AGREEMENT OF PURCHASE AND SALE dated as of May 21, 1998 (the
"Agreement"), among Intelligroup, Inc., a New Jersey corporation
("Intelligroup"), Intelligroup Europe Limited (No. 3205142), a corporation
formed pursuant to the laws of England and Wales and a wholly-owned subsidiary
of Intelligroup ("Sub"), Xxxxxxx Xxxx Xxxxxx ("Xxxxxx"), the sole shareholder of
CPI Resources Limited (No. 2080824), a corporation formed pursuant to the laws
of England and Wales ("Resources").
WITNESSETH:
WHEREAS, the Boards of Directors of Intelligroup and Sub have
determined that it is advisable and in the best interests of their respective
shareholders for Intelligroup and Sub to acquire the entire issued share capital
of Resources ("Resources Capital") upon the terms and subject to the conditions
set forth herein;
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
Intelligroup and Sub have each approved the acquisition of Resources Capital by
Sub (the "Acquisition");
WHEREAS, pursuant to the Acquisition, the Resources Capital shall be
acquired by Sub in exchange for the consideration set forth in Section 2.3
hereof upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Intelligroup, Sub and Xxxxxx hereby agree as follows:
ARTICLE 1.
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DEFINITIONS
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1.1. Defined Terms. As used herein, the terms below shall have the
following meanings:
"Affiliate" of a Person means any other Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Ancillary Agreements" means the Employment and Non-Compete Agreement,
the Tax Deed and all other agreements required hereunder to consummate the
Acquisition.
"Assets" means the right, title and interest of Resources in and to its
properties, assets and rights of any kind, whether tangible or intangible, real
or personal, including without limitation the right, title and interest in the
following:
(a) all Contracts and Contract Rights;
(b) all Fixtures and Equipment;
(c) all Books and Records;
(d) all Proprietary Rights;
(e) all Permits;
(f) all cash, accounts receivable, deposits and prepaid
expenses; and
(g) all goodwill.
"Average Share Price" means, as of any date of determination, the
average of the closing prices of Intelligroup Stock on the Nasdaq National
Market as reported in the Wall Street Journal for the 20 trading days ending on
the day which is three trading days prior to such date of determination.
"Balance Sheet" means the balance sheet of Resources as of the Balance
Sheet Date.
"Balance Sheet Date" means December 31, 1997.
"Books and Records" means (a) all product, business and marketing
plans, sales and promotional literature and artwork relating to the Assets or
the Business, (b) all books, records, lists, ledgers, financial data, files,
reports, product and design manuals, plans, drawings, technical manuals and
operating records of every kind relating to the Assets or the Business
(including records and lists of customers, distributors, suppliers and
personnel) and (c) all telephone and fax numbers used in the Business, in each
case whether maintained as hard copy or stored in computer memory and whether
owned by Resources or any of its Affiliates.
"Business" means the business and operations of Resources consisting in
part of acting as a holding and management company and of providing software
utilities for the management of data and applications within large
organizations.
"Closing" has the meaning set forth in Section 2.1(b).
"Closing Date" means the date of the Closing.
"Companies Act 1985" means the Companies Xxx 0000 (as amended by the
Companies Act 1989) (both being UK statutes).
"Consents" means any and all Permits and any and all consents,
approvals or waivers from third parties that are required for the consummation
of the transactions contemplated by this Agreement.
"Contract Rights" means all rights and obligations under the Contracts.
"Contracts" means all agreements, contracts, leases (whether for real
or personal property), purchase orders, undertakings, covenants not to compete,
employment agreements, confidentiality agreements, licenses, instruments,
obligations and commitments to which Resources is a party or by which Resources
or any of the Assets are bound or affected, whether written or oral.
"Court Order" means any judgment, decision, consent decree, injunction,
ruling or order of any foreign, federal, state or local court or governmental
agency, department or authority that is binding on any Person or its property
under applicable law.
"Default" means (a) a breach of or default under any Contract, (b) the
occurrence of an event that with the passage of time or the giving of notice or
both would constitute a breach of or default under any
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Contract or (c) the occurrence of an event that with or without the passage of
time or the giving of notice or both would give rise to a right of termination,
renegotiation or acceleration under any Contract.
"Employees" means all officers and directors of Resources and all other
Persons employed by Resources on a full or part-time basis as of the relevant
date.
"Employment and Non-Compete Agreement" means the Agreement to be
entered into among Intelligroup, Sub and Xxxxxx, in the form of Exhibit A
hereof.
"Encumbrance" means any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction, conditional sales agreement, encumbrance or other right of
third parties, whether voluntarily incurred or arising by operation of law, and
includes any agreement to give any of the foregoing in the future, and any
contingent sale or other title retention agreement or lease in the nature
thereof.
"Environmental Conditions" means the state of the environment,
including natural resources (e.g., flora and fauna), soil, surface water, ground
water, any drinking water supply, subsurface strata or ambient air, relating to
or arising out of the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, pouring, emptying,
discharging, injecting, escaping, leaching, disposal, dumping or threatened
release of Hazardous Substances by Resources or any of its predecessors or
successors in interest, or by its agents, representatives, employees or
independent contractors when acting in such capacity on behalf of Resources.
With respect to Environmental Claims by third parties, Environmental Conditions
also include the exposure of persons to Hazardous Substances at the work place
or the exposure of persons or property to Hazardous Substances migrating from or
otherwise emanating from or located on property owned or occupied by Resources.
"Environmental Laws" means all applicable federal, state, district and
local laws, all rules or regulations promulgated thereunder, and all orders,
consent orders, judgments, notices, permits or demand letters issued,
promulgated or entered pursuant thereto, relating to pollution or protection of
the environment (including, without limitation, ambient air, surface water,
ground water, land surface, or subsurface strata), including, without
limitation, (i) laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, industrial materials, wastes or
other substances into the environment and (ii) laws relating to the
identification, generation, manufacture, processing, distribution, use,
treatment, storage, disposal, recovery, transport or other handling of
pollutants, contaminants, chemicals, industrial materials, wastes or other
substances. Environmental Laws shall include, without limitation, applicable
United Kingdom environmental laws being any statute, rule, regulation, statutory
instrument, treaty, directive, direction, decision, by-law, code of practice,
circular, guidance note, order, notice, demand, injunction, rule of common law
or statutory or common law, duty of care of (in each case) any governmental
authority or agency or any regulatory or other body (whether in the United
Kingdom or overseas) in relation to Environmental Conditions.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and the rules and regulations promulgated thereunder.
"Facilities" means all offices, manufacturing facilities, stores,
warehouses, administration buildings and all real property and related
facilities used by Resources all as identified or listed on Schedule 3.8.
"Fixtures and Equipment" means all of the furniture, fixtures,
furnishings, machinery, computer hardware, and other tangible personal property
owned by Resources wherever located and including any such Fixtures and
Equipment in the possession of any of the suppliers or other vendors of
Resources.
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"Hazardous Substances" means all pollutants, contaminants, chemicals,
wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic or
otherwise hazardous substances or materials (whether solids, liquids or gases)
subject to regulation, control or remediation under Environmental Laws. By way
of example only, the term Hazardous Substances includes petroleum, urea
formaldehyde, flammable, explosive and radioactive materials, PCBs, pesticides,
herbicides, asbestos, sludge, slag, acids, metals, solvents and waste waters.
"Intelligroup Stock" means the common stock, par value $.01 per share,
of Intelligroup.
"knowledge" or "to the knowledge" of a party (or similar phrases) means
to the extent of matters (i) which are actually known by such party or (ii)
which, based on facts of which such party is aware, would be known to a
reasonable Person in similar circumstances, and when used in the context of
Xxxxxx shall be deemed to include the knowledge of the Employees.
"Liability" means any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, absolute, contingent, matured,
unmatured, liquidated, unliquidated, known or unknown.
"Management Accounts" means the balance sheet of Resources as of March
31, 1998 and the related statements of income, changes in shareholders' equity
and cash flows, of Resources for the three months then ended.
"Material Adverse Effect" or "Material Adverse Change" or a similar
phrase means, with respect to any Person, (a) any material adverse effect on or
change with respect to (i) the business, operations, assets (taken as a whole),
liabilities (taken as a whole), condition (financial or otherwise) or results of
operations, of such Person, taken as a whole, or (ii) the right or ability of
such Person to consummate any of the transactions contemplated hereby or (b) any
event or condition which, with the passage of time, the giving or receipt of
notice or the occurrence or nonoccurrence of any other circumstance, action or
event, would reasonably be expected to constitute a "Material Adverse Effect" on
or "Material Adverse Change" with respect to such Person.
"Permitted Encumbrances" means (a) liens for Taxes or governmental
charges or claims (i) not yet due and payable, or (ii) being contested in good
faith, if a reserve or other appropriate provision, if any, as shall be required
by U.S. GAAP or U.K. GAAP, as applicable, shall have been made therefor, (b)
statutory liens of landlords, liens of carriers, warehousepersons, mechanics and
materialpersons and other liens imposed by law incurred in the ordinary course
of business for sums (i) not yet due and payable, or (ii) being contested in
good faith, if a reserve or other appropriate provision, if any, as shall be
required by U.S. GAAP or U.K. GAAP, as applicable, shall have been made
therefor, (c) liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other similar types of social security
programs or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, performance and return of
money bonds and similar obligations, in each case in the ordinary course of
business, consistent with past practice, and (d) easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case, which do
not interfere with the ordinary conduct of business of Resources and do not
materially detract from the value of the property upon which such encumbrance
exists.
"Permits" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, necessary or desirable for
the past, present or anticipated conduct or operation of the Business or
ownership of the Assets of such Person.
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"Person" means any person or entity, whether an individual, trustee,
corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority or any similar entity.
"Proprietary Rights" means all (a) U.S. and foreign patents, patent
applications, patent disclosures and improvements thereto, including xxxxx
patents and utility models and applications therefor, (b) U.S. and foreign
trademarks, service marks, trade dress, logos, trade names and corporate names
and the goodwill associated therewith and registrations and applications for
registration thereof, (c) U.S. and foreign copyrights and registrations and
applications for registration thereof, (d) U.S. and foreign mask work rights and
registrations and applications for registration thereof, (e) Trade Secrets, (f)
other proprietary rights, (g) copies and tangible embodiments thereof (in
whatever form or medium) and (h) licenses granting any rights with respect to
any of the foregoing.
"Regulations" means any laws, statutes, ordinances, regulations, rules,
notice requirements, court decisions, agency guidelines, principles of law and
orders of any foreign, federal, state or local government and any other
governmental department or agency, including without limitation energy, motor
vehicle safety, public utility, zoning, building and health codes, Environmental
Laws, occupational safety and health and laws respecting employment practices,
employee documentation, terms and conditions of employment and wages and hours.
"Related Party" means (i) any of Resources' officers, directors and
shareholders, and any officers, directors, partners, associates or relatives of
such officers, directors and shareholders, and (ii) any Person in which
Resources or any Shareholder or any Affiliate, associate or relative of any such
Person has any direct or indirect interest.
"Representative" of any Person means any officer, director, principal,
attorney, agent, employee or other representative of such Person.
"Resources Financial Statements" means (a) the audited financial
statements, the balance sheets of Resources as of December 31, 1997 and November
30, 1996 and the profit and loss account of Resources for the periods then
ended, together with the report of Xxxxxxx Xxxx thereon, and (b) the Management
Accounts.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which at least 50% of the securities or interests having, by their terms,
ordinary voting power to elect members to the board of directors, or other
persons performing similar functions with respect to such corporation, is held,
directly or indirectly, by such Person, (b) any partnership or limited liability
company of which (i) such Person is a general partner or managing member or (ii)
such person possesses a 50% or greater interest in the total capital or total
income of such partnership or limited liability company.
"Tax Deed" means the deed to be entered into between Sub and Xxxxxx, in
the form of Exhibit B hereof.
"Tax Return" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including information
returns, any documents with respect to or accompanying requests for the
extension
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of time in which to file any such report, return, document, declaration or other
information.
"Taxes" mean any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, service, license, net worth, payroll, franchise and transfer
and recording, imposed by Inland Revenue or any taxing authority (whether
domestic or foreign, including any federal, state, county, local or foreign
government or any subdivision or taxing agency thereof (including a U.S.
possession)), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest whether paid or
received, fines, penalties or additional amounts attributable to, or imposed
upon, or with respect to, any such taxes, charges, fees, levies or other
assessments.
"Trade Secrets" means all trade secrets and confidential business
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
research and development information, software, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information).
"U.K. GAAP" means generally accepted United Kingdom accounting
principles.
"U.S. GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), or in such other statements by such entity as may be in general use
by significant segments of the U.S. accounting profession, which are applicable
to the facts and circumstances on the date of determination.
1.2. Interpretation Provisions.
(a) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement, and article, section,
schedule and exhibit references are to this Agreement unless otherwise
specified. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. The term "or" is disjunctive but
not necessarily exclusive. The terms "include" and "including" are not limiting
and mean "including without limitation."
(b) References to agreements and other documents shall be deemed
to include all subsequent amendments and other modifications thereto.
(c) References to statutes shall include all regulations
promulgated thereunder and references to statutes or regulations shall be
construed as including all statutory and regulatory provisions consolidating,
amending or replacing the statute or regulation.
(d) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
(e) The language used in this Agreement shall be deemed to be
the language chosen by the parties to express their mutual intent, and no rule
of strict construction shall be applied against either party.
(f) The annexes, schedules and exhibits to this Agreement are
a material part hereof
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and shall be treated as if fully incorporated into the body of the Agreement.
ARTICLE 2.
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THE ACQUISITION
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2.1. The Acquisition.
(a) Effective Time. At the Closing (as defined in Section 2.1(b)
hereof), and subject to and upon the terms and conditions of this Agreement,
Xxxxxx agrees to sell to Sub, and Sub agrees to purchase from Xxxxxx, the
Resources Capital.
(b) Closing. Subject to the satisfaction or waiver, if
permissible, of the conditions set forth in Articles 5 and 6, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place (i)
at the offices of Xxxxxxxx Xxxxxxxxx, 000 Xxxxxxx Xxxx Xxxx, Xxxxxxxxx, Xxx
Xxxxxx, xx the date hereof or (ii) at such other time, date or place as
Intelligroup and Xxxxxx may mutually agree.
2.2. Directors and Officers. Xxxxxx shall resign as a director and
officer of Resources and shall cause Xxxxxx Xxxxxxxxx to tender her resignation
as Company Secretary at the Closing.
2.3. Purchase Price. At the Closing, Xxxxxx shall receive 371,000
shares of validly issued, fully paid and nonassessable shares of restricted
Intelligroup Stock.
The shares of Intelligroup Stock issued in connection with the
Acquisition pursuant to this Section 2.3 are sometimes referred to herein as the
"Acquisition Shares."
2.4. Taking of Necessary Action; Further Action. Each of Intelligroup,
Sub and Xxxxxx will take all such reasonable lawful action as may be necessary
or appropriate in order to effect the Acquisition in accordance with this
Agreement as promptly as practicable. If, at any time after the Closing, any
such further action is necessary or desirable to carry out the purposes of this
Agreement, to vest Sub with full right, title and possession to all the
property, rights, privileges, power and franchises of Resources and to vest
Xxxxxx with full right, title and possession of the Acquisition Shares, the
officers and directors of Intelligroup, Sub and Xxxxxx, immediately prior to the
Closing are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action.
ARTICLE 3.
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REPRESENTATIONS AND WARRANTIES OF XXXXXX
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As an inducement of Intelligroup and Sub to enter into this Agreement,
Xxxxxx hereby makes, as of the date hereof, the following representations and
warranties to Intelligroup and Sub, except as otherwise set forth in written
disclosure schedules (the "Schedules") delivered to Intelligroup and Sub on or
prior to the date hereof, a copy of which is attached hereto. The Schedules are
numbered to correspond to the various sections of this Article 3 setting forth
certain exceptions to the representations and warranties contained in this
Article 3 and certain other information called for by this Agreement. Unless
otherwise specified, no disclosure made in any particular Schedule shall be
deemed made in any other Schedule unless expressly made therein (by
cross-reference or otherwise), unless, and only to the extent, that it would
fairly be understood to contain information which also is applicable to another
representation and warranty in this Article 3. It is understood and agreed that
for purposes of this Article
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3 (other than Sections 3.1 and 3.2), Resources shall include all of its
Subsidiaries, including, without limitation, CPI Consulting Limited (No.
3316554), a corporation formed pursuant to the laws of England and Wales
("Consulting").
3.1. Organization of Resources. Resources is a corporation duly
organized, validly existing and in good standing under the laws of England and
Wales. Resources has full corporate power and authority to conduct the Business
as it is presently being conducted and to own or lease, as applicable, the
Assets owned or leased by it. Resources is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is necessary under applicable law as a result of the conduct of
the Business or the ownership of its properties and where the failure to be so
qualified would have a Material Adverse Effect on Resources. Each jurisdiction
in which Resources is qualified to do business as a foreign corporation is set
forth in Schedule 3.1.
3.2. Capitalization of Resources.
(a) As of the date of this Agreement, the authorized issued
share capital of Resources is (pound)10,000 consisting of 10,000 ordinary shares
of (pound)1 each, of which 100 ordinary shares of (pound)1 each are in issue.
Resources has no other capital stock authorized, issued or outstanding. Xxxxxx
is the sole holder of Resources Capital.
(b) There are no outstanding options, warrants, convertible
securities or rights of any kind to purchase or otherwise acquire any shares of
capital stock or other securities of Resources.
(c) All issued shares of Resources Capital are validly issued,
fully paid and nonassessable and not subject to any preemptive or other rights
created by statute, Resources' Certificate of Incorporation or Memorandum and
Articles of Association or any Contract or otherwise. The Resources Capital has
been issued in compliance with the Companies Xxx 0000.
(d) Other than the transactions contemplated by this Agreement,
there is no outstanding vote, plan, pending proposal or right of any Person to
cause any redemption of Resources Capital or the merger or consolidation of
Resources with or into any other entity.
(e) Other than Consulting, Resources has no subsidiaries.
3.3 Ownership of Share Capital; Title.
(a) The Resources Capital held by Xxxxxx is not subject to any
shareholder agreement, voting trust, proxy or other agreement or understanding
with respect to or concerning the purchase, sale or voting of such Resources
Capital. Upon the Acquisition by Sub of the Resources Capital presently held by
Xxxxxx, Intelligroup shall acquire good title to such Resources Capital, free
and clear of all Encumbrances.
(b) The share capital in Consulting (the "Consulting Capital")
(representing 70% of the issued share capital of Consulting) held by Resources
is not subject to any shareholder agreement, voting trust, proxy or other
agreement or understanding with respect to or concerning the purchase, sale or
voting of such Consulting Capital. Upon the Acquisition by Sub of the Consulting
Capital presently held by Resources, Intelligroup shall acquire good title to
such Consulting Capital, free and clear of all Encumbrances.
3.4. Shareholders' Agreements, Etc. There are no shareholder
agreements, voting trusts, proxies or other agreements or understandings with
respect to or concerning the purchase, sale or voting
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of the capital stock of Resources.
3.5. Authorization. Xxxxxx has all necessary power and authority to
enter into this Agreement and the Ancillary Agreements to which he is a party
and has taken all actions necessary to consummate the transactions contemplated
hereby and thereby and to perform his obligations hereunder and thereunder. This
Agreement has been duly executed and delivered by Xxxxxx and is, and upon the
execution and delivery thereof each Ancillary Agreement to which he is a party
will be, a valid and binding obligation of Xxxxxx, enforceable against Xxxxxx in
accordance with its terms, except that enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors or (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
3.6. Officers and Directors. Schedule 3.6 contains a true, correct and
complete list of all the officers and directors of Resources.
3.7. Bank Accounts. Schedule 3.7 contains a list of all of
Resources' bank accounts, safe deposit boxes, and persons authorized to draw
thereon or have access thereto.
3.8. Real Property.
(a) General. Resources has a revocable license to use all real
property necessary for the conduct of its business as presently conducted.
Schedule 3.8 sets forth all such real property. Except as otherwise set forth on
Schedule 3.8, Resources is not a party to any Leases of real property.
(b) Owned Real Property. Resources does not own any real
property.
3.9. Personal Property.
(a) General. Resources owns or leases all personal property
Assets necessary for the conduct of its business as presently conducted, and the
personal property Assets (taken as a whole) are in such operating condition and
repair (subject to normal wear and tear) as is necessary for the conduct of its
business as presently conducted.
(b) Owned Personal Property. Resources has good and marketable
title to all such personal property owned by it, free and clear of any and all
Encumbrances other than Permitted Encumbrances. With respect to each such item
of personal property (i) there are no Leases, subleases, licenses, options,
rights, concessions or other agreements, written or oral, granting to any party
or parties the right of use of any portion of such item of personal property
(except licenses of Proprietary Rights in the ordinary course of business), (ii)
there are no outstanding options or rights of first refusal in favor of any
other party to purchase any such item of personal property or any portion
thereof or interest therein and (iii) there are no parties (other than
Resources) who are in possession of or who are using any such item of personal
property.
(c) Leased Personal Property. Resources has good and valid
leasehold title to all of its Fixtures and Equipment, vehicles and other
tangible personal property Assets leased by it from third parties, free and
clear of any and all Encumbrances other than Permitted Encumbrances which would
not permit the termination of the lease therefor by the lessor. Resources is not
a party to any Lease for personal property involving annual payments in excess
of $25,000.
With respect to each Lease listed on Schedule 3.9, (i) there has been
no material default under any such Lease by Resources or, to the knowledge of
Xxxxxx, by any other party, (ii) the execution,
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delivery and performance of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby will not cause
a material default under any such Lease, (iii) such Lease is a valid and binding
obligation of Resources, is in full force and effect with respect to Resources,
and is enforceable against Resources, in accordance with its terms, except as
the enforceability thereof may be limited by (1) applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which affect
the enforcement of creditors' rights generally or (2) general principles of
equity, whether considered in a proceeding at law or in equity, (iv) no action
has been taken by Resources, and no event has occurred which, with notice or
lapse of time or both, would permit termination, modification or acceleration by
a party thereto other than Resources without the consent of Resources, under any
such Lease that is material to Resources, (v) no party has repudiated in writing
any term thereof or threatened in writing to terminate, cancel or not renew any
such Lease that is material to Resources and (vi) Resources has not assigned,
transferred, conveyed, mortgaged or encumbered any interest therein or in any
leased property subject thereto (or any portion thereof).
3.10. Environmental Matters.
(a) Resources is in material compliance with all Environmental
Laws. Xxxxxx or Resources has not received any notice to the effect that, and
Xxxxxx has no knowledge that, (i) Resources is not in compliance in any material
respect with, or is in violation of, any such Environmental Laws required
thereunder or (ii) any currently existing circumstances are likely to result in
a failure of Resources to comply with, or a violation by Resources of, any such
Environmental Laws. Resources does not handle or utilize Hazardous Substances in
the operation of its Business.
(b) To the knowledge of Xxxxxx, (i) no underground tank or other
underground storage receptacle for Hazardous Substances is currently located on
the Facilities, and there have been no releases of any Hazardous Substances from
any such underground tank or related piping and (ii) there have been no releases
(i.e., any past or present releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping) of Hazardous Substances in quantities exceeding the reportable
quantities as defined under federal or state law by Resources on, upon or into
the Facilities other than those authorized by Environmental Laws including,
without limitation, the Permits required thereunder.
(c) To the knowledge of Xxxxxx, there are no PCBs or
asbestos-containing materials located at or on the Facilities.
3.11. Contracts.
(a) Disclosure. Schedule 3.11 sets forth a complete and accurate
list of all of the Contracts of the following categories:
(i) Contracts not made in the ordinary course of business;
(ii) License agreements or royalty agreements, whether
Resources is the licensor or licensee thereunder;
(iii) Confidentiality and non-disclosure agreements (whether
Resources is the beneficiary or the obligated party thereunder);
(iv) Customer orders under which the customer is to make a
payment after the date hereof of $10,000 or more;
- 10 -
(v) Research, consulting, service or distribution
agreements;
(vi) Contracts or commitments involving future expenditures
or Liabilities, actual or potential, in excess of $10,000 after the date hereof
or otherwise material to the Business or the Assets;
(vii) Contracts or commitments relating to commission
arrangements with others;
(viii) Employment contracts, consulting contracts and
severance agreements, including Contracts (A) to employ or terminate executive
officers or other personnel and other contracts with present or former officers
or directors of Resources or (B) that will result in the payment by, or the
creation of any Liability of Resources, Xxxxxx, Intelligroup or Sub to pay any
severance, termination, "golden parachute," or other similar payments to any
present or former personnel following termination of employment or otherwise as
a result of the consummation of the transactions contemplated by this Agreement;
(ix) Indemnification agreements;
(x) Promissory notes, loans, agreements, indentures,
evidences of indebtedness, letters of credit, guarantees, or other instruments
relating to an obligation to pay money, whether Resources shall be the borrower,
lender or guarantor thereunder (excluding credit provided by Resources in the
ordinary course of business to purchasers of its products and obligations to pay
vendors in the ordinary course of business and consistent with past practice);
(xi) Contracts containing covenants limiting the freedom of
Resources or any officer, director, Employee or Affiliate of Resources, to
engage in any line of business or compete with any Person that relates directly
or indirectly to the Business;
(xii) Any Contract with the federal, state or local
government or any agency or department thereof;
(xiii) Any Contract with a Related Party;
(xiv) Leases of real or personal property involving annual
payments of more than $10,000; and
(xv) Any other Contract under which the consequences of a
default or termination would reasonably be expected to have a Material Adverse
Effect on Resources, individually or in the aggregate.
Complete and accurate copies of all of the Contracts listed on Schedule
3.11, including all amendments and supplements thereto, have been made available
to Intelligroup. Xxxxxx has included as part of Schedule 3.11 a brief summary of
the material terms of each oral Contract.
(b) Absence of Defaults. All of the Contracts are valid, binding
and enforceable in accordance with their terms with no existing (or to the
knowledge of Xxxxxx, threatened) Default or dispute. Resources has fulfilled, or
taken all action necessary to enable it to fulfill when due, all of its material
obligations under each of such Contracts. To the knowledge of Xxxxxx, all
parties to such Contracts have complied in all material respects with the
provisions thereof, no party is in Default thereunder and no notice of any claim
of Default has been given to Resources or Xxxxxx. Xxxxxx does
- 11 -
not have any reason to believe that the products or services called for by any
executory Contract cannot be supplied in accordance with the terms of such
Contract, including time specifications, and has no reason to believe that any
unfinished Contract will, upon performance by Resources result in a loss to
Resources.
(c) Product Warranty. Resources has not committed any act, and
there has been no omission, which may result in, and there has been no
occurrence which may give rise to Liability for breach of warranty (whether
covered by insurance or not) on the part of Resources, with respect to services
rendered prior to or on the Closing Date.
3.12. No Conflict or Violation; Consents. Except as set forth on
Schedule 3.12, none of the execution, delivery or performance of this Agreement
or any Ancillary Agreement, the consummation of the transactions contemplated
hereby or thereby, nor compliance by Xxxxxx with any of the provisions hereof or
thereof, will (a) violate or conflict with any provision of the governing
documents of Resources, (b) violate, conflict with, or result in a breach of or
constitute a default (with or without notice of passage of time) under, or
result in the termination of, or accelerate the performance required by, or
result in a right to terminate, accelerate, modify or cancel under, or require a
notice under, or result in the creation of any Encumbrance upon any of its
respective assets under, any Contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, security interest or other arrangement to which
Resources or Xxxxxx is a party or by which Resources or Xxxxxx is bound or to
which any of its respective assets are subject, (c) violate any applicable
Regulation or Court Order or (d) impose any Encumbrance on any Assets or the
Business. Except as set forth on Schedule 3.12, no notices to, declaration,
filing or registration with, approvals or Consents of, or assignments by, any
Persons (including any federal, state or local governmental or administrative
authorities) are necessary to be made or obtained by Resources or Xxxxxx in
connection with the execution, delivery or performance of this Agreement or any
Ancillary Agreement or the consummation of the transactions contemplated hereby
or thereby.
3.13. Permits. The operation of the Business does not require any
Permits.
3.14. Resources Financial Statements; Books and Records. Except as set
forth on Schedule 3.14, the Resources Financial Statements:
(i) comply with the provisions of the Companies Xxx 0000 and
all other relevant statutes;
(ii) have been prepared in accordance with U.K.GAAP;
(iii) are complete and accurate in all material respects;
and
(iv) show a true and fair view of the state of affairs of
Resources as at the Balance Sheet Date and of the profit or loss of the
Resources for the accounting period ended on that date.
(b) Full provision or reserve has been made in the Resources
Financial Statements for all taxation liable to be assessed on Resources, or for
which Resources is accountable, in respect of:
(i) profits, gains or income earned, arising, accruing or
received or deemed to arise, accrue or have been received for any purpose;
- 12 -
(ii) transactions effected or deemed to have been effected
or any event before the Balance Sheet Date; and
(iii) distributions made or deemed to have been made down to
such date provided for in the Resources Financial Statements.
(c) Full provision has been made in the Resources Financial
Statements for deferred taxation in accordance with U.K. GAAP.
(d) The aggregate book value of plant and machinery for which
capital allowances have been claimed under Part II of the Capital Allowances Act
1990 (a UK statute) (the "CAA") does not exceed the written-down value of the
qualifying expenditure under that Act.
(e) If each of the capital assets of the Resources (other than
assets on which capital allowances are claimed but are not calculated
separately) were disposed of for a consideration equal to the book value of that
asset in or adopted for the purposes of the Resources Financial Statements, no
liability to corporation tax on chargeable gains or balancing charge under the
CAA would arise (for this purpose there shall be disregarded any relief or
allowance available to the Resources (other than amounts falling to be deducted
from the consideration receivable under Section 38 of the Taxation of Chargeable
Gains Act 1992 (a UK statute) (the "TCGA")).
(f) The values placed on the current assets of Resources in the
Resources Financial Statements are not in excess of their market values at the
Balance Sheet Date nor their market values at the date of this agreement.
(g) The stock-in-trade and work-in-progress have been valued in
the Resources Financial Statements at the lower of cost and net realisable
value. Full provision has been made for all damaged, obsolete and slow moving
stock.
(h) The results shown by the Resources Financial Statements were
not materially affected by:
(i) transactions of a nature not usually undertaken by the
Resources;
(ii) circumstances of an extraordinary, exceptional or
non-recurring nature;
(iii) charges or credits relating to prior years; or
(iv) any change in the basis of accounting.
(i) Resources maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
with management's authorizations, (ii) transactions are recorded as necessary to
permit preparation of audited financial statements in accordance with U.K. GAAP
and the Companies Xxx 0000 and to maintain accountability for assets, (iii)
access to assets is permitted only in accordance with management's authorization
and (iv) the recorded accountability for assets is compared with existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(j) The Books and Records, in reasonable detail, accurately and
fairly reflect the activities of Resources and the Business and have been
provided to Intelligroup for its inspection.
- 13 -
(k) Resources has not engaged in any transaction, maintained any
bank account or used any corporate funds except for transactions, bank accounts
or funds which have been and are reflected in the normally maintained Books and
Records.
(l) The stock records and minute books of Resources that are
made available to Intelligroup have been accurately and properly maintained and
fully reflect all minutes of meetings, resolutions and other material actions
and proceedings of their respective shareholders and boards of directors and all
committees thereof, all issuances, transfers and redemptions of share capital of
which Resources and Xxxxxx are aware and contain true, correct and complete
copies of its Certificate of Incorporation and Memorandum and Articles of
Association and all amendments thereto through the date hereof.
3.15. Absence of Certain Changes or Events. Except as set forth on
Schedule 3.15, since the Balance Sheet Date there has not been any:
(a) Material Adverse Change with respect to Resources;
(b) failure to operate the Business of Resources in the ordinary
course so as to use its commercially reasonable efforts to preserve the Business
intact and to preserve the continued services of its Employees and the goodwill
of customers and others having business relations with Resources or their
respective Representatives;
(c) resignation or termination of any officer or Employee of
Resources, or any increase in the rate of compensation payable or to become
payable to any officer, Employee or Representative of Resources, including the
making of any loan to, or the payment, grant or accrual of any bonus, incentive
compensation, service award or other similar benefit to, any such Person, or the
addition to, modification of, or contribution to any Employee Plan;
(d) payment, loan or advance of any amount to or in respect of,
or the sale, transfer or lease of any properties or the Assets of Resources to,
or entering into of any Contract with, any Related Party except (i) directors'
fees and (ii) forgiveness of loans in the amounts and to the individuals set
forth on Schedule 3.15;
(e) sale, assignment, license, transfer or Encumbrance of any of
the Assets of Resources, tangible or intangible, singly or in the aggregate,
other than sales of products and services in the ordinary course of business and
consistent with past practice;
(f) new Contracts, or extensions, modifications, terminations or
renewals thereof, except for Contracts entered into, modified or terminated in
the ordinary course of business and consistent with past practice;
(g) actual or threatened early termination of any material
customer account or group of accounts;
(h) disposition or lapsing of any Proprietary Rights of
Resources, in whole or in part, or any disclosure of any trade secret, process
or know-how to any Person not an Employee;
(i) material change in accounting methods or practices by
Resources;
(j) revaluation by Resources of any of its Assets, including
writing off notes or accounts receivable other than for which adequate reserves
have been established;
- 14 -
(k) damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the Assets, the Business or the
prospects of Resources;
(l) declaration, setting aside or payment of dividends or
distributions in respect of any share capital of Resources or any redemption,
purchase or other acquisition of any equity securities of Resources;
(m) issuance or reservation for issuance by Resources of, or
commitment of it to issue or reserve for issuance, any share capital or other
equity securities or obligations or securities convertible into or exchangeable
for share capital or other equity securities;
(n) increase, decrease or reclassification of the share capital
of Resources;
(o) amendment of the Memorandum of Association or Articles of
Association of Resources;
(p) capital expenditure or execution of any lease or any
incurring of liability therefor by Resources, involving payments in excess of
$10,000 in the aggregate;
(q) failure to pay any material obligation of Resources when
due;
(r) cancellation of any indebtedness or waiver of any rights of
substantial value to Resources, except in the ordinary course of business and
consistent with past practice;
(s) indebtedness incurred by Resources for borrowed money or any
commitment to borrow money entered into by Resources, or any loans made or
agreed to be made by Resources;
(t) liability incurred by Resources except in the ordinary
course of business and consistent with past practice, or any increase or change
in any assumptions underlying or methods of calculating any bad debt,
contingency or other reserves;
(u) payment, discharge or satisfaction of any Liabilities of
Resources other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of Liabilities reflected or
reserved against in the Financial Statements or incurred in the ordinary course
of business and consistent with past practice since the Balance Sheet Date;
(v) acquisition by Resources of any equity interest in any other
Person; or
(w) agreement by Resources to do any of the foregoing.
3.16. Liabilities. Except as set forth on Schedule 3.16:
(a) Resources has no Liabilities or obligations (absolute,
accrued, contingent or otherwise) except (i) Liabilities which are reflected and
properly reserved against in the Resources Financial Statements, (ii)
Liabilities incurred in the ordinary course of business and consistent with past
practice since the Balance Sheet Date (all of which liabilities do not exceed
$50,000 in the aggregate) and (iii) liabilities arising under the Contracts
(other than obligations which are required to be reflected on a balance sheet
prepared in accordance with U.K. GAAP) set forth on Schedule 3.11 or which are
not required to be disclosed on such Schedule and which have arisen or been
incurred in the ordinary course of business.
- 15 -
(b) None of the Liabilities described in this Section 3.16
relates to any breach of Contract, breach of warranty, tort, infringement or
violation of law or arose out of any action, order writ, injunction, judgment or
decree outstanding or claim, suit, litigation, proceeding, investigation or
dispute (collectively, "Actions").
(c) The reserves set forth on the Balance Sheet for liabilities
are reasonable.
3.17. Litigation. There is no Action, pending or, to the knowledge of
Xxxxxx, threatened (i) against, relating to or affecting Resources, any of its
Assets or any of its officers and directors as such, (ii) which seeks to enjoin
or obtain damages in respect of the transactions contemplated hereby or by the
Ancillary Agreements or (iii) with respect to which there is a reasonable
likelihood of a determination which would prevent Xxxxxx from consummating the
transactions contemplated hereby. To the knowledge of Xxxxxx, there is no basis
for any Action, which if adversely determined against Resources or Xxxxxx, their
respective directors or officers, or any other Person could reasonably be
expected to result in a loss to Resources, individually or in the aggregate, in
excess of $10,000. There are presently no outstanding judgments, decrees or
orders of any court or any governmental or administrative agency against or
affecting Resources, its Business or any of its Assets.
3.18. Labor Matters.
(a) Resources has five Employees, Xxx Xxxxxx, Xxxxxx Xxxxxxxxx,
Xxxxx Xxxxx, Xxxx Xxxxxxxxxx and Xxxxxxx Xxxxx. The current salaries of such
Employees are set forth on Schedule 3.18. To the knowledge of Xxxxxx, Resources
is in material compliance with all applicable Regulations respecting employment
practices, terms and conditions of employment, wages and hours, equal employment
opportunity, and the payment of social security and similar taxes, and none of
them are engaged in any unfair labor practice.
(b) To the knowledge of Xxxxxx, Resources has not entered into
any severance or similar arrangement in respect of any present or former
Employee that will result in any obligation (absolute or contingent) of
Intelligroup or Sub, Resources to make any payment to any present or former
Employee following termination of employment or upon consummation of the
transactions contemplated by this Agreement.
3.19. Employee Benefit Plans. As of the Closing, Resources shall
neither operate nor be a participant in any pension arrangement. Resources does
not operate or participate in or have any legal or moral obligation to
contribute to any permanent health insurance, private health provision, accident
benefit or any other ancillary schemes or have any liability with respect to any
such benefit, arrangement or scheme.
3.20. Transactions with Related Parties. Except for employment
agreements and other compensation arrangements disclosed on Schedule 3.20, to
the knowledge of Xxxxxx, no Related Party has (a) borrowed or loaned money or
other property to Resources which has not been repaid or returned, (b) any
contractual or other claims, express or implied, of any kind whatsoever against
Resources or (c) any interest in any property used by Resources.
3.21. Compliance with Law. Resources has conducted the Business in
material compliance with all applicable Regulations and Court Orders. Neither
Resources nor Xxxxxx has received any notice to the effect that, or has
otherwise been advised that, Resources is not in compliance with any such
Regulations or Court Orders, and Xxxxxx has no reason to anticipate that any
existing circumstances are likely to result in any material violation of any of
the foregoing.
- 16 -
3.22 Intellectual Property.
(a) General. Resources does not hold or use any patent, patent
application, trademark, tradename, service xxxx, copyright or mask work.
(b) Adequacy. The Proprietary Rights of Resources are all those
necessary for the normal conduct of the Business as presently conducted and as
presently contemplated.
(c) Royalties and Licenses. Except as set forth on Schedule
3.22, Resources has no obligation to compensate any Person for the use of any of
its Proprietary Rights nor, except in the ordinary course of business, has
Resources granted to any Person any license, option or other rights to use in
any manner any of its Proprietary Rights, whether requiring the payment of
royalties or not.
(d) Ownership. Resources owns or has a valid right to use its
Proprietary Rights, and such Proprietary Rights will not cease to be valid
rights of Resources by reason of the execution, delivery and performance of this
Agreement or the Ancillary Agreements or the consummation of the transactions
contemplated hereby or thereby.
(e) Absence of Claims. Neither Resources nor Xxxxxx (A) has
received any notice alleging, or otherwise has knowledge of facts that might
give rise to, invalidity with respect to any of the Proprietary Rights of
Resources or (B) has received any notice of alleged infringement of any rights
of others due to any activity by Resources. To the knowledge of Xxxxxx,
Resources' use of its Proprietary Rights in its past, current and planned
products do not and would not infringe upon or otherwise violate the valid
rights of any third party anywhere in the world. No other Person (i) has
notified Resources or Xxxxxx that it is claiming any ownership of or right to
use any of Resources' Proprietary Rights or (ii) to the knowledge of Xxxxxx, is
infringing upon any such Proprietary Rights in any way.
3.23. Tax Matters. Except as set forth on Schedule 3.23:
(a) Capital Gains.
(i) In respect of any asset owned by Resources at the
Balance Sheet Date or acquired since the Balance Sheet Date:
(A) the provisions of Section 19(3) of the Capital
Gains Tax Act 1979 (a UK statute) (the "CGTA") and/or Sections 17 or 165 of the
TCGA do not apply;
(B) no claim has been made under Sections 23, 140, 152
to 158 inclusive or 247 of the TCGA;
(C) no such asset is subject to a deemed disposal and
re-acquisition under paragraphs 16, 19 or 21 of Schedule 2 to the TCGA or the
mandatory use of 6 April 1965 valuation under that Schedule;
(D) no such asset is a wasting asset under Section 44
of the TCGA which does not qualify in full for capital allowances under Section
47(1) of the TCGA; and
(E) no election has been made under Section 35(5) of
the TCGA.
- 17 -
(ii) Resources does not own an unutilised capital loss to
which the provisions of Section 18(3) of the TCGA applies.
(iii) No capital gain chargeable to corporation tax will
accrue to Resources on the disposal of any debt owing to Resources.
(iv) Resources has not made any claim or election under
Section 161(3) of the TCGA.
(v) No chargeable gain would arise on the disposal by
Resources of any asset acquired since the Balance Sheet Date for a consideration
equal to the consideration actually given for the acquisition of such asset
(disregarding any indexation relief).
(b) Depreciatory Transactions. No loss which might accrue on the
disposal by Resources of any asset is liable to be reduced by virtue of any
depreciatory transaction within the meaning of Sections 176 and 177 of the TCGA
nor is any expenditure on any share or security liable to be reduced under
Section 125 of the TCGA and no chargeable gain or allowable loss arising on a
disposal by Resources is likely to be adjusted pursuant to the provisions of
Sections 29 and 30 of the TCGA or to fall within the provisions of Section 34
thereof relating to value shifting.
(c) Close Companies.
(i) Resources has not made (and will not be deemed to have
made) any loan or advance so as to become liable to make any payment under
Sections 419 or 422 of the Income and Corporation Taxes Act 1988 (a U.K.
statute) (the "Taxes Act") nor has Resources written off or released or agreed
to write off or release the whole or any part of any such loan or advance.
(ii) Resources is not and has never been a close
investment-holding company within the meaning of Section 13A of the Taxes Act.
(d) Deemed Distributions. No distribution within Section 418 of
the Taxes Act has been made by Resources.
(e) Liability for Tax Primarily Due from Another Person.
(i) No transaction, omission or event has occurred in
consequence of which Resources is or may be held liable for any taxation or
deprived of relief otherwise available to it or may be otherwise held liable for
any taxation primarily chargeable against some other company or Person (whether
by reason of any such other company being or having been a member of the same
group of companies or otherwise).
(ii) Resources has not since the Balance Sheet Date made any
payment in respect of taxation primarily chargeable against some other company
or Person.
(f) Claims by Resources.
(i) There are no matters relating to taxation in respect of
which Resources (either alone or jointly with any other person) has made:
(A) any claim (including, but not limited to, a
supplementary claim) for relief under any taxation statute;
- 18 -
(B) any election for one type of relief, or one basis,
system or method of taxation as opposed to another;
(C) any appeal (including, but not limited to, a
further appeal against an assessment to taxation; and
(D) any application for the postponement of taxation.
(ii) Resources has made no claim under Sections 24, 279 or
280 of the TCGA or Sections 242 or 584 of the Taxes Act.
(g) Non-allowable Payments.
(i) There are no rents, interest, annual payments or other
sums of an income nature paid or payable by Resources or which Resources is
under an obligation to pay in the future that are or may be wholly or partially
disallowable as deductions or charges in computing profits for the purposes of
corporation tax by reason of the provisions of Sections 74, 79, 125, 338, 339,
770, 779 to 786 (inclusive) or 787 of the Taxes Act or otherwise.
(ii) Resources has not made any payment to or provided any
benefit or agreed to make any payment to or provide any benefit for any present
or former director, officer or employee of Resources or a dependent of any such
Persons which is not allowable as a deduction in calculating the profits of
Resources for taxation purposes.
(h) Capital Allowances.
(i) All expenditures which Resources has incurred or may
incur under any subsisting commitment on the provision of machinery or plant has
qualified or will qualify (if not deductible as a trading expense of a trade
carried on by Resources) for writing-down allowances under the CAA.
(ii) The value attributed in the Accounts to each Asset or
pool of Assets is such that on a disposal of each such Asset or pool of Assets
on the Balance Sheet Date for a consideration equal to such value or aggregate
value no balancing charge would have arisen.
(iii) All capital expenditures incurred by Resources since
the Balance Sheet Date and all capital expenditures which may be incurred by
Resources under any existing contract has qualified or will be capable of
qualifying for capital allowances. Such allowances have been or will be made in
taxing Resources' trade.
(iv) Since the Balance Sheet Date, Resources has not done or
omitted to do or agreed to do or permitted to be done any act as a result of
which Resources could be required to bring a disposal value into account or
suffer a balancing charge or be subject to recovery of excess relief for the
purpose of capital allowances under Sections 4, 24, 87, 100 or 128 of the CAA or
a withdrawal of first year allowances or a recovery of excess relief under
Sections 46 or 47 of the CAA.
(v) Resources has not incurred any expenditure on the
provision of any capital allowance bearing asset for leasing.
(vi) No claim for capital allowances on expenditure incurred
by Resources prior to Closing on the provision of machinery or plant which at
the date hereof is still leased will or may
- 19 -
be restricted by reason of Section 61(5) of the CAA (machinery and plant on
lease).
(vii) Resources has not made any election under Section 37
of the CAA (short life assets) nor is it taken to have made any such election
under subsection (8)(c) thereof.
(viii) Resources has not obtained any capital allowances
under Chapter VI Part II of the CAA (fixtures).
(ix) Resources is not involved in a dispute with another
person as to the entitlement of capital allowances under Section 51(7) of the
CAA.
(i) Distributions.
(i) No distribution within the meaning of Sections 209 or
210 of the Taxes Act (other than dividends shown in its audited accounts) has
been made by Resources since 6 April 1965. Resources is not bound to make any
such distribution.
(ii) No securities (within the meaning of Section 254(1) of
the Taxes Act) issued by Resources and remaining in issue at the date hereof
were issued in such circumstances that the interest payable thereon or any other
payment in respect of them fails to be treated as a distribution under Section
209 of the Taxes Act.
(iii) Resources has not been concerned in any exempt
distribution within Section 213 of the Taxes Act.
(iv) Resources has not received any capital distributions to
which the provisions of Section 346 of the Taxes Act could apply.
(v) Resources has not issued nor agreed to issue any share
capital in the circumstances referred to in Section 211(1) of the Taxes Act.
(j) Carry-Forward of Losses. Nothing has been done and no event
or series of events has occurred or will, as a result of any Contract, agreement
or arrangement entered into before the date hereof occur which might cause or
contribute to the disallowance of the carry forward of losses or excess charges
on income or surplus advance corporation tax under the provisions of Sections
245, 245A, 393 or 768 of the Taxes Act or the disallowance of the carry back of
losses under the provisions of Sections 393A and 768A of the Taxes Act.
(k) Anti-avoidance Provisions.
(i) Resources has not been engaged in or been a party to any
transaction or series of transactions or scheme or arrangement which has
resulted or could result in the avoidance of or a reduction in a liability to
taxation and to which the principle on which the case of Xxxxxxx v Xxxxxx was
decided could apply.
(ii) Resources has not been a party to or otherwise involved
in any transaction, scheme or arrangement to which any of the following
provisions could apply:
the TCGA: Sections 29 - 34, 106
the Taxes Act: Sections 37, 56, 116, 240(11)-(13),
395, 399, 404, 410, 710-28, 729-38,
739-46, 774-87
- 20 -
the CAA: Sections 42, 46, 47, 75 and 159 (4),
(5) and (6).
(iii) Resources has not been a party to or otherwise
involved in any transaction to which any of the following provisions have been
or could be applied other than transactions in respect of which all necessary
clearances or consents have been obtained:
the TCGA: Sections 135-139
the Taxes Act: Sections 703-709, and 776.
(l) Migration of Companies. Resources has not without the prior
consent of the appropriate UK agency entered into or agreed to enter into any of
the transactions specified in Section 765 of the Taxes Act.
(m) Value Added Tax.
(i) Resources has duly registered and is a taxable person
for the purposes of value added tax ("VAT"). It has complied with all statutory
requirements, orders, provisions, directions or conditions relating to VAT.
(ii) Resources maintains complete, correct and up-to-date
records for the purposes of compliance with VAT legislation.
(iii) Resources is not in arrears with any payment or
returns of VAT or liable to any abnormal or non-routine payment or any
forfeiture or penalty or to the operation of any penal provision.
(iv) All input tax for which Resources has claimed credit
has been paid by Resources in respect of supplies made to it relating to goods
or services used or to be used wholly for the purpose of Resources' business.
(v) All supplies of goods and services made by Resources are
taxable supplies for the purposes of the Value Added Tax Act 1994 (a U.K.
statute) (the "VATA") and Resources has not been and will not be denied credit
for any input tax by reason of the operation of Section 26 of the VATA.
(vi) No supplies have been made to Resources to which the
provisions of Section 8 of the VATA might apply.
(vii) Resources has not been required by the Commissioners
of Customs and Excise to give security for VAT purposes.
(viii) All VAT returns and payments due in respect of any
group of companies of which Resources is or has been a member for VAT purposes
(calculated otherwise than by reference to a supply by Resources) have been or
will have been duly made by the representative member of the group up to the
time when Resources ceased or will have ceased to be liable for VAT under the
group registration provisions in respect of such group or groups.
(ix) Resources has not, during the period of 12 or 24 months
respectively preceding Closing, received a surcharge liability notice under
Section 59 of the VATA or a penalty liability notice under Section 64 of the
VATA.
- 21 -
(x) Neither Resources nor any "relevant associate" (as
defined in paragraph 3 of Schedule 10 to the VATA) has elected to waive
exemption pursuant to Schedule 10 to the VATA.
(xi) Resources does not hold any interest in any building or
work such as is referred to in Item 1(a) Group 1 Part II Schedule 9 of the VATA.
(xii) Resources has not incurred any liability under the
provisions of paragraph 6 of Schedule 10 to the VATA and there are no
circumstances in existence at the date of this Agreement whereby Resources would
become so liable on the occurrence of any of the events mentioned in paragraph
5(1)(a) or 5(1)(b) of Schedule 10 of the VATA.
(xiii) There are no circumstances whereby Resources is or
could become liable to make any payment or increased payment as a result of
another person having elected or electing to waive exemption pursuant to
Schedule 10 to the VATA.
(xiv) Resources owns no assets to which Part XV of The Value
Added Tax Regulations 1995 applies.
(n) Stamp Duty and Stamp Duty Reserve Tax.
(i) Resources has not claimed or obtained relief from stamp
duty under Section 42 of the Finance Xxx 0000 or Sections 75-77 of the Finance
Xxx 0000.
(ii) Resources has not entered into any transaction,
contract or arrangement, whether verbal or written and whether made within or
outside the United Kingdom, under which it has or may become liable to pay or to
account for stamp duty or stamp duty reserve tax and which liability remains
unsatisfied.
(o) Inheritance Tax.
(i) Resources has not made or received any transfers of
value within Sections 94 or 99 of the Inheritance Tax Xxx 0000.
(ii) Resources has not been a party to associated operations
in relation to a transfer of value within the meaning of Section 268 of the
Inheritance Tax Xxx 0000.
(iii) There is no outstanding Inland Revenue charge under
Section 237 of the Inheritance Tax Xxx 0000 over the assets of or the shares in
Resources.
(iv) No person has by virtue of Section 212 of the
Inheritance Tax Xxx 0000 any power of sale, mortgage or charge in respect of any
share in or asset of Resources.
(p) Purchase of Own Shares. Resources has not purchased,
redeemed or repaid nor agreed to purchase, redeem or repay any of its own shares
in circumstances to which Section 219 of the Taxes Act applies.
(q) Gains Accruing to Non-Resident Companies or Trusts. There
has not accrued any gain in respect of which Resources may be liable to
corporation tax on chargeable gains by virtue of the provisions of Sections 13
or 86 to 98 or Schedule 5 of the TCGA.
(r) Offshore Funds. Resources does not own and has never owned a
material
- 22 -
interest in an offshore fund which is or has at any material time been a
non-qualifying offshore fund as defined by Section 760 of the Taxes Act.
(s) No Interest in a Controlled Foreign Company. Resources does
not have and has never had any interest in a controlled foreign company as
defined in Section 747 of the Taxes Act.
(t) Residence. Resources is and has always been resident only in
the United Kingdom.
(u) Returns, Records and Payments.
(i) Resources has maintained full, accurate and complete
records of all taxation matters where required to do so including (but not
limited to) in relation to deductions made and/or accounted for in relation to
National Insurance Graduated Pension Contributions and sums deducted under the
PAYE system.
(ii) All returns, computations and payments which should be,
or should have been, made by Resources for any taxation purpose have been made
within the requisite periods and are up-to-date, correct and on a proper basis
and none of them is, or is likely to be, the subject of any dispute with any
taxation authority.
(iii) Resources is not and has not at any time been liable
to pay any penalty or interest charged by virtue of the provisions of the Taxes
Management Act or other taxation legislation.
(iv) There is no dispute and there has not at any time been
any dispute between Resources and any taxation authority, and Resources is not
and has not at any time been the subject of any investigation or discovery by
any taxation authority and there are no facts which are likely to give rise to
any such dispute or investigation.
(v) All payments made by Resources to employees,
ex-employees or to any other person which ought to have been made under
deduction of taxation have been so made.
(vi) Resources has duly and properly accounted to the
relevant taxation authority for all taxation deducted where required to do so.
(vii) Resources has duly and properly accounted to the
Inland Revenue for all taxation chargeable on benefits provided for employees
and ex-employees of Resources.
(viii) All National Insurance, Graduated Pension
Contributions and sums payable to the Inland Revenue under the PAYE system up to
the date of this Agreement have been duly and properly paid.
(v) Employee Benefits. Resources has not established any share
option, incentive and profit sharing schemes.
(w) Group Income. Resources has not made an election under
Section 247 of the Taxes Act and Resources has not paid any dividend without
accounting for advance corporation tax or made any payment without deduction of
income tax in the circumstances specified in subsection 6 of that section.
- 23 -
(x) Group Relief and Surrender of Advance Corporation Tax.
(i) Resources is not or has not been a party to any
arrangement or agreement relating to group relief (as defined by Section 402 of
the Taxes Act).
(ii) Resources is not or has not been a party to any
arrangement or agreement relating to the surrender of advance corporation tax
either made or received by Resources under Section 240 of the Taxes Act.
(iii) Resources has not paid nor is liable to pay for the
benefit of any advance corporation tax which is or may become incapable of
set-off against the Resources' liability to corporation tax.
(y) Intra Group Transfer. Resources has not acquired any asset
(past or present) from any other company then or afterwards belonging to the
same group of companies as Resources within the meaning of Section 170 of the
TCGA.
3.24. Insurance. Schedule 3.24 contains a complete and accurate list of
all policies or binders of insurance (showing as to each policy or binder the
carrier, policy number, coverage limits, expiration dates, annual premiums, a
general description of the type of coverage provided and any pending claims
thereunder) of which Resources is the owner, insured or beneficiary. All of such
policies are sufficient for (i) compliance with all Regulations and all of the
Contracts, (ii) covering all reasonably foreseeable damage to and liabilities or
contingencies relating to Resources' conduct of the Business and (iii) providing
replacement cost insurance coverage for all of the Assets, Fixtures and
Equipment of Resources and all leasehold improvements. Resources is not in
default under any of such policies or binders, and none of them has failed to
give any notice or to present any claim under any such policy or binder in a due
and timely fashion. There are no facts known to Xxxxxx upon which an insurer
might be justified in reducing or denying coverage or increasing premiums on
existing policies or binders. There are no outstanding unpaid claims under any
such policies or binders. Such policies and binders are in full force and effect
on the date hereof and shall be kept in full force and effect by Resources
through the Closing Date.
3.25. Accounts Receivable. The accounts and notes receivable reflected
in the Balance Sheet, and all accounts or notes receivable arising since the
Balance Sheet Date, represent bona fide claims against debtors for services
performed or other charges arising on or before the date of recording thereof,
and all the services performed which gave rise to said accounts were performed
in accordance with the applicable orders, Contracts or customer requirements. To
the knowledge of Xxxxxx, all such receivables are fully collectible in the
ordinary course of business except to the extent of an amount not in excess of
the reserve for doubtful accounts reflected on the Balance Sheet and additions
to such reserves as reflected on the Books and Records.
3.26 Customers. Schedule 3.26 sets forth a complete and accurate list
of the names and addresses of the ten customers who purchased from Resources the
greatest dollar volume of services during its last fiscal year and last fiscal
quarter, showing the approximate total sales in dollars to each such customer
during such fiscal year and quarter. Since the Balance Sheet Date, there has
been no Material Adverse Change in the business relationship of Resources with
any customer named on Schedule 3.26.
3.27. Brokers; Transaction Costs. Neither Resources nor Xxxxxx has
entered into or will enter into any contract, agreement, arrangement or
understanding with any Person which will result in the obligation of
Intelligroup, Sub, Resources or Xxxxxx to pay any finder's fee, brokerage
commission or
- 24 -
similar payment in connection with the transactions contemplated hereby.
3.28. No Other Agreements to Sell Resources or the Assets. Neither
Resources nor Xxxxxx has any legal obligation, absolute or contingent, to any
other Person to sell the Assets (other than Inventory in the ordinary course of
business) or to sell any capital stock of Resources or to effect any merger,
consolidation or other reorganization of Resources or to enter into any
agreement with respect thereto, except pursuant to this Agreement.
ARTICLE 4.
----------
REPRESENTATIONS AND WARRANTIES OF INTELLIGROUP AND SUB
------------------------------------------------------
As an inducement to Xxxxxx to enter into this Agreement, except as set
forth on the Intelligroup Schedule of Exceptions attached to this Agreement,
Intelligroup represents and warrants to Xxxxxx as follows, which representations
and warranties are, as of the date hereof, true and accurate:
4.1. Organization. Intelligroup is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey.
Intelligroup has full corporate power and authority to conduct its business as
it is presently being conducted and to own or lease, as applicable, the assets
owned or leased by it. Intelligroup is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is necessary under applicable law as a result of the conduct of
its business or the ownership of its properties and where the failure to be so
qualified would have a Material Adverse Effect on Intelligroup. Sub is a
corporation duly organized, validly existing and in good standing under the laws
of England and Wales.
4.2. Capitalization.
(a) There are 25,000,000 shares of Intelligroup Stock authorized
under its Articles of Incorporation, 11,993,697 of which were issued and
outstanding as of February 28, 1998; 5,000,000 authorized shares of Preferred
Stock, $.01 par value, of Intelligroup ("Intelligroup Preferred Stock")
authorized under its Articles of Incorporation, none of which were issued and
outstanding. Intelligroup has no other stock authorized, issued or outstanding.
(b) As of December 31, 1997, there were (i) 1,450,000 shares of
Intelligroup Stock reserved for issuance upon the exercise of options granted or
available for grant under the Intelligroup Option Plan (the "Intelligroup
Options"), (ii) Intelligroup Options representing the right to purchase an
aggregate of 1,079,992 shares of Intelligroup Stock outstanding and (iii)
370,008 shares of Intelligroup Stock available for future grants of Intelligroup
Options.
(c) Except for the Intelligroup Options and shares of
Intelligroup Preferred Stock listed above, and except for director options and
warrants exercisable for not more than 140,000 shares, there are no outstanding
options, warrants, convertible securities or rights of any kind to purchase or
otherwise acquire any shares of capital stock or other securities of
Intelligroup. Except as set forth above, no shares of capital stock of
Intelligroup are reserved for issuance.
(d) All shares of Intelligroup Stock to be issued hereunder will
be validly issued, fully paid and nonassessable and not subject to any
preemptive rights created by statute, Intelligroup's Certificate of
Incorporation or Bylaws or any Contract.
(e) Other than the transactions contemplated by this Agreement,
there is no outstanding vote, plan or pending proposal for any redemption of
stock of Intelligroup or any merger or
- 25 -
consolidation of Intelligroup with or into any other entity.
(f) The authorized share capital stock of Sub consists of 1,000
ordinary shares of(pound)1 each of which 2 shares are in issue and are held by
Intelligroup.
4.3. Authorization. Each of Intelligroup and Sub has all necessary
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is a party and has taken all action necessary to
consummate the transactions contemplated hereby and thereby and to perform its
respective obligations hereunder and thereunder. This Agreement has been duly
executed and delivered by each Intelligroup and Sub, and this Agreement is, and
upon execution and delivery each of the Ancillary Agreements to which each of
Intelligroup and Sub is a party will be, a valid and binding obligation of each
of Intelligroup and Sub enforceable against each of Intelligroup and Sub in
accordance with its terms, except that enforceability may be limited by the
effect of (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights of creditors or (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
4.4. No Conflict or Violation; Consents. None of the execution,
delivery or performance of this Agreement or any Ancillary Agreement, the
consummation of the transactions contemplated hereby or thereby, nor compliance
by Intelligroup or Sub with any of the provisions hereof or thereof, will (a)
violate or conflict with any provision of Intelligroup's or Sub's governing
documents to the extent applicable, (b) violate, conflict with, or result in a
breach of or constitute a default (with or without notice of passage of time)
under, or result in the termination of, or accelerate the performance required
by, or result in a right to terminate, accelerate, modify or cancel under, or
require a notice under, or result in the creation of any Encumbrance upon any of
its assets under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which Intelligroup or
Sub is a party or by which Intelligroup or Sub is bound or to which any of their
respective assets are subject, (c) violate any Regulation or Court Order
applicable to Intelligroup or Sub or (d) impose any Encumbrance on any assets of
Intelligroup or Sub. Except as set forth on Schedule 4.4, no notices to,
declaration, filing or registration with, approvals or Consents of, or
assignments by, any Persons (including any federal, state or local governmental
or administrative authorities) are necessary to be made or obtained by
Intelligroup or Sub in connection with the execution, delivery or performance of
this Agreement or any Ancillary Agreement or the consummation of the
transactions contemplated hereby or thereby.
4.5. Reports and Financial Statements. Intelligroup has timely filed
all reports required to be filed with the SEC pursuant to the Exchange Act or
the Securities Act (collectively, the "SEC Reports"), and has previously made
available to Resources true and complete copies of all such SEC Reports. Such
SEC Reports, as of their respective dates, complied in all materials respects
with the applicable requirements of the Securities Act and the Exchange Act, as
the case may be, and none of such SEC Reports contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of Intelligroup, including the notes thereto, included in
the SEC Reports have been prepared in accordance with U.S. GAAP consistently
applied and fairly present the consolidated financial condition of Intelligroup
as at the dates thereof and consolidated results of operations and cash flows
for the periods then ended.
- 26 -
4.6. Absence of Certain Changes or Events. Except as set forth on
Schedule 4.6, since the Balance Sheet Date, there has not been any fact, event,
circumstance or change affecting or relating to Intelligroup and its
subsidiaries which has had or is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Intelligroup (an "Intelligroup
Material Adverse Effect"), including:
(a) any litigation (whether criminal or civil), arbitration or
reference of any dispute or disagreement with an expert or any alternative
dispute resolution process (apart from routine debt collection) and there are no
facts or circumstances known to the management of Intelligroup likely to give
rise to such litigation, arbitration, referenced or any alternative dispute
resolution process;
(b) receipt of written notification from any customer or
supplier that such customer or supplier intends to cease to do business with
Intelligroup or to substantially reduce its existing level of business with
Intelligroup;
(c) receipt of written notification from SAP, Oracle or any
similar licensor that Intelligroup's license with such licensor is to be
terminated;
(d) receipt of written notification from any officer or senior
employee of Intelligroup that they are to leave their employment with
Intelligroup or have dismissed such senior employee or officer;
(e) entering into any contract other than in the ordinary course
of business or acquired any material interest in another corporation or
unincorporated business; or
(f) entering into an arrangement or composition with its
creditors in any form whatsoever;
provided, however, that an Intelligroup Material Adverse Effect shall not
include any adverse effect following the date of this Agreement which is solely
attributable to (i) the announcement or pendency of the transactions
contemplated by this Agreement or (ii) changes in national economic conditions,
stock market or industry conditions generally.
4.7. S-3 Eligibility. Intelligroup satisfies the registrant
requirements set forth in the general instructions for use of Form S-3 under the
Securities Act.
4.8. Certain Securities Law Representations. Intelligroup has been
given the opportunity to obtain any information or documents relating to, and to
ask questions and receive answers about, Resources and the business and
prospects of Resources which it deems necessary to evaluate the merits and risks
related to its investment in the Resources Capital and to verify the information
received, and Intelligroup's knowledge and experience in financial and business
matters are such that it is capable of evaluating the merits and risks of its
receipt of such shares.
ARTICLE 5.
----------
CONDITIONS TO XXXXXX'X OBLIGATIONS
----------------------------------
The obligation of Xxxxxx to effect the Acquisition and complete the
related transactions contemplated by this Agreement are subject, in the
discretion of Xxxxxx, to the satisfaction, on or prior to the Closing Date, of
each of the following conditions or the waiver of such conditions by Xxxxxx:
- 27 -
5.1. Representations, Warranties and Covenants. All representations
and warranties of Intelligroup and Sub contained in this Agreement shall be true
and correct in all material respects at and as of the Closing Date, and
Intelligroup and Sub shall have performed in all material respects all
agreements and covenants required hereby to be performed by it prior to or at
the Closing Date. There shall be delivered to Xxxxxx a certificate signed by a
senior officer of Intelligroup and Sub to the foregoing effect ("Intelligroup
Closing Certificate").
5.2. Consents. All Consents, approvals and waivers from governmental
authorities and other parties necessary to permit Intelligroup and Sub to
consummate the Acquisition as contemplated hereby and by the Ancillary
Agreements shall have been obtained. Xxxxxx shall be satisfied that all
approvals required under any Regulations to permit Intelligroup and Sub to carry
out the transactions contemplated by this Agreement and the Ancillary Agreements
shall have been obtained.
5.3. No Court Orders. No Action by any court, governmental authority
or other Person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and by the
Ancillary Agreements. There shall not be any Regulation or Court Order that
makes the acquisition of the Resources Capital contemplated hereby illegal or
otherwise prohibited.
5.4. Closing Documents. Intelligroup shall have delivered to Xxxxxx
the documents and other items described in Section 7.2 and such other documents
and items as Xxxxxx may reasonably require.
ARTICLE 6.
----------
CONDITIONS TO INTELLIGROUP'S OBLIGATIONS
----------------------------------------
The obligations of Intelligroup and Sub to effect the Acquisition and
complete the related transactions contemplated by this Agreement are subject, in
the discretion of Intelligroup and Sub, to the satisfaction, on or prior to the
Closing Date, of each of the following conditions, or the waiver of such
conditions by Intelligroup and Sub:
6.1. Representations, Warranties and Covenants. All representations
and warranties of Xxxxxx contained in this Agreement shall be true and correct
at and as of the Closing Date, and Xxxxxx shall have performed in all material
respects all agreements and covenants required hereby to be performed prior to
or at the Closing Date. There shall be delivered to Intelligroup and Sub a
certificate signed by Xxxxxx ("Xxxxxx Closing Certificate") to the foregoing
effect.
6.2. Consents. All Consents, approvals and waivers from governmental
authorities and other parties necessary to permit Xxxxxx to consummate the
Acquisition as contemplated hereby and by the Ancillary Agreements and for the
operation of the Business after the Closing (including all required third party
consents under the Contracts) shall have been obtained. Intelligroup and Sub
shall be satisfied that all approvals required under any Regulations to permit
Xxxxxx to carry out the transactions contemplated by this Agreement and the
Ancillary Agreements shall have been obtained.
6.3. No Actions or Court Orders. No Action by any court, governmental
authority or other Person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
by the Ancillary Agreements and which could reasonably be expected to damage
Intelligroup, the Assets or the Business materially if the transactions
contemplated hereby or thereby are consummated, including any material adverse
effect on the right or ability of Intelligroup to own, operate or transfer
Resources after the Closing. There shall not be any Regulation or Court Order
that makes the acquisition of the Resources Capital contemplated hereby illegal
or otherwise prohibited
- 28 -
or that otherwise may have a Material Adverse Effect on Resources.
6.4. Closing Documents. Xxxxxx shall have delivered to Intelligroup
and Sub the documents and other items described in Section 7.1 and such other
documents and items as Intelligroup may reasonably require.
6.5. Exemption under Federal and State Securities Laws. The issuance
of shares of Intelligroup Stock in the Acquisition shall not violate any federal
or state securities laws.
6.6. Balance Sheets. Except as set forth on Schedule 6.6, on the
Closing Date, immediately prior to the Closing, there shall be no indebtedness
on Resources' balance sheet other than payables and accrued expenses incurred by
Resources in the ordinary course of business consistent with past practice. In
addition, the aggregate amount of cash, cash equivalents and accounts receivable
on Resources' balance sheet as of the Closing Date shall exceed its accounts
payable.
6.7. Pooling Accounting Treatment.
(a) Set forth on Schedule 6.7 is a list of all Persons who are,
in Xxxxxx'x reasonable judgment, "affiliates" of Resources as defined in Rule
144 under the Securities Act or for purposes of qualifying the Acquisition as a
pooling of interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations. Xxxxxx shall cause each such Person to
deliver to Intelligroup and Sub on or prior to the Closing Date a written
agreement substantially in the form attached hereto as Exhibit C (an "Affiliate
Letter").
(b) Xxxxxx shall use diligent efforts in good faith to cause the
transactions contemplated by this Agreement to be accounted for as a pooling of
interests under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations, and to have such accounting treatment accepted by
Resources' independent public accountants, by Intelligroup's public accountants,
and by the SEC, respectively. Xxxxxx agrees that he has not taken or will not
take any action that would cause such accounting treatment not to be obtained.
6.8. Delivery of Certificates. Xxxxxx shall have delivered to
Intelligroup and Sub a duly executed stock transfer form in favor of Sub,
together with the Certificate or Certificates representing the Resources Capital
held by Xxxxxx.
6.9. Board of Directors Approval. The Acquisition shall have been
approved by appropriate action of the Board of Directors of Intelligroup and
Sub.
6.10. Tax Matters.
(a) No new elections with respect to Taxes, or changes in
current elections with respect to Taxes, affecting Resources shall have been
made after the date of this Agreement without the prior written consent of
Intelligroup, which consent shall not be unreasonably withheld.
(b) Xxxxxx surrendering Certificates on the Closing Date shall
have provided Intelligroup and Sub with (i) all forms, certificates and/or other
instruments required to pay the stamp duty arising from the transactions
contemplated by this Agreement.
6.11. Material Adverse Change. There shall not have been any Material
Adverse Change of Resources.
- 29 -
6.12. Acquisition of Resources Capital. Sub shall have acquired all of
the Resources Capital on or prior to the Closing Date and such transaction shall
have been consummated in a manner to qualify the Acquisition as a pooling of
interests in accordance with Section 6.7 hereof.
ARTICLE 7.
----------
CLOSING
-------
On the Closing Date at the place of Closing:
7.1. Deliveries by Xxxxxx to Intelligroup and Sub. Xxxxxx shall
deliver (or cause to be delivered) to Intelligroup and Sub:
(a) the Ancillary Agreements, duly executed by Xxxxxx;
(b) any Consents required to be obtained by Xxxxxx;
(c) the Xxxxxx Closing Certificate;
(d) an opinion of Xxxxxxxx, Xxxxx + Xxxx, counsel to Xxxxxx,
dated as of the Closing Date, in a form reasonably satisfactory to Intelligroup;
(e) a fully executed Affiliate Letter from the Person identified
on Schedule 6.7 hereof;
(f) a letter (the "Pooling Letter"), dated the Closing Date,
rom the independent certified public accountants of Resources and Intelligroup,
which shall be satisfactory to Intelligroup in its sole discretion, stating
without qualification that the accounting for the business combination
contemplated in this Agreement and the Ancillary Agreements qualifies as a
"pooling of interests" under Opinion 16 of the Accounting Principles of Board
and applicable rules and regulations of the SEC;
(g) a duly executed stock transfer form in respect of the
Resources Capital in favor of Sub;
(h) the share certificate relating to the Resources Capital;
(i) the statutory books of Resources written up to date;
(j) the books of unissued share certificates and the common
seals, if any, of Resources;
(k) the certificates of incorporation and any certificates of
incorporation on change of name of Resources;
(l) all available prints of the Memoranda and Articles of
Association of Resources;
(m) all books of account, check books, paying-in books and
unused checks of Resources;
(n) the written resignations of the auditors of Resources
containing an acknowledgement that they have no claim for compensation for loss
of office, professional fees or otherwise and a statement pursuant to Section
394 of the Companies Xxx 0000 that there are no circumstances connected with
such resignations which the auditors consider should be brought to the
- 30 -
attention of the members or creditors of Resources;
(o) the written resignations of the directors and officers of
Resources containing an acknowledgement that they have no actual or contingent
claims against Resources; and
(p) such other documents and certificates duly executed as may
reasonably be requested by Intelligroup or Sub prior to the Closing Date.
7.2. Deliveries by Intelligroup. Intelligroup shall deliver to Xxxxxx,
or any other appropriate Persons:
(a) the Ancillary Agreements to which Intelligroup or Sub is a
party, duly executed by them;
(b) any Consents required to be obtained by Intelligroup;
(c) the Intelligroup Closing Certificate;
(d) an opinion of Xxxxxxxx Ingersoll, counsel to Intelligroup,
dated as of the Closing Date, in a form reasonably satisfactory to Resources;
(e) the Acquisition Shares to be issued to Xxxxxx on the Closing
Date; and
(f) such other documents and certificates duly executed as may
reasonably be requested by Xxxxxx prior to the Closing Date.
ARTICLE 8.
----------
INDEMNIFICATION OF XXXXXX, INTELLIGROUP AND SUB
-----------------------------------------------
8.1. Survival of Representations, Etc. All statements contained in
this Agreement, any schedule or in any certificate or instrument of conveyance
delivered by or on behalf of the parties pursuant to this Agreement or in
connection with the transactions contemplated hereby, shall be deemed to be
representations and warranties by such party hereunder. The representations and
warranties contained herein shall survive the Closing Date (and claims based
upon or arising out of such representations and warranties, as well as any
claims based upon or arising out of any covenants and agreements herein or made
hereunder, may be asserted at any time before the date which shall be) until
December 31, 1998; provided, however, Xxxxxx'x representations and warranties in
Section 3.3 (Ownership of Share Capital; Title), Section 3.10 (Environmental
Matters), Section 3.19 (Employee Benefit Plans) and Section 3.23 (Tax Matters)
and covenants made in the Tax Deed shall survive until the first anniversary of
the Closing Date. The termination of the representations and warranties provided
herein shall not affect the rights of a party in respect of any claim made by
such party in a writing received by the other party prior to the expiration of
the applicable survival period provided herein.
- 31 -
8.2. Indemnification.
General.
(a) Subsequent to the Closing, Xxxxxx shall indemnify
Intelligroup, its Affiliates, and each of their respective, officers, directors,
employees, shareholders and agents ("Intelligroup Indemnified Parties") against,
and hold each of the Intelligroup Indemnified Parties harmless from any damage,
claim, loss, cost, liability or expense, including without limitation, interest,
penalties, reasonable attorneys' fees and expenses of investigation, diminution
of value, response action, removal action or remedial action (collectively
"Damages") incurred by any such Intelligroup Indemnified Party, that are
incident to, arise out of, in connection with, or related to, whether directly
or indirectly, the breach of any warranty, representation, covenant or agreement
of Xxxxxx contained in this Agreement or any schedule hereto or in any
certificate or instrument of conveyance delivered by or on behalf of Resources
or any such holder pursuant to this Agreement or in connection with the
transactions contemplated hereby; provided, however, that the indemnity
provisions set forth in this Section 8.2(a) shall not become effective until
such time as the Damages exceed $25,000.
(b) Subsequent to the Closing, Intelligroup shall indemnify
Xxxxxx and his heirs and assigns ("Xxxxxx Indemnified Parties"), against, and
hold each of the Xxxxxx Indemnified Parties harmless from, any Damages incurred
by such Xxxxxx Indemnified Party, that are incident to, arise out of, in
connection with, or related to, whether directly or indirectly, the breach of
any warranty, representation, covenant or agreement of Intelligroup or Sub
contained in this Agreement, any schedule or in any certificate or instrument of
conveyance delivered by or on behalf of Intelligroup or Sub pursuant to this
Agreement or in connection with the transactions contemplated hereby; provided,
however, that the indemnity provisions set forth in this Section 8.2(b) shall
not become effective until such time as the Damages exceed $25,000.
The term "Damages" as used in this Section 8.2 is not limited to
matters asserted by third parties against the Xxxxxx Indemnified Parties or
Intelligroup Indemnified Parties, but includes Damages incurred or sustained by
such persons in the absence of third party claims. Notwithstanding the
foregoing, none of the parties hereto shall be liable for any special, indirect,
incidental or consequential Damages.
It is understood and agreed that Xxxxxx shall not be liable for Damages
on all matters taken in the aggregate asserted under this Section 8.2 in excess
of the value (at Closing) of one-half of the shares of Intelligroup Stock
delivered to Xxxxxx hereunder. In the event that Xxxxxx opts to satisfy any
Claim (as defined below) with shares of Intelligroup Stock, such shares shall be
valued at the greater of (i) the Average Share Price at the Closing Date or (ii)
the Average Share Price at the date on which a Claim is made.
8.3. No Right of Contribution. After the Closing, Xxxxxx shall not
have any right of contribution against the Surviving Corporation for any breach
of any representation, warranty, covenant or agreement of Resources. The
remedies described in this Article 8 shall be in addition to, and not in lieu
of, any other remedies at law or in equity that the parties may elect to pursue.
8.4. Procedure for Claims. If a claim for Damages (a "Claim") is to be
made under Article 8 by a person entitled to indemnification hereunder, the
person claiming such indemnification (the "Indemnified Party") shall give
written notice (a "Claim Notice") to the indemnifying person (the "Indemnifying
Party") as soon as practicable after the Indemnified Party becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under Section 8.2. The failure of any Indemnified
Party to give timely notice hereunder shall not affect rights
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to indemnification hereunder, except and only to the extent that, the
Indemnifying Party demonstrates actual material damage caused by such failure.
In the case of a Claim involving the assertion of a claim by a third party
(whether pursuant to a lawsuit or other legal action or otherwise, a
"Third-Party Claim"), if the Indemnifying Party shall acknowledge in writing to
the Indemnified Party that the Indemnifying Party shall be obligated to
indemnify the Indemnified Party under the terms of its indemnity hereunder in
connection with such Third-Party Claim, then (A) the Indemnifying Party shall be
entitled and, if it so elects, shall be obligated at its own cost, risk and
expense, (1) to take control of the defense and investigation of such
Third-Party Claim and (2) to pursue the defense thereof in good faith by
appropriate actions or proceedings promptly taken or instituted and diligently
pursued, including, without limitation, to employ and engage attorneys of its
own choice reasonably acceptable to the Indemnified Party to handle and defend
the same, and (B) the Indemnifying Party shall be entitled (but not obligated),
if it so elects, to compromise or settle such claim, which compromise or
settlement shall be made only with the written consent of the Indemnified Party,
such consent not to be unreasonably withheld. In the event the Indemnifying
Party elects to assume control of the defense and investigation of such lawsuit
or other legal action in accordance with this Section 8.4, the Indemnified Party
may, at its own cost and expense, participate in the investigation, trial and
defense of such Third-Party Claim; provided that, if the named persons to a
lawsuit or other legal action include both the Indemnifying Party and the
Indemnified Party and the Indemnified Party has been advised in writing by
counsel that there may be one or more legal defenses available to such
Indemnified Party that are different from or additional to those available to
the Indemnifying Party, the Indemnified Party shall be entitled, at the
Indemnifying Party's cost, risk and expense, to separate counsel of its own
choosing. If the Indemnifying Party fails to assume the defense of such
Third-Party Claim in accordance with this Section 8.4 within 10 calendar days
after receipt of the Claim Notice, the Indemnified Party against which such
Third-Party Claim has been asserted shall (upon delivering notice to such effect
to the Indemnifying Party) have the right to undertake the defense, compromise
and settlement of such Third-Party Claim. In the event the Indemnifying Party
assumes the defense of the claim, the Indemnifying Party shall keep the
Indemnified Party reasonably informed of the progress of any such defense,
compromise or settlement, and in the event the Indemnified Party assumes the
defense of the claim, the Indemnified Party shall keep the Indemnifying Party
reasonably informed of the progress of any such defense, compromise or
settlement. The Indemnifying Party shall be liable for any settlement of any
Third-Party Claim effected pursuant to and in accordance with this Section 8.4
and for any final judgment (subject to any right of appeal), and the
Indemnifying Party agrees to indemnify and hold harmless each Indemnified Party
from and against any and all Damages by reason of such settlement or judgment.
ARTICLE 9.
----------
MISCELLANEOUS
-------------
9.1. Certain Securities Laws Representations. Xxxxxx represents as
follows with respect to the Acquisition Shares to be acquired in connection with
the Acquisition:
(a) He has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
investment in the Acquisition Shares;
(b) He is receiving such shares for investment for his own
account and not with a view to, or for resale in connection with, the
distribution or other disposition thereof, other than as contemplated hereby;
(c) He has been given the opportunity to obtain any information
or documents relating to, and to ask questions and receive answers about,
Intelligroup and the business and prospects
- 33 -
of Intelligroup which he deems necessary to evaluate the merits and risks
related to his investment in such shares and to verify the information received,
and his knowledge and experience in financial and business matters are such that
he is capable of evaluating the merits and risks of his receipt of such shares;
(d) His financial condition is such that he can afford to bear
the economic risk of holding the shares for an indefinite period of time and has
adequate means for providing for his current needs and contingencies and to
suffer a complete loss of his investment in such shares;
(e) All information that he has provided to Intelligroup
concerning himself and his financial position is correct and complete; and
(f) He has been advised that, subject to the registration
provisions set forth in Section 9.2 (i) Intelligroup's issuance of shares to him
will not have been registered under the Securities Act, (ii) such shares may
need to be held indefinitely, and he must continue to bear the economic risk of
the investment in such shares unless they are subsequently registered under the
Securities Act or an exemption from such registration is available, (iii) there
may not be a public market for such shares, (iv) when and if such shares may be
disposed of without registration in reliance on Rule 144 promulgated under the
Securities Act, such disposition can be made only in limited amounts in
accordance with the terms and conditions of such Rule, (v) if the Rule 144
exemption is not available, public sale without registration will require
compliance with an exemption under the Securities Act and (vi) a restrictive
legend in the following form shall be placed on the certificates representing
such shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR QUALIFIED
UNDER ANY APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS"), HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND QUALIFICATION UNDER THE STATE ACTS OR EXEMPTIONS FROM SUCH REGISTRATION OR
QUALIFICATION REQUIREMENTS (INCLUDING, IN THE CASE OF THE SECURITIES ACT, THE
EXEMPTION AFFORDED BY RULE 144). UNLESS WAIVED BY INTELLIGROUP, INC.,
INTELLIGROUP, INC. SHALL BE FURNISHED WITH AN OPINION OF COUNSEL OPINING AS TO
THE AVAILABILITY OF EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION AS A
PRECONDITION TO ANY SUCH TRANSFER.
9.2. Registration of Intelligroup Shares. Intelligroup agrees to
register the shares of restricted Intelligroup Stock being distributed to Xxxxxx
pursuant to Section 2.3 by filing a registration statement on Form S-3 ("Form
S-3") with respect to 185,500 shares of Intelligroup Stock immediately after the
Closing Date, but in no event later than seven days after the issuance of such
shares of Intelligroup Stock. Intelligroup shall file a Form S-3 with respect to
the remaining 185,500 shares of Intelligroup Stock within 26 weeks of the
Closing Date. In each case, Intelligroup shall use its best efforts to make each
such registration statement effective as soon as practicable after filing.
9.3. Compliance with the Exchange Act. Intelligroup shall comply with
all applicable reporting requirements of Section 13 of the Exchange Act for
three (3) years following the date of this Agreement.
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9.4. Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Xxxxxx without the prior written
consent of Intelligroup, or by Intelligroup or Sub without the prior written
consent of Xxxxxx.
9.5. Notices. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to the other
shall be in writing and delivered in person or by courier, telegraphed, telexed,
sent by facsimile transmission, sent via overnight delivery service or mailed by
registered or certified mail (such notice to be effective upon receipt), as
follows:
If to Xxxxxx, to the address of Xxxxxx as set forth on Annex 1 hereto.
With a copy to:
Xxxxxxxx, Xxxxx + Xxxx
Xxxxxx Xxxxx
Xxxx Xxxx
Xxxxxxxxxxxx XX00XX
Xxxxxx Xxxxxxx
Fax: 000-00-0000-000000
Attention: Xxxxx Xxxxxxxx, Esq.
If to Intelligroup:
Intelligroup, Inc.
000 Xxxxx Xxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxxx, General Counsel
If to Sub:
Del Xxxxx Xxxxx Xxxxxx Xxxx
Xxxxxxx XX000XX
Xxxxxx Xxxxxxx
Fax: 000-00-0000-000000
Attention: Xxxx Xxxxxxx
With a copy to:
Xxxxxxxx Ingersoll
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
9.6. Choice of Law. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State of
New Jersey except with respect to matters of law concerning the internal
corporate affairs of any corporate entity which is a party to or the subject
- 35 -
of this Agreement, and as to those matters the law of the jurisdiction under
which the respective entity derives its powers shall govern and in respect of
such matters the parties hereby submit to the authority of the courts of such
jurisdiction.
9.7. Descriptive Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.8. Entire Agreement; Amendments and Waivers. This Agreement,
together with all exhibits and schedules hereto, constitute the entire agreement
among the parties pertaining to the subject matter hereof and supersede all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
9.9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.10. Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
9.11. Expenses. Each party will be liable for its own expenses incurred
in connection with the negotiation, preparation, execution and performance of
this Agreement, however, Intelligroup agrees to pay an amount, not to exceed
$70,000 to the advisors of Xxxxxx.
9.12. Publicity. Except as required by law or on advice of counsel,
neither party shall issue any press release or make any public statement
regarding the transactions contemplated hereby without the prior approval of the
other parties, and the parties hereto shall issue a mutually acceptable press
release as soon as practicable after the date hereof and after the Closing Date.
Notwithstanding the foregoing, Intelligroup shall be permitted to make any
public statement without obtaining the consent of any other party hereto if (i)
the disclosure is required by law and (ii) Intelligroup has first used its
reasonable efforts to consult with (but not to obtain the consent of) the other
parties about the form and substance of such disclosure.
9.13. No Third Party Beneficiaries. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, except
as specifically set forth in Article 9 hereof.
[Signature page follows]
------------------------
- 36 -
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be duly executed on its behalf by its officer thereunto
duly authorized, as of the day and year first above written.
INTELLIGROUP, INC.,
a New Jersey corporation
By:/s/ Xxxxx Xxxxxx
---------------------------------------
Its: Co-Chairman of the Board of Directors
--------------------------------------
INTELLIGROUP EUROPE LIMITED,
a United Kingdom corporation
By:/s/ Xxxxx Xxxxxx
---------------------------------------
Its: Director
--------------------------------------
CPI RESOURCES LIMITED SHAREHOLDER
/s/ Xxxxxxx Xxxx Xxxxxx
------------------------------------------
Xxxxxxx Xxxx Xxxxxx
Witnessed by:
/s/ Xxxxx X. Xxxxxxxx
------------------------------------------
Xxxxx X. Xxxxxxxx
Solicitor
Xxxxxx Xxxxx
Xxxx Xxxx
Xxxxxxxxxxxx
- 00 -
