AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER ("Agreement") is made and entered into as of
October 2, 2005, by and among: SYNOPSYS, INC., a Delaware corporation
("Parent"); SNAP ACQUISITION, INC., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"); and HPL TECHNOLOGIES, INC., a Delaware
corporation (the "Company"). Certain capitalized terms used in this Agreement
are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub into the Company (the "Merger") in accordance with this Agreement and the
Delaware General Corporation Law (the "DGCL"). Upon consummation of the Merger,
Merger Sub will cease to exist, and the Company will become a wholly-owned
subsidiary of Parent.
B. Contemporaneously with the execution and delivery of this Agreement:
certain stockholders of the Company, are entering into Voting Agreements in
favor of Parent (the "Voting Agreements") and Proxies related thereto (the
"Proxies"), to take effect upon consummation of the Merger.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 Merger of Merger Sub into the Company. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 Effects of the Merger. The Merger shall have the effects set forth in this
Agreement and in the applicable provisions of the DGCL.
1.3 Closing; Effective Time. The consummation of the Contemplated Transactions
(the "Closing") shall take place at the offices of Xxxxxx Godward LLP, 3175
Hanover Street, Palo Alto, California, on a date to be designated by Parent,
which shall be no later than the second business day after the satisfaction or
waiver of the last to be satisfied or waived of the conditions set forth in
Sections 6 and 7 (other than the conditions set forth in Section 6.5(c) and
Section 7.4 which by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of each of such conditions). The date on
which the Closing actually takes place is referred to as the "Closing Date." A
certificate of merger satisfying the applicable requirements of the DGCL shall
be duly executed by the Company in connection with the Closing, and,
concurrently with or as soon as practicable following the Closing, shall be
filed with the Secretary of State of the State of Delaware. The Merger shall
become effective at the time of the filing of such certificate of merger with
the Secretary of State of the State of Delaware or at such later time as may be
specified in such certificate of merger with the mutual consent of Parent and
the Company prior to the Closing (the time as of which the Merger becomes
effective being referred to as the "Effective Time").
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1.4 Certificate of Incorporation and Bylaws; Directors and Officers.
At the Effective Time:
(a) the Certificate of Incorporation of the Surviving Corporation shall be
amended and restated to conform to the Certificate of Incorporation of Merger
Sub as of the date of this Agreement (other than with respect to the name of the
Surviving Corporation);
(b) the Bylaws of the Surviving Corporation shall be amended and restated to
conform to the Bylaws of Merger Sub as in effect immediately prior to the
Effective Time; and
(c) unless otherwise determined by Parent prior to the Effective Time, the
directors and officers of the Surviving Corporation shall be the respective
individuals who are directors and officers of Merger Sub immediately prior to
the Effective Time.
1.5 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and without any further
action on the part of Parent, Merger Sub, the Company or any stockholder of the
Company:
(i) any shares of Company Common Stock held by the Company or any wholly-owned
Subsidiary of the Company (or held in the Company's treasury) immediately prior
to the Effective Time shall be canceled and retired and shall cease to exist,
and no consideration shall be paid in exchange therefor;
(ii) any shares of Company Common Stock held by Parent, Merger Sub or any other
wholly-owned Subsidiary of Parent immediately prior to the Effective Time shall
be canceled and retired and shall cease to exist, and no consideration shall be
paid in exchange therefor;
(iii) except as provided in clauses "(i)" and "(ii)" above and subject to
Sections 1.5(b), 1.5(c) and 1.8, each share of Company Common Stock outstanding
immediately prior to the Effective Time shall be converted into the right to
receive $0.30 in cash, without interest; and
(iv) each share of the common stock, $0.01 par value per share, of Merger Sub
outstanding immediately prior to the Effective Time shall be converted into one
share of common stock of the Surviving Corporation.
The amount of cash consideration per share specified in clause "(iii)" of the
preceding sentence (as such amount may be adjusted in accordance with Section
1.5(b)) is referred to as the "Per Share Merger Price."
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(b) If, during the period commencing on the date of this Agreement and ending at
the Effective Time, the outstanding shares of Company Common Stock are changed
into a different number or class of shares by reason of any stock split,
division or subdivision of shares, stock dividend, reverse stock split,
consolidation of shares, reclassification, recapitalization or other similar
transaction, then the Per Share Merger Price shall be appropriately adjusted.
1.6 Closing of the Company's Transfer Books. At the Effective Time: (a) all
shares of Company Common Stock outstanding immediately prior to the Effective
Time shall automatically be canceled and retired and shall cease to exist, and
all holders of certificates representing shares of Company Common Stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as stockholders of the Company; and (b) the stock transfer books of the
Company shall be closed with respect to all shares of Company Common Stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of Company Common Stock shall be made on such stock transfer books
after the Effective Time. If, after the Effective Time, a valid certificate
previously representing any shares of Company Common Stock outstanding
immediately prior to the Effective Time (a "Company Stock Certificate") is
presented to the Payment Agent (as defined in Section 1.7) or to the Surviving
Corporation or Parent, such Company Stock Certificate shall be canceled and
shall be exchanged as provided in Section 1.7.
1.7 Surrender of Certificates.
(a) On or prior to the Closing Date, Parent shall select a reputable bank or
trust company to act as payment agent in the Merger (the "Payment Agent").
Within one business day after the Effective Time, Parent shall deposit with the
Payment Agent cash sufficient to pay the cash consideration payable pursuant to
Section 1.5. The cash amount so deposited with the Payment Agent is referred to
as the "Payment Fund." The Payment Agent will invest the funds included in the
Payment Fund in the manner directed by Parent. Any interest or other income
resulting from the investment of such funds shall be the property of, and will
be paid promptly to, Parent.
(b) Within five business days after the Effective Time, the Payment Agent will
mail to the Persons who were record holders of Company Stock Certificates
immediately prior to the Effective Time: (i) a letter of transmittal in
customary form containing such provisions as Parent or the Payment Agent may
reasonably specify (including a provision confirming that delivery of Company
Stock Certificates shall be effected, and risk of loss and title to Company
Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Payment Agent); and (ii) instructions for use in effecting
the surrender of Company Stock Certificates in exchange for Merger
Consideration. Upon surrender of a Company Stock Certificate to the Payment
Agent for exchange, together with a duly executed letter of transmittal and such
other documents as may be reasonably required by the Payment Agent or Parent:
(A) the holder of such Company Stock Certificate shall be entitled to receive in
exchange therefor the dollar amount that such holder has the right to receive
pursuant to the provisions of Section 1.5; and (B) the Company Stock Certificate
so surrendered shall be canceled. Until surrendered as contemplated by this
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Section 1.7(b), each Company Stock Certificate shall be deemed, from and after
the Effective Time, to represent only the right to receive Merger Consideration
as contemplated by Section 1.5. If any Company Stock Certificate shall have been
lost, stolen or destroyed, Parent or the Payment Agent may, in its discretion
and as a condition precedent to the payment of any Merger Consideration with
respect to the shares of Company Common Stock previously represented by such
Company Stock Certificate, require the owner of such lost, stolen or destroyed
Company Stock Certificate to provide an appropriate affidavit and to deliver a
bond (in such sum as Parent or the Payment Agent may reasonably direct) as
indemnity against any claim that may be made against the Payment Agent, Parent
or the Surviving Corporation with respect to such Company Stock Certificate.
(c) Any portion of the Payment Fund that remains undistributed to holders of
Company Stock Certificates as of the date one year after the Closing Date shall
be delivered to Parent upon demand, and any holders of Company Stock
Certificates who have not theretofore surrendered their Company Stock
Certificates in accordance with this Section 1.7 shall thereafter look only to
Parent for satisfaction of their claims for Merger Consideration.
(d) Each of the Payment Agent, Parent and the Surviving Corporation shall be
entitled to deduct and withhold from any consideration payable to any holder of
any Company Stock Certificate (in his or her capacity as a holder of Company
Common Stock) such amounts as are required to be deducted or withheld from such
consideration under the Code or any provision of state, local or foreign tax law
or under any other applicable Legal Requirement. To the extent such amounts are
so deducted or withheld, such amounts shall be treated for all purposes under
this Agreement as having been paid to the Person to whom such amounts would
otherwise have been paid.
(e) Neither Parent nor the Surviving Corporation shall be liable to any holder
of any Company Stock Certificate or to any other Person with respect to any
Merger Consideration delivered to any public official pursuant to any applicable
abandoned property law, escheat law or similar Legal Requirement.
1.8 Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in this Agreement, shares
of Company Common Stock held by a holder who has made a demand for appraisal of
such shares in accordance with Section 262 of the DGCL (any such shares being
referred to as "Dissenting Shares" until such time as such holder fails to
perfect or otherwise loses such holder's appraisal rights under Section 262 of
the DGCL with respect to such shares) shall not be converted into or represent
the right to receive Merger Consideration in accordance with Section 1.5, but
shall be entitled only to such rights as are granted by the DGCL to a holder of
Dissenting Shares.
(b) If any Dissenting Shares shall lose their status as such (through failure to
perfect or otherwise), then, as of the later of the Effective Time or the date
of loss of such status, such shares shall automatically be converted into and
shall represent only the right to receive Merger Consideration in accordance
with Section 1.5, without interest thereon, upon surrender of the Company Stock
Certificate representing such shares.
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(c) The Company shall give Parent: (i) prompt written notice of (A) any demand
for appraisal received by the Company prior to the Effective Time pursuant to
the DGCL, (B) any withdrawal of any such demand and (C) any other demand, notice
or instrument delivered to the Company prior to the Effective Time pursuant to
the DGCL; and (ii) the opportunity to participate in all negotiations and
proceedings with respect to any such demand, notice or instrument. The Company
shall not make any payment or settlement offer prior to the Effective Time with
respect to any such demand, notice or instrument unless Parent shall have given
its written consent to such payment or settlement offer.
1.9 Treatment of Stock Options. Prior to the Effective Time, the Company shall
use commercially reasonable efforts to cause each Company Option granted
pursuant to an Option Plan that is outstanding immediately prior to the
Effective Time (whether or not then vested or exercisable) and that represents
the right to acquire shares of Company Common Stock to be canceled and
terminated and converted at the Effective Time into the right to receive a cash
amount equal to the Option Consideration (as hereinafter defined) for each share
of Company Common Stock then subject to the Company Option. Prior to the
Effective Time, the Company shall take all actions necessary to terminate the
Company Stock Plans, such termination to be effective at or before the Effective
Time. Prior to the Effective Time, Parent shall deposit with the Payment Agent
an amount of cash equal to the sum of the aggregate Option Consideration for
each Company Option then outstanding (subject to any applicable withholding
tax), together with instructions that such cash be promptly distributed
following the Effective Time to the holders of such Company Options in
accordance with this Section 1.9. For purposes of this Agreement, "Option
Consideration" means, with respect to any share of Company Common Stock issuable
under a particular Company Option, an amount equal to the excess, if any, of:
(1) Per Share Merger Price over (2) the exercise price payable in respect of
such share of Company Common Stock issuable under such Option (it being
understood that if the exercise price payable in respect of such share of
Company Common Stock issuable under such Company Option exceeds the Per Share
Merger Price the Option Consideration shall be zero).
1.10 Further Action. If, at any time after the Effective Time, any further
action is determined by Parent or the Surviving Corporation to be necessary or
desirable to carry out the purposes of this Agreement or to vest the Surviving
Corporation with full right, title and possession of and to all rights and
property of Merger Sub and the Company, then the officers and directors of the
Surviving Corporation and Parent shall be fully authorized (in the name of
Merger Sub, in the name of the Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as expressly set forth in the applicable Part of the Disclosure
Schedule, the Company represents and warrants to Parent and Merger Sub as
follows:
2.1 Subsidiaries; Due Organization; Etc.
(a) The Company has no Subsidiaries, except for the Entities identified in Part
2.1(a)(i) of the Disclosure Schedule; and neither the Company nor any of the
other Entities identified in Part 2.1(a)(i) of the Disclosure Schedule owns any
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capital stock of, or any equity interest of any nature in, any other Entity,
other than (i) interests in the Entities identified in Part 2.1(a)(ii) of the
Disclosure Schedule and (ii) interests classified as cash equivalents or
short-term investments on the June 30, 2005 Balance Sheet. Each of the Entities
identified in Part 2.1(a)(i) is a wholly-owned direct or indirect subsidiary of
the Company and no other Person holds any equity interest (contingent or
otherwise) in such Entities. None of the Acquired Corporations has agreed or 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. None of the Acquired Corporations has, at any time, been a general
partner of, or has otherwise been liable for any of the debts or other
obligations of, any general partnership, limited partnership or other Entity.
(b) Each of the Acquired Corporations is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all necessary power and authority: (i) to conduct its
business in the manner in which its business is currently being conducted; (ii)
to own and use its assets in the manner in which its assets are currently owned
and used; and (iii) to perform its obligations under all Contracts by which it
is bound.
(c) Each of the Acquired Corporations is qualified to do business as a foreign
corporation, and is in good standing, under the laws of all jurisdictions where
the nature of its business requires such qualification.
2.2 Certificate of Incorporation; Bylaws; Charters and Codes of Conduct. The
Company has Made Available to Parent accurate and complete copies of the
certificate of incorporation, bylaws and other charter and organizational
documents of the respective Acquired Corporations, including all amendments
thereto. Part 2.2 of the Disclosure Schedule lists, and the Company has Made
Available to Parent, accurate and complete copies of: (a) the charters of all
committees of the Company's board of directors; and (b) any code of conduct or
similar policy adopted by any of the Acquired Corporations or by the board of
directors, or any committee of the board of directors, of any of the Acquired
Corporations, each as in effect on the date of this Agreement.
2.3 Capitalization, Etc.
(a) The authorized capital stock of the Company consists of: (i) 75,000,000
shares of Company Common Stock, $0.001 par value, of which 41,305,348 shares
were issued and outstanding as of the date of this Agreement; and (ii)
10,000,000 shares of Preferred Stock, $.001 par value per share, of which no
shares have been issued or are outstanding. All of the outstanding shares of
Company Common Stock have been duly authorized and validly issued, and are fully
paid and nonassessable. The Company does not hold any shares of its capital
stock in its treasury. There are no shares of Company Common Stock held by any
of the other Acquired Corporations. None of the outstanding shares of Company
Common Stock is entitled or subject to any preemptive right, right of
participation, right of maintenance or any similar right. None of the
outstanding shares of Company Common Stock is subject to any right of first
refusal in favor of the Company. There is no Company Contract relating to the
voting or registration of, or restricting any Person from purchasing, selling,
pledging or otherwise disposing of (or granting any option or similar right with
respect to), any shares of Company Common Stock. None of the Acquired
Corporations is under any obligation, or is bound by any Contract pursuant to
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which it may become obligated, to repurchase, redeem or otherwise acquire any
outstanding shares of Company Common Stock. Part 2.3(a)(iii) of the Disclosure
Schedule accurately and completely describes all repurchase rights held by the
Company with respect to shares of Company Common Stock as of the date of this
Agreement, and specifies which of those repurchase rights are currently
exercisable.
(b) As of the date of this Agreement: (i) 6,260,285 shares of Company Common
Stock are subject to issuance pursuant to stock options granted and outstanding
under the Company's 2001 Amended and Restated Equity Incentive Plan (the "2001
Plan"), (ii) 130,827 shares of Company Common Stock are subject to issuance
pursuant to stock options granted and outstanding under equity incentive plans
of the other Acquired Corporations (collectively, such plans together with the
2001 Plan, the "Option Plans"), (iii) 4,367,391 additional shares of Company
Common Stock are reserved for future issuance pursuant to the 2001 Plan, and
(iv) 1,097 shares of Company Common Stock are reserved for issuance pursuant to
the Amended and Restated Employee Stock Purchase Plan and the 2001 Foreign
Employee Stock Purchase Plan (collectively, the "ESPP"). (Options to purchase
shares of Company Common Stock (whether granted by the Company pursuant to the
2001 Plan, assumed by the Company in connection with any merger, acquisition or
similar transaction or otherwise issued or granted) are referred to in this
Agreement as "Company Options.") Part 2.3(c) of the Disclosure Schedule sets
forth the following information with respect to each Company Option outstanding
as of the date of this Agreement: (A) the particular Option Plan (if any)
pursuant to which such Company Option was granted; (B) the name of the optionee;
(C) the number of shares of Company Common Stock subject to such Company Option;
(D) the exercise price of such Company Option; (E) the date on which such
Company Option was granted; (F) the applicable vesting schedule, and the extent
to which such Company Option is vested and exercisable as of the date of this
Agreement; (G) the date on which such Company Option expires; and (H) whether
such Company Option is an "incentive stock option" (as defined in the Code) or a
non-qualified stock option. The Company has Made Available to Parent accurate
and complete copies of all stock option plans pursuant to which any of the
Acquired Corporations has ever granted stock options, and the forms of all stock
option agreements evidencing such options.
(c) Except as set forth in Part 2.3(c) of the Disclosure Schedule and except for
options granted after the date of this Agreement in accordance with Section
4.2(b)(ii) or rights under the ESPP to purchase shares of Company Common Stock,
there is no: (i) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of any of the Acquired Corporations; (ii) outstanding
security, instrument or obligation that is or may become convertible into or
exchangeable for any shares of the capital stock or other securities of any of
the Acquired Corporations; (iii) stockholder rights plan (or similar plan
commonly referred to as a "poison pill") or Contract under which any of the
Acquired Corporations is or may become obligated to sell or otherwise issue any
shares of its capital stock or any other securities; or (iv) to the Company's
Knowledge, condition or circumstance that has given rise to or provides a basis
for the assertion of a claim by any Person to the effect that such Person is
entitled to acquire or receive any shares of capital stock or other securities
of any of the Acquired Corporations.
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(d) All outstanding shares of Company Common Stock, options, warrants and other
securities of the Acquired Corporations have been issued and granted in
compliance with: (i) all applicable securities laws and other applicable Legal
Requirements; and (ii) all requirements set forth in applicable Contracts.
(e) All of the shares of capital stock of each of the Company's Subsidiaries
have been duly authorized and validly issued, are fully paid and nonassessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof, and are owned beneficially and of record by the Company, free
and clear of any Encumbrances, other than restrictions on transfer imposed by
applicable securities laws.
2.4 SEC Filings; Financial Statements.
(a) The Company has Made Available to Parent accurate and complete copies of all
registration statements, proxy statements, Certifications (as defined below) and
other statements, reports, schedules, forms and other documents filed by the
Company with the SEC since July 30, 2001 (the "Company SEC Documents") as well
as all comment letters received by the Company from the SEC since July 30, 2001
and all responses to such comment letters provided to the SEC by or on behalf of
the Company. Except as set forth in Part 2.4(a) of the Disclosure Schedule, all
statements, reports, schedules, forms and other documents required to have been
filed by the Company, or by any of its directors or officers (as such
statements, reports, schedules, forms and other documents relate to the Company
or to such director's or officer's ownership of securities of the Company), with
the SEC have been so filed on a timely basis. None of the Company's Subsidiaries
is required to file any documents with the SEC. As of the time it was filed with
the SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the Company SEC
Documents complied in all material respects with the applicable requirements of
the Securities Act or the Exchange Act (as the case may be); and (ii) none of
the Company SEC Documents contained any untrue statement of a material fact or
omitted 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. The certifications and statements required
by Rule 13a-14 under the Exchange Act, and 18 U.S.C. ss.1350 (Section 906 of the
Xxxxxxxx-Xxxxx Act) relating to the Company SEC Documents (collectively, the
"Certifications") are accurate and complete, and complied as to form and content
with all applicable Legal Requirements as of the date of such filing (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing). As used in this Section 2, the term "file" and
variations thereof shall be broadly construed to include any manner in which a
document or information is furnished, supplied or otherwise made available to
the SEC.
(b) The Acquired Corporations maintain disclosure controls and procedures that
satisfy the requirements of Rule 13a-15 under the Exchange Act. Such disclosure
controls and procedures are effective to ensure that all material information
concerning the Acquired Corporations is made known on a timely basis to the
individuals responsible for the preparation of the Company's filings with the
SEC. Part 2.4(b) of the Disclosure Schedule lists, and the Company has Made
Available to Parent accurate and complete copies of, all written descriptions
of, and all policies, manuals and other documents promulgating, such disclosure
controls and procedures in effect as of the date of this Agreement.
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(c) The financial statements (including any related notes) contained or
incorporated by reference in the Company SEC Documents: (i) complied as to form
in all material respects with the published rules and regulations of the SEC
applicable thereto; (ii) were prepared in accordance with generally accepted
accounting principles in the United States ("U.S. GAAP") applied on a consistent
basis throughout the periods covered (except as may be indicated in the notes to
such financial statements or, in the case of unaudited financial statements, as
permitted by Form 10-Q or Form 8-K of the SEC, and except that the unaudited
financial statements may not contain footnotes and are subject to normal and
recurring year-end adjustments that will not, individually or in the aggregate,
be material in amount); and (iii) fairly present in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
as of the respective dates thereof and the consolidated results of operations
and cash flows of the Company and its consolidated subsidiaries for the periods
covered thereby. No financial statements of any Person other than the Acquired
Corporations are required by U.S. GAAP to be included in the consolidated
financial statements of the Company. The financial statements required to be
delivered to Parent pursuant to Section 4.1(i): (x) will be prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the periods
covered (except that such financial statements may not contain footnotes and may
be subject to normal and recurring year-end adjustments that will not,
individually or in the aggregate, be material in amount); and (y) will fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of the respective dates thereof and
the consolidated results of operations of the Company and its consolidated
subsidiaries for the periods covered thereby.
(d) To the Company's Knowledge, the Company's independent auditor has at all
times since the date of enactment of the Xxxxxxxx-Xxxxx Act been: (i) a
registered public accounting firm (as defined in Section 2(a)(12) of the
Xxxxxxxx-Xxxxx Act); (ii) "independent" with respect to the Company within the
meaning of Regulation S-X under the Exchange Act; and (iii) in compliance with
subsections (g) through (l) of Section 10A of the Exchange Act and the rules and
regulations promulgated by the SEC and the Public Company Accounting Oversight
Board thereunder. Part 2.4(e) of the Disclosure Schedule contains an accurate
and complete description of all non-audit services performed by the Company's
auditors for the Acquired Corporations since March 31, 2005 and the fees paid
for such services. All non-audit services were approved as required by Section
202 of the Xxxxxxxx-Xxxxx Act.
(e) The Acquired Corporations maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with U.S. GAAP and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. Part 2.4(f) of the Disclosure Schedule
lists as of the date of this Agreement, and the Company has Made Available to
Parent accurate and complete copies of, all written descriptions of, and all
policies, manuals and other documents promulgating, such internal accounting
controls.
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(f) Part 2.4(f) of the Disclosure Schedule lists, and the Company has Made
Available to Parent accurate and complete copies of the documentation creating
or governing, all securitization transactions and "off-balance sheet
arrangements" (as defined in Item 303(c) of Regulation S-K under the Exchange
Act) effected by any of the Acquired Corporations since July 30, 2001.
2.5 Absence of Changes. Since June 30, 2005:
(a) there has not been any Company Material Adverse Effect, and no event has
occurred or circumstance has arisen that, in combination with any other events
that shall have occurred since June 30, 2005, or circumstances that shall have
arisen since June 30, 2005, would reasonably be expected to have a Company
Material Adverse Effect;
(b) there has not been any material loss, damage or destruction to, or any
material interruption in the use of, any of the assets of any of the Acquired
Corporations (whether or not covered by insurance);
(c) none of the Acquired Corporations has (i) declared, accrued, set aside or
paid any dividend or made any other distribution in respect of any shares of
capital stock, or (ii) repurchased, redeemed or otherwise reacquired any shares
of capital stock or other securities;
(d) none of the Acquired Corporations has sold, issued or granted, or authorized
the issuance of: (i) any capital stock or other security (except for Company
Common Stock issued upon the valid exercise of outstanding Company Options);
(ii) any option, warrant or right to acquire any capital stock or any other
security (except for Company Options identified in Part 2.3(c) of the Disclosure
Schedule or pursuant to the ESPP); or (iii) any instrument convertible into or
exchangeable for any capital stock or other security (except for Company Options
identified in Part 2.3(c) of the Disclosure Schedule or pursuant to the ESPP);
(e) the Company has not amended or waived any of its rights under, or permitted
the acceleration of vesting under any provision of: (i) any of the Option Plans;
(ii) any Company Option or any Contract evidencing or relating to any Company
Option; (iii) any restricted stock purchase agreement; or (iv) any other
Contract evidencing or relating to any equity award (whether payable in cash or
stock);
(f) there has been no amendment to the certificate of incorporation, bylaws or
other charter or organizational documents of any of the Acquired Corporations,
and none of the Acquired Corporations has effected or been a party to any
merger, consolidation, share exchange, business combination, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(g) none of the Acquired Corporations has formed any Subsidiary or acquired any
equity interest or other interest in any other Entity other than any interest
classified as a short-term investment on the June 30, 2005 Balance Sheet;
(h) none of the Acquired Corporations has amended or terminated, or waived any
material right or remedy under, any Material Contract (as defined in Section
2.10);
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(i) none of the Acquired Corporations has: (i) acquired, leased or licensed any
material right or other material asset from any other Person; (ii) sold or
otherwise disposed of, or leased or licensed, any material right or other
material asset to any other Person; or (iii) waived or relinquished any right,
except for rights or other assets acquired, leased, licensed or disposed of in
the ordinary course of business and consistent with past practices;
(j) none of the Acquired Corporations has written off as uncollectible other
than in the ordinary course of business consistent with past practice, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness;
(k) none of the Acquired Corporations has made any pledge of any of its assets
or otherwise permitted any of its assets to become subject to any Encumbrance,
except for Permitted Encumbrances;
(l) none of the Acquired Corporations has: (i) lent money to any Person other
than money advanced to its employees in the ordinary course of business
consistent with past practice and pursuant to the Company's policies in order to
defray routine travel expenses; or (ii) incurred or guaranteed any indebtedness
for borrowed money;
(m) none of the Acquired Corporations has, except as required by applicable
Legal Requirements: (i) adopted, established or entered into any Company Benefit
Plan or Company Benefit Agreement; (ii) caused or permitted any Company Benefit
Plan to be amended in any material respect; or (iii) paid any bonus or made any
profit-sharing or similar payment to, or materially increased the amount of the
wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees other than
in the ordinary course of business consistent with past practices or upon the
promotion of the affected employee;
(n) none of the Acquired Corporations has changed any of its methods of
accounting or accounting practices in any material respect other than as
required by the rules and regulations of the SEC or by U.S. GAAP;
(o) none of the Acquired Corporations has made any material Tax election;
(p) none of the Acquired Corporations has commenced or settled any Legal
Proceeding other than routine collection proceedings initiated by the Acquired
Corporations in the ordinary course of business;
(q) none of the Acquired Corporations has entered into any material transaction
or taken any other material action outside the ordinary course of business or
inconsistent with past practices; and
(r) none of the Acquired Corporations has agreed or committed to take any of the
actions referred to in clauses "(c)" through "(r)" above.
2.6 Title to Assets. The Acquired Corporations own, and have good and valid
title to, all assets (excluding Intellectual Property Rights and Intellectual
11
Property) purported to be owned by them, including: (a) all assets reflected on
the June 30, 2005 Balance Sheet (except for inventory sold or otherwise disposed
of in the ordinary course of business since June 30, 2005); and (b) all other
assets reflected in the books and records of the Acquired Corporations as being
owned by the Acquired Corporations. All of said assets are owned by the Acquired
Corporations free and clear of any Encumbrances, except for (i) Permitted
Encumbrances and (ii) liens described in Part 2.6 of the Disclosure Schedule.
The Acquired Corporations are the lessees of, and hold valid leasehold interests
in, all assets purported to have been leased by them, including: (A) all assets
reflected as leased on the June 30, 2005 Balance Sheet; and (B) all other assets
reflected in the books and records of the Acquired Corporations as being leased
by the Acquired Corporations. The Acquired Corporations enjoy adequate rights of
ingress and egress to all real property leased by them and undisturbed
possession of all personal property leased by them.
2.7 Cash Balance; Receivables; Customers.
(a) As of June 30, 2005, the sum of the Company's cash, cash equivalents and
short-term investments, determined in accordance with U.S. GAAP (applied on a
basis consistent with the basis on which the financial statements contained in
the Company SEC Documents have been prepared) exceeded $1,400,000.
(b) All existing accounts receivable of the Acquired Corporations (including
those accounts receivable reflected on the June 30, 2005 Balance Sheet that have
not yet been collected and those accounts receivable that have arisen since June
30, 2005 and have not yet been collected): (i) represent valid obligations of
customers of the Acquired Corporations arising from bona fide transactions
entered into in the ordinary course of business; and (ii) are current and, to
the Company's Knowledge, will be collected in full when due, without any
counterclaim or set off (net of an allowance for doubtful accounts not to exceed
$100,000 in the aggregate).
(c) Part 2.7(c) of the Disclosure Schedule contains an accurate and complete
list of each outstanding loan or advance made by any of the Acquired
Corporations to any Company Associate, other than routine travel advances made
to employees in the ordinary course of business.
(d) Part 2.7(d) of the Disclosure Schedule accurately identifies, and provides
an accurate and complete breakdown of the revenues received from, the 20 largest
customers (measured by the aggregate dollar amount of revenue generated by the
Acquired Corporations from each customer in the applicable fiscal year) of the
Acquired Corporations in each of the fiscal years ended March 31, 2004 and 2005.
None of the Acquired Corporations has received any notice or other communication
or information (in writing or otherwise) indicating, and the Company has no
basis for believing, that any customer identified in Part 2.7(d) of the
Disclosure Schedule may cease dealing with any of the Acquired Corporations or
may otherwise materially reduce the volume of business transacted by such
customer with any of the Acquired Corporations.
2.8 Equipment; Real Property; Leasehold. All material items of equipment and
other tangible assets owned by or leased to the Acquired Corporations are
12
adequate for the uses to which they are being put, are in good and safe
condition and repair (ordinary wear and tear excepted) and are adequate for the
conduct of the business of the Acquired Corporations in the manner in which such
business is currently being conducted. None of the Acquired Corporations own any
real property or any interest in real property, except for the leaseholds
created under the real property leases identified in Part 2.8 of the Disclosure
Schedule.
2.9 Intellectual Property.
(a) Part 2.9(a) of the Disclosure Schedule accurately identifies and describes
as of the date of this Agreement:
(i) in Part 2.9(a)(i) of the Disclosure Schedule: (A) each Patent, registered
Trademark and other item of Registered IP in which any of the Acquired
Corporations has an ownership interest of any nature (whether exclusively,
jointly with another Person or otherwise); (B) the jurisdiction in which such
Patent, Trademark or other item of Registered IP has been registered or filed
and the applicable registration or serial number; and (C) any other Person that
has an ownership interest in such Patent, Trademark or other item of Registered
IP and the nature of such ownership interest;
(ii) in Part 2.9(a)(ii) of the Disclosure Schedule, each Contract pursuant to
which any Intellectual Property Right or Intellectual Property is licensed to
any of the Acquired Corporations (other than any non-exclusive license to
non-customized software that: (1) is so licensed solely in executable or object
code form, (2) is not incorporated into or bundled with any Company Software,
and (3) is generally available on standard terms); and
(iii) in Part 2.9(a)(iii) of the Disclosure Schedule, each Contract entered into
since July 30, 2001 pursuant to which any Person has been granted any license
directly or indirectly from an Acquired Company under, or otherwise has received
or acquired any right (whether or not currently exercisable) or interest
directly or indirectly from an Acquired Company in, any Company IP (other than
end user licenses for Company Software granted by an Acquired Corporation, or an
authorized reseller or distributor of an Acquired Corporation, in the ordinary
course of business, and Channel Agreements identified in Part 2.10(a)(iv) of the
Disclosure Schedule).
(b) The Company has Made Available to Parent an accurate and complete copy of
the current version of each standard form of Company IP Contract used by any of
the Acquired Corporations, including each standard form of: (i) end user license
agreement; (ii) maintenance or support agreement; (iii) distributor or reseller
agreement; (iv) employee agreement containing any assignment or license of
Intellectual Property or Intellectual Property Rights or any confidentiality
provision; (v) consulting or independent contractor agreement containing any
assignment or license of Intellectual Property or Intellectual Property Rights
or any confidentiality provision; or (vi) confidentiality or nondisclosure
agreement. The Company has provided to Parent or to Parent's outside counsel
each Company IP Contract (other than end user license agreements on the current
versions of any of Acquired Corporation's standard form) that is either (1) an
end user license agreement with one of the 20 largest customers (measured by the
aggregate dollar amount of revenue generated by the Acquired Corporations from
13
each customer in the applicable fiscal year) of the Acquired Corporations in
each of the fiscal years ended March 31, 2004 and 2005 or (2) an end user
license agreement based on a form of agreement proposed by the customer (as
opposed to the Company's standard form of end user license agreement).
(c) The Acquired Corporations exclusively own all right, title and interest to
and in the Company IP (other than Intellectual Property Rights or Intellectual
Property licensed to the Company, as identified in Part 2.9(a)(ii) of the
Disclosure Schedule and the Intellectual Property Rights or Intellectual
Property described in the Contracts exempted from disclosure by the terms of
Section 2.9(a)(ii)) free and clear of any Encumbrances (other than (i)
nonexclusive licenses granted pursuant to the Contracts listed in Part
2.9(a)(iii) of the Disclosure Schedule, (ii) nonexclusive licenses granted
pursuant to the Contracts exempted from disclosure by the terms of Section
2.9(a)(iii) and (iii) end user licenses for Company Software granted by an
Acquired Corporation, or an authorized distributor of an Acquired Corporation,
in the ordinary course of business and Channel Agreements identified in Part
2.10(a)(iv) of the Disclosure Schedule). Without limiting the generality of the
foregoing:
(i) all documents and instruments necessary to record the assignment or transfer
to the Acquired Corporations of the rights held by the Acquired Corporations in
the Company IP that is Registered IP have been validly executed, delivered and
filed in a timely manner with the appropriate Governmental Body;
(ii) No Person developed any components of the Company IP who was not an
employee or independent contractor of an Acquired Corporation at the time such
development took place, and each Person who is or was an employee or independent
contractor of any of the Acquired Corporations and who is or was involved in any
material respect in the creation or development of any Company IP has signed a
written agreement containing an irrevocable assignment of Intellectual Property
Rights to the Acquired Corporation for which such Person is or was an employee
or independent contractor and confidentiality provisions protecting the Company
IP;
(iii) to the Company's Knowledge, no Company Associate has any claim, right
(whether or not currently exercisable) or interest to or in any Company IP;
(iv) to the Company's Knowledge, no employee or independent contractor of any of
the Acquired Corporations is: (A) bound by or otherwise subject to any Contract
restricting him or her from performing his or her duties for such Acquired
Corporation; or (B) in breach of any Contract with an Acquired Corporation, any
former employer or other Person concerning Intellectual Property Rights or
confidentiality;
(v) no funding, facilities or personnel of any Governmental Body were used,
directly or indirectly, to develop or create, in whole or in part, any Company
IP;
(vi) each of the Acquired Corporations has taken reasonable steps to maintain
the confidentiality of and otherwise protect and enforce its rights in the
material Company Source Code and all other material proprietary information held
by any of the Acquired Corporations, or purported to be held by any of the
Acquired Corporations, as a trade secret;
14
(vii) none of the Acquired Corporations has assigned or otherwise transferred
ownership of, or agreed to assign or otherwise transfer ownership of, any
material Intellectual Property Right to any other Person;
(viii) none of the Acquired Corporations is now or has ever been a member or
promoter of, or a contributor to, any industry standards body or similar
organization that required (or has the right under any Contract to require) any
of the Acquired Corporations to disclose, or grant or offer to any other Person
any license or right to, any Company IP;
(ix) other than (i) the Intellectual Property Rights and Intellectual Property
licensed to the Company, as identified in Part 2.9(a)(ii) of the Disclosure
Schedule, (ii) the Intellectual Property Rights and Intellectual Property
described in Contracts exempted from disclosure by the terms of Section
2.9(a)(ii), (iii) the nonexclusive licenses granted pursuant to the Contracts
listed in Part 2.9(a)(iii) of the Disclosure Schedule, (iv) the nonexclusive
licenses granted pursuant to the Contracts exempted from disclosure by the terms
of Section 2.9(a)(iii), (v) end user licenses for Company Software granted by an
Acquired Corporation, or an authorized distributor of an Acquired Corporation,
in the ordinary course of business and on the Company's standard form of end
user license agreement and (vi) Channel Agreements identified in Part
2.10(a)(iv) of the Disclosure Schedule, none of the Acquired Corporations is
bound by, and no Company IP is subject to, any Contract containing any covenant
or other provision that in any way limits or restricts the ability of any of the
Acquired Corporations in any material way to use, exploit, assert, or enforce
any Company IP anywhere in the world; and
(x) the Acquired Corporations own or otherwise have, and immediately after the
Closing the Surviving Corporation will continue to have, all Intellectual
Property Rights needed to conduct the business of the Acquired Corporations as
currently conducted and currently planned by the Company to be conducted.
(d) To the Company's Knowledge, all Company IP is valid, subsisting and
enforceable. Without limiting the generality of the foregoing:
(i) each item of Company IP that is Registered IP is and at all times has been
in compliance with all Legal Requirements, and all filings, payments and other
actions required to be made or taken to maintain such item of Company IP in full
force and effect have been made by the applicable deadline (other than those
actions not made or taken that have not jeopardized or diminished any Company IP
or any Intellectual Property Right therein); (ii) no application for a patent or
for a copyright, mask work or trademark registration or any other type of
Registered IP filed by or on behalf of any of the Acquired Corporations has been
abandoned, allowed to lapse or rejected;
(iii) the Company has Made Available to Parent accurate and complete copies of
all applications and other material documents (including correspondence with the
U.S. Patent and Trademark Office and similar authorities in other jurisdictions)
related to each patent included in Company IP; and
15
(iv) no interference, opposition, reissue, reexamination or other Legal
Proceeding of any nature is or has been pending or, to the Company's Knowledge,
has been threatened, in which the scope, validity or enforceability of any
Company IP is being, has been or would reasonably be expected to be contested or
challenged.
(e) Neither the execution, delivery or performance of this Agreement nor the
consummation of any of the Contemplated Transactions will, with or without
notice or the lapse of time, result in or give any other Person the right or
option to cause or declare: (i) a material loss of, or material Encumbrance on,
any Company IP; (ii) a material breach of any Material Contract; (iii) the
release, disclosure or delivery of any Company Source Code or other material
Company IP by or to any escrow agent or other Person; or (iv) the grant,
assignment or transfer to any other Person of any material license or other
material right or interest under, to or in any of the Company IP.
(f) To the Company's Knowledge, no Person is currently infringing,
misappropriating or otherwise violating, any Company IP in any material respect.
Part 2.9(f) of the Disclosure Schedule accurately identifies (and the Company
has actually delivered to Parent or to Parent's outside counsel an accurate and
complete copy of) each letter or other written or electronic communication or
correspondence that has been sent or otherwise made available by or to any of
the Acquired Corporations or any Representative of any of the Acquired
Corporations since July 30, 2001 regarding any actual, alleged or suspected
infringement or misappropriation of any Company IP, and provides a brief
description of the current status of the matter referred to in such letter,
communication or correspondence.
(g) Except as set forth in the applicable subsection of Part 2.9(g) of the
Disclosure Schedule, to the Company's Knowledge: (i) none of the Acquired
Corporations has ever infringed (directly, contributorily, by inducement or
otherwise), misappropriated or otherwise violated any Intellectual Property
Right of any other Person; and (ii) none of the Company Software infringes any
Intellectual Property Right of any Person or contains or embodies any software
code, algorithms, or other Intellectual Property that has been misappropriated
from any Person.
(h) No infringement, misappropriation or similar claim or Legal Proceeding is
pending or, to the Company's Knowledge, has been threatened against any of the
Acquired Corporations. To the Company's Knowledge, no infringement,
misappropriation or similar claim or Legal Proceeding is pending or has been
threatened against any other Person who may be entitled to be indemnified,
defended, held harmless or reimbursed by the Company with respect to such claim
or Legal Proceeding. To the Company's Knowledge, no facts or circumstances exist
that provide a basis for any claim of the kind described in this Section 2.9(h).
(i) Except as described in Part 2.9(i) of the Disclosure Schedule, since July
30, 2001 none of the Acquired Corporations has received any notice or other
communication (in writing or otherwise) claiming that any Acquired Corporation
or Company Software is or may be infringing, misappropriating or otherwise
violating, or has or may have infringed, misappropriated or otherwise violated,
or offering a license to or suggesting that any Acquired Corporation may need a
license to, any Intellectual Property Right of another Person. Part 2.9(i) of
the Disclosure Schedule provides a brief description of the current status of
16
each matter described therein. The Company has Made Available to Parent an
accurate and complete copy of each written or electronic notice or communication
identified in Part 2.9(i) of the Disclosure Schedule.
(j) None of the Acquired Corporations has ever assumed, or agreed to indemnify,
hold harmless, defend, discharge or otherwise take responsibility for, any
existing or potential liability of another Person for infringement,
misappropriation or violation of any Intellectual Property Right (other than
pursuant to indemnification provisions in (i) end user license agreements for
Company Software entered into by an Acquired Corporation in the ordinary course
of business or (ii) Channel Agreements identified in Part 2.10(a)(iv) of the
Disclosure Schedule).
(k) None of the Company Software contains any Malicious Code.
(l) None of the Company Software is subject to any "copyleft" or other
obligation or condition (including any obligation or condition under any "open
source" license such as the GNU Public License, Lesser GNU Public License or
Mozilla Public License) that by its terms: (i) requires, or conditions the use
or distribution of such Company Software on, the disclosure, licensing or
distribution of any source code for any portion of such Company Software; or
(ii) otherwise imposes any material limitation, restriction or condition on the
right or ability of the Company to use or distribute any Company Software.
(m) No Company Source Code has been delivered, licensed or made available to any
escrow agent or other Person who is not, as of the date of this Agreement, an
employee of one of the Acquired Corporations. None of the Acquired Corporations
has any duty or obligation (whether present, contingent or otherwise) to
deliver, license or make available any Company Source Code to any escrow agent
or other Person. No event has occurred, and no circumstance or condition exists,
that (with or without notice or lapse of time) will, or would reasonably be
expected to, result in the delivery, license or disclosure of any Company Source
Code to any other Person.
2.10 Contracts.
(a) Part 2.10 of the Disclosure Schedule identifies each Company Contract that
constitutes a "Material Contract" (other than Company IP Contracts that are not
required to be identified in Part 2.9 of the Disclosure Schedule and that would
not otherwise be considered Material Contracts under any subsection of this
Section 2.10(a) other than subsection (ii) below). For purposes of this
Agreement, each of the following shall be deemed to constitute a "Material
Contract":
(i) any Company Contract: (A) relating to the employment of, or the performance
of services by, any employee or consultant that requires, or may require,
payments in excess of $100,000 on an annual basis to any Person; (B) the terms
of which obligate or may in the future obligate any of the Acquired Corporations
to make any severance, termination or similar payment to any current or former
employee or director; or (C) pursuant to which any of the Acquired Corporations
is or may become obligated to make any bonus or similar payment (other than
17
payments constituting base salary or sales commissions) in excess of $20,000 to
any current or former employee or director;
(ii) any Company IP Contract;
(iii) any Company Contract relating to the acquisition, sale, spin-off,
outsourcing or disposition of any business operation or unit or any product line
of any Acquired Corporation (except for Company Contracts terminated prior to
July 30, 2001 under which the Company had no remaining obligations following
such date);
(iv) any Company Contract in which another Person is or was appointed as a
distributor, reseller or sales representative with respect to, or otherwise is
or was authorized to market, promote, distribute, resell, sublicense, support or
solicit orders for, any Company Software (a "Channel Agreement");
(v) any Company Contract (other than Channel Agreements) that provides for
indemnification of any Company Associate or any current or former agent of any
of the Acquired Corporations (an "Indemnification Contract");
(vi) any Company Contract imposing any restriction on the right or ability of
any Acquired Corporation: (A) to compete with any other Person; (B) to acquire
any product or other asset or any services from any other Person; (C) to
solicit, hire or retain any Person as an employee, consultant or independent
contractor; (D) to develop, sell, supply, distribute, offer, support or service
any product or any technology or other asset to or for any other Person; (E) to
perform services for any other Person; or (F) to transact business or deal in
any other manner with any other Person;
(vii) any Company Contract (other than Company Contracts evidencing Company
Options or rights under the ESPP): (A) relating to the acquisition, issuance,
voting, registration, sale or transfer of any securities; (B) providing any
Person with any preemptive right, right of participation, right of maintenance
or similar right with respect to any securities; or (C) providing any of the
Acquired Corporations with any right of first refusal with respect to, or right
to repurchase or redeem, any securities;
(viii) any Company Contract that imposes on any Acquired Corporation any
guaranty, any warranty or any indemnity or similar obligation, except for
Channel Agreements and end user license agreements for Company Software entered
into by an Acquired Corporation in the ordinary course of business;
(ix) any Company Contract relating to any currency hedging;
(x) any Company Contract: (A) imposing any confidentiality obligation on any of
the Acquired Corporations or on any other Person (other than confidentiality or
nondisclosure agreements entered into by any Acquired Corporation in the
ordinary course of business that do not otherwise constitute Material Contracts
under this Section 2.10(a)); or (B) containing "standstill" or similar
provisions;
18
(xi) any Company Contract requiring that any of the Acquired Corporations give
any notice or provide any information to any Person prior to considering or
accepting any Acquisition Proposal or similar proposal, or prior to entering
into any discussions, agreement, arrangement or understanding relating to any
Acquisition Transaction or similar transaction;
(xii) any Company Contract that contemplates or involves the payment or delivery
of cash or other consideration in an amount or having a value in excess of
$100,000 in the aggregate, or contemplates or involves the performance of
services having a value in excess of $100,000 in the aggregate;
(xiii) any Company Contract that would reasonably be expected to have a Material
Adverse Effect on: (A) the business, financial condition, capitalization,
aggregate fair market value of the assets (including cash, cash equivalents,
short-term investments and Intellectual Property) of the Acquired Corporations
minus the amount of the liabilities (accrued, contingent or otherwise) of the
Acquired Corporations, operations or financial performance of the Acquired
Corporations taken as a whole; or (B) the ability of the Company to consummate
the Merger or any of the other Contemplated Transactions or to perform any of
its obligations under this Agreement; and
(xiv) any other Company Contract, if a breach of such Company Contract would
reasonably be expected to have a Company Material Adverse Effect.
The Company has Made Available to Parent an accurate and complete copy of each
Company Contract that constitutes a Material Contract (other than Company IP
Contracts that do not need to be specifically identified in Part 2.9 of the
Disclosure Schedule). For each Material Contract that is a Channel Agreement,
Part 2.10(a) of the Disclosure Schedule identifies such Material Contract as a
Channel Agreement and also indicates whether such Channel Agreement is currently
in effect.
(b) Each Company Contract that constitutes a Material Contract is valid and in
full force and effect, and is enforceable in accordance with its terms, subject
to: (i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors; and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
(c) (i) None of the Acquired Corporations has violated or breached, or committed
any default under, any Company Material; and, to the Company's Knowledge, no
other Person has violated or breached, or committed any default under, any
Company Contract; (ii) except for express warranty and indemnification remedies
set forth in the standard forms of Company IP Contracts described in Section
2.9(b) or in any Channel Agreement or end user license agreement entered into in
the ordinary course of business that was Made Available to Parent, no end user,
distributor, or other licensee of the Company Software has any conditional or
unconditional return, refund, or credit rights exercisable against the Acquired
Corporations with respect to such Company Software; (iii) to the Company's
Knowledge, no event has occurred, and no circumstance or condition exists, that
(with or without notice or lapse of time) would reasonably be expected to: (A)
result in a material violation or breach of any of the provisions of any Company
Contract; (B) give any Person the right to declare a default or exercise any
material remedy under any Company Contract; (C) give any Person the right to
receive or require a material rebate, chargeback, penalty or change in delivery
19
schedule under any Company Contract; (D) give any Person the right to accelerate
the maturity or performance of any Company Contract; (E) result in the
disclosure, release or delivery of any Company Source Code; or (F) give any
Person the right to cancel, terminate or modify any Company Contract; (iv) since
July 30, 2001, none of the Acquired Corporations has received any notice or
other communication regarding any actual or possible violation or breach of, or
default under, any Company Contract, except for claims under or based upon any
warranty provided by or on behalf of any of the Acquired Corporations or based
upon any services performed by any of the Acquired Corporations; and (v) without
limiting the generality of the foregoing, none of the Acquired Corporations has
failed to meet any development or delivery milestone under any Company Contract.
2.11 Sale of Products; Performance of Services.
(a) Part 2.11(a) of the Disclosure Schedule accurately identifies each Company
Software product that is currently being developed, marketed, distributed,
licensed or sold by any Acquired Corporation.
(b) The data and other information Made Available to Parent relating to bugs,
design defects and other defects or deficiencies in the Company Software is
accurate and complete.
(c) Since March 31, 2005, no customer or other Person has asserted or, to the
Company's Knowledge, threatened to assert any claim against any of the Acquired
Corporations: (i) under or based upon any warranty provided by or on behalf of
any of the Acquired Corporations; or (ii) based upon any services performed by
any of the Acquired Corporations. For the avoidance of doubt, Customer requests
for technical support in the ordinary course of business do not constitute
"claims" for purposes of this Section 2.11(c).
(d) Since March 31, 2005, no end user customer that was one of the 20 largest
customers (measured by the aggregate dollar amount of revenue generated by the
Acquired Corporations from each customer in the applicable fiscal year) of the
Acquired Corporations in either of the fiscal years ended March 31, 2004 and
2005, and no distributor, reseller, or sales representative of any Acquired
Corporation, has terminated or, to the Company's Knowledge, overtly threatened
or expressed an intention to terminate or not to renew, its relationship or any
Contract with any of the Acquired Corporations.
2.12 Liabilities. None of the Acquired Corporations has, and none of the
Acquired Corporations is responsible for performing or discharging, any accrued,
contingent or other liabilities of any nature, either matured or unmatured,
except for: (a) liabilities identified as such on the face of the June 30, 2005
Balance Sheet; (b) normal and recurring current liabilities that have been
incurred by the Acquired Corporations since June 30, 2005 in the ordinary course
of business and consistent with past practices; (c) liabilities for performance
of obligations of the Acquired Corporation under Company Contracts, to the
extent such liabilities are readily ascertainable (in nature, scope and amount)
from the copies of such Company Contracts Made Available to Parent prior to the
date of this Agreement; (d) liabilities described in Part 2.12(a) of the
Disclosure Schedule; and (e) liabilities and obligations under this Agreement.
20
2.13 Compliance with Legal Requirements. Each of the Acquired Corporations is,
and has at all times since July 30, 2001 been, in compliance in all material
respects with all applicable Legal Requirements. To the Company's Knowledge,
each Person who is or was a director or officer of any Acquired Corporation is,
and has at all times since July 30, 2001 been, in compliance in all material
respects with all applicable Legal Requirements as such Legal Requirements apply
to such Person in his or her capacity as a director or officer of the Company.
Since July 30, 2001, none of the Acquired Corporations has received any notice
or other communication from any Governmental Body or other Person regarding any
actual or possible violation of, or failure to comply with, any Legal
Requirement.
2.14 Certain Business Practices. None of the Acquired Corporations, and (to the
Company's Knowledge) no director, officer, other employee or agent of any of the
Acquired Corporations acting or purporting to act in his capacity as such, has:
(a) used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (b) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (c) made any other unlawful
payment.
2.15 Governmental Authorizations. The Acquired Corporations hold all material
Governmental Authorizations necessary to enable the Acquired Corporations to
conduct their respective businesses in the manner in which such businesses are
currently being conducted. All such Governmental Authorizations are valid and in
full force and effect. Each Acquired Corporation is, and at all times since July
30, 2001 has been, in compliance in all material respects with the terms and
requirements of such Governmental Authorizations. Since July 30, 2001, none of
the Acquired Corporations has received any notice or other communication from
any Governmental Body regarding: (a) any actual or possible violation of or
failure to comply with any term or requirement of any material Governmental
Authorization; or (b) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any material Governmental
Authorization.
2.16 Tax Matters.
(a) Each of the material Tax Returns required to be filed by or on behalf of the
respective Acquired Corporations with any Governmental Body on or before the
Closing Date (the "Company Returns"): (i) has been or will be filed on or before
the applicable due date (including any extensions of such due date); and (ii)
has been, or will be when filed, prepared in all material respects in compliance
with all applicable Legal Requirements. All Taxes required to be paid by the
Acquired Corporations on or before the Closing Date have been or will be paid on
or before the Closing Date, other than any Taxes for which adequate reserves
have been established in accordance with Section 2.16(b).
(b) The June 30, 2005 Balance Sheet fully accrues all actual and contingent
liabilities for Taxes with respect to all periods through the date of this
Agreement in accordance with U.S. GAAP, except for liabilities for Taxes
incurred since June 30, 2005 in the operation of the business of the Acquired
Corporations. On or before the Closing Date, each Acquired Corporation will
establish, in the ordinary course of business and consistent with its past
21
practices, reserves adequate for the payment of all Taxes for the period from
June 30, 2005 through the Closing Date.
(c) No Company Return has ever been examined or audited by any Governmental
Body. No extension or waiver of the limitation period applicable to any of the
Company Returns has been granted (by the Company or any other Person), and no
such extension or waiver has been requested from any Acquired Corporation.
(d) No claim or Legal Proceeding is pending or, to the Company's Knowledge, has
been threatened against or with respect to any Acquired Corporation in respect
of any material Tax. There are no unsatisfied liabilities for material Taxes
(including liabilities for interest, additions to tax and penalties thereon and
related expenses) with respect to any notice of deficiency or similar document
received by any Acquired Corporation with respect to any material Tax (other
than liabilities for Taxes asserted under any such notice of deficiency or
similar document which are being contested in good faith by the Acquired
Corporations and with respect to which adequate reserves for payment have been
established on the June 30, 2005 Balance Sheet). There are no liens for Taxes
upon any of the assets of any of the Acquired Corporations except liens for
current Taxes not yet due and payable. None of the Acquired Corporations will be
required to include any adjustment in taxable income for any tax period (or
portion thereof) after the Closing pursuant to Section 481 or Section 263 or
263A of the Code (or any comparable provision of state or foreign Tax laws) as a
result of transactions or events occurring, or accounting methods employed,
prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract covering,
benefiting or relating to any Company Associate that, considered individually or
considered collectively with any other such Contracts, would reasonably be
expected to give rise directly or indirectly to the payment of any amount that
would not be deductible pursuant to Section 280G or Section 162(m) of the Code
(or any comparable provision of state or foreign Tax laws). None of the Acquired
Corporations is, or has ever been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar Contract.
No Acquired Corporation is a party to any agreement to compensate any Person for
excise taxes payable pursuant to Section 4999 of the Code.
(f) No written claim has ever been made by any Governmental Body in a
jurisdiction where an Acquired Corporation does not file a Tax Return that such
Acquired Corporation is or may be subject to taxation by that jurisdiction.
(g) There is no Company Contract relating to allocating or sharing of Taxes. No
Acquired Corporation: (i) is liable for Taxes of any other Person, or is
currently under any contractual obligation to indemnify any Person with respect
to any portion of such Person's Taxes (except for customary agreements to
indemnify lenders or security holders in respect of Taxes); or (ii) is a party
to or bound by any Contract providing for payments by such Acquired Corporation
with respect to any amount of Taxes of any other Person, other than such a
Company Contract of which Acquired Corporations are the only parties.
(h) No Acquired Corporation has constituted either a "distributing corporation"
or a "controlled corporation" within the meaning of Section 355(a)(1)(A) of the
22
Code. No Acquired Corporation is or has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code, and
Parent will not be required to withhold any Tax on the purchase of the Company
by reason of Section 1445 of the Code.
(i) No Acquired Corporation has been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code or within the
meaning of any similar Legal Requirement to which an Acquired Corporation may be
subject, other than the affiliated group of which the Company is the common
parent.
(j) The Company has Made Available to Parent copies of all Tax Returns of the
Acquired Corporations for all fiscal years still open to potential audit.
(k) The Company has disclosed on its federal income Tax Returns all positions
that could give rise to a material understatement penalty within the meaning of
Section 6662 of the Code or any similar Legal Requirement.
(l) No Acquired Corporation has participated, or is currently participating, in
a "Listed Transaction" or a "Reportable Transaction" within the meaning of
Treasury Regulation Section 1.6011-4(b)(2) or in a similar transaction under any
corresponding or similar Legal Requirement.
2.17 Employee and Labor Matters; Benefit Plans.
(a) Part 2.17(a) of the Disclosure Schedule identifies each Company Benefit
Plan.
(b) None of the Acquired Corporations maintains, sponsors or contributes to, and
none of the Acquired Corporations has at any time in the past maintained,
sponsored or contributed to, any employee pension benefit plan (as defined in
Section 3(2) of ERISA), or any similar pension benefit plan that is a Foreign
Plan, whether or not excluded from coverage under specific Titles or Subtitles
of ERISA, for the benefit of any Company Associate.
(c) With respect to each Company Benefit Plan, the Company has Made Available to
Parent (where applicable): (i) an accurate and complete copy of such Company
Benefit Plan (including all amendments thereto); (ii) an accurate and complete
copy of the annual report (Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under ERISA or the Code, with
respect to such Company Benefit Plan for the three most recent plan years; (iii)
if such Company Benefit Plan is subject to the minimum funding standards of
ERISA Section 302, the most recent annual and periodic accounting of such
Company Benefit Plan's assets; (iv) an accurate and complete copy of the most
recent summary plan description, together with each summary of material
modifications, if required under ERISA, with respect to such Company Benefit
Plan; (v) if such Company Benefit Plan is funded through a trust or any third
party funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including all amendments thereto) and accurate and complete
copies of the most recent financial statements thereof; (vi) accurate and
complete copies of all Contracts relating to such Company Benefit Plan,
including service provider agreements, insurance contracts, minimum premium
contracts, stop-loss agreements, investment management agreements, subscription
and participation agreements and recordkeeping agreements; (vii) all written
materials provided to any Company Associate relating to such Company Benefit
Plan and any proposed Company Benefit Plan, in each case relating to any
amendments, terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which could result
in any material liability to any of the Acquired Corporations; (viii) all
23
material correspondence, if any, to or from any Governmental Body relating to
such Company Benefit Plan; (ix) all forms and related notices required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
with respect to such Company Benefit Plan; (x) all insurance policies, if any,
in the possession of any of the Acquired Corporations pertaining to fiduciary
liability insurance covering the fiduciaries for such Company Benefit Plan; (xi)
if such Company Benefit Plan is intended to be qualified under Section 401(a) of
the Code, all discrimination tests, if any, required under the Code for such
Company Benefit Plan for the three most recent plan years; (xii) if such Company
Benefit Plan is intended to be qualified under Section 401(a) of the Code, the
most recent determination letter (or opinion letter, if applicable) received
from the Internal Revenue Service with respect to such Company Benefit Plan; and
(xiii) if such Company Benefit Plan is a Foreign Plan, all Governmental
Authorizations received from any foreign Governmental Body with respect to such
Company Benefit Plan.
(d) None of the Acquired Corporations is or has ever been required to be treated
as a single employer with any other Person other than the Acquired Corporations
under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the
Code. None of the Acquired Corporations has ever been a member of an "affiliated
service group" within the meaning of Section 414(m) of the Code.
(e) No Acquired Corporation has ever maintained, established, sponsored,
participated in or contributed to or could incur any liability under any: (i)
Company Benefit Plan subject to Section 302 or Title IV of ERISA or Section 412
of the Code; (ii) "multiemployer plan" within the meaning of Section 3 (37) of
ERISA; (iii) "multiple employer plan" (within the meaning of Section 413(c) of
the Code); or (iv) Company Benefit Plan in which stock of any of the Acquired
Corporations is or was held as a "plan asset" within the meaning of DOL
Regulations Section 2510.3-101. For purposes of clarity, stock of an Acquired
Corporation shall not be deemed to be a "plan asset" for purposes of the
preceding sentence solely by virtue of the fact that such stock is held by an
investment company registered under the Investment Company Act of 1940 and the
stock of such investment company is a "plan asset." None of the Acquired
Corporations has ever made a complete or partial withdrawal from a multiemployer
plan, as such term is defined in Section 3(37) of ERISA, resulting in withdrawal
liability, as such term is defined in Section 4201 of ERISA (without regard to
subsequent reduction or waiver of such liability under either Section 4207 or
Section 4208 of ERISA).
(f) With respect to each Company Benefit Plan as to which any of the Acquired
Corporations may incur any liability under, or that is subject to, Section 302
or Title IV of ERISA or Section 412 of the Code: (i) such Company Benefit Plan
has not been terminated so as to result, directly or indirectly, in any material
liability, contingent or otherwise, of any of the Acquired Corporations under
Title IV of ERISA; (ii) no complete or partial withdrawal from such Company
Benefit Plan has been made by any of the Acquired Corporations, or by any other
Person, so as to result in any material liability to any of the Acquired
24
Corporations, whether such liability is contingent or otherwise; (iii) no
proceeding has been initiated by any Person (including the Pension Benefit
Guaranty Corporation (the "PBGC")) to terminate such Company Benefit Plan or to
appoint a trustee for such Company Benefit Plan; (iv) no condition or event
exists or is expected to occur that could result, directly or indirectly, in any
material liability of any of the Acquired Corporations under Title IV of ERISA,
whether to the PBGC or otherwise, on account of the termination of such Company
Benefit Plan; (v) if such Company Benefit Plan were to be terminated as of the
Closing Date or if any Person were to withdraw from such Company Benefit Plan,
none of the Acquired Corporations would incur, directly or indirectly, any
material liability under Title IV of ERISA; (vi) no "reportable event" (as
defined in Section 4043 of ERISA) has occurred with respect to such Company
Benefit Plan, nor has notice of any such event or similar notice to any foreign
Governmental Body been required to be filed for such Company Benefit Plan within
the past twelve months nor will any such notice be required to be filed as a
result of any of the Contemplated Transactions; (vii) such Company Benefit Plan
has not incurred any "accumulated funding deficiency" (as defined in Section 302
of ERISA and Section 412 of the Code, respectively), whether or not waived, and
none of the Acquired Corporations has provided, or is required to provide,
security to such Company Benefit Plan pursuant to Section 401(a)(29) of the
Code; and (viii) none of the Contemplated Transactions will result in any event
described in Section 4062(e) of ERISA with respect to such Company Benefit Plan.
(g) None of the Acquired Corporations has any plan or commitment to create any
additional Company Benefit Plan, or to modify or change any existing Company
Benefit Plan (other than to comply with applicable Legal Requirements as
previously disclosed to Parent in writing) in a manner that would create any
material liability for any of the Acquired Corporations.
(h) No Company Benefit Plan provides (except at no cost to the Acquired
Corporations), or reflects or represents any liability of any of the Acquired
Corporations to provide, retiree life insurance, retiree health benefits or
other retiree employee welfare benefits to any Person for any reason, except as
may be required by COBRA or other applicable Legal Requirements. Other than
commitments made that involve no future costs to any of the Acquired
Corporations, no Acquired Corporation has ever represented, promised or
contracted (whether in oral or written form) to any Company Associate (either
individually or as part of a group of Company Associates) or any other Person
that such Company Associate or other Person would be provided with retiree life
insurance, retiree health benefits or other retiree employee welfare benefits,
except to the extent required by applicable Legal Requirements.
(i) Each of the Company Benefit Plans has been operated and administered in all
material respects in accordance with its terms and with applicable Legal
Requirements, including ERISA, the Code, applicable U.S. and non-U.S. securities
laws and regulations and applicable foreign Legal Requirements. The Acquired
Corporations have performed all material obligations required to be performed by
them under the Company Benefit Plans and none of the Acquired Corporations is in
default or violation of any material term of any Company Benefit Plan. To the
Company's Knowledge, there has been no default or violation by any other party
with respect to any material term of any Company Benefit Plan. Each Company
Benefit Plan intended to be qualified under Section 401(a) of the Code has
25
obtained a favorable determination letter (or opinion letter, if applicable) as
to its qualified status under the Code or has remaining a period in which to
apply for such a letter, and to the Company's Knowledge, there is not and there
has never been any event, condition or circumstance that would reasonably be
expected to result in disqualification under the Code. To the Company's
Knowledge, there is not and there has never been any event, condition or
circumstance that would reasonably be expected to result in any Company Benefit
Plan that is a Foreign Plan failing to qualify for the Tax benefits customarily
associated with plans of such type. There are no claims or Legal Proceedings
pending, or to the Company's Knowledge, threatened or reasonably anticipated
(other than routine claims for benefits) against any Company Benefit Plan or
against the assets of any Company Benefit Plan. To the Company's Knowledge, no
breach of fiduciary duty has occurred with respect to which any Acquired
Corporation or any of its fiduciaries would reasonably be expected to incur a
material liability. Each Company Benefit Plan can be amended, terminated or
otherwise discontinued after the Effective Time in accordance with its terms,
without liability to any of the Acquired Corporations (other than ordinary
administration expenses). To the Company's Knowledge, no Company Benefit Plan is
under audit or investigation, or is subject to any other Legal Proceeding
commenced by the Internal Revenue Service, the DOL or any other Governmental
Body, nor is any such audit, investigation or other Legal Proceeding pending or,
to the Company's Knowledge, threatened. No "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA (other than
a transaction exempt under Section 408 of ERISA and the regulatory guidance
thereunder), has occurred with respect to any Company Benefit Plan. No mortgage,
lien, pledge, charge, security interest or other Encumbrance of any kind has
been imposed under the Code, ERISA or any foreign Legal Requirement with respect
to any Company Benefit Plan or any of the assets of any Company Benefit Plan,
with the exception of participant loans granted under pension plans. All
contributions, premiums and expenses to or in respect of each Company Benefit
Plan have been paid in full or, to the extent not yet due, have been adequately
accrued on the June 30, 2005 Balance Sheet.
(j) None of the Acquired Corporations has incurred or reasonably expects to
incur, either directly or indirectly (including as a result of an
indemnification obligation), any material liability under Title I or IV of ERISA
or under the penalty, excise tax or joint and several liability provisions of
the Code or any foreign Legal Requirement relating to employee benefit plans
(including Section 406, 409, 502(i), 502(l), 4069 or 4212(c) of ERISA, or
Section 4971, 4975 or 4976 of the Code), or under any Contract or Legal
Requirement pursuant to or under which any of the Acquired Corporations or any
Company Benefit Plan has agreed to indemnify or is required to indemnify any
Person against liability incurred under, or for a violation or failure to
satisfy the requirements of, any such Contract or Legal Requirement; and, to the
Company's Knowledge, no event, transaction or condition has occurred, exists or
is expected to occur which could result in the incurrence of any such material
liability by any of the Acquired Corporations or by Parent.
(k) Neither the execution, delivery or performance of this Agreement, nor the
consummation of any of the Contemplated Transactions (either alone or in
combination with another event, whether contingent or otherwise), will: (i)
result in any bonus, severance or other payment or obligation to any Company
Associate (whether or not under any Company Benefit Plan); (ii) materially
increase the benefits payable or provided to, or result in a forgiveness of any
indebtedness of, any Company Associate; or (iii) accelerate the vesting, funding
or time of payment of any compensation, equity award or other similar benefit.
26
(l) Under each Company Benefit Plan that is a single employer defined benefit
plan, as of the last day of the most recent plan year ended prior to the date of
this Agreement, the actuarially determined present value of all "benefit
liabilities," within the meaning of Section 4001(a)(16) of ERISA (as determined
on the basis of the actuarial assumptions contained in the Company Benefit
Plan's most recent actuarial valuation), did not exceed the then current value
of the assets of such Company Benefit Plan, and there has been no material
adverse change in the financial condition of such Company Benefit Plan (with
respect to either assets or benefits) since the last day of such most recent
plan year. The fair market value of the assets of each funded Foreign Plan, the
liability of each insurer for any Foreign Plan funded through insurance or the
book reserve established for any Foreign Plan, together with any accrued
contributions, is sufficient to procure or provide in full for the accrued
benefit obligations with respect to all current and former participants in such
Foreign Plan according to the actuarial assumptions and valuations most recently
used to determine employer contributions to and obligations under such Foreign
Plan. Neither the execution of this Agreement nor the consummation of any of the
Contemplated Transactions, will cause any of the assets or insurance obligations
to be less than the benefit obligations under such Company Benefit Plan or
Foreign Plan.
(m) None of the Acquired Corporations: (i) maintains any plan, agreement or
arrangement, formal or informal, that provides material benefits in the nature
of severance; or (ii) has any outstanding liabilities with respect to material
severance benefits.
(n) None of the Acquired Corporations has any material liability (including a
material liability arising out of an indemnification, guarantee, hold harmless
or similar agreement) relating to any insurance Contract held under or purchased
to fund a Company Benefit Plan, the issuer of which is or was insolvent or in
reorganization or the payments under which were suspended.
(o) Except for the 2001 Plan and the ESPP, none of the Acquired Corporations
maintains any plan, program or arrangement or is a party to any Contract that
provides any material benefits or provides for material payments to any Person
based on or measured by the value of any equity security of, or interest in, any
of the Acquired Corporations.
(p) No Acquired Corporation has undertaken any option re-pricing or option
exchange program with respect to any stock options.
(q) Part 2.17(q) of the Disclosure Schedule sets forth any and all indebtedness
of any Company Associate to any of the Acquired Corporations in excess of $5,000
that is currently outstanding other than commission advances made to any of the
Acquired Corporations' employees pursuant to the Company's sales commission
plans and routine travel advances made in the ordinary course of business
consistent with past practices and pursuant to the Company's policies.
(r) With respect to each Company Benefit Plan and with respect to each state
workers' compensation arrangement that is funded wholly or partially through an
insurance policy or public or private fund, all premiums required to have been
paid under such insurance policy or fund have been paid when due, and none of
the Acquired Corporations has any material liability under any such insurance
27
policy or fund or under any related Contract (whether in the nature of a
retroactive rate adjustment or loss sharing arrangement or otherwise).
(s) Part 2.17(s) of the Disclosure Schedule accurately sets forth, as of the
date of this Agreement, with respect to each employee of each of the Acquired
Corporations (including any employee of any of the Acquired Corporations who is
on a leave of absence or on layoff status):
(i) the name of such employee, the Acquired Corporation by which such employee
is employed and the date as of which such employee was originally hired by such
Acquired Corporation;
(ii) such employee's title and current written description of such employee's
duties and responsibilities;
(iii) the aggregate dollar amount of the compensation (including wages, salary,
commissions, director's fees, fringe benefits, bonuses, profit sharing payments
and other payments or benefits of any type) received by such employee from the
applicable Acquired Corporation with respect to services performed in the fiscal
year ended March 31, 2005;
(iv) such employee's annualized base wages or salary, as applicable, annualized
target commission and annualized target bonus as of the date of this Agreement;
(v) each Company Benefit Plan in which such employee participates or is eligible
to participate; and
(vi) any material Governmental Authorization that is held by such employee and
that relates to or is useful in connection with the businesses of the Acquired
Corporations.
(t) Part 2.17(t) of the Disclosure Schedule accurately identifies, as of the
date of this Agreement, each employee of any of the Acquired Corporations who is
not fully available to perform work because of disability or other leave and
sets forth the type of such disability or leave and the anticipated date of
return to full service.
(u) Part 2.17(u) of the Disclosure Schedule accurately identifies, as of the
date of this Agreement, each former employee of any of the Acquired Corporations
who is receiving or is scheduled to receive (or whose spouse or other dependent
is receiving or is scheduled to receive) any benefits (whether from any of the
Acquired Corporations or otherwise) relating to such former employee's
employment with any of the Acquired Corporations; and Part 2.17(u) of the
Disclosure Schedule accurately and completely describes such benefits.
(v) None of the Acquired Corporations is a party to, or has a duty to bargain
for, any collective bargaining agreement or other Contract with a labor
organization representing any of its employees, and there are no labor
28
organizations representing, purporting to represent or, to the Company's
Knowledge, seeking to represent any employees of any of the Acquired
Corporations. Since July 30, 2001, none of the Acquired Corporations has had any
strike, slowdown, work stoppage, lockout, job action, or threat of any of the
foregoing, or question concerning representation, by or with respect to any of
its employees.
(w) The employment of each of the Acquired Corporations' employees is terminable
by the applicable Acquired Corporation at will. The Company has Made Available
to Parent accurate and complete copies of all employee manuals and employee
handbooks of each of the Acquired Corporations used or in force at any time
since July 30, 2001. The Company has Made Available to Parent accurate and
complete copies of all material disclosure materials, material policy statements
and other material materials, in each case relating to the employment of
employees of each of the Acquired Corporations on or after July 30, 2001.
(x) To the Company's Knowledge:
(i) no employee of any of the Acquired Corporations currently intends to
terminate his employment with the Company; and
(ii) no employee of any Acquired Corporation is a party to or is bound by any
confidentiality agreement, noncompetition agreement or other Contract (with any
Person) that may have an adverse effect on: (A) the performance by such employee
of any of his duties or responsibilities as an employee of such Acquired
Corporation; or (B) the business or operations of any of the Acquired
Corporations.
(y) Each of the Acquired Corporations: (i) is in compliance in all material
respects with all applicable Legal Requirements and with any order, ruling,
decree, judgment or arbitration award of any arbitrator or any court or other
Governmental Body respecting employment, employment practices, terms and
conditions of employment, wages, hours or other labor-related matters, including
Legal Requirements, orders, rulings, decrees, judgments and awards relating to
discrimination, wages and hours, labor relations, leave of absence requirements,
occupational health and safety, privacy, harassment, retaliation, immigration,
wrongful discharge or violation of the personal rights of employees, former
employees or prospective employees; (ii) has withheld and reported all material
amounts required by any Legal Requirement or Contract to be withheld and
reported with respect to wages, salaries and other payments to any Company
Associate; (iii) has no material liability for any arrears of wages or any Taxes
or any penalty for failure to comply with any of the foregoing; and (iv) has no
liability for any payment to any trust or other fund governed by or maintained
by or on behalf of any Governmental Body with respect to unemployment
compensation benefits, social security or other benefits or obligations for any
Company Associate (other than routine payments to be made in the normal course
of business and consistent with past practice). Since July 30, 2001, none of the
Acquired Corporations has effectuated a "plant closing," partial "plant
closing," "relocation" or "termination" (each as defined in the Worker
Adjustment and Retraining Notification Act (the "WARN Act") or any similar Legal
Requirement) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of any of the Acquired
Corporations.
(z) Part 2.17(z) of the Disclosure Schedule accurately sets forth, with respect
to each Person who is or was, at any time since March 31, 2005, an independent
29
contractor of any of the Acquired Corporations and who has received or may be
entitled to receive in excess of $50,000 from any of the Acquired Corporations:
(i) the name of such independent contractor, the Acquired Corporation with which
such independent contractor is or was under contract and the date as of which
such independent contractor was originally retained by such Acquired
Corporation;
(ii) a description of such independent contractor's performance objectives,
services, duties and responsibilities;
(iii) the aggregate dollar amount of the compensation (including all payments or
benefits of any type) received by such independent contractor from the
applicable Acquired Corporation with respect to services performed in the fiscal
year ended March 31, 2005;
(iv) the terms of compensation of such independent contractor; and
(v) any material Governmental Authorization that is held by such independent
contractor and that relates to or is useful in connection with the businesses of
the Acquired Corporations.
(aa) No current or former independent contractor of any of the Acquired
Corporations could be deemed to be a misclassified employee. No independent
contractor is eligible to participate in any material Company Benefit Plan.
Since July 30, 2001, no Acquired Corporation has had any temporary or leased
employees that were not treated and accounted for in all respects as employees
of such Acquired Corporation.
(bb) There is no Legal Proceeding, claim, labor dispute or grievance pending, or
to the Company's Knowledge, threatened or reasonably anticipated relating to any
employment contract, wages and hours, leave of absence, plant closing
notification, employment statute or regulation, privacy right, labor dispute,
workers' compensation policy, long-term disability policy, safety, retaliation,
immigration or discrimination matter involving any Company Associate, including
charges of unfair labor practices or harassment complaints. To the Company's
Knowledge, none of the Acquired Corporations has engaged in any unfair labor
practice within the meaning of the National Labor Relations Act. Each of the
Acquired Corporations has good labor relations, and, to the Company's Knowledge,
there are no facts indicating that (i) the consummation of any of the
Contemplated Transactions will have a material adverse effect on the labor
relations of any of the Acquired Corporations, or (ii) any of the employees of
any of the Acquired Corporations intends to terminate his or her employment.
(cc) The provisions of Section 5.4 are consistent with, and the actions
contemplated by Section 5.4 will not result in a breach or violation of, any
Option Plan or any other Company Benefit Plan or Company Benefit Agreement.
2.18 Environmental Matters.
30
(a) Each of the Acquired Corporations: (i) is and has been in compliance in all
material respects with, and has not been and is not in material violation of or
subject to any material liability under, any applicable Environmental Laws (as
defined below); and (ii) possesses all material permits and other Governmental
Authorizations required under applicable Environmental Laws for the conduct of
its business as currently conducted and is in compliance in all material
respects with the terms and conditions of such Governmental Authorizations.
(b) None of the Acquired Corporations has received any written notice, whether
from a Governmental Body or otherwise, that alleges that any of the Acquired
Corporations is not or might not be in compliance with any Environmental Law.
(c) To the Company's Knowledge: (i) all property that is or was leased to,
controlled by or used by any of the Acquired Corporations, and all surface
water, groundwater and soil associated with or adjacent to such property, is
free of any Materials of Environmental Concern (as defined in Section 2.18(f))
or material environmental contamination of any nature; (ii) none of the property
that is or was leased to, controlled by or used by any of the Acquired
Corporations contains any underground storage tanks, asbestos, equipment using
PCBs or underground injection xxxxx; and (iii) none of the property that is or
was leased to, controlled by or used by any of the Acquired Corporations
contains any septic tanks in which process wastewater or any Materials of
Environmental Concern have been Released (as defined in Section 2.18(f)).
(d) No Acquired Corporation has ever Released any Materials of Environmental
Concern except in compliance in all material respects with all applicable
Environmental Laws.
(e) No Acquired Corporation has ever sent or transported, or arranged to send or
transport, any Materials of Environmental Concern to a site that, pursuant to
any applicable Environmental Law: (i) has been placed on the "National
Priorities List" of hazardous waste sites or any similar state list; (ii) is
otherwise designated or identified as a potential site for remediation, cleanup,
closure or other environmental remedial activity; or (iii) is subject to a Legal
Requirement to take "removal" or "remedial" action as detailed in any applicable
Environmental Law or to make payment for the cost of cleaning up any site.
(f) For purposes of this Section 2.18: (i) "Environmental Law" means any
federal, state, local or foreign Legal Requirement relating to pollution by or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata) from Materials of
Environmental Concern, including any Legal Requirement relating to Releases or
threatened Releases of Materials of Environmental Concern, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern; (ii) "Materials of
Environmental Concern" means chemicals, pollutants, contaminants, wastes, toxic
substances, petroleum and petroleum products and any other substance that is now
or hereafter regulated by any Environmental Law; and (iii) "Release" means any
spilling, leaking, emitting, discharging, depositing, escaping, dumping or other
releasing of Materials of Environmental Concern into the environment, whether
intentional or unintentional.
31
2.19 Insurance.
(a) The Company has Made Available to Parent accurate and complete copies of all
material insurance policies and all material self insurance programs and
arrangements relating to the business, assets, liabilities and operations of the
Acquired Corporations. To the Company's Knowledge, each of such insurance
policies is in full force and effect. Since July 30, 2001, none of the Acquired
Corporations has received any notice or other communication regarding any actual
or possible: (a) cancellation or invalidation of any insurance policy; (b)
refusal or denial of any material coverage, reservation of rights or rejection
of any material claim under any insurance policy; or (c) material adjustment in
the amount of the premiums payable with respect to any insurance policy. There
is no pending workers' compensation or other claim under or based upon any
insurance policy of any of the Acquired Corporations. All information provided
to insurance carriers (in applications and otherwise) on behalf of each of the
Acquired Corporations is accurate and complete to the extent that the failure of
such information to be accurate and complete would entitle the applicable
insurance carrier to cancel the insurance policy procured on the basis of or in
reliance on such information, reduce the scope of coverage under such policy,
increase the premiums payable by the Acquired Corporations or otherwise take any
action adverse to any of the Acquired Corporations in any material respect. The
Company has provided timely written notice to the appropriate insurance
carrier(s) of each Legal Proceeding pending or threatened in writing against any
of the Acquired Corporations, and no such carrier has issued a denial of
coverage or a reservation of rights with respect to any such Legal Proceeding,
or informed in writing any of the Acquired Corporations of its intent to do so.
(b) The Company has Made Available to Parent accurate and complete copies of all
material correspondence between any of the Acquired Corporations and any
insurance carrier or insurance broker.
(c) Attached as Annex 2.19(c) to the Disclosure Schedule are accurate and
complete copies of the existing policies (primary and excess) of directors' and
officers' liability insurance maintained by the Company as of the date of this
Agreement (the "Existing D&O Policies"). The Company has Made Available to
Parent accurate and complete copies of all directors' and officers' liability
insurance policies issued to the Company incepting on or after July 30, 2001.
Part 2.19(c) of the Disclosure Schedule accurately sets forth as of the date of
this Agreement the most recent annual premiums paid by the Company with respect
to the Existing D&O Policies.
2.20 Transactions with Affiliates. Since March 31, 2005, no event has occurred
that would be required to be reported by the Company pursuant to Item 404 of
Regulation S-K promulgated by the SEC. Part 2.20(a) of the Disclosure Schedule
identifies each Person who is (or who may be deemed to be) an "affiliate" (as
that term is used in Rule 145 under the Securities Act) of the Company as of the
date of this Agreement.
2.21 Legal Proceedings; Orders.
(a) Except as set forth on Part 2.21(a) of the Disclosure Schedule, there is no
pending Legal Proceeding, and to the Company's Knowledge, no Person has
32
threatened to commence any Legal Proceeding: (i) that involves any of the
Acquired Corporations or any of the assets owned or used by any of the Acquired
Corporations; or (ii) that challenges, or that, if decided adversely to any
Acquired Corporation, would reasonably be expected to have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other Contemplated Transactions. To the Company's Knowledge, there
is no pending Legal Proceeding, and no Person has threatened to commence any
Legal Proceeding, that involves any Company Associate (in his or her capacity as
such). To the Company's Knowledge, no event has occurred, and no claim, dispute
or other condition or circumstance exists, that would reasonably be expected to
give rise to or serve as a basis for the commencement of any such Legal
Proceeding. The Legal Proceedings identified in Part 2.21(a) of the Disclosure
Schedule have not had and, if decided adversely to any Acquired Corporation,
would not reasonably be expected to have a Company Material Adverse Effect.
(b) There is no order, writ, injunction, judgment or decree to which any of the
Acquired Corporations, or any of the assets owned or used by any of the Acquired
Corporations, is subject. To the Company's Knowledge, no officer or other key
employee of any of the Acquired Corporations is subject to any order, writ,
injunction, judgment or decree that prohibits such officer or other employee
from engaging in or continuing any conduct, activity or practice relating to the
business of any of the Acquired Corporations.
2.22 Authority; Binding Nature of Agreements.
(a) The Company has all necessary corporate power and authority to enter into
and to perform its obligations under this Agreement. The board of directors of
the Company has duly and unanimously adopted resolutions by which such board of
directors has: (a) determined that this Agreement and the Merger are advisable
and fair to and in the best interests of the Company and its stockholders; (b)
authorized and approved the execution, delivery and performance of this
Agreement; (c) recommended the adoption of this Agreement by the holders of
Company Common Stock and directed that this Agreement be submitted for
consideration by the Company's stockholders at the Company Stockholders' Meeting
(as defined in Section 5.2(a)). This Agreement constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to: (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors; and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
Prior to the execution of the Voting Agreements, the board of directors of the
Company approved the Voting Agreements and the transactions contemplated
thereby.
2.23 Inapplicability of Anti-takeover Statutes. The restrictions applicable to
business combinations contained in Section 203 of the DGCL are not, and will not
be, applicable to the execution, delivery and performance of this Agreement and
the Voting Agreements and to the consummation of the Merger and the other
Contemplated Transactions. No other state takeover statute or similar Legal
Requirement applies or purports to apply to the Merger, this Agreement, the
Voting Agreements or any of the other Contemplated Transactions.
2.24 Vote Required. The affirmative vote of the holders of a majority of the
shares of Company Common Stock outstanding on the record date for the Company
Stockholders' Meeting and entitled to vote (the "Required Stockholder Vote") is
33
the only vote of the holders of any class or series of the Company's capital
stock necessary to adopt this Agreement.
2.25 Non-Contravention; Consents. Neither (x) the execution, delivery or
performance of this Agreement, nor (y) the consummation of the Merger or any of
the other Contemplated Transactions, will directly or indirectly (with or
without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of the
provisions of the certificate of incorporation, bylaws or other charter or
organizational documents of any of the Acquired Corporations, or (ii) any
resolution adopted by the stockholders, the board of directors or any committee
of the board of directors of any of the Acquired Corporations;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge the Merger (other than
existing rights of stockholders under the DGCL) or any of the other Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any order, writ, injunction, judgment or decree to which any of
the Acquired Corporations, or any of the assets owned or used by any of the
Acquired Corporations, is subject;
(c) contravene, conflict with or result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any material Governmental Authorization
that is held by any of the Acquired Corporations or that otherwise relates to
the business of any of the Acquired Corporations or to any of the assets owned
or used by any of the Acquired Corporations;
(d) contravene, conflict with or result in a violation or breach of, or result
in a default under, any provision of any material Company Contract, or give any
Person the right to: (i) declare a default or exercise any remedy under any
material Company Contract; (ii) a rebate, chargeback, penalty or change in
delivery schedule under any such material Company Contract; (iii) accelerate the
maturity or performance of any material Company Contract; or (iv) cancel,
terminate or modify any term of material Company Contract;
(e) result in the imposition or creation of any Encumbrance upon or with respect
to any asset owned or used by any of the Acquired Corporations (except for
Permitted Encumbrances); or
(f) result in, or increase the likelihood of, the disclosure or delivery to any
escrow holder or other Person of any Company Source Code, or the transfer of any
material asset of any of the Acquired Corporations to any Person.
Except as may be required by the Exchange Act or the DGCL or as set forth on
Part 2.25 of the Disclosure Schedule, none of the Acquired Corporations was, is
or will be required to make any filing with or give any notice to, or to obtain
any Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement or (y) the consummation of the Merger or any of
the other Contemplated Transactions.
34
2.26 Fairness Opinion. The board of directors of the Company has received the
written opinion of SVB Alliant, financial advisor to the board of directors (the
"Financial Advisor"), dated October 2, 2005 and addressed to the board of
directors, to the effect that subject to the assumptions, qualifications and
limitations set forth therein, the Per Share Merger Price is fair, from a
financial point of view, to the stockholders of the Company. For informational
purposes only, the Company has furnished an accurate and complete copy of said
written opinion to Parent.
2.27 Financial Advisor. Except for the Financial Advisor and Silicon Valley
Bank, no broker, finder or investment banker is entitled to any brokerage fee,
finder's fee, opinion fee, success fee, transaction fee or other fee or
commission in connection with the Merger or any of the other Contemplated
Transactions based upon arrangements made by or on behalf of any of the Acquired
Corporations. The Company has furnished or Made Available to Parent accurate and
complete copies of all agreements under which any such fees, commissions or
other amounts have been paid or may become payable and all indemnification and
other agreements related to the engagement of the Financial Advisor and Silicon
Valley Bank.
2.28 Full Disclosure. This Agreement (including the Disclosure Schedule) does
not, and the certificate referred to in Section 6.5(c) will not: (i) contain any
representation, warranty or information that is false, misleading or incomplete
with respect to any material fact; or (ii) omit to state any material fact
necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information were
or will be made or provided) not false or misleading.
Section 3. Representations and Warranties of Parent and Merger Sub
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 Valid Existence. Parent and Merger Sub are corporations validly
existing and in good standing under the laws of the State of Delaware.
3.2 Authority; Binding Nature of Agreement. Parent has all necessary corporate
power and authority to enter into and to perform its obligations under this
Agreement and the execution, delivery and performance by Parent of this
Agreement has been duly authorized by any necessary action on the part of Parent
and its board of directors. This Agreement constitutes the legal, valid and
binding obligations of Parent, enforceable against it in accordance with its
terms, subject to: (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors; and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies. Merger Sub has all
necessary corporate power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance by
Merger Sub of this Agreement has been duly authorized by any necessary action on
the part of Merger Sub and its board of directors (subject to the adoption of
this Agreement by Parent as the sole stockholder of Merger Sub, which adoption
shall occur immediately after the execution and delivery of this Agreement by
the parties hereto). This Agreement constitutes the legal, valid and binding
obligation of Merger Sub, enforceable against it in accordance with its terms,
35
subject to: (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors; and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
3.3 Non-Contravention. Neither the execution and delivery of this Agreement by
Parent and Merger Sub nor the consummation by Parent and Merger Sub of the
Merger will (a) result in a violation of any provision of the certificate of
incorporation or bylaws of Parent or Merger Sub or (b) result in a violation by
Parent or Merger Sub of any order, writ, injunction, judgment or decree to which
Parent or Merger Sub is subject, except in each case for any violation that will
not have a material adverse effect on the ability of Parent or Merger Sub to
consummate the Merger.
3.4 No Legal Proceedings Challenging the Merger. As of the date of this
Agreement, (a) there is no Legal Proceeding pending against Parent or Merger Sub
challenging the Merger or the other Contemplated Transactions, and (b) to
Parent's Knowledge no Legal Proceeding has been threatened against Parent or
Merger Sub challenging the Merger or the other Contemplated Transactions.
3.5 Activities of Merger Sub. Merger Sub was formed solely for the purpose of
effecting the Merger and the other Contemplated Transactions. Merger Sub has not
and will not engage in any activities other than those contemplated by this
Agreement and has, and will have as of immediately prior to the Effective Time,
no liabilities other than those contemplated by this Agreement.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY
4.1 Access and Investigation. Subject to the Confidentiality Agreement, during
the period commencing on the date of this Agreement and ending at the Effective
Time (the "Pre-Closing Period"), the Company shall, and shall cause the
respective Representatives of the Acquired Corporations to: (a) provide Parent
and Parent's Representatives with reasonable access to the Acquired
Corporations' Representatives, personnel, books, records, Tax Returns, material
operating and financial reports, work papers and other documents and information
relating to the Acquired Corporations; (b) provide Parent and Parent's
Representatives with such copies of the books, records, Tax Returns, work papers
and other documents and information relating to the Acquired Corporations, and
with such additional financial, operating and other data and information
regarding the Acquired Corporations, as Parent may reasonably request; and (c)
permit Parent's officers and other employees to meet, upon reasonable notice and
during normal business hours, with the chief financial officer and other
officers and managers of the Company responsible for the Company's financial
statements and the internal controls of the Acquired Corporations to discuss
such matters as Parent may reasonably deem necessary or appropriate in order to
enable Parent to satisfy its obligations under the Xxxxxxxx-Xxxxx Act and the
rules and regulations relating thereto or otherwise in connection with the
Merger or any of the other Contemplated Transactions. Without limiting the
generality of any of the foregoing, subject to the Confidentiality Agreement,
during the Pre-Closing Period, the Company shall promptly provide Parent with
copies of:
(i) the quarterly financial statements for the three and six month periods
ending September 30, 2005 shall be provided by the Company to Parent as soon as
36
they become available, and in any event no later than November 1, 2005, and as
reviewed by the Company's independent registered public accounting firm no later
than November 10, 2005;
(ii) the unaudited monthly consolidated balance sheets of the Acquired
Corporations as of the end of each calendar month and the related unaudited
monthly consolidated statements of operations, statements of stockholders'
equity and statements of cash flows for such calendar month, which shall be
delivered by the Company to Parent within fifteen days after the end of such
calendar month;
(iii) the monthly booking forecast updates for the upcoming calendar month,
which shall be delivered by the Company to Parent within three business days
before the beginning of such calendar month;
(iv) any written materials or other written communications sent by or on behalf
of the Company to its stockholders (in their capacity as stockholders);
(v) any material notice, document or other written communication sent by or on
behalf of any of the Acquired Corporations to any party to any Material Contract
or sent to any of the Acquired Corporations by any party to any Material
Contract containing any allegation of any actual, possible, potential or
threatened breach, violation or default of or under such Material Contract;
(vi) any notice, report or other document filed with or otherwise furnished,
submitted or sent to any Governmental Body on behalf of any of the Acquired
Corporations in connection with the Merger or any of the other Contemplated
Transactions;
(vii) any material notice, report or other document received by any of the
Acquired Corporations from any Governmental Body;
(viii) any material correspondence between any of the Acquired Corporations and
any insurance carrier or insurance broker;
(ix) any non-privileged notice, document or other communication sent by or on
behalf of, or sent to, any of the Acquired Corporations relating to any pending
or threatened Legal Proceeding involving or affecting any of the Acquired
Corporations or any director or officer of any of the Acquired Corporations; and
(x) at least 48 hours in advance of the filing of any periodic or current report
or schedule or proxy statement with the SEC, such periodic or current report or
schedule or proxy statement.
4.2 Operation of the Company's Business.
(a) During the Pre-Closing Period, unless Parent has given its prior written
consent: (i) the Company shall ensure that each of the Acquired Corporations
conducts its business and operations in the ordinary course and in accordance
with past practices; and (ii) the Company shall use reasonable efforts to ensure
that each of the Acquired Corporations (A) conducts its business and operations
in compliance with all applicable Legal Requirements and the requirements of all
37
Company Contracts that constitute Material Contracts, (B) preserves intact its
current business organization, (C) keeps available the services of its current
officers and other employees and (D) maintains its relations and goodwill with
suppliers, customers, landlords, creditors, licensors, licensees, employees and
other Persons having material business relationships with the respective
Acquired Corporations; (iii) the Company shall keep in full force all insurance
policies referred to in Section 2.19; (iv) the Company shall cause to be
provided all notices, assurances and support required by any Company Contract
relating to any Intellectual Property or Intellectual Property Right in order to
ensure that no condition under such Company Contract occurs that could result
in: (A) any transfer or disclosure by any Acquired Corporation of any Company
Source Code; or (B) a release from any escrow of any Company Source Code that
has been deposited or is required to be deposited in escrow under the terms of
such Company Contract; (v) the Company shall properly withhold and remit to the
appropriate Governmental Body all withholding Taxes; and (vi) the Company shall
promptly notify Parent in writing of: (A) any notice or other written
communication from any Person alleging that the Consent of such Person is or may
be required in connection with any of the Contemplated Transactions; and (B) any
Legal Proceeding or material claim that is commenced, or, to the Company's
Knowledge, threatened, against, relating to or involving or otherwise affecting
in any material respect any of the Acquired Corporations or, to the Company's
Knowledge, any director, officer or key employee of any of the Acquired
Corporations. The Company shall consult with Parent regarding the Company's
efforts to amend the agreements referenced in Section 4.4 and shall obtain
Parent's prior written approval before entering into any such amendment (which
consent shall not be unreasonably withheld, delayed or conditioned if the terms
of such amendment are reasonably satisfactory to Parent).
(b) During the Pre-Closing Period, without the prior written consent of Parent
(which consent, in the case of matters referred to in clauses "(vii)" and
"(ix)", shall not be unreasonably withheld, delayed or conditioned), the Company
shall not and shall not permit any of the other Acquired Corporations to:
(i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or repurchase, redeem or
otherwise reacquire any shares of capital stock or other securities (other than
repurchases of Company Common Stock from employees pursuant to restricted stock
purchase agreements to the extent required by, and in compliance with, Section
4.2(d));
(ii) sell, issue, grant or authorize the sale, issuance or grant of: (A) any
capital stock or other security; (B) any option, call, warrant or right to
acquire any capital stock or other security; or (C) any instrument convertible
into or exchangeable for any capital stock or other security, except that the
Company may issue shares of Company Common Stock upon the valid exercise of
Company Options outstanding as of the date of this Agreement;
(iii) amend or waive any of its rights under, or permit the acceleration of the
vesting under (other than as contemplated by Section 5.4), any provision of (A)
any of the Company's stock option plans, (B) any Company Option or any agreement
evidencing or relating to any outstanding stock option, (C) any restricted stock
purchase agreement or (D) any other Contract evidencing or relating to any
equity award (whether payable in cash or stock);
(iv) amend or permit the adoption of any amendment to its certificate of
incorporation or bylaws or other charter or organizational documents, or effect
or become a party to any merger, consolidation, share exchange, business
combination, amalgamation, recapitalization, reclassification of shares, stock
split, reverse stock split, division or subdivision of shares, consolidation of
shares or similar transaction;
38
(v) form any Subsidiary or acquire any equity interest or other interest in any
other Entity other than the purchase, in the ordinary course of business
consistent with past practices, of marketable securities that would be
classified as short-term investments on the Company's balance sheet;
(vi) make any capital expenditure (except a capital expenditure that: (A) is in
the ordinary course of business and consistent with past practices; (B) does not
exceed $30,000 individually; and (C) when added to all other capital
expenditures made on behalf of the Acquired Corporations since the date of this
Agreement, does not exceed $100,000 in the aggregate);
(vii) enter into or become bound by, or permit any of the assets owned or used
by it to become bound by, any Material Contract, or amend or terminate, or waive
or exercise any material right or remedy under, any Material Contract (other
than a Material Contract described in Part 4.2(b)(vii) of the Disclosure
Schedule)(1);
(viii) enter into, amend or waive any right under any Indemnification Contract;
(ix) acquire, lease or license any right or other asset from any other Person or
sell or otherwise dispose of, or lease or license, any right or other asset to
any other Person (except in each case for assets (that are not material
individually or in the aggregate) acquired, leased, licensed or disposed of by
the Company in the ordinary course of business and consistent with past
practices), or waive or relinquish any material right;
(x) other than in the ordinary course of business consistent with past
practices, write off as uncollectible, or establish any extraordinary reserve
with respect to, any receivable or other indebtedness;
(xi) make any pledge of any of its assets or permit any of its assets to become
subject to any Encumbrances, except for Permitted Encumbrances;
(xii) make a loan to any Person except for advances made to its employees in the
ordinary course of business consistent with past practice (A) pursuant to the
Company's policies in order to defray routine travel expenses or (B) as
commission advances pursuant to the Company's sales commission plans;
(xiii) without limiting the ability of the Acquired Corporations to pay or
accrue in accordance with applicable Legal Requirements its obligations for
payroll taxes incurred in the ordinary course of business and in accordance with
------------------------------------------------------------------------------
(1) 4.2(b)(vii) may include an increase in the Company's credit line to
$4,000,000 on the same terms as the current credit line.
39
past practices, incur or guarantee any indebtedness in an amount in excess of
$3,500,000 in the aggregate (including amounts incurred or guaranteed as of the
date of this Agreement), except that if the Acquired Corporations have
reasonably incurred or guaranteed indebtedness in an amount in excess of
$3,250,000, Parent shall not unreasonably withhold, delay or condition its
consent to the Company incurring indebtedness in excess of $3,500,000 but in no
event to exceed $4,000,000;
(xiv) establish, adopt, enter into or amend (except as may be required by
applicable Legal Requirements) any Company Benefit Plan or Company Benefit
Agreement, pay any bonus or make any profit-sharing or similar payment to, or
increase the amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers or other
employees (except that the Company: (A) may grant routine, reasonable salary
increases to non-officer employees in the ordinary course of business and in
accordance with past practices in connection with the Company's customary
employee review process; and (B) may make customary bonus payments and profit
sharing payments consistent with past practices and in accordance with existing
bonus and profit sharing plans referred to in Part 2.17(a) of the Disclosure
Schedule);
(xv) hire any employee with an annual base salary greater than $100,000, hire
any employee with an annual base salary greater than that paid to comparably
situated (considering, among other things, title, experience and geographic
location of employment) employees of the Company as of the date of this
Agreement, hire any employee such that the total number of the Company's
employees exceeds 210, promote any employee except in order to fill a position
vacated after the date of this Agreement, or, except in the ordinary course of
business, terminate the employment of any employee listed on Schedule 6.6 or any
employee with an annual base salary greater than $50,000;
(xvi) except in the ordinary course of business consistent with past practices
or as required by applicable Legal Requirements (A) change any of its pricing
policies, product return policies, product maintenance polices, service
policies, product modification or upgrade policies, personnel policies or other
business policies or (B) change any of its methods of accounting or accounting
practices in any respect (other than as required by the rules and regulations of
the SEC or by U.S. GAAP);
(xvii) make any material Tax election;
(xviii) commence or settle any Legal Proceeding, other than routine collection
proceedings commenced in the ordinary course of business consistent with past
practices and involving less than $200,000 in the aggregate;
(xix) purchase or renew any liability insurance of any nature;
(xx) enter into any material transaction or take any other material action
outside the ordinary course of business or inconsistent with past practices;
(xxi) agree or commit to take any of the actions described in clauses "(i)"
through "(xx)" of this Section 4.2(b).
40
(c) During the Pre-Closing Period, the Company shall promptly notify Parent in
writing of: (i) the discovery by the Company of any event, condition, fact or
other circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by the Company in this Agreement to the extent
that one or more of the conditions set forth in Section 6.1 would be reasonably
likely not to be satisfied as a result of such inaccuracy or the circumstances
giving rise to such inaccuracy (considered together with any other inaccuracies
in any representations or warranties made by the Company in this Agreement and
the circumstances giving rise thereto); (ii) the Company obtaining Knowledge of
any event, condition, fact or other circumstance that occurs, arises or exists
after the date of this Agreement and that would cause or constitute a material
inaccuracy in any representation or warranty made by the Company in this
Agreement, to the extent that one or more of the conditions set forth in Section
6.1 would be reasonably likely not to be satisfied as a result of such
inaccuracy or the circumstances giving rise to such inaccuracy (considered
together with any other inaccuracies in any representations or warranties made
by the Company in this Agreement and the circumstances giving rise thereto), if:
(A) such representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or other
circumstance; or (B) such event, condition, fact or other circumstance had
occurred, arisen or existed on or prior to the date of this Agreement; (iii) the
Company obtaining Knowledge of any material breach of any covenant or obligation
of the Company; and (iv) any event, condition, fact or other circumstance that
(considered together with any other circumstances) would reasonably be expected
to make the timely satisfaction of any of the conditions set forth in Section 6
or Section 7 impossible or unlikely or that (considered together with any other
circumstances) has had or would reasonably be expected to have a Company
Material Adverse Effect. No notification given to Parent pursuant to this
Section 4.2(c) shall limit or otherwise affect any of the representations,
warranties, covenants or obligations of the Company contained in this Agreement.
(d) The Company shall (to the extent directed by Parent in writing) timely
exercise in full any right or option it may have to repurchase shares of its
capital stock which is or becomes exercisable during the Pre-Closing Period, if
the applicable repurchase price is less than the Per Share Merger Price. The
Company shall use reasonable efforts to notify Parent in writing at least ten
days in advance of any such repurchase right or option becoming exercisable.
4.3 No Solicitation.
(a) The Company (1) shall not directly or indirectly take or permit to be taken
any action referred to in clause "(i)", "(ii)", "(iii)", "(iv)", "(v)" or "(vi)"
of this sentence, (2) shall ensure that no officer, director, financial advisor,
legal advisor or accounting advisor of or to any of the Acquired Corporations
directly or indirectly takes or permits to be taken any action referred to in
clause "(i)", "(ii)", "(iii)", "(iv)", "(v)" or "(vi)" of this sentence and (3)
shall use reasonable efforts to ensure that no Representative of any of the
Acquired Corporations directly or indirectly takes any action referred to in
clause "(i)", "(ii)", "(iii)", "(iv)", "(v)" or "(vi)" of this sentence:
41
(i) solicit, initiate, encourage, knowingly induce or knowingly facilitate the
communication, making, submission or announcement of any Acquisition Proposal or
Acquisition Inquiry;
(ii) furnish any nonpublic information regarding any of the Acquired
Corporations in connection with or in response to an Acquisition Proposal or
Acquisition Inquiry;
(iii) engage in discussions or negotiations with any Person that shall have
made, submitted or announced (or on whose behalf there shall have been made,
submitted or announced) an Acquisition Proposal or Acquisition Inquiry, or with
any of such Person's Representatives, with respect to any such Acquisition
Proposal or Acquisition Inquiry;
(iv) release any Person from, or waive any provision of or right under, any
confidentiality, non-solicitation, no hire, "standstill" or similar agreement to
which any of the Acquired Corporations is a party or under which any of the
Acquired Corporations has any rights;
(v) approve, endorse or recommend any Acquisition Proposal; or
(vi) execute or enter into any letter of intent or similar document or any
Contract contemplating or otherwise relating to any Acquisition Transaction
(other than confidentiality agreements contemplated by this Section 4.3 and
except as expressly permitted by Section 8.1(h));
provided, however, that, notwithstanding anything contained in this Section
4.3(a), prior to the adoption of this Agreement by the Required Stockholder Vote
(as defined in Section 2.24 above), the Company may take any of the actions
referred to in clauses (ii) and (iii) of this sentence in response to an
Acquisition Proposal that has been made by such Person (and not withdrawn) if:
(A) the Company Board of Directors (the "Company Board") determines in good
faith, after having consulted with the Company's outside legal counsel and the
Financial Advisor, that such Acquisition Proposal constitutes a Superior Offer
or is likely to lead to the submission to the Company of a Superior Offer by
such Person; (B) such Acquisition Proposal shall not have arisen directly or
indirectly from any breach of any of the provisions of this Section 4.3 and
neither the Company nor any Representative of any of the Acquired Corporations
shall have otherwise breached any of the provisions set forth in this Section
4.3 in connection with such Acquisition Proposal; (C) the Company Board
determines in good faith, after having consulted with the Company's outside
legal counsel, that such action is required in order for the Company Board to
comply with its fiduciary obligations to the Company's stockholders under
applicable Legal Requirements; (D) at least one business day prior to the
earlier of the furnishing of any such nonpublic information to, or the entering
into discussions or negotiations with, such Person, the Company gives Parent
written notice of the identity of such Person and of the Company's intention to
furnish nonpublic information to, or enter into discussions or negotiations
with, such Person, as the case may be; (E) the Company receives from such Person
an executed confidentiality agreement containing provisions at least as
favorable to the Company as those contained in the Confidentiality Agreement;
and (F) prior to furnishing any such nonpublic information to such Person, the
Company furnishes such nonpublic information to Parent. Without limiting the
42
generality of the foregoing, the Company acknowledges and agrees that, in the
event any officer, director, financial advisor, legal advisor or accounting
advisor of or to any of the Acquired Corporations (whether or not such Person is
purporting to act on behalf of any of the Acquired Corporations) takes any
action that, if taken by the Company, would constitute a breach of this Section
4.3 by the Company, the taking of such action by such Person shall be deemed to
constitute a breach of this Section 4.3 by the Company for purposes of this
Agreement.
(b) Nothing contained in this Agreement shall prevent the Company Board from
complying with Rule 14d-9 or Rule 14e-2 under the Exchange Act with regard to an
Acquisition Proposal (except that the Board shall not be permitted to withdraw
the Company Board Recommendation or modify the Company Board Recommendation in a
manner adverse to Parent except as specifically provided in Section 5.2(c)).
(c) If the Company obtains Knowledge of an Acquisition Proposal or Acquisition
Inquiry at any time during the Pre-Closing Period, then the Company shall
promptly (and in no event later than one business day after obtaining such
Knowledge) notify Parent of such Acquisition Proposal or Acquisition Inquiry
(including the identity of the Person making or submitting such Acquisition
Proposal or Acquisition Inquiry, and the terms thereof). The Company shall keep
Parent informed with respect to the status and terms of any such Acquisition
Proposal or Acquisition Inquiry and any modification or proposed modification
thereto.
(d) The Company shall immediately cease and cause to be terminated any existing
discussions with any Person that relate to any Acquisition Proposal or
Acquisition Inquiry.
(e) To the extent reasonably requested by Parent, the Company shall enforce or
cause to be enforced each confidentiality, non-solicitation, no hire,
"standstill" or similar agreement to which any of the Acquired Corporations is a
party or under which any of the Acquired Corporations has any rights. The
Company shall, promptly following Parent's instruction that the Company do so,
instruct each Person that has executed a confidentiality or similar agreement in
connection with its consideration of a possible Acquisition Transaction or
equity investment to destroy (and certify as to the destruction of) or return to
the Acquired Corporations all confidential information heretofore furnished to
such Person by or on behalf of any of the Acquired Corporations; provided,
however, that notwithstanding anything to the contrary contained in this
Agreement, prior to the adoption of this Agreement by the Required Stockholder
Vote, the Company shall not be required to comply with this Section 4.3(e) if
(1) the Company Board makes a determination in good faith after having consulted
with the Company's outside legal counsel and the Financial Advisor that such
action is required in order for the Company Board to comply with its fiduciary
obligations to the Company's stockholders under applicable Legal Requirements
and (2) the Company notifies Parent of such determination within 24 hours after
the making of such determination.
4.4 Amendment of Contracts. The Company shall use its best efforts to amend such
distribution agreements identified by Parent, on terms reasonably requested by
Parent, on or prior to the Closing.
43
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 Proxy Statement.
(a) As promptly as practicable after the date of this Agreement, the Company
shall prepare, and Parent shall provide reasonable cooperation to the Company in
the preparation of, a proxy statement to be sent to the Company's stockholders
in connection with the Company Stockholders' Meeting (the "Proxy Statement").
The Company shall: (i) cause the Proxy Statement to comply with the rules and
regulations promulgated by the SEC; (ii) provide Parent with a reasonable
opportunity to review and comment on drafts of the Proxy Statement; (iii)
promptly cause the Proxy Statement to be filed with the SEC; (iv) promptly
provide Parent with copies of all correspondence between the Company or any of
its Representatives, on the one hand, and the SEC or its staff, on the other
hand; (v) promptly notify Parent upon the receipt of any comments or requests
from the SEC or its staff with respect to the Proxy Statement; (vi) provide
Parent with a reasonable opportunity to review and comment on any subsequent
drafts of the Proxy Statement and any related correspondence and filings, and
include in the Proxy Statement and in any such correspondence and filings all
changes reasonably proposed by Parent; (vii) promptly respond to any comments or
requests of the SEC or its staff; and (viii) cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as practicable following the
date of this Agreement. To the extent practicable, the Company and its outside
counsel shall permit Parent and its outside counsel to participate in all
communications with the SEC and its staff (including all meetings and telephone
conferences) relating to the Proxy Statement, this Agreement or any of the
Contemplated Transactions.
(b) If any event relating to any of the Acquired Corporations occurs, or if the
Company becomes aware of any information, that should be disclosed in an
amendment or supplement to the Proxy Statement, then the Company shall promptly
inform Parent of such event or information and shall, in accordance with the
procedures set forth in Section 5.1(a), (i) prepare and file with the SEC such
amendment or supplement as soon thereafter as is reasonably practicable, and
(ii) if appropriate, cause such amendment or supplement to be mailed to the
stockholders of the Company. If Parent becomes aware of any information
regarding Parent that is required to be disclosed in an amendment or supplement
to the Proxy Statement, then Parent shall promptly inform the Company of such
information.
(c) The Company shall ensure that (i) none of the information included or
incorporated by reference in the Proxy Statement (other than information
relating to Parent included in the Proxy Statement that was provided in writing
by Parent to the Company specifically for inclusion in the Proxy Statement)
will, at the time the Proxy Statement is mailed to the stockholders of the
Company or at the time of the Company Stockholders' Meeting (or any adjournment
or postponement thereof), 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 the light of the circumstances under
which they are made, not misleading and (ii) the Proxy Statement complies as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations of the SEC thereunder.
(d) Parent shall ensure that none of the information relating to Parent that is
provided in writing by Parent to the Company specifically for inclusion in the
44
Proxy Statement and that is included in the Proxy Statement will, at the time
the Proxy Statement is mailed to the stockholders of the Company or at the time
of the Company Stockholders' Meeting (or any adjournment or postponement
thereof), contain any untrue statement of a material fact or omit to state any
material fact required to be included in such information or necessary in order
to make the statements included in such information, in the light of the
circumstances under which they are made, not misleading.
5.2 Company Stockholders' Meeting.
(a) The Company shall take all action necessary under all applicable Legal
Requirements to call, give notice of and hold a meeting of the holders of
Company Common Stock to vote on the adoption of this Agreement (the "Company
Stockholders' Meeting"). The Company Stockholders' Meeting shall be held (on a
date selected by the Company in consultation with Parent) as promptly as
practicable after the date of this Agreement. The Company shall ensure that all
proxies solicited in connection with the Company Stockholders' Meeting are
solicited in compliance with all applicable Legal Requirements. Parent shall
cause any shares of Company Common Stock owned by Parent to be voted in favor of
the adoption of this Agreement.
(b) Subject to Section 5.2(c): (i) the Proxy Statement shall include a statement
to the effect that the board of directors of the Company (the "Company Board")
unanimously recommends that the Company's stockholders vote to adopt this
Agreement at the Company Stockholders' Meeting (such recommendation that the
Company's stockholders vote to adopt this Agreement being referred to as the
"Company Board Recommendation"); and (ii) the Company Board Recommendation shall
not be withdrawn or modified in a manner adverse to Parent, and no resolution by
the board of directors of the Company or any committee thereof to withdraw or
modify the Company Board Recommendation in a manner adverse to Parent shall be
adopted or proposed. For purposes of this Agreement, the Company Board
Recommendation shall be deemed to have been modified in a manner adverse to
Parent if the recommendation of the Company Board supporting the Company Board
Recommendation shall no longer be unanimous, or if any member of the Company
Board votes in favor of the withdrawal of the Company Board Recommendation. The
Proxy Statement shall include the opinion of the Financial Advisor referred to
in Section 2.27.
(c) Notwithstanding anything to the contrary contained in Section 5.2(b) (but
subject to the other provisions of this Agreement), at any time prior to the
adoption of this Agreement by the Required Stockholder Vote, the Company Board
Recommendation may be withdrawn or modified in a manner adverse to Parent if:
(i) at least three business days prior to any meeting of the Company Board at
which the Company Board will consider and determine whether the Company Board
Recommendation should be withdrawn or modified in a manner adverse to Parent,
the Company delivers to Parent a written notice setting forth the time and date
of such meeting and the specific circumstances giving rise to the meeting and
giving rise to the Company Board's reconsideration of the Company Board
Recommendation, (ii) the Company Board determines in good faith, after having
consulted with the Company's outside legal counsel and the Financial Advisor,
that the withdrawal or modification of the Company Board Recommendation is
required in order for the Company Board to comply with its fiduciary obligations
45
to the Company's stockholders under applicable Legal Requirements, (iii) there
is not pending any Acquisition Proposal that arose or resulted, directly or
indirectly, from any breach of any of the provisions set forth in Section 4.3.
(d) Subject to the right of the Company to terminate this Agreement in
accordance with Section 8.1(h), the Company's obligation to call, give notice of
and hold the Company Stockholders' Meeting in accordance with Section 5.2(a)
shall not be limited or otherwise affected by the commencement, disclosure,
announcement or submission of any Superior Offer or other Acquisition Proposal,
or by any withdrawal or modification of the Company Board Recommendation.
5.3 Regulatory Matters. Each party shall use reasonable efforts to file or
otherwise submit, as soon as practicable after the date of this Agreement, all
notices, reports and other documents required to be filed by such party with or
otherwise submitted by such party to any Governmental Body with respect to the
Merger and the other Contemplated Transactions, and to submit promptly any
additional information requested by any such Governmental Body. Without limiting
the generality of the foregoing, the Company and Parent shall, promptly after
the date of this Agreement, prepare and file any notification or other document
required to be filed in connection with the Merger under any applicable foreign
Legal Requirement relating to antitrust or competition matters.
5.4 Stock Options and ESPP.
(a) Within five business days of the date hereof, the Company shall prepare and
submit to Parent for approval and, after approval by Parent, shall promptly
cause to be mailed to each holder of a Company Option or other "Award" (as
defined in the 2001 Plan), a notice that such holder's Company Option or Award,
as applicable, shall become fully vested and terminate at and as of the
Effective Time.
(b) Prior to the Closing, the Company shall take all actions that may be
necessary to ensure that: (i) the 2001 Plan is terminated effective as of the
Effective Time; (ii) all Company Options and Awards outstanding as of the
Effective Time are cancelled and extinguished at the Effective Time without any
conversion or assumption thereof; and (iii) holders of Company Options and
Awards shall have no rights with respect thereto following the Effective Time.
(c) Prior to the Effective Time, if permitted pursuant to the terms of the ESPP,
the Company shall take all actions that may be necessary to: (i) cause the
exercise (as of the last business day prior to the Closing Date) of each
outstanding purchase right (if any) under the ESPP, and make any pro-rata
adjustments that may be necessary to reflect the shortened offering period but
otherwise cause such shortened offering period to be treated as a fully
effective and completed offering period for all purposes under the ESPP; and
(ii) provide that no further offering period or purchase period shall commence
under the ESPP after the Effective Time; provided, however, that any such
exercise of outstanding purchase rights, and the cessation of further offering
and purchase periods, shall be conditioned upon the consummation of the Merger.
On the last business day prior to the Closing Date, the Company shall apply the
funds credited as of such date under the ESPP (if any) within each participant's
payroll withholding account to the purchase of whole shares of Company Common
Stock in accordance with the terms of the ESPP. Each share of Company Common
Stock purchased under the ESPP as contemplated by the immediately preceding
46
sentence shall be automatically converted into the right to receive the Per
Share Merger Price on the same basis as all other shares of Company Common
Stock, except that each such share shall be automatically converted into the
right to receive the Per Share Merger Price without the issuance of a
certificate representing such share. Immediately prior to and effective as of
the Effective Time (and subject to the consummation of the Merger), the Company
shall terminate the ESPP.
5.5 Employees and Employee Benefits.
(a) Parent agrees that, subject to any necessary transition period and subject
to any applicable plan provisions and Legal Requirements, and except in the case
of a benefit normally covered by an insurance program not being covered by
insurance or in the case that any of the following would result in a duplication
of benefits: (i) all employees of the Acquired Corporations who continue
employment with Parent, the Surviving Corporation or any Subsidiary of the
Surviving Corporation after the Effective Time ("Continuing Employees") shall be
eligible to participate in Parent's health, vacation, 401(k) and severance
plans, to substantially the same extent as similarly situated, newly-hired
employees of Parent; and (ii) for purposes of determining a Continuing
Employee's eligibility to participate in such plans, such Continuing Employee
shall receive credit under such plans for his or her years of service with the
Acquired Corporations prior to the Effective Time. Nothing in this Section
5.5(a) or elsewhere in this Agreement shall be construed to create a right in
any employee of any of the Acquired Corporations to employment with Parent, the
Surviving Corporation or any Subsidiary of the Surviving Corporation, and the
employment of each Continuing Employee shall be "at will" employment. Except for
Indemnified Persons (as defined in Section 5.6(a)) to the extent of their
respective rights pursuant to Section 5.6, no Company Associate or Continuing
Employee shall be deemed to be a third party beneficiary of this Agreement.
(b) The Company shall not take or permit to be taken any action to terminate any
employee benefit plan sponsored by any of the Acquired Corporations (or in which
any of the Acquired Corporations participates) that contains a cash or deferred
arrangement intended to qualify under Section 401(k) of the Code; provided,
however, that if so directed in writing by Parent no later than seven days prior
to the Effective Time, the Company shall terminate, effective no later than the
day immediately prior to the Effective Time, any such employee benefit plan.
(c) If the Company obtains knowledge of the possible resignation or other
possible termination of employment of any employee of the Company or any of the
other Acquired Corporations holding the title of director or above, then the
Company shall promptly notify Parent in writing of such possible resignation or
other possible termination of employment.
5.6 Indemnification of Officers and Directors.
(a) All rights to indemnification, advancement of expenses and exculpation by
the Company existing in favor of each individual who is an officer or director
of the Company as of the date of this Agreement (each such individual, an
"Indemnified Person") for his acts and omissions as a director or officer of the
Company occurring at or prior to the Effective Time, as provided in the
Company's certificate of incorporation or bylaws (as in effect as of the date of
this Agreement) or as provided in the Indemnification Contract between the
Company and such Indemnified Person (as in effect as of the date of this
Agreement) in the form disclosed by the Company to Parent prior to the date of
this Agreement, shall survive the Merger and shall continue in full force and
effect (to the fullest extent such rights to indemnification, advancement of
expenses and exculpation are available under and are consistent with Delaware
law and the law of the jurisdiction in which the Indemnified Person is employed
47
by the applicable Acquired Corporation). Parent shall, or shall cause the
Surviving Corporation to, honor and fulfill the obligations of the Surviving
Corporation in respect of such rights to indemnification, advancement of
expenses and exculpation.
(b) From the Effective Time until the sixth anniversary of the Effective Time,
Parent shall, or shall cause the Surviving Corporation to, maintain in effect,
for the benefit of the Indemnified Persons with respect to their acts and
omissions as directors and officers of the Company occurring prior to the
Effective Time, the Existing D&O Policies; provided, however, that (i) Parent or
the Surviving Corporation may substitute for the Existing D&O Policies a policy
or policies containing terms not materially less advantageous to the Indemnified
Persons, and (ii) neither Parent nor the Surviving Corporation shall be required
to pay total annual premiums for the Existing D&O Policies (or for any
substitute policies) that exceed, in the aggregate, an amount equal to 200% of
the annual premiums paid for the Existing D&O Policies for the most recent
policy year prior to the Effective Time (the lesser of such amounts being
referred to as the "Maximum Premium"). In the event the premiums for the
Existing D&O Policies (or any substitute policies) exceed the Maximum Premium in
the aggregate, Parent and the Surviving Corporation shall be entitled to reduce
the amount of coverage of the Existing D&O Policies (or any substitute policies)
to as much coverage as can be obtained for a premium equal to the Maximum
Premium. The provisions of this Section 5.6(b) shall be deemed to have been
satisfied if Parent or the Surviving Corporation obtains prepaid policies that
provide the Indemnified Persons with coverage not materially less advantageous
to them than the Existing D&O Policies for an aggregate period of six years with
respect to their acts and omissions as officers and directors of the Company
occurring prior to the Effective Time.
(c) Parent shall cause the Surviving Corporation to fulfill its obligations
under Sections 5.6(a) and 5.6(b) above. Parent shall not, and shall not permit
the Surviving Corporation to, merge into or consolidate with, or sell all or
substantially all of its assets to, any other Person unless the resulting,
surviving or acquiring (as the case may be) entity or Parent assumes (by
operation of law or otherwise) the obligations imposed by this Section 5.6.
5.7 Additional Agreements.
(a) Subject to Section 5.7(b), Parent and the Company shall use reasonable
efforts to cause to be taken all actions necessary to consummate the Merger and
make effective the other Contemplated Transactions. Without limiting the
generality of the foregoing, but subject to Section 5.7(b), each party to this
Agreement: (i) shall make all filings and other submissions (if any) and give
all notices (if any) required to be made and given by such party in connection
48
with the Merger and the other Contemplated Transactions; (ii) shall use
reasonable efforts to obtain each Consent (if any) required to be obtained
(pursuant to any applicable Legal Requirement or Contract, or otherwise) by such
party in connection with the Merger or any of the other Contemplated
Transactions; and (iii) shall use reasonable efforts to lift any injunction
prohibiting, or any other legal bar to, the Merger or any of the other
Contemplated Transactions. The Company and Parent shall provide each other with
a copy of each proposed filing with or other submission to any Governmental Body
relating to any of the Contemplated Transactions, and shall give each other a
reasonable time prior to making such filing or other submission in which to
review and comment on such proposed filing or other submission. The Company and
Parent shall each promptly deliver to the other a copy of each such filing or
other submission made, each notice given and each Consent obtained during the
Pre-Closing Period.
(b) Notwithstanding anything to the contrary contained in this Agreement, Parent
shall not have any obligation under this Agreement: (i) to dispose of or
transfer or cause any of its Subsidiaries to dispose of or transfer any assets,
or to commit to cause any of the Acquired Corporations to dispose of or transfer
any assets; (ii) to discontinue or cause any of its Subsidiaries to discontinue
offering any product or service, or to commit to cause any of the Acquired
Corporations to discontinue offering any product or service; (iii) to license or
otherwise make available, or cause any of its Subsidiaries to license or
otherwise make available to any Person any technology, software or other
Intellectual Property or Intellectual Property Right, or to commit to cause any
of the Acquired Corporations to license or otherwise make available to any
Person any technology, software or other Intellectual Property or Intellectual
Property Right; (iv) to hold separate or cause any of its Subsidiaries to hold
separate any assets or operations (either before or after the Closing Date), or
to commit to cause any of the Acquired Corporations to hold separate any assets
or operations; or (v) to make or cause any of its Subsidiaries to make any
commitment (to any Governmental Body or otherwise) regarding its future
operations or the future operations of any of the Acquired Corporations.
Notwithstanding anything to the contrary contained in this Agreement, Parent
shall not have any obligation under this Agreement to contest any Legal
Proceeding or any order, writ, injunction, judgment or decree relating to the
Merger or any of the other Contemplated Transactions.
5.8 Disclosure. Without limiting any of the Company's obligations under the
Confidentiality Agreement, the Company shall not, and shall not permit any of
its Subsidiaries or any Representative of any of the Acquired Corporations to,
issue any press release or make any disclosure (including communications to
customers or employees of any of the Acquired Corporations not consistent with
content approved for such purposes by Parent) to the public or otherwise
regarding the Merger or any of the other Contemplated Transactions unless: (a)
Parent shall have approved such press release or disclosure in writing; or (b)
the Company shall have received the advice of its outside legal counsel
confirming that such disclosure is required by applicable Legal Requirements
and, at least 48 hours before such press release or disclosure is issued or
made, the Company advises Parent of, and consults with Parent regarding, the
text of such press release or disclosure.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions to be consummated at the Closing are
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
49
6.1 Accuracy of Representations.
(a) The representations and warranties of the Company contained in this
Agreement shall have been accurate in all respects as of the date of this
Agreement and shall be accurate in all respects as of the Closing Date as if
made on and as of the Closing Date (except for representations and warranties
expressly made only as of a specified date, which need be accurate in all
respects only as of the specified date); provided, however, that: (i) in
determining the accuracy of such representations and warranties for purposes of
this Section 6.1(a), (A) all materiality qualifications that are contained in
such representations and warranties shall be disregarded and (B) any update of
or modification to the Disclosure Schedule made or purported to have been made
on or after the date of this Agreement shall be disregarded; (ii) the condition
set forth in this Section 6.1(a) shall be deemed satisfied unless the
circumstances giving rise to all inaccuracies in such representations and
warranties (considered collectively) constitute a Company Material Adverse
Effect, or would reasonably be expected to have a Company Material Adverse
Effect; and (iii) nothing in this Section 6.1(a) shall be deemed to limit the
right of Parent to rely independently on the separate condition set forth in
Section 6.1(b) in refusing to consummate the Merger or any other transaction.
(b) Each of the representations and warranties of the Company contained in
Sections 2.3(a), 2.3(b), 2.3(c), 2.7(a), 2.22, 2.23, 2.24, 2.26 and 2.27 shall
have been accurate in all material respects as of the date of this Agreement and
shall be accurate in all material respects as of the Closing Date as if made on
and as of the Closing Date (except for representations and warranties expressly
made only as of a specified date, which need be accurate in all material
respects only as of the specified date); provided, however, that: (i) in
determining the accuracy of such representations and warranties for purposes of
this Section 6.1(b), any update of or modification to the Disclosure Schedule
made or purported to have been made on or after the date of this Agreement shall
be disregarded; and (ii) nothing in this Section 6.1(b) shall be deemed to limit
the right of Parent to rely independently on the separate condition set forth in
Section 6.1(a) in refusing to consummate the Merger or any other transaction.
6.2 Performance of Covenants. Each of the covenants and obligations in this
Agreement that the Company is required to comply with or to perform at or prior
to the Closing shall have been complied with and performed by the Company in all
material respects.
6.3 Stockholder Approval. This Agreement shall have been duly adopted and
approved by the Required Stockholder Vote.
6.4 Dissenting Shares. No more than 10% of the shares of Company Common
Stock outstanding as of the Closing Date shall be Dissenting Shares.
6.5 Agreements and Other Documents. Parent shall have received from the
Company, the following agreements and other documents, each of which shall be in
full force and effect:
(a) evidence satisfactory to Parent of the repurchase by the Company of the
shares, if any, of Company Common Stock required to be repurchased by the
Company pursuant to Section 4.2(d);
50
(b) written resignations in forms satisfactory to Parent, dated as of the
Closing Date and effective as of the Closing, executed by the officers and
directors of each of the Acquired Corporations; and
(c) a certificate executed by the Company's Chief Executive Officer and Chief
Financial Officer certifying that the conditions set forth in Sections 6.1, 6.2,
6.3, 6.4, 6.6, 6.7, 6.9, 6.10 and 6.11 have been duly satisfied.
6.6 Employees. None of the individuals on Schedule 6.6 shall be Departing
Employees For purposes of this Section 6.6, an individual shall be deemed to be
a "Departing Employee" if such individual (i) shall have ceased to be employed
by the Company or any Subsidiary of the Company, (ii) shall have expressed an
intention to decline to accept employment with Parent, (iii) shall have
expressed an intention to discontinue (prior to, at or after the Closing) his or
her employment with Parent or any Acquired Corporation or (iv) shall not have
countersigned an offer letter from Parent, or shall have countersigned an offer
letter from Parent but shall have failed to reaffirm his or her acceptance of
such offer letter if requested to do so by Parent (which request may be made by
Parent on not more than one occasion with respect to any particular individual)
..
6.7 No Company Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any Company Material Adverse Effect, and no event shall
have occurred or circumstance shall exist that, in combination with any other
events that shall have occurred since the date of this Agreement, or
circumstances that may exist since the date of this Agreement, would reasonably
be expected to have a Company Material Adverse Effect.
6.8 Regulatory Matters. Any Governmental Authorization required to be obtained
in order to consummate the Merger or any of the other Contemplated Transactions
under any Legal Requirement shall have been obtained and shall remain in full
force and effect, and no such Governmental Authorization or other Consent
obtained by Parent or any of the Acquired Corporations shall impose or contain
any term, limitation, condition or restriction that Parent determines in good
faith to be materially burdensome.
6.9 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger or any of
the other Contemplated Transactions shall have been issued by any court of
competent jurisdiction or other Governmental Body and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger or any of the other Contemplated Transactions that makes consummation of
the Merger or any of the other Contemplated Transactions illegal.
6.10 No Governmental Proceedings Relating to Contemplated Transactions or Right
to Operate Business. There shall not be pending, and there shall not have been
threatened, any Legal Proceeding in which a Governmental Body is or has
threatened to become a party: (a) challenging or seeking to restrain or prohibit
the consummation of the Merger or any of the other Contemplated Transactions;
(b) relating to the Merger or any of the other Contemplated Transactions and
seeking to obtain from Parent or any of the Acquired Corporations any damages or
other relief that may be material to Parent or the Acquired Corporations; (c)
seeking to prohibit or limit in any material respect Parent's ability to vote,
transfer, receive dividends with respect to or otherwise exercise ownership
51
rights with respect to any of the stock of the Surviving Corporation; (d) that
could materially and adversely affect the right or ability of Parent or any of
the Acquired Corporations to own the assets or operate the business of any of
the Acquired Corporations; or (e) seeking to compel any of the Acquired
Corporations, Parent or any Subsidiary of Parent to dispose of or hold separate
any material assets.
6.11 Xxxxxxxx-Xxxxx Certifications. Neither the chief executive officer nor the
chief financial officer of the Company shall have failed to provide, with
respect to any Company SEC Document filed (or required to be filed) with the SEC
on or after the date of this Agreement, any necessary certification in the form
required under Rule 13a-14 under the Exchange Act and 18 U.S.C. ss.1350.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY
The obligation of the Company to effect the Merger and consummate the
transactions to be consummated at the Closing are subject to the satisfaction,
at or prior to the Closing, of the following conditions:
7.1 Accuracy of Representations. The representations and warranties of Parent
and Merger Sub contained in this Agreement shall have been accurate in all
respects as of the date of this Agreement and shall be accurate as of the
Closing Date as if made on and as of the Closing Date (except for
representations and warranties expressly made only as of a specified date, which
need be accurate only as of the specified date); provided, however, that (i) in
determining the accuracy of such representations and warranties for purposes of
this Section 7.1, all materiality qualifications that are contained in such
representations and warranties shall be disregarded and (ii) the condition set
forth in this Section 7.1 shall be deemed satisfied unless the circumstances
giving rise to all inaccuracies in such representations and warranties has a
material adverse effect on the ability of Parent or Merger Sub to consummate the
Merger.
7.2 Performance of Covenants. The covenants and obligations in this Agreement
that Parent and Merger Sub are required to comply with or to perform at or prior
to the Closing shall have been complied with and performed in all respects,
except where the failure to so comply or perform would not reasonably be
expected to have a material adverse effect on the ability of Parent or Merger
Sub to consummate the Merger.
7.3 Stockholder Approval. This Agreement shall have been duly adopted and
approved by the Required Stockholder Vote.
7.4 Certificate. The Company shall have received a certificate executed on
behalf of Parent by an executive officer of Parent confirming that the
conditions set forth in Sections 7.1 and 7.2 have been duly satisfied.
7.5 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger or any of
the other Contemplated Transactions shall have been issued by any court of
52
competent jurisdiction or other Governmental Body and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger or any of the other Contemplated Transactions that makes consummation of
the Merger or any of the other Contemplated Transactions illegal.
SECTION 8. TERMINATION
8.1 Termination. This Agreement may be terminated prior to the Effective Time
(whether before or after the adoption of this Agreement by the Required
Stockholder Vote):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by April 2, 2006 (the "End Date"); provided, however, that a party
shall not be permitted to terminate this Agreement pursuant to this Section
8.1(b) if the failure to consummate the Merger by the End Date is attributable
to a failure on the part of such party to perform any covenant or obligation in
this Agreement that is required to be performed by such party at or prior to the
Effective Time;
(c) by either Parent or the Company if a court of competent jurisdiction or
other Governmental Body shall have issued a final and nonappealable order,
decree or ruling, or shall have taken any other action, having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger;
(d) by either Parent or the Company if: (i) the Company Stockholders' Meeting
(including any adjournments and postponements thereof) shall have been held and
the Company's stockholders shall have taken a vote on a proposal to adopt this
Agreement; and (ii) this Agreement shall not have been adopted and approved at
the Company Stockholders' Meeting (or shall not have been adopted and approved
at any adjournment or postponement thereof, as the case may be) by the Required
Stockholder Vote; provided, however, that: (A) a party shall not be permitted to
terminate this Agreement pursuant to this Section 8.1(d) if the failure to have
this Agreement adopted and approved by the Required Stockholder Vote is
attributable to a failure on the part of such party to perform any covenant or
obligation in this Agreement that is required to be performed by such party at
or prior to the Effective Time; and (B) the Company shall not be permitted to
terminate this Agreement pursuant to this Section 8.1(d) unless the Company
shall have made any payment required to be made to Parent pursuant to Section
8.3(a) or shall have paid to Parent any fee required to be paid to Parent
pursuant to Section 8.3(c);
(e) by Parent if a Triggering Event shall have occurred;
(f) by Parent if: (i) any of the Company's representations and warranties
contained in this Agreement shall be inaccurate as of the date of this
Agreement, or shall have become inaccurate as of a date subsequent to the date
of this Agreement (as if made on and as of such subsequent date), such that the
condition set forth in Section 6.1(a) or Section 6.1(b) would not be satisfied
(it being understood that (A) in determining the accuracy of such
representations and warranties as of the date of this Agreement or as of any
subsequent date for purposes of this Section 8.1(f), any update of or
modification to the Disclosure Schedule made or purported to have been made on
or after the date of this Agreement shall be disregarded and (B) in determining
the accuracy of such representations and warranties as of the date of this
53
Agreement or any subsequent date for purposes of determining whether the
condition set forth in Section 6.1(a) would be satisfied, all materiality
qualifications that are contained in such representations and warranties shall
be disregarded); or (ii) any of the Company's covenants or obligations contained
in this Agreement shall have been breached such that the condition set forth in
Section 6.2(a) would not be satisfied; provided, however, that if an inaccuracy
in any of the Company's representations and warranties or a breach of a covenant
or obligation by the Company is curable by the Company within 20 days after the
date on which the Company receives notice of such inaccuracy or breach and the
Company is continuing to exercise reasonable efforts to cure such inaccuracy or
breach, then Parent may not terminate this Agreement under this Section 8.1(f)
on account of such inaccuracy or breach: (1) during the 20-day period commencing
on the date on which the Company receives notice of such inaccuracy or breach;
or (2) after such 20-day period if such inaccuracy or breach shall have been
cured during such 20-day period in a manner that does not result in a breach of
any covenant or obligation of the Company;
(g) by the Company if: (i) any of Parent's or Merger Sub's representations and
warranties contained in this Agreement shall be inaccurate as of the date of
this Agreement, or shall have become inaccurate as of a date subsequent to the
date of this Agreement (as if made on and as of such subsequent date), such that
the condition set forth in Section 7.1 would not be satisfied (it being
understood that, in determining the accuracy of such representations and
warranties as of the date of this Agreement or as of any subsequent date for
purposes of this Section 8.1(g), all materiality qualifications that are
contained in such representations and warranties shall be disregarded); or (ii)
any of Parent's covenants or obligations contained in this Agreement shall have
been breached such that the condition set forth in Section 7.2 would not be
satisfied; provided, however, that if an inaccuracy in any of Parent's
representations and warranties or a breach of a covenant or obligation by Parent
is curable by Parent within 20 days after the date of the on which Parent
receives notice of such inaccuracy or breach and Parent is continuing to
exercise reasonable efforts to cure such inaccuracy or breach, then the Company
may not terminate this Agreement under this Section 8.1(g) on account of such
inaccuracy or breach: (1) during the 20-day period commencing on the date on
which Parent receives notice of such inaccuracy or breach; or (2) after such
20-day period if such inaccuracy or breach shall have been fully cured during
such 20-day period in a manner that does not result in a breach of any covenant
or obligation of Parent; or
(h) by the Company (at any time prior to the adoption of this Agreement by the
Required Stockholder Vote), in order to accept a Superior Offer and enter into
the Specified Definitive Acquisition Agreement (as defined below) relating to
such Superior Offer, if (i) such Superior Offer shall not have arisen directly
or indirectly from any breach of any of the provisions of Section 4.3 and none
of the Acquired Corporations, and no Representative of any of the Acquired
Corporations, shall have breached any of the provisions set forth in Section 4.3
in connection with such Superior Offer, (ii) the Company Board, after satisfying
all of the requirements set forth in Section 5.2(c) in connection with such
Superior Offer, shall have authorized the Company to enter into a binding,
written, definitive acquisition agreement providing for the consummation of the
transaction contemplated by such Superior Offer (the "Specified Definitive
54
Acquisition Agreement"), (iii) the Company shall have delivered to Parent a
written notice (that includes a copy of the Specified Definitive Acquisition
Agreement as an attachment) containing the Company's representation and warranty
that (A) the Specified Definitive Acquisition Agreement has been duly executed
and delivered to the Company by the other party thereto and the offer thereby
made by such other party cannot be withdrawn by such other party at any time
during the period of five business days commencing on the date of Parent's
receipt of such notice, (B) the Company Board has authorized the execution and
delivery of the Specified Definitive Acquisition Agreement on behalf of the
Company and the termination of this Agreement pursuant to this Section 8.1(h)
and (C) the Company intends to enter into the Specified Definitive Acquisition
Agreement contemporaneously with the termination of this Agreement pursuant to
this Section 8.1(h), (iv) a period of at least five business days shall have
elapsed since the receipt by Parent of such notice, and the Company shall have
made its Representatives available during such period for the purpose of
engaging in negotiations with Parent regarding a possible amendment to this
Agreement or a possible alternative transaction, (v) the Company shall have
immediately advised Parent of any modification proposed to be made to the
Specified Definitive Acquisition Agreement by the other party thereto (which
shall result in a recommencement of the five business day period set forth in
clause "(iv)" above), (vi) any written proposal by Parent to amend this
Agreement or enter into an alternative transaction shall have been considered by
the Company Board in good faith, and the Company Board shall have determined in
good faith (after having consulted with the Financial Advisor) that the terms of
the proposed amended agreement of merger (or other alternative transaction) are
not as favorable to the Company's stockholders, from a financial point of view,
as the terms of the transaction contemplated by the Specified Definitive
Acquisition Agreement, as it may have been modified to make such terms more
favorable to the Company, (vii) the Company shall have paid to Parent the fee
required to be paid to Parent pursuant to Section 8.3(d), and (viii) on the date
five business days after Parent receives the written notice referred to in
clause "(iii)" of this Section 8.1(h), the Company shall have executed and
delivered to the other party thereto the Specified Definitive Acquisition
Agreement (as it may have been modified to make it more favorable to the
Company), and the Specified Definitive Acquisition Agreement (as it may have
been so modified) shall have thereupon become fully binding and effective (it
being understood that if the Company validly terminates this Agreement pursuant
to this Section 8.1(h) by satisfying all of the conditions set forth in clauses
"(i)" through "(viii)" of this Section 8.1(h), then the termination of this
Agreement shall be deemed to occur contemporaneously with the execution and
delivery of the Specified Acquisition Agreement by the Company).
Notwithstanding anything to the contrary contained in this Agreement, the
Company may not terminate this Agreement pursuant to any subsection of this
Section 8.1 unless the Company Board shall have adopted a resolution
specifically recommending the termination of this Agreement pursuant to such
subsection.
8.2 Effect of Termination. In the event of the termination of this Agreement as
provided in Section 8.1, this Agreement shall be of no further force or effect;
provided, however, that (i) this Section 8.2, Section 8.3 and Section 9 (and the
Confidentiality Agreement) shall survive the termination of this Agreement and
shall remain in full force and effect, and (ii) the termination of this
Agreement shall not relieve any party from any liability for any inaccuracy in
or breach of any representation, warranty, covenant, obligation or other
provision contained in this Agreement.
55
8.3 Expenses; Termination Fee.
(a) Except as set forth in this Section 8.3, all fees and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees and expenses, whether
or not the Merger is consummated; provided, however, that if this Agreement is
terminated by Parent or the Company pursuant to Section 8.1(d), then the Company
shall make a nonrefundable cash payment to Parent, at the time specified in the
next sentence, in an amount equal to the lesser of (i) $150,000 or (ii) the
aggregate amount of all fees and expenses (including all attorneys' fees,
accountants' fees and filing fees) that have been paid or that may become
payable by or on behalf of Parent in connection with the preparation and
negotiation of this Agreement and otherwise in connection with the Merger and
the other Contemplated Transactions. In the case of termination of this
Agreement by the Company, any nonrefundable payment required to be made pursuant
to the proviso to the preceding sentence shall be made by the Company prior to
the time of such termination, and in the case of termination of this Agreement
by Parent, any nonrefundable payment required to be made pursuant to the proviso
to the preceding sentence shall be made by the Company within two business days
after such termination.
(b) If: (i) this Agreement is terminated by Parent or the Company pursuant to
Section 8.1(b); (ii) at or prior to the time of the termination of this
Agreement either (A) the Company Stockholders' Meeting shall not have been held
and completed or (B) an Acquisition Proposal shall have been commenced,
submitted or made; and (iii) on or prior to the day 180 days following the date
of the termination of this Agreement, an Acquisition Transaction is consummated
or a definitive agreement contemplating an Acquisition Transaction is executed,
then the Company shall pay to Parent, in cash at the time such Acquisition
Transaction is consummated, a nonrefundable fee in the amount of $500,000 (the
"Termination Fee").
(c) If this Agreement is terminated by Parent or the Company pursuant to Section
8.1(d) and at or prior to the time of the termination of this Agreement (i) the
commencement, submission or making of an Acquisition Proposal shall have been
publicly disclosed or announced, (ii) such Acquisition Proposal shall not have
been publicly withdrawn as of the date five business days prior to the date of
the Company Stockholders' Meeting (as it may have been adjourned or postponed)
and (iii) on or prior to the day 180 days following the date of the termination
of this Agreement, an Acquisition Transaction is consummated or a definitive
agreement contemplating an Acquisition Transaction is executed; then the Company
shall pay to Parent, in cash at the earlier of the time the Acquisition
Transaction is consummated or a definitive agreement contemplating an
Acquisition Transaction is executed, the Termination Fee, provided, however,
that if Parent shall have previously received a nonrefundable payment from the
Company pursuant to Section 8.3(a), then the amount of the Termination Fee
payable pursuant to this sentence shall be reduced by the amount of such
nonrefundable payment.
(d) If this Agreement is terminated by Parent pursuant to Section 8.1(e) or by
the Company pursuant to Section 8.1(h), then the Company shall pay to Parent, in
cash at the time specified in the next sentence, the Termination Fee. In the
case of termination of this Agreement by Parent pursuant to Section 8.1(e), the
fee referred to in the preceding sentence shall be paid by the Company within
two business days after such termination, and in the case of termination of this
56
Agreement by the Company pursuant to Section 8.1(h), the fee referred to in the
preceding sentence shall be paid by the Company at or prior to the time of such
termination.
(e) If the Company fails to pay when due any amount payable under this Section
8.3, then (i) the Company shall reimburse Parent for all reasonable costs and
expenses (including reasonable fees and disbursements of counsel) incurred in
connection with the collection of such overdue amount and the enforcement by
Parent of its rights under this Section 8.3, and (ii) the Company shall pay to
Parent interest on such overdue amount (for the period commencing as of the date
such overdue amount was originally required to be paid and ending on the date
such overdue amount is actually paid to Parent in full) at an annual rate two
percentage points above the "prime rate" (as announced by Bank of America or any
successor thereto) in effect on the date such overdue amount was originally
required to be paid.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 Amendment. This Agreement may be amended with the approval of the respective
boards of directors of the Company and Parent at any time (whether before or
after the Required Stockholder Vote has been obtained); provided, however, that
after the Required Stockholder Vote has been obtained, no amendment shall be
made which by law requires further approval of the stockholders of the Company
without the further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
9.2 Waiver.
(a) No failure on the part of any party to exercise any power, right, privilege
or remedy under this Agreement, and no delay on the part of any party in
exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No party shall be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement, unless
the waiver of such claim, power, right, privilege or remedy is expressly set
forth in a written instrument duly executed and delivered on behalf of such
party; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
9.3 No Survival of Representations and Warranties. None of the
representations and warranties contained in this Agreement shall survive the
Merger.
9.4 Entire Agreement; Counterparts. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among or between any of the parties with respect to the subject matter
hereof and thereof; provided, however, that the Confidentiality Agreement shall
not be superseded by this Agreement and shall remain in full force and effect.
This Agreement may be executed in several counterparts, each of which shall be
deemed an original and all of which shall constitute one and the same
instrument.
57
9.5 Applicable Law; Jurisdiction. 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. In any action or suit between any of the parties arising out of or
relating to this Agreement or any of the transactions contemplated by this
Agreement each of the parties irrevocably and unconditionally consents and
submits to the exclusive jurisdiction and venue of the Court of Chancery (or to
the extent such court does not have subject matter jurisdiction, other state
courts) located in the State of Delaware.
9.6 Disclosure Schedule. The Disclosure Schedule shall be arranged in separate
parts corresponding to the numbered and lettered sections contained in Section
2. The information disclosed in any numbered or lettered part of the Disclosure
Schedule shall be deemed to relate to and to qualify only the particular
representation or warranty set forth in the corresponding numbered or lettered
section in Section 2, and shall not be deemed to relate to or to qualify any
other representation or warranty; provided, however, that if it is readily
apparent, upon a reading of such information without any independent knowledge
on the part of the reader regarding such information, that such information
qualifies, and constitutes an exception to, another representation and warranty
contained in Section 2, then such information shall also be deemed to qualify
such other representation and warranty. For purposes of this Agreement, each
statement or other item of information set forth in the Disclosure Schedule or
in any update to the Disclosure Schedule shall be deemed to be a representation
and warranty made by the Company in Section 2.
9.7 Attorneys' Fees. In any action at law or suit in equity to enforce this
Agreement or the rights of any of the parties under this Agreement, the
prevailing party in such action or suit shall be entitled to receive a
reasonable sum for its attorneys' fees and all other reasonable costs and
expenses incurred in such action or suit.
9.8 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective successors and assigns; provided, however, that neither this
Agreement nor any rights under this Agreement may be assigned by any party
without the prior written consent of the other parties, and any attempted
assignment of this Agreement or any of such rights by a party without such
consent shall be void and of no effect. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any employee or creditor of any
Acquired Corporation, or any other Person (other than (i) the parties hereto and
(ii) the Indemnified Persons (and their respective heirs and personal
representatives) to the extent of such Indemnified Persons' respective rights
pursuant to Section 5.6) any right, benefit or remedy of any nature.
9.9 Notices. All notices, requests, instructions or other documents or
communications to be given or delivered under this Agreement shall be in writing
and shall be deemed given or delivered (i) when sent if sent by facsimile
(provided that the fax is promptly confirmed by telephone confirmation thereof),
(ii) when delivered, if delivered personally to the intended recipient and (iii)
one business day following sending by overnight delivery via a national courier
service, and in each case, addressed to a party at the following address or
facsimile telephone number for such party (or to such other address or facsimile
telephone number as such party shall have specified in a written notice given to
the other parties hereto):
58
if to Parent or Merger Sub:
Synopsys, Inc.
000 Xxxx Xxxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
if to the Company:
HPL Technologies, Inc.
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx LLP
0000 Xx Xxxxx Xxxxxxx Xxxxx, 0xx Xxxxx
Xxx Xxxxx, XX 00000-0000
Attention: Xxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
9.10 Cooperation. The Company agrees to cooperate fully with Parent and to
execute and deliver such further documents, certificates, agreements and
instruments and to take such other actions as may be reasonably requested by
Parent to evidence or reflect the Contemplated Transactions.
9.11 Non-Exclusivity. The respective rights and remedies of the Company and
Parent under this Agreement are not exclusive of or limited by any other rights
or remedies that they may have, whether at law, in equity, by contract or
otherwise, all of which shall be cumulative (and not alternative). Without
limiting the generality of the foregoing, the respective rights, remedies,
obligations and liabilities of the Company and Parent under this Agreement are
in addition to their respective rights, remedies, obligations and liabilities
under all applicable Legal Requirements.
9.12 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
59
or enforceability of the remaining terms and provisions of this Agreement or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If a final judgment of a court of
competent jurisdiction declares that any term or provision of this Agreement is
invalid or unenforceable, the parties hereto agree that the court making such
determination shall have the power to limit such term or provision, to delete
specific words or phrases or to replace such term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be valid and enforceable as so modified. In the event such court does not
exercise the power granted to it in the prior sentence, the parties hereto agree
to replace such invalid or unenforceable term or provision with a valid and
enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term or
provision.
9.13 Construction.
(a) For purposes of this Agreement, whenever the context requires: the singular
number shall include the plural, and vice versa; the masculine gender shall
include the feminine and neuter genders; the feminine gender shall include the
masculine and neuter genders; and the neuter gender shall include masculine and
feminine genders.
(b) The parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement to
"Sections," "Exhibits" and "Schedules" are intended to refer to Sections of this
Agreement and Exhibits and Schedules to this Agreement.
(e) The bold-faced headings contained in this Agreement are for convenience of
reference only, shall not be deemed to be a part of this Agreement and shall not
be referred to in connection with the construction or interpretation of this
Agreement.
60
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
SYNOPSYS, INC.
By: /s/ Xxx X. Xxxxxxx
-------------------------------------------------
Print Name: Xxx X. Xxxxxxx
Print Title: Sr. Vice President, General Counsel and
Acting Chief Financial Officer
SNAP ACQUISITION, INC.
By: /s/ Xxx X. Xxxxxxx
------------------------------------------------
Print Name: Xxx X. Xxxxxxx
Print Title: President and CEO
HPL TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxxxxxxxx
------------------------------------------------
Print Name: Xxxx Xxxxxxxxxx
Print Title: Chief Executive Officer and President
61
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquired Corporations. "Acquired Corporations" shall mean the Company
and its Subsidiaries and the respective predecessors of the Company and its
Subsidiaries (including any Entity that shall have merged into the Company or
any Subsidiary of the Company).
Acquisition Inquiry. "Acquisition Inquiry" shall mean an inquiry,
indication of interest or request for information (other than an inquiry,
indication of interest or request for information made or submitted by Parent)
that would reasonably be expected to lead to an Acquisition Proposal.
Acquisition Proposal. "Acquisition Proposal" shall mean any offer,
proposal or indication of interest (other than an offer, proposal or indication
of interest made or submitted by Parent) contemplating or otherwise relating to
any Acquisition Transaction (it being understood that for the sole purpose of
Section 8.3(b) of the Agreement, the references to "15%" in the definition of
"Acquisition Transaction" shall be deemed instead to refer to "40%").
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction or series of transactions (other than the Merger and the
Contemplated Transactions) involving:
(a) any merger, consolidation, amalgamation, share exchange,
business combination, issuance of securities, acquisition of
securities, recapitalization, tender offer, exchange offer or other
similar transaction: (i) in which a Person or "group" (as defined in
the Exchange Act and the rules promulgated thereunder) of Persons
directly or indirectly acquires beneficial or record ownership of
securities representing more than 15% of the outstanding securities of
any class of voting securities of any of the Acquired Corporations; or
(ii) in which any Acquired Corporation issues securities representing
more than 15% of the outstanding securities of any class of voting
securities of such Acquired Corporation (other than a transaction in
which one or more Acquired Corporations issues securities to another
Entity that is an Acquired Corporation immediately prior to the
issuance of such securities); or
(b) any sale, lease, exchange, transfer, license, acquisition
or disposition of any business or businesses or assets that constitute
or account for (i) 15% or more of the consolidated net revenues of the
Acquired Corporations, consolidated net income of the Acquired
Corporations or consolidated book value of the assets of the Acquired
Corporations or (ii) 15% or more of the fair market value of the assets
of the Acquired Corporations;
provided, however, that, for the sole purpose of Section 8.3(b) and 8.3(c)of the
Agreement, the references to "15%" in this definition of "Acquisition
Transaction" shall be deemed instead to refer to "40%".
1
Agreement. "Agreement" shall mean the Agreement of Merger to which this
Exhibit A is attached, as it may be amended from time to time.
COBRA. "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
Company Affiliate. "Company Affiliate" shall mean any Person under
common control with any of the Acquired Corporations within the meaning of
Sections 414(b), (c), (m) and (o) of the Code, and the regulations issued
thereunder.
Company Associate. "Company Associate" shall mean any current or former
employee, independent contractor, officer or director of any of the Acquired
Corporations or any Company Affiliate.
Company Benefit Agreement. "Company Benefit Agreement" shall mean each
management, employment, severance, consulting, relocation, repatriation or
expatriation agreement or other Contract between any of the Acquired
Corporations or any Company Affiliate and any Company Associate, other than any
such Contract with a Company Associate that is terminable "at will" without any
material obligation on the part of the applicable Acquired Corporation or
Company Affiliate to make any payments or provide any benefits in connection
with such termination, except for any payments of benefits accrued before such
termination.
Company Benefit Plan. "Company Benefit Plan" shall mean each
employment, consulting, salary, bonus, vacation, deferred compensation,
incentive compensation, stock purchase, stock option or other equity-based,
severance, termination, retention, change-in-control, death and disability
benefits, hospitalization, medical, life or other insurance, flexible benefits,
supplemental unemployment benefits, other welfare fringe benefits,
profit-sharing, pension or retirement plan, program, agreement or commitment and
each other employee benefit plan or arrangement, whether funded or unfunded,
including each Foreign Plan and each "employee benefit plan," within the meaning
of Section 3(3) of ERISA, sponsored, maintained, contributed to or required to
be contributed to by any of the Acquired Corporations for the benefit of any
Company Associate or with respect to which any of the Acquired Corporations has
or could incur any liability or obligation.
Company Common Stock. "Company Common Stock" shall mean the Common
Stock, $0.001 par value per share, of the Company.
Company Contract. "Company Contract" shall mean any Contract: (a) to
which any of the Acquired Corporations is a party; (b) by which any of the
Acquired Corporations or any asset of any of the Acquired Corporations is or may
become bound or under which any of the Acquired Corporations has, or may become
subject to, any obligation; or (c) under which any of the Acquired Corporations
has or may acquire any right or interest.
Company IP. "Company IP" shall mean (a) all Intellectual Property
Rights in the Company Software (including the Company Source Code) and (b) all
2
Intellectual Property Rights in which any of the Acquired Corporations has (or
purports to have) an ownership interest or an exclusive license or similar
exclusive right.
Company IP Contract. "Company IP Contract" shall mean any Contract to
which any of the Acquired Corporations is or was a party, or by which any of the
Acquired Corporations is or was bound or to which any Company IP is or was
subject, that contains any assignment or license of, or any covenant not to
assert or enforce, any Intellectual Property Right or that otherwise relates to
any Company IP or any Intellectual Property developed by, with or for any of the
Acquired Corporations.
Company Material Adverse Effect. "Company Material Adverse Effect"
shall mean any effect, change, event or circumstance (or any series or group of
related effects, changes, events and circumstances) that has or would reasonably
be expected to have a material adverse effect on (a) the business, financial
condition, capitalization, net assets (as defined in the next sentence),
operations or financial performance of the Acquired Corporations taken as a
whole, (b) the ability of the Company to consummate the Merger or any of the
other Contemplated Transactions or (c) Parent's ability to vote, transfer,
receive dividends with respect to or otherwise exercise ownership rights with
respect to any of the stock of the Surviving Corporation; provided, however,
that any effects resulting from (i) changes after the date of this Agreement in
the U.S. or global economy or capital markets in general that do not have a
materially disproportionate effect on the Acquired Corporations, (ii) changes
after the date of this Agreement that affect generally the industries in which
the Company participates but that do not have a materially disproportionate
effect on the Acquired Corporations, (iii) changes after the date of this
Agreement in applicable law or in U.S. GAAP, (iv) any decline in customer
orders, or any resignation of any employees (other than the employees listed on
Schedule 6.6), that is attributable to the announcement of the Merger, (v)
changes in the market price or trading volume of the Company Common Stock
(provided that the underlying causes of such changes may qualify as "Company
Material Adverse Effects"), (vi) failure(s) by the Company to meet internal
operating projections or forecasts, or published revenue or earnings predictions
(provided that shortfalls in financial results which result in such missed
projections or forecasts and the underlying causes of such shortfalls may
qualify as "Company Material Adverse Effects"), and (vii) any effects resulting
from any Legal Proceeding against the Company by the stockholders of the Company
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other Contemplated Transactions, shall not constitute a Company
Material Adverse Effect. For purposes of the preceding sentence, "net assets"
means the aggregate fair market value of the assets (including cash, cash
equivalents, short-term investments and Intellectual Property) of the Acquired
Corporations minus the amount of the liabilities (accrued, contingent or
otherwise) of the Acquired Corporations.
Company Software. "Company Software" shall mean any software (including
firmware and other software embedded in hardware devices) owned, developed (or
currently being developed), marketed, distributed, licensed or sold by any of
the Acquired Corporations at any time (other than (a) third-party software
licensed to any of the Acquired Corporations solely for internal use on a
non-exclusive basis and (b) third-party software resold by any Acquired
Corporation without any change or modification by any Acquired Corporation that
is not incorporated into any software owned or developed (or currently being
3
developed) by any Acquired Corporation) and shall include each version of the
software products known as Odyssey, Cell Designer, YIELD Projector, Testchip,
Testchip Advantage, Recipe Management and Editing, YIELDirector and DSSA Sentry.
Company Source Code. "Company Source Code" shall mean the
human-readable source code version of any Company Software, including all
calculation formulae embodied in the Company Software, descriptions or details
of any algorithms embodied in the Company Software and all annotations,
commentary, instructions, specifications (including design, functional and other
technical specifications), programmer notes (technical or otherwise), logic
diagrams, flowcharts, input and output layouts, field descriptions, sort
sequences, data dictionaries and file layouts relating to any Company Software.
Confidentiality Agreement. "Confidentiality Agreement" shall mean the
Nondisclosure Agreement dated April 6, 2005 between the Company and Parent.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contemplated Transactions. "Contemplated Transactions" shall mean the
Merger and the other transactions and actions contemplated by this Agreement.
Contract. "Contract" shall mean any legally binding written, oral or
implied agreement, contract, subcontract, lease, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan or
commitment or undertaking of any nature.
Disclosure Schedule. "Disclosure Schedule" shall mean the disclosure
schedule that has been prepared by the Company in accordance with the
requirements of Section 9.6 of the Agreement and that has been delivered by the
Company to Parent on the date of the Agreement.
DOL. "DOL" shall mean the United States Department of Labor.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
mortgage, security interest, encumbrance, claim, infringement, interference,
option, right of first refusal, preemptive right, community property interest,
restriction or other encumbrance of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any company
limited by shares, limited liability company or joint stock company), firm,
society or other enterprise, association, organization or entity.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
4
Foreign Plan. "Foreign Plan" shall mean (a) any plan, program, policy,
practice, Contract or other arrangement mandated by a Governmental Body outside
the United States to which any of the Acquired Corporations is required to
contribute or under which any of the Acquired Corporations has or may have any
liability, (b) any Company Benefit Plan that is subject to any of the Legal
Requirements of any jurisdiction outside the United States and (c) any Company
Benefit Plan that covers or has covered any Company Associate whose services are
or have been performed primarily outside of the United States.
Governmental Authorization. "Governmental Authorization" shall mean any
permit, license, certificate, franchise, permission, variance, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement.
Governmental Body. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, ministry, fund, foundation, center, organization,
unit, body or Entity and any court or other tribunal).
Intellectual Property. "Intellectual Property" shall mean algorithms,
application programmers' interfaces (APIs), apparatus, databases, data and
results from simulations or tests, design rules, diagrams, formulae, GDSII
files, inventions (whether or not patentable), know-how, logos, marks (including
brand names, product names, logos and slogans), methods, network configurations
and architectures, processes, proprietary information, protocols, schematics,
simulation methods or techniques, specifications, software, software code (in
any form, including source code and executable or object code), software
development tools, subroutines, techniques, test vectors, user interfaces,
uniform resource locators (URLs), web sites, works of authorship and other forms
of technology (whether or not embodied in any tangible form and including all
tangible embodiments of the foregoing, such as instruction manuals, laboratory
notebooks, prototypes, samples, studies and summaries).
Intellectual Property Rights. "Intellectual Property Rights" shall mean
all rights of the following types, which may exist or be created under the laws
of any jurisdiction in the world: (a) rights associated with works of
authorship, including exclusive exploitation rights, copyrights, moral rights
and mask works; (b) Trademark and trade name rights and similar rights; (c)
trade secret rights; (d) Patent and industrial property rights; (e) other
proprietary rights in Intellectual Property; and (f) rights in or relating to
registrations, renewals, extensions, combinations, divisions, and reissues of,
and applications for, any of the rights referred to in clauses "(a)" through
"(e)" above.
IRS. "IRS" shall mean the United States Internal Revenue Service.
Knowledge. "Knowledge" shall mean, when used with respect to the
Company, the actual knowledge of any officer or director of the Company; and,
when used with respect to Parent, the actual knowledge of any officer or
director of Parent.
5
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought or conducted or heard by or
before any court or other Governmental Body or any arbitrator or arbitration
panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body (or under the
authority of the NASDAQ National Market).
Made Available. "Made Available" shall mean that the information
referred to (i) has been actually delivered to Parent or to its outside legal
counsel or presented for review to Parent or legal counsel at the offices of the
Company or (ii) with respect to any information expressly contemplated by this
Agreement to be delivered or actually delivered to Parent or to its outside
legal counsel during the Pre-Closing Period only.
Malicious Code. "Malicious Code" shall mean any "back door," "drop dead
device," "time bomb," "Trojan horse," "virus," or "worm" (as such terms are
commonly understood in the software industry) or any other code designed or
intended to have, or capable of performing, any of the following functions: (i)
disrupting, disabling, harming or otherwise impeding in any manner the operation
of, or providing unauthorized access to, a computer system or network or other
device on which such code is stored or installed; or (ii) damaging or destroying
any data or file without the user's consent. For avoidance of doubt, "bugs" and
other unintentional defects or errors in a software program are not considered
Malicious Code and features of a software program that allow the user thereof to
intentionally interrupt, suspend or cease the operation of the program (e.g.,
the "Esc" key or simultaneously pressing the "Ctrl", "Alt" and "Delete" keys)
are not considered Malicious Code.
Merger Consideration. "Merger Consideration" shall mean the cash
consideration that a holder of shares of Company Common Stock who does not
perfect his, her or its appraisal rights under the DGCL is entitled to receive
in exchange for such shares of Company Common Stock pursuant to Section 1.5.
Parent Common Stock. "Parent Common Stock" shall mean the Common Stock,
$0.01 par value per share, of Parent.
Patents. "Patents" shall mean patents and patent applications in any
jurisdiction in the world.
Person. "Person" shall mean any individual, Entity or Governmental
Body.
Permitted Encumbrance. "Permitted Encumbrance" shall mean (A) statutory
liens for taxes that are not yet due and payable or liens for taxes being
contested in good faith by any appropriate proceedings for which adequate
reserves have been established on the Year-End Balance Sheet; (B) statutory
liens to secure obligations to landlords, lessors or renters under leases or
6
rental agreements that have not been breached; (C) deposits or pledges made in
connection with, or to secure payment of, workers' compensation, unemployment
insurance or similar programs mandated by applicable Legal Requirements; (D)
statutory liens in favor of carriers, warehousemen, mechanics and materialmen,
to secure claims for labor, materials or supplies and other like liens; (E)
liens in favor of customs and revenue authorities arising as a matter of Legal
Requirements to secure payments of customs duties in connection with the
importation of goods; (F) non-exclusive object code licenses of software by the
any Acquired Corporation or any reseller or distributor of any Acquired
Corporation in the ordinary course of its business consistent with past
practice; and (G) Encumbrances set forth in that certain Loan and Security
Agreement dated July 21, 2005 by and between the Company and Silicon Valley
Bank; and (H) Encumbrances that do not materially interfere with the use,
operation or transfer of, or any of the benefits of ownership of, the property
subject thereto.
Registered IP. "Registered IP" shall mean all Intellectual Property
Rights that are registered, filed or issued by, with or under the authority of
any Governmental Body, including all patents, registered copyrights, registered
mask works and registered Trademarks and all applications for any of the
foregoing.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933,
as amended.
Subsidiary. An Entity shall be deemed to be a "Subsidiary" of another
Person if such Person directly or indirectly owns or purports to own,
beneficially or of record, (a) an amount of voting securities of other interests
in such Entity that is sufficient to enable such Person to elect at least a
majority of the members of such Entity's board of directors or other governing
body, or (b) at least 50% of the outstanding equity, beneficial or financial
interests or such Entity.
Superior Offer. "Superior Offer" shall mean an unsolicited, bona fide
written offer made by a third party to purchase at least 75% of the outstanding
shares of Company Common Stock or assets of the Acquired Corporations, taken as
a whole, on terms that the Company Board determines, in its good faith judgment,
after having consulted with the Financial Advisor, to be (a) more favorable to
the Company's stockholders from a financial point of view than the terms of the
Merger and (b) reasonably likely to be consummated if such offer were to be
accepted by the Company; provided, however, that any such offer shall not be
deemed to be a "Superior Offer" if any financing is required to consummate the
transaction contemplated by such offer and either (i) such financing is not
committed or (ii) the Company Board has not determined that such financing is
likely to be obtained by such third party.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, estimated tax,
unemployment tax, national health insurance tax, excise tax, ad valorem tax,
transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
withholding tax or payroll tax), levy, assessment, tariff, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty, addition to tax or interest), imposed, assessed or collected
by or under the authority of any Governmental Body.
7
Tax Return. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
Trademarks. "Trademarks" shall mean trademarks and service marks
(whether registered or unregistered), including applications therefor, in any
jurisdiction in the world.
Triggering Event. A "Triggering Event" shall be deemed to have occurred
if: (i) the Company Board shall have failed to recommend unanimously that the
Company's stockholders vote to adopt the Agreement or the Company Board shall
have withdrawn or modified in a manner adverse to Parent the Company Board
Recommendation; (ii) the Company shall have failed to include in the Proxy
Statement the Company Board Recommendation or a statement to the effect that the
Company has determined and believes that the Merger is advisable and fair to and
in the best interests of the Company's stockholders; (iii) the Company Board
fail to reaffirm publicly the Company Board Recommendation, or fails to reaffirm
its determination that the Merger is advisable and fair to and in the best
interests of the Company's stockholders, in each case within five business days
after Parent requests in writing that such recommendation or determination be
reaffirmed publicly; (iv) the Company Board or any committee thereof shall have
approved, endorsed or recommended any Acquisition Proposal; (v) the Company
shall have executed any letter of intent, memorandum of understanding or similar
document or Contract relating to any Acquisition Proposal other than as
expressly permitted in Section 4.3(a) of the Agreement; (vi) a tender or
exchange offer relating to securities of the Company shall have been commenced
and the Company shall not have sent to its security holders, within ten business
days after the commencement of such tender or exchange offer, a statement
disclosing that the Company recommends rejection of such tender or exchange
offer; or (vii) an Acquisition Proposal has arisen directly or indirectly from
any breach of any of the provisions of Section 4.3, or any of the Acquired
Corporations or any Representative of any of the Acquired Corporations shall
have otherwise materially and willfully breached any of the provisions set forth
in Section 4.3 in connection with an Acquisition Proposal.
8
TABLE OF CONTENTS
PAGE
SECTION 1. DESCRIPTION OF TRANSACTION.................................................................1
1.1 Merger of Merger Sub into the Company..........................................................1
1.2 Effects of the Merger..........................................................................1
1.3 Closing; Effective Time........................................................................1
1.4 Certificate of Incorporation and Bylaws; Directors and Officers................................2
1.5 Conversion of Shares...........................................................................2
1.6 Closing of the Company's Transfer Books........................................................3
1.7 Surrender of Certificates......................................................................3
1.8 Appraisal Shares...............................................................................4
1.9 Treatment of Stock Options.....................................................................5
1.10 Further Action.................................................................................5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................................5
2.1 Subsidiaries; Due Organization; Etc............................................................5
2.2 Certificate of Incorporation; Bylaws; Charters and Codes of Conduct............................6
2.3 Capitalization, Etc............................................................................6
2.4 SEC Filings; Financial Statements..............................................................8
2.5 Absence of Changes............................................................................10
2.6 Title to Assets...............................................................................11
2.7 Cash Balance; Receivables; Customers..........................................................12
2.8 Equipment; Real Property; Leasehold...........................................................12
2.9 Intellectual Property.........................................................................13
2.10 Contracts.....................................................................................17
2.11 Sale of Products; Performance of Services. ...................................................20
2.12 Liabilities...................................................................................20
2.13 Compliance with Legal Requirements............................................................21
2.14 Certain Business Practices....................................................................21
2.15 Governmental Authorizations...................................................................21
2.16 Tax Matters...................................................................................21
2.17 Employee and Labor Matters; Benefit Plans.....................................................23
2.18 Environmental Matters.........................................................................30
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TABLE OF CONTENTS
(CONTINUED)
PAGE
2.19 Insurance.....................................................................................32
2.20 Transactions with Affiliates..................................................................32
2.21 Legal Proceedings; Orders.....................................................................32
2.22 Authority; Binding Nature of Agreements.......................................................33
2.23 Inapplicability of Anti-takeover Statutes.....................................................33
2.24 Vote Required.................................................................................33
2.25 Non-Contravention; Consents...................................................................34
2.26 Fairness Opinion..............................................................................35
2.27 Financial Advisor.............................................................................35
2.28 Full Disclosure...............................................................................35
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...................................35
3.1 Valid Existence...............................................................................35
3.2 Authority; Binding Nature of Agreement........................................................35
3.3 Non-Contravention.............................................................................36
3.4 No Legal Proceedings Challenging the Merger...................................................36
3.5 Activities of Merger Sub......................................................................36
SECTION 4. CERTAIN COVENANTS OF THE COMPANY..........................................................36
4.1 Access and Investigation......................................................................36
4.2 Operation of the Company's Business...........................................................37
4.3 No Solicitation...............................................................................41
4.4 Amendment of Contracts........................................................................43
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES.......................................................44
5.1 Proxy Statement...............................................................................44
5.2 Company Stockholders' Meeting.................................................................45
5.3 Regulatory Matters............................................................................46
5.4 Stock Options and ESPP........................................................................46
5.5 Employees and Employee Benefits...............................................................47
5.6 Indemnification of Officers and Directors.....................................................47
5.7 Additional Agreements.........................................................................48
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5.8 Disclosure....................................................................................49
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB..............................49
6.1 Accuracy of Representations...................................................................50
6.2 Performance of Covenants......................................................................50
6.3 Stockholder Approval..........................................................................50
6.4 Dissenting Shares.............................................................................50
6.5 Agreements and Other Documents................................................................50
6.6 Employees.....................................................................................51
6.7 No Company Material Adverse Effect............................................................51
6.8 Regulatory Matters............................................................................51
6.9 No Restraints.................................................................................51
6.10 No Governmental Proceedings Relating to Contemplated Transactions or Right to Operate
Business......................................................................................51
6.11 Xxxxxxxx-Xxxxx Certifications.................................................................52
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY.........................................52
7.1 Accuracy of Representations...................................................................52
7.2 Performance of Covenants......................................................................52
7.3 Stockholder Approval..........................................................................52
7.4 Certificate...................................................................................52
7.5 No Restraints.................................................................................52
SECTION 8. TERMINATION...............................................................................53
8.1 Termination...................................................................................53
8.2 Effect of Termination.........................................................................55
8.3 Expenses; Termination Fee.....................................................................56
SECTION 9. MISCELLANEOUS PROVISIONS..................................................................57
9.1 Amendment.....................................................................................57
9.2 Waiver........................................................................................57
9.3 No Survival of Representations and Warranties.................................................57
9.4 Entire Agreement; Counterparts................................................................57
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9.5 Applicable Law; Jurisdiction..................................................................58
9.6 Disclosure Schedule...........................................................................58
9.7 Attorneys' Fees...............................................................................58
9.8 Assignability.................................................................................58
9.9 Notices.......................................................................................58
9.10 Cooperation...................................................................................59
9.11 Non-Exclusivity...............................................................................59
9.12 Severability..................................................................................59
9.13 Construction..................................................................................60
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EXHIBITS
Exhibit A - Certain Definitions
===============================================================================
AGREEMENT OF MERGER
among:
SYNOPSYS, INC.,
a Delaware corporation;
SNAP ACQUISITION, INC.,
a Delaware corporation; and
HPL TECHNOLOGIES, INC.,
a Delaware corporation
---------------------------
Dated as of October 2, 2005
---------------------------
===============================================================================
