Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CENTILLIUM COMMUNICATIONS, INC.,
XXXXXX ACQUISITION CORP.,
vENGINES, INC.,
AND
PRINCIPAL STOCKHOLDERS
October 5, 2000
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER............................................................................. 2
1.1 The Merger.............................................................................. 2
1.2 Effective Time.......................................................................... 2
1.3 Effect of the Merger.................................................................... 2
1.4 Certificate of Incorporation and Bylaws................................................. 2
1.5 Directors and Officers.................................................................. 3
1.6 Effect on Capital Stock................................................................. 3
1.7 Shares Subject to Vesting............................................................... 7
1.8 Dissenting Shares....................................................................... 7
1.9 Surrender of Certificates............................................................... 7
1.10 No Further Ownership Rights in Company Capital Stock.................................... 9
1.11 Lost, Stolen or Destroyed Certificates.................................................. 9
1.12 Tax and Accounting Consequences......................................................... 9
1.13 Taking of Necessary Action; Further Action.............................................. 9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE INDIAN SUBSIDIARY.............. 10
2.1 Organization of the Company............................................................ 10
2.2 Company Capital Structure.............................................................. 11
2.3 Authority.............................................................................. 12
2.4 No Conflict............................................................................ 13
2.5 Consents .............................................................................. 13
2.6 Company Financial Statements........................................................... 13
2.7 No Undisclosed Liabilities............................................................. 14
2.8 No Changes............................................................................. 14
2.9 Tax Matters............................................................................ 16
2.10 Restrictions on Business Activities.................................................... 20
2.11 Title of Properties; Absence of Liens and Encumbrances; Condition of Equipment......... 20
2.12 Intellectual Property.................................................................. 21
2.13 Agreements, Contracts and Commitments.................................................. 25
2.14 Interested Party Transactions.......................................................... 26
2.15 Governmental Authorization............................................................. 26
2.16 Litigation............................................................................. 27
2.17 Accounts Receivable.................................................................... 27
2.18 Minute Books........................................................................... 27
2.19 Environmental Matters.................................................................. 27
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2.20 Brokers' and Finders' Fees; Third Party Expenses....................................... 28
2.21 Employee Benefit Plans and Compensation................................................ 28
2.22 Insurance.............................................................................. 32
2.23 Compliance with Laws................................................................... 32
2.24 Warranties; Indemnities................................................................ 32
2.25 Complete Copies of Materials........................................................... 32
2.26 Permit Application, Information Statement.............................................. 33
2.27 Powers of Attorney..................................................................... 33
2.28 Representations Complete............................................................... 33
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.................................... 33
3.1 Organization, Standing and Power....................................................... 34
3.2 Authority.............................................................................. 34
3.3 Capital Structure...................................................................... 34
3.4 No Conflict............................................................................ 35
3.5 Consents .............................................................................. 35
3.6 SEC Documents; Parent Financial Statements............................................. 35
3.7 Permit Application; Information Statement.............................................. 36
3.8 Tax-Free Reorganization................................................................ 36
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.................................................. 36
4.1 Conduct of Business of the Company..................................................... 36
4.2 No Solicitation........................................................................ 39
ARTICLE V ADDITIONAL AGREEMENTS................................................................. 40
5.1 Preparation of Permit Application/Information Statement................................ 40
5.2 Restrictions on Transfer............................................................... 41
5.3 Access to Information.................................................................. 41
5.4 Confidentiality........................................................................ 42
5.5 Expenses .............................................................................. 42
5.6 Public Disclosure...................................................................... 42
5.7 Consents .............................................................................. 42
5.8 FIRPTA Compliance...................................................................... 43
5.9 Reasonable Efforts..................................................................... 43
5.10 Notification of Certain Matters........................................................ 43
5.11 Additional Documents and Further Assurances............................................ 44
5.12 Affiliate Agreements................................................................... 44
5.13 Exemption from Federal Registration; California Blue Sky............................... 44
5.14 Company Options; Commission Filing..................................................... 45
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5.15 Nasdaq National Market................................................................. 45
5.16 Termination of 401(k) Plan............................................................. 45
5.17 Employee Benefits...................................................................... 45
5.18 Employment Offers...................................................................... 45
5.19 Stockholder List....................................................................... 45
5.20 Private Resale......................................................................... 45
5.21 Non-Competition Agreement.............................................................. 46
5.22 No Solicitation by Parent.............................................................. 46
5.23 Approval of the Plan................................................................... 46
5.24 Directors' and Officers' Insurance..................................................... 46
ARTICLE VI CONDITIONS TO THE MERGER............................................................. 46
6.1 Conditions to Obligations of Each Party to Effect the Merger........................... 46
6.2 Conditions to the Obligations of Parent and Sub........................................ 47
6.3 Conditions to Obligations of the Company and the Principal Stockholders................ 49
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION......................... 50
7.1 Survival of Representations, Warranties and Covenants.................................. 50
7.2 Recovery For Losses.................................................................... 51
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.................................................. 58
8.1 Termination............................................................................ 58
8.2 Effect of Termination.................................................................. 60
8.3 Amendment.............................................................................. 60
8.4 Extension; Waiver...................................................................... 60
8.5 Parent Investment in Company Upon Certain Termination Events........................... 60
ARTICLE IX GENERAL PROVISIONS................................................................... 65
9.1 Notices .............................................................................. 65
9.2 Interpretation......................................................................... 66
9.3 Counterparts........................................................................... 66
9.4 Entire Agreement; Assignment........................................................... 66
9.5 Severability........................................................................... 67
9.6 Other Remedies......................................................................... 67
9.7 Governing Law.......................................................................... 67
9.8 Rules of Construction.................................................................. 67
9.9 Attorneys' Fees........................................................................ 67
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INDEX OF EXHIBITS
Exhibit Description
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Exhibit A Company Voting Agreement
Exhibit B Noncompetition Agreement
Exhibit C Certificate of Merger
Exhibit D Certificate of Incorporation of Surviving Corporation
Exhibit E Rule 145 Affiliate Agreement
Exhibit F Opinion of Pillsbury Madison & Sutro
Exhibit G Opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Exhibit H Proposed Terms of Convertible Note and Warrant
AGREEMENT AND PLAN
OF
REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of October 5, 2000 by and among Centillium Communications, Inc.,
a Delaware corporation ("Parent"), Xxxxxx Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Sub"), vEngines, Inc., a
Delaware corporation (the "Company"), and the Principal Stockholders, as defined
below).
BACKGROUND
A. The Boards of Directors of each of Parent, Sub and the Company believe
it is in the best interests of their respective companies and the stockholders
of their respective companies that Parent acquire the Company through the
statutory merger of Sub with and into the Company (the "Merger") and, in
furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, all of the issued and
outstanding capital stock of the Company shall be converted into the right to
receive the consideration upon the terms and conditions set forth herein.
C. The Company, on the one hand, and Parent and Sub, on the other hand,
desire to make certain representations, warranties, covenants and other
agreements in connection with the Merger.
D. Concurrently with the execution and delivery of this Agreement, as
material inducements to Parent and Sub to enter into this Agreement, (i) certain
stockholders of the Company (the "Principal Stockholders") are entering into a
Voting Agreement, in the form attached as Exhibit A (the "Company Voting
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Agreement"), with Parent, and (ii) certain key employees of the Company are
entering into Noncompetition Agreements, in the form attached as Exhibit B (the
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"Noncompetition Agreements").
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined below) and subject to
and upon the terms and conditions of this Agreement and the applicable
provisions of the Delaware General Corporation Law (the "Delaware Law"), Sub
shall be merged with and into the Company, the separate corporate existence of
Sub shall cease and the Company shall continue as the surviving corporation and
as a wholly-owned subsidiary of Parent. The surviving corporation after the
Merger is sometimes referred to as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is terminated earlier pursuant
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to Section 8.1, the closing of the Merger (the "Closing") will take place within
two (2) business days, subject to the provisions set forth in Section 8.1(e),
following satisfaction or waiver of the conditions set forth in Article VI
hereof, at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional
Corporation, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx, unless another time
and/or place is mutually agreed upon in writing by Parent and the Company. The
date upon which the Closing actually occurs shall be referred to as the "Closing
Date." On the Closing Date, the parties shall cause the Merger to be consummated
by filing an Certificate of Merger (or like instrument), in substantially the
form attached hereto as Exhibit C, with the Secretary of State of the State of
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Delaware (the "Certificate of Merger"), in accordance with the applicable
provisions of Delaware Law (the time of acceptance by the Secretary of State of
the State of Delaware of such filing shall be referred to as the "Effective
Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
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shall be as provided in the applicable provisions of Delaware Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, except as otherwise agreed to pursuant to the terms of this Agreement, all
the property, rights, privileges, powers and franchises of the Company and Sub
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of the Company and Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Certificate of Incorporation and Bylaws.
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(a) Unless otherwise determined by Parent prior to the Effective
Time, the Certificate of Incorporation of Sub shall be amended and restated as
set forth in Exhibit D, and shall be the Certificate of Incorporation of the
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Surviving Corporation at the Effective Time until thereafter amended in
accordance with Delaware Law and as provided in such Certificate of
Incorporation, provided, that no such amendment or restatement shall diminish
any right of indemnification extended to the Company's current directors under
the Company's Certificate of Incorporation as in effect on the date hereof.
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(b) Unless otherwise determined by Parent prior to the Effective
Time, the Bylaws of Sub, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation at the Effective Time until
thereafter amended in accordance with Delaware Law and such Bylaws, provided,
that no right of indemnification extended to the directors or officers of the
Company incumbent as of the date hereof under the Bylaws of the Company as in
effect on the date hereof shall be curtailed or diminished thereby.
1.5 Directors and Officers. Unless otherwise determined by Parent prior
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to the Effective Time, the directors and officers of Sub immediately prior to
the Effective Time shall be the directors and officers of the Surviving
Corporation immediately after the Effective Time, in accordance with the
provisions of Delaware Law and the Certificate of Incorporation and Bylaws of
the Surviving Corporation, until their respective successors are duly elected or
appointed and qualified.
1.6 Effect on Capital Stock.
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(a) Definitions. For all purposes of this Agreement, the following
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terms shall have the following respective meanings:
"Aggregate Consideration" shall mean forty-one million six
-----------------------
hundred thousand U.S. dollars ($41,600,000). If the Company executes promissory
notes to ICICI and its affiliated entities in an aggregate amount of $700,000
(collectively, the "ICICI Notes") and such principal amount is received by the
Company in cash prior to the Closing Date, then to the extent the entire
principal balance on all of these such notes is converted to Company Capital
Stock, the "Aggregate Consideration" shall be increased to an amount equal to
forty-two million three hundred thirty-five thousand U.S. dollars ($42,335,000).
If the Company executes the ICICI Notes and such principal amount is received by
the Company in cash prior to the Closing Date and the entire principal balance
on all of these such notes is not converted to Company Capital Stock, the
"Aggregate Consideration" shall be reduced to an amount equal to forty-one
million five hundred sixty-five thousand U.S. dollars ($41,565,000).
"Company Capital Stock" shall mean (i) the shares of Company
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Common Stock, and (ii) the shares of Company Preferred Stock.
"Company Options" shall mean all issued and outstanding options
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issued pursuant to the Company's 2000 Option Plan (the "Plan") to purchase
Company Common Stock (whether or not vested) held by any person or entity.
"Company Common Stock" shall mean shares of common stock, par
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value $0.001 per share, of the Company.
"Company Preferred Stock" shall mean the Series A Preferred
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Stock, par value $0.001 per share, of the Company.
"DGCL" shall mean the Delaware Law.
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"Escrow Amount" shall mean ten and one-half percent (10.5%) of
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the Merger Shares.
"Escrow Stockholder" shall mean a holder of Parent Common Stock
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that is subject to, and a part of, the Escrow Amount.
"GAAP" shall mean U.S. generally accepted accounting principles,
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consistently applied.
"Knowledge" shall mean the actual knowledge of the Company's
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officers and directors and the knowledge that such persons would have obtained
of the matter represented after reasonable inquiry thereof under the
circumstances.
"Material Adverse Effect" shall mean any change, event or effect
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(other than a general economic trend) that is materially adverse to the
business, assets (including intangible assets), liabilities, condition
(financial or otherwise), results of operations or capitalization of the Company
and its subsidiaries, taken as a whole.
"Merger Shares" shall mean the shares of Parent Common Stock;
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issued pursuant to Section 1.6(b) below, as may be adjusted pursuant to Section
5.5(b) below.
"Parent Option" shall mean any option to purchase shares of
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Parent Common Stock issued pursuant to the terms of Section 1.6(d) in connection
with the assumption of a Company Option.
"Parent Common Stock" shall mean shares of the common stock, par
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value $0.001 per share, of Parent.
"SEC" shall mean the U.S. Securities and Exchange Commission.
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"Stockholder" shall mean each holder of any Company Capital Stock
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immediately prior to the Closing Date.
(b) Conversion of Company Capital Stock. Prior to the Effective Time,
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the holders of a majority of the Company Preferred Stock shall vote to convert
their shares of Company Preferred Stock into shares of Company Common Stock. At
the Effective Time, by virtue of the Merger and without any action on the part
of the Sub, the Company or the holders of any securities, each share of the
Company Capital Stock issued and outstanding immediately prior to the Effective
Time (other than any Dissenting Shares, as defined in Section 1.8) will be
canceled and extinguished and converted automatically into the right to receive,
upon surrender of the certificate(s) representing such share of Company Capital
Stock and upon the terms and subject to the conditions set forth in this Section
1.6 and throughout this Agreement, such number of shares of Parent Common Stock
equal to the Exchange Ratio. The Exchange Ratio shall be appropriately adjusted
to fully reflect the effect of any stock split, reverse stock split, stock
dividend, reorganization, recapitalization or like
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change with respect to Parent Common Stock occurring after the date hereof and
prior to the Effective Time.
(c) Exchange Ratio.
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(i) The "Exchange Ratio" shall be equal to the quotient of the
Exchange Stock Price divided by the Transaction Stock Price.
(ii) "Exchange Stock Price" shall be equal to the quotient of
the Aggregate Consideration divided by the total number of outstanding shares of
Company Capital Stock at the Effective Time.
(iii) Subject to Section 8.1(e)(ii) "Transaction Stock Price"
shall be determined as follows:
(1) If the Closing Stock Price (as defined below) is (a)
not greater than 1.1 multiplied by the Signing Stock Price (as defined below)
and (b) is not less than 0.9 multiplied by the Signing Stock Price, then the
Transaction Stock Price shall be equal to the Signing Stock Price.
(2) If the Closing Stock Price is greater than 1.1
multiplied by the Signing Stock Price, then the Transaction Stock Price shall be
the Closing Stock Price divided by 1.1.
(3) If the Closing Stock Price is less than 0.9
multiplied by the Signing Stock Price, then the Transaction Stock Price shall be
the Closing Stock Price divided by 0.9.
(iv) "Closing Stock Price" is the average of the closing prices
on the Nasdaq National Market of the Parent Common Stock for the twenty (20)
trading days prior to the Closing Date, as published at xxx.xxxxxx.xxx.
(v) "Signing Stock Price" is $84.15.
(d) Assumption of Company Options to Purchase Common Capital Stock.
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(i) At the Effective Time, each Company Option, whether vested
or unvested, granted under the Plan shall be deemed to constitute an option (an
"Assumed Option") to acquire, on the same terms and conditions as were
applicable under the Company Option, a number of shares of Parent Common Stock
equal to the number of shares of Company Common Stock that could have been
purchased under the Company Option multiplied by the Exchange Ratio (with the
resulting number of shares being rounded to the nearest whole share), at a price
per share of Parent Common Stock equal to the option exercise price (rounded up
to the nearest whole cent) of the Company Option divided by the Exchange Ratio;
provided, however, that in the case of any
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Assumed Option to which Section 422 of the Code applies ("Incentive Stock
Options"), the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such options shall be
determined in order to comply with Section 424(a) of the code.
(ii) Prior to the Effective Time, the Company shall take all
action necessary to effect the transactions anticipated by this Section 1.6(d).
(e) Withholding Taxes. Any number of shares of Parent Common Stock
-----------------
issuable pursuant to Section 1.6(b) to any Stockholder shall be subject to, and
reduced by, the amount of any state, federal and foreign withholding taxes
incurred (and not previously paid by or on behalf of the Company) in connection
with (i) the acquisition of Company Common Stock upon the exercise of Company
Options, or (ii) the acceleration of the vesting of any Company Capital Stock,
or (iii) the payment of a bonus in the form of Company Capital Stock, if any, to
such Stockholder. For purposes of any such reduction, a share of Parent Common
Stock shall be valued at the Transaction Stock Price.
(f) Stockholder Loans. In the event that any Stockholder has
-----------------
outstanding loans from the Company as of the Effective Time, the Company shall
use commercially reasonable efforts to ensure that such loan is paid in full by
the Stockholder prior to the Effective Time. In the event such loan is not paid
in full to the Company, the consideration payable to such Stockholder pursuant
to this Section 1.6 shall be reduced by an amount equal to the outstanding
principal plus accrued interest of such Stockholder's loans as of the Effective
Time. For purposes of any such reduction, a share of Parent Common Stock shall
be valued at the Transaction Stock Price.
(g) Capital Stock of Sub. Each share of Common Stock of Sub issued
--------------------
and outstanding immediately prior to the Effective Time shall be converted into
and exchanged for one validly issued, fully paid and nonassessable share of
Common Stock of the Surviving Corporation. Each stock certificate of Sub
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
(h) Fractional Shares. No fraction of a share of Parent Common Stock
-----------------
will be issued, but in lieu thereof, each holder of shares of Company Capital
Stock who would otherwise be entitled to a fraction of a share of Parent Common
Stock (after aggregating all fractional shares of Parent Common Stock to be
received by such holder) shall be entitled to receive from Parent an amount of
cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the Transaction Stock Price.
(i) Escrow. Notwithstanding the provisions in this Section 1.6, and
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as soon as practicable after the Closing Date, subject and in accordance with
the provisions of Article VII hereof, Parent shall cause to be deposited in the
Escrow Fund (as defined in Section 7.2(b) hereof
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the Escrow Amount for purposes of securing the indemnification obligations set
forth in Article VII of this Agreement.
1.7 Shares Subject to Vesting. If any shares of Company Capital Stock
-------------------------
issued and outstanding immediately prior to the Effective Time are subject to a
repurchase option by the Company, risk of forfeiture or other condition under
any applicable stock restriction agreement or other agreement with the Company,
then the shares of Parent Common Stock issued in exchange for such shares of
Company Capital Stock shall also be subject to the same repurchase option, risk
of forfeiture or other condition (including any requirement that any unvested
shares be held in escrow), and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends in the
discretion of Parent.
1.8 Dissenting Shares.
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(a) Notwithstanding any other provisions of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has exercised
and perfected appraisal rights for such shares in accordance with Section 262 of
the Delaware Law, and, to the extent applicable in accordance with California
law and who has not effectively withdrawn or lost such appraisal rights
("Dissenting Shares"), shall not be converted into or represent a right to
receive the consideration set forth in Section 1.6 hereof, but the holder shall
only be entitled to such rights as are provided by Delaware Law, and, to the
extent applicable in accordance with California law.
(b) Notwithstanding the provisions of Section 1.8(a) hereof, if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) such holder's appraisal rights under Delaware Law, and,
to the extent applicable in accordance with California law, then, as of the
later of the Effective Time and the occurrence of such event, such holder's
shares shall automatically be converted into and represent only the right to
receive the consideration set forth in Section 1.6 hereof, without interest
thereon, upon surrender of the certificate(s) representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written
demand for appraisal received by the Company pursuant to the applicable
provisions of Delaware Law, and, to the extent applicable in accordance with
California law, and (ii) the opportunity to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to any such
demands or offer to settle or settle any such demands.
1.9 Surrender of Certificates.
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(a) Exchange Agent. ChaseMellon Shareholder Services shall serve as
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the exchange agent (the "Exchange Agent") for the Merger.
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(b) Parent to Provide Parent Common Stock. Promptly after the
-------------------------------------
Effective Time, Parent shall make available to the Exchange Agent for exchange
in accordance with this Article I the shares of Parent Common Stock issuable
pursuant to Section 1.6 (as modified, if at all, by Section 5.5 below) in
exchange for outstanding shares of Company Capital Stock (the "Exchange Fund");
provided, however, that on behalf of the Stockholders, Parent shall deposit into
the Escrow Fund (as defined in Section 7.2(b)) a number of shares of Parent
Common Stock (allocated on a pro rata basis among the Stockholders) equal to the
Escrow Amount out of the aggregate number of shares of Parent Common Stock
otherwise issuable to the Stockholders pursuant to Section 1.6.
(c) Exchange Procedures. As promptly as practicable after the
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Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a certificate(s) which, immediately prior to the Effective Time,
represented outstanding shares of Company Capital Stock (the "Certificates"),
whose shares were converted into the right to receive shares of Parent Common
Stock pursuant to Section 1.6, (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify), and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificate(s) representing shares of Parent Common
Stock. Upon surrender of Certificates for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by Parent, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefor certificate(s) representing the number of whole
shares of Parent Common Stock, and the Certificates so surrendered shall
forthwith be canceled. Until so surrendered, outstanding Certificates will be
deemed from and after the Effective Time, for all corporate purposes other than
the payment of dividends, to evidence the ownership of the number of full shares
of Parent Common Stock into which such shares of Company Capital Stock shall
have been so converted. To the extent all outstanding original stock
certificates of the Company are delivered at Closing, Parent shall forward such
stock certificates directly to the Exchange Agent for cancellation, and in
exchange therefor shall issue certificate(s) representing the applicable number
of whole shares of Parent Common Stock.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
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other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time will be paid to
the holder of any unsurrendered Certificates with respect to the shares of
Parent Common Stock represented thereby until the holder of record of such
Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holder thereof, without interest, certificate(s) representing
whole shares of Parent Common Stock issued in exchange therefor.
(e) Transfers of Ownership. If any certificate for shares of Parent
----------------------
Common Stock is to be issued in a name other than that in which the Certificates
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificates so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
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exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificates surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
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which remains undistributed to the Stockholders of Company one year after the
Effective Time, as the result of failure of a Stockholder to surrender a
Certificate pursuant to Section 1.9(c) prior to that time, shall be delivered to
Parent, upon demand, and any Stockholders of Company who have not previously
complied with this Section 1.9 shall thereafter look only to Parent for their
Certificates and any dividends or distributions with respect to Parent Common
Stock.
(g) No Liability. Notwithstanding anything to the contrary in this
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Section 1.9, neither the Exchange Agent, the Surviving Corporation nor any party
hereto shall be liable to a holder of shares of Company Capital Stock for any
amount properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
1.10 No Further Ownership Rights in Company Capital Stock. The shares of
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Parent Common Stock paid in respect of the surrender for exchange of shares of
Company Capital Stock in accordance with the terms hereof (including any cash
paid with respect to fractional shares of Parent Common Stock) shall be deemed
to be full satisfaction of all rights pertaining to such shares of Company
Capital Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of Company Capital Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
1.11 Lost, Stolen or Destroyed Certificates. In the event any certificates
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evidencing shares of Company Capital Stock shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of Parent Common Stock as may be required pursuant
to Section 1.6 hereof; provided, however, that Parent may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificates to deliver a bond in such amount as it
may reasonably direct against any claim that may be made against Parent or the
Exchange Agent with respect to the certificates alleged to have been lost,
stolen or destroyed.
1.12 Tax and Accounting Consequences. It is intended by the parties that
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the Merger shall constitute a reorganization within the meaning of Section
368(a) of the Code.
1.13 Taking of Necessary Action; Further Action. If at any time after the
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Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, Parent, Sub, and the officers and directors of
the
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Company, Parent and Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE INDIAN SUBSIDIARY
The Company and the Indian Subsidiary (as defined below), jointly and
severally, hereby represent and warrant to Parent and Sub, subject to such
exceptions as are specifically disclosed in the disclosure schedules
(referencing the appropriate section and paragraph numbers) supplied by the
Company and the Indian Subsidiary to Parent and Sub (the "Disclosure Schedule")
and dated as of the date hereof as follows, provided, however, that no
representation is made by the Indian Subsidiary other than with respect to
matters concerning the Indian Subsidiary:
2.1 Organization of the Company.
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(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Delaware. The Company has
the corporate power to own its properties and to carry on its business as
currently conducted and as currently contemplated to be conducted. The Company
is duly qualified or licensed to do business and in good standing as a foreign
corporation in each jurisdiction in which it conducts business. The Company has
delivered a true and correct copy of its Certificate of Incorporation and
Bylaws, each as amended to date and in full force and effect on the date hereof,
to Parent. Schedule 2.1 lists the directors and officers of the Company. Other
------------
than the Indian Subsidiary (as defined in Section (b) below), the Company does
not have, and has never had, any subsidiaries and does not otherwise own, and
has not otherwise owned, any share in the capital of or any interest in, or
control of, directly or indirectly, any corporation, partnership, association,
joint venture or other business entity.
(b) The Company's subsidiary, vEngines India Pvt. Limited, is a
private limited company incorporated under the provisions of the Indian
Companies Act, 1956 (the "Indian Subsidiary"). The Company owns all outstanding
capital stock of the Indian Subsidiary and there are no other rights to acquire
any capital stock of the Indian Subsidiary. The Indian Subsidiary's
capitalization is set forth on Schedule 2.1(b). The Indian Subsidiary is duly
organized, validly existing and in good standing under the laws of the Republic
of India. The Indian Subsidiary has the corporate power to own its properties
and to carry on its business as currently conducted and as currently
contemplated to be conducted. The Indian Subsidiary is duly qualified or
licensed to do business and in good standing as a foreign corporation in each
jurisdiction, other than the jurisdiction of its domicile, in which it conducts
business. The Indian Subsidiary has delivered a true and correct copy of its
Articles and Memorandum of Association, each as amended to date and in full
force and effect on the date hereof, to Parent. The Indian Subsidiary does not
have, and has never had, any subsidiaries and does not otherwise own, and has
not otherwise owned, any share in the capital of or
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any interest in, or control of, directly or indirectly, any corporation,
partnership, association, joint venture or other business entity.
2.2 Company Capital Structure.
-------------------------
(a) The authorized capital stock of the Company consists of (i)
30,000,000 shares of Common Stock, of which 4,476,500 shares are issued and
outstanding as of the date hereof, and (ii) 10,000,000 shares of Preferred
Stock, 7,000,000 shares of which have been designated Series A Preferred Stock,
of which 6,694,600 are issued and outstanding as of the date hereof. As of the
date hereof, the capitalization of the Company, including the names, addresses
and domiciles of the securities holders, is as set forth on Schedule 2.2(a).
--------------
Assuming the same total capitalization as on the date hereof, the total number
of shares of Company Common Stock outstanding as of immediately prior to the
Effective Time (assuming the conversion, exercise or exchange of all securities
convertible into, or exercisable or exchangeable for, shares of Company Common
Stock, including without limitation the Company Preferred Stock and the exercise
of all Company Options) will be as set forth in Schedule 2.2(a). All
---------------
outstanding shares of Company Capital Stock are duly authorized, validly issued,
fully paid and non-assessable and not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of the Company, or any
agreement to which the Company is a party or by which it is bound. All
outstanding shares of Company Capital Stock, Company Common Stock issued upon
exercise of Company Options and Company Options have been issued or repurchased
(in the case of shares that were outstanding and repurchased by the Company) in
compliance with all applicable federal and state securities laws. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of the Company Preferred Stock are as set forth in the
Company's Certificate of Incorporation. There are not outstanding any
adjustments made or required to be made to the conversion rates applicable to
Company Preferred Stock set forth in the Company's Certificate of Incorporation.
There are no declared or accrued but unpaid dividends with respect to any shares
of Company Capital Stock. The Company has no other capital stock authorized,
issued or outstanding. The requisite vote required to approve the Merger under
applicable law, the Company's Certificate of Incorporation, Bylaws and any other
agreement to which the Company or any other Stockholder of the Company is bound
is as follows: holders of a majority of each class of outstanding shares. Each
share of Company Preferred Stock is convertible to Company Common Stock on a
one-to-one basis and, as of the Effective Time, each share of Company Preferred
Stock will be converted to Company Common Stock. Holders of Company Capital
Stock sufficient to approve the Merger, each of whom is an "affiliate" of the
Company as defined in Rule 12b-2 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), have executed the Company Voting
Agreement.
(b) Except for the Plan, the Company has never adopted or
maintained any stock option plan or other plan providing for equity compensation
of any person. The Company has reserved 2,000,000 shares of Company Common Stock
for issuance to employees and directors of, and consultants to, the Company upon
the exercise of options granted under the Plan, of which (i) 930,000 shares are
issuable, as of the date hereof, upon the exercise of outstanding, unexercised
options granted under the Plan, and (ii) no shares have been issued, as of the
date hereof, upon the
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exercise of options granted under the Plan. Schedule 2.2(b) sets forth (i) for
---------------
each outstanding Company Option, the name of the holder of such Option, the
domicile address of such holder, the number of shares of Company Common Stock
issuable upon the exercise of such Option, the exercise price of such Option,
the vesting schedule for such Option, including the extent vested to date and
whether the vesting of such Option will be accelerated by the transactions
contemplated by this Agreement, and whether such Option is intended to qualify
as an incentive stock option as defined in Section 422 of the Code, and (ii) for
each right to repurchase shares in favor or the Company, the name of the
Stockholder, the number of shares of Company Capital Stock subject to repurchase
by the Company, the price at which such shares maybe repurchased, the schedule
by which such repurchase right lapses, including the extent to which such
repurchase right has lapsed to date and whether the lapsing of the repurchase
right will be accelerated by the transactions contemplated by this Agreement.
Except as described above, there are no options, warrants, calls, rights,
commitments or agreements of any character, written or oral, to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of the Company or
obligating the Company to grant, extend, accelerate the vesting of, change the
price of, otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or other similar rights with
respect to the Company. Except as contemplated hereby, there are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting stock of the Company. As a result of the Merger, Parent will be the sole
record and beneficial holder of all issued and outstanding Company Capital Stock
and all rights to acquire or receive any shares of Company Capital Stock,
whether or not such shares of Company Capital Stock are outstanding.
2.3 Authority. The Company and the Indian Subsidiary have all requisite
---------
power and authority to enter into this Agreement and any Related Agreements (as
defined below) to which they are party and to consummate the transactions
contemplated hereby and thereby. Except as stated below, the execution and
delivery of this Agreement, any Related Agreements to which the Company is party
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of the
Company, and no further action is required on the part of the Company or the
Indian Subsidiary to authorize the Agreement, any Related Agreements to which
they are party and the transactions contemplated hereby and thereby, subject
only to the approval of this Agreement and the transactions contemplated hereby
by the Stockholders. As of the date hereof, this Agreement and the Merger have
been unanimously approved by the Board of Directors of the Company and such
Board of Directors has recommended to the Stockholders to vote in favor of this
Agreement, the Merger and the transactions contemplated thereby. The affirmative
vote of the holders of a majority of the shares of Company Common Stock and
Company Preferred Stock outstanding on the record date for the Written Consent
of Stockholders relating to this Agreement, is the only vote of the holders of
any of Company's Capital Stock necessary under the Certificate of Incorporation,
as amended to date, and DGCL to approve this Agreement and the transactions
contemplated hereby. This Agreement and any Related Agreements to which the
Company and/or any of the Principal Stockholders is a party has been duly
-12-
executed and delivered by the Company or the Principal Stockholder, as the case
may be, and, assuming the due authorization, execution and delivery by the other
parties hereto and thereto, constitute the valid and binding obligations of the
Company, enforceable against the Company, as applicable, in accordance with
their respective terms, except as such enforceability may be subject to the laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies. For the purposes of this Agreement, the term "Related
Agreements" shall mean the Company Voting Agreement, the Escrow Agreement, the
Certificate of Merger, the Noncompetition Agreements and any other agreements to
which the Company or a Principal Stockholder is a party that it enters into in
order to consummate the transactions contemplated thereby.
2.4 No Conflict. The execution and delivery by the Company, the Indian
-----------
Subsidiary and each of the Principal Stockholders of this Agreement and any
Related Agreement to which the Company, the Indian Subsidiary and/or any
Principal Stockholder is a party, and the consummation of the transactions
contemplated hereby and thereby, will not conflict with or result in any
violation of or default under (with or without notice or lapse of time, or both)
or give rise to a right of termination, cancellation, modification or
acceleration of any obligation or loss of any benefit under (any such event, a
"Conflict") (i) any provision of the Certificate of Incorporation or Bylaws of
the Company, each as amended to date, (ii) any Contract (as defined in Section
2.13(b) below) to which the Company or any of its properties or assets
(including intangible assets), the Indian Subsidiary, or to which any of the
Principal Stockholders, is subject, or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its properties (tangible and intangible) or assets, or applicable to any of the
Principal Stockholders.
2.5 Consents. No consent, waiver, approval, order or authorization of,
--------
or registration, declaration or filing with any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission (each, a "Governmental Entity")
or any third party, including a party to any agreement with the Company (so as
not to trigger any Conflict), is required by or with respect to the Company, the
Indian Subsidiary or any of the Principal Stockholders in connection with the
Company's execution and delivery of this Agreement, any of the Related
Agreements to which the Company, the Indian Subsidiary or any of the Principal
Stockholders are party, or the consummation of the transactions contemplated
hereby or thereby, except for (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable securities laws, (ii) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware, and (iii) the approval of this
Agreement and the transactions contemplated hereby by the Stockholders.
2.6 Company Financial Statements. Schedule 2.6 sets forth (i) the
---------------------------- ------------
Company's unaudited financial statements for the fiscal year ended December 31,
1999 (and its unaudited financial statements for the eight-month period ended
August 31, 2000) and the related statements of income, cash flow and
stockholders' equity, and (ii) the Indian Subsidiary's unaudited financial
statements for the fiscal year ended March 31, 2000 (and its unaudited financial
statements for the five-month
-13-
subsidiary's period ended August 31, 2000) and the related statements of income,
cash flow and stockholder's equity (collectively, the "Financials"). The
Financials are correct in all material respects and have been prepared in
accordance with GAAP consistently applied on a basis consistent throughout the
periods indicated and consistent with each other. The Financials present fairly
the financial condition, operating results and cash flows of the Company (and
its predecessors) as of the dates and during the periods indicated therein. The
Company's unaudited balance sheet as of August 31, 2000 is referred to
hereinafter as the "Current Balance Sheet." Company maintains and will continue,
prior to the Effective Time, to maintain a standard system of accounting
established and administered in accordance with GAAP.
2.7 No Undisclosed Liabilities. The Company and the Indian Subsidiary
--------------------------
have no liabilities, indebtedness, obligations, expenses, claims, deficiencies,
guaranties or endorsements of any type, whether accrued, absolute, contingent,
matured, unmatured or other (whether or not required to be reflected in
financial statements in accordance with GAAP), which individually or in the
aggregate (i) has not been adequately reflected in the Current Balance Sheet, or
(ii) has not arisen in the ordinary course of business consistent with past
practices since August 31, 2000 and which are not, individually or in the
aggregate, material.
2.8 No Changes. Since August 31, 2000, there has not been, occurred or
----------
arisen any:
(a) transaction by the Company or the Indian Subsidiary except
in the ordinary course of business consistent with past practices ;
(b) amendments or changes to the Certificate of Incorporation or
Memorandum and Articles of Association of the Company or the Indian Subsidiary;
(c) capital expenditure or capital expenditure commitment by the
Company or the Indian Subsidiary exceeding $25,000 individually or $100,000 in
the aggregate;
(d) payment, discharge or satisfaction, in any amount in excess
of $25,000 in any one case, or $100,000 in the aggregate, of any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in the Current
Balance Sheet;
(e) destruction of, damage to or loss of any material assets or
material business or loss of any material customer of the Company or the Indian
Subsidiary (whether or not covered by insurance);
(f) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(g) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or the
Indian Subsidiary other than as required by GAAP;
-14-
(h) change in any election in respect of Taxes (as defined
below), adoption or change in any accounting method in respect of Taxes,
agreement or settlement of any claim or assessment in respect of Taxes, or
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(i) revaluation by the Company or the Indian Subsidiary of any
of its assets;
(j) declaration, setting aside or payment of a dividend or other
distribution (whether in cash, stock or property) in respect of any Company
Capital Stock, or any split, combination or reclassification in respect of any
shares of Company Capital Stock, or any issuance or authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of Company Capital Stock, or any direct or indirect repurchase,
redemption, or other acquisition by the Company of any shares of Company Capital
Stock (or options or other rights convertible into, exercisable or exchangeable
therefor), except in accordance with the agreements evidencing Company Options;
(k) increase in the salary or other compensation payable or to
become payable by the Company or the Indian Subsidiary to any of its officers,
directors, employees or advisors, or the declaration, payment or commitment or
obligation of any kind for the payment by the Company or the Indian Subsidiary
of a severance payment, termination payment, bonus or other additional salary or
compensation to any such person;
(l) any agreement, contract, covenant, instrument, lease,
license or commitment to which the Company or the Indian Subsidiary is party or
by which it or any of its assets (including intangible assets) are bound or any
termination, extension, amendment or modification of the terms of any agreement,
contract, covenant, instrument, lease, license or commitment to which the
Company or the Indian Subsidiary is party or by which it or any of its assets
are bound;
(m) sale, lease or other disposition of any of the material
assets or material properties of the Company or the Indian Subsidiary or any
creation of any security interest in such material assets or material
properties;
(n) loan by the Company or the Indian Subsidiary to any person
or entity, incurring by the Company or the Indian Subsidiary of any
indebtedness, guaranteeing by the Company or the Indian Subsidiary of any
indebtedness, issuance or sale of any debt securities of the Company or the
Indian Subsidiary or guaranteeing of any debt securities of others, except for
advances to employees for travel and business expenses in the ordinary course of
business consistent with past practices;
(o) waiver or release of any right or claim of the Company or
the Indian Subsidiary, including any write-off or other compromise of any
account receivable of the Company or the Indian Subsidiary;
-15-
(p) the commencement, settlement, notice or, to the Knowledge of
the Company, the Indian Subsidiary or any of the Principal Stockholders, threat
of any lawsuit or proceeding or other investigation against the Company or the
Indian Subsidiary or their affairs, or any reasonable basis for any of the
foregoing;
(q) notice to the Company, or to the best of Company's knowledge
any Stockholder, director or officer of the Company, of any claim or potential
claim of ownership by any person other than the Company or the Indian Subsidiary
of the Company Intellectual Property (as defined in Section 2.12 below) owned by
or developed or created by the Company or of infringement by the Company of any
other person's Intellectual Property (as defined in Section 2.12 below);
(r) issuance or sale, or contract to issue or sell, by the
Company of any shares of Company Capital Stock or securities convertible into,
or exercisable or exchangeable for, shares of Company Capital Stock, or any
securities, warrants, options or rights to purchase any of the foregoing;
(s) (i) sale or license of any Company Intellectual Property or
entering into of any agreement with respect to the Company Intellectual Property
with any person or entity or with respect to the Intellectual Property of any
person or entity, (ii) purchase or license of any Intellectual Property or
entering into of any agreement with respect to the Intellectual Property of any
person or entity, (iii) agreement with respect to the development of any
Intellectual Property with a third party, or (iv) change in pricing or royalties
set or charged by the Company to its customers or licensees or in pricing or
royalties set or charged by persons who have licensed Intellectual Property to
the Company;
(t) agreement or modification to agreement pursuant to which any
other party was granted marketing, distribution, development or similar rights
of any type or scope with respect to any products or technology of the Company
or the Indian Subsidiary;
(u) hiring or termination of employees of the Company or the
Indian Subsidiary;
(v) event or condition of any character that has had or is
reasonably likely to have a Material Adverse Effect on the Company or the Indian
Subsidiary; or
(w) sale of any portion of the capital stock or assets of the
Indian Subsidiary;
(x) agreement by the Company or the Indian Subsidiary or any
officer or employees on behalf of the Company to do any of the things described
in the preceding clauses (a) through (w) (other than negotiations with Parent
and its representatives regarding the transactions contemplated by this
Agreement).
2.9 Tax Matters.
-----------
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(a) Definition of Taxes. For the purposes of this Agreement, the
-------------------
term "Tax" or, collectively, "Taxes" shall mean (i) any and all federal, state,
local and foreign taxes, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts, (ii) any liability for the payment of any
amounts of the type described in clause (i) above as a result of being a member
of an affiliated, consolidated, combined or unitary group for any period, and
(iii) any liability for the payment of any amounts of the type described in
clauses (i) or (ii) above as a result of any express or implied obligation to
indemnify any other person or as a result of any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits.
----------------------
(i) The Company and the Indian Subsidiary will have prepared
and timely filed all required federal, state, local and foreign returns,
estimates, information statements and reports ("Returns") relating to any and
all Taxes concerning or attributable to the Company and the Indian Subsidiary or
its operations and such Returns are correct and have been completed in
accordance with applicable law.
(ii) The Company and the Indian Subsidiary (A) have timely
paid all Taxes it is required to pay and withheld with respect to its employees
all federal and state income taxes, Federal Insurance Contribution Act ("FICA"),
Federal Unemployment Tax Act ("FUTA") and other Taxes required to be withheld,
and (B) have accrued on the Current Balance Sheet all Taxes attributable to the
periods preceding the Current Balance Sheet and will not have incurred any
liability for Taxes for the period commencing after the date of the Current
Balance Sheet and ending immediately prior to the Effective Time, other than in
the ordinary course of business.
(iii) The Company and the Indian Subsidiary have not been
delinquent in the payment of any Tax, nor is there any Tax deficiency
outstanding, assessed or proposed against the Company or the Indian Subsidiary,
nor has the Company or the Indian Subsidiary executed any waiver of any statute
of limitations on or extending the period for the assessment or collection of
any Tax.
(iv) No audit or other examination of any Return of the
Company or the Indian Subsidiary is presently in progress, nor has the Company
or the Indian Subsidiary been notified of any request for such an audit or other
examination.
(v) The Company and the Indian Subsidiary have no liabilities
for unpaid federal, state, local and foreign Taxes which have not been accrued
or reserved on the Current Balance Sheet, whether asserted or unasserted,
contingent or otherwise, and the Company and the
-17-
Indian Subsidiary have not incurred any liability for Taxes since the date of
the Current Balance Sheet other than in the ordinary course of business.
(vi) The Company and the Indian Subsidiary have made available
to Parent, its legal counsel and its accountants, copies of all foreign,
federal, state and local income and all state and local sales and use Returns
for the Company and the Indian Subsidiary filed for all periods since their
inception.
(vii) There are (and immediately following the Effective Time
there will be) no liens, pledges, charges, claims, restrictions on transfer,
mortgages, security interests or other encumbrances of any sort other than Liens
for Taxes not yet due and payable (collectively, "Liens") on the assets of the
Company and the Indian Subsidiary relating to or attributable to Taxes.
(viii) Neither the Company nor the Indian Subsidiary have
Knowledge of any basis for the assertion of any claim relating or attributable
to Taxes which, if adversely determined, would result in any Lien on the assets
of the Company or the Indian Subsidiary.
(ix) None of the Company's nor the Indian Subsidiary's assets
is treated as "tax-exempt use property," within the meaning of Section 168(h) of
the Code.
(x) The Company and the Indian Subsidiary have not filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(4) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by the Company and the Indian
Subsidiary.
(xi) The Company and the Indian Subsidiary are not party to
any tax sharing, indemnification or allocation agreement nor does the Company or
the Indian Subsidiary owe any amount under any such agreement.
(xii) The Company's and the Indian Subsidiary's tax basis in
their assets for purposes of determining its future amortization, depreciation
and other federal income Tax deductions is accurately reflected on the Company's
and the Indian Subsidiary's tax books and records.
(xiii) The Company and the Indian Subsidiary are not, and have
not been at any time, a "United States Real Property Holding Corporation" within
the meaning of Section 897(c)(2) of the Code.
(xiv) No adjustment relating to any Return filed by the Company
or the Indian Subsidiary has been proposed formally or, to the Knowledge of the
Company or the Indian Subsidiary, informally by any tax authority to the
Company, the Indian Subsidiary or any representative thereof.
-18-
(xv) The Company and the Indian Subsidiary have (a) never been
a member of an affiliated group (within the meaning of Code (S)1504(a)) filing a
consolidated federal income Tax Return (other than a group the common parent of
which was Company), (b) no liability for the Taxes of any person (other than
Company) under Treas. Reg. (S) 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract, or otherwise,
and (c) never been a party to any joint venture, partnership or other agreement
that could be treated as a partnership for Tax purposes.
(xvi) The Company and the Indian Subsidiary have not
constituted either a "distributing corporation" or a "controlled corporation" in
a distribution of stock qualifying for tax-free treatment under Section 355 of
the Code (x) in the two years prior to the date of this Agreement, or (y) in a
distribution which could otherwise constitute part of a "plan" or "Series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(c) Executive Compensation Tax. There is no contract, agreement, plan
--------------------------
or arrangement to which the Company is a party, including, without limitation,
the provisions of this Agreement, covering any employee or former employee of
the Company, which, individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to Sections 280G, 404 or
162(m) of the Code.
(d) Tax Free Reorganization.
-----------------------
(i) The Company and the Indian Subsidiary have not taken or
agreed to take any action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
Prior to and in connection with the Merger, the Company or the Indian Subsidiary
will not have redeemed, and related persons with respect to the Company or the
Indian Subsidiary, as such term is defined by Treasury Regulation Section 1.368-
1(e)(3) (without regard to Section 1.368-1(e)(3)(i)(a)), will not have purchased
any Company Capital Stock, and the Company will not have made any extraordinary
distributions within the meaning of Temporary Treasury Regulation Section 1.368-
1T(e) with respect to its Capital Stock.
(ii) The Company and the Indian Subsidiary have not entered
into any agreement or understanding as to any transaction whereby immediately
following the Merger they will hold less than 90% of the fair market value of
their net assets or less than 70% of the fair market value of their gross assets
held immediately prior to the Merger. For purposes of this representation,
amounts paid by the Company to dissenters, amounts paid by the Company to
Stockholders who receive cash or other property, amounts used by the Company to
pay reorganization expenses and all redemptions and distributions (except for
regular, normal dividends) made by the Company will be included as assets of the
Company immediately prior to the Merger.
(iii) The Company and the Indian Subsidiary have not entered
into any agreement or arrangement whereby at the Effective Time they will have
any outstanding warrants, options, convertible securities or any other type of
right pursuant to which any person could acquire
-19-
stock in the Company or the Indian Subsidiary that, if exercised or converted,
would affect Parent's acquisition or retention of control of the Company, as
defined in Section 368(c)(1) of the Code.
(iv) The Company and the Indian Subsidiary are not an investment
company as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(v) At the Effective Time, the fair market value of the assets
of the Company and the Indian Subsidiary will exceed the sum of their
liabilities, plus the amount of liabilities, if any, to which the assets are
subject.
(vi) The Company and the Indian Subsidiary are not under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
(e) Indian Subsidiary Tax Status. To the extent Xxxxxxx Xxxxx
----------------------------
Associates issues an opinion stating, in part, that the Indian Subsidiary will
not lose its current tax treatment as a "Software Technology Park" and lose the
income-tax benefits currently available to it under Section 10A of the Indian
Income Tax Act, 1961, under current Indian law, the Indian Subsidiary will not,
as a result of the transaction contemplated by this Agreement, lose its current
tax treatment as a "Software Technology Park," and lose the income-tax benefits
currently available to it under Section 10A of the Indian Income-tax Act, 1961.
2.10 Restrictions on Business Activities. There is no agreement (noncompete
-----------------------------------
or otherwise), commitment, judgement, injunction, order or decree to which the
Company or the Indian Subsidiary is a party or otherwise binding upon the
Company or the Indian Subsidiary which has or may reasonably be expected to have
the effect of prohibiting or impairing any business practice of the Company or
the Indian Subsidiary, any acquisition of property (tangible or intangible) by
the Company or the Indian Subsidiary, the conduct of business by the Company or
the Indian Subsidiary or otherwise limiting the freedom of the Company or the
Indian Subsidiary to engage in any line of business or to compete with any
person. Without limiting the generality of the foregoing, neither the Company
nor the Indian Subsidiary has entered into any agreement under which the Company
or the Indian Subsidiary is restricted from selling, licensing or otherwise
distributing any of its technology or products to, or providing services to,
customers or potential customers or any class of customers, in any geographic
area, during any period of time or in any segment of the market.
2.11 Title of Properties; Absence of Liens and Encumbrances; Condition of
--------------------------------------------------------------------
Equipment.
---------
(a) The Company and the Indian Subsidiary own no real property, nor
has either ever owned any real property. Schedule 2.11(a) sets forth a list of
----------------
all real property currently leased by the Company and the Indian Subsidiary, the
name of the lessor, the date of the lease and each amendment thereto and, with
respect to any current lease, the aggregate annual rental payable under any such
lease. All such current leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a
-20-
default) by the Company or, to the Knowledge of the Company or the Indian
Subsidiary, by any other party.
(b) The Company and the Indian Subsidiary have good and valid title
to, or, in the case of leased properties and assets, valid leasehold interests
in, all of their respective tangible properties and assets, real, personal and
mixed, used or held for use in their respective business, free and clear of any
Liens, except (i) as reflected in the Current Balance Sheet, (ii) Liens for
Taxes not yet due and payable, and (iii) such imperfections of title and
encumbrances, if any, which do not detract materially from the value or
interfere materially, or interfere with the present use, of the property subject
thereto or affected thereby.
(c) Schedule 2.11(c) lists all material items of equipment (the
---------------
"Equipment") owned or leased by the Company and the Indian Subsidiary and such
Equipment is (i) adequate for the conduct of the business of the Company and the
Indian Subsidiary, as applicable, as currently conducted and as currently
contemplated to be conducted, and (ii) in good operating condition, regularly
and properly maintained, subject to normal wear and tear.
2.12 Intellectual Property.
---------------------
(a) Definitions. For all purposes of this Agreement, the following
-----------
terms shall have the following respective meanings:
"Intellectual Property" shall mean any or all of the following (i) works of
---------------------
authorship including, without limitation, computer programs, source code and
executable code, whether embodied in software, firmware or otherwise,
development tools, documentation, designs, files, records, data and all media on
which any of the foregoing is recorded, all Web addresses, sites and domain
names, and mask works, (ii) inventions (whether or not patentable),
improvements, and technology, (iii) proprietary and confidential information,
trade secrets and know how, (iv) databases, data compilations and collections,
customer lists and technical data, (v) logos, trade names, trade dress,
trademarks and service marks, (vi) domain names, Web addresses and sites, (vii)
tools, methods and processes, and (viii) all disclosures of the foregoing in any
form and embodied in any media and all documentation related to the foregoing.
"Intellectual Property Rights" shall mean common law and statutory rights
----------------------------
worldwide associated with (i) patents and patent applications, (ii) copyrights,
copyrights registrations and copyrights applications and "moral" rights, (iii)
the protection of trade and industrial secrets and confidential information,
(iv) other proprietary rights relating to intangible intellectual property, (v)
trademarks, trade names and service marks, (vi) logos, common law trademarks and
service marks, trademark and servicemark registrations and applications and
application therefor and all goodwill associated therewith throughout the world,
and (vii) divisions, continuations, continuations-in-part, renewals,
reissuances, provisionals, and extensions of the foregoing (as applicable), all
mask works, mask work registrations and applications therefor throughout the
world.
-21-
"Company Intellectual Property" shall mean any Intellectual Property and
-----------------------------
Intellectual Property Rights that are owned by or exclusively licensed to the
Company and/or the Indian Subsidiary.
"Registered Intellectual Property Rights" shall mean Intellectual Property
---------------------------------------
Rights that have been registered, filed, certified or otherwise perfected by
recordation with any state, government or other public legal authority anywhere
in the world.
(b) Schedule 2.12(b) lists all Registered Intellectual Property
---------------
owned, in whole or in part, by, or filed in the name of, the Company and/or the
Indian Subsidiary (the "Company Registered Intellectual Property") and lists any
proceedings or actions before any court tribunal (including the United States
Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the
world) related to any of the Company Registered Intellectual Property Rights.
(c) Each item of Company Intellectual Property, including without
limitation all Company Registered Intellectual Property listed in Schedule
--------
2.12(b) and all Intellectual Property licensed to the Company, is free and clear
-------
of any Liens or other encumbrances. The Company is the exclusive owner or
exclusive licensee of all Company Intellectual Property.
(d) To the extent that any Intellectual Property has been developed
or created independently or jointly by any person other than the Company for
which the Company has, directly or indirectly, paid or otherwise sought to
obtain rights thereon, the Company has a written agreement with such person with
respect thereto, and the Company thereby has obtained ownership of, and is the
exclusive owner of, all such Intellectual Property therein and associated
Intellectual Property Rights by operation of law or by valid assignment.
(e) The Company has not transferred ownership of, or granted any
exclusive license of or exclusive right to use, or authorized the retention of
any exclusive rights to use or joint ownership of, any Intellectual Property or
Intellectual Property Rights that is or was Company Intellectual Property, to
any other person.
(f) Other than Intellectual Property Rights acquired pursuant to
"shrink-wrap" and similar widely available binary code and commercial end-user
licenses, the Company Intellectual Property constitutes all the Intellectual
Property and Intellectual Property Rights used in and/or necessary to the
conduct of the business of the Company as it currently is conducted, including
without limitation the design, development, manufacture, use, import and sale of
products, technology and services (including products, technology or services
currently under development). Consummation of the transactions contemplated by
this Agreement will not result in the loss of, or otherwise adversely affect,
any ownership rights of the Company in any Company Intellectual Property.
(g) Other than "shrink-wrap" and similar widely available binary code
and commercial end-user licenses, Schedule 2.12(g) lists all contracts, licenses
---------------
and agreements to which
-22-
the Company is a party with respect to any Intellectual Property and
Intellectual Property Rights. No person who has licensed Intellectual Property
or Intellectual Property Rights to the Company has ownership rights or license
rights to improvements made by the Company in such Intellectual Property which
has been licensed to the Company.
(h) Other than "shrink-wrap" and similar widely available binary code
and commercial end-user licenses, Schedule 2.12(h) lists all contracts, licenses
---------------
and agreements between the Company and any other person wherein or whereby the
Company has agreed to, or assumed, any obligation or duty to warrant, indemnify,
reimburse, hold harmless, guaranty or otherwise assume or incur any obligation
or liability or provide a right of rescission with respect to the infringement
or misappropriation by the Company or such other person of the Intellectual
Property Rights of any person other than the Company.
(i) The operation of the business of the Company as it currently is
conducted, including but not limited to the design, development, use, import,
manufacture and sale of the products, technology or services (including
products, technology or services currently under development) of the Company has
not, does not and will not infringe or misappropriate the Intellectual Property
Rights of any person, violate the rights of any person (including rights to
privacy or publicity), or constitute unfair competition or trade practices under
the laws of any jurisdiction, and the Company has received no notice from any
person claiming that such operation or any act, product, technology or service
(including products, technology or services currently under development) of the
Company infringes or misappropriates the Intellectual Property Rights of any
person or constitutes unfair competition or trade practices under the laws of
any jurisdiction (nor is the Company aware of any basis therefor).
(j) Each item of Company Registered Intellectual Property is valid
and subsisting, and all necessary registration, maintenance and renewal fees in
connection with such Company Registered Intellectual Property have been paid and
all necessary documents and certificates in connection with such Company
Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. There are no actions that must be taken by the
Company within 60 days of the Closing Date, including the payment of any
registration, maintenance or renewal fees or the filing of any documents,
applications or certificates for the purposes of maintaining, perfecting or
preserving or renewing any Company Intellectual Property Rights. For each
product, technology or service of the Company that constitutes or includes a
copyrightable work, the Company has registered the copyright in the latest
version of such work with the United States Copyright Office. In each case in
which the Company has acquired any Intellectual Property rights from any person
or entity, the Company has obtained a valid and enforceable assignment
sufficient to irrevocably transfer all rights in such Intellectual Property and
the associated Intellectual Property Rights to the Company and, to the maximum
extent provided for by, and in accordance with, applicable laws and regulations,
the Company has recorded each such assignment with the relevant governmental
authorities, including
-23-
the PTO, the U.S. Copyright Office, or their respective equivalents in any
relevant foreign jurisdiction, as the case may be.
(k) There are no contracts, licenses or agreements between the
Company and any other person with respect to Company Intellectual Property under
which there is any dispute known to the Company regarding the scope of such
agreement, or performance under such agreement including with respect to any
payments to be made or received by the Company thereunder.
(l) Neither this Agreement nor the transactions contemplated by this
Agreement, including the assignment to Parent by operation of law or otherwise
(to the extent that such transactions are deemed to effect such assignment) of
any contracts or agreements to which the Company is a party, will result in: (i)
Parent, Sub or the Company granting to any third party any right to or with
respect to any Intellectual Property or Intellectual Property Rights owned by,
or licensed to, any of them, (ii) Parent, Sub or the Company being bound by, or
subject to, any non-compete or other material restriction on the operation or
scope or their respective businesses, or (iii) Parent, Sub or the Company being
obligated to pay any royalties or other material amounts to any third party in
excess of those payable by any of them, respectively, in the absence of this
Agreement or the transactions contemplated hereby.
(m) To the Knowledge of the Company and the Indian Subsidiary, no
person is infringing or misappropriating any Company Intellectual Property.
(n) The Company has taken all steps that are reasonably required to
protect the Company's rights in confidential information and trade secrets of
the Company or provided by any other person to the Company. Without limiting the
foregoing, the Company has, and enforces, a policy requiring each employee and
consultant to execute proprietary information, confidentiality and assignment
agreements substantially in the Company's standard forms, and all current and
former employees and consultants of the Company have executed such an agreement
in substantially the Company's standard form.
(o) No Company or Indian Subsidiary Intellectual Property or
Intellectual Property Rights is subject to any proceeding or outstanding decree,
order, judgment or settlement agreement or stipulation that restricts in any
manner the use, transfer or licensing thereof by the Company or may affect the
validity, use or enforceability of such Company Intellectual Property.
(p) To the Knowledge of the Company and the Indian Subsidiary, no (i)
product, technology, service or publication of the Company, (ii) material
published or distributed by the Company, or (iii) conduct or statement of
Company constitutes obscene material, a defamatory statement or material, false
advertising or otherwise violates any law or regulation.
(q) None of the Company Intellectual Property was developed by or on
behalf of or using grants or any other subsidies of any Governmental Entity.
-24-
(r) The Indian Subsidiary has assigned all rights to Intellectual
Property to the Company.
2.13 Agreements, Contracts and Commitments.
-------------------------------------
(a) The Company or the Indian Subsidiary is not party to nor is it
bound by:
(i) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization;
(ii) any agreement or plan, including without limitation any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(iii) any fidelity or surety bond or completion bond;
(iv) any lease of personal property having an annual rental
rate in excess of $25,000 individually or $100,000 in the aggregate;
(v) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $25,000 individually or
$100,000 in the aggregate;
(vi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of the Company's business;
(vii) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit;
(viii) any purchase order or contract for the purchase of
materials involving in excess of $25,000 individually or $100,000 in the
aggregate;
(ix) any construction contracts;
(x) any dealer, distribution, joint marketing or development
agreement;
(xi) any sales representative, original equipment manufacturer,
value added, remarketer, reseller or independent software vendor or other
agreement for use or distribution of the Company's products, technology or
services; or
-25-
(xii) any other agreement, contract or commitment that involves
$25,000 individually or $100,000 in the aggregate or more and is not cancelable
without penalty within 30 days.
(b) The Company and the Indian Subsidiary are in compliance with and
have not breached, violated or defaulted under, or received notice that they
have breached, violated or defaulted under, any of the terms or conditions of
any agreement, contract, covenant, instrument, lease, license or commitment to
which they are party or by which they are bound (collectively a "Contract"), nor
is the Company, or the Indian Subsidiary aware of any event that would
constitute such a breach, violation or default with the lapse of time, giving of
notice or both. Each Contract is in full force and effect and is not subject to
any default thereunder, nor is any party obligated to the Company or the Indian
Subsidiary pursuant thereto subject to any default thereunder. The Company and
the Indian Subsidiary have obtained, or will obtain prior to the Effective Time,
all necessary consents, waivers and approvals of parties to any Contract as are
required thereunder in connection with the Merger or for such Contracts to
remain in effect without modification, limitation or alteration after the
Effective Time. Following the Effective Time, the Company and the Indian
Subsidiary will be permitted to exercise all of their rights under the Contracts
without the payment of any additional amounts or consideration other than
amounts or consideration which the Company or the Indian Subsidiary would
otherwise be required to pay had the transactions contemplated by this Agreement
not occurred.
2.14 Interested Party Transactions. No officer, director or, to the
-----------------------------
Knowledge of the Company or the Indian Subsidiary stockholder of the Company has
or has had, directly or indirectly, (i) an interest in any entity which
furnished or sold, or furnishes or sells, services, products or technology that
the Company or the Indian Subsidiary furnishes or sells, or proposes to furnish
or sell, (ii) any interest in any entity that purchases from or sells or
furnishes to the Company or the Indian Subsidiary, any goods or services, or
(iii) a beneficial interest in any Contract to which the Company or the Indian
Subsidiary is a party; provided, however, that ownership of no more than 1% of
the outstanding voting stock of a publicly traded corporation shall not be
deemed to be an "interest in any entity" for purposes of this Section 2.14.
2.15 Governmental Authorization. Each consent, license, permit, grant or
--------------------------
other authorization (i) pursuant to which the Company or the Indian Subsidiary
currently operates or holds any interest in any of their properties, or (ii)
which is required for the operation of the Company's and the Indian Subsidiary's
business as currently conducted or currently contemplated to be conducted or the
holding of any such interest (collectively, "Company Authorizations") has been
issued or granted to the Company or the Indian Subsidiary, as applicable. The
Company Authorizations are in full force and effect, and shall remain in full
force and effect without modification after the Closing, and constitute all
Company Authorizations required to permit the Company and the Indian Subsidiary
to operate or conduct their business or hold any interest in their properties or
assets.
-26-
2.16 Litigation. There is no action, suit, claim or proceeding of any
----------
nature pending, or to the Knowledge of the Company or the Indian Subsidiary,
threatened against the Company, the Indian Subsidiary, their properties
(tangible or intangible) or any of their officers or directors, nor is there any
reasonable basis therefor. There is no investigation or other proceeding pending
or, to the Knowledge of the Company, or the Indian Subsidiary, threatened
against the Company, any of their properties (tangible or intangible) or any of
their officers or directors by or before any Governmental Entity, nor is there
any reasonable basis therefor. No Governmental Entity has at any time notified
the Company or the Indian Subsidiary of any challenge to or question of the
legal right of the Company or the Indian Subsidiary to conduct their operations
as presently or previously conducted or as presently contemplated to be
conducted.
2.17 Accounts Receivable.
-------------------
(a) The Company and the Indian Subsidiary has made available to
Parent and its accountants a list of all accounts receivable of the Company and
the Indian Subsidiary as of [July 31, 2000], together with a range of days
elapsed since invoice. All of the Company's accounts receivable arose in the
ordinary course of business, are carried at values determined in accordance with
GAAP consistently applied and are collectible except to the extent of reserves
therefor set forth in the Current Balance Sheet or, for receivables arising
subsequent to August 31, 2000, as reflected on the books and records of the
Company and the Indian Subsidiary. No person has any Lien on any of the
Company's or the Indian Subsidiary's accounts receivable and no request or
agreement for deduction or discount has been made with respect to any of the
Company's or the Indian Subsidiary's accounts receivable.
(b) Schedule 2.17(b) sets forth the customers of the Company and the
----------------
Indian Subsidiary, as well as the aggregate dollar amount of business between
the customer and the Company or the Indian Subsidiary, from the beginning of
fiscal year 1999 to date. The Company and the Indian Subsidiary have not
received any customer complaints that the Company or the Indian Subsidiary has
not been able to address to the satisfaction of the complainant.
2.18 Minute Books. The minutes of the Company made available to counsel
------------
for Parent are the only minutes of the Company and contain accurate summaries of
all meetings of the Board of Directors (or committees thereof) of the Company
and its Stockholders or actions by written consent since the time of
incorporation of the Company.
2.19 Environmental Matters.
---------------------
(a) Hazardous Material. The Company and the Indian Subsidiary have
------------------
not: (i) operated any underground storage tanks at any property that the Company
or the Indian Subsidiary have at any time owned, operated, occupied or leased,
or (ii) illegally released any amount of any substance that has been designated
by any Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including without limitation PCBs, asbestos, petroleum, and urea-
formaldehyde and all
-27-
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste pursuant to the United States Resource Conservation
and Recovery Act of 1976, as amended, and the regulations promulgated pursuant
to said laws (a "Hazardous Material"), but excluding office and janitorial
supplies properly and safely maintained. To the Company's knowledge, no
Hazardous Materials are present in, on or under any property, including the land
and the improvements, ground water and surface water thereof, that the Company
has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company and the Indian
------------------------------
Subsidiary have not transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in violation
of any law in effect on or before the Effective Time, nor has the Company or the
Indian Subsidiary disposed of, transported, sold, or manufactured any product
containing a Hazardous Material (any or all of the foregoing being collectively
referred to herein as "Hazardous Materials Activities") in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company and the Indian Subsidiary currently hold all
-------
environmental approvals, permits, licenses, clearances and consents (the
"Environmental Permits") necessary for the conduct of the Company's Hazardous
Material Activities, respectively, and other businesses of the Company and the
Indian Subsidiary as such activities and businesses are currently being
conducted and as currently contemplated to be conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Knowledge of the Company or the Indian Subsidiary, threatened concerning any
Environmental Permit, Hazardous Material or any Hazardous Materials Activity of
the Company or the Indian Subsidiary. Neither the Company nor the Indian
Subsidiary have any Knowledge of any fact or circumstance which is reasonably
likely to involve the Company or the Indian Subsidiary in any environmental
litigation or impose upon the Company or the Indian Subsidiary any environmental
liability.
2.20 Brokers' and Finders' Fees; Third Party Expenses. The Company has not
------------------------------------------------
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with the Agreement or any transaction contemplated hereby. Schedule 2.20 sets
-------------
forth the Company's current reasonable estimate of all Third Party Expenses (as
defined in Section 5.5(a) below) expected to be incurred by the Company in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby.
2.21 Employee Benefit Plans and Compensation.
---------------------------------------
(a) Definitions. For all purposes of this Agreement, the following
-----------
terms shall have the following respective meanings:
-28-
"Affiliate" shall mean any other person or entity under common control with
---------
the Company within the meaning of Section 414(b), (c), (m) or (o) of the Code,
and the regulations issued thereunder.
"Company Employee Plan" shall mean any plan, program, policy, practice,
---------------------
contract, agreement or other material arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written, unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by the Company or any Affiliate for the benefit
of any Employee, or with respect to which the Company or any Affiliate has or
may have any liability or obligation.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
-----
1985, as amended.
"DOL" shall mean the United States Department of Labor.
---
"Employee" shall mean any current or former employee, consultant or
--------
director of the Company or any Affiliate.
"Employee Agreement" shall mean each management, employment, severance,
------------------
consulting, relocation, repatriation, expatriation, visas, work permit or other
agreement, or contract between the Company or any Affiliate and any Employee.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended.
"FMLA" shall mean the Family Medical Leave Act of 1993, as amended.
----
"IRS" shall mean the United States Internal Revenue Service.
---
"PBGC" shall mean the United States Pension Benefit Guaranty Corporation.
----
"Pension Plan" shall mean each Company Employee Plan which is an "employee
------------
pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) Schedule. Schedule 2.21(b) contains an accurate and complete list
-------- ---------------
of each Company Employee Plan and each Employee Agreement under each Company
Employee Plan or Employee Agreement. The Company has no plan or commitment to
establish any new Company Employee Plan or Employee Agreement, to modify any
Company Employee Plan or Employee Agreement (except to the extent required by
law or to conform any such Company Employee Plan or Employee Agreement to the
requirements of any applicable law, in each case as previously disclosed to
Parent in writing, or as required by this Agreement), or to enter into any
Company Employee Plan
-29-
or Employee Agreement. Schedule 2.21(b) also sets forth a table setting forth
----------------
the name and salary of each employee of the Company and the Indian Subsidiary.
(c) Documents. The Company has provided to Parent (i) correct and
---------
complete copies of all documents embodying each Company Employee Plan and each
Employee Agreement, including without limitation all amendments thereto and all
related trust documents, (ii) the three most recent annual reports (Form Series
5500 and all schedules and financial statements attached thereto), if any,
required under ERISA or the Code in connection with each Company Employee Plan,
(iii) if the Company Employee Plan is funded, the most recent annual and
periodic accounting of Company Employee Plan assets, (iv) the most recent
summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each Company
Employee Plan, (v) all material written agreements and contracts relating to
each Company Employee Plan, including without limitation administrative service
agreements and group insurance contracts, (vi) all communications material to
any Employee or Employees relating to any Company Employee Plan and any proposed
Company Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any liability to the
Company, (vii) all correspondence to or from any governmental agency relating to
any Company Employee Plan, (viii) all COBRA forms and related notices, (ix) all
policies pertaining to fiduciary liability insurance covering the fiduciaries
for each Company Employee Plan, (x) all discrimination tests for each Company
Employee Plan for the most recent plan year, and (xi) all registration
statements, annual reports (Form 11-K and all attachments thereto) and
prospectuses prepared in connection with each Company Employee Plan.
(d) Employee Plan Compliance. The Company has performed all
------------------------
obligations required to be performed by it under, is not in default or violation
of, and has no Knowledge of any default or violation by any other party to each
Company Employee Plan, and each Company Employee Plan has been established and
maintained in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code. No "prohibited transaction," within the meaning of Section
4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt
under Section 408 of ERISA, has occurred with respect to any Company Employee
Plan. There are no actions, suits or claims pending, or, to the Knowledge of the
Company or any of the Principal Stockholders, threatened or reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan. Each Company
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without liability to Parent, the
Surviving Corporation, the Company or any Affiliate (other than ordinary
administration expenses). There are no audits, inquiries or proceedings pending
or, to the Knowledge of the Company or any of Principal Stockholders, or any
Affiliates, threatened by the IRS or DOL with respect to any Company Employee
Plan. Neither the Company nor any Affiliate is subject to any penalty or tax
with respect to any Company Employee Plan under Section 502(i) of ERISA or
Sections 4975 through 4980 of the Code.
-30-
(e) No Pension Plans. Neither the Company nor any other Affiliate
----------------
has ever maintained, established, sponsored, participated in, or contributed to,
any (i) Pension Plans subject to Title IV of ERISA, or (ii) "multiemployer plan"
within the meaning of Section (3)(37) of ERISA.
(f) No Post-Employment Obligations. No Company Employee Plan
------------------------------
provides, or reflects or represents any liability to provide, retiree life
insurance, retiree health or other retiree employee welfare benefits to any
person for any reason, except as may be required by COBRA or other applicable
statute, and the Company has never represented, promised or contracted (whether
in oral or written form) to any Employee (either individually or to Employees as
a group) or any other person that such Employee(s) or other person would be
provided with retiree life insurance, retiree health or other retiree employee
welfare benefit, except to the extent required by statute.
(g) COBRA. The Company and each Affiliate has, prior to the
-----
Effective Time, complied with the health care continuation requirements of
COBRA, the requirements of FMLA or any similar provisions of state law
applicable to its Employees.
(h) Effect of Transaction. The execution of this Agreement and the
---------------------
consummation of the transactions contemplated hereby will not constitute an
event under any Company Employee Plan, Employee Agreement, trust or loan that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee, except as
expressly required by this Agreement.
(i) Employment Matters. The Company: (i) is in compliance with all
------------------
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees, (ii) has withheld
and reported all amounts required by law or by agreement to be withheld and
reported with respect to wages, salaries and other payments to Employees, (iii)
is not liable for any arrears of wages or any taxes or any penalty for failure
to comply with any of the foregoing, (iv) is not obligated to make any payment
or confer any benefit with respect to any employee which may be characterized as
a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, and
(v) is not liable for any payment to any trust or other fund governed by or
maintained by or on behalf of any governmental authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending or,
to the Knowledge of the Company, threatened or reasonably anticipated claims or
actions against the Company under any worker's compensation policy or long-term
disability policy.
(j) Labor. No work stoppage or labor strike against the Company is
-----
pending or, to the Knowledge of the Company, threatened or reasonably
anticipated. The Company does not know of any activities or proceedings of any
labor union to organize any Employees. There are no actions, suits, claims,
labor disputes or grievances pending or, to the Knowledge of the Company,
-31-
threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Employee, including without limitation
charges of unfair labor practices or discrimination complaints. The Company has
not engaged in any unfair labor practices within the meaning of the National
Labor Relations Act. The Company is not presently, nor has it been in the past,
a party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by the Company.
(k) No Interference or Conflict. To the Knowledge of the Company
---------------------------
and the Indian Subsidiary, no Stockholder, officer, employee or consultant of
the Company is obligated under any contract or agreement subject to any
judgment, decree or order of any court or administrative agency that would
interfere with such person's efforts to promote the interests of the Company or
that would interfere with the Company's business. To the Knowledge of the
Company, neither the execution nor delivery of this Agreement, nor the carrying
on of the Company's business as presently conducted or proposed to be conducted,
nor any activity of its officers, directors, employees or consultants in
connection with the carrying on of the Company's business as presently conducted
or currently proposed to be conducted, will conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default under, any
contract or agreement under which any of such officers, directors, employees or
consultants is now bound.
2.22 Insurance. Schedule 2.22 lists all insurance policies and fidelity
--------- -------------
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company or the Indian Subsidiary. There
is no claim by the Company pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies and
bonds have been paid, and the Company are otherwise in material compliance with
the terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). Neither the Company nor the Indian
Subsidiary have any Knowledge of threatened termination of, or premium increase
with respect to, any of such policies.
2.23 Compliance with Laws. The Company and the Indian Subsidiary have
--------------------
complied with, are not in violation of, and have not received any notices of
violation with respect to, any foreign, federal, state or local statute, law or
regulation.
2.24 Warranties; Indemnities. Except for the warranties and indemnities
-----------------------
contained in those contracts and agreements set forth in Schedule 2.12(h) and
warranties implied by law, the Company and the Indian Subsidiary have not given
any warranties or indemnities relating to products or technology sold or
services rendered by the Company and the Indian Subsidiary.
2.25 Complete Copies of Materials. The Company and the Indian Subsidiary
----------------------------
have delivered true and complete copies of each document (or summaries of same)
that has been requested by Parent or its counsel.
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2.26 Permit Application, Information Statement. The information supplied
-----------------------------------------
by Company for inclusion in the application for issuance of a permit (the
"Permit Application") pursuant to Section 25121 of the California Securities Act
and information statement to be sent to the holders of Company Capital Stock to
consider the Merger (such information statement as amended or supplemented is
referred to herein as the "Information Statement"), will not, on the date the
fairness hearing is held pursuant to Section 25142 of the California Securities
Act (the "Fairness Hearing"), on the date the Information Statement is first
mailed to the Stockholders, or at the Effective Time, contain any statement
which at such time and in light of the circumstances under which it shall be
made, is false or misleading with respect to any material fact, or shall omit to
state any material fact necessary in order to make the statements made therein
not false or misleading, or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the Permit
Application or the consent solicitation which has become false or misleading. If
at any time prior to the Effective Time any event relating to Company or any of
its respective affiliates, officers or directors should be discovered by Company
which should be set forth in an amendment or a supplement to the Permit
Application or the Information Statement, Company shall promptly inform Parent
and Sub. Notwithstanding the foregoing, Company makes no representation or
warranty with respect to any information supplied by Parent or Sub which is
contained in any of the foregoing documents.
2.27 Powers of Attorney. There are no outstanding powers of attorney
------------------
executed on behalf of the Company, the Indian Subsidiary and/or any of the
Principal Stockholders with respect to either the Company or the Indian
Subsidiary.
2.28 Representations Complete. None of the representations or warranties
------------------------
made by the Company or the Indian Subsidiary, nor any financial statement, other
written financial information or statements made in any exhibit, schedule or
certificate furnished by the Company or the Indian Subsidiary pursuant to this
Agreement, or furnished in or in connection with documents mailed or delivered
to the Stockholders for use in soliciting their consent to this Agreement and
the Merger, contains or will contain at the Effective Time any untrue statement
of a material fact or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. There is no event, fact or condition that has caused, or that
reasonably could be expected to cause, a Material Adverse Effect, that has not
been set forth in this Agreement or the Disclosure Schedules.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub hereby represent and warrant to the Company that on the date
hereof as follows:
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3.1 Organization, Standing and Power. Parent is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of Parent and Sub has the
corporate power to own its properties and to carry on its business as currently
conducted and is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to be so qualified or
licensed would have a material adverse effect on the business, assets (including
intangible assets), liabilities, condition (financial or otherwise), results of
operations or capitalization of Parent (a "Parent Material Adverse Effect");
provided, however, changes in the Transaction Stock Prices of Parent Common
Stock (in and of itself) shall not be deemed a Parent Material Adverse Effect.
3.2 Authority. Each of Parent and Sub has all requisite corporate power
---------
and authority to enter into this Agreement and any Related Agreements to which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement, any Related Agreements to
which it is a party and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Parent and Sub. As of the date hereof, this Agreement and the Merger
have been unanimously approved by the Board of Directors of Parent, and such
Board of Directors has recommended to the stockholders of Parent to vote in
favor of this Agreement, the Merger and the transactions contemplated thereby.
This Agreement and any Related Agreement to which Parent and Sub are parties
have been duly executed and delivered by Parent and Sub and, assuming the due
authorization, execution and delivery by the other parties hereto and thereto,
constitute the valid and binding obligations of Parent and Sub, enforceable in
accordance with their terms, except as such enforceability may be limited by
principles of public policy and subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
3.3 Capital Structure.
-----------------
(a) The authorized stock of Parent consists of 100,000,000 shares of
Common Stock, $0.001 par value, of which 32,883,986 shares were issued and
outstanding as of June 30, 2000, and 10,000,000 shares of undesignated Preferred
Stock, $0.001 par value, none of which are issued. The authorized capital stock
of Sub consists of 1,000 shares of Common Stock, $0.001 par value, 1,000 shares
of which, as of the date hereof, are issued and outstanding and are held by
Parent. All such shares of Parent and Sub have been duly authorized, and all
such issued and outstanding shares have been validly issued, are fully paid and
nonassessable, are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof, are not subject to
preemptive rights created by statute, the Certificate of Incorporation or Bylaws
of Parent as currently in effect or any agreement to which Parent is a party or
by which it is bound, and have been issued in compliance with federal and state
securities laws.
(b) The shares of Parent Common Stock to be issued pursuant to the Merger
and pursuant to valid exercise of Assumed Options will be duly authorized,
validly issued, fully paid,
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non-assessable, free of any liens or encumbrances and not subject to any
preemptive rights or rights of first refusal created by statute or the
Certificate of Incorporation or Bylaws of Parent or Sub or any agreement to
which Parent or Sub is a party or is bound and will be issued in compliance with
federal and state securities laws.
3.4 No Conflict. The execution and delivery by each of Parent and Sub of
-----------
this Agreement and any Related Agreements to which Parent and Sub are party do
not, and the consummation of the transactions contemplated hereby and thereby
will not, conflict with or result in any violation of or default under (with or
without notice or lapse of time, or both), or give rise to a Conflict under (i)
any provision of the Certificate of Incorporation or Bylaws, each as amended, of
Parent or Sub, (ii) any mortgage, indenture, lease, contract or other agreement
or instrument, permit, concession, franchise or license to which Parent or any
of its respective properties or assets are subject and which has been filed as
an exhibit to Parent's filings under the Securities Act or Exchange Act, or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Sub or their respective properties or assets, except in
each case where such Conflict will not have a Parent Material Adverse Effect.
3.5 Consents. No consent, approval, order or authorization of, or
--------
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent or Sub in connection with the execution and delivery
of this Agreement by Parent and Sub or the consummation by Parent and Sub of the
transactions contemplated hereby, except for (i) the Certificate of Merger in
Delaware as provided in Section 2.1, (ii) the filing by Parent of an application
for qualification by permit with the State of California pursuant to section
25121 of the California Securities Act, (iii) the filing and effectiveness of a
registration statement pursuant to Securities Act of 1933, as amended for the
purpose of registering the Parent Common Stock to be issued pursuant to the
Merger, in the event a permit is not granted by the State of California, (iv)
the filing, if any, of a Form 8-K with the Commission and National Association
of Securities Dealers ("NASD"), (v) the issuance of a permit qualifying the
issuance of the Parent Common Stock and the assumption of the Assumed Options
after a Fairness Hearing before the California Department of Corporations, (vi)
any filings as may be required under applicable state securities laws and the
securities laws of any foreign country, (vii) the filing with the NASDAQ
National Market of a Notification Form for Listing of Additional Shares with
respect to the shares of Parent Common Stock issuable upon conversion of the
Company Common Stock in the Merger, and (viii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on Parent and would not prevent,
materially alter or delay any of the transactions contemplated by this
Agreement.
3.6 SEC Documents; Parent Financial Statements. Parent has made available
------------------------------------------
(via XXXXX) to the Company a true and complete copy of each annual, quarterly
and other reports, registration statements and definitive proxy statement filed
by Parent with the SEC since April 30, 1999 (the "Parent SEC Documents"). As of
their respective filing dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act, as
the case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Parent SEC Documents, and none of the Parent SEC Documents
contained on their filing dates
-35-
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, except to
the extent corrected by a subsequently filed Parent SEC Document. The financial
statements of Parent included in the Parent SEC Documents (the "Parent Financial
Statements") complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto or, in the case of
unaudited financial statements, as permitted under Form 10-Q under the Exchange
Act) and fairly presented the consolidated financial position of Parent and its
consolidated subsidiaries as of the respective dates thereof and the
consolidated results of Parent's operations and cash flows for the periods
indicated (subject to, in the case of unaudited statements, to normal and
recurring year-end audit adjustments).
3.7 Permit Application; Information Statement. The information supplied
-----------------------------------------
by Parent for inclusion in the Permit Application and the Information Statement,
will not, on the date of the Fairness Hearing, on the date the Information
Statement is first mailed to the Stockholders, or at the Effective Time, contain
any statement which, at such time and in light of the circumstances under which
it shall be made, is false or misleading with respect to any material fact, or
shall omit to state any material fact necessary in order to make the statements
made therein not false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the Permit Application or the consent solicitation which has become false or
misleading. If at any time prior to the Effective Time any event relating to
Parent or any of its respective affiliates, officers or directors should be
discovered by Parent which should be set forth in an amendment or a supplement
to the Permit Application or the Information Statement, Parent shall promptly
inform Company. Notwithstanding the foregoing, Parent makes no representation or
warranty with respect to any information supplied by Company which is contained
in any of the foregoing documents.
3.8 Tax-Free Reorganization. Parent and Sub have not taken or agreed to
-----------------------
take any action that would prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
----------------------------------
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees, except to the extent that
Parent shall otherwise consent in writing, to carry on the Company's business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay the debts and Taxes of the Company when due, to pay
or perform other obligations when due, and, to the extent consistent with such
business, preserve intact the Company's present business organizations, keep
available the services of the Company's present
-36-
officers and key employees and preserve the Company's relationships with
customers, suppliers, distributors, licensors, licensees and others having
business dealings with it, all with the goal of preserving unimpaired the
Company's goodwill and ongoing businesses at the Effective Time. The Company
shall promptly notify Parent of any event or occurrence or emergency not in the
ordinary course of business of the Company and any event involving the Company
that is likely to have a Material Adverse Effect. Except as expressly
contemplated by this Agreement, the Company shall not, without the prior written
consent of Parent:
(a) make any capital expenditures or enter into any capital
expenditure commitment or transaction exceeding $25,000 individually or $100,000
in the aggregate;
(b) (i) sell, license or transfer to any person or entity any rights
to any Company Intellectual Property or enter into any agreement with respect to
any Company Intellectual Property with any person or entity or with respect to
any Intellectual Property of any person or entity, (ii) buy or license any
Intellectual Property or enter into any agreement with respect to the
Intellectual Property of any person or entity, (iii) enter into any agreement
with respect to the development of any Intellectual Property with a third party,
or (iv) change pricing or royalties charged by the Company to its customers or
licensees, or the pricing or royalties set or charged by persons who have
licensed Intellectual Property to the Company;
(c) enter into or amend any Contract pursuant to which any other
party is granted marketing, distribution, development or similar rights of any
type or scope with respect to any products or technology of the Company;
(d) amend or otherwise modify (or agree to do so), or violate the
terms of, any of the Contracts set forth or described in the Disclosure
Schedule;
(e) commence or settle any litigation;
(f) declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any Company
Capital Stock, or split, combine or reclassify any Company Capital Stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of Company Capital Stock, or repurchase, redeem
or otherwise acquire, directly or indirectly, any shares of Company Capital
Stock (or options, warrants or other rights exercisable therefor) except in
accordance with the agreements evidencing Company Options or purchases of
Company Common Stock by employees or consultants;
(g) issue, grant, deliver or sell, or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of Company Capital Stock, or securities convertible into, or
subscriptions, rights, warrants or options to acquire, shares of Company Capital
Stock, or other agreements or commitments of any character obligating it to
issue or purchase any such shares or other convertible securities, except for
the issuance of shares of
-37-
Company Common Stock upon the conversion of Company Preferred Stock and the
exercise of outstanding Company Options;
(h) cause or permit any amendments to its Certificate of
Incorporation or Bylaws;
(i) acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the Company's
business;
(j) sell, lease, license or otherwise dispose of any of the Company's
properties or assets;
(k) incur any indebtedness or guarantee any indebtedness or issue or
sell any debt securities or guarantee any debt securities of others, other than
the issuance of ICICI Notes, the terms of which are subject to verbal veto by
Parent within 48 hours of notification and presentation by the Company of
definitive agreements that Company is prepared to execute, provided that Parent
will not veto the terms thereof if they reasonably conform to those set forth on
Exhibit H.
---------
(l) grant any loans to others or purchase debt securities of others
or amend the terms of any outstanding loan agreement;
(m) grant any severance or termination pay (i) to any director or
officer of the Company, or (ii) to any other employee except payments made
pursuant to written agreements outstanding on the date hereof and disclosed in
the Disclosure Schedule;
(n) adopt or amend any employee benefit plan, or enter into any
employment contract, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salaries, wage rates
or other compensation of its employees except payments made pursuant to standard
written agreements in place on the date hereof and disclosed in the Disclosure
Schedule, provided, that the Company shall retain the right to obtain standard
directors' and officers' insurance and tail coverage without the consent of
Parent. The cost of such insurance shall be treated as a Third Party Expense of
the Company under Section 5.5.
(o) revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(p) pay, discharge or satisfy, in an amount in excess of $10,000 in
any one case, or $50,000 in the aggregate, any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the Current Balance Sheet or
disclosed in Schedule 2.8;
------------
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(q) make or change any election in respect of Taxes, adopt or change
any accounting method in respect of Taxes, enter into any closing agreement,
settle any claim or assessment in respect of Taxes, or consent to any extension
or waiver of the limitation period applicable to any claim or assessment in
respect of Taxes, or change the accounting methods or practices (including any
changes in depreciation or amortization policies or notes) by the Company other
than as required by GAAP;
(r) enter into any strategic alliance or joint marketing arrangement
or agreement;
(s) take any action to accelerate the vesting schedule of any of the
outstanding Company Options, Pre-Merger Options and New Employee Options or
Company Capital Stock, or amend, modify or waive any term or provision of any
stock restriction or repurchase agreement to which the Company is party;
(t) hire or terminate any employees, or encourage any employees to
resign from the Company; or
(u) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through 4.1(t) above, or any other action
that would make any of the representations or warranties of the Company and the
Indian Subsidiary untrue or incorrect or result in any of the conditions to the
merger set forth in Article VI not being satisfied or prevent the Company or any
of the Principal Stockholders from performing or cause the Company or any of the
Principal Stockholders not to perform their respective covenants hereunder.
4.2 No Solicitation. Until the earlier of (a) the Effective Time, or (b)
---------------
the date of termination of this Agreement pursuant to the provisions of Section
8.1 hereof, neither the Company, the Indian Subsidiary nor any of the Principal
Stockholders shall (nor shall the Company, the Indian Subsidiary or any of the
Principal Stockholders permit, to the extent legally possible, any of the
Company's officers, directors, employees, stockholders, agents, representatives
or affiliates to), directly or indirectly, take any of the following actions
with any party other than Parent and its designees:
(a) solicit, encourage, initiate or participate in any inquiry,
negotiations or discussions, or enter into any agreement, with respect to any
offer or proposal to acquire all, substantially all, or any significant portion
of the Company's business, properties or technologies, or any portion of the
Company's capital stock (whether or not outstanding), whether by merger,
purchase of assets, tender offer, license or otherwise, or effect any such
transaction;
(b) disclose any information not customarily disclosed to any person
concerning the Company's or the Indian Subsidiary's business, technologies or
properties, or afford to any person or entity access to its properties,
technologies, books or records, not customarily afforded such access; or
-39-
(c) assist or cooperate with any person to make any proposal to
purchase all or any part of the Company capital stock or assets of the Company
or the Indian Subsidiary.
In the event that the Company, the Indian Subsidiary or any Principal
Stockholder shall receive, prior to the Effective Time or the termination of
this Agreement, any offer, proposal, or request, directly or indirectly, of the
type referenced in clause (a) or (c) above, or any request for disclosure or
access pursuant to clause (b) above, the Company, the Indian Subsidiary or such
Principal Stockholder, as applicable, who receives the contact shall immediately
notify Parent thereof, including (subject to any pre-existing non-disclosure
agreements) information as to the identity of the offeror or the party making
any such offer or proposal and the specific terms of such offer or proposal, as
the case may be, and such other information related thereto as Parent may
reasonably request. The parties hereto agree that irreparable damage would
occur in the event that the provisions of this Section 4.2 were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed by the parties hereto that Parent shall be entitled to seek
an injunction or injunctions to prevent breaches of the provisions of this
Section 4.2 and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which Parent may be entitled at law or in
equity.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of Permit Application/Information Statement.
-------------------------------------------------------
(a) As soon as practicable after the execution of this Agreement,
Company shall prepare, with the cooperation of Parent, an Information Statement
for the stockholders of Company to approve this Agreement, the Certificate of
Merger and the transactions contemplated hereby and thereby. The Information
Statement shall include a disclosure document for the offer and issuance of the
shares of Parent Common Stock to be received by the holders of Company Capital
Stock in the Merger. Parent and Company shall each use reasonable commercial
efforts to cause the Information Statement to comply with applicable federal and
state securities laws requirements. Each of Parent and Company agrees to provide
promptly to the other such information concerning its business and financial
statements and affairs as, in the reasonable judgment of the providing party or
its counsel, may be required or appropriate for inclusion in the Information
Statement, or in any amendments or supplements thereto, and to cause its counsel
and auditors to cooperate with the other's counsel and auditors in the
preparation of the Information Statement. Company will promptly advise Parent,
and Parent will promptly advise Company, in writing if at any time prior to the
Effective Time either Company or Parent shall obtain knowledge of any facts that
might make it necessary or appropriate to amend or supplement the Information
Statement in order to make the statements contained or incorporated by reference
therein not misleading or to comply with applicable law. The Information
Statement shall contain the recommendation of the Board of Directors of Company
that the Company Stockholders approve the Merger and this Agreement and
-40-
the conclusion of the Board of Directors that the terms and conditions of the
Merger are fair and reasonable to the Stockholders of Company. Anything to the
contrary contained herein notwithstanding, Company shall not include in the
Information Statement any information with respect to Parent or its affiliates
or associates, the form and content of which information shall not have been
approved by Parent prior to such inclusion.
(b) As soon as practicable after the execution of this Agreement,
Parent shall prepare, with the cooperation of Company, the Permit Application.
Parent and Company shall each use reasonable commercial efforts to cause the
Permit Application to comply with the requirements of applicable federal and
state laws. Each of Parent and Company agrees to provide promptly to the other
such information concerning its business and financial statements and affairs
as, in the reasonable judgment of the providing party or its counsel, may be
required or appropriate for inclusion in the Permit Application, or in any
amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the Permit
Application. Company will promptly advise Parent, and Parent will promptly
advise Company, in writing if at any time prior to the Effective Time either
Company or Parent shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Permit Application in order
to make the statements contained or incorporated by reference therein not
misleading or to comply with applicable law. Anything to the contrary contained
herein notwithstanding, Parent shall not include in the Permit Application any
information with respect to Company or its affiliates or associates, the form
and content of which information shall not have been approved by Company prior
to such inclusion.
5.2 Restrictions on Transfer. Each share of Parent Common Stock to be
------------------------
issued hereunder shall be issued without any legend restricting transfer of such
shares except (i) to the extent an exemption from registration under Section
3(a)(10) of the Securities Act is not available, as it relates to restrictions
on transfer by affiliates of the Company pursuant to Rule 145 of the Securities
Act, and (ii) any legend relating to Company restricted stock while such shares
are subject to any repurchase option, risk of forfeiture or other condition.
5.3 Access to Information. The Company and the Indian Subsidiary shall
---------------------
afford Parent and its accountants, counsel and other representatives, reasonable
access during the period prior to the Effective Time to (i) all of the Company's
and the Indian Subsidiary's properties, books, contracts, commitments and
records, (ii) all other information concerning the business, properties and
personnel (subject to restrictions imposed by applicable law) of the Company and
the Indian Subsidiary as Parent may reasonably request, and (iii) (with
reasonable frequency and notice) all employees of the Company and the Indian
Subsidiary as identified by Parent. The Company and the Indian Subsidiary agree
to provide to Parent and its accountants, counsel and other representatives
copies of internal financial statements (including Tax returns and supporting
documentation) promptly upon request. No information or knowledge obtained in
any investigation pursuant to this Section 5.3 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger in accordance with the terms
and provisions hereof.
-41-
5.4 Confidentiality. Each party agrees that the information obtained in
---------------
any investigation pursuant to Section 5.3, or pursuant to the negotiation and
execution of this Agreement or the effectuation of the transactions contemplated
hereby, shall be governed by the terms of the Mutual Non-Disclosure Agreement
effective as of August 14, 2000 (the "Mutual Non-Disclosure Agreement") between
the Company and Parent.
5.5 Expenses. (a) Except as set forth in Section 5.5(b), whether or
--------
not the Merger is consummated, all fees and expenses incurred in connection with
the Merger, including without limitation all legal, accounting, financial
advisory, consulting and all other fees and expenses of third parties, other
than fees associated with an audit of the Company's financial statements ("Third
Party Expenses") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby shall be the obligation of the respective party incurring
such fees and expenses; provided, however, that Parent shall be liable for all
Third Party Expenses of Parent, Sub, and the Company incurred in connection with
the preparation and filing or mailing, respectively, of the Permit Application
and audit of the Company's financial statements,
(b) In the event the Merger is consummated, the Surviving Corporation
shall be responsible for all Third Party Expenses incurred by the parties
hereto; provided, however, that such Third Party Expenses of the Company shall
not exceed $250,000. As provided in Section 6.2(n) below, the Company shall
deliver a certificate, certified by its Chief Executive Officer, and Chief
Accounting or Financial Officer to Parent, dated as of date two days prior to
the Closing Date, which shall set forth the Third Party Expenses incurred by the
Company as of such date (the "Third Party Expenses Certificate"). To the
extent that the Third Party Expenses set forth on such Certificate exceed
$250,000, Parent may, in its sole discretion, assert under the terms of Article
VII a claim for a Loss in an amount equal to the amount by which the Third Party
Expenses exceed $250,000. The claim for Losses in excess of the $250,000 limit
set forth in this Section 5.5 shall not be subject to the identification of
Losses in excess of the Basket Amount (as defined in Section 7.2(b)).
5.6 Public Disclosure. Prior to the Effective Time, no disclosure
-----------------
(whether or not in response to an inquiry) shall be made by any party regarding
the subject matter of this Agreement, the Merger or the transactions
contemplated hereby, including, if applicable, the termination of this Agreement
and the reasons therefor, without the written consent of both Parent and the
Company prior thereto, except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange or with
the National Association of Securities Dealers or other required disclosure
under applicable law or regulatory authority, and provided that if this
Agreement is terminated for any reason no mutual written consent shall be
required for disclosure by either party pursuant to written agreement protecting
the confidentiality of the disclosure made privately in the course of
negotiations with respect to either a potential acquisition or financing of the
Company.
5.7 Consents. The Company and the Indian Subsidiary shall use
--------
commercially reasonable efforts to obtain the consents, waivers and approvals
under any of the Contracts as may
-42-
be required in connection with the Merger so as to preserve all rights of, and
benefits to, the Company and the Indian Subsidiary thereunder from and after the
Effective Time.
5.8 FIRPTA Compliance. On the Closing Date, the Company shall deliver
-----------------
to Parent a properly executed statement in a form reasonably acceptable to
Parent (the "FIRPTA Compliance Certificate") for purposes of satisfying Parent's
obligations under Treasury Regulation Section 1.1445-2(c)(3).
5.9 Reasonable Efforts. Subject to the terms and conditions provided in
------------------
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings (including without limitation
filings and actions in connection with the California Fairness Hearing (as
defined in Section 5.13)) and to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement; provided, however,
that Parent shall not be required to agree to any divestiture by Parent or the
Company, or any of Parent's subsidiaries or affiliates, of shares of capital
stock, or of any business, assets or property of Parent or its subsidiaries or
affiliates, or of the Company, its affiliates, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to own
or exercise control of such assets, properties and stock.
5.10 Notification of Certain Matters. (a) The Company, the Indian
-------------------------------
Subsidiary and each of the Principal Stockholders, as the case may be, shall
give prompt notice to Parent of: (i) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which is likely to cause any
representation or warranty given by it, respectively, in this Agreement to be
untrue or inaccurate at or prior to the Effective Time, and (ii) any failure of
it, respectively, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.10 shall not (A) limit or
otherwise affect any remedies available to the party receiving such notice, or
(B) constitute an acknowledgment or admission of a breach of this Agreement. No
disclosure by the Company, the Indian Subsidiary or any of the Principal
Stockholders pursuant to this Section 5.10, however, shall be deemed to amend or
supplement the Disclosure Schedule or prevent or cure any misrepresentations,
breach of warranty or breach of covenant. Notice provided by any one of the
parties with respect to any specified event pursuant to this Section 5.10 shall
be deemed to satisfy the notice obligations as to all other such parties.
(b) The Company shall deliver to Parent as soon as practicable, but
in any event within 15 calendar days after the end of each monthly accounting
period beginning with the month ended September 30, 2000 and ending with the
monthly accounting period occurring before the earlier of the Effective Time or
the termination of this Agreement in accordance with its terms, an unaudited pro
forma balance sheet and a statement of operations for the Company and the Indian
-43-
subsidiary, which financial statements shall be prepared in the ordinary course
of business, in accordance with the Company's books and records and GAAP (except
that such financial statements need not contain the footnotes required by GAAP)
and shall fairly present the consolidated financial position of the Company and
the Indian subsidiary as of their respective dates and the results of the
Company's and the Indian Subsidiary's operations for the periods then ended.
5.11 Additional Documents and Further Assurances. Each party hereto, at
-------------------------------------------
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of the Merger and the
transactions contemplated hereby.
5.12 Affiliate Agreements. Schedule 5.13 sets forth those persons who, in
-------------------- -------------
the Company's reasonable judgment, are or may be "affiliates" of the Company
within the meaning of Rule 145 (each such person, a "Rule 145 Affiliate")
promulgated under the Securities Act ("Rule 145"). The Company shall provide
Parent such information and documents as Parent shall reasonably request for
purposes of reviewing such list. The Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement (and in
any case prior to the Closing Date), from each of the Rule 145 Affiliates of the
Company, an executed Rule 145 Affiliate Agreement in the form attached hereto as
Exhibit E. Subject to Section 5.2, Parent and Sub shall be entitled to place
---------
appropriate legends on the certificates evidencing any Parent Common Stock to be
received by such Rule 145 Affiliates pursuant to the terms of this Agreement,
and to issue appropriate stop transfer instructions to the transfer agent for
Parent Common Stock, consistent with the terms of such Rule 145 Affiliate
Agreements.
5.13 Exemption from Federal Registration; California Blue Sky. The parties
--------------------------------------------------------
expect that the Parent Common Stock to be issued in connection with the Merger
will be issued, and they will use commercially reasonable efforts to cause the
Parent Common Stock to be issued, in a transaction exempt from registration
under the Securities Act by reason of Section 3(a)(10) thereof, and the Parent
Common Stock and the assumption of the Company Options hereunder to be qualified
under the California Securities Act, pursuant to Section 25121 thereof, after
the Fairness Hearing has been held pursuant to the authority granted by Section
25142 of such California Securities Act (the "California Fairness Hearing"). In
the event that (i) the exemption from registration by reason of Section 3(a)(10)
is not available, or (ii) California's Department of Corporations does not deem
this Merger fair to the Company's shareholders within 69 days of the date of
this Agreement, Parent will, subject to satisfaction or waiver of the closing
conditions set forth in Article VI below (the "Private Placement Exemption"),
issue the Parent Common Stock issued in connection with the Merger pursuant to a
private placement transaction exempt from registration under the Securities Act
by reason of Section 4(2) thereof, provided that the Company and the Principal
Stockholders shall take all actions necessary within their legal power to ensure
compliance with the Private Placement Exemption, including without limitation
the delivery of executed stockholder Investment Representation Statements. If
the Parent issues stock pursuant to the Private Placement Exemption, Parent will
file with the SEC a registration statement on Form S-1 no later than February
15, 2001 and will use commercially reasonable efforts to cause such registration
statement to become
-44-
effective, covering the resale of the shares of Parent Common Stock issued to
the Stockholders in connection with the Merger.
5.14 Company Options; Commission Filing. Parent shall take all corporate
----------------------------------
action necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery under the Assumed Options. Within sixty (60) days
after the Effective Time, Parent shall file a registration statement on Form S-8
(or any successor or other appropriate forms), or another appropriate form, with
respect to the shares of Parent Common Stock subject to the Assumed Options and
shall use its commercially reasonable efforts to maintain the effectiveness of
such registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses in connection therewith) for so long as
the Company Options remain outstanding.
5.15 Nasdaq National Market. Parent shall use commercially reasonable
----------------------
efforts to ensure that, at the Effective Time, the shares of Parent Common Stock
to be delivered to the Company Stockholders pursuant to this Agreement shall
have been accepted for listing on the Nasdaq National Market, subject to notice
of issuance.
5.16 Termination of 401(k) Plan. At Parent's request, the Company shall
--------------------------
cause its 401(k) plan to terminate prior to the Closing Date by taking such
actions as Parent determines to be reasonably necessary or appropriate.
5.17 Employee Benefits. Parent shall use its commercially reasonable
-----------------
efforts to ensure that employees of the Company who continue in service with the
Parent or the Surviving Corporation following the Effective Time shall be
eligible to receive benefits and, if applicable, incentive packages, consistent
with Parent's standard human resources policies and Parent's other similarly
situated employees, respectively.
5.18 Employment Offers. The Company shall use commercially reasonable
-----------------
efforts to encourage each of its employees to accept the offer of employment
made by Parent, including without limitation executing and delivering Parent's
standard confidentiality, proprietary information and assignment of inventions
agreement subject to the Closing. The Company's five founders, Xxxxxx Xxxxxxx,
Xxxxxxx Xxxxxxx, X. X. Xxxxx, N.M. Kumar, and Xxxxxx Krishna R., and at least
eighty percent (80%) of the Company's (including any Company subsidiary)
technical employees shall enter into definitive employment agreements with
Parent.
5.19 Stockholder List. As of a date which is two days prior to the Closing
----------------
Date, the Company shall provide Parent and its counsel with a statement
certified by the Chief Executive Officer of the Company setting forth any
changes which would have been required to be set forth on Schedules 2.2(a) and
----------------
2.2(b) as if such had been made and delivered as of the Closing Date (the
------
"Updated Capitalization Certificate").
5.20 Private Resale. Prior to the effectiveness of any registration of
--------------
the shares of Parent Common Stock received as Merger consideration, Parent will
provide reasonable assistance to the
-45-
Stockholders to effect private resales of the Parent Common Stock, provided that
the Stockholder in each such case shall deliver to Parent satisfactory written
evidence, which may at Parent's reasonable discretion include an opinion of
legal counsel in form and substance reasonably satisfactory to Parent, to the
effect that the shares are to be sold in compliance with Rule 144 and Rule 145
promulgated under the Securities Act.
5.21 Non-Competition Agreement. The Company shall use commercially
-------------------------
reasonable efforts to cause each of Xxxxxx Xxxxxxx, Xxxxxxx Xxxxxxx, X. X.
Xxxxx, N.M. Kumar, and Xxxxxx Krishna R. to execute and deliver to Parent a
Noncompetition Agreement and Non-Solicitation Agreement in the form attached
hereto as Exhibit B.
---------
5.22 No Solicitation by Parent. Until one (1) year following the date of
-------------------------
termination of this Agreement pursuant to the provisions of Section 8.1 hereof
neither Parent nor Sub shall (nor shall the Parent or Sub permit, to the extent
legally possible, any of the Parent's or Sub's officers, directors, employees,
stockholders, agents, representatives or affiliates to), directly or indirectly
solicit, induce, recruit any employee of the Company for employment with Parent,
Sub, or any affiliate of either of them.
5.23 Approval of the Plan. Holders of a majority of the Company's capital
--------------------
stock shall have approved the Plan.
5.24 Directors' and Officers' Insurance. Parent and Sub shall not cancel
----------------------------------
any policy providing directors' and officers' insurance or tail coverage
protecting the incumbent directors and officers of the Company prior to the
expiration of one (1) year following the Closing.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of the Company and Parent to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall be
--------------------
approved and adopted by the Stockholders of Company by the requisite vote under
applicable law and the Company's Certificate of Incorporation.
(b) No Order. No Governmental Entity shall have enacted, issued,
--------
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(c) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or
-46-
other legal restraint or prohibition preventing the consummation of the Merger
shall be in effect, nor shall any proceeding brought by an administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending.
(d) Nasdaq National Market Listing. The shares of Parent Common
------------------------------
Stock to be issued in the Merger shall have been approved for listing on the
Nasdaq National Market, subject to official notice of issuance.
(e) Tax Opinions. The Company and Parent shall each have received
------------
written opinions from their respective counsel, Pillsbury, Madison & Sutro and
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, to the effect that
the Merger will constitute a reorganization within the meaning of Section 368(a)
of the Code. The parties to this Agreement agree to make reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
(f) Certificate of Merger. The Certificate of Merger shall have been
---------------------
filed with, and accepted by, the Secretary of State of the State of Delaware.
(g) Initial Public Offering Lock-Up. The various existing initial
-------------------------------
public offering agreements (the "IPO Lock-Up") between the several stockholders
of Parent and Credit Suisse First Boston and between Parent and Credit Suisse
First Boston, among others, shall have expired or Credit Suisse First Boston
shall have waived the restrictions on said stockholders of Parent from disposing
of shares and waived the restrictions on Parent from issuing new shares of
Parent Common Stock subject to the IPO Lock-Up.
6.2 Conditions to the Obligations of Parent and Sub. The obligation of
-----------------------------------------------
Parent and Sub to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) Representations, Warranties and Covenants. (i) The
-----------------------------------------
representations and warranties of the Company and the Indian Subsidiary in this
Agreement (other than the representations and warranties of the Company and the
Indian Subsidiary as of a specified date, which will be true and correct as of
such date) shall be true and correct in all material respects (except for
representations and warranties qualified by materiality which shall be correct
in all respects) on and as of the Effective Time as though such representations
and warranties were made on and as of the Effective Time, and (ii) each of the
Company, the Indian Subsidiary and the Principal Stockholders shall have
performed and complied with all covenants and obligations under this Agreement
and Xxxxxxx Xxxxxxx shall have performed and complied with all covenants and
obligations within the Director Agreement of even date herewith, between
Centillium Communications, Inc. and Xxxxxxx Xxxxxxx, required to be performed
and complied with by such parties as of the Effective Time.
-47-
(b) Third Party Consents. Parent shall have been furnished with
--------------------
evidence satisfactory to it that the Company has obtained all consents, waivers,
approvals, and assignments listed in Schedule 6.2(b).
---------------
(c) No Material Adverse Change. There shall not have occurred any
--------------------------
event or condition of any character that has had or is reasonably likely to have
a Material Adverse Effect on the Company since the date of this Agreement.
(d) Noncompetition Agreements. Each of the individuals named in
-------------------------
Section 5.21 shall have executed and delivered to Parent a Noncompetition
Agreement and Non-Solicitation Agreement in the form attached as Exhibit B, and
---------
all of such Noncompetition and Non-Solicitation Agreements shall be in full
force and effect for the terms specified in Exhibit B.
---------
(e) Company Stockholder Approval. As of the date of this Agreement,
----------------------------
Stockholders holding at least a majority of each class of the Company Capital
Stock, which such Stockholders are as set forth on Schedule 6.2(b) and which
---------------
include the vote required under Section 2.2(a) above, shall have agreed to
approve this Agreement, the Merger and the transactions contemplated thereby and
the Company Voting Agreements shall be in full force and effect. Stockholders
holding no more than 10% of the Company Capital Stock shall have exercised or
given notice of their intent to exercise appraisal rights in accordance with
Delaware Law.
(f) Company Legal Opinion. Parent shall have received a legal opinion
---------------------
from Pillsbury, Madison & Sutro, legal counsel to the Company, substantially in
the form attached as Exhibit F.
---------
(g) Termination of 401(k) Plan. Parent shall have received from the
--------------------------
Company evidence that the Company's 401(k) plan has been terminated pursuant to
resolution of the Company's Board of Directors (the form and substance of which
shall have been subject to review and approval of Parent), effective as of two
days preceding the Closing Date.
(h) Certificates of the Company and of the Principal Stockholders.
-------------------------------------------------------------
Parent shall have received a certificate, validly executed by the Chief
Executive Officer of the Company for and on its behalf, to the effect that, as
of the Closing:
(i) all representations and warranties made by the Company in
this Agreement (other than the representations and warranties of the Company as
of a specified date, which will be true and correct as of such date) were true
and correct in all material respects (except for representations and warranties
qualified by materiality which shall be correct in all respects) on and as of
the Effective Time as though such representations and warranties were made on
and as of such time;
(ii) all covenants and obligations under this Agreement to be
performed by the Company on or before the Closing have been so performed in all
material respects; and
-48-
(iii) the conditions to the obligations of the Company and the
Principal Stockholders set forth in this Section 6.3 have been satisfied (unless
otherwise waived in accordance with the terms hereof).
In addition, Parent shall have received a certificate of each Principal
Stockholder that the Principal Stockholder has performed in all material
respects all covenants and obligations under this Agreement to be performed by
him on or prior to the Closing.
(i) Certificate of Secretary of Company. Parent shall have received
-----------------------------------
a certificate, validly executed by the Secretary of the Company, certifying as
to (i) the correct form and effectiveness of the Certificate of Incorporation
and the Bylaws of the Company, each as amended to date, and (ii) the valid
adoption of resolutions of the Board of Directors of the Company and the
Stockholders approving this Agreement and the consummation of the transactions
contemplated hereby.
(j) Certificate of Good Standing. Parent shall have received
----------------------------
certificates of good standing of the Company from the Secretaries of State of
the States of Delaware and California, dated within a reasonable period prior to
the Closing.
(k) FIRPTA Certificate. Parent shall have received a copy of the
------------------
FIRPTA Compliance Certificate, validly executed by a duly authorized officer of
the Company.
(l) Rule 145 Affiliate Agreements. Each of the persons listed on
-----------------------------
Schedule 5.12 shall have executed a Rule 145 Affiliate Agreement substantially
-------------
in the form attached as Exhibit E and such Affiliates Agreements shall be in
---------
full force and effect.
(m) Continued Employment. The employees of Company, representing
--------------------
at least eighty percent (80%) of the Company's technical employees (and those of
the Indian Subsidiary), listed on Schedule 6.2(m) of the Disclosure Schedule
---------------
shall have accepted Parent's offers of employment and executed and delivered
Parent's standard confidentiality, proprietary information and assignment of
inventions agreement.
(n) Third Party Expenses; Stockholder List. Pursuant to Sections
--------------------------------------
5.5 and 5.19 above, Parent shall have received from the Chief Executive Officer
and/or the Chief Financial or Accounting Officer of the Company, respectively,
the Third Party Expenses Certificate and Updated Capitalization Certificate.
(o) Approval of Plan. The Company's stockholders shall have approved
----------------
and adopted the Plan by the requisite vote under applicable law prior to the
Closing Date.
6.3 Conditions to Obligations of the Company and the Principal
----------------------------------------------------------
Stockholders. The obligations of the Company, the Indian Subsidiary and the
------------
Principal Stockholders to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the
-49-
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations, Warranties and Covenants. (i) The representations and
-----------------------------------------
warranties of Parent and Sub in this Agreement (other than the representations
and warranties of Parent as of a specified date, which will be true and correct
as of such date) shall be true and correct on and as of the Effective Time as
though such representations and warranties were made on and as of such time, and
each of Parent and Sub shall have performed and complied with all covenants and
obligations of this Agreement required to be performed and complied with by it
as of the Effective Time.
(b) Certificate of Parent. The Company shall have received a certificate
---------------------
executed on behalf of Parent by the Chief Executive Officer to the effect that,
as of the Closing:
(i) all representations and warranties made by the Parent and Sub in
this Agreement (other than the representations and warranties of Parent as of a
specified date, which will be true and correct as of such date) are true and
correct in all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time;
(ii) all covenants and obligations under this Agreement to be
performed by Parent and Sub on or before the Closing have been so performed in
all material respects; and
(iii) the conditions to the obligations of the Company and the
Principal Stockholders set forth in this Section 6.3 have been satisfied (unless
otherwise waived in accordance with the terms hereof).
(c) Parent Legal Opinion. The Company shall have received a legal opinion
--------------------
from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, legal counsel to Parent, substantially in
the form attached as Exhibit G.
---------
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
7.1 Survival of Representations, Warranties and Covenants. The
-----------------------------------------------------
representations and warranties of the Company contained in this Agreement, or in
any certificate or other instrument delivered pursuant to this Agreement, shall
terminate on the 12-month anniversary of the Closing Date (the "Termination
Date"). The representations and warranties of Parent and Sub contained in this
Agreement, or in any certificate or other instrument delivered pursuant to this
Agreement, shall terminate at the Effective Time.
-50-
7.2 Recovery For Losses.
-------------------
(a) Indemnification.
---------------
(i) The Company and the Escrow Stockholders agree to jointly
and severally indemnify and hold Parent and its officers, directors and
affiliates harmless against all claims, losses, liabilities, damages,
deficiencies, costs and expenses, including reasonable attorneys' fees and
expenses of investigation and defense (individually a "Loss" and collectively
"Losses") incurred by Parent, its officers, directors or affiliates (including
the Surviving Corporation) (collectively, the "Indemnified Parties") directly or
indirectly as a result of (A) any inaccuracy or breach of a representation or
warranty of the Company, the Director or any Principal Stockholder contained in
this Agreement, the Director Agreement of even date herewith, between Parent and
Xxxxxxx Xxxxxxx, or in any certificate, instrument or other document delivered
by Company, the Director or any Principal Stockholder pursuant to the terms of
this Agreement, (B) any failure by the Company, the Indian Subsidiary or the
Principal Stockholders to perform or comply with any covenant contained herein,
or (C) any Dissenting Shares. Nothing herein shall limit the liability of the
Parent, the Company or any of the Principal Stockholders for any breach of any
representation, warranty or covenant if the Merger does not close, subject to
Section 8.5(f). The Escrow Stockholders shall not have any right of contribution
from the Company or Parent with respect to any Loss pursuant to this Article
VII.
(ii) In the event the Company, the Indian Subsidiary or the
Principal Stockholders shall have any liability for indemnification or otherwise
(including without limitation, for breach of covenants or otherwise at law or
equity) to Parent or Sub under this Agreement, the sole satisfaction of such
liability shall be from the Escrow Fund, provided however, that nothing in this
Agreement shall limit the liability in amount, indemnification period, or
otherwise (i) of Company, the Indian Subsidiary or the Principal Stockholders
with respect to fraud or criminal activity or (ii) of any Principal Stockholder
each with respect to its own fraud, intentional misrepresentation or criminal
activity or in connection with any breach by the Principal Stockholder of any
representation or covenant of the Principal Stockholder under any of the
agreements which are exhibits hereto or any agreement, certificate or document
delivered by the Principal Stockholder (excluding those entered into as an
authorized and qualified representative on behalf of the Company) in connection
with the Merger and the transactions contemplated thereby to which the Principal
Stockholder is a party or otherwise bound.
(b) Escrow Fund. As security for the indemnity provided for in Section
-----------
7.2(a) above and by virtue of this Agreement and the Certificate of Merger, the
Company and the Escrow Stockholders will be deemed to have received (subject to
the conditions of this Section 7.2) and deposited with the Escrow Agent the
Escrow Amount (plus any additional shares as may be issued in respect of any
stock split, stock dividend or recapitalization effected by Parent after the
Effective Time with respect to the Escrow Amount) without any act of the Company
or the Escrow Stockholders. The Escrow Amount shall be available to compensate
the Indemnified Parties for any claims by such Parties for any Losses suffered
or incurred by them and for which they are entitled to
-51-
recovery under this Article VII. As promptly as practicable after the Effective
Time, the Escrow Amount, without any act of the Escrow Stockholders, will be
deposited with Imperial Bank, as Escrow Agent (or other institution acceptable
to Parent and the Stockholder Representative (as defined in Section 7.2(h) below
and the preamble above)), such deposit of the Escrow Amount to constitute an
escrow fund (the "Escrow Fund") to be governed by the terms set forth herein.
The Escrow Agent may execute this Agreement following the date hereof and prior
to the Effective Time, and such later execution, if so executed after the date
hereof, shall not affect the binding nature of this Agreement as of the date
hereof between the other signatories hereto. Notwithstanding any provision of
this Agreement to the contrary (except as set forth in Section 5.5 and 7.2(m)),
after the Effective Time, no Indemnified Party shall be entitled to
indemnification or to obtain any proceeds from the Escrow Fund or to otherwise
recover any amount unless and until one or more Officer's Certificate (as
defined in Section 7.2(e) below) identifying Losses in excess of $100,000 in the
aggregate (the "Basket Amount") has or have been delivered to the Escrow Agent
as provided in Section 7.2(e) below, in which case, subject to subsections (f)
and (g) of this Section 7.2, an Indemnified Party shall be entitled to recover
all Losses including the Basket Amount; provided, however, legal fees incurred
by the Stockholder Representative to the extent set forth in Section 7.2(h)(ii)
and indemnity claims of the stockholder Representative thereunder, as provided
in Section 7.2(m), and any amounts required to be paid by the Parent or the
Surviving Corporation holders of Company Capital Stock with respect to
Dissenting Shares, shall not be subject to such Basket Amount.
(c) Escrow Period; Distribution upon Termination of Escrow Period. Subject
-------------------------------------------------------------
to the following requirements, the Escrow Fund shall be in existence immediately
following the Effective Time and shall terminate at 5:00 p.m., P.D.T., on the
day prior to the 12-month anniversary of the Closing Date (the "Escrow Period"),
at which time the Escrow Agent shall distribute the Escrow Fund to the Escrow
Stockholders; provided, however, that the Escrow Period shall not terminate with
respect to, and the Escrow Agent shall retain in the Escrow Fund, any amount
which, in the reasonable judgment of Parent is necessary to satisfy any then
pending and unsatisfied claims specified in any Officer's Certificate (as
defined in Section 7.2(e)(i) delivered to the Escrow Agent (and to the
Stockholder Representative pursuant to Section 7.2(f)) prior to 12-month
anniversary of the Closing Date the with respect to facts and circumstances
existing prior to the 12-month anniversary of the Closing Date. As soon as all
such claims have been resolved, the Escrow Agent shall deliver to the Escrow
Stockholders the remaining portion of the Escrow Fund, if any, not required to
satisfy such claims. Deliveries of Escrow Amounts to the Escrow Stockholders
pursuant to this Section 7.2(c) shall be made in proportion to their respective
original contributions to the Escrow Fund as determined pursuant to Section
1.9(b).
(d) Protection of Escrow Fund; Distribution of Interest from Escrow Fund.
--------------------------------------------------------------------
(i) The Escrow Agent shall hold and safeguard the Escrow Fund during
the Escrow Period, shall treat such fund as a trust fund in accordance with the
terms of this Agreement and not as the property of Parent and shall hold and
dispose of the Escrow Fund only in accordance with the terms hereof and of the
Escrow Agreement.
-52-
(ii) Any shares of Parent Common Stock or other equity securities
issued or distributed by Parent (including shares issued upon a stock split)
("New Shares") in respect of Parent Common Stock in the Escrow Fund which have
not been released from the Escrow Fund shall be added to the Escrow Fund and
become a part thereof. New Shares issued in respect of shares of Parent Common
Stock which have been released from the Escrow Fund shall not be added to the
Escrow Fund but shall be distributed to the record holders thereof. Cash
dividends on Parent Common Stock shall not be added to the Escrow Fund but shall
be distributed to the record holders thereof.
(iii) Each Escrow Stockholder shall have voting rights and the right
to distributions of dividends with respect to the shares of Parent Common Stock
contributed to the Escrow Fund by such Escrow Stockholder (and on any voting
securities added to the Escrow Fund in respect of such shares of Parent Common
Stock), as determined pursuant to Section 1.9(b).
(e) Claims Upon Escrow Fund.
-----------------------
(i) Upon receipt by the Escrow Agent at any time on or before the
before the last date of the Escrow Period of a certificate signed by any officer
of Parent (an "Officer's Certificate"): (A) stating that an Indemnified Party
has paid, sustained or properly accrued or reasonably anticipates that it will
have to pay, sustain or accrue Losses in a stated amount, and (B) specifying in
reasonable detail the individual items of Losses included in the amount so
stated, the date each such item was paid, sustained or properly accrued, or the
basis for such anticipated liability, and the nature of the misrepresentation,
breach of warranty or covenant or other indemnity to which such item is related,
the Escrow Agent shall, subject to the provisions of Section 7.2(f) and Section
7.2(g) below, deliver to the Indemnified Party out of the Escrow Fund, as
promptly as practicable, shares of Parent Common Stock held in the Escrow Fund
in an amount equal to such Losses. Shares of the Escrow Stockholders contributed
to the Escrow Fund in accordance with Section 1.9(b) shall be delivered to
Parent out of the Escrow Fund pro rata based on each Escrow Stockholder's
contribution to the Escrow Fund.
(ii) For the purposes of determining the number of shares of Parent
Common Stock to be delivered to an Indemnified Party out of the Escrow Fund
pursuant to this Article VII, the shares of Parent Common Stock shall be valued
at the Transaction Stock Price.
(f) Objections to Claims. At the time of delivery of any Officer's
--------------------
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Stockholder Representative and for a period of 30 days after
such delivery, the Escrow Agent shall make no delivery to any Indemnified Party
of any Escrow Amounts pursuant to Section 7.2(e)(i) or any other provision
hereof. After the expiration of such 30-day period, the Escrow Agent shall make
delivery of shares of Parent Common Stock from the Escrow Fund in accordance
with Section 7.2(e) hereof, provided that no such payment or delivery may be
made if the Stockholder Representative shall object in a written statement to
the claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent prior to the expiration of such 30-day period.
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(g) Resolution of Conflicts; Arbitration.
------------------------------------
(i) In case the Stockholder Representative shall object in writing
to any claim or claims made in any Officer's Certificate within 30 days after
delivery of such Certificate, the Stockholder Representative and Parent shall
attempt in good faith to agree upon the rights of the respective parties with
respect to each of such claims. If the Stockholder Representative and Parent
should so agree, a memorandum setting forth such agreement shall be prepared and
signed by both parties and delivered to the Escrow Agent. The Escrow Agent shall
be entitled to rely on such memorandum and distribute shares of Parent Common
Stock from the Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Stockholder Representative may after ten (10)
business days demand arbitration of the matter; provided, however, that if the
amount of the Loss at issue is the subject of pending litigation with a third
party, arbitration shall not be commenced until (A) such amount is ascertained
or (B) both parties agree to arbitration. In either such event the matter shall
be settled by binding arbitration in San Jose, California under the American
Arbitration Association (the "AAA") International Arbitration Rules and
Supplemental Procedures for Large Complex Disputes. A single, neutral arbitrator
(the "Arbitrator") shall be appointed by the AAA within ten (10) days after the
demand is submitted for arbitration. The parties shall have seven (7) days to
object in writing to the appointment of the Arbitrator, the sole basis for
objection being an actual conflict of interest. The AAA, in its sole discretion,
shall determine within seven (7) days the validity of any objection to the
appointment of the Arbitrator based on an actual conflict of interest. The
parties shall use their commercially reasonable efforts to cooperate with each
other in causing the arbitration to be held in as efficient and expeditious a
manner as practicable, including but not limited to, providing such documents
and making available such of their personnel as the Arbitrator may request, so
that the Arbitrator's decision on the matter may be timely. The Arbitrator shall
have the power to decide all questions of arbitrability. The Arbitrator shall
render a decision on the matter within fifty (50) days after being appointed to
serve as Arbitrator, unless the parties otherwise agree in writing or the
Arbitrator makes a finding that the party has carried the burden of showing good
cause for a longer period. The parties to the arbitration may apply to any court
of competent jurisdiction for a temporary restraining order, preliminary
injunction or other interim or conservatory relief, as necessary, without breach
of this arbitration provision and without any abridgement of the powers of the
Arbitrator, but shall not otherwise have the right to remove the proceeding to a
court of law or equity or supersede the arbitration by a judicial proceeding
except by mutual consent. The parties hereto agree that, any provision of
applicable law notwithstanding, they will not request and the Arbitrator shall
have no authority to award punitive or exemplary damages against any party.
Judgment on the award rendered by the Arbitrator may be entered in any court
having jurisdiction thereof. The Escrow Agent shall be entitled to act in
accordance with such judgment and make or withhold payments out of the Escrow
Fund in accordance therewith. The Arbitrator may award to the prevailing party,
if any, as determined by the Arbitrator, all of its reasonable costs and fees,
including without limitation AAA administrative fees, Arbitrator fees and
attorney's fees.
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(h) Stockholder Representative of the Stockholders; Power of Attorney.
-----------------------------------------------------------------
(i) In the event that the Merger is approved, effective upon such
vote, and without the further act of any Stockholder, Xxxxxx Xxxx shall be
appointed as agent and attorney-in-fact for each Stockholder (except such
Stockholders, if any, as shall have perfected their appraisal or dissenters'
rights under Delaware Law), for and on behalf of the Stockholders, to give and
receive notices and communications, to authorize delivery to an Indemnified
Party of shares of Parent Common Stock from the Escrow Fund in satisfaction of
claims by an Indemnified Party, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of
Stockholder Representative for the accomplishment of the foregoing. The
Stockholder Representative shall have the right to resign and such agency may be
changed by the Stockholders from time to time upon not less than 30 days prior
written notice to Parent; provided, however, that the Stockholder Representative
may not be removed unless holders of a majority in interest of the Escrow Fund
agree to such removal and to the identity of the substituted agent. Any vacancy
in the position of Stockholder Representative may be filled by approval of the
holders of a majority in interest of the Escrow Fund. No bond shall be required
of the Stockholder Representative, and the Stockholder Representative shall not
receive compensation for his or her services, except as shall be approved by the
majority in interest of the Escrow Stockholders pursuant to Section 7.2(m), from
amounts distributed from the Escrow Fund thereunder. Notices or communications
to or from the Stockholder Representative shall constitute notice to or from
each of the Stockholders.
(ii) The Stockholder Representative shall not be liable for any act
done or omitted hereunder as Stockholder Representative while acting in good
faith and in the exercise of reasonable judgment. The Stockholder
Representative shall have the right to retain and consult legal counsel and any
act done or omitted by the Stockholder Representative pursuant to the advice of
counsel shall be deemed in good faith and reasonable judgment. The Escrow
Stockholders on whose behalf the Escrow Amount was contributed to the Escrow
Fund shall severally indemnify from the Escrow Fund as provided in Section
7.2(m) the Stockholder Representative and hold the Stockholder Representative
harmless against any loss, liability or expense incurred without negligence or
bad faith on the part of the Stockholder Representative and arising out of or in
connection with the acceptance or administration of the Stockholder
Representative's duties hereunder, including the reasonable fees and expenses of
any legal counsel retained by the Stockholder Representative not to exceed an
aggregate of 1/21 of the Escrow Amount.
(i) Actions of the Stockholder Representative. A decision, act, consent
-----------------------------------------
or instruction of the Stockholder Representative authorized hereunder, including
but not limited to an extension or waiver of this Agreement pursuant to Section
8.4 hereof, shall constitute a decision of all the Stockholders and shall be
final, binding and conclusive upon each such Stockholder, and the Escrow Agent
and Parent may rely upon any such decision, act, consent or instruction of the
Stockholder Representative as being the decision, act, consent or instruction of
each and every such Stockholder. The Escrow Agent and Parent (and any
Indemnified Party) are hereby relieved from
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any liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Stockholder Representative.
(j) Third-Party Claims. In the event Parent becomes aware of a third
------------------
party claim which Parent believes may result in a demand against the Escrow
Fund, Parent shall notify the Stockholder Representative of such claim, and the
Stockholder Representative, as representative for the Escrow Stockholders, shall
be entitled, at its expense, to participate in, but not to determine or conduct,
the defense of such claim. Parent shall have the right in its sole discretion to
conduct the defense of and settle any such claim; provided, however, that except
with the written consent of the Stockholder Representative, no settlement of any
such claim with third party claimants shall be determinative of the amount of
Losses relating to such matter. In the event that the Stockholder Representative
has consented to any such settlement, neither the Stockholder Representative nor
any of the Escrow Stockholders shall have the power or authority to object under
any provision of this Article VII to the amount of any claim by Parent against
the Escrow Fund with respect to such settlement.
(k) Escrow Agent's Duties.
---------------------
(i) The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein, and as set forth in any
additional written escrow instructions consistent with this Agreement which the
Escrow Agent may receive after the date of this Agreement which are signed by an
officer of Parent and the Stockholder Representative, and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed to be genuine and to have been signed or presented by the proper party
or parties. The Escrow Agent shall not be liable for any act done or omitted
hereunder as Escrow Agent while acting in good faith and in the exercise of
reasonable judgment, and any act done or omitted pursuant to the advice of
counsel shall be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to comply with
and obey orders, judgments or decrees of any court of law, notwithstanding any
notices, warnings or other communications from any party or any other person to
the contrary. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, the Escrow Agent shall not be liable to any of
the parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on account
of the identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration of any
rights under any statute of limitations with respect to this Agreement or any
documents deposited with the Escrow Agent.
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(v) In performing any duties under the Agreement, the Escrow Agent
shall not be liable to any party for damages, losses, or expenses, except for
gross negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent shall not incur any such liability for (A) any act or failure to
act made or omitted in good faith, or (B) any action taken or omitted in
reliance upon any instrument, including any written statement or affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with the legal counsel in connection
with Escrow Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or permitted by him/her in good faith in accordance
with the advice of counsel. The Escrow Agent is not responsible for determining
and verifying the authority of any person acting or purporting to act on behalf
of any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and shares of Parent Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Escrow Agent's good faith discretion, the Escrow Agent
may be required, despite what may be set forth elsewhere in this Agreement. In
such event, the Escrow Agent will not be liable for damage. Furthermore, the
Escrow Agent may at its option, file an action of interpleader requiring the
parties to answer and litigate any claims and rights among themselves. The
Escrow Agent is authorized to deposit with the clerk of the court all documents
and shares of Parent Common Stock held in escrow, except all cost, expenses,
charges and reasonable attorney fees incurred by the Escrow Agent due to the
interpleader action and which the parties jointly and severally agree to pay.
Upon such action, the Escrow Agent shall be fully released and discharged of and
from all obligations and liability imposed by the terms of this Agreement.
(vii) The parties and their respective successors and assigns agree
jointly and severally to indemnify and hold Escrow Agent harmless against any
and all losses, claims, damages, liabilities, and expenses, including reasonable
costs of investigation, counsel fees, and disbursements that may be imposed on
Escrow Agent or incurred by Escrow Agent in connection with the performance of
its duties under this Agreement, including but not limited to any litigation
arising from this Agreement or involving its subject matter, other than arising
out of its negligence or willful misconduct.
(viii) The Escrow Agent may resign at any time upon giving at least 30
days written notice to the parties; provided, however, that no such resignation
shall become effective until the appointment of a successor escrow agent which
shall be accomplished as follows: Parent and the Stockholder Representative
shall use their commercially reasonable efforts to mutually agree on a successor
escrow agent within 30 days after receiving such notice. If the parties fail to
agree upon a successor escrow agent within such time, the Escrow Agent shall
have the right to appoint a successor escrow agent authorized to do business in
the State of California. The successor escrow
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agent shall execute and deliver an instrument accepting such appointment and it
shall, without further acts, be vested with all the estates, properties, rights,
powers, and duties of the predecessor escrow agent as if originally named as
escrow agent. The former Escrow Agent thereupon shall be discharged from any
further duties and liability under this Agreement.
(l) Fees. All fees of the Escrow Agent for performance of its duties
----
hereunder shall be paid by Parent in accordance with the standard fee schedule
of the Escrow Agent. It is understood that the fees and usual charges agreed
upon for services of the Escrow Agent shall be considered compensation for
ordinary services as contemplated by this Agreement. In the event that the
conditions of this Agreement are not promptly fulfilled, or if the Escrow Agent
renders any service not provided for in this Agreement, or if the parties
request a substantial modification of its terms, or if any controversy arises,
or if the Escrow Agent is made a party to, or intervenes in, any litigation
pertaining to the Escrow Fund or its subject matter, the Escrow Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or litigation.
(m) Stockholder Representative Fees. At the written request of the
-------------------------------
Stockholder Representative, the Escrow Agent shall as promptly as practicable,
deliver to the Stockholder Representative, in his capacity as such, out of the
Escrow Fund, subject to the maximum aggregate amount of 1/21th of the Escrow
Amount, shares of Parent Common Stock held in the Escrow Fund in an amount equal
to the amount requested by the Stockholder Representative. The Stockholder
Representative shall deliver his written request to the Escrow Agent, with a
copy to Parent. The amount of such distribution shall not be subject to the
Basket Amount. At the request of the Stockholder Representative, Parent shall
facilitate and shall cause its transfer agent to facilitate the sale of the
shares so distributed in a broker's transaction at the market and shall allow
the proceeds thereof, net of costs of sale, to be delivered to the Stockholder
Representative. The Stockholder Representative shall hold the shares or proceeds
thereof so distributed in trust for distribution to the Escrow Stockholders pro
rata or for payment of applicable costs, fees or expenses at such time as the
Stockholder's Representative shall deem appropriate or as determined by vote of
the majority in interest of the Escrow Stockholders.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 hereof, this Agreement
-----------
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual agreement of the Company and Parent;
(b) except as set forth in Section 8.1(e) below, by Parent or the
Company if: (i) the Effective Time has not occurred by the date which is 84 days
from the date of this Agreement; provided, however, that the right to terminate
this Agreement under this Section 8.1(b) shall not be
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available to any party whose action or failure to act has been a principal cause
of the failure of the Merger to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement; (ii) there shall be a
final non-appealable order of a federal or state court in effect preventing
consummation of the Merger or (iii) there shall be any statute, rule, regulation
or order enacted, promulgated or issued or deemed applicable to the Effective
Time by any Governmental Entity that would make consummation of the Merger
illegal;
(c) by Parent if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any Governmental Entity, which would: (i) prohibit Parent's or Sub's
ownership or operation of any portion of the business of the Company; (ii)
compel Parent or the Company to dispose of or hold separate all or any portion
of the business or assets of the Company or Parent or (iii) compel Parent to
dispose or hold separate all or a portion of the business or assets of Parent;
(d) by Parent, if it is not in material breach of its obligations under
this Agreement, upon a breach of any representation, warranty, covenant or
agreement of the Company, the Indian Subsidiary or any of the Principal
Stockholders, as applicable, contained in this Agreement such that the
conditions set forth in Section 6.2 would not be satisfied and such breach has
not been cured within ten (10) calendar days after written notice thereof to the
Company or the applicable Principal Stockholder; provided, however, that no cure
period shall be required for a breach which by its nature cannot be cured;
(e) by Parent, under the following conditions:
If, on the date (the "Test Date") on which counsel for Parent and
counsel for the Company shall concur that the parties are otherwise prepared to
proceed with the Closing, the average of the closing prices on the Nasdaq
National Market of the Parent Common Stock for the preceding twenty (20) trading
days, as published at www. xxxxxx.xxx, shall be less than $46.00 per share,
then, notwithstanding Section 1.2, the Closing will take place 5 calendar days
subsequent to the Test Date unless such date shall be a Saturday, Sunday, or
holiday in which case the Closing shall be the next business day following such
date provided that Parent shall have the right, by written notice delivered in
person or by facsimile to an executive officer of the Company, at any time prior
to 4:00 p.m. (Pacific Time) on the fourth (4/th/) calendar day subsequent to the
Test Date, to declare its intent to terminate this Agreement. This Agreement
automatically shall terminate at 6:00 a.m. (Pacific Time) on the Closing if the
aforesaid notice is so delivered, provided that the Agreement shall not
terminate, and the parties shall remain obligated as otherwise provided in this
Agreement with respect to proceeding with the Closing Date, as prescribed in
this Section 8.1(e), if on that date either (i) the Closing Price (as determined
under Section 1.6(c)(iv) hereof) shall be at least $46.00 per share, in which
case the Transaction Stock Price shall be determined as provided in Section
1.6(c)(iii), or (ii) the Company shall have given written notice, delivered in
person or by facsimile to an executive officer of Parent, prior to 6:00 a.m. on
the Closing Date (as defined in this Section 8.1(e)), of its intention to
proceed with the Closing, provided that in this case (ii), the
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Transaction Stock Price shall be $51.11, notwithstanding that the Closing Stock
Price as determined under Section 1.6(c)(iv) otherwise would be below $46.00.
(f) by the Company, if neither the Company, the Indian Subsidiary nor
any of the Principal Stockholders are in material breach of their respective
obligations under this Agreement, upon a breach of any representation, warranty,
covenant or agreement of Parent or Sub contained in this Agreement such that the
conditions set forth in Section 6.3 would not be satisfied and such breach has
not been cured within ten calendar days after written notice thereof to Parent;
provided, however, that no cure period shall be required for a breach which by
its nature cannot be cured.
Where action is taken to terminate this Agreement pursuant to this Section
8.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Section 8.1 hereof, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Sub, the
Company or the Principal Stockholders, or their respective officers, directors
or stockholders; provided, however, that each party shall remain liable for any
breaches of this Agreement prior to its termination; and provided further,
however, that, the provisions of Sections 5.4, 5.5, 5.6 and 5.22 hereof, Article
IX hereof and this Section 8.2 shall remain in full force and effect and survive
any termination of this Agreement.
8.3 Amendment. This Agreement may be amended by the parties at any time
---------
by execution of an instrument in writing signed on behalf of each of the parties
hereto. For purposes of this Section 8.3, any amendment of this Agreement
approved by Stockholders holding a majority in interest of the Company Capital
Stock or the shares of Parent Common Stock comprising the Escrow Fund shall be
binding upon and effective against the Stockholders (including the Principal
Stockholders) whether or not they have signed such amendment.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent
-----------------
and Sub, on the one hand, and the Company and the Stockholder Representative, on
the other hand, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. For purposes of this Section 8.4, any extension or waiver
signed by the Stockholder Representative shall be binding upon and effective
against all Stockholders (including the Principal Stockholders) whether or not
they have signed such extension or waiver.
8.5 Parent Investment in Company Upon Certain Termination Events.
------------------------------------------------------------
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(a) Subject to the provisions of this Section 8.5(c), upon
termination by Parent of this Agreement pursuant to either Section 8.1(b), (c)
(d) or (e), Parent will immediately invest $1,000,000 in the Company (the
"Parent Investment") pursuant to a convertible promissory note and a warrant,
which shall be on substantially the same terms as the ICICI Notes or, if there
are no ICICI Notes, then such convertible promissory note and warrant shall have
the principal terms set forth on Exhibit H (the "Convertible Note and Warrant")
---------
and shall be subject to documentation and other terms and conditions reasonably
satisfactory to Parent (subject to Section 8.5(c)(vi) and Section 8.5(d) below).
(b) Within ten (10) days following the date of this Agreement, funds
for the Parent Investment (the "Investment Escrow Amount"), shall be deposited
with Imperial Bank, as the Investment Escrow Agent (or other institution
acceptable to Parent and Stockholder Representative), such deposit of the
Investment Escrow Amount to constitute an escrow fund (the "Investment Escrow
Fund") to be governed by terms set forth in Section 8.5(d).
(c) The Investment Escrow Amount shall be released to the Company
from the Investment Escrow Fund immediately upon the satisfaction of all of the
following conditions:
(i) The Parent shall have terminated this Agreement pursuant to
either Section 8.1(b), (c) (d) or (e).
(ii) There shall not have occurred any violation of the
provisions set forth in Section 4.2 of this Agreement or Section 1 of the
Director Agreement, dated even date herewith, between Xxxxxxx Xxxxxxx and
Parent.
(iii) There shall not have occurred any fraud, intentional
misrepresentation or criminal activity on behalf of the Company, the Indian
Subsidiary, the Director or the Principal Stockholders.
(iv) The Company, the Indian Subsidiary, the Director and the
Principal Stockholders shall not have solicited the consent of the Stockholders
to the Merger by providing an untrue statement of a material fact or an omission
of a material fact to the Stockholders.
(v) More than fifty percent (50%) of the Company's and the
Indian Subsidiary's technical employees and more than fifty percent (50%) of the
Company's five founders shall remain employees of the Company.
(vi) The Company shall have executed and delivered, against
delivery to the Company of the Investment Escrow Amount, the Convertible Note
and Warrant on terms that are reasonably acceptable to Parent (provided that the
terms of the ICICI Notes pursuant to Section 4.1(k) shall be deemed accepted by
Parent unless vetoed as provided therein), and such Convertible Note and Warrant
shall be in full force and effect.
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(d) If the representations and warranties of the Company, the Indian
Subsidiary, the Director and the Principal Stockholders in this Agreement (other
than the representations and warranties as of a specified date, which must be
true and correct as of such date) shall fail to be true and correct in all
material respects (except for representations and warranties qualified by
materiality which shall be correct in all respects) on and as of the date of
release of the Investment Escrow Fund as though such representations and
warranties were made on and as of the date of release of the Investment Fund,
then the Convertible Note and Warrant delivered in consideration of the Parent
Investment shall provide for a conversion discount (in the case of the note) and
the exercise price (in the case of the warrant) that is thirty percent (30%)
more favorable to Parent than to the corresponding terms in the ICICI Notes and
accompanying warrants or Exhibit H, as the case may be.
---------
If any of the conditions contained in Sections 6.1 and 6.2 are not
satisfied, then the Convertible Note and Warrant delivered in consideration of
the Parent Investment shall provide for a conversion discount (in the case of
the note) and the exercise price (in the case of the warrant) that is thirty
percent (30%) more favorable to Parent than to the corresponding terms in the
ICICI Notes and accompanying warrants or Exhibit H as the case may be.
---------
(e) If upon termination of the Agreement, the Investment Escrow Fund
is not released to the Company due to failure of the requisite conditions
provided in Section 8.5(c), then the Escrow Fund shall be immediately released
--------
to Parent. In addition, the Escrow Fund shall be released to the Parent on the
------
Effective Time. The Investment Escrow Fund shall terminate following release of
the Fund to the Company or the Parent as the case may be.
(f) In the event that the Parent Investment is made in the Company
pursuant to this Section 8.5, such investment shall constitute liquidated
damages and the Parent shall have no further liability to the Company or any of
its stockholders, and the Company, the Indian Subsidiary and the Principal
Stockholders shall be released from all liability to Parent and Sub, in each
case under this Agreement except with respect to the surviving provisions hereof
as provided in Section 8.2.
(g) All interest accrued on the Investment Escrow Amount shall be
paid by the Investment Escrow Agent to the Parent upon release of the Investment
Escrow Fund.
(h) The Investment Escrow Agent shall hold and safeguard the
Investment Escrow Fund, shall treat such fund as a trust in accordance with the
terms of this Section 8.5 and not as the property of Parent and shall hold and
dispose of the Investment Escrow Fund only in accordance with the terms of this
Section 8.5 and of the Investment Escrow Agreement, which shall be executed
within ten (10) days of the date of this Agreement.
(i) All fees of the Investment Escrow Agent for the performance of
the duties hereunder shall be paid by Parent in accordance with the standard fee
schedule of the Investment Escrow Agent. It is understood that the fees and
usual charges agreed upon for services of the
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Investment Escrow Agent shall be considered compensation for ordinary services
as contemplated by this Agreement. In the event that the conditions of this
Agreement are not promptly fulfilled, or if the Investment Escrow Agent renders
any service not provided for in this Agreement, or if the parties request a
substantial modification of its terms, or if any controversy arises, or if the
Investment Escrow Agent is made a party to, or intervenes in, any litigation
pertaining to the Investment Escrow Fund or its subject matter, the Investment
Escrow Agent shall be reasonably compensated for such extraordinary services and
reimbursed for all costs, attorney's fees, and expenses occasioned by such
default, delay, controversy or litigation.
(j) Investment Escrow Agent's Duties.
--------------------------------
(i) The Investment Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions consistent with this
Agreement which the Investment Escrow Agent may receive after the date of this
Agreement which are signed by an officer of Parent and the Stockholder
Representative, and may rely and shall be protected in relying or refraining
from acting on any instrument reasonably believed to be genuine and to have been
signed or presented by the proper party or parties. The Investment Escrow Agent
shall not be liable for any act done or omitted hereunder as Investment Escrow
Agent while acting in good faith and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith.
(ii) The Investment Escrow Agent is hereby expressly authorized
to comply with and obey orders, judgments or decrees of any court of law,
notwithstanding any notices, warnings or other communications from any party or
any other person to the contrary. In case the Investment Escrow Agent obeys or
complies with any such order, judgment or decree of any court, the Investment
Escrow Agent shall not be liable to any of the parties hereto or to any other
person by reason of such compliance, notwithstanding any such order, judgment or
decree being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
(iii) The Investment Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties executing
or delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder.
(iv) The Investment Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Investment Escrow Agent.
(v) In performing any duties under the Agreement, the
Investment Escrow Agent shall not be liable to any party for damages, losses, or
expenses, except for gross negligence or willful misconduct on the part of the
Investment Escrow Agent. The Investment Escrow Agent shall not incur any such
liability for (A) any act or failure to act made or omitted in good faith, or
(B) any action taken or omitted in reliance upon any instrument, including any
written statement or
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affidavit provided for in this Agreement that the Investment Escrow Agent shall
in good faith believe to be genuine, nor will the Investment Escrow Agent be
liable or responsible for forgeries, fraud, impersonations, or determining the
scope of any representative authority. In addition, the Investment Escrow Agent
may consult with the legal counsel in connection with Investment Escrow Agent's
duties under this Agreement and shall be fully protected in any act taken,
suffered, or permitted by him/her in good faith in accordance with the advice of
counsel. The Investment Escrow Agent is not responsible for determining and
verifying the authority of any person acting or purporting to act on behalf of
any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Investment Escrow Agent will not be
required to determine the controversy or to take any action regarding it. The
Investment Escrow Agent may hold all documents and funds of the Parent and may
wait for settlement of any such controversy by final appropriate legal
proceedings or other means as, in the Investment Escrow Agent's discretion, the
Investment Escrow Agent may be required, despite what may be set forth elsewhere
in this Agreement. In such event, the Investment Escrow Agent will not be liable
for damage. Furthermore, the Investment Escrow Agent may at its option, file an
action of interpleader requiring the parties to answer and litigate any claims
and rights among themselves. The Investment Escrow Agent is authorized to
deposit with the clerk of the court all documents and funds of the Parent held
in escrow, except all cost, expenses, charges and reasonable attorney fees
incurred by the Investment Escrow Agent due to the interpleader action and which
the parties jointly and severally agree to pay. Upon such action, the Investment
Escrow Agent shall be fully released and discharged of and from all obligations
and liability imposed by the terms of this Agreement.
(vii) The parties and their respective successors and assigns
agree jointly and severally to indemnify and hold Investment Escrow Agent
harmless against any and all losses, claims, damages, liabilities, and expenses,
including reasonable costs of investigation, counsel fees, and disbursements
that may be imposed on Investment Escrow Agent or incurred by Escrow Agent in
connection with the performance of its duties under this Agreement, including
but not limited to any litigation arising from this Agreement or involving its
subject matter, other than arising out of its negligence or willful misconduct.
(viii) The Investment Escrow Agent may resign at any time upon
giving at least 30 days written notice to the parties; provided, however, that
no such resignation shall become effective until the appointment of a successor
escrow agent which shall be accomplished as follows: Parent and the Stockholder
Representative shall use their commercially reasonable efforts to mutually agree
on a successor escrow agent within 30 days after receiving such notice. If the
parties fail to agree upon a successor escrow agent within such time, the
Investment Escrow Agent shall have the right to appoint a successor escrow agent
authorized to do business in the State of California. The successor escrow agent
shall execute and deliver an instrument accepting such appointment and it shall,
without further acts, be vested with all the estates, properties, rights,
powers, and duties of the predecessor escrow agent as if originally named as
escrow agent. The
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former Investment Escrow Agent thereupon shall be discharged from any further
duties and liability under this Agreement.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice); provided, however,
that notices sent by mail will not be deemed given until received:
(a) if to Parent or Sub, to:
Centillium Communications, Inc.
00000 Xxxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Page Xxxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to the Company or the Principal Stockholders, to:
vEngines, Inc.
0000 Xxxxxxxxx Xx., 0xx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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with a copy to:
Pillsbury, Madison & Sutro
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxx Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(c) if to the Stockholder Representative:
_______________________________________
_______________________________________
Attention: Xxxxxx Xxxx
Telephone No.: (___) ___-____
Facsimile No: (___) ___-____
(d) if to the Escrow Agent:
Imperial Bank
Special Corporate Financial Services
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
Telephone No. (000) 000-0000
Facsimile No.: (000) 000-0000
9.2 Interpretation. The words "include," "includes" and "including" when
--------------
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the exhibits hereto,
----------------------------
the Disclosure Schedule, the Mutual Non-Disclosure Agreement, the Director
Agreement and the documents and instruments and other agreements among the
parties hereto referenced herein: (i) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings both written and oral, among the parties with
respect to the subject matter hereof; (ii) are not intended to confer upon any
other person any rights or remedies hereunder;
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and (iii) shall not be assigned by operation of law or otherwise, except that
Parent or Sub may each assign its rights and delegate its obligations hereunder,
to the extent the obligations reasonably may be delegated in the context of the
transactions contemplated hereby, to its respective affiliates.
9.5 Severability. In the event that any provision of this Agreement or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances than those with respect to which it
is deemed void will be interpreted so as reasonably to effect the intent of the
parties hereto within the boundaries of applicable law. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent practicable
within applicable law, the economic, business and other purposes of such void or
unenforceable provision.
9.6 Other Remedies. Any and all remedies herein expressly conferred upon
--------------
a party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction
and venue of any court within Santa Xxxxx County, State of California, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction, venue and such process.
9.8 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefor, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.9 Attorneys' Fees. If any action or other proceeding relating to the
---------------
enforcement of any provision of this Agreement is brought by any party hereto,
the prevailing party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements (in addition to any other relief to which the prevailing
party may be entitled).
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IN WITNESS WHEREOF, Parent, Sub, the Company, each of the Principal
Stockholders and, with respect to Articles VII and IX only, the Stockholder
Representative and the Escrow Agent, have caused this Agreement to be signed,
all as of the date first written above.
CENTILLIUM COMMUNICATIONS, INC. XXXXXX ACQUISITION CORP.
/s/ Xxxxx Xxxxxx /s/ Xxxxx Xxxxxx
------------------------------- ------------------------------
Name: Xxxxx Xxxxxx Name: Xxxxx Xxxxxx
Title: Chief Executive Officer Title: Chief Executive Officer
PRINCIPAL STOCKHOLDERS vENGINES, INC.
/s/ Xxxxxx Xxxxxxx /s/ Xxxxxx Xxxxxxx
------------------------------- ------------------------------
Name: Xxxxxx Xxxxxxx Name: Xxxxxx Xxxxxxx
Title: President
/s/ Shankar Narayan
-------------------------------
Name: Shankar Narayan
/s/ X.X. Xxxxx
-------------------------------
Name: X.X. Xxxxx
_______________________________
Name:
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
Amendment No. 1
This Amendment No. 1 (the "Amendment") is entered into as of this 19/th/
day of December 2000. The Amendment is to that certain Agreement and Plan of
Reorganization, dated as of October 5, 2000, by and among Centillium
Communications, Inc., Xxxxxx Acquisition Corp., vEngines, Inc. and the Principal
Stockholders (the "Agreement"). Capitalized terms used in this Amendment
without definition have the same meanings specified in the Agreement, unless the
context requires otherwise, and section references used in this Amendment refer
to Sections of the Agreement.
Background
A. Section 8.1(e) of the Agreement provides Centillium the right to
terminate the Agreement, by notice to vEngines at a prescribed time, if the
average of the closing prices of the Parent Common Stock on the Nasdaq National
Market have been below $46.00 per share for a specified period. The termination
right is subject to a right of vEngines to require Centillium to proceed with
the Closing (subject to other closing conditions set forth in the Agreement),
upon providing written notice of vEngines' intent to proceed with the Closing
upon the understanding that the Transaction Stock Price will be set at $51.11,
notwithstanding any calculation to the contrary under Section 1.6(c)(iv).
B. The parties desire to amend the Agreement to provide that the
Transaction Stock Price will be set at $51.11 and that the termination right of
Centillium set forth in Section 8.1(e) is deleted and is null and void.
Therefore, the parties agree to amend the Agreement as follows:
1. Section 1.6(c)(iii) is amended and restated to read in its entirety as
follows: ""The Transaction Stock Price" is $51.11."
2. Section 1.6(c)(iv) and (v) are deleted in their entirety.
3. Parent's termination right under Section 8.1(e) is eliminated and is
null and void.
4. Except as explicitly amended by this Agreement, all other terms and
conditions of the Agreement remain in full force and effect. This Amendment may
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be executed in counterparts, each of which shall be deemed an original and all
of which shall constitute one instrument.
In Witness Whereof, the parties execute this Amendment as of the date
first written above.
CENTILLIUM COMMUNICATIONS, INC.
By: /s/ Xxxxx Xxxxxx
--------------------------------------
Title: Chief Executive Officer
-----------------------------------
vENGINES, INC. PRINCIPAL STOCKHOLDERS
By: /s/ Xxxxxx Xxxxxxx /s/ Xxxxxx Xxxxxxx
------------------- -----------------------------------------
Xxxxxx Xxxxxxx, President
/s/ ShanKar Narayan
-----------------------------------------
/s/ X.X. Xxxxx
-----------------------------------------
-----------------------------------------
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Exhibit A
---------
Company Voting Agreement
-4-
Exhibit B
---------
Noncompetition Agreement
-5-
Exhibit C
---------
Certificate of Merger
-6-
Exhibit D
---------
Certificate of Incorporation of Surviving Corporation
-7-
Exhibit E
---------
Rule 145 Affiliate Agreement
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Exhibit F
---------
Opinion of Pillsbury Madison & Sutro
-9-
Exhibit G
---------
Opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
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Exhibit H
---------
Principal Terms of Convertible Note and Warrant
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