EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PROGRESS SOFTWARE CORPORATION,
PSI ACQUISITION SUB, INC.
AND
PERSISTENCE SOFTWARE, INC.
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and
entered into as of September 26, 2004, by and among Progress Software
Corporation, a Massachusetts corporation ("PARENT"), PSI Acquisition Sub, Inc.,
a Delaware corporation and a wholly owned first-tier subsidiary of Parent
("MERGER SUB"), and Persistence Software, Inc., a Delaware corporation (the
"COMPANY").
RECITALS
A. The respective Boards of Directors of Parent, Merger Sub and the
Company have approved this Agreement, and declared advisable the merger of
Merger Sub with and into the Company (the "MERGER") upon the terms and subject
to the conditions of this Agreement and in accordance with the General
Corporation Law of the State of Delaware ("DELAWARE LAW").
B. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
certain stockholders of the Company are entering into Voting Agreements with
Parent in the form of Exhibit A (the "VOTING AGREEMENTS").
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement, the parties agree as
follows:
ARTICLE 1
THE MERGER
1.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "COMPANY OPTION" shall mean each outstanding unexercised option
to purchase Company Common Stock, whether or not then vested or fully
exercisable, granted on or prior to the date hereof to any current or former
employee or director of the Company or any subsidiary of the Company or any
other person under any Company Option Plan or other similar plan of the Company
or in connection with any employment, consulting or other agreement or other
arrangement approved by the Company's Board of Directors with the Company or any
subsidiary of the Company on or prior to the date hereof.
(b) "COMPANY OPTION PLAN" shall mean the Company's 1994 Stock
Purchase Plan, 1997 Stock Plan, 1999 Employee Stock Purchase Plan and 1999
Directors' Stock Option Plan.
(c) "COMPANY WARRANT" shall mean each outstanding warrant or other
right to purchase Company Common Stock other than Company Options.
(d) "IN-THE-MONEY OPTIONS" shall mean all vested Company Options
which are exercisable (or will become exercisable as a result of the
transactions contemplated hereby), as of immediately prior to the Effective
Time, at an exercise price per share less than the Merger Consideration (as
defined in Section 1.7(a)).
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(e) "IN-THE-MONEY WARRANTS" shall mean all Company Warrants which
are exercisable (or will become exercisable as a result of the transactions
contemplated hereby), as of immediately prior to the Effective Time, at an
exercise price per share less than the Merger Consideration.
1.2 THE MERGER. Upon the terms and subject to the conditions of this
Agreement and the applicable provisions of Delaware Law, at the Effective Time
(as defined below), Merger Sub shall be merged with and into the Company, the
separate corporate existence of Merger Sub shall cease, and the Company shall
continue as the surviving corporation of the Merger (the "SURVIVING
CORPORATION").
1.3 EFFECTIVE TIME; CLOSING. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a certificate of merger (the "CERTIFICATE OF MERGER") consistent with this
Agreement with the Secretary of State of the State of Delaware in accordance
with the relevant provisions of Delaware Law and the General Corporation Law of
the State of California ("CALIFORNIA LAW"), the time of such filing (or such
later time as may be agreed in writing by the Company and Parent and specified
in the Certificate of Merger) being the "EFFECTIVE TIME", as soon as practicable
on or after the Closing Date (as defined below). The closing of the Merger (the
"CLOSING") shall take place at the offices of Xxxxx Xxxx LLP, Seaport World
Trade Center West, 000 Xxxxxxx Xxxxxxxxx, Xxxxxx, Xxxxxxxxxxxxx, at a time and
date to be specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver of the conditions set forth in
Article 6, or at such other time, date and location as the parties hereto agree
in writing (the "CLOSING DATE").
1.4 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.5 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) The Certificate of Merger shall provide that, at the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall be in
the form of the Certificate of Incorporation of the Merger Sub as in effect
immediately prior to the Effective Time; PROVIDED, HOWEVER, that as of the
Effective Time, Article I of the Certificate of Incorporation of the Surviving
Corporation shall read: "The name of the corporation is Persistence Software,
Inc."
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended.
1.6 DIRECTORS AND OFFICERS. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
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1.7 EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, the Company or the holders of any of the
following securities:
(a) Each share of common stock, par value $0.001 per share, of the
Company ("COMPANY COMMON STOCK") issued and outstanding immediately prior to the
Effective Time, other than any shares of Company Common Stock to be canceled
pursuant to Section 1.7(b) and any "Dissenting Shares" (as defined, and to the
extent provided in Section 1.13(a)), will be canceled and extinguished and
automatically converted into the right to receive $5.70 in cash, without
interest, subject to adjustment as set forth in Section 1.10 (the "MERGER
CONSIDERATION").
(b) Each share of Company Common Stock held by the Company or owned
by Merger Sub, Parent or any subsidiary of the Company or of Parent immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(c) Each share of common stock, par value $0.001 per share, of
Merger Sub ("MERGER SUB COMMON STOCK"), issued and outstanding immediately prior
to the Effective Time shall be converted into one validly issued, fully paid and
nonassessable share of common stock, $.001 par value per share, of the Surviving
Corporation. Following the Effective Time, each certificate evidencing ownership
of shares of Merger Sub Common Stock shall evidence ownership of such shares of
capital stock of the Surviving Corporation.
1.8 OPTIONS.
(a) Promptly following the execution of this Agreement, the Company
shall use commercially reasonable efforts to ensure that at the Effective Time,
all Company Options shall be canceled, in each case, in accordance with and
pursuant to the terms of the Company Option Plans under which such Company
Options were granted. In consideration of such cancellation, each holder of an
In-the-Money Option canceled in accordance with this Section 1.8 will be
entitled to receive in settlement of such In-the-Money Option, as promptly as
practicable following the Effective Time, a cash payment from the Payment Fund
(as defined in Section 1.11), subject to any required withholding of taxes,
equal to the product of (i) the total number of shares of Company Common Stock
otherwise issuable upon exercise of such In-the-Money Option and (ii) the excess
of the Merger Consideration over the applicable exercise price per share of
Company Common Stock otherwise issuable upon exercise of such In-the-Money
Option (the "IN-THE-MONEY OPTION CONSIDERATION"); PROVIDED, HOWEVER, that with
respect to any person subject to Section 16(a) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), any such amount shall be paid as soon as
practicable after the first date payment can be made without liability to such
person under Section 16(b) of the Exchange Act. For the avoidance of doubt, all
Company Options that are not In-the-Money Options (including without limitation
the unvested portion of any Company Options regardless of their exercise price)
shall be canceled without payment of any consideration and without any further
liability to the Company or the Surviving Corporation and shall not be
accelerated, and the holders of Company Options shall be entitled to the
In-the-Money Option Consideration pursuant to this Section 1.8 only to the
extent such Company Options are In-the-Money Options.
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(b) The Company shall use commercially reasonable efforts to cause
each holder of a Company Option to execute a written acknowledgment of such
holder that (i) the payment of the In-the-Money Option Consideration, if any,
will satisfy in full the Company's obligation to such person pursuant to such
Company Option and (ii) subject to the payment of the In-the-Money Option
Consideration, if any, such Company Option held by such holder shall, without
any action on the part of the Company or the holder, be deemed terminated,
canceled, void and of no further force and effect as between the Company and the
holder and neither party shall have any further rights or obligations with
respect thereto and (iii) that the portion of any Company Option held by such
holder that is not an In-the-Money Option shall be canceled without payment of
any consideration and without any further liability to the Company or the
Surviving Corporation. Such written acknowledgment shall be substantially in the
form attached hereto as Exhibit 1.8.
1.9 WARRANTS.
(a) Promptly following the execution of this Agreement, the Company
shall use commercially reasonable efforts to ensure that at the Effective Time,
all Company Warrants shall be terminated. In consideration of such termination,
each holder of an In-the-Money Warrant terminated in accordance with this
Section 1.9 will be entitled to receive in settlement of such In-the-Money
Warrant, as promptly as practicable following the Effective Time, a cash payment
from the Payment Fund (as defined in Section 1.11), subject to any required
withholding of taxes, equal to the product of (i) the total number of shares of
Company Common Stock otherwise issuable upon exercise of such In-the-Money
Warrant and (ii) the excess of the Merger Consideration over the applicable
exercise price per share of Company Common Stock otherwise issuable upon
exercise of such In-the-Money Warrant (the "IN-THE-MONEY WARRANT
CONSIDERATION"); PROVIDED, HOWEVER, that with respect to any person subject to
Section 16(a) of the Exchange Act, any such amount shall be paid as soon as
practicable after the first date payment can be made without liability to such
person under Section 16(b) of the Exchange Act. For the avoidance of doubt, all
Company Warrants that are not In-the-Money Warrants shall be terminated without
payment of any consideration and without any further liability to the Company or
the Surviving Corporation and shall not be accelerated, and the holders of
Company Warrants shall be entitled to the In-the-Money Warrant Consideration
pursuant to this Section 1.9 only to the extent such Company Warrants are
In-the-Money Warrants.
(b) The Company shall use commercially reasonable efforts to cause
each holder of a Company Warrant to execute a written acknowledgment of such
holder that (i) the payment of the In-the-Money Warrant Consideration, if any,
will satisfy in full the Company's obligation to such person pursuant to such
Company Warrant and (ii) subject to the payment of the In-the-Money Warrant
Consideration, if any, such Company Warrant held by such holder shall, without
any action on the part of the Company or the holder, be deemed terminated,
canceled, void and of no further force and effect as between the Company and the
holder and neither party shall have any further rights or obligations with
respect thereto and (iii) that any Company Warrant held by such holder that is
not an In-the-Money Warrant shall be canceled without payment of any
consideration and without any further liability to the Company or the Surviving
Corporation. Such written acknowledgment shall be substantially in the form
attached hereto as Exhibit 1.9.
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1.10 ADJUSTMENTS TO MERGER CONSIDERATION. Without limiting any other
provision of this Agreement, the Merger Consideration shall be adjusted, at any
time and from time to time, to reflect fully the effect of any stock split,
reverse split, stock dividend (including any dividend or distribution of
securities convertible into Company Common Stock), reorganization,
recapitalization or other like change, if permitted by the terms of Section 4.1,
with respect to Company Common Stock occurring after the date of this Agreement
and prior to the Effective Time.
1.11 PAYMENT FOR COMPANY COMMON STOCK, IN-THE-MONEY OPTIONS AND
IN-THE-MONEY WARRANTS.
(a) Prior to the Effective Time, Parent shall appoint a commercial
bank or trust company reasonably acceptable to the Company to act as exchange
and paying agent, registrar and transfer agent (the "AGENT") for the purpose of
(i) exchanging certificates representing, immediately prior to the Effective
Time, Company Common Stock for the applicable portion of the Merger
Consideration, (ii) making payment of the aggregate In-the-Money Option
Consideration in exchange for the cancellation of all In-the-Money Options and
(iii) making payment of the aggregate In-the-Money Warrant Consideration in
exchange for termination of all In-the-Money Warrants. Within two business days
after the Effective Time, Parent shall deposit, or cause to be deposited, in
trust with the Agent for the benefit of the holders of shares of Company Common
Stock, In-the-Money Options and In-the-Money Warrants, cash in an aggregate
amount equal to the Merger Consideration multiplied by the number of shares of
Company Common Stock outstanding, plus the aggregate amount of In-the-Money
Option Consideration, plus the aggregate amount of In-the-Money Warrant
Consideration (such amount being hereinafter referred to as the "PAYMENT FUND").
For purposes of determining the aggregate amount of cash to be deposited by
Parent pursuant to this Section 1.11(a), Parent shall assume that no holder of
shares of Company Common Stock will perfect their right to appraisal or demand
purchase of their shares of Company Common Stock under Delaware Law or
California Law, respectively. The Agent shall, pursuant to instructions provided
by Parent, make the payments provided for in Section 1.7, 1.8 and 1.9 of this
Agreement out of the Payment Fund (it being understood that any and all interest
earned on funds made available to the Agent pursuant to this Agreement shall be
turned over to the party depositing such funds with the Agent). The Payment Fund
shall not be used for any other purpose except as provided in this Agreement.
(b) Promptly after the Effective Time, Parent or the Surviving
Corporation shall cause the Agent to mail to each holder of record of a
certificate or certificates ("CERTIFICATES") that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock that were
converted into the right to receive a portion of the Merger Consideration under
Section 1.7 and to each holder of Dissenting Shares (i) a notice of the
effectiveness of the Merger, (ii) a letter of transmittal in customary form
(that shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Agent and shall contain such other provisions as Parent or the Surviving
Corporation may reasonably specify), (iii) instructions for use in surrendering
such Certificates and receiving the applicable portion of the Merger
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Consideration in respect thereof and (iv) such notification as may be required
under Delaware Law and California Law to be given to the holders of Dissenting
Shares. Upon surrender to the Agent of a Certificate, together with such letter
of transmittal duly executed and completed in accordance with the instructions
thereto, the holder of such Certificate shall be entitled to receive, in
exchange therefor, cash in an amount equal to the product of (i) the number of
shares of Company Common Stock formerly represented by such Certificate and (ii)
the Merger Consideration, which amounts shall be paid by Agent by check or wire
transfer in accordance with the instructions provided by such holder. No
interest or dividends will be paid or accrued on the consideration payable upon
the surrender of any Certificate. If the consideration provided for herein is to
be delivered in the name of a person other than the person in whose name the
Certificate surrendered is registered, it shall be a condition of such delivery
that the Certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that the person requesting such delivery shall pay
any transfer or other taxes required by reason of such delivery to a person
other than the registered holder of the Certificate, or that such person shall
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 1.11(b), each Certificate (other than Certificates
representing Dissenting Shares or shares of Company Common Stock to be canceled
pursuant to Section 1.7(b)) shall represent, for all purposes, only the right to
receive an amount in cash equal to the Merger Consideration multiplied by the
number of shares of Company Common Stock formerly evidenced by such Certificate
without any interest or dividends thereon.
(c) The consideration issued upon the surrender of Certificates in
accordance with this Agreement shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock
formerly represented thereby. After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of any shares
of Company Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged as provided in this Article 1.
(d) Any portion of the Payment Fund (including any amounts that may
be payable to the former stockholders of the Company in accordance with the
terms of this Agreement) which remains unclaimed by the former stockholders of
the Company upon the 180th day immediately following the Closing Date shall be
returned to the Surviving Corporation, upon demand, and any former stockholders
of the Company who have not theretofore complied with this Article 1 shall,
subject to the remainder of this Section 1.11(d), thereafter look to the
Surviving Corporation only as general unsecured creditors thereof for payment of
any Merger Consideration, without any interest or dividends thereon, that may be
payable in respect of each share of Company Common Stock held by such
stockholder. Following the Closing, the Agent shall retain the right to invest
and reinvest the Payment Fund on behalf of the Surviving Corporation in
securities listed or guaranteed by the United States government or certificates
of deposit of commercial banks that have, or are members of a group of
commercial banks that has, consolidated total assets of not less than
$500,000,000 and the Surviving Corporation shall receive the interest earned
thereon. None of Merger Sub, the Company or Agent shall be liable to a holder of
Certificates or any other person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
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If any Certificates shall not have been surrendered upon the seventh anniversary
of the Closing Date (or immediately prior to such earlier date on which any
Merger Consideration, dividends (whether in cash, stock or property) or other
distributions with respect to shares of Company Common Stock in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 2.2(c)) any such shares, cash,
dividends or distributions in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interests of any person previously entitled
thereto.
(e) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit (in form and substance acceptable to
the Surviving Corporation) of that fact by the person (who shall be the record
owner of such Certificate) claiming such Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by such
person of a bond in such amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
(f) Each of the Agent, the Surviving Corporation and Parent shall
be entitled to deduct and withhold from any consideration otherwise payable to
any former holder of shares of Company Common Stock, In-the-Money Options or
In-the-Money Warrants pursuant to this Agreement such amounts as may be required
to be deducted or withheld with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "CODE"), or any applicable
provision of state, local or foreign tax law. To the extent that amounts are so
deducted or withheld and paid over to the appropriate taxing authority by Agent,
the Surviving Corporation or Parent, such amounts shall be treated for all
purposes of this Agreement as having been paid to the person to whom such
amounts would otherwise have been paid.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub will take all such lawful and necessary action. Parent
shall cause Merger Sub to perform all of its obligations relating to this
Agreement and the transactions contemplated hereby.
1.13 DISSENTERS' RIGHTS.
(a) Notwithstanding any provision of this Agreement to the contrary
other than Section 1.13(b), any shares of Company Common Stock held by a holder
who duly demands appraisal or purchase of such shares in accordance with
Delaware Law or California Law, respectively, and is in compliance with all the
provisions of Delaware Law or California Law, as applicable, concerning the
right of such holder to demand appraisal or purchase of such shares in
connection with the Merger ("DISSENTING SHARES"), shall not be converted into or
represent a right to receive Merger Consideration pursuant to Section 1.7, but
instead shall be converted into the right to receive only such consideration as
may be determined to be due with respect to such Dissenting Shares under
Delaware Law or California Law, respectively. From and after the Effective Time,
a holder of Dissenting Shares shall not be entitled to exercise any of the
voting rights or other rights of a stockholder of the Surviving Corporation.
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(b) Notwithstanding the provisions of Section 1.7(a), if any holder
of shares of Company Common Stock who demands appraisal or purchase of such
shares under Delaware Law or California Law, respectively, shall effectively
withdraw or lose (through failure to perfect or otherwise) the right to
appraisal or purchase, then, as of the later of the Effective Time and the
occurrence of such event, such holder's shares shall no longer be Dissenting
Shares and shall automatically be converted into and represent only the right to
receive the Merger Consideration as provided in Section 1.7(a), without interest
thereon, upon surrender of the certificate representing such shares pursuant to
Section 1.11.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal or purchase of any shares of Company Common Stock,
withdrawals of such demands, and any other instruments served pursuant to
Delaware Law or California Law, respectively, and received by the Company which
relate to any such demand for appraisal or purchase and (ii) the opportunity to
participate in all negotiations and proceedings which take place prior to the
Effective Time with respect to demands for appraisal or purchase under Delaware
Law or California Law, respectively. The Company shall not, except with the
prior written consent of Parent, voluntarily make any payment with respect to
any demands for appraisal or purchase of Company Common Stock or offer to settle
or settle any such demands.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date of this Agreement and as of the Closing Date, the
Company represents and warrants to Parent and Merger Sub, subject to any
exceptions expressly stated in the disclosure schedule delivered by the Company
to Parent dated as of the date hereof and certified by a duly authorized officer
of the Company (the "COMPANY DISCLOSURE Schedule"), which exception shall
specifically identify the representation to which it relates, as follows:
2.1 ORGANIZATION; SUBSIDIARIES.
(a) The Company and each of its subsidiaries (which subsidiaries
are identified on Part 2.1 of the Company Disclosure Schedule) (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized; (ii) has the corporate or other
power and authority to own, lease and operate its assets and property and to
carry on its business as now being conducted; and (iii) except as would not be
material to the Company, is duly qualified or licensed to do business in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary.
(b) Other than the corporations identified in Part 2.1 of the
Company Disclosure Schedule, neither the Company nor any of the other
corporations identified in Part 2.1 of the Company Disclosure Schedule owns any
capital stock of, or any equity interest of any nature in, any corporation,
partnership, joint venture arrangement or other business entity, other than the
entities identified in Part 2.1 of the Company Disclosure Schedule. Neither the
Company nor any of its subsidiaries has agreed or is obligated to make, or is
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bound by any written or oral agreement, contract, lease, instrument, note,
option, warranty, purchase order, license, insurance policy, benefit plan or
legally binding commitment or undertaking of any nature, as in effect as of the
date hereof or as may hereinafter be in effect under which it may become
obligated to make any future investment in or capital contribution to any other
entity. Neither the Company, nor any of its subsidiaries, has, at any time, been
a general partner of any general partnership, limited partnership or other
entity. Part 2.1 of the Company Disclosure Schedule indicates the jurisdiction
of organization of each entity listed therein and the Company's direct or
indirect equity interest therein.
(c) The Company has delivered or made available to Parent a true
and correct copy of the Certificate of Incorporation and Bylaws of the Company
and similar governing instruments of each of its subsidiaries, each as amended
to date (collectively, the "COMPANY CHARTER DOCUMENTS"), and each such
instrument is in full force and effect. Neither the Company nor any of its
subsidiaries is in violation of any of the provisions of the Company Charter
Documents. The Company has delivered or made available to Parent all proposed or
considered amendments to the Company Charter Documents.
2.2 COMPANY CAPITALIZATION.
(a) The authorized capital stock of the Company consists solely of
7,500,000 shares of Company Common Stock, of which there were 2,718,664 shares
issued and outstanding as of the close of business on September [23], 2004, and
500,000 shares of preferred stock, par value $0.001 per share, of which no
shares are issued or outstanding. All outstanding shares of Company Common Stock
are duly authorized, validly issued, fully paid and nonassessable and are not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of the Company or any agreement or document to which the
Company is a party or by which it is bound. As of the date of this Agreement,
there are no shares of Company Common Stock held in treasury by the Company.
(b) As of the close of business on September 23, 2004, (i) 366,134
shares of Company Common Stock are subject to issuance pursuant to outstanding
Company Options for an aggregate exercise price of $2,600,357.81, (ii) 223,513
shares of Company Common Stock are subject to issuance pursuant to outstanding
Company Warrants; and (iii) 122,997 shares of Company Common Stock are reserved
for future issuance under the Company's 1999 Employee Stock Purchase Plan (the
"COMPANY ESPP"). Part 2.2(b) of the Company Disclosure Schedule sets forth the
following information with respect to each Company Option and each Company
Warrant outstanding as of the date of this Agreement: (i) the name of the
optionee or warrant holder; (ii) the number of shares of Company Common Stock
subject to such Company Option or Company Warrant; (iii) the exercise price of
such Company Option or Company Warrant; (iv) the date on which such Company
Option or Company Warrant was granted or assumed; (v) the date on which such
Company Option or Company Warrant expires, (vi) the Company Option Plan pursuant
to which such Company Option was granted, and (vii) whether the exercisability
of such Company Option or Company Warrant will be accelerated in any way by the
transactions contemplated by this Agreement, and indicates the extent of any
such acceleration. The Company has delivered to Parent accurate and complete
copies
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of the Company Option Plans and each form of stock option agreement evidencing
any Company Options and an accurate and complete copy of each Company Warrant.
All shares of Company Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Part 2.2(b) of the Company Disclosure
Schedule, there are no commitments or agreements of any character to which the
Company is bound obligating the Company to accelerate the vesting of any Company
Option or Company Warrant as a result of the Merger.
(c) All outstanding shares of Company Common Stock, all outstanding
Company Options, all outstanding Company Warrants and all outstanding shares of
capital stock of each subsidiary of Company have been issued and granted in
compliance with (i) all applicable securities laws and other applicable material
Legal Requirements and (ii) all material requirements set forth in applicable
agreements or instruments. For the purposes of this Agreement, "LEGAL
REQUIREMENTS" means 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 court, administrative agency or commission or other governmental
authority or instrumentality, foreign or domestic (each, a "GOVERNMENTAL
ENTITY").
(d) As of the Closing Date, all Company options shall have been
irrevocably cancelled and all Company Warrants shall have been irrevocably
terminated.
2.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in
Part 2.3 of the Company Disclosure Schedule, there are no equity securities,
partnership interests or similar ownership interests of any class of Company
equity security, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except for
securities the Company owns free and clear of all claims and Encumbrances (as
defined below), directly or indirectly through one or more subsidiaries, and
except for shares of capital stock or other similar ownership interests of
certain subsidiaries of the Company that are owned by certain nominee equity
holders as required by the applicable law of the jurisdiction of organization of
such subsidiaries, as of the date of this Agreement, there are no equity
securities, partnership interests or similar ownership interests of any class of
equity security of any subsidiary of the Company, or any security exchangeable
or convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except as set forth in Part 2.2 or Part 2.3 of the Company
Disclosure Schedule, there are no subscriptions, options, warrants, equity
securities, convertible debt, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which the Company or any of its subsidiaries is a
party or by which it is bound obligating the Company or any of its subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition of, any shares of capital stock, partnership interests or similar
ownership interests of the Company or any of its subsidiaries or obligating the
Company or any of its subsidiaries to grant, extend, accelerate the vesting of
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or enter into any such subscription, option, warrant, equity security, call,
right, commitment or agreement. Except as contemplated by this Agreement there
are no registration rights, and there is no voting trust, proxy, rights
agreement, "poison pill" anti-takeover plan or other agreement or understanding
to which the Company is a party or by which it is bound with respect to any
equity security of any class of the Company or with respect to any equity
security, partnership interest or similar ownership interest of any class of any
of its subsidiaries.
For purposes of this Agreement, "ENCUMBRANCES" means any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance, claim,
infringement, interference, option, right of first refusal, preemptive right,
community property interest or restriction 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).
2.4 AUTHORITY; NON-CONTRAVENTION.
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the Company
Stockholder Approval (as defined below) and the filing of the Certificate of
Merger pursuant to Delaware Law. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock entitled to vote at
the Stockholders Meeting (as defined in Section 5.1) (the "COMPANY STOCKHOLDER
APPROVAL") is sufficient for the Company's stockholders to approve and adopt
this Agreement and approve the Merger, and no other approval of any holder of
any securities of the Company is required in connection with the consummation of
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and, assuming the due execution and delivery by Parent
and Merger Sub, constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws affecting the
rights of creditors generally and general principles of equity.
(b) The execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not, (i)
conflict with or violate the Company Charter Documents, (ii) subject to
obtaining the Company Stockholder Approval and compliance with the requirements
set forth in Section 2.4(c), conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to the Company or any of its subsidiaries
or by which the Company or any of its subsidiaries or any of their respective
material properties is bound or affected, or (iii) result in any material breach
of or constitute a material default (or an event that with notice or lapse of
time or both would become a material default) under, or impair the Company's (or
a subsidiary's) rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on any of the
properties or assets of the Company or any of its subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise, concession, or other instrument or obligation to which the
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Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective material properties are bound
or affected. Part 2.4(b) of the Company Disclosure Schedule lists all consents,
waivers and approvals under any of the Company's or any of its subsidiaries'
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby, which, if
individually or in the aggregate not obtained, would result in a material loss
of benefits to the Company, Parent or the Surviving Corporation as a result of
the Merger.
(c) Except as disclosed in Part 2.4 of the Company Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity or other person, is required
to be obtained or made by the Company in connection with the execution and
delivery of this Agreement or the consummation of the Merger, except for (i) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business, (ii) the filing of the Proxy
Statement (as defined in Section 2.17) with the Securities and Exchange
Commission ("SEC") in accordance with the Exchange Act, (iii) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal, foreign and state securities (or
related) laws and the securities or antitrust laws of any foreign country, and
(iv) such other consents, authorizations, filings, approvals and registrations
which if not obtained or made would not be material to the Company, Parent or
the Surviving Corporation or have a material adverse effect on the ability of
the parties hereto to consummate the Merger.
2.5 SEC FILINGS; COMPANY FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports and documents required
to be filed by the Company with the SEC and has made available to Parent such
forms, reports and documents in the form filed with the SEC (if and to the
extent such forms, reports and documents are not available on XXXXX). All such
required forms, reports and documents (including those that the Company may file
subsequent to the date hereof) are referred to herein as the "COMPANY SEC
REPORTS." As of their respective dates, the Company SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Company SEC
Reports and (ii) did not at the time they were filed (or if subsequently amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such subsequent filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of Company's subsidiaries is required
to file any forms, reports or other documents with the SEC. Except as set forth
in the Company SEC Reports, since the date of the Company's last proxy statement
filed with the SEC, no event has occurred as of the date of this Agreement that
would be required to be reported by the Company pursuant to Item 404 of
Regulation S-K promulgated by the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company SEC Reports (the
"COMPANY FINANCIALS"), including each Company SEC Report filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with generally accepted accounting principles ("GAAP")
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applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q, 8-K or any successor
form under the Exchange Act) and (iii) fairly presented the consolidated
financial position of the Company and its subsidiaries as at the respective
dates thereof and the consolidated results of the Company's operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements may not contain all the footnotes required by GAAP for audited
statements, and were or are subject to normal and recurring year-end adjustments
that the Company does not expect to be material, individually or in the
aggregate. The balance sheet of the Company contained in the Company SEC Reports
as of June 30, 2004 is hereinafter referred to as the "COMPANY BALANCE SHEET."
Neither the Company nor any of its subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise) that are, individually or in the aggregate,
material to the business, results of operations or financial condition of the
Company and its subsidiaries taken as a whole, except for liabilities reflected
on the Company Balance Sheet or incurred since the date of the Company Balance
Sheet in the ordinary course of business consistent with past practices.
(c) The Company has not been notified by its independent auditors
or by the staff of the SEC that such auditors or the staff of the SEC, as the
case may be, are of the view that any financial statement included in any
registration statement filed by the Company under the Securities Act or any
periodic or current report filed by the Company under the Exchange Act should be
restated, or that the Company should modify its accounting in future periods in
a manner that would be materially adverse to the Company. The Company has
heretofore furnished to Parent a complete and correct copy of any amendments or
modifications, which have not yet been filed with the SEC but which are required
to be filed, to agreements, documents or other instruments which previously had
been filed by the Company with the SEC pursuant to the Securities Act or the
Exchange Act.
(d) The Company is in compliance in all material respects with all
effective provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the "XXXXXXXX-XXXXX
ACT") that are applicable to the Company, and any related rules and regulations
promulgated by the SEC, and is diligently making preparations to comply on a
timely basis with all other provisions of the Xxxxxxxx-Xxxxx Act, including the
requirements of Section 404 thereof, as they become effective and applicable to
the Company.
2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Company
Balance Sheet there has not been: (i) any Company Material Adverse Effect (as
defined in Section 8.3)) with respect to the Company, (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether in
cash, stock or property) in respect of, any of the Company's or any of its
subsidiaries' capital stock, or any purchase, redemption or other acquisition by
the Company of any of the Company's capital stock or any other securities of the
Company or its subsidiaries or any grant or issuance of any options, warrants,
calls or rights to acquire any such shares or other securities except for
repurchases from employees following their termination pursuant to the terms of
their pre-existing stock option or purchase agreements, (iii) any split,
combination or reclassification of any of the Company's or any of its
subsidiaries' capital stock, (iv) any granting by the Company or any of its
subsidiaries of any increase in compensation or fringe benefits to any of their
officers or employees, or any payment by the Company or any of its subsidiaries
of any bonus to any of their officers or employees, or any granting by the
Company or any of its subsidiaries of any increase in severance or termination
pay or any entry by the Company or any of its subsidiaries into, or material
modification or amendment of, any currently effective employment, severance,
termination or indemnification agreement or any agreement the benefits of which
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are contingent or the terms of which are materially altered upon the occurrence
of a transaction involving the Company of the nature contemplated hereby or any
acceleration or release of any vesting condition to the right to exercise any
option, warrant or other right to purchase or otherwise acquire any shares of
the Company's capital stock or any acceleration or release of any right to
repurchase shares of the Company's capital stock upon the termination of
employment or services with the Company, (v) any material change or alteration
in the policy of the Company relating to the granting of stock options or other
equity compensation to its employees and consultants, (vi) entry by the Company
or any of its subsidiaries into, or material modification, amendment or
cancellation of, any development services, licensing, distribution, sales, sales
services or other similar agreement with respect to any material Intellectual
Property Rights (as defined in Section 2.9) other than in the ordinary course of
business consistent with past practices, (vii) any acquisition, sale or transfer
of any material asset by the Company or any of its subsidiaries other than in
the ordinary course of business, (viii) any material change by the Company in
its accounting methods, principles or practices, except as required by
concurrent changes in GAAP, or (ix) any material revaluation by the Company of
any of its assets, including writing off notes or accounts receivable other than
in the ordinary course of business.
2.7 TAXES.
(a) The Company and each of its subsidiaries have timely filed all
Tax Returns required to be filed by or on behalf of the Company and each of its
subsidiaries; such Tax Returns were true, correct and complete in all material
respects; and the Company and each of its subsidiaries have paid all Taxes due
and owing (whether or not shown on such Tax Returns).
(b) The Company and each of its subsidiaries have withheld and paid
all Taxes required to be withheld and paid in connection with any amounts paid
or owing to any employee, independent contractor, creditor, stockholder or other
third party.
(c) Neither the Company nor any of its subsidiaries is currently
the beneficiary of any extension of time within which to file any Tax Return.
(d) Neither the Company nor any of its subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(e) There are no liens for Taxes (other than Taxes not yet due and
payable) upon any of the assets of the Company or any of its subsidiaries.
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(f) Neither the Company or any of its subsidiaries thereof has
received from any taxing authority any (i) notice indicating an intent to open
an audit or other review or (ii) notice or deficiency or proposed adjustment for
any amount of Tax proposed, asserted, or assessed by any taxing authority
against the Company or any of its subsidiaries.
(g) No tax audit or administrative or judicial Tax proceeding is
pending or presently in progress with respect to the Company or any of its
subsidiaries.
(h) The unpaid Taxes of the Company and its subsidiaries did not,
as of the date of the most recent Company Balance Sheet, exceed the reserve for
Tax liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of such
Company Balance Sheet (rather than in any notes thereto) and do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company and its subsidiaries
in filing their Tax Returns.
(i) Neither the Company nor any of its subsidiaries is a party to
any agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any (i) "excess parachute
payment" within the meaning of Code section 280G (or any corresponding provision
of state, local of foreign Tax law) or (ii) any amount that will not be fully
deductible as a result of Code section 162(m) or 404 (or any corresponding
provision of state, local of foreign Tax law).
(j) Neither the Company nor any of its subsidiaries has filed a
consent under section 341(f) of the Code or agreed to have section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as defined in
section 341(f)(4) of the Code) owned by the Company or any of its subsidiaries.
(k) Neither the Company nor any of its subsidiaries is party to or
has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement.
(l) Neither the Company nor any of its Subsidiaries (A) has been a
member of an Affiliated Group (as defined below) filing a consolidated federal
income Tax Return (other than a group the common parent of which was the
Company) or (B) has any liability for the Taxes of any Person (other than the
Company or any of its Subsidiaries) under Treasury Regulation section 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract or otherwise.
(m) Neither the Company nor any of its subsidiaries will be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending after
the Closing Date as a result of any change in method of accounting for a taxable
period ending on or prior to the Closing Date.
(n) None of the Company's or its subsidiaries' assets are tax
exempt use property within the meaning of section 168(h) of the Code.
(o) Neither the Company nor any of its subsidiaries has distributed
stock of a corporation, or has had its stock distributed, in a transaction
purported or intended to be governed in whole or in part by section 355 or 361
of the Code.
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(p) The Company has delivered to Parent correct and complete copies
of all foreign, federal and state income tax and all state sales and use Tax
Returns filed for the Company and each of its subsidiaries and each of the
Company's and its subsidiaries' predecessor entities, if any, filed since
December 31, 2001.
For the purposes of this Agreement, "TAX" or "TAXES" means any federal,
state, local or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not and including any obligations to indemnify or
otherwise assume or succeed to the Tax liability of any other Person.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
For purposes of this Agreement, "AFFILIATED GROUP" means any affiliated
group within the meaning of Code section 1504(a) or any similar group defined
under a similar provision of state, local, or foreign law.
2.8 TITLE TO PROPERTIES.
(a) Neither the Company nor any of its subsidiaries owns any
interest in real property, other than the leaseholds described in Part 2.8 of
the Company Disclosure Schedule. Part 2.8 of the Company Disclosure Schedule
lists all real property leases to which the Company is a party and each
amendment thereto that is in effect as of the date of this Agreement. All such
current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default) that would give rise to a
claim against the Company in excess of $50,000.
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Encumbrances, except as reflected in the Company
Financials and except for liens for Taxes not yet due and payable and such
Encumbrances, if any, which are not material in character, amount or extent.
Each of the Company's subsidiaries has good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any Encumbrances, except as reflected in the
Company Financials and except for liens for Taxes not yet due and payable and
such Encumbrances, if any, which are not material in character, amount or
extent.
2.9 INTELLECTUAL PROPERTY. For purposes of this Agreement, the
following terms shall have the definitions set forth below:
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"INTELLECTUAL PROPERTY RIGHTS" means all intellectual property rights
used by the Company and its subsidiaries in the conduct of their business,
including, without limitation: (i) all trademarks, service marks, trade names,
Internet domain names, trade dress, and the goodwill associated therewith, and
all registrations or applications for registration thereof (collectively, the
"COMPANY MARKS"); (ii) all patents, patent applications and continuations
(collectively, the "COMPANY PATENTS"); (iii) all copyrights, database rights and
moral rights in both published works and unpublished works, including all such
rights in software, user and training manuals, marketing and promotional
materials, internal reports, business plans and any other expressions, mask
works, firmware and videos, whether registered or unregistered, and all
registrations or applications for registration thereof (collectively, the
"COMPANY COPYRIGHTS"); and (iv) trade secret and confidential information,
including such rights in inventions (whether or not reduced to practice),
know-how, customer lists, technical information, proprietary information,
technologies, processes and formulae, software, data, plans, drawings and blue
prints, whether tangible or intangible and whether stored, compiled, or
memorialized physically, electronically, photographically, or otherwise
(collectively, the "COMPANY SECRET INFORMATION"). For purposes of this Section
2.9, "SOFTWARE" means any and all: (w) computer programs and applications,
including any and all software implementations of algorithms, models and
methodologies, whether in source code or object code, (x) databases and
compilations, including any and all data and collections of data, whether
machine readable or otherwise, (y) descriptions, flow-charts, library functions,
algorithms, architecture, structure, display screens and development tools, and
other information, work product or tools used to design, plan, organize or
develop any of the foregoing and (z) all documentation, including user manuals
and training materials, relating to any of the foregoing.
(a) Part 2.9 of the Company Disclosure Schedule sets forth a
complete and correct list of each of the following which is owned by the Company
or its subsidiaries: (i) each registered Company Xxxx, (ii) each material
unregistered Company Xxxx, if any; (iii) each Company Patent and (iv) each
registered Company Copyright. Except as set forth in Part 2.9 of the Company
Disclosure Schedule, the Company or one of its subsidiaries: (i) owns all right,
title and interest in and to the Intellectual Property Rights, free and clear of
all Encumbrances, or (ii) is licensed to use, or otherwise possesses legally
valid and enforceable rights to use, the Intellectual Property Rights that it
does not so own. The Company and its Subsidiaries have made all necessary
filings, recordations and payments to protect and maintain their interests in
the Intellectual Property Rights owned by or licensed to the Company except
where the failure to make such filings, recordations or payments would not have
a Company Material Adverse Effect. No person has notified the Company or any
subsidiary of any claim that any of the products, services or technology used,
sold, offered for sale or licensed or proposed for use, sale, offer for sale or
license by the Company or any of its subsidiaries infringes any intellectual
property rights of any person.
(b) Except as set forth in Part 2.9 of the Company Disclosure
Schedule: (i) all the Company Patents are valid and subsisting; (ii) to the best
of the Company's knowledge, none of the Company Patents is being infringed; and
(iii) to the best of the Company's knowledge, neither the validity nor the
enforceability of any of the Company Patents has been challenged by any person.
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(c) Except as set forth in Part 2.9 of the Company Disclosure
Schedule: (i) all the Company Marks are valid and subsisting; (ii) to the best
of the Company's knowledge, none of the Company Marks is being infringed or
diluted; and (iii) to the best of the Company's knowledge, none of the Company
Marks has been opposed or challenged and no proceeding has been commenced or
threatened that would seek to prevent the use by the Company or any of its
subsidiaries of any Company Xxxx.
(d) Except as set forth in Part 2.9 of the Company Disclosure
Schedule: (i) all the Company Copyrights, whether or not registered, are valid
and enforceable; (ii) to the best of the Company's knowledge, none of the
Company Copyrights is being infringed, or its validity challenged or threatened
in any way; and (iii) no proceeding has been commenced or threatened that would
seek to prevent the use by the Company or any of its subsidiaries of the Company
Copyrights.
(e) The Company and its subsidiaries have taken reasonable measures
to protect the secrecy, confidentiality and value of the Company Secret
Information. To the best of the Company's knowledge, no Company Secret
Information has been used, divulged or appropriated for the benefit of any
person (other than the Company or any of its subsidiaries) or otherwise
misappropriated in a manner which would have a Company Material Adverse Effect.
(f) No Intellectual Property Right is subject to any outstanding
order, proceeding (other than pending proceedings pertaining to applications for
patent or trademark or copyright registration) or stipulation that restricts in
any manner the licensing thereof by the Company or any of its subsidiaries.
(g) To the best of the Company's knowledge, none of its employees
engaged in the development of software or in performing sales and marketing
functions on behalf of the Company is obligated under any contract with any
third party which would materially conflict with such employee's rights to
develop software or engage in such sales and marketing functions on behalf of
the Company.
(h) All employees, contractors, agents and consultants of the
Company or any of its subsidiaries who are or were involved in the creation of
material Intellectual Property Rights owned by the Company have executed an
assignment of inventions agreement to vest in the Company or its subsidiary, as
appropriate, exclusive ownership of such Intellectual Property Rights, except
where the failure to have executed such an agreement will not have a Company
Material Adverse Effect. All employees, contractors, agents and consultants of
the Company or any of its subsidiaries who have or have had access to Company
Secret Information owned by the Company have executed nondisclosure agreements
to protect the confidentiality of such Company Secret Information, except where
the failure to have executed such an agreement will not have a Company Material
Adverse Effect.
(i) Without limiting the generality of the foregoing, except as set
forth in Part 2.9 of the Company Disclosure Schedule, all the software that the
Company or any of its subsidiaries licenses or otherwise makes available to
customers, and all Intellectual Property Rights therein, were: (i) developed by
employees of the Company or of a subsidiary of the Company within the scope of
their employment and subject to their obligation to assign inventions and
patents therein; or (ii) developed by independent contractors or consultants who
assigned all of their right, title and interest in and to that software to the
Company; or (iii) otherwise acquired or licensed by the Company from a third
party by an agreement or contract that is disclosed in Part 2.9 of the Company
Disclosure Schedule.
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(j) All material contracts, licenses and agreements relating to the
Intellectual Property Rights are in full force and effect. The consummation of
the transactions contemplated by this Agreement will neither violate nor result
in the breach, modification, cancellation, termination, or suspension of such
contracts, licenses and agreements. The Company and each of its subsidiaries are
in material compliance with, and have not materially breached any term of any of
such contracts, licenses and agreements and, to the knowledge of the Company and
its subsidiaries, all other parties to such contracts, licenses and agreements
are in compliance in all material respects with, and have not materially
breached any term of, such contracts, licenses and agreements. Following the
Closing Date, the Surviving Corporation will be permitted to exercise all of the
Company's rights under such contracts, licenses and agreements to the same
extent the Company would have been able to had the transactions contemplated by
this Agreement not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which the Company
would otherwise be required to pay.
2.10 COMPLIANCE WITH LAWS.
(a) Neither the Company nor any of its subsidiaries is in conflict
with, or in default or violation of (i) any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or by
which the Company or any of its subsidiaries or any of their respective
properties is bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or its or any of their respective
properties is bound or affected, except for conflicts, violations and defaults
that, individually or in the aggregate, would not cause the Company to lose any
material benefit or incur any material liability. No investigation or review by
any Governmental Entity is pending or, to the Company's knowledge, has been
threatened in a writing delivered to the Company against the Company or any of
its subsidiaries, nor, to the Company's knowledge, has any Governmental Entity
indicated an intention to conduct an investigation of the Company or any of its
subsidiaries. There is no agreement, judgment, injunction, order or decree
binding upon the Company or any of its subsidiaries which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of the Company or any of its subsidiaries, any acquisition
of material property by the Company or any of its subsidiaries or the conduct of
business by the Company and its subsidiaries as currently conducted.
(b) The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from Governmental Entities that are
material to or required for the operation of the business of the Company and of
its subsidiaries as currently conducted (collectively, the "COMPANY PERMITS").
The Company and its subsidiaries are in compliance, in all material respects,
with the terms of the Company Permits.
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2.11 LITIGATION. Except as disclosed in Part 2.11 of the Company
Disclosure Schedule, there are no claims, suits, actions or proceedings pending
or, to the knowledge of the Company, threatened against, relating to or
affecting the Company or any of its subsidiaries, before any Governmental Entity
or any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected, either singularly or in the aggregate with all such claims, actions or
proceedings, to be material to the Company, any of its subsidiaries or the
Surviving Corporation following the Merger or have a material adverse effect on
the ability of the parties hereto to consummate the Merger. No Governmental
Entity has at any time challenged or questioned in a writing delivered to the
Company the legal right of the Company or any of its subsidiaries to design,
offer or sell any of its products or services in the present manner or style
thereof or otherwise to conduct its business as currently conducted. As of the
date hereof, to the knowledge of the Company, no event has occurred, and no
claim, dispute or other condition or circumstance exists, that will, or that
would reasonably be expected to, cause or provide a bona fide basis for a
director or executive officer of the Company or of any of its subsidiaries to
seek indemnification from the Company.
2.12 EMPLOYEE BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of
"Affiliate" set forth in Section 2.12(a)(i) below (which definition shall apply
only to this Section 2.12), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity under
common control with the Company within the meaning of Sections 414(b),
(c), (m) or (o) of the Code and the regulations issued thereunder;
(ii) "COMPANY EMPLOYEE PLAN" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock
or stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including without limitation, each "employee
benefit plan" within the meaning of Section 3(3) of ERISA which is or
has been maintained, contributed to, or required to be contributed to,
by the Company or any Affiliate for the benefit of any Employee;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "EMPLOYEE" shall mean any current, former or retired
employee, officer or director of the Company or any Affiliate;
(vi) "EMPLOYEE AGREEMENT" shall mean each management,
employment, severance, consulting, relocation, repatriation,
expatriation, visa, work permit or similar agreement or contract
between the Company or any Affiliate and any Employee or consultant;
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(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended;
(ix) "INTERNATIONAL EMPLOYEE PLAN" shall mean each Company
Employee Plan that has been adopted or maintained by the Company,
whether informally or formally, for the benefit of Employees outside
the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan," as defined in Section
3(37) of ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiii) "PENSION PLAN" shall mean each Company Employee Plan
which is an "employee pension benefit plan," within the meaning of
Section 3(2) of ERISA.
(b) DISCLOSURE OF PLANS. Part 2.12(b) of the Company Disclosure
Schedule contains an accurate and complete list of each Company Employee Plan
and each Employee Agreement. The Company does not have any plan or commitment to
establish any new Company Employee Plan, to modify any Company Employee Plan or
Employee Agreement (except to the extent required by law or to conform any such
Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement, nor does it have any intention or commitment to do any of
the foregoing.
(c) DOCUMENTS. The Company has provided to Parent: (i) accurate and
complete copies of all documents embodying each Company Employee Plan and each
Employee Agreement including all amendments thereto and written interpretations
thereof; (ii) the most recent annual actuarial valuations, if any, prepared for
each Company Employee Plan; (iii) the three most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Company Employee
Plan or related trust; (iv) if the Company Employee Plan is funded, the most
recent annual and periodic accounting of Company Employee Plan assets; (v) the
most recent summary plan description together with the summary of material
modifications thereto, if any, required under ERISA with respect to each Company
Employee Plan; (vi) all IRS determination, opinion, notification and advisory
letters, and rulings relating to Company Employee Plans and copies of all
applications and correspondence to or from the IRS or the DOL with respect to
any Company Employee Plan; (vii) all material written agreements and contracts
relating to each Company Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and group insurance
contracts; (viii) all communications material to any Employee or Employees
relating to any Company Employee Plan and any proposed Company Employee Plans,
in each case, relating to any amendments, terminations, establishments,
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increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material liability to the
Company; (ix) all COBRA forms and related notices; (x) all registration
statements and prospectuses prepared in connection with each Company Employee
Plan; and (xi) a list of all employees, officers and consultants of the Company
reflecting each such person's current title and/or job description and
compensation.
(d) EMPLOYEE PLAN COMPLIANCE. (i) The Company has performed in all
material respects all obligations required to be performed by it under, is not
in default or violation of, and has no knowledge of any default or violation by
any other party to, each Company Employee Plan and/or Employee Agreement, and
each Company Employee Plan has been established and maintained in all material
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) each Company Employee Plan intended to qualify under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code has either received a favorable determination letter from the
IRS with respect to each such Plan as to its qualified status under the Code or
has remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a determination letter and make any
amendments necessary to obtain a favorable determination and no event has
occurred which would adversely affect the status of such determination letter or
the qualified status of such Plan; (iii) no "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 408 of ERISA, has occurred with respect to any
Company Employee Plan; (iv) there are no actions, suits or claims pending, or,
to the knowledge of the Company, threatened or reasonably anticipated (other
than routine claims for benefits) against any Company Employee Plan or against
the assets of any Company Employee Plan; (v) each Company Employee Plan can be
amended, terminated or otherwise discontinued either before or after the
Effective Time in accordance with its terms, without liability to Parent, the
Company or any of its Affiliates (other than ordinary administration expenses
typically incurred in a termination event); (vi) there are no audits, inquiries
or proceedings pending or, to the knowledge of the Company, threatened by the
IRS or DOL with respect to any Company Employee Plan; (vii) neither the Company
nor any Affiliate is subject to any penalty or tax with respect to any Company
Employee Plan under Section 402(i) of ERISA or Sections 4975 through 4980 of the
Code; and (viii) all contributions due from the Company or any Affiliate with
respect to any of the Company Employee Plans have been made as required under
ERISA or have been accrued on the Company Balance Sheet and no further
contributions will be due or will have accrued thereunder as of the Closing
Date; (ix) to the Company's knowledge, all individuals who, pursuant to the
terms of any Company Employee Plan or Employee Agreement, are entitled to
participate in any such Company Employee Plan or Employee Agreement are
currently participating in such Company Employee Plan or Employee Agreement, or
have been given the opportunity to do so and have declined; (x) there has been
no amendment to, written interpretation or authorized announcement (whether or
not written) by the Company relating to, or change in employee participation or
coverage under, any Company Employee Plan or Employee Agreement that would
increase materially the expense of maintaining such Company Employee Plan or
Employee Agreement above the level of the expense incurred in respect thereof
during the calendar year 2003.
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(e) PENSION PLANS. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) MULTIEMPLOYER PLANS. At no time has the Company contributed to
or been requested to contribute to any Multiemployer Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. No Company Employee Plan
provides, or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and the Company
has never represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h) COBRA; FMLA. Neither the Company nor any Affiliate has, prior
to the Effective Time, and in any material respect, violated any of the health
care continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its Employees. The group health plans (as
defined in Section 4980B(g) of the Code) that benefit employees of the Company
are in compliance, in all material respects, with the continuation coverage
requirements of Section 4980B of the Code and Sections 601 through 608 of ERISA,
the Americans with Disabilities Act of 1990, as amended and the FMLA, and the
regulations thereunder, as such requirements affect the Company and its
employees. As of the Closing Date, there will be no material outstanding,
uncorrected violations under COBRA, with respect to any of the Company Employee
Plans or Employee Agreements, covered employees or qualified beneficiaries.
(i) EFFECT OF TRANSACTION. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee. No payment or benefit
which will or may be made by the Company or its Affiliates with respect to any
Employee as a result of the transactions contemplated by this Agreement will be
characterized as an "excess parachute payment," within the meaning of Section
280G(b)(1) of the Code or will be treated as a nondeductible expense within the
meaning of Section 162 of the Code.
(j) EMPLOYMENT MATTERS. The Company and each of its subsidiaries:
(i) is in compliance in all material respects with all applicable foreign,
federal, state and local laws, rules and regulations respecting employment,
employment practices, immigration, terms and conditions of employment and wages
and hours, in each case, with respect to Employees; (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages, salaries
and other payments to Employees; (iii) has properly classified independent
contractors for purposes of federal and applicable state tax laws, laws
applicable to employee benefits and other applicable laws; (iv) is not liable
for any arrears of wages or any taxes or any penalty for failure to comply with
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any of the foregoing; and (v) is not liable for any material payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
pending, or, to the Company's knowledge, threatened or reasonably anticipated
claims or actions against the Company under any workers compensation policy or
long-term disability policy. To the Company's knowledge, no Employee of the
Company has violated any employment contract, nondisclosure agreement or
noncompetition agreement by which such Employee is bound due to such Employee
being employed by the Company and disclosing to the Company or using trade
secrets or proprietary information of any other person or entity. All employees
of the Company are legally permitted to be employed by the Company in the United
States of America in their current jobs. There are no controversies pending or,
to the Company's knowledge threatened, between the Company and any subsidiary
and any of their employees that would be reasonably likely to result in the
Company's incurring material liability. The Company does not have any employment
contracts, Employee Agreements, or consulting agreements currently in effect
that are not terminable at will (other than agreements for the sole purpose of
providing for the confidentiality of proprietary information or assignment of
invention). The Company will have no liability to any employee or to any
organization or any other entity as a result of the termination of any employee
leasing arrangement.
(k) LABOR. No work stoppage or labor strike against the Company is
pending, threatened or reasonably anticipated. The Company does not know of any
activities or proceedings of any labor union to organize any Employees. There
are no actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of the Company, threatened or reasonably anticipated relating to any
labor, safety or discrimination matters involving any Employee, including
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in any
material liability to the Company. Neither the Company nor any of its
subsidiaries has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act. The Company is not presently, nor has it been in
the past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to Employees and no collective bargaining agreement is
being negotiated by the Company.
(l) INTERNATIONAL EMPLOYEE PLANS. Each International Employee Plan
has been established, maintained and administered in material compliance with
its terms and conditions and with the requirements prescribed by any and all
statutory or regulatory laws that are applicable to such International Employee
Plan. Furthermore, no International Employee Plan has unfunded liabilities that
are not fully accrued on the Company Balance Sheet. Except as required by law,
no condition exists that would prevent the Company or Parent from terminating or
amending any International Employee Plan at any time for any reason.
2.13 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Except as would not result in material
liability to the Company, no underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
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asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies (a "HAZARDOUS MATERIAL") are present, as a result of the
actions of the Company or any of its subsidiaries or any affiliate of the
Company, or, to the Company's knowledge, as a result of any actions of any third
party or otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof that the Company or any of
its subsidiaries has at any time owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. Except as would not result in a
material liability to the Company (in any individual case or in the aggregate)
(i) neither the Company nor any of its subsidiaries has transported, stored,
used, manufactured, disposed of, released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the Closing
Date, and (ii) neither the Company nor any of its subsidiaries has disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) PERMITS. The Company and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents
("ENVIRONMENTAL PERMITS") material to and necessary for the conduct of the
Company's and its subsidiaries' Hazardous Material Activities and other
businesses of the Company and its subsidiaries as such activities and businesses
are currently being conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ or injunction is pending, and to the
Company's knowledge, no action, proceeding, revocation proceeding, amendment
procedure, writ or injunction has been threatened by any Governmental Entity
against the Company or any of its subsidiaries in a writing delivered to the
Company concerning any Environmental Permit of the Company, Hazardous Material
or any Hazardous Materials Activity of the Company or any of its subsidiaries.
The Company is not aware of any fact or circumstance which could involve the
Company or any of its subsidiaries in any environmental litigation or impose
upon the Company any material environmental liability.
2.14 CERTAIN AGREEMENTS. Except as otherwise set forth in the
applicable lettered subsection of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement or commitment with any
employee or member of the Company's Board of Directors, providing any term of
employment or compensation guarantee or any consulting agreement or any
employment agreement that provides severance benefits or other benefits after
the termination of employment of such employee regardless of the reason for such
termination of employment, except as required by applicable law;
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(b) any agreement or plan, including any stock option plan, stock
appreciation right plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(c) any agreement of indemnification, any guaranty or any
instrument evidencing indebtedness for borrowed money by way of direct loan,
sale of debt securities, purchase money obligation, conditional sale, or
otherwise;
(d) any agreement, obligation or commitment containing covenants
purporting to limit or which effectively limit the Company's or any of its
subsidiaries' freedom to compete in any line of business or in any geographic
area or which would so limit Parent, the Company or the Surviving Corporation or
any of its subsidiaries after the Effective Time or granting any exclusive
distribution or other exclusive rights;
(e) any agreement or commitment currently in force relating to the
disposition or acquisition by the Company or any of its subsidiaries after the
date of this Agreement of assets not in the ordinary course of business, or
pursuant to which the Company has any material ownership or participation
interest in any corporation, partnership, joint venture, strategic alliance or
other business enterprise other than the Company's subsidiaries;
(f) any licensing, distribution, resale or other agreement,
contract or commitment with regard to the acquisition, distribution, resale or
licensing of any Intellectual Property Rights other than licenses, distribution,
resale agreements, advertising agreements, or other similar agreement entered
into in the ordinary course of business consistent with past practice;
(g) agreement to forgive any indebtedness in excess of $5,000 of
any person to the Company or any subsidiary;
(h) agreement regarding the lease of real property involving rental
obligations in excess of $50,000 per annum, or agreement regarding the purchase
of real property;
(i) loan agreement, promissory note or other evidence of
indebtedness for borrowed money;
(j) agreement pursuant to which the Company or any subsidiary (A)
uses any intellectual property of any third party that is material to the
operation of its business (other than off-the-shelf commercial software programs
with respect to which no future license or royalty payment will become due), (B)
incorporates any third party intellectual property in any of its products; or
(C) has granted to any third party an exclusive license of any Intellectual
Property Rights owned by the Company or any license of its source code
(including customary source code escrow arrangements entered into in the
ordinary course of business);
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(k) agreement obligating the Company or any subsidiary to make
aggregate payments in excess of $50,000 to any third party during the two-year
period ending June 30, 2006;
(l) agreement pursuant to which the Company or any subsidiary (A)
reasonably expects to receive aggregate payments in excess of $100,000 during
the two year period ending June 30, 2006 or (B) reasonably expects to recognize
revenue in such aggregate amount during such two year period; (m) agreement or
commitment with any affiliate of the Company;
(n) any agreement or commitment currently in force providing for
capital expenditures by the Company or its subsidiaries in excess of $50,000; or
(o) any other agreement or commitment currently in effect that is
material to the Company's or its subsidiaries' business as presently conducted
and proposed to be conducted.
Each agreement that is required to be disclosed in the Company
Disclosure Schedule pursuant to clauses (a) through (o) above or pursuant to
Section 2.9 and each agreement that is required to be filed with any Company SEC
Report shall be referred to herein as a "COMPANY CONTRACT." Each Company
Contract is valid and in full force and effect. Neither the Company nor any of
its subsidiaries, nor to the Company's knowledge, any other party thereto, is in
breach, violation or default under, and neither the Company nor any of its
subsidiaries has received written notice alleging that it has breached, violated
or defaulted under, any of the terms or conditions of any Company Contract in
such a manner as would permit any other party thereto to cancel or terminate any
such Company Contract, or would permit any other party to seek material damages
or other remedies for any or all such alleged breaches, violations, or defaults.
2.15 BROKERS' AND FINDERS' FEES. Except for fees payable to Seven Hills
Partners LLC ("SEVEN HILLS") pursuant to an engagement letter dated August 31,
2004, a copy of which has been provided to Parent, the Company has not incurred,
nor will it incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
2.16 INSURANCE. The Company and each of its subsidiaries have policies
of insurance and bonds of the type and in amounts customarily carried by persons
conducting business or owing assets similar to those of the Company and its
subsidiaries. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies have been paid, and the Company and its subsidiaries are otherwise
in compliance in all material respects with the terms of such policies and
bonds. To the knowledge of the Company, there has been no threatened termination
of, or material premium increase with respect to, any of such policies. Part
2.16 of the Company Disclosure Schedule sets forth a description of each such
policy or bond which provides coverage for the Company or any of its
subsidiaries.
2.17 INFORMATION IN PROXY STATEMENT.
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(a) Each document required to be filed by the Company with the SEC
in connection with the transactions contemplated by this Agreement (the "COMPANY
DISCLOSURE DOCUMENTS"), including, without limitation, the proxy or information
statement of the Company containing information required by Regulation 14A under
the Exchange Act (together with all amendments and supplements thereto, the
"PROXY STATEMENT"), to be filed with the SEC in connection with the Merger,
will, when filed, comply as to form in all material respects with the applicable
requirements of the Exchange Act. The representations and warranties contained
in this Section 2.17(a) will not apply to statements or omissions included in
the Company Disclosure Documents based upon information furnished to the Company
in writing by Parent or Merger Sub or any of their representatives specifically
for use therein.
(b) At the time the Proxy Statement or any amendment or supplement
thereto is first mailed to stockholders of the Company and at the time such
stockholders vote on approval and adoption of this Agreement and approval of the
Merger, the Proxy Statement, as supplemented or amended, if applicable, will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. At the time of the
filing of any Company Disclosure Document other than the Proxy Statement and at
the time of any distribution thereof, such Company Disclosure Document will not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties contained in this Section 2.17(b) will not apply to statements or
omissions included in the Company Disclosure Documents based upon information
furnished to the Company in writing by Parent or Merger Sub or any of their
representatives specifically for use therein.
2.18 CUSTOMERS; ACCOUNTS RECEIVABLE.
(a) The Company has no reason to believe, based on indications it
has received from its customers, that the Company's software license revenue for
the year ended September 30, 2005 is reasonably likely to be less than 80% of
the Company's software license revenue for the year ended September 30, 2004.
(b) The receivables shown on the Company Balance Sheet arose in the
ordinary course of business, consistent with past practice, and have been
collected or are collectible in the book amounts thereof, less an amount not
materially in excess of the allowance for doubtful accounts provided for on the
Company Balance Sheet. Allowances for doubtful accounts and warranty returns are
adequate and have been prepared in accordance with GAAP consistently applied and
in accordance with the Company's past practices. The Company's receivables
arising after the date of the Company Balance Sheet and prior to the Closing
Date arose or will arise in the ordinary course of business, consistent with
past practice, and have been collected or are collectible in the book amounts
thereof, less reasonable allowances for doubtful accounts determined in
accordance with the Company's past practices. To the Company's knowledge, none
of its receivables is subject to any material claim of setoff, recoupment or
counter claim and it has no knowledge of any specific facts or circumstances
(whether asserted or unasserted) that could give rise to any such claim. No
material amount of receivables are contingent upon the performance by the
Company of any obligation or contract other than normal warranty repair and
replacement. No person has any Encumbrance on any of such receivables and no
agreement for deduction or discount has been made with respect to any of such
receivables.
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2.19 BOARD APPROVAL. The Board of Directors of the Company has approved
this Agreement and declared the advisability of this Agreement and the Merger
and recommended that the stockholders of the Company approve and adopt this
Agreement and approve the Merger. The Board of Directors of the Company has
taken all actions so that the restrictions contained in Section 203 of Delaware
Law applicable to a "business combination" (as defined therein) will not apply
to the execution, delivery or performance of this Agreement or the consummation
of the Merger or the other transactions contemplated by this Agreement.
2.20 FAIRNESS OPINION. The Company's Board of Directors has received an
opinion from Seven Hills, dated as of the date hereof, to the effect that, as of
the date hereof, the Merger Consideration is fair to the Company's stockholders
from a financial point of view, and has, or will as promptly as practicable
after receipt thereof, deliver to Parent a copy of the written confirmation of
such opinion.
2.21 ACCOUNTING SYSTEM. The Company and its subsidiaries have internal
control over financial reporting, as defined in Rule 13a-15(f) under the
Exchange Act and such internal control over financial reporting is reasonably
effective. Since January 1, 2002, there has been no change in the internal
control over financial reporting of the Company and its subsidiaries that has
materially affected, or is reasonably likely to materially affect, the internal
control over financial reporting of the Company and its subsidiaries. Without
limiting the generality of the foregoing, the Company and its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (a) transactions are executed in accordance with
management's general or specific authorizations; (b) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability; (c) access to assets is permitted
only in accordance with management's general or specific authorization; and (d)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has not been notified by its independent auditor that
there is any significant deficiency or material weakness in the Company's
internal control over financial reporting. Part 2.21 of the Company Disclosure
Schedule includes complete and accurate copies of any management letter or
similar correspondence from any independent auditor of the Company or any of its
subsidiaries.
2.22 DISCLOSURE. None of the information furnished or made available by
the Company to Parent in this Agreement, the Company Disclosure Schedule, or in
any certificate to be executed or delivered pursuant hereto by the Company at or
prior to the Closing Date, is false or misleading or contains any misstatement
of a material fact, or omits to state any material fact required to be stated in
order to make the statements herein or therein not misleading in light of the
circumstances under which they were made. There is no fact known to the Company
and not disclosed to Parent in writing that is reasonably likely to give rise to
a Company Material Adverse Effect or to have the effect of preventing,
materially delaying, making illegal or otherwise interfering with the Merger and
the other transactions contemplated by this Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As of the date of this Agreement and as of the Closing Date, Parent and
Merger Sub represent and warrant to the Company, subject to any exception
expressly stated in the disclosure schedule, delivered by Parent to the Company
dated as of the date hereof and certified by a duly authorized officer of Parent
(the "PARENT DISCLOSURE SCHEDULE"), which exception shall specifically identify
the representation to which it relates, as follows:
3.1 ORGANIZATION OF PARENT AND MERGER SUB.
(a) Each of Parent and Merger Sub (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized; (ii) has the corporate or other power and
authority to own, lease and operate its assets and property and to carry on its
business as now being conducted; and (iii) except as would not be material to
Parent, is duly qualified or licensed to do business in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary.
(b) Parent has delivered or made available to Company a true and
correct copy of the Certificate of Incorporation and Bylaws of Parent and Merger
Sub, each as amended to date (collectively, the "PARENT CHARTER DOCUMENTS"), and
each such instrument is in full force and effect. Neither Parent nor Merger Sub
is in violation of any of the provisions of the Parent Charter Documents. Parent
has delivered or made available to Company all proposed or considered amendments
to the Parent Charter Documents.
3.2 AUTHORITY; NON-CONTRAVENTION.
(a) Parent and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub, subject
only to the filing of the Certificate of Merger pursuant to Delaware Law. No
other approval of any holder of any securities of Parent is required in
connection with the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Parent and Merger Sub and,
assuming the due authorization, execution and delivery by the Company,
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms, except
as enforceability may be limited by bankruptcy and other similar laws affecting
the rights of creditors generally and general principles of equity.
(b) The execution and delivery of this Agreement by Parent and
Merger Sub does not, and the performance of this Agreement by Parent and Merger
Sub will not, (i) conflict with or violate the Parent Charter Documents, (ii)
subject to compliance with the requirements set forth in Section 3.2(c) below,
conflict with or violate any material law, rule, regulation, order, judgment or
decree applicable to Parent or Merger Sub or by which any of their respective
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material properties is bound or affected, or (iii) result in any material breach
of or constitute a material default (or an event that with notice or lapse of
time or both would become a material default) under, or impair Parent's rights
or alter the rights or obligations of any third party under, or give to others
any rights of termination, amendment, acceleration or cancellation of; or result
in the creation of an Encumbrance on any of the properties or assets of Parent
or Merger Sub pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or Merger Sub is a party or by which Parent or Merger
Sub or any of their respective material properties are bound or affected.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or other person
is required to be obtained or made by Parent or Merger Sub in connection with
the execution and delivery of this Agreement or the consummation of the Merger,
except for (i) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, (ii) the filing of a Schedule 13D with regard to
the Voting Agreements in accordance with the Securities Act and the Exchange
Act, (iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal, foreign
and state securities (or related) laws and the securities or antitrust laws of
any foreign country, and (iv) such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not be material
to Parent or the Surviving Corporation or have a material adverse effect on the
ability of the parties hereto to consummate the Merger.
3.3 LITIGATION. There are no claims, suits, actions or proceedings
pending or, to the knowledge of Parent, threatened against, relating to or
affecting Parent or any of its subsidiaries, before any Governmental Entity or
any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected, either singularly or in the aggregate with all such claims, actions or
proceedings, to have a material adverse effect on the ability of the parties
hereto to consummate the Merger.
3.4 INFORMATION TO BE SUPPLIED. Parent and Merger Sub will deliver to
the Company all information reasonably requested by the Company for inclusion in
the Proxy Statement. None of the information to be supplied by Parent or Merger
Sub to the Company for inclusion in the Proxy Statement will, at the time it is
sent to the stockholders of the Company or at the time of the Stockholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
3.5 BROKERS' AND FINDERS' FEES. Parent has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS BY THE COMPANY. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, the Company and each of
its subsidiaries shall, except to the extent that Parent shall otherwise consent
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in writing, carry on its business in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted and in compliance in all
material respects with all applicable laws and regulations, pay its debts and
Taxes when due subject to good faith disputes over such debts or Taxes, pay or
perform other material obligations when due, and use commercially reasonable
efforts consistent with past practices and policies to (i) preserve intact its
present business organization, (ii) keep available the services of its present
officers and employees, (iii) collect its accounts receivable and any other
amounts payable to it when due and otherwise enforce any obligations owed to it
by others substantially in accordance with their terms, and (iv) preserve its
relationships with customers, suppliers, licensors, licensees, and others with
which it has business dealings. In addition, the Company will promptly notify
Parent of any material event involving its business or operations.
In addition, except as permitted by the terms of this Agreement,
without the prior written consent of Parent, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, the Company shall not do
any of the following and shall not permit its subsidiaries to do any of the
following:
(a) Take any action out of the ordinary course of business or
otherwise inconsistent with past practices with respect to accounts payable or
accounts receivable of the Company, including without limitation negotiating any
discounts with respect to accounts receivable or delaying payment of any
accounts payable past its due date;
(b) Waive any stock repurchase rights, accelerate, amend or change
the period of exercisability of options or repurchase of restricted stock, or
reprice options granted to any employee, consultant, director or authorize cash
payments in exchange for any options or take any such action with regard to any
warrant or other right to acquire the Company's capital stock;
(c) Grant any severance or termination pay to any officer or
employee except pursuant to written agreements in effect, or policies existing,
on the date hereof and as previously disclosed in writing to Parent, or adopt
any new severance plan;
(d) Transfer or license to any person or entity or otherwise
extend, amend or modify in any material respect any rights to Intellectual
Property Rights, other than non-exclusive licenses in the ordinary course of
business and consistent with past practice;
(e) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(f) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of the Company or its subsidiaries, except
repurchases of unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to option agreements or
purchase agreements in effect on the date hereof;
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(g) Enter into any agreement, obligation or commitment containing
covenants purporting to limit or which effectively limit the Company's or any of
its subsidiaries' freedom to compete in any line of business or in any
geographic area or which would so limit Parent, the Company or the Surviving
Corporation or any of its subsidiaries after the Effective Time or granting any
exclusive distribution or other exclusive rights;
(h) Issue, deliver, sell, authorize, pledge or otherwise encumber
any shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares of
capital stock or any securities convertible into shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than the issuance,
delivery and/or sale of (i) shares of Company Common Stock pursuant to the
exercise of Company Options and Company Warrants, (ii) shares of Company Common
Stock issuable to participants in the Company ESPP consistent with the terms
thereof and (iii) options granted to newly hired employees, consistent in
amounts with the Company's prior practices;
(i) Cause, permit or propose any amendments to the Company Charter
Documents or to the charter documents of any subsidiary;
(j) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof; or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
business of the Company or enter into any material joint ventures, strategic
relationships, alliances, marketing or co-sale agreements or make any material
loan or advance to, or investment in, any person, except for loans or capital
contributions to a subsidiary or advances of routine business or travel expenses
to employees, officers or directors in the ordinary course of business,
consistent with past practice;
(k) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of the Company;
(l) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of the Company,
enter into any "keep well" or other agreement to maintain any financial
statement condition or enter into any arrangement having the economic effect of
any of the foregoing other than (i) in connection with the financing of ordinary
course trade payables consistent with past practice or (ii) pursuant to existing
credit facilities in the ordinary course of business;
(m) Adopt or amend any employee benefit plan or employee stock
purchase or employee stock option plan, or enter into any employment contract or
collective bargaining agreement (other than offer letters and letter agreements
entered into in the ordinary course of business consistent with past practice
with employees who are terminable "at will"), pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
or fringe benefits (including rights to severance or indemnification) of its
directors, officers, employees or consultants other than in the ordinary course
of business, consistent with past practice, and other than indemnification
agreements with directors and officers in the form previously provided to
Parent, or change in any material respect any management policies or procedures;
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(n) Make any capital expenditures outside of the ordinary course of
business in excess of $50,000 in the aggregate;
(o) Modify, amend or terminate any Company Contract or other
material contract or agreement to which the Company or any subsidiary thereof is
a party or waive, release or assign any material rights or claims thereunder;
(p) Enter into, modify, amend or cancel any development services,
licensing, distribution, sales, sales representation or other similar agreement
or obligation with respect to any Intellectual Property Rights other than such
agreements entered into in the ordinary course of business consistent with past
practices or enter into any contract of a character required to be disclosed by
Section 2.14;
(q) Materially revalue any of its assets or, except as required by
GAAP, make any change in accounting methods, principles or practices;
(r) Discharge, settle or satisfy any disputed claim, litigation,
arbitration, disputed liability or other controversy (absolute, accrued,
asserted or unasserted, contingent or otherwise), including any liability for
Taxes, other than the discharge or satisfaction in the ordinary course of
business consistent with past practice, or in accordance with their terms, of
liabilities reflected or reserved against in the Company Balance Sheet or
incurred since June 30, 2004 in the ordinary course of business consistent with
past practice, or waive any material benefits of, or agree to modify in any
material respect, any confidentiality, standstill or similar agreements to which
the Company or any of its subsidiaries is a party; PROVIDED, HOWEVER, that the
discharge or settlement of any disputed claim, liability or other controversy in
the amount of less than $50,000 shall not be deemed to be prohibited by the
foregoing;
(s) Engage in any action with the intent to directly or indirectly
adversely affect any of the transactions contemplated by this Agreement,
including with respect to any "poison pill" or similar plan, agreement or
arrangement, or any anti-takeover, control share acquisition, fair price,
moratorium or other similar statute (each, a "TAKEOVER Statute"); or
(t) Agree in writing or otherwise to take any of the actions
described in Section 4.1(a) through 4.1(s) above.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 STOCKHOLDERS MEETING.
(a) The Company, acting through its Board of Directors, shall, in
accordance with applicable law and its certificate of incorporation and bylaws,
duly call, give notice of, convene and hold a special meeting of its
stockholders (the "STOCKHOLDERS MEETING") as soon as reasonably practicable
following the clearance by the SEC of the Proxy Statement for the purpose of
considering and voting upon the approval and adoption of this Agreement and the
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approval of the Merger and such other matters as may be necessary to effectuate
the transactions contemplated hereby. The Company's Board of Directors shall (i)
recommend to the stockholders of the Company the approval and adoption of this
Agreement and the approval of the Merger, (ii) include in the Proxy Statement
its recommendation that the stockholders of the Company vote in favor of the
approval and adoption of this Agreement and the approval of the Merger, (iii)
use commercially reasonable efforts to solicit such approval from the
stockholders of the Company and (iv) not withdraw or modify such favorable
recommendation, except as permitted in paragraph (c) below.
(b) As soon as reasonably practicable following the execution of
this Agreement and in connection with the Stockholders Meeting, the Company
shall (i) promptly prepare and file with the SEC, use commercially reasonable
efforts to have cleared by the SEC and thereafter mail to its stockholders as
promptly as practicable the Proxy Statement and all other proxy materials
required in connection with such meeting, (ii) notify Parent of the receipt of
any comments of the SEC with respect to the Proxy Statement and of any requests
by the SEC for any amendment or supplement thereto or for additional information
and shall promptly provide to Parent copies of all correspondence between the
Company or any representative of the Company and the SEC and (iii) shall give
Parent and its counsel the opportunity to review the Proxy Statement prior to
its being filed with the SEC and shall give Parent and its counsel the
opportunity to review all amendments and supplements to the Proxy Statement and
all responses to requests for additional information and replies to comments
prior to their being filed with, or sent to, the SEC.
(c) Nothing in this Agreement shall prevent the Board of Directors
of the Company from withholding, withdrawing, amending or modifying its
recommendation in favor of the Merger if (i) a Superior Offer (as defined below)
is made to the Company and is not withdrawn, (ii) the Company shall have
provided written notice to Parent (a "NOTICE OF SUPERIOR Offer") advising Parent
that the Company has received a Superior Offer, specifying all of the material
terms and conditions of such Superior Offer and identifying the person or entity
making such Superior Offer, (iii) the Board of Directors of the Company
reasonably concludes, after consultation with its outside counsel, that, in
light of such Superior Offer, the withholding, withdrawal, amendment or
modification of such recommendation is required in order for the Board of
Directors of the Company to comply with its fiduciary obligations to the
Company's stockholders under applicable law, and (iv) the Company shall not have
violated any of the restrictions set forth in Section 5.4 or this Section 5.1.
The Company shall provide Parent with at least three business days prior notice
(or such lesser prior notice as is provided to the members of the Company's
Board of Directors but in no event less than twenty-four hours) of any meeting
of the Company's Board of Directors at which the Company's Board of Directors is
reasonably expected to consider any Acquisition Proposal (as defined in Section
5.4) to determine whether such Acquisition Proposal is a Superior Offer. Nothing
contained in this Section 5.1 shall limit the Company's obligation to hold and
convene the Stockholders Meeting (regardless of whether the recommendation of
the Board of Directors of the Company shall have been withdrawn, amended or
modified).
For purposes of this Agreement, "SUPERIOR OFFER" shall mean an
unsolicited, bona fide written offer made by a third party to consummate any of
the following transactions: (i) a merger or consolidation involving the Company
pursuant to which the stockholders of the Company immediately preceding such
transaction hold less than 50% of the equity interest in the surviving or
resulting entity of such transaction or (ii) the acquisition by any person or
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"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) (including by way of a tender offer or an exchange offer
or a two step transaction involving a tender offer followed with reasonable
promptness by a cash-out merger involving the Company), directly or indirectly,
of ownership of 100% of the then outstanding shares of capital stock of the
Company, on terms that the Board of Directors of the Company determines, in its
reasonable judgment (based on consultation with Seven Hills or another financial
advisor of national standing) to be more favorable to the Company stockholders
than the terms of the Merger; PROVIDED, HOWEVER, that any such offer shall not
be deemed to be a "SUPERIOR OFFER" unless any financing that is required to
consummate the transaction contemplated by such offer is committed, or unless
the Company's Board of Directors shall reasonably conclude (based on
consultation with its financial advisor) that such financing is likely to be
obtained by such third party on a timely basis.
(d) Nothing contained in this Agreement shall prohibit the Company
or its Board of Directors from disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act, if,
in the good faith judgment of the Company's Board of Directors, after
consultation with and advice from its outside counsel, is required in order for
the Board of Directors to comply with its fiduciary obligations, or is otherwise
required, under applicable law.
5.2 ANTITRUST AND OTHER FILINGS.
(a) As promptly as practicable after the execution of this
Agreement, each of the Company and Parent will prepare and file any pre-merger
notification forms required by the merger notification or control laws and
regulations of any applicable jurisdiction, as agreed to by the parties (the
"ANTITRUST FILINGS") and (ii) any other filings required to be filed by it under
the Exchange Act, the Securities Act or any other federal, state or foreign laws
relating to the Merger and the transactions contemplated by this Agreement (the
"OTHER FILINGS"). The Company and Parent each shall promptly supply the other
with any information which may be required in order to effectuate any filings
pursuant to this Section 5.2.
(b) Each of the Company and Parent will notify the other promptly
upon the receipt of any comments from any government officials in connection
with any filing made pursuant hereto and of any request for amendments or
supplements to any Antitrust Filings or Other Filings or for additional
information and will supply the other with copies of all correspondence between
such party or any of its representatives, on the one hand, and any government
officials, on the other hand, with respect to the Merger or any Antitrust Filing
or Other Filing. Each of the Company and Parent will cause all documents that it
is responsible for filing with any regulatory authorities to comply in all
material respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. Whenever any event occurs which is required
to be set forth in an amendment or supplement to any Antitrust Filing or Other
Filing, the Company or Parent, as the case may be, will promptly inform the
other of such occurrence and cooperate in filing with the appropriate government
officials such amendment or supplement.
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5.3 CONFIDENTIALITY; ACCESS TO INFORMATION.
(a) The parties acknowledge that the Company and Parent have
previously executed that certain Confidentiality Agreement dated as of June 3,
2004 (the "CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will
continue in full force and effect in accordance with its terms.
(b) The Company will afford Parent and its accountants, counsel and
other representatives reasonable access to its properties, books, records and
personnel during the period prior to the Effective Time to obtain all
information concerning the business, including the status of product development
efforts, properties, results of operations and personnel, as Parent may
reasonably request. No information or knowledge obtained by a party in any
investigation pursuant to this Section 5.3 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.4 NO SOLICITATION.
(a) From and after the date of this Agreement until the Effective
Time or termination of this Agreement pursuant to its terms, the Company and its
subsidiaries will not, nor will they authorize or permit any of their respective
officers, directors, affiliates or employees or any investment banker, attorney
or other advisor or representative retained by any of them to, directly or
indirectly, (i) solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal, (ii) participate in any discussions or
negotiations regarding, or furnish to any person any nonpublic information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) engage in discussions with any person with respect
to any Acquisition Proposal, except to refer them to the provisions of this
Section 5.4(a), (iv) approve, endorse or recommend any Acquisition Proposal or
(v) enter into any letter of intent or similar document or any contract,
agreement or commitment contemplating or otherwise relating to any Acquisition
Proposal; PROVIDED, HOWEVER, that prior to the approval and adoption of this
Agreement and approval of the Merger at the Stockholders Meeting, this Section
5.4(a) shall not prohibit the Company from furnishing nonpublic information
regarding the Company and its subsidiaries to, or entering into discussions
with, any person or group who has submitted (and not withdrawn) to the Company
an unsolicited, written, bona fide Acquisition Proposal that the Board of
Directors of the Company reasonably concludes (based on consultation with Seven
Hills or another financial advisor of national standing) constitutes, or is
likely to lead to, a Superior Offer; provided that (1) neither the Company nor
any representative of the Company and its subsidiaries shall have violated any
of the restrictions set forth in this Section 5.4, (2) the Board of Directors of
the Company concludes in good faith, after consultation with its outside legal
counsel, that such action is required in order for the Board of Directors of the
Company to comply with its fiduciary obligations to the Company's stockholders
under applicable law, (3) prior to furnishing any such nonpublic information to,
or entering into any such discussions with, such person or group, the Company
gives Parent written notice of the identity of such person or group and all of
the material terms and conditions of such Acquisition Proposal and of the
Company's intention to furnish nonpublic information to, or enter into
discussions with, such person or group, and the Company receives from such
person or group an executed confidentiality agreement containing terms at least
as restrictive with regard to the Company's confidential information as the
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Confidentiality Agreement, (4) the Company gives Parent at least three business
days advance notice of its intent to furnish such nonpublic information or enter
into such discussions, and (5) contemporaneously with furnishing any such
nonpublic information to such person or group, the Company furnishes such
nonpublic information to Parent (to the extent such nonpublic information has
not been previously furnished by the Company to Parent). The Company and its
subsidiaries will immediately cease any and all existing activities, discussions
or negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding two sentences by any
officer, director or employee of the Company or any of its subsidiaries or any
investment banker, attorney or other advisor or representative of the Company or
any of its subsidiaries shall be deemed to be a breach of this Section 5.4 by
the Company.
For purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean any
offer or proposal (other than an offer or proposal by Parent) relating to, or
involving: (A) any acquisition or purchase by any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 15% beneficial ownership interest in the total
outstanding voting securities of Company or any of its subsidiaries; (B) any
tender offer or exchange offer that if consummated would result in any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) beneficially owning 15% or more of the total outstanding
voting securities of the Company or any of its subsidiaries; (C) any merger,
consolidation, business combination or similar transaction involving the Company
pursuant to which the stockholders of the Company immediately preceding such
transaction hold less than 85% of the equity interests in the surviving or
resulting entity of such transaction; (D) any sale, lease, exchange, transfer,
license (other than in the ordinary course of business), acquisition, or
disposition of any material assets of the Company; or (E) any liquidation or
dissolution of the Company.
(b) In addition to the obligations of the Company set forth in
paragraph (a) of this Section 5.4, the Company as promptly as practicable, and
in any event within 24 hours of its receipt, shall advise Parent orally and in
writing of an Acquisition Proposal or any request for nonpublic information or
other inquiry which the Company reasonably believes could lead to an Acquisition
Proposal, the material terms and conditions of such Acquisition Proposal,
request or inquiry, and the identity of the person or group making any such
Acquisition Proposal, request or inquiry. The Company will keep Parent informed
as promptly as practicable in all material respects of the status and details
(including material amendments or proposed amendments) of any such Acquisition
Proposal, request or inquiry.
5.5 PUBLIC DISCLOSURE. Parent and the Company will consult with each
other, and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to the Merger, this Agreement
or an Acquisition Proposal and will not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
law or any listing agreement with a national securities exchange.
5.6 REASONABLE EFFORTS; NOTIFICATION.
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(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement, including using all commercially reasonable efforts to accomplish the
following: (i) causing the conditions precedent set forth in Article 6 to be
satisfied, (ii) obtaining all necessary actions or nonactions, waivers,
consents, approvals, orders and authorizations from Governmental Entities and
making of all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities) and taking
all steps that may be necessary to avoid any suit, claim, action, investigation
or proceeding by any Governmental Entity, (iii) obtaining all necessary
consents, approvals or waivers from third parties, (iv) defending any suits,
claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) executing and delivering any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement. Notwithstanding anything in this Agreement to
the contrary, neither Parent nor any of its affiliates shall be under any
obligation to make proposals, execute or carry out agreements or submit to
orders providing for the sale or other disposition or holding separate (through
the establishment of a trust or otherwise) of any assets or categories of assets
of Parent or any of its affiliates or the Company or any of its subsidiaries or
the holding separate of the shares of Company Common Stock (or shares of stock
of the Surviving Corporation) or imposing or seeking to impose any limitation on
the ability of Parent or any of its subsidiaries or affiliates to conduct their
business or own such assets or to acquire, hold or exercise full rights of
ownership of the shares of Company Common Stock (or shares of stock of the
Surviving Corporation).
(b) Each of the Company and Parent will give prompt notice to the
other of (i) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the Merger, (ii)
any notice or other communication from any Governmental Entity in connection
with the Merger or (iii) any litigation relating to, involving or otherwise
affecting the Company, Parent or their respective subsidiaries that relates to
the consummation of the Merger. The Company shall give prompt notice to Parent
of any representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate, or any failure of the Company to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; PROVIDED, HOWEVER, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. Parent shall give prompt notice to the Company of any
representation or warranty made by it or Merger Sub contained in this Agreement
becoming untrue or inaccurate, or any failure of Parent or Merger Sub to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement; PROVIDED, HOWEVER,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
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(c) The Company shall give prompt notice to Parent of receipt by
the Company of any demand for appraisal or purchase rights pursuant to Delaware
Law or California Law, respectively.
5.7 THIRD PARTY CONSENTS. As soon as practicable following the date
hereof, the Company will use all commercially reasonable efforts to obtain any
consents, waivers and approvals under any of its or its subsidiaries' respective
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby.
5.8 EMPLOYEE STOCK PURCHASE PLAN. The Company shall take all actions
necessary pursuant to the terms of the Company ESPP in order to shorten the
participation period(s) under such plan which includes the Effective Time (the
"CURRENT OFFERINGS") such that a new purchase date for each such participation
period shall occur prior to the Effective Time and shares shall be purchased by
the Company ESPP participants prior to the Effective Time. The Current Offerings
shall expire immediately following such new purchase date, and the Company ESPP
shall terminate immediately prior to the Effective Time. Subsequent to such new
purchase date, the Company shall take no action, pursuant to the terms of the
Company ESPP, to commence any new offering period.
5.9 INDEMNIFICATION.
(a) From and after the Effective Time, Parent will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
the Company pursuant to any indemnification agreements between the Company and
its directors and officers as of the Effective Time (the "INDEMNIFIED PARTIES")
and any indemnification provisions under the Company's Certificate of
Incorporation or Bylaws as in effect on the date hereof. The Certificate of
Incorporation and Bylaws of the Surviving Corporation will contain provisions
with respect to exculpation and indemnification that are at least as favorable
to the Indemnified Parties as those contained in the Certificate of
Incorporation and Bylaws of the Company as in effect on the date hereof, which
provisions will not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who, immediately prior to the Effective Time,
were directors, officers, employees or agents of the Company, unless such
modification is required by law.
(b) Parent shall, or the Company may with the prior written consent
of Parent, purchase prior to the Effective Time a six year extended reporting
endorsement ("D&O TAIL COVERAGE") under the Company's existing directors' and
officers' liability insurance policy, or with the Company's prior written
consent, which shall not be unreasonably withheld or conditioned, a
substantially similar policy, with respect to claims arising from facts or
events that occurred on or prior to the Effective Time. Notwithstanding the
foregoing, in no event shall the aggregate premiums for such D&O Tail Coverage
exceed $225,000 (the "D&O PREMIUM CAP"). If Parent is unable to obtain the D&O
Tail Coverage for an aggregate amount less than or equal to the D&O Premium Cap,
Parent, after consultation with the Company, shall obtain as much insurance as
can be obtained for the D&O Premium Cap.
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(c) This Section 5.9 shall survive the consummation of the Merger,
is intended to benefit the Surviving Corporation and each Indemnified Party,
shall be binding on all successors and assigns of the Surviving Corporation and
Parent, and shall be enforceable by the Indemnified Parties.
5.10 TAKEOVER STATUTES. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, each of Parent and Company and their respective Boards of Directors
shall grant such approvals and take such lawful actions as are necessary to
ensure that such transactions may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise act to eliminate or
minimize the effects of such statute and any regulations promulgated thereunder
on such transactions.
5.11 PRIOR SERVICE CREDIT. Parent shall, to the extent permitted by any
employee benefit plan or program sponsored or maintained by Parent or any
affiliate thereof (including, with limitation, the Surviving Corporation after
the Effective Time), give former employees of the Company that are retained as
employees of the Surviving Corporation credit for their service with the Company
both prior to and after the Effective Time for purposes of determining
eligibility to participate in and vesting or accrual in such plan or program.
5.12 401(k) PLAN. The Company shall take all action necessary in
advance of the Effective Time to terminate its and its subsidiaries 401(k) plans
effective immediately prior to the Effective Time (all such plans are referred
to herein collectively as the "COMPANY 401(K) PLAN"). Parent will cause its
401(k) plan to accept rollovers or direct rollovers of "eligible rollover
distributions" within the meaning of Section 402(c) of the Code made with
respect to the Company's and its subsidiaries' employees pursuant to the Company
401(k) Plan by reason of the transactions contemplated by this Agreement.
5.13 2004 EMPLOYEE BONUS POLICY. Part 5.13 of the Company Disclosure
Schedule describes the terms and conditions of the Company's 2004 employee bonus
policy (the "EMPLOYEE BONUS POLICY). The Employee Bonus Policy shall survive the
consummation of the Merger, is intended to benefit each of the Company's
employees eligible to participate in such Policy, shall be binding on all
successors and assigns of the Surviving Corporation and Parent, and shall be
enforceable by such eligible employees.
ARTICLE 6
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) STOCKHOLDER APPROVALS. The Company Stockholder Approval shall
have been obtained.
(b) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
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(c) MATERIAL CONSENTS. All material consents, approvals, permits
of, authorizations from, notifications to and filings with any Governmental
Entities required to be made or obtained prior to the consummation of the Merger
shall have been made or obtained.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation
of the Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and
warranty of Parent and Merger Sub contained in this Agreement (i) shall have
been true and correct as of the date of this Agreement and (ii) shall be true
and correct on and as of the Closing Date with the same force and effect as if
made on the Closing Date except, (A) in each case, or in the aggregate, as does
not constitute a material adverse effect on Parent or Merger Sub as of the
Closing Date; PROVIDED, HOWEVER, such material adverse effect qualification
shall be inapplicable with respect to the representations and warranties
contained in Section 3.2 (which representations shall be true and correct at the
applicable times in all material respects), and (B) for those representations
and warranties which address matters only as of a particular date (which
representations shall have been true and correct (subject to the qualifications
set forth in the preceding clause (A)) as of such particular date) (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, any update of or modification to the Parent
Disclosure Schedule made or purported to have been made after the execution of
this Agreement shall be disregarded). The Company shall have received a
certificate with respect to the foregoing signed on behalf of Parent by an
authorized officer of Parent. In the event that Parent shall have given any
notice required by Section 5.6 that any representation or warranty by Parent in
this Agreement is or has become untrue or inaccurate, such certification shall
make specific reference to such notice and shall state concisely the basis of
Parent's judgment that the matter or matters identified in any such notice do
not individually, or in the aggregate, constitute a material adverse effect on
Parent or Merger Sub as of the Closing Date.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and the Company shall have received a certificate to such
effect signed on behalf of Parent by an authorized officer of Parent.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and
warranty of the Company contained in this Agreement (i) shall have been true and
correct as of the date of this Agreement and (ii) shall be true and correct on
and as of the Closing Date with the same force and effect as if made on and as
of the Closing Date except (A) in each case, or in the aggregate, as does not
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constitute a Company Material Adverse Effect as of the Closing Date; PROVIDED,
HOWEVER, such Company Material Adverse Effect qualification shall be
inapplicable with respect to the representations and warranties contained in
Sections 2.2, 2.3, 2.4, 2.19 and 2.20 (which representations shall be true and
correct at the applicable times in all material respects), and (B) for those
representations and warranties which address matters only as of a particular
date (which representations shall have been true and correct (subject to the
qualifications set forth in the preceding clause (A)) as of such particular
date) (it being understood that, for purposes of determining the accuracy of
such representations and warranties, any update of or modification to the
Company Disclosure Schedule made or purported to have been made after the
execution of this Agreement shall be disregarded). Parent shall have received a
certificate with respect to the foregoing signed on behalf of the Company by the
Chief Executive Officer or Chief Financial Officer of the Company. In the event
that the Company shall have given any notice required by Section 5.6 that any
representation or warranty by the Company in this Agreement is or has become
untrue or inaccurate, such certification shall make specific reference to such
notice and shall state concisely the basis of the Company's judgment that the
matter or matters identified in any such notice do not individually, or in the
aggregate, constitute a Company Material Adverse Effect on the Company as of the
Closing Date.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date, including the agreements and covenants set forth in Section 4.1 regarding
conduct of business by the Company, and Parent shall have received a certificate
to such effect signed on behalf of the Company by the Chief Executive Officer or
Chief Financial Officer of the Company.
(c) MATERIAL ADVERSE EFFECT. No Company Material Adverse Effect
shall have occurred since the date of this Agreement and be continuing.
(d) CONSENTS. (i) All required approvals or consents of any
Governmental Entity in connection with the Merger and the consummation of the
other transactions contemplated hereby shall have been obtained (and all
relevant statutory, regulatory or other governmental waiting periods, shall have
expired) unless the failure to receive any such approval or consent would not be
reasonably likely, directly or indirectly, to result in a Company Material
Adverse Effect or a material adverse effect on Parent or the Surviving
Corporation, considered as separate entities, and (ii) all such approvals and
consents which have been obtained shall be on terms that are not reasonably
likely, directly or indirectly, to result in a Company Material Adverse Effect
or a material adverse effect on Parent or the Surviving Corporation, considered
as separate entities.
(e) DISSENTERS' RIGHTS. Holders of no more than five percent of the
number of issued and outstanding shares of Company Common Stock shall have
indicated in writing to the Company or Parent prior to the Effective Time that
they are seeking appraisal or dissenters' rights for such shares under Delaware
Law or California Law.
(f) NO RESTRAINTS. There shall not be instituted or pending any
action or proceeding by any Governmental Entity (i) seeking to restrain,
prohibit or otherwise interfere with the ownership or operation by Parent or any
of its subsidiaries of all or any portion of the business of the Company or any
of its subsidiaries or of Parent or any of its subsidiaries or to compel Parent
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or any of its subsidiaries to dispose of or hold separate all or any portion of
the business or assets of the Company or any of its subsidiaries or of Parent or
any of its subsidiaries, (ii) seeking to impose or confirm limitations on the
ability of Parent or any of its subsidiaries effectively to exercise full rights
of ownership of the shares of Company Common Stock (or shares of stock of the
Surviving Corporation) including the right to vote any such shares on any
matters properly presented to shareholders or (iii) seeking to require
divestiture by Parent or any of its subsidiaries of any such shares.
(g) EMPLOYMENT ARRANGEMENTS. Each "KEY EMPLOYEE" designated on Part
6.3(g) of the Parent Disclosure Schedule shall have entered into employment
arrangements with Parent or the Surviving Corporation, in form and substance
satisfactory to Parent, which shall include non-solicitation provisions, and no
Key Employee shall have terminated such employment arrangement, or provided
notice of his or her intention to do so.
(h) TERMINATION OF OPTIONS AND WARRANTS. All Company Options shall
have been canceled in accordance with Section 1.8 and all Company Warrants shall
have been terminated in accordance with Section 1.9.
(i) RESIGNATIONS OF DIRECTORS. Parent shall have received written
resignations from all of the directors of the Company and its subsidiaries
effective as of the Effective Time.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the Company Stockholder Approval has
been obtained:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) by either the Company or Parent if the Merger shall not have
been consummated by February 28, 2005 for any reason; PROVIDED, HOWEVER, that
the right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement;
(c) by either the Company or Parent if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree, ruling or other action is final and
nonappealable;
(d) by either the Company or Parent, if the Company Stockholder
Approval shall not have been obtained by reason of the failure to obtain the
required vote at a meeting of the Company stockholders duly convened therefore
or at any adjournment thereof; PROVIDED, HOWEVER, that the right to terminate
this Agreement under this Section 7.1(d) shall not be available to the Company
where the failure to obtain the Company Stockholder Approval shall have been
caused by (i) the action or failure to act of the Company and such action or
failure to act constitutes a material breach by the Company of this Agreement or
(ii) a breach of any of the Voting Agreements by any party thereto other than
Parent;
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(e) by Parent (at any time prior to the adoption and approval of
this Agreement and the Merger by the required vote of the stockholders of the
Company) if a Triggering Event (as defined below) shall have occurred;
(f) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that if such
inaccuracy in Parent's representations and warranties or breach by Parent is
curable by Parent, then the Company may not terminate this Agreement under this
Section 7.1(f) for 30 days after delivery of written notice from the Company to
Parent of such breach and intent to terminate, provided Parent continues to
exercise commercially reasonable efforts to cure such breach (it being
understood that the Company may not terminate this Agreement pursuant to this
paragraph (f) if such breach by Parent is cured during such 30-day period, or if
the Company shall have materially breached this Agreement); or
(g) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 6.3(a) or Section
6.3(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue, PROVIDED that if such
inaccuracy in the Company's representations and warranties or breach by the
Company is curable by the Company, then Parent may not terminate this Agreement
under this Section 7.1(g) for 30 days after delivery of written notice from
Parent to the Company of such breach and intent to terminate, PROVIDED the
Company continues to exercise commercially reasonable efforts to cure such
breach (it being understood that Parent may not terminate this Agreement
pursuant to this paragraph (g) if such breach by the Company is cured during
such 30-day period, or if Parent shall have materially breached this Agreement).
For the purposes of this Agreement, a "TRIGGERING EVENT" shall be
deemed to have occurred if: (i) the Board of Directors of the Company or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Parent its recommendation in favor of the
adoption and approval of the Agreement or the approval of the Merger; (ii) the
Company shall have failed to include in the Proxy Statement the recommendation
of the Board of Directors of the Company in favor of the adoption and approval
of the Agreement and the approval of the Merger; (iii) the Board of Directors of
the Company fails publicly to reaffirm its recommendation in favor of the
adoption and approval of the Agreement and the approval of the Merger within 10
business days after Parent requests in writing that such recommendation be
reaffirmed at any time following the public announcement of an Acquisition
Proposal; (iv) the Board of Directors of the Company or any committee thereof
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shall have approved or publicly recommended any Acquisition Proposal; (v) the
Company shall have entered into any letter of intent or similar document or any
agreement, contract or commitment accepting any Acquisition Proposal; (vi) the
Company shall have breached any of the provisions of Sections 5.1, 5.4 or 5.10;
or (vii) a tender or exchange offer relating to securities of the Company shall
have been commenced by a person unaffiliated with Parent, and the Company shall
not have sent to its securityholders pursuant to Rule 14e-2 promulgated under
the Exchange Act, within 10 business days after such tender or exchange offer is
first published sent or given, a statement disclosing that the Company
recommends rejection of such tender or exchange offer.
7.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any proper
termination of this Agreement under Section 7.1 will be effective immediately
upon the delivery of written notice of the terminating party to the other
parties hereto. In the event of the termination of this Agreement as provided in
Section 7.1, this Agreement shall be of no further force or effect, except (i)
as set forth in this Section 7.2, Section 7.3 and Article 8, each of which shall
survive the termination of this Agreement, and (ii) nothing herein shall relieve
any party from liability for any willful breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 FEES AND EXPENSES.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses whether or not the
Merger is consummated.
(b) In the event that this Agreement is terminated by Parent or the
Company, as applicable, pursuant to Sections 7.1(b), 7.1(d) or 7.1(e), the
Company shall promptly, but in no event later than two days after the date of
such termination, pay Parent a fee equal to $650,000 in immediately available
funds (the "TERMINATION FEE"); PROVIDED, that in the case of a termination under
Sections 7.1(b) or 7.1(d) prior to which no Triggering Event has occurred, (i)
such payment shall be made only if (A) following the date of this Agreement and
prior to the termination of this Agreement, a person has publicly announced an
Acquisition Proposal and (B) within 18 months following the termination of this
Agreement a Company Acquisition (as defined below) is consummated or the Company
enters into a binding agreement providing for a Company Acquisition and (ii)
such payment shall be made promptly, but in no event later than two days after
the consummation of such Company Acquisition or the entry by the Company into
such agreement.
(c) Each of Parent and the Company acknowledges that the agreements
contained in this Section 7.3 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, neither
Parent nor the Company would enter into this Agreement. Accordingly, if the
Company fails to pay in a timely manner amounts due pursuant to Section 7.3(b),
and, in order to obtain such payment, Parent makes a claim for such amounts that
results in a judgment against the Company for the amounts described in Section
7.3(b), the Company shall pay to Parent its reasonable costs and expenses
(including reasonable attorneys' fees and expenses as provided in Section
8.7(b)) in connection with such suit, together with interest on the amounts
described in Section 7.3(b) (at the prime rate of Bank of America, N.A. in
effect on the date such payment was required to be made) from such date until
the payment of such amount (together with such accrued interest). Payment of the
fees described in Section 7.3(b) shall not be in lieu of damages incurred in the
event of breach of this Agreement.
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For the purposes of this Agreement, "COMPANY ACQUISITION" shall mean
any of the following transactions (other than the transactions contemplated by
this Agreement); (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company pursuant to which the stockholders of the Company immediately preceding
such transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction, (ii) a sale or other
disposition by the Company of assets representing in excess of 50% of the
aggregate fair market value of the Company's business immediately prior to such
sale, or (iii) the acquisition by any person or group (including by way of a
tender offer or an exchange offer or issuance by the Company), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing in excess of 50% of the voting power of the then
outstanding shares of capital stock of the Company.
7.4 AMENDMENT. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of Parent and the Company.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE 8
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company, Parent and Merger Sub contained in this Agreement
shall terminate at the Effective Time, and only the covenants that by their
express terms survive the Effective Time shall survive the Effective Time.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given upon delivery either personally or by
commercial delivery service, or sent via facsimile (receipt confirmed) to the
parties at the following addresses or facsimile numbers (or at such other
address or facsimile numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Progress Software Corporation
00 Xxx Xxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Chief Executive Officer
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with copies to:
Progress Software Corporation
00 Xxx Xxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Vice President and
General Counsel
and
Xxxxx Xxxx LLP
Seaport World Trade Center West
000 Xxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq. and
Xxxxxxx X. Xxxx, Esq.
(b) if to the Company, to:
Persistence Software, Inc.
0000 Xxxxx Xxxxxxxx Xxxx., 0xx Xxxxx
Xxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxxxxxx Xxxxx, Chief Executive Officer
with a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
8.3 INTERPRETATION; CERTAIN DEFINED TERMS.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The headings contained in this
Agreement are only for reference purposes and shall not affect in any way the
meaning or interpretation of this Agreement. When reference is made herein to
"the business of" an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity. Reference to
the subsidiaries of an entity shall be deemed to include all direct and indirect
subsidiaries of such entity. Reference to an agreement herein is to such
agreement as amended in accordance with its terms up to the date hereof.
Reference to a statute herein is to such statute, as amended.
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(b) For purposes of this Agreement, "KNOWLEDGE" means, with respect
to any fact, circumstance, event or other matter in question, the actual
knowledge of such fact, circumstance, event or other matter of (i) an
individual, if used in reference to an individual, or (ii) any officer or
director of such party, if used in reference to a person that is not an
individual. Any such individual will be deemed to have actual knowledge of a
particular fact, circumstance, event or other matter if (x) such fact,
circumstance, event or other matter is reflected in one or more documents
(whether written or electronic, including e-mails sent to or by such individual)
in, or that have been in, such individual's possession, including personal files
of such individual, (y) such fact, circumstance, event or other matter is
reflected in one or more documents (whether written or electronic) contained in
books and records of such party (in the case of knowledge of a party that is not
an individual) that would reasonably be expected to be reviewed by an individual
who has the duties and responsibilities of such individual in the customary
performance of such duties and responsibilities or (z) such knowledge could be
obtained from reasonable inquiry of the persons employed by such party charged
with administrative or operational responsibility for such matters for such
party.
(c) For purposes of this Agreement, the term "COMPANY MATERIAL
ADVERSE EFFECT" means any change, event, circumstance or effect (whether or not
such change, event, circumstance or effect constitutes a breach of a
representation, warranty or covenant made by the Company in this Agreement) that
is or is reasonably likely to be materially adverse to the business, assets
(including intangible assets), capitalization, financial condition, operations
or results of operations or prospects of the Company taken as a whole with its
subsidiaries, including (i) litigation not otherwise disclosed on the Company
Disclosure Schedule (or if disclosed on the Company Disclosure Schedule,
modified by amendment or otherwise to include additional claims against the
Company) that is reasonably likely to be determined adversely to the Company,
and if determined adversely to the Company, (A) if money damages are sought,
would, in the aggregate, result in liability to the Company or its subsidiaries
in excess of $250,000 (exclusive of any such amount that would be covered and
payable, net of all deductible amounts, under any insurance policy of the
Company or its subsidiaries) or (B) if equitable relief is sought, which would
prohibit or otherwise materially impair the Company and its subsidiaries from
conducting their business as a whole in the manner presently conducted; (ii)
failure of the Company to disclose to Parent obligations, whether written or
oral, due third parties, including customers, including liabilities pursuant to
maintenance, consulting, and other service agreements with customers and other
third parties, in excess, in the aggregate, of $250,000; (iii) failure of the
Company to disclose to Parent proprietary rights of third parties which may
materially impair any Intellectual Property Rights material to the Company or
its subsidiaries or may result in the Company being required to pay fees or
other damages to third parties in excess, in the aggregate of $250,000,
including the undisclosed incorporation of third party software proprietary
rights, directly or indirectly, as components of the Company's software products
and services; and (iv) failure of the Company to disclose to Parent payments or
loans, in cash or in kind, made, or to be made, to any officer or director of
the Company, other than in accordance with the Company's customary compensation
and cost reimbursement practices; and excluding any change, event, circumstance
-49-
or effect that directly and primarily results from (A) changes in general
economic conditions or changes generally affecting the industry in which the
Company operates (PROVIDED that such changes do not affect the Company in a
disproportionate manner) or (B) changes, effects or events resulting from the
announcement or pendency of the Merger or from the taking of any action required
by this Agreement. Any change in the price at which the shares of Company Common
Stock are traded shall not, in and of itself, constitute a Company Material
Adverse Effect, in the absence of an underlying change, effect or event that has
caused or contributed to such change or failure and which is or is reasonably
likely to be materially adverse to the business, assets (including intangible
assets) capitalization, operations, results of operations or prospects of the
Company taken as a whole with its subsidiaries. The Company shall be required to
sustain the burden of demonstrating that any such change, effect or event is
directly attributable to the Merger and the taking of any action required by
this Agreement.
(d) For purposes of this Agreement, the term "PERSON" shall mean
any individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
(e) For purposes of this Agreement, "SUBSIDIARY" of a specified
entity will be any corporation, partnership, limited liability company, joint
venture or other legal entity of which the specified entity (either alone or
through or together with any other subsidiary) owns, directly or indirectly, 50%
or more of the stock or other equity or partnership interests the holders of
which are generally entitled to vote for the election of the Board of Directors
or other governing body of such corporation or other legal entity.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement, its
Exhibits and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein, including the Company
Disclosure Schedule and the Parent Disclosure Schedule (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, it being understood that
the Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically provided in Section 5.9 and 5.13.
8.6 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
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8.7 OTHER REMEDIES; SPECIFIC PERFORMANCE; FEES.
(a) Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
(b) If any action, suit or other proceeding (whether at law, in
equity or otherwise) is instituted concerning or arising out of this Agreement
or any transaction contemplated hereunder, the prevailing party shall recover,
in addition to any other remedy granted to such party therein, all such party's
costs and attorneys fees incurred in connection with the prosecution or defense
of such action, suit or other proceeding.
8.8 GOVERNING LAW; SUBMISSION TO 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 law thereof. The parties hereby irrevocably and unconditionally
consent to submit to the exclusive jurisdiction of the courts of the United
States of America located in Boston, Massachusetts for any actions, suits or
proceedings arising out of or relating to this Agreement (and the parties agree
not to commence any action, suit or proceeding relating thereto except in such
courts), and further agree that service of any process, summons, notice or
document by U.S. certified mail shall be effective service of process for any
action, suit or proceeding brought against the parties in any such court. The
parties hereby irrevocably and unconditionally waive any objection to the laying
of venue of any action, suit or proceeding arising out of this Agreement, in the
courts of the United States of America located in Boston, Massachusetts, and
hereby further irrevocably and unconditionally waive and agree not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
8.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 ASSIGNMENT. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
consent of the other parties hereto. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Any purported
assignment in violation of this Section 8.10 shall be void.
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8.11 WAIVER OF JURY TRIAL. EACH OF PARENT, THE COMPANY AND MERGER SUB
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE
COMPANY OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
* * * * *
IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be executed by their duly authorized respective officers as of the
date first written above.
PROGRESS SOFTWARE CORPORATION
/s/ Xxxxxx X. Xxxxx
------------------------------------
By: Xxxxxx X. Xxxxx
Title:
PSI ACQUISITION SUB, INC.
/s/ Xxxxxx X. Xxxxx
------------------------------------
By: Xxxxxx X. Xxxxx
Title:
PERSISTENCE SOFTWARE, INC.
/S/ XXXXXXXXXXX XXXXX
------------------------------------
By: Xxxxxxxxxxx Xxxxx
Title: Chief Executive Officer
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Schedules and Exhibits Omitted Pursuant to Item 601(b)(2) of Regulation S-K
The following schedules and exhibits to the Agreement and Plan of
Merger were omitted from this Exhibit 99.1 pursuant to Item 601(b)(2) of
Regulation S-K. We agree to furnish supplementally to the Securities and
Exchange Commission copies of these omitted schedules and exhibits upon request.
Company Disclosure Schedule
Parent Disclosure Schedule
Exhibit A Form of Voting Agreement
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