Exhibit 2.1
AGREEMENT AND PLAN OF
MERGER
This Agreement and Plan of Merger
(the “Agreement”) is made as of December 6, 2006, by
and among Skywire Software, LLC, a Texas limited liability company
(the “Purchaser”), Skywire Star Acquisition Corp., a
Delaware corporation (“Merger Sub”), and Docucorp
International, Inc., a Delaware corporation (the
“Company”).
WHEREAS, the respective Boards of
Directors of Purchaser and the Company each have determined that it
is in the best interests of their respective stockholders for
Purchaser to acquire the Company upon the terms and conditions set
forth herein, and the Company’s Board of Directors has
resolved to recommend its acceptance by the Company’s
stockholders; and
WHEREAS, Purchaser has formed the
Merger Sub as a wholly-owned subsidiary for the purpose of
consummating such acquisition;
WHEREAS, concurrently with the
execution and delivery of this Agreement, as a material inducement
to Purchaser and Merger Sub to enter into this Agreement, the
members of the Board of Directors of the Company are executing and
delivering support agreements (the “Support
Agreements”) substantially in the form attached hereto as
Exhibit A, to Purchaser;
NOW, THEREFORE, in consideration of
the mutual covenants and agreements contained herein, and certain
other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto covenant and
agree as follows:
ARTICLE 1
THE MERGER
1.1
Merger .
In accordance with the provisions of
the Delaware General Corporation Law (“DGCL”), at the
Effective Date , Merger Sub shall be merged (the
“Merger”) into the Company, as soon as practicable
following the satisfaction or waiver, if permissible, of the
conditions set forth in Articles 6 and 7 . Following
the Merger, the Company shall continue as the surviving corporation
(the “Surviving Corporation”) and shall continue to be
governed by the Laws of the State of Delaware.
1.2
Continuing of Corporate
Existence .
Except as may otherwise be set forth
herein, the corporate existence and identity of the Company, with
all its purposes, powers, franchises, privileges, rights and
immunities, shall continue unaffected and unimpaired by the Merger,
and the corporate existence and identity of Merger Sub, with all
its purposes, powers, franchises, privileges, rights and
immunities, at the Effective Date shall be merged with and into
that of the Company, and
the Surviving Corporation shall be vested fully
therewith and the separate corporate existence and identity of
Merger Sub shall thereafter cease except to the extent continued by
statute.
1.3
Effective Date
.
The Merger shall become effective
upon the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware pursuant to the provisions of the
DGCL. The date and time when the Merger shall become effective is
hereinafter referred to as the “Effective
Date.”
1.4
Corporate Governance
.
(a)
The Certificate
of Incorporation of the Merger Sub, as in effect on the Effective
Date, shall continue in full force and effect and shall be the
Certificate of Incorporation of the Surviving Corporation, except
as to the name of the Surviving Corporation.
(b)
The Bylaws of the
Merger Sub, as in effect as of the Effective Date, shall continue
in full force and effect and shall be the Bylaws of the Surviving
Corporation.
(c)
The members of
the Board of Directors of the Surviving Corporation shall be the
Persons constituting the Board of Directors of Merger Sub as of the
Effective Date.
(d)
Unless the
Purchaser otherwise sets forth in writing, the officers of the
Surviving Corporation shall be the Persons holding such offices in
the Company as of the Effective Date.
1.5
Effects of the
Merger .
The Merger shall have the effects on
the rights and obligations of the Surviving Corporation as set
forth in the applicable provisions of the DGCL.
1.6
Closing .
Consummation of the transactions
contemplated by this Agreement (the “Closing”) shall
take place at the offices of the Company in Dallas, Texas,
commencing at 10:00 a.m., local time, on the date (i) on which the
Special Meeting of the Company’s stockholders occurs or (ii)
as soon as possible thereafter when each of the other conditions
set forth in Articles 6 and 7 have been satisfied or
waived, and shall proceed promptly to conclusion, or at such other
place, time and date as shall be fixed by mutual agreement between
the Purchaser and the Company. The day on which the Closing shall
occur is referred to herein as the “Closing
Date.” Each party will cause to be prepared, executed
and delivered the Certificate of Merger to be filed with the
Secretary of State of Delaware and all other appropriate and
customary documents as any party or its counsel may reasonably
request for the purpose of consummating the transactions
contemplated by this Agreement. All actions taken at the Closing
shall be deemed to have been taken simultaneously at the time the
last of any such actions is taken or completed.
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ARTICLE 2
CONVERSION OF SHARES; TREATMENT OF OPTIONS
2.1
Conversion of Shares
.
At the Effective Date, by virtue of
the Merger and without any action on the part of the holder
thereof:
(a)
Each share of
common stock, $.01 par value per share, of the
Company (“Company Common Stock”), which shall be
outstanding immediately prior to the Effective Date (other than
shares owned by Purchaser or the Company or any of their respective
subsidiaries, all of which shall be canceled, and Dissenting Shares
(the “Converted Shares”) shall at the Effective Date,
by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and represent the right to
receive $10.00 per share (the “Merger Price”) in cash
without any interest thereon.
(b)
Each share of
Common Stock, $.01 par value, of Merger Sub which shall be
outstanding immediately prior to the Effective Date shall at the
Effective Date, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into one share of the
common stock of the Surviving Corporation.
2.2
Dissenting
Shares .
Shares of Company Common Stock that
are issued and outstanding immediately prior to the Effective Date
and that have not been voted for adoption of the Merger and with
respect of which appraisal rights have been properly demanded in
accordance with the applicable provisions of the DGCL
(“Dissenting Shares”) shall not be converted into the
right to receive the consideration provided for in Section
2.1 at or after the Effective Date unless and until the holder
of such shares withdraws his demand for such appraisal (in
accordance with the applicable provisions of the DGCL) or becomes
ineligible for such appraisal. If a holder of Dissenting Shares
withdraws his demand for such appraisal (in accordance with the
applicable provisions of the DGCL) or becomes ineligible for such
appraisal, then, as of the Effective Date or the occurrence of such
event, whichever later occurs, such holder’s Dissenting
Shares shall cease to be Dissenting Shares and shall be converted
into and represent the right to receive the consideration provided
for in Section 2.1 . If any holder of Company Common Stock
shall assert the right to be paid the fair value of such Company
Common Stock as described above, the Company shall give Purchaser
prompt notice thereof and Purchaser shall have the right to
participate in all negotiations and proceedings with respect to any
such demands. The Company shall not, except with the prior written
consent of Purchaser, make any payment with respect to, or settle
or offer to settle, any such demand for payment. After the
Effective Date, Purchaser will cause the Surviving Corporation to
pay its statutory obligations to holders of Dissenting
Shares.
2.3
Stock Option
Plans.
At the Effective Date, the holders
of then outstanding options to purchase shares of Company Common
Stock under the Company’s stock option plans (the
“Stock Option Plans”), whether or not then exercisable
(collectively the “Options”) shall, in
cancellation
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and settlement thereof, receive for each share
of Company Common Stock subject to such Option an amount (subject
to any applicable withholding tax) in cash equal to the difference
between the Merger Price and the per share exercise price of such
Option to the extent such difference is a positive number (such
amount being hereinafter referred to as, the “Option
Consideration”). The surrender of an Option to the Company in
exchange for the Option Consideration shall be deemed a release of
any and all rights the holder had or may have had in respect of
such Option. The Stock Option Plans shall terminate as of the
Effective Date, 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 Date.
Prior to the Closing, the Company shall take all action necessary
to (i) ensure that, following the Effective Date, no participant in
the Stock Option Plans or any other plans, programs or arrangements
shall have any right thereunder to acquire equity securities of the
Company, the Surviving Corporation or any subsidiary thereof and
(ii) terminate all such plans, programs and
arrangements.
2.4
Adjustment
.
If, between the date of this
Agreement and the Closing Date or the Effective Date, as the case
may be, the outstanding shares of Company Common Stock shall have
been changed into a different number of shares or a different class
by reason of any classification, recapitalization, split-up,
combination, exchange of shares, or readjustment or a stock
dividend thereon shall be declared with a record date within such
period, then the consideration to be received pursuant to this
Article 2 by the holders of shares of Company Common Stock
and/or Options shall be adjusted to accurately reflect such
change.
2.5
Exchange Agent
.
(a)
Purchaser shall authorize the
Company’s transfer agent, or other corporate trust operation
selected by Purchaser and reasonably acceptable to the Company, to
serve as exchange agent hereunder (the “Exchange
Agent”). Immediately prior to the Effective Date, Purchaser
shall deposit or shall cause to be deposited in trust with the
Exchange Agent the cash amount of the Merger Price and Option
Consideration with respect to each Converted Share and Option, as
the case may be (such cash amount being hereinafter referred to as
the “Exchange Fund”). The Exchange Fund may be invested
by the Exchange Agent as directed by Purchaser only in direct
obligations of the United States, obligations for which the full
faith and credit of the United States is pledged to provide for the
payment of principal and interest, commercial paper rated of the
highest quality by Moody’s Investors Services, Inc. or
Standard & Poor’s Corporation or certificates of deposit,
bank repurchase agreements or bankers’ acceptances of a
commercial bank having at least $100,000,000 in assets
(collectively, “Permitted Investments”) or in money
market funds which are invested in Permitted Investments, and any
net earnings with respect thereto shall be paid to Purchaser as and
when requested by Purchaser. The Exchange Agent shall, pursuant to
irrevocable instructions received from Purchaser, pay the Merger
Price and Option Consideration with respect to such Converted Share
and Option, as the case may be, as provided for in this Article
2 out of the Exchange Fund. The Exchange Fund shall not be used
for any other purpose, except as provided in this Agreement, or as
otherwise agreed to by Purchaser and Company prior to the Effective
Date.
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(b)
As soon as
practicable after the Effective Date, the Exchange Agent shall mail
and otherwise make available to each record holder (other than
holders of Dissenting Shares) who, as of the Effective Date, was a
holder of an outstanding certificate or certificates which
immediately prior to the Effective Date represented shares of
Company Common Stock (the “Certificates”) and to each
holder of Options under the Stock Option Plans recorded on
Company’s books a form of letter of transmittal and
instructions for use in effecting the surrender of the Certificates
and Options for payment therefor and conversion thereof, which
letter of transmittal shall be prepared by the Purchaser and shall
be reasonably acceptable to the Company, and shall comply with all
applicable rules of the Nasdaq.
(c)
Delivery of
Certificates shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and the form of letter of
transmittal shall so reflect. Upon surrender to the Exchange Agent
of a Certificate, together with such letter of transmittal duly
executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a check representing the cash
consideration to which such holder shall have become entitled
pursuant to this Article 2 , and the Certificate so
surrendered shall forthwith be cancelled. No interest will be paid
or accrued on the cash payable upon surrender of the
Certificates.
(d)
Options shall be
cancelled as of the Effective Date and upon the occurrence of the
Effective Date the holder of each Option shall be entitled to
receive in exchange therefor a check representing the cash
consideration to which such holder will have become entitled
pursuant to this Article 2 (less applicable withholding
taxes). No interest will be paid or accrued on the cash payable
upon the cancellation of Options.
(e)
If any portion of
the consideration to be received pursuant to this Article 2
upon exchange of a Certificate is to be issued or paid to a Person
other than the Person in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such
issuance and payment that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that
the Person requesting such exchange shall pay in advance any
transfer or other taxes required by reason of the issuance of a
check representing cash to such other Person, or establish to the
satisfaction of the Exchange Agent that such tax has been paid or
that no such tax is applicable. From the Effective Date until
surrender in accordance with the provisions of this Section
2.5 , each Certificate (other than Certificates representing
treasury shares of Company and Certificates representing Dissenting
Shares) shall represent for all purposes only the right to receive
the consideration provided in this Article 2 . All payments
in respect of shares of Company Common Stock that are made in
accordance with the terms hereof shall be deemed to have been made
in full satisfaction of all rights pertaining to such
securities.
(f)
In the case of
any lost, mislaid, stolen or destroyed Certificates, the holder
thereof will be required to tender a notarized affidavit of lost
certificate, including an agreement to indemnify the Surviving
Corporation in the event that a bona fide holder in due course
submits the Certificate and seeks to receive the merger
consideration payable in respect thereof, and may be required, as a
condition precedent to the delivery to such holder of the
consideration described in this Article 2 , to deliver to
Purchaser a bond in such
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reasonable sum as Purchaser
may direct as indemnity against any claim that may be made against
the Exchange Agent, Purchaser or the Surviving Corporation with
respect to the Certificate alleged to have been lost, mislaid,
stolen or destroyed.
(g)
After the
Effective Date, there shall be no transfers on the stock transfer
books of the Surviving Corporation of the shares of Company Common
Stock that were outstanding immediately prior to the Effective
Date. If, after the Effective Date, Certificates are presented to
the Surviving Corporation for transfer, they shall be cancelled and
exchanged for the consideration described in this Article 2
. From and after the Effective Date, the holders of Certificates
shall cease to have any rights with respect to the shares of
Company Common Stock represented thereby, except as otherwise
provided for herein or by applicable Law.
(h)
Any portion of
the Exchange Fund that remains unclaimed by the stockholders of
Company for six months after the Effective Date shall be returned
to Purchaser, upon demand, and any holder of Company Common Stock
who has not theretofore complied with Section 2.5(c) shall
thereafter look only to Purchaser for payment of the consideration
to which such holder has become entitled pursuant to this
Article 2 . Notwithstanding any provision of this Agreement
to the contrary, none of the Purchaser, the Surviving Corporation
or the Exchange Agent shall be liable to any Person for any amount
properly paid from the Exchange Fund or delivered to a public
official pursuant to any applicable abandoned property, escheat or
similar Law.
(i)
If any
Certificates shall not have been surrendered prior to three years
after the Effective Date (or immediately prior to such earlier date
on which any Merger Consideration would otherwise escheat to or
became the property of any Governmental Body), any such portion of
the Exchange Fund in respect thereof shall, to the extent permitted
by applicable Law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any Person
previously entitled thereto.
2.6
Subsequent
Actions .
If at any time after the Effective
Date the Surviving Corporation will consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions
or things are necessary or desirable to vest, perfect or confirm of
record or otherwise in the Surviving Corporation its right, title
or interest in, to or under any of the rights, properties or assets
of the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers and directors
of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of the Company, all such deeds,
bills of sale, instruments of conveyance, assignments and
assurances and to take and do, in the name and on behalf of each of
such corporations or otherwise, all such other actions and things
as may be necessary or desirable to vest, perfect or confirm any
and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and
warrants to Purchaser as follows:
3.1
Organization and Good Standing of
Company .
Each of the Company Entities is a
corporation duly organized, validly existing and in good standing
under the Laws of the jurisdiction of its incorporation.
3.2
Capital Stock of Company
Subsidiaries and Other Ownership Interests .
Exhibit 21.1 to the Company’s
Report on Form 10-K for the year ended July 31, 2006 (the
“Current 10-K”), a copy of which is attached hereto as
Schedule 3.2 , sets forth a true and complete list of all
corporations, partnerships and other entities in which the Company
owns any equity interest (the “Company Subsidiaries”)
and the jurisdiction in which each Company Subsidiary is
incorporated or organized. Each Company Subsidiary is owned
directly or indirectly 100% by the Company, and no Person has an
option, warrant, subscription, or contractual right to purchase any
equity security of any of the Company Subsidiaries, either from the
Company or from any Company Subsidiary. The shares of capital stock
or other equity interests of each Company Subsidiary have been duly
authorized and are validly issued, fully paid and nonassessable and
are owned directly or indirectly by the Company free and clear of
any and all Liens.
3.3
Foreign Qualification
.
Each Company Entity is duly
qualified or licensed to do business and is in good standing as a
foreign corporation in every jurisdiction where the failure so to
qualify has had or would reasonably be expected to have a Company
Material Adverse Effect. As used in this Agreement, “Company
Material Adverse Effect” means a change, circumstance, event
or effect that individually or in the aggregate would be materially
adverse to (a) the business, operations, prospects, assets or
financial condition of the Company Entities taken as a whole or (b)
the validity or enforceability of, or the ability of the Company to
perform its obligations under, this Agreement.
3.4
Corporate Power and
Authority .
Each of the Company Entities has the
corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as currently
being conducted. The Company has the corporate power and authority
to execute and deliver this Agreement and, subject to the approval
of this Agreement and the Merger by its stockholders, to perform
its obligations under this Agreement and to consummate the Merger.
The execution, delivery and performance by the Company of this
Agreement and consummation of the transactions contemplated herein
has been duly authorized by all necessary corporate action and no
other corporate action is necessary other than the approval of this
Agreement and the Merger by its stockholders. The Board of
Directors, at a meeting duly called and held, duly adopted
resolutions (i) approving this Agreement and the transactions
contemplated hereby, (ii) determining that the terms of this
Agreement are fair
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to and in the best interest of the
Company’s stockholders, (iii) declaring the advisability
of this Agreement and (iv) resolving to recommend acceptance of
this Agreement and the transactions contemplated hereby to the
Company’s stockholders, which resolutions, subject to the
Board of Directors’ rights set forth in Section 5.4
, have not been subsequently rescinded, modified or withdrawn
in any way. The action taken by the Board of Directors of the
Company constitutes approval of the transactions contemplated
herein by the Board of Directors of the Company under the
provisions of Section 203 of the DGCL, and no other state takeover
statute is applicable to the transactions contemplated herein or
this Agreement. The affirmative vote (in person or by proxy) of the
holders of a majority of the outstanding shares of Company Common
Stock in favor of the adoption of this Agreement (the
“Required Stockholder Approval”) is the only vote or
approval of the holders of any securities of any Company Entity
that is necessary to adopt this Agreement.
3.5
Binding Effect
.
This Agreement has been duly
executed and delivered by the Company and is the legal, valid and
binding obligation of the Company enforceable in accordance with
its terms except that (i) enforceability may be limited by
bankruptcy, insolvency or other similar Laws affecting
creditors’ rights; (ii) the availability of equitable
remedies may be limited by equitable principles of general
applicability; and (iii) rights to indemnification may be limited
by considerations of public policy.
3.6
Absence of Restrictions and
Conflicts .
Except as set forth on Schedule
3.6 or as specifically set forth herein, the execution,
delivery and performance of this Agreement and the consummation of
the Merger and the fulfillment of and compliance with the terms and
conditions of this Agreement do not and will not, with the passing
of time or the giving of notice or both, violate or conflict with,
constitute a breach of or default under, result in the loss of any
material benefit under, or permit the acceleration of any
obligation or give rise to any right of termination, amendment,
cancellation or acceleration or result in the creation of any Lien
under, (i) any term or provision of the Articles or Certificate of
Incorporation or Bylaws of any Company Entity, (ii) the terms,
conditions, or provisions of any note, bond, mortgage, indenture,
lease, license, permit, franchise, concession, contract, agreement
or other instrument or obligation to which any Company Entity is a
party or by which any of them or any of their properties or assets
is bound, (iii) any decree, judgment, writ, injunction, or order of
any court or Governmental Body to which any Company Entity is a
party or by which Company, any Company Entity or any of their
respective properties is bound, or (iv) any Law, regulation,
permit, license or rule applicable to any Company Entity other
than, with respect to clauses (ii), (iii) and (iv), any such
violation, conflict, breach or default which would not have a
Company Material Adverse Effect. Except for the filing of the
Certificate of Merger with the Secretary of State of the State of
Delaware, compliance with the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the “HSR Act”), the Securities Act of 1933, as amended
(the “Securities Act”), Securities Exchange Act of
1934, as amended (the “Exchange Act”) and applicable
state securities Laws or as set forth on Schedule 3.6 , no
consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Body with respect to
any Company Entity is
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required in connection with the
execution, delivery or performance of this Agreement by the Company
or the consummation of the transactions contemplated
hereby.
3.7
Company SEC Reports
.
The Company has duly filed with the
Securities and Exchange Commission (the “SEC”) the
following: (i) the Current 10-K, (ii) the Form 10-Q for the
quarter ended October 31, 2006 (the “Current 10-Q”) and
(iii) the proxy statement relating to the Company’s meeting
of stockholders on December 5, 2006 (collectively, the
“Company SEC Reports”). As of their respective dates,
the Company SEC Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. For at least the past three fiscal years, the Company
has filed all forms, reports and documents with the SEC required to
be filed by it pursuant to the federal securities Laws and the SEC
rules and regulations thereunder, each of which complied as to
form, at the time such form, report or document was filed, in all
material respects with the applicable requirements of the
Securities Act and the Exchange Act and the applicable rules and
regulations thereunder.
3.8
Capitalization of the
Company .
Except as set forth on Schedule
3.8(i) , the authorized and outstanding capital stock of the
Company is as set forth on its Consolidated Balance Sheet
comprising a part of the Current 10-Q (the “Most Recent
Balance Sheet”). All of the issued and outstanding shares of
Company Common Stock have been duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights.
Schedule 3.8(ii) lists the name of each record holder of any
Option, the number of Options held by such record holder, and the
exercise price of each such Option. Except as set forth on
Schedule 3.8(ii) , there is no outstanding subscription,
contract, convertible or exchangeable security, option, warrant,
call or other right obligating any Company Entity to issue, sell,
exchange, or otherwise dispose of, or to purchase, redeem or
otherwise acquire, shares of, or securities convertible into or
exchangeable for, capital stock of any Company Entity or
obligations of any Company Entity to grant, extend or enter into
any such option, warrant, call, subscription or other right,
agreement, arrangement or commitment. Except as contemplated by
this Agreement, there are no outstanding contractual obligations of
the any Company Entity to repurchase, redeem or otherwise acquire
any capital stock of any Company Entity or Affiliate of any Company
Entity or to provide funds to make any investment (in the form of a
loan, capital contribution or otherwise) in any Company Entity or
any other Person.
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3.9
Financial Statements
.
(a)
The financial
statements (including the related notes thereto) set forth in the
SEC Reports (the “Company Financial Statements”) have
been prepared from and are in accordance with, the books and
records of the Company Entities, comply in all material respects
with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been
prepared in accordance with United States generally accepted
accounting principles (“GAAP”) applied on a consistent
basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial
position and the consolidated results of operations and cash flows
(and changes in financial position, if any) of the Company Entities
as at the dates thereof and for the periods presented therein
(subject, in the case of unaudited statements, to normal year-end
audit adjustments which were not and are not expected, individually
or in the aggregate, to be material in amount). Since October 31,
2006, there has been no change in accounting principles applicable
to, or methods of accounting utilized by any Company Entity except
as noted in the Company Financial Statements.
(b)
No Company Entity
has any liability or obligation of whatever kind or nature (whether
known or unknown, whether asserted or unasserted, whether absolute
or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any
liability for Taxes, of a nature required by GAAP to be reflected
in a consolidated balance sheet or the notes thereto, except (i)
liabilities accrued or reserved against in the most recent
financial statements included in the SEC Reports filed prior to the
date hereof or are reflected in the notes thereto or (ii)
liabilities which are incurred in the ordinary course of business
since October 31, 2006 and which do not exceed $50,000 (other than
those set forth on Schedule 3.9(b) ).
3.10
Absence of
Certain Changes .
Since October 31, 2006, and except
as set forth in the SEC Reports or on Schedule 3.10 , there
has not occurred any events or changes (including the incurrence of
any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise) that have had or would be
reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect; and no Company Entity
has:
(a)
suffered any
damage or destruction to or loss of property or assets, that
has had or would be reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect;
(b)
sold, licensed to
any third party or otherwise disposed of any assets that are
material, individually or in the aggregate, to the Company Entities
taken as a whole, except for software licenses to customers entered
into in the ordinary course of business;
(c)
entered into,
modified, or terminated any material agreement, commitment or
transaction, or agreed or made any changes in material leases or
agreements, other than renewals or extensions thereof and leases,
agreements,
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transactions and
commitments entered into or terminated in the ordinary course of
business;
(d)
guaranteed the
indebtedness or obligations of any Person, granted any Lien, or
agreed to the imposition of any restriction or charge of any kind
with respect to any material assets;
(e)
purchased,
licensed from any third party or otherwise acquired any assets or
made any capital expenditures in excess of $100,000 individually or
$250,000 in the aggregate or outside of the ordinary course of
business;
(f)
written up,
written down or written off the book value of any material amount
of assets by more than $25,000 individually or $50,000 in the
aggregate or outside of the ordinary course of
business;
(g)
declared, paid or
set aside for payment any dividend or distribution with respect to
the Company’s capital stock;
(h)
effected or
declared, any split, combination or reclassification of any of the
Company’s capital stock or other equity or voting interests
or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares
of capital stock of, or other equity or voting interests in, the
Company;
(i)
redeemed,
purchased or otherwise acquired, or sold, granted or otherwise
disposed of, directly or indirectly, any of the Company’s
capital stock or securities (other than shares issued upon exercise
of the Options) or any rights to acquire such capital stock or
securities, or agreed to changes in the terms and conditions of any
such rights outstanding as of the date of this
Agreement;
(j)
entered into,
adopted or amended any employee benefit plan;
(k)
implemented any
layoff of employees that could implicate the Worker Adjustment and
Retraining Notification Act of 1988, as amended, or any similar Law
(collectively, the “WARN Act”);
(l)
entered into or
amended any collective bargaining agreement with a representative
of any unit of employees or been a party to any proceeding or order
under which any union is certified as the authorized representative
for any unit of employees;
(m)
entered into any
settlement, conciliation or similar agreement, the performance of
which will involve payment after the execution date of this
Agreement of consideration in excess of $50,000 for any one claim
and in excess of $100,000 in the aggregate;
(n)
made any loan to,
or entered into any other transaction with, any of its directors or
officers, or any of its employees outside the ordinary course of
business;
11
(o)
granted any
increase in compensation of or made any material changes in the
employment terms of any of its directors or officers or any of its
employees outside the ordinary course of business;
(p)
amended or
resolved to amend any Company Entity’s certificate of
incorporation or bylaws or other applicable governing
documents;
(q)
failed to
maintain insurance coverage consistent with past
practices;
(r)
entered into any
employment or severance agreement or arrangement or any agreement
or arrangement with any officer, director or employee or any
agreement or arrangement that would require the Company to make
payments to any officer, director or employee in connection with
the transactions contemplated by this Agreement;
(s)
made or changed
any tax election or adopted any new annual accounting
period;
(t)
changed any
accounting method or principal, made changes to or drawn-down upon
any reserves (except for changes in reserves that are in the
ordinary course of business), or changed any policies or practices
concerning payment processing;
(u)
filed any amended
Tax Return, changed any entity classification election under
Treasury Regulation §301.7701-3, entered into any closing
agreement, settled any Tax claim or assessment, surrendered any
right to claim a refund of Taxes, consented to any extension or
waiver of the limitation period applicable to any Tax claim or
assessment, or taken any other similar action, or omited to take
any action relating to the filing of any Tax Return or the payment
of any Tax;
(v)
received
notification of any Material Customer that it intends to terminate
or not renew its agreement with the Company;
(w)
granted any
Option or issued any Company Common Stock (other than issuances
upon exercise of previously granted Options);
(x)
delayed,
postponed, or accelerated the payment of any material accounts
payable;
(y)
canceled,
compromised, or waived any material claim;
(z)
except to the
Purchaser and its representatives, disclosed any Company Trade
Secret other than in the ordinary course of business;
(aa)
entered into any
non-compete with any Person;
12
(bb)
entered into an
exclusive license of any Company Intellectual Property;
(cc)
promoted any
person to, or hired a person as, an officer of any Company Entity;
or
(dd)
entered into any
agreement or understanding to do any of the foregoing
3.11
Litigation and
Government Claims .
Except as disclosed in the Company
SEC Reports or on Schedule 3.11 , there is no pending, or to
the Knowledge of the Company, threatened, suit, claim, charge,
grievance, action or litigation, or administrative, arbitration or
other proceeding or investigation or inquiry by any Governmental
Body against any Company Entity or to which their businesses or
assets are subject. No Company Entity is subject to any judgment,
decree, injunction, rule or order of any court, or, to the
Knowledge of the Company, any restriction imposed by any
Governmental Body applicable to any Company Entity, which has had
or would reasonably be likely to have, individually or in the
aggregate, a Company Material Adverse Effect. Schedule 3.11
lists and describes all judgments, decrees, injunctions, rules, and
orders of any court or Governmental Body to which the Company is
subject.
3.12
Properties
.
Schedule 3.12
lists and describes briefly (i) all
real property that the Company Entities own and (ii) all real
property leased to any Company Entity, the location, the rent, any
deposits, and the expiration dates under such leases. The Company
has good and marketable title to, or a valid leasehold or license
interest in, all tangible properties and assets (real, personal and
mixed) reflected on the Most Recent Balance Sheet or acquired after
the date thereof (except for properties and assets sold or
otherwise disposed of in the ordinary course of business since the
date of the Most Recent Balance Sheet) necessary for the present or
proposed conduct of its business, free and clear of any and all
liens, charges, easements, adverse claims, demands, encumbrances,
limitations, mortgages, security interests, options, pledges, or
any other title defect or restriction of any kind (collectively
“Liens”), subject only to (i) statutory Liens arising
or incurred in the ordinary course of business with respect to
which the underlying obligations are not delinquent, (ii) Liens for
taxes, assessments or other charges or levies imposed by any
Governmental Body which are not yet due and payable, (iii) Liens
which are not substantial in character, amount, or extent, and
which do not materially detract from the value, or interfere with
the present use, of the property subject thereto or affect thereby
or (iv) Liens reflected on the Most Recent Balance Sheet
(collectively, “Permitted Liens”). Each Company Entity
has a valid leasehold interest under each such lease, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and
similar Laws affecting creditors’ rights and remedies
generally and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and there is no default by the
Company under any such lease or, to the Knowledge of the Company,
by any other party thereto; and except as set forth on Schedule
3.12 , no event has occurred that with the lapse of time or the
giving
13
of notice or both would constitute a default
thereunder. Each Company Entity has been in peaceable possession of
the premises covered by each such lease or sublease since the
commencement of the original term of such lease or
sublease.
3.13
Intellectual Property
.
(a)
Except as set
forth on Schedule 3.13(a) , the Company Entities own all
right, title and interest in, or have valid, binding and
enforceable rights to use, all Intellectual Property necessary for
the business of the Company Entities, without any conflict with the
rights of others (an “IP Assignment Agreement”).
“Intellectual Property” means all intellectual
property, including without limitation, all (i) patents,
inventions, trademarks, service marks, trade names, Internet domain
names, copyrights, designs and trade secrets; (ii) applications for
and registrations of such patents, trademarks, service marks, trade
names, domain names, copyrights and designs; (iii) lists (including
customer lists), databases, processes, formulae, methods,
schematics, technology, know-how, computer software programs and
related documentation; (iv) computer software, data and databases
including, without limitation, object code, source code, related
documentation and all copyrights therein and (v) other tangible or
intangible proprietary or confidential information and
materials.
(b)
Schedule
3.13(b) sets forth (i) each
patent and registration which has been issued to any Company Entity
with respect to any of their Intellectual Property, (ii) each
pending patent application or application for registration which
any Company Entity has made with respect to any of their
Intellectual Property, (iii) all computer software owned by and
distributed or maintained by any Company Entity (“Company
Software”); (iv) other than customer contracts entered
into in the ordinary course of business, each license, agreement or
other permission which any Company Entity has granted to any third
party with respect to any of its Intellectual Property, including
reseller agreements; (v)(1) all computer software licenses or
similar agreements or arrangements through which any Company Entity
embeds, integrates, bundles, redistributes, resells or otherwise
sublicenses such software (“Third Party Software”); (2)
all computer software licenses or similar agreements or
arrangements to support the development of the Company Software for
which any Company Entity has, during the past three fiscal years,
paid more than $25,000 in the aggregate in license fees or pays
more than $25,000 in annual support fees; or (3) all computer
software licenses or similar agreements or arrangements relating to
information technology used in the business of the Company Entities
for which any Company Entity has, during the past three fiscal
years, paid more than $50,000 in the aggregate in license fees or
pays more than $25,000 in annual support fees; or (vi) all other
material agreements or similar arrangements, in effect as of the
date hereof, relating to the use of Intellectual Property by any
Company Entity, including, without limitation, settlement
agreements, consent-to-use or standstill agreements, standalone
source code escrow agreements, outsourcing agreements relating to
software development or information technology, and standalone
indemnification agreements (collectively, all agreements set forth
under Subsections (iv), (v) and (vi) will be referred to as
“IP Agreements”).
(c)
Except as set
forth on Schedule 3.13(c) , no Company Entity, nor the
conduct of their respective businesses or operations,
infringes,
violates or misappropriates, or has
14
been alleged to infringe,
violate or misappropriate, any Intellectual Property of any third
party. No Company Entity has received any notice (including,
without limitation, any demand letter or offer to license) from any
third party pertaining to or challenging the right of any Company
Entity to use any Intellectual Property owned by any Company Entity
or used pursuant to an agreement set forth on Schedule
3.13(b) . No claim by any third party contesting the validity,
enforceability or ownership of any Intellectual Property owned or
used by any Company Entity is currently outstanding or, to the
Knowledge of the Company, threatened.
(d)
To the Knowledge
of the Company, no third party is infringing, violating or
misappropriating any of the Intellectual Property owned by any
Company Entity and to the Knowledge of the Company there are no
facts that indicate a likelihood of the foregoing. All Intellectual
Property owned by any Company Entity, including, without
limitation, the Company Software was developed by employees of a
Company Entity working within the scope of their employment or as a
work for hire at the time of such development.
(e)
The Company’s general policy
is, and during the preceding three years has been, to require that
each of the former and current employees, and the consultants and
contractors of each Company Entity who have developed or have or
have had access to Intellectual Property or other confidential
information, execute written instruments that (x) assign to any
Company Entity all of such Person’s rights, title and
interest in and to any and all Intellectual Property and (y)
include confidentiality provisions in favor of any Company Entity.
Schedule 3.13(e) sets forth the names of any current product
development employees of, or consultants to, any Company Entity
which have not executed an IP Agreement. The failure to secure an
IP Assignment Agreement from any employee of or consultant to the
Company will not result in, or could reasonably be foreseeable in
causing, a Company Material Adverse Effect.
(f)
Each Company
Entity has taken commercially reasonable security measures to
protect the secrecy, confidentiality and value of all trade secrets
owned by any Company Entity or used or held for use by any Company
Entity (the “Company Trade Secrets”).
(g)
Schedule
3.13(g) identifies any and all
software (in source or object code form) subject to a license
commonly referred to as an open source, free software, copyleft or
community source code license (including but not limited to any
library or code licensed under the GNU General Public License, GNU
Lesser General Public License or any other restrictive license
arrangement) (“Open Source Software”) that has, during
the last five fiscal years, been incorporated into, integrated or
bundled with, linked to or otherwise used in or with, or used in
the development of, any of the products of any Company Entity or
any of the Intellectual Property (“Company Open Source
Software”);
(h)
Schedule
3.13(h) identifies (A) the name of
any of the Open Source Software identified in Schedule
3.13(g) , (B) a description of each Company Entity’s
past, present and intended future usage of such Open Source
Software, (C) license type of such Open Source Software, (D)
products with which it interacts or effects, (E) a description of
any distribution of any such Open Source Software, (F) the
Company’s reasonably detailed explanation of why such Open
Source Software does not adversely affect any of the Intellectual
Property
15
and (G) an indication of
whether the Company believes that its use of any such Open Source
Software will subject any Company Entity’s Intellectual
Property to the terms of such Open Source Software and, if yes, a
reasonably detailed explanation of the consequences
thereof.
(i)
with respect to
any such Company Open Source Software, Schedule 3.13(i) sets
forth the incorporation, linking, calling or other use by the
products of any Company Entity or any other Intellectual Property.
Use of any of the Company Open Source Software does not obligate,
nor would it obligate upon distribution, any Company Entity to make
available, offer or deliver the source code of any product of any
Company Entity or any component thereof or any other Intellectual
Property to any third party.
(k)
No Company Entity
has in connection with any collection of personally identifiable
information, failed to use its commercially reasonable efforts to
comply with all applicable statutes, rules and regulations in all
relevant jurisdictions and its publicly available privacy policy
(if any) relating to the collection, storage and onward transfer of
all personally identifiable information collected by any Company
Entity or by any third party having authorized access to the
databases or other records of any Company Entity.
(l)
To the Knowledge
of the Company, no product of any Company Entity (excluding third
party products which are sold separately by the Company and are not
integrated into the Company’s products) contains any
“viruses,” “worms,” “time
bombs,” “key-locks” or any other devices that
could disrupt or interfere with the operation of such products or
equipment upon which such products operate, or the integrity of the
data, information or signals such products produce.
3.14
Material Contracts
.
The Company has furnished to the
Purchaser accurate and complete copies of the Material Contracts of
each Company Entity, all of which are listed on Schedule
3.14 (along with a description or notation of why each such
contract is a Material Contract); provided, however, that the
Company is not required to furnish a copy of any agreements with
Material Customers pursuant to clause (v) of the definition of
Material Contracts below unless such Material Customer either (i)
accounted for more than $250,000 of revenue during the year ended
July 31, 2006 or (ii) was one of the Company’s 30 largest
customers (measured by revenue) in either of the two fiscal years
ended July 31, 2005. There is not under any of the Material
Contracts any existing breach, default or event of default by any
Company Entity, nor event that with notice or lapse of time or both
would constitute a breach, default or event of default by any
Company Entity; nor does the Company have Knowledge of, and the
Company has not received notice of, or made a claim with respect
to, any breach or default by any other party thereto. Each Material
Contract is valid and binding on the applicable Company Entity and
is in full force and effect and, to the Knowledge of the Company,
is not the subject of any renegotiation by the counterparty (other
than customary addenda for the provision of additional products or
services in the case of customer contracts, and settlements
described on Schedule 3.10 ). As used herein, the term
“Material Contracts” shall mean any contract, agreement
or arrangement (whether written or oral) of any Company Entity
that: (i) is filed, or required to be filed, as an exhibit to
the Company SEC Reports; (ii) have been entered into since October
31, 2006 which
16
would be required to be filed as an exhibit to
the Company’s filings under the Securities Exchange Act of
1934; (iii) constitutes a debt instrument, including, without
limitation, any loan agreement, promissory note, security agreement
or other evidence of “Indebtedness,” where any Company
Entity is a lender or borrower; (iv) that restricts any Company
Entity from engagement in any line of business; (v) is an agreement
with a Material Customer with a term in excess of six months; (vi)
any joint venture or teaming agreement; (vii) any agreement
providing for contingent consideration; (viii) any agreement,
option, commitment or rights with, to or in any third party to
acquire or to sell a material business division or unit after the
date hereof; (ix) any agreement or contract not made in the
ordinary course of business; (x) all IP Agreements set forth on
Schedule 3.13(b) ; (xi) any agreement that is set forth on
Schedule 3.6 ; (xii) includes a “future pricing”
provision (i.e., a commitment to pricing with respect to products
or services to be delivered pursuant to arrangements after the date
of this Agreement that can not be changed by the Company on less
than 30 days’ notice), other than inflation (CPI) adjustments
and similar provisions; or (xiii) includes a “future
product” provision (i.e., a requirement that any Company
Entity build, customize or tailor a product for a customer,
partner, reseller or other contractual counter-party), other than
future product provisions entered into in the ordinary course of
business providing for standard upgrades or releases of fixes or
patches as part of customary maintenance and support services. As
used in this Agreement, “Indebtedness” means (1)
indebtedness for borrowed money, whether secured or unsecured, (2)
other indebtedness evidenced by notes, bonds or debentures, (3) all
indebtedness for the deferred purchase price of property or
services, whether or not represented by a note, (4) all
indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender
under such agreement in the event of default are limited to
repossession or sale of such property), (5) all indebtedness
secured by a purchase money mortgage or other lien to secure all or
part of the purchase price of the property subject to such mortgage
or lien, (6) capitalized leases, (7) all interest, fees and other
expenses and amounts owed with respect to the indebtedness referred
to above, and (8) all indebtedness referred to above which is
directly or indirectly guaranteed by any Company Entity or to which
any Company Entity has agreed (contingently or otherwise) to
purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss).
3.15
Insurance .
Schedule 3.15
contains a complete and accurate
description of all policies or binders of insurance held by or on
behalf of any Company Entity or insuring any of its empl
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