AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

EXECUTION VERSION

AGREEMENT AND PLAN OF MERGER

by and among

MCAFEE, INC.,

SEABISCUIT ACQUISITION CORPORATION

and

SECURE COMPUTING CORPORATION

Dated as of September 21, 2008

TABLE OF CONTENTS

 

 

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INDEX OF EXHIBITS AND SCHEDULES

 

Company Disclosure Letter*

*

Pursuant to Item 601(b)(2) of Regulation S-K promulgated by the Securities and Exchange Commission (the “Commission”), the schedules and exhibits to this Agreement and Plan of Merger identified above have been omitted. These schedules and exhibits will be furnished supplementally to the Commission upon request.

 

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AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of September 21, 2008, by and among McAfee, Inc., a Delaware corporation (“ Parent ”), Seabiscuit Acquisition Corporation, a Delaware corporation and direct wholly owned subsidiary of Parent (“ Merger Sub ”), and Secure Computing Corporation, a Delaware corporation (the “ Company ”).

RECITALS

A. The respective Boards of Directors of Parent, Merger Sub and the Company have deemed it advisable and in the best interests of their respective corporations and stockholders that Parent and the Company consummate the business combination and other transactions provided for herein.

B. The respective Boards of Directors of Merger Sub and the Company have approved, in accordance with the Delaware General Corporation Law (“ Delaware Law ”), this Agreement and the transactions contemplated hereby, including the Merger.

C. Contemporaneously with the execution and delivery of this Agreement by the parties hereto, and as a condition and material inducement to Parent and Merger Sub to enter into this Agreement, each of the Persons listed on Schedule 1 are entering into a Voting Agreement and an irrevocable proxy in substantially the form attached hereto as Exhibits A-1 and A-2 (the “ Voting Agreements ”) pursuant to which, among other things, such stockholder agrees to vote all shares of the Company’s capital stock owned by it, him or her in favor of the adoption of this Agreement and the other transactions contemplated hereby.

D. Contemporaneously with the execution and delivery of this Agreement by the parties hereto, and as a condition and material inducement to Parent and Merger Sub to enter into this Agreement, the Persons listed on Schedule 2 (the “ Key Employees ”) are entering into or executing, as applicable (i) a non-competition and non-solicitation agreement with Parent, each in the form attached hereto as Exhibit B-1 (collectively, the “ Key Employee Non-Competition Agreements ”), and (ii) an offer letter, each in the form attached hereto as Exhibit B-2 (collectively, the “ Key Employee Offer Letters ”), each to be effective as of the Effective Time.

E. The Board of Directors of the Company has resolved to recommend to its stockholders the adoption of this Agreement.

F. Parent, as the sole stockholder of Merger Sub, has approved and adopted this Agreement and approved the Merger.

G. Parent, Merger Sub and the Company desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe certain conditions to the Merger.

NOW, THEREFORE , in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

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ARTICLE I

DEFINITIONS

1.1 Certain Defined Terms . For all purposes of and under this Agreement, the following capitalized terms shall have the following respective meanings:

(a) “ Acquisition ” shall mean, for the purposes of Section 8.3(b ) only, with respect to the Company, any of the following transactions (other than the transactions contemplated by this Agreement): (i) any purchase or acquisition by any Person or “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) of a fifty percent (50%) or more interest in the total outstanding voting securities of the Company or any of its Subsidiaries, or any tender offer or exchange offer that if consummated would result in any Person or “group” beneficially owning fifty percent (50%) or more of the total outstanding voting securities of the Company or any of its Subsidiaries; (ii) any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company pursuant to which the equity interests held in the Company and retained following such transaction or issued to or otherwise received in such transaction by the stockholders of the Company immediately preceding such transaction constitute less than fifty percent (50%) of the aggregate equity interests in the surviving or resulting entity of such transaction or any direct or indirect parent thereof; or (iii) any sale, lease, exchange, transfer, license (other than in the ordinary course of business consistent with past practices) or other disposition (including by way of joint venture) by the Company of assets (including capital stock or other ownership interests in Subsidiaries of the Company) representing fifty percent (50%) or more of the aggregate fair market value of the consolidated assets of the Company and its Subsidiaries, taken as a whole, immediately prior to such sale.

(b) “ Alternative Transaction Proposal ” shall mean, with respect to the Company, any offer, expression of interest or proposal (whether binding or non-binding), or any public announcement of any intention to make any such offer, expression of interest or proposal, whether made to the Company or its stockholders, relating to any transaction or series of related transactions involving: (i) any purchase or acquisition by any Person or “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) of more than a fifteen percent (15%) interest in the total outstanding voting securities of the Company or any of its Subsidiaries, or any tender offer or exchange offer that if consummated would result in any Person or “group” beneficially owning fifteen percent (15%) or more of the total outstanding voting securities of the Company or any of its Subsidiaries; (ii) any merger, consolidation, business combination or similar transaction involving the Company or any of its Subsidiaries; (iii) any sale, lease, exchange, transfer, license (other than in the ordinary course of business consistent with past practices) or other disposition (including by way of joint venture) of assets (including capital stock or other ownership interests in Subsidiaries of the Company) representing fifteen percent (15%) or more of the aggregate fair market value of the consolidated assets of the Company and its Subsidiaries, taken as a whole; (iv) any liquidation, dissolution, reorganization or recapitalization of the Company; or (v) the declaration or payment of any extraordinary dividend, whether of cash or other property, by the Company; provided , however , for the sake of clarity, the transactions among Parent, Merger Sub and the Company contemplated by this Agreement shall not be deemed an Alternative Transaction Proposal.

(c) “ Anti-Corruption and Anti-Bribery Laws ” shall mean the Foreign Corrupt Practices Act of 1977, as amended, any rules or regulations thereunder, or any other applicable United States or non-U.S. anti-corruption or anti-bribery laws or regulations.

(d) “ Base Amount ” shall mean one hundred dollars ($100).

(e) “ Bid ” shall mean any bid, quotation or proposal submitted to any Governmental Entity in connection with obtaining any current Contract between the Company, on the one hand, and any

 

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Governmental Entity, on the other hand, and any outstanding bid, quotation or proposal by the Company that if accepted or awarded would reasonably be expected to lead to a Contract between the Company, on the one hand, and any Governmental Entity or any prime contractor or upper-tier subcontractor for any Governmental Entity, on the other hand.

(f) “ Business Day ” shall mean each day that is not a Saturday, Sunday or other day on which Parent is closed for business or banking institutions located in San Francisco, California or Minneapolis, Minnesota are authorized or obligated by law or executive order to close.

(g) “ Change of Recommendation ” shall mean the withholding, withdrawal or amendment, qualification or modification (in a manner adverse to Parent), by the Company’s Board or Directors (or any committee thereof) of its recommendation in favor of adoption of this Agreement, and, in the case of a tender or exchange offer made by a third party directly to the Company’s stockholders, a failure to recommend that Company’s stockholders reject such tender or exchange offer.

(h) “ COBRA ” shall mean Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

(i) “ Common Stock Merger Consideration ” shall mean an amount of cash equal to $5.75 per share, without interest.

(j) “ Company Common Stock ” shall mean the common stock, par value $0.01 per share, of the Company.

(k) “ Company Employee Plan ” shall mean any plan, program, policy, practice, contract, agreement or other arrangement, whether written, unwritten or otherwise, providing for compensation, severance benefits, termination pay, change of control pay, bonus pay, deferred compensation, performance awards, stock or stock-related awards, phantom stock, commission pay, vacation or paid time off, profit sharing, welfare benefits, retirement benefits, fringe benefits or other employee benefits or remuneration of any kind, whether written, unwritten or otherwise, funded or unfunded, including each “employee benefit plan,” within the meaning of Section 3(3) of ERISA which is or has been maintained, contributed to, or required to be contributed to, by the Company or any ERISA Affiliate for the benefit of any Employee, or with respect to which the Company or any ERISA Affiliate has or may have any liability or obligation and any International Employee Plan.

(l) “ Company Government Contract ” shall mean any Contract between the Company, on the one hand, and any Governmental Entity, on the other hand.

(m) “ Company Government Subcontract ” shall mean any Contract between the Company, on the one hand, and any prime contractor or upper-tier subcontractor, on the other hand, relating to a Contract between such Person and any Governmental Entity.

(n) “ Company Financial Advisor ” shall mean Citigroup Global Markets Inc.

(o) “ Company Intellectual Property ” shall mean any and all Intellectual Property and Intellectual Property Rights that are owned by, or claimed to be owned by, or exclusively licensed to, the Company or its Subsidiaries.

 

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(p) “ Company Options ” shall mean all outstanding options to purchase Company Common Stock.

(q) “ Company Preferred Stock ” shall mean the preferred stock, par value $0.01 per share, of the Company.

(r) “ Company Products ” shall mean all products, technologies and services developed (including products, technologies and services under development), owned, made, provided, distributed, imported, sold or licensed by or on behalf of the Company and any of its Subsidiaries.

(s) “ Company Registered Intellectual Property ” shall mean all of the Registered Intellectual Property owned by, or filed in the name of, the Company or any of its Subsidiaries.

(t) “ Company RSUs ” shall mean restricted stock units of the Company issued from the Company Stock Plans, whereby each restricted stock unit represents a bookkeeping entry representing the equivalent of one (1) share of Company Common Stock.

(u) “ Company Series A Preferred Stock ” shall mean the Series A convertible preferred stock, par value $0.01 per share, of the Company.

(v) “ Company Stock ” shall mean the Company Preferred Stock, the Company Series A Preferred Stock and the Company Common Stock.

(w) “ Company Stock Plans ” shall mean all stock option plans or other equity-related plans of the Company, including: (i) the Company’s 2002 Stock Incentive Plan, (ii) the Company’s Amended and Restated 1995 Omnibus Stock Option Plan, (iii) the Company’s 2000 Stock Option Plan, (iv) the N2H2 1997 Stock Option Plan, the (v) N2H2 1999 Stock Option Plan, (vi) the N2H2 1999 Non-Employee Director Plan, (vii) the N2H2 1999/2000 Transition Plan, (viii) the N2H2 2000 Stock Option Plan, (ix) the Howard Philip Welt Plan, (x) the CyberGuard 1994 Stock Option Plan, and (xi) the CyberGuard 1998 Stock Option Plan.

(x) “ Company Unvested Common Stock ” shall mean any shares of Company Common Stock outstanding immediately prior to the Effective Time that are unvested or are subject to a repurchase option, risk of forfeiture or other condition under any applicable restricted stock purchase agreement or other agreement with the Company.

(y) “ Company Warrants ” shall mean all warrants to purchase Company Common Stock issued by the Company.

(z) “ Contract ” shall mean any written or oral agreement, contract, subcontract, settlement agreement, lease, binding understanding, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan or legally binding commitment or undertaking of any nature, as in effect as of the date hereof or as may hereinafter be in effect.

(aa) “ DOJ ” shall mean the United States Department of Justice.

(bb) “ DOL ” shall mean the United States Department of Labor.

 

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(cc) “ Employee ” shall mean any current or former employee, consultant, adviser, independent contractor or director of the Company or any ERISA Affiliate.

(dd) “ Employee Agreement ” shall mean each management, employment, severance, separation, change of control, settlement, bonus, consulting, contractor, relocation, repatriation, expatriation, loan, visa, work permit or other agreement or Contract (including, any offer letter which provides for any term of employment other than employment at will or any agreement providing for acceleration of Company Options or Company Unvested Common Stock, or similar equity awards, or any other agreement providing for compensation or benefits) between the Company or any ERISA Affiliate and any Employee, whether written or unwritten or otherwise pursuant to which the Company or ERISA Affiliate has or may have any current or future liability or obligation (contingent or otherwise).

(ee) “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended.

(ff) “ ERISA Affiliate ” shall mean any Subsidiary of the Company and any other Person under common control with the Company or any of its Subsidiaries, or that, together with the Company or any Subsidiary of the Company, could be deemed a “single employer” within the meaning of Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code, and the regulations issued thereunder.

(gg) “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

(hh) “ Exchange Ratio ” shall mean the quotient obtained by dividing (i) the Common Stock Merger Consideration, by (ii) the Parent Stock Price.

(ii) “ Export and Import Approvals ” shall mean all export licenses, license exceptions, consents, notices, waivers, approvals, orders, authorizations, registrations, declarations and filings, from or with any Governmental Entity, that are required for compliance with Export and Import Control Laws.

(jj) “ Export and Import Control Laws ” shall mean any U.S. law, regulation, or order or applicable non-U.S. law, regulation or order to the extent permitted under U.S. law governing (i) imports, exports, re-exports, or transfers of products, services, software, or technologies from or to the United States or another country; (ii) any release of technology or software in any foreign country or to any foreign person (anyone other than a citizen or lawful permanent resident of the United States, or a protected individual as defined by 8 U.S.C. § 1324b(a)(3)) located in the United States or abroad; (iii) economic sanctions or embargoes; or (iv) compliance with unsanctioned foreign boycotts.

(kk) “ FTC ” shall mean the United States Federal Trade Commission.

(ll) “ Governmental Entity ” shall mean any supranational, national, state, municipal, local or foreign government, any instrumentality, subdivision, court, works council or other foreign labor entity, administrative agency or commission or other governmental authority or instrumentality, or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority.

(mm) “ HIPAA ” shall mean the Health Insurance Portability and Accountability Act of 1996, as amended.

 

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(nn) “ HSR Act ” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

(oo) “ Intellectual Property ” shall mean any or all of the following: (i) works of authorship including computer programs, source code, and executable code, whether embodied in software, firmware or otherwise, architecture, documentation, designs, files, records, and data, (ii) inventions (whether or not patentable), discoveries, improvements, and technology, (iii) proprietary and confidential information, trade secrets and know how, (iv) databases, data compilations and collections and technical data, (v) logos, trade names, trade dress, trademarks and service marks, (vi) domain names, web addresses and sites, (vii) tools, methods and processes, (viii) devices, prototypes, schematics, breadboards, netlists, maskworks, test methodologies, verilog files, emulation and simulation reports, test vectors and hardware development tools, and (ix) any and all instantiations of the foregoing in any form and embodied in any media.

(pp) “ Intellectual Property Rights ” shall mean worldwide common law and statutory rights associated with (i) patents, patent applications and inventors’ certificates, (ii) copyrights, copyright registrations and copyright applications, “moral” rights and mask work rights, (iii) Trade Secrets, (iv) other proprietary rights relating to intangible intellectual property, (v) trademarks, trade names and service marks, (vi) divisions, continuations, renewals, reissuances and extensions of the foregoing (as applicable) and (vii) analogous rights to those set forth above, including the right to enforce and recover remedies for any of the foregoing.

(qq) “ International Employee Plan ” shall mean each Company Employee Plan or Employee Agreement that has been adopted, contributed to, required to be contributed to, or maintained by the Company, any of its Subsidiaries or any ERISA Affiliate, whether formally or informally, or with respect to which the Company or any ERISA Affiliate will or may have any liability, for the benefit of Employees who perform services outside the United States.

(rr) “ Intervening Event ” shall mean a material event (other than (i) an Alternative Transaction Proposal or a Superior Proposal, and (ii) events to the extent relating to developments in the Company’s progress toward goals set forth in its business plan) arising after the date of this Agreement, that was neither known to the Board of Directors of the Company as of the date hereof nor reasonably foreseeable by the Board of Directors of the Company as of or prior to the date hereof, which becomes known to the Board of Directors of the Company prior to the receipt of the Company Stockholder Approval.

(ss) “ IRS ” shall mean the United States Internal Revenue Service.

(tt) “ knowledge ” shall mean, with respect to a party hereto, with respect to any fact, circumstance, event or other matter in question, (i) the actual knowledge of any of the directors of such party, and (ii) the actual knowledge of any of the executive officers of such party after reasonable inquiry of the senior employees of such party and its Subsidiaries who have primary administrative or operational responsibility for such matter in question.

(uu) “ Legal Requirement ” shall mean any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, order, decree, directive, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity.

 

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(vv) “ Liabilities ” shall mean the debts, liabilities and other obligations of a Person, whether accrued or fixed, absolute or contingent, matured or unmatured, determined or determinable, known or unknown, including those arising under any Legal Requirement, action or order by any Governmental Entity, and those arising under any Contract.

(ww) “ Lien ” shall mean any mortgage, deed of trust, lien, pledge, charge, security interest, title retention device, collateral assignment, restriction or other encumbrance of any kind in respect of an asset, tangible or intangible (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset).

(xx) “ Liquidation Amount ” shall mean the sum of (i) the Base Amount, plus (ii) an amount of interest on such Base Amount accreting daily at the annual rate of five percent (5.0%), compounded semi-annually, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months from January 12, 2006 to the Closing Date, plus (iii) an amount equal to any accrued but unpaid dividends on a share of Company Series A Preferred Stock as of the Closing Date.

(yy) “ made available ” shall mean that the Company has posted such materials, on or before 11:59 p.m. Pacific time on September 21, 2008, to the virtual data room managed by the Company hosted at the following IP address:

https://vault.netvoyage.com/neWeb2/cabinetHome.aspx?targetCabinet=NG-UPV0V4MI

(zz) “ Material Adverse Effect ” shall mean, when used in connection with an entity, any change, event, circumstance, condition or effect (any such item, an “ Effect ”), individually or when taken together with all other Effects, (i) that is or is reasonably likely to be materially adverse to the condition (financial or otherwise), business, assets (including intangible assets), liabilities, operations or results of operations of such entity and its Subsidiaries, taken as a whole, or (ii) that is reasonably likely to materially impede the authority or ability of such entity to consummate the transactions contemplated by this Agreement in accordance with the terms hereof and applicable Legal Requirements, except in each case to the extent that any such Effect directly results from any of the following: (a) changes in general economic conditions or changes affecting the industry generally in which such entity operates, or acts of war (including escalation in conflicts involving the United States), acts of God (including natural disasters) or terrorism (provided that such changes or acts do not affect such entity disproportionately as compared to other companies operating in the same industries or geographies as such entity); (b) changes in the trading volume or trading prices of such entity’s capital stock, or any failure to meet published analyst estimates, in each case, in and of themselves (provided that such exclusion shall not apply to any underlying Effect that may have caused such change in trading prices or volumes or failure to meet estimates); (c) any changes in applicable Legal Requirements or GAAP; (d) the announcement of this Agreement or the pendency or consummation of the transactions contemplated hereby; or (e) any failure by the Company or any of its Subsidiaries to meet revenue or earnings projections ( provided that such exclusion shall not apply to any underlying Effect that may have caused such failure to meet revenue or earnings projections).

(aaa) “ Merger Consideration ” shall mean the Preferred Stock Merger Consideration and the Common Stock Merger Consideration.

 

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(bbb) “ Merger Sub Common Stock ” shall mean the common stock, par value $0.01 per share, of Merger Sub.

(ccc) “ NYSE ” shall mean The New York Stock Exchange.

(ddd) “ Open Source ” shall mean any open source, public source or freeware Intellectual Property, or any modification or derivative thereof, including any version of any software licensed pursuant to any GNU general public license or limited general public license or software that is licensed pursuant to a license that purports to require the distribution of or access to Source Code or purports to restrict the licensee’s ability to charge for distribution of or to use software for commercial purposes or requires the inclusion of attribution notices in any redistributed software.

(eee) “ Parent Common Stock ” shall mean the common stock of Parent, par value $0.01 per share.

(fff) “ Parent Stock Price ” shall mean the average of the closing sale prices for a share of Parent Common Stock as quoted on NYSE for the ten (10) consecutive trading days ending with the second trading day that precedes the Closing Date.

(ggg) “ Pension Plan ” shall mean each Company Employee Plan that is an “employee pension benefit plan,” within the meaning of Section 3(2) of ERISA.

(hhh) “ Permitted Liens ” shall mean any of the following: (i) Liens for Taxes, assessments and governmental charges or levies either not yet due and payable or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established in accordance with GAAP; (ii) mechanics, carriers’, workmen’s, warehouseman’s, repairmen’s, materialmen’s or other Liens or security interests that are not yet due; (iii) Liens to secure obligations to landlords, lessors or renters under leases or rental agreements or underlying leased property; (iv) Liens imposed by applicable Legal Requirements (other than Tax law); (v) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; (vi) pledges and deposits to secure the performance of bids, trade contracts, leases, surety and appeal bonds, performance bonds and other obligations of a similar nature, in each case in the ordinary course of business; and (vii) Liens the existence of which are specifically disclosed in the notes to the consolidated financial statements of the Company included in the Company SEC Reports.

(iii) “ Person ” shall mean any individual, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization, entity or Governmental Entity.

(jjj) “ Preferred Stock Merger Consideration ” shall mean the sum of (i) the Liquidation Amount plus (ii) an amount equal to five percent (5%) of the Liquidation Amount, without interest.

(kkk) “ Proxy Statement ” shall mean the proxy statement to be filed by the Company with the SEC in connection with the solicitation of proxies from Company stockholders for the Company Stockholder Approval, as amended or supplemented.

(lll) “ PTO ” shall mean the United States Patent and Trademark Office.

 

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(mmm) “ Registered Intellectual Property ” shall mean applications, registrations and filings for Intellectual Property Rights that have been registered, filed, certified or otherwise perfected or recorded with or by any state, government or other public or quasi-public legal authority.

(nnn) “ SEC ” shall mean the United States Securities and Exchange Commission.

(ooo) “ Securities Act ” shall mean the Securities Act of 1933, as amended.

(ppp) “ Shrink - Wrapped Code ” shall mean generally commercially available binary code (other than development tools and development environments) where available for a cost of not more than $10,000 for a perpetual license for a single user or work station (or $75,000 in the aggregate for all users and work stations).

(qqq) “ Source Code ” shall mean computer software and code, in form other than object code form, including related programmer comments and annotations, help text, data and data structures, instructions and procedural, object-oriented and other code, which may be printed out or displayed in human readable form.

(rrr) “ Subsidiary ” shall mean, when used with respect to any party, any corporation, association, business entity, partnership, limited liability company or other Person of which such party, either alone or together with one or more Subsidiaries or by one or more Subsidiaries (i) directly or indirectly owns or controls securities or other interests representing more than fifty percent (50%) of the voting power of such Person, or (ii) is entitled, by Contract or otherwise, to elect, appoint or designate directors constituting a majority of the members of such Person’s board of directors or other governing body.

(sss) “ Superior Proposal ” shall mean, with respect to the Company, an unsolicited, bona fide written Alternative Transaction Proposal that (i) the Board of Directors of the Company determines in good faith (after consultation with its outside legal counsel and the Company Financial Advisor) to be more favorable (taking into account all relevant legal, financial, regulatory, timing and other aspects of such Alternative Transaction Proposal (including the conditions thereto) and the identity of the Person making the proposal), and provides greater financial value, to the Company’s stockholders than the transactions contemplated by this Agreement (after taking into account all of the terms of any proposal by Parent to amend or modify the terms of the transactions contemplated by this Agreement), (ii) provides for consideration consisting exclusively of cash and/or publicly traded securities, and for which financing, to the extent required by the Person making the offer, is then fully committed and not subject to any contingencies other than the conditions to such Alternative Transaction Proposal, and (iii) is reasonably capable of being consummated on the terms proposed without unreasonable delay relative to the transactions contemplated by this Agreement; provided that, for purposes of this definition of “Superior Proposal,” that each reference to “15%” in the definition of “Alternative Transaction Proposal” contained herein shall be deemed to be a reference to “85%.”

(ttt) “ Termination Fee ” shall mean an amount in cash equal to sixteen million one hundred thirty five thousand dollars ($16,135,000.00).

(uuu) “ Trade Secrets ” shall mean trade and industrial secrets and confidential information.

(vvv) “ Voting Debt ” shall mean any bonds, debentures, notes or other indebtedness of the Company or any of its Subsidiaries (i) having the right to vote on any matters on which stockholders 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 or voting stock of the Company.

 

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(www) “ WARN ” shall mean the Worker Adjustment and Retraining Notification Act, as amended.

1.2 Additional Defined Terms . The following capitalized terms shall have the respective meanings set forth in the respective Sections of this Agreement set forth opposite each such respective terms below:

 

 

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ARTICLE II

THE MERGER

2.1 The Merger . At the Effective Time and subject to and upon the terms and conditions of this Agreement and the applicable provisions of Delaware Law, Merger Sub shall be merged with and into the Company (the “ Merger ”), the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation and as a wholly owned subsidiary of Parent. The surviving corporation after the Merger is hereinafter sometimes referred to as the “ Surviving Corporation .”

2.2 Effective Time; Closing . Subject to the provisions of this Agreement, the parties hereto shall cause the Merger to be consummated by filing a Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the relevant provisions of Delaware Law (the “ Certificate of Merger ”) (the time of such filing with the Secretary of State of the State of Delaware, or such later time as may be agreed in writing by the Company and Parent and specified in the Certificate of Merger, being the “ Effective Time”) as soon as practicable on or after the Closing Date. The closing of the Merger (the “ Closing ”) shall take place at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, located at 650 Page Mill Road, Palo Alto, California, at a time and date to be specified by the parties, which shall be no later than the second

 

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Business Day after the satisfaction or waiver of the conditions set forth in Article V (other than those that by their terms are to be satisfied or waived at the Closing), or at such other time, date and location as the parties hereto agree in writing. The date on which the Closing occurs is referred to herein as the “ Closing Date .”

2.3 Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of Delaware Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

2.4 Certificate of Incorporation and Bylaws . Unless otherwise determined by Parent prior to the Effective Time, at the Effective Time, the Certificate of Incorporation of the Company shall be amended and restated in its entirety to be identical to the Certificate of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, until thereafter amended in accordance with Delaware Law and as provided in such Certificate of Incorporation; provided , however , that at the Effective Time, Article I of the Certificate of Incorporation of the Surviving Corporation shall be amended and restated in its entirety to read as follows: “The name of the corporation is Secure Computing Corporation” and the Certificate of Incorporation shall be amended so as to comply with Section 6.10(a ). Unless otherwise determined by Parent prior to the Effective Time, at the Effective Time, the Bylaws of the Company shall be amended and restated in their entirety to be identical to the Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, until thereafter amended in accordance with Delaware Law and as provided in such Bylaws; provided, however, that at the Effective Time, the Bylaws shall be amended so as to comply with Section 6.10(a ).

2.5 Directors and Officers . Unless otherwise determined by Parent prior to the Effective Time, (a) the initial directors of the Surviving Corporation shall be the directors of Merger Sub immediately prior to the Effective Time, until their respective successors are duly elected or appointed and qualified, (b) the initial officers of the Surviving Corporation shall be the officers of Merger Sub immediately prior to the Effective Time, until their respective successors are duly appointed, and (c) Parent, the Company and the Surviving Corporation shall cause the directors and officers of Merger Sub immediately prior to the Effective Time to be the directors and officers, respectively of each of the Company’s Subsidiaries immediately after the Effective Time, each to hold office as a director or officer of each such Subsidiary in accordance with the provisions of the laws of the respective jurisdiction of organization and the respective bylaws or equivalent organizational documents of each such Subsidiary.

2.6 Effect on Capital Stock . Upon the terms and subject to the conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any shares of capital stock of the Company, the following shall occur:

(a) Company Common Stock . Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time, other than any shares of Company Common Stock to be cancelled pursuant to Section 2.6(e ), will be cancelled and extinguished and automatically converted (subject to Section 2.7 ) into the right to receive the Common Stock Merger Consideration upon surrender of the certificate representing such share of Company Common Stock in the manner provided in Section 2.8 (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 2.10 ).

(b) Company Preferred Stock . Each share of Company Series A Preferred Stock issued and outstanding immediately prior to the Effective Time, will be redeemed, cancelled and extinguished and

 

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automatically converted (subject to Section 2.7 ) into the right to receive the Preferred Stock Merger Consideration, upon surrender of the certificate representing such share of Company Series A Preferred Stock in the manner provided in Section 2.8 (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 2.10 ).

(c) Company Unvested Common Stock and Company RSUs . As of the Effective Time, each share of Company Unvested Common Stock that is outstanding as of the Effective Time and each Company RSU that is unexpired, unexercised, unvested (after giving effect to the waivers of acceleration contained in the Key Employee Offer Letters) and outstanding as of the Effective Time, shall, on the terms and subject to the conditions set forth in this Agreement, be assumed by Parent. Each such share of Company Unvested Common Stock and each Company RSU so assumed by Parent under this Agreement shall continue to have, and be subject to, the same terms and conditions (including, if applicable, the vesting arrangements and other terms and conditions set forth in the Company Stock Plans and the applicable purchase agreement) as are in effect immediately prior to the Effective Time, except that such share of Company Unvested Common Stock or Company RSU shall represent that number of whole shares of Parent Common Stock equal to the product (rounded down to the next whole number of shares of Parent Common Stock, with no cash being payable for any fractional share eliminated by such rounding) obtained by multiplying (i) the number of shares of Company Unvested Common Stock or Company RSUs held by such Person immediately prior to the Effective Time by (ii) the Exchange Ratio.

(d) Company Warrants . Following the Effective Time, all Company Warrants outstanding at the Effective Time shall be terminated and cancelled, and shall not represent any right to receive consideration pursuant to the terms of this Agreement, and in no event shall such Company Warrants continue to be or become exercisable for any equity securities of Parent, the Company or any of their respective Subsidiaries, in each case pursuant to a Company Warrant termination agreement, in the form attached hereto as Exhibit C , delivered by the holders of Company Warrants contemporaneously with, or prior to, the execution of this Agreement by the parties hereto.

(e) Cancellation of Treasury and Parent Owned Stock . Each share of Company Common Stock or Company Series A Preferred Stock held by the Company or Parent, or any direct or indirect wholly owned Subsidiary of the Company or of Parent, immediately prior to the Effective Time shall be cancelled and extinguished without any conversion thereof.

(f) Capital Stock of Merger Sub . Each share of Merger Sub Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of common stock, no par value, of the Surviving Corporation. Each certificate evidencing ownership of shares of Merger Sub Common Stock shall evidence ownership of such shares of capital stock of the Surviving Corporation.

(g) Stock Options . As of the Effective Time, each of the Company Options that is outstanding (whether or not theretofore vested) will be terminated and cancelled in exchange for the right to receive a single lump sum cash payment equal to the excess, if any, of (i) the product obtained by multiplying (A) the Common Stock Merger Consideration by (B) the number of shares of Company Common Stock subject to such Company Option, less (ii) the product obtained by multiplying (x) the exercise price per share with respect to each share of Company Common Stock subject to such Company Option by (y) the number of shares of Company Common Stock subject to such Company Option. Prior to the Effective Time, the Company shall take or cause to be taken any and all actions reasonably necessary to give effect to the treatment of the Company Options pursuant to this Section 2.6(g ).

 

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(h) Adjustments to Merger Consideration . The Merger Consideration shall be adjusted to reflect fully the appropriate effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Company Common Stock or Company Series A Preferred Stock, as the case may be), reorganization, recapitalization, reclassification or other like change with respect to Company Common Stock or Company Series A Preferred Stock, as the case may be, having a record date on or after the date hereof and prior to the Effective Time.

2.7 Dissenting Shares .

(a) Notwithstanding any other provisions of this Agreement to the contrary, any shares of Company Common Stock or Company Series A Preferred Stock held by a holder who is entitled to demand, and who properly demands, appraisal of such shares (a “ Dissenting Stockholder ”), pursuant to, and also complies in all material respects with, Section 262 of Delaware Law (such Section, “ Section 262 ” and such shares, the “ Dissenting Shares ”), shall not be converted into or represent a right to receive the applicable consideration for Company Common Stock or Company Series A Preferred Stock set forth in Section 2.6 , but rather, such Dissenting Stockholder shall only be entitled to payment of the fair value of such Dissenting Shares in accordance with Section 262 (and, at the Effective Time, such Dissenting Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and such Dissenting Stockholder shall cease to have any right with respect thereto, except the right to receive the fair value of such Dissenting Shares in accordance with Section 262).

(b) Notwithstanding the provisions of Section 2.7(a ), if any Dissenting Stockholder shall effectively withdraw or lose (through failure to perfect or otherwise) such holder’s appraisal rights under Section 262, then, as of the later of the Effective Time and the occurrence of such event, such Dissenting Shares shall automatically be converted into and represent only the right to receive the consideration for Company Common Stock or Company Series A Preferred Stock, as applicable, set forth in Section 2.6 , without interest thereon, upon surrender of the certificate representing such shares.

(c) The Company shall give Parent (i) prompt notice of any written demand for appraisal received by the Company pursuant to Section 262, and (ii) the opportunity to participate in any negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any such demands or offer to settle or settle any such demands. Any communication to be made by the Company to any holder of Company Common Stock with respect to such demands shall be submitted to Parent in advance and shall not be presented to any holder of Company Common Stock prior to the Company receiving Parent’s consent (not to be unreasonably withheld or delayed; and in no event delayed in a manner that prevents the Company from timely complying with its obligations under Section 262 or other applicable Legal Requirements).

2.8 Surrender of Certificates .

(a) Exchange Agent . Parent shall select an institution reasonably acceptable to the Company (whose consent shall not be unreasonably withheld or delayed) to act as the exchange agent (the “ Exchange Agent ”) for the Merger and the payment of the Merger Consideration.

(b) Parent to Provide Cash . Prior to the Effective Time, Parent shall enter into an agreement with the Exchange Agent (to be effective as of the Effective Time) that shall provide that Parent shall deposit with the Exchange Agent, in trust for the benefit of the Company’s stockholders and for exchange in accordance with this Article II , the aggregate Merger Consideration payable pursuant to Section 2.6 . Any cash deposited with the Exchange Agent shall hereinafter be referred to as the “ Exchange Fund .”

 

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(c) Exchange Procedures . Promptly following the Effective Time, Parent shall instruct the Exchange Agent to mail to each holder of record of certificates or instruments evidencing the Company Common Stock, Company Series A Preferred Stock, and, in Parent’s discretion, Company Options, that were outstanding immediately prior to the Effective Time (collectively, the “ Certificates ”) and which were converted into the right to receive the applicable portion of the Merger Consideration pursuant to Section 2.6 , (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 proper delivery of the Certificates to the Exchange Agent, and shall be in such form and have such other provisions as Parent and/or the Exchange Agent may reasonably specify), and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the applicable portion of the Merger Consideration. Upon surrender of Certificates for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Parent, 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 Parent or the Exchange Agent (including any required IRS Form W-9 or Form W-8), the holders of such Certificates shall be entitled to receive in exchange therefor a check or wire transfer in the amount of U.S. dollars representing the applicable portion of the Merger Consideration that such holders have the right to receive pursuant to Section 2.6 , and the Certificates so surrendered shall forthwith be cancelled. Until so surrendered, outstanding Certificates will be deemed from and after the Effective Time, for all corporate purposes, to evidence only the right to receive upon surrender thereof the applicable portion of the Merger Consideration that the holders thereof have the right to receive pursuant to Section 2.6 . No interest will be paid or accrued on any cash payable to holders of Certificates pursuant to this Agreement. In the event of a transfer of ownership of shares of Company Common Stock or Company Series A Preferred Stock or Company Options (if applicable) that is not registered in the transfer records of the Company, the applicable portion of the Merger Consideration that the holder thereof has the right to receive pursuant to Section 2.6 may paid to a transferee if the Certificate representing such shares of Company Common Stock, Company Series A Preferred Stock or Company Options (if applicable) is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer Taxes have been paid.

(d) Required Withholding . Each of Parent, the Exchange Agent and the Surviving Corporation shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement such amounts as may be required to be deducted or withheld therefrom under the Internal Revenue Code of 1986, as amended (the “ Code ”), or any other applicable Legal Requirement. 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.

(e) No Liability . Notwithstanding anything to the contrary in this Section 2.8 , neither Parent, the Exchange Agent, the Surviving Corporation nor any party hereto shall be liable to a holder of shares of Company Common Stock, Company Series A Preferred Stock or Company Options for any amount paid to a public official pursuant to any applicable abandoned property, escheat or similar law.

(f) Investment of Exchange Fund . The Exchange Agent shall invest the 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 stockholders pursuant to this Article II . Any interest and other income resulting from such investment shall become a part of the Exchange Fund, and any amounts in excess

 

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of the amounts payable to Company stockholders or holders of Company Options pursuant to this Article II shall promptly be paid to Parent. To the extent that there are any losses with respect to any such investments, or the Exchange Fund diminishes for any reason below the level required for the Exchange Agent to promptly pay the cash amounts contemplated by this Article II , Parent shall, or shall cause the Surviving Corporation to, promptly replace or restore the cash in the Exchange Fund so as to ensure that the Exchange Fund is at all times maintained at a level sufficient for the Exchange Agent to make such payments contemplated by this Article II .

(g) Termination of Exchange Fund . Any portion of the Exchange Fund which remains undistributed to the holders of Certificates twelve (12) months after the Effective Time shall, at the request of the Surviving Corporation, be delivered to the Surviving Corporation or otherwise according to the instruction of the Surviving Corporation, and any holders of the Certificates who have not surrendered such Certificates in compliance with this Section 2.8 shall after such delivery to the Surviving Corporation, subject to Section 2.8(e ), look only to the Surviving Corporation solely as general creditors for the cash constituting the Merger Consideration (which shall not accrue interest) pursuant to Section 2.6(a ).

2.9 No Further Ownership Rights in any Company Securities . All Merger Consideration paid upon the surrender for exchange of Company Common Stock, Company Series A Preferred Stock and Company Options in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such Company Common Stock, Company Series A Preferred Stock and Company Options, and there shall be no further registration of transfers on the records of the Surviving Corporation of shares of Company Common Stock, Company Series A Preferred Stock and Company Options which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be cancelled and exchanged as provided in this Article II .

2.10 Lost, Stolen or Destroyed Certificates . In the event any Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof, such cash constituting the Merger Consideration; provided , however , that Parent or Exchange Agent may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificates to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Parent, the Company or the Exchange Agent with respect to the Certificates alleged to have been lost, stolen or destroyed.

2.11 Further Action . At and after the Effective Time, the officers and directors of Parent and the Surviving Corporation will be authorized to execute and deliver, in the name and on behalf of the Company and Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of Company and Merger Sub, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the disclosure letter of the Company addressed to Parent and Merger Sub, dated as of the date hereof and delivered to Parent and Merger Sub concurrently with the parties’ execution of this Agreement (the “ Company Disclosure Letter ”), referencing a representation or warranty herein (it being

 

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understood that (i) the Company Disclosure Letter shall be arranged in sections and subsections corresponding to the sections and subsections contained in this Article III , (ii) the disclosures in any section or subsection of the Company Disclosure Letter shall qualify the applicable representations and warranties in the corresponding section or subsection of this Article III and, in addition, the representations and warranties in other sections or subsections in this Article III to the extent it is reasonably apparent on the face of such disclosures that such disclosures are applicable to such other sections or subsections, and (iii) such disclosures in the Company Disclosure Letter relating to representations and warranties in this Article III shall also be deemed to be representations and warranties made by the Company under this Article III (to the extent required by such representations and warranties)), the Company represents and warrants to Parent and Merger Sub as follows:

3.1 Organization; Standing and Power; Charter Documents; Subsidiaries .

(a) Organization; Standing and Power . The Company and each of its Subsidiaries (i) 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 (except, in the case of good standing, for entities organized under the laws of any jurisdiction that does not recognize such concept), (ii) has the requisite power and authority to own, lease and operate its properties and to carry on its business as currently conducted, and (iii) is duly qualified or licensed to do business and in good standing as a foreign corporation in each jurisdiction in which the character or location of its assets or properties (whether owned, leased or licensed) or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed to do business and to be in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company.

(b) Charter Documents . The Company has made available to Parent (i) a true and correct copy of the certificate of incorporation, the certificate of designations, preferences and rights of Company Series A Preferred Stock (the “ Certificate of Designations ”), and bylaws of the Company, each as amended to date (collectively, the “ Company Charter Documents ”) and (ii) the certificate of incorporation and bylaws, or like organizational documents (collectively, “ Subsidiary Charter Documents ”), of each of its Subsidiaries, and each such instrument is in full force and effect. The Company is not in violation of any of the provisions of the Company Charter Documents and each Subsidiary is not in violation of its respective Subsidiary Charter Documents.

(c) Subsidiaries . Section 3.1(c ) of the Company Disclosure Letter sets forth each Subsidiary of the Company. The Company is the owner, directly or indirectly, of all of the outstanding shares of capital stock of, or other equity or voting interests in, each such Subsidiary and all such shares or interests have been duly authorized, validly issued and are fully paid and nonassessable, free and clear of all 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. Other than the Subsidiaries of the Company, neither the Company nor any of its Subsidiaries owns any capital stock of, or other equity or voting interests of any nature in, or any interest convertible, exchangeable or exercisable for, capital stock of, or other equity or voting interests of any nature in, any other Person, except for passive investments of less than 1% in the equity interests of public companies as part of the Company’s cash management program.

3.2 Capital Structure .

(a) Capital Stock . The authorized capital stock of Company consists of: (i) one hundred million (100,000,000) shares of Company Common Stock and (ii) two million (2,000,000) shares of

 

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Company Preferred Stock, of which seven hundred thousand (700,000) shares are designated Company Series A Preferred Stock. As of the close of business on September 18, 2008 (the “ Cutoff Time ”): (i) 68,319,443 shares of Company Common Stock were issued and outstanding (excluding shares of Company Common Stock held by the Company in its treasury and Company Unvested Common Stock), (ii) 2,175,835 shares of Company Unvested Common Stock were issued and outstanding, (iii) 350,423 Company RSUs were issued and outstanding, (iv) 6,656,910 shares of Company Common Stock were issued and held by the Company in its treasury and (v) seven hundred thousand (700,000) shares of Company Series A Preferred Stock were issued and outstanding, and no other shares of Company Preferred Stock were issued and outstanding. No shares of Company Common Stock or Company Series A Preferred Stock are owned or held by any Subsidiary of the Company. All outstanding shares of Company Common Stock and Company Series A Preferred Stock are duly authorized, validly issued, fully paid and non-assessable and are not subject to preemptive rights created by statute, the Company Charter Documents, or any agreement to which the Company is a party or by which it is bound. In the period from the Cutoff Time to the date hereof, the Company has not issued any shares of Company Stock other than pursuant to the exercise of Company Options, Company RSUs or Company Warrants outstanding as of the Cutoff Time.

(b) Company Unvested Common Stock and Company RSUs . Section 3.2(b ) of the Company Disclosure Letter sets forth, as of the Cutoff Time, a list of each holder of Company Unvested Common Stock and Company RSUs, and (i) the name and address of the holder of such Company Unvested Common Stock or Company RSUs, (ii) the number of shares of Company Unvested Common Stock or Company RSUs held by such holder, (iii) the date of issuance of such shares of Company Unvested Common Stock or Company RSUs, (iv) the repurchase price of such Company Unvested Common Stock, (v) the applicable vesting schedule of such Company RSUs, and the applicable vesting schedule for such Company Unvested Common Stock pursuant to which the Company’s right of repurchase or forfeiture lapses, (vi) the extent to which such Company right of repurchase or forfeiture has lapsed as of the date hereof and whether such right of repurchase or forfeiture will be accelerated or otherwise affected by the transactions contemplated hereby with respect to the Company Unvested Common Stock, and (vii) whether or not the holder of such shares of Company Unvested Common Stock or Company RSUs is an employee of the Company or one of its Subsidiaries. There are no commitments or agreements of any character to which the Company is bound obligating the Company to waive its right of repurchase or forfeiture with respect to any Company Unvested Common Stock as a result of the Merger (whether alone or upon the occurrence of any additional or subsequent events). In the period from the Cutoff Time to the date hereof, the Company has not issued any shares of Company Unvested Common Stock or Company RSUs.

(c) Company Options and Company Warrants . As of the Cutoff Time: (i) 10,616,972 shares of Company Common Stock are issuable upon the exercise of Company Options under the Company Stock Plans, the weighted average exercise price of such Company Options is $8.89472, and 8,647,656 shares of Company Common Stock underlying such Company Options are vested and exercisable; (ii) 4,627,408 shares of Company Common Stock are available for future grant under the Company Stock Plans; (iii) 1,095,182 shares of Company Common Stock are available for issuance under the Company’s Amended and Restated Employee Stock Purchase Plan and any other employee stock purchase plan of the Company (the “ Company Purchase Plans ”); (iv) no shares of Company Common Stock are issuable pursuant to outstanding options to purchase Company Common Stock (A) which are issued other than pursuant to the Company Stock Plans and (B) other than shares reserved for issuance under the Company Purchase Plans; and (v) 1,064,259 shares of Company Common Stock are issuable upon the exercise of Company Warrants. Section 3.2(c) of the Company Disclosure Letter sets forth a list of each outstanding Company Option and Company Warrant: (a) the particular Company Stock Plan (if any) pursuant to which any such Company Option was granted; (b) the name and address of the holder of such Company Option or Company Warrant;

 

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(c) the number of shares of Company Common Stock subject to such Company Option or Company Warrant; (d) the exercise price of such Company Option or Company Warrant; (e) the date on which such Company Option or Company Warrant was granted or issued; (f) the applicable vesting schedule, if any, and the extent to which such Company Option or Company Warrant is vested and exercisable as of the date hereof; and (g) the date on which such Company Option or Company Warrant expires. All shares of Company Common Stock subject to issuance under the Company Stock Plans, the Company Purchase Plans and the Company Warrants, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no commitments or agreements of any character to which the Company is bound obligating the Company to accelerate the vesting of any Company Option as a result of the Merger (whether alone or upon the occurrence of any additional or subsequent events). As of the end of the second most recent payroll period ending prior to the date hereof (which ended on August 31, 2008), the aggregate amount credited to the accounts of participants in the Company Purchase Plans was $172,940.26 and the aggregate amount credited to such accounts for such payroll period was $65,782.30. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or other similar rights with respect to the Company. In the period from the Cutoff Time to the date hereof, the Company has not granted any Company Options or issued any Company Warrants.

(d) Voting Debt . No Voting Debt is issued or outstanding as of the date hereof.

(e) Other Securities . Except as otherwise set forth in Section 3.2(b) , Section 3.2(c) or Section 3.2(e) of the Company Disclosure Letter, as of the date hereof, there are no securities, options, warrants, calls, rights, contracts, commitments, agreements, instruments, arrangements, understandings, obligations or undertakings of any kind to which the Company or any of its Subsidiaries is a party or by which any of them is bound obligating the Company or any of its Subsidiaries to (including on a deferred basis) issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of Company Stock, Voting Debt or other voting or non-voting securities of the Company or any of its Subsidiaries, or obligating the Company or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, instrument, arrangement, understanding, obligation or undertaking. All outstanding shares of Company Stock, Company Options, Company Warrants and all outstanding shares of capital stock of each Subsidiary of the Company have been issued, granted or repurchased in compliance with (i) all applicable securities laws and all other applicable Legal Requirements, and (ii) all requirements set forth in applicable Contracts of the Company or any of its Subsidiaries. Except for shares of Company Unvested Common Stock, there are no outstanding Contracts of the Company or any of its Subsidiaries to (x) repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries or (y) dispose of any shares of the capital stock of, or other equity or voting interests in, any of its Subsidiaries. The Company is not a party to any voting agreement with respect to shares of the capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries and, to the knowledge of the Company, other than the Voting Agreements and the irrevocable proxies granted pursuant to the Voting Agreements, there are no irrevocable proxies and no voting agreements, voting trusts, rights plans, anti-takeover plans or registration rights agreements with respect to any shares of the capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries.

3.3 Authority; No Conflict; Necessary Consents .

(a) Authority . The Company has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, subject, in the case of consummation of the Merger, to obtaining Company Stockholder Approval (as defined below) as contemplated in Section 6.2 .

 

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The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, and no further action is required on the part of the Company to authorize the execution and delivery of this Agreement or to consummate the Merger and the other transactions contemplated hereby, subject only to obtaining the Company Stockholder Approval and the filing of the Certificate of Merger pursuant to Delaware Law. The vote of the Company’s stockholders that is required by the Charter Documents, by applicable Legal Requirements and by any applicable Contracts between the Company and any of its stockholders, to approve this Agreement, the Merger and the transactions contemplated hereby by the Company stockholders is set forth in Section 3.3(a ) of the Company Disclosure Letter (such required vote set forth on Section 3.3(a ) of the Company Disclosure Letter, the “ Company Stockholder Approval ”). By resolution adopted by unanimous vote at a meeting of all members of the Company’s Board of Directors duly called and held and not subsequently rescinded or modified in any way, the Board of Directors of the Company has duly (i) determined that the Merger is fair to, and in the best interests of, the Company and its stockholders, and declared the Merger to be advisable, (ii) approved this Agreement and the transactions contemplated hereby, including the Merger, and (iii) recommended that the stockholders of the Company approve and adopt this Agreement and approve the Merger and directed that such matter be submitted to the Company’s stockholders at the Company Stockholders’ Meeting. This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery by Parent and Merger Sub, constitutes the valid and binding obligation of the Company, enforceable against the 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.

(b) No Conflict . Neither the execution and delivery of this Agreement by the Company, nor the consummation of the Merger or any other transaction contemplated hereby: (a) conflicts with, or (with or without notice or lapse of time, or both) results in a termination, breach, impairment or violation of, or constitutes a default under, or requires a consent, waiver or approval of any Person under, (i) any provision of the Company Charter Documents or any Subsidiary Charter Documents, each as currently in effect, (ii) subject to compliance with the requirements of the Necessary Consents (as defined below), any Legal Requirement applicable to the Company, any of its Subsidiaries, or any of their respective assets or properties, or (iii) any Company Material Contract (as defined below) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective assets or properties are bound, (except in the case of clauses (ii) or (iii), where such conflicts, terminations, breaches, impairments, violations or defaults, or failures to obtain such consents, waivers or approvals, individually or in the aggregate, would not reasonably be expected to constitute a Material Adverse Effect on the Company; or (b) will result in the creation of any Lien on any of the material properties or assets of the Company or its Subsidiaries, except where such Liens, individually or in the aggregate, would not reasonably be expected to constitute a Material Adverse Effect on the Company.

(c) Necessary Consents . No consent, waiver, approval, order or authorization of, or registration, declaration or filing with any Governmental Entity is required to be obtained or made by the Company in connection with the execution and delivery of this Agreement or the consummation of the Merger and other transactions contemplated hereby and thereby, except for (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents, as required by applicable Legal Requirements, with the relevant authorities of other states in which the Company and/or Parent are qualified to do business, (ii) the filing of the Proxy Statement with the SEC in accordance with the Exchange Act and such other filings with Governmental Entities as may be required by any federal or state securities laws, (iii) the filing of the Notification and Report Forms with FTC and the Antitrust Division of

 

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the DOJ required by the HSR Act and the expiration or termination of the applicable waiting period under the HSR Act and such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under the foreign merger control regulations, if applicable, and such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under any required foreign merger control regulations, if applicable, as reasonably determined Parent, and (iv) such other consents, waivers, approvals, orders, authorizations, registrations, declarations and filings which if not obtained or made would not have a Material Adverse Effect on the Company. The consents, approvals, orders, authorizations, registrations, declarations and filings set forth in (i) through (iv) are referred to herein as the “ Necessary Consents .”

3.4 SEC Filings; Financial Statements; Internal Controls .

(a) SEC Filings . Since January 1, 2005, the Company has filed all required registration statements, prospectuses, reports, schedules, forms, statements, certifications and other documents (including exhibits and all other information incorporated by reference) required to be filed by it with, or furnished to, the SEC (all such required registration statements, prospectuses, reports, schedules, forms, statements and other documents (including those that the Company may file subsequent to the date hereof) are referred to herein as the “ Company SEC Reports ”). As of their respective dates, the Company SEC Reports (i) were prepared in accordance and complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Company SEC Reports and the disclosure requirements of Rule 4350 of the NASDAQ Global Select Market, in each case, as in effect on the date such Company SEC Report was filed, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless corrected in a later filed Company SEC Report. None of the Company’s Subsidiaries is required to file any forms, reports or other documents with the SEC. The Company and each of its executive officers and directors are in compliance with, and have complied, in each case in all material respects with (i) the applicable provisions of the Sarbanes-Oxley Act of 2002 and the related rules and regulations promulgated under or pursuant to such act (“ SOX ”), and (ii) the applicable listing and corporate governance rules and regulations of the NASDAQ Global Select Market.

(b) Financial Statements . Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Company SEC Reports (the “ Company Financials ”), including each Company SEC Report filed after the date hereof until the Closing: (i) complied, as of their respective dates of filing with the SEC, as to form in all material respects with the published rules and regulations of the SEC with respect thereto, (ii) 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 or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q or 8-K under the Exchange Act), and (iii) fairly and accurately presented, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries as at the respective dates thereof and the consolidated results of the Company’s operations and cash flows for the periods indicated (except that the unaudited interim financial statements were subject to normal and recurring year-end and quarter-end adjustments which were not material). The Company does not intend to correct or restate, nor, to the knowledge of the Company, is there any basis, facts or circumstances that would reasonably be expected to result in any correction or restatement of, any material aspect of the Company Financials. The audited balance sheet of the Company contained in the Company SEC Reports as of June 30, 2008, is hereinafter referred to as the “ Company Balance Sheet .” The Company has not had any

 

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significant dispute with any of its auditors regarding accounting matters or policies during any of its past five (5) full fiscal years or during the current fiscal year-to-date. The books and records of the Company and each Subsidiary have been, and are being, maintained in all material respects in accordance with applicable legal and accounting requirements, and the Company Financials are consistent with such books and records. Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract relating to any transaction or relationship between or among the Company or any of its Subsidiaries, on the one hand, and any unconsolidated affiliate, including any structured finance, special purpose or limited purpose Person, on the other hand, including, without limitation, any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K promulgated by the SEC), where the result, purpose or intended effect of such contract or arrangement is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of its Subsidiaries in the Company’s or such Subsidiary’s published financial statements or other Company SEC Reports. The Company and its Subsidiaries have made appropriate disclosures in the Financial Statements in accordance with the requirements of Financial Interpretation No. 48 of FASB Statement No. 109.

(c) No Undisclosed Liabilities . Except as reflected or reserved against in the Company Balance Sheet, neither the Company nor any of its Subsidiaries has any Liabilities of any nature that would be required by GAAP to be reflected on a consolidated balance sheet of the Company and its Subsidiaries or described in the notes thereto which are, individually or in the aggregate, material to the business, results of operations or financial condition of the Company and its Subsidiaries, taken as a whole, except (i) Liabilities incurred since the date of the Company Balance Sheet in the ordinary course of business consistent with past practice which are of the type which ordinarily recur and, individually or in the aggregate, are not material in nature or amount and do not result from any breach of Contract, tort or violation of any applicable Legal Requirement, and (ii) Liabilities arising under this Agreement or incurred in connection with the transactions contemplated by this Agreement.

(d) Amendments . The Company has made available to Parent a complete and correct copy of any amendments or modifications which have not yet been filed with, or furnished to, the SEC, but which are required to be filed or furnished, to agreements, documents or other instruments which previously had been filed by Company with the SEC, or furnished by the Company to the SEC, pursuant to the Securities Act or the Exchange Act. Since January 1, 2005, no “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K promulgated by the SEC) filed as an exhibit to the Company SEC Reports has been amended or modified, except for amendments or modifications which have been filed as an exhibit to a subsequently dated Company SEC Report. The Company has responded to all comment letters of the staff of the SEC relating to the Company SEC Reports, and the SEC has not advised the Company that any final responses are inadequate, insufficient or otherwise non-responsive. To the Company’s knowledge, none of the Company SEC Reports is the subject of ongoing SEC review or outstanding SEC comments. The Company has made available to Parent true, correct and complete copies of all correspondence between the SEC, on the one hand, and the Company and any of its Subsidiaries, on the other, including all SEC comment letters and responses to such comment letters by or on behalf of the Company, since January 1, 2005.

(e) Internal Controls . The Company has established and maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions, receipts and expenditures of the Company and its Subsidiaries are being executed and made only in accordance with appropriate authorizations of management and the Company’s Board of Directors, (ii) transactions are recorded as necessary (A) to permit preparation of financial statements in conformity with GAAP applied on a consistent basis and (B) to maintain accountability for assets, (iii) provide reasonable assurance regarding prevention or

 

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timely detection of unauthorized acquisition, use or disposition of the assets of the Company and its Subsidiaries, (iv) the amount recorded for assets on the books and records of the Company is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. There are no “significant deficiencies” or “material weaknesses” (as defined by the Public Company Accounting Oversight Board) in the design or operation of the Company’s internal controls and procedures which could adversely affect the Company’s ability to record, process, summarize and report financial data. To the Company’s knowledge, there is no fraud, whether or not material, that involves management or other current or former employees of the Company or any of its Subsidiaries who have a role in the Company’s internal control over financial reporting. The Company has established and maintains “disclosure controls and procedures” (as defined in Rule 13a-15 promulgated under the Exchange Act) designed to ensure that information required to be disclosed by the Company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the “principal executive officer” and the “principal financial officer” of the Company required by Section 302 of the SOX with respect to such reports, and such controls are effective for this purpose. Each of the principal executive officer of the Company and the principal financial officer of the Company (or each former principal executive officer of the Company and each former principal financial officer of the Company, as applicable) has made all certifications required by Sections 302 and 906 of SOX and the rules and regulations promulgated thereunder with respect to the Company SEC Reports and the statements contained in such certifications are true and accurate as of the date hereof. The Company has established and maintains “internal control over financial reporting” (as defined in Rule 13a-15 promulgated under the Exchange Act) and such internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of the Company’s financial statements in accordance with GAAP.

3.5 Absence of Certain Changes or Events . Since the date of the Company Balance Sheet, the Company and its Subsidiaries have operated their businesses in the ordinary course consistent with past practices, and since such date there has not been:

(a) any amendment or change in the Company Charter Documents or Subsidiary Charter Documents;

(b) any Material Adverse Effect on the Company;

(c) any acquisition by the Company or any Subsidiary of the Company, or agreement by the Company or any Subsidiary to acquire by merging or consolidating with, or by purchasing, any material portion of assets or equity securities of, or by any other manner, any business or corporation, partnership, association or other business organization or division thereof;

(d) any Contract, agreement in principle, letter of intent, memorandum of understanding or similar agreement with respect to any material joint venture, strategic partnership or alliance;

(e) any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, any of the Company’s or any of its Subsidiaries’ capital stock, or any purchase, redemption or other acquisition by the Company or any of its Subsidiaries of any of the Company’s capital stock or any other securities of the Company or its Subsidiaries, or any Company Option, Company Warrant, calls or rights to acquire any such shares or other securities, except for

 

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repurchases from, and forfeitures by, Employees following their termination pursuant to the terms of their pre-existing stock option or purchase agreements and restricted stock award and restricted stock unit award agreements;

(f) any split, combination or reclassification of any of the Company’s or any of its Subsidiaries’ capital stock;

(g) any forgiveness by the Company or any of its Subsidiaries, whether orally or in writing, of any loan to any Employee in an amount exceeding $10,000;

(h) (i) any material increase or decrease in compensation or fringe benefits (except for normal increases or decreases of cash compensation to current non-officer employees in the ordinary course of business consistent with past practice) by the Company or any of its Subsidiaries, whether orally or in writing, (ii) any promise, commitment or payment by the Company or any of its Subsidiaries, whether orally or in writing, of any material bonus (except for bonuses made to current non-officer employees in the ordinary course of business consistent with past practice), (iii) any adoption, change, or termination by the Company or any of its Subsidiaries, whether orally or in writing, of any severance, change of control, termination or bonus plan, policy or practice, or (iv) the adoption, termination or amendment of any Company Employee Plan or collective bargaining agreement;

(i) any amendment or termination with respect to any Company Material Contract;

(j) (i) entry into a customer Contract that provides for (or is reasonably expected to provide for) revenues in excess of $250,000 annually and contains any material non-standard terms, including but not limited to, non-standard discounts, provisions for unpaid future deliverables, non-standard service requirements or future royalty payments other than in the ordinary course of business consistent with past practice, or any material change in the manner in which the Company or any of its Subsidiaries extends discounts, credits or warranties to customers or otherwise deals with its customers, or (ii) entry into any reseller or distributor agreement that provides for (or is reasonably expected to provide for) revenues in excess of $250,000 annually), in each case, other than in the ordinary course of business consistent with past practice;

(k) any change by the Company in its accounting methods, except as required by GAAP or applicable Legal Requirements;

(l) any debt, capital lease or other debt or equity financing transaction by the Company or any of its Subsidiaries or entry into any agreement by the Company or any of its Subsidiaries in connection with any such transaction;

(m) any material restructuring activities by the Company or any of its Subsidiaries, including any reductions in force, lease terminations, restructuring of contracts or similar actions;

(n) any sale, lease, license, encumbrance or other disposition of any business lines or any properties or assets, except the sale, lease, license or disposition of property or assets which are not material, individually or in the aggregate, to the business of the Company or the licenses of current Company Products, in each case, in the ordinary course of business and in a manner consistent with past practice;

 

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(o) (i) any loan or extension of credit by the Company or any of its Subsidiaries to any Person other than in the ordinary course of business consistent with past practice, or (ii) any loan, advance or capital contribution to, or any investment in, any of the Company’s or its Subsidiaries’ executive officers, directors or 1% stockholders or any firm or business enterprise in which the Company had knowledge that such officer, director or stockholder had a direct or indirect material interest at the time of such loan, advance, capital contribution or investment;

(p) adoption of or change in any Tax accounting method or Tax election, entering into any closing agreement in respect of Taxes, settlement or compromise of any Tax claim or assessment, or extension or waiver of the limitation period applicable to any Tax claim or assessment other than with respect to any Tax liability that is in an amount less than $200,000 individually or $400,000 in the aggregate;

(q) any expenditure, transaction or commitment by the Company or any of its Subsidiaries exceeding $200,000 individually or $400,000 in the aggregate, other than in the ordinary course of business consistent with past practice;

(r) any material damage, destruction or loss of any material property or material asset of the Company or any of its Subsidiaries, whether or not covered by insurance;

(s) any termination of employment of a senior manager or key employee, or the termination of a material number of employees;

(t) any claims or matters raised by any individual, Governmental Entity, or workers’ representative organization, bargaining unit or union, regarding, claiming or alleging a labor dispute, labor trouble, wrongful discharge or any other unlawful employment or labor practice or action with respect to the Company or any of its Subsidiaries;

(u) any material Liability incurred by it to any of its officers, directors or stockholders, except for normal and customary compensation and expense allowances payable to officers and directors in the ordinary course of its business consistent with its past practices;

(v) any commencement or settlement of any material litigation by the Company or any of its Subsidiaries;

(w) any material revaluation, or any indication that such a revaluation was merited under GAAP, by the Company of any of its material assets, other than in the ordinary course of business consistent with past practice; or

(x) announcement of, any negotiation by or any entry into any Contract to do any of the things described in the preceding clauses (a) through (w) by the Company or any of its Subsidiaries (other than negotiations and agreements with Parent and its representatives regarding the transactions contemplated by this Agreement).

3.6 Taxes

(a) Definition of Taxes . For the purposes of this Agreement, the term “ Tax ” or, collectively, “ Taxes ” shall mean any and all U.S. federal, state, local and non-U.S. taxes, assessments and other governmental charges, duties, impositions and liabilities relating to taxes, including taxes based upon or

 

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measured by gross receipts, income, profits, sales, use and occupation, value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes as well as social security charges (including health, unemployment, workers’ compensation and pension insurance) and fees, together with all interest, penalties and additions imposed with respect to such amounts.

(b) Tax Returns and Audits .

(i) The Company and each of its Subsidiaries have timely filed all U.S. federal, state, local and non-U.S. returns, estimates, information statements and reports (“ Returns ”) relating to all Taxes of the Company or any of its Subsidiaries and such Returns are true and correct in all material respects and have been completed in accordance with applicable Legal Requirements.

(ii) The Company and each of its Subsidiaries have complied in all material respects with all applicable Legal Requirements relating to the payment and withholding of Taxes (including withholding of Taxes in connection with amounts paid or owing to any employee, former employee or independent contractor) and has duly and timely withheld and has paid over to the appropriate Governmental Entity all amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Legal Requirements.

(iii) Neither the Company nor any of its Subsidiaries has been delinquent in the payment of any material Tax, nor is there any material Tax deficiency outstanding, assessed or proposed against the Company or any of its Subsidiaries, nor has the Company or any of its Subsidiaries executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax, which waiver or extension is currently in effect.

(iv) No audit or other examination of any Return of the Company or any of its Subsidiaries is currently in progress, nor has the Company or any of its Subsidiaries received written notice of any request for such an audit or other examination. Neither the Company nor any of its Subsidiaries has received written notice of a proposed material adjustment by any Tax authority relating to any Return filed by it. Each of the Company and its Subsidiaries has in its possession copies of all Tax settlement agreements or similar reports issued by a Tax authority as a result of an auditor examination for all periods since its inception.

(v) Neither the Company nor any of its Subsidiaries is or has been at any time, a “United States Real Property Holding Corporation” within the meaning of Section 897(c)(2) of the Code.

(vi) Neither the Company nor any of its Subsidiaries is required to include any income or gain in or exclude any deduction or loss from income for any tax period (or portion thereof) after the Closing (A) as a result of a closing agreement (within the meaning of Section 7121 of the Code or any comparable provision of applicable law) executed prior to the Closing or (B) under Section 481(a) of the Code by reason of a voluntary change in accounting method initiated by, or with respect to, the Company or a Subsidiary. The IRS has not proposed in writing any such adjustment or change in accounting method.

(vii) Neither the Company nor any of its Subsidiaries has any Liabilities for unpaid Taxes which have not been accrued or reserved on the Company Financials in accordance with GAAP, and neither the Company nor any of its Subsidiaries has incurred any Liability for Taxes since the date of the Company Balance Sheet other than in the ordinary course of business.

 

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(viii) Neither the Company nor any of its Subsidiaries has (a) ever been a member of an affiliated group (within the meaning of Code §1504(a)) filing a consolidated U.S. federal income Tax Return (other than a group the common parent of which was Company), (b) ever been a party to any Tax sharing, indemnification or allocation agreement, or (c) any liability for the Taxes of any Person (other than Company or any of its Subsidiaries), under Treasury Regulation § 1.1502 6 (or any similar provision of state, local or non-U.S. law including any arrangement for group or consortium Tax relief or similar arrangement), as a transferee or successor, by contract or agreement, by operation of law, or otherwise.

(ix) Neither the 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) Neither the Company nor any of its Subsidiaries has participated in any listed transaction within the meaning of Section 1.6011-4(b)(2) of the Treasury Regulations, or, to the knowledge of the Company, in a reportable transaction under Treasury Regulations Section 1.6011-4(b).

(xi) Neither the Company nor any of its Subsidiaries has received written notice from a Governmental Entity in a jurisdiction where the Company or a Subsidiary, as applicable, does not file Returns to the effect that the Company or the Subsidiary is or may be subject to taxation by that jurisdiction.

(xii) The Company and its Subsidiaries are and have been in compliance in all material respects with all applicable transfer pricing laws and regulations, including the execution and maintenance of contemporaneous documentation substantiating transfer pricing practices of the Company and its Subsidiaries. The prices for any property or services (or for the use of any property) provided by or to the Company or any of its Subsidiaries are arm’s-length prices for purposes of the relevant transfer pricing laws, including Treasury Regulations promulgated under Section 482 of the Code.

(xiii) The Company and each of its Subsidiaries have complied in all material respects with all applicable escheat or unclaimed property laws, and neither the Company nor any of its Subsidiaries has any liabilities for the payment of any amounts as a result of the application of such laws that have not been reserved for in accordance with GAAP on the Company Financials.

(xiv) The Company has provided to Parent all documentation relating to, and each of the Company and its Subsidiaries is in compliance in all material respects with, all terms and conditions of any Tax exemption, Tax holiday or other Tax reduction agreement or order.

(c) Loss of Executive Compensation Deduction . There is no Contract to which the Company or any of its ERISA Affiliates is a party, including the provisions of this Agreement, covering any Employee of the Company or any ERISA Affiliate, which, individually or collectively with other payments the Company makes, that will give rise to the payment of any amount that would not be deductible pursuant to Sections 404 or 162(m) of the Code.

(d) Section 409A . Section 3.6(d) of the Company Disclosure Letter lists each Contract between the Company or any ERISA Affiliate and any Employee that is a “nonqualified deferred compensation plan” subject to Section 409A of the Code. Each such nonqualified deferred compensation plan, if any, has been operated since January 1, 2005 in good faith compliance with Section 409A of the Code. No deferred compensation plan existing prior to January 1, 2005, which would otherwise be subject to Section 409A, has been “materially modified” at any time after October 3, 2004. No stock right (as defined in

 

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U.S. Treasury Department regulation 1.409A-1(l)) has been granted to any Employee that (i) has an exercise price that has been or may be less than the fair market value of the underlying equity as of the date such option or right was granted, (ii) has any feature for the deferral of compensation other than the deferral of recognition of income until the later of exercise or disposition of such option or rights, or (iii) has been granted after December 31, 2004, with respect to any class of stock that is not “service recipient stock” (within the meaning of applicable regulations under Section 409A of the Code). No compensation shall be includable in the gross income of any Employee as a result of the operation of Section 409A of the Code with respect to any arrangements or agreements in effect as of the Effective Time. There is no Contract, agreement, plan or arrangement to which the Company or any of its ERISA Affiliates is a party, including the provisions of this Agreement, covering any Employee of the Company, which individually or collectively could require the Company or any of its Affiliates to pay a tax gross up payment to any Employee for Tax-related payments under Section 409A of the Code.

(e) Section 280G . None of the Company or any of its ERISA Affiliates has made any payment to any Employee and is not party to a Contract, agreement or arrangement with any Employee to make payment, individually or considered collectively with any other Contracts, that will, or could reasonably be expected to, be characterized as a “parachute payment” within the meaning of Section 280G(b)(1) of the Code or that could not be deductible under Section 280G of the Code. There is no Contract by which the Company or any of its ERISA Affiliates is bound to compensate any Employee for excise taxes paid pursuant to Section 4999 of the Code. Section 3.6(e) of the Company Disclosure Letter lists all Employees reasonably believed to be “disqualified individuals” (within the meaning of Section 280G of the Code) as determined as of the date hereof.

3.7 Title to Properties .

(a) Properties . Neither the Company nor any of its Subsidiaries owns or has ever owned any real property. Section 3.7(a) of the Company Disclosure Letter sets forth a list of all real property currently leased, licensed or subleased by the Company or any of its Subsidiaries or otherwise used or occupied by the Company or any of its Subsidiaries (the “ Leased Real Property ”), the name of the lessor, licensor, sublessor, master lessor and/or lessee, the date of the lease, license, sublease or other occupancy right and each amendment thereto. All such current leases are in full force and effect, are valid and effective in accordance with their respective terms (except as such enforceability may be subject to laws of general application relating to bankruptcy, insolvency, and the relief of debtors and rules of law governing specific performance, injunctive relief, or other equitable remedies), and there is not, under any of such leases, any existing material default or event of default (or event which with notice or lapse of time, or both, would constitute a material default) by the Company or any of its Subsidiaries, or to the knowledge of the Company, by any other party thereto. The Company or its Subsidiaries currently occupy all of the Leased Real Property for the operation of its business. To the knowledge of the Company, no parties other than the Company or any of its Subsidiaries have a right to occupy any Leased Real Property. To the knowledge of the Company, the Leased Real Property is in compliance, in all material respects, with Legal Requirements. The Company and each of its Subsidiaries has performed all of its material obligations under any material termination agreements pursuant to which it has terminated any leases of real property that are no longer in effect and has no material continuing Liability with respect to such terminated real property leases. The physical assets of the Company and the Subsidiaries are, in all material respects, in good condition and repair, subject to normal wear and tear.

(b) Documents . The Company has made available to Parent correct and complete copies of all leases, lease guaranties, agreements for the leasing, use or occupancy of, or otherwise granting a right in

 

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or relating to the Leased Real Pr