**Exhibit 2.5**

 

***Execution Copy***

 

**AMENDED AND RESTATED EARNOUT AGREEMENT**

 

**THIS AMENDED AND RESTATED EARNOUT AGREEMENT**(this “Agreement”) effective as of February15, 2006, by and among Edgewater Technology, Inc., a Delaware corporation (“Purchaser”),National Decision Systems, Inc., a New Jersey corporation (the “Company”) andthe undersigned stockholders of the Company (each such person is individuallyreferred to as a “Stockholder” and such persons are collectively referred to asthe “Stockholders”).

 

**RECITALS**

 

**WHEREAS**, pursuant to a Stock Purchase Agreement dated of even date herewith,by and among Purchaser, the Company and the Stockholders (the “PurchaseAgreement”), Purchaser is acquiring the Shares from the Stockholders, with theStockholders receiving the Purchase Price as a consequence thereof; and

 

**WHEREAS**, Section 1.2(c) of the Purchase Agreement provides that any and allpayments pursuant to this Agreement constitute and are considered a part of thePurchase Price; and

 

**WHEREAS**, Section 7.2 of the Purchase Agreement provides that it is a conditionprecedent to the obligation of the Company and the Stockholders to consummatethe transactions contemplated by the Purchase Agreement that Purchaser shallhave entered into one or more counterparts of this Agreement.

 

**AGREEMENT**

 

**NOW, THEREFORE**, for good and valuable consideration the receipt and sufficiency ofwhich is hereby acknowledged by the parties hereto and in consideration of thepremises, the representations, warranties, covenants and agreements containedherein and subject to the conditions contained herein, the parties hereto agreeas follows:

 

1.                                       Definitions. Capitalized terms not otherwise defined in this Section 1 orotherwise in this Agreement shall have the meanings ascribed thereto in thePurchase Agreement.

 

“30 Day Trailing Average”shall mean the average 4:00 p.m. share price of the Common Stock of Purchaserfor the thirty (30) consecutive trading days ending on the last business dayimmediately prior to the date any Earnout Shares are to be issued to theSelling Stockholders, as reported on the NASDAQ.

 

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“Agent” shall mean RichardFoudy.

 

“Business Day” means anyday, other than Saturday, Sunday or a federal holiday, and shall consist of thetime period from 12:01 a.m. through 12:00 midnight (Eastern time).

 

“Cash Consideration” meansthe dollar amount equal to the cash portion of the Initial Earnout, the cashportion of the Second Earnout, or the cash portion of the Third Earnout.

 

“Certificate” means thecertificate to be delivered by Purchaser, and executed by an executive ofPurchaser, reflecting the Earnout Consideration and the applicable calculationsrelating thereto.

 

“Company’s EBITDA” means thedollar amount equal to the sum of the Company’s earnings before interest,taxes, depreciation and amortization for the appropriate Earnout Period basedon the Financial Statements for that period, calculated in accordance withGAAP.

 

“Company’s Initial EBITDA”means the Company’s EBITDA during the Initial Earnout Period.

 

“Company Initial EBITDADifferential” means the excess of the Company Initial EBITDA over $2,000,000.00.If the Company Initial EBITDA Differential shall exceed $2,280,000.00, theamount of such excess is referred to as “Excess Initial EBITDA” and shall notbe counted as Company Initial EBITDA Differential. 

 

“Company’s Second EBITDA”means the sum of (i) the Company’s EBITDA during the Second Earnout Period, and(ii) the Excess Initial EBITDA, if any.

 

“Company Second EBITDA Differential”means the excess of (i) the Company Second EBITDA over (B) $2,000,000.00. Ifthe Company Second EBITDA Differential shall exceed $2,280,000.00, the amountof such excess shall not be counted as Company Second EBITDA Differential.

 

“Company Third EBITDADifferential” means the excess of (i) the Company’s Second EBITDA over (ii) theThird Company’s EBITDA Minimum Threshold.

 

“Determination Date” meansthe date that Purchaser delivers the Financial Statements to the Agent; provided,however, that such date shall not be later than ninety (90) daysfollowing the end of the applicable Earnout Period.

 

“Earnout Consideration”means the Cash Consideration and the Earnout Shares, as the case may be.

 

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“Earnout Periods” means theInitial Earnout Period and the Second Earnout Period.

 

“Earnout Shares” means theInitial Earnout Shares, the Second Earnout Shares and the Third Earnout Shares.

 

“Excess Initial EBITDA”means the amount, if any, by which the Company’s Initial EBITDA is in excess ofthe Initial Company EBITDA Maximum Threshold.

 

“Financial Statements” meansCompany income statements, which will be prepared by Purchaser in accordancewith GAAP.

 

“Initial Company’s EBITDAMinimum Threshold” means $2,000,000.

 

“Initial Earnout” means thedollar amount equal to the product of (i) the Company’s Initial EBITDADifferential multiplied by (ii) 1.535.

 

“Initial Earnout Period”,means the twelve (12)-months period commencing on the Closing Date. 

 

“Initial Earnout Shares”  means the portion of the Initial Earnout paidto the Stockholders in Shares.

 

“Notice Form” has themeaning set forth in Section 3(a)(iii).

 

“Second Company’s EBITDAMinimum Threshold” means $2,000,000.

 

“Second Earnout” means thedollar amount equal to the product of (i) Company’s Second EBITDA Differentialmultiplied by (ii)1.627.

 

“Second Earnout Period”means the twelve (12)-months period commencing on the first anniversary of theClosing.

 

“Second Earnout Shares”means the portion of the Second Earnout paid to the Stockholders in Shares.

 

“Shares” means shares of thePurchaser’s Common Stock.

 

“Third Company’s EBITDAMinimum Threshold” means $4,700,000.

 

“Third Earnout” means thedollar amount equal to the product of (i) Company’s Third EBITDA Differentialmultiplied by (ii) 1.00.

 

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“Third Earnout Shares” meansthe portion of the Third Earnout paid to the Stockholders in Shares.

 

2.                                       Calculation of the Earnout Consideration. Subject to the provisions set forth below,the Stockholders (in accordance with Schedule A attached hereto) shall beeligible to receive the Earnout Consideration, pursuant to and in accordancewith the payment and review procedures in Section 3 below.

 

(i)                                     If Company’s Initial EBITDA is equal to or inexcess of the Initial Company’s EBITDA Minimum Threshold, the Stockholdersshall be entitled to receive the Initial Earnout. In no event shall the valueof the Initial Earnout (including any Initial Earnout Shares) exceed ThreeMillion Five Hundred Thousand ($3,500,000.00) Dollars.

 

(ii)                                  If the Company’s Second EBITDA is in excessof the Second Company’s EBITDA Minimum Threshold, the Stockholders shall beentitled to receive the Second Earnout. In no event shall the value of theSecond Earnout (including any Second Earnout Shares) exceed Three Million SevenHundred Ten Thousand ($3,710,000.00) Dollars.

 

(iii)                               If the Company’s Third EBITDA is in excess ofthe Third Company’s EBITDA Minimum Threshold, the Stockholders shall be entitledto receive the Third Earnout.

 

(iv)                              Subject to clause (vi) below, Purchaser shallpay to the Stockholders eighty (80%) percent of the Initial Earnout and theSecond Earnout, if any, in the form of Cash Consideration, and twenty (20%)percent in the form of Initial Earnout Shares or Second Earnout Shares, valuedat the 30 Day Trailing Average.

 

(v)                                 Subject to clause (vi) below, Purchaser shallpay to the Stockholders seventy (70%) percent of the Third Earnout, if any, inthe form of Cash Consideration and thirty (30%) percent in the form of ThirdEarnout Shares valued at the 30 Day Trailing Average.

 

(vi)                              No Earnout Share, together with any priorissuance of Earnout Shares pursuant to this Agreement, and any issuance ofPurchaser Common Stock pursuant to Purchase Agreement, shall be issued if suchissuance would result in a collective issuance under this Agreement and thePurchase Agreement of more than 19.9% of Purchaser’s common stock outstandingas of February

 

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15, 2006 unless suchissuance shall have been approved by stockholders of Purchaser, and in theevent of any failure to obtain such stockholder approval prior to suchscheduled issuance, the value of such shares in excess of 19.9% of Purchaser’soutstanding common stock (valued at the 30 Day Trailing Average) shall bepayable and be paid instead in cash. The Earnout Shares shall be subject to theterms and conditions of the Restriction Agreement, provided, however, that anytransfer restrictions imposed on the Shares shall lapse thirty six (36) monthsfrom the date of the Closing.

 

3.                                       Payment and Review Procedures.

 

(a)                                  Delivery of the Certificate and the ReviewedFinancial Statements. On the Determination Date, Purchaser will deliver thefollowing items to the Agent (except with respect to Section 3(a)(iii) whichshall be delivered by the Agent to the Purchaser):

 

(i)                                     the Certificate;

 

(i)                                     a notice form that will require the Agent todesignate the bank account, address and other necessary information that willenable Purchaser to deliver the Cash Consideration (the “Cash Notice Form”);

 

(ii)                                  a notice form providing the Purchaser withsuch necessary information to enable the Purchaser to deliver the EarnoutShares to the Stockholders (the “Share Notice Form”, and with the Cash NoticeForm, collectively, the “Notice Form”).

 

(iii)                               a copy of the Financial Statements from whichthe calculations in the Certificate were derived; and/or

 

(iv)                              a letter denoting that no payment is due withrespect to the Earnout Consideration, if applicable.

 

(b)                                 Payment Without Objection. If the Agent doesnot object to any of the calculations in the Certificate or the FinancialStatements from which such calculations were derived in accordance with theobjection procedures in subsection (c) below, then on or before the eleventh(11th) Business Day following the Purchaser’s receipt of the Notice Form,Purchaser will promptly pay the Earnout Consideration by delivering to theStockholders and the Company the Cash Consideration and Earnout Sharesreflected in the Certificate.

 

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(c)                                  Objection Procedures and Payment Thereafter. Ifthe Agent has any objection to the calculation of the Earnout Consideration inthe Certificate or the Financial Statements from which such calculation wasderived, then the Agent shall deliver a detailed statement describing suchobjections to Purchaser within ten (10) Business Days after receiving theCertificate. Purchaser and the Agent will use reasonable efforts to resolve anysuch objections themselves. If the parties do not obtain a final resolutionwithin ten (10) Business Days after Purchaser has received the statement ofobjections, then Purchaser and the Agent will select an accounting firm mutuallyacceptable to them to resolve any remaining objections (the “Referee”). IfPurchaser and the Agent are unable to agree on the choice of a Referee, theBoston, Massachusetts office of Grant Thornton, LLP shall act as the Referee. Thedetermination of any Referee so selected as to any objections of the Agent orPurchaser will be set forth in writing and will be conclusive and binding uponthe parties. Within five (5) Business Days, Purchaser will revise theCertificate as appropriate to reflect the resolution of any objections theretopursuant to this Section 3(c) by the Referee. Following resolution of theobjection and on or before the tenth (10th) Business Day following receipt ofthe Notice Form, Purchaser will promptly pay to the Stockholders the EarnoutConsideration by delivering the Cash Consideration and Earnout Shares inaccordance with the amounts shown on such revised Certificate.

 

(d)                                 Review of Materials. Purchaser will make thework papers and back-up materials used in preparing the Certificate availableto the Agent and its accountants and other representatives at reasonable timesand upon reasonable notice at any time during: (i) the review by the Agentof the Certificate; and (ii) the resolution by the parties of any objectionsthereto.

 

4.                                       Termination of Purchaser’s Obligations andResponsibilities. Notwithstandingany other provision of this Agreement, following the completion of the SecondEarnout Period Purchaser’s obligations, responsibilities, covenants, agreementsand liabilities pursuant to this Agreement shall terminate on the earlier ofeither of the following situations:  (i)payment in accordance with Section 3(b) above; (ii) delivery of the letter byPurchaser denoting that no payment is due with respect to the EarnoutConsideration and no objection by the Agent pursuant to Section 3(c)above; or (iii) resolution of objections to the Certificate by the Referee inaccordance with Section 3(c) above and delivery of the Earnout Considerationthereafter based upon the Referee’s findings and conclusions.

 

5.                                       Company Operations. During the Earnout Periods, (i) thecompensation and benefits of the Company’s employees shall be managed andstructured in accordance with the Company’s historical business practices, andany increases in compensation of the Company’s employees to

 

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reflect appropriate upward adjustmentsrelating to Purchaser’s employee benefits (in the aggregate), shall beappropriately reflected at the Closing, and (ii) no direct and indirect sellingexpenses or general and administrative expenses of Purchaser shall be allocatedto the Company, unless set forth in Exhibit 5 attached hereto or otherwiseagreed to in writing by the Purchaser and the Agent.

 

6.                                       Miscellaneous.

 

(a)                                  No Third Party Beneficiaries. This Agreementshall not confer any rights or remedies upon any Person other than the partiesnamed herein and their respective successors and permitted assigns.

 

(b)                                 Entire Agreement. This Agreement, togetherwith the Purchase Agreement (and the Exhibits and Schedules thereto), and anycertificates or other documents delivered thereunder, supersedes all prioragreements, understandings or representations by or among the parties hereto,written or oral, that may have related in any way to the subject matterthereof.

 

(c)                                  Succession and Assignment. This Agreementshall be binding upon and inure to the benefit of the parties named herein andtheir respective successors and permitted assigns. No party may assign eitherthis Agreement or any of its rights, interests, or obligations hereunderwithout the prior written approval of the other party.

 

(d)                                 Counterparts. This Agreement may be executedin one or more counterparts (including execution by facsimile), each of whichshall be deemed an original but all of which together will constitute one andthe same instrument.

 

(e)                                  Headings. The section headings contained inthis Agreement are inserted for convenience only and shall not affect in anyway the meaning or interpretation of this Agreement.

 

(f)                                    Notices. Notices shall be delivered to theparties at the addresses set forth in Section 10.6 of the Purchase Agreement. Allcommunications required or permitted hereunder shall be provided in accordancewith and pursuant to Section 10.6 of the Purchase Agreement.

 

(g)                                 Governing Law. This Agreement shall begoverned by and construed in accordance with the domestic laws of the State ofDelaware without giving effect to any choice or conflict of law provision orrule that would cause the application of the laws of any jurisdiction otherthan the State of Delaware.

 

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(h)                                 Amendments and Waivers. No amendment of anyprovision of this Agreement shall be valid unless the same shall be in writingand signed by all of the parties hereto. No waiver by any party of any covenantor agreement hereunder shall be deemed to extend to any prior or subsequentdefault or breach of covenant or agreement hereunder or affect in any way anyrights arising by virtue of any prior or subsequent such occurrence.

 

(i)                                     Severability. Any term of this Agreement thatis invalid or unenforceable in any situation in any jurisdiction shall notaffect the validity or enforceability of the remaining terms and provisionshereof or the validity or enforceability of the offending term or provision inany other situation or in any other jurisdiction.

 

(j)                                     Expenses. Purchaser shall pay all costs andexpenses incurred or to be incurred by them in negotiating and preparing thisAgreement and carrying out the transactions contemplated thereby. TheStockholders shall be solely responsible for and bear all of their ownrespective expenses, including without limitation, expenses of legal counsel,accountants, finders, financial advisors incurred at any time in connectionwith pursuing or consummating this Agreement and the transactions contemplatedthereby. Notwithstanding the foregoing, Purchaser and the Stockholders willshare the fees and expenses of the Referee equally.

 

(k)                                  Construction. The parties have participatedjointly in the negotiation and drafting of this Agreement. In the event anambiguity or question of intent or interpretation arises, this Agreement shallbe construed as if drafted jointly by the parties and no presumption or burdenof proof shall arise favoring or disfavoring any party by virtue of theauthorship of any of the provisions of this Agreement. Any reference to anyfederal, state, local, or foreign statute or law shall be deemed also to referto all rules and regulations promulgated thereunder, unless the contextrequires otherwise. The word “including” shall mean without limitation. Theparties intend that each representation, warranty, and covenant containedherein shall have independent significance. If any party has breached anyrepresentation, warranty, or covenant contained herein in any respect, then thefact that there exists another representation, warranty, or covenant relatingto the same subject matter (regardless of the relative levels of specificity)which the party has not breached shall not detract from or mitigate the factthat the party is in breach of the first representation, warranty, or covenant.

 

(l)                                     Specific Performance. Each of the partiesacknowledges and agrees that the other parties would be damaged irreparably inthe event any of the provisions of this Agreement are not performed inaccordance with their specific terms or otherwise are breached. Accordingly,each of the parties agrees that the other parties shall be

 

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entitled to an injunction orinjunctions to prevent breaches of the provisions of this Agreement and toenforce specifically this Agreement and the terms and provision hereof in anyaction instituted in any court of the United States or any state thereof havingjurisdiction over the parties and the matter in addition to any other remedy towhich they may be entitled, at law or in equity.

 

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**IN WITNESS WHEREOF**, the parties hereto have executed this Agreement as of the date firstabove written.

 
|   | **EDGEWATER  TECHNOLOGY, INC.**      |                                                          |
|--------|--------------------------------------|---------------------------------------------------------------|
|   | ** **                           |                                                          |
|   |                                 |                                                          |
|   | By:                                  | /s/ Kevin R. Rhodes                                           |   |
|   | Title:                               | Chief Financial Officer, Treasurer & Corporate  Secretary |
|   |                                 |
|   |                                 |
|   | **NATIONAL  DECISION SYSTEMS, INC.** |
|   | ** **                           |
|   |                                 |
|   | By:                                  | /s/ Richard J. Foudy                                          |   |
|   | Title:                               | President                                                     |   |
|   |                                 |
|   |                                 |
|   | **THE  STOCKHOLDERS:**               |                                                          |
|   |                                 |                                                          |
|   | /s/ Richard J. Foudy                 |                                                          |
|   | Richard J. Foudy                     |                                                          |
|   |                                 |                                                          |
|   | /s/ Mark Manfredi                    |                                                          |
|   | Mark Manfredi                        |                                                          |
|   |                                 |                                                          |
|   | /s/ Mark Farrell                     |                                                          |
|   | Mark Farrell                         |                                                          |
|   |                                 |                                                          |
|   | /s/ Joanne Wortman                   |                                                          |
|   | Joanne Wortman                       |                                                          |
|   |                                 |                                                          |
|   | /s/ Dan MacAndrew                    |                                                          |
|   | Dan MacAndrew                        |                                                          |
|   |                                 |                                                          |
|   | /s/ Sundar Ranganathan               |                                                          |
|   | Sundar Ranganathan                   |                                                          |
|   |                                 |                                                          |
|   | /s/ Kenneth Allard                   |                                                          |
|   | Kenneth Allard                       |                                                          |

 

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Exhibit5

 

Expenses to be allocated to the Company’soperations:

 

1.                                       All direct expenses related to the Companyemployees’ participation in the Purchaser’s benefits programs will be allocatedto the Company, as such benefits programs are outlined in the Purchaser’s thenexisting human resources/employee Manual.

 

2.                                       All incremental direct costs related toadding the Company’s operations onto Purchaser’s insurance policies will beallocated to the Company, and such expense will not exceed $36,000 per annum.

 

3.                                       Direct marketing costs associated withrevenue generation programs for the Company will be allocated to the Company,including but not limited to advertising, production of marketing materials,participation in trade shows and production of case studies.

 

4.                                       Direct costs and expenses incurred to recruitand hire any new employees or engage new independent contractors for theCompany will be allocated to the Company.

 

5.                                       Direct costs for legal fees incurred torepresent the Company on any legal matters will be allocated to the Company.

 

6.                                       Direct costs for sales commissions,regardless of the sales personnel’s affiliation with Purchaser or the Company,derived from revenue generated by the Company will be allocated to the Company.

 

7.                                       Direct costs for salary, fringe and taxes forthe use of any of the Purchaser’s personnel who are directed to work on anengagement for the Company, for the duration of time directed to perform suchwork, will be allocated to the Company.

 

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