AGREEMENT AND PLAN OF MERGER dated as of December 15, 2006 by and among M2M HOLDINGS, INC., MAGIC SOFTWARE ACQUISITION CORP. and KNOVA SOFTWARE, INC.
Exhibit 2.1
Execution Version
AGREEMENT AND PLAN OF MERGER
dated as of
December 15, 2006
by and among
M2M HOLDINGS, INC.,
MAGIC SOFTWARE ACQUISITION CORP.
and
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of
December 15, 2006 by and among M2M Holdings, Inc., a Delaware corporation (“Parent”), Magic
Software Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent
(“Merger Sub”), and KNOVA Software, Inc., a Delaware corporation (the “Company”).
RECITALS:
A. The Boards of Directors of each of the Company, Parent and Merger Sub believe it is in the
best interests of each company and their respective stockholders that Parent acquire the Company
through the statutory merger of Merger Sub with and into the Company (the “Merger”) upon
the terms and subject to the conditions of this Agreement and in accordance with the General
Corporation Law of the State of Delaware (the “DGCL”), and, in furtherance thereof, have
approved this Agreement and the Merger.
B. Pursuant to the Merger and subject to the terms and conditions hereof, among other things,
all of the issued and outstanding shares of capital stock of the Company and all outstanding
options, warrants and other rights to receive shares of the Company’s capital stock shall be
converted into the right to receive cash.
C. Concurrently with the execution of this Agreement, and as a condition and inducement to
Parent’s and Merger Sub’s willingness to enter into this Agreement, certain stockholders of the
Company, who hold in the aggregate approximately 41% of the outstanding capital stock of the
Company shall enter into a Voting Agreement in the form attached hereto as Exhibit A (the
“Voting Agreement”).
D. The Company, on the one hand, and Parent and Merger Sub, on the other hand, desire to make
certain representations, warranties, covenants and other agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants, promises and representations set forth
herein, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
DEFINITIONS
1.1. Certain Definitions. As used in this Agreement, the following terms shall have
the meanings set forth or as referenced below:
“Acquisition Proposal” means, other than the transactions contemplated by this
Agreement, any offer, proposal or inquiry relating to (a) any acquisition or purchase, direct or
indirect, of 25% or more of the consolidated assets of the Company and its Subsidiaries or over 25%
of any class of equity or voting securities of the Company or any of its Subsidiaries whose
assets, individually or in the aggregate, constitute more than 25% of the consolidated assets of
Agreement and Plan of Merger Page 2
the Company, (b) any tender offer (including a self-tender offer) or exchange offer that, if
consummated, would result in such Third Party’s beneficially owning 25% or more of any class of
equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or
in the aggregate, constitute more than 25% of the consolidated assets of the Company, or (c) a
merger, consolidation, share exchange, business combination, sale of substantially all the assets,
reorganization, recapitalization, liquidation, dissolution or other similar transaction involving
the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute
more than 25% of the consolidated assets of the Company.
“Affiliate” when used with respect to any specified Person, means any other Person who
or that, directly or indirectly through one or more intermediaries, Controls, is Controlled by or
is under common Control with such specified Person.
“Business” means the business of the Company and its Subsidiaries as conducted on the
date hereof, including the Company’s business of providing customer relationship management (CRM)
software applications.
“Business Day” means a day, other than Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by applicable Law to close.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company 10-K” means the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2005.
“Company Balance Sheet” means the consolidated balance sheet of the Company as of
December 31, 2005, including the footnotes thereto, set forth in the Company 10-K.
“Company Common Stock” means the Common Stock, par value $.01 per share, of the
Company.
“Company Financial Statements” means all of the financial statements of the Company
and its Subsidiaries included in the Company Reports.
“Company Intellectual Property” means any Intellectual Property that is owned or held
by the Company or any of its Subsidiaries or that is being used, or is currently under development
for use, in the Business.
“Company Option” means each outstanding option to purchase shares of Company Common
Stock under the Company Option Plans.
“Company Option Plans” means the Company’s Amended and Restated 2000 Stock Incentive
Plan, as amended and restated on April 15, 2005, and as further amended on June 13, 2006.
Agreement and Plan of Merger Page 3
“Company Reports” means all forms, reports, statements, information and other
documents (as supplemented and amended since the time of filing) filed or required to be filed by
the Company with the SEC since December 31, 2002, including the Company 10-K.
“Contract” means any contract (written or oral), undertaking, commitment, arrangement,
plan or other legally binding agreement or understanding.
“Control” means, as to any Person, the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting securities, by
contract or otherwise. The term “Controlled” shall have a correlative meaning.
“Current Company Reports” means all forms, reports, statements, information and other
documents (as supplemented and amended since the time of filing) filed or required to be filed by
the Company with the SEC since December 31, 2005, including the Company 10-K.
“Employment Agreements” means any termination or severance agreements, change of
control agreements or any other Contracts respecting the terms and conditions of employment of any
officer or employee of the Company (but shall exclude the standard offer letter that the Company
provides to new employees, a copy of which has been provided to Parent).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“GAAP” means generally accepted accounting principles in the United States.
“Governmental Authority” means any U.S. or foreign, federal, state, provincial or
local governmental, regulatory or administrative authority, agency or commission or any court,
tribunal, judicial or arbitral body and any instrumentality of any of the foregoing.
“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation,
determination, award or binding agreement issued, promulgated or entered by or with any
Governmental Authority.
“Intellectual Property” means all intellectual property and other similar proprietary
rights in any jurisdiction, whether owned or held for use under license, whether registered or
unregistered, including without limitation such rights in and to: (a) trademarks, trade dress,
service marks, certification marks, logos and trade names, and the goodwill associated with the
foregoing (collectively, “Trademarks”); (b) patents and patent applications, and any and
all divisions, continuations, continuations-in-part, reissues, continuing patent applications,
reexaminations, and extensions thereof, any counterparts claiming priority therefrom, utility
models, patents of importation/confirmation, certificates of invention, certificates of
registration and like rights (collectively, “Patents”); (c) inventions, invention
disclosures, discoveries and improvements, whether or not patentable; (d) writings and other works
of authorship, moral rights and mask works (collectively, “Copyrights”); (e) trade secrets
(including those trade secrets defined in the Uniform Trade Secrets Act and under corresponding
foreign statutory Law and common law), business, technical and know-how information, non-public
information and confidential information and rights to limit the use or disclosure thereof by any
Person (collectively, “Trade Secrets”); (f) software, including without limitation data
files, source code, object code, application programming interfaces, databases and other
software-related
Agreement and Plan of Merger Page 4
specifications and documentation (collectively, “Software”); (g) registered domain
names and uniform resource locators (“Domain Names”); and (h) claims, causes of action and
defenses relating to the enforcement of any of the foregoing; in each case, including any
registrations of, applications to register, and renewals and extensions of, any of the foregoing
clauses (a) through (g) with or by any Governmental Authority in any jurisdiction.
“International Plan” means any benefit plan or arrangement that is administered, or
contributed to, by the Company or any member of its Controlled Group that covers any current or
former employee of the Company or any member of its Controlled Group who is based primarily in a
country other than the United States.
“IRS” means the Internal Revenue Service.
“Knowledge,” with respect to the Company, means the knowledge (assuming reasonable due
inquiry) of any of the following persons: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Sham ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
“Laws” means any federal, national, state or local constitution, statute, law,
ordinance, regulation, rule, code, injunction, judgment or other Governmental Order, requirement or
rule of law.
“Liability” or “Liabilities” means any liabilities or obligations of any
nature (whether fixed, contingent, potential or otherwise, and whether due or to become due, known
or unknown, accrued or unaccrued), and whether presently existing, or arising or asserted at any
time hereafter.
“Lien” means any lien (statutory or otherwise), mortgage, pledge, charge, option,
hypothecation, collateral assignment, encumbrance, security interest, restriction or similar claim
in equity of any kind or nature whatsoever; provided, however, that the term Lien
shall not include any Permitted Liens.
“Management Retention Plan” means that certain Management Retention Plan adopted by
the Board of Directors of the Company on or about October 30, 2006, as amended through the date
hereof.
“Material Adverse Effect (or Change)” means any circumstance, development, effect,
event, condition or occurrence (any such item, an “Effect”) that (a) has been, or
reasonably could be expected to be, material and adverse with respect to the business, condition
(financial or otherwise), assets, properties, Liabilities, rights, obligations or operations of the
Business or the Company and its Subsidiaries, taken as a whole, or (b) materially impairs or
delays, or reasonably could be expected to materially impair or delay, the ability of the Company
to consummate the transactions contemplated by this Agreement or to perform its obligations under
this Agreement; provided, however, that in no event shall any of the following
occurring after the date hereof, alone or in combination, be deemed to constitute, nor be taken
into account in determining whether there has been or will be, a Material Adverse Effect (or
Change): (i) any change in the Company’s stock price or trading volume, in and of itself
(provided, however, that the exception in this clause shall not in any way prevent
or otherwise affect a determination that any change, event, circumstance, development or effect
underlying such decrease has resulted in,
Agreement and Plan of Merger Page 5
or contributed to, a Material Adverse Effect (or Change)), (ii) any failure by the Company to
meet published revenue or earnings projections, in and of itself, (iii) any Effect that results
from changes affecting the enterprise software industry or the customer relationship management
software market generally (to the extent such Effect is not disproportionate with respect to the
Company in any material respect) or the United States economy generally (to the extent such Effect
is not disproportionate with respect to the Company in any material respect), (iv) any Effect that
results from changes affecting general worldwide economic or capital market conditions (to the
extent such Effect is not disproportionate with respect to the Company in any material respect),
(v) any Effect resulting from compliance with the terms and conditions of this Agreement, or (vi)
any Effect directly attributable to the loss of any individual officer or employee of the Company
or any number of officers or employees in the aggregate, other than, in either case, any Effect
directly attributable to the loss of any individual or officer identified on Schedule I,
which Effect may be taken into account in determining whether there has been or will be, a Material
Adverse Effect (or Change).
“Permitted Liens” means (a) mechanic’s and other similar statutory liens that are not
material in nature or amount, (b) liens for Taxes or other governmental charges not yet due and
payable or which are being contested in good faith, in appropriate proceedings for which adequate
reserves have been established in accordance with GAAP, (c) zoning, entitlement, building and other
land use regulations, (d) covenants, conditions, restrictions, easements and other similar matters
of record affecting title but not adversely affecting current occupancy or use and (e) restrictions
on the transfer of securities arising under federal and state securities laws.
“Person” means any individual, corporation, partnership, limited liability company,
joint venture, governmental agency or instrumentality, or any other entity.
“Representatives” means, as to any Person, such Person’s officers, directors,
employees, auditors, attorneys and financial advisors.
“SEC” means the Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“Subsidiary” means, with respect to any Person, any entity of which securities or
other ownership interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at any time directly or indirectly
owned by such Person.
“Taxes” means all federal, provincial, territorial, state, municipal, local, foreign
or other taxes, rates, levies, assessments and other charges, including all income, excise,
franchise, gains, capital, real property, goods and services, transfer, value added, gross
receipts, windfall profits, severance, ad valorem, personal property, production, sales, use,
license, stamp, documentary stamp, mortgage recording, employment, payroll, social security,
unemployment, disability, estimated or withholding taxes, and all customs and import duties, in
each case imposed by a Taxing Authority, whether disputed or not, and all interest and penalties
thereon and additions thereto imposed by any Taxing Authority.
Agreement and Plan of Merger Page 6
“Taxing Authority” means any Governmental Authority responsible for the administration
or imposition of any Tax.
“Tax Return” means any returns, statement, report, form, information return or claim
for refund relating to Taxes, including any schedule or attachment thereto, and including any
amendment thereof, in each case filed with a Taxing Authority.
“Third Party” means any Person or group (as defined in Section 13(d)(3) of the
Exchange Act) other than Company, Parent, Merger Sub or any Affiliates thereof.
“Transaction Documents” means all of the agreements, documents, instruments and
certificates contemplated by this Agreement or to be executed by a party to this Agreement in
connection with the consummation of the transactions contemplated by this Agreement.
“Uniform Trade Secrets Act” means the Uniform Trade Secret Act promulgated by the
National Conference of Commissioners on Uniform State Laws in 1979, as amended.
1.2. Cross-References. In addition to the foregoing defined terms, each of the
following terms is defined in the Section set forth opposite such term:
Term |
Section | |
Adverse Recommendation Change |
6.4(a) | |
Certificate of Merger |
2.3 | |
Certifications |
4.7(b) | |
Closing |
2.2 | |
Closing Date |
2.2 | |
Commitments |
5.6 | |
Company Certificates |
3.5(b) | |
Company Board Recommendation |
4.2(b) | |
Company ESPP |
3.4 | |
Company Products |
4.13(a) | |
Company Stockholder Approval |
4.2(a) | |
Company Stockholders’ Meeting |
4.8 | |
Company Warrant |
3.3 | |
Confidentiality Agreement |
10.12 | |
Controlled Group |
4.16 | |
Current Offerings |
3.4 | |
Disclosure Schedule |
Article IV | |
Dissenting Shares |
3.7 | |
Effective Time |
2.3 | |
Employee Plans |
4.16 | |
Environmental Laws |
4.22 | |
Environmental Liabilities |
4.22 | |
Expenses |
9.4(b) | |
Hazardous Materials |
4.22 | |
Hired Employees |
7.6(b) | |
Insurance Policies |
4.15 |
Agreement and Plan of Merger Page 7
Term |
Section | |
M2M |
5.6 | |
Material Contract |
4.12(b) | |
Merger Consideration |
3.1(a) | |
Notice of Superior Proposal |
9.1(i) | |
Option Consideration |
3.2(a) | |
Outside Date |
9.1(c) | |
Owned Intellectual Property |
4.13(d) | |
Parent Benefit Plans |
7.6(b) | |
Paying Agent |
3.5(a) | |
Permits |
4.17 | |
Proxy Statement |
4.8 | |
Publicly Available Software |
4.13(j) | |
Real Property |
4.10(a) | |
Rights Agreements |
4.6(d) | |
Subsidiary Securities |
4.3(b) | |
Superior Proposal |
6.4(e) | |
Surviving Corporation |
2.1 | |
Termination Fee |
9.4(a) | |
Warrant Consideration |
3.4 |
1.3. Rules of Construction. References in this Agreement to gender include references
to all genders, and references to the singular include references to the plural and vice versa. The
words “include,” “includes” and “including” when used in this Agreement shall be deemed to be
followed by the phrase “without limitation.” Unless the context otherwise requires, references in
this Agreement to Articles, Sections and Schedules shall be deemed references to Articles and
Sections of, and Exhibits and Schedules to, this Agreement. Unless the context otherwise requires,
the words “hereof,” “hereby” and “herein” and words of similar meaning when used in this Agreement
refer to this Agreement in its entirety and not to any particular Article, Section or provision of
this Agreement. The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
References herein to “date hereof,” “date of this Agreement” or similar references shall mean as of
December 15, 2006.
ARTICLE II
THE MERGER
THE MERGER
2.1. The Merger. Upon the terms and subject to satisfaction or waiver of the
conditions set forth in this Agreement, and in accordance with the DGCL, Merger Sub, at the
Effective Time, shall be merged with and into the Company. As a result of the Merger, the separate
corporate existence of Merger Sub shall cease and the Company shall continue as the surviving
corporation of the Merger (the “Surviving Corporation”).
2.2. The Closing. The closing of the transactions contemplated hereby (the
“Closing”) shall take place (i) on the second Business Day after the satisfaction or waiver
of each of the conditions set forth in Article VIII, or (ii) at such other time as the parties
hereto agree in writing.
Agreement and Plan of Merger Page 8
The Closing shall take place at the offices of ▇▇▇▇▇▇▇▇ & Worcester LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, or at such other location as the parties hereto agree in writing.
The date on which the Closing occurs is herein referred to as the “Closing Date.”
2.3. Effective Time. On the Closing Date, or on such other date as the parties hereto
agree in writing, the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the “Certificate of Merger”) with the office of the Secretary of
State of the State of Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, the DGCL (the date and time of such filing, or if another date and time is
specified in such filing, such specified date and time, being the “Effective Time”).
2.4. Effect of the Merger. At the Effective Time, the effect of the Merger shall be
as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, at the Effective Time, except as otherwise
provided herein, all the property, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.
2.5. Certificate of Incorporation; Bylaws. At the Effective Time, the Certificate of
Incorporation and Bylaws of Merger Sub as in effect immediately prior to the Effective Time shall
become the Certificate of Incorporation and Bylaws of the Surviving Corporation; provided,
however, that Article I of the Certificate of Incorporation of the Surviving Corporation will
be amended at the Effective Time to read: “The name of the corporation is KNOVA Software, Inc.”
2.6. Directors and Officers. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation. The
officers of Merger Sub immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
2.7. Taking of Necessary Action; Further Action. If, at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Merger Sub, the officers and directors
of the Company, Parent and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary action.
ARTICLE III
CONVERSION OF SECURITIES
CONVERSION OF SECURITIES
3.1. Conversion of Shares. At the Effective Time, by virtue of the Merger and without
the requirement of any action on the part of any holder of capital stock of Parent, Merger Sub or
the Company:
Agreement and Plan of Merger Page 9
(a) each share of the Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares cancelled pursuant to Section 3.1(b) and, subject to Section 3.7,
Dissenting Shares) shall be cancelled and converted into the right, in accordance with the terms of
this Agreement, to receive $5.00 in cash, without interest (the “Merger Consideration”),
payable to the holder thereof, upon surrender of the certificate formerly representing such share
and such other documents as may be reasonably required in the manner provided in Section 3.5;
(b) any shares of capital stock of the Company held by the Company (or held in the Company’s
treasury) as of the Effective Time will be cancelled without any conversion thereof and no payment
or distribution shall be made with respect thereto; and
(c) each share of capital stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, par value $.001 per share, of the Surviving Corporation and
shall constitute the only outstanding shares of capital stock of the Surviving Corporation.
3.2. Company Options.
(a) At the Effective Time, each then-outstanding Company Option, whether vested or unvested,
shall be cancelled as follows: (i) in the case of a Company Option having a per share exercise
price less than the Merger Consideration, such Company Option shall be cancelled in exchange for
the right to receive from the Surviving Corporation for each share of Company Common Stock subject
to such Company Option immediately prior to the Effective Time an amount (subject to any applicable
withholding Tax) in cash equal to the product of (A) the number of shares of Company Common Stock
subject to such Company Option immediately prior to the Effective Time and (B) the amount by which
the Merger Consideration exceeds the per share exercise price of such Company Option, or (ii) in
the case of a Company Option having a per share exercise price equal to or greater than the Merger
Consideration, such Company Option shall be cancelled without the payment of cash or issuance of
other securities in respect thereof. The cancellation of a Company Option as provided in the
immediately preceding sentence shall be deemed a release of any and all rights the holder thereof
had or may have had in respect of such Company Option. The aggregate amount paid or payable in
respect of the cancellation of the Company Options as set forth in this Section 3.2(a) is referred
to herein as the “Option Consideration.” Unless provision is made with the Paying Agent,
the Surviving Corporation shall, as soon as reasonably practicable after its receipt of a duly
executed transmittal letter from each holder of a Company Option entitled to receive Option
Consideration hereunder (and in no event more than ten (10) Business Days thereafter) mail to each
holder of a Company Option the applicable Option Consideration to which they are due, subject to
any applicable withholding Tax.
(b) Prior to the Effective Time, the Company shall take such actions as may be necessary to
give effect to the transactions contemplated by this Section 3.2, including, but not limited to,
satisfaction of the requirements of Rule 16b-3(e) under the Exchange Act.
Agreement and Plan of Merger Page 10
(c) The Company Option Plans shall terminate as of the Effective Time and the provisions in
any other plan, program or arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of the Company or any Subsidiary thereof shall be canceled as of the
Effective Time. The Company shall ensure that following the Effective Time no participant in the
Company Option Plans or other plans, programs or arrangements shall have any right thereunder to
acquire any equity securities of the Company, the Surviving Corporation or any Subsidiary thereof.
(d) Prior to the Effective Time, the Company shall deliver to the holders of Company Options
notices, in form and substance reasonably acceptable to Parent, setting forth such holders’ rights
pursuant to this Agreement.
3.3. Company Warrants. At the Effective Time, each then-outstanding warrant to
purchase capital stock of the Company (each a “Company Warrant”) shall be cancelled as
follows: (a) in the case of a Company Warrant having a per share exercise price less than the
Merger Consideration, such Company Warrant shall be cancelled in exchange for the right to receive
from the Surviving Corporation for each share of Company Common Stock subject to such Company
Warrant immediately prior to the Effective Time an amount in cash equal to the product of (i) the
number of shares of Company Common Stock subject to such Company Warrant immediately prior to the
Effective Time and (ii) the amount by which the Merger Consideration exceeds the per share exercise
price of such Company Warrant, or (b) in the case of a Company Warrant having a per share exercise
price equal to or greater than the Merger Consideration, such Company Warrant shall be cancelled
without the payment of cash or issuance of other securities in respect thereof. The cancellation
of a Company Warrant as provided in the immediately preceding sentence shall be deemed a release of
any and all rights the holder thereof had or may have had in respect of such Company Warrant. The
aggregate amount paid or payable in respect of the cancellation of the Company Warrants as set
forth in this Section 3.3 is referred to herein as the “Warrant Consideration.” Unless
provision is made with the Paying Agent, the Surviving Corporation shall, as soon as reasonably
practicable after its receipt of a duly executed warrant termination agreement from each holder of
a Company Warrant entitled to receive consideration hereunder (and in no event more than ten (10)
Business Days thereafter) mail to each holder of a Company Warrant the applicable Warrant
Consideration to which they are due, subject to any applicable withholding Tax.
3.4. Company ESPP. Prior to the Effective Time, the Company shall take all actions
necessary pursuant to the terms of the Company’s Employee Stock Purchase Plan (the “Company
ESPP”) to (i) shorten each currently ongoing purchase and/or offering period under the Company
ESPP that extends beyond the Effective Time (the “Current Offerings”) such that a new
purchase date for each such Current Offering shall occur prior to the Effective Time and shares of
Company Common Stock shall be purchased by the Company ESPP participants prior to the Effective
Time, and (ii) preclude the commencement of any new purchase or offering period. The Company shall
take all actions necessary so that the Company ESPP shall terminate immediately prior to the
earlier of (A) the Effective Time and (B) the date upon which the Company ESPP terminates by its
terms.
Agreement and Plan of Merger Page 11
3.5. Surrender of Certificates.
(a) Not less than five (5) days prior to the Closing Date, Parent shall designate and enter
into an agreement with a bank or trust company reasonably acceptable to the Company to serve as
Paying Agent in the Merger (the “Paying Agent”). After the Effective Time, Parent shall
make available to the Paying Agent on a timely basis, if and when needed for the benefit of the
stockholders of the Company and otherwise for payment in accordance with this Article III,
sufficient cash necessary for the payment of (i) the Merger Consideration as provided in Section
3.1(a) upon surrender as part of the Merger of certificates formerly representing shares of Company
Common Stock in the manner provided in Section 3.1(a) and (ii) at the sole discretion of Parent,
the Option Consideration and the Warrant Consideration as provided in Sections 3.2 and 3.3 with
respect to the treatment of the Company Options and the Company Warrants. Funds made available to
the Paying Agent shall be invested by the Paying Agent as directed by Parent (it being understood
that any and all interest or income earned on funds made available to the Paying Agent pursuant to
this Agreement shall be turned over to Parent).
(b) As promptly as practicable after the Effective Time, Parent shall cause the Paying Agent
to mail to each holder of record of a certificate or certificates that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the “Company
Certificates”) (i) a letter of transmittal in a form reasonably acceptable to the Company which
shall specify that delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon actual delivery of the Company Certificates (or an affidavit of
lost certificate and, if required by Parent, an accompanying bond or indemnity as contemplated by
Section 0(d)) to the Paying Agent and shall be in such form and have such other provisions as
Parent shall reasonably specify, and (ii) instructions for use in effecting the surrender of the
Company Certificates in exchange for the Merger Consideration, without any interest thereon. Upon
surrender of Company Certificates for cancellation to the Paying Agent, together with a duly
executed letter of transmittal and such other documents as the Paying Agent shall reasonably
require, the holder of such Company Certificates shall be entitled to receive in exchange therefor
a check in the amount of the Merger Consideration for each share of Company Common Stock formerly
represented thereby to be mailed within ten (10) Business Days of receipt of such Company
Certificate and letter of transmittal, in accordance with Section 3.1(a), and the Company
Certificates so surrendered shall be canceled. At the sole discretion of Parent, Parent may make
similar arrangements with the Paying Agent for the payment of the Option Consideration and the
Warrant Consideration to the holders of the Company Options and the Company Warrants, as the case
may be; provided, however, that the payment of the applicable Warrant Consideration
shall, in all events, be conditioned upon the holder of the applicable Company Warrant delivering
to Parent or the Paying Agent, as applicable, a written termination agreement releasing the
Company, Parent and their respective Affiliates from any and all claims the holder thereof may have
in respect of such Company Warrant.
(c) Promptly following the date that is twelve (12) months after the Effective Time, the
Paying Agent shall deliver to Parent all cash and any documents in its possession relating to the
transactions described in this Agreement, and the Paying Agent’s duties shall terminate.
Thereafter, each holder of a Company Certificate shall thereafter look only to Parent for payment
of the Merger Consideration and may surrender such Company Certificate to the Surviving Corporation
or Parent and (subject to applicable abandoned property, escheat and
Agreement and Plan of Merger Page 12
similar laws) receive in exchange therefor the Merger Consideration, without any interest
thereon. Notwithstanding the foregoing, none of the Paying Agent, Parent, Merger Sub, the Company
or the Surviving Corporation shall be liable to a holder of shares of Company Common Stock for any
amounts delivered to a public official pursuant to applicable abandoned property, escheat or
similar Laws.
(d) If any Company Certificate shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such Company Certificate to be lost, stolen or
destroyed, the Paying Agent (or if more than twelve (12) months after the Effective Time, the
Surviving Corporation), shall issue in exchange for such lost, stolen or destroyed Company
Certificate, the Merger Consideration deliverable in respect thereof determined in accordance with
this Article III. When authorizing such issuance in exchange therefor, the Board of Directors of
the Surviving Corporation may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Company Certificate to deliver to the
Paying Agent (or if more than twelve (12) months after the Effective Time, the Surviving
Corporation) a bond in such amount as the Surviving Corporation may reasonably request, or the
execution and delivery by such Person of an indemnity agreement in such form as the Surviving
Corporation may direct, in each case as indemnity against any claim that may be made against the
Surviving Corporation with respect to the Company Certificate alleged to have been lost, stolen or
destroyed.
(e) Except as required by law, no dividends or other distributions with respect to capital
stock of the Surviving Corporation with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Company Certificate.
(f) All cash paid in respect of the surrender for exchange of shares of Company Common Stock
in accordance with the terms hereof shall be deemed to be in full satisfaction of all rights
pertaining to such shares of Company Common Stock. If, after the Effective Time, Company
Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article III.
(g) The Surviving Corporation (and/or any of its Affiliates) shall be entitled to deduct and
withhold from the amounts otherwise payable pursuant to this Agreement to any holder of shares of
Company Common Stock or any holders of Company Options and Company Warrants, such amounts as the
Surviving Corporation (and/or any of its Affiliates) is required to deduct and withhold with
respect to the making of such payment under the Code, or any applicable Law, including any
provision of state, local or foreign Tax law. To the extent that amounts are so withheld by the
Surviving Corporation and/or any of its Affiliates, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock,
or the holder of Company Options or Company Warrants, with respect to which such deduction and
withholding was made.
3.6. Closing of the Company’s Transfer Books. At and after the Effective Time,
holders of Company Certificates shall cease to have any rights as stockholders of the Company,
except for the right to receive the Merger Consideration pursuant to Section 3.1(a). At the
Effective Time, the stock transfer books of the Company shall be closed and no transfer of shares
Agreement and Plan of Merger Page 13
of Company Common Stock which were outstanding immediately prior to the Effective Time shall
thereafter be made.
3.7. Dissenting Shares. (a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Common Stock issued and outstanding immediately prior to the
Effective Time that are held by a stockholder who has exercised and perfected appraisal rights for
such shares in accordance with DGCL and who, as of the Effective Time, has not effectively
withdrawn or lost such appraisal rights (“Dissenting Shares”), shall not be converted into
or represent a right to receive the consideration for Company Common Stock pursuant to Section 3.1,
but the holder thereof shall only be entitled to such rights as are granted by the DGCL.
(b) Notwithstanding the provisions of subsection (a), if any holder of Dissenting Shares shall
effectively withdraw or lose (through failure to perfect or otherwise) his or her appraisal rights,
then, as of the later of Effective Time and the occurrence of such event, such holder’s shares of
Company Common Stock shall automatically be converted into and represent only the right to receive
the consideration for Company Common Stock to which such stockholder would otherwise be entitled
under Section 3.1, without interest thereon, upon surrender of the certificate representing such
shares.
(c) The Company shall give Parent (i) prompt notice of its receipt of any written demands for
appraisal of any shares of Company Common Stock, withdrawals of such demands and any other
instruments relating to the Merger served pursuant to Section 262 of the DGCL and received by the
Company and (ii) the opportunity to participate in all negotiations and proceedings with respect to
such demands. The Company shall not, except with the prior written consent of Parent, voluntarily
make any payment with respect to any such demands or offer to settle or settle any such demands.
3.8. Certain Adjustments. Notwithstanding the restrictions contained in Section 6.2,
in the event that the Company changes the number of shares of Common Stock, or securities
convertible or exchangeable into or exercisable for shares of Common Stock, issued and outstanding
prior to the Effective Time as a result of a reclassification, stock split (including a reverse
stock split), stock dividend or distribution, recapitalization, merger, subdivision, issuer tender
or exchange offer, or other similar transaction, the Merger Consideration and any other dependent
items shall be proportionately adjusted to reflect such change.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that the statements
contained in this Article IV are true and correct, except as expressly set forth on the Disclosure
Schedule attached hereto (the “Disclosure Schedule”) or as disclosed in the Current Company
Reports (to the extent it is reasonably apparent that any such disclosure set forth in the Current
Company Reports would qualify the representations and warranties contained herein).
4.1. Existence and Power. The Company is a corporation duly formed, validly existing
and in good standing under the Laws of its jurisdiction of incorporation, and has all
Agreement and Plan of Merger Page 14
corporate power and all governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted, except as would not reasonably be expected to have a
Material Adverse Effect. The Company is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except such jurisdictions where
the failure to be so qualified or licensed or in good standing would not reasonably be expected to
have a Material Adverse Effect. Set forth on Section 4.1 of the Disclosure Schedule is a
complete list of all of the addresses at which the Company maintains any offices or any material
property or assets. The Company has heretofore delivered or made available (including through the
SEC’s ▇▇▇▇▇ system) to Parent true and complete copies of the Certificate of Incorporation and
Bylaws of the Company as currently in effect.
4.2. Corporate Authorization. (a) The execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the transactions contemplated
hereby are within the Company’s corporate powers and, except for the required approval of the
Company’s stockholders in connection with the consummation of the Merger, have been duly authorized
by all necessary corporate action on the part of the Company. The affirmative vote of the holders
of a majority of the outstanding shares of the Company Common Stock is the only vote of the holders
of any of the Company’s capital stock necessary in connection with the consummation of the Merger
(the “Company Stockholder Approval”). Assuming the due authorization, execution and
delivery hereof by Parent and Merger Sub, this Agreement constitutes a valid and binding agreement
of the Company, subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting creditors’ rights
generally, general equitable principles (whether considered in a proceeding in equity or at law)
and any implied covenant of good faith and fair dealing.
(b) At a meeting duly called and held, the Company’s Board of Directors has unanimously
determined that this Agreement and the transactions contemplated hereby are fair to and in the best
interests of the Company’s stockholders, unanimously approved and adopted this Agreement and the
transactions contemplated hereby and unanimously resolved (subject to Section 6.4) to recommend
approval and adoption of this Agreement by its stockholders (such recommendation, the “Company
Board Recommendation”).
4.3. Subsidiaries.
(a) Except for the Subsidiaries of the Company identified in the Current Company Reports, the
Company does not own, directly or indirectly or through nominees, any capital stock of or any other
equity interest in, or control, directly or indirectly, any other Person or any Subsidiary, and the
Company is not, directly or indirectly, a party to, member of or participant in any partnership,
joint venture or similar business entity. Each Subsidiary of the Company is duly organized,
validly existing and in good standing under the Laws of its jurisdiction of formation. Each
Subsidiary of the Company has the full corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Each Subsidiary of the Company is
duly qualified or licensed to do business and is in good standing as a foreign corporation in each
jurisdiction in which the conduct of its business or the ownership, leasing, holding or use of its
properties makes such qualification necessary,
Agreement and Plan of Merger Page 15
except such jurisdictions where the failure to be so qualified or licensed or in good standing
would not reasonably be expected to have a Material Adverse Effect. The Company has delivered or
made available a true and correct copy of each such Subsidiary’s Certificate of Incorporation and
Bylaws (or other comparable organizational documents), each as amended to date and in full force
and effect on the date hereof, to Parent and no amendments thereto are pending. None of the
Company’s Subsidiaries has violated its Certificate of Incorporation or Bylaws or any of its
organizational documents in any material respect. Section 4.3 of the Disclosure Schedule
lists every jurisdiction in which each of the Company’s Subsidiaries has facilities, maintains an
office or has a current employee.
(b) Except as set forth in Section 4.3 of the Disclosure Schedule, all of the
outstanding capital stock of, or other ownership interests in, each Subsidiary of the Company is
owned by the Company, directly or indirectly, free and clear of any Lien. There are no outstanding
(i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for
shares of capital stock or other voting securities or ownership interests in any other Subsidiary
or (ii) options or other rights to acquire from the Company or any of its Subsidiaries, or
obligation on the part of the Company or any of its Subsidiaries to issue, any capital stock,
voting securities or other ownership interests in, or any securities convertible into or
exchangeable for any capital stock, voting securities or ownership interests in, any of the
Company’s Subsidiaries (the items in clauses (i) and (ii) being referred to collectively as the
“Subsidiary Securities”). There are no outstanding obligations of the Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities.
All outstanding shares of capital stock of each such Subsidiary have been duly authorized and
validly issued and are fully paid and non-assessable.
4.4. Governmental Authorization. The execution, delivery and performance by the
Company of this Agreement and each of the Transaction Documents to which the Company is a party
require no action by or in respect of, or filing with, any Governmental Authority, other than (a)
the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which the Company does
business, (b) compliance with any applicable requirements of the Securities Act, the Exchange Act,
and any other applicable U.S. state or federal securities laws and (c) any actions or filings the
absence of which would not be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.
4.5. Non-Contravention. The execution, delivery and performance by the Company of
this Agreement and the consummation of the transactions contemplated hereby do not and will not (a)
contravene in any material respect, conflict with, or result in any violation or breach of any
provision of the Certificate of Incorporation or Bylaws of the Company, (b) assuming compliance
with the matters referred to in Section 4.4 and subject to obtaining the Company Stockholder
Approval, contravene, conflict with or result in a material violation or breach of any provision of
any Law, (c) except as set forth on Section 4.5 of the Disclosure Schedule, require any
material consent or other action by any Person under, constitute a material default, or an event
that, with or without notice or lapse of time or both, would constitute a material default under,
or cause or permit the termination, cancellation, acceleration or other change of any material
right or obligation or the loss of any material benefit to which the Company or any of its
Subsidiaries is entitled, under any provision of any material Contract or other material instrument
Agreement and Plan of Merger Page 16
binding upon the Company or any of its Subsidiaries or any material license, franchise, permit,
certificate, approval or other similar authorization affecting, or relating in any way to, the
assets or business of the Company and its Subsidiaries or (d) result in the creation or imposition
of any Lien on any material asset of the Company or any of its Subsidiaries.
4.6. Company Capital Structure.
(a) The authorized capital stock of the Company consists of 50,000,000 shares of Company
Common Stock, of which, as of the date hereof, 8,923,823 shares are issued and outstanding. All
outstanding shares of Company Common Stock (i) are duly authorized, validly issued, fully paid and
non-assessable and are not subject to preemptive rights created by statute, the Company’s
Certificate of Incorporation or Bylaws or any Contract to which the Company is a party or by which
it is bound, and (ii) have been offered, sold and delivered by the Company in compliance in all
material respects with all applicable Laws. There are no declared or accrued but unpaid dividends
with respect to any shares of Company Common Stock.
(b) The Company Option Plans have been duly authorized, approved and adopted by the Company’s
Board of Directors and its stockholders and are in full force and effect. The Company has reserved
a total of 2,909,497 shares of Company Common Stock for issuance under the Company Option Plans, of
which (i) 2,352,200 shares are issuable, as of the date hereof, upon the exercise of outstanding,
unexercised Company Options, (ii) 441,155 shares are available for grant but have not yet been
granted pursuant to the Company Option Plans, and (iii) 116,142 shares have been issued and are
outstanding pursuant to the prior exercise of stock options or other stock rights granted pursuant
to the Company Option Plans. All outstanding Company Options have been offered, issued and
delivered by the Company in compliance in all material respects with all applicable Laws and with
the terms and conditions of the Company Option Plans. Section 4.6(b) of the Disclosure
Schedule sets forth, as of the date hereof: (i) for each outstanding Company Option, the name
of the record holder of such Company Option, the number of shares of Company Common Stock subject
to such option, the exercise price of such option and the vesting schedule for such option,
including the extent vested to the date of this Agreement and (ii) for each outstanding Company
Warrant, the name of the record holder of such Company Warrant, the number of shares of Company
Common Stock subject to such warrant and the exercise price of such Company Warrant.
(c) Except for the Company Options and the Company Warrants set forth on Section 4.6(b) of
the Disclosure Schedule and as set forth on Section 4.6(c) of the Disclosure Schedule,
there are no options, warrants, calls, rights, convertible securities, commitments or agreements of
any character, written or oral, to which the Company or any of its Subsidiaries is a party, or by
which the Company or any of its Subsidiaries is bound, obligating the Company or any of its
Subsidiaries to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any Company Common Stock or any capital stock or equity interest of such
Subsidiary or obligating the Company or any of its Subsidiaries to grant, extend, accelerate the
vesting of, change the price of, otherwise amend or enter into any such option, warrant, call,
right, commitment or agreement. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or other similar rights with respect
to the Company or any of its Subsidiaries.
Agreement and Plan of Merger Page 17
(d) Except as set forth in Section 4.6(d) of the Disclosure Schedule, (i) there are no
voting trusts, proxies, or other agreements or understandings with respect to the voting stock of
the Company or any of its Subsidiaries to which the Company or any of its Subsidiaries is a party,
by which the Company or any of its Subsidiaries is bound, or of which the Company has Knowledge,
and (ii) there are no agreements or understandings to which the Company or any of its Subsidiaries
is a party, by which the Company or any of its Subsidiaries is bound, or of which the Company has
Knowledge relating to the registration, sale or transfer (including agreements relating to rights
of first refusal, “co-sale” rights, “drag-along” rights or registration rights) of any Company
Common Stock, or any other investor rights, including, without limitation, rights of participation
(i.e., pre-emptive rights), co-sale, voting, first refusal, board observation, visitation or
information or operational covenants (the items described in clauses (i) and (ii) being,
collectively, the “Rights Agreements”). With respect to all Rights Agreements (other than
Rights Agreements that are registration rights agreements as identified on Section 4.6(d) of
the Disclosure Schedule and the Voting Agreement), such Rights Agreements shall terminate and
be of no further force or effect at or prior to the Effective Time. With respect to the Rights
Agreements that are registration rights agreements as identified on Section 4.6(d) of the
Disclosure Schedule, from and after the Effective Time, no party thereto shall have the right
to cause the Surviving Corporation to file a registration statement under the Securities Act or
otherwise effect the registration under the Securities Act of any shares of capital stock of the
Surviving Corporation.
4.7. Company Reports; Financial Statements.
(a) Except as set forth on Section 4.7(a) of the Disclosure Schedule, the Company has
timely filed all Company Reports required to be filed with the SEC on or prior to the date hereof
and will timely file all Company Reports required to be filed with the SEC after the date hereof
and prior to the Effective Time. No Subsidiary of the Company is subject to the reporting
requirements of Section 13(a) or 15(d) of the Exchange Act. Each Company Report has complied, or
will comply as the case may be, in all material respects with the applicable requirements of the
Securities Act, and the rules and regulations promulgated thereunder, or the Exchange Act, and the
rules and regulations promulgated thereunder, as applicable, each as in effect on the date so
filed. None of the Company Reports (including any financial statements or schedules included or
incorporated by reference therein) contained or will contain, as the case may be, when filed (and,
in the case of registration statements and proxy statements, on the dates of effectiveness and the
dates of mailing, respectively) any untrue statement of a material fact or omitted or omits or will
omit, as the case may be, to state a material fact required to be stated or incorporated by
reference therein or necessary to make the statements therein, in the light of the circumstances
under which they were or are made, not misleading.
(b) Each of the Chief Executive Officer and Chief Financial Officer of the Company has made
all certifications required by Rules 13a-14 and 15d-14 under the Exchange Act and Sections 302 and
906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act with respect to the applicable Company Reports filed prior to the
date hereof (collectively, the “Certifications”) and the statements contained in such
Certifications are accurate in all material respects as of the filing thereof.
(c) All of the Company Financial Statements comply in all material respects with applicable
requirements of the Exchange Act and have been prepared in accordance with
Agreement and Plan of Merger Page 18
GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the consolidated financial position of the Company at
the respective dates thereof and the consolidated results of its operations and changes in cash
flows for the periods indicated (subject, in the case of unaudited statements, to normal year-end
audit adjustments consistent with GAAP).
(d) The Company and its Subsidiaries have implemented and maintain a system of internal
accounting controls sufficient to provide reasonable assurances regarding the reliability of
financial reporting and the preparation of financial statements in accordance with GAAP. The
Company has implemented and maintains disclosure controls and procedures (as defined in Rule
13-15(e) of the Exchange Act) designed to ensure that information relating to the Company,
including its consolidated Subsidiaries, required to be disclosed in the reports the Company files
or submits under the Exchange Act is made known to the Chief Executive Officer and the Chief
Financial Officer of the Company by others within those entities.
(e) The Company is, and since enactment of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act has been, in compliance in
all material respects with the applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(f) The Company has adopted a code of ethics, as defined by Item 406(b) of Regulation S-K
promulgated under the Exchange Act, for senior financial officers, applicable to its principal
financial officer, comptroller or principal accounting officer, or persons performing similar
functions. The Company has promptly disclosed, as required by Section 406(b) of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act,
any change in or waiver of the Company’s code of ethics. To the Knowledge of the Company, there
have been no violations of provisions of the Company’s code of ethics.
(g) There are no outstanding loans or other extensions of credit made by the Company or any of
its Subsidiaries to any executive officer (as defined in Rule 3(a)(7) under the Exchange Act) or
director of the Company. The Company has not, since the enactment of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, taken
any action prohibited by Section 402 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act applicable to the Company.
(h) There are no Liabilities of the Company or any of its Subsidiaries of any kind whatsoever,
whether or not accrued and whether or not contingent or absolute, that are material to the Company,
other than (i) Liabilities disclosed and provided for in the Company Balance Sheet or in the notes
thereto; (ii) Liabilities incurred in the ordinary course of business consistent with past practice
since December 31, 2005; (iii) Liabilities incurred on behalf of the Company under this Agreement;
or (iv) Liabilities that would not reasonably be expected to have a Material Adverse Effect.
4.8. Disclosure Documents. None of the information supplied by the Company for
inclusion in the proxy statement or any amendment or supplement thereto (the “Proxy
Statement”) to be sent to the stockholders of the Company in connection with their meeting to
consider this Agreement and the Merger (the “Company Stockholders’ Meeting”), at the time
the
Proxy Statement or any amendment or supplement thereto is first mailed to the stockholders of
the Company and at the time of the Company Stockholders’ Meeting, will contain any untrue
Agreement and Plan of Merger Page 19
statement
of a material fact or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not misleading.
4.9. Absence of Certain Changes. Since the date of the Company Balance Sheet, except
as set forth on Section 4.9 of the Disclosure Schedule, the Company has conducted its
business in the ordinary course consistent with past practices, and there has not been any:
(a) event, occurrence, development or state of circumstances or facts that has had or would
reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the
Company;
(b) amendment to the Company’s Certificate of Incorporation or Bylaws;
(c) split, combination or reclassification of any outstanding shares of the Company’s capital
stock or repurchase, redemption or other acquisition of any shares of the Company’s capital stock
or the declaration or payment of any dividends on such shares;
(d) formation of any material Subsidiary or acquisition of any material equity interest in any
other Person;
(e) adjustment or change in the price or other change in the terms of any options, warrants or
convertible securities of the Company (including the Company Options and Company Warrants);
(f) sale, lease, license or other disposition of any material subsidiary or any material
amount of assets, securities or property by the Company or any of its Subsidiaries, except (i)
pursuant to existing Contracts and (ii) in the ordinary course consistent with past practice;
(g) acquisition or Contract to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof;
(h) capital expenditure or other expenditures outside the ordinary course of business or
inconsistent with past practices, in excess of $100,000 in the aggregate;
(i) payments outside the ordinary course of business for purposes of settling any dispute;
(j) transaction entered into between the Company, on the one hand, and any stockholder,
officer, director or employee of the Company or any Affiliate or family member of such Person, on
the other hand, outside of the ordinary course of business;
(k) other than between the Company and its Subsidiaries, incurrence of any indebtedness for
borrowed money or the guarantee of any such indebtedness in excess of $100,000 in the aggregate;
Agreement and Plan of Merger Page 20
(l) adoption or material amendment of any Employee Plan, the entering into of any Employment
Agreement or any increase in the compensation or fringe benefits of any director, officer or
employee (except for normal increases in compensation and payment of year-end bonuses made in the
ordinary course of business that are consistent with past practices or as may be required by
applicable Law);
(m) changing by the Company or any of its Subsidiaries of any material Tax election, or
making, changing, or revocation by the Company or any of its Subsidiaries of any material Tax
sharing arrangement or Tax agreement with any Taxing Authority; or
(n) Contract entered into by the Company, or amended by the Company, pursuant to which any
other Person is granted exclusive marketing or any other exclusive rights in, or to Intellectual
Property, of any type or scope, with respect to the Business.
4.10. Properties.
(a) The Company does not own any real property. The Company leases or subleases all real
property used in the Business. Section 4.10(a) of the Disclosure Schedule describes all
real property leased or subleased by the Company (the “Real Property”), specifying the name
of the lessor or sublessor, the lease term and basic annual rent.
(b) The Company has good and valid title to, or a valid leasehold interest in, all of its
tangible personal property and assets reflected in the Company Balance Sheet (except for personal
property sold since the date of the Company Balance Sheet in the ordinary course of business
consistent with past practice). Except as disclosed in Section 4.10(b) of the Disclosure
Schedule, all material properties and assets reflected in the Company Balance Sheet are free
and clear of all Liens. All leases of personal property are (i) valid, binding and enforceable in
accordance with their respective terms, except as such enforceability may be limited by (x)
applicable insolvency, bankruptcy, reorganization, moratorium or other similar laws affecting
creditors’ rights generally, and (y) applicable equitable principles (whether considered in a
proceeding at law or in equity) and (ii) there does not exist under any such lease any material
breach by the Company or any event known to the Company that with notice or lapse of time or both,
would constitute a material default.
4.11. Litigation. Except as disclosed in Section 4.11 of the Disclosure
Schedule, there is no material action, suit, investigation or proceeding pending against, or,
to the Knowledge of the Company, threatened against or affecting, the Company or any of its
Subsidiaries before any court or arbitrator or before or by any Governmental Authority. Since
December 31, 2002, there have not been, nor are there currently any internal investigations or
inquiries being conducted by the Company, the Company’s Board of Directors (or any committee
thereof) or any Third Party at the request of any of the foregoing concerning any financial,
accounting, tax, conflict of interest, self-dealing, fraudulent or deceptive conduct or other
misfeasance or malfeasance issues.
4.12. Material Contracts.
(a) Except for the Contracts disclosed in Section 4.12 of the Disclosure Schedule, as
of the date of this Agreement, the Company is not a party to any:
Agreement and Plan of Merger Page 21
(i) Contract that has a remaining term of more than one year from the date
hereof and that (A) cannot be unilaterally terminated by the Company at any time,
without material penalty, within ninety (90) days of providing notice of termination
or (B) involves the payment in excess of $100,000 per year; in each case other than
(X) standard end-user Contracts (including non-exclusive, object code license
agreements and the related confidentiality and/or indemnification obligations)
entered into by the Company in the ordinary course of business; or (Y) Contracts
entered into prior to January 1, 2003 in the ordinary course of business for which
the Company has not received any payments in the last three (3) years;
(ii) partnership, joint venture or other similar Contract;
(iii) dealer, distributor, reseller, OEM, VAR, joint marketing or joint
development Contract that cannot be canceled without material penalty upon notice of
ninety (90) days or less, or any Contract pursuant to which the Company has
continuing material obligations to jointly develop any Intellectual Property that
will not be owned exclusively by the Company;
(iv) Contract relating to indebtedness for borrowed money or the deferred
purchase price of property (whether incurred, assumed, guaranteed or secured by any
asset), except Contracts relating to indebtedness incurred in the ordinary course of
business in an amount not exceeding $100,000;
(v) Employment Agreement;
(vi) Contract that limits the freedom of the Company to compete in any line of
business or with any Person or in any geographic area to operate the Business; or
(vii) Contract that includes any material indemnification, guaranty or warranty
provisions other than those contained in Contracts entered into in the ordinary
course of the Company’s business.
(b) Set forth on Section 4.12(b) of the Disclosure Schedule is a list of the Company’s
top ten (10) customers, measured in terms of the aggregate revenue derived by the Company from such
customers, for each of the three (3) fiscal years during the three-year period ended on December
31, 2005.
(c) Except as disclosed in Section 4.12(c) of the Disclosure Schedule, each Contract
disclosed in the Disclosure Schedule or required to be disclosed pursuant to Section 4.12(a) or
provided pursuant to Section 4.12(b) (each a “Material Contract”) is a valid and binding
agreement of the Company and is in full force and effect, and the Company is not, and to
the Company’s Knowledge, neither is any other party thereto, in default in any material
respect under the terms of any such Contract, nor, to the Company’s Knowledge, has any event or
circumstance occurred that, with notice or lapse of time or both, would constitute an event of
default thereunder.
Agreement and Plan of Merger Page 22
(d) All of the Contracts to which the Company is a party or by which its assets are bound that
are required to be described in the Company Reports (or to be filed as exhibits thereto) are so
described or filed.
4.13. Intellectual Property.
(a) Section 4.13 of the Disclosure Schedule lists: (i) all Patents, all Trademarks and
all registered Copyrights owned by or on behalf of the Company or its Subsidiaries; (ii) all of the
standard (non-customized) material products and services that are (or were) owned, created,
designed, developed, manufactured, marketed, licensed or sold (whether in existence or in
development) by or on behalf of the Company over the last five (5) years, including hardware,
Software, firmware, interfaces and every type of device (collectively, the “Company
Products”); and (iii) all licenses (in and out), sublicenses and other agreements relating to
Intellectual Property (A) to which the Company is a party and pursuant to which the Company or any
other Person is authorized to use any material Company Intellectual Property or exercise any other
right with regard thereto or (B) which otherwise are material to the Business (other than (1)
Contracts pursuant to which any Company Intellectual Property is licensed by the Company or any of
its Subsidiaries in the ordinary course of business to a Third Party customer, (2) commercially
available over-the-counter “shrink-wrap” licenses used by the Company or any of its Subsidiaries or
(3) non-negotiated, licenses of Third Party Intellectual Property embedded in equipment or fixtures
that are used by the Company or any of its Subsidiaries for internal business purposes only).
(b) Each item of the Company Intellectual Property is either: (i) owned solely by the Company
or its Subsidiaries free and clear of any Liens; or (ii) rightfully used and authorized for use by
the Company and its successors pursuant to a valid and enforceable written license. The Company or
its Subsidiaries have all rights in the Company Intellectual Property necessary for the conduct of
the Business.
(c) Except as disclosed in Section 4.13(c) of the Disclosure Schedule, the Company is
not in material violation of any license, sublicense or other agreement to which the Company is a
party or otherwise bound relating to any of the Company Intellectual Property. Except as noted in
Section 4.13(c) of the Disclosure Schedule, neither the Company nor any of its Affiliates
is obligated to provide any consideration (whether financial or otherwise) to any Third Party, nor
is any Third Party otherwise entitled to any consideration, with respect to any exercise of rights
by the Company, before or after the Merger, in the Company Intellectual Property.
(d) The use of the Company Intellectual Property and the operation of the Business by the
Company, to the Company’s Knowledge, do not infringe any other Person’s Intellectual Property
rights. No claims (i) challenging the validity, enforceability, effectiveness or ownership by the
Company of any of the Company Intellectual Property that is owned or
purported to be owned by the Company (collectively, the “Owned Intellectual Property”)
or (ii) to the effect that the operation of the Business infringes on any Intellectual Property of
any Person have been asserted against the Company or, to the Knowledge of the Company, are
threatened by any Person nor, to the Company’s Knowledge, does there exist any valid basis for such
a claim. There are no legal or governmental proceedings, including interference, re-
Agreement and Plan of Merger Page 23
examination,
reissue, opposition, nullity, or cancellation proceedings pending that relate to any of the Owned
Intellectual Property, other than review of pending patent applications, and the Company is not
aware of any information indicating that any such proceedings are threatened or contemplated by any
Governmental Authority or any other Person. To the Company’s Knowledge, all (i) granted or issued
Patents and (ii) registered Trademarks and Copyrights currently being used in the Business, which
are owned or purported to be owned by the Company are valid, enforceable and subsisting. Except as
set forth in Section 4.13(d) of the Disclosure Schedule, to the Company’s Knowledge, there
is no unauthorized use, infringement, or misappropriation of any of the Owned Intellectual Property
by any Third Party, employee or former employee.
(e) The Company has secured from all parties (including present and former employees and
present and former consultants) who have created any portion of, or otherwise have any rights in or
to, any material Owned Intellectual Property valid and enforceable written assignments of any such
work, invention, improvement or other rights to the Company, except where the failure to have
executed such a written assignment would not have a Material Adverse Effect.
(f) The consummation of the transactions contemplated under this Agreement will not materially
alter, impair or otherwise affect any rights or obligations of the Company in any of the Company
Intellectual Property.
(g) The Company has taken its reasonable best measures to protect the proprietary nature of
the Company Intellectual Property and to maintain in confidence all Trade Secrets owned or used by
the Company in the Business.
(h) Except as set forth in Section 4.13(h) of the Disclosure Schedule, there are no
currently pending unresolved material claims against the Company or its any of its Subsidiaries by
any Person to the effect that the Company Products currently being offered to Third Party users,
when properly installed and used, do not operate and function either (i) materially and
substantially in accordance with published specifications or corresponding end user documentation
or (ii) otherwise in accordance with applicable contractual obligations of the Company and its
Subsidiaries. For purposes of this Section 4.13(h), “claims” shall include only those claims that
have been asserted against the Company in writing or via e-mail pursuant to the notice provision of
the applicable Contract, sent by an authorized representative of the Person making the claim and of
which a Person at the Company at the Vice President level or above is aware.
(i) Except as set forth in Section 4.13(i) of the Disclosure Schedule, prior to the
Closing Date, the Company has not provided, and is not obligated to provide, directly or
indirectly, the source code for any of the Software that is included in the Company Intellectual
Property to any other Person. Moreover, the Company has not, by license, transfer, sale, escrow
or otherwise, permitted any other Person to reverse engineer, disassemble or decompile any
such Software to create such source code.
(j) Except as set forth on Section 4.13(j) of the Disclosure Schedule the Company
Intellectual Property does not include any Publicly Available Software and neither the
Agreement and Plan of Merger Page 24
Company nor
the Seller has used Publicly Available Software in whole or in part in the development of any part
of the Company Intellectual Property in a manner that may subject the Company Intellectual Property
in whole or in part, to all or part of the license obligations of any Publicly Available Software.
“Publicly Available Software” means each of (i) 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 and distribution models; and (ii) any software
that requires as a condition of use, modification, and/or distribution of such software that such
software or other software incorporated into, derived from, or distributed with such software (a)
be disclosed or distributed in source code form; (b) be licensed for the purpose of making
derivative works; or (c) be redistributable at no or minimal charge. Publicly Available Software
includes, without limitation, software licensed or distributed under any of the following licenses
or distribution models similar to any of the following: (a) GNU General Public License (GPL) or
Lesser/Library GPL (LGPL), (b) the Artistic License (e.g. PERL), (c) the Mozilla Public License,
(d) the Netscape Public License, (e) the Sun Community Source License (SCSL), the Sun Industry
Source License (SISL), and (f) the Apache Server License.
4.14. Taxes.
Except as set forth on Section 4.14 of the Disclosure Schedule:
(a) The Company and each of its Subsidiaries has timely filed and will timely file with the
appropriate Governmental Authorities all material Tax Returns that are required to be filed by it
prior to the Effective Time, taking into account extensions. All such Tax Returns were true,
correct and complete in all material respects to the extent such Tax Returns reflect liability for
Taxes and, in the case of Tax Returns to be filed prior to the Effective Time, will be true,
correct and complete in all material respects to the extent such Tax Returns reflect liability for
Taxes. All material Taxes due and owing by the Company and each of its Subsidiaries (whether or not
shown on such Tax Returns) have been timely paid and, in the case of Tax Returns to be filed, will
be timely paid. No written claim has ever been made by a Taxing Authority in a jurisdiction where
the Company does not file Tax Returns that the Company or any of its Subsidiaries is or may be
subject to taxation in that jurisdiction. There are no liens on any of the assets of the Company or
its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax,
other than Permitted Liens.
(b) The Company and each of its Subsidiaries have timely withheld and paid to the appropriate
Taxing Authority all material Taxes required to have been withheld and paid by the Company or any
of its Subsidiaries in connection with amounts distributed, paid or owing to any employee,
independent contractor, creditor, shareholder or other Third Party by the Company or any of its
Subsidiaries.
(c) There is no dispute concerning any material Tax Liability of the Company or any of its
Subsidiaries raised by any Taxing Authority in writing to the Company or any of its
Subsidiaries that remains unpaid, and the Company has not received written notice of any
threatened audits or investigations relating to any Taxes nor otherwise has any Knowledge of any
threatened audits or investigations relating to any material Taxes of the Company or any of its
Subsidiaries.
Agreement and Plan of Merger Page 25
(d) Neither the Company nor any of its Subsidiaries has waived any outstanding statute of
limitations in respect of material Taxes or agreed to, or requested, any outstanding extension of
time with respect to a material Tax assessment or deficiency imposed by a Taxing Authority.
(e) The unpaid Taxes of the Company and its Subsidiaries did not, as of December 31, 2005,
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 Company
Balance Sheet (disregarding any notes thereto) and will not exceed such reserve (rather than any
reserve for deferred Taxes established to reflect timing differences between book and Tax income)
as adjusted for the passage of time through the Effective Time in accordance with reasonable past
custom and practice of the Company and each of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has incurred any Tax Liability since December 31, 2005 other than a Tax Liability in
the ordinary course of business.
(f) The Company has made available to Parent complete and accurate copies of all Tax Returns
filed by the Company and any of its Subsidiaries on or prior to the date hereof for all Tax periods
beginning after December 31, 2002.
(g) There are no outstanding written Tax sharing agreements or arrangements relating to any
obligation to allocate or share material Taxes with any other Person (other than the Company or its
Subsidiaries) or to indemnify any other Person (other than the Company or its Subsidiaries) with
respect to the payment of any material Taxes to which the Company or any of its Subsidiaries is a
party.
(h) Neither the Company nor any of its Subsidiaries has been a member of an affiliated group
of corporations within the meaning of Section 1504 of the Code or within the meaning of any similar
provision of law to which the Company or any of its Subsidiaries may be subject, other than the
affiliated group of which the Company is the common parent and neither the Company nor any of its
Subsidiaries has any liability for Taxes of another Person by reason of being a member of any such
group other than the affiliated group of which the Company is the common parent.
(i) During the two-year period ending on the date of this Agreement, neither the Company nor
any of its Subsidiaries was a “distributing corporation” or a “controlled corporation” within the
meaning of Section 355(a)(1)(A) of the Code in a transaction intended to be governed by Section 355
or 356 of the Code.
(j) Neither the Company nor any of its Subsidiaries has agreed, or is it required, to make any
adjustments pursuant to Section 481(a) of the Code or any similar provision of state, local or
foreign law by reason of a change in accounting method initiated by it or any other relevant party,
and the IRS has not proposed any such adjustment or change in
accounting method in writing nor, to the Knowledge of the Company, otherwise proposed any
material adjustment or change in accounting method, nor does the Company or any of its Subsidiaries
have any application pending with any Governmental Authority requesting permission for any changes
in accounting methods that relate to the business or assets of the Company or any of its
Subsidiaries.
Agreement and Plan of Merger Page 26
(k) No closing agreement pursuant to Section 7121 of the Code (or any predecessor provision)
or any similar provision of any state, local or foreign law has been entered into by or with
respect to the Company or any of its Subsidiaries.
(l) Neither the Company nor any of its Subsidiaries has participated in a “reportable
transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(1).
(m) Neither the Company nor any of its Subsidiaries is a party to any Contract or plan that
either (i) has resulted or would result, separately or in the aggregate, in the payment of any
“excess parachute payment” within the meaning of Section 280G of the Code (or any corresponding
provision of state, local or foreign Tax law) arising out of the transactions contemplated by this
Agreement; or (ii) could otherwise give rise to the payment of any amount that would not be
deductible to the Company pursuant to the terms of Section 280G or 162(m) of the Code.
4.15. Insurance Coverage. Section 4.15 of the Disclosure Schedule contains a
complete list of all insurance policies (including “self-insurance” programs) currently maintained
by the Company (collectively, the “Insurance Policies”). To the Knowledge of the Company,
such Insurance Policies are reasonably sufficient to insure the business and assets of the Company
and its Subsidiaries against all risks normally insured against, and in amounts normally carried
by, corporations of similar size engaged in similar lines of business. The Insurance Policies are
in full force and effect, the Company is not in default in any material respect under any Insurance
Policy, and no claim for coverage under any Insurance Policy, other than contested claims under the
Company’s workers’ compensation policies or subject to any Employee Benefit Plans, has been denied
during the past two (2) years. The Company has not received any written notice of cancellation or
intent to cancel with respect to the Insurance Policies.
4.16. Employee Benefit Plans. Except for the plans or arrangements listed on
Section 4.16 of the Disclosure Schedule (hereinafter referred collectively to as the
“Employee Plans” and individually as an “Employee Plan”), neither the Company nor
any member of its Controlled Group, directly or indirectly, maintains, sponsors or has an
obligation or liability with respect to, any “employee benefit plan,” as defined in Section 3(3) of
ERISA, or any material benefit arrangement that is not an “employee benefit plan” as defined in
Section 3(3) of ERISA including, without limitation, any executive compensation or incentive plan,
bonus or severance, International Plan, salary continuation or other similar arrangement,
Employment Agreement, collective bargaining agreement, union contract, deferred compensation
agreement, stock purchase or other equity plan or arrangement, educational assistance arrangement,
any arrangement providing for insurance coverage or workers’ compensation benefits, any arrangement
providing salary continuation for disability or other leave of absence, supplemental unemployment
benefits, lay-off, reduction in force or similar benefits, any compensation policy or practice
(including, without limitation sick and vacation pay policies or practices), any change
of control arrangements or policies, any plan governed by Section 125 of the Code, or any or
other fringe benefit plan or arrangement. Section 4.16 of the Disclosure Schedule
separately identifies each Employee Plan that is an International Plan. For the purposes of this
Agreement, “Controlled Group” shall mean the Company and any trade or business, whether or
not incorporated, which is treated together with the Company as a single employer under Section
Agreement and Plan of Merger Page 27
4001(b)(1) of ERISA or Sections 414(b), (c), (m) or (o) of the Code. With respect to each Employee
Plan identified and except as disclosed on Section 4.16 of the Disclosure Schedule:
(a) Each Employee Plan has been maintained, operated, and administered in compliance with its
terms and any related documents or agreements and in compliance with all applicable Laws, in each
case in all material respects; there are no actions, suits or claims pending (other than routine
claims for benefits) or, to the Knowledge of the Company, threatened against such Employee Plan,
the Company (solely with respect to such Employee Plan) or against any fiduciary of such Employee
Plan; there is no pending or, to the Knowledge of the Company (solely with respect to such Employee
Plan), threatened proceeding involving any Employee Plan before the IRS, the United States
Department of Labor or any other governmental authority;
(b) Neither the Company nor any member of the Controlled Group has taken any action, or failed
to take any action, which action or failure would reasonably be expected to subject the Company to
any material liability for breach of any fiduciary duty, or for any prohibited transaction (as
defined in Section 4975 of the Code), with respect to or in connection with any Employee Plan;
(c) Each Employee Plan intended to be qualified under Section 401(a) of the Code has been
qualified in form and operation since its adoption and has received a favorable determination
letter as to its qualification (at least through the “GUST” amendments) from the IRS or the Company
has submitted a request for such a letter within the applicable remedial amendment period (or has
an opinion letter issued to the prototype sponsor of the plan on which the Company is entitled to
rely); a copy of the most recent IRS determination letter or determination letter application (or
opinion letter) regarding such qualified status for each such plan has been delivered to Parent;
(d) The Controlled Group does not maintain or contribute, and within the preceding six years
has not maintained or been required to contribute to a “defined benefit plan” within the meaning of
Section 3(35) of ERISA or Section 414(j) of the Code, nor is or was the Controlled Group a party to
a “multiemployer plan” as described in Section 3(37) of ERISA or Section 414(f) of the Code. No
Employee Plan intended to be qualified under Section 401(a) of the Code that is also subject to
Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code had an accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived,
as of the last day of the most recently completed fiscal year of such plan;
(e) Except as disclosed in Section 4.16(e) of the Disclosure Schedule, no Employee
Plan (i) provides for non-terminable or non-alterable benefits for employees, dependents or
retirees or (ii) provides any benefits for any person upon or following retirement or termination
of employment, except as otherwise required by Part 6 of Subtitle B of Title I of
ERISA or Section 4980B of the Code or applicable Law; and no condition exists that would
prevent Parent from amending or terminating any Employee Plan in accordance with the requirements
of ERISA and the Code;
Agreement and Plan of Merger Page 28
(f) Full and timely payment has been made of all material amounts which the Controlled Group
is required, under applicable Law or under any Employee Plan, to have paid as a contribution; and,
with respect to all material amounts that the Controlled Group is not yet required under applicable
Law or under any Employee Plan to contribute (but with respect to which an accrual is required in
accordance with GAAP), such amounts have been so accrued in accordance with GAAP;
(g) Except as disclosed in Section 4.16(g) of the Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will not, solely in and of itself,
(i) entitle any current or former employee or officer of the Company to severance pay, unemployment
compensation or any other payment, (ii) accelerate the time of payment or vesting under the
Employee Plans, (iii) increase the amount of compensation due any such employee or officer, or (iv)
except as specifically set forth herein, directly or indirectly cause the Company to transfer or
set aside any assets to fund or otherwise provide for the benefits under the Employee Plan for any
current or former employee, officer or director;
(h) The Company has made available to Parent with respect to each Employee Plan complete and
accurate copies of (i) all written documents comprising such Employee Plan (including, where
applicable, amendments and individual, trust or insurance agreements relating thereto); (ii) in the
case of any Employee Plan for which Federal Forms 5500 are required to be filed, the three most
recent years’ Federal Forms 5500 (including all schedules thereto); (iii) the three most recent
financial statements and actuarial reports, if any, pertaining to each such plan or arrangement;
(iv) the summary plan description currently in effect and all material modifications thereto, if
any, for each such Employee Plan; and (v) written communications to employees to the extent the
substance of any Employee Plan described therein differs materially from the other documentation
furnished under this Section;
(i) All options that have been granted by the Company to employees that purport to be
“incentive stock options” under the Code comply with all applicable requirements necessary to
qualify for such tax status, and no option is subject to the provisions of Section 409A of the
Code; and
(j) Except as disclosed in Section 4.16(j) of the Disclosure Schedule, the Company
does not maintain any “nonqualified deferred compensation plan” subject to Section 409A of the
Code.
4.17. Compliance with Laws. Except as set forth in Section 4.17 of the Disclosure
Schedule, the Company is in compliance, in all material respects, with all Laws and judgments
of any Governmental Authority applicable to the Company or the Business or by which any property,
asset or the business or operations of the Business is bound or affected. The Company has all
material permits, licenses, membership privileges, authorizations, consents, approvals, waivers or
franchises to be granted by or obtained from any Governmental Authority (“Permits”) that
are required for the Company to conduct its Business as currently being conducted.
Agreement and Plan of Merger Page 29
4.18. Employees and Independent Contractors.
(a) The Company has provided Parent with an accurate and complete list, as of December 7,
2006, of (i) all employees of the Company (including any employee of the Company who is on a leave
of absence or on layoff status); and (A) their titles or responsibilities; (B) their principal
residence address; (C) their dates of hire; (D) their current salaries or wages and all bonuses,
commissions and incentives paid at any time during the past twelve months; (E) any specific bonus,
commission or incentive plans or agreements for or with them; (F) each Employee Benefit Plan in
which they participate; and (G) any outstanding loans or advances made by or to them, and (ii) all
material sales representatives and independent contractors engaged by the Company and (A) their
state or country of residence; (B) their payment arrangements; and (C) a brief description of their
jobs or projects currently in progress.
(b) Except for any limitations of general application which may be imposed under applicable
employment Laws, pursuant to the Employment Agreements set forth on Section 4.12 of the
Disclosure Schedule, and as set forth in Section 0(b) of the Disclosure Schedule, the
Company has the right to terminate the employment of each of its employees at will and to terminate
the engagement of any of its independent contractors without payment to such employee or
independent contractor other than for services rendered through termination and without incurring
any penalty or liability other than liability for severance pay in accordance with the Company’s
severance pay policy, as described on Section 0(b) of the Disclosure Schedule.
(c) The Company is in compliance, in all material respects, with all Laws and obligations
relating to employment practices and worker classification.
(d) The Company is not a party to or bound by any union or collective bargaining Contract, nor
is any such Contract currently in effect or being negotiated by or on behalf of the Company.
(e) Since January 1, 2000, the Company has not experienced any labor problem that was or is
material to it. To the Knowledge of the Company, the Company’s relations with its employees are
currently good.
4.19. Customers and Suppliers. Except as disclosed in Section 4.19 of the
Disclosure Schedule, the Company has not received notice from and is not otherwise aware that
(a) any customer (or group of customers under common ownership or control) that accounted for a
material percentage of the revenues of the Business during the past 12 months has stopped or
intends to stop purchasing the products or services of the Business or (b) any supplier (or group
of suppliers under common ownership or control) that accounted for a material percentage of the
aggregate supplies purchased by the Business during the past 12 months has stopped or intends to
stop supplying products or services to the Business.
4.20. Minute Books and Corporate Records. The minute and record books of the Company
contain minutes which are complete and accurate in all material respects of all material meetings
of, and copies of all bylaws and resolutions passed by, or consented to in writing by, the
directors (and any committees thereof) and stockholders of Company since its incorporation
Agreement and Plan of Merger Page 30
and
which are required to be maintained in such books under the DGCL, all such meetings were duly
called and held and all such bylaws and resolutions were duly passed or enacted.
4.21. Interested Party Transactions. Except as set forth on Section 4.21 of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to any
transaction or agreement with any Affiliate, 5% or more stockholder, director or executive officer
of the Company. No event has occurred since the date of the Company’s last proxy statement to its
stockholders that would be required to be reported by the Company pursuant to Item 404 of
Regulation S-K promulgated by the SEC.
4.22. Environmental Matters. To the Knowledge of the Company, the Company has
complied in all material respects with all Laws applicable to it intended to protect the
environment and/or human health or safety (collectively, “Environmental Laws”). The
Company has not released, handled, generated, used, stored, transported or disposed of any
material, substance or waste which is regulated by Environmental Laws (“Hazardous
Materials”), except for the use of reasonable amounts of ordinary office and/or office-cleaning
supplies in material compliance with Environmental Laws. The Company is not aware of any
environmental investigation, study, test or analysis, the purpose of which was to discover,
identify, or otherwise characterize the condition of the soil, groundwater, air or the presence of
Hazardous Materials at any location at which the business of the Company has been conducted. To
the Knowledge of the Company, the Company has no Environmental Liabilities. As used herein,
“Environmental Liabilities” are any claims, demands, or liabilities under Environmental Law
which (i) arise out of or in any way relate to the Company’s operations or activities, or any real
property at any time owned, operated or leased by the Company, whether contingent or fixed, actual
or potential, and (ii) arise from or relate to actions occurring (including any failure to act) or
conditions existing on or before the Closing Date.
4.23. Data Security and Privacy. The Company has implemented reasonable steps
consistent with the type of activities conducted by the Company which are known in the information
systems industry (and which are generally known as best practices) to protect, physically and
electronically, its information assets and data from unauthorized disclosure, use or modification.
To the Knowledge of the Company, there have been no breaches of security affecting the Company’s
information assets or data. To the Knowledge of the Company, the Company has conducted its
business and has collected, maintained and used its data at all times materially in accordance with
(i) accepted industry practice by businesses comparable in size, revenue and type of activity
conducted; and (ii) all applicable Laws, including but not limited to those relating to privacy.
4.24. Section 203 of the DGCL; Anti-takeover Laws. The Company and its Board of
Directors have taken all action necessary such that no restrictions contained in any “fair price,”
“moratorium,” “control share acquisition,” “business combination” or similar statute, including
without limitation Section 203 of the DGCL, or any applicable regulation thereunder, will apply
to the execution, delivery or performance of this Agreement or the transactions contemplated
hereby.
4.25. Finders’ Fees. Except as disclosed on Section 4.25 of the Disclosure
Schedule, there is no investment banker, broker, finder or other intermediary that has been
retained by or is
Agreement and Plan of Merger Page 31
authorized to act on behalf of the Company who might be entitled to any fee or
commission from Parent, the Company or any of their respective Affiliates upon consummation of the
transactions contemplated by this Agreement.
4.26. Opinion of Financial Advisor. The Company has received the written opinion of
Pagemill Partners, LLC, financial advisor to the Company, to the effect that, as of the date of
this Agreement, the Merger Consideration is fair to the Company’s stockholders from a financial
point of view. A copy of such opinion shall be provided to Parent solely for informational
purposes as soon as practicable after the date of this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant to the Company that
the statements contained in this Article V are true and correct.
5.1. Organization and Existence. Parent is a corporation duly incorporated, validly
existing and in good standing under the Laws of the State of Delaware and has all corporate powers
and all material governmental licenses, authorizations, consents and approvals required to carry on
its business as now conducted. Merger Sub is a corporation duly incorporated, validly existing and
in good standing under the Laws of the State of Delaware and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required to carry on its
business as now conducted. Parent owns, directly or indirectly, all of the outstanding capital
stock of Merger Sub free and clear of all Liens.
5.2. Corporate Authorization. The execution, delivery and performance by Parent and
Merger Sub of this Agreement, each of the Transaction Documents to which either Parent or Merger
Sub is a party and the consummation by Parent and Merger Sub of the transactions contemplated
hereby and thereby are within the corporate powers of Parent and Merger Sub and have been duly
authorized by all necessary corporate action on the part of Parent and Merger Sub. This Agreement
and each of the Transaction Documents to which Parent is a party have been duly executed and
delivered by Parent and Merger Sub and constitute valid and binding agreements of Parent and Merger
Sub, respectively.
5.3. Governmental Authorization. The execution, delivery and performance by Parent
and Merger Sub of this Agreement and each of the Transaction Documents to with either Parent or
Merger Sub is a party require no action by or in respect of, or filing with, any Governmental
Authority.
5.4. Non-Contravention.
(a) The execution, delivery and performance by Parent and Merger Sub of this Agreement and
each of the Transaction Documents to which either of them is a party and the
consummation by Parent and Merger Sub of the transactions contemplated hereby and thereby do
not and will not (i) contravene or conflict with the corporate charter or bylaws of Parent or
Merger Sub, (ii) contravene or conflict with any provision of any Law, judgment, injunction, order
or decree binding upon or applicable to Parent or Merger Sub or by which any material property or
assets of Parent or Merger Sub is bound or affected or (iii) result in a breach of or
Agreement and Plan of Merger Page 32
constitute a
default under (or an event that with notice or lapse of time or both would become a default under),
give to others (immediately or with notice or lapse of time or both) any right of termination,
amendment, acceleration or cancellation of, result (immediately or with notice or lapse of time or
both) in triggering any payment or other obligations, or result (immediately or with notice or
lapse of time or both) in the creation of Lien on any material property or assets of Parent or
Merger Sub pursuant to any Contract to which Parent or Merger Sub is now a party or by which Parent
or Merger Sub or any of its properties or assets may be bound or affected.
(b) The execution and delivery of this Agreement by Parent and Merger Sub do not, and the
performance of this Agreement by Parent and Merger Sub will not, require any consent, approval,
authorization or permit of, or filing with or notification to, or registration or qualification
with, any Governmental Authority, except for applicable requirements, if any, of the Securities
Act, the Exchange Act, or state securities laws or “blue sky” laws and filing and recordation of
the Certificate of Merger.
5.5. Litigation. There is no action, suit, investigation or proceeding pending
against, or to the knowledge of Parent or Merger Sub threatened against or affecting, Parent or
Merger Sub before any court or arbitrator or any Governmental Authority which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated
hereby.
5.6. Sufficient Funds. Parent, through its wholly owned subsidiary Made2Manage
Systems, Inc. (“M2M”), will have available at the consummation of the Merger sufficient
immediately available funds through cash on hand or binding credit facility commitments from
reputable lenders and financial institutions to perform all of their respective obligations under
this Agreement, to consummate the Merger and to pay in full all consideration, fees and expenses
payable by Parent or the Surviving Corporation in connection with this Agreement and the
transactions contemplated hereby. In connection therewith, on or prior to the date hereof,
Parent has previously delivered to the Company debt and equity commitment letters from Bank of
Montreal, ▇▇▇▇▇▇, ▇.▇. and certain of Parent’s stockholders (the “Commitments”). Each of
the Commitments, in the form so delivered, is a legal, valid and binding obligation of M2M and, to
the knowledge of Parent or Merger Sub, the other parties thereto. No event has occurred which, with
or without notice, lapse of time or both, would constitute a default or breach on the part of M2M,
Parent or Merger Sub under any term or condition of the Commitments. Neither Parent nor Merger Sub
has any reason to believe that M2M, Parent and Merger Sub will be unable to satisfy on a timely
basis any term or condition of closing to be satisfied by it contained in the Commitments. M2M,
Parent or Merger Sub will pay in full any and all commitment fees or other fees required by the
Commitments prior to the end of the first Business Day following the date of this Agreement.
Without limiting the generality of the foregoing, Parent’s ability to consummate the transactions
contemplated hereby is not contingent on Parent’s ability to complete any public offering or
private placement of equity or debt securities or to obtain any other type of financing prior to
consummating the Merger.
5.7. Proxy Statement. None of the information supplied or to be supplied by Parent or
Merger Sub for inclusion in the Proxy Statement or any amendment or supplement thereto, at the time
the Proxy Statement or any amendment thereto is first mailed to the stockholders of the Company and
at the time of the Company Stockholders’ Meeting, will contain any untrue
Agreement and Plan of Merger Page 33
statement of a material
fact or omit to state a material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
5.8. Brokers. No broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or Merger Sub or any of their
respective directors, officers or employee, for which the Company may become liable.
5.9. Interim Operations of Merger Sub. Merger Sub was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement, and has engaged in no business
other than in connection with the transactions contemplated hereby.
ARTICLE VI
COVENANTS OF THE COMPANY
COVENANTS OF THE COMPANY
6.1. Access to Information and Employees.
(a) From the date hereof to the Effective Time or the earlier termination of this Agreement,
upon reasonable prior notice, the Company shall, and shall cause the Representatives of the Company
to, afford the Representatives of Parent and Merger Sub reasonable access during normal business
hours to the officers, employees, agents (including outside accountants), properties, offices and
other facilities, books and records of the Company and, during such period, the Company shall, and
shall cause each of its Subsidiaries to, furnish or otherwise make available (including via ▇▇▇▇▇,
if applicable) to Parent (i) a copy of each report, schedule, form, statement and other document
filed by it or received by it during such period pursuant to the requirements of federal or state
securities Laws reasonably promptly following such filing or receipt, (ii) to the extent available,
for the period beginning after the date of this Agreement and ending at the Effective Time or the
earlier termination of this Agreement, as soon as practicable after the end of each month, and in
any event within thirty days thereafter, a copy of the monthly consolidated financial statements of
the Company, including statements of financial condition, results of operations, and statements of
cash flow, and (iii) all other information concerning its business, properties and personnel as
Parent may reasonably request. Notwithstanding the foregoing, any such investigation or
consultation shall be conducted in such a manner as not to interfere unreasonably with the business
or operations of the Company or its Subsidiaries or otherwise result in any unreasonably
interference with the prompt and timely discharge by such employees of their normal duties.
Neither the Company nor any of its Subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would violate or prejudice the rights of its
customers, jeopardize the attorney-client privilege of the Company or its Subsidiaries or violate
any Law or binding agreement entered into prior to the date of this Agreement.
(b) During the period between the date hereof and the Effective Time or the earlier
termination of this Agreement, the Company shall provide, and shall cause its Subsidiaries and its
and their Representatives to provide, to Parent and to the Representatives of Parent, all
cooperation that may be reasonably requested by Parent in connection with Parent’s financing of the
Merger Consideration, Option Consideration and Warrant Consideration payable
Agreement and Plan of Merger Page 34
pursuant to this
Agreement, including but not limited to using commercially reasonable efforts to cause its advisors
to provide financial statements and comfort letters that may be reasonably requested and are
otherwise customary for such financing transactions.
(c) No investigation pursuant to this Section 6.1 shall affect any representation or warranty
in this Agreement of any party hereto or any condition to the obligations of the parties hereto.
6.2. Operation of the Business. At all times from and after the date of this
Agreement until the Effective Time or the earlier termination of this Agreement, the Company agrees
as follows (except as expressly contemplated or permitted by this Agreement, as required by Law or
as set forth on Schedule 6.2, or to the extent that Parent otherwise consents in writing):
(a) The Company and its Subsidiaries shall conduct the Business only in, and the Company and
its Subsidiaries shall not take any action except in, the ordinary course consistent with past
practices. Further, the Company shall not, and shall not permit any of its Subsidiaries to, (i)
take any action that would make any representation and warranty of the Company hereunder inaccurate
in any material respect at, or as of any time prior to, the Effective Time or (ii) omit to take any
action necessary to prevent any such representation or warranty from being inaccurate in any
material respect at any such time.
(b) Without limiting the generality of Section 6.2(a): (i) the Company and its Subsidiaries
shall use their commercially reasonable efforts to preserve their respective present business
organizations, keep available the services of their respective key officers and employees, maintain
their assets and properties in good working order and condition (ordinary wear and tear excepted),
maintain insurance on their tangible assets and business in such amounts and against such risks and
losses as are currently in effect, preserve their relationships with customers and suppliers and
others having significant business dealings with them and comply in all material respects with all
Laws applicable to them, and (ii) the Company shall not, and shall not permit any of its
Subsidiaries to:
(i) amend its Certificate of Incorporation or Bylaws;
(ii) split, combine or reclassify any outstanding shares of its capital stock
or repurchase, redeem or otherwise acquire any shares of its capital stock or
declare or pay any dividends on such shares;
(iii) form any subsidiary or acquire any equity interest in any other Person;
(iv) issue, sell or grant any additional shares of its capital stock or any
options, warrants, convertible securities, subscription rights, conversion rights,
exchange rights or other Contracts relating to the issuance or sale of any shares of
its capital stock, other than Company Common Stock issued as a result of the
proper exercise of Company Options or the Company Warrants outstanding as of the
date of this Agreement;
Agreement and Plan of Merger Page 35
(v) adjust or change the price or otherwise change the terms of any options,
warrants or other convertible securities (including the Company Options and the
Company Warrants) outstanding as of the date of this Agreement;
(vi) sell, transfer, lease or license to any Person, or encumber, any assets
that are material to the Business other than in the ordinary course of business
consistent with past practices;
(vii) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
Person or any joint venture, association or other business organization or division
thereof;
(viii) make or agree to make any capital expenditure that is outside the
ordinary course of business or inconsistent with past practices in excess of
$100,000 in the aggregate;
(ix) make any payments outside the ordinary course of business for purposes of
settling any dispute;
(x) enter into any transaction with any executive officer or director of the
Company (other than expense advancement or reimbursements made in the ordinary
course consistent with past practice);
(xi) incur any indebtedness for borrowed money or guarantee any such
indebtedness;
(xii) adopt or amend any Employee Plan, enter into any Employment Agreement or
increase the compensation or fringe benefits of any director, officer or employee or
pay any benefit not required by any existing Contract or plan (except for normal
increases in compensation and payment of year-end bonuses made in the ordinary
course of business that are consistent with past practices or as may be required by
applicable Law);
(xiii) amend in a manner adverse to the Company or terminate any Material
Contract or waive, release or assign any rights material to the Company under any
Material Contract, in each case other than in the ordinary course of business;
(xiv) change any of its methods of accounting or accounting practices, except
for any such change required by reason of a concurrent change in GAAP or Regulation
S-X under the Exchange Act or consistent with past practice;
(xv) change any material Tax election with any Taxing Authority, or make,
change or revoke any material Tax sharing arrangement or Tax agreement with any
Taxing Authority;
Agreement and Plan of Merger Page 36
(xvi) enter into any transaction that could give rise to a disclosure
obligation as a “listed transaction” under Section 6011 of the Code and the Treasury
Regulations promulgated thereunder;
(xvii) enter into or amend any Contract pursuant to which any other Person is
granted exclusive marketing or any other exclusive rights in, or to Company
Intellectual Property, of any type or scope, with respect to the Business; or
(xviii) enter into a Contract to take any of the actions described in clauses
(i) through (xvii).
(c) Each of the Company and each of its Subsidiaries shall use its commercially reasonable
efforts to: (i) file any Tax Return listed on Section 4.14 of the Disclosure Schedule and
cause each such Tax Return when filed to be true, complete and correct in all material respects to
the extent any such Tax Return reflects liability for Taxes; and (ii) file any other material Tax
Return when due and cause each such Tax Return when filed to be true, complete and correct in all
material respects to the extent such Tax Return reflects liability for Taxes.
6.3. Stockholder Meeting; Proxy Statement. Subject to the terms of this Agreement,
the Company shall cause the Company Stockholders’ Meeting to be duly called and held for the
purpose of voting on the approval and adoption of this Agreement and the Merger as soon as
reasonably practicable following the date that the Company has received confirmation that the staff
of the SEC has no comments or no further comments on the Proxy Statement. Subject to the terms of
this Agreement, the Board of Directors of the Company shall recommend approval and adoption of this
Agreement and the Merger by the Company’s stockholders. In connection with such meeting, the
Company shall (i) with the assistance of Parent, promptly prepare the Proxy Statement and promptly
following the date that the Company has received confirmation that the staff of the SEC has no
comments or further comments on the Proxy Statement, mail to its stockholders the Proxy Statement
and all other proxy materials for such meeting, (ii) use its reasonable best efforts to obtain the
Company Stockholder Approval and (iii) otherwise comply with all legal requirements applicable to
such meeting. At the Company Stockholders’ Meeting, the Company shall submit this Agreement and
the Merger to the Stockholders for approval and adoption as provided by the DGCL and the Company’s
Certificate of Incorporation and Bylaws.
6.4. No Solicitation; Other Offers.
(a) Subject to Section 6.4(b), neither the Company nor any of its Subsidiaries shall, nor
shall the Company or any of its Subsidiaries authorize or permit any of its or their officers,
directors, employees, investment bankers, attorneys, accountants, consultants or other agents or
advisors to, directly or indirectly, (i) solicit, initiate or take any action intended to
facilitate or encourage the submission of any Acquisition Proposal, (ii) enter into or participate
in
any discussions or negotiations with, or furnish any nonpublic information relating to the
Company or any of its Subsidiaries to any Third Party that the Company is aware is seeking to make,
or has made, an Acquisition Proposal, (iii) fail to make, withdraw or modify in a manner adverse to
Parent the Company Board Recommendation (or recommend an Acquisition
Agreement and Plan of Merger Page 37
Proposal) (any of the
foregoing in this clause (iii), an “Adverse Recommendation Change”), (iv) grant any waiver
or release under any standstill or similar agreement with respect to any class of equity securities
of the Company or the Subsidiary Securities or (v) enter into any agreement in principle, letter of
intent, term sheet or other similar instrument relating to an Acquisition Proposal.
(b) Notwithstanding the foregoing, prior to receiving the Company Stockholder Approval, the
Board of Directors of the Company (which, for purposes of this Section 6.4 shall include any
committee thereof formed specifically for the purpose of negotiating with respect to an Acquisition
Proposal or taking the actions contemplated hereby), directly or indirectly through advisors,
agents or other intermediaries, may (i) engage in negotiations or discussions with any Third Party
that has made a bona fide written Acquisition Proposal that the Board of Directors of the Company
reasonably believes will lead to a Superior Proposal, (ii) thereafter furnish to such Third Party
nonpublic information relating to the Company or any of its Subsidiaries pursuant to a
confidentiality agreement with terms no less favorable to the Company than those contained in the
Confidentiality Agreement, (iii) in response to the receipt of an unsolicited bona fide written
Acquisition Proposal, make an Adverse Recommendation Change (or not include the Company Board
Recommendation in the Proxy Statement), (iv) other than in connection with an Acquisition Proposal,
if the Board of Directors of the Company determines in good faith by a majority vote, after
considering advice from outside legal counsel to the Company, that it is required to do so in order
to comply with its fiduciary duties under applicable Law, make an Adverse Recommendation Change
and/or (v) take any nonappealable, final action that any court of competent jurisdiction orders the
Company to take, but in each case referred to in the foregoing clauses (i) through (iii) only if
the Board of Directors of the Company determines in good faith by a majority vote, after
considering advice from outside legal counsel to the Company, that not doing so would be
inconsistent with its fiduciary duties under applicable Law. Nothing contained herein shall
prevent the Board of Directors of the Company from complying with Rule 14e-2(a) or Rule 14d-9 under
the Exchange Act with regard to an Acquisition Proposal; provided, however, that
the Board of Directors of the Company shall not recommend that the Company’s stockholders tender
shares of capital stock in connection with any tender or exchange offer unless the Board of
Directors of the Company determines in good faith, after considering advice from outside legal
counsel to the Company, that to not do so would be inconsistent with its fiduciary duties under
applicable Law.
(c) The Board of Directors of the Company shall not take any of the actions referred to in
clauses (iii) and (iv) or the last sentence of Section 6.4(b) unless the Company shall have
delivered to Parent a prior written notice advising Parent that it intends to take such action. In
addition, the Company shall notify Parent promptly (but in no event later than 48 hours) after
receipt by the Company (or any of its advisors) of any Acquisition Proposal or any request for
information relating to the Company or any of its Subsidiaries or regarding any Acquisition
Proposal. The Company shall provide such notice orally or in writing (and, additionally, by
electronic mail) and shall identify the Third Party making, and the material terms and conditions
of, any such Acquisition Proposal, indication or request. The Company shall keep Parent
reasonably informed, on a current basis, of the status and details of any such Acquisition
Proposal or request.
Agreement and Plan of Merger Page 38
(d) The Company shall, and shall cause its Subsidiaries and the advisors, employees and other
agents of the Company and any of its Subsidiaries to, cease immediately and cause to be terminated
any and all existing activities, discussions or negotiations, if any, with any Third Party
conducted prior to the date hereof with respect to any Acquisition Proposal and shall instruct any
such Third Party in possession of confidential information about the Company that was furnished by
or on behalf of the Company to return or destroy all such information.
(e) For purposes of this Agreement, a “Superior Proposal” shall mean any bona fide,
written Acquisition Proposal for greater than 50% of the then outstanding shares of Company Common
Stock that the Board of Directors of the Company determines in its good faith judgment by a
majority vote (after considering the advice of a financial advisor of nationally recognized
reputation and taking into account all the terms and conditions of the Acquisition Proposal,
including any break-up fees, expense reimbursement provisions and conditions to consummation) to be
more favorable to the Company’s stockholders than the terms of the Merger and is reasonably likely
to be consummated.
6.5. Stockholder Litigation. The Company shall keep Parent reasonably informed and,
to the extent permitted by law or applicable regulatory agencies, give Parent the opportunity to
participate in the formulation and implementation of a defense strategy with respect to any
stockholder litigation against the Company and/or its directors relating to the Merger, this
Agreement or the transactions contemplated hereby; provided, however, that Parent
shall participate in the formulation and implementation of a defense strategy to such stockholder
litigation through legal counsel chosen by Parent, and the fees and expenses of such legal counsel
shall be borne by Parent; and provided, further, however, that Parent shall
in no event be authorized to direct the conduct of such litigation on behalf of the Company, its
stockholders, officers, directors or employees.
6.6. Company Option Holders. The Company shall provide, at least one (1) Business Day
prior to the Closing Date, a full and complete list, as of the Closing Date, which list shall be
attached hereto as Schedule 6.6, of each outstanding Company Option, the name of the record
holder of such Company Option (and, to the Knowledge of the Company, the name of the beneficial
holder, if different), the domicile address of such holder as set forth on the books of the
Company, an indication of whether such holder is an employee, the date of grant or issuance of such
option, the number of shares of Company Common Stock subject to such option, the exercise price of
such option, the vesting schedule for such option, including the extent vested to the date of this
Agreement and whether and to what extent the exercisability of such option will be accelerated and
become exercisable as a result of the transactions contemplated by this Agreement, and whether such
option is a nonstatutory option or an incentive stock option as defined in Section 422 of the Code.
ARTICLE VII
COVENANTS OF THE PARTIES
COVENANTS OF THE PARTIES
7.1. Commercially Reasonable Efforts. Subject to the terms and conditions hereof,
prior to the Effective Time or the earlier termination of this Agreement, each of the parties shall
use its commercially reasonable efforts to take all actions and to do all things necessary, proper
or advisable to consummate the Merger and the other transactions contemplated by this
Agreement and Plan of Merger Page 39
Agreement
(subject to the fiduciary duties of the Company’s Board of Directors), including using its
reasonable best efforts to (i) prepare, execute and deliver such instruments and take or cause to
be taken such actions as any other party shall reasonably request, and (ii) after consultation with
the other parties, obtain any consent, waiver, approval or authorization from any Person reasonably
requested by such other party in order to maintain in full force and effect any of the Company’s
Contracts, permits, licenses or other rights following the Merger and the other transactions
contemplated hereby. Notwithstanding anything to the contrary herein, nothing in this Agreement
shall require Parent or any of its Subsidiaries to (i) agree to or to effect any divestiture, hold
separate (including by establishing a trust or otherwise), settlement, undertaking, consent decree,
or enter into any license or similar agreement with respect to, or agree to restrict its ownership
or operation of, any business or assets of the Company or its Subsidiaries or of Parent or its
Subsidiaries, (ii) enter into, amend or agree to enter into or amend, any Contracts of the Company
or its Subsidiaries or of Parent or its Subsidiaries, (iii) otherwise waive, abandon or alter any
material rights or obligations of the Company or its Subsidiaries or of Parent or its Subsidiaries
or (iv) file or defend any lawsuit, appeal any judgment or contest any injunction issued in a
proceeding initiated by a Governmental Authority.
7.2. Notification of Certain Matters. Prior to the Effective Time or the earlier
termination of this Agreement, each of the parties agrees to give prompt notice to each other of,
and to use commercially reasonable efforts to remedy, (i) the occurrence or failure to occur of any
event which occurrence or failure to occur would be likely to cause any of its representations or
warranties in this Agreement to be untrue or inaccurate in any material respect at the Effective
Time, and (ii) any material failure on its part to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 7.2 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.3. Certain Filings. (a) The Company and Parent shall cooperate with one another
(i) in connection with the preparation of the Proxy Statement, (ii) in determining whether any
action by or in respect of, or filing with, any Governmental Authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any material contracts,
in connection with the consummation of the transactions contemplated by this Agreement and (iii) in
taking such actions or making any such filings, furnishing information required in connection
therewith or with the Proxy Statement and seeking timely to obtain any such actions, consents,
approvals or waivers.
(b) The Parent and its counsel shall be given a reasonable opportunity to review and comment
on the Proxy Statement before such document (or any amendment thereto) is filed with the SEC, and
the Company shall give reasonable and good faith consideration to any comments made by Parent and
its counsel. The Company shall provide Parent and its counsel with (i) any written comments or
other communications and any material oral comments or other communications, that the Company or
its counsel may receive from time to time from the SEC or its staff with respect to the Proxy
Statement promptly after receipt of those comments or other
communications and (ii) a reasonable opportunity to participate in the response to those
comments and to provide comments on that response, including by participating in any material
discussions or meetings with the SEC.
Agreement and Plan of Merger Page 40
7.4. Public Statements. Unless otherwise required by applicable law or by obligations
pursuant to any listing agreement with or rules of any securities exchange, (i) the initial press
release with respect to the Merger and the other transactions contemplated by this Agreement shall
require the prior mutual agreement and approval of both Parent and the Company, and (ii) any
subsequent press releases or other public statements (including the scheduling of any press
conference or conference call with investors or analysts) with respect to the Merger or the other
transactions contemplated by this Agreement shall require prior consultation between Parent and the
Company and the parties shall use their reasonable best efforts to accommodate the reasonable
requests of the other party with respect to such press releases or public statements.
7.5. Directors’ and Officers’ Indemnification and Insurance.
(a) For a period of six (6) years from and after the Effective Time, the Surviving Corporation
shall indemnify and hold harmless all past and present officers and directors of the Company and
its Subsidiaries to the same extent and in the same manner such persons are indemnified as of the
date of this Agreement by the Company and such Subsidiaries pursuant to any indemnification
agreements between the Company or such Subsidiaries and its or their directors and officers as of
the date hereof, the DGCL, the Company’s or its Subsidiaries’ Certificates of Incorporation and/or
Bylaws for acts or omissions occurring at or prior to the Effective Time. The Certificate of
Incorporation and the Bylaws of the Surviving Corporation will contain provisions with respect to
exculpation and indemnification that are at least as favorable to the indemnified parties as those
contained in the Company’s and its Subsidiaries Certificates of Incorporation and Bylaws as in
effect on the date hereof, which provisions will not be amended, repealed or otherwise modified for
a period of not less than six (6) years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who, immediately prior to the Effective Time, were
directors, officers, employees or agents of the Company or its Subsidiaries, unless such a
modification is required by Law.
(b) For a period of six (6) years from the Effective Time, Parent shall cause the Surviving
Corporation to maintain in effect (or Parent may instead elect to maintain pursuant to Parent’s
policy or policies) for the benefit of the Company’s and its Subsidiaries’ current directors and
officers an insurance and indemnification policy that provides coverage for acts or omissions
occurring prior to the Effective Time that is substantially equivalent to the Company’s and its
Subsidiaries’ existing policy on terms with respect to coverage in the aggregate no less favorable
than those of such policy in effect on the date hereof, or, if substantially equivalent insurance
coverage is unavailable, the best available coverage; provided, however, that the
Surviving Corporation shall not be required to pay an annual premium for such insurance in excess
of 150% of the last annual premiums paid prior to the date hereof (which premiums the Company has
disclosed to Parent), but in such case shall purchase as much coverage as possible for such amount.
(c) This Section 7.5 shall survive the consummation of the Merger, is intended to benefit the
Company, its Subsidiaries, the Surviving Corporation and each indemnified party, shall be binding
on all successors and assigns of the Surviving Corporation and Parent, and shall be enforceable by
the indemnified parties. The provisions of this Section 7.5 are intended to be for the benefit of,
and will be enforceable by, each indemnified party, his
Agreement and Plan of Merger Page 41
or her heirs, and his or her
representatives and are in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such Person may have by contract or otherwise.
7.6. Employee Benefits.
(a) From and after the Effective Time, Parent shall cause the Surviving Corporation to honor
and provide for payment of all accrued obligations and benefits under all of the Company’s Employee
Plans (including, without limitation, employment or severance agreements between the Company and
Persons who are or had been employees of the Company or any of its Subsidiaries at or prior to the
Effective Time), all in accordance with their respective terms.
(b) As soon as reasonably practicable after the Effective Time, Parent shall take all
reasonable action so that employees of the Company who remain employed with the Surviving
Corporation or the Parent after the Effective Time (“Hired Employees”) shall be entitled to
participate in each employee benefit plan, program or arrangement maintained by Parent or the
Surviving Corporation or their respective Affiliates (the “Parent Benefit Plans”) to the
same extent as similarly-situated employees of Parent and its subsidiaries; provided,
however, that for the period commencing at the Effective Time and ending on May 31, 2007,
Parent shall use its commercially reasonable efforts to provide that the Hired Employees will be
entitled to continue to participate in the Employee Plans (disregarding, for the avoidance of
doubt, any such Employee Plan that is not an “employee benefit plan” within the meaning of Section
3(3) of ERISA) in which such individuals participated immediately prior to the Effective Time.
Parent shall, subject to any third party insurers consent, use its commercially reasonable efforts
to cause each Parent Benefit Plan in which the Hired Employees are eligible to participate to take
into account for purposes of eligibility and vesting thereunder (and for purposes of calculating
vacation, sick leave and severance benefits thereunder) including, but not limited to,
applicability of minimum waiting periods for participation, the service of such employees with the
Company to the same extent as such service was credited for such purpose by the Company.
(c) Subject to the foregoing Section 7.6(b), if the Hired Employees become eligible to
participate in a Parent Benefit Plan that is a medical, dental or health plan, Parent shall use
its commercially reasonable efforts to cause each such Parent Benefit Plan to (subject to the
consent and cooperation of any third party insurer): (i) waive any preexisting condition
limitations to the extent such conditions are covered under the applicable medical, health or
dental plans of Parent (subject to each Hired Employee providing, in a form reasonably acceptable
to Parent or the plan, evidence of coverage of the condition under Company’s plans), and (ii) honor
under such Parent Benefit Plans any deductible, co-payment and out-of-pocket expenses incurred by
the Hired Employees and their beneficiaries during the portion of the calendar year prior to such
participation.
(d) At least one (1) Business Day prior to the Closing Date, the Company shall provide to
Parent the last compensation changes and the dates on which such changes were made with respect to
all employees of the Company as of the date hereof.
Agreement and Plan of Merger Page 42
ARTICLE VIII
CONDITIONS PRECEDENT TO THE MERGER
CONDITIONS PRECEDENT TO THE MERGER
8.1. Conditions Precedent to the Obligations of Each Party to the Effect the Merger.
Each party’s obligations to effect the Merger and otherwise consummate the transactions
contemplated by this Agreement are subject to the satisfaction or waiver at or prior to the
Closing, of each of the following conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval shall have been
obtained in accordance with the Company’s Certificate of Incorporation, Bylaws and the DGCL.
(b) No Injunctions or Restraints. No temporary restraining order, preliminary or
permanent injunction or other order issued by any Governmental Authority or other material legal
restraint or prohibition issued or promulgated by a Governmental Authority preventing the
consummation of the transactions contemplated by this Agreement shall be in effect, and there shall
not be any Legal Requirement enacted or deemed applicable to the transactions contemplated by this
Agreement that makes consummation of such transactions illegal.
8.2. Conditions Precedent to Obligations of Parent and Merger Sub. The obligations of
Parent and Merger Sub to effect the Merger and otherwise consummate the transactions contemplated
by this Agreement are subject to the satisfaction or waiver, at or prior to the Closing, of each of
the following conditions:
(a) Accuracy of Representations. The representations and warranties of the Company
set forth in this Agreement shall be true and correct on and as of the date hereof and on and as of
the Closing Date with the same force and effect as if they had been made on and as of the Closing
Date, except (i) for such untruths or inaccuracies (without regard to any materiality, Material
Adverse Effect or Knowledge qualifications contained in such representations and warranties) that,
individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect on
the Company and (ii) to the extent expressly made as of an earlier date, in which case as of such
earlier date.
(b) Performance. All of the obligations, covenants and agreements with which the
Company is required to comply or that the Company is required to perform pursuant to this Agreement
at or prior to the Closing shall have been complied with and performed in all material respects.
(c) Material Adverse Change. There shall have been no Material Adverse Change with
respect to the Company, and Parent shall have received a certificate to such effect, dated as of
the Closing Date, executed by an authorized officer of the Company.
8.3. Conditions Precedent to the Company’s Obligations. The Company’s obligation to
effect the Merger and otherwise consummate the transactions contemplated by this Agreement is
subject to the satisfaction or waiver, at or prior to the Closing, of the following conditions:
(a) Accuracy of Representations. The representations and warranties of Parent and
Merger Sub set forth in this Agreement shall be true and correct on and as of the date
Agreement and Plan of Merger Page 43
hereof and
on and as of the Closing Date with the same force and effect as if they had been made on and as of
the Closing Date except (i) for such untruths or inaccuracies (without regard to any materiality,
material adverse effect or knowledge qualifications contained in such representations and
warranties) that would not reasonably be expected to prevent Parent or Merger Sub, as the case may
be, from performing its obligations under this Agreement and (ii) to the extent expressly made as
of an earlier date, in which case as of such earlier date.
(b) Performance of Covenants. All of the obligations, covenants and agreements with
which Parent or Merger Sub is required to comply or that Parent or Merger Sub is required to
perform pursuant to this Agreement at or prior to the Closing shall have been complied with and
performed in all material respects.
ARTICLE IX
TERMINATION
TERMINATION
9.1. Termination. This Agreement may be terminated prior to the Effective Time:
(a) by written consent of all parties;
(b) by the Company or Parent, if any Governmental Authority shall have issued a Governmental
Order or taken any other action permanently enjoining, restraining or otherwise prohibiting the
Merger, and such Governmental Order or other action shall have become final and nonappealable;
(c) by either Parent or the Company if the Merger has not been consummated by April 30, 2007
(the “Outside Date”) (unless the failure to consummate the Merger is attributable to a
breach of this Agreement on the part of the party seeking to terminate this Agreement);
(d) by Parent if there shall have been a breach or failure to perform any covenant or
agreement on the part of the Company contained in this Agreement (i) that causes any condition
precedent to Parent’s obligations as set forth in Sections 8.2(a) and 8.2(b) above not to be
satisfied, and (ii) which breach or failure to perform is not capable of being cured or, if
reasonably capable of being cured, shall not have been cured prior to the earlier of (A) twenty
(20) Business Days following notice of such breach and (B) the Outside Date; provided that
Parent shall not have the right to terminate this Agreement pursuant to this Section 9.1(d) if
Parent is then in material breach of any of its representations, warranties, covenants or
agreements contained in this Agreement;
(e) by the Company if there shall have been a breach or failure to perform any covenant or
agreement on the part of Parent or Merger Sub contained in this Agreement (i) that causes any
condition precedent to the Company’s obligations as set forth in Section 8.3 above
not to be satisfied, and (ii) which breach or failure to perform is not capable of being cured
or, if reasonably capable of being cured, shall not have been cured prior to the earlier of (A)
twenty (20) Business Days following notice of such breach and (B) the Outside Date;
provided that the Company shall not have the right to terminate this Agreement pursuant to
this Section 9.1(e) if the Company is then in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement;
Agreement and Plan of Merger Page 44
(f) by Parent if the Company’s Board of Directors shall have effected an Adverse
Recommendation Change as permitted by Section 6.4;
(g) by Parent if (i) the Company shall have entered into a definitive agreement with respect
to an Acquisition Proposal; or (ii) a tender offer or exchange offer for outstanding shares of the
Company Common Stock is commenced (other than by Parent or an Affiliate of Parent) and the Board of
Directors of the Company recommends that the stockholders of the Company tender their shares in
such tender or exchange offer or, within ten (10) days after commencement of such tender or
exchange offer, fails to recommend against acceptance of such offer or takes no position with
respect to the acceptance thereof;
(h) by either Parent or the Company if at the Company Stockholders’ Meeting (including any
adjournment or postponement thereof), the requisite vote of the stockholders of the Company in
favor of the Merger shall not have been obtained; and
(i) by the Company if the Board of Directors of the Company effects an Adverse Recommendation
Change in response to a Superior Proposal but only (A) after providing written notice to Parent (a
“Notice of Superior Proposal”) advising Parent that the Board of Directors of the Company
has received a Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the Person making such Superior Proposal; (B) if Parent does not, within
48 hours of Parent’s receipt of the Notice of Superior Proposal, make an offer that the Board of
Directors of the Company determines, in its good faith judgment, after considering advice from
outside legal counsel to the Company, to be at least as favorable to the Company’s stockholders as
such Superior Proposal, provided that during such 48 hour period, the Company shall negotiate in
good faith with Parent (to the extent Parent wishes to negotiate) to enable Parent to make such an
offer; and (C) if the Company pays to Parent within one (1) Business Day of such termination the
Termination Fee contemplated by Section 9.4(a)(iv).
9.2. Effect of Termination. In the event of termination of this Agreement pursuant to
Section 9.1, this Agreement shall forthwith become void and there shall be no liability or further
obligation on the part of the Company, Parent, Merger Sub or their respective officers or directors
(except for obligations in this Section 9.2, in Sections 7.4 and 9.4, and in Article X, all of
which shall survive the termination). Nothing in this Section 9.2 shall relieve any party from
liability for any willful and knowing breach of this Agreement, in which case the terminating party
shall retain its rights against such other party in respect of such other party’s breach.
9.3. Frustration of Conditions. Neither Parent or Merger Sub, on the one hand, nor
the Company, on the other, may rely on the failure of any condition set forth in Section 8.1, 8.2,
or 8.3 to be satisfied if such failure was caused by such party’s failure to comply with or
perform any of its covenants or obligations set forth in this Agreement.
9.4. Termination Fee; Expense Reimbursement.
(a) Termination Fee. The Company agrees that in order to compensate Parent for the
direct and substantial damages suffered by Parent in the event of termination of this Agreement
under certain circumstances, which damages cannot be determined with reasonable
Agreement and Plan of Merger Page 45
certainty, the
Company shall pay to Parent the amount of Two Million Three Hundred Sixty-One Thousand Seven
Hundred Ninety-One US Dollars ($2,361,791.00 USD) less any Expenses actually paid by the
Company to Parent pursuant to Section 9.4(b) (the “Termination Fee”) upon the earliest to
occur of the following events:
(i) The termination of this Agreement by Parent pursuant to Section 9.1(f) or
9.1(g);
(ii) The termination of this Agreement by Parent or the Company pursuant to
Section 9.1(c) if: (A) the Company’s noncompliance with its obligations under this
Agreement materially contributed to the Merger not being consummated on a timely
basis and (B) prior to such termination an Acquisition Proposal shall have been made
and not withdrawn and within twelve (12) months of the termination of this
Agreement, the Company has consummated a transaction with respect to such
Acquisition Proposal;
(iii) The termination of this Agreement by Parent pursuant to Section 9.1(d) if
(A) such failure of any of the conditions precedent described therein was caused by
the Company’s noncompliance with its obligations under this Agreement, (B) such
noncompliance materially contributed to the failure of such condition precedent and
(C) prior to such termination an Acquisition Proposal shall have been made and not
withdrawn and within twelve (12) months of the termination of this Agreement, the
Company has consummated a transaction with respect to such Acquisition Proposal; or
(iv) The termination of this Agreement by the Company pursuant to Section
9.1(i);
provided, however, that for purposes of determining whether a Termination Fee
is payable pursuant to Sections 9.4(a)(i) (solely with respect to a termination of this Agreement
pursuant to Section 9.1(g)), 9.4(a)(ii) or 9.4(a)(iii) only, the definition of Acquisition Proposal
shall be read such that the percentage set forth therein shall be 50% rather than 25%.
(b) Expense Reimbursement. Upon any termination of this Agreement for any of the
reasons set forth in Sections 9.1(c) through 9.1(i) (provided that (1) neither Parent’s nor Merger
Sub’s noncompliance with its obligations under this Agreement has materially contributed to the
breach, failure to perform or other event or condition giving rise to such termination, and (2) for
purposes of determining whether such Expenses (as defined below) are payable pursuant to this
Section 9.4(b) in connection with a termination pursuant to Section 9.1(g), the definition of
Acquisition Proposal shall be read such that the percentage set forth
therein shall be 50% rather than 25%), the Company shall reimburse Parent and its Affiliates
for 100% of their Expenses (as defined below). The term “Expenses” means all actual and
documented out-of-pocket expenses of Parent and its Affiliates in connection with this Agreement
and the transactions contemplated hereby up to $500,000 in aggregate, including, without
limitation, fees and expenses of accountants, attorneys and financial advisors, and all costs of
Parent and its Affiliates relating to the financing of the Merger (including, without limitation,
advisory and commitment fees and reasonable fees and expenses of counsel to potential lenders).
Agreement and Plan of Merger Page 46
(c) Payment Terms. The Termination Fee or Expenses, as applicable, payable pursuant
to this Section 9.4 shall be paid within three (3) Business Days after demand therefor following
the first to occur of the events giving rise to the payment obligation. All payments under this
Section 9.4 shall be made by wire transfer of immediately available funds to an account designated
by Parent. Any such payments as described in this Section 9.4 shall be made without duplication.
(d) Interest. The Company acknowledges that the agreements contained in this Section
9.4 are an integral part of the transactions contemplated by this Agreement, and that, without
these agreements, Parent would not enter into this Agreement. Accordingly, if the Company fails to
promptly pay any amounts owing pursuant to this Section 9.4 when due, the Company shall in addition
thereto pay to Parent and its Affiliates all costs and expenses (including fees and disbursements
of counsel) incurred in collecting such amounts, together with interest on such amounts (or any
unpaid portion thereof) from the date such payment was required to be made until the date such
payment is received by Parent and its Affiliates at the prime rate of Citibank, N.A. as in effect
from time to time during such period.
(e) Exclusive Remedy. Parent (for itself and its Affiliates) hereby agrees, that,
upon any termination of this Agreement under circumstances where Parent is entitled to the
Termination Fee and such Termination Fee (including any interest and costs of collection Parent may
be entitled to as set forth in Section 9.4(d)) is paid in full by the Company to Parent, except in
the case of fraud or a willful and material breach by the Company, Parent and its affiliates shall
be precluded from any other remedy against the Company and its Affiliates, at Law or in equity or
otherwise, and neither Parent nor any of its Subsidiaries may seek (and Parent shall cause its
Subsidiaries not to seek) to obtain any additional recovery, judgment, or damages of any kind,
including consequential, indirect, or punitive damages, against the Company or any of its
directors, officers, employees, partners, managers, members, or stockholders in connection with
this Agreement or the transactions contemplated hereby.
ARTICLE X
MISCELLANEOUS
MISCELLANEOUS
10.1. Nonsurvival of Representations. None of the representations and warranties in
this Agreement or in any instrument delivered pursuant to this Agreement will survive the Effective
Time. This Section 10.1 shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
10.2. Assignment. This Agreement shall not be assigned by any party hereto whether by
operation of law or otherwise, except that Merger Sub may assign this Agreement (and its rights and
obligations hereunder) to any direct or indirect wholly owned subsidiary of Parent. Subject to the
foregoing, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the
permitted successors and assigns of the parties hereto.
10.3. Captions. The captions herein are included for convenience of reference only
and shall be ignored in the construction or interpretation hereof.
Agreement and Plan of Merger Page 47
10.4. No Third Party Beneficiaries. Except for Section 7.5 hereof, no provisions of
this Agreement are intended or shall be construed to confer upon or give to any person or entity
other than Parent and the Company any rights, remedies or other benefits under or by reason of this
Agreement.
10.5. Notices. All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial messenger or courier service, or
mailed by registered or certified mail (return receipt requested) or sent via facsimile (with
acknowledgment of complete transmission) or sent via email (with acknowledgement of receipt) to the
parties hereto at the following addresses (or at such other address for a party as shall be
specified by like notice), provided, however, that notices sent by mail will not be deemed given
until received:
if to Parent or Merger Sub:
M2M Holdings, Inc.
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: R. ▇▇▇▇▇ ▇▇▇▇▇▇, President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: R. ▇▇▇▇▇ ▇▇▇▇▇▇, President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ & Worcester LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
if to the Company:
KNOVA Software, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇, CFO
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇.▇▇▇▇▇@▇▇▇▇▇.▇▇▇
KNOVA Software, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇, CFO
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇.▇▇▇▇▇@▇▇▇▇▇.▇▇▇
Agreement and Plan of Merger Page 48
with a copy (which shall not constitute notice) to:
KNOVA Software, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇.▇▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇.▇▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
-and-
Ropes & ▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
10.6. Amendments and Waivers.
(a) Any provision of this Agreement may be amended or waived prior to the Effective Time if,
but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by
each party to this Agreement or, in the case of a waiver, by each party against whom the waiver is
to be effective; provided, however, that, after the Company Stockholder Approval
there shall not be made any amendment that by law requires further approval by such stockholders
without the further approval of such stockholders.
(b) No failure or delay by any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies
provided by applicable Law.
10.7. Governing Law. This Agreement will be governed by and construed and enforced in
accordance with laws of the State of Delaware without giving effect to conflict of laws principles.
10.8. Headings. Headings used in this Agreement are for ease of reference only and
shall not be used to interpret any aspect of this Agreement.
10.9. Entire Agreement. This Agreement, including the Confidentiality Agreement and
all exhibits and schedules which are incorporated herein by reference, constitutes the entire
agreement between the parties with respect to the subject matter hereof, and supersedes and
replaces all prior and contemporaneous understandings or agreements, written or oral, regarding
such subject matter.
Agreement and Plan of Merger Page 49
10.10. Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be an original and together which shall constitute one and the same instrument.
10.11. Reformation. In the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of a provision contained in this Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement; but this Agreement shall be reformed and construed as if such invalid
or illegal or unenforceable provision, or part of a provision, had never been contained herein, and
such provisions or part reformed so that it would be valid, legal and enforceable to the maximum
extent possible.
10.12. Confidentiality. The terms of the confidentiality agreement dated as of
September 5, 2006 (the “Confidentiality Agreement”) between the Company and Parent are
incorporated by reference herein and shall continue in full force and effect indefinitely in
accordance with its terms.
10.13. Fees and Expenses. Whether or not the Merger is consummated, except as
otherwise set forth in Section 9.4(b) hereof, all fees and expenses incurred by the parties in
connection with the negotiation and effectuation of the terms and conditions of this Agreement and
the transactions contemplated hereby shall be the obligation of the respective party incurring such
fees and expenses.
10.14. Remedies; Specific Performance. Any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof this being in addition to any other remedy to
which they are entitled at law or in equity.
10.15. Consent to Jurisdiction; Venue.
(a) Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the state
courts of Delaware and to the jurisdiction of the United States District Court for the District of
Delaware for the purpose of any action arising out of or relating to this Agreement and the
Confidentiality Agreement, and each of the parties hereto irrevocably agrees that all claims in
respect to such action may be heard and determined exclusively in any Delaware state
or federal court sitting in the State of Delaware. Each of the parties hereto agrees that a
final judgment in any action shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.
(b) Each of the parties hereto irrevocably consents to the service of any summons and
complaint and any other process in any other action relating to the Merger, on
Agreement and Plan of Merger Page 50
behalf of itself or
its property, by the personal delivery of copies of such process to such party. Nothing in this
Section 10.15 shall affect the right of any party hereto to serve legal process in any other manner
permitted by law.
10.16. Waiver of Trial by Jury. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH
PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.16.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the undersigned have executed this Agreement and Plan of Merger as an
instrument under seal as of the day and year first above written.
| M2M HOLDINGS, INC. | ||||||
| By: | /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
|
|||||
| Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | ||||||
| Title: Vice President of Finance | ||||||
| MAGIC SOFTWARE ACQUISITION CORP. | ||||||
| By: | /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
|
|||||
| Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | ||||||
| Title: Vice President of Finance | ||||||
| KNOVA SOFTWARE, INC. | ||||||
| By: | /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
|
|||||
| Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | ||||||
| Title: President and Chief Executive Officer | ||||||
EXHIBITS AND SCHEDULES TO THE AGREEMENT AND PLAN OF MERGER
1.
|
Exhibit A: | Voting Agreement, dated as of December 15, 2006, by and among M2M Holdings, Inc. and the certain KNOVA Software, Inc. stockholders signatory thereto | ||
| 2. | Disclosure Schedule to the Agreement and Plan of Merger | |||
3.
|
Schedule I: | Management Retention Plan Participants | ||
4.
|
Schedule 6.2: | Operation of the Business | ||