Exhibit 2.1
AMENDED & RESTATED AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PARAMETRIC TECHNOLOGY CORPORATION,
PTC MAPLE CORPORATION
ARBORTEXT, INC.
AND
THE STOCKHOLDER REPRESENTATIVE
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July 15, 2005
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Form 8-K Exhibit Notice:
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This Agreement is included as an exhibit to the Form 8-K to provide
information regarding its terms. Except for its status as the contractual
document between the parties with respect to the Merger described herein, it
is not intended to provide factual information about the parties. The
representations and warranties contained in this Agreement were made only for
purposes of this agreement and as of specific dates, were solely for the
benefit of the parties hereto, and may be subject to limitations agreed by the
contracting parties, including being qualified by disclosures between the
parties. These representations and warranties may have been made for the
purposes of allocating contractual risk between the parties to the agreement
instead of establishing these matters as facts, and may be subject to
standards of materiality applicable to the contracting parties that differ
from those applicable to investors. They should be viewed by investors in this
context.
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TABLE OF CONTENTS
Page
SECTION 1 THE MERGER AND OTHER TRANSACTIONS..........................1
1.1 Certain Definitions..........................................1
1.2 The Merger...................................................7
1.3 Closing......................................................8
1.4 Effective Time; Effects of the Merger........................8
1.5 Certificate of Incorporation and Bylaws......................8
1.6 Directors and Officers.......................................8
1.7 Merger Consideration.........................................8
1.8 Conversion of Stock and Options.............................10
1.10 Dissenters Rights...........................................12
1.11 Lost, Stolen or Destroyed Certificates......................12
1.12 Tax Withholding.............................................13
1.13 Further Actions.............................................13
SECTION 2 REPRESENTATIONS AND WARRANTIES OF ARBORTEXT...............13
2.1 Organization and Qualification..............................13
2.2 Capitalization; Subsidiaries................................13
2.3 Authority; Enforceability...................................15
2.4 No Breach; Consents.........................................15
2.5 Certificate of Incorporation and Bylaws; Corporate Records..15
2.6 Financial Statements........................................16
2.7 Absence of Undisclosed Liabilities..........................17
2.8 Accounts and Notes Receivable...............................17
2.9 Absence of Certain Changes..................................17
2.10 Tax Matters.................................................18
2.11 Compliance with Laws; Permits...............................21
2.12 Actions and Proceedings.....................................21
2.13 Contracts and Other Agreements..............................21
2.14 Real Estate.................................................23
2.15 Tangible Property...........................................23
2.16 Proprietary Rights..........................................24
2.17 Title to Assets; Liens......................................27
2.18 Customers; Warranties.......................................27
2.19 Employee Benefit Plans......................................28
2.20 Employment Matters..........................................31
2.21 Insurance...................................................32
2.22 Brokerage...................................................32
2.23 Environmental Compliance....................................32
2.24 Unlawful Payments...........................................33
2.25 Related Party Transactions..................................33
2.26 Bank and Brokerage Accounts; Powers of Attorney.............34
2.27 Books and Records; Internal Controls........................34
2.28 Rights to Acquire...........................................34
2.29 Full Disclosure.............................................34
SECTION 3 REPRESENTATIONS AND WARRANTIES OF PTC AND MERGER SUB......34
3.1 Organization................................................34
3.2 Authority to Execute and Perform Agreements.................35
3.3 No Breach; Consents.........................................35
3.4 Actions and Proceedings.....................................35
3.5 Brokerage...................................................35
3.6 Financing...................................................36
SECTION 4 COVENANTS AND AGREEMENTS..................................36
4.1 Conduct of Arbortext's Business.............................36
4.2 Corporate Examinations and Investigations...................37
4.3 Consummation, Governmental and Third-Party Notices
and Consents...............................................38
4.5 Stockholder Approval; Dissenters' Rights....................39
4.6 Tax Matters.................................................39
4.7 Continuing Obligation to Inform.............................41
4.8 Exclusivity.................................................41
4.9 Transaction Expenses........................................42
4.10 Public Announcements and Confidentiality....................42
4.11 Indemnification of Directors and Officers...................42
4.12 Employee Benefits...........................................43
4.13 Termination of Options......................................45
4.14 Delivery of Monthly Financial Statements....................45
4.15 Employee Benefit Plans......................................45
4.16 Subsidiary Employee Agreements..............................45
4.17 280G Approval...............................................45
SECTION 5 CONDITIONS TO EACH PARTY'S OBLIGATION TO CLOSE............46
5.1 Stockholder Approval........................................46
5.2 Antitrust Clearance.........................................46
5.3 Legal Proceedings...........................................46
SECTION 6 CONDITIONS TO THE OBLIGATION OF PTC AND MERGER SUB
TO CLOSE.................................................46
6.1 Compliance; CEO Certificate.................................47
6.2 Secretary Certificate.......................................47
6.3 Third Party Consents and Approvals..........................47
6.4 Certificates................................................47
6.5 Escrow Agreement............................................47
6.6 Dissenting Stockholders.....................................47
6.7 Termination of Purchase Rights..............................48
6.8 Opinion of Counsel to Arbortext.............................48
6.9 FIRPTA Certificate..........................................48
6.10 No Bank Debt or Liens.......................................48
6.11 Termination of Other Agreements.............................48
6.12 Intercompany Royalty Agreement..............................48
6.13 Accrued Vacation ...........................................48
6.14 Miscellaneous...............................................48
SECTION 7 CONDITIONS TO ARBORTEXT'S OBLIGATION TO CLOSE.............48
7.1 Compliance; Officer Certificates............................48
7.2 Secretary Certificates......................................49
7.3 Escrow Agreement............................................49
7.4 Opinion of Counsel to PTC...................................49
SECTION 8 INDEMNIFICATION...........................................49
8.1 Survival....................................................49
8.2 Obligation of the Securityholders to Indemnify..............49
8.3 Notice and Opportunity to Defend............................50
8.4 Limitations on Indemnification..............................52
SECTION 9 TERMINATION, AMENDMENT AND WAIVER.........................53
9.1 Termination.................................................53
9.2 Effect of Termination.......................................53
9.3 Amendment; Waiver...........................................54
SECTION 10 MISCELLANEOUS.............................................54
10.1 Notices.....................................................54
10.2 Entire Agreement............................................55
10.3 Governing Law...............................................55
10.4 Dispute Resolution..........................................55
10.5 Specific Performance and Other Remedies.....................56
10.6 Binding Effect..............................................57
10.7 Counterparts................................................57
10.8 Exhibits and Schedules......................................57
10.9 Headings....................................................57
10.10 Severability................................................57
10.11 Stockholder Representative..................................57
195069.1
SCHEDULES
The following schedules and exhibits are omitted in reliance on Item 601(b)(2)
of Regulation S-K but will be furnished supplementally to the Commission upon
request.
Arbortext Disclosure Schedule
Schedule 1.1 - Distribution Schedule
Schedule 1.2 - List of Arbortext Officers Deemed to have Knowledge
Schedule 1.9 - Designated Individuals
EXHIBITS
Exhibit A - Form of Escrow Agreement
Exhibit B - Matters to be Covered in the Opinion of Counsel to Arbortext
Exhibit C - Form of FIRPTA Certificate
Exhibit D - Form of FIRPTA IRS Notice
Exhibit E - Matters to be Covered in the Opinion of Counsel to PTC
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the
"Agreement") dated as of the 15th day of July, 2005, by and among Parametric
Technology Corporation, a Massachusetts corporation ("PTC"), PTC Maple
Corporation, a Delaware corporation and newly-formed, indirect, wholly-owned
subsidiary of PTC ("Merger Sub"), Arbortext, Inc., a Delaware corporation
("Arbortext"), and Xxxxxx Xxxxx, as the Stockholder Representative hereunder,
amends and restates in its entirety the Agreement and Plan of Merger entered
into by the parties as of the 30th day of June, 2005.
Recitals
WHEREAS, the Boards of Directors of PTC and Arbortext have deemed it
advisable and in the best interest of their respective companies and their
respective stockholders to enter into a business combination by means of the
merger of Merger Sub with and into Arbortext under the terms of this Agreement
and have approved and adopted this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
SECTION 1
THE MERGER AND OTHER TRANSACTIONS
1.1 Certain Definitions. For purposes of this Agreement:
(a) "1999 Plan" means Arbortext's 1999 Stock Plan.
(b) "Accounts Receivable" has the meaning given in Section 2.8.
(c) "Advent Agreement" means the Share Purchase Agreement dated October 12,
2004 by and among Arbortext, Advent Publishing Systems Limited ("Advent"), and
the shareholders of Advent named therein.
(d) "Advent Holdback Shares" means the shares of Arbortext Common Stock
outstanding and held by Arbortext at the Effective Time pursuant to Section 2.3
of the Advent Agreement.
(e) "Aggregate Option Exercise Price" means with respect to all outstanding
Options exercisable at the Effective Time, the aggregate of the products of (i)
the number of shares of Arbortext Common Stock subject to such Options and (ii)
the exercise price per share of such Arbortext Common Stock of such Options.
(f) "Annual Financials" has the meaning given in Section 2.6.
(g) "Business Day" means Monday through Friday, but excluding holidays, in
Boston, Massachusetts.
(h) "Certificate of Merger" has the meaning given in Section 1.3.
(i) "Claims Termination Date has the meaning given to such term in the Escrow
Agreement.
(j) "Closing" has the meaning given in Section 1.3.
(k) "Closing Adjustments" has the meaning given in Section 1.7.
(l) "Closing Date" has the meaning given in Section 1.3.
(m) "Closing Deadline" has the meaning given in Section 9.1(a).
(n) "Code" means the U.S. Internal Revenue Code of 1986, as amended.
(o) "Consent" means any filing with, notice to, or approval, consent or
waiver.
(p) "DGCL" has the meaning given in Section 1.2.
(q) "Dissenting Shares" and "Dissenting Stockholder" have the respective
meanings given in Section 1.10.
(r) "Distribution Schedule" means Schedule 1.1 hereto. In the event of any
negative Closing Adjustment under Section 1.7(b), the amount of such Adjustment
shall be allocated among the Securityholders pro rata in accordance with the
respective amounts shown under "Tier 4 - Remaining Proceeds" on the Distribution
Schedule, and the amounts shown in each of the columns shall be reduced
accordingly.
(s) "Effective Date" has the meaning given in Section 1.4.
(t) "Effective Time" has the meaning given in Section 1.4.
(u) "Escrow Agent" has the meaning given in Section 1.9(c).
(v) "Excess Transaction Expenses" has the meaning given in Section 4.9.
(w) "Escrow Agreement" has the meaning given in Section 1.9(c).
(x) "Escrow Funds" means the sum held by the Escrow Agent from time to time
pursuant to Section 1.9(c) and the Escrow Agreement.
(y) "Excess Parachute Payment" has the meaning given in Section 280G(b) of the
Code.
(z) "Expiration Date" has the meaning given in Section 8.4(b).
(aa) "Financial Statements" has the meaning given in Section 2.6.
(bb) "Final Claim" has the meaning given in the Escrow Agreement.
(cc) "Forfeitable Shares" means (i) shares of Arbortext Stock that are,
immediately before the Effective Time, subject to Arbortext's right of
Forfeiture pursuant to the 1999 Plan and Option agreements thereunder and (ii)
shares underlying outstanding Options that would be Forfeitable Shares if such
Options were exercised immediately before the Effective Time. For purposes of
this Agreement, "forfeiture" of Forfeitable Shares includes termination of an
Option exercisable for Forfeitable Shares.
(dd) "GAAP" means generally accepted accounting principles in the United
States of America.
(ee) "Governmental Entity" means any foreign, federal, state, local or other
court or governmental, regulatory or administrative agency, body or authority.
(ff) "Hazardous Materials" has the meaning given in Section 2.23(b).
(gg) "H-S-R Act" means the U.S. Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
(hh) "including" means "including but not limited to."
(ii) "Independent Accountant" means a mutually acceptable independent
accountant of national or regional standing that has not been engaged by either
PTC or Arbortext within three years before the Closing Date.
(jj) "Insurance Policies" has the meaning given in Section 2.21.
(kk) "Interim Balance Sheet" has the meaning given in Section 2.6.
(ll) "Interim Balance Sheet Date" has the meaning given in Section 2.6.
(mm) "Interim Financials" has the meaning given in Section 2.6.
(nn) "Key Customers" has the meaning given in Section 2.18.
(oo) "Knowledge," when used in this Agreement in reference to Arbortext, means
the Knowledge of any of the individuals identified on Schedule 1.2 hereto. Any
such individual will be deemed to have "Knowledge" of a particular fact or other
matter if such individual is actually aware of such fact or other matter.
(pp) "Liabilities" means any liabilities of any nature, whether accrued,
absolute, contingent or otherwise (including, without limitation, liabilities as
guarantor or otherwise with respect to obligations of others, liabilities for
taxes due or then accrued or to become due, and contingent liabilities relating
to activities of Arbortext or any Subsidiary or the conduct of its business,
regardless of whether claims in respect thereof have been asserted).
(qq) "Lien" means any lien, charge, security interest, condition, restriction,
mortgage, pledge, community property interest, right of first refusal, option,
easement, reservation, tenancy, or any other encumbrance whatsoever.
(rr) "Loss" means any loss, liability, damage, deficiency, cost or expense,
including interest and penalties imposed or assessed by any judicial or
administrative body or arbitrator and reasonable attorneys', accountants', or
other experts' or advisors' fees and expenses, whether arising out of
third-party claims or otherwise incurred, and including all amounts paid in
investigation, defense or settlement of the foregoing.
(ss) "Arbortext's Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of Arbortext as in effect on the date of this
Agreement, and as may be amended before the Effective Time.
(tt) "Arbortext Common Stock" means the shares of common stock, par value
$0.0001 per share, of Arbortext.
(uu) "Arbortext Disclosure Schedule" has the meaning given in Section 2.
(vv) "Arbortext Intellectual Property" has the meaning given in Section
2.16(b)(i).
(ww) "Arbortext Licenses" has the meaning given in Section 2.16(b)(ii).
(xx) "Arbortext Option Plans" has the meaning given in Section 2.2(a).
(yy) "Arbortext Preferred Stock" means the shares of all series of preferred
stock, par value $0.0001 per share, of Arbortext.
(zz) "Arbortext Stock" means the shares of capital stock of Arbortext of all
classes and series.
(aaa) "Material Adverse Effect" means a material adverse effect on (i) the
business, assets, financial condition or results of operations of Arbortext or
the Surviving Corporation, and the Subsidiaries, taken as a whole or (ii) the
ability of PTC to operate the Surviving Corporation after the Effective Time,
other than such changes, effects or circumstances reasonably attributable to:
(A) economic conditions generally in the United States or foreign economies in
any locations where Arbortext and its Subsidiaries have material operations or
sales; (B) conditions generally affecting the industries in which Arbortext
participates, provided that, with respect to clauses (A) and (B), such changes,
effects or circumstances do not have a materially disproportionate effect
(relative to other industry participants) on Arbortext and its Subsidiaries; (C)
the payment of any amounts due to, or the provision of any other benefits to,
any officers or employees under employment contracts, employee benefit plans,
severance arrangements or other arrangements in existence on the date of this
Agreement and disclosed in the Arbortext Disclosure Schedule; (D) any action
taken by Arbortext with PTC's express written consent; (E) any of the matters
set forth in Section 2.12 of the Arbortext Disclosure Schedule, assuming in each
case the reasonably complete and accurate description of such matter therein; or
(F) the announcement or pendency of the Merger.
(bbb) "Material Contracts" has the meaning given in Section 2.13(a).
(ccc) "Merger" has the meaning given in Sections 1.2.
(ddd) "Merger Consideration" has the meaning given in Section 1.7(a).
(eee) "Most Favored Customer Provision" means a provision in a contract or other
agreement that would customarily be referred to as a "most favored customer,"
"most favored nation," or "most favored pricing" provision, including any
provision wherein Arbortext or any Subsidiary (a) warrants that Arbortext or any
Subsidiary is not selling or licensing (or has not sold or licensed) products
and/or services to any other customer or group of customers at prices or on
other terms better than the pricing or terms being offered to the customer under
such contract, (b) covenants that, if Arbortext enters into an agreement with
any other customer providing such other customer with more favorable pricing or
other terms than the terms under such contract, the pricing or other terms under
such contract will be made equivalent to or more favorable than such other
customer's more favorable agreement or (c) contains a provision similar to
clause (a) or (b) above.
(fff) "Option" means an option to purchase Arbortext Common Stock granted under
any of the Arbortext Option Plans.
(ggg) "Permitted Liens" has the meaning given in Section 2.17.
(hhh) "Pro Rata Escrow Consideration," with respect to any Securityholder as of
any time, means the amount set forth opposite such Securityholder's name under
the heading "Escrow Funds" on the Distribution Schedule plus any amount
determined under the next sentence. In the event that, at such time, (x) any
Forfeitable Shares have been forfeited (assuming for this purpose that such
Forfeitable Shares, or the Options exercisable therefor, had remained
outstanding following the Effective Time on the basis described in Section
1.9(d)) or (y) any Advent Holdback Shares have been forfeited (assuming for this
purpose that such shares had remained outstanding and subject to the holdback
provisions of the Advent Agreement following the Effective Time), the respective
amounts set forth on the Distribution Schedule opposite the name of the holder
of such Forfeitable Shares or Advent Holdback Shares under the heading "End of
Temp. Serv. Period" or "Advent Escrow Funds," as the case may be, shall be
allocated among the other Securityholders pro rata in accordance with their
respective amounts shown under the heading "Tier 4 - Remaining Proceeds," and
each such Securitytholder's share of the Escrow Funds shall be appropriately
adjusted.
(iii) "Per Share Net Closing Consideration" shall mean an amount equal to the
quotient obtained by dividing (a) the difference between (i) the Merger
Consideration and (ii) the sum of the Aggregate Preferred Liquidation Preference
and the amount of the Escrow Funds by (b) the Fully Diluted Shares Outstanding.
(jjj) "Per Share Net Closing Option Consideration" means, with respect to each
share of Arbortext Common Stock covered by an Option outstanding and exercisable
at the Effective Time, (i) the Per Share Net Closing Consideration minus (ii)
the exercise price per share of such Option.
(kkk) "Pre-Closing Periods" has the meaning given in Section 4.6(a).
(lll) "Purchase Right" has the meaning given in Section 2.2(b).
(mmm) "Qualified Plan" has the meaning given in Section 2.19(d).
(nnn) "Return Rate" means the dollar value of licenses returned by customers or
otherwise not paid for in any given period, to the extent based on the
respective customer's assertion that the products and/or services received from
Arbortext or any Subsidiary did not conform to the agreed specifications
thereof, divided by consolidated license revenue for that period.
(ooo) "Series A Preferred Stock" shall mean the shares of Series A Preferred
Stock, $0.0001 par value per share, of Arbortext.
(ppp) "Series B Preferred Stock" shall mean the shares of Series B Preferred
Stock, $0.0001 par value per share, of Arbortext.
(qqq) "Series C Preferred Stock" shall mean the shares of Series C Preferred
Stock, $0.0001 par value per share, of Arbortext.
(rrr) "Series C-1 Preferred Stock" shall mean the shares of Series C-1 Preferred
Stock, $0.0001 par value per share, of Arbortext.
(sss) "Series C-2 Preferred Stock" shall mean the shares of Series C-2 Preferred
Stock, $0.0001 par value per share, of Arbortext.
(ttt) "Series C-3 Preferred Stock" shall mean the shares of Series C-3 Preferred
Stock, $0.0001 par value per share, of Arbortext.
(uuu) "Series C-4 Preferred Stock" shall mean the shares of Series C-4 Preferred
Stock, $0.0001 par value per share, of Arbortext.
(vvv) "Series C-5 Preferred Stock" shall mean the shares of Series C-5 Preferred
Stock, $0.0001 par value per share, of Arbortext.
(www) "Securityholders" shall mean, collectively, the Stockholders and the
holders of Options who are entitled to payment under Section 1.8(b)(i).
(xxx) "Stockholder Representative" shall mean the person appointed as the
Stockholder Representative from time to time pursuant to Section 10.11.
(yyy) "Stockholder Representative Funds" shall have the meaning given in Section
1.9(e).
(zzz) "Stockholders" means the holders of Arbortext Stock or, following the
Effective Time, the holders of Arbortext Stock immediately before the Effective
Time.
(aaaa) "Straddle Periods" has the meaning given in Section 4.6(a).
(bbbb) "Subsidiary" means any corporation or other organization, whether
incorporated or unincorporated, of which (i) at least 25% of the securities or
other interests having by their terms (A) ordinary voting power to elect a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization or (B) the right to appoint
the manager, general partner, or other person(s) controlling the management of
such organization are directly or indirectly owned or controlled by Arbortext or
by any one or more of its Subsidiaries, or by Arbortext and one or more of its
Subsidiaries or (ii) Arbortext or any other Subsidiary of Arbortext is a general
partner or managing member.
(cccc) "Surviving Corporation" has the meaning given in Section 1.2.
(dddd) "Tax" or "Taxes" means any and all federal, state or local or foreign
taxes, charges, fees, levies, deficiencies or other assessments of whatever kind
or nature, including without limitation all net income, gross income, profits,
gross receipts, excise, value added, real or personal property, sales, ad
valorem, withholding, social security, social insurance, retirement, employment,
unemployment, minimum estimated, severance, stamp, property, occupation,
environmental, windfall profits, use, service, net worth, payroll, franchise,
license, gains, customs, transfer, recording and other taxes, customs duties,
fees assessments or charges of any kind whatsoever, imposed by any taxing
authority, including any liability therefor for a predecessor entity or as a
transferee under Section 6901 of the Code or any similar provision of applicable
federal, state, local or foreign law, as a result of U.S. Treasury Regulation
ss.1.1502-6 or any similar provision of federal, state, local or foreign
applicable law, or as a result of any Tax sharing or similar agreement, together
with any interest, penalties or additions to tax relating thereto.
(eeee) "Tax Return" means any return, declaration, report, claim for refund,
information return, or statement, and any schedule, attachment, or amendment
thereto, including without limitation any consolidated, combined or unitary
return or other document (and any schedule, attachment or amendment thereto),
filed or required to be filed by any taxing authority in connection with the
determination, assessment, collection, imposition, payment, refund or credit of
any federal, state, local or foreign Tax or the administration of the laws
relating to any Tax.
(ffff) "Transaction Expenses" means Arbortext's legal, accounting, brokerage,
consulting and other expenses relating to the negotiation and consummation of
the Memorandum of Understanding between PTC and Arbortext dated as of May 27,
2005 (the "Memorandum of Understanding"), this Agreement, the Escrow Agreement
(other than expenses incurred with respect thereto after the Closing Date), the
Merger and the other transactions contemplated hereby.
(gggg) "Transfer Taxes" has the meaning given in Section 4.6(e).
1.2 The Merger. Upon the terms and subject to the conditions hereof, and in
accordance with the Delaware General Corporation Law (the "DGCL"), Merger Sub
shall be merged with and into Arbortext (the "Merger"). The Merger shall occur
at the Effective Time. Following the Merger, Arbortext shall continue as the
surviving corporation (sometimes referred to herein as the "Surviving
Corporation") and the separate corporate existence of Merger Sub shall cease.
1.3 Closing. Subject to the satisfaction or waiver of the conditions set forth
in Sections 5, 6 and 7, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxx & Dodge LLP,
000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx on such date and at such time as
the parties may agree, but not later than the earlier to occur of the third
(3rd) Business Day after the satisfaction or waiver of the conditions set forth
in Sections 5, 6 and 7 or the Closing Deadline (the "Closing Date"). At the
Closing, the parties shall (a) deliver to each other the various certificates,
instruments and other deliveries required to be made at Closing under this
Agreement, (b) execute a certificate of merger (the "Certificate of Merger") in
accordance with the DGCL, (c) cause the Certificate of Merger to be filed with
the Secretary of State of Delaware in accordance with the DGCL, and (d) take all
such further actions as may be required or appropriate to make the Merger
effective.
1.4 Effective Time; Effects of the Merger. The Merger shall be effective at
such time as the Certificate of Merger is duly filed with the Secretary of State
of Delaware or at such later time as is specified in the Certificate of Merger
(the "Effective Time," and the date on which the Effective Time occurs is the
"Effective Date"). The Merger shall have the effects provided in this Agreement
and the applicable provisions of the DGCL.
1.5 Certificate of Incorporation and Bylaws. The certificate of incorporation
and bylaws of Merger Sub in effect immediately before the Effective Time shall
be the certificate of incorporation and bylaws of the Surviving Company until
amended in accordance with applicable law.
1.6 Directors and Officers. The directors and officers of Merger Sub
immediately before the Effective Time shall be the directors and officers of the
Surviving Corporation immediately after the Effective Time, each to hold office
in accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws. Each current director and officer of Arbortext and its Subsidiaries
shall submit his or her resignation at the Closing to be effective at the
Effective Time.
1.7 Merger Consideration.
(a) Merger Consideration. As used in this Agreement, "Merger Consideration"
means the amount equal to One Hundred Ninety Million Dollars ($190,000,000) less
the aggregate of the negative Closing Adjustments and plus the aggregate of the
positive Closing Adjustments, in each case determined in accordance with
Subsection 1.7(b).
(b) Closing Adjustments. Before the Closing Date, Arbortext shall deliver to
PTC (i) a consolidated balance sheet of Arbortext and its Subsidiaries as of the
fifth (5th) Business Day before the Closing Date (the "Pre-Closing Date"), (ii)
a list of Accounts Receivable as of the Pre-Closing Date, and (iii) invoices for
all Transaction Expenses incurred by Arbortext, in each case binding on the
obligees of such indebtedness or fees and which describe in reasonable detail
the services provided to Arbortext. Such delivery shall be accompanied by a
certificate signed on behalf of Arbortext by its chief financial officer
representing (x) that such balance sheet and list of Accounts Receivable have
been prepared from, and are in accordance with, the books and records of
Arbortext and such balance sheet presents fairly the financial position of
Arbortext and its Subsidiaries as of the date indicated in accordance with GAAP
consistently applied with prior periods, except as otherwise stated therein, and
(y) the amount of Excess Transaction Expenses as of the Closing Date.
(i) If the Other Liabilities of Arbortext as shown on the consolidated balance
sheet as of the Pre-Closing Date (the "Pre-Closing Other Liabilities") exceed
zero, such excess shall be a negative Closing Adjustment. For purposes of this
Section 1.7, "Other Liabilities" shall mean all Liabilities required by GAAP to
be shown on a consolidated balance sheet of Arbortext and its Subsidiaries, but
excluding the sum of (A) current, ordinary course trade payables, (B) current,
ordinary course accrued expenses (other than Taxes), (C) current, ordinary
course accrued compensation and benefits, (D) deferred revenues, (E) deferred
taxes, and (F) Transaction Expenses.
(ii) The Excess Transaction Expenses, as so certified by Arbortext, shall be a
negative Closing Adjustment.
(iii) The Aggregate Option Exercise Price shall be a positive Closing
Adjustment.
(c) Post-Closing True-Up.
(i) Not later than ninety (90) days after the Closing Date, PTC will provide
to the Stockholder Representative a calculation of the Other Liabilities of
Arbortext as of the close of business on the day before the Closing Date. PTC
will make available all records and work papers used in calculating such
amounts. If the Stockholder Representative disagrees with PTC's calculation, the
Stockholder Representative may provide a written notice of proposed changes to
such calculation (a "Change Notice") to PTC within thirty (30) days after the
receipt of PTC's calculation (and in the event no Change Notice is provided
during such period, the Stockholder Representative will be deemed to have agreed
to and accepted such calculation as of the end of such period). PTC shall
promptly cooperate with the Stockholder Representative in providing such
information as he reasonably requests in connection with the review of the
calculation contemplated by this section, and the Stockholder Representative's
thirty (30) day period for reviewing such calculation shall be extended as is
reasonably necessary to enable him to review any such additional information
provided to him after the provision of the original calculation. If the
Stockholder Representative provides a Change Notice to PTC within such period,
the amount of Other Liabilities shall be finally determined in accordance with
Section 1.7(d).
(ii) If the amount of Other Liabilities as finally determined is greater than
the Pre-Closing Other Liabilities, PTC shall be entitled to receive from the
Escrow Funds (as a Final Claim) an amount equal to the difference. If the amount
of Other Liabilities as finally determined is less than the Pre-Closing Other
Liabilities, PTC shall pay to the Stockholder Representative for the benefit of
the Securityholders an amount equal to the difference.
(d) Resolution of Disputes. PTC and the Stockholder Representative will
attempt in good faith promptly to resolve any differences with respect to the
calculation under Section 1.7(c) that are raised within the applicable period.
If they are unable to resolve any differences within twenty (20) days after
delivery of the Change Notice, such remaining differences will be submitted to
an Independent Accountant for prompt determination. The Independent Accountant
will determine those matters in dispute and will render a written report as to
the disputed matters, which report shall be conclusive and binding upon the
parties. The fees and expenses of the Independent Accountant in respect of such
report shall be paid one-half by PTC and one-half by the Stockholder
Representative.
1.8 Conversion of Stock and Options. At the Effective Time, by virtue of the
Merger and without any action on the part of PTC, Merger Sub or Arbortext, but
subject to Sections 1.9 through 1.12 and Section 8:
(a) Arbortext Stock. The outstanding shares of Arbortext Stock shall be
converted into and represent the right to receive cash, without any interest
thereon, in the respective amounts set forth opposite the respective names of
the holders thereof under "Total" on the Distribution Schedule;
(b) Purchase Rights.
(i) The issued and outstanding Options that are vested and exercisable at the
Effective Time shall, immediately after the Effective Time, be cancelled and
automatically converted into and represent the right to receive cash, without
any interest thereon, in the respective amounts set forth opposite the
respective names of the holders thereof under "Total" on the Distribution
Schedule
(ii) The issued and outstanding Options that are unvested and unexercisable at
the Effective Time shall thereupon be cancelled and terminated. In consideration
therefor, PTC shall cause Arbortext to pay each Arbortext employee who was a
holder of such an Option the amount set forth opposite such employee's
respective name under "Unvested Option Payout" on the Distribution Schedule
(less any required federal, state, local and foreign Tax withholding amounts,
which PTC shall cause to be paid to the applicable Taxing authorities), which
amount is in addition to, and not part of, the Merger Consideration.
(iii) Each issued and outstanding Purchase Right, other than an Option, that has
not been exercised before the Effective Time shall thereupon be cancelled and
terminated without payment by or on behalf of Arbortext or PTC of any
consideration therefor.
(c) Cancellation of Treasury Stock. Each share of Arbortext Stock held
immediately before the Effective Time by Arbortext as treasury stock shall be
cancelled and no payment shall be made with respect thereto.
(d) Cancellation of Merger Sub Stock. Each share of common stock, $0.001 par
value, of Merger Sub issued and outstanding immediately before the Effective
Time shall be converted into and thereafter evidence one fully paid and
non-assessable share of common stock of the Surviving Corporation.
(e) Closing of Transfer Books. At the Effective Time, the stock transfer books
of Arbortext shall be closed and no transfer of Arbortext Stock shall thereafter
be made. Until surrendered in accordance with the provisions of Section 1.9(a),
each certificate representing Arbortext Stock shall be deemed from and after the
Effective Time, for all corporate purposes, to evidence only a right to receive
that portion of the Merger Consideration into which such shares of Arbortext
Stock shall have been so converted pursuant to this Section 1.8.
1.9 Delivery of Merger Consideration; Escrow. At the Closing:
(a) Subject to Section 1.11, Arbortext shall surrender and deliver to PTC for
cancellation the certificates representing all outstanding shares of Arbortext
Stock as of immediately before the Effective Time, duly endorsed in blank or
with stock powers duly executed by such Stockholder;
(b) PTC shall, subject to Sections 1.9(d) through (f), 1.10, 1.11 and 1.12,
deliver to:
(i) the holders of Arbortext Stock, the respective amounts set forth opposite
such holders' respective names under "Closing/Shares" on the Distribution
Schedule, and
(ii) Arbortext an amount equal to the aggregate amount set forth under
"Closing/Options" on the Distribution Schedule, and Arbortext shall as promptly
as practicable pay to the holders of outstanding Options that are vested and
exercisable at the Effective Time the respective amounts set forth opposite such
holders' respective names under "Closing/Options" on the Distribution Schedule,
less any required federal, state, local and foreign Tax withholding amounts,
which Arbortext shall cause to be paid to the applicable Taxing authorities.
(c) PTC shall deliver to U.S. Bank National Association (the "Escrow Agent")
an amount equal to Nineteen Million Dollars ($19,000,000.00) of the Merger
Consideration to be held in escrow as security for (i) any payment to PTC
pursuant to Section 1.7(c)(ii) and (ii) the Securityholders' indemnification
obligations under Section 8 pursuant to the provisions of an escrow agreement in
substantially the form of Exhibit A hereto (the "Escrow Agreement"). Any portion
of the Escrow Funds that is distributable to the Securityholders under the
Escrow Agreement shall be allocated among them pro rata in accordance with their
respective Pro Rata Escrow Consideration amounts.
(d) All amounts otherwise deliverable to, or held as part of the Escrow Funds
with respect to, a Securityholder listed on Schedule 1.9 (a "Designated
Individual") with respect to the Shares and Options listed opposite such
Designated Individual's name on Schedule 1.9 shall be delivered to the
Stockholder Representative or held as part of the Escrow Funds, as the case may
be, subject to forfeiture to the Securityholders on the terms set forth in
Schedule 1.9. Such amounts shall be paid by the Stockholder Representative to
the respective Designated Individuals (or, if held as part of the Escrow Funds,
remain subject to the terms of the Escrow Agreement no longer subject to
forfeiture) within thirty (30) days after the date that such amounts cease to be
forfeitable. Upon any forfeiture, the respective amount held by the Stockholder
Representative shall be paid to the Securityholders in accordance with Section
1.8 and the right to any such amount then part of the Escrow Funds shall be
forfeited by the Designated Individual. Before making any payment (x) of any
such amounts to a Designated Individual or (y) of any amounts forfeited by a
Designated Individual to any former holder of Options or Forfeitable Shares (in
his or her capacity as such), the Stockholder Representative shall provide PTC
with a list of all such proposed payments and payees, shall withhold from any
such proposed payment such amounts as PTC specifies for federal, state, local
and foreign Tax withholding, and shall cause such amounts to be remitted to the
applicable Taxing authorities.
(e) All amounts otherwise deliverable to Stockholders under Section 1.9(b) or
held as part of the Escrow Funds under Section 1.9(c) with respect to shares of
Arbortext Stock held by Arbortext at the Effective Time pursuant to the Advent
Agreement shall be retained by PTC subject to forfeiture to the Surviving
Corporation pursuant to the Advent Agreement. Such amounts shall be paid to the
respective Stockholders if, as and when such shares would have been distributed
to them under the Advent Agreement.
(f) PTC or Arbortext, as applicable, shall deliver to the Stockholder
Representative Five Hundred Thousand Dollars ($500,000) of the Merger
Consideration (the "Stockholder Representative Funds") otherwise payable at
Closing to the Securityholders after application of the foregoing provisions of
this Section 1.9 to be held in escrow to provide for the expenses of the
Stockholder Representative hereunder and under the Escrow Agreement. All such
funds, if any, that remain after the payment of the Stockholder Representative
expenses shall be distributed to the Securityholders pro rata based on the their
respective amounts listed under the heading "S/H Rep's Fund" on the Distribution
Schedule.
1.10 Dissenters Rights. Shares of Arbortext Stock held as of the Effective Time
by a Stockholder who has not voted such shares in favor of the adoption of this
Agreement and with respect to which appraisal shall have been duly demanded and
perfected in accordance with Section 262 of the DGCL and not effectively
withdrawn or forfeited prior to the Effective Time (collectively, the
"Dissenting Shares"), shall not be converted into Merger Consideration, but
shall be converted into the right to receive from the Surviving Corporation such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to the DGCL. If a holder of Dissenting Shares (a "Dissenting
Stockholder") forfeits or withdraws his, her or its right to appraisal of
Dissenting Shares, then, (i) as of the occurrence of such event, such holder's
Dissenting Shares shall cease to be Dissenting Shares and shall be converted
into and represent the right to receive the Merger Consideration payable in
respect of such shares of Arbortext Stock pursuant to Section 1.8, and (ii)
promptly following the occurrence of such event, PTC or the Surviving
Corporation shall deliver to such Dissenting Stockholder a payment representing
the Merger Consideration to which such holder is entitled pursuant to Section
1.8.
1.11 Lost, Stolen or Destroyed Certificates. In the event any certificate
representing Arbortext Stock shall have been lost, stolen or destroyed, PTC
shall issue the respective Merger Consideration in exchange for such lost,
stolen or destroyed certificate only following delivery by the holder thereof of
an affidavit of that fact and such indemnities against any claim that may be
made against PTC or its transfer agent with respect to the certificate alleged
to have been lost, stolen or destroyed as are customarily requested by
institutional transfer agents.
1.12 Tax Withholding. PTC, Arbortext or the Surviving Corporation, as the case
may be, shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of
Arbortext Stock or Purchase Rights such amounts as it is required to deduct and
withhold with respect to the making of such payment under the Code or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of shares of Arbortext Stock or
Purchase Rights, as the case may be, in respect of which such deduction and
withholding was made.
1.13 Further Actions. If, at any time after the Effective Time, any further
action is necessary or desirable to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Arbortext and Merger Sub, the officers and directors from time
to time of the Surviving Corporation are fully authorized in the name of
Arbortext and Merger Sub, as the case may be, or otherwise to take, and will
take, all such lawful and necessary action as is consistent with this Agreement.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF ARBORTEXT
Arbortext represents and warrants to PTC that, except as set forth in
the disclosure schedule of even date herewith delivered to PTC by Arbortext (the
"Arbortext Disclosure Schedule"), the provisions of which are numbered to
correspond to the section numbers of this Agreement to which they refer;
provided, however, that the disclosures in any section or paragraph in the
Arbortext Disclosure Schedule shall qualify as disclosures with respect to other
sections and paragraphs in this Section 2 to the extent that it is reasonably
apparent from the reading of such disclosure that it also qualifies or applies
to such other sections or paragraphs:
2.1 Organization and Qualification. Arbortext and each of its Subsidiaries is
a corporation (or similar foreign entity with corporate characteristics) duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, and each such entity has the
requisite corporate (or similar) power and authority to own, lease and operate
its assets, properties and business and to carry on its business as now being
and as proposed to be conducted. Arbortext and each of its Subsidiaries is duly
qualified or otherwise authorized to transact business as a foreign corporation
in each jurisdiction (in the United States and outside of the United States) in
which such qualification or authorization is required by law, except where the
failure to be so qualified or authorized, individually or in the aggregate,
would not have a Material Adverse Effect. Arbortext and each of its Subsidiaries
has maintained and filed all statutory accounts required by law.
2.2 Capitalization; Subsidiaries.
(a) Outstanding Capital Stock. The authorized capital stock of Arbortext
consists of (a) 48,000,000 shares of Arbortext Common Stock of which (i)
7,603,690 shares are issued and outstanding, (ii) 11,074,035 shares are reserved
for issuance pursuant to all stock option and other equity incentive plans of
Arbortext (the "Arbortext Option Plans"), (iii) 10,177,507 shares are subject to
issuance upon exercise of outstanding Options, (iv) 851,317 shares are subject
to issuance upon exercise of outstanding warrants to purchase Arbortext Common
Stock, and (v) 2,224,000 shares are held as treasury stock, and (b) 36,132,275
shares of Arbortext Preferred Stock of which (i) 2,099,999 are designated as
Series A Preferred Stock, all of which are issued and outstanding, (ii)
5,759,928 are designated as Series B Preferred Stock, 5,457,260 of which are
issued and outstanding and 184,843 are subject to issuance upon exercise of
outstanding warrants, (iii) 8,199,922 are designated as Series C Preferred
Stock, 7,773,199 of which are issued and outstanding and 466,723 are subject to
issuance upon exercise of outstanding warrants, (iv) 8,199,922 are designated as
Series C-1 Preferred Stock, none of which is issued or outstanding, (v)
2,375,000 are designated as Series C-2 Preferred Stock, all of which are issued
and outstanding, (vi) 2,375,000 are designated as Series C-3 Preferred Stock,
none of which is issued or outstanding, (vii) 3,561,252 are designated as Series
C-4 Preferred Stock, 2,136,751 of which are issued and outstanding, and (viii)
3,561,252 are designated as Series C-5 Preferred Stock, none of which is issued
and outstanding. No other class of capital stock of Arbortext is authorized or
outstanding. There are 86,476 Advent Holdback Shares at the date hereof. The
outstanding shares of Arbortext Stock are held of record and beneficially by the
persons and in the respective amounts set forth in Section 2.2(a) of the
Arbortext Disclosure Schedule. All of the issued and outstanding shares of
Arbortext Stock have been duly authorized and validly issued and are fully paid
and nonassessable and free of pre-emptive rights, whether under Arbortext's
Certificate of Incorporation or Bylaws or any other agreement or instrument to
which Arbortext is a party. None of the issued and outstanding shares of
Arbortext Stock has been issued in violation of the Securities Act or of any
other applicable federal, state or foreign laws. To Arbortext's Knowledge, there
are no shareholder agreements, voting trusts or agreements, proxies or other
agreements, instruments or understandings with respect to any shares of
Arbortext Stock.
(b) Purchase Rights; Convertible Securities. Except as set forth in Section
2.2(b) of the Arbortext Disclosure Schedule (which lists, among other things,
the respective holders, numbers of underlying shares, grant and termination (or
expiration) dates, vesting, exercisability or retention schedule, and the
exercise or conversion prices thereof), there are no outstanding rights,
subscriptions, warrants, calls, preemptive rights, convertible or exchangeable
securities, options (including Options issued under the Arbortext Option Plans)
or other agreements or commitments of any kind to purchase or otherwise to
receive from Arbortext any of the outstanding, authorized but unissued,
unauthorized or treasury shares of Arbortext Stock or any other security of
Arbortext (collectively, "Purchase Rights"). Arbortext has previously provided
or otherwise made available to PTC true and correct copies of all the agreements
and other instruments with respect to its outstanding Purchase Rights. No
Purchase Right has been repurchased, redeemed, terminated or forfeited other
than for no consideration pursuant to its terms.
(c) Subsidiaries. The name, locations, jurisdiction of incorporation or
organization and details of Arbortext's ownership of each of the Subsidiaries
are set forth in Section 2.2(c) of the Arbortext Disclosure Schedule. Arbortext
(or one of its Subsidiaries) is the sole record and beneficial owner of all
outstanding shares of capital stock or other securities of each Subsidiary free
and clear of any and all Liens. All of the issued and outstanding shares of
capital stock or other securities of each Subsidiary have been duly authorized
and validly issued and are fully paid and nonassessable and have been offered,
issued and sold by such Subsidiary in compliance with all applicable federal,
state and foreign laws. There are no outstanding rights, subscriptions,
warrants, calls, preemptive rights, convertible or exchangeable securities,
options or other agreements or commitments of any kind to purchase or otherwise
to receive from any Subsidiary any of the outstanding, authorized but unissued,
unauthorized or shares of capital stock or other securities of such Subsidiary.
There are no registration rights agreements, shareholder agreements, voting
trusts or agreements, proxies or other agreements, instruments or understandings
with respect to any shares of capital stock or other securities of any
Subsidiary. There are no restrictions or limitations on (i) the ability of any
of the Subsidiaries to make any dividend or other distribution or (ii) the
ability of any owner of any Subsidiary to transfer any shares, membership
interests, or other equity interests of such entity.
2.3 Authority; Enforceability. Arbortext has all requisite corporate power and
authority to enter into, execute and deliver this Agreement and the Escrow
Agreement and to perform its obligations hereunder and thereunder, and to
consummate the Merger and the other transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Escrow Agreement,
and the consummation of the Merger and the other transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action
on the part of Arbortext except for the affirmative vote of the holders of a
majority of the outstanding shares of (a) Arbortext Common Stock and Arbortext
Preferred Stock, voting together as a single class, and (b) Arbortext Preferred
Stock, voting as a separate class. This Agreement has been, and the Escrow
Agreement when delivered at the Closing will be, duly executed and delivered by
Arbortext. This Agreement constitutes, and the Escrow Agreement, when executed
and delivered, will constitute, the valid and binding obligation of Arbortext,
enforceable against it in accordance with their respective terms, in each case
except to the extent that their enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
2.4 No Breach; Consents. The execution, delivery and performance of this
Agreement and the Escrow Agreement by Arbortext and the consummation of the
transactions contemplated hereby and thereby do not and will not, with notice or
lapse of time or both: (a) violate any provision of the Arbortext Certificate of
Incorporation or Bylaws; (b) violate, conflict with or result in the breach of
any of the terms or conditions of, result in modification of the effect of, or
otherwise give any other contracting party the right to terminate, modify or
accelerate any rights under, or constitute a default under, any Material
Contract; (c) violate any order, judgment, injunction, award or decree of any
Governmental Entity or arbitrator against, or binding upon, Arbortext or any
Subsidiary or upon their respective securities, properties, assets or business;
(d) violate any statute, law or regulation applicable to or enforceable against
Arbortext or any Subsidiary; (e) violate any Permit; (f) require on the part of
Arbortext or any Subsidiary any Consent of any Governmental Entity or of any
other person, including any holder of Options or other Purchase Rights, except
for (i) the pre-merger notification requirements under the H-S-R Act or the
requirements of any applicable foreign antitrust or takeover laws, and (ii) the
filing of the Certificate of Merger under the DGCL; or (g) result in the
creation of any Lien on any of the assets or properties of Arbortext or any
Subsidiary, excluding from the foregoing clauses (d), (e) and (g), any
exceptions thereto as would not, individually or in the aggregate, have a
Material Adverse Effect.
2.5 Certificate of Incorporation and Bylaws; Corporate Records. Arbortext has
previously provided or otherwise made available to PTC true and complete copies
of (a) the Arbortext Certificate of Incorporation, certified by the Secretary of
the State of Delaware, and Bylaws, in each case as amended and as presently in
effect and (b) the organizational or governing documents of each of its
Subsidiaries, in each case as amended and as presently in effect. The minute
books (or other records of the meetings of directors and stockholders) and stock
records of Arbortext and each of its Subsidiaries contain, respectively, records
of all meetings and consents in lieu of meetings of the board of directors or
other governing body of Arbortext and each Subsidiary and of the Stockholders
and the equity holders of each Subsidiary since the time of Arbortext's or such
Subsidiary's incorporation that are true and complete in all material respects
and accurately reflect all actions taken by such bodies, respectively, and all
other transactions referred to in such minutes and consents in lieu of meetings.
None of Arbortext and its Subsidiaries is in violation of its Certificate of
Incorporation or other organizational or governing documents.
2.6 Financial Statements.
(a) The (i) audited consolidated financial statements of Arbortext and its
Subsidiaries as of and for the fiscal years ended December 31, 2003 and 2004,
respectively, including the respective notes thereto (the "Annual Financials"),
(ii) the unaudited consolidated balance sheet of Arbortext and the Subsidiaries
(the "Interim Balance Sheet") as of March 31, 2005 (the "Interim Balance Sheet
Date") and related unaudited statements of operations and cash flows for the
three-month period then ended (together with the Interim Balance Sheet, the
"Interim Financials"), and (iii) the unaudited summary consolidated balance
sheet of Arbortext and the Subsidiaries (the "Current Balance Sheet") estimated
as of June 27, 2005 and related unaudited summary statement of operations for
the 88-day period then ended (together with the Current Balance Sheet, the
"Current Financials") are included in Section 2.6 of the Arbortext Disclosure
Schedule. The Annual Financials and the Interim Financials (collectively, the
"Financial Statements") have been prepared from, and are in accordance with, the
books and records of Arbortext and present fairly the financial position and the
results of operations of Arbortext and its Subsidiaries as of the dates and for
the periods indicated, in each case in accordance with GAAP consistently applied
throughout the periods involved except as otherwise stated therein; provided
that the Interim Financials do not include the footnotes required by GAAP
(which, if included, would not differ materially from those included in the
Audited Financials) and are subject to normal year-end adjustments, none of
which, individually or in the aggregate, is expected to be material. The Current
Financials have been estimated from, and are in accordance with, the books and
records of Arbortext and, subject to the following proviso, present fairly in
all material respects the financial position and the results of operations of
Arbortext and its Subsidiaries as of the date and for the 88-day period
indicated, in accordance with GAAP consistently applied with prior periods
except as otherwise stated therein; provided that the Current Financials have
not been prepared following Arbortext's standard monthly financial statement
closing process, do not include the footnotes required by GAAP (which, if
included, would not differ materially from those included in the Audited
Financials) and are subject to normal month-end and year-end adjustments, none
of which, individually or in the aggregate, is expected to be material. No
financial statements of any person other than Arbortext and the Subsidiaries are
required to be included in the Financial Statements or the Current Financials.
(b) KPMG LLP, which has expressed its opinion with respect to the Annual
Financials, is, and has been throughout the periods covered thereby,
"independent" with respect to Arbortext within the meaning of SEC Regulation S-X
and the applicable requirements of the U.S. Public Company Accounting Board.
None of the chief executive officer, controller, chief financial officer, chief
accounting officer or any person serving in an equivalent position with
Arbortext was employed by KPMG LLP and participated in any capacity in the audit
of the Annual Financials.
2.7 Absence of Undisclosed Liabilities. Neither Arbortext nor any Subsidiary
has any Liabilities except those (i) stated or adequately reserved against on
the face of the Interim Balance Sheet, (ii) that would not be required by GAAP
to be disclosed on the face of the Interim Balance Sheet or in the notes
thereto, or (iii) incurred after the Interim Balance Sheet Date in the ordinary
course of business consistent with past practice and that do not exceed $100,000
individually or in the aggregate for any series of related transactions.
2.8 Accounts and Notes Receivable. Section 2.8 of the Arbortext Disclosure
Schedule sets forth a true, correct and complete list of billed and unbilled
notes and accounts receivable of Arbortext and its Subsidiaries ("Accounts
Receivable") as of the Interim Balance Sheet Date (and as updated as of the
fifth (5th) Business Day before the Closing Date pursuant to Section 1.7(b)) and
identifying the respective entity and including the aging thereof. All Accounts
Receivable arose out of the provision of services or the sales of goods in the
ordinary course of business, are supported by valid purchase orders, are not
subject to set-off or counterclaim, and to the Knowledge of Arbortext, are
collectible in the face value thereof using normal collection procedures, net of
the reserve for doubtful accounts (i) set forth in the Interim Balance Sheet
with respect to Accounts Receivable reflected in the Interim Balance Sheet or
(ii) set forth in subsequent balance sheets of Arbortext with respect to
Accounts Receivable arising after the Interim Balance Sheet Date, which reserves
were adequate as of their respective dates and were calculated in accordance
with GAAP applied consistently with past practices. Since the Interim Balance
Sheet Date, no discount or allowance from any Accounts Receivable has been made
or agreed to and none represents xxxxxxxx before actual receipt of a purchase
order. To Arbortext's Knowledge, none of the customers and other debtors whose
obligations comprise the Accounts Receivable is in or subject to a bankruptcy or
insolvency proceeding and none of the Accounts Receivable have been made subject
to an assignment for the benefit of creditors.
2.9 Absence of Certain Changes. Since December 31, 2004, except as set forth
or reflected in the Interim Financials, there has been no change, event or
circumstance in or affecting the assets, property, financial affairs or business
of Arbortext and its Subsidiaries that has had or may reasonably be expected to
have a Material Adverse Effect, whether or not covered by insurance, and there
has been no:
(i) incurrence of any indebtedness for borrowed money, or cancellation or
modification of any material debt or claim owing to, or waiver of any material
right of, Arbortext or any Subsidiary;
(ii) purchase, sale or other disposition of any properties or assets of or by
Arbortext or any Subsidiary with a value, individually or in the aggregate, in
excess of $100,000, other than in the ordinary course of business consistent
with past practices;
(iii) declaration, setting aside or payment of any dividend or distribution by
Arbortext or any Subsidiary (excluding dividends or distributions from a
Subsidiary to Arbortext) or the making of any other distribution in respect of
any shares of Arbortext Stock or any shares or other securities of any
Subsidiary;
(iv) change in the compensation paid or payable by Arbortext or any Subsidiary
to any of its directors, officers, employees, agents or independent contractors
other than normal increases granted to employees after normal periodic
performance reviews in the ordinary course of business consistent with past
practice, or any obligation or liability incurred by Arbortext or any Subsidiary
to any of its shareholders, directors, officers or employees, or any loans or
advances made by Arbortext to any of its shareholders, directors, officers or
employees, except normal compensation and expense allowances payable in the
ordinary course of business consistent with past practices;
(v) adoption, amendment, or termination of any Employee Benefit Plan, any
increase in benefits provided under any Employee Benefit Plan, other than option
grants in the ordinary course of business consistent with past practices, or any
promise or commitment to undertake any of the foregoing in the future;
(vi) payment or discharge of a material Lien or Liability of Arbortext or any
Subsi diary other than in the ordinary course of business consistent with past
practices;
(vii) change in accounting methods or practices, or billing or collection
policies, used by Arbortext;
(viii) other transaction or series of related transactions entered into by
Arbortext or any Subsidiary other than in the ordinary course of business
consistent with past practices and having an aggregate value in excess of
$100,000;
(ix) agreement or understanding, whether in writing or otherwise, obligating
Arbortext or any Subsidiary to take any of the actions specified above, except
as specifically contemplated hereby.
2.10 Tax Matters.
(a) All Tax Returns required to be filed on or before the date hereof by or
with respect to Arbortext or any Subsidiary have been filed within the time and
in the manner prescribed by law. All such Tax Returns are true, correct, and
complete in all material respects, and all Taxes owed by Arbortext or any
Subsidiary, whether or not shown on any Tax Return, have been paid when due.
Neither Arbortext nor any Subsidiary is currently the beneficiary of any
extension of time within which to file any Tax Return. Arbortext and each
Subsidiary has filed all required Tax Returns in all jurisdictions where it is
or has been required to so file, and no claim has ever been made by any taxing
authority in any other jurisdiction that Arbortext is or may be subject to
taxation by that jurisdiction. Arbortext and each Subsidiary have complied in
all material respects with all applicable laws relating to the payment,
collecting, or withholding of Taxes and the remittance thereof to the relevant
Government Entity.
(b) There are no Liens with respect to Taxes upon any of the assets or
properties of Arbortext or any Subsidiary, other than Permitted Liens with
respect to Taxes.
(c) No audit or other similar examination is currently pending with respect to
any Tax Return of Arbortext or any Subsidiary and neither Arbortext nor any
Subsidiary has received any written communication from any taxing authority
which has caused or should reasonably have caused it to believe that an audit is
forthcoming. No deficiency for any Taxes has been asserted, proposed, or
threatened in writing (or, to the Knowledge of Arbortext, orally) against
Arbortext or any Subsidiary, which deficiency has not been paid in full. No
issue relating to Taxes of Arbortext or any Subsidiary has been finally resolved
in favor of any taxing authority in a completed Tax audit or examination of
Arbortext or any Subsidiary that, by application of the same principles,
Arbortext reasonably expects to result in the assertion by any taxing authority
of a deficiency for Taxes of Arbortext or any Subsidiary for any other period.
(d) Section 2.10(d) of the Arbortext Disclosure Schedule lists all United
States federal, state and local, and all foreign income Tax Returns filed with
respect to Arbortext and each Subsidiary for taxable periods ended on or after
December 31, 1999, and indicates those Tax Returns that have been audited or
subject to similar examination by a taxing authority and those Tax Returns that
currently are the subject of audit or such examination. There are no outstanding
agreements, waivers or arrangements extending the statutory period of limitation
(or any other period during which any Tax can be assessed) applicable to any
claim for, or the period for the collection or assessment of, Taxes due from or
with respect to Arbortext or any Subsidiary for any taxable period, and no power
of attorney granted by or with respect to Arbortext or any Subsidiary relating
to Taxes is currently in force. Arbortext has delivered or otherwise made
available to PTC true, complete and correct copies of all Tax Returns, audit
reports, and statements of deficiencies for each of the last three taxable years
filed by or issued to or with respect to Arbortext and any Subsidiary (or,
insofar as such items relate to Arbortext or any Subsidiary, by or to any
affiliated, consolidated, combined, or unitary group of which Arbortext or any
Subsidiary was then a member).
(e) The unpaid Taxes of Arbortext and any Subsidiary for all taxable periods
(or portions thereof) ending (i) on or before the Interim Balance Sheet Date did
not, as of such date, 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 the Interim Balance Sheet (rather
than in any notes thereof) and (ii) on or before the Effective Date will not, as
of the Effective Date, exceed that reserve as adjusted to reflect the ordinary
operations of Arbortext and its Subsidiaries after the Interim Balance Sheet
Date and through the Effective Date in accordance with the past customs and
practice of Arbortext and its Subsidiaries in filing its Tax Returns.
(f) Neither Arbortext nor any Subsidiary is a "consenting corporation" within
the meaning of former Section 341(f) of the Code, and no consent to the
application of former Section 341(f)(2) of the Code (or any predecessor
provision) has been made or filed by or with respect to Arbortext or any
Subsidiary or any of their respective assets or properties. Neither Arbortext
nor any Subsidiary has agreed, nor is it required, to make any adjustment under
Section 481(a) of the Code (or any similar provision of applicable state, local,
or foreign law) by reason of a change in accounting method or otherwise. Neither
Arbortext nor any Subsidiary has used the installment method under Section 453
of the Code (or any similar provision of applicable state, local or foreign law)
to defer any material income to any taxable period ending after the Effective
Date. There is no limitation on the utilization by Arbortext or any Subsidiary
of its net operating losses, built-in losses, tax credits or other similar items
under Section 382, 383, or 384 of the Code (or any similar provision of
applicable state, local, or foreign law) (other than any such limitation arising
as a result of the consummation of the Arbortext Stock purchase as contemplated
by this Agreement).
(g) Neither Arbortext nor any Subsidiary has ever been (i) a member of any
affiliated group filing or required to file a consolidated, combined, or unitary
Tax Return (other than any such group of which Arbortext is the common parent)
or (ii) a party to or bound by, nor does it have or has it ever had any
obligation under, any Tax sharing agreement or similar contract or arrangement.
Neither Arbortext nor any Subsidiary has any liability for the Taxes of any
other Person under U.S. Treasury Regulation ss.1.1502-6 (or any similar
provision of applicable federal, state, local, or foreign law), as a transferee
or successor, by contract, or otherwise.
(h) Neither Arbortext nor any Subsidiary has distributed to its stockholders
or security holders stock or securities of a controlled corporation in a
transaction to which Section 355 of the Code applies (i) in the two years before
the date of this Agreement or (ii) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) that includes the transactions
contemplated by this Agreement, nor was Arbortext or any Subsidiary the subject
of any such distribution pursuant to any transaction with respect to which
Arbortext or any Subsidiary has agreed to or is otherwise obligated to indemnify
any person for any Tax resulting from or attributable to such transaction.
(i) Arbortext is not and has not been during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code, a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code.
(j) Section 2.10(j) of the Disclosure Schedule contains a complete and
accurate list of all outstanding Arbortext Stock that is subject to a
substantial risk of forfeiture (within the meaning of Section 83 of the Code),
states the date of grant or issuance of such restricted Arbortext Stock, the
fair market value of the Arbortext Stock on the date of grant, and the amount
paid, if any, by such holder for such restricted Arbortext Stock, and indicates
whether Arbortext has received from the holder of such restricted Arbortext
Stock a copy of an election under Section 83(b) of the Code with respect to suc
grant or issuance.
(k) No U.S. Form 8832 has been filed electing treatment as other than an
association taxable as a corporation for any Subsidiary, and all Subsidiaries
are treated as corporations for U.S. and non-U.S. Tax purposes. No Subsidiary
organized in a jurisdiction outside the United States has made an election to be
treated as a domestic corporation pursuant to Section 897(i) of the Code. No
Subsidiary (other than Advent 3B2 Inc. or Arbortext International Inc.) conducts
any trade or business within the United States or holds an investment in any
United States property (within the meaning of Section 956 of the Code) or any
United States real property interest (within the meaning of Section 897 of the
Code).
2.11 Compliance with Laws; Permits.
(a) Neither Arbortext nor any Subsidiary is or has been in violation of any
order, judgment, injunction, award or decree binding upon it, nor of any
federal, state, local or foreign law, ordinance or regulation (including,
without limitation, laws, regulations or ordinances relating to environmental
matters, employment practices, occupational safety, Tax, import/export or
corrupt practices) of any governmental or regulatory body applicable to its
business or assets, except for any such violations that, individually or in the
aggregate, would not have a Material Adverse Effect. Neither Arbortext nor any
Subsidiary has received any written (or, to Arbortext's Knowledge, oral) notice
or communication from any Governmental Entity of any such violation or
noncompliance, and there has been no citation, fine or penalty imposed or
asserted against Arbortext or any Subsidiary for any such violation of such
laws, regulations or ordinances.
(b) Arbortext and each Subsidiary has in full force and effect, and is in
compliance in all material respects with, all licenses, permits and other
approvals ("Permits") of any Governmental Entity required for the conduct of the
business of Arbortext and each Subsidiary as presently conducted. No proceeding
is pending or, to the Knowledge of Arbortext, threatened to revoke or limit any
such Permit.
2.12 Actions and Proceedings. There is no outstanding order, judgment,
injunction, award or decree of any court, Governmental Entity or arbitration
tribunal against or involving Arbortext or any Subsidiary, any of their
respective assets or properties, or any of their respective directors or
officers in their capacities as such. There is no action, suit or claim, legal,
administrative or arbitration proceeding, or investigation pending or, to the
Knowledge of Arbortext, threatened against or involving Arbortext or any
Subsidiary, any of their respective assets or properties or any of their
respective directors or officers in their capacities as such or that in any
manner challenges or seeks to prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement. To Arbortext's Knowledge, there is
no fact, event or circumstance that reasonably could be expected to give rise to
any suit, action, claim, investigation or proceeding that individually or in the
aggregate would have a material adverse effect upon the transactions
contemplated hereby or a Material Adverse Effect.
2.13 Contracts and Other Agreements.
(a) Contracts and other agreements described in this subsection, whether
written or oral, to which Arbortext or any of its Subsidiaries is a party or by
or to which it or any of its assets or properties are bound or subject are
referred to herein collectively as "Material Contracts":
(i) contracts and other agreements with any current or former officer,
director, stockholder or employee of Arbortext or any Subsidiary or with any
entity in which any of the foregoing is an officer, director or 5% or greater
shareholder and pursuant to which Arbortext or any Subsidiary or such other
party has current or future obligations or liabilities in excess of $100,000 in
any fiscal year;
(ii) contracts and other agreements with any labor union or association
representing any employee of Arbortext or any Subsidiary;
(iii) contracts and other agreements for the purchase, sale or license of
software, materials, supplies, equipment, merchandise or services, or relating
to capital expenditures, for an amount in excess of $100,000 (taking into
account any escalation, renegotiation or redetermination);
(iv) contracts and other agreements for the sale or exclusive license of any of
the assets or properties of Arbortext or any Subsidiary or for the grant to any
person of any option, right of first refusal, or preferential or similar right
to purchase any of such assets or properties;
(v) partnership, collaboration, mutual assistance, joint development, joint
marketing and joint venture agreements;
(vi) contracts or other agreements under which Arbortext or any Subsidiary
agrees to indemnify any party for Tax liabilities or to share the Tax liability
of any party;
(vii) contracts and other agreements that obligate Arbortext or any Subsidiary
to purchase or license all or substantially all of its requirements of a
particular product from a supplier, or for periodic minimum purchases or
licenses of a particular product from a supplier;
(viii) contracts and other agreements with customers, suppliers, partners or
collaborators for the sharing of fees, the rebating of charges or other similar
arrangements, including contracts containing any Most Favored Customer
Provision;
(ix) contracts and other agreements containing covenants of Arbortext or any
Subsidiary not to compete in any line of business or geographical area, or with
any person, or covenants of any current or former employee or other person not
to compete with Arbortext or any Subsidiary;
(x) contracts and other agreements relating to the acquisition by Arbortext or
any Subsidiary of any operating business or the capital stock or other
securities of any other person;
(xi) contracts and other agreements requiring the payment to any person of a
commission, fee or royalty, other than to employees in the ordinary course of
business;
(xii) mortgages, indentures, loan or credit agreements, factoring agreements,
promissory notes and other agreements and instruments relating to the borrowing
of money or financing or sale of receivables;
(xiii) research, development (whether contracted or shared), distributorship,
manufacturing and reseller agreements;
(xiv) leases, financing agreements, subleases or other agreements under which
Arbortext or any Subsidiary is lessor or lessee of any real or personal
property;
(xv) licenses, sublicenses and other agreements required to be listed in
Section 2.16(b) of the Arbortext Disclosure Schedule; and
(xvi) any other material contract or agreement, whether or not made in the
ordinary course of business.
(b) All Material Contracts are listed in Section 2.13 of the Arbortext
Disclosure Schedule (which may be by cross-reference to Section 2.16(b) or
2.19(a)). Arbortext has delivered or made available to PTC true and complete
copies of all Material Contracts and all amendments, waivers or other
modifications thereto or, in the case of oral Material Contracts, complete and
accurate descriptions. All of the Material Contracts are valid, in full force
and effect, and binding upon Arbortext or the respective Subsidiary and, to
Arbortext's Knowledge, on the other party(ies) thereto. No written (or, to
Arbortext's Knowledge, oral) notice of termination or amendment of any Material
Contract has been given to Arbortext or any Subsidiary by any other party
thereto. Arbortext or the respective Subsidiary and each other party thereto has
paid in full or, to Arbortext's Knowledge, accrued all amounts now due from it
under each Material Contract and has satisfied in full or provided for all of
its liabilities and obligations thereunder that are presently required to be
satisfied or provided for, and is not in default under any of them, nor has any
event occurred or does any condition exist that with notice or lapse of time or
both would constitute a default by Arbortext or any Subsidiary or, to
Arbortext's Knowledge, any such other party thereunder.
2.14 Real Estate. Neither Arbortext nor any Subsidiary owns any real property
or any buildings or other structures or has any options or any contractual
obligations to purchase or acquire any interest in real property. All leasehold
interests of Arbortext and each Subsidiary are set forth in Section 2.13(a)(xiv)
of the Arbortext Disclosure Schedule, and such interests are subject to no Liens
other than statutory and common law landlord's liens and superior rights of
lenders to landlords. With respect such leasehold interests: (a) there are no
disputes, oral agreements or forbearance programs in effect as to the lease or
sublease; (b) neither Arbortext nor or any Subsidiary has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold
or subleasehold; (c) to the Knowledge of Arbortext, all facilities leased or
subleased thereunder have received all approvals of the applicable Governmental
Entities (including licenses and permits) required in connection with the
operation thereof and been operated and maintained in accordance with applicable
laws, rules and regulations; and (d) all facilities leased or subleased
thereunder are supplied with utilities and all other services necessary for the
operation of the business of Arbortext and each Subsidiary as currently
conducted and as currently proposed to be conducted and for the operation of
said facilities.
2.15 Tangible Property. The equipment, furniture, leasehold improvements,
fixtures, vehicles, and any related capitalized items whose book value is a
material part of the Interim Balance Sheet, and all other tangible property
material to the business of Arbortext and each Subsidiary, are in good operating
condition and repair, reasonable wear and tear excepted, and have been the
subject of normal maintenance consistently performed, and Arbortext has not
received any notice, whether written, oral or otherwise, that any of such
property is in violation of any existing law or any building, zoning, health,
safety or other ordinance, code or regulation.
2.16 Proprietary Rights.
(a) As used in this Agreement, "Proprietary Rights" means, collectively, all
(i) U.S. and foreign, whether registered or unregistered, patents, trademarks,
trade names, trade dress, service marks, copyrights, and applications therefor,
(ii) computer software programs or applications (in both source code and object
code form), (iii) industrial models, inventions, invention disclosures, author's
rights, designs, utility models, inventor rights, schematics, technology, (iv)
trade secrets, know-how, and other intangible information or material, and (v)
confidential information and any other proprietary data or information of any
nature or form.
(b) Section 2.16(b)(i) and (ii), respectively of the Arbortext Disclosure
Schedule set forth a true, accurate and complete list of:
(i) all Proprietary Rights owned, licensed, used, or operated under by
Arbortext and/or any Subsidiary and that are material to the business of
Arbortext and its Subsidiaries as currently conducted and as contemplated to be
conducted (the "Arbortext Intellectual Property"), specifying whether such
Proprietary Rights are exclusive or non-exclusive to Arbortext and its
Subsidiaries and including identifying information of all U.S. federal, state
and non-U.S. registrations of such Arbortext Intellectual Property or
applications for registration thereof, provided that, the items listed in
clauses (iii), (iv) and (v) of the definition of "Proprietary Rights" shall not
be required to be listed in the Arbortext Disclosure Schedule;
(ii) all licenses, sublicenses, and royalty, escrow, maintenance, support and
other agreements to which Arbortext and/or any Subsidiary is a party and
pursuant to which Arbortext, any Subsidiary or any other person is authorized to
use, license the use of, distribute or exercise any other rights with respect to
any (A) Arbortext Intellectual Property, or (B) third party Proprietary Rights
that are incorporated in or used by, any Arbortext products or services, or form
a part of any Arbortext Intellectual Property (collectively, the "Arbortext
Licenses"); including but not limited to any licenses granted by Arbortext or
any Subsidiary to modify, distribute, integrate or bundle any Arbortext software
products or software developed or licensed exclusively by Arbortext ("Arbortext
OEM/Reseller Licenses"); provided, however, that customer contracts granting
only a non-exclusive, internal-use, end-user license to object code need not be
listed in Section 2.16(b)(ii) of the Arbortext Disclosure Schedule. Section
2.16(b)(i) of the Arbortext Disclosure Schedule also accurately and completely
identifies any Arbortext OEM/Reseller Licenses (1) which are exclusive in a
territory specifying in what territory they are exclusive and/or (2) under which
the third party licensee holds in its possession inventory of Arbortext software
products, specifying the products held in inventory by name and version number
and stating the number of copies of each such version held in inventory as of
the Interim Balance Sheet Date.
(c) Arbortext or its Subsidiaries owns, is licensed to use, or otherwise has
the full legal right to use all of the Arbortext Intellectual Property, free and
clear of any Lien (whether arising by contract or by operation of law).
Arbortext and each of its Subsidiaries owns, possesses or otherwise has the
right to use all Arbortext Intellectual Property and, to the Knowledge of
Arbortext, all other Proprietary Rights necessary or required for the conduct of
the business of Arbortext or such Subsidiary, as applicable, as currently
conducted and as contemplated to be conducted, including the development,
marketing and distribution of the existing and currently planned products of
Arbortext and each Subsidiary. Except for the Arbortext Licenses, there are no
outstanding rights or options (whether or not currently exercisable), licenses
or agreements of any kind relating to the Arbortext Intellectual Property.
Except under the Arbortext Licenses, neither Arbortext nor any Subsidiary is
obligated to pay any royalties or other compensation (other than market rate
fees for standard software licenses that are generally commercially available),
to any third party in respect of its ownership, use or license of any Arbortext
Intellectual Property. There has been no breach or violation by Arbortext or any
Subsidiary of, and to the Knowledge of Arbortext, there is no breach or
violation by any other party to, any Arbortext License.
(d) The execution and delivery of this Agreement by Arbortext and the
consummation of the transactions contemplated hereby will not impair the rights
of PTC or the Surviving Corporation to use, practice, operate under, license,
sublicense, dispose of, or bring suit for infringement of any of the Arbortext
Intellectual Property to the same extent that Arbortext and each Subsidiary
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 that Arbortext or any Subsidiary
would otherwise be required to pay.
(e) Neither the business of Arbortext or any Subsidiary, as currently
conducted, nor the services, products or support delivered by Arbortext or any
Subsidiary to its customers, nor, to the Knowledge of Arbortext, Arbortext's or
any Subsidiary's use of third party products or services, infringe, constitute
the misappropriation of, or conflict with, any Proprietary Rights of any third
party (including without limitation due to the use of any third party software
without a valid license or without complying with the restrictions and terms of
a valid license). Arbortext has no Knowledge of any claim, and neither Arbortext
nor any Subsidiary has ever received any written (or, to the Knowledge of
Arbortext, oral) notice or other communication of any claim from, any person
asserting that the business of Arbortext or any Subsidiary, as currently
conducted and/or as contemplated to be conducted, or any of the services,
products or support delivered by Arbortext or any Subsidiary to its customers,
or any use by Arbortext or any Subsidiary of any third party products or
services, infringe or may infringe, constitute the misappropriation of, or
conflict with, any Proprietary Rights of another person. Arbortext has no
Knowledge of any existing or threatened infringement, misappropriation, or
competing claim by any third party regarding the right to use or ownership of
any Arbortext Intellectual Property.
(f) Section 2.16(f) of the Arbortext Disclosure Schedule lists any software
(regardless whether in object or source code form or whether only forming part
of a software application or only part of a function or procedure in a software
application) that (i) has been incorporated or embedded into, or distributed
with, any Arbortext software products and (ii) was not developed by employees of
Arbortext or any Subsidiary in the course of their employment for Arbortext or
any Subsidiary. No consultants, contractors, or other third parties (other than
employees of Arbortext or any Subsidiary in the course of their employment) have
contributed to, or participated in any respect in the development of, the
Arbortext Intellectual Property (excluding any Intellectual Property underlying
third party commercially available software, non-exclusively licensed to
Arbortext for its internal operations, and which is not embedded or incorporated
in, or used by Arbortext to support or design, its software products).
(g) Neither Arbortext nor any Subsidiary is subject to any "open source" or
"copyleft" obligations or otherwise required to make any public disclosure or
general availability of source code either used, acquired for use or developed
by Arbortext or any Subsidiary. Neither Arbortext nor any Subsidiary uses any
software that contains, or is derived in any manner (in whole or in part) from,
any software that is distributed as free software, open source software (e.g.,
Linux) or similar licensing or distribution models (collectively, "Open Source
Software"), including software licensed or distributed under any of the
following licenses or distribution models, or licenses or distribution models
similar to any of the following: (i) GNU's General Public License (GPL) or
Lesser/Library GPL (LGPL); (ii) the Artistic License (e.g., PERL); (iii) the
Mozilla Public License; (iv) the Netscape Public License; (v) the Sun Community
Source License (SCSL); or (vi) the Sun Industry Standards License (SISL).
Arbortext and its Subsidiaries (and their respective consultants, affiliates,
and agents) have not incorporated, bundled, or distributed any Open Source
Software into or with any of Arbortext's or its Subsidiaries' software products
in such a manner as to cause or require, under the terms of the applicable open
source license agreement for such Open Source Software, (A) all or any portion
of such software product (other than original Open Source Software) to be
treated as Open Source Software under the terms of such open source license or
(B) the source code of such software product (other than the original Open
Source Software) to be distributed or provided to licensees in connection with
the licensing or distribution of such software product. Neither Arbortext nor
any Subsidiary has incorporated in, or included with, any Arbortext software
products, or otherwise delivered to any customers, any software or any
derivative of any software which both (A) Arbortext or any of its Subsidiaries
created and/or delivered to a customer in the course of performing consulting,
implementation, maintenance or other services and (B) in which such customer has
any ownership or other rights other than a nonexclusive license from Arbortext
or a Subsidiary (regardless whether such rights were assigned to or vested in
such customer).
(h) To Arbortext's Knowledge, there are no defects in the filing or
prosecution of any of the patent applications and patents included within the
Arbortext Intellectual Property that could reasonably be expected to cause
either the invalidity of any such patent or any patent that may issue from any
such patent application, or cause a patent not to issue from any such patent
application. All patents or patent applications that are filed or registered
with any governmental body and included within the Arbortext Intellectual
Property are, to Arbortext's Knowledge, subsisting and valid, and as to issued
patents, neither Arbortext, nor anyone in privity with Arbortext, has taken any
action that would render such patents unenforceable.
(i) Arbortext and its Subsidiaries have implemented policies and procedures
reasonably designed to establish and preserve the ownership of the Arbortext
Intellectual Property, including the protection of trade secrets and other
confidential information. Without limiting the generality of the foregoing, all
employees, consultants and independent contractors of Arbortext or any
Subsidiary who are or were involved in, or who have contributed to, the creation
or development of any Arbortext Intellectual Property or have otherwise had
access to confidential or proprietary information of Arbortext or the applicable
Subsidiary have executed and delivered to Arbortext or any Subsidiary legally
binding confidentiality and assignment of inventions agreements in form and
substance substantially identical to the form of the Confidentiality and
Inventions Agreement included in Section 2.16(i) of the Arbortext Disclosure
Schedule. Copies of such agreements have been delivered to PTC, and all of such
agreements are in full force and effect. Neither Arbortext or any Subsidiary is
aware of any violation of the confidentiality of any trade secrets or
proprietary information comprising Arbortext Intellectual Property. Neither
Arbortext or any Subsidiary or, to the Knowledge of Arbortext, the employees,
consultants, or independent contractors of Arbortext or any Subsidiary have any
agreements or arrangements with any former employers relating to confidential
information or trade secrets of such employers that would interfere with the
activities of Arbortext or any Subsidiary. To the Knowledge of Arbortext, the
activities of the employees, consultants, or independent contractors of
Arbortext or any Subsidiary on behalf of the business of Arbortext or any
Subsidiary as currently conducted and contemplated to be conducted do not
violate any agreements or arrangements which such employees have with former
employers or any other third person. To Arbortext's Knowledge, no current or
former employee, officer, director, stockholder, consultant or independent
contractor of Arbortext or any Subsidiary has any right, claim or interest in or
with respect to any of the Arbortext Intellectual Property.
2.17 Title to Assets; Liens. Arbortext and each Subsidiary owns outright and
has good title to, or, in the case of leased properties and assets, has valid
leasehold interests in, all of its assets and properties, including, without
limitation, all of the assets and properties reflected on the Interim Balance
Sheet and all other assets and properties that are reasonably necessary for the
conduct of its business as presently conducted, free and clear of any Lien,
except for (a) assets and properties disposed of, or subject to purchase or
sales orders, in the ordinary course of business since the date of the Interim
Balance Sheet and (b) liens or other encumbrances securing the claims of
materialmen, carriers, landlords and like persons, or for Taxes, all of which
are not yet due and payable ("Permitted Liens"). At the Effective Time, the
Surviving Corporation will own all right, title and interest thereto, free and
clear of Liens except Permitted Liens.
2.18 Customers; Warranties.
(a) Section 2.18 of the Arbortext Disclosure Schedule sets forth the thirty
(30) customers who accounted for the largest sales of Arbortext and its
Subsidiaries for the fiscal year ended December 31, 2004 (the "Key Customers").
The relationships between Arbortext and any Subsidiary and the Key Customers are
generally good commercial working relationships. Except at the request of
Arbortext or any Subsidiary, no Key Customer has cancelled or otherwise
terminated its relationship with Arbortext or such Subsidiary (including
pursuant to the expiration of any license or maintenance contract without
renewal). Neither Arbortext nor any Subsidiary has received notice, whether
written or, to the Knowledge of Arbortext, oral, that any Key Customer intends
to terminate, cancel or decrease materially or limit its usage of the products
of Arbortext or such Subsidiary. During the fiscal year ended December 31, 2004,
Arbortext recognized at least 90% of the amount of revenue that would have been
recognizable in respect of software maintenance contracts coming due for renewal
in that year if all such contracts had then been renewed, and Arbortext has no
Knowledge of any facts, circumstances or events that would cause such renewal
rate to materially change from that in 2004.
(b) No commercially released product manufactured, sold (whether directly or
indirectly, including through any reseller, channel partner or distributor),
licensed, leased, or delivered by Arbortext or any Subsidiary is subject to any
guaranty, warranty, or other indemnity other than (i) standard terms and
conditions of sale or license as set forth in Section 2.18(b) of the Arbortext
Disclosure Schedule, (ii) in a Material Contract listed in Section 2.13 of the
Arbortext Disclosure Schedule, or (iii) the exposure under which does not exceed
$100,000 individually or in the aggregate for any series of related
transactions. All products manufactured, sold (whether directly or indirectly,
including through any reseller, channel partner or distributor), licensed,
leased and delivered by Arbortext or any Subsidiary have been in conformity in
all material respects with all applicable contractual commitments and expressed
and implied warranties, and no liability for any warranty claims exists for the
repair or replacement thereof or otherwise. Arbortext and its Subsidiaries
collectively did not experience a Return Rate in excess of five percent (5%) of
their consolidated license revenue during the fiscal year ended December 31,
2004, and Arbortext has no Knowledge of any facts, circumstances or events that
would cause the Return Rate for fiscal 2005 to change materially from that in
2004.
(c) Neither Arbortext nor any Subsidiary has granted any pricing or other
terms to any customer with respect to any products or services that required or
will require any discount, pricing terms or other terms granted by Arbortext or
any Subsidiary to any other customer be made more favorable for such other
customer by reason of any Most Favored Customer Provision.
2.19 Employee Benefit Plans.
(a) Section 2.19 of the Arbortext Disclosure Schedule contains a complete and
accurate list of all Employee Benefit Plans (as defined below) currently
maintained or contributed to by Arbortext or any ERISA Affiliate (as defined
below), or pursuant to which Arbortext or any Subsidiary has any Liability. For
purposes of this Agreement, "Employee Benefit Plan" means (i) any "employee
pension benefit plan" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), (ii) any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and (iii) any other written
or oral plan, program, agreement or arrangement providing employee benefits or
compensation, including without limitation salary, wages, insurance coverage,
severance benefits, disability benefits, deferred compensation, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement or post-termination compensation, in
each case relating to any current or former director, officer, employee,
consultant, member, partner, independent contractor or agent of Arbortext or any
ERISA Affiliate that is currently maintained or contributed to by Arbortext or
any ERISA Affiliate or pursuant to which Arbortext or any Subsidiary has any
Liability. For purposes of this Agreement, "ERISA Affiliate" means (i) any
corporation included with Arbortext in a controlled group of corporations within
the meaning of Section 414(b) of the Code; (ii) any trade or business (whether
or not incorporated) that is under common control with Arbortext within the
meaning of Section 414(c) of the Code; (iii) any member of an affiliated service
group of which Arbortext is a member within the meaning of Section 414(m) of the
Code; or (iv) any other person or entity treated as aggregated with Arbortext
under Section 414(o) of the Code.
(b) Arbortext has provided or otherwise made available to PTC current,
accurate and complete copies of (i) each Employee Benefit Plan that has been
reduced to writing and all amendments thereto, (ii) a summary of the material
terms of each Employee Benefit Plan that has not been reduced to writing,
including all amendments thereto, (iii) the summary plan description for each
Employee Benefit Plan subject to Title I of ERISA, and in the case of each other
Employee Benefit Plan, any similar employee summary (including but not limited
to any employee handbook description), (iv) for each Employee Benefit Plan
intended to be qualified under Section 401(a) of the Code, the most recent
determination letter or exemption determination issued by the IRS, (v) for each
Employee Benefit Plan with respect to which a Form 5500 series annual
report/return is required to be filed, the most recently filed such annual
report/return and annual report/return for the two preceding years, together
with all schedules and exhibits, and (vi) all insurance contracts,
administrative services contracts, trust agreements, investment management
agreements or similar agreements maintained in connection with any Employee
Benefit Plan. No employee benefit handbook or similar employee communication
relating to any Employee Benefit Plan nor any written communication of benefits
under such Employee Benefit Plan describes the Employee Benefit Plan in a manner
materially inconsistent with the documents and summary plan descriptions
relating to such Employee Benefit Plan that have been delivered pursuant to the
preceding sentence.
(c) There is no entity (other than Arbortext and its Subsidiaries) that
together with Arbortext would be treated as a single-employer within the meaning
of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.
(d) Each Employee Benefit Plan which is intended to be qualified under Section
401(a) of the Code is so qualified. Each Employee Benefit Plan has been
administered in all material respects in accordance with the terms of such plan
and the provisions of any and all statutes, orders or governmental rules or
regulations, including without limitation ERISA and the Code, and nothing has
been done or not done with respect to any Plan that could result in any
liability on the part of Arbortext under Title I of ERISA or Chapter 43 of the
Code; provided, however, that with respect to acts or omissions of third
parties, the foregoing representation shall be to the Knowledge of Arbortext.
All reports, forms and notices required to be filed with respect to each
Employee Benefit Plan, including without limitation Form 5500 series annual
reports/returns and PBGC Form 1s, have been timely filed. All contributions,
premiums and other amounts due to or in connection with each Employee Benefit
Plan under the terms of the Employee Benefit Plan or applicable law have been
timely made, and provision has been made in the Interim Balance Sheet for such
contributions, premiums and other amounts that were due as of the Interim
Balance Sheet Date but were attributable to service before such date. Each
employee stock option designated as an incentive stock option (or ISO) on
Attachment 2.2(b) to Section 2.2 of the Arbortext Disclosure Schedule meets the
requirements for treatment as an incentive stock option under Section 422 of the
Code.
(e) No Employee Benefit Plan is or has been subject to Title IV of ERISA or
Section 412 of the Code.
(f) All claims for welfare benefits incurred by participants and beneficiaries
on or before the Closing Date are or will be fully covered by fully-funded or
paid-up third-party insurance policies or programs, and no insured arrangement
involves any retrospective premium, minimum premium, or similar arrangement with
any of Arbortext's or any Subsidiary's insurers. Except for continuation of
health coverage to the extent required under Section 4980B of the Code or
Section 601 et seq. of ERISA ("COBRA"), or applicable state and foreign laws,
there are no obligations under any Employee Benefit Plan providing welfare
benefits after termination of employment.
(g) Except for individual employment agreements, each Employee Benefit Plan
can be amended, modified or terminated without advance notice to or consent by
any employee, former employee or beneficiary, and without liability for any
payment or penalty, except as required by law.
(h) Neither Arbortext nor any Subsidiary or ERISA Affiliate has ever
maintained, sponsored, contributed to, been required to contribute to, or
incurred any liability under any: (i) multi-employer plan as defined in Section
3(37) or Section 4001(a)(3) of ERISA, (ii) multiple employer plan as defined in
Section 413(c) of the Code, or any plan that has two or more contributing
sponsors at least two of whom are not under common control, within the meaning
of Section 4063(a) of ERISA, (iii) welfare benefit fund within the meaning of
Section 419(e) of the Code, or (iv) voluntary employees' beneficiary
association, within the meaning of Section 501(c)(9) of the Code.
(i) No employee of, consultant to, or other provider of services to Arbortext,
or any Subsidiary or any ERISA Affiliates will be entitled to any additional
benefit or the acceleration of the payment or vesting of any benefit under any
Employee Benefit Plan by reason of the Merger or any of the other transactions
contemplated by this Agreement.
(j) None of Arbortext, any Subsidiary or any ERISA Affiliate has any "leased
employees" within the meaning of Section 414(n) of the Code or any independent
contractors or other individuals who provide employee-type services but who are
not recognized by Arbortext or any Subsidiary as employees of Arbortext or such
Subsidiary.
(k) Neither Arbortext nor any Subsidiary is a party to any contract or
agreement, plan, or arrangement, including, without limitation, the consummation
of the transactions or other events contemplated by this Agreement, concerning
any person that, individually or collectively with other similar agreements, and
taking into account any transactions or payments contemplated by this Agreement,
could reasonably be expected to give rise to the payment of any amount that
would not be deductible by Arbortext or such Subsidiary by reason of Section
280G of the Code. Neither Arbortext nor any Subsidiary has any obligation to
make any reimbursement or other payment to any such person with respect to any
Tax imposed under Section 4999 of the Code. None of the Employee Benefit Plans,
in form or in operation, is a "nonqualified deferred compensation plan" within
the meaning of Section 409A(d)(1) of the Code.
(l) With respect to any Employee Benefit Plan maintained for employees outside
of the United States (each a "Foreign Plan"): (i) each Foreign Plan covers only
employees of a single company who regularly perform services in a single country
and no other employees, (ii) each Foreign Plan and the manner in which it has
been administered satisfies all applicable laws, (iii) all contributions to each
Foreign Plan required through the Effective Date have been and will be made by
Arbortext or its Subsidiaries, (iv) each Foreign Plan is either fully funded (or
fully insured) based upon generally accepted local actuarial and accounting
practices and procedures or adequate accruals for each Foreign Plan have been
made in Arbortext's financial statements, and (v) the consummation of the
transactions contemplated by this Agreement will not by itself create or
otherwise result in any liability with respect to any Foreign Plan.
2.20 Employment Matters.
(a) Section 2.20 of the Arbortext Disclosure Schedule lists the name, title
and date of hire of (i) each current employee of Arbortext and each Subsidiary,
(ii) each independent contractor who is hired directly and not through an agency
or subcontracting company and who, to Arbortext's Knowledge, spends the majority
of his or her working time on the business of Arbortext or its Subsidiaries, and
(iii) the principal work location and rate of compensation of each current
employee and (iv) each person to whom an offer of employment has been accepted
or is outstanding. The employment of all employees of Arbortext and each
Subsidiary is "at will" and may be terminated by the Surviving Corporation
without payment of any severance or other compensation other than accrued
compensation. Arbortext has provided or made available to PTC accurate and
complete records of service credit of all employees and other persons subject to
any Employee Benefit Plan.
(b) Arbortext and each Subsidiary (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, (ii) has withheld all amounts required by law or
by agreement to be withheld from the wages, salaries and other payments to its
respective current and former employees, (iii) is not liable for any arrears of
wages or any Taxes or any penalty for failure to comply with any of the
foregoing, and (iv) is not liable for any payment to any trust or other fund or
to any Governmental Entity 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 as reflected in the Financial Statements.
(c) No work stoppage or labor strike is pending against Arbortext or any
Subsidiary or, to the Knowledge of Arbortext, threatened. Neither Arbortext nor
any Subsidiary is involved in or, to the Knowledge of Arbortext, threatened
with, any labor dispute, grievance, or litigation relating to labor, safety or
discrimination matters involving any employee, including, without limitation,
charges of unfair labor practices or discrimination complaints. Neither
Arbortext nor any Subsidiary has engaged in any unfair labor practices within
the meaning of the National Labor Relations Act or comparable activity
proscribed by foreign law. Neither Arbortext nor any Subsidiary is presently,
nor has it been in the past, a party to, or bound by (i) any collective
bargaining agreement or union contract (and no collective bargaining agreement
is being negotiated by Arbortext or any Subsidiary) or (ii) any statutory works
council or other agreement, statute, rule or regulation that mandates employee
approval, participation, consultation or consent with regard to any corporate
matter, including without limitation the transactions contemplated hereby.
(d) To the Knowledge of Arbortext, (i) no employee of or consultant to
Arbortext or any Subsidiary is, and no former employee or consultant was during
the term of his or her service, in violation of any term of any employment
contract, intellectual property disclosure agreement, non-competition agreement,
or any restrictive covenant (A) to a former employer relating to the right of
any such employee or consultant to be employed by or to consult with Arbortext
or any Subsidiary because of the nature of the business conducted or presently
proposed to be conducted by Arbortext or any Subsidiary or (B) relating to the
use of trade secrets or proprietary information of others, and (ii) no employee
of Arbortext or any Subsidiary listed on Section 2.20 of the Arbortext
Disclosure Schedule has given notice of his or her intent to terminate his or
her employment with Arbortext or any Subsidiary.
2.21 Insurance. Section 2.21 of the Arbortext Disclosure Schedule sets forth a
list of all policies or binders of fire, theft, general liability, product
liability, professional liability, worker's compensation, vehicular, directors
and officers and other insurance held by or on behalf of Arbortext and its
Subsidiaries, and of all life insurance policies maintained on the lives of any
of their employees, specifying the type and amount of coverage, the premium, the
insurer and the expiration date of each such policy (collectively, the
"Insurance Policies"). True, correct and complete copies of all Insurance
Policies have been previously delivered or otherwise made available to PTC. The
Insurance Policies are in full force and effect, are in conformity with the
requirements of all leases to which Arbortext is a party, and are valid and
enforceable in accordance with their terms. All premiums due on the Insurance
Policies or renewals thereof have been paid, and to the Knowledge of Arbortext
there is no default under any of the Insurance Policies. Neither Arbortext nor
any Subsidiary has any outstanding claim or any dispute with any insurance
carrier regarding claims, settlements or premiums.
2.22 Brokerage. No broker, finder, agent or similar intermediary has acted on
behalf of Arbortext or any Subsidiary or any of its Stockholders in connection
with this Agreement or the transactions contemplated hereby, and there are no
brokerage commissions, finders' fees or similar fees or commissions payable in
connection therewith.
2.23 Environmental Compliance.
(a) Neither Arbortext nor any Subsidiary is in violation of any federal,
state, local law, ordinance or regulation of any governmental or regulatory body
relating to emissions, discharges, releases of Hazardous Materials (as
hereinafter defined), including, without limitation, those related to ambient
air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials. Neither Arbortext nor any
Subsidiary has ever received any notice, whether written, oral or otherwise, of
any such violation or alleged violation, and there has never been, any citation,
fine or penalty imposed or asserted against Arbortext or any Subsidiary for any
such violation or alleged violation. There is no pending or, to the Knowledge of
Arbortext, threatened civil or criminal litigation, written notice of violation,
formal administrative proceeding, or investigation, inquiry or information
request by any governmental entity, relating to any such law or regulation.
(b) Neither Arbortext nor any Subsidiary has generated, used or handled any
Hazardous Materials, nor has Arbortext or any Subsidiary treated, stored or
disposed of any Hazardous Materials at any site owned or leased by Arbortext or
any Subsidiary or shipped any Hazardous Materials for treatment, storage or
disposal at any other site or facility. No other person generated, used,
handled, stored or disposed of any Hazardous Materials at any site owned or
leased by Arbortext or any Subsidiary during the period of Arbortext's or any
Subsidiary's ownership or lease. There was no release of any Hazardous Materials
at any such site during such period and, to the Knowledge of Arbortext, no such
release is threatened at any site now owned or leased by Arbortext or any
Subsidiary. For purposes of this Agreement, "Hazardous Materials" shall mean and
include any "hazardous waste" as defined in either the United States Resource
Conservation and Recovery Act, 42 U.S.C. 6901, regulations adopted pursuant to
said Act, and also any "hazardous substances" or "hazardous materials" as
defined in the United States Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. 9601.
2.24 Unlawful Payments. Neither Arbortext nor any Subsidiary or, to the
Knowledge of Arbortext, any director, officer, agent, employee or other person
acting on behalf of Arbortext or any Subsidiary has (a) used any corporate or
other funds for unlawful contributions, payments, gifts, or entertainment, (b)
made any unlawful expenditures relating to political activity to government
officials or others, (c) established or maintained any unlawful or unrecorded
funds in violation of applicable United States or non-United States law, (d)
accepted or received any unlawful contributions, payments, gifts or
expenditures, or (e) made any unlawful offer, payment or promise to pay any
money, or to make any gift to any official or employee of a Governmental Entity
or any political party or official thereof or any candidate for political
office.
2.25 Related Party Transactions.
(a) To Arbortext's Knowledge, no officer or director of Arbortext or any
Subsidiary nor any affiliate of any such person, now has or within the last
three (3) years had, either directly or indirectly:
(i) an equity interest greater than 5% or debt interest in any corporation,
partnership, joint venture, association, organization or other person or entity
that furnishes or sells or during such period furnished or sold products or
services to Arbortext or any Subsidiary, or purchases or licenses or during such
period purchased or licensed from Arbortext or any Subsidiary any goods,
software or services, or otherwise does or during such period did business with
Arbortext or any Subsidiary; or
(ii) a beneficial interest in any contract, commitment or agreement to which
Arbortext or any Subsidiary is or was a party or under which any of them is or
was obligated or bound or to which any of their respective properties may be or
may have been subject, other than stock options and other contracts, commitments
or agreements between Arbortext or any Subsidiary and such persons in their
capacities as employees, officers or directors of Arbortext or any Subsidiary.
(b) To Arbortext's Knowledge, no officer, director or employee of Arbortext or
any Subsidiary nor any affiliate of any such person, is acting or plans to act
as a director or employee of or consultant to, owns a greater than 1% equity
interest (or, with respect to any such affiliate, a greater than 5% equity
interest), or is otherwise actively involved with any person that competes
directly with Arbortext or any Subsidiary.
2.26 Bank and Brokerage Accounts; Powers of Attorney. Section 2.26 of the
Arbortext Disclosure Schedule (a) identifies all bank and brokerage accounts
used in connection with the operations of Arbortext or any Subsidiary, whether
or not such accounts are held in the name of Arbortext and lists the respective
signatories therefor and (b) lists the names of all persons holding a power of
attorney from Arbortext or any Subsidiary and a summary statement of the terms
thereof.
2.27 Books and Records; Internal Controls. The general ledgers and books of
account of Arbortext and each Subsidiary are complete and correct in all
material respects and have been maintained in accordance with good business
practice and in accordance with all applicable procedures required by laws and
regulations. Arbortext and each Subsidiary have implemented procedures over
financial reporting that are reasonably designed and effective to permit
Arbortext and each Subsidiary to record, process, summarize and report financial
information as required to provide reasonable assurance regarding the
reliability of their financial reporting and the preparation of financial
statements for external purposes in accordance with applicable accounting
principles.
2.28 Rights to Acquire. Other than this Agreement, Arbortext and its
Subsidiaries are not a party to any, and to the Knowledge of Arbortext there is
no, agreement, contract, arrangement or understanding granting any rights of
first refusal, option, rights of prior notice, or rights of first negotiations
to acquire any material assets of Arbortext or its Subsidiaries or to effectuate
a merger, consolidation, reorganization or other type of business combination
with Arbortext or any of its Subsidiaries.
2.29 Full Disclosure. The information concerning Arbortext and each Subsidiary
set forth in this Agreement and the Arbortext Disclosure Schedule, and in any
certificate or other instrument furnished or to be furnished to PTC pursuant to
Sections 1.7, 4.14, or 6 hereof, does not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated herein or therein or necessary to make the statements and facts contained
herein or therein, in light of the circumstances in which they are made, not
false and misleading.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF PTC AND MERGER SUB
PTC and Merger Sub represent and warrant to Arbortext that:
3.1 Organization. PTC is duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts and has full corporate power
and authority to own, lease and operate its assets, properties and business and
to carry on its business as now being conducted. Merger Sub is duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to own, lease and operate its assets,
properties and business. Merger Sub has engaged in no other business activities
and has conducted no operations except in connection with the transactions
contemplated hereby.
3.2 Authority to Execute and Perform Agreements. Each of PTC and Merger Sub
has all requisite corporate power and authority to enter into this Agreement and
the Escrow Agreement, as the case may be, and to perform fully its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
Escrow Agreement and the consummation of the Merger and the other transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of PTC and Merger Sub, respectively. This Agreement
has been, and the Escrow Agreement will have been, duly executed and delivered
by each of PTC and Merger Sub, as the case may be, and this Agreement
constitutes, and the Escrow Agreement will constitute, the valid and binding
obligation of PTC or Merger Sub, as the case may be, enforceable against them in
accordance with their respective terms, in each case except to the extent that
their enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general equitable principles.
3.3 No Breach; Consents. The execution, delivery and performance by PTC of
this Agreement and the Escrow Agreement, and the consummation by PTC of the
transactions contemplated hereby and thereby do not and will not, with notice or
lapse of time or both: (a) violate any provision of the Articles of Organization
or Bylaws of PTC; (b) violate, conflict with or result in a breach of any of the
terms or conditions of, result in modification of the effect of, or otherwise
give any other contracting party the right to terminate, modify, or accelerate
any rights under, or result in the creation of any Lien on the properties or
assets of PTC under, or constitute a default under, any material contract to
which PTC is a party or by which it or any of its material assets are bound; (c)
violate any order, judgment, injunction, award or decree of any Governmental
Entity against, or binding upon, PTC; (d) violate any statute, law or regulation
applicable to or enforceable against PTC; (e) violate any license or permit of
PTC; or (f) require on the part of PTC the making or obtaining of any Consent of
any Governmental Entity or of any other Person, except for (i) the pre-merger
notification requirements under the H-S-R Act or the requirements of any
applicable foreign antitrust or takeover laws, and (ii) the filing of the
Certificate of Merger under the DGCL; excluding from the foregoing clauses (d)
and (e), any exceptions thereto as would not individually or in the aggregate,
have a material adverse effect on the validity or enforceability of this
Agreement or the Escrow Agreement.
3.4 Actions and Proceedings. There is no action, suit or claim, legal,
administrative or arbitration proceeding, or investigation pending or, to the
knowledge of PTC, threatened against or involving PTC or any of its directors,
officers or employees in their capacities as such that in any manner challenges
or seeks to prevent, enjoin, alter or delay any of the transactions contemplated
by this Agreement.
3.5 Brokerage. No broker, finder, agent or similar intermediary will be
entitled to any brokerage commissions, finders' fees or similar fees or
commissions payable by Arbortext or the Securityholders in connection with this
Agreement or the transactions contemplated by this Agreement based on any
agreement, arrangement or understanding with PTC or any action taken by or on
behalf of PTC.
3.6 Financing. At Closing, PTC will have sufficient cash and/or available
credit facilities (and has provided Arbortext with evidence thereof) to pay the
Merger Consideration and to make all other necessary payments of fees and
expenses in connection with the transactions contemplated by this Agreement.
SECTION 4
COVENANTS AND AGREEMENTS
4.1 Conduct of Arbortext's Business. Except with the prior written consent of
PTC, and except as set forth in Section 4.1 of the Arbortext Disclosure Schedule
or otherwise contemplated herein, during the period from the date hereof to the
Closing Date or the earlier termination of this Agreement, Arbortext shall
observe the following covenants:
(a) Affirmative Covenants Pending Closing. Arbortext will, and will cause each
Subsidiary to:
(i) use reasonable efforts to preserve intact its business organization and
keep available the services of present employees, in each case in accordance
with past practice, it being understood that termination of employees with poor
performance ratings shall not constitute a violation of this covenant;
(ii) comply with all laws and regulations applicable to it or to the conduct of
its business and perform and comply with all contracts, commitments and
obligations by which it is bound;
(iii) duly and timely file all Tax Returns or reports required to be filed with
taxing authorities and promptly pay all Taxes, assessments and governmental
charges levied or assessed upon them or any of their properties (unless
contesting the same in good faith and adequate provision has been made
therefor);
(iv) keep in effect casualty, public liability, worker's compensation and other
insurance policies in coverage amounts not less than those in effect at the date
of this Agreement;
(v) in the ordinary course consistent with past practice, preserve, advertise,
promote and market its business, keep its properties intact, maintain good
commercial working relationships with its Key Customers, preserve its goodwill,
and maintain all physical properties in good operating condition;
(vi) use best efforts to preserve and protect its Proprietary Rights; and
(vii) operate its business diligently and solely in the ordinary course.
(b) Negative Covenants Pending Closing. Arbortext will not, and will cause
each Subsidiary not to:
(i) sell, transfer, mortgage, pledge or create or permit to be created any
Lien on, any of its assets, other than sales or transfers in the ordinary course
of business and Permitted Liens;
(ii) (A) incur any obligation or liability other than (1) in the ordinary course
of business or (2) for Transaction Expenses pursuant to Section 4.9, (B) incur
any indebtedness for borrowed money, or (C) enter into any contracts or
commitments involving payments by Arbortext of $100,000 or more, other than
purchase orders or commitments for inventory, materials and supplies in the
ordinary course of business;
(iii) change the compensation or fringe benefits of any officer, director,
employee or consultant or enter into or modify any Employee Benefit Plan with
any person;
(iv) (A) grant or accelerate the exercisability of any option, warrant or other
right to purchase, or to convert any obligation into, shares of its capital
stock, (B) declare or pay any dividend or other distribution with respect to any
shares of its capital stock, other than dividends or distributions from
Subsidiaries to Arbortext in the ordinary course of business, or (C) issue any
shares of its capital stock other than pursuant to the exercise of Purchase
Rights listed in Section 2.2(b) of the Arbortext Disclosure Schedule;
(v) amend its Certificate of Incorporation or Bylaws or other organizational
or governing documents;
(vi) make any acquisition of any other business or other acquisition of
property other than in the ordinary course of business consistent with past
practices;
(vii) enter into or modify any Material Contract other than in the ordinary
course of business consistent with past practices;
(viii) take any actions that would result in any of the representations or
warranties made in Section 2 hereof being untrue in any material respect;
(ix) take any affirmative action or fail to take any reasonable action within
its control as a result of which any of the changes or events listed in Section
2.9 is likely to occur; or
(x) with respect to Taxes, make or change any election, change an annual
accounting period, adopt or change any material accounting method, file an
amended Tax Return, enter into any closing agreement, compromise or file an
appeal with respect to any Tax claim or assessment related to Arbortext or any
Subsidiary, surrender any right to claim a refund of Taxes, or consent to any
extension or waiver of the limitation period applicable to any Tax claim or
assessment relating to Arbortext or any Subsidiary.
4.2 Corporate Examinations and Investigations. During the period from the date
hereof to the Closing Date or the earlier termination of this Agreement, PTC
shall be entitled, through its employees and representatives, to have such
access to the assets, properties, business, books, records and operations of
Arbortext and its Subsidiaries as PTC shall reasonably request in connection
with PTC's investigation of Arbortext with respect to the transactions
contemplated hereby. Any such investigation and examination shall be conducted
at reasonable times and, to the extent practicable, during normal business
hours, and Arbortext shall cooperate fully therein. No investigation by PTC
shall diminish or obviate any of the representations, warranties, covenants or
agreements of Arbortext contained in this Agreement. In order that PTC may have
full opportunity to make such investigation, Arbortext shall furnish the
representatives of PTC during such period with all such information and copies
of such documents concerning the affairs of Arbortext as such representatives
may reasonably request and cause its officers, employees, consultants, agents,
accountants and attorneys to cooperate fully with such representatives in
connection with such investigation. The Confidentiality Agreement, dated as of
February 16, 2005 between Arbortext and PTC will apply with respect to all
information obtained by PTC under this Section 4.2.
4.3 Consummation, Governmental and Third-Party Notices and Consents.
(a) Each party shall use all reasonable efforts to take all actions and to do
all things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement and shall use all reasonable efforts to perform
and fulfill all conditions and obligations to be performed and fulfilled by it
under this Agreement and to ensure that to the extent within its control or
capable of influence by it, no breach of any of the respective representations,
warranties and agreements hereunder occurs or exists on or before the Effective
Time, all to the end that the transactions contemplated by this Agreement shall
be fully carried out in a timely fashion.
(b) Each party shall use all reasonable efforts to obtain, at its expense, all
waivers, permits, consents, approvals or other authorizations from Governmental
Entities, and to effect all registrations, filings and notices with or to
Governmental Entities, as may be required for such party to consummate the
transactions contemplated by this Agreement and to otherwise comply with all
applicable laws and regulations in connection with the consummation of the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, each of the parties shall promptly file any Notification and
Report Forms and related material that it may be required to file with the
Federal Trade Commission and/or the Antitrust Division of the United States
Department of Justice under the H-S-R Act, shall use its reasonable efforts to
obtain an early termination of the applicable waiting period thereunder, and
shall make any further filings or information submissions pursuant thereto that
may be necessary, proper or advisable; provided, however, that notwithstanding
anything to the contrary in this Agreement, PTC shall not be obligated to sell
or dispose of or hold separately (through a trust or otherwise) any assets or
businesses of PTC or its affiliates.
(c) Arbortext shall use its reasonable efforts to obtain, at its expense, all
such waivers, consents or approvals from third parties, and to give all such
notices to third parties, as are required to be listed in the Arbortext
Disclosure Schedule.
4.4 Communications with Customers and Suppliers. Arbortext and the
Subsidiaries will cooperate in good faith and to the extent reasonably
practicable with PTC in communications with suppliers and customers to
accomplish the effective transfer of the business of Arbortext and the
Subsidiaries to PTC on the Closing Date.
4.5 Stockholder Approval; Dissenters' Rights.
(a) Arbortext will, as soon as practicable following the execution of this
Agreement, duly call, give notice of, convene and hold a special meeting of the
Stockholders or solicit a written consent of the Stockholders in accordance with
the DGCL and the Arbortext Certificate of Incorporation and By-Laws for the
purpose of considering the adoption of this Agreement and the approval of the
Merger and of the arrangements relating thereto, including the delivery of the
Escrow Funds to the Escrow Agent and the appointment of the Stockholder
Representative. In connection with such special meeting of Stockholders or
written Stockholder consent, Arbortext shall (i) provide to its Stockholders the
recommendation of the Arbortext Board of Directors that the Stockholders vote in
favor of the adoption of this Agreement and the approval of the Merger, and (ii)
comply with Section 262 of the DGCL in consultation with PTC.
(b) Arbortext shall give PTC (i) prompt notice of any written demands for
appraisal under the DGCL with respect to any shares of Arbortext Stock, any
withdrawal of any such demands and any other instruments served pursuant to the
DGCL and received by Arbortext and (ii) the right to participate in all
negotiations and proceedings with respect to any demands for appraisal under the
DGCL with respect to any shares of Arbortext Stock. Arbortext shall cooperate
with PTC concerning, and shall not, except with the prior written consent of
PTC, voluntarily make any payment with respect to, or offer to settle or settle,
any such demands.
4.6 Tax Matters. The following provisions of this Section 4.6 shall govern the
allocation between PTC and the Surviving Corporation, on the one hand, and the
Securityholders, on the other hand, of responsibility for certain tax matters
following the Effective Time. As used in this Section 4.6, the term "Arbortext"
includes Arbortext and its Subsidiaries.
(a) PTC and the Surviving Corporation shall prepare or cause to be prepared,
and file or cause to be filed, all Tax Returns for Arbortext (i) for all Tax
periods ending on or before the Effective Date that are due after the Effective
Date (the "Pre-Closing Periods") and (ii) for all Tax periods that begin before
the Effective Date and end after the Effective Date (the "Straddle Periods").
Such Tax Returns shall be prepared in a manner consistent with Arbortext's past
practices. Such Tax Returns, together with a statement setting forth the amount
of Tax allocated to the Securityholders pursuant to this Section 4.6 (the "Tax
Statement") with respect to such Tax Return, shall be provided to the
Stockholder Representative, acting for the Securityholders, for his review and
comment not later than thirty (30) days before the due date for filing such Tax
Returns (including extensions). The Stockholder Representative shall be entitled
to suggest to PTC any reasonable changes to such Tax Returns or the Tax
Statement and to dispute items in such Tax Returns or Tax Statement. The
Stockholder Representative shall provide PTC with a written description of
proposed changes to such Tax Returns or Tax Statements and a description of the
items in the Tax Returns or the Tax Statements that he intends to dispute within
ten (10) days following the delivery to him of such documents. In the event that
the Stockholder Representative does not provide such written description within
the ten (10) day period specified in the preceding sentence, he shall be deemed
to have accepted and agreed to such Tax Returns or Tax Statements in the form
provided. PTC and the Stockholder Representative agree to consult with each
other and to resolve in good faith any timely-raised issue arising as a result
of the review of such Tax Returns or the Tax Statement to permit the filing of
such Tax Returns as promptly as possible. In the event the parties are unable to
resolve any dispute within ten (10) days following the delivery of written
notice to PTC by the Stockholder Representative of disputed items, the
Stockholder Representative and PTC shall jointly request an Independent
Accountant to resolve any issue in dispute no later than five business days
prior to the due date of such Tax Return, in order that such Tax Return may be
timely filed. If the Independent Accountant is unable to make a determination
with respect to any disputed issue within five (5) business days before the due
date (including extensions) for the filing of the Tax Return in question, then
PTC and the Surviving Corporation may file such Tax Return on the due date
(including extensions) therefor without such determination having been made and
without the consent of the Stockholder Representative; provided, however, that
such Tax Return shall incorporate such changes as have at the time of such
filing been agreed to by the parties pursuant to this Section 4.6(a).
Notwithstanding the filing of such Tax Return, the Independent Accountant shall
make a final determination with respect to any disputed issue, and the amount of
Taxes that are allocated to the Securityholders pursuant to this Section 4.6
shall be as determined by the Independent Accountant. The filing of such Tax
Return prior to the final determination of any disputed item and the position
taken on such Tax Return with respect to any disputed item shall not be a factor
in the determination by the Independent Accountant of the amount of Taxes that
are allocated to the Securityholders pursuant to this Section 4.6. The
Stockholder Representative and PTC shall each bear one-half of the Independent
Accountant's fees and expenses, and the determination of the Independent
Accountant shall be binding on all parties.
(b) The Securityholders shall reimburse PTC and the Surviving Corporation in
accordance with Section 8.2 for all Taxes of Arbortext with respect to (i) the
Pre-Closing Periods and (ii) the portion of the Straddle Periods ending on the
Effective Date, except to the extent such Taxes were included as Other
Liabilities in the calculation of the Closing Adjustment under Section
1.7(c)(ii), in each case within fifteen (15) days after payment by PTC, the
Surviving Corporation, or Arbortext of such Taxes. For purposes of this section,
in the case of any Taxes that are imposed on a periodic basis and are payable
for a Straddle Period, the portion of such Tax that relates to the portion of
such taxable period ending on the Effective Date shall (i) in the case of the
Taxes other than Taxes based on or related to income or receipts, be deemed to
be the amount of such Tax for the entire taxable period multiplied by a
fraction, the numerator of which is the number of days in the taxable period
ending on the Effective Date and the denominator of which is the number of days
in the entire taxable period; and (ii) in the case of any Tax based upon or
related to income or receipts be deemed equal to the amount which would be
payable if the relevant taxable period ended on the Effective Date. Any Tax
credits relating to a Straddle Period shall be taken into account as though the
relevant taxable period ended at the Effective Date.
(c) Nothing in this Section 4.6 shall excuse the Securityholders from their
responsibility for their share, as determined in accordance with this Section
4.6, of any such Taxes if the amount of Taxes as ultimately determined (on audit
or otherwise) for the periods covered by such Tax Returns exceeds the amount
determined under this Section 4.6.
(d) Each of PTC, the Surviving Corporation, the Stockholder Representative,
and the Securityholders shall cooperate fully and in good faith, as and to the
extent reasonably requested by any other party to this Agreement, in connection
with the filing of Tax Returns pursuant to this Section and any audit,
litigation, or other proceeding with respect to Taxes of Arbortext. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information that are reasonably relevant to the
preparation of any such Tax Return or to any such audit, litigation, or other
proceeding. Each Securityholder and the Stockholder Representative shall (i)
retain all books and records in his, her or its possession with respect to Tax
matters pertinent to Arbortext relating to any taxable period beginning before
the Effective Date until the expiration of the applicable statute of limitations
(and, to the extent notified by PTC or the Surviving Corporation, any extension
thereof) of the applicable taxable periods, and abide by all record retention
agreements entered into with any taxing authority, and (ii) give to PTC and the
Surviving Corporation reasonable written notice before transferring, destroying
or discarding any such books and records and, if PTC or the Surviving
Corporation so requests, the Stockholder Representative or such Securityholder
shall allow PTC or the Surviving Corporation to take possession of such books
and records.
(e) All transfer, documentary, sales, use, stamp, registration, and other such
Taxes and fees (including any penalties and interest) incurred in connection
with the consummation of the transactions contemplated by this Agreement (the
"Transfer Taxes") shall be paid by the Securityholders when due, and the
Securityholders will, at no expense to PTC or the Surviving Corporation, file
all necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration, and other Taxes and
fees, and, if, required by applicable law, PTC and the Surviving Corporation
will, and will cause their affiliates to, join in the execution of any such Tax
Returns and other documentation.
(f) To the extent permitted under applicable law, the parties hereto agree to
treat the payment of consideration with respect to Options pursuant to Sections
1.8(b)(i) (to which the provisions of Section 1.9(d) do not apply) and
1.8(b)(ii) of this Agreement as being allocable to the portion of the Effective
Date after the Effective Time and, accordingly, that any federal income tax
deduction related to such payment shall be reflected on the Arbortext's federal
income Tax Return for the taxable period beginning on the day after the
Effective Date (and in a consistent manner on any applicable state or local
income Tax Returns).
4.7 Continuing Obligation to Inform. From time to time before the Closing,
Arbortext will deliver or cause to be delivered to PTC all information coming to
Arbortext's attention, or concerning events occurring, after the date hereof
that would render any statement, representation or warranty in this Agreement or
any information contained in the Arbortext Disclosure Schedule inaccurate or
incomplete in any material respect if made as of such later date; provided that
none of such supplemental information shall constitute an amendment of any
statement, representation or warranty in this Agreement or any Schedule, Exhibit
or document furnished pursuant hereto.
4.8 Exclusivity. Neither Arbortext nor any of its directors, Stockholders,
officers, employees, agents or affiliates (collectively, "Related Parties")
shall, directly or indirectly, (a) solicit, initiate, encourage or otherwise
facilitate offers or proposals from, or engage in or continue any discussions or
negotiations with, any other party (other than PTC) for (i) the sale or other
disposition of all or any portion of the equity interests or (outside the
ordinary course of business) the assets of Arbortext or any Subsidiary or the
merger, consolidation or other combination of Arbortext, any Subsidiary or their
respective businesses or assets with any other person or entity or (ii) the
issuance to any person (other than pursuant to Section 4.1(b)(iv)) of shares or
Purchase Rights that give or would give the holder thereof the direct or
indirect beneficial ownership of any issued and outstanding Arbortext Stock, or
(b) provide or offer to provide any information to any other party or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person to do or seek any of the foregoing.
Arbortext agrees to notify PTC promptly of any such proposal or offer, or any
inquiry or contact with respect thereto received by Arbortext or any Related
Party. In the event Arbortext or any of the Related Parties takes or omits any
action in contravention of this Section 4.8, Arbortext shall, within ten (10)
Business days after written demand therefor by PTC, pay to PTC as liquidated
damages and as reimbursement for the expenses and losses incurred and estimated
to be incurred by PTC in connection with this Agreement the amount of $5,000,000
in cash or by certified or bank cashier's check or wire transfer.
4.9 Transaction Expenses. PTC and Arbortext shall each bear their own costs
incurred in connection herewith; provided that, if the Merger is consummated,
Arbortext's Transaction Expenses shall not exceed $500,000 in the aggregate (all
of which shall have been charged at customary rates and supported by detailed
invoices). The foregoing shall not limit the right of the Securityholders to pay
for any Transaction Expenses in excess of $500,000 ("Excess Transaction
Expenses"), and the Stockholder Representative, on behalf of the
Securityholders, shall promptly pay and discharge all such Excess Transaction
Expenses not included within the Closing Adjustments as they come due. PTC shall
be entitled to treat any Excess Transaction Expenses not paid by the Stockholder
Representative as Losses recoverable under Section 8.
4.10 Public Announcements and Confidentiality.
(a) Any press release or public announcement before the Closing by Arbortext
or any of its Related Parties with respect to this Agreement or the transactions
contemplated hereby shall require the prior approval of PTC, which approval
shall not be unreasonably withheld or delayed, provided that a party shall not
be prevented from making such disclosure as it shall have been advised by
counsel is required by law.
(b) The terms of this Agreement and all information furnished to either party
or any of its Related Parties by the other party or any of its Related Parties,
and all analyses, compilations, data, studies or other documents prepared by or
for either party containing or based in whole or in part on any such furnished
information or reflecting its review of, or interest in, the transaction shall
continue to be subject to the terms of the Confidentiality Agreement dated
February 16, 2005 between PTC and Arbortext (the "MNDA").
4.11 Indemnification of Directors and Officers.
(a) All rights to indemnification by Arbortext existing at the Effective Time
in favor of each person who is now or has been prior to the date hereof or who
becomes prior to the Effective Time an officer or director of Arbortext or any
Subsidiary (the "Indemnified Persons") shall survive the Merger, and PTC shall
cause the Surviving Corporation to continue such rights in full force and effect
for six (6) years from the Effective Time and to perform, in a timely manner,
its obligations with respect thereto. Nothing contained herein shall make PTC,
Merger Sub, Arbortext or the Surviving Corporation an insurer, a co-insurer or
an excess insurer in respect of any insurance policies which may provide
coverage for Liabilities subject to such indemnification, nor shall this Section
4.11 relieve the obligations of any insurer in respect thereto. Each Indemnified
Person is intended to be a third party beneficiary of this Section 4.11. This
Section 4.11 shall survive the consummation of the Merger at the Effective Time
and shall be binding on all successors and assigns of PTC and the Surviving
Corporation.
(b) Arbortext shall, before the Closing Date, purchase tail liability
insurance covering those persons who, as of immediately prior to the Effective
Time, are covered by Arbortext's directors' and officers' liability insurance
policy for a period of three (3) years after the expiration date of such policy
on terms substantially the same as those of Arbortext's present directors' and
officers' liability insurance policy; provided, however, that in no event will
Arbortext be required to pay in excess of 300% of the annual premium most
recently paid by Arbortext for such coverage; provided further, that
notwithstanding the foregoing, in the event such coverage is not available (or
is only available for an amount in excess of 300% of the annual premium most
recently paid by Arbortext for such coverage), Arbortext shall nevertheless use
its commercially reasonable efforts to obtain such coverage as may be obtained
for such 300% amount.
4.12 Employee Benefits.
(a) As of the Effective Time, except as otherwise provided in any written
employment agreement with Arbortext or its Subsidiaries, PTC shall, or shall
cause the Surviving Corporation or its Subsidiaries, to (i) initially maintain
the Employee Benefit Plans (other than equity-based benefits) maintained by
Arbortext or its Subsidiaries immediately prior to the Effective Time with
respect to employees of Arbortext or its Subsidiaries immediately prior to the
Effective Time who continue employment with the Surviving Corporation or any
Subsidiary of the Surviving Corporation ("Continuing Employees"), and (ii)
within one year following the Effective Time, provide such Continuing Employees
with the employee benefits provided by PTC to similarly situated employees of
PTC under PTC's employee benefits plans. Nothing in this Agreement shall be
construed to create a right in any Continuing Employee to employment with PTC,
the Surviving Corporation, or any of their respective Subsidiaries. Subject to
any written agreement between a Continuing Employee and PTC, the Surviving
Corporation, or any of their respective Subsidiaries, the employment of a
Continuing Employee shall be terminable by the employer "at will" with no
further liability to the Continuing Employee other than as expressly provided
under the employer's employee benefit plans.
(b) With respect to employee benefit plans, if any, of PTC, the Surviving
Corporation, or any of their respective Subsidiaries that provide group medical,
dental, or prescription drug coverage in which Continuing Employees become
eligible to participate after the Effective Time (the "PTC Group Health Plans"),
PTC shall, or shall cause the Surviving Corporation or their respective
Subsidiaries to: (i) waive any exclusions for pre-existing conditions under such
PTC Group Health Plan that would result in a lack of coverage for any condition
for which the applicable Continuing Employee would have been entitled to
coverage under the corresponding Employee Benefit Plan in which such Continuing
Employee was an active participant immediately prior to his or her transfer to
the PTC Plan if such Continuing Employee can provide proof of coverage under the
corresponding plan of either Arbortext, its Subsidiaries, or another employer's
plan; (ii) waive any coverage waiting period under such PTC Group Health Plan to
the extent that such period exceeds the corresponding waiting period under the
corresponding Employee Benefit Plan in which such Continuing Employee was an
active participant immediately prior to his or her transfer to the PTC Group
Health Plan (after taking into account any prior service with Arbortext or its
Subsidiaries credited under such Employee Benefit Plan for purposes of
satisfying such waiting period); and (iii) provide each Continuing Employee with
credit for any co-payments and deductibles paid by such Continuing Employee
prior to his or her transfer to the PTC Group Health Plan (to the same extent
such credit was given under the analogous Employee Benefit Plan prior to such
transfer) in satisfying any applicable deductible or out-of-pocket requirements
under such PTC Group Health Plan for the plan year that includes such transfer;
provided that, such Continuing Employee shall be responsible for any applicable
co-payments required to be made under such PTC Group Health Plan. Covered
Employees not currently covered by any group health plan of Arbortext or its
Subsidiaries may, subject to any eligibility requirements, enroll in any PTC
Group Health Plan extended to the Continuing Employees during the next open
enrollment period.
(c) Continuing Employees shall receive credit for past service with Arbortext
and its Subsidiaries for purposes of eligibility to participate in any defined
contribution retirement plans extended by PTC, the Surviving Corporation, or
their respective Subsidiaries to the Continuing Employees, but the Continuing
Employees shall not receive credit for any other purposes. The terms and
conditions of any such defined contribution retirement plan shall be determined
by PTC, the Surviving Corporation, or their respective Subsidiaries.
(d) Continuing Employees shall receive credit for past service with Arbortext
and its Subsidiaries for purposes of eligibility to participate in any severance
plan extended by PTC, the Surviving Corporation, or their respective
Subsidiaries to the Continuing Employees, but the Continuing Employees shall not
receive credit for any other purposes. The terms and conditions of any such
severance plan shall be determined by PTC, the Surviving Corporation, or their
respective Subsidiaries.
(e) Any vacation days, sick days, or other paid time off that is accrued but
unused by current or former employees of Arbortext or its Subsidiaries
(determined immediately prior to the Effective Date) under the plans, programs,
arrangements, or policies of Arbortext or its Subsidiaries that, under the terms
thereof or applicable law, may be "banked," "rolled over" to a subsequent plan
year, or are otherwise deemed vested or that constitute a binding obligation of
the employer shall be paid out by Arbortext and its Subsidiaries in cash
(subject to applicable withholding) prior to the Effective Time. The Continuing
Employees will continue to accrue vacation days or other paid time off under the
plans, programs, arrangements, or policies of Arbortext or its Subsidiaries
until September 30, 2005. Accrued but unused vacation days or other paid time
off under the plans, programs, arrangements, or policies of Arbortext or its
Subsidiaries shall be subject to amendment, suspension, termination, or
forfeiture at December 31, 2005, as determined by PTC. It is the intention of
PTC to transition the Continuing Employees to the paid time off policies
applicable to PTC employees generally after September 30, 2005, for which
purpose the Continuing Employees shall receive credit for past service with
Arbortext and its Subsidiaries.
(f) Except as otherwise provided in this Section 4.12, nothing in this
Agreement shall require PTC, the Surviving Corporation, or their respective
Subsidiaries to provide any particular type or level of compensation or employee
benefits, nor shall anything limit the right of PTC, the Surviving Corporation,
or their respective Subsidiaries to amend, suspend, or terminate any employee
benefit plan at any time.
4.13 Termination of Options. Arbortext's Board of Directors shall take such
actions and provide such notices as are required under the Arbortext Option
Plans to (a) require that no Options may be exercised after the fifth (5th)
business day after the date hereof and (b) cause all Options that will be
unvested and unexercisable at the Effective Time to terminate and cease to be
outstanding at the Effective Time, in accordance with Section 1.8(b) hereof.
4.14 Delivery of Monthly Financial Statements. As promptly as possible
following the last day of each month after the date hereof until the Closing
Date, and in any event within fifteen (15) days after the end of each such
month, Arbortext shall deliver to PTC the consolidated balance sheet of
Arbortext and the Subsidiaries and the related statements of operations and cash
flows for the one-month period then ended, all certified by the chief financial
officer of Arbortext to the effect that such monthly financial statements are
prepared in accordance with GAAP consistently applied with prior periods and
fairly present the financial condition of Arbortext and its Subsidiaries as of
the date thereof and for the period covered thereby.
4.15 Employee Benefit Plans. Arbortext shall use commercially reasonable
efforts to (a) file all Forms 5500 Annual Report/Return of Employee Benefit Plan
(together, if applicable, with any audited financial statements and schedules)
("Form 5500") required to be filed with respect to any Employee Benefit Plan of
Arbortext or any Subsidiary as of the date immediately prior to the Effective
Time, including all Forms 5500 due for the plan year ended December 31, 2004
(determined without regard to any filing extension), (b) pay all Taxes owed by
Arbortext or any Subsidiary as of the date immediately prior to the Effective
Time as a result of any failure to timely file any Form 5500 for any Employee
Benefit Plan of Arbortext or any Subsidiary, and pay any penalties, fees,
interest, or other amounts owed to the US Department of Labor, and (c) pay all
accrued vacation under Arbortext's former vacation policy as reflected in the
Financial Statements.
4.16 Subsidiary Employee Agreements. Arbortext shall use commercially
reasonable efforts to cause each Subsidiary to enter into employment agreements
with each of its respective employees substantially in the form previously
provided or made available to PTC.
4.17 280G Approval.
(a) As promptly as practicable following the date hereof, Arbortext shall use
its reasonable best efforts to obtain a binding agreement (a "280G Agreement")
from any person who, if stockholder approval meeting the requirements of Section
280G(b)(5) of the Code and Treasury Regulations Section 1.280G-1 is not obtained
before the Closing Date, is reasonably expected to receive an Excess Parachute
Payment in connection with the transactions contemplated by this Agreement. The
280G Agreement shall provide that such person agrees to forego and waive without
payment that portion of his or her compensation that, if not so waived and
cancelled, would result in such person receiving an Excess Parachute Payment if
such stockholder approval is not obtained. The determination of the person or
persons who shall be asked to execute a 280G Agreement and the form of the 280G
Agreement shall be subject to PTC's approval, and no amendment or supplement to
such documents shall be made by Arbortext without PTC's approval.
(b) As promptly as practicable following the date hereof, Arbortext shall use
its reasonable best efforts to obtain, before the Closing Date, approval of its
stockholders meeting the requirements of Section 280G(b)(5) of the Code and
Treasury Regulations Section 1.280G-1 of any payments that, absent such
stockholder approval, would result in the payment of an Excess Parachute
Payment. The stockholder consent form on which such stockholder approval shall
be sought, and the form of disclosure statement that will accompany such consent
form, shall be subject to PTC's approval, and no amendment or supplement to such
documents shall be made by Arbortext without PTC's approval.
(c) Arbortext shall, no later than 14 days before the Closing Date, provide
PTC with a copy of the calculations showing the amount of any Excess Parachute
Payment that would be received in the absence of stockholder approval meeting
the requirements of Section 280G(b)(5) and applicable Treasury regulations,
together with all historical compensation information required to calculate the
amount of any Excess Parachute Payment.
SECTION 5
CONDITIONS TO EACH PARTY'S OBLIGATION TO CLOSE
The respective obligations of each Party to consummate the Merger are
subject to the satisfaction, at or before the Closing, of the following
conditions:
5.1 Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the Stockholders in accordance with the DGCL and the
Arbortext Certificate of Incorporation.
5.2 Antitrust Clearance. All required filings under the H-S-R Act shall have
been completed and all applicable waiting periods for the clearance of the
Merger under such Act and other antitrust laws shall have expired or been
terminated.
5.3 Legal Proceedings. No proceeding by or before any Governmental Entity
shall be pending or threatened wherein an unfavorable judgment, order, decree,
stipulation or injunction would (i) prevent or delay consummation of the
transactions contemplated by this Agreement, (ii) cause the transactions
contemplated by this Agreement to be rescinded following consummation or (iii)
have, individually or in the aggregate, a Material Adverse Effect, and no such
judgment, order, decree, stipulation or injunction shall be in effect.
SECTION 6
CONDITIONS TO THE OBLIGATION OF PTC AND MERGER SUB TO CLOSE
The obligation of PTC and Merger Sub to consummate the Merger is
subject to the satisfaction, at or before the Closing, of the following
conditions, any of which may be waived by PTC in its discretion:
6.1 Compliance; CEO Certificate. The representations and warranties of
Arbortext contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date (unless any such representation or warranty
is made only as of a specific date, in which event such representation and
warranty shall be true and correct in all material respects, as the case may be,
as of such specified date), except that those representations and warranties
that by their terms are qualified by materiality shall be true and correct in
all respects; there shall not have been any circumstance, event or occurrence
since the date of this Agreement that, individually, or in the aggregate, has
resulted, or could be reasonably expected to result, in a Material Adverse
Effect; Arbortext shall have performed and complied in all material respects
with all covenants and agreements required by this Agreement to be performed or
complied with by it on or before the Closing Date; and Arbortext shall have
delivered to PTC a certificate of its chief executive officer, dated the Closing
Date, to the foregoing effect.
6.2 Secretary Certificate. Arbortext shall have delivered to PTC a certificate
of the Secretary of Arbortext and each Subsidiary dated the Closing Date as to
(a) the Arbortext Certificate of Incorporation and Bylaws or the organizational
documents of each Subsidiary, each as in effect on and as of the Closing Date,
(b) the resolutions of the Board of Directors and Stockholders of Arbortext (and
if required, the applicable body of each of the Subsidiaries) authorizing and
approving the execution, delivery and performance by Arbortext of this Agreement
and all transactions related hereto, and (c) the incumbency of the officers of
Arbortext executing this Agreement or any other agreement or instrument
delivered in connection herewith.
6.3 Third Party Consents and Approvals. Arbortext shall have obtained and
delivered to PTC all Consents of Governmental Entities and other parties that
are required in connection with the Closing under this Agreement, the
performance by Arbortext of its obligations hereunder or the continuance of any
of the Material Contracts without adverse effect by the Surviving Corporation
after the Effective Time.
6.4 Certificates. Arbortext shall have provided PTC with certificates of
appropriate governmental officials in (a) each U.S. jurisdiction in which
Arbortext is required to qualify to do business as to the due qualification and
good standing (including tax) of Arbortext in each such jurisdiction and (b) the
United Kingdom as to the due organization and good standing of Arbortext United
Kingdom Ltd. and Arbortext Software Limited.
6.5 Escrow Agreement. The Escrow Agreement shall have been executed and
delivered by all parties thereto.
6.6 Dissenting Stockholders. The period for Stockholders to demand appraisal
rights pursuant to Section 262 of the DGCL shall have expired and appraisal
rights shall not have been properly demanded by Stockholders pursuant to Section
262 of the DGCL for shares of Arbortext Stock in an aggregate number greater
than five percent (5%) of the Arbortext Common Stock issued and outstanding
immediately before the Closing (determined on an as-converted-to-common basis),
for which purpose shares as to which such rights have been demanded but later
effectively withdrawn or forfeited shall not be counted.
6.7 Termination of Purchase Rights. There shall not be outstanding any
Purchase Rights (other than Options), and each holder of a Purchase Right (other
than any that expires by its terms or has been exercised at or before the
Effective Time) shall have executed and delivered to Arbortext a termination
agreement with respect to such Purchase Right in form satisfactory to PTC.
6.8 Opinion of Counsel to Arbortext. Arbortext shall have delivered an opinion
of Xxxxxx & Xxxxxxx LLP, counsel to Arbortext, in form reasonably satisfactory
to PTC, dated the Closing Date, addressed to PTC and Merger Sub, with respect to
the matters set forth on Exhibit B hereto.
6.9 FIRPTA Certificate. PTC or its designated affiliate shall have received
certification from Arbortext, substantially in the form of Exhibit C hereto,
dated no more than thirty (30) days before the Effective Date and signed by a
responsible corporate officer of Arbortext, that Arbortext is not, and has not
been at any time during the five years preceding the date of such certification,
a United States real property holding company, as defined in Section 897(c)(2)
of the Code, and proof reasonably satisfactory to PTC that Arbortext has
provided notice of such certification to the IRS, substantially in the form of
Exhibit D hereto, in accordance with the provisions of Treasury Regulations
ss.1.897-2(h)(2).
6.10 No Bank Debt or Liens. Arbortext shall not be party to any loan, line of
credit, or other Indebtedness to any financial institution, and there shall be
no Liens in favor of any financial institution on any assets of Arbortext or any
of the Subsidiaries.
6.11 Termination of Other Agreements. The Arbortext Stock Purchase Agreements
and other related agreements that do not terminate by their terms at or before
the Effective Time shall have been terminated.
6.12 Intercompany Royalty Agreement. Arbortext, Inc. and Arbortext Software
Limited shall have entered into the intercompany royalty agreement substantially
in the form previously provided or made available to PTC.
6.13 Accrued Vacation . Arbortext shall have paid all accrued vacation under
Arbortext's former vacation policy as reflected in the Financial Statements.
6.14 Miscellaneous. Arbortext shall have delivered or caused to be delivered to
PTC all other documents reasonably requested by PTC in connection with the
consummation of the transactions contemplated hereby.
SECTION 7
CONDITIONS TO ARBORTEXT'S OBLIGATION TO CLOSE
The obligation of Arbortext to consummate the Merger is subject to the
satisfaction, at or before the Closing, of the following conditions, any of
which may be waived by Arbortext in its discretion:
7.1 Compliance; Officer Certificates. The representations and warranties of
PTC contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date (unless any such representation or warranty
is made only as of a specific date, in which event such representation and
warranty shall be true and correct in all material respects, as the case may be,
as of such specified date), except that those representations and warranties
that by their terms are qualified by materiality shall be true and correct in
all respects; each of PTC and Merger Sub shall have performed and complied in
all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by them on or before the Closing
Date; and PTC and Merger Sub shall each shall have delivered to Arbortext a
certificate of an executive officer, dated the Closing Date, to the foregoing
effect.
7.2 Secretary Certificates. (a) Merger Sub shall have delivered to Arbortext a
certificate of its Secretary dated the Closing Date as to (i) its Certificate of
Incorporation and Bylaws, as in effect on and as of the Closing Date and (ii)
the resolutions of its Board of Directors and stockholders authorizing and
approving the execution, delivery and performance by such company of this
Agreement and all transactions related hereto and (b) PTC shall have delivered
to Arbortext a certificate of its Clerk or Assistant Clerk dated the Closing
Date as to (i) its Articles of Organization and Bylaws, as in effect on and as
of the Closing Date and (ii) the resolutions of its Board of Directors
authorizing and approving the execution, delivery and performance by PTC of this
Agreement and all transactions related hereto.
7.3 Escrow Agreement. The Escrow Agreement shall have been executed and
delivered by all parties thereto.
7.4 Opinion of Counsel to PTC. PTC shall have delivered an opinion of Xxxxxx &
Dodge LLP, counsel to PTC and Merger Sub, in form reasonably satisfactory to
Arbortext, dated the Closing Date, addressed to Arbortext, with respect to the
matters set forth on Exhibit E hereto.
SECTION 8
INDEMNIFICATION
8.1 Survival. Notwithstanding any right of any party to fully investigate the
affairs of the other party and notwithstanding any knowledge of facts determined
or determinable by such party pursuant to such investigation or right of
investigation, each party has the right to rely fully upon and seek remedy for
the breach of any of the representations, warranties, covenants and agreements
of each other party in this Agreement, in any Schedule hereto, or in any
certificate or other instrument delivered by any party pursuant to Sections 1.7,
4.14, or 6 hereto. All such representations, warranties, covenants and
agreements shall survive the execution and delivery hereof and the Closing
hereunder, and shall thereafter survive in accordance with the provisions of
Section 8.4 below.
8.2 Obligation of the Securityholders to Indemnify. Subject to the limitations
set forth in Section 8.4 hereof, after the Effective Time, the Securityholders
shall, jointly and severally, indemnify and hold harmless PTC, the Surviving
Corporation and the Subsidiaries, and their respective directors, officers,
employees, agents, affiliates and assigns (collectively, the "PTC Indemnitees")
from and against any and all Losses incurred as a result of:
(a) any inaccuracy in or breach of any (i) representation or warranty, or (ii)
any covenant or agreement, of Arbortext contained in this Agreement, the Escrow
Agreement, any schedule hereto (including the Arbortext Disclosure Schedule) or
any certificate or other instrument delivered by Arbortext or any Subsidiary
pursuant to Sections 1.7, 4.14, or 6 hereto;
(b) the incidence of any liability for (i) any Tax of Arbortext or any
Subsidiary with respect to any taxable period (or portion thereof, determined in
a manner consistent with Section 4.6(b) hereof) ending on or before the
Effective Date, except to the extent such Tax is included as an Other Liability
in the calculation of the Closing Adjustment under Section 1.7(c)(ii), (ii) any
Tax resulting from or attributable to the consummation of the transactions
contemplated by this Agreement, (iii) any Transfer Taxes, or (iv) the unpaid
Taxes of any person other than Arbortext or any Subsidiary 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. Each claim for
Losses described in clause (a) of this Section 8.2 (to the extent that such
claim relates to the representations and warranties set forth in Section 2.10 or
the covenants set forth in Section 4.6, 4.1(a)(iii) or 4.1(b)(x)) or in this
clause (b) of this Section 8.2 is referred to herein as a "Tax Claim" and
collectively as the "Tax Claims;"
(c) any claim related to the matters identified in Section 2.16(e)(1) of the
Arbortext Disclosure Schedule; and
(d) to the extent the stockholder vote described in Section 4.17 is not
obtained and there is a resulting Excess Parachute Payment; provided that the
respective Loss shall be the amount of such Excess Parachute Payment multiplied
by PTC's deemed effective tax rate of thirty-nine percent (39%).
8.3 Notice and Opportunity to Defend.
(a) Notice of Claims. Promptly after receipt by an PTC Indemnitee of notice of
any complaint by a third party or the commencement of any action or proceeding
by a third party (each, a "Third-Party Claim") that may result in a Loss with
respect to which such PTC Indemnitee may claim indemnification under this
Section 8, the PTC Indemnitee shall give written notice (a "Third-Party Demand")
to the Stockholder Representative on behalf of the Securityholders obligated to
provide indemnification under this Section 8 (each, an "Indemnifying Party") and
to the Escrow Agent. In the event any PTC Indemnitee seeks indemnification
pursuant to this Section 8 other than in connection with a Third-Party Claim,
such PTC Indemnitee shall send a written notice of the respective Loss, or of
any circumstance that with the lapse of time and/or the occurrence of any other
event or circumstance, may give rise to a Loss (together with any Third-Party
Demand, a "Demand") to the Stockholder Representative on behalf of the
Indemnifying Parties and to the Escrow Agent. Any Demand delivered pursuant to
this Section 8.3(a) shall (i) describe the basis for such Demand in reasonable
detail and (ii) indicate the amount (reasonably estimated, if appropriate) of
the Loss that has been or may be suffered by the PTC Indemnitee. No delay or
failure to give any such notice by any PTC Indemnitee shall relieve any
Indemnifying Party from any obligation hereunder or otherwise prejudice any
claim capable of being made against the Escrow Funds (provided that such Demand
is made before the Claims Termination Date), except to the extent that the
Indemnifying Party is materially prejudiced thereby.
(b) Response to a Demand. The Stockholder Representative may reply to a Demand
by written notice given to the PTC Indemnitee making such Demand and to the
Escrow Agent, which notice shall state whether the Stockholder Representative
agrees or disagrees that such PTC Indemnitee is entitled to indemnification
under this Agreement for all or any part of the claim asserted in such Demand
and agrees or disagrees with respect to the amount of indemnifiable Losses
asserted in such Demand, and which specifies the nature and the amount of any
such dispute (a "Contest Notice"). If, within twenty (20) days after receipt of
the Demand (the "Contest Notice Period"), the Stockholder Representative does
not deliver a Contest Notice in compliance with the foregoing or gives a notice
to the PTC Indemnitee making such Demand that the Demand is undisputed in whole
or in part, the Indemnifying Party(ies) shall thereupon pay to the PTC
Indemnitee making such Demand the amount of the undisputed portion of the Losses
asserted in such Demand (which amount shall be satisfied solely from the Escrow
Funds available under the Escrow Agreement), and the Escrow Agent shall disburse
such amount from the Escrow Funds to such PTC Indemnitee. Any portion of any
Demand that is disputed in a Contest Notice properly delivered within the
applicable Contest Notice Period shall be considered a "Disputed Claim" and
shall be resolved in accordance with the dispute resolution provisions of
Section 8.3(c).
(c) Disputed Claims. The parties hereto shall make a reasonable good faith
effort to resolve their differences with respect to any Disputed Claim for a
period of twenty (20) days following the receipt of any timely Contest Notice
from the Stockholder Representative. Any portion of such Disputed Claim that is
resolved by the parties during such period shall cease to be a Disputed Claim,
and shall either be paid by the Indemnifying Party(ies) out of the Escrow Funds
as set forth in Section 8.3(b) hereof or shall be dismissed, in accordance with
the resolution reached by the parties. To the extent that, at the end of such
twenty (20)-day period, the parties have failed to reach a written agreement
with respect to any portion of the Disputed Claim, the provisions of Section
10.4(b) shall apply.
(d) Defense of Third Party Claims.
(i) The Stockholder Representative, on behalf of the Indemnifying Party(ies),
may elect to compromise or defend, and control the defense of, any Third-Party
Claim at its own expense and by counsel who shall be reasonably satisfactory to
the PTC Indemnitee(s). If the Stockholder Representative elects to compromise or
defend such Third-Party Claim, he shall within twenty (20) days after receipt of
the respective Third-Party Demand (or sooner, if the nature or procedural
posture of the Third-Party Claim so requires) notify the PTC Indemnitee(s)
making such Demand of his intent to do so, and such PTC Indemnitee(s) shall
reasonably cooperate upon the request and at the expense of the Stockholder
Representative in the compromise of, or defense against, such Third-Party Claim.
The foregoing notwithstanding, the Stockholder Representative may not agree to
any compromise or settlement to which the PTC Indemnitee(s) has not consented in
writing, such consent not to be unreasonably withheld. If the Stockholder
Representative elects not to compromise or defend the Third-Party Claim, or
fails to notify the PTC Indemnitee(s) of its election as herein provided, or
fails to diligently defend or seek to compromise such Third-Party Claim after
electing to assume such defense or compromise, the PTC Indemnitee(s) may, in the
exercise of its reasonable discretion, pay, compromise or defend such
Third-Party Claim. In any event, (y) the PTC Indemnitee(s) may participate in
(but shall not have the right to control), at its own expense, the defense of
any Third-Party Claim by the Stockholder Representative and (z) the PTC
Indemnitee(s) shall have the right to retain or resume control of any
Third-Party Claim if it reasonably determines that the amount of any Loss
related to such claim would exceed the amount of the then-remaining Escrow Funds
(reduced by the amount of any outstanding Disputed Claims). In the event the
Stockholder Representative elects to defend and/or settle a Third-Party Claim
arising with respect to the matters described in Section 8.2(c), the costs of
such defense and settlement incurred by the Stockholder Representative, to the
extent related to such matters, shall be payable from the Escrow Funds.
(ii) The Stockholder Representative shall use reasonable efforts to keep the
PTC Indemnitee(s) advised of the status of any Third Party Claim that he has
elected to control pursuant to clause (i) of this Section 8.3(d) any Loss
related to which would constitute a Tax Claim (including any Tax audits,
examinations, appeals, litigation, or other similar proceedings). The
Stockholder Representative shall furnish to the PTC Indemnitee(s) copies of any
inquiries or requests for information from any taxing authority relating to such
Tax Claim, and shall notify the PTC Indemnitee(s) in advance of any other
written communication (i.e., communications not relating to inquiries or
requests for information covered above) proposed to be submitted by the
Stockholder Representative to the taxing authority relating to such Tax Claim.
The PTC Indemnitee(s) shall notify the Stockholder Representative in writing as
to which inquiries or information requests, or which other proposed written
communications, it desires to monitor and, with respect to such matters, the
Stockholder Representative shall submit for the PTC Indemnitee(s)'s review the
information proposed to be provided to a taxing authority in response to such
inquiries or requests, or in such other written communications. The PTC
Indemnitee(s) shall have the right to consult with the Stockholder
Representative regarding any such response. The Stockholder Representative shall
promptly furnish to the PTC Indemnitee(s) a copy of any notice of proposed
adjustment, revenue agent's report, or similar report or notice of deficiency
received with respect to any such Tax Claim.
(iii) Any prepayment, bond, or other security required to be paid with respect
to any claim for which a Demand is made hereunder in order to commence or
continue any action to defend or compromise such claim shall be treated at the
time of payment as an undisputed Loss under this Section 8, subject to immediate
payment of indemnification therefor from the Escrow Funds; provided, however,
that any portion of such amount that is recovered upon a successful defense or
compromise of the underlying Asserted Liability shall be returned to the Escrow
Funds for distribution pursuant to the Escrow Agreement, subject to setoff by
the PTC Indemnitee(s) against any other claim that is or would be a Final Claim
under the Escrow Agreement.
8.4 Limitations on Indemnification. The indemnification provided by Section
8.2 shall, except with respect to any claim against any party arising from fraud
or intentional misstatements, be subject to the following limitations:
(a) No indemnification shall be payable pursuant to clause (i) of Section
8.2(a) or Section 8.2(c) with respect to any Loss (other than a Loss resulting
from fraud or intentional misrepresentation) unless such Loss shall exceed
$20,000 (the "Minimum Claim Size") and then unless the total of all Losses
indemnifiable pursuant to clause (i) of Section 8.2(a) or Section 8.2(c) that
exceed the Minimum Claim Size exceeds $1,000,000 (the "Basket Amount"),
whereupon indemnification will be payable for the entire amount of such Losses
that exceed the Minimum Claim Size, subject to the further provisions of this
Agreement. In determining whether a Loss exceeds the Minimum Claim Size, (x) all
costs, expenses, interest, penalties and other amounts, including attorneys
fees, in connection with the investigation, defense and settlement may be
included, and (y) all Losses that result from the same or a substantially
related breach, claim or liability shall be aggregated and deemed to be a single
Loss. In connection with any claim for indemnification under this Agreement, the
PTC Indemnitee shall provide the Stockholder Representative with written notice
of all claims included in the Basket Amount.
(b) No indemnification shall be payable pursuant to Section 8.2 with respect
to any claim not made before 5:00 p.m. Boston, Massachusetts time on the Claims
Termination Date.
(c) All indemnification claims made by an PTC Indemnitee under Section 8.2
shall be satisfied solely from the Escrow Funds held pursuant to the Escrow
Agreement.
SECTION 9
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time before the
Effective Time as follows:
(a) by PTC or Arbortext if, without fault of the terminating party, the
Closing shall not have occurred on or before October 4, 2005, which date may be
extended by mutual agreement of the parties (the "Closing Deadline");
(b) by Arbortext upon written notice to PTC if PTC has materially breached any
representation, warranty or covenant contained herein and has not cured such
breach within ten (10) Business Days of receipt of written notice from Arbortext
or by the Closing Date, if earlier;
(c) by PTC upon written notice to Arbortext if Arbortext has materially
breached any representation, warranty or covenant contained herein and has not
cured such breach within ten (10) Business Days of receipt of written notice
from PTC or by the Closing Date, if earlier;
(d) by either PTC or Arbortext if any court of competent jurisdiction or
governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger, and
such order, decree or ruling shall have become final and nonappealable; or
(e) at any time with the written consent of PTC and Arbortext.
9.2 Effect of Termination. If this Agreement is terminated in accordance with
Section 9.1, it shall forthwith be void and have no effect, without liability or
obligation as a result of such termination on the part of any party, its
directors, officers or stockholders, except that the provisions of this Section
9.2, Section 4.9 relating to Transaction Expenses, and Section 4.10 relating to
publicity and confidentiality shall survive termination. Nothing contained
herein shall relieve any party from liability for any breach of this Agreement
occurring before such termination.
9.3 Amendment; Waiver. This Agreement may be amended only by an instrument
signed by each party hereto, and any provision hereof may be waived only by an
instrument signed by each party benefited by such provision.
SECTION 10
MISCELLANEOUS
10.1 Notices. Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally, sent by facsimile
transmission with confirmation retained, sent by overnight courier, postage
prepaid with proof of delivery from the courier requested, or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when received, as follows:
(a) if to PTC, to it at:
Parametric Technology Corporation
Attn: General Counsel
000 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Dodge LLP
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
(b) If to Arbortext, to it at:
Arbortext, Inc.
Attn: Chief Executive Officer
0000 Xxxxxxx Xxx
Xxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
with copies to:
Xxxxxx & Whitney LLP
00 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
(c) if to the Stockholder Representative, to:
Xxxxxx Xxxxx
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
with copies to:
Xxxxxx & Whitney LLP
00 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder,
provided that any party receiving such a designation shall not be required to
send any notice hereunder to the new address or person before the fifth business
day after receipt thereof.
10.2 Entire Agreement. This Agreement (including the Schedules and Exhibits
hereto), the Escrow Agreement and any collateral agreements executed in
connection with the consummation of the transactions contemplated herein
constitute the entire agreement among the parties with respect to the
transactions contemplated hereby, and supersede all prior agreements and
understandings, written or oral, with respect thereto other than the MNDA,
including without limitation the Memorandum of Understanding.
10.3 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, exclusive of its choice of
law rules.
10.4 Dispute Resolution.
(a) Submission to Jurisdiction. Subject to Section 10.4(b), each party hereby
irrevocably submits to the jurisdiction of any state or federal court sitting in
Wilmington, Delaware in any action or proceeding arising out of or relating to
this Agreement or the Escrow Agreement, and agrees that all claims in respect of
such action or proceeding may be heard and determined in any such court. Each
party hereby waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety or other security
that might be required of the other party with respect thereto.
(b) Dispute Resolution Procedures. Except to the extent of any resolution
procedure provided for any Dispute under any other section of this Agreement,
any dispute, controversy or claim between any PTC Indemnitee, on the one hand,
and Arbortext, any Securityholder, or the Stockholder Representative, on the
other hand (a "Dispute"), with respect to any provision of this Agreement or the
Escrow Agreement shall be resolved in accordance with the procedures described
in this Section 10.4(b). The parties shall establish an internal hierarchy to
facilitate resolution of any Dispute as set forth below:
(i) The parties shall first attempt to resolve any Dispute between themselves.
If they are unable to do so within a reasonable period not to exceed sixty (60)
days, such Dispute shall be submitted to mandatory and binding arbitration at
the election of either PTC or the Stockholder Representative. Except as
otherwise provided in this Section 10.4(b), the arbitration shall be pursuant to
the Commercial Arbitration Rules of the American Arbitration Association (the
"AAA Rules") then pertaining and shall be governed by the United States
Arbitration Act, 9 U.S.C. Sections 1-16. A panel of three (3) arbitrators (the
"Arbitration Panel") shall preside over any Dispute(s). The Arbitration Panel
shall be appointed in accordance with the AAA Rules. The Optional Rules for
Emergency Measures of Protection of the AAA shall apply if a party believes it
needs emergency relief before constitution of the Arbitration Panel. Any
award(s) of the Arbitration Panel shall include Findings of Fact and Conclusions
of Law and shall be a Reasoned Award, all as defined by the AAA Rules. Any
award(s) of the Arbitration Panel shall be subject to the confidentiality
provisions of this Agreement. The award(s) rendered by the Arbitration Panel in
accordance with this provision shall be final and judgment may be entered upon
it in accordance with applicable law in any court having jurisdiction.
(ii) The place of arbitration shall be at the office of the American
Arbitration Association in Wilmington, Delaware. The parties expressly covenant
and agree to be bound by the decision of the Arbitration Panel and to accept any
such decision as the final determination of the matter in dispute. Any decision,
award and/or judgment rendered by the Arbitration Panel may be entered in any
court having competent jurisdiction. The expenses and fees of the Arbitration
Panel shall be borne as set forth in the award of the Arbitration Panel. Each
party shall bear its own legal fees and expenses and all other fees and expenses
incurred by it in connection with any Dispute.
(iii) The Arbitration Panel shall be bound to apply the substantive law of the
State of Delaware. Arbitration of a Dispute involving the application of the
terms of this Agreement shall be decided by the Arbitration Panel in accordance
with the express terms of this Agreement.
(iv) The parties stipulate that the provisions of this Section 10.4(b) shall be
a complete defense to any action or proceeding instituted in any federal, state
or local court or before any administrative tribunal with respect to any
controversy or dispute arising out of this Agreement. The procedures specified
in this Section 10.4(b) shall be the sole and exclusive procedures for the
resolution of a Dispute; provided, however, that a party, without prejudice to
the above procedures, may seek a preliminary injunction or other provisional
judicial relief, if in its sole judgment such action is necessary to avoid
irreparable damage or to preserve the status quo.
10.5 Specific Performance and Other Remedies. Each party hereby acknowledges
that the rights of each party to consummate the transactions contemplated hereby
are special, unique and of extraordinary character and that, in the event that
either party violates or fails or refuses to perform any covenant or agreement
made by it herein, the non-breaching party may be without an adequate remedy at
law. In the event that either party violates or fails or refuses to perform any
covenant or agreement made by such party herein, the non-breaching party may,
subject to the terms hereof and in addition to any remedy at law for damages or
other relief, institute and prosecute an action in any court of competent
jurisdiction to enforce specific performance of such covenant or agreement or
seek any other equitable relief. Such right to specific performance shall be
available notwithstanding any other remedy for breach provided for in this
Agreement, at law, or in equity, and if any such alternative remedy is
available, a party shall have the right to elect between them.
10.6 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and legal
representatives.
10.7 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, including by facsimile, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of,
the parties hereto.
10.8 Exhibits and Schedules. The Exhibits and Schedules (including the
Arbortext Disclosure Schedule) are a part of this Agreement as if fully set
forth herein. All references herein to Sections, subsections, clauses, Exhibits
and Schedules shall be deemed references to such parts of this Agreement, unless
the context shall otherwise require. The inclusion of information in the
Schedules hereto shall not be construed as an admission that such information is
material to Arbortext. In addition, matters reflected in the Schedules are not
necessarily limited to matters required by this Agreement to be reflected in
such Schedules. Such additional matters are set forth for informational purposes
only and do not necessarily include other matters of a similar nature.
10.9 Headings. The headings in this Agreement are for reference only, and
shall not affect the interpretation of this Agreement.
10.10 Severability. Nothing contained herein shall be construed to require the
commission of any act contrary to law. Should there be any conflict between any
provisions hereof and any present or future statute, law, ordinance, regulation,
or other pronouncement having the force of law, the latter shall prevail, but
the provision of this Agreement affected thereby shall be curtailed and limited
only to the extent necessary to bring it within the requirements of the law, and
the remaining provisions of this Agreement shall remain in full force and
effect.
10.11 Stockholder Representative.
(a) In order to efficiently administer the provisions of this Agreement,
including the defense and/or settlement of any claims for which the
Securityholders may be required to indemnify any PTC Indemnitee pursuant to
Section 8 hereof, Xxxxxx Xxxxx has been appointed to act as the Stockholder
Representative as more fully described in this Section 10.11. The Stockholder
Representative shall have the authority, functions, powers, obligations and
liabilities set out in this Agreement and the same shall continue in effect
following the Effective Time.
(b) Arbortext hereby irrevocably appoints the Stockholder Representative as
its agent and attorney-in-fact, and authorizes the Stockholder Representative on
its behalf (and the adoption of this Agreement by the Stockholders shall
constitute the ratification of such appointment and authority on behalf of the
Securityholders), to: (i) take all action permitted in connection with the
implementation of those provisions of this Agreement and the Escrow Agreement
that require or permit action by the Stockholder Representative, (ii) take all
action permitted in connection with the defense and/or settlement of any and all
claims for which the Securityholders may be required to provide indemnification
pursuant to Section 8 hereof (including rejecting, contesting, settling and
resolving any such claims) and any claims that may be made against the Escrow
Funds under the Escrow Agreement, (iii) review and take action with respect to
Tax Returns and the Tax Statement pursuant to Section 4.6 hereof, (iv) give and
receive all notices and service of process required or permitted to be given or
received by the Securityholders or the Stockholder Representative under this
Agreement or the Escrow Agreement, and (v) take any and all such additional
action as is contemplated to be taken by or on behalf of the Securityholders by
the terms of this Agreement or of the Escrow Agreement.
(c) The Stockholder Representative shall have the power to designate his
successor hereunder. In the event that the Stockholder Representative resigns
from such position or is unable to continue in such position without having
designated a successor, Securityholders holding among them the rights to receive
at least a majority of the amount then remaining in the Escrow Funds to be
distributed to the Securityholders (the "Majority Holders") shall promptly
appoint another representative to fill such vacancy, and such substituted
representative shall be deemed to be the Stockholder Representative for all
purposes of this Agreement; provided that a resigning Stockholder Representative
shall continue to perform his duties and obligations until his successor is
appointed and has become a party to this Agreement and the Escrow Agreement. In
the absence of such appointment, the Stockholder Representative or PTC may apply
to a court of competent jurisdiction for the appointment of a successor
Stockholder Representative, and the costs, expenses and reasonable attorneys'
fees incurred in connection with such proceeding shall be paid by the
Securityholders. The Stockholder Representative may be removed at any time upon
the written consent of the Majority Holders with concurrent written notice to
PTC; provided however, that a successor Stockholder Representative must be
concurrently appointed and become a party to this Agreement and the Escrow
Agreement.
(d) All decisions, actions, agreements, and instructions by the Stockholder
Representative, including any consent, waiver, or agreement between the
Stockholder Representative and any PTC Indemnitee relating to the defense or
settlement of any claim for which the Securityholders may be required to provide
indemnification pursuant to Section 8 hereof, and all notices provided to and/or
legal process served upon the Stockholder Representative in accordance with this
Agreement shall be deemed to be provided to and/or served upon the
Securityholders and shall be conclusive and binding upon the Securityholders,
and no Securityholder nor anyone claiming through a Securityholder shall have
the right to object, dissent, protest or otherwise contest the same nor, except
in the case of fraud or willful breach of this Agreement by the Stockholder
Representative, any cause of action against the Stockholder Representative
therefor. By virtue of their approval of this Agreement and the Merger, the
Stockholders hereby jointly and severally agree to indemnify the Stockholders
Representative for, and hold him harmless against, any loss, liability or
expense incurred in good faith and without gross negligence or bad faith on the
part of the Stockholders Representative and arising out of or in connection with
the acceptance or administration of his duties hereunder.
(e) The Stockholder Representative is authorized to act on behalf of the
Securityholders notwithstanding any dispute or disagreement among the
Securityholders. Any person may conclusively and absolutely rely, without
inquiry, upon any actions of the Stockholder Representative as the acts of the
Securityholders in all matters referred to in this Agreement and the Escrow
Agreement. In taking any actions as Stockholder Representative, the Stockholder
Representative may rely conclusively, without any further inquiry or
investigation, upon any certification or confirmation, oral or written, given by
any person he reasonably believes to be authorized thereunto.
(f) PTC and each other PTC Indemnitee shall be entitled to rely conclusively
on the instructions and decisions of the Stockholder Representative as to all
matters described herein, including in connection with the defense or settlement
of any claims for indemnification pursuant to Section 8 hereof or any other
actions required or permitted to be taken by the Stockholder Representative
hereunder or under the Escrow Agreement and shall have no duty to inquire into
the authority of any person reasonably believed by them to be the Stockholder
Representative, and no party hereunder shall have any cause of action against
PTC or any such other person for any action taken by it in reliance upon the
instructions or decisions of any such person.
(g) The provisions of this Section 10.11 are independent and severable, are
irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any Securityholder may have in
connection with the transactions contemplated by this Agreement. Remedies
available at law for any breach of the provisions of this Section 10.11 will be
inadequate; therefore, PTC and each other PTC Indemnitee shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
damages or posting any bond if such person brings an action or proceeding to
enforce the provisions of this Section 10.11.
(h) The Stockholder Representative may employ and obtain the advice of legal
counsel, accountants and other professional advisors and incur such other
reasonable expenses on behalf of the Securityholders in connection with this
Agreement and the Escrow Agreement as the Stockholder Representative, in his
sole discretion, deems necessary or advisable in the performance of his or her
duties as the Stockholder Representative. The fees and expenses incurred by the
Stockholder Representative may be paid from the Stockholder Representative
Funds, but not from any part of the Escrow Funds.
(i) The Stockholder Representative represents and warrants to PTC and
Arbortext that he has all requisite capacity and authority to execute and
deliver this Agreement, to perform his obligations hereunder and to consummate
the transactions contemplated hereby, this Agreement has been duly executed and
delivered by the Stockholder Representative and, assuming the due authorization,
execution and delivery of this Agreement by each other party hereto, constitutes
a legal, valid and binding obligation of the Stockholder Representative,
enforceable against the Stockholder Representative in accordance with its terms.
[The rest of this page intentionally blank]
IN WITNESS WHEREOF, the parties, intending to be bound hereby, have
executed this Agreement under seal as of the date first written above.
PARAMETRIC TECHNOLOGY CORPORATION
By: /s/ Xxxxxxxxx X. Xxxxx
------------------------------------
Executive Vice President and
Chief Financial Officer
PTC MAPLE CORPORATION
Agreement adopted by the stockholder of
PTC Arbortext Corporation pursuant to
DGCL xx.xx. 251 and 252: By: /s/ Xxxx X. Xxxxx
-------------------------------------
Name:
President
/s/ Xxxxx X. xxx Xxxxxx
-----------------------------------
Secretary ARBORTEXT, INC.
Agreement adopted by the stockholders of
Arbortext, Inc. pursuant to DGCL xx.xx. 251
and 252:
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------------
President and
Chief Executive Officer
/s/ Xxxxx Xxxxxxxx
-----------------------------------
Secretary
STOCKHOLDER REPRESENTATIVE:
/s/ Xxxxxx Xxxxx
------------------------------------
Xxxxxx Xxxxx
