AGREEMENT AND PLAN OF MERGER

 

 

 

Exhibit 2.01 

 

 

 

 

 

 

 

 

 

 

 

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

COMPUTER SCIENCES CORPORATION,

SURFSIDE ACQUISITION CORP.,

AND

COVANSYS CORPORATION

DATED AS OF APRIL 25, 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

Index of Defined Terms

 

 

 

 

 

 

 

 

 

 

 

 

AGREEMENT AND PLAN OF MERGER

 

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of April 25, 2007, by and among Computer Sciences Corporation, a Nevada corporation (“ Parent ”), Surfside Acquisition Corp., a Michigan corporation and wholly-owned subsidiary of Parent (“ Merger Sub ”), and Covansys Corporation, a Michigan corporation (“ Company ”).

RECITALS

A.   The Board of Directors of Company has, in accordance with the Michigan Business Corporation Act (the “ MBCA ”), (i) determined that the Merger is fair to, and in the best interests of, Company and its shareholders and declared the Merger to be advisable, (ii) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby upon the terms and conditions contained herein, and adopted the plan of merger contained in this Agreement, and (iii) resolved to recommend that the holders of shares of Company Common Stock approve this Agreement and the plan of merger contained herein in accordance with the applicable provisions of the MBCA and directed that such matter be submitted to Company’s shareholders at the Shareholders’ Meeting;

B.   Parent, as the sole shareholder of Merger Sub, has approved and adopted this Agreement and approved the Merger.

C.   Concurrently with the execution of this Agreement, and as a condition to Parent and Merger Sub entering into this Agreement, Company and EquiServe Trust Company, N.A. are entering into an amendment (the “ Rights Plan Amendment ”) to that certain Rights Agreement, dated as of December 1, 2004, as amended (the “ Rights Plan ”), so as to render the rights issued thereunder (the “ Rights ”) inapplicable to this Agreement and the transactions contemplated hereby.

D.   Prior to the execution of this Agreement, the Board of Directors of Company has approved in advance the transactions contemplated by this Agreement including the acquisition of Company and shares of the capital stock of Company by Parent and Parent becoming an “interested shareholder”, for purposes of Section 782 of the MBCA.

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 agree as follows:

ARTICLE I  

THE MERGER

(a)    Company Common Stock . Each share of the Common Stock, no par value, of Company (“ Company Common Stock ”) issued and outstanding immediately prior to the Effective Time (other than any shares of Company Common Stock to be canceled pursuant to Section 1.6(b)), together with any Rights associated therewith, will be canceled and extinguished and automatically converted into the right to receive $34.00 in cash, without interest (the “ Merger Consideration ”) upon surrender of the certificate representing such share of Company Common Stock in the manner provided in Section 1.7(c) (or in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit and bond, if required, in the manner provided in Section 1.9). As of the Effective Time, such shares of Company Common Stock and any associated Rights with respect thereto shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate that immediately prior to the Effective Time represented any such shares of Company Common Stock (a “ Certificate ”) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration.

(b)    Cancellation of Treasury and Parent Owned Stock . Each share of Company Common Stock held by Company or Parent or any direct or indirect wholly-owned Subsidiary of Company or of Parent immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof or the payment of any consideration therefor.

(c)    Capital Stock of Merger Sub . Each share of capital stock of Merger Sub (the “ Merger Sub Capital Stock ”) issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of capital stock of the Surviving Corporation with the same rights, powers and privileges as the shares so converted.

(d)    Stock Options . At the Effective Time, all Company Options outstanding under the Company Stock Plans shall be treated in accordance with Section 5.8.

(a)    Paying Agent . Prior to the Effective Time, Parent shall appoint an institution reasonably acceptable to Company to act as the paying agent (the “ Paying Agent ”), in accordance with an agreement reasonably satisfactory to Company, to receive the funds necessary to make the payments contemplated by Section 1.6.

(b)    Parent to Provide Merger Consideration . At or prior to the Effective Time, Parent shall deposit or cause the Merger Sub to deposit with the Paying Agent for payments in accordance with this Section 1.7, cash, for the benefit of the holders of Company Common Stock, in an amount sufficient to make payments of the Merger Consideration, pursuant to Section 1.6 and such funds shall hereinafter be referred to as the “ Exchange Fund .” The Paying Agent shall, pursuant to irrevocable instructions, make payments out of the Exchange Fund and the Exchange Fund shall not be used for any purpose other than to fund payments upon surrender of Certificates. All expenses of the Paying Agent shall be paid by the Parent or Surviving Corporation.

(c)    Exchange Procedures . Immediately after the Effective Time, Parent shall mail, or shall cause the Paying Agent to mail, to each holder of record (as of the Effective Time) of a Certificate or Certificates which immediately prior to the Effective Time represented outstanding shares of Company Common Stock that were converted into the right to receive the Merger Consideration pursuant to Section 1.6(a): (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as Parent may reasonably specify); and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of Certificates for cancellation to the Paying Agent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificates shall be entitled to receive in exchange therefor by check an amount in cash (after taking into account all Certificates surrendered by such holder) to which such holder is entitled pursuant to Section 1.6(a) and the Certificates so surrendered shall forthwith be canceled.

(d)    Transfers of Ownership . If payment of the Merger Consideration is to be made to a Person other than a Person in whose name in which the Certificates surrendered in exchange therefor are registered, it will be a condition of the payment thereof that the Certificates so surrendered will be properly endorsed and otherwise in proper form for transfer and that the Person requesting such exchange will have paid any transfer and other Taxes required by reason of the payment to a Person other than the registered holder of the Certificates surrendered, or established to the satisfaction of Parent or any agent designated by it that such Tax has been paid or is not payable.

 

(e)    Withholding . Each of Parent, the Paying Agent and the Surviving Corporation shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement to any holder or former holder of Company Common Stock such amounts as may be required to be deducted or withheld therefrom under the Internal Revenue Code of 1986, as amended (the “ Code ”) or under any provision of state, local or foreign Tax Law or under any other applicable Law. To the extent such amounts are so deducted or withheld, the amount of such consideration shall be treated for all purposes under this Agreement as having been paid to the Person to whom such consideration would otherwise have been paid.

 

(f)    Investment of Exchange Fund . The Paying Agent shall invest any cash included in the Exchange Fund as directed by Parent on a daily basis, provided that no such investment or loss thereon shall affect the amounts payable to Company shareholders pursuant to this Section 1.7. To the extent that there are losses with respect to such investments, Parent shall promptly replace or restore the portion of the Exchange Fund lost through investments so as to ensure that the Exchange Fund is maintained at a level sufficient to make such payments. Any interest and other income resulting from such investment shall become a part of the Exchange Fund, and any amounts in excess of the amounts payable to Company shareholders pursuant to this Section 1.7 shall promptly be paid to Parent.

 

(g)    Termination of Exchange Fund . Notwithstanding anything to the contrary in this Section 1.7(g), neither Parent, Merger Sub, the Paying Agent, the Surviving Corporation nor any party hereto shall be liable to any Person for any cash from the Exchange Fund properly paid to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any portion of the Exchange Fund which remains undistributed to the holders of Certificates one year after the Effective Time shall, at the request of Parent, be delivered to Parent or otherwise on the instruction of Parent, and any holders of the Certificates who have not surrendered such Certificates in compliance with this Section 1.7(g) shall after such delivery to Parent look only to Parent, and Parent shall thereafter be liable, for the Merger Consideration pursuant to Section 1.6(a), with respect to the shares of Company Common Stock formerly represented thereby.

 

 

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF COMPANY

Except as disclosed in the correspondingly numbered section of the disclosure letter dated the date of this Agreement and delivered by Company to Parent immediately prior to the execution of this Agreement (the “ Company Disclosure Letter ”), that specifically relates to such section or in another section of the Company Disclosure Letter to the extent that it is reasonably apparent from the text of such disclosure that such disclosure is applicable to such section, Company hereby represents and warrants to Parent and Merger Sub as follows:

 

(a)    Organization; Standing and Power . Company and each of its Subsidiaries is a corporation or other organization duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (to the extent the “good standing” concept is applicable in the case of any jurisdiction outside of the United States). Each of Company and its Subsidiaries has the requisite corporate power and authority to own, lease and operate its respective properties and to carry on its business as now being conducted. Each of Company and its Subsidiaries is duly qualified to do business and in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary (to the extent the “good standing” concept is applicable in the case of any jurisdiction outside of the United States) other than where the failure to so qualify or to be in good standing would not, individually or in the aggregate, have a Company Material Adverse Effect. For purposes of this Agreement, “ Subsidiary ,” when used with respect to any party, shall mean any corporation or other organization, whether incorporated or unincorporated, at least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its subsidiaries, or by such party and one or more of its subsidiaries (it being understood that, for purposes of this Agreement, Fortune shall be deemed to be a Subsidiary of Company).

 

(b)    Charter Documents . Company has delivered or made available to Parent: (i) a true and correct copy of the Restated Articles of Incorporation (including any Certificate of Designations) and Bylaws of Company, each as amended to date (collectively, the “ Company Charter Documents ”) and (ii) the certificate of incorporation and bylaws, or like organizational documents, each as amended to date (collectively, the “ Subsidiary Charter Documents ”), of each of its Subsidiaries, and each such instrument is in full force and effect. Company is not in violation of any of the provisions of the Company Charter Documents. No Subsidiary is in violation of any of its applicable Subsidiary Charter Documents, except where such violations that would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(c)    Subsidiaries . Section 2.1(c) of the Company Disclosure Letter lists all of the Subsidiaries of Company. All of the outstanding shares of capital stock of, or other equity or voting interests in, each such Subsidiary have been validly issued, were issued free of preemptive rights, and are fully paid and nonassessable and are owned directly or indirectly by Company, free and clear of all pledges, liens, mortgages, encumbrances and security interests of any kind or nature whatsoever (collectively, “ Liens ”), including   any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests, except for restrictions imposed by applicable securities Laws. Except for the capital stock of, or other equity or voting interests in, its Subsidiaries, Company does not own, directly or indirectly, any capital stock of, or other equity or voting interests in, any corporation, partnership, joint venture, association, limited liability company or other entity, other than ordinary course investments in investment securities.

 

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(a)    Capital Stock . The authorized capital stock of Company consists of: (i) 200,000,000 shares of Company Common Stock, without par value, and (ii) 1,000,000 shares of preferred stock, no par value (the “ Company Preferred Stock ”), of which 200,000 shares of Company Preferred Stock are designated as Series A Voting Convertible Preferred Stock and 37,620 shares of Company Preferred Stock are designated as Series B Participating Preferred Stock (the “ Junior Preference Shares ”). At the close of business on the business day immediately preceding the date hereof (the “ Capitalization Date ”): (i) 36,492,526 shares of Company Common Stock were issued and outstanding, (ii) 9,000,000 shares of Company Common Stock were subject to issuance pursuant to the Warrants, and (iii) no shares of Company Preferred Stock were issued and outstanding; provided that 37,620 Junior Preference Shares have been reserved for issuance in connection with the Rights Plan. Section 2.2(a) of the Company Disclosure Letter sets forth a list of each outstanding Warrant, and (1) the name of the holder of such Warrant, (2) the number and class of shares of Company capital stock subject to such Warrant, (3) the exercise price of such Warrant and (4) the date on which such Warrant expires. All of the outstanding shares of capital stock of Company are, and all shares of capital stock of Company which may be issued as contemplated or permitted by this Agreement will be, when issued, duly authorized and validly issued, fully paid and nonassessable and not subject to any preemptive rights. Dissenters’ rights are not available pursuant to Section 762 of the MBCA with respect to shares of Company Common Stock in connection with the transactions contemplated by this Agreement.

 

(b)    Options . (i) As of the close of business on the Capitalization Date, an aggregate of 1,617,085 shares of Company Common Stock were subject to issuance pursuant to outstanding options or stock appreciation rights to purchase Company Common Stock (“ Company Options ”) granted under the Covansys Corporation 1996 Stock Option Plan, as amended, and the Covansys Corporation 2007 Stock Option Plan (collectively, the “ Company Stock Plans ”). All shares of Company Common Stock subject to issuance under the Company Stock Plans upon issuance in accordance with the terms and conditions specified in the instruments pursuant to which they are issuable, would be duly authorized, validly issued, fully paid and nonassessable. Section 2.2(b)(i) of the Company Disclosure Letter sets forth each Company Option outstanding as of the Capitalization Date, the number of shares of Company Common Stock issuable thereunder or related thereto, the expiration date and the exercise price thereof.

 

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(ii)    There are no outstanding or authorized stock appreciation rights, phantom stock, profit participation, rights to purchase or acquire Company Preferred Stock or other similar rights with respect to Company, other than in respect of the Junior Preference Shares. Other than the Company Options and the Warrants, there are no outstanding (i) securities of Company or any of its Subsidiaries convertible into or exchangeable for shares of Voting Debt, capital stock, voting securities or other ownership interests in Company, (ii) options, restricted stock warrants, rights or other agreements or commitments to acquire from Company or any of its Subsidiaries, or obligations of Company or any of its Subsidiaries to issue, any Voting Debt, capital stock, voting securities or other ownership interests in (or securities convertible into or exchangeable for capital stock, voting securities or other ownership interests in) Company, (iii) obligations of Company or any of its Subsidiaries to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment relating to any Voting Debt, capital stock, voting securities or other ownership interests in Company (the items in clauses (i), (ii) and (iii), together with the capital stock of Company, being referred to collectively as “ Company Securities ”). All outstanding shares of Company Common Stock, all outstanding Warrants, all outstanding Company Options, and all outstanding shares of capital stock of each Subsidiary of Company have been issued and granted in compliance in all material respects with all requirements set forth in applicable Contracts.

 

(iii)    There are no outstanding Contracts requiring Company or any of its Subsidiaries to (A) repurchase, redeem or otherwise acquire any Company Securities or Subsidiary Securities or (B) dispose of any Subsidiary Securities. Other than as set forth in Section 2.2(b)(iii) of the Company Disclosure Letter, Company is not a party to any voting agreement with respect to any Company Securities or Subsidiary Securities.

 

(iv)    To the knowledge of Company, all Company Options have an exercise price equal to no less than the fair market value of the underlying shares of Company Common Stock on the accounting measurement date, except where such violations would not, individually or in the aggregate, have a Company Material Adverse Effect. To the knowledge of Company, all Company Options granted after December 31, 2004, were granted with respect to a class of stock of Company that is “service recipient stock” (within the meaning of applicable regulations under Code Section 409A).

 

(c)    Voting Debt . No bonds, debentures, notes or other indebtedness of Company or any of its Subsidiaries (i) having the right to vote on any matters on which shareholders or other equity owners may vote (or which is convertible into, or exchangeable for, securities having such right) or (ii) the value of which is any way based upon or derived from capital stock or voting securities of Company or any of its Subsidiaries, is issued or outstanding as of the date hereof (collectively, “ Voting Debt ”).

 

(d)    Warrants . Since the issuance of each of the Warrants, (i) no adjustment has occurred to the Exercise Price (as defined, respectively, in each of the Warrants) or the number of shares of Company Common Stock subject to the Warrants, and (ii) there has been no Change that requires any such adjustment.

 

(e)    Subsidiary Securities . There are no outstanding (i) securities of Company or any of its Subsidiaries convertible into or exchangeable for shares of Voting Debt, capital stock, voting securities or other ownership interests in any Subsidiary of Company, (ii) options, restricted stock, warrants, rights or other agreements or commitments to acquire from Company or any of its Subsidiaries, or obligations of Company or any of its Subsidiaries to issue, any Voting Debt, capital stock, voting securities or other ownership interests in (or securities convertible into or exchangeable for capital stock, voting securities or other ownership interests in) any Subsidiary of Company, (iii) obligations of Company or any of its Subsidiaries to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment relating to any Voting Debt, capital stock, voting securities or other ownership interests in any Subsidiary of Company (the items in clauses (i), (ii) and (iii), together with the capital stock or other equity interests of such Subsidiaries, being referred to collectively as “ Subsidiary Securities ”).

 

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(a)    Authority . Company has all requisite corporate power and authority to enter into this Agreement and, in the case of the consummation of the Merger, and the other transactions contemplated hereby, subject to obtaining the Requisite Shareholder Approval and the filing of the Certificate of Merger pursuant to the MBCA. The execution and delivery of this Agreement by Company and the consummation by Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Company and no other corporate proceedings on the part of Company are necessary by Company to authorize the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, other than in the case of consummation of the Merger, obtaining the Requisite Shareholder Approval and the filing of the Certificate of Merger pursuant to the MBCA. This Agreement has been duly executed and delivered by Company and, assuming due authorization, execution and delivery by Parent and Merger Sub, constitutes a legal, valid and binding obligation of Company, enforceable against Company in accordance with its terms except that such enforceability (a) may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting or relating to creditors’ rights generally and (b) is subject to general principles of equity, whether considered in a proceeding at law or in equity. The making of any offer or proposal, or indication of interest in making an offer or proposal, and the taking of any other action by Parent or Merger Sub in accordance with this Agreement and the transactions contemplated hereby have been consented to by the Board of Directors of Company under provisions of the confidentiality agreement, dated April 9, 2007, between Parent and Company (the “ Confidentiality Agreement ”).

 

(b)    Company Board Recommendation . The Board of Directors of Company, by resolutions duly adopted at a meeting of all directors duly called and held, has in accordance with the MBCA (i) determined that the Merger is fair to, and in the best interests of, Company and its shareholders and declared the Merger to be advisable, (ii) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby in accordance with the MBCA upon the terms and conditions contained herein and adopted the plan of merger contained in this Agreement, and (iii) resolved to recommend that the holders of shares of Company Common Stock approve this Agreement and the plan of merger contained herein in accordance with the applicable provisions of the MBCA and directed that such matter be submitted to Company’s shareholders at the Shareholders’ Meeting (collectively, the “ Company Board Recommendation ”).

 

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(c)    Requisite Shareholder Approval . The affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock, voting together as a single class, is the only vote of the holders of any class or series of Company capital stock required to approve this Agreement and the Merger. The approval of this Agreement and the Merger by the vote required by the preceding sentence is referred to herein as the “ Requisite Shareholder Approval ”.

 

(d)    Takeover Laws . The bylaws of Company provide that Company will not be subject to the provisions of the MBCA regarding control share acquisitions. The Board of Directors of Company, by resolutions duly adopted at a meeting of all directors duly called and held, approved in advance the transactions contemplated by this Agreement, including the acquisition of Company and shares of the capital stock of Company by Parent and Parent becoming an “interested shareholder”, for purposes of Section 782 of the MBCA, and such approval is sufficient to render inapplicable to the Agreement and the transactions contemplated hereby Section 780 of the MBCA. Such resolutions and approvals have not been subsequently rescinded, modified or withdrawn in any way.

 

(e)    Rights Plan . Company has taken all necessary action, including executing the Rights Plan Amendment, to render the Rights Plan inapplicable to this Agreement and the transactions contemplated hereby. The Rights Plan, as so amended, has not been further amended or modified. Copies of all such amendments to the Rights Plan have been previously provided to Parent.

 

(f)    Non-Contravention . The execution and delivery of this Agreement by Company does not, and performance of this Agreement by Company will not: (i) conflict with or violate the Company Charter Documents or any of the Subsidiary Charter Documents, (ii) subject to obtaining the Requisite Shareholder Approval and compliance with the requirements set forth in Section 2.3(g), conflict with or violate any Law applicable to Company or any of its Subsidiaries or by which Company or any of its Subsidiaries or any of their respective properties is bound or affected, (iii) subject to obtaining the Requisite Shareholder Approval and compliance with the requirements set forth in Section 2.3(g), result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default), or impair Company’s or any of its Subsidiaries’ rights or alter the rights or obligations of any third party, or give to others any rights of termination, amendment, acceleration or cancellation, or require any consent, under any Contract, or (iv) result in the creation of any Lien on any of the properties or assets of Company or any of its Subsidiaries, except in the case of each of clauses (iii) and (iv) above, for such violations, conflicts, defaults, terminations, accelerations or Liens which would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(g)    Consents . No consent, approval, order or authorization of, or registration, declaration or filing (any of the foregoing being a “ Consent ”) with any federal, state or foreign government, any instrumentality, political subdivision, court, administrative agency or commission or other governmental authority or instrumentality, or any quasi-governmental body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority (a “ Governmental Entity ”) is required to be obtained or made by Company in connection with the execution and delivery of this Agreement or the consummation of the Merger and other transactions contemplated hereby, except for: (i) the filing of the Certificate of Merger with the Department of Labor and Economic Growth and appropriate documents with the relevant authorities of other states to satisfy the applicable material Laws of states in which Company is qualified to do business, (ii) the filing of the Proxy Statement with the Securities and Exchange Commission (“ SEC ”) in accordance with the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and such reports under the Exchange Act as may be required in connection with this Agreement, the Merger and the other transactions contemplated by this Agreement, (iii) such Consents, as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”) and any applicable foreign antitrust, competition or merger control Laws (“ Foreign Antitrust Laws ”), that are applicable to the transactions contemplated by this Agreement, (iv) such material Consents as may be required under applicable state securities, “blue sky” or federal laws, the securities laws of any foreign country, or the rules and regulations of the NASDAQ Global Select Market (“ Nasdaq ”) or the New York Stock Exchange (“ NYSE ”), and (v) such other Consents, which if not obtained or made would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

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(a)    SEC Filings . Company has filed with or furnished to the SEC all registration statements, prospectuses, reports, schedules, forms, statements and other documents (including exhibits and all other information incorporated by reference) required to be so filed or furnished by it since January 1, 2005 (the “ Company   SEC Documents ”). Company has made available to Parent all such Company SEC Documents (except to the extent such Company SEC Documents are publicly available in the Electronic Data Gathering, Analysis and Retrieval (EDGAR) database of the SEC). As of their respective filing dates (or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing prior to the date hereof), each of the Company SEC Documents complied as to conform in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), the Exchange Act and the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”), as applicable, and the rules and regulations of the SEC thereunder applicable to such Company SEC Documents. None of the Company SEC Documents, including any financial statements, schedules or exhibits included or incorporated by reference therein at the time they were filed (or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing prior to the date hereof) contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. None of Company’s Subsidiaries is required to file any forms, reports or other documents with the SEC.

 

(b)    Financial Statements . Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Company SEC Documents (the “ Company Financials ”), as amended or supplemented prior to the date of this Agreement: (i) was prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto), and (ii) fairly presents in all material respects the consolidated financial position of Company and its consolidated Subsidiaries at the respective dates thereof and the consolidated results of Company’s operations, shareholders’ equity and cash flows for the periods indicated; provided , that unaudited interim financial statements may not contain footnotes required by GAAP to be included in audited financial statements and are subject to normal year-end audit adjustments which are not, individually or in the aggregate, material in amount or significance, in each case as permitted by GAAP and the applicable rules and regulations of the SEC.

 

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(c)    Internal Controls . Company has implemented and maintains a system of internal controls over financial reporting that are sufficient to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with GAAP, including policies and procedures that provide reasonable assurance that (i) transactions are executed only in accordance with authorizations of management and directors and (ii) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP. Company has implemented and maintains disclosure controls and procedures sufficient to ensure that information required to be disclosed by Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time frames specified by the SEC’s rules and forms. None of Company or its Subsidiaries has been made aware of (A) any significant deficiencies or material weaknesses in the design or operation of Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act), which would, individually or in the aggregate, have a Company Material Adverse Effect or (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Company’s internal controls over financial reporting.

 

(d)    Undisclosed Liabilities . The balance sheet of Company, dated as of December 31, 2006 (the “ Balance Sheet Date ”), contained in the Company SEC Documents filed prior to the date hereof is hereinafter referred to as the “ Company Balance Sheet .” Neither Company nor any of its Subsidiaries has any liabilities (absolute, accrued, contingent, or otherwise) of the type required to be disclosed by GAAP on the Company Balance Sheet (or reflected in the footnotes thereto) that would, individually or in the aggregate, reasonably be expected to be material to Company and its Subsidiaries taken as a whole, other than (a) liabilities as and to the extent reflected or reserved against on the Company Balance Sheet and (b) liabilities and obligations incurred since the Balance Sheet Date in the ordinary course of business consistent with past practice.

 

(e)    Off-Balance Sheet Arrangements . Neither Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, partnership agreement or any similar Contract (including any Contract relating to any transaction, arrangement or relationship between or among Company or any of its Subsidiaries, on the one hand, and any unconsolidated affiliate or other entity, including any structured finance, special purpose or limited purpose entity or person, on the other hand) the purpose or effect of which is to avoid disclosure of any material transaction involving Company or any of its Subsidiaries in Company’s consolidated financial statements, or is otherwise a party to any arrangement described in Section 303(a)(4) of Regulation S-K promulgated by the SEC.

 

(f)    Sarbanes-Oxley Compliance . The chief executive officer and chief financial officer of Company have made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with respect to any Company SEC Document, except as disclosed in certifications filed with Company SEC Documents. Neither Company nor, to the knowledge of Company, any of its officers has received notice from any Governmental Entity challenging or questioning the accuracy, completeness, form or manner of filing of such certifications.

 

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(a)    Definition . For the purposes of this Agreement, the term “ Tax ” or, collectively, “ Taxes ” shall mean any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities in the nature of taxes, including taxes based upon or measured by gross receipts, net worth, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts.

 

(b)    Tax Returns and Audits .

 

Except as would not, individually or in the aggregate, have a Company Material Adverse Effect:

 

(i)    Company and each of its Subsidiaries have prepared and timely filed all required federal, state, local and foreign returns, estimates, information statements and reports and any amendments thereto (“ Tax Returns ”) relating to any and all Taxes concerning or attributable to Company, its Subsidiaries or their respective operations and such Tax Returns are true and correct and have been completed in accordance with applicable Law.

 

(ii)    Company and each of its Subsidiaries have complied with all applicable Laws relating to the payment and withholding of Taxes and have timely withheld and paid to the appropriate foreign or domestic Governmental Entity exercising any taxing or Tax regulatory authority (a “ Taxing Authority ”) all Taxes and any other amounts required to be paid or withheld in connection with amounts paid or owed to any employee, independent contractor, creditor or other third party.

 

(iii)    Neither Company nor any of its Subsidiaries is delinquent in the payment of any Tax, nor is there any Tax deficiency outstanding, assessed or proposed against Company or any of its Subsidiaries, nor does Company or any of its Subsidiaries have in effect any waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax.

 

(iv)    No audit or other examination of any Tax Return of Company or any of its Subsidiaries is presently in progress, nor has Company or any of its Subsidiaries received written notification of any request for such an audit or other examination.

 

(v)    There are no Liens on the assets of Company or any of its Subsidiaries relating to or attributable to Taxes, other than Liens for Taxes not yet due and payable.

 

(vi)    None of the assets of Company or any of its Subsidiaries is treated as “tax-exempt use property,” within the meaning of Section 168(h) of the Code.

 

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(vii)    Neither Company nor any of its Subsidiaries is, nor has been at any time during the 5-year period ending with the Effective Time, a “United States Real Property Holding Corporation” within the meaning of Section 897(c)(2) of the Code.

 

(viii)    Neither Company nor any of its Subsidiaries (1) is, or since January 1, 2002 has been, a member of an affiliated group (within the meaning of Code §1504(a)) filing a consolidated federal income Tax Return (other than a group the common parent of which was Company), (2) is a party to any Tax sharing, indemnification or allocation agreement, nor does Company or any of its Subsidiaries owe any amount under any such agreement, or (3) has any liability for the Taxes of any Person (other than Company or any of its Subsidiaries) under Treas. Reg. § 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by contract, or otherwise.

 

(ix)    Neither Company nor any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code (x) in the two years prior to the date of this Agreement or (y) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the Merger.

 

(x)    Neither Company nor any of its Subsidiaries has participated in a transaction that is the same as or substantially similar to one of the types of transactions that the Internal Revenue Service has determined to be a tax avoidance transaction and identified by notice, regulation, or other form of published guidance as a listed transaction, as set forth in Section 6707A(c)(2) of the Code.

 

(xi)    Company and each of its Subsidiaries are in compliance with all terms and conditions of any Tax exemption, Tax holiday or other Tax reduction agreement or order of a territorial or non-U.S. government.

 

(xii)    No claim has been made in writing by any Taxing Authority in a jurisdiction where none of the Company or any of its Subsidiaries files Tax Returns to the effect that any of Company or its Subsidiaries is or may be subject to taxation by, or any of Company or its Subsidiaries is required to file any Tax Return in, that jurisdiction.

 

(xiii)    Neither Company nor any of its Subsidiaries (a) has agreed to or is required to make any adjustment under Section 481 of the Code that will require an adjustment to taxable income for any period following the Effective Time, (b) has received written notification that the Internal Revenue Service is proposing any such adjustment, or (c) has an application pending with the Internal Revenue Service requesting permission for any changes in methods of accounting.

 

(xiv)    To the knowledge of Company, (a) neither Company nor any of its Subsidiaries has participated in or cooperated with an international boycott within the meaning of Section 999 of the Code and (b) Company is not and, within the past three years, has not been a passive foreign investment company within the meaning of Section 1297 of the Code.

 

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(xv)    Company has not within the past three years received written notification from any U.S. federal or state Taxing Authority making or proposing any adjustment of Tax items of the Company or any of its Subsidiaries pursuant to Section 482 of the Code.

 

(xvi)    Neither Company nor any of its Subsidiaries has entered into a gain recognition agreement described in Treas. Reg. § 1.367(a)-8 that would be outstanding after the Effective Time.

 

(xvii)    Neither Company nor any of its Subsidiaries is party to or bound by any closing agreement with any U.S. federal or state Taxing Authority that has been entered into within the past three years.

 

 

(a)    Section 2.7(a) of Company Disclosure Letter contains a complete and accurate list (by name and version number), as of the date hereof, of all Company owned material products (i) currently distributed, marketed, or sold by Company or its Subsidiaries and (ii) that Company expects or intends to make available commercially or for revenue that are in development by the Company or any of its Subsidiaries as of the Closing Date (“ Company Products ”), provided that Company makes no representation or warranty that all such Company Products will in fact be made commercially available as of the Closing Date or that there are no other products that may become available at that time.

 

(b)    Section 2.7(b) of Company Disclosure Letter contains a complete and accurate list, as of the date hereof, of the following Owned Company IP: (i) all such registered Trademarks and material unregistered Trademarks; (ii) all such Patents, if any, and (iii) all registered Copyrights, in each case listing, as applicable, (A) the name of the current owner, (B) the jurisdiction where the application/registration was filed or issued, and (C) the application or registration number. To the knowledge of Company, none of the Owned Company IP is invalid, except for any such invalidity that would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(c)    Section 2.7(c) of Company Disclosure Letter contains a complete and accurate list, as of the date hereof, of Company’s Domain Name registrations. Section 2.7(c) of Company Disclosure Letter identifies, for each Domain Name registration, the named owner, and the registrar with which that Domain Name is registered. To the knowledge of Company, Company’s use and registration of its Domain Names do not infringe any third party’s Intellectual Property Rights, except for any such infringement that would not, individually or in the aggregate, have a Company Material Adverse Effect. In the case in which Company or any of its Subsidiaries has acquired ownership of a Domain Name registration from another party, Company or its Subsidiary has, to the knowledge of Company, made or procured a transfer of the Domain Name in accordance with the procedure of the registrar, except as would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(d)    In each case in which Company or any of its Subsidiaries has acquired assignments of ownership of any registered Trademarks, registered Copyrights, or Patents currently included in the Owned Company IP from another Person as set forth in the Company Disclosure Letter, Company or one of its Subsidiaries has recorded or caused to be recorded each such assignment with the U.S. Patent and Trademark Office, the U.S. Copyright Office, or their respective equivalents in the applicable jurisdiction, in each case in accordance with applicable Laws, except as would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

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(e)    “ Company IP Agreements ” shall mean any material Contract that is in effect on the date hereof and (i) under which Company or any of its Subsidiaries uses or otherwise exploits or has the right to use or otherwise exploit any Licensed Company IP, other than licenses and related services agreements for software that is used or otherwise exploited by Company or any of its Subsidiaries but not incorporated into any Company Products and that has not been materially customized solely for use or exploitation by Company or any of its Subsidiaries by the relevant licensor or service provider; or (ii) under which Company or any of its Subsidiaries has licensed to others any rights under or agreed to transfer to others any of the Company IP or Company Intellectual Property Rights, other than customer licenses or other similar agreements entered into in the ordinary course of business. To the knowledge of Company, neither the Company nor any of its Subsidiaries is in breach of any of the Company IP Agreements and, in each case except as would not, individually or in the aggregate, have a Company Material Adverse Effect: (1) the parties contracting with Company or any of its Subsidiaries under the Company IP Agreements are not in breach thereof; (2) there are no pending disputes regarding the scope of such Company IP Agreements, performance under the Company IP Agreements, or with respect to payments made or received under such Company IP Agreements; and (3) all Company IP Agreements are in full force and effect.

 

(f)    To the knowledge of Company, the Owned Company IP, together with the Licensed Company IP, is sufficient for the conduct of the business of Company and its Subsidiaries as currently conducted.

 

(g)    Company and its Subsidiaries own all right, title and interest in the Owned Company IP, free and clear of all Liens other than (i) encumbrances, restrictions or other obligations arising under any of the Company IP Agreements and (ii) Liens that would not, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect.

 

(h)    Company and each of its Subsidiaries has taken reasonable and appropriate steps that, as a whole, are reasonable and appropriate to protect and preserve the confidentiality of any Trade Secrets that comprise any part of the Company IP. To the knowledge of Company, all use and disclosure by Company or any of its Subsidiaries of Trade Secrets owned by another Person have been pursuant to the terms of a written or other agreement with such Person or were otherwise lawful, except as would not, individually or in the aggregate, have a Company Material Adverse Effect. Company and its Subsidiaries have used commercially reasonable efforts to enforce any policy they respectively maintain with respect to the confidentiality of Trade Secrets, except for any failure to enforce that would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(i)    To the knowledge of Company, the Company Products and the conduct by the Company and its Subsidiaries of their respective businesses have not infringed upon or otherwise violated and do not infringe upon or otherwise violate the Intellectual Property Rights of any third party, except for any such infringement that would not, individually or in the aggregate, have a Company Material Adverse Effect. To the knowledge of Company, no Person or any of such Person’s products is infringing upon in any material respect any Owned Company IP.

 

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(j)    There is no Proceeding involving a third party pending or, to the knowledge of Company, filed or threatened with respect to, and Company has not been notified in writing of, any alleged infringement or other violation in any material respect by Company or any of its Subsidiaries or any of its or their current products or services or other operation of Company’s or its Subsidiaries’ business of the Intellectual Property Rights of such third party. There is no pending or, to the knowledge of Company, threatened claim challenging the validity or enforceability of, or contesting Company’s or any of its Subsidiaries’ ownership of or rights with respect to, any of the Owned Company IP. To the knowledge of Company, Company and its Subsidiaries are not subject to any Order that restricts or impairs the use of any Company Intellectual Property or Intellectual Property Rights, other than restrictions or impairments that would not, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect.

 

(k)    The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (including the Offer and the Merger) will not result in (i) Company or its Subsidiaries granting to any third party any rights or licenses to any Intellectual Property or Intellectual Property Rights pursuant to any Company IP Agreement, (ii) any right of termination or cancellation under any Company IP Agreement, (iii) the imposition of any Lien on any Owned Company IP, or (iv) after the Merger, Parent or any of its Subsidiaries being required, under the terms of any agreement to which Company or any of its Subsidiaries is a party, to grant any third party any rights or licenses to any of Parent’s or any of its Subsidiaries’ material Intellectual Property or material Intellectual Property Rights, except, in the case of each of clauses (ii) and (iii), as would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(l)    Company and its Subsidiaries have taken commercially reasonable steps and implemented commercially reasonable procedures to prevent viruses and other disabling codes from entering Company Products. For the avoidance of doubt, any unauthorized access caused, in whole or in part, by the operating systems, hardware or software of third parties shall not be deemed to be caused by the Company Products.

 

(m)    To the knowledge of Company, the Company Disclosure Letter contains a complete and accurate list of all software that is distributed as “open source software” or under a similar licensing or distribution model (including but not limited to the GNU General Public License) that is incorporated into or bundled with (i) a Company Product or (ii) any material software used by the Company or any of its Subsidiaries and covered in whole or material part by any Owned Company IP.

 

(n)    To the knowledge of Company, neither Company nor any of its Subsidiaries has experienced any material defects in the software and hardware used in their business as it is currently conducted (including any error or omission in the processing of any data) that, if not resolved, would, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect.

 

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(o)    To the knowledge of Company, Company’s and its Subsidiaries’ collection and dissemination of personal customer information in connection with their business has been conducted in accordance with applicable privacy policies published or otherwise adopted by Company and its Subsidiaries and any applicable Laws, except as would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(p)    For purposes of this Agreement, the following terms have the meanings set forth herein:

 

(i)    “ Derivative Work ” shall have the meaning set forth in 17 U.S.C. Section 101.

 

(ii)    “ Domain Names ” shall mean any alphanumeric designation that is registered with, or assigned by, any domain name registrar, domain name registry, or other domain name registration authority as part of an electronic address on the Internet.

 

(iii)    “ Intellectual Property ” shall mean any or all of the following: (1) proprietary inventions (whether patentable or not), invention disclosures, industrial designs, improvements, trade secrets, proprietary information, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (2) business, technical and know-how information, non-public information, and confidential information and rights to limit the use or disclosure thereof by any Person including databases and data collections and all rights therein; (3) original works of authorship (including computer program, source code, object code, whether embodied in software, firmware or otherwise), architecture, documentation, files, records, schematics, verilog files, netlists, emulation and simulation reports, test vectors and hardware development tools; and (4) any similar or equivalent property of any of the foregoing (as applicable).

 

(iv)    “ Intellectual Property Rights ” shall mean any or all of the following and all worldwide common law and statutory rights in, arising out of, or associated therewith: (1) patents and applications therefor, if any, and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof (“ Patents ”); (2) copyrights, copyrights registrations and applications therefor, and all other rights corresponding thereto throughout the world including moral and economic rights of authors and inventors, however denominated (“ Copyrights ”); (3) industrial designs and any registrations and applications therefor; (4) trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor (“ Trademarks ”); and (5) trade secrets (including, those trade secrets defined in the Uniform Trade Secrets Act and under corresponding foreign statutory 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; including databases and data collections and all rights therein (“ Trade Secrets ”).

 

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(v)    “ Company IP ” shall mean all material Intellectual Property that is used or held for use by Company or any of its Subsidiaries.

 

(vi)    “ Licensed Company IP ” means all Company IP and the Intellectual Property Rights of the Company other than the Owned Company IP.

 

(vii)    “ Owned Company IP ” shall mean that portion of the Company IP and the Intellectual Property Rights of the Company that are owned by Company and its Subsidiaries.

 

 

(a)    Compliance . The Company and each of its Subsidiaries is, and at all times since the Balance Sheet Date has been, in compliance in all material respects with all Laws applicable to Company or any of its Subsidiaries or to the conduct of the business or operations of Company and its Subsidiaries, except for such violations or noncompliance that would not, individually or in the aggregate, have a Company Material Adverse Effect. There is no outstanding or currently existing order, judgment, decision, decree, injunction, ruling, writ or assessment of any Governmental Entity (“ Order ”), that is binding on Company or any of its Subsidiaries that prohibits or materially impairs any material business practice of Company or any of its Subsidiaries, any acquisition of material property by Company or any of its Subsidiaries or the conduct of business by Company and its Subsidiaries as currently conducted, except for such Order that would not, individually or in the aggregate, have a Company Material Adverse Effect. No representation or warranty is made in this Section 2.8 with respect to (i) compliance with the Securities Act, the Exchange Act or Sarbanes-Oxley, to the extent such compliance is covered in this Agreement, (ii) applicable Laws with respect to Taxes, (iii) Environmental Laws, (iv) ERISA matters, (v) the MBCA and (vi) Intellectual Property.

 

(b)    Permits . Company and its Subsidiaries hold, to the extent legally required, all material permits, licenses, consents, authorizations and approvals from Governmental Entities (“ Permits ”) that are required to conduct their business as currently conducted (collectively, “ Company   Permits ”), and no suspension or cancellation of any of the Company Permits is pending or, to the knowledge of Company, threatened, except for such noncompliance, suspensions or cancellation that would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(c)    Foreign Corrupt Practices Act . Neither Company nor any of its Subsidiaries (including any of their respective officers or directors) has (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, or (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended, or any rules or regulations thereunder.

 

 

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