AGREEMENT AND PLAN OF MERGER BY AND AMONG NUANCE COMMUNICATIONS, INC. SPEAKEASY ACQUISITION CORPORATION SPEAKEASY ACQUISITION LLC SNAPIN SOFTWARE, INC. U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent AND THE STOCKHOLDER REPRESENTATIVE NAMED HEREIN...
Exhibit 2.1
CONFIDENTIAL
EXECUTION VERSION
EXECUTION VERSION
BY AND AMONG
SPEAKEASY ACQUISITION CORPORATION
SPEAKEASY ACQUISITION LLC
SNAPIN SOFTWARE, INC.
U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent
AND
THE STOCKHOLDER REPRESENTATIVE NAMED HEREIN
Dated as of August 13, 2008
TABLE OF CONTENTS
Page | ||||
ARTICLE I THE MERGER |
2 | |||
1.1 The Integrated Merger |
2 | |||
1.2 Effective Time |
2 | |||
1.3 Effect of the First Step Merger and the Second Step Merger |
3 | |||
1.4 Formation Documents |
3 | |||
1.5 Management |
4 | |||
1.6 Effect of First Step Merger on the Capital Stock of the Constituent Corporations |
4 | |||
1.7 Dissenting Shares |
19 | |||
1.8 Parent’s Obligations Fulfilled |
20 | |||
1.9 Surrender of Certificates |
21 | |||
1.10 No Further Ownership Rights in Company Capital Stock |
23 | |||
1.11 Lost, Stolen or Destroyed Certificates |
23 | |||
1.12 Reorganization Status |
24 | |||
1.13 Taking of Necessary Action; Further Action |
24 | |||
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
24 | |||
2.1 Organization of the Company |
24 | |||
2.2 Company Capital Structure |
25 | |||
2.3 Subsidiaries |
26 | |||
2.4 Authority |
26 | |||
2.5 No Conflict |
27 | |||
2.6 Consents |
27 | |||
2.7 Company Financial Statements |
28 | |||
2.8 No Undisclosed Liabilities |
28 | |||
2.9 Internal Controls |
29 | |||
2.10 No Changes |
29 | |||
2.11 Tax Matters |
32 | |||
2.12 Restrictions on Business Activities |
35 | |||
2.13 Title to Properties; Absence of Liens and Encumbrances |
35 | |||
2.14 Intellectual Property |
37 | |||
2.15 Agreements, Contracts and Commitments |
42 | |||
2.16 Interested Party Transactions |
45 | |||
2.17 Governmental Authorization |
45 | |||
2.18 Litigation |
45 | |||
2.19 Minute Books |
46 |
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TABLE OF CONTENTS
(continued)
(continued)
Page | ||||
2.20 Environmental Matters |
46 | |||
2.21 Brokers’ and Finders’ Fees; Third Party Expenses |
46 | |||
2.22 Employee Benefit Plans and Compensation |
46 | |||
2.23 Insurance |
52 | |||
2.24 Compliance with Laws |
52 | |||
2.25 Bank Accounts, Letters of Credit and Powers of Attorney |
52 | |||
2.26 Information Supplied |
53 | |||
2.27 Complete Copies of Materials |
53 | |||
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND THE SUBS |
53 | |||
3.1 Organization, Standing and Power |
53 | |||
3.2 Authority |
54 | |||
3.3 Consents |
54 | |||
3.4 No Conflict |
54 | |||
3.5 Parent Common Stock |
54 | |||
3.6 SEC Documents |
54 | |||
3.7 Parent Financial Statements |
55 | |||
3.8 No Undisclosed Liabilities |
55 | |||
3.9 Absence of Certain Changes or Events |
55 | |||
3.10 Interim Operations of Subs |
56 | |||
3.11 Litigation |
56 | |||
3.12 Information Supplied |
56 | |||
3.13 S-3 Eligibility |
56 | |||
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME |
57 | |||
4.1 Conduct of Business of the Company |
57 | |||
4.2 No Solicitation |
61 | |||
4.3 Procedures for Requesting Parent Consent |
62 | |||
ARTICLE V ADDITIONAL AGREEMENTS |
62 | |||
5.1 Information Statement; Stockholder Approval |
62 | |||
5.2 Access to Information |
63 | |||
5.3 Confidentiality |
64 | |||
5.4 Expenses |
64 | |||
5.5 Public Disclosure |
65 | |||
5.6 Consents |
65 | |||
5.7 FIRPTA Compliance |
65 |
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TABLE OF CONTENTS
(continued)
(continued)
Page | ||||
5.8 Notification of Certain Matters |
65 | |||
5.9 Additional Documents and Further Assurances |
66 | |||
5.10 New Employment Arrangements |
66 | |||
5.11 Company Equity Awards |
66 | |||
5.12 Termination of 401(k) Plan |
67 | |||
5.13 Section 280G |
67 | |||
5.14 Financials |
68 | |||
5.15 Indemnification of Directors and Officers |
68 | |||
5.16 Reasonable Efforts; Regulatory Filings |
69 | |||
ARTICLE VI CONDITIONS TO THE FIRST STEP MERGER |
69 | |||
6.1 Conditions to Obligations of Each Party to Effect the First Step Merger |
70 | |||
6.2 Conditions to the Obligations of Parent and Sub I |
70 | |||
6.3 Conditions to Obligations of the Company |
73 | |||
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES |
73 | |||
7.1 Survival of Representations, Warranties and Covenants |
73 | |||
7.2 Indemnification |
74 | |||
7.3 Escrow Arrangements |
74 | |||
7.4 Indemnification Claims |
77 | |||
7.5 Stockholder Representative |
84 | |||
7.6 Maximum Payments; Remedy |
85 | |||
ARTICLE VIII EARNOUT |
86 | |||
8.1 Earnout Arrangements |
86 | |||
8.2 Earnout Determination |
88 | |||
8.3 Calculation of Earnout Distributions; Stockholder Representative Objections |
88 | |||
ARTICLE IX REGISTRATION |
90 | |||
9.1 Filing and Effectiveness of Stockholder Registration Statement |
90 | |||
9.2 Limitations on Registration Rights |
91 | |||
9.3 Registration Procedures and Other Requirements |
92 | |||
9.4 Requirements of Stockholders |
94 | |||
9.5 Assignment of Rights |
95 | |||
9.6 Stockholders Beneficiaries of this Article |
95 |
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TABLE OF CONTENTS
(continued)
(continued)
Page | ||||
ARTICLE X TERMINATION, AMENDMENT AND WAIVER |
95 | |||
10.1 Termination |
95 | |||
10.2 Effect of Termination |
96 | |||
10.3 Amendment |
97 | |||
10.4 Extension; Waiver |
97 | |||
ARTICLE XI GENERAL PROVISIONS |
97 | |||
11.1 Notices |
97 | |||
11.2 Interpretation |
99 | |||
11.3 Counterparts |
99 | |||
11.4 Entire Agreement; Assignment |
99 | |||
11.5 Severability |
99 | |||
11.6 Other Remedies; Specific Performance |
99 | |||
11.7 Exchange Rate |
100 | |||
11.8 Governing Law |
100 | |||
11.9 Rules of Construction |
100 | |||
11.10 Waiver of Jury Trial |
100 |
iv
INDEX OF EXHIBITS
Exhibit | Description | |
Exhibit A
|
Form of Voting and No-Hire Agreement | |
Exhibit B
|
Form of Employee Proprietary Information, Inventions and Non-Competition Agreement | |
Exhibit C-1
|
Form of Certificate of Merger | |
Exhibit C-2
|
Form of Second Step Certificate of Merger | |
Exhibit D-1
|
Form of Company’s Standard Proprietary Information Agreement | |
Exhibit D-2
|
Form of Company’s Confidentiality and Proprietary Information Deed | |
Exhibit E
|
List of Specified Contracts | |
Exhibit F
|
Legal Opinion of Counsel of the Company | |
Exhibit G
|
List of Persons for Purposes of Determining “Knowledge” | |
Exhibit H
|
List of Company Materials Requested | |
Exhibit I
|
Description of the Escrow Agent’s Insured Money Market Account | |
Exhibit J
|
Customer Identification Program |
Schedules
Company Disclosure Schedule
Schedule 5.11
|
Vesting of Company RSUs and Company Incentive Options | |
Schedule 6.2(d)
|
Liens to be Released | |
Schedule 6.2(p)
|
List of Key Employees |
Annex
Annex A
|
Certain Defined Terms |
v
THIS AGREEMENT AND PLAN OF MERGER (the “Agreement”) is made and entered into as of August 13,
2008 by and among Nuance Communications, Inc., a Delaware corporation (“Parent”), Speakeasy
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent (“Sub I”),
Speakeasy Acquisition LLC, a Delaware limited liability company and a wholly owned subsidiary of
Parent (“Sub II”, and with Sub I, the “Subs”), SNAPin Software, Inc., a Delaware corporation (the
“Company”), U.S. Bank National Association, to act as escrow agent hereunder, and as a party to
this Agreement solely with respect to ARTICLE VII herein (the “Escrow Agent”) and Xxxxxx X. Xxxxxx,
who will serve as the representative of the Company’s stockholders, and is referred to herein from
time to time as the “Stockholder Representative.” Parent, Company and Stockholder Representative
are sometimes referred to herein as the “Interested Parties.”
RECITALS
A. The Boards of Directors of each of Parent, Sub I and the Company believe it is in the best
interests of such company and its stockholders that Parent acquire the Company through the
statutory merger of Sub I with and into the Company (the “First Step Merger”) and, in furtherance
thereof, have approved the First Step Merger.
B. As soon as practicable following the First Step Merger, Parent shall cause the Company to
merge with and into Sub II (the “Second Step Merger” and, taken together with the First Step
Merger, the “Integrated Merger” or the “Merger”). The Integrated Merger is intended to constitute
a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the “Code”). Parent and the Company intend that the First Step Merger and the Second Step
Merger will constitute integrated steps in a single “plan of reorganization” within the meaning of
Treas. Reg. §§1.368-2(g) and 1.368-3, which plan of reorganization the parties adopt by executing
this Agreement.
C. Pursuant to the First Step Merger, among other things, and subject to the terms and
conditions of this Agreement, all of the issued and outstanding capital stock of the Company shall
be converted into the right to receive the consideration set forth herein.
D. A portion of the consideration payable in connection with the First Step Merger shall be
placed in escrow as security for the indemnification obligations set forth in this Agreement.
E. The Company, on the one hand, and Parent and the Subs, on the other hand, desire to make
certain representations, warranties, covenants and other agreements in connection with the
Integrated Merger.
F. Concurrent with the execution and delivery of this Agreement, as a material inducement to
Parent and the Subs to enter into this Agreement, all officers and directors of the Company, and
certain stockholders of the Company are entering into Voting and No-Hire Agreements, in
substantially the form attached hereto as Exhibit A (the “Voting and No-Hire
Agreements”), with Parent, pursuant to which such stockholders have irrevocably agreed (i) to
vote in favor of the Integrated Merger and the transactions contemplated thereby, (ii) until the
earlier of the termination of this Agreement and the date which is twenty-four (24) months from the
Effective Time (as defined below), not to hire any individual who is an employee of the Company as
of the date of this Agreement, and (iii) to other matters set forth therein.
G. Concurrent with the execution and delivery of this Agreement, certain individuals are
entering into offer letters and Employee Proprietary Information, Inventions and Non-Competition
Agreements, in substantially the form attached hereto as Exhibit B (the “Employee Proprietary
Information, Inventions and Non-Competition Agreements”), with Parent or the Final Surviving
Entity, as determined by Parent.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and other promises set
forth herein, the mutual benefits to be gained by the performance thereof, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted,
the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1
The Integrated Merger. At the Effective Time (as defined in Section 1.2 hereof) and
subject to and upon the terms and conditions of this Agreement and the applicable provisions of the
General Corporation Law of the State of Delaware (“Delaware Law”), Sub I shall be merged with and
into the Company, the separate corporate existence of Sub I shall cease, and the Company shall
continue as the surviving corporation and as a wholly owned subsidiary of Parent. The surviving
corporation after the First Step Merger is hereinafter referred to as the “Interim Surviving
Corporation.” As soon as practicable after the Effective Time, and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of Delaware Law and the Delaware
Limited Liability Company Act (the “LLC Act”), the Interim Surviving Corporation shall be merged
with and into Sub II, the separate corporate existence of the Interim Surviving Corporation shall
cease, and Sub II shall continue as the surviving entity and as a wholly owned subsidiary of
Parent. The surviving entity after the Second Step Merger is hereinafter referred to as the “Final
Surviving Entity.”
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant to Section 10.1
hereof, the closing of the First Step Merger (the “Closing”) will take place as promptly as
practicable after the execution and delivery hereof by the parties hereto, and following
satisfaction or waiver of the conditions set forth in ARTICLE VI hereof, at the offices of Xxxxxx
Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, 0000 X Xxxxxx X.X., Xxxxx Xxxxx, Xxxxxxxxxx,
X.X. 00000, unless another time or place is mutually agreed upon in writing by Parent and the
Company.
2
The date upon which the Closing actually occurs shall be referred to herein as the “Closing
Date.” On the Closing Date, the parties hereto shall cause the First Step Merger to be consummated
by filing a Certificate of Merger in substantially the form attached hereto as Exhibit C-1, with
the Secretary of State of the State of Delaware (the “Certificate of Merger”), in accordance with
the applicable provisions of Delaware Law (the time of the acceptance of such filing by the
Secretary of State of the State of Delaware shall be referred to herein as the “Effective Time”).
As soon as practicable after the Effective Time, Parent shall cause the Second Step Merger to be
consummated by filing a Certificate of Merger in substantially the form attached hereto as
Exhibit C-2 with the Secretary of State of the State of Delaware (the “Second Step Certificate of
Merger”) in accordance with the applicable provisions of Delaware Law and the LLC Act.
1.3 Effect of the First Step Merger and the Second Step Merger. At the Effective Time, the
effect of the First Step Merger 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 of the property, rights,
privileges, powers and franchises of the Company and Sub I shall vest in the Interim Surviving
Corporation, and all debts, liabilities and duties of the Company and Sub I shall become the debts,
liabilities and duties of the Interim Surviving Corporation. At the effective time of the Second
Step Merger, the effect of the Second Step Merger shall be as provided in the applicable provisions
of Delaware Law and the LLC Act. Without limiting the generality of the foregoing, and subject
thereto, at the effective time of the Second Step Merger, except as otherwise agreed to pursuant to
the terms of this Agreement, all of the property, rights, privileges, powers and franchises of the
Interim Surviving Corporation shall vest in Sub II as the surviving entity in the Second Step
Merger, and all debts, liabilities and duties of the Interim Surviving Corporation shall become the
debts, liabilities and duties of Sub II as the surviving entity in the Second Step Merger.
1.4 Formation Documents.
(a) Unless otherwise determined by Parent prior to the Effective Time, the certificate of
incorporation of the Interim Surviving Corporation shall be amended and restated as of the
Effective Time to be identical to the certificate of incorporation of Sub I as in effect
immediately prior to the Effective Time, until thereafter amended in accordance with Delaware Law
and as provided in such certificate of incorporation; provided, however, that at the Effective
Time, Article I of the certificate of incorporation of the Interim Surviving Corporation shall be
amended and restated in its entirety to read as follows: “The name of the corporation is SNAPin
Software, Inc.”
(b) Unless otherwise determined by Parent prior to the Effective Time, the bylaws of Sub I, as
in effect immediately prior to the Effective Time, shall be the bylaws of the Interim Surviving
Corporation at the Effective Time until thereafter amended in accordance with Delaware Law and as
provided in the certificate of incorporation of the Interim Surviving Corporation and such bylaws.
3
(c) Unless otherwise determined by Parent prior to the Effective Time, the certificate of
formation of Sub II as in effect immediately prior to the effective time of the Second Step Merger
shall be the certificate of formation of the Final Surviving Entity in the Second Step Merger until
thereafter amended in accordance with the LLC Act and as provided in such certificate of formation;
provided, however, that at the effective time of the Second Step Merger, Article I of such
certificate of formation shall be amended and restated in its entirety to read as follows: “The
name of this limited liability company is SNAPin Software, LLC.”
(d) Unless otherwise determined by Parent prior to the Effective Time, the Limited Liability
Company Agreement of Sub II as in effect immediately prior to the effective time of the Second Step
Merger shall be the Limited Liability Company Agreement of the Final Surviving Entity, until
thereafter amended in accordance with the LLC Act and as provided in such Limited Liability Company
Agreement; provided, however, that at the Effective Time, Section 3 of such Limited Liability
Company Agreement shall be amended and restated in its entirety to read as follows: “The name of
this limited liability company is SNAPin Software, LLC.”
1.5 Management.
(a) Directors/Managers of Company. Unless otherwise determined by Parent prior to the
Effective Time, the directors of Sub I immediately prior to the Effective Time shall be the
directors of the Interim Surviving Corporation immediately after the Effective Time and the
managers of the Final Surviving Entity immediately after the effective time of the Second Step
Merger, each to hold the office of a director of the Interim Surviving Corporation and the office
of a manager of the Final Surviving Entity, respectively, in accordance with the provisions of
Delaware Law and the certificate of incorporation and bylaws of the Interim Surviving Corporation
and the LLC Act and the certificate of formation of the Final Surviving Entity, respectively, until
their respective successors are duly elected and qualified.
(b) Officers of Company. Unless otherwise determined by Parent prior to the Effective Time,
the officers of Sub I immediately prior to the Effective Time shall be the officers of the Interim
Surviving Corporation immediately after the Effective Time and the officers of the Final Surviving
Entity after the effective time of the Second Step Merger, each to hold office in accordance with
the provisions of the bylaws of the Interim Surviving Corporation and the Limited Liability Company
Agreement of the Final Surviving Entity, respectively.
1.6 Effect of First Step Merger on the Capital Stock of the Constituent Corporations.
(a) Definitions. For all purposes of this Agreement, the following terms shall have the
following respective meanings:
4
(i) “Additional Earnout Payment Date” shall mean the date that is two (2) Business Days
following the date on which the Earnout Notice relating to the applicable Additional Earnout
Payment becomes final pursuant to Section 8.3 hereof.
(ii) “Aggregate Liquidation Preference” shall mean the sum of the Series A Aggregate
Liquidation Preference, the Series B Aggregate Liquidation Preference, the Series C Aggregate
Liquidation Preference, the Series D Aggregate Liquidation Preference, and the Series D-1 Aggregate
Liquidation Preference.
(iii) “Aggregate Participating Closing Consideration” shall mean the Enterprise Value
minus the Aggregate Liquidation Preference.
(iv) “Aggregate Vested Option Exercise Value” shall mean the aggregate exercise price of all
Company Vested Options.
(v) “Business Day(s)” shall mean each day that is not a Saturday, Sunday or holiday on which
banking institutions located in New York, New York are authorized or obligated by law or executive
order to close.
(vi) “Cash” shall mean cash and cash equivalents of the Company, plus the Aggregate Vested
Option Exercise Value and, for the avoidance of doubt, the aggregate exercise price of the Company
Warrants actually received by the Company in cash (including by check), plus the amount of
the Stockholder Representative Expense Holdback, less any indebtedness for borrowed money
of the Company.
(vii) “Cash Deficit” shall mean the amount, if any, by which Closing Cash is less than
$5,000,000.
(viii) “Cash Surplus” shall mean the amount, if any, by which Closing Cash is more than
$5,000,000.
(ix) “Closing Cash” shall mean the Cash at the Effective Time.
(x) “Closing Consideration” shall mean that number of fully paid nonassessable shares of
Parent Common Stock equal to the number obtained by dividing (x) the Enterprise Value by
(y) the Signing Price.
(xi) “Company Capital Stock” shall mean shares of Company Common Stock and Company Preferred
Stock.
(xii) “Company Common Stock” shall mean shares of common stock, $0.001 par value per share, of
the Company.
5
(xiii) “Company Incentive Options” shall mean any and all options to purchase Company Common
Stock that are issued pursuant to Section 5.11 hereof and outstanding immediately prior to the
Effective Time.
(xiv) “Company Insurance Coverage” shall mean insurance coverage under insurance policies
issued to the Company; provided that the premiums for such coverage have been fully paid on or
prior to the Closing Date. For avoidance of doubt, if the premium paid for insurance coverage for
a particular period was paid after the Closing Date, such insurance coverage is not Company
Insurance Coverage.
(xv) “Company Material Adverse Effect” shall mean any change, event or effect that is
materially adverse to the business, assets (whether tangible or intangible), financial condition,
operations or capitalization of the Company and the Company Subsidiaries, taken as a whole;
provided that, in no event shall any of the following, alone or in combination with one another, be
deemed to constitute, nor shall any of the following be taken into account in determining whether
there has been or would reasonably be expected to be a Company Material Adverse Effect: (A) any
effect resulting from changes or effects in general worldwide or United States economic, capital
market or political conditions (other than those that have had a disproportionate adverse effect
relative to other industry participants on the Company and the Company Subsidiaries, taken as a
whole), (B) any effect resulting from changes or effects generally affecting the industries or
markets in which the Company or any Company Subsidiary operates (other than those that have had a
disproportionate adverse effect relative to other industry participants on the Company and the
Company Subsidiaries, taken as a whole), (C) any effect resulting from any act of war or terrorism
(or, in each case, any escalation thereof) (other than those that have had a disproportionate
adverse effect relative to other industry participants on the Company and the Company Subsidiaries,
taken as a whole), (D) any changes in Laws or GAAP or the interpretation thereof, (E) any effect
resulting from actions taken at the written direction of, or with the express written consent of,
Parent after the date of this Agreement, or (F) any effect resulting from actions explicitly
required to be taken pursuant to the provisions of this Agreement.
(xvi) “Company Options” shall mean all options (including commitments to grant options, but
excluding Company Warrants and Company Incentive Options) to purchase or otherwise acquire Company
Common Stock (whether or not vested) held by any person or entity, each of which is listed on
Section 2.2(b) of the Disclosure Schedule, that are issued and outstanding immediately prior to the
Effective Time.
(xvii) “Company Preferred Stock” shall mean the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series D-1
Preferred Stock, taken together.
6
(xviii) “Company Preferred Stockholder” shall mean a holder of Preferred Stock, each of whom
is listed on Section 2.2(a) of the Disclosure Schedule.
(xix) “Company RSU” shall have the meaning set forth in Section 1.6(c)(vi).
(xx) “Company Subsidiary” shall have the meaning ascribed to such term in Section 2.3 hereof.
(xxi) “Company Unvested Options” shall mean all Company Options that are unvested immediately
prior to the Effective Time.
(xxii) “Company Vested Options” shall mean all Company Options that are vested (and have not
been exercised) immediately prior to the Effective Time. For the avoidance of doubt, Company
Options that accelerate as a result of Parent’s election under Section 1.6(c)(i)(B) shall not be
deemed to be Company Vested Options.
(xxiii) “Company Warrants” shall mean all issued and outstanding warrants or other rights
(including commitments to grant warrants or other rights, but excluding Company Options) to
purchase or otherwise acquire Company Capital Stock (whether or not vested) held by any person or
entity, each of which is listed on Section 2.2(b) of the Disclosure Schedule.
(xxiv) “Consideration Pro Rata Portion” shall mean, with respect to each Stockholder, an
amount equal to the quotient obtained by dividing (x) the number of shares of Company Common Stock
held by such holder immediately prior to the Effective Time and/or issuable upon conversion of
shares of Company Preferred Stock held by such holder immediately prior to the Effective Time by
(y) the Total Outstanding Shares.
(xxv) “Contract” shall mean any written or oral agreement, contract, subcontract, lease,
binding understanding, instrument, note, bond, mortgage, indenture, option, warranty, purchase
order, license, sublicense, benefit plan, obligation, commitment or undertaking of any nature.
(xxvi) “Earnout Consideration” shall mean $45,000,000, consisting of cash delivered by wire
transfer of immediately available funds.
(xxvii) “Earnout Determination Date” shall mean March 1, 2010, or such earlier time as Parent
may elect.
(xxviii) “Earnout Payment Date” shall mean the date that is two (2) Business Days following
the date on which the Earnout Notice becomes final pursuant to Section 8.3 hereof.
7
(xxix) “Earnout Period” shall mean the period from the Effective Time through December 31,
2009.
(xxx) “Earnout Price” shall mean the volume-weighted sales price per share rounded to four (4)
decimal places of Parent Common Stock on the Nasdaq Global Select Market for the consecutive period
of ten (10) Business Days beginning at 9:30 a.m. New York time on the eleventh (11th)
Business Day immediately preceding the date on which the Earnout Notice becomes final and
concluding at 4:00 p.m. New York time on the second (2nd) Business Day immediately
preceding the date on which the Earnout Notice becomes final, as calculated by Bloomberg Financial
LP under the function “NUAN Equity AQR.”
(xxxi) “Enterprise Value” shall mean $180,000,000 minus the Company’s Third Party
Expenses (as defined in Section 5.4 hereof but for the avoidance of doubt, excluding any Third
Party Expenses paid by the Company prior to the Effective Time), minus the Stockholder
Representative Expense Holdback, minus any Cash Deficit, plus any Cash Surplus.
(xxxii) “Environmental Laws” shall mean all Laws relating to pollution or protection of the
environment or exposure of any individual to Hazardous Materials, including laws and regulations
relating to emissions, discharges, releases or threatened releases of Hazardous Materials, or
otherwise relating to the manufacture, processing, registration, distribution, labeling, recycling,
use, treatment, storage, disposal, transport or handling of Hazardous Materials and including any
Hazardous Materials related electronic waste, product content or product take-back requirements.
(xxxiii) “Escrow Amount” shall mean that number of fully paid, nonassessable shares of Parent
Common Stock equal to the number obtained by dividing (x) $18,000,000 by (y) the Signing Price and
rounding down to the nearest whole share.
(xxxiv) “Escrow Outstanding Shares” shall mean the aggregate number of shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time (following exercise or
termination of Company Warrants) plus the number of shares of Company Common Stock issuable upon
conversion of all of the shares of Company Preferred Stock issued and outstanding immediately prior
to the Effective Time. For the avoidance of doubt, Escrow Outstanding Shares does not include
Company RSUs and Company Incentive Options.
(xxxv) “Escrow Pro Rata Portion” shall mean, with respect to each Stockholder, an amount equal
to the quotient obtained by dividing (x) the number of shares of Company Common Stock held by such
holder immediately prior to the Effective Time and/or issuable upon conversion of shares of Company
Preferred Stock held by such holder immediately prior to the Effective Time by (y) the Escrow
Outstanding Shares.
8
(xxxvi) “Euro-Dollar
Exchange Rate” shall mean US$1.4899:€1.
(xxxvii) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(xxxviii) “Final Earnout Amount” shall mean such portion of the Earnout Consideration that is
finally determined to be payable to the Stockholders pursuant to Sections 8.1(c) and 8.2 hereof,
minus, Excess Losses (as defined in Section 7.4(b)), if any.
(xxxix) “GAAP” shall mean United States generally accepted accounting principles consistently
applied.
(xl) “Hazardous Materials” shall mean chemicals, pollutants, contaminants, wastes, toxic
substances, radioactive and biological materials, asbestos-containing materials (ACM), hazardous
substances, petroleum and petroleum products.
(xli) “Knowledge” or “Known” shall mean, with respect to the Company, the actual knowledge of
the persons listed on Exhibit G hereto and the knowledge that such persons should have acquired had
they made diligent inquiry of those employees of the Company whom such persons reasonably believe
would have actual knowledge of the matters represented.
(xlii) “Laws” shall mean any federal, state, local or foreign law, statute, ordinance, code,
rule, regulation, order, judgment, decree, or other government restriction or requirement of any
kind.
(xliii) “Lien” shall mean any lien, pledge, charge, claim, mortgage, security interest or
other encumbrance of any sort.
(xliv) “Merger Consideration” shall mean the Closing Consideration, plus the Earnout
Consideration.
(xlv) “Parent Common Stock” shall mean the common stock, par value $0.001 per share, of
Parent.
(xlvi) “Parent Material Adverse Effect” shall mean any change, event or effect that (i) is
materially adverse to the business, assets (whether tangible or intangible), financial condition,
operations or capitalization of Parent and its subsidiaries, taken as a whole or (ii) will or is
reasonably likely to materially impede the ability of Parent to timely consummate the transactions
contemplated by this Agreement in accordance with the terms hereof; provided, however, that, for
purposes of clause (i) above, in no event shall any of the following, alone or in combination with
one another, be deemed to constitute, nor shall any of the following be taken into account in
determining whether there has been or would reasonably be expected to be a Parent Material Adverse
Effect:
9
(A) any effect resulting from changes or effects in general worldwide or United States
economic, capital market or political conditions (which changes or effects do not
disproportionately affect Parent), (B) any effect resulting from changes or effects generally
affecting the industries or markets in which Parent operates (which changes or effects do not
disproportionately affect Parent), (C) any effect resulting from any act of war or terrorism (or,
in each case, any escalation thereof) which changes or effects do not disproportionately affect
Parent), (D) any changes in Laws or GAAP or the interpretation thereof, (E) any action taken
pursuant to this Agreement or at the request of the Stockholder Representative following the date
of this Agreement or (F) any change in and of itself in Parent’s stock price or trading volume.
(xlvii) “Per Share Participating Closing Consideration” shall mean the quotient obtained by
dividing (x) the Aggregate Participating Closing Consideration by (y) the Total Outstanding
Shares.
(xlviii) “Plan” shall mean the Company’s 2003 Equity Incentive Plan.
(xlix) “Related Agreements” shall mean the Certificates of Merger and the Voting and No-Hire
Agreements.
(l) “SEC” shall mean the United States Securities and Exchange Commission.
(li) “Securities Act” shall mean the Securities Act of 1933, as amended.
(lii) “Series A Aggregate Liquidation Preference” shall mean (x) the aggregate number of
shares of Series A Preferred Stock issued and outstanding immediately prior to the Effective Time,
multiplied by (y) $0.5955.
(liii) “Series A Preferred Stock” shall mean the Company’s Series A Preferred Stock, $0.001
par value per share.
(liv) “Series B Aggregate Liquidation Preference” shall mean (x) the aggregate number of
shares of Series B Preferred Stock issued and outstanding immediately prior to the Effective Time,
multiplied by (y) $0.8175 per share.
(lv) “Series B Preferred Stock” shall mean the Company’s Series B Preferred Stock, $0.001 par
value per share.
(lvi) “Series C Aggregate Liquidation Preference” shall mean (x) the aggregate number of
shares of Series C Preferred Stock issued and outstanding immediately prior to the Effective Time,
multiplied by (y) $1.7621 per share.
10
(lvii) “Series C Preferred Stock” shall mean the Company’s Series C Preferred Stock, $0.001
par value per share.
(lviii) “Series D Aggregate Liquidation Preference” shall mean (x) the aggregate number of
shares of Series D Preferred Stock issued and outstanding immediately prior to the Effective Time,
multiplied by (y) $2.3554 per share.
(lix) “Series D Preferred Stock” shall mean the Company’s Series D Preferred Stock, $0.001 par
value per share.
(lx) “Series D-1 Aggregate Liquidation Preference” shall mean (x) the aggregate number of
shares of Series D-1 Preferred Stock issued and outstanding immediately prior to the Effective
Time, multiplied by (y) $0.01 per share.
(lxi) “Series D-1 Preferred Stock” shall mean the Company’s Series D-1 Preferred Stock, $0.001
par value per share.
(lxii) “Signing Price” shall mean $16.2652 (reflecting the volume-weighted sales price per
share rounded to four (4) decimal places of Parent Common Stock on the Nasdaq Global Select Market
for the consecutive period of ten (10) Business Days beginning at 9:30 a.m. New York time on the
tenth (10th) Business Day immediately preceding the date of this Agreement and
concluding at 4:00 p.m. New York time on the first (1st) Business Day immediately
preceding the date of this Agreement, as calculated by Bloomberg Financial LP under the function
“NUAN Equity AQR.”
(lxiii) “Specified Contract” shall mean each of the Contracts listed on Exhibit E hereto.
(lxiv) “Stockholder” shall mean any holder of any Company Capital Stock that is issued and
outstanding immediately prior to the Effective Time.
(lxv) “Stockholder Representative Expense Holdback” shall mean an amount in cash equal to
$250,000.
(lxvi) “Total Company Equity Awards” shall mean that number of Company RSUs and Company
Incentive Options, in any combination, having an aggregate value of $6,250,000, with each Company
RSU having a value equal to the Per Share Participating Closing Consideration and each Company
Incentive Option having a value equal to the Black Scholes value of such option as of the date of
grant, as reasonably determined by Parent after consultation with the Company.
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(lxvii) “Total Outstanding Shares” shall mean the aggregate number of shares of Company Common
Stock issued and outstanding immediately prior to the Effective Time (following exercise or
termination of Company Warrants), plus the number of shares of
Company Common Stock issuable upon the exercise of the Company Vested Options, plus the number
of shares of Company Common Stock issuable upon conversion of all of the shares of Company
Preferred Stock issued and outstanding immediately prior to the Effective Time. For the avoidance
of doubt, Total Outstanding Shares does not include Company RSUs or Company Incentive Options.
(lxviii) “UK Company Options” shall mean those Company Options granted to employees resident
in the UK under the sub-plan established under the Plan for UK Employees.
(lxix) “UK Company Unvested Options” shall mean those UK Company Options that are unvested
immediately prior to the Effective Time.
(lxx) “UK Company Vested Options” shall mean those UK Company Options that have vested
immediately prior to the Effective Time.
Certain additional terms are defined in Annex A hereto.
(b) Effect on Capital Stock; Distribution of Merger Consideration. By virtue of the First
Step Merger and without any action on the part of Sub I, the Company or the holders of shares of
Company Capital Stock, each share of Company Capital Stock (excluding, for the avoidance of doubt,
unexercised Company Options, Company RSUs and Company Incentive Options) issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares (as defined in Section 1.7(a)
hereof) and subject to the escrow provisions contained herein), upon the terms and subject to the
conditions set forth in this Section 1.6 and throughout this Agreement, will be cancelled and
extinguished and be converted automatically into the right to receive, upon surrender of the
certificate representing such shares of Company Capital Stock in the manner provided in Section 1.9
hereof, the Merger Consideration as follows in this Section 1.6(b):
(i) Closing Consideration Payment. Promptly following the Effective Time, Parent shall
deliver to the Exchange Agent (as defined in Section 1.9) the Closing Consideration which shall be
distributed as follows:
(1) Each holder of Series D-1 Preferred Stock that is issued and outstanding immediately prior
to the Effective Time (other than Dissenting Shares (as defined in Section 1.7 hereof)) shall be
entitled to receive that number of shares of Parent Common Stock equal to: (A) the sum of (x) the
number of shares of Series D-1 Preferred Stock owned by such holder immediately prior to the
Effective Time multiplied by $0.01 plus (y) the number of shares of Company Common Stock
issuable upon conversion of the Series D-1 Preferred Stock owned by
12
such holder immediately prior
to the Effective Time multiplied by the Per Share Participating Closing Consideration divided
by (B) the Signing Price, rounded down to the nearest whole share.
(2) Each holder of Series D Preferred Stock that is issued and outstanding immediately prior
to the Effective Time (other than Dissenting Shares) shall be entitled to receive that number of
shares of Parent Common Stock equal to: (A) the sum of (x) the number of shares of Series D
Preferred Stock owned by such holder immediately prior to the Effective Time multiplied by $2.3554
plus (y) the number of shares of Company Common Stock issuable upon
conversion of the Series D Preferred Stock owned by such holder immediately prior to the
Effective Time multiplied by the Per Share Participating Closing Consideration divided by
(B) the Signing Price, rounded down to the nearest whole share.
(3) Each holder of Series C Preferred Stock that is issued and outstanding immediately prior
to the Effective Time (other than Dissenting Shares) shall be entitled to receive that number of
shares of Parent Common Stock equal to: (A) the sum of (x) the number of shares of Series C
Preferred Stock owned by such holder immediately prior to the Effective Time multiplied by $1.7621
plus (y) the number of shares of Company Common Stock issuable upon conversion of the
Series C Preferred Stock owned by such holder immediately prior to the Effective Time multiplied by
the Per Share Participating Closing Consideration divided by (B) the Signing Price, rounded
down to the nearest whole share.
(4) Each holder of Series B Preferred Stock that is issued and outstanding immediately prior
to the Effective Time (other than Dissenting Shares) shall be entitled to receive that number of
shares of Parent Common Stock equal to: (A) the sum of (x) the number of shares of Series B
Preferred Stock owned by such holder immediately prior to the Effective Time multiplied by $0.8175
plus (y) the number of shares of Company Common Stock issuable upon conversion of the
Series B Preferred Stock owned by such holder immediately prior to the Effective Time multiplied by
the Per Share Participating Closing Consideration divided by (B) the Signing Price, rounded
down to the nearest whole share.
(5) Each holder of Series A Preferred Stock that is issued and outstanding immediately prior
to the Effective Time (other than Dissenting Shares) shall be entitled to receive that number of
shares of Parent Common Stock equal to: (A) the sum of (x) the number of shares of Series A
Preferred Stock owned by such holder immediately prior to the Effective Time multiplied by $0.5955
plus (y) the number of shares of Company Common Stock issuable upon conversion of the
Series A Preferred Stock owned by such holder immediately prior to the Effective Time multiplied by
the Per Share Participating Closing Consideration divided by (B) the Signing Price, rounded
down to the nearest whole share.
(6) Each holder of Company Common Stock that is issued and outstanding immediately prior to
the Effective Time (other than Dissenting Shares) shall be entitled
13
to receive that number of
shares of Parent Common Stock equal to: (A) the number of shares of Company Common Stock owned by
such holder immediately prior to the Effective Time (but excluding, for the purpose of clarity, any
shares of Company Common Stock issuable upon conversion of any Company Preferred Stock owned by
such holder), multiplied by the Per Share Participating Closing Consideration, divided
by (B) the Signing Price rounded down to the nearest whole share.
(7) Each distribution made to a Stockholder holding Company Capital Stock pursuant to this
Section 1.6(b)(i) shall be reduced by such Stockholder’s Escrow Pro Rata Portion of the Escrow
Amount in accordance with Section 7.3(b) hereof.
(8) Notwithstanding anything in this Section 1.6(b)(i) to the contrary, in no event shall
Parent be obligated to distribute in the aggregate any number of shares of Parent Common Stock in
excess of the Closing Consideration.
(ii) Earnout Consideration Payment. On the Earnout Payment Date, Parent shall deliver to the
Exchange Agent the Final Earnout Amount, if any, which shall be distributed as follows:
(1) Each holder of Company Capital Stock that was issued and outstanding immediately prior to
the Effective Time shall be entitled to receive a cash amount equal to such Stockholder’s
Consideration Pro Rata Portion of the Final Earnout Amount.
(2) Notwithstanding anything in this Section 1.6(b)(ii) to the contrary, in no event shall
Parent be obligated pursuant to this Section 1.6(b)(ii) to distribute in the aggregate cash in
excess of the Earnout Consideration.
(c) Treatment of Company Options, Company RSUs and Company Incentive Options.
(i) With respect to each Company Option that is outstanding immediately prior to the Effective
Time (which shall not include UK Company Vested Options that are exercised in accordance with
Section 1.6(g)), Parent shall, at its sole discretion and pursuant to a written election of Parent
made to the Company a reasonable period of time prior to the Closing, agree to either (A) assume
each Company Option in accordance with the terms set forth below in this Section 1.6(c)(i) and the
Plan or (B) cause each Company Option (to the extent unvested) to fully accelerate immediately
prior to the Effective Time and thereafter terminate in accordance with its respective terms (each
referred to herein as a “Cashed-Out Option”) and Parent will make a cash payment to the holder of
each such Cashed-Out Option in an amount equal to (x) the number of shares of Company Common Stock
underlying each Company Option held by such holder immediately prior to the Effective Time
multiplied by (y) the Per Share Participating Closing
14
Consideration and minus
(z) the aggregate exercise price of each such Company Option. If Parent elects to assume all
Company Options, (i) each such assumed Company Option shall thereby be converted into an option (an
“Assumed Option”) to purchase the number of shares of Parent Common Stock equal to the product of
the number of shares of Company Common Stock that were issuable upon exercise of such Company
Option immediately prior to the Effective Time multiplied by the Closing Exchange Ratio (as
defined below), rounded down to the nearest whole number of shares of Parent Common Stock, and
(ii) the per share exercise price for the shares of Parent Common Stock issuable upon exercise of
such Assumed Option shall be equal to the quotient obtained by dividing the per share exercise
price of the Company Option immediately prior to the Closing Date by the Closing Exchange Ratio,
rounded up to the nearest whole cent. Each Assumed Option shall otherwise retain the terms and
conditions (including vesting schedule) of the Company Option as were applicable under the
respective Company Option immediately prior to the Effective Time.
(ii) On the first Business Day after the occurrence of the Earnout Payment Date (the “Option
Adjustment Date”), at Parent’s sole discretion and pursuant to a written election delivered to the
Stockholder Representative, either (A) each Assumed Option (to the extent unexercised and
outstanding as of the Option Adjustment Date) shall be readjusted as described below to reflect the
actual payment of the Final Earnout Amount, or (B) the holder of each Assumed Option (to the extent
unexercised and outstanding as of the Option Adjustment Date) shall receive from Parent a cash
payment equal to such holder’s Option Earnout Value (as defined below). The
adjustment pursuant to Section 1.6(c)(ii)(A) shall result in (X) an Assumed Option to purchase
the number of shares of Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company Option immediately prior to the
Effective Time multiplied by the Earnout Exchange Ratio (as defined below), rounded down to the
nearest whole number of shares of Parent Common Stock, and (Y) the per share exercise price for the
shares of Parent Common Stock issuable upon exercise of such Assumed Option shall be equal to the
quotient obtained by dividing the per share exercise price of the Company Option immediately prior
to the Closing Date by the Earnout Exchange Ratio, rounded up to the nearest whole cent. Each
Assumed Option shall, other than the adjustments described above, retain the terms and conditions
(including vesting schedule) of the Company Option.
(iii) To the extent an Assumed Option, or any portion thereof, has been exercised prior to the
Option Adjustment Date, as applicable, the holder thereof shall have the right to receive, on the
Option Adjustment Date, as applicable, at Parent’s sole discretion and pursuant to a written
election delivered to the Stockholder Representative, either (A) the Exercised Option Earnout Value
(as defined below) or (B) a cash payment from Parent equal to the Exercised Option Earnout Value
multiplied by the Earnout Price.
(iv) On the Option Adjustment Date, each former holder of a Cashed-Out Option (if and as
applicable) shall be entitled to receive, at Parent’s sole discretion and pursuant to a
15
written
election delivered to the Stockholder Representative, either (A) the number of shares of Parent
Common Stock equal to the quotient obtained by dividing such holder’s Option Earnout Value by the
Earnout Price, rounded down to the nearest whole number of shares of Parent Common Stock (with any
fractional share amount paid in cash by Parent) or (B) a cash payment from Parent equal to such
holder’s Option Earnout Value.
(v) In the event that Parent shall make any Additional Earnout Payments pursuant to
Section 8.1(c)(iii), each Assumed Option (to the extent unexercised and outstanding as of the first
Business Day after the Additional Earnout Payment Date) shall be readjusted to reflect the actual
payment of such Additional Earnout Payments in a manner consistent with Section 1.6(c)(ii). To the
extent an Assumed Option, or any portion thereof, has been exercised by a holder prior to the first
Business Day after the Additional Earnout Payment Date, as applicable, or the individual is a
former holder of a Cashed-Out Option (if and as applicable), such holder shall have the right to
receive, on such first Business Day, consideration in a manner consistent with Section 1.6(c)(iii)
or (iv), as applicable.
(vi) At the Effective Time, each restricted stock unit award of the Company (each, a “Company
RSU”) that is outstanding immediately prior to the Effective Time, whether or not then vested
(each, an “Assumed Unit”), shall be assumed by Parent. Each Assumed Unit shall be converted into
an award to receive that number of shares of Parent Common Stock equal to the product obtained by
multiplying (x) the number of shares of Company Common Stock subject to such Assumed Unit
immediately prior to the Effective Time by (x) the Closing Exchange Ratio, rounded down, if
necessary, to the nearest whole share of Parent Common Stock. Each Assumed Unit shall otherwise be
subject to the same terms and conditions (including as to vesting and issuance) as were applicable
under the respective Company RSU immediately prior to the Effective Time. Each Company Incentive
Option shall be treated in a manner consistent with the terms of Section 1.6(c)(i).
Notwithstanding anything to the contrary in this Agreement, (i) in no
event shall any Assumed Unit or any Assumed Incentive Option be adjusted as a result of the
earning or payment of any Earnout Consideration and (ii) the only Company RSUs and Company
Incentive Options eligible to be assumed by Parent under Section 1.6(c)(i) and Section 1.6(c)(vi),
as the case may be, are those Company RSUs and Company Incentive Options issued pursuant to
Section 5.11 that are outstanding immediately prior to the Effective Time.
(vii) For the purposes of this Section 1.6(c):
(1) “Assumed Incentive Option” shall mean any Company Incentive Option that Parent elects to
assume and convert into an option to purchase the number of shares of Parent Common Stock in a
manner consistent with the terms of Section 1.6(c)(i).
(2) “Closing Exchange Ratio” shall mean the quotient obtained by dividing (A) the Per Share
Assumed Option Closing Consideration by (B) the Closing Price.
16
(3) “Closing Price” shall mean the volume-weighted sales price per share rounded to four (4)
decimal places of Parent Common Stock on the Nasdaq Global Select Market for the consecutive period
of ten (10) Business Days beginning at 9:30 a.m. New York time on the eleventh (11th)
Business Day immediately preceding the Effective Time and concluding at 4:00 p.m. New York time on
the second (2nd) Business Day immediately preceding the Effective Time, as calculated by
Bloomberg Financial LP under the function “NUAN Equity AQR.”
(4) “Earnout Exchange Ratio” shall mean the sum of (A) the Closing Exchange Ratio plus
(B) the quotient obtained by dividing the Per Share Earnout Consideration by the Earnout Price.
(5) “Exercised Option Earnout Value” shall mean additional shares of Parent Common Stock in an
amount equal to the difference between (A) the total number of shares of Parent Common Stock that
the holder thereof would have received had the Assumed Option, or the portion thereof which was
previously exercised, been readjusted pursuant to the Earnout Exchange Ratio, as applicable,
minus (B) the number of shares of Parent Common Stock that were issued upon the previous
exercise of such Assumed Option.
(6) “Option Earnout Value” shall mean (A) the number of shares of Company Common Stock
underlying each Company Option held by a holder immediately prior to the Effective Time multiplied
by (B) the Per Share Earnout Consideration.
(7) “Per Share Assumed Option Closing Consideration” shall mean the Per Share Participating
Closing Consideration divided by the Signing Price and multiplied by the Closing Price.
(8) “Per Share Earnout Consideration” shall mean the quotient obtained by dividing (A) the
Final Earnout Amount by (B) the Total Outstanding Shares.
(viii) If and to the extent necessary or required by the terms of the Plan or the terms of any
Company Option, Company RSU, or Company Incentive Option agreement, the Company shall, prior to the
Effective Time, (i) provide any notices to and obtain any consents from holders of Company Options,
Company RSUs, and Company Incentive Options and (ii) amend
the terms of its equity incentive plans or arrangements, to give effect to the provisions of
this Section 1.6(c). It is intended that the assumption of the Company Options and Company
Incentive Options by Parent and each Assumed Option and Assumed Incentive Option shall comply with
Section 424 of the Code and shall also be considered by Parent and the Company to be in good faith
compliance with respect to Section 409A of the Code. Each of Parent, Merger Sub, the Interim
Surviving Corporation and the Final Surviving Entity agree that the treatment of the Company
Options, the Company RSUs, the Company Incentive Options, the Assumed Options, the Assumed Units,
the Assumed Incentive Options and any payments to any holder made in the manner set forth
17
in this
Section 1.6(c) is either exempt from or in compliance with the provisions of Section 409A of the
Code, as the case may be, and none of Parent, Merger Sub, the Interim Surviving Corporation or the
Final Surviving Entity shall take any action that is inconsistent with such agreement. The Company
shall take no action, other than those actions contemplated by this Agreement, which will cause or
result in the accelerated vesting of the Company Options, Company RSUs or Company Incentive
Options. As soon as practicable after each of the Effective Time and, with respect to Assumed
Options, the Earnout Payment Date, Parent shall deliver to the holder of each Company Option,
Company RSU and Company Incentive Option, as applicable, appropriate notices setting forth the
number of shares of Parent Common Stock subject to such Assumed Option, Assumed Incentive Option
and Assumed Unit then held by each such holder and the per share exercise price under each such
Assumed Option and Assumed Incentive Option.
(ix) Parent shall take such actions as are necessary for the assumption of the Company
Options, Company RSUs and Company Incentive Options pursuant to this Section 1.6(c), including the
reservation, issuance and listing of Parent Common Stock as is necessary to effectuate the
transactions contemplated by this Section 1.6(c). Parent shall use its reasonable best efforts to
file a registration statement on Form S-8 with the SEC on or prior to the 5th Business
Day following the Closing Date with respect to the shares of Parent Common Stock subject to the
Assumed Options, Assumed Units and Assumed Incentive Options and use commercially reasonable
efforts to maintain the effectiveness of such registration statement for so long as such Assumed
Options, Assumed Units and Assumed Incentive Options remain outstanding. To the extent that shares
of Parent Common Stock become issuable as a result of adjustments to Assumed Options made pursuant
to Section 1.6(c)(ii) and Section 1.6(c)(iii) and such shares are not registered on the original
Form S-8 filed with the SEC for the Assumed Options, Parent agrees to file a registration statement
on Form S-8 (or an amendment to the previously filed Form S-8 for the Assumed Options if permitted
by applicable law) with respect to such additional shares of Parent Common Stock covered by such
adjustments on or prior to the Earnout Payment Date and to use commercially reasonable efforts to
maintain the effectiveness of such registration statement for so long as such Assumed Options
remain outstanding.
(x) Parent may assume, in its sole and absolute discretion, the Plan, with such assumption
being effective as of the Effective Time; provided, however, that if Parent assumes Company Options
and/or Company Incentive Options, Parent shall assume the Plan. Upon receipt of written notice
from Parent confirming its intent to assume the Plan, the Company shall take such actions prior to
the Effective Time as are reasonable and appropriate to effect the provisions of this
Section 1.6(c)(x), including, without limitation, (i) taking such actions as may be required to
confirm that the Board of Directors of Parent (or any of its committees) shall, effective as of the
Effective Time, become the administrator of the assumed Plan and shall have any and all amendment
authority with respect thereto, (ii) taking such actions as may be required to effect the grant of
Company RSUs
and Company Incentive Options, including taking such actions as may be required pursuant to
18
Section 5.11 hereto and (iii) adopting such amendments and obtaining such consents as may be
required to effect the assumption of the Plan contemplated by this Section 1.6(c)(x).
(d) Treatment of Company Warrants. The Company shall take all necessary actions (including
providing all required notices) to ensure that all outstanding Company Warrants are exercised or
terminated immediately prior to the Effective Time.
(e) Withholding Taxes. Notwithstanding any other provision in this Agreement, Parent, the
Company, the Subs, the Exchange Agent (as defined in Section 1.9) and the Escrow Agent shall have
the right to deduct and withhold Taxes (as defined in Section 2.11) from any payments to be made
hereunder (including with respect to the Final Earnout Amount, if any) if such withholding is
required by law and to request any necessary Tax forms, including Form W-9 or the appropriate
series of Form W-8, as applicable, or any similar information, from the Stockholders and any other
recipients of payments hereunder. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been delivered and paid to
the Stockholder or other recipient of payments in respect of which such deduction and withholding
was made.
(f) Capital Stock of Subs. Each share of Common Stock of Sub I 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 Interim Surviving Corporation.
Each stock certificate of Sub I evidencing ownership of any such shares shall continue to evidence
ownership of such shares of capital stock of the Interim Surviving Corporation. Each share of
Common Stock of the Interim Surviving Corporation issued and outstanding immediately after the
Effective Time shall be converted into and exchanged for the applicable corresponding interest of
the Final Surviving Entity. Each stock certificate of the Interim Surviving Corporation evidencing
ownership of any such shares shall continue to evidence the applicable corresponding interest in
the Final Surviving Entity.
(g) Treatment of UK Company Options. The Company shall notify each holder of UK Company
Vested Options that he or she has the right to exercise his or her UK Company Vested Options prior
to the Effective Time and that, to the extent that such holder exercises such UK Company Vested
Options, such holder will participate in the Merger in accordance with Section 1.6(b). If a UK
Company Vested Option is not timely exercised after such notice from the Company it shall be
treated as all other Company Options as set out in Section 1.6(c) as an Assumed Option or a Cashed
Out-Option. UK Company Unvested Options shall also be treated as Assumed Options or as Cashed
Out-Options as set out in Section 1.6(c).
1.7 Dissenting Shares.
19
(a) Notwithstanding any other provisions of this Agreement to the contrary, any shares of
Company Capital Stock held by a holder who has not voted for the Merger, who shall have properly
demanded appraisal for such shares in accordance with Section 262 of Delaware Law, and who has not
effectively withdrawn or lost such holder’s appraisal rights under Delaware Law
(collectively, the “Dissenting Shares”) shall not be converted into or represent a right to
receive the applicable consideration for Company Capital Stock set forth in Section 1.6 hereof, but
the holder thereof shall only be entitled to such rights as are provided by Delaware Law.
(b) Notwithstanding the provisions of Section 1.7(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, 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 for Company Capital Stock, as applicable, set forth in
Section 1.6 hereof, without interest thereon, upon surrender of the certificate representing such
shares, and shall thereupon cease to be Dissenting Shares for purposes of this Agreement.
(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 (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. Notwithstanding the foregoing,
to the extent that Parent or the Company (i) makes any payment or payments in respect of any
Dissenting Shares in excess of the consideration that otherwise would have been payable in respect
of such shares in accordance with this Agreement (provided, that such payment, if made after the
Effective Time other than pursuant to court direction under Section 262(i) of Delaware Law, has
been approved by the Stockholder Representative, which approval shall not be withheld unreasonably)
or (ii) reasonably incurs any other costs or expenses (including specifically, but without
limitation, reasonable attorneys’ fees, costs and expenses in connection with any action or
proceeding or in connection with any investigation) in respect of any Dissenting Shares (excluding
payments for such shares) (together “Dissenting Share Payments”), Parent shall be entitled to
recover under the terms of Section 7.2 hereof the amount of such Dissenting Share Payments without
regard to the Threshold Amount (as defined in Section 7.4(a) hereof).
1.8 Parent’s Obligations Fulfilled.
(a) At least two (2) Business Days prior to the Effective Time, the Company shall deliver to
Parent an updated version of Section 2.2(a) of the Disclosure Schedule.
(b) At least two (2) Business Days prior to the Effective Time, and thereafter within two (2)
Business Days from the time Parent deposits the Earnout Consideration, if any, with the Exchange
Agent under this Agreement, the Stockholder Representative shall deliver to Parent
20
and the Exchange
Agent a schedule (each, a “Payment Schedule”) setting forth (i) the name and address of each
Stockholder/former Stockholder entitled to distribution of Merger Consideration at such time and
(ii) the amount of consideration to which each such Stockholder/former Stockholder is then
entitled, together with any supporting schedules and documentation (showing the number and type of
shares held immediately prior to the Effective Time by each such holder, together with calculations
of the amount then payable to such holder). Parent and the Exchange Agent may rely on the Payment
Schedule for distributions and shall have no responsibility or liability with respect thereto other
than the payment and delivery of the Merger Consideration in accordance with the
Payment Schedule. Upon Parent or the Exchange Agent making each distribution required of
Parent under this Agreement to the Stockholders/former Stockholders, Parent shall have fulfilled
its obligations with respect to such payment.
1.9 Surrender of Certificates.
(a) Exchange Agent. Parent, or an institution selected by Parent prior to the Effective Time
and reasonably acceptable to the Stockholder Representative, shall serve as the exchange agent
(Parent in such capacity, or such institution, the “Exchange Agent”) for the Merger.
(b) Parent to Provide Consideration. Subject to the provisions of Section 7.2(b) relating to
escrow arrangements, promptly following the Effective Time, and on the Earnout Payment Date (if
any), as applicable, Parent shall make available to the Exchange Agent for exchange in accordance
with this ARTICLE I the consideration payable at such times pursuant to Section 1.6 hereof in
exchange for outstanding shares of Company Capital Stock; provided, however, that, Parent shall
deposit into the Escrow Fund (as defined in Section 7.3(a) hereof) the shares of Parent Common
Stock that comprise the Escrow Amount out of the aggregate number of shares of Parent Common Stock
otherwise deliverable to the Stockholders pursuant to Section 1.6 hereof. The Escrow Pro Rata
Portion of the Parent Common Stock comprising the Escrow Amount shall be deemed to be contributed
to the Escrow Fund with respect to each Stockholder. Neither Parent nor the Exchange Agent shall
have any liability whatsoever with respect to the distribution of such payments among the
Stockholders/former Stockholders of the Company provided that such payments are in accordance with
the Payment Schedule.
(c) Exchange Procedures. On or after the Closing Date, Parent shall (or shall cause the
Exchange Agent to) mail a letter of transmittal, in a form reasonably acceptable to the Company,
(the “Letter of Transmittal”) to each Stockholder at the address set forth opposite each such
Stockholder’s name on Section 2.2(a) of the Disclosure Schedule. After receipt of such Letter of
Transmittal, the Stockholders will surrender the certificates representing their shares of Company
Capital Stock (the “Company Stock Certificates”) to the Exchange Agent for cancellation together
with a duly completed and validly executed Letter of Transmittal. Upon surrender of a Company
Stock Certificate for cancellation to the Exchange Agent, together with such Letter of Transmittal,
duly completed and validly executed in accordance with the instructions thereto, subject to the
terms
21
of Section 1.9(e) hereof, the holder of such Company Stock Certificate shall be entitled to
receive from the Exchange Agent in exchange therefor, Parent Common Stock to which such holder is
entitled pursuant to Section 1.6 hereof (less the Escrow Pro Rata Portion of the Escrow Amount to
be deposited into the Escrow Fund with respect to such Stockholder), and the Company Stock
Certificate so surrendered shall be cancelled. Until so surrendered, each Company Stock
Certificate outstanding after the Effective Time will be deemed, for all corporate purposes
thereafter, to evidence only the right to receive the applicable portion of the Merger
Consideration pursuant to Section 1.6 hereof in exchange for shares of Company Capital Stock
(without interest) into which such shares of Company Capital Stock shall have been so converted.
No portion of the Merger Consideration will be paid to the holder of any unsurrendered Company
Stock Certificate with respect to shares of Company Capital Stock formerly represented thereby
until the holder of record of such Company Stock Certificate shall surrender such Company Stock
Certificate pursuant hereto.
Notwithstanding anything in Section 1.9 to the contrary, if a record holder, on an aggregate
basis together with all affiliates of such record holder, holds at least 150,000 shares of Company
Capital Stock and surrenders to Parent or the Exchange Agent (i) a duly executed Letter of
Transmittal and (ii) the applicable Company Stock Certificates held by such holder, at least two
(2) Business Days prior to the anticipated Closing Date, and such holder is the record holder of
such Company Capital Stock as of the Closing Date, then the holder of such Company Stock
Certificates shall be entitled to receive, no later than two (2) Business Days after the Closing
Date certificate(s) evidencing the Parent Common Stock to which such holder is entitled pursuant to
Section 1.6 hereof (less the Escrow Amount to be deposited into the Escrow Fund with respect to
such Stockholder).
(d) Distributions With Respect to Unexchanged Shares. No dividends or 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 Company Stock Certificate
with respect to the shares of Parent Common Stock represented thereby until the holder of record of
such Company Stock Certificate shall surrender such Company Stock Certificate. Subject to
applicable law, following surrender of any such Company Stock Certificate, there shall be paid to
the record holder of the certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid with respect to
such whole shares of Parent Common Stock. No interest shall be payable on any cash deliverable
upon the exchange of any Company Capital Stock.
(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 Company Stock Certificate surrendered in exchange
therefor is registered, or if any cash amounts are to be disbursed pursuant to Section 1.6 hereof
to a person other than the person or entity whose name is reflected on the Company Stock
Certificate surrendered in exchange therefor, it will be a condition of the issuance or delivery
thereof that the certificate so surrendered will be properly endorsed and otherwise in proper form
for transfer and that the person requesting such exchange will have paid to Parent or any agent
designated by it
22
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
certificate 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) Exchange Agent to Return Merger Consideration. At any time following the last day of the
respective six (6) month period following each of the Effective Time and the Earnout Payment Date
(if any), as applicable, Parent shall be entitled to require the Exchange Agent to deliver to
Parent or its designated successor or assign all shares of Parent Common Stock and cash that have
been deposited with the Exchange Agent pursuant to Section 1.9(b) hereof, and any income or
proceeds thereof, not disbursed to the holders of Company Stock Certificates pursuant to
Section 1.9(c) hereof, and thereafter the holders of Company Stock Certificates shall be entitled
to look only to Parent (subject to the terms of Section 1.9(g) hereof) only as general creditors
thereof with respect to any and all amounts that may be payable to such holders of Company Stock
Certificates pursuant to Section 1.6 hereof upon the due surrender of such Company Stock
Certificates in the manner set forth in Section 1.9(c) hereof.
(g) No Liability. Notwithstanding anything to the contrary in this Section 1.9, neither the
Exchange Agent, the Final Surviving Entity, 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 Merger Consideration paid in
respect of the surrender for exchange of shares of Company Capital Stock in accordance with the
terms hereof 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 Final Surviving Entity of shares of Company Capital Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Company Stock Certificates are
presented to the Final Surviving Entity 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 Company Stock Certificates 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 amount, if any, 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 Stockholder who is the owner of such lost, stolen or destroyed certificates to either
(i) deliver a bond in such reasonable and customary amount as it may reasonably direct or
(ii) provide an indemnification agreement in a reasonable and customary form acceptable to Parent,
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.
23
1.12 Reorganization Status. The Integrated Merger is intended to constitute a “reorganization”
within the meaning of Section 368(a) of the Code. Parent and the Company intend that the First
Step Merger and the Second Step Merger will constitute integrated steps in a single “plan of
reorganization” within the meaning of Treas. Reg. §1.368-2(g) and 1.368-3, which plan of
reorganization the parties adopt by executing this Agreement. None of the parties hereto have
taken, will take or will cause to be taken, any action, except as specifically contemplated by this
Agreement, that reasonably could be expected to cause the Integrated Merger to fail to qualify as 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 Effective Time, any
further action is necessary or desirable to carry out the purposes of this Agreement and to vest
the Final Surviving Entity with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of the Company, Parent, the Subs, and the officers and directors
of the Company, Parent and the Subs 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
The Company hereby represents and warrants to Parent and the Subs, subject to such exceptions
as are specifically disclosed in the disclosure schedule, which disclosure shall be deemed to be
disclosed and incorporated into any section and paragraph numbers where such disclosure would
otherwise be appropriate if and to the extent that the relevance of such other sections and
paragraphs is or should be reasonably apparent to the reader, supplied by the Company to Parent
(the “Disclosure Schedule”) and dated as of the date hereof, on the date hereof and as of the
Effective Time, as though made at the Effective Time, as follows (references to “Company” in this
ARTICLE II shall refer, wherever not inappropriate by reference to the context, to the Company and
each Company Subsidiary):
2.1 Organization of the Company. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Company has the corporate power
to own its properties and to carry on its business as currently conducted. The Company is duly
qualified or licensed to do business and in good standing as a foreign corporation in each
jurisdiction in which such qualification or licensure is required by law, except for those
jurisdictions where failure to be so qualified or licensed and in good standing would not
reasonably be expected to have, individually, or in the aggregate, a Company Material Adverse
Effect. The Company and each Company Subsidiary has made available a true and correct copy of its
certificate of incorporation and bylaws (or, in respect of SNAPin Software UK Limited, its
memorandum and articles of association), each as amended to date and in full force and effect on
the date hereof (collectively, the “Charter Documents”), to Parent. Section 2.1 of the Disclosure
Schedule lists the
24
directors and officers of the Company as of the date hereof. The operations now being
conducted by the Company are not now and have never been conducted by the Company under any other
name. Section 2.1 of the Disclosure Schedule also lists (i) each jurisdiction in which the Company
is qualified or licensed to do business and (ii) every state or foreign jurisdiction in which the
Company has employees or facilities.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of 49,650,000 shares of Company
Common Stock, of which 2,320,592 shares are issued and outstanding, and 23,841,588 shares of
Company Preferred Stock, of which 3,620,147 shares have been designated Series A Preferred Stock,
of which 3,600,147 shares are issued and outstanding, 3,669,725 shares have been designated
Series B Preferred Stock, of which 3,669,725 shares are issued and outstanding, 10,996,126 shares
have been designated Series C Preferred Stock, of which 10,974,845 shares are issued and
outstanding, 5,250,000 shares have been designated Series D Preferred Stock, of which 5,094,676
shares are issued and outstanding, and 305,590 shares have been designated Series D-1 Preferred
Stock, none of which are issued and outstanding. Each share of Preferred Stock outstanding is
convertible into one share of Company Common Stock. As of the date hereof, the capitalization of
the Company is as set forth in Section 2.2(a) of the Disclosure Schedule. The Company Capital
Stock is held by the persons with the domicile addresses and in the numbers of shares set forth in
Section 2.2(a) of the Disclosure Schedule. All outstanding shares of Company Capital Stock are
duly authorized, validly issued, fully paid and non-assessable and except as set forth in
Section 2.2(a) of the Disclosure Schedule, not issued in violation of any preemptive rights created
by statute, the Charter Documents of the Company, or any agreement to which the Company is a party
or by which it is bound, and together with all Company Options and Company Warrants have been
issued in compliance with all applicable federal and state securities laws. The Company has not,
and will not have, suffered or incurred any liability (contingent or otherwise) or claim, loss,
damage, deficiency, cost or expense relating to or arising out of the issuance or repurchase of any
Company Capital Stock or options or warrants to purchase Company Capital Stock, or out of any
agreements or arrangements relating thereto (including any amendment of the terms of any such
agreement or arrangement). There are no declared or accrued but unpaid dividends with respect to
any shares of Company Capital Stock. The Company has no capital stock other than the Company
Capital Stock authorized, issued or outstanding. The Company has no Company Capital Stock that is
unvested.
(b) Except for the Plan or as set forth in Section 2.2(b) of the Disclosure Schedule, the
Company has never adopted, sponsored or maintained any stock option plan or any other plan or
agreement providing for equity compensation to any person. The Company has reserved 4,300,000
shares of Company Common Stock for issuance to employees and directors of, and consultants to, the
Company upon the issuance of stock or the exercise of options granted under the Plan or any other
plan, agreement or arrangement (whether written or oral, formal or informal),
25
of which 3,507,800 shares are issuable, as of the date hereof, upon the exercise of
outstanding, unexercised options. Except for the Company Options and Company Warrants and as
otherwise set forth in Section 2.2(b) of the Disclosure Schedule (such schedule to contain, for
each holder of Company Options and Company Warrants, the name and address of such holder, the
number of shares of Company Common Stock or Company Preferred Stock issuable upon exercise of such
Company Options or Company Warrants held by such holder, the vesting schedule and exercise price
of such Company Options and Company Warrants, the dates on which such Company Options and Company
Warrants were granted and will expire, and whether any Company Options are intended to be incentive
stock options under the Code), there are no options, warrants, calls, rights, convertible
securities, commitments or agreements of any character, written or oral, to which the Company is a
party or by which the Company 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
Company Capital Stock 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
or as set forth in Section 2.2(b) of the Disclosure Schedule, there are no voting trusts, proxies,
or other agreements or understandings with respect to the voting securities of the Company. Except
as set forth in Section 2.2(b) of the Disclosure Schedule, there are no agreements to which the
Company is a party relating to the registration, sale or transfer (including agreements relating to
rights of first refusal, co-sale rights or “drag-along” rights) of any Company Capital Stock. As a
result of the First Step 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 Subsidiaries. Section 2.3 of the Disclosure Schedule lists each of the Company’s
subsidiaries as of the date hereof (each, a “Company Subsidiary”), the jurisdiction of
incorporation of each such subsidiary, and the Company’s equity interest therein. Each subsidiary
of the Company is wholly owned by the Company. Except as set forth in Section 2.3 of the
Disclosure Schedule, neither the Company nor any of its subsidiaries has agreed, is obligated to
make, or is bound by any Contract under which it may become obligated to make any future investment
in, or capital contribution to, any other entity. Except as set forth in Section 2.3 of the
Disclosure Schedule, neither the Company nor any of its subsidiaries directly or indirectly owns
any equity or similar interest in or any interest convertible, exchangeable or exercisable for, any
equity or similar interest in, any person.
2.4 Authority. The Company has all requisite 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 and any Related Agreements to
which the Company is a party and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the
26
part of the Company and no further action is required on the part of the Company to authorize
the Agreement and any Related Agreements to which it is a party and the transactions contemplated
hereby and thereby, subject only to the approval of this Agreement by the Stockholders entitled to
vote thereon. The vote required to approve this Agreement by the Stockholders entitled to vote
thereon is set forth in Section 2.4 of the Disclosure Schedule (the “Sufficient Stockholder Vote”).
This Agreement and the Integrated Merger have been unanimously approved by the Board of Directors
of the Company. This Agreement and each of the Related Agreements to which the Company is a party
has been duly executed and delivered by the Company 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 it 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.
2.5 No Conflict. Except as set forth on Section 2.5 of the Disclosure Schedule, the execution
and delivery by the Company of this Agreement and any Related Agreement to which the Company 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
Charter Documents, (ii) any Material Contract, or (iii) any material judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of its properties
(whether tangible or intangible) or assets. Section 2.5 of the Disclosure Schedule sets forth all
necessary consents, waivers and approvals of parties to any Material Contracts that are required
thereunder in connection with the Merger, or for any such Material Contract to remain in full force
and effect without limitation, modification or alteration after the Effective Time so as to
preserve all rights of, and benefits to, the Company under such Contracts from and after the
Effective Time. Following the Effective Time, the Interim Surviving Corporation (and following the
Second Step Merger, the Final Surviving Entity) will be permitted to exercise all of its rights
under such Material Contracts without the payment of any additional amounts or consideration under
any such Material Contracts, other than ongoing fees, royalties or payments which the Company would
otherwise be required to pay pursuant to the terms of such Material Contracts had the transactions
contemplated by this Agreement not occurred.
2.6 Consents. No consent, notice, 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 or regulatory authority,
instrumentality, agency or commission (each, a “Governmental Entity”), is required by, or with
respect to, the Company in connection with the execution and delivery of this Agreement and any
Related Agreement to which the Company is a party or the consummation of the transactions
contemplated hereby and thereby, except for (i) the filing of the Certificate of Merger with the
Secretary of State
27
of the State of Delaware and the Second Step Certificate of Merger, and (ii) compliance with
the pre-merger notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the “HSR Act”) and under the comparable non-U.S. competition laws the parties
reasonably determine apply.
2.7 Company Financial Statements.
(i) Section 2.7 of the Disclosure Schedule sets forth the Company’s (i) audited balance sheets
as of December 31, 2006 and 2007, and the consolidated statements of income, cash flow and
stockholders’ equity for the twelve (12) month periods ended December 31, 2006 and 2007 (the
“Year-End Financials”), and (ii) unaudited balance sheets as of March 31, 2007 and March 31, 2008
(the “Balance Sheet Date”), and the related unaudited statement of income, cash flow and
stockholders’ equity for the three month periods then ended (the “Interim Financials”). The
Year-End Financials and the Interim Financials (collectively referred to as the “Financials”) have
been prepared in accordance with GAAP and Regulation S-X promulgated under the Exchange Act
(“Regulation S-X”) applied on a consistent basis throughout the periods indicated and consistent
with each other (except that the Interim Financials do not contain footnotes and other presentation
items that may be required by GAAP). The Interim Financials have been reviewed by the Company’s
independent accountants in accordance with Statement of Auditing Standards No. 100 (“SAS-100”).
The Financials fairly present, in all material respects, the Company’s financial condition,
operating results and cash flows as of the dates and during the periods indicated therein, subject
in the case of the Interim Financials to normal year-end adjustments, which are not material in
amount or significance in any individual case or in the aggregate. The Company’s unaudited
consolidated balance sheet as of the Balance Sheet Date is referred to hereinafter as the “Current
Balance Sheet.”
(ii) Any financial statements provided by the Company pursuant to Section 5.14 hereof, when
delivered, will (i) have been derived from the books and records of the Company, and (ii) fairly
present, in all material respects, the consolidated financial position, results of operations and
cash flows of the Company at the dates and for the periods indicated in accordance with GAAP and
Regulation S-X promulgated under the Exchange Act, except as indicated in the footnotes thereto.
2.8 No Undisclosed Liabilities. The Company has no liability, indebtedness, obligation,
expense, claim, deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured or other (“Liabilities”) that would (i) be required to be reflected
in financial statements in accordance with GAAP or (ii) to the Knowledge of the Company, that would
not be required to be reflected in financial statements in accordance with GAAP, in each case of
(i) and (ii) other than Liabilities (a) which have been reflected in the Current Balance Sheet,
(b) arising in the ordinary course of business consistent with past practices since the Balance
Sheet Date (c) arising under the Company’s Contracts (other than as a result of a breach by the
Company)
28
which are not required to be reflected in the Company’s financial statements under GAAP, or
(d) set forth in Section 2.8 of the Disclosure Schedule. The aggregate amount of the Company’s
indebtedness for borrowed money outstanding on the date hereof is $0.
2.9 Internal Controls. The Company maintains accurate books and records reflecting its assets
and liabilities and maintains proper and adequate internal accounting controls which the Company’s
Board of Directors and management reasonably believe provide reasonable assurance that
(i) transactions are executed with management’s authorization and (ii) transactions are recorded as
necessary to permit preparation of the consolidated financial statements of the Company in
accordance with GAAP and to maintain accountability for the Company’s consolidated assets. As of
the date of this Agreement, there has been no fraud, whether or not material, that involved
management or other employees of the Company who have a significant role in the Company’s internal
controls over financial reporting.
2.10 No Changes. Since the Balance Sheet Date, except as set forth on Section 2.10 of the
Disclosure Schedule, there has not been, occurred or arisen any:
(a) other than immaterial transactions with a total monetary value that does not exceed
$50,000 individually or $200,000 in the aggregate, transaction by the Company except in the
ordinary course of business and consistent with past practices;
(b) amendments or changes to the Charter Documents of the Company other than as contemplated
by this Agreement;
(c) capital expenditure or commitment by the Company exceeding $50,000 individually or
$200,000 in the aggregate, except as contemplated by the Company’s 2008 operating plan approved by
the Company’s Board of Directors, a copy of which has been provided to Parent;
(d) payment, discharge or satisfaction, in any amount in excess of $50,000 in any one case, or
$200,000 in the aggregate, of any claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise of the Company), other than payments, discharges or
satisfactions in the ordinary course of business, consistent with past practices, of liabilities
reflected or reserved against in the Current Balance Sheet or arising in the ordinary course of
business since the Balance Sheet Date;
(e) destruction of, damage to, or loss of any material assets (whether tangible or
intangible), material business or material customer of the Company (whether or not covered by
insurance);
(f) employment dispute, including but not limited to, claims or matters raised by any
individuals or any workers’ representative organization, bargaining unit or union regarding labor
29
trouble or claim of wrongful discharge or other unlawful employment or labor practice or
action with respect to the Company;
(g) change in accounting methods or practices (including any change in depreciation or
amortization policies or rates) by the Company other than as required by GAAP;
(h) adoption of or change in any material Tax (as defined in Section 2.11) election or any Tax
accounting method, entering into any closing agreement with respect to Taxes, settlement or
compromise of any Tax claim or assessment, or extension or waiver of the limitation period
applicable to any Tax claim or assessment;
(i) revaluation by the Company of any of its assets (whether tangible or intangible),
including without limitation, writing down the value of inventory or writing off notes or accounts
receivable;
(j) declaration, setting aside or payment of a dividend or other distribution (whether in
cash, stock or property) in respect of any Company Common Stock, or any split, combination or
reclassification in respect of any shares of Company Common 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 Common Stock, or any direct or indirect repurchase, redemption, or other acquisition by the
Company of any shares of Company Common Stock (or options, warrants or other rights convertible
into, exercisable or exchangeable therefor);
(k) increase in the salary or other compensation payable or to become payable by the Company
to any of its respective officers, directors, employees, consultants or advisors, or the
declaration, payment or commitment or obligation of any kind for the payment (whether in cash or
equity) by the Company of a severance payment, termination payment, bonus or other additional
salary or compensation to any such person;
(l) Material Contract or any termination or amendment thereof;
(m) sale, lease, license or other disposition of any of the assets (whether tangible or
intangible) or properties of the Company outside of the ordinary course of business, including, but
not limited to, the sale of any accounts receivable of the Company, or any creation of any security
interest in such assets or properties;
(n) loan by the Company to any person or entity, or purchase by the Company of any debt
securities of any person or entity, except for advances to employees for travel and business
expenses in the ordinary course of business in an amount not to exceed $10,000 in any one case or
$25,000 in the aggregate;
30
(o) incurrence by the Company of any indebtedness, amendment of the terms of any outstanding
loan agreement, guaranteeing by the Company of any indebtedness, issuance or sale of any debt
securities of the Company 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;
(p) waiver or release of any right or claim of the Company, including any write-off or other
compromise of any account receivable of the Company;
(q) commencement or settlement of any lawsuit by the Company, the commencement, settlement,
notice or, to the Knowledge of the Company, threat of any lawsuit or proceeding or other
investigation against the Company or its affairs, or any reasonable basis for any of the foregoing;
(r) written notice or, to the Knowledge of the Company, oral notice, of any claim or potential
claim of ownership, interest or right by any person other than the Company of the Company
Intellectual Property (as defined in Section 2.14 hereof) or of infringement by the Company of any
other person’s Intellectual Property Rights (as defined in Section 2.14 hereof);
(s) issuance or sale, or contract or agreement to issue or sell, by the Company of any shares
of Company Common Stock, Company Preferred Stock or securities convertible into, or exercisable or
exchangeable for, shares of Company Common Stock, Company Preferred Stock or any securities,
warrants, options or rights to purchase any of the foregoing, except for issuances of Company
Common Stock upon the exercise of options issued under the Plan or issuances of shares of Company
Common Stock or Company Preferred Stock upon the exercise of Company Warrants;
(t) (i) except standard end user licenses entered into in the ordinary course of business,
consistent with past practice, sale or license of any Company Intellectual Property or execution,
modification or amendment of any agreement with respect to the Company Intellectual Property with
any person or entity or with respect to the Intellectual Property Rights of any person or entity,
(ii) except in the ordinary course of business, consistent with past practice, purchase or license
of any Intellectual Property Rights or execution, modification or amendment of any agreement with
respect to the Intellectual Property Rights of any person or entity, (iii) agreement or material
modification or amendment of an existing agreement with respect to the development of any
Technology or Intellectual Property Rights with a third party, or (iv) material 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 Technology or Intellectual Property Rights to the
Company;
(u) event or condition of any character that has had or is reasonably likely to have a Company
Material Adverse Effect;
31
(v) lease, license, sublease or other occupancy of any Leased Real Property (as defined in
Section 2.13 hereof) by the Company; or
(w) agreement by the Company, or any officer or employees on behalf of the Company, to do any
of the things described in the preceding clauses (a) through (w) of this Section 2.10 (other than
negotiations with Parent and its representatives regarding the transactions contemplated by this
Agreement and the Related Agreements).
2.11 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement, the term “Tax” or, collectively,
“Taxes” shall mean (i) any and all U.S. federal, state, local and non-U.S. 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, escheat, employment, excise and
property taxes as well as public imposts, fees and social security charges (including but not
limited to health, unemployment and pension insurance), 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) of this Section 2.11(a) as a result of being or ceasing to be a
member of an affiliated, consolidated, combined or unitary group for any period (including any
arrangement for group or consortium relief or similar arrangement), and (iii) any liability for the
payment of any amounts of the type described in clauses (i) or (ii) of this Section 2.11(a) as a
result of any express or implied obligation to indemnify any other person or as a result of any
obligation under any agreement or arrangement with any other person with respect to such amounts
and including any liability for taxes of a predecessor or transferor or otherwise by operation of
law.
(b) Tax Returns and Audits.
(i) The Company has (a) prepared and timely filed all required U.S. federal, state, local and
non-U.S. returns, estimates, information statements and reports (“Returns”) relating to any and all
Taxes concerning or attributable to the Company or its operations and such Returns are true and
correct in all material respects and have been completed in accordance with applicable law and
(b) timely paid all Taxes it is required to pay.
(ii) The Company has paid or withheld with respect to its Employees and other third parties,
all U.S. federal, state and non-U.S. income taxes and social security charges and similar fees,
Federal Insurance Contribution Act amounts, Federal Unemployment Tax Act amounts and other Taxes
required to be withheld, and has timely paid over any such withheld Taxes to the appropriate
authorities.
32
(iii) The Company has not been delinquent in the payment of any Tax, nor is there any Tax
deficiency outstanding, assessed or, to the Company’s Knowledge, proposed against the Company, nor
has the Company 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 is presently in progress, nor
has the Company been notified in writing of any request for such an audit or other examination. No
adjustment relating to any Return filed by the Company has, to Company’s Knowledge, been proposed
by any Tax authority to the Company or any representative thereof. No claim has ever been made in
writing, or otherwise to the Company’s Knowledge, by an authority in a jurisdiction where the
Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.
(v) As of the date of the Current Balance Sheet, the Company had no liabilities for unpaid
Taxes which have not been accrued or reserved on the Current Balance Sheet, whether asserted or
unasserted, contingent or otherwise, and the Company has not incurred any liability for Taxes since
the date of the Current Balance Sheet other than in the ordinary course of business. The Company
has identified all uncertain tax positions contained in all Tax Returns filed by the Company and
has established adequate reserves and made any appropriate disclosures in the Financials in
accordance with the requirements of Financial Interpretation No. 48 of FASB Statement No. 109.
(vi) The Company has made available to Parent or its legal counsel, copies of all material Tax
Returns for the Company filed for all periods since its inception.
(vii) There are no Liens on the assets of the Company relating to or attributable to Taxes,
other than Liens for Taxes not yet due and payable. The Company has no 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.
(viii) The Company has (a) never been a member of an affiliated group (within the meaning of
Code §1504(a)) filing a consolidated federal income Tax Return (other than a group the common
parent of which was the Company), (b) never been a party to any Tax sharing, indemnification,
allocation or similar agreement, (c) no liability for the Taxes of any person or entity under
Treasury Regulation § 1.1502-6 (or any similar provision of state, local or non-us law (including
any arrangement for group or consortium relief or similar arrangement)), as a transferee or
successor, by operation of law, by contract or agreement, or otherwise and (d) never been a party
to any joint venture, partnership or other arrangement that could be treated as a partnership for
Tax purposes.
33
(ix) The Company has not been, at any time, a “United States Real Property Holding
Corporation” within the meaning of Section 897(c)(2) of the Code.
(x) The Company has not constituted either a “distributing corporation” or a “controlled
corporation” in a distribution of stock intended to qualify for tax-free treatment under
Section 355 of the Code.
(xi) The Company has not engaged in a reportable transaction under Treas. Reg. § 1.6011-4(b),
including a transaction that is the same as or substantially similar to one of the types of
transactions that the Internal Revenue Service has determined to be a tax avoidance transaction and
identified by notice, regulation, or other form of published guidance as a listed transaction, as
set forth in Treas. Reg. § 1.6011-4(b)(2).
(xii) The Company will not be required to include any income or gain or exclude any deduction
or loss from Taxable income for any taxable period or portion thereof after the Closing as a result
of any (a) change in method of accounting made prior to the Closing, (b) closing agreement under
Section 7121 of the Code executed prior to the Closing, (c) deferred intercompany gain or excess
loss account under Treasury Regulations under Section 1502 of the Code in connection with a
transaction consummated prior to the Closing (or in the case of each of (a), (b) and (c), under any
similar provision of applicable law), (d) installment sale or open transaction disposition
consummated prior to the Closing or (e) prepaid amount received prior to the Closing.
(xiii) The Company uses the accrual method of accounting for tax purposes, or, in the case of
SNAPin Software UK Limited, in accordance with UK GAAP (the historical cost basis of accounting).
(xiv) The Company is not subject to Tax in any jurisdiction other than its country of
incorporation or formation by virtue of having a permanent establishment, place of business or
source of income in that country.
(xv) The Company is in compliance in all material respects with all terms and conditions of
any Tax exemption, Tax holiday or other Tax reduction agreement or order (“Tax Incentive”), and the
consummation of the transactions contemplated by this Agreement will not have any adverse effect on
the continued validity and effectiveness of any such Tax Incentive.
(xvi) The Company and its subsidiaries are in compliance in all material respects with all
applicable transfer pricing laws and regulations, including the execution and maintenance of
contemporaneous documentation substantiating the transfer pricing practices and methodology of the
Company and its subsidiaries. The prices for any property or services (or for the
34
use of any property) provided by or to the Company are arm’s length prices for purposes of the
applicable transfer pricing laws.
(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 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 or 404 of the Code.
(d) 409A. Each “nonqualified deferred compensation plan” (as such term is defined in
Section 409A(d)(1) of the Code) sponsored or maintained by the Company since January 1, 2005 has
been operated since that date in good faith compliance with Section 409A of the Code, the final or
proposed regulations thereunder, and any other IRS guidance issued with respect thereto, to the
extent applicable to such plan. No deferred compensation plan existing prior to January 1, 2005,
which would otherwise not be subject to Section 409A of the Code, has been “materially modified” at
any time after October 3, 2004. Each Company Option, stock appreciation right, or other similar
right to acquire Company Common Stock or other equity of the Company, granted to or held by an
individual or entity who is or may be subject to United States taxation, (i) has an exercise price
that is not less than the fair market value of the underlying equity as of the date such Company
Option, stock appreciation right or other similar right was granted, (ii) has no feature for the
deferral of compensation other than the deferral of recognition of income until the later of
exercise or disposition of such Company Option, stock appreciation right or other similar right,
(iii) to the extent it was granted after December 31, 2004, was granted with respect to a class of
stock of the Company that is “service recipient stock” (within the meaning of Section 409A and the
proposed or final regulations or other IRS guidance issued with respect thereto), and (iv) has been
properly accounted for in accordance with GAAP in the Financials.
2.12 Restrictions on Business Activities. Except as set forth in Section 2.12 of the
Disclosure Schedule, there is no agreement (non-competition or otherwise), commitment, judgment,
injunction, order or decree to which the Company is a party or otherwise binding upon the Company
which has or may reasonably be expected to have the effect of prohibiting or impairing any business
practice of the Company, any acquisition of property (tangible or intangible) by the Company, the
conduct of business by the Company, or otherwise limiting the freedom of the Company to engage in
any line of business or to compete with any person. Without limiting the generality of the
foregoing, except as set forth in Section 2.12 of the Disclosure Schedule, the Company has not
entered into any agreement under which the Company is restricted from selling, licensing,
manufacturing or otherwise distributing any of its technology or products or from 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.
2.13 Title to Properties; Absence of Liens and Encumbrances.
35
(a) The Company does not own any real property, nor has the Company ever owned any real
property. Section 2.13(a) of the Disclosure Schedule sets forth a list of all real property
currently leased, subleased or licensed by or from the Company or otherwise used or occupied by the
Company for the operation of its business (the “Leased Real Property”), the name of the lessor,
licensor, sublessor, master lessor and/or lessee, the date and term of the lease, license, sublease
or other occupancy right and each amendment thereto (the “Lease Agreements”) and, with respect to
any current lease, license, sublease or other occupancy right the aggregate annual rental payable
thereunder. All such Lease Agreements are valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing default by the Company, no rentals
are past due, or event of default by the Company (or event which with notice or lapse of time, or
both, would constitute a default by the Company). The Company has not received any written notice
of a default, alleged failure to perform, or any offset or counterclaim with respect to any such
Lease Agreement, which has not been fully remedied and withdrawn. To the Company’s Knowledge, the
Closing will not affect the enforceability against any person of any such Lease Agreement or the
rights of the Company to the continued use and possession of the Leased Real Property for the
conduct of business as presently conducted.
(b) To the Company’s Knowledge, the Leased Real Property is in good operating condition and
repair (subject to normal wear and tear), free from structural, physical and mechanical defects and
is structurally sufficient and otherwise suitable for the conduct of the business as presently
conducted. To the Company’s Knowledge, neither the operation of the Company on the Leased Real
Property nor such Leased Real Property, including the improvements thereon, violate in any material
respect any applicable building code, zoning requirement or statute relating to such property or
operations thereon, and any such non-violation is not dependent on so-called non-conforming use
exceptions. The Company does not owe any brokerage commissions or finders fees with respect to any
Leased Real Property or would owe any such fees if any existing Lease Agreement were renewed
pursuant to any renewal options contained in such Lease Agreements. The Company has performed all
of its obligations under any termination agreements pursuant to which it has terminated any leases,
subleases, licenses or other occupancy agreements for real property that are no longer in effect
and has no continuing liability with respect to such terminated agreements. Neither the Company
nor any Company Subsidiary is reasonably likely to be required to expend more than $25,000 in
causing any Leased Real Property to comply with the surrender conditions set forth in the
applicable Lease Agreement.
(c) The Company has good and valid title to, or, in the case of leased properties and assets,
valid leasehold interests in, all of its tangible properties and assets, real, personal and mixed,
used or held for use in its 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 materially detract from the value or interfere with
the present use of the property subject thereto or affected thereby.
36
2.14 Intellectual Property.
(a) Definitions. For all purposes of this Agreement, the following terms shall have the
following respective meanings:
“Technology” 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, architecture, documentation, designs, files, records, databases, and data,
(ii) inventions (whether or not patentable), discoveries, improvements, and technology,
(iii) proprietary and confidential information, trade secrets and know how, (iv) databases, data
compilations and collections and technical data, (v) domain names, web addresses and sites,
(vi) tools, methods and processes, and (vii) any and all instantiations or embodiments of the
foregoing in any form and embodied in any media.
“Intellectual Property Rights” shall mean worldwide common law and statutory rights associated
with (i) patents and patent applications of any kind, (ii) copyrights, copyright registrations and
copyright applications, “moral” rights and mask work rights, (iii) the protection of trade and
industrial secrets and confidential information, (iv) logos, trademarks, trade names and service
marks and (v) any other proprietary rights relating to Technology, including any analogous rights
to those set forth above.
“Company Intellectual Property” shall mean any and all Technology and Intellectual Property
Rights that are owned by or exclusively licensed to the Company.
“Registered Intellectual Property Rights” shall mean any and all Intellectual Property Rights
that have been registered, applied for, filed, certified or otherwise perfected, issued, or
recorded with or by any state, government or other public or quasi-public legal authority.
“Shrink-Wrap Code” shall mean generally commercially available software other than
(i) development tools and development environments, (ii) software used by the Company in the
development of the Company’s products, (iii) server-side software used to host and operate the
Company’s products and (iv) other software that is otherwise incorporated into, combined with, or
distributed in conjunction with any of the Company’s products.
(b) Section 2.14(b) of the Disclosure Schedule lists all Registered Intellectual Property
Rights owned by, or filed in the name of, the Company (the “Company Registered Intellectual
Property Rights”) and any material 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 or Company
Intellectual Property.
37
(c) Each item of Company Registered Intellectual Property Rights is valid and subsisting, and
all necessary registration, maintenance and renewal fees in connection with such Company Registered
Intellectual Property Rights have been paid and all necessary documents and certificates in
connection with such Company Registered Intellectual Property Rights 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 Rights, except as provided in Section 2.14(c) of the Disclosure Schedule. There are no
actions that must be taken by the Company within one hundred twenty (120) days following the date
of this Agreement, 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 Registered Intellectual Property Rights, except as provided in
Section 2.14(c) of the Disclosure Schedule. In each case in which the Company has acquired any
Technology or Intellectual Property Rights from any person, the Company has obtained a valid and
enforceable assignment sufficient to irrevocably transfer all rights in such Technology and the
associated Intellectual Property Rights (including the right to seek past and future damages with
respect thereto) 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 the PTO, the U.S. Copyright Office, or their
respective equivalents in any relevant foreign jurisdiction, as the case may be.
(d) All Company Intellectual Property is fully transferable and licensable by the Company, and
following the Closing will be fully transferable and licensable by the Final Surviving Entity
and/or Parent, without restriction and without payment of any kind to any third party.
(e) Each item of Company Intellectual Property, including all Company Registered Intellectual
Property Rights listed in Section 2.14(b) of the Disclosure Schedule, and all Technology and
Intellectual Property Rights licensed to the Company, is free and clear of any Liens other than
those set forth on Section 2.14(e) of the Disclosure Schedule. The Company is the exclusive owner
or exclusive licensee of all Company Intellectual Property.
(f) To the extent that any Technology has been developed or created independently or jointly
by any person other than the Company for which the Company has, directly or indirectly, provided
consideration for such development or creation, 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 Technology and associated Intellectual Property Rights by operation of
law or by valid assignment, and has required the waiver of all non-assignable rights.
(g) The Company has not (i) 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 Technology or Intellectual Property Rights that are or were Company Intellectual
38
Property, to any other person or (ii) permitted the Company’s rights in any material Company
Intellectual Property to enter into the public domain.
(h) Except for (i) the Technology and Intellectual Property Rights licensed to the Company
pursuant to the in-bound licenses listed in Section 2.14(v) and Section 2.15(a)(xv) of the
Disclosure Schedule and (ii) Shrink-Wrap Code licensed to the Company that is not incorporated
into, embedded into, distributed with, installed with, or otherwise utilized by any Company
Products, all Technology that is used in or necessary to the conduct of Company’s business as
presently conducted or currently contemplated to be conducted by the Company was written and
created solely by either (i) employees of the Company acting within the scope of their employment
who have validly and irrevocably assigned all of their rights, including all Intellectual Property
Rights therein, to the Company or (ii) by third parties who have validly and irrevocably assigned
all of their rights, including all Intellectual Property Rights therein, to the Company, and no
third party owns or has any rights to any of the Company Intellectual Property.
(i) The Company Intellectual Property, together with (i) the Technology and Intellectual
Property Rights non-exclusively licensed to the Company pursuant to the in-bound licenses listed in
Section 2.14(v) and Section 2.15(a)(xv) of the Disclosure Schedule and (ii) the Shrink-Wrap Code
licensed to the Company that is not incorporated into, embedded into, distributed with, installed
with, or otherwise utilized by any Company Products, constitutes all of the Technology and
Intellectual Property Rights used in, necessary to or otherwise infringed by the conduct of the
business of the Company as it currently is conducted or planned by the Company to be conducted,
including, without limitation, the design, development, marketing, manufacture, use, import and
sale of any product, technology or service (including products, technology or services currently
under development). Except as set forth in Section 2.14(i) of the Disclosure Schedule, the Final
Surviving Entity will own or possess sufficient rights to all Technology and Intellectual Property
Rights immediately following the Closing Date that are necessary to the operation of the business
of the Company as it currently is conducted or planned by the Company to be conducted and without
infringing on the Intellectual Property Rights of any person.
(j) None of the Material Contracts pursuant to which the Company licenses any Technology or
Intellectual Property Rights will terminate, or may be terminated, solely by the passage of time or
at the election of a third party.
(k) No third party that has licensed Technology or Intellectual Property Rights to the Company
has ownership rights or license rights to improvements or derivative works made by the Company in
such Technology or Intellectual Property Rights that have been licensed to the Company.
(l) There are no contracts, licenses or agreements between the Company and any other person
with respect to Company Intellectual Property or other Technology or Intellectual
39
Property Rights
used in and/or necessary to the conduct of the business as it is currently conducted or planned by
the Company to be conducted under which there is any dispute 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.
(m) The operation of the business of the Company as it has been conducted, is currently
conducted and is currently contemplated by the Company to be conducted, including but not limited
to the design, development, use, import, branding, advertising, promotion, marketing, distribution,
manufacture and sale of any product, technology or service (including products, technology or
services currently under development) of the Company has not infringed or misappropriated, does not
infringe or misappropriate, and will not infringe or misappropriate when conducted by Parent and/or
the Final Surviving Entity following the Closing in the manner currently planned to be conducted,
any Intellectual Property Rights of any person, and does not violate any right of any person
(including any right to privacy or publicity) or constitute unfair competition or trade practices
under the laws of any jurisdiction. The Company has not received notice from any person claiming
that such operation or any act, any product, technology or service (including products, technology
or services currently under development) or Technology of the Company infringes or misappropriates
any Intellectual Property Rights of any person, violates any right of any person (including any
right to privacy or publicity), or constitutes unfair competition or trade practices under the laws
of any jurisdiction (nor does the Company have Knowledge of any basis therefor).
(n) Neither this Agreement nor the transactions contemplated by this Agreement, including the
assignment to Parent or the Final Surviving Entity by operation of law or otherwise of any
contracts or agreements to which the Company is a party, will result in: (i) Parent, the Final
Surviving Entity or any of their subsidiaries granting to any third party any right to or with
respect to any Intellectual Property Rights owned by, or licensed to Parent, the Company or any of
their subsidiaries, (ii) Parent, the Final Surviving Entity or any of their subsidiaries, being
bound by or subject to, any exclusivity obligations, non-compete or other restriction on the
operation or scope of their respective businesses, or (iii) Parent, the Final Surviving Entity or
any of their subsidiaries 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. Notwithstanding the foregoing, the
representations in this Section 2.14(n) will not be breached as a result of the operation of
provisions contained in agreements to which Parent is a party but the Company is not a party.
(o) To the Knowledge of the Company, no person or entity has infringed or misappropriated or
is infringing or misappropriating any Company Intellectual Property.
(p) The Company has taken all reasonable steps that are required or necessary to protect the
Company’s rights in confidential information and trade secrets of the Company or
40
provided by any
other person to the Company. Without limiting the foregoing, the Company has, and enforces, a
policy requiring each employee, consultant, and contractor to execute proprietary information,
confidentiality and assignment agreements substantially in the Company’s standard forms (as set
forth in Exhibit D-1 with respect to U.S. based employees and contractors, as applicable, and
Exhibit D-2 with respect to U.K. based employees), and, except as set forth in Section 2.14(p) of
the Disclosure Schedule, all current and former employees, consultants and contractors of the
Company have executed such an agreement in substantially the Company’s standard form.
(q) No Company Intellectual Property, product, technology, or service of the Company 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.
(r) No (i) product, technology, service or publication of the Company, (ii) material published
or distributed by the Company, or (iii) conduct or statement of the Company constitutes obscene
material, a defamatory statement or material, false advertising or otherwise violates any law or
regulation.
(s) No government funding, facilities or resources of a university, college, other educational
institution or research center or funding from third parties was used in the development of the
Company Intellectual Property and no Governmental Entity, university, college, other educational
institution or research center has any claim or right in or to the Company Intellectual Property.
No rights have been granted to any Governmental Entity with respect to any Company product,
technology or service, or under any Company Intellectual Property, other than the same standard
commercial rights as are granted by the Company to commercial end users of the Company products,
technologies and services in the ordinary course of business. Except as set forth on
Section 2.14(s) of the Disclosure Schedule, no current or former employee, consultant or
independent contractor of the Company who was involved in, or who contributed to, the creation or
development of any Company Intellectual Property, has performed services for the government, a
university, college or other educational institution, or a research center, during a period of time
during which such employee, consultant or independent contractor was also performing services for
the Company.
(t) The Company has not collected any personally identifiable information concerning users of
its products, services and websites from any third parties, except as described in Section 2.14(t)
of the Disclosure Schedule. The Company has complied in all respects with all applicable laws and
its privacy policies relating to the privacy of users of the Company’s products, services and
websites. The Company has complied in all respects with all applicable laws and its
respective privacy policies relating to the collection, use, storage, transfer, and disclosure
of any personally identifiable information of any employees, contractors or consultants, both in
the United
41
States and internationally. The execution, delivery and performance of this Agreement
complies with all applicable laws relating to privacy and does not violate Company’s privacy
policies. True and correct copies of all such privacy policies are attached to Section 2.14(t) of
the Disclosure Schedule, and the Company has at all times made all privacy policy disclosures to
such users or customers as required by applicable laws and none of such disclosures made or
contained in any such privacy policy has been inaccurate, misleading or deceptive or in violation
of any applicable laws.
(u) Except as set forth in Section 2.14(u) of the Disclosure Schedule, neither the Company nor
any person or entity acting on the Company’s behalf has disclosed, delivered or licensed to any
person or entity, agreed to disclose, deliver or license to any person or entity, or permitted the
disclosure or delivery to any escrow agent or other person or entity of any source code owned by
the Company or used in its business (“Company Source Code”). No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time or both) will, or
would reasonably be expected to, result in the disclosure or delivery by or on behalf of the
Company of any Company Source Code. Company Source Code means any software source code or related
proprietary or confidential information or algorithms of any Company Intellectual Property.
(v) Section 2.14(v) of the Disclosure Schedule lists all software or other material that is
distributed as “freeware,” “free software,” “open source software” or under a similar licensing or
distribution model (including but not limited to the GNU General Public License) that the Company
uses or licenses in the development of the Company’s products or services or that is server-side
software used to host and operate the Company’s products, and identifies that which is incorporated
into, combined with, or distributed in conjunction with any Company products or services
(“Incorporated Open Source Software”). The Company’s use and/or distribution of each component of
Incorporated Open Source Software complies with all material provisions of the applicable license
agreement, and in no case does such use or distribution give rise under such license agreement to
any rights in any third parties under any Company Intellectual Property or obligations for the
Company with respect to any Company Intellectual Property, including without limitation any
obligation to disclose or distribute any such Technology in source code form, to license any such
Technology for the purpose of making derivative works, or to distribute any such Technology without
charge.
(w) Section 2.14(w) of the Disclosure Schedule lists all industry standards bodies and similar
organizations of which the Company is a member, to which it has been a contributor or in which it
has been a participant. The Company is not and never was a member in, a contributor to, or
participant in any industry standards body or similar organization that could require or obligate
the Company to grant or offer to any other Person any license or right to any Technology or
Intellectual Property Rights.
2.15 Agreements, Contracts and Commitments.
42
(a) Except as set forth in Section 2.15 of the Disclosure Schedule (specifying the appropriate
subparagraph), the Company is not a party to, nor is it bound by any of the following (each, a
“Material Contract”):
(i) any employment, contractor or consulting agreement, contract or commitment with an
employee or individual consultant, contractor or salesperson, or consulting, services or sales
agreement, contract, or commitment with a firm or other organization providing for compensation or
remuneration with an aggregate value in excess of $50,000; provided that the foregoing shall not
include at-will employment offer letters;
(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 (either alone or upon the occurrence of any additional subsequent
events) 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 or equipment having a value in excess of $50,000
individually or $200,000 in the aggregate;
(v) any agreement of indemnification or guaranty, but excluding agreements of indemnification
or guaranty with respect to the infringement by the Company products of the Intellectual Property
Rights of third parties that are contained in the Company’s written agreements with its customers
that have been entered into in the ordinary course of business substantially in the Company’s
standard form of customer agreement;
(vi) any agreement, contract or commitment relating to capital expenditures and involving
future payments in excess of $50,000 individually or $200,000 in the aggregate;
(vii) 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;
(viii) 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;
43
(ix) any purchase order, contract or other commitment obligating the Company to purchase
materials or services at a cost in excess of $50,000 individually or $200,000 in the aggregate;
(x) any agreement containing covenants or other obligations granting or containing any current
or future commitments regarding exclusive rights, non-competition, “most favored nations,”
restriction on the operation or scope of its businesses or operations, or similar terms;
(xi) any agreement providing a customer with refund rights;
(xii) any dealer, distribution, marketing, development or joint venture agreement which
requires payment in excess of $50,000 individually or $200,000 in the aggregate;
(xiii) any sales representative, original equipment manufacturer, manufacturing, value added,
remarketer, reseller, or independent software vendor, or other agreement for use or distribution of
the products, technology or services of the Company;
(xiv) any out-bound licenses with respect to the Company’s products;
(xv) any contracts, licenses and agreements to which the Company is a party with respect to
any Technology or Intellectual Property Rights, including without limitation any in-bound licenses,
out-bound licenses and cross-licenses, but excluding (i) non-disclosure agreements
and non-exclusive out-bound licenses with respect to the provision of Company’s products to
end-users (in each case, pursuant to written agreements that have been entered into in the ordinary
course of business), (ii) in-bound licenses and purchase agreements for Shrink-Wrap Code licensed
to the Company that is not incorporated into, embedded into, distributed with, installed with, or
otherwise utilized by any Company Products, and (iii) in-bound licenses for “freeware,” “free
software,” “open source software” licensed to the Company and not used in the development of the
Company’s products or services and not server-side software used to host and operate the Company’s
products; or
(xvi) any other agreement, contract or commitment that involves $50,000 individually or
$200,000 in the aggregate or more and is not cancelable by the Company without penalty within
thirty (30) days.
(b) The Company is in compliance in all material respects with and has not breached, violated
or defaulted under, or received written notice that it has breached, violated or defaulted under,
any of the terms or conditions of any Material Contract, nor does the Company have Knowledge of any
event that would constitute such a material breach, violation or default with the lapse of time,
giving of notice or both. Each Material Contract is in full force and effect, and the Company is
not subject to any default thereunder, nor to the Knowledge of the Company is any party
44
obligated
to the Company pursuant to any such Material Contract subject to any default thereunder. Except as
set forth in Section 2.15(b) of the Disclosure Schedule, no Material Contract will terminate, or
may be terminated by either party, solely by the passage of time or at the election of either party
within 120 days after the Closing.
2.16 Interested Party Transactions. No officer or director of the Company (nor, to the Company’s
Knowledge, any ancestor, sibling, descendant or spouse of any of such persons, or any trust,
partnership or corporation in which any of such persons has or has had an interest), has or has
had, directly or indirectly, (i) an interest in any entity which furnished or sold or licensed, or
furnishes or sells or licenses, services, products, Technology or Intellectual Property Rights that
the Company furnishes or sells, or proposes to furnish or sell, or (ii) any interest in any entity
that purchases from or sells or furnishes to the Company, any goods or services, or (iii) a
beneficial interest in any Material Contract to which the Company is a party (other than in such
person’s capacity as a stockholder, director, officer or employee of the Company); provided,
however, that ownership of no more than one percent (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 2.16. No Stockholder has any loans outstanding from the Company except for business
travel advances in the ordinary course of business, consistent with past practice, to employees of
the Company.
2.17 Governmental Authorization. Each consent, license, permit, grant or other authorization of a
Governmental Entity (i) pursuant to which the Company currently operates or holds any interest in
any of its properties, or (ii) which is required for the operation of the Company’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, as the case may
be. The Company Authorizations are in full force and effect in all material respects and
constitute all Company Authorizations required to permit the Company to operate or conduct its
business or hold any interest in its properties or assets.
2.18 Litigation. There is no action, suit, claim or proceeding of any nature pending or, to the Knowledge of
the Company, threatened, against the Company or any Company Subsidiary, their properties (tangible
or intangible) or any of their officers or directors, each in such capacity, by or before any
Governmental Entity. There is no investigation, audit, or other proceeding pending or, to the
Knowledge of the Company, threatened, against the Company or any Company Subsidiary, any of their
properties (tangible or intangible) or any of their officers or directors by or before any
Governmental Entity, nor to the Knowledge of the Company is there any reasonable basis therefor.
No Governmental Entity has at any time challenged or questioned the legal right of the Company or
any Company Subsidiary to conduct their respective operations as presently or previously conducted
or as presently contemplated to be conducted. To the Knowledge of the Company, there is no action,
suit, claim or proceeding of any nature pending or threatened against any individual or entity who
has a contractual right or a right pursuant to Delaware Law to indemnification from the Company or
any Company Subsidiary related to facts and circumstances existing prior to the
45
Effective Time, nor
are there, to the Knowledge of the Company, any facts or circumstances that would give rise to such
an action, suit, claim or proceeding.
2.19 Minute Books. The minutes of the Company made available to counsel for Parent contain
complete and accurate records of all corporate actions taken, and summaries of all meetings held,
by the stockholders (or, in respect of SNAPin Software UK Limited, the shareholders), the Board of
Directors of the Company and each of its subsidiaries (and any committees thereof) since the time
of incorporation of the Company, as the case may be.
2.20 Environmental Matters. The Company (i) has not received any written notice of any alleged
claim, violation of or Liability under any Environmental Law which has not heretofore been cured or
for which there is any remaining Liability and (ii) has not entered into any agreement that may
require it to guarantee, reimburse, pledge, defend, hold harmless or indemnify any other party with
respect to liabilities arising out of Environmental Laws or the Hazardous Materials related
activities of the Company or its Subsidiaries. To the Company’s Knowledge, there are no Hazardous
Materials in, on, or under any properties owned, leased or used at any time by the Company such as
could give rise to any material Liability or material corrective or remedial obligation of the
Company under any Environmental Laws.
2.21 Brokers’ and Finders’ Fees; Third Party Expenses. Except as set forth in Section 2.21 of the
Disclosure Schedule, the Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders’ fees or agents’ commissions, fees related to investment banking
or similar advisory services or any similar charges
in connection with the Agreement or any transaction contemplated hereby. Section 2.21 of the
Disclosure Schedule sets forth the principal terms and conditions of any agreement, written or
oral, with respect to such fees.
2.22 Employee Benefit Plans and Compensation.
(a) Definitions. For all purposes of this Agreement, the following terms shall have the
following respective meanings:
“ERISA Affiliate” shall mean any Company Subsidiary or 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 arrangement providing for compensation (other than base salary or wages), severance,
termination pay, deferred compensation, retirement benefits, 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 maintained,
46
contributed to, or required to be contributed to, by the Company or any ERISA Affiliate for the
benefit of any Employee, or with respect to which the Company or any Company Subsidiary has or may
have any liability or obligation; provided, however, employer contributions or taxes towards social
security and government-mandated and workers’ compensation and unemployment insurance shall not be
considered to be a “Company Employee Plan” for purposes of this Agreement.
“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, independent contractor or
director of the Company, or any ERISA Affiliate.
“Employee Agreement” shall mean each management, employment, severance, separation,
settlement, consulting, contractor, relocation, change of control, retention, bonus, repatriation,
expatriation, loan, visa, work permit or other agreement, or contract (including, without
limitation, any offer letter or any agreement providing for acceleration of Company Options or
Company Common Stock that is unvested, or any other agreement providing for compensation or
benefits) between the Company or any Company Subsidiary and any Employee, and which the Company or
any Company Subsidiary has or may have any liability or obligation.
“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.
“HIPAA” shall mean the Health Insurance Portability and Accountability Act of 1996, as
amended.
“International Employee Plan” shall mean each Company Employee Plan or Employee Agreement that
is sponsored or maintained by the Company or any ERISA Affiliate, whether formally or informally,
or with respect to which the Company or any Company Subsidiary will or may have any liability with
respect to Employees who perform services outside the United States.
“IRS” shall mean the United States Internal Revenue Service.
“Pension Plan” shall mean each Company Employee Plan that is an “employee pension benefit
plan,” within the meaning of Section 3(2) of ERISA.
“WARN” shall mean the Worker Adjustment and Retraining Notification Act.
47
(b) Schedule. Section 2.22(b)(1) of the Disclosure Schedule contains an accurate and complete
list of each Company Employee Plan and each Employee Agreement (other than at will offer letters
that do not provide for any severance or termination benefits). The Company has not made any 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, or as
required by this Agreement), or to enter into any Company Employee Plan or Employee Agreement.
Section 2.22(b)(2) of the Disclosure Schedule sets forth a table setting forth (i) the name, hiring
and/or start date, commissions, bonuses and annual salary as of the date hereof and (ii) accrued
but unpaid vacation balances as of July 31, 2008, and there have been no material changes to such
accrued but unpaid vacation balances since July 31, 2008, of each employee of the Company and each
Company Subsidiary. To the Knowledge of the Company, no employee listed on Section 2.22(b)(2) of
the Disclosure Schedule intends to terminate his or her employment for any reason.
Section 2.22(b)(3) of the Disclosure Schedule contains the accurate and complete list of all
persons who have a consulting or advisory relationship with the Company.
(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 (other than at will offer
letters that do not provide for any severance or termination benefits), (ii) the three (3) 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 distributed to any Employee or Employees during the
last year and 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
material liability to the Company, (vii) all material correspondence during the last three (3)
years to or from any governmental agency relating to any Company Employee Plan, (viii) all model
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 three (3) most recent plan years, and (xi) the most recent IRS
determination, opinion or advisory letter issued with respect to each Company Employee Plan.
(d) Employee Plan Compliance. The Company and each ERISA Affiliate has performed all material
obligations required to be performed by it under each Company Employee Plan, are not in material
default or material violation of, and the Company has no Knowledge of any
48
material default or
material violation by any other party to each Company Employee Plan, and each Company Employee Plan
has been established and maintained in all material respects 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. Any Company Employee Plan intended to be qualified under
Section 401(a) of the Code has obtained a favorable determination letter (or opinion or advisory
letter valid as to the Company, if applicable) with respect to its qualified status under 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 4975 of the Code or 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, 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 material liability to Parent, the
Company or any Company Subsidiary (other than ordinary administration expenses and payment of
accrued benefits). There are no audits, inquiries or proceedings pending, or to the Knowledge of
the Company, threatened by the IRS, DOL, or any other Governmental Entity with respect to any
Company Employee Plan. Neither the Company nor any ERISA 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. The Company has timely made all contributions and other payments
required by and due under the terms of each Company Employee Plan.
(e) No Pension Plans. Neither the Company nor any current or past ERISA Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any Pension Plans subject
to Title IV of ERISA or Section 412 of the Code.
(f) No Self-Insured Plans. Neither the Company nor any ERISA Affiliate has ever maintained,
established sponsored, participated in or contributed to any self-insured plan that provides
benefits to Employees (including, without limitation, any such plan pursuant to which a stop-loss
policy or contract applies).
(g) Collectively Bargained, Multiemployer and Multiple-Employer Plans. At no time has the
Company or any current or past ERISA Affiliate contributed to or been obligated to contribute to
any Pension Plan which is a “Multiemployer Plan,” as defined in Section 3(37) of ERISA. Neither
the Company nor any ERISA Affiliate has at any time ever maintained, established, sponsored,
participated in or contributed to any multiple employer plan or to any plan described in
Section 413 of the Code.
(h) No Post-Employment Obligations. No Company Employee Plan or Employee Agreement 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
49
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 benefits, except to the extent required by
statute.
(i) COBRA; FMLA; CRFA; HIPAA. The Company and each ERISA Affiliate has, prior to the
Effective Time, complied with COBRA, FMLA, HIPAA, and any similar provisions of state law
applicable to Employees.
(j) Effect of Transaction. Except as required to comply with Section 5.12, as may otherwise
be required by law or as set forth in Section 2.22(j) of the Disclosure Schedule, the execution of
this Agreement and the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) 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.
(k) Section 280G. No payment or benefit which has been, will be or may be made with respect
to any Employee will, or could reasonably be expected to, be characterized as a “parachute
payment,” within the meaning of Section 280G(b)(2) of the Code as a result of the
transactions contemplated by this Agreement. There is no contract, agreement, plan or
arrangement to which the Company or any ERISA Affiliate is a party or by which it is bound to
compensate any Employee for excise taxes paid pursuant to Section 4999 of the Code.
Section 2.22(k) of the Disclosure Schedule lists all persons who are “disqualified individuals”
(within the meaning of Section 280G of the Code and the regulations promulgated thereunder) as
determined as of the date hereof.
(l) Employment Matters. The Company and each Company Subsidiary is in compliance with all
applicable foreign, federal, state and local laws, rules, regulations, and ordinances respecting
employment, employment practices, terms and conditions of employment, worker classification, tax
withholding, prohibited discrimination, equal employment, fair employment practices, meal and rest
periods, immigration status, employee safety and health, wages (including overtime wages),
compensation, and hours of work, and in each case, with respect to Employees: (i) 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, (ii) is not liable for any arrears of wages,
bonuses, benefits, severance pay or any Taxes or any penalty for failure to comply with any of the
foregoing, and (iii) 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
50
practice). There are
no action, suits, claims, audits, investigations, or administrative matters pending or, to the
Knowledge of the Company, threatened against the Company, any Company Subsidiary, or any of their
Employees relating to any Employee, Employee Agreement or Company Employee Plan. There are no
pending or, to the Knowledge of the Company, threatened claims or actions against the Company, any
Company Subsidiary, or any Company trustee under any worker’s compensation policy or long-term
disability policy. Neither the Company nor any Company Subsidiary is party to a conciliation
agreement, consent decree, or other agreement or order with any federal, state, or local agency or
governmental authority with respect to employment practices. The services provided by the
Company’s and each Company Subsidiary’s Employees is terminable at the will of the Company or
Company Subsidiary, as applicable, and any such termination would result in no material liability
to the Company or Company Subsidiary, as applicable (other than for the payment of benefits that
have accrued under the Company Employee Plans and Employee Agreements) (except in the United
Kingdom where employment at will is not recognized and employees may have unfair dismissal rights
requiring that their employment be terminated for a fair reason and following a fair process, as
prescribed by English law). To the Knowledge of the Company, neither the Company nor any Company
Subsidiary has any material liability with respect to any misclassification of: (a) any Person as
an independent contractor rather than as an employee, (b) any employee leased from another
employer, or (c) any employee currently or formerly classified as exempt from overtime wages.
(m) Labor. No strike, labor dispute, slowdown, concerted refusal to work overtime, or work
stoppage against the Company or any Company Subsidiary is pending, or to the Knowledge of the
Company, threatened. The Company has no Knowledge 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, threatened relating to any labor matters involving any
Employee, including, without limitation, charges of unfair labor practices. Neither the Company
nor any Company Subsidiary has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act. Neither the Company nor any Company Subsidiary is 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, no collective bargaining agreement is being negotiated by the Company or
any Company Subsidiary, and no employees of the Company or any Company Subsidiary are members of a
union. Neither the Company nor any Company Subsidiary has taken any action that would constitute a
“plant closing” or “mass layoff” within the meaning of the WARN Act or similar state or local law,
issued any notification of a plant closing or mass layoff required by the WARN Act or similar state
or local law, or incurred any liability or obligation under WARN or any similar state or local law
that remains unsatisfied.
(n) No Interference or Conflict. To the Knowledge of the Company, no stockholder or Employee
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
51
business. 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 such Employees in connection
with the carrying on of the Company’s business as presently conducted or currently proposed to be
conducted will, to the Knowledge of the Company, 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 Employees is now bound.
(o) International Employee Plan. Each International Employee Plan has been established,
maintained and administered in all material respects in compliance with its terms and conditions
and with the requirements prescribed by any and all statutory or regulatory laws that are
applicable to such International Employee Plan. Furthermore, no International Employee Plan has
unfunded liabilities that, as of the Effective Time, will not be offset by insurance or fully
accrued. Except as required by law, no condition exists that would prevent the Company or Parent
from terminating or amending any International Employee Plan in accordance with its terms, without
material liability to the Company or any Company Subsidiary (other than ordinary administration
expenses and payment of accrued benefits).
2.23 Insurance. Section 2.23 of the Disclosure Schedule lists all insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees, officers and directors
of the Company or the Company Subsidiaries, including the type of coverage, the carrier, the amount
of coverage, the term and the annual premiums of such policies. There is no claim by the Company
pending under any of such policies or bonds as to which coverage has been denied or disputed or
that the Company has a reason to believe will be denied or disputed by the underwriters of such
policies or bonds. In addition, there is no pending insurance claim against the Company of which
its total value (inclusive of defense expenses) is reasonably likely to exceed the policy limits.
All premiums due and payable under all such policies and bonds have been paid (or if installment
payments are due, will be paid if incurred prior to the Closing Date) and the Company is otherwise
in material compliance with the terms of such policies and bonds. The Company has no Knowledge of
threatened termination of, or premium increase with respect to, any of such policies. The Company
has never maintained, established, sponsored, participated in or contributed to any self-insurance
plan.
2.24 Compliance with Laws. The Company and each Company Subsidiary has complied in all material
respects with, is not in material violation of, and has not received any notices of suspected,
potential, or actual violation with respect to, any Laws.
2.25 Bank Accounts, Letters of Credit and Powers of Attorney. Section 2.25 of the Disclosure
Schedule lists (a) all bank accounts, lock boxes and safe deposit boxes relating to the business
and operations of the Company (including the name of the bank or other institution where such
account or box is located and the name of each authorized signatory thereto), (b) all outstanding
letters of credit issued by financial institutions for the account of the Company (setting forth,
in each
52
case, the financial institution issuing such letter of credit, the maximum amount available
under such letter of credit, the terms (including the expiration date) of such letter of credit and
the party or parties in whose favor such letter of credit was issued), and (c) the name and address
of each person who has a power of attorney to act on behalf of the Company. The Company has
heretofore delivered to Parent true, correct and complete copies of each letter of credit and each
power of attorney described in Section 2.25 of the Disclosure Schedule.
2.26 Information Supplied. None of the information supplied in writing by the Company for
inclusion or incorporation by reference in the information provided to Stockholders in the
Soliciting Materials will, at the time they are mailed to the Stockholders and at all times during
which stockholder consents are solicited in connection with the Merger, contain any untrue
statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading; provided,
however, that for the avoidance of doubt, the foregoing representation shall not apply to any
information supplied by Parent for inclusion in the Soliciting Materials.
2.27 Complete Copies of Materials. The Company has delivered or made available, true and complete
copies of each document (or summaries of same) that has been requested by Parent or its counsel as
reflected on Exhibit H hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE SUBS
Each of Parent and the Subs hereby represents and warrants to the Company that on the date
hereof and as of the Effective Time, as though made at the Effective Time, as follows:
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 I is a corporation duly
organized, validly existing and in good standing under the laws of Delaware. Sub I is newly formed
and was formed solely to effectuate the First Step Merger. Sub II is a limited liability company
duly organized, validly existing and in good standing under the laws of Delaware. Sub II is now
and has always been disregarded as an entity separate from Parent, within the meaning of 26 C.F.R.
§301.7701-3. Each of Parent and the Subs has the corporate or limited liability company power to
own its properties and to carry on its business as now being conducted and is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which such qualification or
licensure is required by law except where the failure to be so qualified or licensed would not have
a Parent Material Adverse Effect. Parent 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 the Company.
53
3.2 Authority. Each of Parent and the Subs has all requisite corporate or limited liability
company 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 and 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 or limited liability company action on the part of Parent and the Subs. This Agreement
and any Related Agreements to which Parent and the Subs are parties have been duly executed and
delivered
by Parent and the Subs and constitute the valid and binding obligations of Parent and the
Subs, enforceable against each of Parent and the Subs 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 Consents. No consent, notice, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or with respect to Parent or
the Subs in connection with the execution and delivery of this Agreement and any Related Agreements
to which Parent or the Subs is a party or the consummation of the transactions contemplated hereby
and 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 certificates of merger with the Secretary of State of the State of Delaware,
and (iii) compliance with the pre-merger notification requirements of the HSR Act, and under the
comparable non-U.S. competition Laws the parties reasonably determine apply.
3.4 No Conflict. The execution and delivery by Parent and each Sub of this Agreement and any
Related Agreement to which Parent or a Sub 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
(with or without notice of lapse of time, or both) under (i) the certificate of incorporation,
certificate of formation, bylaws, limited liability company agreement or similar organizational
documents of Parent or a Sub, each as amended to date and in full force and effect on the date
hereof, or (ii) assuming compliance with the matters referred to in Section 3.3 hereof, any
material Laws applicable to Parent or either Sub or any of their respective properties (whether
tangible or intangible) or assets.
3.5 Parent Common Stock. The Parent Common Stock which constitutes the Merger Consideration has
been duly authorized, and upon consummation of the transactions contemplated by this Agreement,
will be validly issued, fully paid and nonassessable. There are no statutory or contractual
stockholders preemptive rights with respect to the issuance of the Parent Common Stock which
constitutes the Merger Consideration.
3.6 SEC Documents. Parent has filed all required registration statements, prospectuses, reports,
schedules, forms, statements and other documents (including exhibits and all other
54
information
incorporated by
reference) required to be filed by it with the SEC since January 1, 2005. Parent has made
available to the Company all such registration statements, prospectuses, reports, schedules, forms,
statements and other documents in the form filed with the SEC. All such required registration
statements, prospectuses, reports, schedules, forms, statements and other documents (including
those that Parent may file subsequent to the date hereof until the Effective Time) are referred to
herein as the “Parent SEC Reports.” As of their respective dates, the Parent SEC Reports (i) were
prepared in accordance and complied in all material respects with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Parent SEC Reports, and (ii) did not at the time they were filed (or
if amended or superseded by a filing prior to the date of this Agreement then on the date of such
filing) contain any untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of Parent’s subsidiaries is
required to file any forms, reports or other documents with the SEC.
3.7 Parent Financial Statements. The financial statements of Parent included in the Parent SEC
Reports comply as to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis throughout the periods indicated (except as may be indicated in the
notes thereto), fairly present the consolidated financial position of Parent and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements to normal year-end
adjustments).
3.8 No Undisclosed Liabilities. Parent has no material Liabilities other than (i) those set forth
or adequately provided for in the balance sheet included in Parent’s most recently filed Quarterly
Report on Form 10-Q (including the notes thereto, the “Parent Balance Sheet”), (ii) those incurred
in the ordinary course of business, consistent with past practice, and not required by GAAP to be
set forth in the Parent Balance Sheet, or (iii) those incurred in the ordinary course of business
since the date of the Parent Balance Sheet, consistent with past practice.
3.9 Absence of Certain Changes or Events. Except as disclosed in the Parent SEC Reports, since
the date of the most recent unaudited financial statements included in the Parent SEC Reports and
through the date of this Agreement, there has not been (i) any Parent Material Adverse Effect,
(ii) any declaration, setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to
any of Parent’s capital stock, (iii) any amendment of any provision of the certificate of
incorporation or bylaws of, or of any material term of any outstanding security issued by, Parent,
(iv) any material change in any method of accounting or accounting practice by Parent except for
any such change required by a change in GAAP, or (v) any split, combination or reclassification of
any of its capital stock or any issuance or the authorization of any
55
issuance of any other
securities in respect of, in lieu of, or in substitution for shares of its capital stock.
3.10 Interim Operations of Subs.
(a) The Subs were formed solely for the purpose of engaging in the transactions contemplated
by this Agreement and have engaged in no business activities other than as contemplated by this
Agreement.
(b) All of the issued and outstanding equity of each Sub is validly issued, fully paid and
non-assessable and is owned, beneficially and of record, by Parent free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal, stockholder agreements,
limitations on Parent’s voting rights, charges and other encumbrances of any nature whatsoever.
(c) As of the date hereof and as of the Effective Time, except for (i) obligations or
liabilities incurred in connection with its incorporation or organization and (ii) this Agreement
and any other agreements or arrangements contemplated by this Agreement or in furtherance of the
transactions contemplated hereby, neither Sub has incurred, directly or indirectly, through any of
its subsidiaries or affiliates, any obligations or liabilities or engaged in any business
activities of any type or kind whatsoever or entered into any agreements or arrangements with any
person.
3.11 Litigation. Except as disclosed in the Parent SEC Reports filed prior to the date of this
Agreement, there is no action, suit, claim or proceeding of any nature pending, or to the knowledge
of Parent, threatened, against Parent, any of its subsidiaries, their respective properties
(tangible or intangible) or any of their respective officers or directors, that is reasonably
likely to result in a Parent Material Adverse Effect, and there is no investigation or similar
proceeding pending or, to the knowledge of Parent, threatened, against Parent by or before the SEC
or Nasdaq. No Governmental Entity has at any time challenged the legal right of Parent or any of
its subsidiaries to conduct its operations as presently or previously conducted.
3.12 Information Supplied. None of the information supplied in writing by Parent for inclusion or
incorporation by reference in the Soliciting Materials will, at the time they are mailed to the
Stockholders and at all
times that stockholder consents are being solicited in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading in light of the
circumstances under which they are made.
3.13 S-3 Eligibility. As of the date hereof, Parent is (i) eligible to register secondary
offerings of securities, including the resale of the Parent Common Stock constituting the Merger
Consideration, on a registration statement on Form S-3 under the Securities Act and (ii) a “well
56
known seasoned issuer” under the Securities Act and the rules and regulations promulgated
thereunder.
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 and the Effective Time, the
Company agrees to conduct its business, except to the extent that Parent shall otherwise consent in
writing (which consent shall not be unreasonably withheld, conditioned or delayed), 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 (subject to Section 4.1(f) below), to pay or perform other
obligations when due, and, to the extent consistent with such business, to preserve intact the
present business organizations of the Company, use commercially reasonable efforts to keep
available the services of the present officers and key employees of the Company and preserve the
relationships of the Company with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with them, all with the goal of preserving unimpaired the goodwill
and ongoing businesses of the Company 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 material event involving the Company that arises during the period from the date of
this Agreement and continuing until the earlier of the termination date of this Agreement or the
Effective Time. In addition to the foregoing, except as expressly contemplated by this Agreement
or required by applicable law, and except as expressly set forth in Section 4.1 of the Disclosure
Schedule, the Company shall not, without the prior consent of Parent (which consent shall not be
unreasonably withheld, conditioned or delayed), from and after the date of this Agreement:
(a) cause or permit any amendments to the certificate of incorporation, bylaws (or, in respect
of SNAPin Software UK Limited, memorandum and articles of association) or other organizational
documents of the Company or any Company Subsidiary;
(b) incur any expenditures or enter into any commitment or transaction exceeding $50,000
individually or $200,000 in the aggregate or any commitment or transaction of the type described in
Section 2.10 hereof (other than in the ordinary course of business consistent with past practice);
(c) pay, discharge, waive or satisfy, any indebtedness for borrowed money;
(d) except in the ordinary course of business consistent with past practice, pay, discharge,
waive or satisfy, any third party expense in an amount in excess of $50,000 in any one case, or
$200,000 in the aggregate, or any other claim, liability, right or obligation (absolute,
57
accrued,
asserted or unasserted, contingent or otherwise), other than with respect to such other claim,
liability right or obligation, the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the Current Balance Sheet;
(e) adopt or change accounting methods or practices (including any change in depreciation or
amortization policies) other than as required by GAAP;
(f) make or change any material Tax election, adopt or change any Tax accounting method, enter
into any closing agreement with respect to Taxes, settle or compromise any Tax claim or assessment,
consent to any extension or waiver of the limitation period applicable to any Tax claim or
assessment or file any material Tax Return or any amended Tax Return unless a copy of such Tax
Return has been delivered to Parent for review a reasonable time prior to filing and Parent has
approved such Tax Return;
(g) revalue any of its assets (whether tangible or intangible), including without limitation
writing down the value of inventory or writing off notes or accounts receivable other than in the
ordinary course of business consistent with past practice;
(h) 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);
(i) Except as set forth in Section 4.1(i) of the Disclosure Schedule, increase the salary or
other compensation payable or to become payable to any officer, director, employee, consultant or
advisor, or make any declaration, payment or commitment or obligation of any kind for the payment
(whether in cash or equity) of a severance payment, termination payment, bonus or other additional
salary or compensation to any such person, except payments made pursuant to written agreements
outstanding on the date hereof and disclosed in the Disclosure Schedule;
(j) sell, lease, license or otherwise dispose of or grant any security interest in any of its
properties or assets (whether tangible or intangible), including without limitation the sale of any
accounts receivable of the Company, except in the ordinary course of business and consistent with
past practices;
(k) make any loan to any person or entity or purchase debt securities of any person or entity
or amend the terms of any outstanding loan agreement;
(l) incur any indebtedness, guarantee any indebtedness of any person or entity, issue or sell
any debt securities, or guarantee any debt securities of any person or entity;
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(m) waive or release any material right or claim of the Company, including any write-off or
other compromise of any account receivable of the Company;
(n) commence or settle any lawsuit, threat of any lawsuit or proceeding or other investigation
against the Company involving an amount in dispute greater than $25,000;
(o) issue, grant, deliver or sell or authorize or propose the issuance, grant, delivery or
sale of, or purchase or propose the purchase of, any Company Capital Stock or any securities
convertible into, exercisable or exchangeable for, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to issue or purchase any
such shares or other convertible securities, except for (i) the issuance of Company Capital Stock
pursuant to the exercise of outstanding Company Options and Company Warrants and (ii) the issuance
of Company Options to new employees as set forth in Section 4.1(o) to the Disclosure Schedule; or
(p) (i) except standard end user licenses or other customer agreements entered into in the
ordinary course of business, consistent with past practice, sell, lease, license or transfer to any
person or entity any rights to any Company Intellectual Property or enter into any agreement or
modify any existing agreement with respect to any Company Intellectual Property with any person or
entity or with respect to any Intellectual Property Rights of any person or entity, (ii) except in
the ordinary course of business, consistent with past practice, purchase or license any
Intellectual Property Rights or enter into any agreement or modify any existing agreement with
respect to the Technology or Intellectual Property Rights of any person or entity, (iii) enter into
any agreement or modify any existing agreement with respect to the development of any Intellectual
Property Rights with a third party, or (iv) change pricing or royalties set or charged by the
Company to its customers or licensees, or the pricing or royalties set or charged by persons who
have licensed Intellectual Property Rights to the Company;
(q) enter into or amend any agreement pursuant to which any other party is granted marketing,
distribution, development, manufacturing or similar rights of any type or scope with respect to any
product, service or technology of the Company;
(r) enter into any agreement to purchase or sell any interest in real property, grant any
security interest in any real property, enter into any lease, sublease, license or other occupancy
agreement with respect to any real property or alter, amend, modify or terminate any of the terms
of any Lease Agreements; or
(s) except as set forth in Section 4.1(s) to the Disclosure Schedule, amend or otherwise
modify (or agree to do so) any of the Material Contracts;
59
(t) 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 business of the
Company;
(u) adopt or amend any Company Employee Plan except as contemplated by this Agreement, enter
into any employment contract, pay or agree to pay any bonus or special remuneration to any director
or Employee, or increase or modify the salaries, wage rates, or other compensation (including,
without limitation, any equity-based compensation) of its Employees except for (i) amendments
required by law or to conform any such Company Employee Plan or Employee Agreement to the
requirements of any applicable law, (ii) payments contemplated in this Agreement, and
(iii) payments made pursuant to written agreements outstanding on the date hereof and disclosed in
Section 4.1(u) of the Disclosure Schedule;
(v) enter into any strategic alliance, affiliate agreement or joint marketing arrangement or
agreement;
(w) except as set forth in Section 4.1(w) of the Disclosure Schedule, hire, promote, demote or
terminate any Employees, or encourage any Employees to resign from the Company; provided, however,
that Parent shall be deemed to have consented to any such action if notice of disapproval is not
provided to the Company within two (2) Business Days after notice of the proposed action is
provided to Parent;
(x) except in cooperation with Parent or in substantial compliance with guidelines provided by
Parent, make any representations or issue any communications (including electronic communications)
to Employees regarding any benefits of the transactions contemplated by this Agreement, including
any representations regarding offers of employment from Parent or the terms thereof;
(y) alter, or enter into any commitment to alter, its interest in any corporation,
association, joint venture, partnership or business entity in which the Company directly or
indirectly holds any interest;
(z) cancel, amend or renew any insurance policy; or
(aa) take, or agree in writing or otherwise to take, any of the actions described in
Sections 4.1(a) through 4.1(z) hereof, or any other action that would (i) prevent the Company from
performing, or cause the Company not to perform, their respective covenants hereunder or (ii) cause
or result in any of its respective representations and warranties contained herein being untrue or
incorrect.
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Parent acknowledges that any action taken with the written consent of Parent pursuant to this
Section 4.1 and after notification by the Company that such action will constitute a breach of a
representation or warranty set forth in ARTICLE II, or that is disclosed in Section 4.1 of the
Disclosure Schedule, in each case that causes any representation and warranty set forth in
ARTICLE II, as modified by the Disclosure Schedule, to be inaccurate as of the Closing Date, shall
be deemed to not be a breach of such representation or warranty.
4.2 No Solicitation. Until the earlier of (i) the Effective Time, or (ii) the date of
termination of this Agreement pursuant to the provisions of Section 10.1 hereof, the Company shall
not (nor shall the Company permit, as applicable, any of its 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, seek,
entertain, support, assist, initiate or participate in any inquiry, negotiations or discussions, or
enter into any agreement, with respect to any offer or proposal to acquire all or any material part
of the business, properties or technologies of the Company, or any amount of the Company 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 business, technologies or properties of the Company, or afford to any
person or entity access to its properties, technologies, books or records, not customarily afforded
such access, (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 (d) enter into any agreement with
any person providing for the acquisition of the Company (other than inventory in the ordinary
course of business), whether by merger, purchase of assets, license, tender offer or otherwise.
The Company shall immediately cease and cause to be terminated any such negotiations, discussion or
agreements (other than with Parent) that are the subject matter of clause (a), (b), (c) or
(d) above. In the event that the Company or any of the Company’s affiliates shall receive, prior
to the Effective Time or the termination of this Agreement in accordance with Section 10.1 hereof,
any offer, proposal, or request, directly or indirectly, of the
type referenced in clause (a), (c), or (d) above, or any request for disclosure or access as
referenced in clause (b) above, the Company shall immediately (x) suspend any discussions with such
offeror or party with regard to such offers, proposals, or requests and (y) notify Parent thereof,
including 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 an immediate injunction or
injunctions, without the necessity of proving the inadequacy of money damages as a remedy and
without the necessity of posting any bond or other security, 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. Without limiting the foregoing, it is understood that
any
61
violation of the restrictions set forth above by any officer, director, agent, representative
or affiliate of the Company shall be deemed to be a breach of this Agreement by the Company.
4.3 Procedures for Requesting Parent Consent. If the Company desires to take an action which
would be prohibited pursuant to Section 4.1 of this Agreement without the written consent of
Parent, prior to taking such action the Company may request such written consent by sending an
e-mail or facsimile to both of the following individuals:
(a) | Xxxxxxx Xxxxxx, Senior Vice President Corporate Development |
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail address: xxxxxxx.xxxxxx@xxxxxx.xxx
Facsimile: (000) 000-0000
E-mail address: xxxxxxx.xxxxxx@xxxxxx.xxx
(b) | Xxxxxxxx X. Xxxxx, Associate General Counsel |
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail address: xxxxxxxx.xxxxx@xxxxxx.xxx
Facsimile: (000) 000-0000
E-mail address: xxxxxxxx.xxxxx@xxxxxx.xxx
ARTICLE V
ADDITIONAL AGREEMENTS
5.1
Information Statement; Stockholder Approval.
(a) As soon as practicable after the date hereof:
(i) the Company shall use its reasonable best efforts to obtain the Sufficient Stockholder
Vote, either at a meeting of the Company’s Stockholders or pursuant to a written stockholder
consent, all in accordance with Delaware Law and the Charter Documents of the Company. In
connection with such meeting of Stockholders or written stockholder consent, the Company shall
submit to the Stockholders the Soliciting Materials (as defined below), which shall (i) include a
solicitation of the approval of the holders of the Company Capital Stock to this Agreement and the
Merger, (ii) specify that adoption of this Agreement shall constitute approval by the Stockholders
of the appointment of Xxxxxx X. Xxxxxx as Stockholder Representative, under and as defined in this
Agreement, (iii) include a summary of the Merger and this Agreement, (iv) include all of the
information required by applicable federal and state securities laws and Delaware Law (with any
information regarding Parent or the Subs being provided by Parent, for which Parent shall be solely
responsible), including the information required pursuant to Regulation D under the Securities Act
so that the issuance of the Parent Common Stock hereunder complies with Rule 506 under the
Securities Act, and (v) include a statement that appraisal rights are available for the
62
Company
Capital Stock pursuant to Section 262 of Delaware Law and a copy of such Section 262. Any
materials to be submitted to the Stockholders in connection with the solicitation of their approval
of the Merger and this Agreement (the “Soliciting Materials”) shall be subject to review and
approval by Parent prior to distribution, such approval not to be unreasonably withheld or delayed,
and shall also include the unanimous recommendation of the Board of Directors of the Company in
favor of the Merger, this Agreement, and the transactions contemplated hereby, and the conclusion
of the Company’s Board of Directors that the terms and conditions of the Merger are fair and
reasonable to the Stockholders.
(b) If the Company shall seek to obtain the Sufficient Stockholder Vote by way of a meeting of
the Stockholders, the Company shall consult with Parent regarding the date of such meeting to
approve this Agreement and the Merger (the “Company Stockholders’ Meeting”) and shall not postpone
or adjourn (other than for absence of a quorum) the Company Stockholders’ Meeting without the
consent of Parent. In the event the Company shall seek to obtain the Sufficient Stockholder Vote
by written consent, immediately upon receipt of written consents of its Stockholders constituting
the Sufficient Stockholder Vote, the Company shall deliver notice of the approval of the Merger by
written consent of the Company’s Stockholders, pursuant to the applicable provisions of Delaware
Law and the Company’s Charter Documents (the “Stockholder Notice”), to all Stockholders that did
not execute such written consent informing them that this Agreement and the Merger were adopted and
approved by the stockholders of the Company and that appraisal rights are available for their
Company Capital Stock pursuant to Section 262 of Delaware Law (which notice shall include a copy of
such Section 262), and shall promptly inform Parent of the date on which the Stockholder Notice was
sent. Notwithstanding the foregoing, the Company
shall give Stockholders sufficient notice to the effect that no Stockholder will be able to
exercise appraisal rights if such Stockholder has not perfected such appraisal rights in accordance
with Section 262 of Delaware Law.
5.2 Access to Information. The Company shall afford Parent and its accountants, counsel and
other representatives, reasonable access during the period from the date hereof and prior to the
Effective Time to (i) all of the properties, books, contracts, commitments and records of the
Company, (ii) all other information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of the Company as Parent may reasonably request, and
(iii) all employees of the Company as identified by Parent. The Company agrees 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 5.2 or otherwise
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.
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5.3 Confidentiality. Each of the parties hereto hereby agrees that the information obtained
in any investigation pursuant to Section 5.2 hereof, 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 that certain Confidentiality Agreement by and between Parent and the Company, dated as
of March 19, 2008 (the “Confidential Disclosure Agreement”). In this regard, the Company
acknowledges that Parent’s common stock is publicly traded and that any information obtained by
Company regarding Parent could be considered to be material non-public information within the
meaning of federal and state securities laws. Accordingly, the Company acknowledges and agrees not
to engage in any transactions in the Parent Common Stock in violation of applicable xxxxxxx xxxxxxx
laws.
5.4 Expenses. Whether or not the Merger is consummated, all fees and expenses incurred in
connection with the Merger including, without limitation, all legal, accounting (including the
costs of any audit and any costs incurred as a result of the compliance with Section 5.14),
financial advisory, consulting, and all other fees and expenses of third parties (including any
costs incurred to obtain consents, waivers or approvals as a result of the compliance with
Section 5.6 hereof) incurred by a party in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated hereby (“Third Party
Expenses”), shall be the obligation of the respective party incurring such fees and expenses. The
Company shall provide Parent with a statement of estimated Third Party Expenses incurred, or to be
incurred, by the
Company at least ten (10) Business Days prior to the Closing Date in form reasonably
satisfactory to Parent. Two (2) Business Days prior to the Closing Date, the Company will deliver
an updated statement of Third Party Expenses incurred, or to be incurred by the Company (the
“Closing Date Third Party Expense Statement”). The Closing Date Third Party Expense Statement
shall be in form reasonably satisfactory to Parent and shall be accompanied by invoices from the
Company’s legal, financial and other advisors providing services in connection with the negotiation
and effectuation of the terms and conditions of this Agreement and the transactions contemplated
hereby reflecting such advisors’ final billable Third Party Expenses. For the avoidance of doubt,
the Closing Date Third Party Expense Statement shall include only Third Party Expenses that have
not, and will not be, paid prior to the Effective Time. The amount of any Third Party Expenses
that are not reflected on the Closing Date Third Party Expense Statement (“Excess Third Party
Expenses”), shall be subject to the indemnification provision of Section 7.2 and shall not be
limited by the Threshold Amount (as defined in Section 7.4(a) hereof) or the maximum amount of
indemnification provided in Section 7.6.
Two (2) Business Days prior to the Closing Date, the Company shall prepare and deliver to
Parent a balance sheet of the Company, prepared in accordance with GAAP, setting forth a good faith
estimate of the Closing Cash (the “Closing Cash Estimate”). If the Closing Cash is less than the
Closing Cash Estimate, the amount of such difference (the “Closing Cash Deficit”) shall be subject
to the indemnification provision of Section 7.2 and shall not be limited by the Threshold
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Amount
(as defined in Section 7.4(a) hereof) or the maximum amount of indemnification provided in
Section 7.6.
5.5 Public Disclosure. No party shall issue any statement or communication to any third party
(other than their respective agents that are bound by confidentiality restrictions) regarding the
subject matter of this Agreement or the transactions contemplated hereby, including, if applicable,
the termination of this Agreement and the reasons therefor, without the consent of the other party,
except that this restriction shall not apply to disclosure made by Parent that Parent reasonably
determines to be necessary or appropriate in order to satisfy its disclosure obligations under
applicable laws, rules or regulations.
5.6 Consents. The Company shall use reasonable best efforts to obtain all necessary consents,
waivers and approvals of any parties to any Material Contract (including with respect to the Lease
Agreements) as are required thereunder in connection with the Merger or for any such Material
Contracts to remain in full force and effect so as to preserve all rights of, and benefits to, the
Company under such Material Contract from and after the Effective Time. Such consents, waivers and
approvals shall be in a form reasonably acceptable to Parent. In the event that the other parties
to any Specified Contract conditions its grant of a consent, waiver or approval (including by
threatening to exercise a “recapture” or other termination right) upon the payment of a consent
fee, “profit sharing” payment or other consideration, including other payments under the Specified
Contract, the Company shall be responsible for making all payments required to obtain such consent,
waiver or approval and such amounts shall be deemed Third Party Expenses under Section 5.4 hereof.
5.7 FIRPTA Compliance. On the Closing Date, the Company shall deliver to Parent a properly
executed statement (a “FIRPTA Compliance Certificate”) in a form reasonably acceptable to Parent
for purposes of satisfying Parent’s obligations under Treasury Regulation Section 1.1445-2(c)(3).
5.8 Notification of Certain Matters. Each of the Company on the one hand, and Parent, on the
other hand, shall give prompt notice to the other 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
of such party contained in this Agreement to be untrue or inaccurate at or prior to the Effective
Time, and (ii) any failure of such party 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 5.8 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 a party pursuant to this Section 5.8 shall be deemed to
amend or supplement the Disclosure Schedule or prevent or cure any misrepresentations, breach of
warranty or breach of covenant.
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5.9 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 reasonably necessary for effecting completely the consummation of the Merger
and the transactions contemplated hereby.
5.10 New Employment Arrangements. Parent or the Final Surviving Entity will offer
substantially all Employees in the United States “at-will” employment by Parent and/or the Final
Surviving Entity, to be effective as of the Closing Date, upon proof of a legal right to work in
the United States. Such “at-will” employment will: (i) be set forth in offer letters on Parent’s
standard form (each, an “Offer Letter”), (ii) be subject to and in compliance with Parent’s
applicable policies and procedures, including, but not limited to, employment background checks and
the execution of an employee proprietary information agreement governing employment conduct and
performance, (iii) have terms, including
the position and salary, which will be determined by Parent after consultation with the
Company’s management, (iv) include, if applicable, a waiver by the Employee of any future
equity-based compensation to which such Employee may otherwise have been eligible, (v) supersede
any prior express or implied employment agreements, arrangements, representations, or offer letters
in effect prior to the Closing Date and (vi) include agreements providing for non-competition with
the business of the Company, Parent and the Final Surviving Entity, non-solicitation of the
customers and employees of the Company, Parent and the Final Surviving Entity following the
termination of such employee, arbitration and release of claims. Each employee of the Company who
remains an employee of Parent or the Final Surviving Entity after the Closing Date shall be
referred to hereafter as a “Continuing Employee.” Continuing Employees shall be eligible to
receive benefits consistent with Parent’s applicable human resources policies. Continuing Employees
shall execute an Offer Letter and an Employee Proprietary Information, Inventions and
Non-Competition Agreement.
5.11 Company Equity Awards. The Company shall, effective as of immediately prior to the
Effective Time, grant Company RSUs and/or Company Incentive Options under the Plan to those
individuals and employees and in such amounts as are mutually agreed upon by Parent and the Company
which shall equal in the aggregate, the Total Company Equity Awards. Prior to the Effective Time,
and subject to the advance review and approval of Parent, the Company shall have taken all actions
necessary to effect the grant of Company RSUs and Company Incentive Options, including delivering
all required notices, adopting a form of restricted stock unit award agreement and Company
Incentive Option agreement (which shall provide, among other things, for a vesting commencement
date of no earlier than the Effective Time, no accelerated vesting as a result of the Merger, and
that such Company RSUs and Company Incentive Options shall terminate in the event this Agreement is
terminated pursuant to ARTICLE X hereof), increasing the share reserve, authorizing the granting of
Company RSUs and Company Incentive Options, and obtaining any required consents and/or approvals
necessary to effectuate the provisions of this Section 5.11 and which may otherwise be required
pursuant to applicable law. Notwithstanding anything in this Agreement to the contrary, unless
otherwise agreed to by Parent and the Company, the number of
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shares of Company Common Stock subject
to Company RSUs and Company Incentive Options that shall be granted pursuant to this Section 5.11
by the Company shall equal the Total Company Equity Awards, the vesting thereof shall be as set
forth in Schedule 5.11 hereof, and the exercise price of the Company Incentive Options shall equal
the Per Share Assumed Option Closing Consideration. Parent shall prepare, subject to the Company’s
approval which shall not be unreasonably withheld, any disclosure as shall be required to comply
with Rule 701 of the Securities Act in connection with the granting of such Company RSUs and
Company Incentive Options (the “701 Disclosure”), which the Company shall distribute in accordance
with Parent’s written instructions. The Company shall cooperate and provide reasonable assistance
to Parent in preparing the 701 Disclosure. Each of Parent and the Company shall use its reasonable
best efforts to ensure that the Company RSUs and Company Incentive Options are granted in such a
manner that they shall be exempt from the requirements of
Section 409A of the Code pursuant to the short-term deferral rule set forth in Treas. Reg.
Section 1.409A-1(b)(4) the rule for stock options set forth in Treas. Reg. Section 1.409A-1(b)(5)
or otherwise.
5.12 Termination of 401(k) Plan. Effective as of the day immediately preceding the Closing
Date, each of the Company and the Company Subsidiary shall terminate any and all Company Employee
Plans sponsored by the Company or any Company Subsidiary intended to include a Code Section 401(k)
arrangement (each, a “401(k) Plan”) (unless Parent provides written notice to the Company that such
401(k) Plans shall not be terminated). Unless Parent provides such written notice to the Company,
no later than five (5) Business Days prior to the Closing Date, the Company shall provide Parent
with evidence that such Company Employee Plan(s) have been terminated (effective as of the day
immediately preceding the Closing Date) pursuant to resolutions of the Board of Directors of the
Company or such Company Subsidiary, as the case may be. The form and substance of such resolutions
shall be subject to the reasonable review and approval of Parent. The Company also shall take such
other actions in furtherance of terminating such Company Employee Plan(s) as Parent and the Company
may agree upon. In the event that termination of a 401(k) Plan would reasonably be anticipated to
trigger liquidation charges, surrender charges or other fees, then the Company shall use
commercially reasonable efforts to reasonably estimate the amount of such charges and/or fees and
provide such estimate in writing to Parent no later than ten (10) Business Days prior to the
Closing Date.
5.13 Section 280G. The Company shall submit to the stockholders of the Company for approval
(in a manner reasonably satisfactory to Parent), by such number of stockholders of the Company as
is required by Section 280G(b)(5)(B) of the Code, any payments and/or benefits that may separately
or in the aggregate, constitute “parachute payments” pursuant to Section 280G of the Code
(“Section 280G Payments”) (which determination shall be made by the Company and shall be subject to
review and approval by Parent, which approval shall not be unreasonably withheld), such that such
payments and benefits shall not be deemed to be Section 280G Payments, and prior to the Effective
Time, the Company shall deliver to Parent evidence satisfactory to Parent that (A) a vote of the
stockholders of the Company was solicited in conformance with Section 280G and the
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regulations
promulgated thereunder and the requisite stockholder approval was obtained with respect to any
payments and/or benefits that were subject to the stockholder vote (the “280G Stockholder
Approval”), or (B) that the 280G Stockholder Approval was not obtained and as a consequence, that
such payments and/or benefits shall not be made or provided to the extent they would cause any
amounts to constitute Section 280G Payments, pursuant to the waivers of those payments and/or
benefits, which were executed by the affected individuals prior to the stockholder vote.
5.14 Financials.
(a) The Company, prior to the Effective Time, shall use reasonable best efforts to cause the
Company’s auditors to deliver any opinions, consents, comfort letters, or other materials necessary
for Parent to file the Required Financials in a registration statement or other filing made by
Parent with the SEC. After the Effective Time, the Stockholder Representative will reasonably
cooperate, upon request of Parent, in Parent’s efforts to cause the Company’s auditors to provide
the foregoing documents.
(b) Within thirty (30) days following the last day of each fiscal quarter ending on or after
March 31, 2008, the Company shall deliver, or cause to be delivered, to Parent the unaudited
balance sheet as of the last day of such fiscal quarter and as of the last day of the corresponding
fiscal quarter from the prior fiscal year, and the related unaudited statements of income, cash
flow, and stockholders’ equity for the three (3) month periods then ended, in each case reviewed by
the Company’s independent accountants in accordance with SAS-100, and such quarterly financial
statements shall be deemed “Interim Financials” under this Agreement.
(c) The financial statements to be delivered pursuant to Section 5.14(b) hereof shall be
referred to as the “Required Financials.”
5.15 Indemnification of Directors and Officers.
(a) For six (6) years after the Effective Time, Parent shall, cause the Final Surviving Entity
or the Surviving Entity, as the case may be, to indemnify and hold harmless the officers and
directors of the Company and of each Company Subsidiary as of immediately prior to the Effective
Time (each a “Covered Person”) in respect of acts or omissions occurring prior to the Effective
Time to the fullest extent permitted under the Charter Documents of the Company or pursuant to any
indemnification agreements between the Company and its officers and directors; provided that such
indemnification shall be subject to any limitation imposed from time to time under applicable law.
Parent shall be liable for any breach of this Section 5.15.
(b) Parent shall purchase a directors’ and officers’ insurance “tail” policy under the
Company’s or each Company Subsidiary’s, as applicable, existing directors’ and officers’ insurance
policy which (i) has an effective term of six (6) years from the Effective Time, (ii) covers
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the Covered Persons, (iii) contains terms and conditions (including, without limitation, coverage
amounts) that are no less advantageous, when taken as a whole, to those currently applicable to the
Covered Persons, and (iv) has a coverage effective date not later than the Closing Date.
(c) The rights of each Covered Person under this Section 5.15 shall be in addition to any
rights such person may have under the Charter Documents as of the date hereof. These rights shall
survive consummation of the First Step Merger and the Second Step Merger and are intended to
benefit, and shall be enforceable by, each Covered Person. The Covered Persons are intended third
party beneficiaries of this Section 5.15.
5.16 Reasonable Efforts; Regulatory Filings.
(a) 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
satisfy the conditions to the obligations to consummate the Merger, subject to Section 5.6, to
obtain all necessary waivers, consents and approvals and to effect all necessary registrations and
filings 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.
(b) As soon as may be reasonably practicable, the Company and Parent each shall file with the
United States Federal Trade Commission (the “FTC”) and the Antitrust Division of the United States
Department of Justice (“DOJ”) Notification and Report Forms relating to the transactions
contemplated herein as required by the HSR Act, as well as comparable pre-merger notification forms
required by the merger notification or control laws and regulations of any applicable jurisdiction,
as reasonably agreed by the parties to be required. The Company and Parent each shall promptly
supply the other with any information which may be required in order to effectuate such filings;
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 limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and stock.
ARTICLE VI
CONDITIONS TO THE FIRST STEP MERGER
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6.1 Conditions to Obligations of Each Party to Effect the First Step Merger. The respective
obligations of the Company and Parent to effect the First Step Merger shall be subject to the
satisfaction, at or prior to the Effective Time, of the following conditions:
(a) 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
First Step Merger illegal or otherwise prohibiting consummation of the First Step Merger.
(b) No Injunctions or Restraints; Illegality. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the First Step 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 threatened or
pending.
(c) Stockholder Approval. Stockholders constituting the Sufficient Stockholder Vote shall
have approved this Agreement, and the transactions contemplated hereby, including the Merger and
the appointment of the Stockholder Representative.
(d) HSR Act. The waiting period (and any extension thereof) applicable to the Merger under
the HSR Act shall have been terminated or shall have expired.
6.2 Conditions to the Obligations of Parent and Sub I. The obligations of Parent and Sub I to
consummate and effect this Agreement and the transactions contemplated hereby 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, by Parent and Sub I:
(a) Representations, Warranties and Covenants. (i) The representations and warranties of the
Company in this Agreement (disregarding, for this purpose, all exceptions in those representations
and warranties relating to materiality, Company Material Adverse Effect or any similar standard or
qualification) shall be true and correct on and as of the date of this Agreement and as of the
Effective Time as though made on and as of the Effective Time (except to the extent expressly made
as of a specified date, in which case as of such date), except where such failure to be so true and
correct would not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect (it being understood and agreed that, for the purposes of determining
whether this condition has been satisfied with respect to the representation and warranty set forth
in Section 2.14(n), Company Material Adverse Effect shall be deemed to include an adverse effect on
Parent) and (ii) the Company shall have performed and complied in all material respects with all
covenants and obligations under this Agreement required to be performed and complied with by the
Company as of the Closing.
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(b) Governmental Approval. Approvals from any court, administrative agency, commission, or
other federal, state, county, local or other foreign governmental authority,
instrumentality, agency, or commission (if any) deemed appropriate or necessary by Parent
shall have been timely obtained.
(c) Third Party Consents. The Company shall have delivered to Parent all necessary consents,
waivers and approvals of parties to any Specified Contract as are required thereunder in connection
with the Merger, or for any such Contract to remain in full force and effect without limitation,
modification or alteration after the Effective Time.
(d) Release of Liens. Parent shall have received from the Company a duly and validly executed
copy of all agreements, instruments, certificates and other documents, in form and substance
reasonably satisfactory to Parent, that are necessary or appropriate to evidence the release of all
Liens set forth in Schedule 6.2(d) to this Agreement.
(e) No Material Adverse Effect. There shall not have occurred any event or condition of any
character that has had, or is reasonably likely to have, a Company Material Adverse Effect since
the date of this Agreement.
(f) Resignation of Officers and Directors. Parent shall have received a written resignation
from each of the officers and directors of the Company effective as of the Effective Time.
(g) Legal Opinion. Parent shall have received a legal opinion from legal counsel to the
Company, substantially in the form attached hereto as Exhibit F.
(h) Appraisal Rights. The holders of no greater than ten percent (10%) of the outstanding
Company Capital Stock shall continue to have a right to exercise appraisal, dissenters’ or similar
rights under applicable law with respect to such equity securities of the Company by virtue of the
Merger.
(i) Certificate of the Company. Parent shall have received a certificate, validly executed by
the Chief Executive Officer of the Company for and on the Company’s behalf, to the effect that the
conditions to the obligations of Parent and Sub I set forth in Section 6.2(a) and Section 6.2(e)
hereof have been satisfied.
(j) Certificate of Secretary of Company. Parent shall have received a certificate, validly
executed by the Secretary of the Company, certifying as to (i) the terms and effectiveness of the
Charter Documents, and (ii) the valid adoption of resolutions of the Board of Directors of the
Company (whereby the Merger and the transactions contemplated hereunder were unanimously approved
by the Board of Directors) and (iii) that the Stockholders constituting the Sufficient Stockholder
Vote have adopted this Agreement and the Merger.
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(k) Certificates of Good Standing. Parent shall have received a long form certificate of good
standing from the Secretary of State of the State of Delaware, and (ii) a good standing certificate
from each jurisdiction in which the Company is qualified to do business, each of which to be dated
within a reasonable period prior to Closing with respect to the Company.
(l) FIRPTA Certificate. Parent shall have received a copy of the FIRPTA Compliance
Certificate, validly executed by a duly authorized officer of the Company.
(m) Termination of 401(k) Plans. Unless Parent has explicitly instructed otherwise pursuant
to Section 5.12 hereof, Parent shall have received from the Company evidence reasonably
satisfactory to Parent that all 401(k) Plans have been terminated pursuant to resolution of the
Board of Directors of the Company or the Company Subsidiary, as the case may be, (the form and
substance of which shall have been subject to review and approval of Parent), effective as of no
later than the day immediately preceding the Closing Date, and Parent shall have received from the
Company evidence of the taking of any and all further actions as provided in Section 5.12 hereof.
(n) Section 280G Payments. With respect to any payments or benefits that Parent determines
may constitute a Section 280G Payment, the stockholders of the Company shall have (i) approved,
pursuant to the method provided for in the regulations promulgated under Section 280G of the Code,
any such Section 280G Payments or (ii) disapproved such payments and/or benefits, and, as a
consequence, no Section 280G Payments shall be paid or provided for in any manner and neither
Parent nor any of its subsidiaries shall have any liabilities with respect to any such Section 280G
Payments.
(o) Litigation. There shall be no material action, suit, claim, order, injunction or
proceeding of any nature pending, or overtly and reasonably threatened, by a customer or
stockholder of the Company, against Parent or the Company, their respective properties or any of
their respective officers or directors arising out of, or in any way connected with, the Merger or
the other transactions contemplated by the terms of this Agreement.
(p) Employees. The persons listed on Schedule 6.2(p) to this Agreement (i) shall have signed
an Offer Letter accepting “at-will” employment (or an independent contractor relationship, as
applicable) with Parent or the Final Surviving Entity (the “Key Employees”) on or prior to the date
hereof and such agreements shall be in full force and effect as of the Effective Time, (ii) shall
still be employees of the Company and performing their usual and customary duties for the Company
immediately before the Effective Time, and (iii) shall not have notified (whether formally or
informally) Parent or the Company of such employee’s intention of leaving the employ of Parent or
the Company following the Effective Time.
(q) Financial Statements. Parent shall have received: (i) the Required Financials, and (ii) a
letter from the Company’s auditors to the effect that they know of no reason why they
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would not deliver consent to file the Required Financials with the SEC or incorporate the
Required Financials into a Registration Statement or deliver a comfort letter, if requested, to an
underwriter in connection with a public offering of Parent’s securities.
6.3 Conditions to Obligations of the Company. The obligations of the Company and each of the
Stockholders to consummate and effect this Agreement and the transactions contemplated hereby 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 the Company:
(a) Representations, Warranties and Covenants. (i) The representations and warranties of
Parent and the Subs in this Agreement (disregarding for this purpose all exceptions in those
representations and warranties relating to materiality or Parent Material Adverse Effect or any
similar standard or qualification) shall be true and correct on and as of the date of this
Agreement and as of the Effective Time as though made on and as of the Effective Time (except to
the extent expressly made as of a specified date, in which case as of such date), except where such
failure to be so true and correct would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect and (ii) each of Parent and the Subs shall have
performed and complied in all material respects with all covenants and obligations under this
Agreement required to be performed and complied with by such parties as of the Closing.
(b) Parent Material Adverse Effect. There shall not have occurred any event or condition of
any character that has had, or is reasonably likely to have, a Parent Material Adverse Effect since
the date of this Agreement.
(c) Certificate of Parent. Company shall have received a certificate, validly executed on
behalf of Parent by a Vice President for and on its behalf to the effect that, as of the Closing
the conditions set forth in Sections 6.3(a) and 6.3(b) hereof have been satisfied.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
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 instruments delivered
pursuant to this Agreement, shall terminate on the one (1) year anniversary of the Closing Date
(the expiration of such one-year period, the “Survival Date”), provided, however, that the
representations and warranties of the Company contained in Section 2.2 hereof shall terminate on
the third anniversary of the Closing Date and that the representations and
warranties of the Company contained in Section 2.11 hereof shall survive until the expiration
of the applicable statute of limitations, and provided further, however, that if, at any time prior
to the close of business on the one (1) year anniversary of the Closing Date, an Officer’s
Certificate (as defined in Section 7.4(b))
73
is delivered alleging Losses and a claim for recovery
under Section 7.3(b), then the claim asserted in such notice shall survive the one (1) year
anniversary of the Closing Date until such claim is fully and finally resolved. The
representations and warranties of Parent and the Subs contained in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall terminate at the
Closing. Notwithstanding anything to the contrary herein, the Stockholder Representative shall
have the right to pursue on behalf of the Stockholders any remedy available at law or in equity for
a breach of any covenant of Parent or the Subs set forth in this Agreement, and nothing herein
shall be construed as a limitation on any Stockholder’s right to pursue any claim that such
Stockholder may have against Parent under applicable federal or state securities laws.
7.2 Indemnification.
(a) Subject to Section 7.6, the Stockholders agree severally in accordance with each
Stockholder’s Escrow Pro Rata Portion, but not jointly, to indemnify and hold Parent and its
officers, directors, and affiliates, including the Final Surviving Entity (the “Indemnified
Parties”), harmless against all claims, losses, liabilities, damages, deficiencies, costs and
expenses, including reasonable attorneys’ fees and expenses of investigation and defense and
diminution in value (hereinafter individually a “Loss” and collectively “Losses”) incurred or
sustained by the Indemnified Parties, or any of them (including the Final Surviving Entity),
directly or indirectly, as a result of (i) any breach or inaccuracy of a representation or warranty
of the Company contained in this Agreement or in any certificate or other instruments delivered by
or on behalf of the Company pursuant to this Agreement or, in the case of a Third Party Claim any
allegation that, if true, would constitute such a breach or inaccuracy, (ii) any failure by the
Company to perform or comply with any covenant applicable to it contained in this Agreement, (iii)
any Excess Third Party Expenses, (iv) any Closing Cash Deficit, or (v) any Dissenting Share
Payments. The Stockholders shall not have any right of contribution from the Final Surviving
Entity or Parent with respect to any Loss claimed by an Indemnified Party.
(b) For all purposes of this Section 7.2, any and all Indemnified Parties seeking to make a
claim pursuant to this Section 7.2 shall use commercially reasonable efforts to pursue proceeds
available under Company Insurance Policies, if any, and all Losses of such Indemnified Parties
shall be net of (A) any insurance recoveries actually received by the Indemnified Parties in
connection with the facts giving rise to the right of indemnification and (B) any actual reduction
of the cash Taxes of the Indemnified Parties in the year of the payment of such Loss as a result of
such
payment, after taking into account all other items of loss, deduction, or credit of such
Indemnified Party.
7.3 Escrow Arrangements.
(a) Escrow Fund. Promptly after the Effective Time, Parent shall deposit with the Escrow
Agent a number of shares of Parent Common Stock represented by a single stock
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certificate
registered in the name of Var & Co., as nominee of the Escrow Agent, which together equal the
Escrow Amount out of the number of shares of Parent Common Stock otherwise deliverable to the
Stockholders pursuant to Section 1.6 hereof and shall confirm such deposit with the Escrow Agent
and the Stockholder Representative. Such deposit of the Escrow Amount (plus
any New Shares (as defined in Section 7.3(c)(v) hereof) shall constitute an escrow fund (the
“Escrow Fund”) to be governed by the terms set forth herein. Such shares of Parent Common stock
shall be deposited by Parent as, for this purpose, agent of the Stockholders, who shall thereupon,
without any act by them, be treated as having received from Parent under Section 1.6 such Parent
Common Stock in accordance with their respective Escrow Pro Rata Portions and then as having
deposited such shares of Parent Common Stock into the Escrow Fund. The Escrow Fund shall be
security for the indemnity obligations provided for in this ARTICLE VII and 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 recovery under this ARTICLE VII. The Escrow
Agent may execute this Agreement following the date hereof and prior to the Closing, 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. Interests in the Escrow Fund
shall be non-transferable.
(b) Escrow Period; Distribution upon Termination of Escrow Periods. 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., local time at Parent’s headquarters, on the Survival Date (the
“Escrow Period”); provided, however, that the Escrow Period shall not terminate with respect to any
amount which, in the reasonable judgment of Parent, is or may be necessary to satisfy any
unsatisfied claims specified in any Officer’s Certificate delivered to the Escrow Agent and the
Stockholder Representative prior to the Escrow Period termination date with respect to facts and
circumstances existing prior to the Survival Date (the “Escrow Holdback Amount”). The number of
shares of Parent Common Stock that may be held back in respect of the Escrow Holdback Amount shall
be based on the Signing Price. As soon as all such claims have been resolved in accordance with
Section 7.4(d), the Escrow Agent shall deliver the portion of the Escrow Holdback Amount not
required to satisfy such claims to the Stockholders. Deliveries of amounts out of the Escrow Fund
to the Stockholders pursuant to this Section 7.3(b) shall be made in proportion to their respective
Escrow Pro Rata Portions of the Escrow Amount, with the number of shares delivered to each
Stockholder rounded down to the nearest whole number of shares of Parent Common Stock. Any
distribution of all or a portion of the Parent Common Stock to the Stockholders shall be made by
delivery of the stock certificate held by the Escrow Agent representing the Parent Common Stock to
the Parent, endorsed for transfer, with instruction to the Parent to transfer and issue, or cause
its transfer agent to transfer and issue, the aggregate number of shares of Parent Common Stock
being distributed, allocated among the Stockholders based upon his, her or its Escrow Pro Rata
Portion, in each case by issuing to each such Stockholder a stock certificate representing such
allocated shares, registered in his, her or its name set forth on the schedule delivered to the
Escrow Agent at Closing and mailed by first class mail to such Stockholders’ address set forth on
such schedule (or to such
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other address as such Stockholder may have previously instructed the
Escrow Agent in writing); and, if less than all the then remaining shares of Parent Common Stock
are to be so distributed and transferred as a result of the retention in the Escrow Fund of an
Escrow Holdback Amount in accordance with this Section 7.3(b), the Escrow Agent shall instruct
Parent to issue and return to the
Escrow Agent (or its nominee, if the Escrow Agent shall so instruct) a stock certificate
representing the shares of Parent Common Stock representing the Escrow Holdback Amount. Parent
shall use reasonable best efforts to cause the distribution of the shares of Parent Common Stock
constituting the Escrow Amount to which to the Stockholders are entitled to be effected promptly
after the Escrow Period termination date, or, in the case an Escrow Holdback Amount is held back in
accordance with this Section 7.3(b), promptly after the claims relating to such Escrow Holdback
Amount have been resolved in accordance with Section 7.4(d). The Escrow Agent shall have no
liability for the actions or omissions of, or any delay on the part of, Parent in connection with
the foregoing.
(c) Protection of Escrow Fund.
(i) The Escrow Agent shall hold and safeguard the Escrow Fund during the Escrow Period and
shall hold and dispose of the Escrow Fund only in accordance with the terms of this Section 7.3(c).
(ii) The Interested Parties agree that, for Tax reporting purposes, all interest and other
income earned from the investment of the Escrow Fund in any Tax year shall, (A) to the extent such
interest or other income is distributed by the Escrow Agent to any person or entity pursuant to the
terms of this Agreement during such tax year, be reported as allocated to such person or entity
and, (B) otherwise, be reported as allocated to the Stockholders in accordance with their
respective Escrow Pro Rata Portions.
(iii) Each of the Interested Parties hereto agrees to provide the Escrow Agent with a
certified tax identification number by signing and returning a Form W-9 (or Form W-8 BEN, in case
of non-U.S. persons) to the Escrow Agent upon the execution and delivery of this Agreement. The
Interested Parties understand that, in the event their tax identification numbers are not certified
to the Escrow Agent, the Internal Revenue Code, as amended from time to time, may require
withholding of a portion of any interest or other income earned on the investment of the Escrow
Amount. Each of the Interested Parties agrees to instruct the Escrow Agent in writing with respect
to the Escrow Agent’s responsibility for withholding and other taxes, assessments or other
governmental charges, and to instruct the Escrow Agent with respect to any certifications and
governmental reporting that may be required under any laws or regulations that may be applicable in
connection with its acting as Escrow Agent under this Agreement.
(iv) Neither the Escrow Agent nor its nominee shall be under any duty to take any action to
preserve, protect, exercise or enforce any rights or remedies under or with respect to the Parent
Common Stock (including without limitation with respect
76
to the exercise of any voting or consent
rights, conversion or exchange rights, defense of title, preservation of rights against prior
matters or otherwise). Notwithstanding the foregoing, each of the Stockholders shall have voting
rights with respect to the shares of Parent Common Stock contributed to and held in the Escrow
Fund on behalf of such Stockholder (and on any voting securities added to the Escrow Fund in
respect of such shares of Parent Common Stock). The Escrow Agent shall from time to time deliver
such proxies, consents and other materials and documents as may be necessary to enable the
Stockholders to exercise such voting rights, and shall instruct the Stockholders to return any
instructions with respect to such voting rights to the Escrow Agent, who shall tabulate all votes
received by the Stockholders and shall vote on their behalf in accordance with the instructions
given by each such Stockholder. In the absence of instructions by any such Stockholder, the Escrow
Agent shall not vote any of the shares held on behalf of such Stockholder.
(v) Cash dividends, cash returned by the Stockholder Representative and any non-cash taxable
dividends or distributions (other than New Shares as defined below), on any shares of Parent Common
Stock in the Escrow Fund shall be distributed to the Stockholders according to their Escrow Pro
Rata Portion, and shall not become a part of the Escrow Fund. Any shares of Parent Common Stock or
other equity securities issued or distributed by Parent after the Effective Time (including shares
issued upon a nontaxable 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. The parties hereto (other than the Escrow Agent) agree that the
Stockholders are the owners of any stock in the Escrow Fund. 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.
7.4 Indemnification Claims.
(a) Threshold Amount. Notwithstanding any provision of this Agreement to the contrary, except
as set forth in the second sentence of this Section 7.4(a), an Indemnified Party may not recover
any Losses under Section 7.2(a)(i) unless and until one or more Officer’s Certificates (as defined
below) identifying such Losses under Section 7.2(a)(i) in excess of $1,800,000 in the aggregate
(the “Threshold Amount”) has or have been delivered to the Stockholder Representative and the
Escrow Agent as provided in Section 7.4(b) hereof, in which case Parent shall be entitled to
recover all Losses so identified without regard to the Threshold Amount from the first dollar of
such Losses. Notwithstanding the foregoing, an Indemnified Party shall be entitled to recover for,
and the Threshold Amount shall not apply as a threshold to, any and all claims or payments made
with respect to (A) all Losses incurred pursuant to clauses (ii) (other Losses relating to breaches
of Section 4.1), (iii), (iv) and (v) of Section 7.2 hereof, and (B) Losses resulting from any
breach of representation or warranty contained in Section 2.2 (Company Capital Structure).
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(b) Claims for Indemnification. In order to seek indemnification under Section 7.2, Parent
shall deliver an Officer’s Certificate to the Stockholder Representative and the Escrow Agent to be
received by them at any time on or before the Survival Date; provided, however, Parent may seek
indemnification (i) for a breach of a representation and warranty of the Company contained in
Section 2.2 hereof, by delivering an Officer’s Certificate to the Stockholder
Representative on or before the third anniversary of the Closing Date, and (ii) for a breach
of a representation and warranty of the Company contained in Section 2.11 hereof, by delivering an
Officer’s Certificate to the Stockholder Representative before the expiration of the applicable
statute of limitations. Unless the Stockholder Representative shall have delivered an Objection
Notice pursuant to Section 7.4(c) hereof, the Escrow Agent shall promptly, and in no event later
than the thirty-fifth (35th) day after its receipt of the Officer’s Certificate, deliver to the
Indemnified Party from the Escrow Fund an amount equal to the Loss set forth in such Officer’s
Certificate. Any payment from the Escrow Fund to Indemnified Parties shall be made in whole shares
of Parent Common Stock (valuing each share of Parent Common Stock equal to the Signing Price) and
shall be deemed to have been made pro rata amongst the Stockholders based on the aggregate amounts
deposited into the Escrow Fund on each such Stockholder’s behalf. For the purposes hereof,
“Officer’s Certificate” shall mean a certificate signed by any officer of Parent: (1) stating that
an Indemnified Party has paid, sustained, incurred, or properly accrued, or reasonably anticipates
that it will have to pay, sustain, incur or accrue, Losses for which the Indemnified Party is
entitled to indemnification under Section 7.2, (2) specifying in reasonable detail the individual
items of Losses included in the amount so stated, the date each such item was paid, sustained,
incurred, or properly accrued, and the nature of the misrepresentation, breach of warranty or
covenant to which such item is related, and (3) specifying the number of whole shares of Parent
Common Stock represented by such Losses. In the event that Parent, in accordance with
Section 7.3(b), shall deliver an Officer’s Certificate for Losses in excess of the available Escrow
Fund, any Earnout Consideration that may become payable pursuant to ARTICLE VIII hereof shall not
be paid to the Exchange Agent to the extent that the Losses claimed in such Officer’s Certificate
exceed the available Escrow Fund but would not result in the limit of liability set forth in
Section 7.6 to be exceeded (the amount of such Losses in excess of the available Escrow Fund,
subject to and not to exceed the limitations set forth in Section 7.6, being referred as the
"Excess Losses”), until such claim contained in such Officer’s Certificate shall be resolved in
accordance with this Section 7.4.
(c) Objections to Claims for Indemnification. No such payment shall be made under
Section 7.4(b) if the Stockholder Representative shall object in a written statement to the claim
made in the Officer’s Certificate (an “Objection Notice”), and such Objection Notice shall have
been received by Parent and the Escrow Agent on or prior to the expiration of the thirtieth (30th)
day after its receipt of the Officer’s Certificate. Notwithstanding the foregoing, the Stockholder
Representative and the Stockholders hereby waive the right to object to any claims in respect of
any Agreed-Upon Loss (as defined in Section 7.4(d)(iii) hereof). If the Stockholder Representative
does not object in writing to the claim made in the Officer’s Certificate within such 30-day
period, such failure to so object shall be an irrevocable acknowledgment by the Stockholder
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Representative that the Indemnified Party is entitled to the full amount of the claim for Losses
set forth in such Officer’s Certificate, and payment in respect of such Losses shall thereafter be
made in accordance with Section 7.4(b).
(d) Resolution of Conflicts.
(i) In case the Stockholder Representative delivers an Objection Notice in accordance with
Section 7.4(c) (other than Agreed-Upon Losses as defined in Section 7.4(d)(iii) hereof), 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 furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any
such memorandum and make distributions from the Escrow Fund in accordance with the terms thereof.
(ii) At any time following delivery of an Objection Notice by the Stockholder Representative
to Parent or in the event of any dispute arising pursuant to Section 8.3, either Parent, on the one
hand, or the Stockholder Representative, on the other hand, may pursue any and all legal or
equitable remedies available to them under applicable law.
(iii) This Section 7.4(d) shall not apply to claims made in respect of (A) any Dissenting
Share Payments (as defined in Section 1.7(c)), (B) any Excess Third Party Expenses (as defined in
Section 5.4), (C) any Closing Cash Deficit (as defined in Section 5.4) or (D) any Agent
Interpleader Expenses or Agent Indemnification Expenses pursuant to clauses (vi) and (vii) of
Section 7.4(g) hereof (each, an “Agreed-Upon Loss”). Claims against the Escrow Fund made in
respect of any Agreed-Upon Loss shall be resolved in the manner described in Section 7.3(b) above.
(e) Third-Party Claims. In the event Parent becomes aware of a third party claim (a “Third
Party Claim”) which Parent reasonably believes may result in a demand for indemnification pursuant
to this ARTICLE VII, Parent shall notify the Escrow Agent and the Stockholder Representative of
such claim. If the Third Party Claim may result in a claim against the Escrow Fund, the
Stockholder Representative on behalf of the Stockholders, shall be entitled, at its expense, to
participate in and make recommendations with respect to, but not to determine or conduct, the
defense of such Third Party Claim; provided, however, that the Stockholders agree and consent, as a
condition of such entitlement of participation, that Parent’s legal counsel in the Third Party
Claim shall not be precluded from representing Parent as against the Stockholders in the event that
the Stockholders dispute the fact or amount of the Parent’s claim of a Loss related to the
Third-Party Claim. Parent shall have the right in its sole discretion to conduct the defense of,
and to settle, any such claim, provided, however that except with the consent of the Stockholder
Representative, no settlement of any such Third Party Claim with third party claimants shall be
determinative of the
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amount of Losses relating to such matter. In the event that the Stockholder
Representative has consented to any such settlement, the Stockholders shall have no power or
authority to object to the amount of any Third Party Claim by Parent. Notwithstanding anything in
this Agreement to the contrary, if Parent does not notify the Stockholder Representative in its
notice provided under the first sentence of this Section 7.4(e), or by separate notice within five
(5) Business Days thereafter, that it has assumed the defense of the Third Party Claim, or notifies
the Stockholder Representative
that it has elected not to assume the defense of the Third Party Claim, the Stockholder
Representative shall have the right to assume and conduct the defense of such claim at its expense;
provided, however, that the Stockholder Representative shall not consent to the entry of any
judgment or enter into any settlement with respect to such claim unless such judgment or settlement
requires solely the payment of money damages not in excess of the amount available in the Escrow
Fund and such judgment or settlement includes as an unconditional term thereof the release by the
claimant or the plaintiff of the Indemnified Party from all liability in respect of such Third
Party Claim. Notwithstanding anything in this Agreement to the contrary, this Section 7.4(e) shall
not apply to any third party claim that is the subject of an Agreed-Upon Loss.
(f) Claims for Stockholder Representative Expenses. Immediately prior to the Closing, the
Company will deposit with the Escrow Agent the Stockholder Representative Expense Holdback, which
shall serve as a source of funds for paying or reimbursing Stockholder Representative Expenses (as
defined in Section 7.5(b). The Stockholder Representative Expense Holdback shall be invested in
the Escrow Agent’s Insured Money Market Account as described in Exhibit I hereto. In order to seek
Stockholder Representative Expenses, the Stockholder Representative shall deliver a certificate (a
“Stockholder Representative’s Certificate”) to the Escrow Agent at any time on or before the
Survival Date. Such Stockholder Representative’s Certificate shall set forth the amount of the
Stockholder Representative Expenses for which reimbursement or advance is requested and shall
specify in reasonable detail the nature of such Stockholder Representative Expenses. Within five
(5) Business Days after the Escrow Agent’s receipt of a Stockholder Representative Certificate, the
Escrow Agent shall deliver to the Stockholder Representative a check in an amount equal to the
amount of Stockholder Representative Expenses set forth in such certificate; provided that in no
event shall the Escrow Agent be required to pay any Stockholder Representative Expenses in excess
of the amount of the Stockholder Representative Expense Holdback (and any undistributed earnings
thereon) then held by the Escrow Agent. If the Stockholder Representative makes a claim for the
advance of any expenses pursuant to this Section 7.4(f) and any portion of such expenses are not
actually incurred, the Stockholder Representative shall promptly return the amount so advanced (or
the proceeds from the sale of any shares of Parent Common Stock that have been sold to raise cash)
to the Escrow Agent to be returned to the Escrow Fund and either held or distributed in accordance
with this Agreement. To the extent that any portion of Stockholder Representative Expense Holdback
has not been paid to the Stockholder Representative or is not subject to a Stockholder
Representative Certificate delivered on or before the Survival Date, such portion (together with
any undistributed earnings thereon) shall be
80
distributed to the Stockholders in accordance with
their respective Escrow Pro Rata Portions promptly after the Survival Date.
(g) 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 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 are not inconsistent with the
terms of this Agreement, or, in the reasonable opinion of Escrow Agent, will not result in
additional obligations or liabilities to the Escrow Agent, 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’s duties hereunder are
ministerial in nature and shall not be deemed fiduciary. 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 legal counsel shall be
conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to disregard any and all warnings given
by any of the parties hereto or by any other person, excepting only orders or process of courts of
law, and is hereby expressly authorized to comply with and obey orders, judgments or decrees of any
court. 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.
(v) In performing any duties under this Agreement, the Escrow Agent shall not be liable to any
party for damages, losses (including investment losses resulting from liquidating a position in the
Money Market Account), 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
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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 legal counsel in connection with
performing the 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 the Escrow Fund and may wait for settlement of any such controversy by final
appropriate legal proceedings or other means as, in the Escrow Agent’s discretion, may be required,
despite what may be set forth elsewhere in this Agreement. In such event, the Escrow Agent will
not be liable for damages. 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 the Escrow
Fund held in escrow, except all costs, expenses, charges and reasonable attorney fees incurred by
the Escrow Agent due to the interpleader action (the “Agent Interpleader Expenses”) and which the
parties agree to pay as follows: fifty percent (50%) to be paid by Parent and fifty percent (50%)
to be paid by the Stockholders on the basis of the Stockholders’ respective Escrow Pro Rata
Portions; provided, however, that in the event any Stockholder fails to timely pay his or her
Escrow Pro Rata Portion of the Agent Interpleader Expenses, the parties agree that Parent may at
its option pay such Stockholder’s Escrow Pro Rata Portion of the Agent Interpleader Expenses and
recover an equal amount (which shall be deemed a Loss) from such Stockholder’s Escrow Pro Rata
Portion of the Escrow Fund. Upon initiating 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, including allocated costs
of in-house counsel and disbursements that may be imposed on Escrow Agent or incurred by Escrow
Agent in connection with the performance of his/her duties under this Agreement, including but not
limited to any litigation arising from this Agreement or involving its subject matter, other than
those arising out of the gross negligence or willful misconduct of the Escrow Agent (the “Agent
Indemnification Expenses”) as follows: fifty percent (50%) to be paid by Parent and fifty percent
(50%) to be paid by the Stockholders on the basis of the Stockholders’ Escrow Pro Rata Portions
directly from the Escrow Fund; provided, however, that in the event the Stockholders’ portion of
the Agent Indemnification Expenses cannot be satisfied from the Escrow Fund in full, the parties
agree that Parent shall pay the shortfall of such Stockholders’ portion of the
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Agent
Indemnification Expenses, and shall be entitled to recover such amount from each Stockholder equal
to such Stockholder’s Escrow Pro Rata Portion of such amount without regard to any caps or other
limits herein.
(viii) The Escrow Agent may resign at any time upon giving at least thirty (30) days written
notice to the Parent and the Stockholder Representative; 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
best efforts to mutually agree on a successor escrow agent within thirty (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 New York or appeal to a court of competent jurisdiction to appoint a
successor escrow agent and shall remain the escrow agent until such order is received. 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. Upon appointment of a
successor escrow agent, the Escrow Agent shall be discharged from any further duties and liability
under this Agreement.
(ix) The Escrow Agent is hereby authorized, in making or disposing of any investment permitted
by this Agreement, or in carrying out any sale of the Escrow Fund permitted by this Agreement, to
deal with itself (in its individual capacity) or with any one or more of its affiliates, whether it
or such affiliate is acting as a subagent of the Escrow Agent or for any third person or dealing as
principal for its own account.
(x) Notwithstanding anything to the contrary, any provision seeking to limit the liability of
the Escrow Agent shall not be applicable in the event such liability arises from the gross
negligence or willful misconduct of the Escrow Agent.
(xi) Notwithstanding any term appearing in this Agreement to the contrary, in no instance
shall the Escrow Agent be required or obligated to distribute any of the Escrow Fund (or take other
action that may be called for hereunder to be taken by the Escrow Agent) sooner than two (2)
Business Days after (i) it has received the applicable documents required under this Agreement in
good form, or (ii) passage of the applicable time period (or both, as applicable under the terms of
this Agreement), as the case may be.
(xii) The Escrow Agent shall not be responsible for delays or failures in performance
resulting from acts beyond its control. Such acts shall include but not be limited to acts of God,
strikes, lockouts, riots, acts of war, terrorism, epidemics, governmental regulations superimposed
after the fact, fire, communication line failures, computer viruses, power failures, earthquakes or
other disasters.
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(h) Fees. All fees (including attorney’s 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 previously delivered to Parent. 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
but that has been requested by an officer of Parent, or if the parties request a substantial
modification of the terms of the Agreement, 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, including allocated costs of in-house counsel, and expenses occasioned by
such default, delay, controversy or litigation.
(i) Successor Escrow Agents. Any corporation or other entity into which the Escrow Agent in
its individual capacity may be merged or converted or with which it may be consolidated, or any
corporation or other entity resulting from any merger, conversion or consolidation to which the
Escrow Agent in its individual capacity shall be a party, or any corporation or other entity to
which substantially all the corporate trust business of the Escrow Agent in its individual capacity
may be transferred, shall be the Escrow Agent under this Escrow Agreement without further act.
(j) Customer Identification Program. Each of the Interested Parties acknowledge
receipt of the notice set forth on Exhibit J attached hereto and made part hereof and that
information may be requested to verify their identities.
7.5 Stockholder Representative.
(a) By virtue of the approval of the Merger and this Agreement by the requisite vote of the
Stockholders, each of the Stockholders shall be deemed to have agreed to appoint Xxxxxx X. Xxxxxx
as its agent and attorney-in-fact, as the Stockholder Representative for and on behalf of the
Stockholders to give and receive notices and communications, to authorize payment to any
Indemnified Party from the Escrow Fund in satisfaction of claims by any Indemnified Party, to
object to such payments, to agree to, negotiate, enter into settlements and compromises of, and
comply with orders of courts with respect to such claims, to assert, negotiate, enter into
settlements and compromises of, and comply with orders of courts with respect to, any other claim
by any Indemnified Party against any Stockholder or by any such Stockholder against any Indemnified
Party or any dispute between any Indemnified Party and any such Stockholder, in each case relating
to this Agreement or the transactions contemplated hereby, and to take all other actions that are
either (i) necessary or appropriate in the judgment of the Stockholder Representative for the
accomplishment of the foregoing or (ii) specifically mandated by the terms of this Agreement. Such
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agency may be changed by the Stockholders from time to time upon not less than thirty (30) days
prior written notice to Parent; provided, however, that the Stockholder Representative may not be
removed unless holders of a two-thirds interest of the Escrow Fund agree to such removal and to the
identity of the substituted agent. A vacancy in the position of Stockholder Representative may be
filled by 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 any
compensation for its services. Notices or communications to or from the Stockholder Representative
shall constitute notice to or from the Stockholders.
(b) 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 Stockholders shall indemnify the Stockholder Representative and hold the Stockholder
Representative harmless against any loss, liability or expense incurred without gross 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, accountant or other professional adviser
retained by the Stockholder Representative (“Stockholder Representative Expenses”). A decision,
act, consent or instruction of the Stockholder Representative, including but not limited to an
amendment, extension or waiver of this Agreement, shall constitute a decision of the Stockholders
and shall be final, binding and conclusive upon the Stockholders; 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 the Stockholders. The Escrow Agent and Parent
are hereby relieved from any liability to any person for any decision, act, consent or instruction
of the Stockholder Representative.
7.6 Maximum Payments; Remedy.
(a) Except as set forth in Sections 7.6(b), 7.6(c) and 7.6(d) hereof, the maximum amount an
Indemnified Party may recover from a Stockholder individually pursuant to the indemnity set forth
in Section 7.2 hereof for Losses shall be limited to: (i) the amounts held in the Escrow Fund with
respect to such Stockholder, and (ii) to the extent of any Excess Losses, such Stockholder’s Escrow
Pro Rata Portion of such Excess Losses (not to exceed such Stockholder’s Consideration Pro Rata
Portion of the first $4,500,000 of Earnout Consideration earned, whether or not yet paid to such
Stockholder pursuant to ARTICLE VIII of this Agreement.
(b) Notwithstanding anything to the contrary set forth in this Agreement, nothing in this
Agreement shall limit the liability of any party in respect of Losses arising out of any fraud or
any intentional breaches of representations and warranties or covenants on the part of such party
(it is agreed and understood that the Survival Date and the Threshold Amount shall not apply in
respect of any such Losses); provided, however, that the maximum amount an Indemnified Party may
recover from each Stockholder individually in respect of any such fraud or intentional breach shall
85
be limited to such Stockholder’s Escrow Pro Rata Portion of the Loss attributable to such fraud or
intentional breach, not to exceed such Stockholder’s Consideration Pro Rata Portion of the Merger
Consideration actually received (including, without duplication, the amount contributed to the
Escrow on behalf of such Stockholder).
(c) Notwithstanding anything to the contrary set forth in this Agreement, nothing in this
Agreement shall limit the liability of the Stockholders in respect of Losses arising out of
breaches of the representations and warranties contained in Section 2.2 or Section 2.11; provided,
however, that the maximum amount an Indemnified Party may recover from each Stockholder
individually pursuant to the indemnity set forth in Section 7.2 in respect of any such breach
shall be limited to such Stockholder’s Escrow Pro Rata Portion of the Loss attributable to such
breach, not to exceed such Stockholder’s Consideration Pro Rata Portion of the Merger Consideration
actually received (including, without duplication, the amount contributed to the Escrow on behalf
of such Stockholder).
(d) Nothing herein shall limit the liability of the Company for any breach or inaccuracy of
any representation, warranty or covenant contained in this Agreement or any Related Agreement if
the Merger does not close.
(e) From and after the Closing, the sole and exclusive liability and responsibility of each
Stockholder to Parent and the other Indemnified Parties under or in connection with this Agreement
or the transactions contemplated hereby (including for any breach of or inaccuracy in any
representation or warranty or for any breach of any covenant or obligation or for any other
reason), shall be as set forth in this ARTICLE VII.
ARTICLE VIII
EARNOUT
8.1 Earnout Arrangements.
(a) Earnout Generally. The parties acknowledge and agree that the Company’s projected
Xxxxxxxx (as such term is defined in Annex A attached hereto) (as described below) are material
factors in determining the valuation of the Company by Parent. Therefore, notwithstanding any
provision of this Agreement to the contrary, Parent shall retain a portion of the Merger
Consideration equal to the Earnout Consideration otherwise payable at the Effective Time to the
Stockholders and shall treat such Earnout Consideration in accordance with this ARTICLE VIII.
(b) Earnout as Merger Consideration. The parties acknowledge and agree that the Earnout
Consideration is intended to be consideration for shares of capital stock of the Company, rather
than compensation for services. All calculations of payments to be made pursuant to
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Section 1.6
shall disregard any portion of the Earnout Consideration not yet earned in accordance with this
ARTICLE VIII.
(c) Distribution of Earnout.
(i) In the event Parent delivers an Earnout Notice (as defined in Section 8.3 hereof) stating
that Earnout Consideration has been earned pursuant to this ARTICLE VIII, subject to
Section 8.1(c)(ii) hereof, Parent shall distribute (or cause the Exchange
Agent to distribute) the Earnout Consideration set forth in the Earnout Notice to the former
Stockholders in accordance with Section 1.6(b).
(ii) In the event Parent delivers an Earnout Notice stating that Earnout Consideration has
been earned pursuant to this ARTICLE VIII, and Parent has a claim or claims outstanding for Excess
Losses, Parent shall distribute (or cause the Exchange Agent to distribute) the Earnout
Consideration in excess of such claimed Excess Losses to the former Stockholders in accordance with
Section 1.6(b), and the Earnout Consideration to the extent of such claimed Excess Losses shall be
retained by Parent, and any such amounts in dispute shall either be (A) distributed to the former
Stockholders in accordance with Section 1.6(b), or (B) permanently retained by Parent, as the case
maybe, upon resolution of such dispute in accordance with Section 7.4(b).
(iii) In the event any Xxxxxxxx are collected after the Earnout Payment Date (the “Delayed
Collections”), Parent shall distribute (or cause the Exchange Agent to distribute), promptly (and
not more than thirty (30) days after such collection) to the former Stockholders any additional
Earnout Consideration earned as a result of such Delayed Collections, in accordance with
Section 1.6(b) and this ARTICLE VIII (each, an “Additional Earnout Payment”).
(iv) With respect to disputes of amounts contained in the Earnout Notice, upon the final
determination of such portion of the Earnout Consideration in dispute determined to be due and
payable to the Stockholders in accordance with Section 7.4(b), Parent shall distribute (or cause
the Exchange Agent to distribute) the Earnout Consideration, if any, as so finally determined to be
payable to the Stockholders not theretofore delivered as soon as practicable but in any event
within five (5) Business Days of such resolution, subject to subparagraph (ii) above.
(v) For the purpose of calculating the Earnout Amount, in the event that any party to the VF
Contract (as such term is defined in Annex A attached hereto), the TM Contract (as such term is
defined in Annex A attached hereto) or any Campaign Contract (as such term is defined in Annex A
attached hereto) asserts, prior to the Earnout Determination Date, a right to repayment of amounts
previously paid by such customer with respect to license or maintenance fees under the VF Contract,
the TM Contract or any Campaign Contract, the aggregate amount of Xxxxxxxx shall be reduced by the
amount in dispute pending resolution of such assertion. Upon final resolution of such assertion,
Xxxxxxxx and the related Earnout Amount shall be appropriately adjusted
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to reflect such resolution,
and Parent shall distribute (or cause the Exchange Agent to distribute) the additional Earnout
Consideration, if any, as so finally determined to be payable to the Stockholders, as soon as
practicable but in any event within thirty (30) days of such resolution.
(d) Forfeited Amounts. All Earnout Consideration that is not earned by the Stockholders
pursuant to this ARTICLE VIII will be forfeited and retained permanently by Parent.
8.2 Earnout Determination. The Final Earnout Amount shall be calculated on a linear scale based
on Xxxxxxxx of between $0 and the Earnout Xxxxxxxx Target (as such term is defined in Annex A
attached hereto) during the Earnout Period, with the Final Earnout Amount being equal to zero ($0)
if Xxxxxxxx equal $0 and equal to $45 million if Xxxxxxxx equal the Earnout Xxxxxxxx Target. By
way of further example and for the avoidance of doubt, if Xxxxxxxx during the Earnout Period were
equal to 80% of the Earnout Xxxxxxxx Target, the Final Earnout Amount would equal $36 million.
Notwithstanding the foregoing or anything to the contrary contained in this Agreement, in no event
shall the Final Earnout Amount exceed the Earnout Consideration.
8.3 Calculation of Earnout Distributions; Stockholder Representative Objections.
(a) Earnout Distribution. On or prior to the Earnout Determination Date, Parent shall deliver
to the Stockholder Representative a memorandum (the “Earnout Notice”) specifying in reasonable
detail the calculation of the portion of the Earnout Consideration earned, if any, and the
calculation of the distribution of the Final Earnout Amount to each of the Stockholders pursuant to
this ARTICLE VIII and Section 1.6, if any, with the basis for such calculation, in accordance with
GAAP, consistently applied, as applicable, and, if applicable, any proposed set off for Excess
Losses in accordance with Section 8.1(c)(ii). Parent agrees that it will supply any reasonably
requested back up or supporting information to the Stockholder Representative or its accountants on
which the Earnout calculations are based; provided, however, that the provision of any such back up
or supporting information shall be conditioned upon the execution of a confidentiality agreement in
a form acceptable to Parent. If the Stockholder Representative gives written notice to Parent that
such Stockholder Representative is in agreement with the Earnout Notice, then the Earnout Notice
shall become final.
(b) Stockholder Representative Objection. The Stockholder Representative shall have thirty
(30) days to make an objection (in writing) to any item in the Earnout Notice, and such statement
must be delivered to Parent prior to the expiration of such thirty-day (30-day) period. If no such
objection has been delivered to Parent within such thirty-day (30-day) period, the Earnout Notice
shall become final.
(c) Resolution of Conflicts. At any time following delivery of an objection pursuant to
Section 8.3(b), or the expiration of the thirty-day (30-day) period for doing so, either
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party may
elect to resolve any dispute regarding the Earnout Consideration in the manner set forth in
Section 7.4(d).
(d) Earnout Rights Not Transferable. No Stockholder may sell, exchange, transfer or otherwise
dispose of his, her or its right to receive any portion of the Earnout Consideration, other than by
the laws of descent and distribution or succession, and any transfer in violation of this
Section 8.3(d) shall be null and void and shall not be recognized by Parent or the Final Surviving
Entity; provided, however, that any Stockholder that is a limited partnership, limited
liability company, corporation, trust or other entity shall have the right to assign its
rights to receive the Earnout Consideration to any affiliated entities within the same fund family
or corporate group. Parent shall maintain, or cause to be maintained by its agent, a register (the
"Register”) on which it enters the name and address of each Person that has a right to receive any
portion of the Earnout Consideration (each, and “Earnout Interest”). Any Earnout Interest may be
assigned or sold in whole or in part only by registration of such assignment or sale on the
Register. Prior to the registration of assignment or sale of any Earnout Interest, Parent shall
treat the Person in whose name such Earnout Interest is registered as the owner thereof for the
purpose of receiving all payments thereon and for all other purposes.
(e) Parent Successor Obligations for Earnout Payments. Notwithstanding anything to the
contrary contained in this Agreement, in the event Parent shall consummate any transaction pursuant
to which all or substantially all of the business, properties or assets of Parent are transferred
to another person not directly or indirectly controlled by Parent, whether by merger, purchase of
assets, tender offer or otherwise (an “Acquisition Transaction”), the Final Earnout Amount shall be
paid in cash.
(f) Earnout Protections.
(i) Parent shall provide sufficient resources to the Company, consistent with the Company’s
current operating plan as provided to Parent, to allow the Company to fulfill its obligations under
the VF Contract, the TM Contract, and any Campaign Contract; provided, however, that the parties
acknowledge and agree that Parent shall have (A) the ability to react in Parent’s good faith
discretion to business conditions as they occur or as they become known and (B) to integrate the
businesses in order to optimize the performance of the combined business. Parent will not take any
action the principal purpose of which is to circumvent or adversely affect the Company’s ability to
achieve the Earnout Xxxxxxxx Target.
(ii) In the event that during the Earnout Period, Parent shall consummate an Acquisition
Transaction, and in connection with such Acquisition Transaction, either the TM Contract or the VF
Contract is terminated, that portion of the Earnout Xxxxxxxx Target that is attributable to such
terminated contract shall be deemed to have been achieved in full.
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(iii) In the event that during the Earnout Period, there shall be an amendment to or
renegotiation of either the TM Contract or the VF Contract that would adversely affect the
Company’s ability to generate Xxxxxxxx, including any adverse change in the Company’s deliverables
or requirements under such contracts, Parent shall make commensurate adjustment to the Xxxxxxxx
Target.
ARTICLE IX
REGISTRATION
9.1 Filing and Effectiveness of Stockholder Registration Statement. Parent shall use its
reasonable best efforts to file, within five (5) Business Days after the Closing, either a
registration statement on Form S-3 (or other appropriate form if Form S-3 is not available) or a
prospectus supplement to an effective registration statement pursuant to Rule 424(b) under the
Securities Act covering the resale to the public by the Stockholders of all shares representing the
Closing Consideration (the “Stockholder Registration Statement”) with the SEC as soon as
practicable. Parent shall use its reasonable best efforts to cause the Stockholder Registration
Statement to be automatically effective upon filing, or if automatic effectiveness is not
available, to be declared effective by the SEC as soon as practicable and use its reasonable best
efforts to assist the Stockholders in allowing sales of shares representing the Closing
Consideration
to occur pursuant to the Stockholder Registration Statement; provided that Parent shall not be
required to make any filing with the SEC prior to the date that such filing otherwise would be due
other than Parent’s Form 8-K containing the required financial statements of the Company and the
pro-forma financial statements required in connection with the Merger (the “Form 8-K”). Parent
will file the Form 8-K, including the required financial statements of the Company and the
pro-forma financial statements required in connection with the Merger, within four (4) Business
Days after the Closing, provided, however, Parent shall have no obligation to file the Form 8-K
until Parent shall have received all required consents from the Company’s auditors. Parent shall
cause the Stockholder Registration Statement to remain available for use until the earlier of
(a) one (1) year after the later of the date such Stockholder Registration Statement is effective
or the Closing Date and (b) such time as all of the Closing Consideration covered by the
Registration Statement has been sold pursuant thereto. Parent shall pay the expenses incurred by
it in complying with its obligations under this Section 9.1 including, without limitation, all
preparation, registration, filing fees, costs and expenses, all exchange listing fees, all fees,
costs and expenses of counsel for Parent, accountants for Parent and other advisors or persons
retained by Parent in connection with the filing of the Stockholder Registration Statement, but
excluding (i) any brokerage fees, selling commissions or underwriting discounts incurred by the
Stockholders in connection with sales under the Stockholder Registration Statement, and (ii) the
fees and expenses of any accountants or attorneys retained by the Stockholders other than fees and
related disbursements of up to $10,000 for one counsel selected by a majority in interest of the
Stockholders.
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9.2 Limitations on Registration Rights.
(a) Parent may, by written notice to the Stockholders, (i) delay the filing or effectiveness
of the Stockholder Registration Statement, or (ii) suspend the Stockholder Registration Statement
after effectiveness and require that the Stockholders immediately cease sales of the Closing
Consideration pursuant to the Stockholder Registration Statement, in the event that (1) Parent
files a registration statement (other than a registration statement on Form S-8 or any successor
form) or a prospectus supplement to an effective registration statement pursuant to Rule 424(b)
under the Securities Act with the SEC for a public offering of its securities for its own behalf,
(2) Parent is engaged in any activity or transaction or preparations or negotiations for any
activity or transaction that Parent desires to keep confidential for business reasons, if Parent
determines in good faith that the public disclosure requirements imposed on Parent under the
Securities Act in connection with the Stockholder Registration Statement would require disclosure
of such activity, transaction, preparations or negotiations, or (3) Parent determines in good faith
that the public disclosure requirements imposed on Parent under the Securities Act in connection
with the Stockholder Registration Statement would require Parent to file any information or
materials with the SEC prior to the date that such information or materials otherwise would be
required to be filed, other than the Form 8-K in connection with the Merger.
(b) If Parent delays or suspends the Stockholder Registration Statement or requires the
Stockholders to cease sales of Closing Consideration pursuant to Section 9.2(a) hereof, Parent
shall, as promptly as practicable following the termination of the circumstance which entitled
Parent to do so, take such actions as may be necessary to file or reinstate the effectiveness of
the Stockholder Registration Statement (with such Stockholder Registration Statement staying
effective and remaining effective for the period contemplated by Section 9.1 above) and/or give
written notice to all Stockholders authorizing them to resume sales pursuant to the Stockholder
Registration Statement. If as a result thereof the prospectus included in the Stockholder
Registration Statement has been amended to comply with the requirements of the Securities Act,
Parent shall enclose such revised prospectus with the notice to Stockholders given pursuant to this
Section 9.2(b), and the Stockholders shall make no offers or sales of Closing Consideration
pursuant to the Stockholder Registration Statement other than by means of such revised prospectus.
(c) Notwithstanding the foregoing, Parent shall not suspend the Stockholder Registration
Statement pursuant to Section 9.2(a) hereof (i) at all during the first two weeks following its
effectiveness, or (ii) for more than sixty (60) days (a “Registration Suspension”), and provided
further that Parent shall not cause more than two Registration Suspensions in any twelve (12) month
period.
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9.3 Registration Procedures and Other Requirements.
(a) In connection with the filing by Parent of the Stockholder Registration Statement, Parent
shall furnish to each Stockholder a copy of the prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act.
(b) Parent shall use its reasonable best efforts to register or qualify all shares
representing the Closing Consideration covered by the Stockholder Registration Statement under the
securities laws of each state of the United States; provided, however, that Parent shall not be
required in connection with this subparagraph to qualify as a foreign corporation or execute a
general consent to service of process in any jurisdiction, except as required by the Securities
Act.
(c) Parent shall notify all Stockholders when the Stockholder Registration Statement has
become effective and anytime when resales must cease or may be resumed.
(d) Parent shall prepare and file with the SEC such amendments and supplements to such
Stockholder Registration Statement and the prospectus used in connection therewith as may be
necessary to comply with the provisions of the Securities Act.
(e) If Parent has delivered preliminary or final prospectuses to the Stockholders and after
having done so the prospectus is amended or supplemented to comply with the
requirements of the Securities Act, Parent shall promptly notify the Stockholders and, if
requested by Parent, the Stockholders shall immediately cease making offers or sales of shares
representing the Closing Consideration under the Stockholder Registration Statement and return all
prospectuses to Parent. Parent shall promptly provide the Stockholders with revised or
supplemented prospectuses and, following receipt of the revised or supplemented prospectuses, the
Stockholders shall be free to resume making offers and sales under the Stockholder Registration
Statement.
(f) Parent shall cause all Closing Consideration to be listed on each securities exchange on
which similar securities issued by Parent are then listed.
(g) If necessary, Parent shall provide a transfer agent, registrar and CUSIP number for the
Closing Consideration, in each case not later than the effective date of the Stockholder
Registration Statement.
(h) During the Registration Period, Parent shall use its reasonable best efforts to file all
such periodic, current and other reports and filings with the SEC as may be necessary to
(i) maintain eligibility to use Form S-3 for purposes of secondary sales of its securities, and
(ii) to satisfy the requirements of Rule 144(c).
(i) Parent shall indemnify and hold harmless each Stockholder, such Stockholder’s partners,
members, officers, directors, and equity owners of such Stockholder Holder,
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any underwriter (as
defined in the Securities Act) for such Stockholder, each person, if any, who controls such
Stockholder or underwriter within the meaning of the Securities Act or the Exchange Act, and any
assignee of such Stockholder under Section 9.5 (a “Stockholder Indemnitee”) from any liability,
cost, expense, claim or damage (including amounts paid in settlement, other than amounts paid in
settlement if such settlement is effected without the consent of Parent, which consent shall not be
unreasonably withheld) (“Damages”) to which such Stockholder Indemnitee may become subject under
the Securities Act, the Exchange Act, or other federal or state law, insofar as such liability,
cost, expense, claim or damage (or any action in respect thereof) arises out of or is based upon
(i) any untrue statement or alleged untrue statement of a material fact contained in the
Stockholder Registration Statement, including any prospectus contained therein or any amendments or
supplements thereto; (ii) an omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not misleading; or (iii) any
violation by Parent of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law;
provided, however, that Parent shall not be liable for any Damages to the extent that they arise
out of or are based upon actions or omissions made in reliance upon and in conformity with written
information furnished by or on behalf of any such Stockholder expressly for use in connection with
the Stockholder Registration Statement. If the indemnification provided for in this Section 9.3(i)
is held by a court of competent jurisdiction to be unavailable to any Stockholder Indemnitee in
respect of any Damages referred to herein, then Parent, in lieu of indemnifying such Stockholder
Indemnitee
hereunder, shall contribute to the amount paid or payable by such person as a result of such
Damages in such proportion as is appropriate to reflect the relative fault of Parent, on the one
hand, and of the Stockholder Indemnitee, on the other hand, in connection with the actions or
omissions that resulted in such Damages, as well as any other relevant equitable considerations..
(j) Parent shall deliver a final form of Selling Stockholder Questionnaire (as defined below),
along with reasonably detailed instructions for return, at least five (5) Business Days before the
Closing Date.
(k) Upon request of any Stockholder (or any broker of such Stockholder), and submission of
such forms of “seller representation letters” and “broker representation letters” as may be
customary, Parent shall, at its sole cost, take such actions as may be reasonably required to cause
the removal of any restrictive legends contained on the certificates evidencing shares of Parent
Common Stock comprising Closing Consideration received by such Stockholder pursuant to this
Agreement (including providing instructions to its transfer agent and making arrangements for any
opinion of counsel required by the transfer agent) in order to facilitate resales of such shares by
or on behalf of such Stockholder pursuant the Stockholder Registration Statement.
(l) At any time beginning six months after the Closing Date, upon request of any Stockholder
(or any broker of such Stockholder), and submission of such forms off “seller representation
letters” and “broker representation letters” as may be customary, Parent shall, at its
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sole cost,
take such actions as may be reasonably required to cause the removal of any restrictive legends
contained on the certificates evidencing shares of Parent Common Stock comprising Closing
Consideration received by such Stockholder pursuant to this Agreement (including providing
instructions to its transfer agent and making arrangements for any opinion of counsel required by
the transfer agent) in order to facilitate resales of such shares by or on behalf of such
Stockholder pursuant to Rule 144 under the Securities Act.
(m) After the one (1) year anniversary of the Closing Date, upon request of any Stockholder
(or any broker of such Stockholder), and submission of such form’s off “seller representation
letters” and “broker representation letters” as may be customary, Parent shall, at its sole cost,
take such actions as may be reasonably required to cause the removal of any restrictive legends
contained on the certificates evidencing shares of Parent Common Stock comprising Closing
Consideration received by such Stockholder pursuant to this Agreement (including providing
instructions to its transfer agent and making arrangements for any opinion of counsel required by
the transfer agent).
9.4 Requirements of Stockholders.
(a) The Stockholder Representative is authorized to (i) give and receive notices for and on
behalf of the Stockholders in connection with this ARTICLE IX, and (ii) deliver, as promptly as
practicable after receipt from Parent, to the Stockholders the Selling Stockholder Questionnaires
(as defined in Section 9.4(b)(i) in the form provided by Parent to the Stockholder Representative,
and collect completed and duly executed Selling Stockholder Questionnaires from the Stockholders.
(b) Parent shall not be required to include any shares representing Closing Consideration held
by a particular Stockholder in the Stockholder Registration Statement unless:
(i) as long as the final form of Selling Stockholder Questionnaire has been delivered to each
Stockholder at least five (5) Business Days before the Closing Date, the Stockholder owning such
Closing Consideration shall have delivered to the Stockholder Representative not later than the
Closing Date, in writing such information regarding such Stockholder and the proposed sale of
Closing Consideration by such Stockholder as Parent may reasonably request and as is customarily
required in connection with the Stockholder Registration Statement or as shall be required in
connection therewith by the SEC or any state securities law authorities (“Selling Stockholder
Questionnaire”). The Selling Stockholder Questionnaire shall include an agreement by the
Stockholders to indemnify Parent and each of its directors and officers against, and hold Parent
and each of its directors and officers harmless from, any losses, claims, damages, expenses or
liabilities (including reasonable attorneys fees) to which Parent or such directors and officers
may become subject by reason of any statement or omission in the Stockholder Registration Statement
made in reliance upon, or in conformity with, a written statement by such
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Stockholder furnished
pursuant to this section, provided, however, that in no event shall such indemnification by any
Stockholder exceed the net proceeds received by such Stockholder from the sale of Closing
Consideration pursuant to the Stockholder Registration Statement (the “Net Proceeds”); and
(ii) the Stockholder Representative shall deliver to Parent all completed and executed Selling
Stockholder Questionnaires as received. To the extent that any Selling Stockholder Questionnaires
are delivered to Parent prior to the second Business Day before the date the Stockholder
Registration Statement is filed with the SEC, Parent shall include the Closing Consideration
represented by such Selling Stockholder Questionnaires in the Stockholder Registration Statement.
To the extent any Selling Stockholder Questionnaires are delivered to Parent after such date,
Parent shall use reasonable best efforts to include the Closing Consideration represented by such
Selling Stockholder Questionnaires in the Stockholder Registration Statement (including by either
amending the Stockholder Registration Statement or filing a supplement to the Stockholder
Registration Statement; provided, however, that in any event Parent shall not be
obligated to file more than one (1) amendment or supplement in any 30-day period).
9.5 Assignment of Rights.
(a) A Stockholder may not assign any of its rights under this ARTICLE IX except in connection
with the transfer (other than a sale) of some or all of such Stockholder’s Closing Consideration to
(i) an immediate family member, a charitable trust, or to a trust for the benefit of such
Stockholder or his/her immediate family member, (ii) with respect to any Stockholder that is a
limited partnership, limited liability company, corporation, trust or other entity, to any
constituent partner (general or limited), member, affiliate, shareholder, beneficiary or similar
party, or (iii) a tax exempt organization under Section 501(c)(3) of the Code, provided each such
transferee agrees in a written instrument delivered to Parent to be bound by the provisions of this
ARTICLE IX.
9.6 Stockholders Beneficiaries of this Article. The Stockholders are intended third party
beneficiaries of this Article IX.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. Except as provided in this Section 10.1 and Section 10.2, this Agreement
may be terminated and the Merger abandoned at any time prior to the Closing:
(a) by unanimous agreement of the Company and Parent;
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(b) by Parent or the Company if the Closing Date shall not have occurred by October 31, 2008;
provided, however, that the right to terminate this Agreement under this Section 10.1(b) shall not
be available to any party whose action or failure to act has been a principal cause of or resulted
in the failure of the First Step Merger to occur on or before such date and such action or failure
to act constitutes breach of this Agreement;
(c) by Parent or the Company if: (i) there shall be a final non-appealable order of a federal
or state court in effect preventing consummation of the First Step Merger, or (ii) there shall be
any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the
Closing by any Governmental Entity that would make consummation of the Closing illegal;
(d) 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 First Step Merger by any Governmental
Entity, which would: (i) prohibit Parent’s ownership or operation of any portion of
the business of the Company or (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 as a result of the
First Step Merger;
(e) by Parent if it is not in material breach of its obligations under this Agreement and
there has been a breach of any representation, warranty, covenant or agreement of the Company or
the Stockholders contained in this Agreement such that the conditions set forth in Section 6.2(a)
hereof would not be satisfied and such breach has not been cured within ten (10) calendar days
after written notice thereof to the Company and the Stockholder Representative; provided, however,
that no cure period shall be required for a breach which by its nature cannot be cured; or
(f) by the Company if none of the Company or the Stockholders is in material breach of their
respective obligations under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement of Parent contained in this Agreement such that the conditions set
forth in Section 6.3(a) hereof would not be satisfied and such breach has not been cured within ten
(10) 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.
10.2 Effect of Termination. In the event of termination of this Agreement as provided in
Section 10.1 hereof, this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, the Company or the Stockholders, or their respective officers,
directors or stockholders, if applicable; provided, however, that each party hereto shall remain
liable for any breaches of this Agreement prior to its termination; and provided further, however,
that, the provisions of Sections 5.3, 5.4 and 5.5 hereof, ARTICLE XI hereof and this Section 10.2
shall remain in full force and effect and survive any termination of this Agreement pursuant to the
terms of this ARTICLE X.
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10.3 Amendment. This Agreement may be amended by the parties hereto at any time by execution
of an instrument in writing signed on behalf of the party against whom enforcement is sought. For
purposes of this Section 10.3, the Stockholders agree that any amendment of this Agreement signed
by the Stockholder Representative shall be binding upon and effective against the Stockholders
whether or not they have signed such amendment.
10.4 Extension; Waiver. At any time prior to the Closing, Parent, 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 covenants, 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 10.4, the Stockholders agree that any
extension or waiver signed by the Stockholder Representative shall be binding upon and effective
against all Stockholders whether or not they have signed such extension or waiver.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by commercial messenger or overnight or same-day courier
service of national reputation (including U.S. Postal Service overnight delivery), 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:
Nuance Communications, Inc.
0 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Senior Vice President Corporate Development
Facsimile No.: (000) 000-0000
0 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Senior Vice President Corporate Development
Facsimile No.: (000) 000-0000
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with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation
0000 X Xxxxxx X.X., Xxxxx Xxxxx
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
0000 X Xxxxxx X.X., Xxxxx Xxxxx
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
SNAPin Software, Inc.
000 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Facsimile No.: (000) 000-0000
000 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx Coie LLP
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Facsimile No.: (000)000-0000
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Facsimile No.: (000)000-0000
(c) if to the Stockholder Representative, to:
Xxxxxx X. Xxxxxx, Stockholder Representative
SeaPoint Ventures
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX, 00000
Facsimile No.: (000) 000-0000
SeaPoint Ventures
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX, 00000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx Coie LLP
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Facsimile No.: (000)000-0000
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Facsimile No.: (000)000-0000
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(d) if to Escrow Agent, to:
U.S. Bank
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, XX 00000
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx, CCTS
Facsimile No.: (000) 000-0000
Facsimile No.: (000) 000-0000
11.2 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.
11.3 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.
11.4 Entire Agreement; Assignment. This Agreement, the Exhibits hereto, the Disclosure
Schedule, the Confidential Disclosure 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, and
(iii) shall not be assigned by operation of law or otherwise, except that Parent may assign its
rights and delegate its obligations hereunder to its affiliates as long as Parent remains
ultimately liable for all of Parent’s obligations hereunder.
11.5 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 will be interpreted so as
reasonably to effect the intent of the parties hereto. 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 possible, the economic, business and other purposes of such void or
unenforceable provision.
11.6 Other Remedies; Specific Performance. 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 and nothing in this Agreement shall be deemed a
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waiver by
any party of any right to specific performance or injunctive relief. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It is accordingly
agreed that the parties shall be entitled
to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any other remedy to which
they are entitled at law or in equity.
11.7 Exchange Rate. To the extent that a warranty in ARTICLE II of this Agreement given by
the Company in respect of SNAPin Software UK Limited contains reference to an amount in US$, the
US$:£ exchange rate shall be US$1.9044:£1.
11.8 Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. Each of the parties hereto irrevocably consents to the
exclusive jurisdiction and venue of any court within the State of Delaware 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 Delaware 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.
11.9 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.
11.10 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
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100
IN WITNESS WHEREOF, Parent, the Subs, the Company, the Stockholder Representative and the
Escrow Agent have caused this Agreement and Plan of Merger to be signed, all as of the date first
written above.
NUANCE COMMUNICATIONS, INC. | ||||
By: | /s/ Xxxx Xxxxx | |||
Name: | Xxxx Xxxxx | |||
Title: | Chairman and Chief Executive Officer | |||
SNAPIN SOFTWARE, INC. | ||||
By: | /s/ Xxxxxx X. Xxxxx | |||
Name: | Xxxxxx X. Xxxxx | |||
Title: | President and Chief Executive Officer | |||
SPEAKEASY ACQUISITION CORPORATION | ||||
By: | /s/ Xxxxxx Xxxxxxxx | |||
Name: | Xxxxxx Xxxxxxxx | |||
Title: | President | |||
SPEAKEASY ACQUISITION LLC | ||||
By: | /s/ Xxxxxx Xxxxxxxx | |||
Name: | Xxxxxx Xxxxxxxx | |||
Title: | Manager |
[Signature Page to Agreement and Plan of Merger]
STOCKHOLDER REPRESENTATIVE | ||||
/s/ Xxxxxx X. Xxxxxx | ||||
Name: Xxxxxx X. Xxxxxx | ||||
U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent: | ||||
By: | /s/ Xxxxxxx Xxxxxxx | |||
Name: | Xxxxxxx Xxxxxxx | |||
Title: | Assistant Vice President |
[Signature Page to Agreement and Plan of Merger]