants made by the SC Shareholders in the Purchase Agreement and against
certain other matters as specified in Article 9 of the Purchase Agreement; and
WHEREAS, to secure payment of the SC Shareholders' indemnification
obligations, 59,052 Exchangeable Shares of the Canadian Buyer (the "Escrow
Shares" and together with additions to or earnings on the same, the "Escrow
Deposit") are being deposited, pursuant to Section 2.4 of the Purchase
Agreement, in escrow to be held as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises of the parties herein contained, and other good and valuable
consideration, receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Establishment of Escrow: Investment.
(a) Canadian Buyer and Nextera have herewith deposited the Escrow
Shares with the Escrow Agent contemporaneously herewith. The
Escrow Shares have been issued in the name of the SC
Shareholders, and shall be accompanied by stock powers or
similar instruments duly signed in blank by the SC
Shareholders. The Escrow Deposit shall be held in escrow in an
account designated as the Sibson Canada Account or an account
having such other similar designation, subject to the terms
and conditions set forth herein. The Escrow Agent shall invest
all cash, if any, held as part of the Escrow Deposit only in
such specific investments as Nextera and the Escrow
Representative (as hereinafter defined) shall from time to
time jointly direct in writing to the Escrow Agent; provided,
however, that such investments shall be limited to:
(i) time and demand deposits, certificates of deposit and
acceptances, maturing within ninety (90) days from
the date of acquisition thereof, issued by state and
national banks located in the United States of
America, including the Escrow Agent or any of its
affiliates, and having capital, surplus and profits
aggregating at least one hundred million dollars
($100,000,000);
<PAGE> 2
- 2 -
(ii) securities or other obligations of, or guaranteed by,
the United States of America or any agency thereof
having maturities of not greater than one (1) year;
(iii) commercial paper, maturing within ninety (90) days
from the date of acquisition thereof, rated A- I or
P- I by Standard & Poor's or Moody's Investors
Service;
(iv) repurchase agreements fully collateralized by
obligations described in clauses l(a)(i), l(a)(ii) or
l(a)(iii) hereof,
(v) shares of investment companies registered under the
Investment Company Act of 1940 which invest in any
obligation described herein, or shares of the Chase
Vista Money Market Mutual Funds or any other mutual
fund for which the Escrow Agent or an affiliate of
the Escrow Agent serves as investment manager,
administrator, shareholder servicing agent, and/or
custodian or subcustodian, notwithstanding that (i)
the Escrow Agent or an affiliate of the Escrow Agent
receives fees from such funds for services rendered
or (ii) services performed for such funds and
pursuant to this Agreement may at times duplicate
those provided to such funds by the Escrow Agent or
its affiliates.
Until further written notice, cash in the Escrow Deposit shall be
invested in Vista Prime Money Market Fund. Unless otherwise directed in writing
by the Escrow Representative and Nextera, the Escrow Agent shall not invest all
or any portion of the Escrow Deposit in any investment if the maturity date of
such investment is later than the Termination Date (as defined below).
(b) Escrow Representative: Michael McInerney shall serve as the
exclusive representative of the SC Shareholders with respect
to the Escrow Deposit and this Agreement (the "Escrow
Representative"). If, for any reason, the Escrow
Representative shall be either unable or unwilling to serve, a
successor Escrow Representative shall be appointed by written
consent of the SC Shareholders and all references to the
Escrow Representative shall be deemed to include such
successor. Each SC Shareholder whose signature appears below
expressly agrees that this Agreement may be amended or
modified, and compliance with any condition or covenant may be
waived without the consent of, or execution thereof by, such
SC Shareholder if the Escrow Representative agrees to such
amendment or modification or grants such waiver, in each case
by a writing duly and validly executed by the Escrow
Representative as provided in Section 14; provided, however,
that the Escrow Representative will not enter into any such
amendment or modification or waive any condition or covenant
that materially and adversely affects any SC Shareholder
differently than all other SC Shareholders affected thereby
without the consent of such SC Shareholder.
2. Amounts Earned on Escrow Deposit: Tax Matters. All amounts earned, paid
or distributed with respect to the Escrow Deposit, if any, (whether
interest, dividends,
<PAGE> 3
- 3 -
distributions from Nextera with respect to the Escrow Shares or
otherwise) shall become a part of the Escrow Deposit, shall be held
hereunder upon the same terms as the original Escrow Deposit and shall
be distributed together with the underlying portion of the original
Escrow Deposit pursuant to the terms of this Agreement. The parties
agree that the SC Shareholders will include all amounts earned on the
Escrow Deposit (or allocated or distributed with respect thereto) in
their gross income for federal, provincial and local income tax
(collectively, "income tax") purposes and pay any income tax resulting
therefrom, pro rata in accordance with their combined ownership
percentage as set forth on Exhibit A.
3. Claims Against Escrow Deposit.
(a) At any time or times prior to the Termination Date (as
hereinafter defined), Nextera, or any successor of Nextera,
may make claims against the Escrow Deposit for indemnification
pursuant to and in accordance with Article 9 of the Purchase
Agreement. Nextera shall notify the Escrow Representative and
the Escrow Agent in writing promptly upon determination to
make a claim and in any event prior to the expiration of this
Agreement of each such claim, including a summary of the
amount of and bases for such claim. If the Escrow
Representative shall dispute such claim, the Escrow
Representative shall give written notice thereof to Nextera
and to the Escrow Agent within thirty (30) days after receipt
of notice of Nextera's claim, in which case the Escrow Agent
shall continue to hold the Escrow Deposit in accordance with
the terms of this Agreement; otherwise, such claim shall be
deemed to have been acknowledged to be payable out of the
Escrow Deposit in the full amount thereof and the Escrow Agent
shall use its best efforts to pay such claim to Nextera within
three (3) business days after expiration of said thirty (30)
day period or as soon thereafter as possible following the
determination of the fair market value of the Escrow Shares
pursuant to Section 3(b)(ii) below. If the amount of the claim
exceeds the value of the Escrow Deposit, the Escrow Agent
shall have no liability or responsibility for any deficiency.
(b) The Escrow Agent shall follow the procedure below in making
any payment in satisfaction of a claim against the Escrow
Deposit:
(i) The Escrow Agent shall make such payment first from
cash additions to or earnings on the Escrow Shares,
if any, until all cash in the Escrow Deposit has been
exhausted.
(ii) To the extent that any claim exceeds the amount of
cash in the Escrow Deposit, the Escrow Agent shall
make payment from the Escrow Shares in such number of
Escrow Shares (computed to the nearest whole unit)
having a value equal to the value of the claim not
satisfied by cash payment. Any payment of Escrow
Shares by the Escrow Agent to Nextera shall be
treated as a sale by the SC Shareholders of such
Escrow Shares for the value described herein. The
value of an Escrow Unit for purposes of this Section
shall be the fair market value of a Class A Common
Unit of Nextera, or after the Incorporation
<PAGE> 4
- 4 -
Transaction (as defined in that certain Share
Exchange Agreement dated as of August 31, 1998 by and
among Nextera, the SC Shareholders and the other
parties listed on the signature pages thereto (the
"Share Exchange Agreement")), a share of Class A
Common Stock of Newco (as defined in the Exchange
Agreement), on the date of the claim as determined by
the Board of Directors of Nextera (the "Board"). The
fair market value shall be determined in good faith
by the Board and the Board shall notify the Escrow
Representative and Escrow Agent in writing of its
determination (the "Initial Valuation Notice"). If
the Escrow Representative disputes the fair market
value of the Escrow Shares as determined by the
Board, then the Escrow Representative shall so notify
the Board and Escrow Agent in writing (the "Appraisal
Notice") within ten (10) business days of receipt of
the Initial Valuation Notice. Within twenty (20)
business days of the receipt of the Appraisal Notice,
the Board and the Escrow Representative shall each
appoint a professional appraiser to determine the
fair market value of the Escrow Shares. Each
appraiser shall have at least five (5) years
experience in appraising companies similar to
Nextera. The two appraisers shall within the
succeeding twenty (20) day period after their
selection, attempt to reach agreement on the fair
market value. If the appraisers reach such agreement
they shall so notify the Escrow Agent and their
agreement shall be final and binding on Canadian
Buyer, Nextera, the Board, the Escrow Representative,
and the SC Shareholders, and their affiliates. If the
appraisers fail to agree, they shall within ten (10)
days thereafter select a third appraiser with the
same qualification requirements, and the three (3)
appraisers shall establish the fair market value by
majority vote within the succeeding twenty (20) day
period and shall notify the Escrow Agent of their
determination. Such determination of the fair market
value shall be final and binding on Canadian Buyer,
Nextera, the Board, the Escrow Representative, and
the SC Shareholders, and their affiliates. In all
events, the appraisers selected shall be unaffiliated
with and otherwise independent of Canadian Buyer,
Nextera, the Board, the Escrow Representative, and
the SC Shareholders, and their affiliates. If the
fair market value of the Escrow Shares, as determined
by the appraisers, is less than or no more than five
percent (5%) greater than the value as determined by
the Board, then the SC Shareholders shall pay all
costs associated with the appraisers. If the fair
market value as determined by the appraisers is more
than five percent (5%) greater than the value as
determined by the Board, then Canadian Buyer and
Nextera shall pay for all costs associated with the
appraisers. In determining fair market value, neither
the Board nor any appraiser shall take into account
(x) the value assigned to the Nextera Class A Shares
in connection with the Purchase Agreement or (y) any
discount for a minority interest.
The Escrow Shares delivered to Nextera in satisfaction of a claim shall
be allocated among the SC Shareholders so as to reduce each SC Shareholder's
interest in the remaining
<PAGE> 5
- 5 -
Escrow Shares in proportion to their respective ownership percentages as set
forth on Exhibit A hereto. Notwithstanding the foregoing, (i) any claim that is
an Individual Claim (as defined in the Purchase Agreement) shall be satisfied by
reduction of the interest in the Escrow Deposit of the SC Shareholder who
committed fraud or who made the representation, warranty or covenant from which
the Individual Claim arose and no other SC Shareholder shall have any liability
therefor hereunder and (ii) the satisfaction of one or more Individual Claims as
describe in clause (i) shall not increase the proportion of any subsequent claim
for which any SC Shareholder would have been responsible absent such prior
satisfaction of such Individual Claims. In the event that the Escrow Agent must
make payment with a number of Shares less than or different from the number of
Shares represented by a certificate in the Escrow Deposit, the Escrow Agent
shall surrender such certificate to Nextera and Nextera shall issue to the
Escrow Agent certificates of Nextera Class A Shares identical in form but for
the number of Shares as necessary to allow for proper payment of the claim so
long as the number of Shares of the new certificates plus the amount of Shares
used to satisfy such claim shall be equivalent to the total number of Shares
covered by the surrendered certificate.
4. Disputed Claims.
(a) If the Escrow Representative shall dispute an indemnification
claim of Nextera as above provided, the Escrow Agent shall set
aside a portion of the Escrow Deposit sufficient to pay said
claim in full as reasonably determined by Nextera in good
faith (the "Set Aside Amount"). Nextera shall notify the
Escrow Agent in writing of the Set Aside Amount. If Nextera
notifies the Escrow Agent in writing that it has made
out-of-pocket expenditures in connection with any such
disputed claim, and provides paid receipts for such
expenditures, in addition to expenditures included in the Set
Aside Amount, an amount equal to such additional expenditures
shall be added to the Set Aside Amount. The appropriate number
of Escrow Shares in the Set Aside Amount shall be determined
by the procedure described in Section 3(b)(ii) above.
(b) If the disputed indemnification claim has not been resolved or
compromised within sixty (60) days after the Escrow Agent's
receipt of the Escrow Representative's notice of dispute of
the same, or in the event of a third-party claim or suit,
within fifteen (15) days after its resolution or compromise,
said indemnification claim shall be referred to the American
Arbitration Association, to be settled by binding arbitration
in New York, New York, in accordance with the commercial
arbitration rules of the Association. The fees and expenses of
the arbitrator shall be borne equally by the SC Shareholders
on the one hand and Canadian Buyer and Nextera on the other.
In no event shall the Escrow Agent be responsible for any fee
or expense of any party to any arbitration proceeding. The
determination of the arbitrator as to the amount, if any, of
the indemnification claim which is properly allowable shall be
conclusive and binding upon the parties hereto and judgment
may be entered thereon in any court having jurisdiction
thereof, including, without limitation, any court in the State
of New York. The arbitrator shall have the authority in its
discretion to award to the prevailing party reasonable costs
and
<PAGE> 6
- 6 -
expenses including attorney's fees and the cost of
arbitration. The Escrow Agent shall use its best efforts to
make payment of such claim, as and to the extent allowed, to
Nextera out of the Set Aside Amount (or if insufficient, out
of the Escrow Deposit) within three (3) business days
following the Escrow Agent's receipt of said determination or
as soon thereafter as possible.
(c) Notwithstanding Section 4(b), if a disputed indemnification
claim has not been resolved or compromised as of the
Termination Date (as hereinafter defined), and such claim does
not involve a third-party claim or suit, Nextera and the
Escrow Representative shall continue to negotiate in good
faith a settlement of such claims for a period of ten (10)
days after the Termination Date. If, after the expiration of
such ten-day period, such indemnification claim still has not
been resolved or compromised, such claim shall be settled in
accordance with the arbitration provisions set forth in
Section 4(b).
(d) It is understood and agreed that should any dispute arise
under this Section 4, the Escrow Agent, upon receipt of
written notice of such dispute or claim by the Escrow
Representative, is authorized and directed to retain in its
possession without liability to anyone, the Set Aside Amount
relating to such dispute plus any expenditures of Nextera made
pursuant to Section 4(a) until such dispute shall have been
settled pursuant to this Section 4. The Escrow Agent may, but
shall be under no duty whatsoever to, institute or defend any
legal proceedings which relate to the Escrow Deposit.
(e) In connection with the resolution of a disputed
indemnification claim, the arbitrator may award, in its
discretion, to the SC Shareholders interest on the amount by
which the Set Aside Amount exceeds the amount which the
arbitrator determined would have been a reasonable Set Aside
Amount, computed from the Termination Date to the date such
Set Aside Amount is released from escrow if the arbitrator
determines that (i) Nextera had no reasonable basis for making
the indemnification claim or (ii) the Set Aside Amount as
determined by Nextera had no reasonable relation to the amount
of the claim. The arbitrator may not award interest under this
Section 4(e) if Nextera's claim is occasioned by, or the Set
Aside Amount corresponds to the amount of, a third-party claim
regardless of the merits of such third-party claim.
5. Exchange of Escrow Shares. Pursuant to the provisions attaching to the
Exchangeable Shares and the provisions under the Share Exchange
Agreement (the "Share Exchange Agreement"), SC Shareholders may
exchange their Exchangeable Shares for Nextera Class A Shares, or such
other Shares or other security (the "Exchanged Securities") as provided
for in the Share Exchange Agreement. In the event of an exchange during
the term of this Agreement, the remaining Escrow Shares shall be
released from escrow under this Agreement and an appropriate number of
Exchanged Securities shall be delivered to the Escrow Agent in
substitution for the Escrow Shares. Following such an exchange, all
references to Escrow Shares in this Agreement shall be deemed to
include such Exchanged
<PAGE> 7
- 7 -
Securities. The Escrow Agent shall follow the joint written instruction
of Nextera and the Escrow Representative in carrying out the provisions
of this Section 5.
6. Termination. This Agreement shall terminate on the date that the Escrow
Deposit is reduced to zero as the result of payments by the Escrow
Agent to Nextera in accordance with the provisions of Section 3 or
Section 4. If, however, the Escrow Deposit has not been reduced to zero
as of the date that is eighteen (18) months following the date of this
Agreement (the "Termination Date") and there are no outstanding
indemnification claims on the Termination Date of which Escrow Agent
has received notice hereunder, the Escrow Agent shall distribute the
amount remaining in the Escrow Deposit to the SC Shareholders in
accordance with their respective ownership percentages as set forth on
Exhibit A hereto. After such payment this Agreement shall terminate;
otherwise this Agreement shall continue in effect until all
indemnification claims Nextera has made pursuant to Section 3 hereof on
or prior to the Termination Date shall have been disposed of. As of the
Termination Date, an amount of the Escrow Deposit adequate to cover all
disputed and undisputed claims made by Nextera pursuant to Section 3
hereof will be held by the Escrow Agent (with the number of Escrow
Shares, if any, to be retained determined in accordance with Section
3(b)(ii)) and the Escrow Agent shall distribute on the Termination Date
the balance, if any, of the Escrow Deposit to the SC Shareholders in
accordance with their respective ownership percentages as set forth on
Exhibit A hereto. At such time as all remaining indemnification claims
hereunder have been resolved and the Escrow Agent has received a
written notice executed by Nextera and the Escrow Representative, or
notification of a determination of an arbitrator pursuant to Section
4(b), to that effect and any amounts to be distributed to Nextera in
connection therewith have been so distributed, the Escrow Agent shall
distribute the remaining Escrow Deposit, if any, to the SC Shareholders
in accordance with their respective ownership percentages as set forth
on Exhibit A hereto.
7. The Escrow Agent.
(a) Direction from Nextera and Escrow Representative.
Notwithstanding anything herein to the contrary, the Escrow
Agent shall promptly dispose of all or any part of the Escrow
Deposit as directed by a writing signed by Nextera and Escrow
Representative.
(b) Reliance by Escrow Agent; Liability of Escrow Agent. Except
with respect to capitalized terms used herein and defined in
the Purchase Agreement or the Exchange Agreement, the Escrow
Agent will not be subject to, or be obliged to recognize, any
other agreement between the parties hereto or directions or
instructions not specifically set forth as provided for
herein. The Escrow Agent will not make any payment or
disbursement from or out of the Escrow Deposit that is not
expressly authorized pursuant to this Agreement. The Escrow
Agent undertakes to perform only such duties as are expressly
set forth herein. The Escrow Agent may rely and shall be
protected in acting or refraining from acting upon any written
notice, instruction or request furnished to it hereunder and
believed by it to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent
shall be
<PAGE> 8
- 8 -
under no duty to inquire into or investigate the validity,
accuracy or content of any such document. The Escrow Agent
shall have no duty to solicit any payment which may be due it
hereunder. The Escrow Agent shall not be liable for any action
taken or omitted by it in good faith unless a court of
competent jurisdiction determines that the Escrow Agent's
gross negligence and willful misconduct was the primary cause
of any loss to Canadian Buyer, Nextera or the SC Shareholders.
In the administration of the Escrow Deposit hereunder, the
Escrow Agent may execute any of its powers and perform its
duties hereunder directly or through agents or attorneys and
may consult with counsel, accountants and other skilled
persons to be selected and retained by it. The Escrow Agent
shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the advice or opinion of
any such counsel, accountants or other skilled persons.
Canadian Buyer, Nextera and the SC Shareholders jointly and
severally hereby agree to indemnify and hold the Escrow Agent
and its directors, officers, agents and employees
(collectively, the "Indemnities") harmless from and against
any and all claims, liabilities, losses, damages, fines,
penalties, and expenses, including out-of-pocket and
incidental expenses and legal fees and expenses ("Losses")
that may be imposed on, incurred by, or asserted against the
Indemnitees or any of them for following any instructions or
other directions upon which the Escrow Agent is authorized to
rely pursuant to the terms of this Agreement. In addition to
and not in limitation of the immediately preceding sentence,
Canadian Buyer, Nextera and the SC Shareholders also agree
jointly and severally to indemnify and hold the Indemnitees
and each of them harmless from and against any and all Losses
that may be imposed on, incurred by, or asserted against the
Indemnitees or any of them in connection with or arising out
of Escrow Agent's performance under this Agreement, provided
the Indemnitees have not acted with gross negligence or
engaged in willful misconduct. Anything in this Agreement to
the contrary notwithstanding, in no event shall the Escrow
Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to
lost profits). As between Canadian Buyer and Nextera on the
one hand and the SC Shareholders on the other, each shall bear
equally the indemnification obligations set forth in this
Section 7(b). The provisions of this Section 7(b) shall
survive the termination of this Agreement and the resignation
or removal of the Escrow Agent for any reason.
(c) Fees and Expenses of the Escrow Agent. All fees of the Escrow
Agent for its services hereunder, together with any expenses
reasonably incurred by the Escrow Agent in connection with
this Agreement, shall be paid by Canadian Buyer. All fees of
the Escrow Agent in connection herewith shall be due from the
parties upon receipt of an invoice from the Escrow Agent
delivered to Nextera.
(d) Resignation and Removal of Escrow Agent; Successor Escrow
Agent.
(i) The Escrow Agent may resign from its duties hereunder
by giving each of the parties hereto not less than
thirty (30) days prior written
<PAGE> 9
- 9 -
notice of the effective date of such resignation
(which effective date shall be at least thirty (30)
days after the date such notice is given). In
addition, the Escrow Agent may be removed and
replaced on a date designated in a written instrument
signed by Nextera and the Escrow Representative and
delivered to the Escrow Agent. The parties hereto
intend that a successor escrow agent mutually
acceptable to the Escrow Representative and Nextera
will be appointed to fulfill the duties of the Escrow
Agent hereunder for the remaining term of this
Agreement in the event of the Escrow Agent's
resignation or removal. Upon the effective date of
such resignation or removal, the Escrow Agent shall
deliver the property comprising the Escrow Deposit to
such successor escrow agent, together with an
accounting of the investments held by it and all
transactions related to this Agreement, including any
distributions made and such records maintained by the
Escrow Agent in connection with its duties hereunder
and other information with respect to the Escrow
Deposit as such successor may reasonably request. If
on or before the effective date of such resignation
or removal, a successor escrow agent has not been
appointed, the Escrow Agent will thereupon deposit
the Escrow Deposit into the registry of a court of
competent jurisdiction.
Upon written acknowledgment by a successor escrow agent appointed in
accordance with this Section 7(d)(i) of its agreement to serve as escrow agent
hereunder and the receipt of the property then comprising the Escrow Deposit,
the Escrow Agent shall be fully released and relieved of all duties,
responsibilities and obligations under this Agreement, except for those arising
under the last sentence of Section 7(b) of this Agreement, and such successor
escrow agent shall for all purposes hereof be the Escrow Agent.
(ii) Any corporation, association or other entity into
which the Escrow Agent may be converted or merged, or
with which it may be consolidated, or to which it may
sell or otherwise transfer all or substantially all
of its corporate trust business, or any corporation,
association or other entity resulting from any such
merger, conversion, consolidation, sale or other
transfer, shall, ipso facto, be and become successor
Escrow Agent hereunder, vested with all of the
powers, discretions, immunities, privileges and all
other matters as was its predecessor, without the
execution or filing of any instrument or any further
act on the part or any of the parties hereto,
anything herein to the contrary notwithstanding.
8. Voting of Escrow Shares. So long as any Escrow Shares are retained by
the Escrow Agent, the SC Shareholders in accordance with their
respective ownership percentages as set forth on Exhibit A hereto,
shall be entitled to exercise the voting power, if any, with respect to
in the Escrow Shares, in accordance with their respective ownership
percentages as set forth on Exhibit A hereto.
9. Governing Law. IT IS THE PARTIES' INTENT THAT THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
<PAGE> 10
- 10 -
INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW).
10. Counterparts. This Escrow Agreement may be executed in one or more
counterparts, all of which documents shall be considered one and the
same document.
11. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given
when received, if personally delivered or delivered by overnight
delivery service or sent by facsimile transmission:
TO CANADIAN BUYER c/o SC/NE. LLC
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (617) 778-4508
With a copy to: Latham and Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Stikeman, Elliott
Suite 5300
Commerce Court West
Toronto, Ontario
M9L 1B9
Attention: Richard E. Clark
Fax: (416) 947-0866
TO NEXTERA Nextera Enterprises, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (617) 778-4508
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
<PAGE> 11
- 11 -
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
With a copy to: Weil, Gotshal & Manages LLP
767 Fifth Avenue
New York NY 10153
Attention: David E. Zeltner, Esq.
Fax: (212) 310-8297
TO ANY To the address set forth in the Purchase
SC SHAREHOLDER: Agreement
With a copy to: Donahue & Partners
Ernst & Young Tower
Toronto-Dominion Centre
222 Bay Street
Suite 2900, Box 197
Toronto, Ontario
M5K 1H6
Attention: David Poynton, Esq.
Fax: (416) 943-2735
TO ESCROW AGENT: Chase Manhattan Trust Company, National
Association
One Oxford Centre
301 Grant Street, Suite 1100
Pittsburgh Pennsylvania 15219
Attention: Bruce J. Karhu
Fax: (412) 456-5565
Addresses may be changed by written notice given pursuant to this
Section. Any notice given hereunder may be given on behalf of any party by his
counsel or other authorized representatives.
12. Certification of Tax Identification Number. The parties hereto agree to
provide the Escrow Agent with a certified tax identification number by
signing and returning a Form W-9 (or Form W-8, in the case of non-U.S.
persons) to the Escrow Agent prior to the date on which any income
earned on the investment of the Escrow Deposit is credited to the
Escrow Deposit. The parties hereto understand that, in the event their
tax identification numbers are not certified to the Escrow Agent, the
Internal Revenue Code, as amended from time to time, may require
withholding of a portion of any interest or other income earned on the
investment of the Escrow Deposit.
<PAGE> 12
- 12 -
13. Force Majeure. Neither Canadian Buyer, Nextera, the SC Shareholders nor
the Escrow Agent shall be responsible for delays or failures in
performance under this Agreement resulting from acts beyond its
control. Such acts shall include but not be limited to acts of God,
strikes, lockouts, riots, acts of war, epidemics, governmental
regulations superimposed after the fact, fire, communication line
failures, computer viruses, power failures, earthquakes or other
disasters.
14. Modifications. This Agreement may not be altered or modified nor may
any condition or covenant set forth herein be waived, without the
express written consent of the parties hereto, provided that, except as
specifically provided by Section 1(b) above, the Escrow Representative
shall be authorized to agree to any amendment, modification or waiver
on behalf of the SC Shareholders which shall be valid and binding upon
the SC Shareholders. No course of conduct shall constitute a waiver of
any of the terms and conditions of this Escrow Agreement, unless such
waiver is specified in writing, and then only to the extent so
specified. A waiver of any of the terms and conditions of this Escrow
Agreement on one occasion shall not constitute a waiver of the other
terms of this Escrow Agreement, or of such terms and conditions on any
other occasion.
15. Reproduction of Documents. This Agreement and all documents relating
thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and
other information previously or hereafter furnished, may be reproduced
by a photographic, photostatic, microfilm, optical disk, micro-card,
miniature photographic or other similar process. The parties agree that
any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made
by a party in the regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise
be admissible in evidence.
16. Permitted Transfers. The Parties hereby acknowledge that from the date
hereof, each SC Shareholder shall be permitted to transfer his
beneficial interest in the Escrow Shares to an individual holding
company ("HOLDCO") and that upon such a transfer, such SC Shareholder
and his Holdco will continue to be jointly and severally liable for the
obligations of such SC Shareholder under the Purchase Agreement and
hereunder. The certificates representing the Escrow Shares shall be
deemed to be in the name of the Holdco of the respective SC
Shareholder. In the event of a transfer of the beneficial interest in
the Escrow Shares to the Holdcos, all of the terms and conditions of
this Agreement shall apply to the Holdcos, as if the Holdcos were the
SC Shareholders mutatis mutandis. The SC Shareholders will promptly
notify the Escrow Agent upon a transfer of any beneficial interest in
the Escrow Shares to Holdco and provide the Escrow Agent with evidence
of such a transfer.
<PAGE> 13
-13-
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be
executed as of the date first written above.
CANADIAN BUYER:
SIBSON ACQUISITION CO.
By: /s/ Richard E. Clark
------------------------------------
Name: Richard E. Clark
Title: Secretary
NEXTERA:
NEXTERA ENTERPRISES, L.L.C.
By: /s/ Michael P. Muldowney
------------------------------------
Name: Michael P. Muldowney
ESCROW AGENT:
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION, As Escrow Agent
By: /s/ Bruce J. Karhu
------------------------------------
Name: Bruce J. Karhu
(Signatures continued on the following page)
<PAGE> 14
-14-
(Signatures continued from previous page)
SC SHAREHOLDERS:
/s/ Paul Britton
________________________________________
Paul Britton
Tax Identification Number: ___________
/s/ David Rainville
________________________________________
David Rainville
Tax Identification Number: ___________
/s/ Michael Hogan
________________________________________
Michael Hogan
Tax Identification Number: ___________
/s/ Michael McInerney
________________________________________
Michael McInerney
Tax Identification Number: ___________
<PAGE> 1
EXHIBIT NO. 10.15
SHARE EXCHANGE AGREEMENT
by and among
NEXTERA ENTERPRISES, L.L.C.
as "Nextera,"
NEXTERA ENTERPRISES, INC.
as "Newco,"
THE SHAREHOLDERS OF SIBSON & COMPANY, INC.
as the "GP Shareholders,"
THE SHAREHOLDERS OF SC2, INC.
as the "LP Shareholders," and
CERTAIN SHAREHOLDERS OF SIBSON ACQUISITION CO.
as the "Canadian Shareholders"
Dated August 31, 1998
<PAGE> 2
SHARE EXCHANGE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. EXCHANGE OF THE SHARES AND CONSIDERATION..............................................................2
1.1. SHARES BEING EXCHANGED; CONSIDERATION........................................................................2
1.2. CLOSING......................................................................................................3
1.3. SURRENDER OF CERTIFICATES....................................................................................3
1.4. NO FURTHER RIGHTS............................................................................................4
1.5. CANADIAN EXCHANGEABLE SHARES.................................................................................4
1.6. SHAREHOLDER REPRESENTATIVE...................................................................................4
1.7. INCORPORATION TRANSACTION....................................................................................5
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS...................................................5
2.1. ORGANIZATION AND QUALIFICATION...............................................................................6
2.2. CAPITALIZATION; BENEFICIAL OWNERSHIP.........................................................................6
2.3. AUTHORITY....................................................................................................7
2.4. SUBSIDIARIES.................................................................................................7
2.5. LIABILITIES..................................................................................................7
2.6. TAXES........................................................................................................7
2.7. EXPERIENCE; ACCREDITED INVESTOR..............................................................................9
2.8. INVESTMENT...................................................................................................9
2.9. NO PUBLIC MARKET............................................................................................10
2.10. ACCESS TO DATA; INCORPORATION TRANSACTION..................................................................10
2.11. RESIDENCE..................................................................................................10
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF NEXTERA..........................................................10
3.1. ORGANIZATION AND QUALIFICATION..............................................................................10
3.2. CAPITALIZATION AND BENEFICIAL OWNERSHIP OF NEWCO............................................................10
3.3. AUTHORITY OF NEXTERA........................................................................................11
3.4. AUTHORITY OF NEWCO..........................................................................................12
3.5. INVESTOR REPRESENTATIONS....................................................................................13
3.6. FORMATION OF NEWCO..........................................................................................13
ARTICLE IV. COVENANTS...........................................................................................13
4.1. FURTHER ASSURANCES..........................................................................................13
4.2. INCORPORATION TRANSACTION...................................................................................13
4.3. NO DISTRIBUTION OF NEXTERA CLASS A UNITS TO THE U.S. SHAREHOLDERS...........................................14
4.4. CONVERSION OF THE PARTNERSHIP...............................................................................14
4.5. NO SOLICITATION OF OTHER OFFERS; NO SALE OF SHARES..........................................................14
4.6. NOTIFICATION OF CERTAIN MATTERS.............................................................................15
4.7. BOARDS OF DIRECTORS AND OFFICERS............................................................................15
4.8. OBLIGATIONS OF NEWCO........................................................................................15
4.9. TAX MATTERS.................................................................................................15
ARTICLE V. CONDITIONS TO OBLIGATIONS OF THE PARTIES.............................................................17
5.1. CONDITIONS TO OBLIGATIONS OF THE U.S. .S AND NEXTERA........................................................17
ARTICLE VI. INDEMNIFICATION.....................................................................................18
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
6.1. INDEMNIFICATION BY THE U.S. SHAREHOLDERS....................................................................18
6.2. SATISFACTION OF CLAIMS AGAINST U.S. SHAREHOLDERS............................................................18
6.3. INDEMNIFICATION BY THE CANADIAN SHAREHOLDERS................................................................19
6.4. SATISFACTION OF CLAIMS AGAINST CANADIAN SHAREHOLDERS........................................................20
6.5. INDEMNIFICATION BY NEXTERA AND NEWCO........................................................................20
6.6. INDEMNIFICATION BY KE.......................................................................................21
6.7. NOTICE; DEFENSE OF CLAIMS...................................................................................21
ARTICLE VII. TERMINATION........................................................................................22
ARTICLE VIII. MISCELLANEOUS.....................................................................................22
8.1. CANADIAN SHAREHOLDERS.......................................................................................22
8.2. SURVIVAL OF REPRESENTATIONS, ETC............................................................................22
8.3. FEES AND EXPENSES...........................................................................................23
8.4. GOVERNING LAW...............................................................................................23
8.5. NOTICES.....................................................................................................23
8.6. ENTIRE AGREEMENT............................................................................................24
8.7. ASSIGNABILITY; BINDING EFFECT...............................................................................25
8.8. CAPTIONS AND GENDER.........................................................................................25
8.9. EXECUTION IN COUNTERPARTS...................................................................................25
8.10. AMENDMENTS.................................................................................................25
8.11. SPECIFIC PERFORMANCE.......................................................................................25
8.12. TERMINATION OF SHAREHOLDERS AGREEMENTS.....................................................................25
</TABLE>
ii
<PAGE> 4
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement (the "Agreement") is entered into
as of August 31, 1998 by and among Nextera Enterprises, L.L.C., a Delaware
limited liability company ("Nextera") and the sole member of SC/NE, LLC, a
Delaware limited liability company ("Buyer"), Nextera Enterprises, Inc., a
Delaware corporation ("Newco"), the holders of the capital stock of Sibson &
Company, Inc., a Delaware corporation ("General Partner"), listed on Exhibit A
hereto (the "GP Shareholders"), the holders of the capital stock of SC2, Inc., a
Delaware corporation ("Limited Partner"), listed on Exhibit A hereto (the "LP
Shareholders") (the GP Shareholders and the LP Shareholders are referred to
herein individually as a "U.S. Shareholder" and collectively as the "U.S.
Shareholders") and the holders of exchangeable preference shares in the capital
of Sibson Acquisition Co., a Nova Scotia unlimited liability company ("Sibson
Acquisition Co."), listed on Exhibit B hereto (the "Canadian Shareholders," and
together with the U.S. Shareholders, the "Shareholders").
WHEREAS, pursuant to an Asset Purchase Agreement (the "Purchase
Agreement") dated as of the date hereof, by and among Buyer, Nextera, Sibson &
Company, L.P. (the "Partnership"), General Partner, Limited Partner and the U.S.
Shareholders, Buyer is purchasing certain assets and assuming certain
liabilities from the Partnership;
WHEREAS, as of the date hereof, the GP Shareholders own one
hundred percent (100%) of the issued and outstanding capital stock (the "GP
Shares") of General Partner, and the LP Shareholders own one hundred percent
(100%) of the issued and outstanding capital stock (the "LP Shares") of Limited
Partner;
WHEREAS, prior to the Closing (as hereinafter defined) the
Partnership will have been converted to a limited liability company the
membership interests of which shall be owned by the U.S. Shareholders or their
Permitted Assignees, as contemplated by Section 4.5, and General Partner and
Limited Partner will own a certain number of Class A Common Units of Nextera
issued to the Partnership pursuant to the Purchase Agreement;
WHEREAS, Knowledge Enterprises, Inc. ("KE") desires to commit to
cause the business of Nextera to be incorporated (the "Incorporation
Transaction");
WHEREAS, Newco desires, and Nextera desires to commit to cause
Newco, to acquire the GP Shares and the LP Shares (collectively, the "Shares")
and the U.S. Shareholders desire to commit to exchange the Shares for Class A
Common Stock of Newco ("Newco Class A Stock");
WHEREAS, pursuant to an Escrow Agreement (the "U.S. Escrow
Agreement") dated as of the date hereof, by and among Buyer, Nextera, the
Partnership, General Partner, Limited Partner, the U.S. Shareholders and the
Escrow Agent (as defined therein) that number of Class A Common Units of Nextera
("Nextera Class A Units") held in escrow shall be released from escrow and
replaced with a portion of the Newco Class A Stock issued to the U.S.
Shareholders in connection with the Incorporation Transaction as described
herein;
<PAGE> 5
WHEREAS, pursuant to a Share Purchase Agreement (the "Canadian
Purchase Agreement") dated as of the date hereof, by and among Nextera, Sibson
Acquisition Co., and the Canadian Shareholders, Nextera is purchasing the
outstanding common stock of Sibson Canada, Inc., or its successor, and the
Canadian Shareholders will receive a number of exchangeable preference shares in
the capital stock of Sibson Acquisition Co. (the "Exchangeable Shares") which
may be exchanged for Nextera Class A Units as provided in the Canadian Purchase
Agreement; and
WHEREAS, Nextera and the Canadian Shareholders desire to cause
the Exchangeable Shares to be exchangeable for Newco Class A Stock following the
Incorporation Transaction.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises of the parties herein contained, and other good and valuable
consideration, receipt and sufficiency of which are hereby acknowledged, and in
reliance upon the representations and warranties hereinafter set forth, the
parties hereto agree as follows:
ARTICLE I.
EXCHANGE OF THE SHARES AND CONSIDERATION.
1.1. Shares Being Exchanged; Consideration.
(a) At the Closing (as hereinafter defined), and subject to the
terms and conditions of this Agreement, each U.S. Shareholder shall assign,
transfer and deliver to Newco all of its Shares in the manner described in
Section 1.3. Subject to the terms and conditions of this Agreement, and in
consideration of the assignment and delivery of the Shares to Newco, Newco shall
issue to the U.S. Shareholders and/or their Permitted Assignees (as defined in
Section 4.5), and the U.S. Shareholders and/or their Permitted Assignees shall,
in the aggregate, acquire and accept from Newco, that certain number of shares
of Newco Class A Stock which represents the identical percentage of the total
issued and outstanding common stock of Newco following the Incorporation
Transaction as that percentage of the total issued and outstanding membership
interest in Nextera which General Partner and Limited Partner own immediately
prior to the Incorporation Transaction (including the Class A Common Units held
pursuant to the Escrow Agreement) (the "New Stock").
Contemporaneous with the exchange of Shares by the U.S.
Shareholders for Newco Class A Stock, each member of Nextera other than General
Partner and Limited Partner shall contribute his membership interest in Nextera
in exchange for that certain number of shares of Newco common stock which
represents the identical percentage of the total issued and outstanding common
stock of Newco following the Incorporation Transaction as that percentage of the
total issued and outstanding membership interest in Nextera which such member
may own immediately prior to the Incorporation Transaction. Each member shall
receive Newco Class A Stock and Class B Common Stock of Newco ("Newco Class B
Stock") in exchange, and in proportion to, the Nextera Class A Units and Class B
Common Units of Nextera ("Nextera
2
<PAGE> 6
Class B Units") which he exchanges. The rights and preferences of the holders of
Newco Class A Stock and Newco Class B Stock shall be identical, except that the
holders of Newco Class A Stock are entitled to one vote per share and the
holders of Newco Class B Stock are entitled to ten votes per share on all
matters voted on by the stockholders of the Company. Each share of Newco Class B
Stock will be convertible into one share of Newco Class A Stock as described on
Schedule 3.2.
(b) To implement the foregoing, at the Closing, Newco shall issue
in the name of each U.S. Shareholder a number of shares of Newco Class A Stock
equal to the product of (i) the aggregate number of shares of Newco Class A
Stock to be issued to the U.S. Shareholders pursuant to Section 1.1(a) and (ii)
such U.S. Shareholder's combined ownership percentage set forth on Exhibit A
hereto (with respect to any U.S. Shareholder, such "U.S. Shareholder's
Percentage"). Each U.S. Shareholder shall be issued two certificates
representing the shares of Newco Class A Stock to which such U.S. Shareholder is
entitled pursuant to the immediately preceding sentence (a "U.S. Shareholder's
Total Newco Shares") as follows: the first for a number of shares of Newco Class
A Stock which is equal to the product of (A) the number of shares of Newco Class
A Stock which represents the identical percentage of the total issued and
outstanding Newco Class A Stock following the Incorporation Transaction as the
percentage of issued and outstanding Nextera Class A Units held pursuant to that
certain Escrow Agreement dated as of the date hereof by and among Nextera, the
Partnership, General Partner, Limited Partner, the U.S. Shareholders and Chase
Manhattan National Trust Company (the "U.S. Escrow Agreement") immediately prior
to the Incorporation Transaction (the "Total Escrow Shares") and (B) such U.S.
Shareholder's Percentage (the number of shares resulting from such product being
referred to as a "U.S. Shareholder's Escrow Shares"), and the second for the
balance of such U.S. Shareholder's Total Newco Shares (a "U.S. Shareholder's
Non-Escrow Shares"). Newco shall deliver the certificates representing each U.S.
Shareholder's Escrow Shares to the Escrow Agent for deposit into escrow pursuant
to the U.S. Escrow Agreement and each U.S. Shareholder shall deliver to the
Shareholder Representative (as hereinafter defined) a stock power, duly executed
in blank with respect to such U.S. Shareholder's Escrow Shares, for delivery by
the Shareholder Representative to the Escrow Agent. Newco shall deliver the
certificates representing each U.S. Shareholder's Non-Escrow Shares to the
Shareholder Representative for delivery to such U.S. Shareholder.
1.2. Closing. The Closing of the transaction contemplated by this
Agreement (the "Closing") shall take place at a mutually agreeable location in
New York, New York on or before January 1, 1999; provided, however, that Nextera
may extend the closing at its option to no later than March 31, 1999 if it in
good faith expects to complete an initial public offering of the capital stock
of Newco within such extended period and delivers to the Shareholder
Representative written notice to such effect on or before December 31, 1998. The
date of the Closing is referred to hereinafter as the "Closing Date."
1.3. Surrender of Certificates.
(a) As of the date hereof, the U.S. Shareholders have delivered
to the Shareholder Representative (who shall have presented to Nextera for
review) each certificate
3
<PAGE> 7
representing Shares with assignments duly executed in blank (or the equivalent)
and such other documents as may reasonably be required by Nextera in order to
effect as of the Closing a valid transfer of such Shares by the U.S.
Shareholders, free and clear of any and all liens, encumbrances, charges or
claims. At the Closing, the Shareholder Representative shall deliver the
certificates and assignments representing Shares to Newco and Newco shall
deliver certificates representing the Newco Class A Stock to the Shareholder
Representative and/or the Escrow Agent as provided in Section 1.1.
(b) There shall be no obligation to deliver the Newco Class A
Stock in respect of any Shares until (and then only to the extent that) the
holder thereof validly surrenders his certificate or certificates representing
the Shares, or, in lieu thereof, delivers to Newco an appropriate affidavit of
loss and an indemnity agreement as may be required in any such case by Newco in
its reasonable discretion.
(c) If any shares of Newco Class A Stock are to be issued in a
name other than that in which the certificate for Shares surrendered for
exchange is registered, it shall be a condition to the payment that the
certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting the payment shall either (i)
pay to Newco any transfer or other taxes required by reason of the issuance of
Newco Class A Stock to a person other than the registered holder of the
certificate surrendered or (ii) establish to the satisfaction of Newco that such
taxes have been paid or are not payable.
1.4. No Further Rights. At and after the Closing, each holder of a
certificate that represented Shares immediately prior to the Closing shall cease
to have any rights as a shareholder of General Partner or Limited Partner. This
Section 1.4 shall not, however, impair rights otherwise expressly provided in
this Agreement.
1.5. Canadian Exchangeable Shares. At and after the Closing, each
certificate that represented Exchangeable Shares (including the Exchangeable
Shares deposited pursuant to that certain Escrow Agreement (the "Canadian Escrow
Agreement") by and among Nextera, Sibson Acquisition Co., the Canadian
Shareholders and Chase Manhattan Trust Company) shall cease to be exchangeable
for Nextera Class A Units and instead shall be exchangeable only for Newco Class
A Stock. Each Exchangeable Share shall be exchangeable for that certain number
of shares of Newco Class A Stock which represents the identical percentage of
the total issued and outstanding common stock of Newco following the
Incorporation Transaction (immediately after giving effect to the exchange of
Shares for shares of Newco Class A Stock by the U.S. Shareholders and the
exchange of membership interests by certain of the members of Nextera for shares
of Newco Class A Stock all as contemplated by Section 1.1 hereof) as that
percentage of the total issued and outstanding membership interest in Nextera
which such Exchangeable Share was exchangeable for immediately prior to the
Incorporation Transaction.
1.6. Shareholder Representative. The Shareholders hereby appoint the
Partnership, and, upon conversion of the Partnership to a limited liability
company as provided in Section 4.4, such limited liability company to serve as
the exclusive representative of the Shareholders with respect to this Agreement
(the "Shareholder Representative") and the
4
<PAGE> 8
Partnership, on behalf of itself and its successors and assigns, hereby accepts
such appointment. If, for any reason, the Shareholder Representative shall be
either unable or unwilling to serve, a successor Shareholder Representative
shall be appointed by written consent of the Shareholders and all references to
the Shareholder Representative shall be deemed to include such successor. Each
Shareholder whose signature appears below expressly agrees that this Agreement
may be amended or modified, and compliance with any condition or covenant may be
waived without the consent of, or execution thereof by, such Shareholder if the
Shareholder Representative agrees to such amendment or modification or grants
such waiver, in each case by a writing duly and validly executed by the
Shareholder Representative as provided in Section 8.10; provided, however, that
the Shareholder Representative will not enter into any such amendment or
modification or waive any condition or covenant that materially and adversely
affects any Shareholder differently than all other Shareholders affected thereby
without the consent of such Shareholder.
1.7. Incorporation Transaction.
(a) KE and the other Members (as defined in the Second Amended
and Restated Limited Liability Company Agreement of Nextera, dated as of May 1,
1998, as amended (the "Nextera Operating Agreement"), a copy of which has been
attached as Exhibit M to the Purchase Agreement), shall effect the Incorporation
Transaction pursuant to Section 11 of the First Amendment to the Nextera
Operating Agreement (the "First Amendment").
(b) The Members, other than General Partner and Limited Partner,
shall be required to contribute their Units to Newco in exchange for the stock
of Newco in accordance with Section 11 of the First Amendment. The amount and
class of such stock issued to each Member shall correspond to the class and
percentage membership interest of such Member immediately prior to the
Incorporation Transaction. Subject to the terms and conditions of this
Agreement, General Partner and Limited Partner shall not contribute their
Nextera Class A Units. In order to implement the foregoing, Nextera has gathered
from its members the certificates representing all of the issued and outstanding
membership interests in Nextera (including certificates representing membership
interests held under escrow agreements to which Nextera is a party) with
assignments duly executed in blank (or the equivalent) and any other documents
as may be reasonably necessary to effect as of the Closing a valid transfer of
such membership interests free and clear of all liens, encumbrances, charges or
claims.
(c) The Stockholders Agreement attached hereto as Exhibit C (the
"Stockholders Agreement") shall be executed as of the date hereof by Nextera,
Newco, the Members, and the Shareholders, shall become effective upon the
Closing and shall govern the actions of the stockholders of Newco with respect
to the matters set forth therein following the Incorporation Transaction.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
5
<PAGE> 9
As a material inducement to Nextera to enter into this Agreement
and consummate the transactions contemplated hereby, each of the U.S.
Shareholders hereby severally, but not jointly, makes to Nextera each of the
representations and warranties set forth in this Article II with respect to
himself only as applicable, and each of the Canadian Shareholders hereby
severally, but not jointly, makes to Nextera each of the representations and
warranties set forth in Section 2.3 and Sections 2.7 through 2.11 of this
Article II with respect to himself only as applicable.
2.1. Organization and Qualification.
(a) Each GP Shareholder represents and warrants to Nextera that
General Partner is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with corporate power and
authority to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or such
business is currently conducted. Copies of the Certificate of Incorporation and
Bylaws of General Partner, and all amendments thereto, heretofore delivered to
Nextera are accurate and complete as of the date hereof. General Partner is not
in violation of any term of its Certificate of Incorporation or Bylaws.
(b) Each LP Shareholder represents and warrants to Nextera that
Limited Partner is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with corporate power and
authority to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or such
business is currently conducted. Copies of the Certificate of Incorporation and
Bylaws of Limited Partner, and all amendments thereto, heretofore delivered to
Nextera are accurate and complete as of the date hereof. Limited Partner is not
in violation of any term of its Certificate of Incorporation or Bylaws.
2.2. Capitalization; Beneficial Ownership.
(a) Each GP Shareholder represents and warrants to Nextera that
the authorized capital stock of General Partner consists of 30,000 shares of
common stock of which 13,788 shares are duly and validly issued, and
outstanding, and are fully paid and non-assessable. Such GP Shareholder is the
record owner of the amount of shares of common stock of General Partner set
forth opposite such GP Shareholder's name on Exhibit A hereto. Other than as set
forth on Schedule 2.2, there are no outstanding options, warrants, rights,
commitments, preemptive rights or agreements of any kind for the issuance or
sale of, or outstanding securities convertible into, any additional equity of
any class of General Partner. None of General Partner's capital stock owned by
such GP Shareholder has been issued in violation of any federal or state law.
Except for the agreements listed on Schedule 2.2 and as provided in Section 4.5
with respect to Permitted Assignees, there are no voting trusts, voting
agreements, proxies or other agreements, instruments or undertakings with
respect to the voting of the capital stock of General Partner to which such GP
Shareholder is a party or by which his property is bound.
(b) Each LP Shareholder represents and warrants to Nextera that
the authorized capital stock of Limited Partner consists of 30,000 shares of
common stock of which
6
<PAGE> 10
3,167 shares are duly and validly issued, and outstanding, and are fully paid
and non-assessable. Such LP Shareholder is the record owner of the amount of
shares of common stock of Limited Partner set forth opposite such LP
Shareholder's name on Exhibit A hereto. Other than as set forth on Exhibit A,
there are no outstanding options, warrants, rights, commitments, preemptive
rights or agreements of any kind for the issuance or sale of, or outstanding
securities convertible into, any additional equity of any class of Limited
Partner. None of Limited Partner's capital stock owned by such LP Shareholder
has been issued in violation of any federal or state law. Except for the
agreements listed on Schedule 2.2 and as provided in Section 4.5 with respect to
Permitted Assignees, there are no voting trusts, voting agreements, proxies or
other agreements, instruments or undertakings with respect to the voting of the
capital stock of Limited Partner to which such LP Shareholder is a party or by
which his property is bound.
(c) Prior to the liquidation or conversion of the Partnership as
provided in Section 4.4., General Partner and Limited Partner will own of record
and beneficially all of the partnership interests of the Partnership.
2.3. Authority. Such Shareholder has full, authority, power and
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by such Shareholder pursuant to this
Agreement and to carry out the transactions contemplated hereby and thereby.
This Agreement and each agreement, document and instrument executed and
delivered by such Shareholder pursuant to this Agreement constitutes a valid and
binding obligation of such Shareholder, enforceable in accordance with their
respective terms (assuming the due authorization, execution and delivery by the
other parties thereto), subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject to the effect of general principles of equity,
including, without limitation, the possible unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law.
2.4. Subsidiaries. Other than General Partner's one percent (1%)
membership interest in Sibson Europe, LLC, a Delaware limited liability company
which shall be transferred to Buyer in connection with the Purchase Agreement,
neither General Partner nor Limited Partner own directly any equity interest in
any entity other than the Partnership.
2.5. Liabilities. There will be no Liabilities (as defined in Section
6.1 below) of General Partner or Limited Partner as of the close of business on
the Closing except for the Assumed Liabilities (as defined in the Purchase
Agreement) and except as set forth on Schedule 2.5 hereto.
2.6. Taxes. Except as otherwise set forth on Schedule 2.6:
(a) Each of General Partner and Limited Partner is, and has been
at all times since its formation, properly characterized as an "S" corporation
for federal income Tax (as defined in the Purchase Agreement) purposes and those
jurisdictions where General Partner or Limited Partner file income Tax Returns
(as hereinafter defined) which recognize such status.
7
<PAGE> 11
(b) Any transferee of stock of General Partner or Limited
Partner, except pursuant to this Agreement, is and will be a person who is
qualified to be a "S" Corporation shareholder.
(c) All returns, declarations, reports, estimates, statements,
schedules or other information or documents with respect to Taxes (collectively,
"Tax Returns") required to be filed by or with respect to General Partner or
Limited Partner have been timely filed (giving effect to extensions granted with
respect thereto) with the appropriate taxing authorities, and all such Tax
Returns are true, correct, and complete in all material respects.
(d) General Partner and Limited Partner have timely paid all
Taxes due from it or claimed to be due from it by any federal, state, local,
foreign or other taxing authority.
(e) There are no liens for Taxes upon any of the assets of, or
interests in General Partner or Limited Partner, except liens for Taxes not yet
due and payable.
(f) No Tax Returns of General Partner or Limited Partner have
been audited by the relevant taxing authority. No deficiency for any Taxes has
been proposed, asserted or assessed against General Partner or Limited Partner
that has not been paid in full. There are no outstanding waivers, extensions, or
comparable consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns of General Partner or Limited Partner
(including the time for filing of Tax Returns or paying Taxes) and neither
General Partner nor any Limited Partner has pending requests for any such
waivers, extensions, or comparable consents.
(g) No audit or other proceeding by any federal, state, local or
foreign court, governmental, regulatory, administrative or similar authority is
presently pending with respect to any Taxes or Tax Return of General Partner or
Limited Partner, and neither General Partner nor any Limited Partner has
received written notice of any pending audits or proceedings.
(h) Neither General Partner nor any Limited Partner has received
a ruling from any taxing authority or signed an agreement with any taxing
authority that could reasonably be expected to have a material adverse effect on
General Partner or Limited Partner or the assets of General Partner or Limited
Partner.
(i) General Partner and Limited Partner have complied in all
material respects with all applicable laws, rules and regulations relating to
the payment and withholding of Taxes (including, without limitation, withholding
of Taxes pursuant to Sections 1441, 1442, 1445 and 1446 of the Code or similar
provisions under any applicable state and foreign laws) and has, within the time
and the manner prescribed by law, paid over to the proper governmental
authorities all amounts so withheld.
(j) Neither General Partner nor any Limited Partner is a party to
or bound by or has any obligation under any Tax sharing allocation or indemnity
agreement or similar contract or arrangement (whether or not written).
8
<PAGE> 12
(k) No power of attorney granted by General Partner or Limited
Partner with respect to any Taxes is currently in force.
(l) There is no expectation that any taxing authority may claim
or assess any material amount of Taxes payable by General Partner or Limited
Partner for any period ending on or prior to the Closing Date and there are no
facts of which General Partner or Limited Partner or the Shareholders are aware
which would constitute grounds for the assessment of any material amount of
Taxes payable by General Partner or Limited Partner for any period ending on or
prior to the Closing Date.
(m) No issue has been raised by a federal, state, local or
foreign taxing authority in any examination relating to General Partner or
Limited Partner which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for any subsequent
taxable period.
(n) Schedule 2.6 sets forth each state, local and foreign
jurisdiction in which General Partner or Limited Partner has filed a Tax Return
during the last five years. No written claim has ever been received by General
Partner or Limited Partner from a taxing authority in a jurisdiction where
General Partner or Limited Partner does not pay Taxes or file Tax Returns that
General Partner or Limited Partner is or may be subject to Taxes assessed by
such jurisdiction, and, to the knowledge of such Shareholder, no such claim has
been threatened by a taxing authority.
(o) General Partner and Limited Partner are United States persons
within the meaning of the Code.
2.7. Experience; Accredited Investor. Such Shareholder has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to Newco so that he is capable of evaluating the
merits and risks of acquiring the Newco Class A Stock to be issued to such
Shareholder and has the capacity to protect his own interests. Such Shareholder
must bear the economic risk of holding the Newco Class A Stock (when issued)
indefinitely unless such securities are registered pursuant to the Securities
Act of 1933, as amended (the "Securities Act"), or an exemption from
registration is available for the disposition thereof. Such Shareholder
understands that there is no assurance that any exemption from registration
under the Securities Act will be available. Such Shareholder is an "accredited
investor" as defined in Rule 501 under the Securities Act.
2.8. Investment. Such Shareholder is acquiring the Newco Class A Stock
for his own account for investment only, and not with the view to, or for resale
in connection with, any distribution thereof. It understands that the Newco
Class A Stock to be acquired has not been, and will not be, registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
the Shareholder's representations as expressed herein.
9
<PAGE> 13
2.9. No Public Market. Such Shareholder understands that no public
market now exists for any of the securities issued by Nextera or Newco and that
Nextera has not made any assurances that a public market will ever exist for
such securities.
2.10. Access to Data; Incorporation Transaction. Such Shareholder has
received and read the Nextera business plan and financial statements and has had
an opportunity to discuss Nextera's business, management and financial affairs
and the Incorporation Transaction with its management. Such Shareholder has also
had an opportunity to ask questions of and receive answers from officers of
Nextera regarding the terms and conditions of acquiring Newco Class A Stock in
the Incorporation Transaction and pursuant to this Agreement, which questions
were answered to such Shareholder's satisfaction.
2.11. Residence. The residence of such Shareholder in which his
investment decision was made is set forth next to such Shareholder's name on the
signature page hereto.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF NEXTERA.
As a material inducement to the Shareholders to enter into this
Agreement and consummate the transactions contemplated hereby, Nextera hereby
makes to the Shareholders each of the representations and warranties set forth
in this Article III.
3.1. Organization and Qualification. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with corporate power and authority to own or lease its properties and
to conduct its business in the manner and in the places where such properties
are owned or leased or such business is currently conducted or proposed to be
conducted as a result of the transactions contemplated by this Agreement. Copies
of the Certificate of Incorporation and Bylaws of Newco and all amendments
thereto shall be delivered to the Shareholder Representative not less than ten
(10) business days before the Closing and will be accurate and complete as of
the Closing. As of the Closing, Newco will not be in violation of any term of
its Certificate of Incorporation or Bylaws.
3.2. Capitalization and Beneficial Ownership of Newco. The Newco Class
A Stock and Newco Class B Stock to be issued to the Shareholders pursuant to
Article I will be duly and validly issued, and outstanding, and fully paid and
non-assessable. As of the Closing the rights and preferences of the holders of
Newco Class A Stock and Newco Class B Stock shall be identical, except that the
holders of Newco Class A Stock will be entitled to one vote per share and the
holders of Newco Class B Stock will be entitled to ten votes per share on all
matters voted on by the stockholders of the Company. Each share of Newco Class B
Stock will be convertible into one share of Newco Class A Stock as described on
Schedule 3.2 . Schedule 3.2 sets forth all of the issued and outstanding
membership interests of Nextera and Buyer on the date hereof and on the Closing
Date (assuming consummation of the transactions contemplated hereby, including,
in the case of Nextera, the sale of Nextera Class A Units and Nextera Class B
Units under the Employment Agreements (as defined in the Purchase Agreement)).
10
<PAGE> 14
The authorized capital stock of Newco will consist of such number of
shares of Newco Class A Stock and Newco Class B Stock as will be set forth on a
revised Schedule 3.2 to be provided at least ten (10) business days prior to the
Closing to the Shareholder Representative, which revised Schedule 3.2 will also
set forth the number of such shares that will be outstanding as of the Closing
assuming the consummation of the transactions contemplated hereby. Other than
options granted under the 1998 Equity Participation Plan of Newco (a true and
complete copy of which will be provided prior to the Closing to the Shareholder
Representative) or as set forth in the Stockholders Agreement or on a revised
Schedule 3.2 to be provided prior to the Closing to the Shareholder
Representative, there will be no outstanding options, warrants, rights,
commitments, preemptive rights or agreements of any kind for the issuance or
sale of, or outstanding securities convertible into, any additional equity of
any class of Newco. As of the Closing, none of Newco's capital stock will have
been issued in violation of any federal or state law. Except as provided in the
Stockholders Agreement, there will be no voting trusts, voting agreements,
proxies or other agreements, instruments or undertakings with respect to the
voting of the capital stock of Newco to which Newco or, to the knowledge of
Newco, any of the Members are or will be a party or by which their property is
or will be bound.
3.3. Authority of Nextera. Nextera has full authority, power and
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by Nextera pursuant to this Agreement
and to carry out the transactions contemplated hereby and thereby. This
Agreement and each agreement, document and instrument executed and delivered by
Nextera pursuant to this Agreement constitutes a valid and binding obligation of
Nextera, enforceable in accordance with their respective terms (assuming the due
authorization, execution and delivery by the other parties thereto), subject to
the effect of any applicable bankruptcy, reorganization, insolvency, moratorium
or similar laws affecting creditors' rights generally and subject to the effect
of general principles of equity, including, without limitation, the possible
unavailability of specific performance or injunctive relief, regardless of
whether considered in a proceeding in equity or at law. No other limited
liability company proceedings on the part of Nextera are necessary to authorize
this Agreement and the transactions contemplated hereby. The execution, delivery
and performance by Nextera of this Agreement and each such agreement, document
and instrument:
(i) does not and will not violate any provision of any laws
of the United States or any state or other jurisdiction applicable to
Nextera, or require Nextera to obtain any approval, consent or waiver
from, or make any filing with, any person or entity (governmental or
otherwise) other than any such approval, consent or waiver of or
filing with respect to which the failure to so obtain will not have a
material adverse effect or result in a change in the condition
(financial or other), business, results of operations, prospects,
assets, Liabilities (as hereinafter defined) or operations of Nextera
and its Subsidiaries (as defined in the Purchase Agreement) taken as a
whole or on the ability of Nextera to consummate the transactions
contemplated hereby, or any event or condition which would, with the
passage of time, have such effect; and
11
<PAGE> 15
(ii) does not and will not result in (a) a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of, any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award to which Nextera is a party
or by which the property of Nextera is bound or affected, or (b) the
creation or imposition of any mortgage, pledge, lien, security interest
or other charge or encumbrance on any of the assets or on the equity of
Nextera, except, in the case of clause (a) for such breaches, defaults,
accelerations or terminations as would not, individually or in the
aggregate, have a material adverse effect or result in a change in the
condition (financial or other), business, results of operations,
prospects, assets, Liabilities or operations of Nextera and its
Subsidiaries (as defined in the Purchase Agreement) taken as a whole or
on the ability of Nextera to consummate the transactions contemplated
hereby, or any event or condition which would, with the passage of
time, have such effect.
3.4. Authority of Newco. Newco has full authority, power and capacity
to enter into this Agreement and each agreement, document and instrument to be
executed and delivered by Newco pursuant to this Agreement and to carry out the
transactions contemplated hereby and thereby. This Agreement and each agreement,
document and instrument executed and delivered by Newco pursuant to this
Agreement constitutes a valid and binding obligation of Newco, enforceable in
accordance with their respective terms (assuming the due authorization,
execution and delivery by the other parties thereto), subject to the effect of
any applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject to the effect of general
principles of equity, including, without limitation, the possible unavailability
of specific performance or injunctive relief, regardless of whether considered
in a proceeding in equity or at law. Except as set forth on Schedule 3.4, no
other corporate proceedings on the part of Newco are necessary to authorize this
Agreement and the transactions contemplated hereby. The execution, delivery and
performance by Newco of this Agreement and each such agreement, document and
instrument:
(i) will not violate any provision of any laws of the United
States or any state or other jurisdiction applicable to Newco, or
require Newco to obtain any approval, consent or waiver from, or make
any filing with, any person or entity (governmental or otherwise),
other than any such approval, consent or waiver of or filing with
respect to which the failure to so obtain will not have a material
adverse effect or result in a change in the condition (financial or
other), business, results of operations, prospects, assets,
Liabilities or operations of Newco and its subsidiaries taken as a
whole or on the ability of Newco to consummate the transactions
contemplated hereby, or any event or condition which would, with the
passage of time, have such effect; and
(ii) will not result in (a) a breach of, constitute a
default under, accelerate any obligation under, or give rise to a
right of termination of, any indenture or loan or credit agreement or
any other agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree,
determination or
12
<PAGE> 16
arbitration award to which Newco is a party or by which the property
of Newco is bound or affected, or (b) the creation or imposition of
any mortgage, pledge, lien, security interest or other charge or
encumbrance on any of the assets or on the capital stock of Newco
except, in the case of clause (a) for such breaches, defaults,
accelerations or terminations as would not, individually or in the
aggregate, have a material adverse effect or result in a change in the
condition (financial or other), business, results of operations,
prospects, assets, Liabilities or operations of Newco and its
subsidiaries taken as a whole or on the ability of Newco to consummate
the transactions contemplated hereby, or any event or condition which
would, with the passage of time, have such effect.
3.5. Investor Representations. Newco will be acquiring the Shares for
its own account for investment only, and not with the view to, or for resale in
connection with, any distribution thereof. It will understand that the Shares to
be acquired will not be registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
Newco's investment intent.
3.6. Formation of Newco. Newco will be formed for the sole purpose of
engaging in the Incorporation Transaction, will have conducted no other business
since its formation and will have no Liabilities upon the Closing except as
provided herein and for expenses related to its formation.
ARTICLE IV.
COVENANTS.
4.1. Further Assurances. Upon the terms and subject to the conditions
contained herein, each Shareholder, Nextera and KE, agree, both before and after
the Closing, (a) to use all reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions to be effected by it
pursuant to this Agreement, (b) to execute any documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to be
executed by it to carry out any of the transactions contemplated hereunder, and
(c) to cooperate with each other in connection with the foregoing. Without
limiting the foregoing, each Shareholder and Nextera agree to use their
respective commercially reasonable efforts (i) to obtain all necessary waivers,
consents and approvals from other parties to effectuate the exchange of shares
by such person described in Article I hereto; provided, however, that no party
shall be required to make any payments, commence litigation or agree to any
other modifications of the terms thereof in order to obtain any such waivers,
consents or approvals, (ii) to give all notices to, and make all registrations
and filings with third parties, including without limitation submissions of
information requested by governmental authorities, and (iii) to fulfill all
conditions to this Agreement.
4.2. Incorporation Transaction. KE agrees to effect the Incorporation
Transaction pursuant to Section 11 of the First Amendment on or before January
1, 1999,
13
<PAGE> 17
provided that in the event Nextera extends the Closing pursuant to Section 1.2,
KE agrees to effect the Incorporation Transaction by such extended date.
4.3. No Distribution of Nextera Class A Units to the U.S.
Shareholders. The U.S. Shareholders shall cause General Partner and Limited
Partner to retain the Nextera Class A Units issued to the Partnership other than
such Nextera Class A Units deposited pursuant to the U.S. Escrow Agreement, and,
except as provided below, to not distribute such Nextera Class A Units to the
U.S. Shareholders, provided that the Partnership shall distribute the Nextera
Class A Units to General Partner and Limited Partner other than such Nextera
Class A Units deposited pursuant to the U.S. Escrow Agreement. General Partner
and Limited Partner may distribute the Nextera Class A Units to the U.S.
Shareholders or their Permitted Assignees if Nextera or KE has breached their
respective obligations to effect the Incorporation Transaction on the schedule
set forth in Section 1.2.
4.4. Conversion of the Partnership. Prior to the Closing, the U.S.
Shareholders, General Partner and Limited Partner shall cause the Partnership to
be converted to a limited liability company, none of the membership interests of
which will be owned by General Partner or Limited Partner.
4.5. No Solicitation of Other Offers; No Sale of Shares. No U.S.
Shareholder will, directly or indirectly, solicit, encourage, assist, initiate
discussions or engage in negotiations with, provide any information concerning
the operations, properties or assets of the Partnership, General Partner or
Limited Partner, or entertain or enter into any agreement or transaction with,
any person, other than SC/NE, LLC or Nextera, relating to the possible
acquisition of the equity of the Partnership, General Partner or Limited Partner
or any of their assets. If such a proposal is received, such U.S. Shareholder
will promptly notify Nextera of the terms of such proposal and the identity of
the party making the proposal. No U.S. Shareholder shall sell, transfer or
assign his Shares without the prior written consent of Nextera; provided,
however, that any U.S. Shareholder may assign his right to receive the Newco
Class A Stock to a Permitted Assignee, provided (a) the Permitted Assignee
agrees in writing to be bound by the terms and provisions of this Agreement and
the Stockholders Agreement and (b) the U.S. Shareholder or Permitted Assignee
furnishes an opinion of counsel reasonably acceptable to Newco such that the
transfer does not violate federal or state securities laws. If the U.S.
Shareholder represents to Newco in writing that the transfer was made as a bona
fide gift without payment of consideration, no securities law opinion is
required. For purposes of this agreement, the term "Permitted Assignee" shall
mean (i) any transferee by will or pursuant to the laws of descent and
distribution to any member or members of a U.S. Shareholder's Family (as defined
below) or (ii) a domestic trust created for the sole benefit of a U.S.
Shareholder or such U.S. Shareholder's Family, provided that in any case where
the U.S. Shareholder is not the trustee with the exclusive right and power
during his life to cast the votes attributable to the Shares and Newco Class A
Stock, as applicable, the trustee of each such trust shall grant an irrevocable
proxy to the Shareholder Representative (or another individual or entity
reasonably acceptable to Nextera) to vote the Newco Class A Stock held by it on
all matters at all times prior to the initial public offering of Newco Class A
Stock. For purposes of this Agreement, the term "Family" shall mean a person's
spouse, lineal
14
<PAGE> 18
descendants, parents, siblings, and lineal descendants of siblings (including
any such relationship by legal adoption).
4.6. Notification of Certain Matters. From the date hereof through the
Closing, the Shareholders and Nextera, shall give prompt notice to the other of
(a) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty contained in
this Agreement or in any exhibit or schedule hereto to be untrue or inaccurate
in any respect and (b) any failure of such party, or any of its respective
affiliates or representatives, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement or any
exhibit or schedule hereto; provided, however, that such disclosure shall not be
deemed to cure any breach of a representation, warranty, covenant or agreement
or to satisfy any condition.
4.7. Boards of Directors and Officers. At the Closing, the directors
of General Partner and Limited Partner shall all resign. At the Closing, all the
officers of General Partner and Limited Partner shall likewise resign.
4.8. Obligations of Newco. Nextera and KE agree to cause Newco to
perform all actions required to be performed by Newco under this Agreement.
4.9. Tax Matters.
(a) The U.S. Shareholders shall be responsible for all Liabilities for
Taxes with respect to all taxable periods of the Partnership ending on or prior
to the Closing Date and, to the extent provided in Section 4.9(b) hereof, all
taxable periods that include, and end after, the Closing Date other than, in
each case, Taxes which have been taken into account in the Working Capital
Adjustment (as defined in Section 2.5 of the Purchase Agreement).
(b) For federal income tax purposes, the U.S. Shareholders and Nextera
agree that the taxable period for which General Partner and Limited Partner are
"S" corporations will end as of the close of business on the day immediately
preceding the Closing Date and that the taxable periods for which General
Partner and Limited Partner are "C" corporations will begin as of the beginning
of business on the Closing Date. For all other Tax purposes, the U.S.
Shareholders will cause General Partner and Limited Partner, to the extent
permitted by applicable law, to close the taxable periods of General Partner and
Limited Partner on the day immediately preceding the Closing Date, and on the
Closing Date, respectively. In any case where applicable law does not permit
General Partner and Limited Partner to close its taxable period on the day
immediately preceding the Closing Date, or on the Closing Date, as the case may
be, then Taxes, if any, attributable to the taxable periods of General Partner
and Limited Partner beginning on or before and ending after the Closing Date
shall be allocated (A) to the U.S. Shareholders for the period up to and
including the Closing Date and (B) to Newco for the period subsequent to the
Closing Date. For purposes of this Section 4.9(b), Taxes for the period up to
and including the Closing Date and for the period subsequent to the Closing Date
shall be determined on the basis of an interim closing of the books as of the
Closing Date or, to the extent not susceptible to such allocation, by
apportionment on the basis of elapsed days.
15
<PAGE> 19
(c) Newco shall be responsible for all Liabilities for Taxes of
General Partner and Limited Partner with respect to all taxable periods of
General Partner and Limited Partner beginning on and after the Closing Date and,
to the extent provided in Section 4.9(b) hereof, all taxable periods that
include, and end after, the Closing Date.
(d) (i) The U.S. Shareholders shall prepare or cause to be prepared,
and shall file or cause to be filed, all Tax Returns required to be filed by or
on behalf of General Partner and Limited Partner which relate to taxable periods
(or portions thereof) ending on or prior to the Closing Date ("Pre-Closing Date
Tax Returns") and shall cause to be paid any Taxes shown to be due thereon
(other than Taxes which have been taken into account in the Working Capital
Adjustment) except as otherwise provided herein. Newco shall be responsible for
preparing and filing or causing to be prepared and filed all Tax Returns
required to be filed by or on behalf of General Partner and Limited Partner and
any of their operations and/or assets on and after the Closing Date and shall
pay or cause to be paid any Taxes shown to be due thereon.
(ii) With respect to any Tax Return required to be filed by Newco
for a taxable period of General Partner or Limited Partner beginning before and
ending after the Closing Date, Newco shall provide the Shareholder
Representative with copies of such Tax Return, along with a calculation setting
forth the amount of Tax shown on such Tax Return for which Newco believes the
U.S. Shareholders are responsible, at least thirty (30) Business Days prior to
the due date for filing of such Tax Return. The Shareholder Representative shall
have the right to review such Tax Return and calculation prior to the filing of
such Tax Return. The Shareholder Representative and Newco agree to consult and
resolve in good faith any issues arising as a result of the review of such Tax
Return and calculation and to mutually consent to the filing of such Tax Return
as promptly as possible. In the event the parties are unable to resolve any
dispute, the parties shall jointly request an independent accounting firm to
resolve any issue in dispute as promptly as possible. The fees and expenses of
such accounting firm to resolve any issue in dispute as promptly as possible.
The fees and expenses of such accounting firm shall be paid one-half by the U.S.
Shareholders and one-half by Newco. Not later than the later of (i) five (5)
days before the due date for payment of Taxes with respect to such Tax Return or
(ii) in the event of a dispute, five (5) days after written notice to the U.S.
Shareholders of the resolution thereof, the U.S. Shareholders shall pay to Newco
an amount equal to the Taxes allocable to the U.S. Shareholders.
(e) Newco shall promptly notify the U.S. Shareholders in writing upon
receipt by Newco, General Partner, Limited Partner or their affiliates of notice
of any pending or threatened Tax audits of or assessments against General
Partner or Limited Partner for any taxable period ending on, prior to or
including the Closing Date. Other than any claim, audit or other proceeding
concerning the validity or the status of the "S" corporation elections of
General Partner or Limited Partner, the Shareholder Representative shall have
the right to represent General Partner's and Limited Partner's interests in any
Tax audit or administrative or court proceeding with respect to any taxable
period ending on, prior to or including the Closing Date, to employ counsel of
their choice at their expense and to agree to a settlement or compromise of any
such audit or proceeding. The parties agree that they will cooperate fully with
each other and
16
<PAGE> 20
their respective counsel in the defense against or compromise of any claim in
any audit or proceeding contemplated herein.
(f) The parties hereto agree to furnish or cause to be furnished to
each other, at their own expense, such information, access to-books and records,
and assistance, including making employees available during regular business
hours on a mutually convenient basis, as may reasonably be necessary for the
preparation and filing of any Tax Return contemplated by this Section 4.9.
(g) Newco agrees to assign and promptly remit (and to cause General
Partner and Limited Partner to assign and promptly remit) to the U.S.
Shareholders all refunds (including interest thereon) of any Taxes received by
Newco, General Partner, Limited Partner or their affiliates for taxable periods
ending on, prior to or including the Closing Date. Newco agrees that, upon the
request of the U.S. Shareholders, Newco shall file, or cause General Partner and
Limited Partner to file, a claim for refund of any such Tax.
(h) The U.S. Shareholders and the Buyer agree to treat any indemnity
payment made pursuant to this Agreement as an adjustment to the consideration
for the Shares for all federal, state, local and foreign income Tax purposes.
(i) Notwithstanding anything to the contrary in this Agreement, the
representations, warranties and obligations of the parties set forth in this
Section 4.9 shall survive until the expiration of the applicable statute of
limitations.
ARTICLE V.
CONDITIONS TO OBLIGATIONS OF THE PARTIES.
The obligations of the parties to consummate the transactions provided
for hereby are subject, in the discretion of such party, to the satisfaction, on
or prior to the Closing, of each of the following conditions, any of which may
be waived by such party:
5.1. Conditions to Obligations of the U.S. .s and Nextera. The
performance of the obligations of the U.S. Shareholders, on the one hand, and
Nextera, on the other, hereunder is subject, at the election of the Shareholders
or Nextera, to the following condition precedent to Closing: No proceedings
shall have been initiated or threatened by any governmental department,
commission, board, bureau, agency or instrumentality, and no proceeding, not
frivolous on its face, has been initiated by any third party seeking to enjoin
or otherwise restrain the consummation of the transactions contemplated hereby.
In addition, the performance of the obligations of the U.S. Shareholders is
subject, at the election of the U.S. Shareholders, to the condition that the
transactions described in the second paragraph of Section 1.1(a) occur
contemporaneously with the Closing.
17
<PAGE> 21
ARTICLE VI.
INDEMNIFICATION
6.1. Indemnification by the U.S. Shareholders. Each U.S. Shareholder
agrees to indemnify and hold harmless Nextera and Newco and their respective
subsidiaries, affiliates, successors and assigns and persons serving as
officers, directors, partners, managers, shareholders, members, employees and
agents thereof (other than the Shareholders, except to the extent of Liabilities
incurred in their capacities as an officer, director or employee of Nextera,
Newco or its subsidiaries after the Closing) (collectively, the "Nextera
Indemnified Parties") harmless from and against any damages, Liabilities,
losses, Tax, fines, penalties, costs, and expenses (including, without
limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) which may be sustained
or suffered by any of them arising, attributable to, out of or based upon any of
the following matters:
(a) the commission of common law fraud by such U.S. Shareholder
in connection with the transactions contemplated by this Agreement;
(b) any failure by such U.S. Shareholder to convey title to the
Shares free and clear of any encumbrances;
(c) any Liability of the Partnership, General Partner or Limited
Partner arising prior to the Closing other than the Assumed Liabilities (as
defined in the Purchase Agreement);
(d) any Liability of the Partnership, General Partner, Limited
Partner for Taxes arising from their respective activities, assets and all
events and transactions on or prior to the Closing and any breach of the
representations and warranties set forth in Section 2.6 hereof and any covenant
with respect to Taxes; and
(e) any other breach (whether or not deliberate or willful) of
any representation, warranty or covenant of the U.S. Shareholders under this
Agreement or in any schedule delivered pursuant hereto, or by reason of any
claim, action or proceeding asserted or instituted growing out of any matter or
thing constituting a breach of such representations, warranties or covenants.
For purposes of this Agreement, the term "Liability" shall mean
any direct or indirect liability, indebtedness, obligation, commitment, expense,
claim, guaranty or endorsement of or by any person of any type, whether accrued,
absolute, contingent, matured, unmatured or other.
6.2. Satisfaction of Claims Against U.S. Shareholders.
(a) In order to satisfy the indemnification obligations of the
U.S.
18
<PAGE> 22
Shareholders hereunder, a Nextera Indemnified Party, acting through Nextera,
shall proceed first directly against the Escrow Deposit as further set forth and
defined in the U.S. Escrow Agreement and then may proceed directly against the
U.S. Shareholders subject to the limitations set forth herein.
(b) To the extent indemnification claims exceed the Escrow
Deposit, the U.S. Shareholders may, at their option, elect to satisfy any
indemnification claims under this Agreement by delivering Nextera Class A Units
or shares of Newco Class A Stock. To the extent that Nextera Class A Units or
shares of Newco Class A Stock are used to satisfy indemnification obligations
under this Agreement, such units or shares shall be valued in accordance with
the terms of the U.S. Escrow Agreement. No statement of value in the Purchase
Agreement shall affect such valuation under the U.S. Escrow Agreement.
(c) No claims for indemnification shall be made under this
Agreement against any U.S. Shareholder, and no indemnification shall be payable
to any Nextera Indemnified Party, with respect to any representation, warranty,
or covenant relating to Taxes after expiration of all applicable statutes of
limitation with respect to the Tax that is the subject of the indemnification
claim taking into account any extensions thereof with respect to collection of
such Tax.
(d) With respect to claims relating to representations or
warranties with respect to, or covenants of, the Partnership, General Partner or
Limited Partner (and not relating to a U.S. Shareholder in his or her individual
capacity), the amount payable by a U.S. Shareholder to all Nextera Indemnified
Parties for claims for indemnification hereunder shall in no event exceed such
U.S. Shareholder's Percentage of the total amount to be paid by all Nextera
Indemnified Parties for claims for indemnification hereunder.
(e) With respect to claims relating to representations or
warranties with respect to, or covenants of, an individual U.S. Shareholder
relating to such U.S. Shareholder in his or her individual capacity, the U.S.
Shareholder who makes the representation, warranty or covenant from which the
claim arose shall be severally liable for indemnification in respect of such a
claim and the other U.S. Shareholders shall not be jointly liable therefor.
6.3. Indemnification by the Canadian Shareholders. Each Canadian
Shareholder agrees to indemnify and hold harmless the Nextera Indemnified
Parties from and against any damages, Liabilities, losses, Tax, fines,
penalties, costs, and expenses (including, without limitation, reasonable fees
of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) which may be sustained or suffered by any of them
arising, attributable to, out of or based upon any of the following matters:
(a) the commission of common law fraud by such Canadian
Shareholder in connection with the transactions contemplated by this Agreement;
and
19
<PAGE> 23
(b) any other breach (whether or not deliberate or willful) of
any representation, warranty or covenant of such Canadian Shareholder under this
Agreement or in any schedule delivered pursuant hereto, or by reason of any
claim, action or proceeding asserted or instituted growing out of any matter or
thing constituting a breach of such representations, warranties or covenants.
6.4. Satisfaction of Claims Against Canadian Shareholders.
(a) In order to satisfy the indemnification obligations of the
Canadian Shareholders hereunder, a Nextera Indemnified Party shall proceed first
directly against the Escrow Deposit as further set forth and defined in that
certain Escrow Agreement (the "Canadian Escrow Agreement") dated as of the date
hereof by and among Nextera, Sibson Acquisition Co., the Canadian Shareholders
and Chase Manhattan Trust Company and then may proceed directly against the
Canadian Shareholders subject to the limitations set forth herein.
(b) To the extent indemnification claims exceed the Escrow
Deposit, the Canadian Shareholders may, at their option, elect to satisfy any
indemnification claims under this Agreement by delivering Exchangeable Shares,
Nextera Class A Units or shares of Newco Class A Stock. To the extent that
Exchangeable Shares, Nextera Class A Units or shares of Newco Class A Stock are
used to satisfy indemnification obligations under this Agreement, such units or
shares shall be valued in accordance with the terms of the Canadian Escrow
Agreement. No statement of value in the Canadian Purchase Agreement shall affect
such valuation under the Canadian Escrow Agreement.
(c) With respect to claims relating to representations or
warranties with respect to, or covenants of, an individual Canadian Shareholder
relating to such Canadian Shareholder in his or her individual capacity, the
Canadian Shareholder who makes the representation, warranty or covenant from
which the claim arose shall be severally liable for indemnification in respect
of such a claim and the other Canadian Shareholders shall not be jointly liable
therefor.
6.5. Indemnification by Nextera and Newco. Nextera agrees, and Newco
will agree, to indemnify and hold harmless the Shareholders and their respective
affiliates, successors and assigns and persons serving as employees and agents
thereof harmless from and against any damages, Liabilities, losses, Tax, fines,
penalties, costs, and expenses (including, without limitation, reasonable fees
of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) which may be sustained or suffered by any of them
arising, attributable to, out of or based upon any of the following matters:
(a) the commission of common law fraud by Nextera or Newco in
connection with the transactions contemplated by this Agreement;
(b) any failure of Newco to convey title to the Newco Class A
Stock free and clear of any encumbrances;
20
<PAGE> 24
(c) any Liability of General Partner or Limited Partner arising
after the Closing other than the Excluded Liabilities (as defined in the
Purchase Agreement); and
(d) any other breach (whether or not deliberate or willful) of
any representation, warranty or covenant of Nextera or Newco under this
Agreement or in any schedule delivered pursuant hereto, or by reason of any
claim, action or proceeding asserted or instituted growing out of any matter or
thing constituting a breach of such representations, warranties or covenants.
6.6. Indemnification by KE. KE agrees to indemnify and hold harmless
the Shareholders and their respective affiliates, successors and assigns and
persons serving as employees and agents thereof harmless from and against any
damages, Liabilities, losses, Tax, fines, penalties, costs, and expenses
(including, without limitation, reasonable fees of counsel) of any kind or
nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising,
attributable to, out of or based upon any of the following matters:
(a) the commission of common law fraud by KE in connection with
the transactions contemplated by this Agreement; and
(b) any other breach (whether or not deliberate or willful) of
any representation, warranty or covenant of KE under this Agreement or in any
schedule delivered pursuant hereto, or by reason of any claim, action or
proceeding asserted or instituted growing out of any matter or thing
constituting a breach of such representations, warranties or covenants.
6.7. Notice; Defense of Claims. An indemnified party shall make claims
for indemnification hereunder by giving written notice thereof to the
indemnifying party promptly on discovery and in any event within the period in
which indemnification claims can be made hereunder. If indemnification is sought
for a claim or Liability asserted by a third party, the indemnified party shall
also give written notice thereof to the indemnifying party promptly after it
receives notice of the claim or Liability being asserted, but the failure to do
so shall not relieve the indemnifying party from any Liability except to the
extent that it is prejudiced by the failure or delay in giving such notice. Such
notice shall summarize the basis for the claim for indemnification and any claim
or Liability being asserted by a third party. Within 20 days after receiving
such notice the indemnifying party shall give written notice to the indemnified
party stating whether it disputes the claim for indemnification and whether it
will defend against any third party claim or Liability at its own cost and
expense. If the indemnifying party fails to give notice that it disputes an
indemnification claim within 20 days after receipt of notice thereof, it shall
be deemed to have accepted and agreed to the claim, which shall become
immediately due and payable. The indemnifying party shall be entitled to direct
the defense against a third party claim or Liability with counsel selected by it
(subject to the consent of the indemnified party, which consent shall not be
unreasonably withheld) as long as the indemnifying party is conducting a good
faith and diligent defense and to compromise or settle it, with the consent of
the indemnified party which consent shall not be unreasonably withheld. The
indemnified party shall at all times have the right to fully participate at its
own expense in the defense of a third party
21
<PAGE> 25
claim or Liability, directly or through counsel; provided, however, that if the
named parties to the action or proceeding include both the indemnifying party
and the indemnified party and the indemnified party is advised that
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the indemnified party may engage
separate counsel at the expense of the indemnifying party. If no such notice of
intent to dispute and defend a third party claim or Liability is given by the
indemnifying party, or if such good faith and diligent defense is not being or
ceases to be conducted by the indemnifying party, the indemnified party shall
have the right, at the expense of the indemnifying party, to undertake the
defense of such claim or Liability (with counsel selected by the indemnified
party), and to compromise or settle it, with consent of the indemnifying party,
which consent shall not be unreasonably withheld. If the third party claim or
Liability is one that by its nature cannot be defended solely by the
indemnifying party, then the indemnified party shall make available such
information and assistance as the indemnifying party may reasonably request and
shall cooperate with the indemnifying party in such defense, at the expense of
the indemnifying party.
ARTICLE VII.
TERMINATION.
7.1 Termination. At any time prior to the Closing, this Agreement may
be terminated by mutual written consent of all of the parties to this Agreement,
provided that the Shareholder Representative may consent on behalf of the
Shareholders. All obligations of the parties hereunder shall cease upon any
termination pursuant to Section 7.1, provided, however, that the provisions of
Article VII, Section 8.3 and Section 8.11 hereof shall survive any termination
of this Agreement. No termination shall relieve any party of any liability for
breach of this Agreement prior to such termination.
ARTICLE VIII.
MISCELLANEOUS.
8.1. Canadian Shareholders. Notwithstanding anything to the contrary
contained herein, in the event that "Closing" under the Canadian Purchase
Agreement has not occurred prior to the Closing hereunder, the obligations
and/or representations of the Canadian Shareholders and the other parties hereto
with respect to Sections 1.5, 6.3 and 6.4 and the representations and warranties
of the Canadian Shareholders in Article II shall be deemed null and void and the
Canadian Shareholders shall be deemed to not be parties to this Agreement. The
terms and provisions of this Agreement shall otherwise survive.
8.2. Survival of Representations, Etc. Each of the representations,
warranties, agreements, covenants and obligations herein are material, shall be
deemed to have been relied upon by the other party and shall survive the Closing
regardless of any investigation and shall not merge in the performance of any
obligation by either party hereto.
22
<PAGE> 26
8.3. Fees and Expenses. Except as otherwise specified in this
Agreement, each party hereto shall pay its own legal, accounting, out-of-pocket
and other expenses incident to this Agreement and to any action taken by such
party in preparation for carrying this Agreement into effect. In the event that
Nextera extends the Closing beyond January 1, 1999 pursuant to Section 1.2,
Nextera shall reimburse the U.S. Shareholders for all costs and expenses
reasonably incurred by them and General Partner and Limited Partner as a result
of such extension up to a maximum aggregate reimbursement of $100,000 per annum.
Notwithstanding the foregoing, in the event Nextera, Newco or KE breaches any
material provision of this Agreement, including, without limitation, the
obligation to effect the Incorporation Transaction on the schedule set forth in
Section 1.2, and the U.S. Shareholders bring an action as a result of such
breach which is successful in whole or in any substantive part, the U.S.
Shareholders shall be entitled to receive from Nextera reimbursement for
reasonable attorneys fees in connection with the enforcement of this Agreement.
8.4. Governing Law. This Agreement shall be construed under and
governed by the internal laws of the State of New York without regard to its
conflict of laws provisions.
8.5. Notices. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail, upon the sooner of the date on which
receipt is acknowledged or the expiration of three days after deposit in United
States post office facilities properly addressed with postage prepaid. All
notices to a party will be sent to the addresses set forth below or to such
other address or person as such party may designate by notice to each other
party hereunder:
TO NEXTERA OR NEWCO: Nextera Enterprises, L.L.C.
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax: (781) 778-4500
With a copy to: Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO KE: Knowledge Enterprises, Inc.
844 Moraga Drive
Los Angeles, CA 90049
With a copy to: Latham & Watkins
23
<PAGE> 27
701 "B" Street, Suite 2100
San Diego, CA 92101
Attention: David A. Hahn, Esq.
Fax: (619) 696-7419
With an additional copy to: Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley E. Maron, Esq.
Fax: (310) 440-3690
TO THE U.S. SHAREHOLDERS: To the address set forth in the
Purchase Agreement.
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: David E. Zeltner, Esq.
Fax: (212) 310-8007
TO THE CANADIAN SHAREHOLDERS:
To the address set
forth in the Canadian
Purchase Agreement.
With a copy to: Donahue & Partners
Ernst & Young Tower
Toronto-Dominion Centre
222 Bay Street
Suite 2900, Box 197
Toronto, Ontario M5K 1H6
Attention: Kenneth R. Rosenstein, Esq.
Fax: (416) 943-2735
With an additional copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: David E. Zeltner, Esq.
Fax: (212) 310-8007
Any notice given hereunder may be given on behalf of any party by his
counsel or other authorized representatives.
8.6. Entire Agreement. This Agreement and schedules and exhibits
hereto constitute the entire agreement of the parties with respect to its
subject matter, and supersede all previous written or oral negotiations,
commitments and writings. No promises, representations, understandings,
warranties and agreements have been made by any of the parties hereto except as
referred to herein or in such schedules and exhibits; and all inducements to the
making of this Agreement relied upon by either party hereto have been expressed
herein or in such schedules or exhibits.
24
<PAGE> 28
8.7. Assignability; Binding Effect. This Agreement shall only be
assignable by (a) Nextera or KE to an entity controlling, controlled by or under
common control with Nextera or KE upon written notice to Shareholder
Representative or (b) a U.S. Shareholder to a Permitted Assignee; provided,
however, that Nextera, KE or such U.S. Shareholder, as applicable, shall remain
liable for all obligations hereunder to the extent such obligations are not
satisfied by the transferee. Except as provided in the preceding sentence, this
Agreement may not be assigned by the Shareholders without the prior written
consent of Nextera. This Agreement shall be binding upon and enforceable by, and
shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. Assignment of this Agreement by any party
shall not relieve such party from its obligations hereunder.
8.8. Captions and Gender. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
8.9. Execution in Counterparts. For the convenience of the parties and
to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
8.10. Amendments. This Agreement may not be amended or modified, nor
may compliance with any condition or covenant set forth herein be waived, except
by a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance, provided, however, that no amendment or
modification of this agreement or waiver of compliance with any condition or
covenant that has been duly and validly executed in writing by the Shareholder
Representative shall require the consent of, or execution thereof by, any
Shareholder and shall be valid and binding without such consent or execution.
8.11. Specific Performance. The parties agree that it would be
difficult to measure damages which might result from a breach of this Agreement
by any party and that money damages would be an inadequate remedy for such a
breach. Accordingly, if there is a breach or proposed breach of any provision of
this Agreement by any Shareholder, on the one hand, or by Nextera or KE, on the
other, Nextera or the Shareholders, as applicable, shall be entitled, in
addition to any other remedies which it may have, to an injunction or other
appropriate equitable relief to restrain such breach without having to show or
prove actual damage to Nextera, the Shareholders, as applicable.
8.12. Termination of Shareholders Agreements. Each GP Shareholder by
signing below hereby agrees to terminate that certain Shareholders Agreement
dated as of October 31, 1993, as amended, among General Partner and the
shareholders identified therein, effective upon the Closing. Each LP Shareholder
by signing below hereby agrees to terminate that certain Shareholders Agreement
dated as of January 1, 1998, as amended, among Limited Partner and the
shareholders identified therein, effective upon the Closing.
25
<PAGE> 29
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized representatives, as of the date first
written above.
NEXTERA:
NEXTERA ENTERPRISES, L.L.C., a Delaware
limited liability company
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------------
Name: Michael P. Muldowney
Title: Chief Financial Officer
NEWCO:
NEXTERA ENTERPRISES, Inc.,
a Delaware corporation
By: /s/ MICHAEL P. MULDOWNEY
---------------------------------------
Name: Michael P. Muldowney
Title: Chief Financial Officer
26
<PAGE> 30
U.S. SHAREHOLDERS:
By: /s/ JOHN BALKCOM
---------------------------------------
Name: John Balkcom
State of Residence: Illinois
By: /s/ MARK BLESSINGTON
---------------------------------------
Name: Mark Blessington
State of Residence: Illinois
By: /s/ FREDERICK BRIGGS
---------------------------------------
Name: Frederick (Ted) Briggs
State of Residence: California
By: /s/ ROGER BROSSY
---------------------------------------
Name: Roger Brossy
State of Residence: California
By: /s/ SEYMOUR BURCHMAN
---------------------------------------
Name: Seymour Burchman
State of Residence: Pennsylvania
By: /s/ PAMELA COHEN
---------------------------------------
Name: Pamela Cohen
State of Residence: Michigan
By: /s/ GLENN DALTON
---------------------------------------
Name: Glenn Dalton
State of Residence: Missouri
By: /s/ BARBARA DEWEY
---------------------------------------
Name: Barbara Dewey
State of Residence: New Jersey
27
<PAGE> 31
By: /s/ DONALD GALLO
---------------------------------------
Name: Donald Gallo
State of Residence: New Jersey
By: /s/ DONALD GOUGH
---------------------------------------
Name: Donald Gough
State of Residence: New Hampshire
By: /s/ ELIZABETH HAWK
---------------------------------------
Name: Elizabeth Hawk
State of Residence: Missouri
By: /s/ MYRNA HELLERMAN
---------------------------------------
Name: Myrna Hellerman
State of Residence: Illinois
By: /s/ JAMES KOCHANSKI
---------------------------------------
Name: James Kochanski
State of Residence: North Carolina
By: /s/ STEVEN LANDBERG
---------------------------------------
Name: Steven Landberg
State of Residence: New York
By: /s/ PETER LeBLANC
---------------------------------------
Name: Peter LeBlanc
State of Residence: North Carolina
By: /s/ WILLIAM O'CONNELL
---------------------------------------
Name: William O'Connell
State of Residence: New Jersey
By: /s/ VINCENT PERRO
---------------------------------------
Name: Vincent Perro
State of Residence: New York
28
<PAGE> 32
By: /s/ JUDE RICH
---------------------------------------
Name: Jude Rich
State of Residence: New Jersey
By: /s/ KAREN ROCHE
---------------------------------------
Name: Karen Roche
State of Residence: California
By: /s/ ANNE SAUNIER
---------------------------------------
Name: Anne Saunier
State of Residence: New York
By: /s/ RICHARD SEMLER
---------------------------------------
Name: Richard Semler
State of Residence: California
By: /s/ STEPHEN STRELSIN
---------------------------------------
Name: Stephen Strelsin
State of Residence: Illinois
By: /s/ GERARD THOMAS
---------------------------------------
Name: Gerard (Chip) Thomas
State of Residence: North Carolina
By: /s/ DOUGLAS TORMEY
---------------------------------------
Name: Douglas Tormey
State of Residence: Connecticut
By: /s/ SUSAN ANNUNZIO TYNAN
---------------------------------------
Name: Susan Annunzio Tynan
State of Residence: Illinois
29
<PAGE> 33
CANADIAN SHAREHOLDERS:
By: /s/ PAUL BRITTON
---------------------------------------
Name: Paul Britton
Place of Residence: Toronto, Canada
By: /s/ DAVID RAINVILLE
---------------------------------------
Name: David Rainville
Place of Residence: Toronto, Canada
By: /s/ MICHAEL HOGAN
---------------------------------------
Name: Michael Hogan
Place of Residence: Toronto, Canada
By: /s/ MICHAEL McINERNEY
---------------------------------------
Name: Michael McInerney
Place of Residence: Toronto, Canada
30
<PAGE> 34
CONSENTED AND AGREED TO SOLELY
FOR PURPOSES OF SECTIONS 1.7, 4.1, 4.2,
4.8, 6.6, 6.7 AND 8.11:
KE
KNOWLEDGE ENTERPRISES, INC., a Delaware corporation
By: /s/ RALPH FINERMAN
--------------------------
Name: Ralph Finerman
Title: Secretary
AGREED TO FOR PURPOSES OF SECTION 8.12
SIBSON & COMPANY, INC. SC2, INC.
By: /s/ DOUGLAS J. TORMEY By: /s/ DOUGLAS J. TORMEY
-------------------------- --------------------------
Name: Douglas J. Tormey Name: Douglas J. Tormey
Title: Vice President Title: Vice President
AGREED TO FOR PURPOSES OF ARTICLE I
AND SECTION 8.10:
SIBSON & COMPANY, L.P.
By: Sibson & Company, Inc., its General Partner
By: /s/ DOUGLAS J. TORMEY
--------------------------
Name: Douglas J. Tormey
Title: Vice President
31
<PAGE> 35
By: /s/ FRED MENDELSOHN
-----------------------------------
Name: Fred Mendelsohn
Place of Residence: London, England
32
<PAGE> 1
EXHIBIT NO. 10.16
SECURITIES PURCHASE AGREEMENT
dated as of
August 31, 1998
between
NEXTERA ENTERPRISES, L.L.C.
and
NEXTERA FUNDING, INC.
<PAGE> 2
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT dated as of August 31, 1998
between NEXTERA ENTERPRISES L.L.C. and NEXTERA FUNDING, INC.
The parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
Section 1.1. Definitions. The following terms, as used herein,
shall have the following meanings:
"Acquisition" means each of (i) the Sibson Acquisition and (ii)
the Delphi Acquisition.
"Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person. For purposes of this definition, "control" including,
with correlative meanings, the terms "controlling", "controlled by" and "under
common control with", as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Securities Purchase Agreement, as amended,
restated or otherwise modified from time to time in accordance with its terms.
"Asset Sale" means any sale, lease or other disposition
(including any such transaction effected by way of merger or consolidation) by
any Credit Party of any asset, including without limitation any sale-leaseback
transaction, but excluding (i) dispositions of inventory and used, surplus or
worn out equipment in the ordinary course of business, (ii) dispositions to a
wholly-owned Subsidiary of any Credit Party and (iii) cash payments otherwise
permitted under this Agreement.
<PAGE> 3
"Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law or other government action to close.
"Cash Equivalents" means (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (ii) time deposits and
certificates of deposit of any domestic commercial bank (including a domestic
branch of a foreign bank) whose outstanding senior long-term debt securities are
rated either A- or higher by Standard & Poor's Ratings Services or A3 or higher
by Moody's Investors Service, Inc., (iii) repurchase obligations with a term of
not more than 7 days for underlying securities of the types described in clause
(i) entered into with any bank meeting the qualifications specified in clause
(ii) above, (iv) commercial paper rated at least A-1 or the equivalent thereof
by Standard & Poor's Ratings Services or at least P-1 or the equivalent thereof
by Moody's Investors Service, Inc., maturing within one year after the date of
acquisition, and (v) investments in money market funds substantially all of
whose assets are comprised of securities of the types described in clauses (i)
through (iv) above.
"Change of Control" means such time as (a) any Member (as such
term is defined in the Nextera LLC Agreement) has sold, transferred or otherwise
disposed of, to any Person (other than (i) solely in the case of Knowledge
Enterprises, Inc. to a Person controlled by or under common control with it,
(ii) pursuant to a Qualified Transfer (as such term is defined in the Nextera
LLC Agreement) or (iii) pursuant to the Share Exchange Agreement to be entered
into in connection with the Sibson Acquisition), any of the common stock or
equity units held by such Person on the date of the Closing; or (b) a sale or
transfer of all or substantially all of the assets of the Company to any person
or group (other than any group consisting solely of the Members as of the date
hereof or persons or entities controlled by such Members) has been consummated;
or (c) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election was approved by a vote of a
majority of the directors then still in office, who either were directors at the
beginning of such period of whose election or nomination for the election was
previously so approved) cease for any reason to constitute a majority of the
directors of the Company then in office; provided that a Change of Control shall
not be deemed to have occurred as a result of the Nextera Incorporation.
2
<PAGE> 4
"Closing" means the date on which all of the conditions set forth
in Section 5.1 shall have been satisfied.
"Commission" means the Securities and Exchange Commission.
"Commitment" means the Sibson Commitment and the Delphi
Commitment, which in the aggregate shall not exceed $40,000,000.
"Company" means Nextera Enterprises, L.L.C., a Delaware limited
liability company.
"Company Corporate Documents" means the operating agreement,
articles of incorporation, by-laws or other governing organizational documents
of each Credit Party.
"Consolidated Debt" means, at any date, the Debt of the Company
and its Consolidated Subsidiaries, determined on a consolidated basis as of such
date.
"Consolidated Subsidiary" means, at any date with respect to any
Person, any Subsidiary or other entity, the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
if such statements were prepared as of such date.
"Credit Party" means, individually, each one of (i) the Company,
(ii) SC/NE, (iii) Delphi (upon the occurrence of the Delphi Acquisition) and
(iv) Direct Subsidiaries of each of the foregoing; and "Credit Parties" means
all of the foregoing, taken collectively.
"Debt" of any Person means, at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business) or which is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations of such Person under Financing Leases, (c) all
obligations (contingent or otherwise) of such Person to reimburse any bank or
other Person in respect of amounts paid under a letter of credit or similar
instrument, (d) all Derivatives Obligations of such Person, (e) all Guarantee
Obligations of such Person in respect of Debt of any other Person and (f) all
liabilities of the types described in clauses (a) through (e) above secured by
any Lien on any property owned by such Person even though such person has not
assumed or otherwise become liable for the payment thereof.
3
<PAGE> 5
"Debt Incurrence" means any incurrence by any Credit Party of any
Debt (including without limitation pursuant to the Permanent Financing), other
than Debt permitted under Section 6.8(c).
"Default" means any Event of Default or any event or condition
which, with the giving of notice or lapse of time or both, would, unless cured
or waived, become an Event of Default.
"Delphi" means Delphi Consulting Group, Inc., a Massachusetts
corporation.
"Delphi Acquisition" means the acquisition of substantially all
of the assets of Delphi pursuant to and in accordance with the Delphi Purchase
Agreement.
"Delphi Commitment" means subject to Section 2.1, $2,500,000, the
obligation of Purchaser to purchase Notes hereunder in an aggregate principal
amount at any time outstanding not to exceed such amount, as such amount may be
reduced from time to time pursuant to Sections 2.4 and 2.5.
"Delphi Purchase Agreement" means the Asset Purchase Agreement to
be entered into by and among Delphi, Delphi Consulting Group, L.L.C., the
Company and the holders of capital stock of Delphi identified on Exhibit A-1
thereto, as amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.
"Derivatives Obligations" of any Person means all obligations of
such Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"Direct Subsidiary" means, with respect to any Person, any
corporation or other entity of which a majority of the capital stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the time
directly owned by such Person.
4
<PAGE> 6
"DLJSC" means Donaldson, Lufkin & Jenrette Securities
Corporation, a Delaware corporation, and its successors.
"dollars" or "$" mean lawful currency of the United States of
America.
"Domestic Taxes" has the meaning set forth in Section 2.8(a).
"Engagement Letter" means an engagement letter between the
Company and DLJSC pursuant to which DLJSC shall be engaged as lead investment
banker for the Credit Parties for the period as set forth therein.
"Environmental Laws" means any and all statutes, laws, judicial
decisions, regulations, ordinances, rules, judgments, orders, decrees, codes,
plans, injunctions, permits, concessions, grants, franchises, licenses and
governmental restrictions, whether now or hereafter in effect, relating to human
health, the environment or to emissions, discharges or releases or pollutants,
contaminants, Hazardous Materials or wastes into the environment, including
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Materials or wastes
or the clean-up or other remediation thereof.
"Equity Issuance" means the issuance of any equity securities by
any Credit Party (including without limitation any equity securities issued
pursuant to the exercise of stock options or warrants or the Permanent
Financing), but excluding equity securities issued to any other Credit Party,
equity securities issued pursuant to employee stock options and equity
securities issued pursuant to the Nextera Incorporation.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Group" means the Company and each Subsidiary, and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Company or any Subsidiary, are treated as a single employer under Section 414 of
the Internal Revenue Code.
"Event of Default" has the meaning set forth in Section 7.1.
5
<PAGE> 7
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Expiration Date" has the meaning set forth in Section 2.1(b).
"Financing Documents" means this Agreement, the Notes, the
Security Documents, the Subordination Agreement and the Subsidiary Guaranties.
"Financing Lease" means any lease of property, real or personal,
the obligations or the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America.
"Guarantee Obligation" means as to any Person (the "guaranteeing
person"), without duplication, any obligation of (a) the guaranteeing person or
(b) another Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Debt, leases, dividends or other
obligations (the "primary obligations") of any other third Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of the guaranteeing person whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (1) for the
purchase or payment of any such primary obligation or (2) to maintain working
capital or equity capital or the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation against loss in respect thereof, provided, however, that
the term Guarantee Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business or the guaranty
obligation of any primary obligation which does not constitute Debt. The amount
of any Guarantee Obligation of any guaranteeing person shall be deemed to be the
lower of (a) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and (b) the
maximum amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which
6
<PAGE> 8
case the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by
such Person in good faith.
"Hazardous Materials" means (i) asbestos; (ii) polychlorinated
biphenyls; (iii) petroleum, its derivatives, by-products and other hydrocarbons;
and (iv) any other toxic, radioactive, caustic or otherwise hazardous substance
regulated under Environmental Laws.
"Hazardous Materials Contamination" means contamination (whether
now existing or hereafter occurring) of the improvements, buildings, facilities,
personalty, soil, groundwater, air or other elements on or of the relevant
property by Hazardous Materials, or any derivatives thereof, or on or of any
other property as a result of Hazardous Materials, or any derivatives thereof,
generated on, emanating from or disposed of in connection with the relevant
property.
"Holder" means any holder of any Note.
"Initial Takedown" means the first Takedown hereunder.
"Interest Payment Date" means the last day of each Interest
Period (or, if any such date is not a Business Day, the next succeeding Business
Day).
"Interest Period" shall mean the period from the date of this
Agreement to but excluding the 90th day thereafter, and thereafter each
successive 90-day period. If any Interest Period would begin or end on a date
which is not a Business Day (as defined below), such Interest Period shall
begin or end, as the case may be, on the next succeeding Business Day and any
Interest Period that would extend beyond the Maturity Date shall end on the
Maturity Date. Purchaser may, in its discretion, select Interest Periods of one
day for any day on or after the Notes shall have become due and payable in
accordance with the terms hereof.
"Investment" means, without duplication, any investment in any
Person, whether by means of share purchase, capital contribution, loan, time
deposit or otherwise.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, or any successor statute.
7
<PAGE> 9
"KU Debt" means, collectively, (i) the Debenture dated March 20,
1997, executed by the Company in favor of Nextera Enterprises Holdings, L.L.C.
in the original principal amount of up to $23,000,000 and (ii) the Debenture
dated January 5, 1998, executed by the Company in favor of Nextera Enterprises
Holdings, L.L.C. in the original principal amount of up to $24,970,000.
"LIBOR Rate" with respect to each Interest Period, shall mean for
any day, as determined by Purchaser, the interest rate per annum offered for
deposits in dollars for the Interest Period in the London interbank market which
appears on Telerate Page 3750 or such other page as may replace Telerate Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association for the purpose of displaying such rate
(collectively, "Telerate Page 3750") as of 11:00 A.M. London time on the second
Business Day prior to any such date. If the Interest Period is of a duration
falling between the Interest Periods for which such rates appear on Telerate
Page 3750, the LIBOR Rate shall be the rate determined by interpolation between
the rates for the next shorter and the next longer Interest Periods for which
such rate appears on Telerate Page 3750, as determined by Purchaser, whose
determination shall be conclusive in the absence of manifest error. In the event
that (i) more than one such LIBOR Rate is provided, the average of such rates
shall apply or (ii) no such LIBOR Rate is published, then the LIBOR Rate shall
be determined from such comparable financial reporting company as Purchaser, in
its discretion, shall determine.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement) and any
other arrangement having substantially the same economic effect as any of the
foregoing.
"Majority Holders" means (i) at any time prior to the issuance of
the Notes, Purchaser and (ii) at any time thereafter, the holders of more than
50% in aggregate principal outstanding amount of Notes at such time.
"Material Acquisition Documents" means the Sibson US Asset
Purchase Agreement including all Exhibits thereto, the Sibson Canada Share
Purchase Agreement including all Exhibits thereto, the Delphi Purchase Agreement
including all Exhibits thereto and the Side Letter dated August 31, 1998 from
Sibson US to the Company regarding disclosure schedules to the Sibson US Asset
Purchase Agreement.
8
<PAGE> 10
"Material Adverse Effect" means a material adverse affect on the
assets, business, financial position, results of operations or prospects of (i)
the Company and its Subsidiaries (taken as a whole), (ii) SC/NE and its
Subsidiaries (taken as a whole), (iii) Delphi and its Subsidiaries (taken as a
whole) or (iv) the validity or enforceability of this Agreement or any of the
other Financing Documents or the rights and remedies of the Purchaser hereunder
or thereunder.
"Material Plan" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $100,000.
"Maturity Date" means March 1, 1999.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the ERISA
Group during such five year period.
"Net Cash Proceeds" means, with respect to any transaction, an
amount equal to the cash proceeds received by any Credit Party from or in
respect of such transaction (including any cash proceeds received as income or
other proceeds of any non-cash proceeds of such transaction), less (i) any
expenses (including commissions) reasonably incurred by any Credit Party in
respect of such transaction, (ii) the amount of any Debt secured by a Lien on a
related asset and discharged from the proceeds of such transaction; (iii) any
taxes paid or payable by any Credit Party with respect to such transaction (as
reasonably estimated by such Credit Party's chief financial officer in good
faith) and (iv) appropriate amounts, reasonably determined by the Credit Party
in accordance with GAAP, as a reserve against any liabilities retained by such
Credit Party with respect to such transaction.
"Nextera Incorporation" shall have the same meaning as
"Incorporation Transaction" as set forth in the Share Exchange Agreement in the
form of Exhibit N to the Sibson US Asset Purchase Agreement.
"Nextera LLC Agreement " means the Second Amended and Restated
Limited Liability Company Agreement of Nextera Enterprises, L.L.C. dated as of
May 1, 1998, as amended through the date hereof.
9
<PAGE> 11
"Notes" means the Senior Secured Notes issued by the Company
substantially in the form set forth as Exhibit A hereto.
"Other Taxes" has the meaning set forth in Section 2.8(a).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permanent Financing" means any Debt Incurrence or Equity
Issuance following the date hereof for the purpose of refinancing the Notes.
"Permits" means all domestic and foreign licenses, permits and
approvals required for the full operation of the Company and its Subsidiaries,
taken as a whole, including, without limitation, provincial, state, federal,
city and county permits and approvals.
"Permitted Liens" means Liens expressly permitted to exist by the
terms of Section 6.11 hereof.
"Permitted Transferee" means any Person that acquires Notes other
than any Person who acquires such Notes (i) in a public offering or (ii) in the
open market pursuant to sales under Rule 144 of Securities Act or otherwise.
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or any agency or political subdivision thereof) or other
entity of any kind.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Purchase Agreements" means, collectively, each of (i) the Sibson
US Asset Purchase Agreement, (ii) the Sibson Canada Share Purchase Agreement and
(iii) the Delphi Purchase Agreement.
10
<PAGE> 12
"Purchaser" means Nextera Funding, Inc., a Delaware corporation,
and its successors.
"Restricted Payment" means, with respect to any Person (i) any
divi dend or other distribution on any shares of the capital stock of such
Person (except dividends payable solely in shares of capital stock of the same
class of such Person) (ii) any payment on account of the purchase, redemption,
retirement or acquisition of (a) any shares of the capital stock of such Person
or (b) any option, warrant or other right to acquire such Person's shares of the
capital stock or (iii) any loan, advance or other payment to any Person or its
Affiliate owning any capital stock of such Person.
"SC/NE" means SC/NE, LLC, a Delaware limited liability company.
"Second Takedown" means the second Takedown hereunder.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means each Security and Pledge Agreement
executed by each of the Company and the Subsidiaries of the Company,
substantially in the form set forth as Exhibit D hereto.
"Security Documents" means, collectively, the Security Agreements
and uniform commercial code financing statements executed pursuant hereto.
"Sibson" means each of (i) Sibson US and (ii) Sibson Canada.
"Sibson Acquisition" means each of (i) the Sibson US Acquisition
and (ii) the Sibson Canada Acquisition.
"Sibson Purchase Agreements" means, collectively, the Sibson US
Asset Purchase Agreement and the Sibson Canada Share Purchase Agreement.
"Sibson Canada" means Sibson Canada Inc., a corporation organized
under the laws of Canada.
"Sibson Canada Acquisition" means the acquisition of all of the
capital stock of Sibson Canada pursuant to and in accordance with the Sibson
Canada Share Purchase Agreement.
11
<PAGE> 13
"Sibson Canada Share Purchase Agreement" means the Share Purchase
Agreement dated August 31, 1998, by and among the Company, Sibson Acquisition
Co., a newly formed Nova Scotia unlimited liability company, and the holders of
all of the outstanding capital stock of Sibson Canada, as amended, supplemented
or otherwise modified from time to time in accordance with the terms hereof.
"Sibson Commitment" means subject to Section 2.1, $38,000,000,
the obligation of Purchaser to purchase Notes hereunder in an aggregate
principal amount at any time outstanding not to exceed such amount, as such
amount may be reduced from time to time pursuant to Sections 2.4 and 2.5.
"Sibson US" means Sibson & Company, L.P., a Delaware limited
partnership.
"Sibson US Acquisition" means the acquisition of substantially
all of the assets of Sibson US pursuant to and in accordance with the Sibson US
Asset Purchase Agreement.
"Sibson US Asset Purchase Agreement" means the Asset Purchase
Agreement dated August 31, 1998, by and among SC/NE, the Company, Sibson, Sibson
& Company, Inc., SC2, Inc., the holders of the capital stock of Sibson &
Company, Inc. identified on Exhibit A thereto and the holders of the capital
stock of SC2, Inc. identified on Exhibit A thereto, as amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof.
"Solvent" as to any Person shall mean that (i) the sum of the
assets of such Person, both at a fair valuation and at present fair salable
value, will exceed its liabilities, including contingent liabilities, (ii) such
Person will have sufficient capital with which to conduct its business as
presently conducted and as proposed to be conducted and (iii) such Person has
not incurred debts, and does not intend to incur debts, beyond its ability to
pay such debts as they mature. For purposes of this definition, "debt" means any
liability on a claim, and "claim" means (x) a right to payment, whether or not
such right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured, or
unsecured, or (y) a right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, or unsecured. With respect to any such contingent
12
<PAGE> 14
liabilities, such liabilities shall be computed at the amount which, in light of
all the facts and circumstances existing at the time, represents the amount
which can reasonably be expected to become an actual or matured liability net of
reasonably expected reimbursements.
"Subordination Agreement" means the Subordination Agreement
executed by the holder of the KU Debt, substantially in the form of Exhibit E
hereto.
"Subsidiary" means, with respect to any Person, any corporation
or other entity of which a majority of the capital stock 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.
"Subsidiary Debt" means, collectively, the bank facilities to
which each of Symmetrix, Inc., SGM Consulting, L.L.C. (d/b/a Sigma Consulting),
Pyramid Imaging, Inc. and Sibson is a party in the amounts and with the lenders
listed on Schedule 5.1(e).
"Subsidiary Guaranty" means each Subsidiary Guaranty in the form
of Exhibit C executed by each Subsidiary of the Company and delivered pursuant
to this Agreement.
"Takedown" has the meaning set forth in Section 2.2(a).
"Taxes" has the meaning set forth in Section 2.8(a).
"Transfer" means any disposition of Notes that would constitute a
sale thereof under the Securities Act.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all benefits under
such Plan exceeds (ii) the fair market value of all Plan assets allocable to
such benefits (excluding any accrued but unpaid contributions), all determined
as of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA Group
to the PBGC or any other Person under Title IV of ERISA.
13
<PAGE> 15
Section 1.2. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP applied on a consistent basis (except for changes concurred
in by the Company's independent public accountants).
ARTICLE II
PURCHASE AND SALE OF SECURITIES, TERMS OF SECURITIES
Section 2.1. Commitment to Purchase. (a) Subject to the terms and
conditions set forth herein and in reliance on the representations and
warranties contained herein and in the other Financing Documents, the Company
may at its option issue and sell, and Purchaser agrees to purchase, Notes in an
aggregate principal amount not to exceed $40,000,000. The purchase price for the
Notes shall be 100% of the principal amount thereof.
(b) Termination of Commitment. Each of the Sibson Commitment and
the Delphi Commitment will terminate on the earliest of (i) the termination of
the Sibson Purchase Agreements and the Delphi Purchase Agreement, respectively,
in accordance with the terms thereof prior to the consummation of the respective
Sibson Acquisition and Delphi Acquisition, (ii) the delivery by the Company of a
notice of termination of such obligation of Purchaser, (iii) the consummation of
the Sibson Acquisition and the Delphi Acquisition, respectively (if such date
occurs prior to the date of any Takedown), (iv) the date on which any Credit
Party commences the marketing of any proposed Permanent Financing with respect
to which DLJSC or any of its affiliates is not the lead manager or lead agent or
lead underwriter, as the case may be or (v) in the case of the Sibson
Commitment, 5:00 PM New York City time on August 31, 1998 if the Closing has not
occurred by such time (such earliest date, the "Expiration Date"); provided that
if at any time on or after the date hereof an Event of Default shall have
occurred and be continuing, Purchaser may at its option terminate any Commitment
by notice to the Company, such termination to be effective upon the giving of
such notice; and provided further that the Commitment shall automatically
terminate, without notice to the Company or any other action on the part of
Purchaser, upon the occurrence of any of the events specified in Sections 7.1(e)
and 7.1(f) with respect to any Credit Party.
14
<PAGE> 16
(c) The Commitment is not revolving in nature, and principal
amounts of Notes prepaid in accordance with Section 2.7 may not be resold to
Purchaser hereunder.
Section 2.2. Takedown Procedures. (a) Notice. The Company shall
give Purchaser written notice not later than 11:00 AM (New York City time) two
Business Days prior to the proposed purchase and sale of Notes hereunder (each,
a "Takedown"), which notice shall specify the principal amount of Notes to be
purchased and sold at such Takedown (which amount shall be in multiples of
$500,000 and shall not be less than $2,000,000) and the date of such Takedown
(which shall be a Business Day). There shall be up to two (2) Takedowns and each
Takedown shall occur on or prior to the Maturity Date.
(b) Funding. On the date of each Takedown, Purchaser shall
deliver by wire transfer, to the account number of the Company specified by the
Company in writing no later than 2:00 PM (New York City time) two Business Days
prior to the date of such Takedown, immediately available funds in an amount
equal to the aggregate purchase price of the Notes to be purchased by Purchaser
hereunder on such date, less the aggregate amount of fees payable by the Company
to Purchaser on such date pursuant to Section 2.3 and expenses (if any) payable
to Purchaser on such date pursuant to Section 9.4.
(c) Delivery of Notes. At each Takedown, against payment as set
forth in subsection (b) of this Section 2.2, the Company shall deliver to
Purchaser a single Note representing the aggregate principal amount of Notes to
be purchased at such Takedown registered in the name of Purchaser, or, if
requested by Purchaser, separate Notes in such other denominations and
registered in such name or names as shall be designated by Purchaser by notice
to the Company at least two Business Days prior to the date of such Takedown.
Section 2.3. Fees. (a) Commitment Fee. Subject to subsection (c)
below, the Company shall pay Purchaser a commitment fee in the amount equal to
one percent (1.00%) of the maximum principal amount of the Notes subject to the
Commitment (the "Commitment Fee"), which shall be fully earned upon the
execution and delivery of this Agreement by the parties hereto and shall be
payable in full in dollars on the earlier of (i) the date of the consummation of
any Acquisition (regardless of whether any Takedown has occurred on or prior to
such date), (ii) the closing of any other transaction or series of transactions
in which any Credit Party or any of its affiliates acquires or recapitalizes
Sibson or Delphi within the next two
15
<PAGE> 17
years or (iii) the payment to the Credit Parties of any break-up fee pursuant to
any Purchase Agreement.
(b) Takedown Fee. Subject to subsection (c) below, on the date of
each Takedown hereunder, the Company shall pay to Purchaser a takedown fee
(each, a "Takedown Fee") in an amount equal to one percent (1.00%) of the aggre-
gate outstanding principal amount of the Notes being purchased at such Takedown.
(c) Credits. If the Notes are refinanced in full through any
Equity Issuance which constitutes the Permanent Financing on or prior to the
twelve-month anniversary of the date of the Initial Takedown, one hundred
percent (100.00%) of the Commitment Fee and the Takedown Fee will be creditable
against fees due to DLJSC.
Section 2.4. Mandatory Termination and Reduction of Commitment.
(a) The Commitment shall terminate on the earlier of the
Expiration Date or the Second Takedown.
(b) The Commitment shall be reduced by an amount equal to the Net
Cash Proceeds received by any Credit Party in respect of any Asset Sale, Debt
Incurrence or Equity Issuance minus the amount of such Net Cash Proceeds applied
to repay outstanding Notes in accordance with Section 2.7(c). Each such
reduction shall be effective on the date of the related prepayment of the Notes,
or if no Notes are at the time outstanding, on the date of receipt of such Net
Cash Proceeds.
Section 2.5. Optional Reduction of Commitment. The Company may,
upon not less than three Business Days' notice to Purchaser, terminate the
unused Commitment at any time or reduce the unused Commitment from time to time
in amounts equal to $5,000,000 or any larger multiple of $1,000,000.
Section 2.6. Interest. (a) Payment Dates. Interest on each Note
shall be payable in dollars quarterly in arrears, on each Interest Payment Date
of each year in which such Note remains outstanding, commencing with the first
Interest Payment Date after the date of issuance thereof, on the principal sum
of such Note outstanding. Interest on each Note shall be calculated at the rate
per annum set forth in subsection (b) below, and shall accrue from and including
the most recent Interest Payment Date to which interest has been paid on such
Note (or if no interest has been
16
<PAGE> 18
paid on such Note, from the date of issuance thereof) to but excluding the date
on which payment in full of the principal sum of such Note has been made.
(b) Interest Rate. Interest shall be payable at the LIBOR Rate
plus a spread (the "Spread"). The Spread will be 450 basis points.
Notwithstanding anything to the contrary set forth above, at no
time shall the per annum interest rate on the Notes exceed seventeen percent
(17.00%) nor shall the per annum interest rate on the Notes be less than ten
percent (10.00%). Interest on each Note will be calculated on the basis of a
365-day year and paid for the actual number of days elapsed.
Section 2.7. Maturity of Notes; Prepayment of Notes. (a) Maturity
Date. The Notes shall mature on the Maturity Date.
(b) Optional Redemption. The Notes may be redeemed, in whole or
in part, upon not less than 10 days written notice, at the option of the
Company, at any time at par plus accrued interest to the redemption date;
provided, that the redemption price shall be one hundred three percent (103.00%)
of par plus accrued interest if the Notes are refunded (whether at the time of
redemption or maturity) with funds raised by any means other than (i) an initial
public offering at a minimum of at least, if not greater than, $75 million of
the Company's common stock lead managed by DLJSC, (ii) a private placement at a
minimum of at least, if not greater than, $75 million of the Company's common
stock or other equity securities in which DLJSC is the lead placement agent,
(iii) a bank deal in which DLJSC is the loan originator and lead syndicate agent
or in which DLJSC formally declines to act as such or (iv) in the case of
optional redemption on the date of maturity, where Knowledge Universe, L.L.C. or
an Affiliate thereof repays, in full, all obligations of the Company to
Purchaser.
(c) Mandatory Prepayments. The Company shall, within five days of
receipt by any Credit Party of the Net Cash Proceeds of any Asset Sale, Debt
Incurrence or Equity Issuance, prepay a principal amount of the Notes equal to
the amount of such Net Cash Proceeds (less any amounts not required to be paid
as a result of the requirement in subsection (d) of this Section 2.7 that all
such prepayments be made in multiples of $1,000), at a redemption price equal
to one hundred percent (100.00%) of the principal amount of the Notes so prepaid
together with accrued interest to the date of prepayment; provided, that the
redemption price shall be one hundred three percent (103.00%) of par plus
accrued interest if the Notes are
17
<PAGE> 19
redeemed with or in anticipation of funds raised by any means other than (i) an
initial public offering at a minimum of at least, if not greater than, $75
million of the Company's common stock lead managed by DLJSC, (ii) a private
placement at a minimum of at least, if not greater than, $75 million of the
Company's common stock or other equity securities in which DLJSC is the lead
placement agent, (iii) a bank deal in which DLJSC is the loan originator and
lead syndicate agent or in which DLJSC formally declines to act as such or (iv)
in the case of optional redemption on the date of maturity, where Knowledge
Universe, L.L.C. or an Affiliate thereof repays, in full, all obligations of the
Company to Purchaser.
(d) Minimum Amount. Any prepayment of the Notes pursuant to
Section 2.7(b) shall be in a minimum amount of at least $1,000,000, unless less
than $1,000,000 of the Notes remain outstanding, in which case all of the Notes
must be prepaid. Any prepayment of the Notes pursuant to Section 2.7(c) shall be
in a minimum amount which is a multiple of $1,000 times the number of Holders at
the time of such prepayment.
(e) Partial Prepayments. Any partial prepayment shall be made so
that the Notes then held by each Holder shall be prepaid in a principal amount
which shall bear the same ratio, as nearly as may be, to the total principal
amount being prepaid as the principal amount of such Notes held by such Holder
shall bear to the aggregate principal amount of all Notes then outstanding. In
the event of a partial prepayment, upon presentation of any Note the Company
shall execute and deliver to or on the order of the Holder, at the expense of
the Company, a new Note in principal amount equal to the remaining outstanding
portion of such Note.
Section 2.8. Taxes. (a) For the purposes of this Section, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings with respect to any payment
by any Credit Party pursuant to this Agreement or under any Note or any other
Financing Document, and all liabilities with respect thereto, excluding, in the
case of Purchaser or any other Holder, taxes imposed on the net income of
Purchaser or such Holder and franchise or similar taxes imposed on Purchaser or
such Holder (all such excluded taxes being hereinafter referred to as "Domestic
Taxes").
"Other Taxes" means any present or future stamp or documentary
taxes and any other excise or property taxes, or similar charges or levies,
which arise from any payment made pursuant to this Agreement or under any Note
or any other
18
<PAGE> 20
Financing Document or from the execution, delivery, registration, recordation or
enforcement of, or otherwise with respect to, this Agreement or any Note or any
other Financing Document.
(b) All payments by any Credit Party to or for the account of
Purchaser or any other Holder under any Financing Document shall be made without
deduction for any Taxes or Other Taxes; provided that, if any Credit Party shall
be required by law to deduct any Taxes or Other Taxes from any such payment, the
sum payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section), Purchaser or such Holder (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, the
Credit Party shall make such deductions, the Credit Party shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and the Company shall promptly furnish to the
Purchaser or such Holder (as the case may be) the original or a certified copy
of a receipt evidencing payment thereof.
(c) The Company agrees to indemnify Purchaser and each other Holder
for the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this Section) paid by Purchaser or such Holder (as the case may be) and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto.
(d) The Company shall have no obligations for Taxes under Section
2.8(a) or Section 2.8(b) for or on account of:
(i) any Taxes (other than Other Taxes) imposed by way of
deduction or withholding that would not have been so imposed but for the
existence of any present or former connection between such Holder and the
jurisdiction imposing the Tax other than merely holding such Note or any
Financing Document, or the receipt of payments in respect thereof, including,
without limitation, such Holder being or having been a citizen or resident
thereof, or being or having been engaged in a trade or business or having a
permanent establishment or other fixed base therein, or making or having made an
election to the effect of which is to subject such Holder to such Tax;
(ii) any Taxes (other than (A) Other Taxes or (B) any Taxes
imposed by way of deduction or withholding) that would not have been so imposed
but for the existence of any present or former connection between such
19
<PAGE> 21
Holder or the beneficial owner (or between a fiduciary, settlor, beneficiary,
member or shareholder of, or possessor of a power over, such Holder or
beneficial owner, if such Holder or beneficial owner is an estate, a trust, a
partnership, a limited liability company or corporation) and the jurisdiction
imposing the Tax other than merely holding such Note or any Financing Document,
or the receipt of payments in respect thereof, including, without limitation,
such Holder or beneficial owner (or such fiduciary, settlor, beneficiary,
member, shareholder, or possessor) being or having been a citizen or resident
thereof, or being or having been engaged in a trade or business or having a
permanent establishment or other fixed base therein, or making or having made an
election to the effect of which is to subject such Holder or beneficial owner
(or such fiduciary, settlor, beneficiary, member, shareholder or possessor) to
such Tax;
(iii) any Taxes in the nature of estate, inheritance or
gift taxes;
(iv) any Tax that is imposed or withheld by reason of the
failure of the Holder or beneficial owner of a Note to comply with a written
request by the Company addressed to such Holder or beneficial owner to provide
(A) information concerning the nationality, residence or identity of such Holder
or beneficial owner that is required under a statute, treaty, regulation or
administrative practice of the jurisdiction imposing such Tax as a precondition
to exemption from all or part of such Tax or (B) the applicable signed form
required to be received by the Credit Parties to qualify for an exemption or
reduction of such Tax;
(v) any Taxes imposed on any payment on a Note to a Holder
that is a fiduciary or partnership or other than sole beneficial owner of such
payment to the extent a beneficiary or settlor with respect to such fiduciary or
a member of such partnership or limited liability company or a shareholder of an
S corporation or a beneficial owner would not have been entitled to the payment
of taxes had such beneficiary, settlor, member, shareholder or beneficial owner
directly received its beneficial or distributive share of such payment;
(vi) any Tax that is imposed or withheld, to the extent that
the Holder would have been subject to such Tax at the time of the original
purchase of the Notes upon their original issuance if the Holder had purchased
the Note at that time; and
(vii) any combination of items (i) through (vi) above.
20
<PAGE> 22
(e) Notwithstanding anything in Section 2.8(d) to the contrary,
the Company agrees to indemnify Purchaser and each other Holder for all Domestic
Taxes of Purchaser or such other Holder (calculated based on a hypothetical
basis at the maximum marginal rate for a corporation) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, in each case to the extent that such Domestic Taxes result from any
payment or indemnification pursuant to this Section 2.8. This indemnification
shall be paid within 15 days after Purchaser or such Holder (as the case may be)
makes demand therefor.
(f) The Company agrees that the provisions of this Section shall
inure to the benefit of any transferee of any Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to Purchaser (both before and
after giving effect to each Acquisition) as set forth below:
Section 3.1. Corporate Existence and Power. Each Credit Party is
a corporation, limited liability company or limited partnership, as applicable,
duly incorporated or formed, as applicable, validly existing and in good
standing under the laws of the state of its incorporation, and has all
corporate, limited liability company or limited partnership powers, as
applicable, and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and as proposed to
be conducted after each Acquisition except for such governmental licenses,
authorizations, consents and approvals as to which the failure to so maintain
could not reasonably be expected to have a Material Adverse Effect.
Section 3.2. Authorization, Execution and Enforceability. The
execution, delivery and performance by each Credit Party party to each of the
Financing Documents and the Material Acquisition Documents and the issuance of
the Notes by the Company have been duly and validly authorized and are within
each such Credit Party's corporate, limited liability company or limited
partnership powers, as applicable. Each of the Financing Documents (other than
the Notes) and Material Acquisition Documents has been duly executed and
delivered by the Credit Parties party thereto and constitutes their valid and
binding agreement, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency and other similar laws affecting creditors'
rights generally and equitable principles of general applicabil-
21
<PAGE> 23
ity. When executed and delivered by the Company against payment therefor in
accordance with the terms hereof, the Notes will constitute valid and binding
obligations of the Company, enforceable in accordance with their terms, subject
to applicable bankruptcy, insolvency and other similar laws affecting creditors'
rights generally and equitable principles of general applicability.
Section 3.3. Governmental Authorization; Compliance with Laws.
The execution and delivery by the Credit Parties party to each of the Financing
Documents and Material Acquisition Documents did not and will not, the issuance
and sale of the Notes by the Company will not, and the consummation of the
transactions contemplated hereby and thereby will not, require any action by or
in respect of, or filing with, any governmental body, agency or governmental
official except actions and filings which, if not taken or made, will not affect
in any manner the validity or enforceability of the Financing Documents or the
Material Acquisition Documents or could reasonably be expected to have a
Material Adverse Effect. Each Credit Party is in compliance with all applicable
laws, ordinances, rules, regulations and requirements of governmental
authorities except to the extent such compliance is not material to the
business, assets, property, condition (financial or otherwise) of such Credit
Party.
Section 3.4. Non-Contravention. The execution and delivery by the
Credit Parties party to each of the Financing Documents and the Material
Acquisition Documents did not and will not, and the issuance and sale of the
Notes by the Company will not, and the consummation of the transactions
contemplated hereby and thereby will not, contravene or constitute a default
under or violation of any provision of applicable law or regulation, any Company
Corporate Documents or any agreement, judgment, injunction, order, decree or
other instrument binding upon any Credit Party or any of its assets, or result
in the creation or imposition of any Lien on any asset of any Credit Party
(other than the Liens created by the Security Documents).
Section 3.5. Financial Information.
(a) The (i) consolidated financial statements of each Credit
Party including balance sheets and incomes and cash flow statements as of the
end of and for each of the last three fiscal years audited by independent public
accountants of recognized national standing and prepared in conformity with
GAAP, together with the report thereon; (ii) unaudited selected financial
information of each Credit Party meeting the requirements of Item 301(a) of
Regulation S-K for the two fiscal years immediately preceding the last three
fiscal years; and (iii) unaudited interim financial
22
<PAGE> 24
statements of each Credit Party, prepared in each case in the same manner as the
historical audited statements for the most recently ended quarterly period and
for the same quarterly period during the most recently ended fiscal year, fairly
present, in conformity with GAAP, the consolidated financial position of such
entities as of each such date and their consolidated results of operations,
changes in stockholders' equity and cash flows for each period (subject to
footnote presentation and normal year-end adjustments).
(b) The unaudited pro forma consolidated balance sheet of the
Company as of June 30, 1998 (including the notes thereto) (the "Pro Forma
Balance Sheet"), copies of which have heretofore been furnished to the
Purchaser, has been prepared giving effect (as if such events had occurred on
such date) to (i) the consummation of each Acquisition, (ii) Debt to be issued
on or about the date of Closing and the use of proceeds thereof and (iii) the
payment of fees and expenses in connection with the foregoing. The Pro Forma
Balance Sheet has been prepared based on the best information available to the
Company as of the date of delivery thereof, and presents fairly on a pro forma
basis the estimated financial position of the Company as of June 30, 1998,
assuming that the events specified in the preceding sentence had actually
occurred at such date.
(c) There has occurred no material adverse change, or development
that could reasonably be expected to result in a material adverse change, in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company, Sibson or Delphi or any of their
respective Subsidiaries, in each case taken as a whole, since December 31, 1997
or in the facts and information supplied to Purchaser through the date hereof
with respect thereto.
Section 3.6. Litigation. Except as set forth on Schedule 3.6, there
is no action, suit or proceeding pending or, to the knowledge of any Credit
Party, threatened against any Credit Party before any court or arbitrator or
any governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could have a Material Adverse Effect or
which challenges the validity of any Financing Document or of any Acquisition;
provided, however, that except as noted on such Schedule 3.6, all matters listed
therein are covered by adequate insurance.
Section 3.7. Environmental Matters. Except as provided on Schedule
3.7:
23
<PAGE> 25
(a) Except to the extent the following could not reasonably be
expected to result in a Material Adverse Effect, other than the generation, use
and storage of Hazardous Materials in compliance with all applicable
Environmental Laws: (i) no Hazardous Materials are located on any properties
owned, leased or operated by any Credit Party; (ii) no Hazardous Materials have
been released into the environment or deposited, discharged, placed or disposed
of, at, on, under or near any of such properties; (iii) no portion of any such
property is being used for the disposal, storage, treatment, processing or other
handling of Hazardous Materials; (iv) no such property is affected by Hazardous
Materials Contamination; (v) to the best of any Credit Party's knowledge, no
previous owner or occupant of such properties has used any portion of the
properties for the treatment, storage, disposal, processing or other handling of
Hazardous Materials; (vi) with respect to properties previously owned, leased or
operated by any Credit Party, to the best of any Credit Party's knowledge, no
Hazardous Materials have been released into the environment, or deposited,
discharged, placed or disposed of, at, on, under or near any such properties
during the time of any Credit Party's ownership, lease or operation thereof.
(b) Except to the extent the following could not reasonably be
expected to result in a Material Adverse Effect, no asbestos or
asbestos-containing materials are present on any of the properties now or
previously owned, leased or operated by any Credit Party.
(c) Except to the extent the following could not reasonably be
expected to result in a Material Adverse Effect, no polychlorinated biphenyls
are located on or in any properties now or previously owned, leased or operated
by any Credit Party, in the form of electrical transformers, fluorescent light
fixtures with ballasts, cooling oils or any other device or form.
(d) Except to the extent the following could not reasonably be
expected to result in a Material Adverse Effect, no underground storage tanks
are located on any properties now or previously owned, leased or operated by any
Credit Party, or were located on any such property and subsequently removed or
filled.
(e) Except as to the extent the following (or the matters referred
to in any of the following) could not reasonably be expected to result in a
Material Adverse Effect, no notice, notification, demand, request for
information, complaint, citation, summons, investigation, administrative order,
consent order and agreement, litigation or settlement directed at any Credit
Party or any property owned, leased or operated by any Credit Party with respect
to Hazardous Materials or Hazardous Materials Contamination is in existence or,
to any Credit Party's knowledge,
24
<PAGE> 26
proposed, threatened or anticipated with respect to or in connection with the
operation of any properties now or previously owned, leased or operated by any
Credit Party. Except as to the extent the following could not result in a
Material Adverse Effect, all such properties and their existing and prior uses
comply and at all time have complied with any applicable governmental
requirements relating to environmental matters of Hazardous Materials and there
is no condition on any of such properties which is in violation of any
applicable governmental requirements relating to Hazardous Materials, and no
Credit Party has received any communication from or on behalf of any
governmental authority that any such condition exists.
(f) There has been no environmental investigation, study, audit,
test, review or other analysis conducted of which any Credit Party has knowledge
in relation to the current or prior business of any Credit Party or any
property or facility now or previously owned, leased or operated by any Credit
Party which has not been delivered to the Purchaser at least five days prior to
the date hereof.
(g) For purposes of this Section 3.7, the term "Credit Party" shall
include any business or business entity (including a corporation) which is, in
whole or in part, a predecessor of any Credit Party.
Section 3.8. Taxes. Except as set forth on Schedule 3.8, all income
tax returns and all other material tax returns which are required to be filed by
or on behalf of any Credit Party have been filed and all taxes shown as due on
such returns have been paid or adequate reserves have been established on the
books of the applicable Credit Party. The charges, accruals and reserves on the
books of the applicable Credit Party and in respect of taxes or other
governmental charges have been established in accordance with GAAP.
Section 3.9. Subsidiaries. The only Subsidiaries of the Company are
Symmetrix Inc., SGM Consulting, L.L.C. (d/b/a Sigma Consulting), Pyramid
Imaging, Inc. and The Planning Technologies Group, L.L.C., Symmetrix European
Holdings, Inc., Symmetrix Europe, S.A., Cranberry Hill Capital, LLC, Scanada,
Inc. and SC/NE.
Section 3.10. Not an Investment Company. No Credit Party is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
Section 3.11. Full Disclosure. The information heretofore furnished
by the Credit Parties to Purchaser for purposes of or in connection with the
Financing
25
<PAGE> 27
Documents or any transaction contemplated hereby does not, and all such
information hereafter furnished by the Credit Parties to Purchaser will not (in
each case taken together and on the date as of which such information is
furnished), contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they are made, not misleading. The
projections and pro forma financial information contained in the materials
referenced above are based upon good faith estimates and assumptions believed by
management of the Company to be reasonable at the time made. The Credit Parties
have disclosed to Purchaser any and all facts which materially and adversely
affect or may affect (to the extent the Company can now reasonably foresee), the
business, operations or financial condition of the Company and its Subsidiaries,
Sibson and its Subsidiaries and Delphi and its Subsidiaries, each taken as a
whole, or the ability of the Company and its Subsidiaries, taken as a whole, to
perform the obligations under the Financing Documents or to complete the
Permanent Financing.
Section 3.12. Capitalization. At the date of each Takedown and after
giving effect to each Acquisition, the capitalization of each Credit Party will
be as set forth on Schedule 3.12. All of the issued and outstanding shares of
capital stock or membership interests, as applicable, of each Credit Party are
validly issued, fully paid and nonassessable and free and clear of any Lien or
other right or claim and the holders thereof are not entitled to any preemptive
or other similar rights. Other than as set forth on Schedule 3.12, there are no
subscriptions, options, warrants, rights, convertible securities, exchangeable
securities or other agreements or commitments of any character pursuant to which
any Credit Party is required to issue any shares of its capital stock or
membership interests, as applicable.
Section 3.13. Solicitation; Access to Information. No form of
general solicitation or general advertising was used by any Credit Party or, to
the best of its knowledge, any other Person acting on behalf of any Credit
Party, in connection with the offer and sale of the Notes. Neither any Credit
Party nor any Person acting on behalf of any Credit Party has, either directly
or indirectly, sold or offered for sale to any Person any of the Notes or any
other similar security of any Credit Party except as contemplated by this
Agreement, and the Company represents that neither it nor any Credit Party nor
any person acting on its behalf other than Purchaser and its Affiliates will
sell or offer for sale to any Person any such security to, or solicit any offers
to buy any such security from, or otherwise approach or negotiate in respect
thereof with, any Person or Persons so as thereby to bring the issuance or sale
of any of the Notes within the provisions of Section 5 of the Securities Act.
26
<PAGE> 28
Section 3.14. Non-fungibility. When the Notes are issued and
delivered pursuant to this Agreement, the Notes will not be of the same class
(within the meaning of Rule 144A under the Securities Act) as securities which
are (i) listed on a national securities exchange registered under Section 6 of
the Exchange Act or (ii) quoted in a U.S. automated inter-dealer quotation
system.
Section 3.15. Permits. Except to the extent any of the following
could not reasonably be expected to result in a Material Adverse Effect: (a)
each Credit Party has all Permits as are necessary for the conduct of their
respective businesses as it has been carried on; (b) all such Permits are in
full force and effect, and each Credit Party has fulfilled and performed all
material obligations with respect to such Permits; (c) no event has occurred
which allows, or after notice or lapse of time would allow, revocation or
termination by the issuer thereof or which results in any other impairment of
the rights of the holder of any such Permit; and (d) each Credit Party has no
reason to believe that any governmental body or agency is considering limiting,
suspending or revoking any such Permit.
Section 3.16. Representations in Other Financing Documents and in
Material Acquisition Documents. (a) Each of the representations and warranties
of the Credit Parties set forth in any of the Financing Documents is true and
correct in all material respects.
(b) Each of the representations and warranties of the Credit Parties
set forth in any of the Material Acquisition Documents is true and correct in
all material respects.
Section 3.17. Compliance with ERISA. Except as set forth on Schedule
3.17, each member of the ERISA Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Internal Revenue Code with respect to
each Plan and is in compliance in all material respects with the presently
applicable provisions of ERISA and the Internal Revenue Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code in respect of
any Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security under
ERISA or the Internal Revenue Code or (iii) incurred any liability under Title
IV or ERISA other than a liability to the PBGC for premiums under Section 4007
of ERISA.
27
<PAGE> 29
Section 3.18. Labor Matters. Except as set forth on Schedule 3.18,
(x) there are no collective bargaining agreements or Multiemployer Plans
covering the employees of any Credit Party and (y) none of such Persons has
suffered any strikes, walkouts, work stoppages or other material labor
difficulty within the last five years and none of the foregoing is now
threatened or imminent.
Section 3.19. Ownership of Property. Schedule 3.19 sets forth all
the real property owned or leased by the Credit Parties and identifies the
street address, the current owner (and current record owner, if different) and
whether such property is leased or owned. The Credit Parties have good and
marketable fee simple title to or valid leasehold interests in all of such real
property and good title to all of their personal property subject to no Lien of
any kind except Liens permitted hereby. The Credit Parties enjoy peaceful and
undisturbed possession under all of their respective material leases.
Section 3.20. Absence of Any Undisclosed Liabilities or Capital
Calls. There are no liabilities of any Credit Party of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of circumstances which
could reasonably be expected to result in such a liability, other than (i) those
liabilities provided for in the financial statements referenced in Section 3.5
hereof and previously delivered to the Purchaser, (ii) the liabilities set forth
in Schedule 3.20, (iii) liabilities incurred in the ordinary course of business
subsequent to the date of the latest financial statements referenced in Section
3.5 hereof, and (iv) other undisclosed liabilities which, individually or in the
aggregate, are not material to any Credit Party. The aggregate amount of
liabilities as of the Closing under clauses (ii) and (iii) of this Section 3.20
do not exceed $500,000 excluding accrued interest from June 30, 1998 through the
Closing under the KU Debt.
Section 3.21. Governmental Regulation. No Credit Party is, or will
be upon the issuance and sale of the Notes and the use of the proceeds described
herein, subject to regulation under the Public Utility Holding Company Act of
1935 or the Federal Power Act (each, as amended) or to any federal or state
statute or regulation in a manner which would limit its ability to issue the
Notes (in the case of the Company) and perform its obligations under any
Financing Document.
Section 3.22. Solvency. On the date of the Closing and after giving
effect to the transactions under each Purchase Agreement, each Credit Party will
be Solvent.
28
<PAGE> 30
Section 3.23. Company Business. The Company (a) conducts no business
other than the operation and direct or indirect ownership of 100% of the equity
interests of Symmetrix Inc., SGM Consulting, L.L.C. (d/b/a SIGMA), Pyramid
Imaging, Inc. and The Planning Technologies Group, L.L.C. and (b) conducts
research services and related consulting services. At any time after Closing,
the Company will conduct no business other than the foregoing.
Section 3.24. Security Interests and Liens. The Security Documents
create, as security for the obligations of the Company incurred pursuant to the
Financing Documents, valid and enforceable security interests in and Liens on
all of the collateral described in such Security Documents (the "Collateral"),
in favor of the Purchaser, and subject to no other Liens other than Permitted
Liens. Such security interests in and Liens on the Collateral shall be superior
to and prior to the rights of all third parties (except as disclosed on Schedule
3.24), and no further recordings or filings are or will be required in
connection with the creation, perfection or enforcement of such security
interests and Liens, other than the filing of continuation statements in
accordance with applicable law.
Section 3.25. Patents, Trademarks, etc. Except as disclosed on
Schedule 3.25, each of the Credit Parties has obtained and holds in full force
and effect all patents, trademarks, servicemarks, trade names, copyrights and
other such intellectual property rights, which are material to the operation of
its business as presently conducted. No material product, process, method,
substance, part or other material presently sold by or employed by any Credit
Party in connection with such business infringes any patent, trademark, service
mark, trade name, copyright, license or other right owned by any other Person.
There is not pending or overtly threatened any claim or litigation against or
affecting any Credit Party contesting its right to sell or use any such product,
process, method, substance, part or other material.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1. Purchase for Investment; Authority; Binding Agreement.
Purchaser represents and warrants to the Company that:
(a) Purchaser is an Accredited Investor within the meaning of Rule
501(a) under the Securities Act and the Notes to be acquired by it pursuant to
this Agreement are being acquired for its own account and Purchaser will not
offer, sell, transfer, pledge, hypothecate or otherwise dispose of the Notes
unless pursuant to a
29
<PAGE> 31
transaction either registered under, or exempt from registration under, the
Securities Act;
(b) the execution, delivery and performance of this Agreement and
the purchase of the Notes pursuant hereto are within Purchaser's corporate
powers and have been duly and validly authorized by all requisite corporate
action;
(c) this Agreement has been duly executed and delivered by
Purchaser;
(d) this Agreement constitutes a valid and binding agreement of
Purchaser enforceable in accordance with its terms; and
(e) Purchaser has such knowledge and experience in financial and
business matters so as to be capable or evaluating the merits and risks of its
investment in the Notes and Purchaser is capable of bearing the economic risks
of such investment.
ARTICLE V
CONDITIONS PRECEDENT TO PURCHASE
Section 5.1. Conditions to Purchaser's Obligation at Initial
Takedown. The obligation of Purchaser to purchase the Notes to be issued and
sold at the Initial Takedown hereunder is subject to the satisfaction of the
following conditions contemporaneously with such Takedown:
(a) (i) Each of the conditions to the parties' obligations under the
applicable Material Acquisition Documents shall have been satisfied or, with the
prior written consent of Purchaser, waived, (ii) the Acquisition to which the
Initial Takedown relates shall have been completed on the terms set forth in the
Material Acquisition Documents (as such terms may have been amended or waived
with the consent of Purchaser), (iii) the aggregate amount of funds required by
the Company with respect to the Sibson Acquisition (including without limitation
for the payment of fees, commissions and expenses) shall not exceed $38,000,000
and (iv) the aggregate amount of funds required by the Company with respect to
the Delphi Acquisition (including without limitation for the payment of fees,
commissions and expenses) shall not exceed $2,000,000;
30
<PAGE> 32
(b) Each of the Material Acquisition Documents, the Financing
Documents and the Company Corporate Documents shall have been duly executed and
delivered by the parties thereto and shall be in full force and effect and,
subject to Purchaser's sole discretion, no material term or condition thereof
shall have been amended, waived or otherwise modified without the prior written
consent of Purchaser;
(c) Purchaser shall have received the financial statements referred
to in Section 3.5 hereof and shall be satisfied with the same in all material
respects in Purchaser's sole discretion;
(d) Purchaser shall have received evidence satisfactory to it that
all governmental, shareholder and, subject to Purchaser's sole discretion,
material third party consents and approvals necessary in connection with the
Acquisition to which the Initial Takedown relates and the other transactions
contemplated by the Financing Documents and by the Material Acquisition
Documents (including without limitation any Hart-Scott-Rodino filings) have been
received and all applicable waiting periods shall have expired without any
action being taken by any competent authority that could restrain, prevent or
impose any materially adverse conditions on the Acquisition to which the
Initial Takedown relates or such other transactions or that could seek or
threaten any of the foregoing, and no law or regulation shall be applicable
which in the judgment of Purchaser could have any such effect;
(e) No Credit Party shall have indebtedness for borrowed money other
than (i) the Notes and (ii) as listed on Schedule 5.1(e), all of which such
indebtedness for borrowed money will contain terms and conditions satisfactory
in all material respects to Purchaser in Purchaser's sole discretion. No Credit
Party shall have preferred stock issued and outstanding;
(f) Purchaser shall have completed and be satisfied in all respects
with its financial, tax, legal, accounting and environmental due diligence
investigations;
(g) The corporate, tax, capital and ownership structure (including
articles of incorporation, operating or member agreements and by-laws),
shareholders agreements and management of the Credit Parties before and after
each Acquisition shall, except as contemplated by each Acquisition, be
consistent with that previously disclosed to Purchaser, and shall not have been
modified, in Purchaser's sole discretion, in any material respect other than
without the prior written consent of Purchaser;
31
<PAGE> 33
(h) Absence of any material adverse change in the business,
condition (financial or otherwise), operations, performance, properties,
prospects or projections of any Credit Party or any of their respective
Subsidiaries, in each case taken as a whole, since the end of the most recently
ended period for which financial statements have been provided to Purchaser or
in the facts and information as represented to date;
(i) Except as set forth on Schedule 3.6, there shall exist no
pending or threatened material litigation, proceedings or investigations which
(x) could or purports to affect any Acquisition or the transactions contemplated
hereby or (y) could reasonably be expected to have a material adverse effect on
the business, assets, debt service capacity, liabilities (including
environmental liabilities), financial condition, operations, prospects or
projections of the Credit Parties taken as a whole;
(j) Purchaser shall have received satisfactory opinions of counsel
to certain of the Credit Parties as to the transactions contemplated hereby, and
such corporate resolutions, certificates and other documents as Purchaser shall
reasonably request;
(k) Absence of any Event of Default or event that, with notice
and/or the passage of time, could reasonably be expected to become an Event of
Default and accuracy of all representations and warranties in all material
respects;
(l) Absence of any disruption or adverse change in the financial or
capital markets generally which could reasonably be expected to materially
adversely affect the purchase of the Notes or the refinancings thereof;
(m) Purchaser shall have received necessary consent from lenders to
the Credit Parties, including, without limitation, lenders of the KU Debt and
the Subsidiary Debt, if any, concerning the anticipated terms and conditions of
the Notes, and the Permanent Financing including the application of the proceeds
from any such financing;
(n) The Engagement Letter shall have been executed;
(o) Purchaser shall have received a solvency certificate
substantially in the form of Exhibit B hereto executed by the Chief Financial
Officer, Secretary or sole Member of each Credit Party dated as of the Closing;
32
<PAGE> 34
(p) Purchaser shall have received a Subsidiary Guaranty in the form
of Exhibit C executed by each Credit Party other than the Company; and
(q) All fees and expenses payable to Purchaser or DLJSC hereunder,
under the Engagement Letter or otherwise in connection with the transactions
contemplated hereby, shall have been paid in full.
Section 5.2. Conditions to Purchaser's Obligations at the Second
Takedown. The obligation of Purchaser to purchase the Notes to be issued and
sold at the Second Takedown hereunder is subject to the satisfaction of the
following conditions contemporaneously with such Takedown:
(a) Each of the conditions precedent set forth in Section 5.1 of
this Agreement as applicable, in the Purchaser's judgment, to the Delphi
Acquisition, shall have been satisfied;
(b) There shall have occurred no material adverse change in the
assets, business, financial position, results of operations or prospects of the
Company and its Subsidiaries, taken as a whole, since March 31, 1998 or in the
facts and information as represented to Purchaser through closing with respect
thereto;
(c) There shall not have occurred any disruption or adverse change
in the financial or capital markets generally which could reasonably be expected
to materially adversely affect the purchase of the Notes or the refinancing
thereof;
(d) The representations and warranties of the Credit Parties
contained in the Financing Documents shall be true and correct in all material
respects on and as of such Takedown as if made on and as of such time and each
of the Credit Parties shall have performed and complied with all covenants and
agreements required by the Financing Documents to be performed by it or complied
with by it at or prior to such Takedown;
(e) There shall not exist any Default;
(f) Purchaser shall have received the Notes to be issued at such
Takedown, duly executed by the Company in the denominations and registered in
the names specified in or pursuant to Section 2.2; and
(g) Purchaser shall have received payment of all fees and expenses
payable to or for the account of Purchaser hereunder at or prior to such time.
33
<PAGE> 35
ARTICLE VI
COVENANTS
The Company agrees (and agrees that it shall cause each Credit Party
to agree) that, from and after the date of the Initial Takedown and so long as
the Commitment remains in effect or any Notes remain outstanding and unpaid or
any other amount is owning to Purchaser or the Holders, and for the benefit of
Purchaser and the Holders:
Section 6.1. Information. The Company will deliver to Purchaser:
(a) as soon as available and in any event within 120 days after the
end of each fiscal year of the Company, an audited consolidated balance sheet of
the Company and its Consolidated Subsidiaries as of the end of such fiscal year
and the related audited statements of income and cash flows and stockholders'
equity (deficit) for such fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, all reported on by the Company or
other independent public accountants of nationally recognized standing in a
manner acceptable to the Commission;
(b) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the Company, a
consolidated balance sheet of the Company and its Consolidated Subsidiaries as
of the end of such quarter and the related consolidated statements of income and
cash flows and stockholders' equity (deficit) for each quarter and for the
portion of the fiscal year ended at the end of such quarter, setting forth in
each case in comparative form the figures for the corresponding quarter and the
corresponding portion of the previous fiscal year, all certified (subject to
footnote presentation and normal year-end adjustments) as to fairness of
presentation, GAAP and consistency by the chief financial officer or the chief
accounting officer of the Company;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of the Company (i) setting
forth in reasonable detail whether the Company was in compliance with the
requirements of Sections 6.8 through 6.11, inclusive, on the date of such
financial statements and (ii) stating whether any Default exists on the date of
such certificate and, if any Default then exists, setting forth the details
thereof and the action which the Company or any of the Credit Parties are taking
or propose to take with respect thereto;
34
<PAGE> 36
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements confirming the
calculations set forth in the officer's certificate delivered simultaneously
therewith pursuant to clause (c) above;
(e) within five days after any officer of any Credit Party obtains
knowledge of a Default or a default under the KU Debt or under any Subsidiary
Debt, a certificate of the chief financial officer or the chief accounting
officer of the Company setting forth the details thereof and the action which
such Credit Party is taking or proposes to take with respect thereto;
(f) promptly upon the filing thereof, copies of all applications,
registration statements or reports which any Credit Party shall have filed with
the Commission or any other national stock exchange;
(g) promptly upon the mailing thereof to the shareholders of any
Credit Party generally, copies of all financial statements, reports and proxy
statements so mailed;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of
such notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security, a
certificate of the
35
<PAGE> 37
chief financial officer or the chief accounting officer of the relevant Credit
Party setting forth details as to such occurrence and action, if any, which the
relevant Credit Party or applicable member of the ERISA Group is required or
proposes to take;
(i) promptly following the commencement thereof, notice and a
description in reasonable detail of any litigation or proceeding to which any
Credit Party is a party in which the amount involved is $1,000,000 or more or in
which injunctive relief is sought;
(j) promptly following the occurrence thereof, notice and a
description in reasonable detail of any material adverse change in the business,
operations, property, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries, taken as a whole; and
(k) from time to time such additional information regarding the
financial position or business of any Credit Party, as Purchaser may reasonably
request.
Section 6.2. Payments of Obligations. The Company will pay and
discharge, and will cause each Credit Party to pay and discharge, at or before
maturity, all their respective material obligations and liabilities, including,
without limitation, tax liabilities, except where the same may be contested in
good faith by appropriate proceedings, and will maintain, and will cause each
Credit Party to maintain, in accordance with GAAP, appropriate reserves for the
accrual of any of the same.
Section 6.3. Insurance. The Company shall, and shall cause each
Credit Party to, keep its insurable properties adequately insured at all times
by financially sound and reputable insurers, maintain such other insurance, to
such extent and against such risks, including fire and other risks insured
against by extended coverage, as is customary with companies in the same or
similar businesses operating in the same or similar locations, including (i)
public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about in connection with the use of any
properties owned, occupied or controlled by it and (ii) business interruption
insurance and such other insurance as may be required by law.
Section 6.4. Conduct of Business and Maintenance of Existence.
Except for the Nextera Incorporation, the Company will continue, and will cause
each Credit Party to continue, to engage in business of the same general type as
now conducted, and will preserve, renew and keep in full force and effect, and
will cause each Subsidiary to preserve, renew and keep in full force and effect
their respective corporate,
36
<PAGE> 38
limited liability company or limited partnership existence, as applicable, and
their respective rights, privileges and franchises necessary or desirable in
the normal conduct of business, except that a Credit Party may discontinue any
immaterial line of business if the Board of Directors or other governing body
of such Credit Party determines that such discontinuation is in the best
interest of the Company and its Subsidiaries, taken as a whole, and could not
cause a Material Adverse Effect.
Section 6.5. Compliance with Laws. The Company will comply, and
cause each Credit Party to comply, in all respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitations, Environmental Laws and ERISA and the rules and
regulations thereunder) except where the failure to so comply could not cause a
Material Adverse Effect.
Section 6.6. Inspection of Property, Books and Records. The Company
will keep, and will cause each Credit Party to keep books of record and account
in which true and correct entries shall be made of all dealings and transactions
in relation to its business and activities, and will permit, and will cause each
Subsidiary to permit representatives of Purchaser, at the expense of the
Purchaser, to visit and inspect any of their respective properties, to examine
and make abstracts from any of their respective books and records and to discuss
their respective affairs, finances and accounts with their respective executive
officers and independent public accountants at such reasonable times and as
often as may reasonably be desired.
Section 6.7. Investment Company Act. No Credit Party is or will
become an open-end investment trust, unit investment trust or face-amount
certificate company that is or is required to be registered under Section 8 of
the Investment Company Act of 1940, as amended.
Section 6.8. Limitation on Debt. No Credit Party will create, incur,
assume or suffer to exist any Debt, except:
(a) Debt evidenced by the Notes;
(b) the Debt described on Schedule 5.1(e) (but only to the extent of
the outstanding balance as of the date hereof shown on such Schedule); and
(c) other Debt incurred after the date hereof, in an aggregate
principal amount not to exceed $4,161,230.
37
<PAGE> 39
Section 6.9. Restricted Payments; Voluntary Prepayments. (a) No
Credit Party will (i) declare or make any Restricted Payment or (ii) make any
capital expenditures, in excess of $250,000, not contained on Schedule 6.9;
provided that the following shall not be a Restricted Payment: (1) any dividend,
distribution or other payment to the Company, (2) the repurchase of any capital
stock or other equity interest of any officer, director or employee of a Credit
Party upon their termination of employment or other business relationship with a
Credit Party, (3) salary and compensation expenses and travel, payroll,
commission and similar advances to employees in the ordinary course of business,
(4) the Permitted Distribution (as defined in the Sibson US Asset Purchase
Agreement), and (5) distributions to the Sibson US principals pursuant to the
Nextera LLC Agreement.
(b) No Credit Party will directly or indirectly, optionally redeem,
retire, purchase, acquire, defease or otherwise make any payment other than
required interest payments in respect of any Debt other than (i) the Notes or
the Subsidiary Debt and (ii) payments in respect of Debt owing to any other
Credit Party.
Section 6.10. Investments. The Company will not, nor will it permit
any Credit Party to, make or acquire any Investment in any Person other than (i)
Investments in direct or indirect wholly-owned Subsidiaries and (ii)
Investments in Cash Equivalents.
Section 6.11. Negative Pledge. No Credit Party will create, assume
or suffer to exist any Lien on any asset now owned or hereafter acquired by it,
except:
(a) existing Liens listed on Schedule 6.11;
(b) (i) inchoate mechanics, workmen's and carriers' liens for
charges not delinquent, incident to current construction, (ii) mechanics,
warehousemen's, unpaid vendors' and carriers' liens incident to such
construction, (iii) statutory and common law Liens of landlords under leases to
which any Credit Party is party and (iv) Liens of carriers, warehousemen,
mechanics and materialmen or other similar statutory Liens, in each case
incurred in the ordinary course of business for sums the payment of which is not
delinquent or which are the subject of good faith proceedings by any Credit
Party;
(c) Liens incurred on deposits made in the ordinary course of
business in connection with workers' compensation, performance bonds,
unemployment insurance and other types of social security, other than any Lien
imposed by or under ERISA;
38
<PAGE> 40
(d) Liens for taxes not yet due;
(e) easements, rights of way, permits, licenses, zoning ordinances,
covenants, restrictions, defects, minor irregularities of title and other
similar Liens on property which in the case of any particular parcel of real
property do not materially detract from the value or utilization of such real
property;
(f) Liens incurred in connection with Debt permitted pursuant to
Section 6.8(c); and
(g) Liens arising in the ordinary course of its business which (i)
do not secure Debt, (ii) do not secure any obligation in an amount exceeding
$100,000 and (iii) do not in the aggregate materially detract from the value of
the assets of the Company and its Subsidiaries, taken as a whole, or materially
impair the use thereof in the operation of its business.
Section 6.12. Transactions with Affiliates. The Company will not,
nor will it permit any Credit Party to, directly or indirectly, pay any funds to
or for the account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect any transaction in
connection with any joint enterprise or other joint arrangement with, any
Affiliate, except on terms no less favorable than terms that could be obtained
from a Person that is not an Affiliate, as determined in good faith by the Board
of Directors, managing member or the equivalent governing body of the relevant
Credit Party; provided that no determination of the Board of Directors, managing
member or the equivalent governing body shall be required with respect to any
such transactions entered into (i) in the ordinary course of business, (ii) if
such transaction, together with all related transactions, does not involve
property, funds, investments or services with a fair market value in excess of
$100,000 or (iii) in connection with the execution or performance of the
Company's obligations under the Engagement Letter.
Section 6.13. Consolidations, Mergers and Sales of Assets; Ownership
of Subsidiaries. (a) No Credit Party will consolidate or merge with or into any
other Person. No Credit Party will sell, lease or otherwise transfer, directly
or indirectly, any substantial part of the assets of any Credit Party to any
other Person. Notwithstanding the foregoing, the Company may change its legal
form to a Delaware corporation, as set forth in the Share Exchange Agreement in
the form of
39
<PAGE> 41
Exhibit N to the Sibson US Asset Purchase Agreement, upon 10 days prior written
notice to Purchaser together with draft documentation reflecting the same,
subject to such documentation being satisfactory to Purchaser in all respects,
including without limitation, documentation evidencing the assumption of all
liabilities and obligations hereunder by any successor entity to the Company.
(b) Except as permitted by subsection (a) above, each Credit Party
will at all times continue to own, directly or indirectly, 100% of the capital
stock or other ownership interests of each Person which is currently, or
hereafter becomes a Subsidiary of such Credit Party. No new Subsidiaries will be
created after the Closing unless the same execute and deliver the Subsidiary
Guaranty and any other documents Purchaser reasonably requests in connection
therewith; provided, however, that this requirement shall not apply to Sibson &
Company, Inc. and SC2, Inc., neither of which holds any assets.
Section 6.14. Use of Proceeds. The proceeds from the issuance and
sale of the Notes by the Company pursuant to this Agreement at the Initial
Takedown shall be used to finance in part the consummation of the Sibson
Acquisition and at the Second Takedown shall be used to finance in part the
consummation of the Delphi Acquisition.
Section 6.15. Restrictions on Certain Amendments. No Credit Party
will amend or waive, or suffer to be amended or waived, any Company Corporate
Document (including, without limitation, the Nextera LLC Agreement) or any
Material Acquisition Document from the respective forms thereof delivered to
Purchasers pursuant to Section 5.1 without the prior written consent of
Purchaser.
Section 6.16. Permanent Financing. (a) The Company will, and will
cause each Credit Party to, take all the actions which, in the reasonable
judgment of DLJSC, are necessary or desirable to obtain Permanent Financing as
soon as practicable through issuance of securities at such interest rates and
other terms as are, in the reasonable opinion of DLJSC, prevailing for new
issues of securities of comparable size and credit rating in the capital
markets at the time such Permanent Financing is consummated and obtained in
comparable transactions made on an arm's length basis between unaffiliated
parties. The amount to be financed shall be in an amount at least sufficient to
repay or redeem the Notes in full in accordance with their terms. The Company
hereby covenants and agrees that the proceeds from the Permanent Financing shall
be used to the extent required to redeem in full the Notes in accordance with
their terms.
40
<PAGE> 42
(b) The Company covenants that it will, and will cause each Credit
Party to, enter into such agreements as in the judgment of DLJSC are customary
in connection with the Permanent Financing, make such filings under the
Securities Act, the Exchange Act, the Trust Indenture Act of 1939, as amended,
and state securities laws as in the reasonable judgment of DLJSC shall be
required to permit consummation of the Permanent Financing and take such steps
as in the reasonable judgment of DLJSC are necessary or desirable to cause such
filings to become effective or in the judgment of DLJSC are otherwise required
to consummate the Permanent Financing.
Section 6.17. Business Activities. The Company will not, and it will
not permit any Credit Party to, enter into any business, either directly or
through any Subsidiary or joint venture, except for those businesses of the same
type as or related to those in which the Credit Parties are engaged on the date
of this Agreement.
Section 6.18. Maintenance of Separateness. The Company will, and
will cause each of its Subsidiaries to, satisfy customary corporate and limited
liability company formalities, as applicable, including the holding of regular
board of directors' and shareholders' meetings or action by directors or
shareholders without a meeting or similar meeting or actions for a limited
liability company and the maintenance of corporate or limited liability company
offices and records. Other than pursuant to any Subsidiary Guaranty entered into
pursuant to this Agreement, neither the Company nor any of its Subsidiaries
shall make any payment to a creditor of any other Subsidiary in respect of any
liability of any such Subsidiary. Any financial statements distributed to any
creditors of any Subsidiary shall clearly establish or indicate the separateness
of such Subsidiary from the Company and its other Subsidiaries. Neither the
Company nor any of its Subsidiaries shall take any action, or conduct its
affairs in a manner, which is likely to result in the corporate or limited
liability company existence of the Company or any of its Subsidiaries being
ignored, or in the assets and liabilities of the Company or any of its
Subsidiaries being substantively consolidated with those of any other such
Person in a bankruptcy, reorganization or other insolvency proceeding.
Section 6.19. KU Debt. Neither the Company nor any Credit Party
shall amend or consent to any amendment of the KU Debt.
Section 6.20. Sibson Canada. The Company will cause Sibson Canada to
deliver to Purchaser within five (5) Business Days from September 1, 1998 an
intercreditor agreement by and between the Toronto-Dominion Bank and Purchaser,
in a form reasonably satisfactory to Purchaser.
41
<PAGE> 43
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1. Events of Default Defined; Acceleration of Maturity;
Waiver of Default. In case one or more of the following (each, an "Event of
Default"), whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation or any
administrative or governmental body, shall have occurred and be continuing:
(a) default in the payment of all or any part of the principal or
premium, if any, on any of the Notes as and when the same shall become due and
payable either at maturity, upon any redemption, by declaration or otherwise; or
(b) default in the payment of any installment of interest upon any
of the Notes or any fees payable under this Agreement as and when the same shall
become due and payable, and continuance of such default for a period of 5 days;
or
(c) failure on the part of the Company duly to observe or perform
any of the covenants contained in Sections 6.2 through 6.4, Sections 6.7 through
6.15, Section 6.17 and Section 6.19 of the Agreement; or
(d) failure on the part of any Credit Party duly to observe or
perform any of the other covenants or agreements contained in the Financing
Documents, if such failure shall continue for a period of 30 days after the date
on which written notice thereof shall have been given to the Company at the
option of and by a holder of a Note; or
(e) any Credit Party shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect in any jurisdiction or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing; or
42
<PAGE> 44
(f) an involuntary case or other proceeding shall be commenced
against any Credit Party seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against any Credit Party under the bankruptcy laws as
now or hereafter in effect in any jurisdiction; or
(g) there shall be a default in respect of any Debt of any Credit
Party in an aggregate principal amount in excess of $500,000 whether such Debt
now exists or shall hereafter be created (excluding the Notes but including Debt
owing to any Credit Party) if such default results in acceleration of the
maturity of such Debt or enables the holder of such Debt to accelerate the
maturity thereof; or any Credit Party shall fail to pay at maturity any such
Debt whether such debt now exists or shall hereafter be created; or
(h) final judgments for the payment of money which in the aggregate
at any one time exceed $500,000 shall be rendered against any Credit Party by a
court of competent jurisdiction and shall remain undischarged for a period
(during which execution shall not be effectively stayed) of 60 days after such
judgment becomes final; or
(i) any representation, warranty, certification or statement made or
deemed made by any Credit Party in any Financing Document or which is contained
in any certificate, document or financial or other statement furnished at any
time under or in connection with any Financing Document shall prove to have been
untrue in any material respect when made or deemed made; or
(j) any member of the ERISA Group has failed to pay when due an
amount or amounts aggregating in excess of $100,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan has been filed under Title IV of ERISA by any member of the ERISA
Group, any plan administrator or any combination of the foregoing; or the PBGC
has instituted proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or to cause a trustee to be appointed to administer any Material Plan; or a
condition has existed by reason of which the PBGC is entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there has occurred a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or
43
<PAGE> 45
more Multiemployer Plans which could cause one or more members of the ERISA
Group to incur a current payment obligation in excess of $100,000; or
(k) a breach under the Engagement Letter has occurred; or
(l) any Subsidiary Guaranty shall have been disavowed thereunder, a
court of competent jurisdiction shall have determined that any Subsidiary
Guaranty is unenforceable or any guarantor thereunder shall default in the
performance of any of its obligations under any Subsidiary Guaranty; or
(m) any of the Security Documents shall for any reason cease to be
in full force and effect, or shall cease to give Purchaser the Liens, rights,
powers and privileges purported to be created thereby including, without
limitation, a perfected first priority security interest in, and Lien on, all of
the collateral covered thereby in accordance with the terms thereof; or
(n) a Change of Control has occurred;
then, and in each and every such case (other than under clauses (e) and (f) with
respect to any Credit Party), unless the principal of all the Notes shall have
already become due and payable, the Purchaser, by notice in writing to the
Company, may declare the entire principal amount of the Notes together with
accrued interest thereon to be immediately due and payable. If an Event of
Default specified in clauses (e) or (f) with respect to any Credit Party occurs,
the principal of and accrued interest on the Notes will be immediately due and
payable without any declaration or other act on the part of the Holders. If an
Event of Default shall occur and for as long as such Event of Default shall be
continuing, the Purchaser shall have the right to appoint one representative to
sit on the Board of Directors of the Company.
Notwithstanding the foregoing, in the event of any default hereunder or pursuant
to any of the Subsidiary Debt, the Company, at Purchaser's request, shall
promptly repay any or all of the Subsidiary Debt, including, at the Purchaser's
sole discretion, by means of the issuance of additional Notes by the Company on
the same terms and conditions as set forth in this Agreement.
44
<PAGE> 46
ARTICLE VIII
LIMITATION ON TRANSFERS
Section 8.1. Restrictions on Transfer. From and after the date of
each Takedown and their respective dates of issuance, as the case may be, none
of the Notes shall be transferable except upon the conditions specified in
Sections 8.2 and 8.3, which conditions are intended to ensure compliance with
the provisions of the Securities Act in respect of the Transfer of any of such
Notes or any interest therein. Purchaser will cause any proposed transferee of
any Notes (or any interest therein) held by it to agree to take and hold such
Notes (or any interest therein) subject to the provisions and upon the
conditions specified in this Section 8.1 and in Sections 8.2 and 8.3.
Section 8.2. Restrictive Legends. (a) Each Note issued to Purchaser
or to a subsequent transferee shall (unless otherwise permitted by the
provisions of Section 8.2(b) or Section 8.3) include a legend in substantially
the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD,
UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND
THEN ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE
SECURITIES PURCHASE AGREEMENT DATED AS OF AUGUST 31, 1998, A COPY OF WHICH
MAY BE OBTAINED FROM THE ISSUER OF THIS SECURITY AT ITS PRINCIPAL
EXECUTIVE OFFICE.
(b) Any Holders of Notes registered pursuant to the Securities Act
and qualified under applicable state securities laws may exchange such Notes on
transfer for new securities that shall not bear the legend set forth in
paragraph (a) of this Section 8.2.
Section 8.3. Notice of Proposed Transfers. (a) Five Business Days
prior to any proposed Transfer (other than Transfers of Notes (i) registered
under the Securities Act, (ii) to an Affiliate of DLJSC or a general partnership
in which DLJSC or an Affiliate of DLJSC is one of the general partners or (iii)
to be made in reliance on Rule 144A under the Securities Act) of any Notes, the
holder thereof shall give written notice to the Company of such holder's
intention to effect such Transfer, setting forth the manner and circumstances of
the proposed Transfer, and shall be
45
<PAGE> 47
accompanied by (i) an opinion of counsel reasonably satisfactory to the Company
addressed to the Company to the effect that the proposed Transfer of such Notes
may be effected without registration under the Securities Act, (ii) such
representation letters in form and substance reasonably satisfactory to the
Company to ensure compliance with the provisions of the Securities Act and (iii)
such letters in form and substance reasonably satisfactory to the Company from
each such transferee stating such transferee's agreement to be bound by the
terms of this Agreement. Such proposed Transfer may be effected only if the
Company shall have received such notice of transfer, opinion of counsel,
representation letters and other letters referred to in the immediately
preceding sentence, whereupon the holder of such Notes shall be entitled to
Transfer such Notes in accordance with the terms of the notice delivered by the
holder. Each Note transferred as above provided shall bear the legend set forth
in Section 8.2(a) except that such Note shall not bear such legend if the
opinion of counsel referred to above is to the further effect that neither such
legend nor the restrictions on Transfer in Sections 8.1 through 8.3 are required
in order to ensure compliance with the provisions of the Securities Act.
Five Business Days prior to any proposed Transfer of any Notes to
be made in reliance on Rule 144A under the Securities Act ("Rule 144A"), the
holder thereof shall give written notice to the Company of such holder's
intention to effect such Transfer, setting forth the manner and circumstances of
the proposed Transfer and certifying that such Transfer will be made (i) in full
compliance with Rule 144A and (ii) to a transferee that (A) such holder
reasonably believes to be a "qualified institutional buyer" within the meaning
of Rule 144A and (B) is aware that such Transfer will be made in reliance on
Rule 144A. Such proposed Transfer may be effected only if the Company shall have
received such notice of transfer, whereupon the holder of such Notes shall be
entitled to Transfer such Notes in accordance with the terms of the notice
delivered by the holder. Each Note transferred as above provided shall bear the
legend set forth in Section 8.2(a).
ARTICLE IX
MISCELLANEOUS
Section 9.1. Notice. All notices, demands and other communications
to any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address set forth on the
signature pages hereof, or such other address as such party may hereinafter
specify for the purpose. Each such notice, demand or other communication shall
be effective (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified on the signature
46
<PAGE> 48
page hereof, or (ii) if given by overnight courier, addressed as aforesaid or by
any other means, when delivered at the address specified in this Section.
Section 9.2. No Waivers; Amendments. (a) No failure or delay on the
part of any party in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to any party at law or in equity or otherwise.
(b) Any provision of this Agreement may be amended, supplemented or
waived if, but only if, such agreement, supplement or waiver is in writing and
is signed by the Company and the Majority Holders; provided, that without the
consent of each Holder of any Note affected thereby, an amendment, supplement or
waiver may not (a) reduce the aggregate principal amount of Notes whose Holders
must consent to an amendment, supplement or waiver, (b) reduce the rate or
extend the time for payment of interest on any Note, (c) reduce the principal
amount of or extend the stated maturity of any Note or alter the redemption
provisions with respect thereto or (d) make any Note payable in money or
property other than as stated in the Notes. In determining whether the Holders
of the requisite principal amount of Notes have concurred in any direction,
consent, or waiver as provided in this Agreement or in the Notes, Notes which
are owned by the Company or any other obligor on or guarantor of the Notes, or,
by any Person controlling, controlled by, or under common control with any of
the foregoing, shall be disregarded and deemed not to be outstanding for the
purpose of any such determination; and provided further that no such amendment,
supplement or waiver which affects the rights of Purchaser and its Affiliates
otherwise than solely in their capacities as Holders of Notes shall be effective
with respect to them without their prior written consent.
Section 9.3. Indemnification. The Company (the "Indemnifying Party")
agrees to indemnify and hold harmless Purchasers, its Affiliates, and each
Person, if any, who controls Purchaser, or any of its affiliates, within the
meaning of the Securities Act or the Exchange Act (a "Controlling Person"), and
the respective partners, agents, employees, officers and directors of Purchaser,
its Affiliates and any such Controlling Person (each an "Indemnified Party" and
collectively, the "Indemnified Parties"), from and against any and all losses,
claims, damages, liabilities and expenses (including, without limitation and as
incurred, reasonable costs of investigating, preparing or defending any such
claim or action, whether or not such Indemnified Party is a party thereto),
arising out of, or in connection with any activ-
47
<PAGE> 49
ities contemplated by this Agreement or any of the services rendered in
connection herewith, including, but not limited to, losses, claims, damages,
liabilities or expenses arising out of or based upon any untrue statement or any
alleged untrue statement of a material fact or any omission or any alleged
omission to state a material fact in any of the disclosure or offering or
confidential information documents (the "Disclosure Documents") pertaining to
any of the transactions or proposed transactions contemplated herein, including
any eventual refinancing or resale of the Notes, provided that the Indemnifying
Party will not be responsible for any claims, liabilities, losses, damages or
expenses that are determined by final judgment of court of competent
jurisdiction to result from such Indemnified Party's gross negligence, willful
misconduct or bad faith. The Indemnifying Party also agrees that Purchaser shall
have no liability (except for breach of provisions of this Agreement) for
claims, liabilities, damages, losses or expenses, including legal fees, incurred
by the Indemnifying Party in connection with this Agreement unless they are
determined by final judgment of a court of competent jurisdiction to result from
(a) Purchaser's gross negligence, willful misconduct or bad faith, (b)
Purchaser's use of Disclosure Documents not approved by the Indemnifying Party
or (c) the failure of Purchaser to furnish to any purchaser of securities any
Disclosure Document furnished to Purchaser by the Indemnifying Party which
corrected any untrue statement of a material fact or omission to state a
material fact contained in a Disclosure Document previously furnished to such
purchaser by Purchaser.
If any action shall be brought against an Indemnified Party with
respect to which indemnity may be sought against the Indemnifying Party under
this Agreement, such Indemnified Party shall promptly notify the Indemnifying
Party in writing and the Indemnifying Party shall, if requested by such
Indemnified Party or if the Indemnifying Party desires to do so, assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party and payment of all reasonable fees and expenses. The
failure to so notify the Indemnifying Party shall not affect any obligations the
Indemnifying Party may have to such Indemnified Party under this Agreement or
otherwise unless the Indemnifying Party is materially adversely affected by such
failure. Such Indemnified Party shall have the right to employ separate counsel
in such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party, unless: (i)
the Indemnifying Party has failed to assume the defense and employ counsel or
(ii) the named parties to any such action (including any impleaded parties)
include such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Indemnifying Party, in which case, if such Indemnified Party
notifies
48
<PAGE> 50
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Party, provided, however, that the Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be responsible hereunder for
the reasonable fees and expenses of more than one such firm of separate counsel,
in addition to any local counsel, which counsel shall be designated by
Purchaser. The Indemnifying Party shall not be liable for any settlement of any
such action effected without the written consent of the Indemnifying Party
(which shall not be unreasonably withheld) and the Indemnifying Party agrees to
indemnify and hold harmless each Indemnified Party from and against any loss or
liability by reasons of settlement of any action effected with the consent of
the Indemnifying Party. In addition, the Indemnifying Party will not, without
the prior written consent of Purchaser, settle or compromise or consent to the
entry of any judgment in or otherwise seek to terminate any pending or
threatened action, claim, suit or proceeding in respect of which indemnification
or contribution may be sought hereunder (whether or not any Indemnified Party is
a party thereto) unless such settlement, compromise, consent, or termination
includes an express unconditional release of Purchaser and the other Indemnified
Parties, reasonably satisfactory in form and substance to Purchaser, from all
liability arising out of such action, claim, suit or proceeding.
If for any reason the foregoing indemnity is unavailable (otherwise
than pursuant to the express terms of such indemnity) to an Indemnified Party or
insufficient to hold an Indemnified Party harmless, then in lieu of
indemnifying the Indemnified Party, the Indemnifying Party shall contribute to
the amount paid or payable by such Indemnified Party as a result of such claims,
liabilities, losses, damages, or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying Party
on the one hand and by Purchaser on the other from the transactions contemplated
by this Agreement or (ii) if the allocation provided by clause (i) is not
permitted under applicable law, in such proportion as is appropriate to reflect
not only the relative benefits received by the Indemnifying Party on the one
hand and Purchaser on the other, but also the relative fault of the Indemnifying
Party and Purchaser as well as any other relevant equitable considerations.
Notwithstanding the provisions of this Section 9.3, the aggregate contribution
of all Indemnified Parties shall not exceed the amount of fees actually received
by Purchaser pursuant to this Agreement. It is hereby further agreed that the
relative benefits to the Indemnifying Party on the one hand and the Purchaser on
the other with respect to the transactions contemplated hereby shall be
determined by
49
<PAGE> 51
reference to, among other things, whether any untrue or alleged untrue
statements of material fact or the omission or alleged omission to state a
material fact related to information supplied by the Indemnifying Party or by
Purchaser and the party's relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
The indemnification, contribution and expense reimbursement
obligations set forth in this Section 9.3 (i) shall be addition to any liability
the Indemnifying Party may have to any Indemnified Party at common law or
otherwise, (ii) shall survive the termination of this Agreement and the payment
in full of the Notes and (iii) shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of Purchaser or any
other Indemnified Party.
Section 9.4. Expenses. The Company agrees to pay all reasonable
out-of-pocket costs, expenses and other payments in connection with the purchase
and sale of the Notes as contemplated by this Agreement including without
limitation (i) fees and disbursements of special counsel and any local counsel
for Purchaser incurred in connection with the preparation of this Agreement,
(ii) all reasonable out-of-pocket expenses of Purchaser, including reasonable
fees and disbursements of counsel, in connection with any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (iii) if an Event of Default occurs, all reasonable out-of-pocket expenses
incurred by Purchaser and each holder of Notes, including reasonable fees and
disbursements of a single counsel (which counsel shall be selected by Purchaser
if Purchaser is a holder of Notes when such Event of Default occurs), in
connection with such Event of Default and collection, bankruptcy, insolvency and
other enforcement proceedings resulting therefrom.
Section 9.5. Payment. The Company agrees that, so long as Purchaser
shall own any Notes purchased by it from the Company hereunder, the Company will
make payments to Purchaser of all amounts due thereon by wire transfer by 1:00
PM (New York City time) on the date of payment to such account as is specified
beneath Purchaser's name on the signature page hereof or to such other account
or in such other similar manner as Purchaser may designate to the Company in
writing.
Section 9.6. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the Company and Purchaser and their
respective successors and assigns; provided that the Company may not assign or
otherwise
50
<PAGE> 52
transfer its rights or obligations under this Agreement to any other Person
without the prior written consent of the Majority Holders except pursuant to the
Nextera Incorporation. All provisions hereunder purporting to give rights to
DLJSC and its Affiliates or to Holders are for the express benefit of such
Persons.
Section 9.7. Brokers. The Company represents and warrants that,
except for DLJSC, neither it nor any Credit Party has employed any broker,
finder, financial advisor or investment banker who might be entitled to any
brokerage, finder's or other fee or commission in connection with any
Acquisition or the sale of the Notes.
Section 9.8. New York Law; Submission to Jurisdiction; Waiver of
Jury Trial. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY
FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.9. Severability. If any term, provision, covenant or
restriction of the Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 9.10. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original with the same effect
as if the signatures thereto and hereto were upon the same instrument.
51
<PAGE> 53
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
NEXTERA ENTERPRISES, L.L.C.
By: /s/ MICHAEL P. MULDOWNEY
-----------------------------------
Name: Michael P. Muldowney
Title: Chief Financial Officer
Address:
One Cranberry Hill
Lexington, MA 02173
Attention: Gresham T. Brebach, Jr.
Fax No.: (781) 778-4500
52
<PAGE> 54
NEXTERA FUNDING, INC.
By: /s/ PAUL THOMPSON, III
-----------------------------------
Name: Paul Thompson, III
Title: Director & President
Address:
277 Park Avenue
New York, NY 10172
Attention: Paul Thompson, III
Fax No.: (212) 892-7272
Account Number and Bank for Payments:
Account Name: DLJ Securities Corp.
Bank Name: Citibank
ABA Number: 021 000 089
Account Number: 3889-6041
For Further Credit to: Nextera Funding, Inc.
Account Number: 275005759
Attn: Bill Spiro
<PAGE> 1
EXHIBIT NO. 10.17
NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD, UNLESS IT
HAS BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND THEN ONLY IN COMPLIANCE
WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SECURITIES PURCHASE AGREEMENT
DATED AS AUGUST 31, 1998, A COPY OF WHICH MAY BE OBTAINED FROM NEXTERA
ENTERPRISES, L.L.C. AT ITS PRINCIPAL EXECUTIVE OFFICE.
No. 1 $38,000,000
NEXTERA ENTERPRISES, L.L.C.
Senior Secured Note
NEXTERA ENTERPRISES, L.L.C. (the "Company"), for value received
hereby promises to pay to NEXTERA FUNDING, INC., a Delaware corporation (the
"Holder"), the principal sum of thirty-eight million dollars ($38,000,000), in
lawful money of the United States of America and in immediately available funds,
on March 1, 1999 and to pay interest on the unpaid principal amount, in like
money and funds, for the period commencing on the date of this Note until
payment in full of the principal sum hereof has been made, at the rates per
annum and on the dates provided in the Agreement (as defined below).
This Senior Secured Note is one of a duly authorized issue of
Senior Secured Notes of the Company (the "Notes") referred to in the Securities
Purchase Agreement dated as of August 31, 1998 between the Company and the
Holder (as the same may be amended, restated or otherwise modified from time to
time in accordance with its terms, the "Agreement"). Capitalized terms used in
this Note have the respective meanings assigned to them in the Agreement.
This Note is entitled to the benefit and security of the Security
Documents.
The Notes are transferable and assignable to one or more
purchasers in accordance with the limitations set forth in the Agreement. The
Company agrees to issue from time to time replacement Notes in the form hereof
to facilitate such transfers and assignments.
A-1
<PAGE> 2
The Company shall keep at its principal office a register (the
"Register") in which shall be entered the names and addresses of the registered
holders of the Notes and particulars of the respective Notes held by them and of
all transfers of such Notes. References to the "Holder" or "Holders" shall mean
the Person listed in the Register as the payee of any Note. The ownership of the
Notes shall be proven by the Register.
Upon the occurrence of an Event of Default, the principal hereof
and accrued interest hereon shall become, or may be declared to be, forthwith
due and payable in the manner, upon the conditions and with the effect provided
in the Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW). THE COMPANY HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS NOTE.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
Dated: September 1, 1998
NEXTERA ENTERPRISES, L.L.C.
By: /s/ MICHAEL P. MULDOWNEY
------------------------------------
Name: Michael P. Muldowney
Title: Chief Financial Officer
A-2
<PAGE> 1
Exhibit 10.18
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and is effective as
of March 3, 1997 (the "Effective date"), by and between Education Technology
Consulting Holding, L.L.C., a Delaware limited liability company ("Company")
and Gresham T. Brebach, Jr. ("Executive"), with reference to the following:
RECITALS
A. Company has been formed for the purpose of engaging in the
business of providing strategic consulting services, including but not limited
to performance innovations, to organizations seeking applications and solutions
to improve productivity and effectiveness of human capital.
B. Company and Executive desire to enter into this Agreement
pursuant to which Executive will be employed by Company in the capacity of
President and Chief Executive Officer of Education Technology Consulting,
L.L.C. ("Consulting"), a subsidiary of Company and will otherwise be engaged to
render valuable services for the benefit of the Company and Consulting, all on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants set forth herein and other good and valuable consideration, the
receipt and sufficiency of which the parties hereby acknowledge, the parties
agree as follows:
1. Employment. Company hereby agrees to employ Executive as
President and Chief Executive Officer of Consulting
-1-
<PAGE> 2
for the term and under the terms and conditions set forth in this Agreement
below.
2. Duties. Executive shall render and perform such services and
functions as such shall be assigned to him from time to time by the Board of
Directors of Company, which duties shall include generally, though not
exclusively, assisting the Company in the building of a business consistent
with Recital A above, including but not limited to consulting with
organizations in information intensive businesses on the use of knowledge and
technology to support individual and organizational performance gain. Neither
Company nor Consulting will engage in any activities that would result in
Company or Consulting being associated with (a) a "broker", as defined in
Section 3(a)(4) of the Securities Exchange of 1934, as amended (the "Exchange
Act"), Section 202(a)(3) of the Investment Advisers Act of 1940, as amended
(the "Investment Advisers Act"), or Section 2(a)(6) of the Investment Company
Act of 1940, as amended (the "Investment Company Act"), (b) a "dealer", as
defined in Section 3(a)(5) of the Exchange Act, Section 202(a)(7) of the
Investment Advisers Act or Section 2(a)(11) of the Investment Company Act, (c)
an "investment adviser", as defined in Section 202(a)(11) of the Investment
Advisers Act or Section 2(a)(20) of the Investment Company Act, (d) an
"investment company", as defined in Section 3(a) of the Investment Company Act,
(e) a "municipal securities dealer", as defined in Section 3(a)(30) of the
Exchange Act, (f) in the case of each of the terms specified in the foregoing
clauses (a) through (e), as each such term is defined under any similar state
law, or
-2-
<PAGE> 3
(g) a "real estate broker" or "business opportunity broker" as each such term
is defined under any federal or state law.
3. Standard of Performance. Executive agrees that at all times during
the Employment Term (as defined below) he will perform all of the services and
duties that are required of Executive under this Agreement faithfully and
efficiently, to the best of Executive's ability. Executive shall devote his
full time and attention consistent with paragraph 4 below, to the business of
Company as shall be required to perform the required services and duties.
4. Exclusive Employment.
4.1 Full Time and Energy; Exceptions.
During the Employment Term (as defined below), Executive shall
perform his duties and functions under this Agreement in a competent and
efficient manner, and shall devote his entire time, attention, and energies to
the affairs of the Company and use his best efforts to promote the Company's
interests and perform the duties assigned to Executive, subject to the ultimate
authority and direction of the Board of the Company; provided that nothing
contained herein shall prevent Executive from (a) serving on community or
charitable boards which do not interfere with the performance of his
responsibilities hereunder; (b) managing his personal investments and affairs
consistent with his duties and responsibilities hereunder; and (c) taking
vacations or sick leave to which he is entitled hereunder.
-3-
<PAGE> 4
4.2 Other Business Activities.
Executive may not render services of any kind to others for
compensation, or engage in any other business activity that would interfere
with the performance of Executive's duties under this Agreement unless
otherwise expressly authorized by the Board, which authorization will not be
unreasonably withheld.
5. Place of Employment. Executive's performance of services under this
Agreement shall be rendered in Boston, Massachusetts. In addition, Executive
shall make himself available from time to time in Los Angeles, California as
requested by the Board.
6. Term of Employment. The "Employment Term" for purposes hereof shall
commence on the Effective Date and, unless terminated earlier as provided in
this Agreement, shall continue for a period of three (3) years following the
Effective Date. Company shall have the option to extend the Employment Term for
an additional period of two years, by giving written notice thereof ninety (90)
days prior to the expiration of the initial term hereof.
7. Compensation. In consideration of Executive's employment and the
covenants and agreements provided in this Agreement, and except as otherwise
provided herein, Executive shall receive from Company the compensation and
benefits described in Sections 7, 8, 9 and 13 hereof, in full and complete
satisfaction of all of Company's obligations to Executive arising from
Executive's employment. The compensation and benefits payable to
-4-
<PAGE> 5
Executive pursuant to this Agreement may be changed only by the written
agreement of the parties. Executive authorizes the Company to deduct and
withhold from all compensation to be paid to him any and all sums required to
be deducted or withheld by Company pursuant to the provisions of any federal,
state, or local law, regulation, ruling, or ordinance, including, but not
limited to, income tax withholding and payroll taxes.
7.1 Salary. Company shall pay Executive an annual base salary
payable at the rate of Five Hundred Thousand Dollars ($500,000.00) per year, in
semi-monthly installments and otherwise in accordance with Company's payroll
methods and procedures. For the initial year of the Employment Term, Company
shall pay Executive $325,000 of his base salary within thirty (30) days of
commencement of the Employment Term and the balance of $175,000 shall be paid
in semi-monthly installments as provided in the preceding sentence.
7.2 Guaranteed Bonus. Company shall pay Executive during the
Employment Term and annual bonus of $150,000 per year, payable in semi-monthly
installments and otherwise in accordance with Company's payroll methods and
procedures.
7.3 Bonus Compensation. In addition to the guaranteed bonus,
provided in Section 7.2 above, the Board shall meet and review Executive's
performance each year and consider at its sole and absolute discretion the
payment of bonus compensation to Executive in an amount not to exceed one-third
of Executive's base salary. Executive acknowledges that there is no obligation
to
-5-
<PAGE> 6
him whatsoever with respect to any bonus, except as provided in Section 7.2
above.
7.4 Other Interests. (a) The Company and Executive acknowledge that
the Executive holds certain Options pursuant to the provisions of a Unit Option
Agreement. Executive's rights and obligations with respect to said Options are
covered by agreements separate and apart herefrom. During the Employment Term,
Executive shall participate in any additional option, retirement or similar
incentive plans which the Company shall have in effect from time to time for the
benefit of all of the executive employees.
(b) The Company and Executive agree that Executive shall have the
right to purchase 4% of the initial common equity of Company. The initial
capitalization of the Company shall be $1 million in common equity and $24
million in straight preferred equity. Executive shall purchase his common equity
for $40,000 on or before March 31, 1997. Company and Executive agree that
Company shall have the right to repurchase a portion of any common equity
Executive purchases pursuant to this Section 7.4(b) at the original cost thereof
in the event this agreement terminates or Executive otherwise leaves the employ
of Company ("termination event") prior to four years from the commencement of
the Employment Term. The portion of Executive's common equity which Company has
a right to repurchase pursuant to this Section 7.4(b) shall equal (i) 80%, if
the termination event is prior to one year from the commencement of employment,
(ii) 60%, if the termination event is after one year but prior to two years the
commencement of employment; (iii) 40% if the termination event is after two
years but prior to
-6-
<PAGE> 7
three years from the commencement of employment; and (iv) 20% if the
termination event is after three years but prior to four years from the
commencement of employment. Company's right to repurchase a portion of
Executive's common equity shall terminate if Executive leaves the employ of
company prior to the end of three years for any reason other than Executive's
death, disability, cause (as defined below), voluntary termination of
employment by Executive, or in event Company does not elect to extend the
Employment Term past the initial three years.
8. Benefits.
8.1 Office Facilities and Secretary. Company shall provide
Executive with suitable office space at such applicable place of employment
described in paragraph 5 above.
8.2 Vacation. During the Employment Term, Executive shall be
entitled to twenty days of vacation at full salary for every period of twelve
months during the Employment Term. Unused vacation time will not accrue in
excess of twenty days unless such accrual is approved in advance by the Board.
Said vacation days shall be planned consistent with Executive's duties and
obligations hereunder.
8.3 Medical, Etc. Executive shall be entitled to specific and
applicable executive benefits, such as group medical and dental for Executive,
Executive's spouse and minor dependent children, life and disability insurance
coverage, and sic leave all as granted to the Company's executives in
accordance with the Company's policies and guidelines as approved by the Board.
-7-
<PAGE> 8
9. Business Expenses. Company shall pay for or reimburse
Executive for all reasonable business expenses incurred by Executive in the
performance of his duties hereunder, upon submission to the Company in
accordance with Company policy of a written accounting of such expenses, which
accounting shall include an itemized list of all expenses incurred, the business
purposes for which such expenses were incurred, and such receipts as Executive
reasonably has been able to obtain. Without limiting the preceding sentence,
Company shall reimburse Executive for the cost of housing in Los Angeles as
necessary to accommodate Executive during the time he is required to be in Los
Angeles.
10. Termination. Except as otherwise expressly provided herein,
this Agreement and all rights and obligations hereunder shall terminate prior
to the end of the Employment Term upon the occurrence of any of the following
events:
10.1 Death. Upon the death of Executive;
10.2 Personal Disability. Upon the ninetieth (90th) day after
receipt by Executive of notice from the Company of its intention to terminate
Executive's employment as a result of the "permanent disability" of Executive.
As used herein, the term "permanent disability" shall mean a physical or mental
disability that renders Executive unable to perform his normal duties for the
Company for a period of 120 consecutive days as determined by a licensed
physician. The Company and Executive or his legal representative shall use
their best efforts to agree on the physician to determine total disability. If
they cannot agree within three (3) days after the first party makes a written
-8-
<PAGE> 9
proposal stating the name of a physician, then the other party shall select a
physician within three (3) days and within three (3) days thereafter the two
physicians shall select a third physician. All such physicians must be board
certified in the medical area giving rise to the alleged permanent disability.
The determination of a majority of the three physicians shall be final and
binding;
10.3 Cessation of Business. Upon the termination or cessation of the
business operation of Company; and
10.4 Cause. Upon a termination by the Company for cause pursuant to
paragraph 11 below.
The effect of any such termination under this paragraph 10 is set forth in
paragraph 13 below.
11. Termination for Cause. The Company may terminate this Agreement for
cause at any time. For purposes of this Agreement, the term "cause" shall be
defined as disloyalty or dishonesty which results or is intended to result in
personal enrichment to Executive at the expense of Company; acts of moral
turpitude or illegal or unprofessional conduct which may adversely affect the
reputation of the Company and/or its relationship with its customers, partners
or suppliers; fraudulent conduct in connection with the business or affairs of
Company without regard to the intent of any such conduct; or material and
intentional violation by Executive of his duties and obligations set forth in
paragraphs 2 through 4 above which results in material injury to Company.
12. Notice of Termination. Except as expressly provided above, any
termination hereunder shall occur upon notification by
-9-
<PAGE> 10
one party to the other in accordance with paragraph 20.3 below. Any such notice
shall refer to the specific termination provision of this Agreement setting
forth in reasonable detail the facts and circumstances claimed as the basis for
such termination. The date of termination shall be either the date of receipt
of the notice or, if the reason for termination is the Executive's death or
Executive's permanent disability, the date of termination shall be as set forth
in paragraph 10 above.
13. Effect of Termination. In the event of termination of Executive's
employment hereunder, the rights and obligations of the parties shall be as
follows:
13.1 In Event of Death. In the event of termination as a result of
Executive's death, the Company shall have no further obligation to the
Executive's representatives and heirs hereunder except as follows:
(a) The Company shall pay to Executive's spouse or estate an
amount equal to Executive's base salary and guaranteed bonus for one year.
(b) To the extent not already 60% vested, Executive's options
referred to in paragraph 7.4(a) above that have not vested shall vest as
provided in the Unit Option Agreement referred to in paragraph 7.4(a).
(c) In the event Executive had not been employed for at least
two (2) years, for purposes of calculating the Company's right to repurchase a
portion of Executive's common equity referred to in paragraph 7.4(b) above,
Executive shall be deemed to have been employed for not less than 2 years.
-10-
<PAGE> 11
13.2 In Event of Permanent Disability. In the event of termination
as a result of permanent disability, Executive shall be entitled to receive
disability and other benefits not less than those provided to disabled
employees and/or other families in accordance with any plans or policies of the
Company in effect at that time.
13.3 In Event Company Terminates Without Cause. In the event the
Company terminates the Executive's employment for any reason other than the
death or disability of Executive, or cause, the Company shall pay Executive (i)
in a lump sum within thirty (30) days of the effective date of termination, any
base salary due through the date of termination; (ii) the balance of
Executive's base salary which he would have been entitled to receive through
the end of the then applicable Employment Term; (iii) continuation of benefits
upon the same terms and conditions then in effect on the date of termination
under all medical, dental and life insurance plans through the end of the then
applicable Employment Term or Executive's commencement of employment elsewhere,
whichever is first to occur, provided that Executive at his own expense shall
be entitled to continue appropriate benefits under any applicable Cobra
program; and (iv) the Company shall reimburse Executive for costs and expenses
which he has incurred and which would otherwise have been payable under
paragraph 9 above had the employment not been so terminated.
13.4 In the event the Company terminates the Executive's
employment for cause or the Executive terminates his employment, the Company's
sole obligation shall be to pay Executive
-11-
<PAGE> 12
his full base salary through the date of termination, and Company shall have no
further obligations to the Executive pursuant to this Agreement.
14. Sale or Dissolution of Business. In the event of voluntary or
involuntary dissolution of the Company or a sale, merger, consolidation or
similar transaction involving the Company in which the Company is not the
surviving entity, or a transfer of all or substantially all of the assets of
the Company, the Company on behalf of it and its successors and assigns agrees
that such transaction or event will not adversely affect the Executive's
financial interests in, or otherwise result in a dilution of Executive's
rights, whether vested or contingent, with regard to, any of Executive's
options or similar programs in which the Executive is then participating.
15. Approval of Publicity. Company and Executive shall mutually approve
all press releases and other items of publicity with respect to Executive's
employment hereunder.
16. Covenants of Executive.
16.1 Confidential Information. "Confidential Information" shall
mean information and compilations of information relating to Company's
business, Company's owners and Company's non-institutional lenders, provided to
Executive during his employment with Company or to which Executive had access
or which he compiled while an executive, including, but not limited to,
information regarding any operating procedures, finances, financial condition,
organization, executives, agents, and other personnel, business activities,
budgets, plans, objectives, or strategies of Company.
-12-
<PAGE> 13
16.2 Covenant as to Nondisclosure or Use of Confidential
Information. Executive agrees that at all times during the Employment Term
hereunder and for a period of two (2) years thereafter, he will not, unless
required to do so pursuant to legal process such as subpoena, disclose to any
individual or business enterprise of any nature, or use for his own personal
use or financial gain, whether individually or on behalf of another person,
firm, corporation or entity, any Confidential Information which Executive has
obtained or will obtain in connection with his employment with Company. Such
restrictions shall not apply to information which has become public prior to
such disclosure by Executive. In the event Executive is required by legal
process to disclose any Confidential Information, he shall give prompt notice
thereof to Company to allow Company to object to such process, obtain a
protective order, or take any other action it deems necessary.
16.3 Return of Business Records. Upon termination of Executive's
employment, Executive shall promptly, if so requested by Company, return all
documents, records, procedures, books, notebooks, and any other documentation
containing any information pertaining to the Company which includes
Confidential Information, including any and all copies of such documentation,
then in Executive's possession or control regardless of whether such
documentation was prepared or compiled by Executive, Company, other executives
of Company, representatives, agents, or independent contractors. Executive
acknowledges that all such
-13-
<PAGE> 14
documentation and copies of such documentation is and shall at all times remain
the sole and exclusive property of Company.
16.4 Additional Covenants Protecting the Interests of Company.
Executive agrees that during his employment hereunder, and (a) for a period of
one year thereafter if the Employment Term ends for reasons other than either
cause, permanent disability, death or Executive terminating his employment
hereunder, or (b) for a period of five years from the date hereof, if the
Employment Term ends for any reason other than as stated in (a) above, Executive
shall not directly or indirectly, individually, or together through any other
person, firm, corporation or entity, without the prior written consent of
Company, engage in any business with any person or entity which is a customer or
client of Company, or approach, counsel, or attempt to induce any person who is
then in the employ of Company, to leave their employ, other than Executive's
secretary, or employ or attempt to employ any such person, other than
Executive's secretary, or aid or counsel any other person, firm, corporation, or
entity to do any of the above.
16.5 Post-Employment Cooperation. Executive agrees that, for a period
of two (2) years following his termination of employment under this Agreement,
he shall, upon Company's reasonable request and in good faith and with his best
efforts, subject to his reasonable availability, cooperate and assist Company in
any dispute, controversy, or litigation in which Company may be involved and
with respect to which Executive obtained knowledge while employed by the Company
or any of its affiliates, successors, or assigns, including, but not limited to,
his
-14-
<PAGE> 15
participation in any court or arbitration proceedings, giving of testimony,
signing of affidavits, or such other personal cooperation as counsel for Company
shall request. Any such activities shall be scheduled, to the extent reasonably
possible, to accommodate Executive's business and personal obligations at the
time. Company shall pay Executive's travel and incidental out-of-pocket expenses
incurred in connection with any such cooperation, as well as the costs of any
attorney Executive engages to advise him in connection with the foregoing.
16.6 Remedies. In view of the position of confidence which Executive
will enjoy with Company and the anticipated relationship with the clients,
customers, and executives of Company pursuant to his employment hereunder, and
recognizing both the access to confidential financial and other information
which Executive will have pursuant to his employment, Executive expressly
acknowledges that the restrictive covenants set forth in this Section 16 are
reasonable and necessary in order to protect and maintain the proprietary
interests and other legitimate business interests of Company. Executive further
acknowledges that (a) it would be difficult to calculate damages to Company from
any breach of his obligations under this Section 16, (b) that injury to Company
from any such breach would be irreparable and impossible to measure, and (c)
that the remedy at law for any breach or threatened breach of this Section 16
would therefore be an inadequate remedy and, accordingly, Company shall, in
addition to all other available remedies, be entitled to injunctive and other
similar equitable remedies.
-15-
<PAGE> 16
17. Dispute Resolution. If a dispute arises between the parties
concerning the interpretation of this Agreement or whether a party is in
violation of this Agreement, including but not limited to claims relating to
termination of this Agreement and definition of "cause", then either party may
deliver a written notice of such dispute to the other party (a "Dispute
Notice"). If such dispute is not resolved by the parties within ten (10) days
of the Dispute Notice, then the resolution of the dispute described in the
Dispute Notice shall be determined by an expedited arbitration proceeding
conducted under California law and the labor arbitration rules of the American
Arbitration Association (the "Arbitration") with discovery conducted pursuant
to the provisions of California Code of Civil Procedure Sections 2016 et seq.
Any arbitration proceeding determinations shall be binding on the parties. The
arbitration shall not be used to modify any provision of this Agreement and
shall merely interpret the provisions hereof.
17.1 Selection and Conduct of Arbitrators. The Arbitration
proceeding shall be conducted by each of the parties appointing a qualified
arbitrator within twenty (20) days of the Dispute Notice. A qualified
arbitrator means a person who has had substantial experience in connection with
matters involving the interpretation of employment agreements and the
operations of companies similar to Company and who is unaffiliated with and
otherwise independent of the parties and their affiliates. The two arbitrators
so selected shall within the succeeding twenty (20) day period after their
selection attempt to reach agreement on the dispute submitted after considering
all of the evidence submitted
-16-
<PAGE> 17
by the parties. If the arbitrators fail to reach an agreement within such
twenty (20) day period, they shall within five (5) days thereafter select a
third qualified arbitrator. In the event the two arbitrators are unable to
reach agreement on the third arbitrator, then the parties shall select a third
arbitrator from a list of seven arbitrators provided by the Los Angeles County
Office of the American Arbitration Association with each party having the right
to strike names in order until they either agree on an arbitrator from the
list, or until one arbitrator's name remains on the list. The party with the
right to strike the first name shall be determined by the flip of a coin. Such
third arbitrator shall determine the resolution of the dispute within the
succeeding twenty (20) day period and such decision shall be final and binding
on the parties.
17.2 Sole and Exclusive Remedy. In consideration of the parties
agreement to submit all disputes hereunder to arbitration, and in further
consideration of minimizing the time and expense of resolving any dispute
pursuant hereto, the arbitration provisions shall be the sole and exclusive
remedy of the parties, and each party expressly waives the right to seek
resolution by any other means or in any other forum.
17.3 Expiration of Claims. All claims that any other party has
against the other must be presented in writing within one (1) year of the date
the claiming party knew or should have known of the facts giving rise to the
claim, or, with respect to claims related to termination of Executive's
employment, within one (1) year of the date of termination hereunder. Any claim
not
-17-
<PAGE> 18
brought within said time period shall be waived and forever barred unless the
party against whom such claim is made agrees to waive such time period.
17.4 Enforceability and Costs. Upon completion of the arbitration,
either party may thereafter unilaterally and immediately cause the other to
comply with the decision made by the arbitration proceeding, and any such
decision may be entered in the Superior Court of the State of California or any
other court having jurisdiction. All arbitration costs during the arbitration
shall be paid equally by the parties until such time as a final decision is
made. Likewise, until such time as a final decision is made, each party shall
bear their own attorneys fees. The prevailing party shall receive a complete
reimbursement from the non-prevailing party upon completion of the arbitration
for all costs incurred by the prevailing party, including, but not limited to,
direct arbitration costs paid by the prevailing party and the prevailing
party's reasonable attorneys' fees and other costs.
18. Representations by Executive. Executive represents and warrants
that he is free to enter into and perform each of the terms and conditions of
this Agreement; and that his execution and/or performance of all his
obligations under this Agreement does not and will not violate or breach any
other agreement between Executive and any other person or entity.
19. Indemnification. Company shall, to the maximum extent permitted
by law, indemnify, defend, and hold Executive harmless for all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries, and
deficiencies,
-18-
<PAGE> 19
including reasonable attorneys' fees, that Executive shall incur or suffer that
arise from, result from, or relate to the discharge of Executive's duties under
this Agreement, except to the extent that Executive has acted in bad faith or
shall be guilty of willful misconduct, fraud, gross negligence, or a wrongful
taking.
20. General Provisions.
20.1 Further Assurance. The parties agree that, at any time and
from time to time during the Employment Term, they will take any action and
execute and deliver any document which any other party reasonably requests in
order to carry out the purposes of this Agreement.
20.2 Amendment of Agreement. This Agreement may be amended or
supplemented only in writing, and no amendment or supplement will be effective
unless executed by all of the parties.
20.3 Notices. Any notice, consent, waiver, demand, or other
communication required or permitted to be given by or to any person pursuant to
this Agreement (collectively "Notice") will be in writing, and will be given
either by personal service, facsimile transmission, by certified mail, return
receipt requested, or by Federal Express or similar commercial overnight
courier service, to a party at the address set forth below:
If to Company:
Education Technology Consulting Holdings, L.L.C.
844 Moraga Drive
Los Angeles, CA 90049
Attention: Michael Milken
If to Executive:
Gresham T. Brebach, Jr.
400 Ocean Avenue
Marblehead, MA 09145
-19-
<PAGE> 20
In the case of personal service, Notice will be deemed effective on the
date of service. In all other cases, Notice will be deemed effective on the
date of delivery, as shown on the return receipt or other written evidence of
delivery, if any, or five (5) days after dispatch if there is no return receipt
or written evidence of delivery. A party may change the address at which Notice
is to be given, at any time and from time to time, by giving Notice of the new
address to the other parties in accordance with this Section.
20.4 Entire Agreement. This Agreement contains the entire
understanding between the parties, and supersedes all prior understandings and
agreements between them, regarding its subject matter. There are no oral or
written representations, agreements, arrangements, or understandings between
the parties relating to the subject matter of this Agreement which are not
fully set forth herein.
20.5 Binding Effect and Assignment. This Agreement is binding upon
and inures to the benefit of the parties and their respective heirs, executors,
administrators, personal representatives, successors, and assigns. Company may
assign its rights or delegate its duties under this Agreement at any time and
from time to time. However, the parties acknowledge that the availability of
Executive to perform services was a material consideration for Company to enter
into this Agreement. Accordingly, Executive may not assign any of his rights or
delegate any of his duties under this Agreement, either voluntarily or by
operation of law, without the prior written consent of Company.
-20-
<PAGE> 21
which may be given or withheld by Company in its sole and absolute discretion.
Company agrees to require any successor to all or substantially all of its
business and/or assets, whether direct or indirect, by agreement in form and
substance reasonably satisfactory to Executive, to assume and agree to perform
this Agreement in the same manner and extent as Company would be required to
perform had no such succession taken place.
20.6 Applicable Law; Choice of Forum. This Agreement has been made
and executed under, and will be construed and interpreted in accordance with,
the laws of the State of California. Subject to paragraph 17 above regarding
Dispute Resolution, the parties consent to the jurisdiction of the courts of
the State of California located in Los Angeles County and the United States
District Courts located in the Central District of the State of California in
any action or proceeding arising out of this Agreement, and agree that in those
actions or proceedings, venue will be proper in Los Angeles County (if the
action or proceeding is brought in the Superior Court of California) or in the
Central District of California (if the action or proceeding is brought in the
United States District Court).
20.7 Attorneys' Fees. In any action or proceeding to enforce or
interpret this Agreement, or arising out of this Agreement, the prevailing
party or parties are entitled to recover a reasonable allowance for fees and
disbursements of counsel and costs of arbitration or suit, to be determined by
the arbitrator or court to which the action or proceeding is brought.
-21-
<PAGE> 22
20.8 Provisions Severable. Every provision of this Agreement is
intended to be severable from every other provision of this Agreement. If any
provision of this Agreement is held to be void or unenforceable, in whole or in
part, the remaining provisions will remain in full force and effect, unless the
remaining provisions are so eviscerated by such holding that they do not
reflect the intent of the parties in entering into this Agreement. If any
provision of this Agreement is held to be unreasonable or excessive in scope or
duration, that provision will be enforced to the maximum extent permitted by
law.
20.9 Non-Waiver of Rights and Breaches. Any waiver by a party of
any breach of any provision of this Agreement will not be deemed to be a waiver
of any subsequent breach of that provision, or of any breach of any other
provision of this Agreement. No failure or delay in exercising any right,
power, or privilege granted to a party under any provision of this Agreement
will be deemed a waiver of that or any other right, power, or privilege. No
single or partial exercise of any right, power, or privilege granted to a party
under any provision of this Agreement will preclude any other or further
exercise of that or any other right, power, or privilege.
20.10 Interpretation of Agreement. Each of the parties has been
represented by counsel in the negotiation and preparation of this Agreement.
The parties agree that this Agreement is to be construed as jointly drafted.
Accordingly, this Agreement will be construed according to the fair meaning of
its
-22-
<PAGE> 23
language, and the rule of construction that ambiguities are to be resolved
against the drafting party will not be employed in the interpretation of this
Agreement.
20.11 Headings. The headings of the Sections and Paragraphs of this
Agreement are inserted for ease of reference only, and will have no effect in
the construction or interpretation of this Agreement.
20.12 Counterparts. This Agreement and any amendment or supplement
to this Agreement may be executed in two or more counterparts, each of which
will constitute an original but all of which will together constitute a single
instrument.
"COMPANY"
Education Technology Consulting
Holdings, L.L.C., a Delaware
limited liability company
By: /s/ MICHAEL MILKEN
--------------------------------------
"Executive"
/s/ GRESHAM T. BREBACH, JR.
-----------------------------------------
Gresham T. Brebach, Jr.
<PAGE> 1
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and is effective as
of April 1, 1997 (the "Effective Date"), by and between Nextera Enterprises
Holdings, L.L.C., a Delaware limited liability company ("Company") and Ronald
K. Bohlin ("Executive"), with reference to the following:
RECITALS
A. Company has been formed for the purpose of engaging in the
business of providing consulting services, including but not limited to
strategic human capital and information technology services, to organizations
seeking applications and solutions to improve their business performance.
B. Company and Executive desire to enter into this Agreement
pursuant to which Executive will be employed by Company in the capacity of
Chief Operating Officer of Nextera Enterprises, L.L.C. ("Consulting"), a
subsidiary of Company and will otherwise be engaged to render valuable services
for the benefit of the Company and Consulting, all on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants set forth herein and other good and valuable consideration, the
receipt and sufficiency of which the parties hereby acknowledge, the parties
agree as follows:
1. Employment. Company hereby agrees to employ Executive as Chief
Operating Officer of Consulting for the term and under the terms and conditions
set forth in this Agreement below.
2. Duties. Executive shall render and perform such services and
functions as such shall be assigned to him from time to time by the President
or by the Board of Directors of Company, which duties shall include generally,
though not exclusively, assisting the Company in the building of a business
consistent with Recital A above, including but not limited to consulting with
organizations in information intensive businesses on the use of knowledge and
technology to support individual and organizational performance gain. Neither
Company nor Consulting will engage in any activities that would result in
Company or Consulting being
<PAGE> 2
associated with (a) a "broker", as defined in Section 3(a)(4) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), Section 202(a)(3) of the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), or
Section 2(a)(6) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), (b) a "dealer", as defined in Section 3(a)(5) of the
Exchange Act, Section 202(a)(7) of the Investment Advisers Act or Section
2(a)(11) of the Investment Company Act, (c) an "investment adviser", as defined
in Section 202(a)(11) of the Investment Advisers Act or Section 2(a)(20) of the
Investment Company Act, (d) an "investment company", as defined in Section 3(a)
of the Investment Company Act, (e) a "municipal securities dealer", as defined
in Section 3(a)(30) of the Exchange Act, (f) in the case of each of the terms
specified in the foregoing clauses (a) through (e), as each such term is defined
under any similar state law, or (g) a "real estate broker" or "business
opportunity broker" as each such term is defined under any federal or state law.
3. Standard of Performance. Executive agrees that at all times during
the Employment Term (as defined below) he will perform all of the services and
duties that are required of Executive under this Agreement faithfully and
efficiently, to the best of Executive's ability. Executive shall devote his
full time and attention consistent with Paragraph 4 below, to the business of
Company as shall be required to perform the required services and duties.
4. Exclusive Employment.
4.1 Full Time and Energy; Exceptions.
During the Employment Term (as defined below), Executive shall
perform his duties and functions under the Agreement in a competent and
efficient manner, and shall devote his entire time, attention, and energies to
the affairs of the Company and use his best efforts to promote the Company's
interests and perform the duties assigned to Executive, subject to the ultimate
authority and direction of the Board of the Company; provided that nothing
contained herein shall prevent Executive from (a) serving on boards of
directors or trustees which do not interfere with the performance of his
responsibilities hereunder; (b) managing his personal investments and affairs
consistent with his duties and responsibilities hereunder; and (c) taking
vacations or sick leave to which he is entitled hereunder.
<PAGE> 3
4.2 Other Business Activities.
Executive may not render services of any kind to others for
compensation, or engage in any other business activity, that would interfere
with the performance of Executive's duties under this Agreement unless otherwise
expressly authorized by the Board, which authorization will not be unreasonably
withheld.
5. Place of Employment. Executive's performance of services under this
Agreement shall be rendered in Boston, Massachusetts. In addition, Executive
shall make himself available from time to time in Los Angeles, California as
requested by the Board.
6. Term of Employment. The "Employment Term" for purposes hereof shall
commence on the Effective Date and, unless terminated earlier as provided in
this Agreement, shall continue for a period of three (3) years following the
Effective Date. Company shall have the option to extend the Employment Term for
an additional period of two years, by giving written notice thereof ninety (90)
days prior to the expiration of the initial term hereof.
7. Compensation. In consideration of Executive's employment and covenants
and agreements provided in this Agreement, and except as otherwise provided
herein, Executive shall receive from Company the compensation and benefits
described in Sections 7, 8, 9 and 13 hereof, in full and complete satisfaction
of all of Company's obligations to Executive arising from Executive's
employment. The compensation and benefits payable to Executive pursuant to this
Agreement may be changed only by the written agreement of the parties. Executive
authorizes the Company to deduct and withhold from all compensation to be paid
to him any and all sums required to be deducted or withheld by Company pursuant
to the provisions of any federal, state, or local law, regulation, ruling, or
ordinance, including, but not limited to, income tax withholding and payroll
taxes.
7.1 Salary. Company shall pay Executive an annual base salary payable
at the rate of Three Hundred Fifty Thousand Dollars ($350,000.00) per year, in
semi-monthly installments and otherwise in accordance with Company's payroll
methods and procedures.
7.2 Guaranteed Bonus. Company shall pay Executive during the
Employment Term an annual bonus of One Hundred Thousand Dollars ($100,000.00)
per year. For the initial year only, this bonus shall be paid within thirty (30)
days of commencement of employment.
<PAGE> 4
7.3 Bonus Compensation. In addition to the guaranteed bonus provided in
Section 7.2 above, the Board shall meet and review Executive's performance each
year and consider at its sole and absolute discretion the payment of bonus
compensation to Executive in an amount not to exceed twenty-five percent (25%)
of Executive's total payments set forth in 7.1 and 7.2 above. Executive
acknowledges that there is no obligation to him whatsoever with respect to any
bonus, except as provided in Section 7.2 above.
7.4 Other Interests. (a) The Company and Executive acknowledge that the
Executive holds certain Options pursuant to the provisions of a Unit Option
Agreement. Executive's rights and obligations with respect to said Options are
covered by agreements separate and apart herefrom. During the Employment Term,
Executive shall participate in any additional option, retirement or similar
incentive plans which the Company shall have in effect from time to time for
the benefit of all of the executive employees.
(b) The Company and Executive agree that Executive shall have the right
to purchase 2% of the initial common equity of Company. The initial
capitalization of the Company shall be $1 million in common equity and $24
million in straight preferred or before March 31, 1997. Company and Executive
agree that Company shall have the right to repurchase a portion of any common
equity Executive purchases pursuant to this Section 7.4(b) at the original cost
thereof in the event this agreement terminates or Executive otherwise leaves
the employ of Company ("termination event") prior to four years from the
commencement of the Employment Term. The portion of Executive's common equity
which Company has a right to repurchase pursuant to this Section 7.4(b) shall
equal (i) 80%, if the termination event is prior to one year from the
commencement of employment, (ii) 60%, if the termination event is after one
year but prior to two years from the commencement of employment; (iii) 40%, if
the termination event is after two years but prior to three years from the
commencement of employment; and (iv) 20% if the termination event is after
three years but prior to four years from the commencement of employment.
Company's right to repurchase a portion of Executive's common equity shall
terminate if Executive leaves the employ of Company prior to the end of three
years for any reason other than Executive's death, disability, cause (as
defined below), voluntary termination of employment by Executive, or in event
Company does not elect to extend the Employment Term past the initial three
years.
<PAGE> 5
8. Benefits.
8.1 Office Facilities and Secretary. Company shall provide Executive
with suitable office space at such applicable place of employment described in
Paragraph 5 above.
8.2 Vacation. During the Employment Term, Executive shall be
entitled to twenty days of vacation at full salary for every period of twelve
months during the Employment Term. Unused vacation time will not accrue in
excess of twenty days unless such accrual is approved in advance by the Board.
Said vacation days shall be planned consistent with Executive's duties and
obligations hereunder.
8.3 Medical, Etc. Executive shall be entitled to specific and
applicable executive benefits, such as group medical and dental for Executive,
Executive's spouse and minor dependent children, life and disability insurance
coverage, and sick leave all as granted to the Company's executives in
accordance with the Company's policies and guidelines as approved by the Board.
9. Business Expenses. Company shall pay for or reimburse Executive for
all reasonable business expenses incurred by Executive in the performance of
his duties hereunder, upon submission to the Company in accordance with Company
policy of a written accounting of such expenses, which accounting shall include
an itemized list of all expenses incurred, the business purposes of which such
expenses were incurred, and such receipts as Executive reasonably has been able
to obtain.
10. Termination. Except as otherwise expressly provided herein, this
Agreement and all rights and obligations hereunder shall terminate prior to the
end of the Employment Term upon the occurrence of any of the following events:
10.1 Death. Upon the death of Executive;
10.2 Personal Disability. Upon the ninetieth (90th) day after receipt
by Executive of notice from the Company of its intention to terminate
Executive's employment as a result of the "permanent disability" of Executive.
As used herein, the term "permanent disability" shall mean a physical or mental
disability that renders Executive unable to perform his normal duties for the
Company for a period of 120 consecutive days as determined by a licensed
physician.
<PAGE> 6
10.3 Cessation of Business. Upon the termination or cessation of the
business operation of the Company; and
10.4 Cause. Upon a termination by the Company for cause pursuant to
Paragraph 11 below.
The effect of any such termination under this Paragraph 10 is set forth in
Paragraph 13 below.
11. Termination For Cause. The Company may terminate this Agreement for
cause at any time. For purposes of this Agreement, the term "cause" shall be
defined as dishonesty which results or is intended to result in personal
enrichment to Executive at the expense of Company; acts of moral turpitude or
illegal or unprofessional conduct which may adversely affect the reputation of
the Company and/or its relationship with its customers, partners or suppliers;
fraudulent conduct in connection with the business or affairs of Company
without regard to the intent of any such conduct; or material and intentional
violation by Executive of his duties and obligations set forth in paragraphs 2
through 4 above which results in material injury to Company.
12. Notice of Termination. Except as expressly provided above, any
termination hereunder shall occur upon notification by one party to the other
in accordance with Paragraph 20.3 below. Any such notice shall refer to the
specific termination provision of this Agreement setting forth in reasonable
detail the facts and circumstances claimed as the basis for such termination.
The date of termination shall be either the date of receipt of the notice or,
if the reason for termination is the Executive's death or Executive's permanent
disability, the date of termination shall be as set forth in Paragraph 10 above.
13. Effect of Termination. In the event of termination of Executive's
employment hereunder, the rights and obligations of the parties shall be as
follows:
13.1 In Event of Death. In the event of termination as a result of
Executive's death, the Company shall have no further obligation to the
Executive's representatives and heirs hereunder except as follows:
(a) The Company shall pay to Executive's spouse or estate an
amount equal to Executive's base salary and guaranteed bonus for one year.
<PAGE> 7
(b) To the extent not already 60% vested, Executive's options
referred to in Paragraph 7.4(a) above that have not vested shall vest as
provided in the Unit Option Agreement referred to in Paragraph 7.4(a).
(c) In the event Executive had not been employed for at least
two (2) years, for purposes of calculating the Company's right to repurchase a
portion of Executive's common equity referred to in Paragraph 7.4(b) above,
Executive shall be deemed to have been employed for not less than 2 years.
13.2 In Event of Permanent Disability. In the event of termination as
a result of permanent disability, Executive shall be entitled to receive
disability and other benefits not less than those provided to disabled employees
and/or other families in accordance with any plans or policies of the Company in
effect at that time.
13.3 In Event Company Terminates Without Cause. In the event the
Company terminates the Executive's employment for any reason other than the
death or disability of Executive, or cause, the Company shall pay Executive
(i) in a lump sum within thirty (30) days of the effective date of termination,
any base salary due through the date of termination; (ii) the balance of
Executive's base salary which he would have been entitled to receive through the
end of the then applicable Employment Term; (iii) continuation of benefits upon
the same terms and conditions then in effect on the date of termination under
all medical, dental and life insurance plans through the end of the then
applicable Employment Term or Executive's commencement of employment elsewhere,
whichever is first to occur, provided that Executive at his own expense shall be
entitled to continue appropriate benefits under any applicable Cobra program;
and (iv) the Company shall reimburse Executive for costs and expenses which he
has incurred and which would otherwise have been payable under Paragraph 9 above
had the employment not been so terminated.
13.4 In the event the Company terminates the Executive's employment
for cause or the Executive terminates his employment, the Company's sole
obligation shall be to pay Executive his full base salary through the date of
termination, and Company shall have no further obligations to the Executive
pursuant to this Agreement.
14. Sale or Dissolution of Business. In the event of voluntary or
involuntary dissolution of the Company or a sale, merger, consolidation or
similar transaction involving the Company in which the Company is not the
surviving entity, or a transfer of all or substantially all
<PAGE> 8
of the assets of the Company, the Company on behalf of it and its successors
and assigns agrees that such transaction or event will not adversely affect the
Executive's financial interests in, or otherwise result in a dilution of
Executive's rights, whether vested or contingent, with regard to, any of
Executive's options or similar programs in which the Executive is then
participating.
15. Approval of Publicity. Company and Executive shall mutually approve
all press releases and other items of publicity with respect to Executive's
employment hereunder.
16. Covenants of Executive.
16.1 Confidential Information. "Confidential Information" shall mean
information and compilations of information relating to Company's business,
Company's owners and Company's non-institutional lenders, provided to Executive
during his employment with Company or to which Executive had access or which he
compiled while an executive, including, but not limited to, information
regarding any operating procedures, finances, financial condition,
organization, executives, agents, and other personnel, business activities,
budgets, plans, objectives, or strategies of Company.
16.2 Covenant as to Nondisclosure or Use of Confidential Information.
Executive agrees that at all times during the Employment Term hereunder and for
a period of two (2) years (thereafter, he will not, unless required to do so
pursuant to legal process such as a subpoena, disclose to any individual or
business enterprise of any nature, or use for his own personal use or financial
gain, whether individually or on behalf of another person, firm, corporation or
entity, any Confidential Information which Executive has obtained or will
obtain in connection with his employment with Company. Such restrictions shall
not apply to information which has become public prior to such disclosure by
Executive. In the event Executive is required by legal process to disclose any
Confidential Information, he shall give prompt notice thereof to Company to
allow Company to object to such process, obtain a protective order, or take any
other action it deems necessary.
16.3 Return of Business Records. Upon termination of Executive's
employment, Executive shall promptly, if so requested by Company, return all
documents, records, procedures, books, notebooks, and any other documentation
containing any information pertaining to the Company which includes
Confidential Information, including any and all copies of such documentation,
then in Executive's possession or control regardless of
<PAGE> 9
whether such documentation was prepared or compiled by Executive, Company,
other executives of Company, representatives, agents, or independent
contractors. Executive acknowledges that all such documentation and copies of
such documentation are and shall at all times remain the sole and exclusive
property of Company.
16.4 Additional Covenants Protecting the Interests of Company.
Executive agrees that during his employment hereunder, and for a period of one
year thereafter, Executive shall not directly or indirectly, individually, or
together through any other person, firm, corporation or entity, without the
prior written consent of Company, engage in any business with any person or
entity which is a customer or client of Company, or approach, counsel, or
attempt to induce any person who is then in the employ of Company, to leave
their employ, other than Executive's secretary, or employ or attempt to employ
any such person, other than Executive's secretary, or aid or counsel any other
person, firm, corporation, or entity to do any of the above.
16.5 Post-Employment Cooperation. Executive agrees that, for a period
of two (2) years following his termination of employment under this Agreement,
he shall, upon Company's reasonable request and in good faith and with his best
efforts, subject to his reasonable availability, cooperate and assist Company
in any dispute, controversy, or litigation in which Company may be involved and
with respect to which Executive obtained knowledge while employed by the
Company or any of its affiliates, successors, or assigns, including, but not
limited to, his participation in any court or arbitration proceedings, giving
of testimony, signing of affidavits, or such other personal cooperation as
counsel for Company shall request. Any such activities shall be scheduled, to
the extent reasonably possible, to accommodate Executive's business and
personal obligations at the time. Company shall pay Executive's travel and
incidental out-of-pocket expenses incurred in connection with any such
cooperation, as well as the costs of any attorney Executive engages to advise
him in connection with the foregoing.
16.6 Remedies. In view of the position of confidence which Executive
will enjoy with Company and the anticipated relationship with the clients,
customers, and executives of Company pursuant to his employment hereunder, and
recognizing both the access to confidential financial and other information
which Executive will have pursuant to his employment, Executive expressly
acknowledges that the restrictive covenants set forth in this Section 16 are
reasonable and necessary in order to protect and maintain the proprietary
interests and other legitimate business interests of Company. Executive further
acknowledges
<PAGE> 10
that (a) it would be difficult to calculate damages to Company from any breach
of his obligations under this Section 16, (b) that injury to Company from any
such breach would be irreparable and impossible to measure, and (c) that the
remedy at law for any breach or threatened breach of this Section 16 would
therefore be an inadequate remedy and, accordingly, Company shall, in addition
to all other available remedies, be entitled to injunctive and other similar
equitable remedies.
17. Dispute Resolution. If a dispute arises between the parties
concerning the interpretation of this Agreement or whether a party is in
violation of this Agreement, including but not limited to claims relating to
termination of this Agreement and definition of "cause", then either party may
deliver a written notice of such dispute to the other party (a "Dispute
Notice"). If such dispute is not resolved by the parties within then (10) days
of the Dispute Notice, then the resolution of the dispute described in the
Dispute Notice shall be determined by an expedited arbitration proceeding
conducted under California law and the labor arbitration rules of the American
Arbitration Association (the "Arbitration") with discovery conducted pursuant
to the provisions of California Code of Civil Procedure Sections 2016 et seq.
Any arbitration proceeding determinations shall be binding on the parties. The
arbitration shall not be used to modify any provision of this Agreement and
shall merely interpret the provisions hereof.
17.1 Selection and Conduct of Arbitrators. The Arbitration
proceeding shall be conducted by each of the parties appointing a qualified
arbitrator within twenty (20) days of the Dispute Notice. A qualified
arbitrator means a person who has had substantial experience in connection with
matters involving the interpretation of employment agreements and the
operations of companies similar to Company and who is unaffiliated with an
otherwise independent of the parties and their affiliates. The two arbitrators
so selected shall within the succeeding twenty (20) day period after their
selection attempt to reach agreement on the dispute submitted after considering
all of the evidence submitted by the parties. If the arbitrators fail to reach
an agreement within such twenty (20) day period, they shall within five (5)
days thereafter select a third qualified arbitrator. In the event the two
arbitrators are unable to reach agreement on the third arbitrator, then the
parties shall select a third arbitrator from a list of seven arbitrators
provided by the Los Angeles County Office of the American Arbitration
Association with each party having the right to strike names in order until
they either agree on an arbitrator from the list, or until one arbitrator's
name remains on the list. The party with the right to strike the first name
shall be determined by the flip of a coin. Such third arbitrator shall
<PAGE> 11
determine the resolution of the dispute within the succeeding twenty (20) day
period and such decision shall be final and binding on the parties.
17.2 Sole and Exclusive Remedy. In consideration of the parties
agreement to submit all disputes hereunder to arbitration, and in further
consideration of minimizing the time and expense of resolving any dispute
pursuant hereto, the arbitration provisions shall be the sole and exclusive
remedy of the parties, and each party expressly waives the right to seek
resolution by any other means or in any other forum.
17.3 Expiration of Claims. All claims that any other party has
against the other must be presented in writing within one (1) year of the date
the claiming party knew or should have known of the facts giving rise to the
claim, or, with respect to claims related to termination of Executive's
employment, within one (1) year of the date of termination hereunder. Any claim
not brought within said time period shall be waived and forever barred unless
the party against whom such claim is made agrees to waive such time period.
17.4 Enforceability and Costs. Upon completion of the arbitration,
either party may thereafter unilaterally and immediately cause the other to
comply with the decision made by the arbitration proceeding, and any such
decision may be entered in the Superior Court of the State of California or any
other court having jurisdiction. All arbitration costs during the arbitration
shall be paid equally by the parties until such time as a final decision is
made. Likewise, until such time as a final decision is made, each party shall
bear their own attorneys fees.
18. Representations By Executive. Executive represents and warrants
that he is free to enter into and perform each of the terms and conditions of
this Agreement; and that his execution and/or performance of all his
obligations under this Agreement does not and will not violate or breach any
other agreement between Executive and any other person or entity.
19. Indemnification. Company shall, to the maximum extent permitted by
law, indemnify, defend, and hold Executive harmless for all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries, and
deficiencies, including reasonable attorneys' fees, that Executive shall incur
or suffer that arise from, result from, or relate to the discharge of
Executive's duties under this Agreement, except to the extent that Executive
has acted in bad faith or shall be guilty of willful misconduct, fraud, gross
negligence, or a wrongful taking.
<PAGE> 12
20. General Provisions.
20.1 Further Assurances. The parties agree that, at any time and
from time to time during the Employment Term, they will take any action and
execute and deliver any document which any other party reasonably requests in
order to carry out the purposes of this Agreement.
20.2 Amendment of Agreement. This Agreement may be amended or
supplemented only in writing, and no amendment or supplement will be effective
unless executed by all of the parties.
20.3 Notices. Any notice, consent, waiver, demand, or other
communication required or permitted to be given by or to any person pursuant to
this Agreement (collectively "Notice") will be in writing, and will be given
either by personal service, facsimile transmission, by certified mail, return
receipt requested, or by Federal Express or similar commercial overnight courier
service, to a party at the address set forth below:
If to Company:
Nextera Enterprises Holdings, L.L.C.
844 Moraga Drive
Los Angeles, CA 90049
Attention: Michael Milken
If to Executive:
Ronald K. Bohlin
9 Partridge Hill Road
Dover, MA 02030
In the case of personal service, Notice will be deemed effective on
the date of service. In all other cases, Notice will be deemed effective on the
date of delivery, as shown on the return receipt or other written evidence of
delivery, if any, or five (5) days after dispatch if there is no return receipt
or written evidence of delivery. A party may change the address at which
Notice is to be given, at any time and from time to time, by giving Notice of
the new address to the other parties in accordance with this Section.
<PAGE> 13
20.4 Entire Agreement. This Agreement contains the entire outstanding
between the parties, and supersedes all prior understandings and agreements
between them, regarding its subject matter. There are no oral or written
representations, agreements, arrangements, or understandings between the
parties relating to the subject matter of this Agreement which are not fully
set forth herein.
20.5 Binding Effect and Assignment. This Agreement is binding upon and
inures to the benefit of the parties and their respective heirs, executors,
administrators, personal representatives, successors, and assigns. Company may
assign its rights or delegate its duties under this Agreement at any time and
from time to time. However, the parties acknowledge that the availability of
Executive to perform services was a material consideration for Company to enter
into this Agreement. Accordingly, Executive may not assign any of his rights or
delegate any of his duties under this Agreement, either voluntarily or by
operation of law, without the prior written consent of Company, which may be
given or withheld by Company in its sole and absolute discretion. Company
agrees to require any successor to all or substantially all of its business
and/or assets, whether direct or indirect, by agreement in form and substance
reasonably satisfactory to Executive, to assume and agree to perform this
Agreement in the same manner and extent as Company would be required to perform
had no such succession taken place.
20.6 Applicable Law; Choice of Forum. This Agreement has been made and
executed under, and will be construed and interpreted in accordance with, the
laws of the State of California. Subject to Paragraph 17 above regarding
Dispute Resolution, the parties consent to the jurisdiction of the courts of
the State of California located in Los Angeles County and the United States
District Courts located in the Central District of the State of California in
any action or proceeding arising out of this Agreement, and agree that in those
actions or proceedings, venue will be proper in Los Angeles County (if the
action or proceeding is brought in the Superior Court of California) or in the
Central District of California (if the action or proceeding is brought in the
United States District Court).
20.7 Attorneys' Fees. In any action or proceeding to enforce or
interpret this Agreement, or arising out of this Agreement, the prevailing
party or parties are entitled to recover a reasonable allowance for fees and
disbursements of counsel and costs of arbitration or suit, to be determined by
the arbitrator or court to which the action or proceeding is brought
<PAGE> 14
20.8 Provisions Severable. Every provision of this Agreement is
intended to be severable from every other provision of this Agreement. If any
provision of this Agreement is held to be void or unenforceable, in whole or in
part, the remaining provisions will remain in full force and effect, unless the
remaining provisions are so eviscerated by such holding that they do not reflect
the intent of the parties in entering into this Agreement. If any provision of
this Agreement is held to be unreasonable or excessive in scope or duration,
that provision will be enforced to the maximum extent permitted by law.
20.9 Non-Waiver of Rights and Breaches. Any waiver by a party of any
breach of any provision of this Agreement will not be deemed to be a waiver of
any subsequent breach of that provision, or of any subsequent breach of that
provision, or of any breach of any other provision of this Agreement. No
failure or delay in exercising any right, power, or privilege granted to a
party under any provision of this Agreement will be deemed a waiver of that or
any other right, power, or privilege. No single or partial exercise of any
right, power, or privilege granted to a party under any provision of this
Agreement will preclude any other or further exercise of that or any other
right, power, or privilege.
20.10 Interpretation of Agreement. Each of the parties has been
represented by counsel in the negotiation and preparation of this Agreement.
The parties agree that this Agreement is to be construed as jointly drafted.
Accordingly, this Agreement will be construed according to the fair meaning of
its language, and the rule of construction that ambiguities are to be resolved
against the drafting party will not be employed in the interpretation of this
Agreement.
20.11 Headings. The headings of the Sections and Paragraphs of this
Agreement are inserted for ease of reference only, and will have no effect in
the construction or interpretation of this Agreement.
20.12 Counterparts. This Agreement and any amendment or supplement to
this Agreement may be executed in two or more counterparts, each of which will
constitute an original but all of which will together constitute a single
instrument.
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
"COMPANY"
Nextera Enterprises Holdings, L.L.C.
a Delaware limited liability company
By: /s/ GRESHAM T. BREBACH, JR.
-----------------------------------
Gresham T. Brebach, Jr.
"Executive"
/s/ RONALD K. BOHLIN
---------------------------------------
Ronald K. Bohlin
<PAGE> 1
EXHIBIT 10.20
NEXTERA ENTERPRISES, L.L.C.
844 Moraga Drive
Los Angeles, CA 90049
April 15, 1997
Mr. Michael P. Muldowney
3 Brook Road
Dover, MA 02030
Dear Mr. Muldowney:
As we have discussed, this letter sets forth the general terms of our
future employment relationship.
1. Position. Nextera Enterprises, L.L.C. ("Nextera") a subsidiary of
Nextera Enterprises Holding, L.L.C. ("Holding"), will employ you as
the Vice President of Finance of Nextera. Nextera will be in the
business of providing strategic and performance innovative services to
companies seeking applications and solutions in information-intensive
businesses. Nextera will not provide any financial consulting services
which could result in it being defined as an Investment Advisor, as
defined in Section 202(a)(ii) of the Investment Advisors Act of 1940
or Section 2(a)(20) of the Investment Company Act of 1940; an
Investment Company as defined in Section 3(a) of the Investment
Company Act; or a Broker or Dealer as defined in Sections 3(a)(4) or
3(a)(5) of the Securities Exchange Act of 1934.
2. Location. The business will be located in Boston, Massachusetts.
3. Compensation. a. Your base salary will be $175,000 per year,
payable twice a month over a twelve month period.
b. A bonus payment will be considered by the Board
each year of the term of employment but in no
event will it exceed 25% of your base salary.
c. You shall have the right to purchase .5% of the
common stock of Holding, at the founders price.
Holding shall have an initial capitalization of $1
million of common equity. Consequently, your .5%
interest shall cost $5,000. In the event you leave
the employ of Nextera, Holding shall have the
right to repurchase your common stock at its then
fair market value provided that, if you leave the
employ
<PAGE> 2
Mr. Michael P. Muldowney
April 15, 1997
Page 2
of Nextera prior to the end of three years volun-
tarily or as a result of being dismissed for
cause, Holding shall have the right to repurchase
your stock at its original cost. Cause shall be
defined as disloyalty or dishonesty which results
in or is intended to result in personal enrichment
to the employee at the expense of the company;
acts of moral turpitude or illegal or
unprofessional conduct which may adversely affect
the reputation of the company; fraudulent
conduct; or material and intentional violations
by the employee of his duties and obligations
which results in material injury to the company.
d. You will be entitled to the benefits provided to
other employees of Nextera (vacation, medical,
etc.).
4. Term. Your employment shall be for a term of one year with the right
of the company to renew said term for additional periods of one year
each by written notice to you not less than 90 days prior to the end
of the one year term. In the event the company does not give you
notice of renewal for an additional year, you shall be given adequate
time during the final three months of the term to seek additional
employment.
5. Confidentiality. All confidential information acquired by you with
respect to Nextera will not be disclosed to any person or used by you
for personal gain for a period of 2 years following the termination
of employment.
In addition, up to one year after the termination of employment, you
will not engage in business with any person or entity which is a
customer or client of Nextera or counsel or attempt to induce any
employee of Nextera to leave their employ.
<PAGE> 3
Mr. Michael P. Muldowney
April 15, 1997
Page 3
If the above is acceptable, please sign the enclosed copy of this letter
where indicated and return it to me.
Very truly yours,
/s/ GRESHAM T. BREBACH, JR
-------------------------------
Gresham T. Brebach, Jr
The above is accepted:
By: /s/ MICHAEL P. MULDOWNEY
---------------------------
4/25/97
<PAGE> 1
Exhibit 10.21
[EDUCATION TECHNOLOGY CONSULTING, L.L.C. LETTERHEAD]
March 25, 1997
Mrs. Debra Bergevine
224 Prospect Street
Franklin, MA 02038
Dear Mrs. Bergevine:
As we have discussed, this letter sets forth the general terms of our
future employment relationship.
1. Position. Education Technology Consulting, L.L.C. ("Consulting"), a
subsidiary of Education Technology Consulting Holding, L.L.C.
("Holding"), will employ you as the Vice President of Marketing of
Consulting. Consulting will be in the business of providing strategic
and performance innovative services to companies seeking applications
and solutions in information-intensive businesses. Consulting will not
provide any financial consulting services which could result in it
being defined as an Investment Advisor, as defined in Section
202(a)(ii) of the Investment Advisors Act of 1940 or Section 2(a)(20)
of the Investment Company Act of 1940; an Investment Company as
defined in Section 3(a) of the Investment Company Act; or a Broker or
Dealer as defined in Sections 3(a)(4) or 3(a)(5) of the Securities
Exchange Act of 1934.
2. Location. The business will be located in Boston, Massachusetts.
3. Compensation. a. Your base salary will be $170,000 per year, payable
twice a month over a twelve month period.
b. A bonus payment will be considered by the Board
each year of the term of employment but in no
event will it exceed 20% of your base salary.
c. You shall have the right to purchase .5% of the
common stock of Holding, at the founders price.
Holding shall have an initial capitalization of
$1 million of common equity. Consequently, your
.5% interest shall cost $5,000. In the event you
leave the employ of Consulting, Holding shall have
the right to repurchase your common stock at its
then fair market value provided that, if you leave
the employ
<PAGE> 2
Mrs. Debra Bergevine
March 25, 1997
Page 2
of Consulting prior to the end of three
years voluntarily or as a result of being
dismissed for cause, Holding shall have the
right to repurchase your stock at its
original cost.
d. You will be entitled to the benefits
provided to other employees of Consulting
(vacation, medical, etc.).
4. At Will. Your employment will be at will.
5. Confidentiality. All confidential information acquired by you with
respect to Consulting will not be disclosed to any person or used by
you for personal gain for a period of 2 years following the
termination of employment.
In addition, up to one year after the termination of employment, you
will not engage in business with any person or entity which is a
customer or client of Consulting or counsel or attempt to induce any
employee of Consulting to leave their employ.
If the above is acceptable, please sign the enclosed copy of this letter
where indicated and return it to me.
Very truly yours,
Gresham T. Brebach, Jr
The above is accepted:
By: /s/ DEBRA BERGEVINE
---------------------------
<PAGE> 1
EXHIBIT 10.22
[EDUCATION TECHNOLOGY CONSULTING, L.L.C. LETTERHEAD]
March 25, 1997
Mr. Robert F. Staley, Jr.
663 Greendale Avenue
Needham, MA 02192
Dear Mr. Staley:
As we have discussed, this letter sets forth the general terms of our
future employment relationship.
1. Position. Education Technology Consulting, L.L.C. ("Consulting"), a
subsidiary of Education Technology Consulting Holding, L.L.C.
("Holding"), will employ you as the Chief Technology Officer of
Consulting. Consulting will be in the business of providing strategic
and performance innovative services to companies seeking applications
and solutions in information-intensive businesses. Consulting will not
provide any financial consulting services which could result in it
being defined as an Investment Advisor, as defined in Section
202(a)(ii) of the Investment Advisors Act of 1940 or Section 2(a)(20)
of the Investment Company Act of 1940; an Investment Company as
defined in Section 3(a) of the Investment Company Act; or a Broker or
Dealer as defined in Sections 3(a)(4) or 3(a)(5) of the Securities
Exchange Act of 1934.
2. Location. The business will be located in Boston, Massachusetts.
3. Compensation. a. Your base salary will be $170,000 per year,
payable twice a month over a twelve month period.
b. A bonus payment will be considered by the Board
each year of the term of employment but in no
event will it exceed 15% of your base salary.
c. You shall have the right to purchase .4% of the
common stock of Holding, at the founders price.
Holding shall have an initial capitalization of $1
million of common equity. Consequently, your .4%
interest shall cost $4,000. In the event you leave
the employ of Consulting, Holding shall have the
right to repurchase your common stock at its then
fair market value provided that, if you leave the
employ
<PAGE> 2
Mr. Robert F. Staley, Jr.
March 25, 1997
Page 2
of Consulting prior to the end of three
years voluntarily or as a result of
being dismissed for cause, Holding shall
have the right to repurchase your stock
at its original cost.
d. You will be entitled to the benefits
provided to other employees of
Consulting (vacation, medical, etc.).
4. At Will. Your employment will be at will.
5. Confidentiality. All confidential information acquired by you
with respect to Consulting will not be disclosed to any person
or used by you for personal gain for a period of 2 years
following the termination of employment.
In addition, up to one year after the termination of employment,
you will not engage in business with any person or entity which
is a customer or client of Consulting or counsel or attempt to
induce any employee of Consulting to leave their employ.
If the above is acceptable, please sign the enclosed copy of this
letter where indicated and return it to me.
Very truly yours,
/s/ GRESHAM T. BREBACH, JR.
--------------------------------
Gresham T. Brebach, Jr.
The above is accepted.
By: /s/ ROBERT F. STALEY, JR.
----------------------------
March 23, 1997
<PAGE> 1
Exhibit 10.23
EMPLOYMENT AGREEMENT
This AGREEMENT (the "Agreement") is made as of August 31, 1998 (the
"Effective Date"), by and between SC/NE, LLC, a Delaware limited liability
company with its headquarters located in New York, New York (the "Company"), and
Roger Brossy (the "Executive"). In consideration of the mutual covenants
contained in this Agreement, the Company and the Executive agree as follows:
1. EMPLOYMENT. Commencing on the Effective Date, the Company agrees to
employ the Executive and the Executive agrees to be employed by the Company on
the terms and conditions set forth in this Agreement.
2. CAPACITY. During the Term (as hereinafter defined), the Executive shall
initially serve the Company as the Senior Managing Principal. The Executive
shall also serve the Company in such other or additional offices as the
Executive may be requested by the Leadership Council of the Company. In such
capacity or capacities, the Executive shall perform such services and duties in
connection with the business, affairs and operations of the Company consistent
with his status as a Principal as may be assigned or delegated to the Executive
from time to time by or under the direction and supervision of the Leadership
Council. The Company will not provide any financial consulting services which
could result in it being defined as an Investment Advisor, as defined in Section
202(a)(ii) of the Investment Advisors Act of 1940 or Section 2(a)(20) of the
Investment Company Act of 1940; an Investment Company as defined in Section 3(a)
of the Investment Company Act; or a Broker or Dealer as defined in Sections
3(a)(4) or 3(a)(5) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
3. TERM. Subject to the provisions of Section 6, the term of employment
under this Agreement (the "Term") shall be for two (2) years from the Effective
Date and shall automatically renew for periods of one (1) year commencing at the
second anniversary of the Effective Date and on each subsequent anniversary
thereafter, unless either the Executive or the Company, acting through its
Leadership Council, gives written notice to the other not less than sixty (60)
days prior to the date of any such anniversary of such party's election not to
extend the Term or, if at such time Nextera Enterprises, L.L.C., a Delaware
limited liability company ("Nextera"), has a policy of not extending employment
agreements to all or a designated class (reasonably consistent with business
operations) of its executives into which the Executive falls, Nextera may give
the written nonrenewal notice as described above. In the event Nextera so elects
to not renew this Agreement and the Executive's employment is not terminated,
thereafter the Executive shall be entitled to the severance benefits which
Nextera has reasonably implemented as a firm-wide policy for all or most of its
executives; provided, however, that such severance benefits shall not be
materially inconsistent with the severance benefits that had been provided under
this Agreement in the case of nonrenewal by the Company.
4. COMPENSATION AND BENEFITS. The regular compensation and benefits payable
to the Executive under this Agreement shall be as follows:
(a) SALARY. During the Term for all services rendered by the Executive
under this Agreement, the Company shall pay the Executive a salary (the
"Salary") at the annual rate of
<PAGE> 2
Two Hundred Fifty Thousand Dollars ($250,000) subject to increase from time to
time at the discretion of the Leadership Council or the Compensation Committee
of the Leadership Council (the "Compensation Committee"). The Salary shall be
payable in periodic installments in accordance with the Company's usual practice
for its senior executives.
(b) BONUS. The Executive shall be entitled to participate in the
Annual Incentive Plan to be adopted by the Company as of the date hereof in the
form attached as "SCHEDULE 1" hereto and in any successor annual incentive
programs if established by the Company. The Executive's annual bonus shall be
determined under the Annual Incentive Plan, and the Executive shall have an
initial annual target bonus equal to sixty percent (60%) of his annual Salary.
(c) REGULAR BENEFITS. The Executive shall also be entitled to
participate in the plans listed on "SCHEDULE 2" hereto and any other employee
benefit plans, medical insurance plans, life insurance plans, disability income
plans, retirement plans, pension plans, profit sharing plans, vacation plans,
expense reimbursement plans and other benefit plans which the Company, may from
time to time have in effect for all or most of its senior executives
(collectively, "Benefits"). Such participation shall be subject to the terms of
the applicable plan documents, generally applicable policies of the Company,
applicable law and the discretion of the Leadership Council, the Compensation
Committee or any administrative or other committee provided for in or
contemplated by any such plan. Nothing contained in this Agreement shall be
construed to create any obligation on the part of the Company to establish any
such plan or to maintain the effectiveness of any such plan which may be in
effect from time to time, provided, however, the Benefits offered to the
Executive shall be substantially similar to those Benefits extended to the
Executive by Sibson & Company, L.P., a Delaware limited partnership (the
"Partnership") immediately prior to the date hereof, provided further that at
any time (i) Nextera may in its sole discretion cause the Company (A) to modify
or terminate any Benefits provided to the Executive as Nextera deems necessary
to provide that any employee Benefit plan and related trust intended to be
qualified and exempt under Sections 401(a) and 501(a) of the Internal Revenue
Code of 1986, as amended, respectively, shall be so qualified and exempt, or (B)
to otherwise comply with the applicable requirements of the Employee Retirement
Income Security Act of 1974, as amended (or other applicable law) and (ii) the
Leadership Council may terminate such Benefits in its discretion. In the event
that any Benefits are terminated or materially reduced pursuant to clause (i)
above, the Company shall provide the Executive with other Benefits or one or
more cash payments which in the aggregate on an after-tax basis are equal to the
value of such terminated or materially-reduced Benefits through the date of the
Executive's termination of employment.
(d) PAST SERVICE. The Executive shall be credited with all past
service with the Partnership in the calculation of all benefits and for all
other relevant purposes whatsoever where past service or seniority shall be
considered, subject to any regulatory limitations. For purposes of the preceding
sentence, the Executive shall be deemed to have begun employment with the
Company on the date the Executive began employment with the Partnership or its
predecessors, as applicable.
(e) OTHER INTEREST.
<PAGE> 3
(i) The Company, Nextera and the Executive agree that on the Effective
Date Nextera shall issue and the Executive shall purchase 1,554 Class A
Common Units of Nextera (the "Class A Common Units") at a purchase price of
$0.14 per Class A Common Unit. Such Class A Common Units are referred to
herein as "Purchased Units" and individually as a "Purchased Unit." Nextera
hereby represents and warrants that the Purchased Units to be sold to the
Executive have been duly authorized, and when issued to and paid for by the
Executive will be validly issued, fully paid and nonassessable.
Within 30 days from the Effective Date (the "Valuation Date"), the
Executive and Nextera shall agree on the fair market value of such
Purchased Units (the "Agreed Value"). Within 15 days of the Valuation Date,
Nextera shall pay to the Executive, as a compensation bonus, cash in an
amount equal to the Executive's federal, state, and local income tax on the
portion of the Agreed Value of such Purchased Units which is in excess of
$.70 per Purchased Unit (the "Excess Value"). The Executive's federal,
state, and local income tax on the Excess Value shall be computed by taking
into account the highest personal income tax rate on ordinary income for
federal purposes and for the state and locality where the Executive has his
tax home, taking into consideration the deduction for federal income tax
purposes of the state and local income taxes paid, and, if applicable, the
deduction for state income tax purposes of the local income taxes paid.
Additionally, on the same date that the compensation bonus described above
is paid to the Executive, Nextera shall pay to the Executive, as an
additional compensation bonus, the amount of cash necessary to "gross-up"
the compensation bonus described above such that after the Executive pays
his federal, state, and local income taxes on the two compensation bonuses,
he will have enough cash remaining to pay his federal, state, and local
income tax on the Excess Value. If any taxing authority challenges the
Agreed Value, then Nextera shall indemnify Executive for (i) any reasonable
costs and expenses incurred in defending against such challenge and (ii)
any additional tax liability incurred by Executive (including any interest
and penalties) if such challenge results in a higher value of such
Purchased Units than the Agreed Value, and such indemnification shall be
"grossed-up" using the "gross-up" procedure described directly above.
(ii) The Executive represents as of the date hereof that the Executive
is an "accredited investor" as such term is defined by Rule 501 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). The
Executive has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to Nextera so
that he is capable of evaluating the merits and risks of acquiring
Purchased Units in connection with this Agreement and has the capacity to
protect his own interests. The Executive must bear the economic risk of
holding the Purchased Units indefinitely unless such securities are
registered pursuant to the Securities Act, or an exemption from
registration is available for the disposition thereof.
(iii) The Executive is acquiring the Purchased Units for his own
account for investment only, and not with the view to, or for resale in
connection with, any distribution thereof. It understands that the
Purchased Units acquired have not been, and will not be, registered under
the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends
<PAGE> 4
upon, among other things, the bona fide nature of the investment intent and
the accuracy of the Executive's representations as expressed herein.
(iv) The Executive understands that no public market now exists for
any of the securities issued by Nextera and that Nextera has not made any
assurances that a public market will ever exist for such securities.
(v) The Executive has received and read the Nextera Operating
Agreement, Nextera business plan and financial statements and has had an
opportunity to discuss Nextera's business, management and financial affairs
with its management. The Executive has also had an opportunity to ask
questions of and receive answers from officers of Nextera regarding the
terms and conditions of acquiring the Purchased Units, which questions were
answered to the Executive's satisfaction.
(vi) The residence of the Executive in which his investment decision
was made is set forth next to the Executive's name on the signature page
hereto.
(vii) Additionally, the Executive may participate in any additional
option or similar incentive plans which the Company and/or Nextera shall
have in effect from time to time for the benefit of all or most of its
executive employees.
(f) VACATION. The Executive's vacation entitlement shall be the same
as the policy of the Partnership immediately prior to the date hereof.
(g) TAXATION OF PAYMENTS AND BENEFITS. The Company shall undertake to
make deductions, withholdings and tax reports with respect to payments and
Benefits under this Agreement to the extent that it reasonably and in good faith
believes that it is required to make such deductions, withholdings and tax
reports. Payments under this Agreement shall be in amounts net of any such
deductions or withholdings. Nothing in this Agreement shall be construed to
require the Company to make any payments to compensate the Executive for any
adverse tax effect associated with any payments or benefits or for any deduction
or withholding from any payment or benefit.
(h) EXCLUSIVITY OF SALARY AND BENEFITS. The Executive shall not be
entitled to any payments or benefits other than those provided under this
Agreement (other than customary business expense reimbursements submitted and
approved in accordance with Company policy).
5. EXTENT OF SERVICE. During the Executive's employment under this
Agreement, the Executive shall, subject to the direction and supervision of the
Leadership Council or the Senior Managing Principal, devote substantially all of
the Executive's business time, and use his best efforts and business judgment,
skill and knowledge to the advancement of the Company's interests and to the
discharge of the Executive's duties and responsibilities under this Agreement.
The Executive shall not engage in any other business activity, except as may be
approved by the Leadership Council which approval shall not be unreasonably
withheld; provided that nothing in this Agreement shall be construed as
preventing the Executive from:
(a) investing the Executive's assets in any company or other entity in
a manner not prohibited by the Non-Compete, Non Solicitation, Proprietary
Information,
<PAGE> 5
Confidentiality and Inventions Agreement referred to in Section 7(a) and in such
form or manner as shall not require any material activities on the Executive's
part in connection with the operations or affairs of the companies or other
entities in which such investments are made; or
(b) engaging in religious, charitable or other community or non-profit
activities that do not materially impair the Executive's ability to fulfill the
Executive's duties and responsibilities under this Agreement.
6. TERMINATION AND TERMINATION BENEFITS. Notwithstanding the provisions of
Section 3, the Executive's employment under this Agreement shall terminate under
the following circumstances set forth in this Section 6.
(a) Termination by the Company for Cause.
(i) The Executive's employment under this Agreement may be
terminated for cause without further liability on the part of the
Company effective immediately upon a vote of the Leadership Council
and written notice to the Executive. Subject to Section 6(h), only the
following shall constitute "cause" for such termination:
(A) material dishonest statements or acts of the Executive
with respect to the Company or any affiliate of the Company;
(B) conviction of the Executive for (x) a felony or (y) any
misdemeanor involving moral turpitude, deceit, dishonesty or
fraud; or
(C) willful and material breach of this Agreement by the
Executive, gross negligence, willful misconduct or willful
failure or refusal of the Executive to comply with explicit
directions of the Leadership Council which directions are
consistent with Section 2 of this Agreement, in each instance
after fifteen (15) days written notice and an opportunity to
cure.
(i) In making any determination under this Section 6(a), the
Leadership Council shall act fairly and in good faith and shall give
the Executive an opportunity to appear and be heard at a meeting of
the Leadership Council and present evidence on his behalf.
(b) TERMINATION BY THE EXECUTIVE. The Executive's employment under
this Agreement may be terminated by the Executive by written notice to the
Leadership Council at least sixty (60) days prior to such termination.
(c) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE WITH
GOOD REASON. Subject to the payment of Termination Benefits pursuant to Section
6(d), the Executive's employment under this Agreement may be terminated by the
Company without cause upon written notice to the Executive by a vote of the
Leadership Council or by the Executive with Good Reason (as defined in Section
8(b)) upon written notice to the Leadership Council.
(d) CERTAIN TERMINATION BENEFITS. Unless otherwise specifically
provided in
<PAGE> 6
this Agreement or otherwise required by law, all compensation and benefits
payable to the Executive under this Agreement shall terminate on the date of
termination of the Executive's employment under this Agreement. Notwithstanding
the foregoing, in the event of termination of the Executive's employment with
the Company pursuant to Section 6(c) above or Section 6(g) below, the Company
shall provide to the Executive the following termination benefits ("Termination
Benefits"):
(i) continuation of the Executive's Salary at the rate then in
effect pursuant to Section 4(a); and
(ii) (A) a bonus for the year in which the termination occurs pro
rata for the period of service in such year, based upon the bonus
amount, if any, paid to the Executive pursuant to the Annual Incentive
Plan described in Section 4(b) for the year preceding the year in
which the termination of employment occurs, or if the termination
occurs prior to the initial determination of a bonus pursuant to the
Annual Incentive Plan, based upon the bonus paid to the Executive by
the Partnership for the year ended December 31, 1997 (such applicable
amount being the "Applicable Bonus") and (B) payments at an annual
rate based upon the Applicable Bonus to be paid monthly during the
period set forth in subsection (iv) below; and
(iii) continuation of all Benefits to the extent authorized by
and consistent with 29 U.S.C. ss.1161 et seq. (commonly known as
"COBRA"), with the cost of the regular premium for such Benefits
shared in the same relative proportion by the Company and the
Executive as in effect on the date of termination.
(iv) The Termination Benefits set forth in (i), (ii)(B) and (iii)
above shall continue effective until the later of (x) the expiration
of the initial Term assuming employment of the Executive had not been
terminated for the initial two-year period of this Agreement (but not
including any renewals that have not yet occurred) or (y) one (1) year
from the date of the termination of the Executive's employment and
will include such payments for accrued vacation pay and any similar
items required by law. Notwithstanding the foregoing, nothing in this
Section 6(d) shall be construed to affect the Executive's right to
receive COBRA continuation entirely at the Executive's own cost to the
extent that the Executive may continue to be entitled to COBRA
continuation after the Executive's right to cost sharing under Section
6(d)(iii) ceases.
(v) In the event of the termination of the Executive's employment
with the Company pursuant to Section 6(c) above any options
exercisable for Class A Common Units granted to the Executive under
the Executive's Equity Participation Agreement which are not vested at
that time shall be deemed to have vested to the extent of fifty
percent (50%) of such remaining unvested portion.
In addition to the foregoing, in the event of the termination of
the Executive's employment with the Company for any reason, the Executive shall
be entitled to payment of any accrued and unpaid Benefits for which the
Executive may otherwise be vested or entitled in accordance with the terms of
the applicable plans governing such Benefits and to payment for reimbursable
expenses under applicable Company policy within thirty (30) days of termination.
<PAGE> 7
(e) DISABILITY. At the election of the Leadership Council, this
Agreement shall terminate on such date as may be selected by the Leadership
Council after the Executive shall have failed to render and perform the services
required of him under this Agreement during any period of 90 days within any 120
day period during the Term because of physical or mental disability. In the
event of such termination, the Company shall have no further obligation for the
payment of compensation or benefits hereunder, except (i) for compensation
accrued and unpaid through the termination date and (ii) the payment of any
disability insurance to which the Executive may be entitled. If there should be
any dispute between the parties as to the Executive's physical or mental
incapacity or disability pursuant to this Section 6(e), such question shall be
settled by the opinion of an impartial reputable physician agreed upon for this
purpose by the parties or their representatives, or failing agreement within ten
(10) days after a written request therefor by any party to the other party, one
selected in accordance with the rules of the American Arbitration Association.
The certificate of such physician as to the matter in dispute shall be final and
binding on the parties.
(f) DEATH. In the event of termination as a result of the Executive's
death, the Company shall have no further obligation to the Executive's
representatives and heirs hereunder.
(g) FAILURE TO RENEW AGREEMENT. In the event the Company or Nextera
elects not to extend the term of this Agreement as permitted by Section 3 and
the Executive's employment is terminated, (i) that portion of Executive's
options exercisable for Class A Common Units granted to the Executive under the
Executive's Equity Participation Agreement which are not vested at that time
shall be deemed to have vested to the extent of fifty percent (50%) of such
remaining unvested portion, and (ii) the Executive shall be entitled to the
other Termination Benefits described in Section 6(d).
(h) LEAVE OF ABSENCE UPON INDICTMENT. Upon indictment of the Executive
for (A) a felony or (B) any misdemeanor involving moral turpitude, deceit,
dishonesty or fraud ("indictment," for these purposes, meaning an indictment,
probable cause hearing or any other procedure pursuant to which an initial
determination of probable or reasonable cause with respect to such offense is
made), the Leadership Council, at its option, may place the Executive on a paid
leave of absence from employment for a period of up to six (6) months from such
election. At the end of the six (6) month period if the indictment is pending,
the Leadership Council may terminate the Executive for "cause" effective
immediately upon a vote of the Leadership Council and written notice to the
Executive without further liability on the part of the Company. In making any
determination under this Section 6(h), the Leadership Council shall act fairly
and in good faith and shall give the Executive an opportunity to appear and be
heard at a meeting of the Leadership Council or any committee thereof and
present evidence on his behalf.
(i) REMOVAL FROM OFFICE AS SENIOR MANAGING PRINCIPAL. Notwithstanding
the foregoing, the Executive may be removed from office as Senior Managing
Principal and his employment may be terminated in accordance with the terms and
provisions of Section 3.19 of the Limited Liability Company Agreement of the
Company. Other than as set forth in the Limited Liability Company Agreement of
the Company, any termination of the Executive's employment under this Section
6(i) shall be without further liability on the part of the Company. In the event
the Executive is removed from office as Senior Managing Principal but his
employment is not also terminated, this Agreement shall be terminated and shall
be replaced with
<PAGE> 8
a written employment agreement with substantially similar terms and conditions
(including the then existing Term) as was provided to the Executive hereby,
other than the status of Senior Managing Principal.
7. NON-COMPETE, NON-SOLICITATION, PROPRIETARY INFORMATION, CONFIDENTIALITY
AND INVENTIONS AGREEMENTS.
(a) The Executive agrees to sign the Nextera Non-Compete,
Non-Solicitation, Proprietary Information, Confidentiality and Inventions
Agreement, a copy of which is attached hereto as Exhibit "A."
(b) LITIGATION AND REGULATORY COOPERATION. During the Executive's
employment, the Executive shall cooperate fully with the Company in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Company or Nextera which relate to
events or occurrences that transpired while the Executive was employed by the
Company, the Partnership or the Partnership's predecessors provided, however,
that the Executive shall be permitted to give testimony and appear as a witness
in any proceeding in which such testimony or appearance is required by law. The
Executive's full cooperation in connection with such claims or actions shall
include, but not be limited to, being available to meet with counsel to prepare
for discovery or trial and to act as a witness on behalf of the Company at
mutually convenient times. During the Executive's employment, the Executive also
shall cooperate fully with the Company in connection with any investigation or
review of any federal, state or local regulatory authority as any such
investigation or review relates to events or occurrences that transpired while
the Executive was employed by the Company. The Executive also agrees to provide
reasonable cooperation to the Company on matters of the type described in this
Section 7(b) after termination of the Executive's employment. The Company shall
reimburse the Executive for any reasonable out-of-pocket expenses incurred in
connection with the Executive's performance of obligations pursuant to this
Section 7(b).
(c) INJUNCTION. The Executive agrees that it would be difficult to
measure any damages caused to the Company which might result from any breach by
the Executive of the promises set forth in this Section 7, and that in any event
money damages would be an inadequate remedy for any such breach. Accordingly,
the Executive agrees that if the Executive breaches, or proposes to breach, any
portion of this Section 7, the Company shall be entitled, in addition to all
other remedies that it may have, to an injunction or other appropriate equitable
relief to restrain any such breach without showing or proving any actual damage
to the Company.
8. CHANGE OF CONTROL.
(a) Change of Control shall mean the occurrence of one or more of the
following events:
(i) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d)(2) of the Exchange Act (other than any fiduciary
holding securities under an employee benefit plan of the Company, any
member of the KU Control Group (as defined in the Nextera Operating
Agreement as amended by the First Amendment to the
<PAGE> 9
Nextera Operating Agreement (the "First Amendment")), or any
Controlled Affiliate (as defined in the First Amendment) of the KU
Control Group (x) becomes a "beneficial owner" (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company or Nextera, representing
fifty percent (50%) or more of the combined voting power of the then
outstanding securities of the Company or Nextera, or (y) has the
right, directly or indirectly, by ownership of voting securities,
contract or otherwise, to elect a majority of the members of the Board
of Directors of Nextera; or
(ii) persons who, as of the Effective Date, constituted the Board
of Directors of Nextera (the "Incumbent Board") cease for any reason,
including without limitation as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a
majority of the Board of Directors of Nextera provided that any person
becoming a member of the Board of Directors of Nextera subsequent to
the Effective Date whose election was approved by at least a majority
of the members then comprising the Incumbent Board shall, for purposes
of this Section 8(ii), be considered a member of the Incumbent Board,
and further provided that any person or persons becoming a member of
the Board of Directors of Nextera subsequent to the Effective Date who
was nominated by the Board of Directors of Nextera or the governing
body of any Controlled Affiliate of the KU Control Group shall, for
purposes of this Section 8(ii), be considered a member of the
Incumbent Board, as applicable; or
(iii) the members or stockholders of the Company or Nextera
approve a merger or consolidation of the Company or Nextera with any
other corporation or other entity, other than (1) a merger or
consolidation which would result in the voting securities of the
Company or Nextera outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than seventy-five
percent (75%) of the combined voting power of the voting securities of
the Company or Nextera or such surviving entity outstanding
immediately after such merger or consolidation or (2) a merger or
consolidation effected to implement a recapitalization of the Company
or Nextera (or similar transaction) in which no "person" or "group"
(as defined in Section 8(a)(i) above) (other than any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, any member of the KU Control Group (as defined in the First
Amendment), or any Controlled Affiliate of the KU Control Group)
acquires more than fifty percent (50%) of the combined voting power of
the Company's or Nextera's then outstanding securities; or
(iv) the members or stockholders of the Company or Nextera
approve a plan of complete liquidation of the Company or Nextera or an
agreement for the sale or disposition by the Company or Nextera of all
or substantially all of the assets of the Company or Nextera.
Notwithstanding the foregoing, for purposes of this Agreement,
(i) a transfer (whether pursuant to a sale or otherwise) of all or a portion of
the stock or membership interests of the Company or Nextera or a transfer
(whether pursuant to a sale or otherwise) of all or a portion of the assets of
the Company or Nextera to an entity controlled by or under common control with
Nextera shall not be deemed to be a Change of Control and (ii) the Incorporation
<PAGE> 10
Transaction (as defined in that certain Share Exchange Agreement dated as of the
date hereof by and among Nextera and the other parties named therein) shall not
be deemed to be a Change of Control.
(b) TERMINATION DUE TO CHANGE OF CONTROL. In the event that during the
period of Executive's active employment with the Company, there is a Change of
Control, as defined above, and within six (6) months of the date upon which
Executive receives notice of the event of Change of Control, Executive's
employment is terminated by the Company without cause or by the Executive for
Good Reason (as defined below), then the Company shall provide the Executive
with the Termination Benefits described in Section 6(d). For purposes of this
Agreement, "Good Reason" shall mean, without the Executive's written consent,
the occurrence of any of the following circumstances:
(i) the assignment to the Executive of any duties substantially
inconsistent and adverse with the position of a Principal in the
Company, without regard to any change with respect to titles or
special functions (including Senior Managing Principal) that the
Executive may hold from time to time;
(ii) in the event of a Change of Control, the assignment to the
Executive of any duties substantially inconsistent and adverse with
the position in the Company that the Executive held immediately prior
to the Change of Control, or a significant adverse alteration in the
nature or status of the Executive's responsibilities or the conditions
of the Executive's employment from those in effect immediately prior
to such Change of Control;
(iii) the Company's reduction of the Executive's annual base
salary as in effect on the date hereof or as the same may be increased
from time to time except for across-the-board salary reductions
similarly affecting all management personnel of the Company;
(iv) the relocation of the Company's offices at which the
Executive is principally employed to a location more than 25 miles
from such location (or, if the office at which the Executive is
principally employed is in the Manhattan business district of New
York, New York, the relocation to a location outside the Manhattan
business district) or the Company's requiring the Executive to be
based anywhere other than the Company's offices at such location
except for required travel on the Company's business to an extent
substantially consistent with the Executive's present business travel
obligations;
(v) the Company's failure to pay to the Executive any portion of
the Executive's current compensation or to pay to the Executive any
portion of an installment of deferred compensation under any deferred
compensation program of the Company within seven (7) days of the date
such compensation is due;
(vi) the Company's failure to continue in effect any material
compensation or benefit plan in which the Executive participates,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with
<PAGE> 11
respect to such plan, or the Company's failure to continue the
Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants;
(vii) the Company's failure to continue to provide the Executive
with benefits substantially similar to those enjoyed by the Executive
under any of the Company's life insurance, medical, health and
accident, or disability plans in which the Executive participates, the
taking of any action by the Company which would directly or indirectly
materially reduce any of such benefits, or the failure by the Company
to provide the Executive with the number of paid vacation days to
which the Executive are entitled on the basis of years of service with
the Company in accordance with the Company's normal vacation policy;
or
(viii) in the event of a Change of Control, a successor to the
Company or Nextera does not expressly assume the obligations of the
Company or Nextera, as applicable, under this Agreement.
9. REPURCHASE OPTION. Capitalized terms used in this Section 9 and not
otherwise defined in this Agreement shall have the meanings ascribed to such
terms in the Stockholders Agreement and the Nextera Operating Agreement as
amended by the First Amendment.
The Executive agrees to be bound by Section 6.4 of the Nextera
Operating Agreement and Section 4.4 of the Stockholders Agreement, subject in
each case to the provisions of this Section 9. In the event that Nextera
exercises the Repurchase Option during the period following the Effective Date
of the First Amendment and prior to expiration of the non-solicitation period
(the "Applicable Period") contained in the Executive's Non-Compete,
Non-Solicitation, Proprietary Information, Confidentiality and Inventions
Agreement (the "Non-Solicitation Agreement"), if the Executive does not breach
any provision of this Agreement or the Non-Solicitation Agreement, then the
Executive shall not be required to sell such Units to Nextera. At such time
within the Applicable Period that the Executive breaches any provision of this
Agreement or the Non-Solicitation Agreement, the Applicable Period shall
immediately terminate. At the termination of the Applicable Period (either by
way of the lapse of the applicable time period or the breach by the Executive of
any provision of this Agreement or the Non-Solicitation Agreement) the terms of
this Section 9 shall no longer apply to the Executive and the terms of Section
6.4 of the Nextera Operating Agreement or Section 4.4 of the Stockholders
Agreement, as applicable, without reference to this Section 9, shall apply to
the Executive except that the six month Repurchase Option Period shall be deemed
to have begun on the termination of the Applicable Period. At such time as the
business of Nextera is incorporated, provisions having the same effect as the
provisions of this Section 9 concerning the Repurchase Option shall apply to any
securities of the newly-incorporated entity issued to the Executive in exchange
for his Units in Nextera, provided, however, that such Repurchase Option shall
terminate upon a Qualified Initial Public Offering.
10. GENERAL.
(a) ARBITRATION OF DISPUTES. Any controversy or claim arising out
of or
<PAGE> 12
relating to this Agreement or the breach thereof or otherwise arising out of the
Executive's employment or the termination of that employment (including, without
limitation, any claims of unlawful employment discrimination whether based on
age or otherwise) shall, to the fullest extent permitted by law, be settled by
arbitration in any forum and form agreed upon by the parties or, in the absence
of such an agreement, under the auspices of the American Arbitration Association
("AAA") in the state where Executive performs substantially all of his duties in
accordance with the Employment Dispute Resolution Rules of the AAA, including,
but not limited to, the rules and procedures applicable to the selection of
arbitrators, except that the arbitrator shall apply the law as established by
decisions of the U.S. Supreme Court and the federal and state courts sitting in
the state where Executive performs substantially all of his duties in deciding
the merits of claims and defenses under federal law or any state or federal
anti-discrimination law, and any awards to the Executive for violation of any
anti-discrimination law shall not exceed the maximum award to which the
Executive could be entitled under the applicable (or most analogous)
anti-discrimination or civil rights laws. In the event that any person or entity
other than the Executive or the Company may be a party with regard to any such
controversy or claim, such controversy or claim shall be submitted to
arbitration subject to such other person or entity's agreement. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The arbitrator shall have the authority to grant the
prevailing party reasonable costs and expenses, including reasonable attorney's
fees and the costs of the arbitration. This Section 10(a) shall be specifically
enforceable. Notwithstanding the foregoing, this Section 10(a) shall not
preclude either party from pursuing a court action for the sole purpose of
obtaining a temporary restraining order or a preliminary injunction in
circumstances in which such relief is appropriate; provided that any other
relief shall be pursued through an arbitration proceeding pursuant to this
Section 10(a).
(b) INTEGRATION. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior understandings and agreements between the parties, whether oral or
written, with respect to any related subject matter.
(c) ASSIGNMENT: SUCCESSORS AND ASSIGNS, ETC. Neither the Company
nor the Executive may make any assignment of this Agreement or any interest
herein, by operation of law or otherwise, without the prior written consent of
the other party provided that the Company may assign its rights under this
Agreement without the consent of the Executive in the event that the Company
shall effect a reorganization, consolidate with or merge into any other
corporation, partnership, organization or other entity, or transfer all or
substantially all of its properties or assets to any other corporation,
partnership, organization or other entity; provided such successor is the
functional equivalent of the Company. This Agreement shall inure to the benefit
of and be binding upon the Company and the Executive, their respective
successors, executors, administrators, heirs and permitted assigns.
(d) ENFORCEABILITY. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of this
Agreement) shall to any extent be declared illegal or unenforceable by a court
of competent jurisdiction, then that court shall have the power to alter such
provision to make it enforceable to the fullest extent permitted by law. The
remainder of this Agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared illegal or
unenforceable, shall not be
<PAGE> 13
affected thereby, and each portion and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
(e) WAIVER. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
(f) NOTICES. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and delivered in person or sent by a nationally recognized overnight courier
service or by registered or certified mail, postage prepaid, return receipt
requested, to the Executive at the last address the Executive has filed in
writing with the Company or, in the case of the Company, at its main offices,
attention of the Leadership Council, and shall be effective on the date of
delivery in person or by courier or three (3) days after the date mailed.
(g) AMENDMENT. This Agreement may be amended or modified only by
a written instrument signed by the Executive and by a duly authorized
representative of the Company.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
11. CONSENT TO JURISDICTION.
(a) GOVERNING LAW. This contract shall be construed under and be
governed in all respects by the laws of the state where the Executive performs
substantially all of his duties, without giving effect to the conflict of laws
principles of such state.
(b) CONSENT TO JURISDICTION. To the extent that any court action
is permitted consistent with or to enforce Section 10(a) of this Agreement, the
parties hereby consent to the jurisdiction of the state and federal courts where
the Executive performs substantially all of his duties. Accordingly, with
respect to any such court action, each of the Executive, the Company and Nextera
(a) submits to the personal jurisdiction of such courts; (b) consents to service
of process; and (c) waives any other requirement (whether imposed by statute,
rule of court, or otherwise) with respect to personal jurisdiction or service of
process.
12. NEXTERA. By signing below, Nextera consents to this Agreement and
the matters provided for herein and agrees that it, together with the Company,
will be jointly and severally liable for all obligations of the Company
hereunder. Following the Incorporation Transaction (as defined in that certain
Share Exchange Agreement (the "Exchange Agreement") dated as of the date hereof
by and among Nextera and the other individuals and parties thereto), all
references herein to "Nextera" shall be deemed to include Newco (as defined in
the Exchange Agreement) as the context requires, and all references herein to
Principal Units or Nextera Class A Units shall be deemed to include Newco Class
A Common Stock as the context requires.
<PAGE> 14
13. TERMINATION OF EMPLOYMENT WITH SIBSON & COMPANY, L.P. By signing
below, the Executive hereby elects to terminate his employment with the
Partnership as of the date hereof and the Partnership accepts such termination.
All prior employment agreements, if any, between the Executive and the
Partnership are superseded by this Agreement and as of the Effective Date are
terminated and are null and void. Executive knowingly and voluntarily releases,
acquits and forever discharges each of the Company, Nextera, the Partnership and
the Partnership's affiliates, partners, predecessors, assigns, agents,
directors, officers, employees and representatives, from any all charges,
complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights, demands,
costs, losses, debts and expenses of any nature whatsoever, known or unknown,
suspected or unsuspected, foreseen or unforeseen, matured or unmatured, arising
out of or in any way related to the termination of the Executive's employment
with the Partnership, including, without limitation, all prior employment
agreements, if any, between the Executive and the Partnership.
<PAGE> 15
INTENDING TO BE LEGALLY BOUND by this Agreement and IN WITNESS
THEREOF, the undersigned parties have executed this Agreement as of this 31st
day of August, 1998.
/s/ ROGER BROSSY
----------------------------
ROGER BROSSY
State of Residence: California
ACCEPTED:
SC/NE, LLC, a Delaware limited liability company
By: NEXTERA ENTERPRISES, L.L.C.
Its: Sole Member
/s/ MICHAEL P. MULDOWNEY
- ---------------------------------
By: Michael P. Muldowney
Its: Chief Financial Officer
CONSENTED AND AGREED TO:
NEXTERA ENTERPRISES, L.L.C.
/s/ MICHAEL P. MULDOWNEY
- ---------------------------------
By: Michael P. Muldowney
Its: Chief Financial Officer
CONSENTED AND AGREED TO
FOR PURPOSES OF SECTION 13:
SIBSON & COMPANY, L.P.
By: SIBSON & COMPANY, INC.
Its: General Partner
/s/ DOUGLAS J. TORMEY
- --------------------------------
By: Douglas J. Tormey
Its: Vice President
<PAGE> 1
Exhibit 10.24
NONCOMPETE, NON-SOLICITATION, PROPRIETARY INFORMATION,
CONFIDENTIALITY AND INVENTIONS AGREEMENT
This Agreement is made as of August 31, 1998, by and between Nextera
Enterprises, L.L.C., a Delaware limited liability company, and the undersigned
Executive. In consideration of the employment and continued employment of
Executive by Nextera Enterprises L.L.C., its successors, subsidiaries and
affiliates (collectively, "Nextera"), the Executive agrees to certain
restrictions on activities necessary to avoid conflicts of interest, ensure the
exclusivity of Executive's services and protect the goodwill, confidential
information, and legitimate business interests of Nextera and its clients. To
further these objectives, the Executive agrees to comply with the following
provisions of this Agreement ("Agreement") as follows:
NONCOMPETE/EXCLUSIVITY
1. During the period of employment by Nextera:
(a) the Executive will devote substantially all of the
Executive's business time to the business of Nextera in
accordance with Section 5 of the Executive's Employment
Agreement with SC/NE, LLC of even date herewith;
(b) will not engage in any business activity, current or
proposed, which competes with the services or products
being developed, marketed or sold by Nextera;
(c) will not, without prior written consent of Nextera,
invest in, enter into or assist any venture, enterprise,
or endeavor which competes or intends to compete with
Nextera, other than as a less than five percent (5%)
stockholder of a publicly held company or a stockholder
of a publicly held company which derives none or an
immaterial portion (i.e., less than ten percent (10%)) of
its revenues from services which compete with the
services of Nextera
2. The Executive represents that, to the best of the Executive's
knowledge, employment by Nextera will not conflict with any
agreement to which the Executive is subject.
NON-SOLICITATION
1. The Executive acknowledges that the names and details of the
firms with whom he has dealings while employed by Nextera
constitute trade secrets belonging to Nextera. In order to
preserve Nextera's trade secrets, during employment with Nextera
and for a period of two years after termination of the
Executive's employment with Nextera for any reason:
1
<PAGE> 2
(a) the Executive will not solicit or cause to be solicited,
or aid in the solicitation of business from firms for
which the Executive did work or from whom the Executive
actively solicited business during the Executive's
employment with Nextera or any of its subsidiaries or
affiliates;
(b) the Executive will not directly or indirectly contact or
solicit any employee of Nextera with regard to present,
future or contemplated employment opportunities on behalf
of himself, or any other person, firm, corporation,
governmental agency or other entity.
PROPRIETARY INFORMATION
1. Proprietary Information refers to any information, not generally
known in the relevant trade or industry, which was obtained from
Nextera or any of its clients, past, present, or prospective,
other than information that is or becomes known to the public or
trade through no breach of this Agreement by the Executive.
2. Proprietary Information includes, but is not limited to, the
following items, whether or not labeled as such: customer lists,
notes, drawings and writings; computer programs (including source
and object codes), algorithms, systems, tools, spreadsheets,
related documentation such as user manuals, functional and
technical specifications, system descriptions, program
documentation, output reports, terminal displays, and data file
contents; plans, process and preparations for Nextera's current
and proposed business activities; discoveries, inventions,
developments, ideas, research, engineering, designs, and
products; projects and improvements made or conceived in
connection with Nextera's customer and prospective customer's
lists; and marketing and financial data of Nextera and its
clients.
3. The Executive agrees not to disclose the existence of or contents
of any documents, records, discs, tapes, and other media that
contain Proprietary Information, and will not copy or remove any
such material from Nextera or its client's premises, except as
required by the Executive's duties or as approved by an
authorized officer of Nextera.
4. The Executive agrees to comply with all restrictions and
regulations of Nextera's clients concerning any and all
information such clients deem proprietary or confidential.
5. The Executive agrees that any material relating to any matter
within the scope of the business of Nextera, and any materials of
clients of Nextera, is and shall remain the property of Nextera
or such clients, as the case may be, and that upon termination of
employment or at any earlier time as requested by Nextera, the
Executive will immediately deliver such material and all copies
in Executive's possession or control to Nextera or such clients,
as the case may be.
2
<PAGE> 3
6. Nextera may provide the Executive with equipment (portable
personal computer, software, etc.) for Executive's use in the
course of employment by Nextera. The Executive acknowledges that
any such equipment will remain the exclusive property of Nextera,
and the Executive agrees to deliver such equipment to Nextera, as
directed by Nextera, upon termination of employment for any
reason, or at any time upon request of Nextera.
CONFIDENTIALITY
1. Except in connection with the Executive's duties for Nextera, the
Executive will not use or disclose to anyone outside Nextera, and
will not use any Proprietary Information or material relating to
the business of Nextera, or its clients, either during or after
employment by Nextera, except with the written permission of
Nextera.
2. The Executive will not disclose to Nextera, and will not induce
Nextera to use any confidential information or material belonging
to others where such disclosure would, to the Executive's
knowledge, violate any rights of, or any duty owing to, a third
party.
3. The Executive agrees not to discuss any information or respond to
any inquiries from the press or other information agencies
regarding Nextera without the express permission of Nextera,
other than responding in the ordinary course of business to
inquiries regarding the consulting industry generally or work
done for clients of SC/NE, LLC.
4. The Executive shall be permitted to give testimony and appear as
a witness in any proceeding in which such testimony or appearance
is required by law, provided the Executive reasonably furnishes
notice to Nextera in order to enable Nextera to seek a protective
order, if applicable.
INVENTIONS
1. The Executive agrees to disclose promptly and fully to Nextera
all developments, inventions, discoveries, improvements, and
proposals for new programs, systems, services, products, tools,
or business endeavors which are related to any business activity
by Nextera, current or proposed (collectively called
"Developments").
2. The Executive hereby assigns to Nextera the Executive's entire
right, title, and interest in each and every work product or
Development related to any business activity by Nextera, current
or proposed (collectively called "Work Product"):
(a) made, developed or conceived solely by the Executive or
jointly with others during or in the course of the
Executive's employment by Nextera,
3
<PAGE> 4
(b) made, developed or conceived wholly or partially as the
result of any task assigned to the Executive or any work
performed by the Executive for or on behalf of Nextera or
its clients, and/or
(c) made or developed with the use of Nextera facilities or
equipment.
3. The Executive agrees to grant to Nextera a right of first refusal
to market on a mutually agreed royalty basis, and a perpetual
non-exclusive license to use, each and every Work Product or
Development made, developed or conceived by the Executive during
employment by Nextera which is not covered under the preceding
paragraph.
4. During employment with Nextera, the Executive agrees to provide
Nextera with copies of any manuscripts produced by the Executive
relating to the business of Nextera or which refers to Nextera in
any manner for approval by Nextera prior to submission for
publication.
5. The Executive does not, however, assign any Developments, if any,
relating in any way to Nextera business which were made prior to
employment with Nextera, which Developments, if any, are
identified on Exhibit A, attached to this Agreement.
GENERAL
1. The Executive's obligations under this Agreement shall survive
the termination of employment. The Executive understands that
this Agreement does not create an obligation of Nextera or any
other party to continue employment.
2. Nextera shall have the unrestricted right to assign this
Agreement to its parent company, its affiliates, and any and all
successors in interest.
3. It is agreed that Nextera may inform any person or entity
subsequently employing or evidencing an intention to employ,
Executive of the nature of the information Nextera asserts to be
confidential, and may inform said person or entity of the
existence of this Agreement, and provide to such persons or
entity a copy of this Agreement.
4. Any breach of this Agreement by the Executive may cause
irreparable damage, and in the event of such a breach, Nextera
shall have, in addition to any remedies at law, the right to an
injunction to prevent or restrain a breach of the Executive's
obligations hereunder.
5. Nextera's failure to exercise any rights under this Agreement
does not constitute a waiver of such right in the event of a
subsequent violation of this Agreement.
4
<PAGE> 5
6. This Agreement shall be governed by the laws of the state of
Executive's employment.
7. In the event a court of competent jurisdiction shall determine
that any provision in this Agreement is too restrictive in scope
or duration, then that court shall have the power to alter such
provision to make it enforceable to the fullest extent permitted
by law. Such a determination shall not have the effect of
rendering any other provision herein contained invalid.
5
<PAGE> 6
INTENDING TO BE LEGALLY BOUND by this Agreement and IN WITNESS THEREOF,
the undersigned parties have executed this Agreement as of this 31st day of
August, 1998.
/s/ ROGER BROSSY
-----------------------------------
Roger Brossy
ACCEPTED:
NEXTERA ENTERPRISES, L.L.C.
/s/ MICHAEL P. MULDOWNEY
- -----------------------------------
By: Michael P. Muldowney
Its: Chief Financial Officer
6
<PAGE> 1
EXHIBIT 10.25
NOTICE TO BORROWER: THIS DOCUMENT CONTAINS
PROVISIONS WHICH REQUIRE A
BALLOON PAYMENT AT MATURITY.
PROMISSORY NOTE
$576,000 January 2, 1998
1. For value received, Gresham Brebach, Jr. ("Borrower"), promises
to pay to the order of Nextera Enterprises Holdings, L.L.C., a Delaware limited
liability company, or its assigns ("Lender"), the sum of Five Hundred
Seventy-Six Thousand Dollars ($576,000), or such lesser sum as shall be advanced
by Lender to Borrower hereunder from time to time (the "Principal Amount"), with
interest on the unpaid balance of such amount from the date of the initial
disbursement of the loan (the "Loan") evidenced hereby, at the rate of interest
specified herein. This Note is secured by the security interest in Borrower's
interest in Enterprise Holdings, L.L.C., a Delaware limited liability company
("NEH"), granted in the Security Agreement of even date herewith entered into
between Lender and Borrower (the "Security Agreement"). Lender shall record the
amount and date of each advance hereunder on Schedule "A" attached hereto,
provided, however, the failure by Lender to make any such notation shall in no
way affect or impair Borrower's obligations to make all payments due hereunder.
2. The Principal Amount hereof shall bear interest at ten percent
(10%) per annum, compounded annually, but in no case shall the interest rate
exceed the maximum rate allowed by law.
3. A final payment of the Maturity Obligations (as hereinafter
defined) shall be due and payable upon the first to occur of the following: (i)
the date which is five (5) years from the date of this Note, or (ii) upon the
date Borrower's Class B Units in NEH are sold, assigned, redeemed, or otherwise
disposed of; or (iii) upon the date HEH sells all or substantially all of its
assets for cash and the members of NEH receive cash distributions of the sales
proceeds (the "Maturity Date").
4. As used herein, "Maturity Obligations" shall mean the entire
outstanding principal amount, together with all accrued but unpaid interest
thereon, and all other sums due and unpaid hereunder and under the Security
Agreement.
1
<PAGE> 2
5. All payments due under this Note are payable at Lender's office
at 844 Moraga Drive, Los Angeles, California 90049 or at such other place as
Lender or other holder hereof shall notify Borrower in writing.
6. All payments received by Lender on this Note shall be applied by
Lender as follows: first, to the payment of delinquency or "late" charges, if
any; second, to accrued and unpaid interest; and third, to the reduction of the
Principal Amount.
7. Any portion of the Principal Amount, or interest unpaid at
maturity, or when the entire amount of this Note is otherwise due and payable,
as a result of acceleration, or otherwise, or after default, shall thereafter
accrue interest at fifteen percent (15%) per annum (the "Delinquency Rate").
The Delinquency Rate shall be effective both before and after any judgment as
may be rendered in a court of competent jurisdiction provided, however, that if
such Delinquency Rate is deemed to be interest in excess of the amount
permitted to be charged to Borrower under applicable law, Lender shall be
entitled to collect a Delinquency Rate only at the highest rate permitted by
law, and any interest actually collected by Lender in excess of such lawful
amount shall be deemed a payment in reduction of the principal amount then
outstanding under this Note and shall be so applied.
8. Borrower may prepay this Note in whole or in part without any
premium or penalty.
9. In the event of any conflict between the provisions of this Note
and those of the Security Agreement or any other document of any nature, the
provisions of this Note shall govern.
10. In the event Borrower fails to pay any installment of interest
or any principal on this Note for ten (10) days after the same shall become due
(a "Default") or upon the happening of any event of default as defined in the
Security Agreement, then, and in any such event, Lender may at its option
declare the entire unpaid Principal Amount, together with interest accrued
thereon, to be immediately due and payable and Lender may proceed to exercise
any rights or remedies that it may have under the Security Agreement, under
this Note, or under any other agreement relating to the Loan or such other
rights and remedies which Lender may have at law, equity, or otherwise. In the
event of such acceleration, Borrower may discharge his obligations to Lender by
paying the Maturity Obligations, with interest at the Delinquency Rate accruing
from the date such acceleration is declared.
2
<PAGE> 3
11. In the event this Note is turned over to an attorney at law for
collection after default, in addition to the Maturity Obligations, Lender shall
be entitled to collect all costs of collection, including but not limited to
reasonable attorneys' fees, incurred in connection with protection of, or
realization of, collateral or in connection with any of Lender's collection
efforts, whether or not suit on this Note or any foreclosure proceeding is
filed, and all such costs and expenses shall be payable on demand and shall
also be secured by the Security Agreement.
12. No failure on the part of Lender or other holder hereof to
exercise any right or remedy hereunder, whether before or after the happening
of a default shall constitute a waiver thereof, and no waiver of any past
default shall constitute waiver of any future default or of any other default.
No failure to accelerate the debt evidenced hereby by reason of default
hereunder, or acceptance of a past due installment, or indulgence granted from
time to time shall be construed to be a waiver of the right to insist upon
prompt payment thereafter or to impose late charges retroactively or
prospectively, or shall be deemed to be a novation of this Note or as a
reinstatement of the debt evidenced hereby or as a waiver of such right or
acceleration or any other right, or be construed so as to preclude the exercise
of any right which Lender may have, whether by the laws of the State of
California, by agreement or otherwise; and Borrower and each endorser or
guarantor hereby expressly waives the benefit of any statute or rule of law or
equity which would produce a result contrary to or in conflict with the
foregoing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom such Agreement is sought to be
enforced.
13. Borrower, for him and his heirs, successors, and assigns, and
each endorser or guarantor of this Note, for its heirs, successors, and assigns,
hereby waives presentment, protest, demand, diligence, notice of dishonor and of
nonpayment, and waives and renounces all rights to the benefits of any statute
of limitations and any moratorium, appraisement, exemption, and homestead now
provided or which may hereafter be provided by any federal or state statute,
including but not limited to exemptions provided by or allowed under the
Bankruptcy Reform Act of 1978, both as to himself personally and as to all of
his property, whether real or personal, against the enforcement and collection
of the obligations evidenced by this Note and any and all extensions, renewals,
and modifications hereof.
14. Borrower represents and warrants to Lender that neither Borrower
nor anyone on his behalf has engaged in any conduct which would give rise to
any fee or commission of any broker, finder, or other person in connection with
this Loan.
3
<PAGE> 4
Borrower hereby indemnifies and agrees to hold harmless Lender, its members,
directors, officers, employees, agents, and affiliates against any and all
claims, demands, causes of action, liabilities, losses, judgments, costs, and
expenses (including, without limitations, attorneys' fees) asserted with
respect to fees or commissions of brokers, finders, or others in connection
with any of the transactions referred to herein or contemplated hereby, and
shall pay in full any such claims on demand by Lender.
15. It is the intention of the parties to conform strictly to applicable
usury laws from time to time in force, and all agreements between Borrower and
Lender, whether now existing or hereafter arising and whether oral or written,
are hereby expressly limited so that in no contingency or event whatsoever,
whether by acceleration of maturity hereof or otherwise, shall the amount paid
or agreed to be paid to Lender or the holder hereof, or collected by Lender or
such holder, for the use, forbearance, or detention of the money to be lent
hereunder or otherwise, or for the payment or performance of any covenant or
obligation contained herein or in the Security Agreement, or in any other
document evidencing, securing, or pertaining to the indebtedness evidenced
hereby, exceed the maximum amount permissible under applicable usury laws. If
under any circumstances whatsoever fulfillment of any provision hereof or of
the Security Agreement, at the time performance of such provision shall be due,
shall involve transcending the limit of validity prescribed by law, then ipso
facto, the obligation to be fulfilled shall be reduced to the limit of such
validity; and if under any circumstances Lender or other holder hereof shall
ever receive an amount deemed interest, by applicable law, which would exceed
the highest lawful rate, such amount that would be excessive interest under
applicable usury laws shall be applied to the reduction of the principal amount
owing hereunder or to other indebtedness secured by the Security Agreement and
not to the payment of interest, or if such excessive interest exceeds the
unpaid principal amount and other indebtedness, the excess shall be deemed to
have been a payment made by mistake and shall be refunded to Borrower or to any
other person making such payment on Borrower's behalf. The terms and provisions
of this paragraph shall control and supersede every other provision of all
agreements between Lender and Borrower and any endorser or guarantor of this
Note.
16. This Note shall be governed by and construed under the laws of the
State of California. Borrower agrees that all actions or proceeding arising in
connection with this Note shall be tried and litigated only in the state and
federal courts located in Los Angeles County, California. Borrower hereby
submits to personal jurisdiction within the State of California for the
enforcement of Borrower's
4
<PAGE> 5
obligations hereunder and under the Security Agreement, and waives any and all
personal rights under the law of any other state to object to jurisdiction
within the State of California for the purposes of litigation to enforce such
obligation of Borrower.
IN WITNESS WHEREOF, Borrower, intending to be legally bound hereby, has
caused this Note to be duly executed the day and year first above written.
"BORROWER"
/s/ GRESHAM BREBACH, JR.
----------------------------------
Gresham Brebach, Jr.
5
<PAGE> 1
EXHIBIT 10.26
NOTICE TO BORROWER: THIS DOCUMENT CONTAINS
PROVISIONS WHICH REQUIRE A
BALLOON PAYMENT AT MATURITY.
PROMISSORY NOTE
$72,000 January 2, 1998
1. For value received, Michael Muldowney ("Borrower"), promises to pay
to the order of Nextera Enterprises Holdings, L.L.C., a Delaware limited
liability company, or its assigns ("Lender"), the sum of Seventy-Two Thousand
Dollars ($72,000), or such lesser sum as shall be advanced by Lender to
Borrower hereunder from time to time (the "Principal Amount"), with interest on
the unpaid balance of such amount from the date of the initial disbursement of
the loan (the "Loan") evidenced hereby, at the rate of interest specified
herein. This Note is secured by the security interest in Borrower's interest in
Nextera Enterprises Holdings, L.L.C., a Delaware limited liability company
("NEH"), granted in the Security Agreement of even date herewith entered into
between Lender and Borrower (the "Security Agreement"). Lender shall record the
amount and date of each advance hereunder on Schedule "A" attached hereto,
provided, however, the failure by Lender to make any such notation shall in no
way affect or impair Borrower's obligations to make all payments due hereunder.
2. The Principal Amount hereof shall bear interest at ten percent
(10%) per annum, compounded annually, but in no case shall the interest rate
exceed the maximum rate allowed by law.
3. A final payment of the Maturity Obligations (as hereinafter
defined) shall be due and payable upon the first to occur of the following: (i)
the date which is five (5) years from the date of this Note, or (ii) upon the
date Borrower's Class B Units in NEH are sold, assigned, redeemed, or otherwise
disposed of; or (iii) upon the date NEH sells all or substantially all of its
assets for cash and the members of NEH receive cash distributions of the sales
proceeds, (the "Maturity Date").
4. As used herein, "Maturity Obligations" shall mean the entire
outstanding principal amount, together with all accrued but unpaid interest
thereon, and all other sums due and unpaid hereunder and under the Security
Agreement.
1
<PAGE> 2
5. All payments due under this Note are payable at Lender's office at
844 Moraga Drive, Los Angeles, California 90049 or at such other place as
Lender or other holder hereof shall notify Borrower in writing.
6. All payments received by Lender on this Note shall be applied by
Lender as follows: first, to the payment of delinquency or "late" charges, if
any; second, to accrued and unpaid interest; and third, to the reduction of the
Principal Amount.
7. Any portion of the Principal Amount, or interest unpaid at
maturity, or when the entire amount of this Note is otherwise due and payable,
as a result of acceleration, or otherwise, or after default, shall thereafter
accrue interest at fifteen percent (15%) per annum (the "Delinquency Rate").
The Delinquency Rate shall be effective both before and after any judgment as
may be rendered in a court of competent jurisdiction provided, however, that if
such Delinquency Rate is deemed to be interest in excess of the amount
permitted to be charged to Borrower under applicable law, Lender shall be
entitled to collect a Delinquency Rate only at the highest rate permitted by
law, and any interest actually collected by Lender in excess of such lawful
amount shall be deemed a payment in reduction of the principal amount then
outstanding under this Note and shall be so applied.
8. Borrower may prepay this Note in whole or in part without any
premium or penalty.
9. In the event of any conflict between the provisions of this Note
and those of the Security Agrement or any other document of any nature, the
provisions of this Note shall govern.
10. In the event Borrower fails to pay any installment of interest or
any principal on this Note for ten (10) days after the same shall become due (a
"Default") or upon the happening of any event of default as defined in the
Security Agreement, then, and in any such event, Lender may at its option
declare the entire unpaid Principal Amount, together with interest accrued
thereon, to be immediately due and payable and Lender may proceed to exercise
any rights or remedies that it may have under the Security Agreement, under
this Note, or under any other agreement relating to the Loan or such other
rights and remedies which Lender may have at law, equity, or otherwise. In the
event of such acceleration, Borrower may discharge his obligations to Lender by
paying the Maturity Obligations, with interest at the Delinquency Rate accruing
from the date such acceleration is declared.
2
<PAGE> 3
11. In the event this Note is turned over to an attorney at law for
collection after default, in addition to the Maturity Obligations, Lender shall
be entitled to collect all costs of collection, including but not limited to
reasonable attorneys' fees, incurred in connection with protection of, or
realization of, collateral or in connection with any of Lender's collection
efforts, whether or not suit on this Note or any foreclosure proceeding is
filed, and all such costs and expenses shall be payable on demand and shall
also be secured by the Security Agreement.
12. No failure on the part of Lender or other holder hereof to exercise
any right or remedy hereunder, whether before or after the happening of a
default shall constitute a waiver thereof, and no waiver of any past default
shall constitute waiver of any future default or of any other default. No
failure to accelerate the debt evidenced hereby by reason of default
hereunder,or acceptance of a past due installment, or indulgence granted from
time to time shall be construed to be a waiver of the right to insist upon
prompt payment thereafter or to impose late charges retroactively or
prospectively, or shall be deemed to be a novation of this Note or as a
reinstatement of the debt evidenced hereby or as a waiver of such right or
acceleration or any other right, or be construed so as to preclude the exercise
of any right which Lender may have, whether by the laws of the State of
California, by agreement or otherwise; and Borrower and each endorser or
guarantor hereby expressly waives the benefit of any statute or rule of law or
equity which would produce a result contrary to or in conflict with the
foregoing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom such agreement is sought to be
enforced.
13. Borrower, for him and his heirs, successors, and assigns, and each
endorser or guarantor of this Note, for its heirs, successors, and assigns,
hereby waives presentment, protest, demand, diligence, notice of dishonor and
of nonpayment, and waives and renounces all rights to the benefits of any
statute of limitations and any moratorium, appraisement, exemption, and
homestead now provided or which may hereafter be provided by any federal or
state statute, including but not limited to exemptions provided by or allowed
under the Bankruptcy Reform Act of 1978, both as to himself personally and as
to all of his property, whether real or personal, against the enforcement and
collection of the obligations evidenced by this Note and any and all
extensions, renewals, and modifications hereof.
14. Borrower represents and warrants to Lender that neither Borrower
nor anyone on his behalf has engaged in any conduct which would give rise to
any fee or commission of any broker, finder, or other person in connection with
this Loan.
3
<PAGE> 4
Borrower hereby indemnifies and agrees to hold harmless Lender, its members,
directors, officers, employees, agents, and affiliates against any and all
claims, demands, causes of action, liabilities, losses, judgments, costs, and
expenses (including, without limitations, attorneys' fees) asserted with
respect to fees or commissions of brokers, finders, or others in connection
with any of the transactions referred to herein or contemplated hereby, and
shall pay in full any such claims on demand by Lender.
15. It is the intention of the parties to conform strictly to
applicable usury laws from time to time in force, and all agreements between
Borrower and Lender, whether now existing or hereafter arising and whether oral
or written, are hereby expressly limited so that in no contingency or event
whatsoever, whether by acceleration of maturity hereof or otherwise, shall the
amount paid or agreed to be paid to Lender or the holder hereof, or collected
by Lender or such holder, for the use, forbearance, or detention of the money
to be lent hereunder or otherwise, or for the payment or performance of any
covenant or obligation contained herein or in the Security Agreement, or in any
other document evidencing, securing, or pertaining to the indebtedness
evidenced hereby, exceed the maximum amount permissible under applicable usury
laws. If under any circumstances whatsoever fulfillment of any provision hereof
or of the Security Agreement, at the time performance of such provision shall
be due, shall involve transcending the limit of validity prescribed by law,
then ipso factor, the obligation to be fulfilled shall be reduced to the limit
of such validity; and if under any circumstances Lender or other holder hereof
shall ever receive an amount deemed interest, by applicable law, which would
exceed the highest lawful rate, such amount that would be excessive interest
under applicable usury laws shall be applied to the reduction of the principal
amount owing hereunder or to other indebtedness secured by the Security
Agreement and not to the payment of interest, or if such excessive interest
exceeds the unpaid principal amount and other indebtedness, the excess shall be
deemed to have been a payment made by mistake and shall be refunded to Borrower
or to any other person making such payment on Borrower's behalf. The terms and
provisions of this paragraph shall control and supersede every other provision
of all agreements between Lender and Borrower and any endorser or guarantor of
this Note.
16. This Note shall be governed by and construed under the laws of
the State of California. Borrower agrees that all actions or proceeding arising
in connection with this Note shall be tried and litigated only in the state and
federal courts located in Los Angeles County, California. Borrower hereby
submits to personal jurisdiction within the State of California for the
enforcement of Borrower's
4
<PAGE> 5
obligations hereunder and under the Security Agreement, and waives any and all
personal rights under the law of any other state to object to jurisdiction
within the State of California for the purposes of litigation to enforce such
obligation of Borrower.
IN WITNESS WHEREOF, Borrower, intending to be legally bound hereby, has
caused this Note to be duly executed the day and year first above written.
"BORROWER"
/s/ MICHAEL MULDOWNEY
---------------------
Michael Muldowney
<PAGE> 1
EXHIBIT 10.27
NOTICE TO BORROWER: THIS DOCUMENT CONTAINS
PROVISIONS WHICH REQUIRE A
BALLOON PAYMENT AT MATURITY.
PROMISSORY NOTE
$62,000 January 2, 1998
1. For value received, Debra Bergevine ("Borrower"), promises
to pay to the order of Nextera Enterprises Holdings, L.L.C., a Delaware limited
liability company, or its assign ("Lender"), the sum of Sixty-Two Thousand
Dollars ($62,000), or such lesser sum as shall be advanced by Lender to Borrower
hereunder from time to time (the "Principal Amount"), with interest on the
unpaid balance of such amount from the date of the initial disbursement of the
loan (the "Loan") evidenced hereby, at the rate of interest specified herein.
This Note is secured by the security interest in Borrower's interest in Nextera
Enterprises Holdings, L.L.C., a Delaware limited liability company ("NEH"),
granted in the Security Agreement of even date herewith entered into between
Lender and Borrower (the "Security Agreement"). Lender shall record the amount
and date of each advance hereunder on Schedule "A" attached hereto, provided,
however, the failure by Lender to make any such notation shall in no way affect
or impair Borrower's obligations to make all payments due hereunder.
2. The Principal Amount hereof shall bear interest at ten percent
(10%) per annum, compounded annually, but in no case shall the interest rate
exceed the maximum rate allowed by law.
3. A final payment of the Maturity Obligations (as hereinafter
defined) shall be due and payable upon the first to occur of the following: (i)
the date which is five (5) years from the date of this Note, or (ii) upon the
date Borrower's Class B Units in NEH are sold, assigned, redeemed, or otherwise
disposed of; or (iii) upon the date HEH sells all or substantially all of its
assets for cash and the members of NEH receive cash distributions of the sales
proceeds, (the "Maturity Date").
4. As used herein, "Maturity Obligations" shall mean the entire
outstanding principal amount, together with all accrued but unpaid interest
thereon, and all other sums due and unpaid hereunder and under the Security
Agreement.
1
<PAGE> 2
5. All payments due under this Note are payable at Lender's office
at 844 Moraga Drive, Los Angeles, California 90049 or at such other place as
Lender or other holder hereof shall notify Borrower in writing.
6. All payments received by Lender on this Note shall be applied by
Lender as follows: first, to the payment of delinquency or "late" charges, if
any; second, to accrued and unpaid interest; and third, to the reduction of the
Principal Amount.
7. Any portion of the Principal Amount, or interest unpaid at
maturity, or when the entire amount of this Note is otherwise due and payable,
as a result of acceleration, or otherwise, or after default, shall thereafter
accrue interest at fifteen percent (15%) per annum (the "Delinquency Rate").
The Delinquency Rate shall be effective both before and after any judgment as
may be rendered in a court of competent jurisdiction provided, however, that if
such Delinquency Rate is deemed to be interest in excess of the amount
permitted to be charged to Borrower under applicable law, Lender shall be
entitled to collect a Delinquency Rate only at the highest rate permitted by
law, and any interest actually collected by Lender in excess of such lawful
amount shall be deemed a payment in reduction of the principal amount then
outstanding under this Note and shall be so applied.
8. Borrower may prepay this Note in whole or in part without any
premium or penalty.
9. In the event of any conflict between the provisions of this Note
and those of the Security Agreement or any other document of any nature, the
provisions of this Note shall govern.
10. In the event Borrower fails to pay any installment of interest
or any principal on this Note for ten (10) days after the same shall become due
(a "Default") or upon the happening of any event of default as defined in the
Security Agreement, then, and in any such event, Lender may at its option
declare the entire unpaid Principal Amount, together with interest accrued
thereon, to be immediately due and payable and Lender may proceed to exercise
any rights or remedies that it may have under the Security Agreement, under
this Note, or under any other agreement relating to the Loan or such other
rights and remedies which Lender may have at law, equity, or otherwise. In the
event of such acceleration, Borrower may discharge his obligations to Lender by
paying the Maturity Obligations, with interest at the Delinquency Rate accruing
from the date such acceleration is declared.
2
<PAGE> 3
11. In the event this Note is turned over to an attorney at law for
collection after default, in addition to the Maturity Obligations, Lender shall
be entitled to collect all costs of collection, including but not limited to
reasonable attorneys' fees, incurred in connection with protection of, or
realization of, collateral or in connection with any of Lender's collection
efforts, whether or not suit on this Note or any foreclosure proceeding is
filed, and all such costs and expenses shall be payable on demand and shall
also be secured by the Security Agreement.
12. No failure on the part of Lender or other holder hereof to exercise
any right or remedy hereunder, whether before or after the happening of a
default shall constitute a waiver thereof, and no waiver of any past default
shall constitute waiver of any future default or of any other default. No
failure to accelerate the debt evidenced hereby by reason of default hereunder,
or acceptance of a past due installment, or indulgence granted from time to time
shall be construed to be a waiver of the right to insist upon prompt payment
thereafter or to impose late charges retroactively or prospectively, or shall be
deemed to be a novation of this Note or as a reinstatement of the debt evidenced
hereby or as a waiver of such right or acceleration or any other right, or be
construed so as to preclude the exercise of any right which Lender may have,
whether by the laws of the State of California, by agreement or otherwise; and
Borrower and each endorser or guarantor hereby expressly waives the benefit of
any statute or rule of law or equity which would produce a result contrary to or
in conflict with the foregoing. This Note may not be changed orally, but only by
an agreement in writing signed by the party against whom such agreement is
sought to be enforced.
13. Borrower, for him and his heirs, successors, and assigns, and
each endorser or guarantor of this Note, for its heirs, successors, and
assigns, hereby waives presentment, protest, demand, diligence, notice of
dishonor and of nonpayment, and waives and renounces all rights to the benefits
of any statute of limitations and any moratorium, appraisement, exemption, and
homestead now provided or which may hereafter be provided by any federal or
state statute, including but not limited to exemptions provided by or allowed
under the Bankruptcy Reform Act of 1978, both as to himself personally and as
to all of his property, whether real or personal, against the enforcement and
collection of the obligations evidenced by this Note and any and all
extensions, renewals, and modifications hereof.
14. Borrower represents and warrants to Lender that neither Borrower
nor anyone on his behalf has engaged in any conduct which would give rise to
any fee or commission of any
3
<PAGE> 4
broker, finder, or any other person in connection with this Loan. Borrower
hereby indemnifies and agrees to hold harmless Lender, its members, directors,
officers, employees, agents, and affiliates against any and all claims, demands,
causes of action, liabilities, losses, judgments, costs, and expenses
(including, without limitations, attorneys' fees) asserted with respect to fees
or commissions of brokers, finders, or others in connection with any of the
transactions referred to herein or contemplated hereby, and shall pay in full
any such claims on demand by Lender.
15. It is the intention of the parties to conform strictly to applicable
usury laws from time to time in force, and all agreements between Borrower and
Lender, whether now existing or hereafter arising and whether oral or written,
are hereby expressly limited so that in no contingency or event whatsoever,
whether by acceleration of maturity hereof or otherwise, shall the amount paid
or agreed to be paid to Lender or the holder hereof, or collected by Lender or
such holder, for the use, forbearance, or detention of the money to be lent
hereunder or otherwise, or for the payment or performance of any covenant or
obligation contained herein or in the Security Agreement, or in any other
document evidencing, securing, or pertaining to the indebtedness evidenced
hereby, exceed the maximum amount permissible under applicable usury laws. If
under any circumstances whatsoever fulfillment of any provision hereof or of
the Security Agreement, at the time performance of such provision shall be due,
shall involve transcending the limit of validity prescribed by law, then ipso
facto, the obligation to be fulfilled shall be reduced to the limit of such
validity; and if under any circumstances Lender or other holder hereof shall
ever receive an amount deemed interest, by applicable law, which would exceed
the highest lawful rate, such amount that would be excessive interest under
applicable usury laws shall be applied to the reduction of the principal amount
owing hereunder or to other indebtedness secured by the Security Agreement and
not to the payment of interest, or if such excessive interest exceeds the
unpaid principal amount and other indebtedness, the excess shall be deemed to
have been a payment made by mistake and shall be refunded to Borrower or to any
other person making such payment on Borrower's behalf. The terms and provisions
of this paragraph shall control and supersede every other provision of all
agreements between Lender and Borrower and any endorser or guarantor of this
Note.
16. This Note shall be governed by and construed under the laws of the
State of California. Borrower agrees that all actions or proceeding arising in
connection with this Note shall be tried and litigated only in the state and
federal courts located in Los Angeles County, California.
4
<PAGE> 5
Borrower hereby submits to personal jurisdiction within the State of California
for the enforcement of Borrower's obligations hereunder and under the Security
Agreement, and waives any and all personal rights under the law of any other
state to object to jurisdiction within the State of California for the purposes
of litigation to enforce such obligation of Borrower.
IN WITNESS WHEREOF, Borrower, intending to be legally bound hereby, has
caused this Note to be duly executed the day and year first above written.
"BORROWER"
/s/ DEBRA BERGEVINE
-----------------------------------------
Debra Bergevine
5
<PAGE> 1
EXHIBIT 23.1.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated April
30, 1998, except for Note 12, as to which the date is August 31, 1998, in the
Registration Statement (Form S-1) and related Prospectus of Nextera Enterprises,
Inc. for the registration of shares of its Class A common stock.
Our audits also included the financial statement schedule of Nextera
Enterprises, L.L.C. included in the Registration Statement. This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the schedule based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
September 18, 1998
<PAGE> 1
EXHIBIT 23.1.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated April 30, 1998, with respect to the 1997 financial
statements of Symmetrix, Inc., included in the Registration Statement (Form S-1)
and related Prospectus of Nextera Enterprises, Inc., for the registration of
shares of its Class A common stock.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
September 18, 1998
<PAGE> 1
EXHIBIT 23.1.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 19, 1996, with respect to the consolidated
financial statements of Symmetrix, Inc., included in the Registration Statement
(Form S-1) and related Prospectus of Nextera Enterprises, Inc., for the
registration of shares of its Class A common stock.
/s/ B.D.O. SEIDMAN LLP
Boston, Massachusetts
September 18, 1998
<PAGE> 1
EXHIBIT 23.1.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated July 21, 1995. We also
consent to the reference to us under the headings "Experts" in such Prospectus.
/s/ PRICEWATERHOUSECOOPERS LLP
Boston, MA
September 17, 1998
<PAGE> 1
EXHIBIT 23.1.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated August 31, 1998, with respect to the financial
statements of SiGMA Consulting, LLC, included in the Registration Statement
(Form S-1) and related Prospectus of Nextera Enterprises, Inc., for the
registration of shares of its Class A common stock.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
September 18, 1998
<PAGE> 1
EXHIBIT 23.1.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 19, 1998, except for Note 8 which is April 4,
1998, with respect to the financial statements of The Planning Technologies
Group, Inc., included in the Registration Statement (Form S-1) and related
Prospectus of Nextera Enterprises, Inc., for the registration of shares of its
Class A common stock.
/s/ HARTE CARUCCI & DRISCOLL, P.C.
Woburn, Massachusetts
September 17, 1998
<PAGE> 1
EXHIBIT 23.1.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 10, 1998, except for Note 13, which is August
31, 1998, with respect to the financial statements of Sibson & Company, L.P.,
and Subsidiaries, included in the Registration Statement (Form S-1) and related
Prospectus of Nextera Enterprises, Inc., for the registration of shares of its
Class A common stock.
/s/ FARKOUH, FURMAN & FACCIO
New York, New York
September 17, 1998
<PAGE> 1
EXHIBIT 23.1.8
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated September 1, 1998, with respect to the financial
statements of Sibson Canada, Inc., included in the Registration Statement (Form
S-1) and related Prospectus of Nextera Enterprises, Inc., for the registration
of shares of its Class A common stock.
/s/ GRANT THORNTON
Toronto, Ontario
September 17, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS, AND NOTES THERETO, INCLUDED IN THE
COMPANY'S REGISTRATION STATEMENT, TO WHICH THIS SCHEDULE IS AN EXHIBIT, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> FEB-26-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 JUN-30-1998
<CASH> 554 2,921
<SECURITIES> 0 0
<RECEIVABLES> 2,302 11,051
<ALLOWANCES> 100 617
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,619 14,931
<PP&E> 1,311 2,542
<DEPRECIATION> 130 493
<TOTAL-ASSETS> 22,655 57,498
<CURRENT-LIABILITIES> 4,954 9,824
<BONDS> 0 0
0 0
0 0
<COMMON> 19,747 2,688
<OTHER-SE> (3,015) (6,593)
<TOTAL-LIABILITY-AND-EQUITY> 16,732 57,498
<SALES> 7,998 22,095
<TOTAL-REVENUES> 7,998 22,095
<CGS> 4,718 14,938
<TOTAL-COSTS> 5,561 7,864
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 32 2,671
<INCOME-PRETAX> (2,313) (3,378)
<INCOME-TAX> 702 200
<INCOME-CONTINUING> (3,015) (3,978)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,015) (3,978)
<EPS-PRIMARY> (0.74) (0.29)
<EPS-DILUTED> (0.74) (0.29)
</TABLE>
