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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;
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(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;
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(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
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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
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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
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