AGREEMENT AND PLAN OF MERGER

EXHIBIT 2.1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

TRIPOS (DE), INC.

PEARSON MERGER CORPORATION

AND

PHARSIGHT CORPORATION

Dated as of September 8, 2008

TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

(continued)

 

 

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TABLE OF CONTENTS

(continued)

 

 

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INDEX OF EXHIBITS

 

 

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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 8, 2008, by and among Tripos (DE), Inc., a Delaware corporation (“ Parent ”), Pearson Merger Corporation, a Delaware corporation and direct wholly-owned subsidiary of Parent (“ Merger Sub ”), and Pharsight Corporation, a Delaware corporation (the “ Company ”).

RECITALS

A. WHEREAS, the board of directors of the Company (the “ Company Board ”) has (i)) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, to enter into this Agreement providing for the merger of Merger Sub with and into the Company in accordance with the applicable provisions of the laws of the State of Delaware (“ Delaware Law ”) upon the terms and subject to the conditions set forth herein, (ii) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby upon the terms and conditions set forth herein, and (iii) resolved to recommend that the stockholders of the Company adopt this Agreement in accordance with Delaware Law.

B. WHEREAS, the board of directors of Parent and the board of directors of Merger Sub have (i) declared it advisable to enter into this Agreement, and (ii) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby upon the terms and subject to the conditions set forth herein.

C. WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the transactions contemplated by this Agreement, and to prescribe certain conditions with respect to the consummation of the transactions contemplated by this Agreement.

D. WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, certain stockholders of the Company are entering into Voting Agreements with Parent and Merger Sub substantially in the form attached as Exhibit A (the “ Voting Agreements ”).

E. WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to the Company’s willingness to enter into this Agreement, Vector Capital III, L.P. (the “ Investor ”) has executed and delivered to the Company an equity commitment letter in connection with this Agreement.

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

ARTICLE I

THE MERGER

Section 1.1 The Merger . At the Effective Time (as defined below) 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. The Company, as the surviving corporation after the Merger, is hereinafter sometimes referred to as the “ Surviving Corporation .”

Section 1.2 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 (as defined below). 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 fifth business day after the satisfaction or waiver of the conditions set forth in Article VI (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 .”

Section 1.3 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, including Section 259 of the General Corporation Law of the State of Delaware (the “ DGCL ”). 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.

Section 1.4 Certificate of Incorporation and Bylaws . At the Effective Time, the certificate of incorporation of the Surviving Corporation shall be amended and restated in its entirety to be identical to the certificate of incorporation of Merger Sub, until thereafter amended in accordance with Delaware Law and as provided in such certificate of incorporation; provided , however , that at the Effective Time, the certificate of incorporation of the Surviving Corporation shall be amended and restated in its entirety as set forth in Exhibit B . At the Effective Time, the bylaws of the Surviving Corporation shall be amended and restated in their entirety to be identical to the bylaws of Merger Sub, until thereafter amended in accordance with Delaware Law and as provided in such bylaws; provided , however , that at the Effective Time, if necessary, the bylaws shall be amended so as to comply with Section 5.8(a).

Section 1.5 Directors and Officers . 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. 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.

 

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Section 1.6 Effect on Capital Stock .

(a) Definitions . For purposes of this Agreement, the following terms shall have the following definitions.

(i) “ Company Capital Stock ” shall mean Company Common Stock, Company Preferred Stock and any other shares of capital stock, if any, of the Company, taken together.

(ii) “ Company Common Stock ” shall mean shares of common stock, par value $0.001 per share, of the Company.

(iii) “ Company ESPP ” shall mean the Company’s (i) Amended and Restated 2000 Employee Stock Purchase Plan, as amended and (ii) 2001 UK Employee Stock Purchase Plan, as amended.

(iv) “ Company Options ” shall mean any options to purchase shares of Company Common Stock outstanding under any of the Company Stock Plans.

(v) “ Company Preferred Stock ” shall mean shares of preferred stock, par value $0.001 per share, of the Company.

(vi) “ Company Stock Plans ” shall mean (i) the Company’s 1995 Stock Plan, as amended, (ii) the Company’s 1997 Stock Plan, as amended, (iii) the Company’s 2000 CEO Non-Qualified Stock Option Plan, as amended, (iv) the Company’s 2000 Equity Incentive Plan, as amended, (v) the UK Company Share Option Plan and (vi) any other compensatory option plans or Contracts of the Company, including option plans or Contracts assumed by the Company pursuant to a merger, acquisition or other similar transaction.

(vii) “ Company Stockholders ” shall mean holders of shares of Company Common Stock in their respective capacities as such.

(viii) “ Company Warrants ” shall mean all issued and outstanding warrants or other rights (including commitments to grant warrants or other rights, but excluding Company Options) to purchase or otherwise acquire Company Common Stock, whether or not vested, held by any person or entity.

(b) Stock of Merger Sub . Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one (1) validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.

(c) Company Common Stock . Upon the terms and subject to the conditions set forth in 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 such securities, each share of Company Common Stock that is outstanding immediately prior to the Effective Time (other than any Cancelled Company Shares and

 

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any Dissenting Company Shares) shall be cancelled and extinguished and automatically converted into the right to receive an amount in cash equal to $5.50 (the “ Per Share Price ”), without interest thereon, upon the surrender of the certificate representing such share of Company Common Stock in the manner set forth in Section 1.7 (or in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit (and bond, if required) in the manner set forth in Section 1.9).

(d) Cancellation of Treasury and Parent-Owned Company Common Stock . Upon the terms and subject to the conditions set forth in 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 such securities, each share of Company Common Stock that is owned by Parent, Merger Sub or the Company, in each case immediately prior to the Effective Time (collectively, the “ Cancelled Company Shares ”), shall be cancelled and extinguished without any conversion thereof or consideration paid therefor.

(e) Conversion of Company Common Stock Owned by Subsidiaries of the Company or Parent . Each share of Company Common Stock held by any Subsidiary (as defined in Section 8.3(e) hereof) of either the Company or Parent immediately prior to the Effective Time (other than Merger Sub) shall be converted into such number of shares of stock of the Surviving Corporation such that each such Subsidiary owns the same percentage of Surviving Corporation immediately following the Effective Time as such Subsidiary owned in the Company immediately prior to the Effective Time.

(f) Adjustment to Per Share Price . The Per Share Price shall be adjusted appropriately to reflect the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Company Common Stock), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Company Common Stock occurring on or after the date hereof and prior to the Effective Time.

(g) Dissenting Company Shares . Notwithstanding anything to the contrary set forth in this Agreement, all shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and held by a Company Stockholder who did not vote in favor of the Merger (nor consent thereto in writing) and who is entitled to demand, and properly and validly demands, statutory appraisal of such shares of Company Common Stock in accordance with Section 262 of the DGCL (collectively, the “ Dissenting Company Shares ”) shall not be converted into, or represent the right to receive, the Per Share Price pursuant to Section 1.6(c). In lieu of the right to receive the Per Share Price pursuant to Section 1.6(c), the holder of any Dissenting Company Shares shall be entitled to receive payment of any amounts determined by a court of competent jurisdiction to be due in respect of such Dissenting Company Shares pursuant to the provisions of Section 262 of the DGCL, and at and as of the Effective Time, such Dissenting Company Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and such holder shall cease to have any rights in respect thereof other than the rights set forth in Section 262 of the DGCL; provided , however , that notwithstanding the foregoing, any Dissenting Company Shares that are held by a Company Stockholder who shall have failed to perfect or who shall have effectively withdrawn or lost such stockholder’s right to appraisal of such Dissenting Company Shares under such Section 262 of the DGCL shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to

 

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receive the Per Share Price, without interest thereon, upon surrender of the certificate or certificates that formerly evidenced such shares of Company Common Stock in the manner set forth in Section 1.7 (or in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit (and bond, if required) in the manner set forth in Section 1.9). The Company shall give Parent prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to Delaware Law and received by the Company in respect of Dissenting Company Shares, and the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under Delaware Law in respect of Dissenting Company Shares. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisal, or settle or offer to settle any such demands for payment, in respect of Dissenting Company Shares.

(h) Company Options; Company ESPP .

(i) Company Options . Except as otherwise agreed in writing by Parent and a holder of a Company Option, Parent shall not assume any Company Options in connection with the Merger or any other transactions contemplated by this Agreement. Upon the terms and subject to the conditions set forth in this Agreement, except as otherwise agreed to in writing by Parent and a holder of a Company Option, at the Effective Time, by virtue of the Merger, the Company shall take such action as may be necessary so that the vesting of each Company Option held by a then-current employee or service provider shall be accelerated in full and each Company Option that remains outstanding as of immediately prior to the Effective Time shall be cancelled and automatically converted into the right to receive an amount in cash, if any, equal to the product obtained by multiplying (x) the aggregate number of shares of Company Common Stock that were issuable upon exercise of such Company Option immediately prior to the Effective Time, by (y) the excess, if any, of the Per Share Price over the per share exercise price of such Company Option (the “ Option Consideration ”) (it being understood and agreed that such exercise price shall not actually be paid to the Company by the holder of a Company Option). Parent shall cause the Company to pay to each holder of any Company Option the applicable Option Consideration, less applicable Taxes required to be withheld with respect to such payments, as soon as reasonably practicable following the Effective Time. To the extent that such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid. The Company shall take all actions necessary to effect the transactions contemplated by this Section 1.6(h)(i) under all Company Option agreements and any other plan or arrangement of the Company, including delivering all required notices.

(ii) Company ESPP . Prior to the Effective Time, the Company shall take all actions necessary pursuant to the terms of the Company ESPP, to (A) shorten each purchase and/or offering period under the ESPP that extends beyond the Effective Time (the “ Current Offering ”) such that a new purchase date for the Current Offering shall occur prior to the Effective Time and shares of Common Stock shall be purchased by the Company ESPP participants prior to the Effective Time and (B) preclude the commencement of any new purchase and/or offering period after the date hereof. The Company shall take all actions necessary so that the ESPP shall terminate immediately prior to

 

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the Effective Time. The Company agrees to take any and all actions necessary, to approve and effectuate the foregoing provisions of this Section 1.6(h)(ii).

(i) Company Warrants . (i) Except as set forth on Schedule 1.6(i)(i), any outstanding Company Warrants not exercised prior to the Effective Time shall terminate and shall not be assumed by Parent. (ii) The Company shall cause the Company Warrants set forth on Schedule 1.6(i)(ii) to be exercised or terminated prior to the Closing, on terms reasonably satisfactory to Parent.

Section 1.7 Surrender of Certificates .

(a) Exchange Agent . Parent shall select its transfer agent or another nationally recognized exchange agent to act as the exchange agent (the “ Exchange Agent ”) in the Merger, which agent shall be reasonably acceptable to the Company.

(b) Parent and the Company to Provide Cash . Prior to the Effective Time, Parent shall enter into an agreement with the Exchange Agent which shall provide that, promptly after the Effective Time, Parent shall deposit with the Exchange Agent for exchange in accordance with this Article I, the aggregate merger consideration to which holders shall become entitled in the Merger in exchange for Company Common Stock less the Minimum Cash Amount (as defined below). At or prior to the Effective Time, the Company shall deposit, or the Company shall otherwise take all steps necessary to cause to be deposited, in trust for the benefit of the holders of shares of Company Common Stock, all cash of the Company contained in the accounts described on Schedule 1.7(b) with the Exchange Agent for deposit into the Exchange Fund, which deposit shall be used solely and exclusively for purposes of paying the consideration specified in Section 1.6. Any cash deposited with the Exchange Agent shall hereinafter be referred to as the “ Exchange Fund .” For purposes of this Agreement, the “ Minimum Cash Amount ” shall mean $14,500,000 less the amount of the Transaction Expenses and the “ Transaction Expenses ” shall be as defined and set forth in Schedule 1.7(b).

(c) Exchange Procedures .

(i) Promptly following the Effective Time, Parent and the Surviving Corporation shall cause the Exchange Agent to mail to each holder of record (as of immediately prior to the Effective Time) of a certificate (a “ Certificate ”) which represented outstanding shares of Company Common Stock as of immediately prior to the Effective Time and each holder of record of uncertificated shares of Company Common Stock represented by book-entry as of immediately prior to the Effective Time (“ Book-Entry Shares ”) (in each case other than Cancelled Company Shares) (A) a letter of transmittal in customary form (which, in the case of shares of Company Common Stock represented by a Certificate, shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of a Certificate to the Exchange Agent), and (B) instructions for use in effecting the surrender of Certificates and Book-Entry Shares in exchange for the Per Share Price payable in respect thereof pursuant to the provisions of this Article I.

 

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(ii) Upon surrender of a Certificate for cancellation to the Exchange Agent (or upon receipt of an agent’s message in the case of Book-Entry Shares), together with a letter of transmittal, properly completed and validly executed in accordance with the instructions thereto, the holder of such Certificate or Book-Entry Shares shall be entitled to receive in exchange therefor an amount in cash equal to the product obtained by multiplying (x) the aggregate number of shares of Company Common Stock evidenced by such Certificate or reflected in such agent’s message in respect of Book-Entry Shares, and (y) the Per Share Price (less any applicable withholding taxes payable in respect thereof), and the Certificate or Book Entry Shares so surrendered shall forthwith be canceled.

(iii) The Exchange Agent shall accept any Certificate or Book-Entry Shares upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. No interest shall be paid or accrued for the benefit of any holder of a Certificate or Book-Entry Shares on the Per Share Price payable upon the surrender of such Certificate or Book-Entry Shares pursuant to this Section 1.7(c)(iii). From and after the Effective Time, until so surrendered, any outstanding Certificate or Book-Entry Shares shall be deemed to evidence only the right to receive the Per Share Price, without interest thereon, payable in respect thereof pursuant to the provisions of this Article I.

(d) Transfers of Ownership . In the event that a transfer of ownership of shares of Company Common Stock is not registered in the stock transfer books or ledger of the Company, or if the Per Share Price is to be paid in a name or to a Person other than that in which the Certificate or Book-Entry Shares surrendered in exchange therefor is or are registered in the stock transfer books or ledger of the Company, the Per Share Price may be paid in a name or to a Person other than the Person in whose name the Certificate or Book-Entry Shares so surrendered is or are registered in the stock transfer books or ledger of the Company only if, in the case of shares represented by a Certificate, such Certificate is properly endorsed and otherwise in proper form for surrender and transfer and, in the case of shares represented by a Certificate or any Book-Entry Shares, the Person requesting such payment has paid to Parent (or any agent designated by Parent) any transfer or other Taxes required by reason of the payment of the Per Share Price to a Person other than the registered holder of such Certificate or Book-Entry Shares, or established to the satisfaction of Parent (or any agent designated by Parent) that such transfer or other Taxes have been paid or are otherwise not payable.

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

(f) No Liability . Notwithstanding anything to the contrary in this Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation nor any party hereto shall be liable to a holder of

 

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shares of Company Common Stock for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar law.

(g) Investment of Exchange Fund . The Exchange Agent shall invest any cash included in the Exchange Fund as directed by Parent; provided , however , that no such investment or loss thereon shall affect the amounts payable to holders of the Company’s securities pursuant to this Article I. The parties hereto acknowledge and agree that the Exchange Fund is owned by Parent for U.S. federal income tax purposes, until paid to holders of Company Common Stock pursuant to this Article I. Accordingly, any income earned by the Exchange Fund will be treated as income of Parent. Any interest and other income resulting from such investment shall become a part of the Exchange Fund, and any amounts in excess of the amounts payable to holders of the Company’s securities pursuant to this Article I shall promptly be paid to Parent.

(h) Termination of Exchange Fund . Any portion of the Exchange Fund that remains undistributed to the holders of Certificates and Book Entry Shares on the date that is six (6) 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 and any holders of shares of Company Common Stock that were outstanding immediately prior to the Effective Time and who have not theretofore surrendered the Certificates evidencing such shares of Company Common Stock for exchange (or delivered an agent’s message in the case of Book-Entry Shares) pursuant to the provisions of this Section 1.7 and the applicable letter of transmittal shall thereafter look for payment of the Per Share Price payable in respect of the shares of Company Common Stock evidenced by such Certificates or in respect of such Book-Entry Shares solely to the Surviving Corporation, as general creditors thereof, for any claim to the applicable Per Share Price to which such holders may be entitled pursuant to the provisions of this Article I.

Section 1.8 No Further Ownership Rights in Company Common Stock . From and after the Effective Time, all shares of Company Common Stock shall no longer be outstanding and shall automatically be cancelled, retired and cease to exist, and each holder of a Certificate representing any shares of Company Common Stock and each holder of Book-Entry Shares (in each case other than Dissenting Company Shares) shall cease to have any rights with respect thereto, except the right to receive the Per Share Price payable therefor upon the surrender thereof (or delivery of an agent’s message in respect of Book-Entry Shares) in accordance with the terms and provisions of Section 1.7. The Per Share Price paid in accordance with the terms of this Article I shall be deemed to have been paid in full satisfaction of all rights pertaining to such Company Common Stock. From and after the Effective Time, there shall be no further registration of transfers on the records of the Surviving Corporation of shares of Company Common Stock that were issued and outstanding immediately prior to the Effective Time, other than transfers to reflect, in accordance with customary settlement procedures, trades effected prior to the Effective Time. If, after the Effective Time, any Certificate (or an agent’s message in respect of Book-Entry Shares) is presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article I.

 

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Section 1.9 Lost, Stolen or Destroyed Certificates . In the event any Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall transfer in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof and, if required by the Surviving Corporation, the posting by such holder of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it or the Exchange Agent with respect to such Certificate, such amount of cash constituting the aggregate merger consideration pursuant to Section 1.6(c) with respect to the shares of Company Common Stock or Company Options formerly represented thereby.

Section 1.10 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 the 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 II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

Except as set forth in the disclosure schedule delivered by the Company to Parent on the date of this Agreement (the “ Company Disclosure Letter ”) (it being understood and hereby agreed that the disclosure set forth in any particular Section or subsection of the Company Disclosure Letter shall be deemed to be an exception to (or, as applicable, a disclosure for purposes of) (A) the representations and warranties of the Company set forth in the corresponding Section or subsection of this Agreement, and (B) any other representations and warranties of the Company set forth in this Agreement if the relevance of that disclosure as an exception to (or a disclosure for purposes of) such other representations and warranties is reasonably apparent on the face of such disclosure), the Company hereby represents and warrants to Parent and Merger Sub as follows:

Section 2.1 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 now being conducted, and (iii) is duly qualified or licensed and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed or to be in good standing, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect (as defined in Section 8.3(c)).

 

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(b) Charter Documents . The Company has delivered or made available to Parent: (i) a true and correct copy of the amended and restated certificate of incorporation 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, other than any violations that would not, individually or in the aggregate, have a Company Material Adverse Effect or otherwise prevent or materially delay the consummation of the transactions described herein.

(c) Subsidiaries . Section 2.1(c) of the Company Disclosure Letter sets forth each Subsidiary of the Company as of the date hereof, its jurisdiction of organization and each jurisdiction in which it is authorized to conduct or actually conducts business. All the outstanding shares of capital stock of, or other equity or voting interests in, each such Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable and are owned by the Company, a wholly-owned Subsidiary of the Company, or the Company and another wholly-owned Subsidiary of the Company, free and clear of all material pledges, liens, charges, encumbrances and security interests of any kind or nature whatsoever (collectively, “ Liens ”), other than Permitted Liens (as defined below). 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. As used herein, “ Permitted Liens ” shall mean (i) Liens disclosed on the consolidated balance sheet of such Person included in the most recent annual or quarterly report filed by such Person with the SEC prior to the date of this Agreement; (ii) Liens for Taxes, assessments and other similar governmental charges or levies either not yet delinquent or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established; (iii) Liens of landlords and liens of carriers, warehousemen, mechanics and materialmen and other like Liens arising in the ordinary course of business for sums not yet due and payable; (iv) undetermined or inchoate Liens, charges and privileges and any statutory Liens, licenses, charges, adverse claims, security interests or encumbrances of any kind or nature whatsoever and claimed or held by any Governmental Entity (as defined below) that are related to obligations that are not due or delinquent; (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; (vii) defects, imperfections or irregularities in title, easements, covenants and rights of way (unrecorded and of record) and other similar restrictions, and zoning, building and other similar codes or restrictions, in each case that do not adversely affect in any material respect the current use of the applicable property owned, leased, used or held for use by the Company or any of its Subsidiaries; (viii) any other Liens that do not secure a liquidated amount, that have been incurred or suffered in the ordinary course of business and that would not, individually or in the aggregate, have a material adverse effect on the Company or on the ability of Parent to obtain financing prior to the Termination Date and (ix) Liens that do not materially interfere with the value or the current use or operation of the property subject thereto.

 

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(d) Board Minutes. Except as set forth in Section 2.1(d) of the Company Disclosure Letter, the Company has heretofore made available to Parent complete and correct copies of the minutes (or, in the case of draft minutes, the most recent drafts thereof) of all meetings of the stockholders of the Company, the Company Board and each committee of the Company Board and the boards of directors (and each committee thereof) of each of the Company’s Subsidiaries held since January 1, 2006; provided that, with respect to meetings for which draft or final minutes are not yet available, the Company has provided to Parent a materially complete and correct summary thereof.

Section 2.2 Capital Structure .

(a) Capital Stock . The authorized capital stock of the Company consists of 120,000,000 shares of Company Common Stock and 5,000,000 shares of Company Preferred Stock. As of August 29, 2008 (the “ Capitalization Date ”): (A) 9,483,913 shares of Company Common Stock were issued and outstanding, and (B) no shares of Company Common Stock were held by the Company as treasury shares. As of the Capitalization Date, no shares of Company Preferred Stock were outstanding. Since the close of business on the Capitalization Date, the Company has not issued or authorized the issuance of any shares of capital stock of the Company other than pursuant to the exercise of Company Options granted under a Company Stock Plan or pursuant to the purchase of shares under the Company ESPP. No shares of Company Common Stock are owned or held by any Subsidiary of the Company.

(b) All outstanding shares of Company Common Stock are, and all shares of Company Common Stock which may be issued as contemplated or permitted by this Agreement will be, when issued, duly authorized, validly issued, fully paid, nonassessable and not subject to any preemptive rights.

(c) Company Options .

(i) The Company has reserved 2,975,265 shares of Company Common Stock for issuance under the Company Stock Plans. As of the Capitalization Date, there were outstanding Company Options to purchase 2,274,957 shares of Company Common Stock. Since such date, the Company has not granted, committed to grant or otherwise created or assumed any obligation with respect to any Company Options, other than as permitted by Section 4.1(b).

(ii) Section 2.2(c)(ii) of the Company Disclosure Letter contains a complete and correct list of each outstanding Company Option as of the Capitalization Date, including the holder, date of grant, exercise price, vesting schedule, date of expiration, which Company Stock Plan it was granted under, whether the option is an “incentive stock option” under Section 422 of the Code or a non-qualified stock-option, and the number of shares subject thereto.

(iii) With respect to the Company Options, (1) each Company Option intended to qualify as an “incentive stock option” under Section 422 of the Code so qualifies, (2) each grant of a Company Option was duly authorized no later than the date on which the grant of such Company Option was by its terms to be effective (the “Grant Date”) by all necessary corporate action, including, as applicable, approval by the Company Board (or a duly constituted and authorized

 

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committee thereof), or a duly authorized delegate thereof, and any required stockholder approval by the necessary number of votes or written consents, (3) each such grant was made in accordance with the terms of the applicable Company Stock Plan, the Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, or any successor statute, rules or regulations thereto (the “ Exchange Act ”) and all other applicable Law, including the Nasdaq Marketplace Rules and (4) the per share exercise price of each Company Option was not, in the good faith judgment of the Company Board, less than the fair market value of a share of Company Common Stock on the applicable Grant Date. Since January 1, 2006, the Company has not granted, and there is no and has been no Company policy or practice to grant, Company Options prior to, or otherwise coordinate the grant of Company Options with, the release or other public announcement of material information regarding the Company or any of its Subsidiaries or their financial results or prospects.

(iv) The Company Stock Plans set forth on Section 2.2(c)(iv) of the Company Disclosure Letter are the only plans or programs the Company or any of its Subsidiaries has maintained under which stock options, restricted shares, restricted share units, stock appreciation rights, performance shares or other compensatory equity-based awards have been granted and remain outstanding or may be granted. All Company Options may, by their terms, be treated in accordance with Section 1.6(h). No Company Options shall become vested or exercisable solely as a result of the transactions contemplated hereby, except as contemplated by this Agreement.

(d) Other Securities .

(i) Except as otherwise set forth on Section 2.2 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 capital stock, voting debt or other 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. There are no outstanding restricted shares, restricted share units, stock appreciation rights, performance shares, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock of, or other voting securities or ownership interests in, the Company that were issued by the Company. As of the Capitalization Date, there were outstanding Company Warrants to purchase 609,465 shares of Company Common Stock. Section 2.2(d)(i) of the Company Disclosure Letter contains a complete and correct list of each outstanding Company Warrant as of the Capitalization Date, including the holder and applicable form of warrant (copies of which are attached to Section 2.2(d)(i) of the Company Disclosure Letter).

(ii) All outstanding shares of Company Common Stock, all outstanding Company Options, all outstanding Company Warrants and all outstanding shares of capital stock of each

 

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Subsidiary of the Company have been issued and granted in compliance in all material respects with all applicable securities laws and all other applicable Legal Requirements (as defined below). There are not any outstanding Contracts of the Company or any of its Subsidiaries to (i) 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 (ii) 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 (as defined in Section 8.3(b)) of the Company, there are no irrevocable proxies and no voting agreements, voting trusts, rights plans or anti-takeover plans with respect to any shares of the capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries. For purposes of this Agreement, “ Legal Requirements ” shall mean any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, order, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity. For purposes of this Agreement, “ Contract ” shall mean any written, oral or other agreement, contract, subcontract, settlement agreement, lease, sublease, instrument, note, bond, mortgage, indenture, warranty, purchase order, license, sublicense, or other legally binding instrument, commitment, arrangement or understanding of any kind or character, as in effect as of the date hereof.

Section 2.3 Authority; Non-Contravention; Necessary Consents .

(a) Authority .

(i) The Company has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Agreement or to consummate the Merger and the other transactions contemplated hereby, subject only to the approval and adoption of this Agreement by the Company’s stockholders and the filing of the Certificate of Merger pursuant to Delaware Law. This Agreement has been duly executed and delivered by the Company and, assuming due execution and delivery by Parent and Merger Sub, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except (A) as enforcement may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws affecting the rights of creditors generally and general equitable principles (whether considered in a proceeding in equity or at law), and (B) as the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of a court of competent jurisdiction before which any proceeding may be brought.

(ii) At a meeting duly called and held, prior to the execution of this Agreement, at which all directors of the Company were present, the Company Board duly and unanimously adopted resolutions (i) declaring that this Agreement and the transactions contemplated hereby are fair to and

 

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in the best interests of the Company’s stockholders, (ii) approving and declaring advisable this Agreement, the Merger and the other transactions contemplated hereby, (iii) directing that the adoption of this Agreement be submitted to the Company Stockholder Meeting, and (iv) recommending that the Company’s stockholders approve and adopt this Agreement, the Merger and the transactions contemplated hereby (such recommendation, the “ Company Board Recommendation ”).

(iii) The affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock (the “ Requisite Stockholder Approval ”) is the only vote of the holders of any class or series of Company Capital Stock that is necessary under applicable Legal Requirements and the Company Charter Documents to adopt and approve this Agreement and consummate the transactions contemplated hereby.

(b) Non–Contravention . The execution and delivery of this Agreement by the Company does not, and performance of this Agreement by the Company will not: (i) conflict with or violate the Company Charter Documents or any Subsidiary Charter Documents, (ii) subject to obtaining the approval and adoption of this Agreement by the Company Stockholders as contemplated in Section 2.3(a) and compliance with the requirements set forth in Section 2.3(c), conflict with or violate any Legal Requirements applicable to the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries or any of their respective properties is bound or affected, or (iii) require any consent or other action by any Person under, result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or impair the Company’s rights or alter the rights or obligations of any third party under, or give to others any rights of termination, material amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the properties or assets of the Company or any of its Subsidiaries, pursuant to any Contract, except in each of the foregoing clauses (ii) – (iii) as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or prevent the Company and its Subsidiaries from performing their obligations under this Agreement or consummating the transactions contemplated hereby in accordance with the terms hereof.

(c) Necessary Consents . No consent, approval, order or authorization of, or registration, declaration or filing with any supranational, national, state, municipal, local or foreign government, any instrumentality, subdivision, court, administrative agency or commission or other governmental authority or instrumentality (a “ 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, except for: (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company and/or Parent are qualified to do business, (ii) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal, foreign and state securities (or related) laws and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”) and satisfaction of such other requirements of the comparable laws of other jurisdictions, (iii) such other consents, authorizations, filings, approvals and registrations set forth in Section 2.3(c) of the Company Disclosure Letter and (iv) such consents, authorizations, filings, approvals and registrations, which if not obtained or made would not reasonably

 

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be expected to have a Company Material Adverse Effect or prevent the Company and its Subsidiaries from performing their obligations under this Agreement or consummating the transactions contemplated hereby in accordance with the terms hereof. The consents, approvals, orders, authorizations, registrations, declarations and filings set forth in (i) and (ii) are referred to herein as the “ Necessary Consents .”

Section 2.4 Company SEC Reports .

(a) The Company has filed with or furnished to the SEC all forms, reports and documents that have been required to be filed or furnished by it under applicable Legal Requirements since January 1, 2006 (all such forms, reports and documents, together with all exhibits and schedules thereto, the “ Company SEC Reports ”). Each Company SEC Report complied, or will comply, as the case may be, as of its filing date, as to form in all material respects with the applicable requirements of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, or any successor statute, rules or regulations thereto or the Exchange Act as the case may be, each as in effect on the date such Company SEC Report was filed or furnished. As of its filing date (or, if amended or superseded by a filing prior to the date of this Agreement, on the date of such amended or superseded filing), each Company SEC Report did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

(b) The Company has made available to Parent copies of all comment letters received by the Company from the SEC since January 1, 2006 relating to the Company SEC Reports, together with all written responses of the Company thereto. There are no outstanding or unresolved comments in any such comment letters received by the Company from the SEC. As of the date of this Agreement, to the Knowledge of the Company, none of the Company SEC Reports is the subject of any ongoing review by the SEC.

(c) Each required form, report and document containing financial statements that has been filed with or submitted to the SEC by the Company since January 1, 2006 was accompanied by the certifications required to be filed or submitted by the Company’s chief executive officer and/or chief financial officer, as required, pursuant to the Sarbanes-Oxley Act and, at the time of filing or submission of each such certification, such certification was true and accurate and complied with the Sarbanes-Oxley Act. None of the Company, any current executive officer of the Company or, to the Company’s Knowledge, any former executive officer of the Company has received written notice from any Governmental Entity challenging or questioning the accuracy, completeness, form or manner of filing of such certifications made with respect to the Company SEC Reports filed prior to the date of this Agreement.

Section 2.5 Financial Statements and Controls .

(a) The consolidated financial statements of the Company and its Subsidiaries filed with the Company SEC Reports have been prepared in accordance with generally accepted accounting principles, as applied in the United States (“ GAAP ”), consistently applied during the periods and at the dates

 

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involved (except as may be indicated in the notes thereto and, in the case of unaudited interim financial statements, as may be permitted by the SEC for Quarterly Reports on Form 10-Q), and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of operations and cash flows for the periods then ended subject, in the case of unaudited interim financial statements, to normal and year-end audit adjustments as permitted by GAAP and the applicable rules and regulations of the SEC and any other adjustments expressly described therein, including the notes thereto.

(b) The Company maintains a system of internal accounting controls that are intended to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. No significant deficiency or material weakness was identified in management’s assessment of internal controls as of June 30, 2008 (nor has any such deficiency or weakness since been identified).

(c) The Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are reasonably designed to ensure that (i) all information (both financial and non-financial) required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported to the individuals responsible for preparing such reports within the time periods specified in the rules and forms of the SEC, and (ii) all such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the principal executive officer and principal financial officer of the Company required under the Exchange Act with respect to such reports.

(d) Since January 1, 2006, there has been no “significant deficiency” or “material weakness” in the Company’s internal controls over financial reporting.

(e) The audit committee of the Company Board includes an Audit Committee Financial Expert, as defined by Item 401(h)(2) of Regulation S-K.

(f) The Company has adopted a code of ethics, as defined by Item 406(b) of Regulation S-K, for senior financial officers, applicable to its principal financial officer, comptroller or principal accounting officer, or persons performing similar functions. The Company has promptly disclosed any change in or waiver of the Company’s code of ethics with respect to any such persons, as required by Section 406(b) of the Sarbanes-Oxley Act. To the Knowledge of the Company, there have been no violations of provisions of the Company’s code of ethics by any such person.

Section 2.6 Absence of Certain Changes or Events . Since June 30, 2008, and through the date hereof, there has not been: (a) any Company Material Adverse Effect, or (b) any action taken by the

 

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Company or any of its Subsidiaries from June 30, 2008, through the date hereof that, if taken during the period from the date hereof through the Effective Time, would constitute a breach of Section 4.1(b); provided that, for the purposes of this Section 2.6, references to “the date hereof” in Section 4.1(b) shall be deemed to refer to June 30, 2008.

Section 2.7 Taxes .

(a) Definition . For the purposes of this Agreement, the term “ Tax ” or, collectively, “ Taxes ” shall mean (i) any and all federal, state, local and non-U.S. taxes and other like governmental charges, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts, and any liability for any of the foregoing as transferee and (ii) in the case of the Company or any of its Subsidiaries, liability for the payment of any amount of the type described in clause (i) as a result of being or having been before the Effective Time a member of an affiliated, consolidated, combined or unitary group, or a party to any agreement or arrangement, as a result of which liability of the Company or any of its Subsidiaries to a Governmental Entity is determined or taken into account with reference to the activities of any other Person. “ Tax Return ” means any federal, state, local or non-U.S. returns, documents, statements, reports or other information or filing required to be supplied to a Governmental Entity with respect to Taxes, including information returns, any documents with respect to or accompanying payments of estimated Taxes, or with respect to or accompanying requests for the extension of time in which to file any such returns, documents, statements, reports or other information.

(b) Tax Returns and Audits . The Company and each of its Subsidiaries have filed when due and in accordance with all applicable laws and regulations all income Tax Returns and other material Tax Returns required to be filed by any of them and have paid (or withheld and remitted to the appropriate Governmental Entity) all material Taxes required to be paid or withheld (whether or not shown on any Tax Returns). All such Tax Returns are true and complete in all material respects. The most recent financial statements contained in the Company SEC Reports reflect an adequate reserve (in accordance with GAAP) for all material Taxes payable by the Company and its Subsidiaries through the date of such financial statements, and each of the Company and its Subsidiaries has established (or has had established on its behalf and for its sole benefit and recourse) in accordance with GAAP an adequate accrual for all material Taxes through the end of the last period for which the Company and its Subsidiaries ordinarily record items on their respective books. No material deficiencies for any Taxes have been asserted or assessed, or, to the Knowledge of the Company, proposed in writing, against the Company or any of its Subsidiaries that are not subject to adequate reserves (in accordance with GAAP). No audit, claim, action, suit, investigation or other examination in respect of any Tax or Tax asset of the Company or any of its Subsidiaries is presently in progress, nor has the Company or any of its Subsidiaries been notified in writing of any request for such an audit, claim, action, suit, investigation or other examination. The income and franchise Tax Returns of the Company and its Subsidiaries through the Tax year ended December 31, 2005 have been examined and closed or are Tax Returns with respect to which the applicable period for assessment under applicable law, after giving effect to extensions or waivers, has expired. Neither the Company nor any of its Subsidiaries has granted any extension or waiver of the

 

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statute of limitations period applicable to any Tax Return, which period (after giving effect to such extension or waiver) has not yet expired. 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. Section 2.7 of the Company Disclosure Letter contains a list of all jurisdictions (whether foreign or domestic) in which the Company or any of its Subsidiaries currently files Tax Returns. Neither the Company nor any of its Subsidiaries owns an interest in real property in any jurisdiction in which a Tax is imposed, or the value of the interest is reassessed, on the transfer of an interest in real property and which treats the transfer of an interest in an entity that owns an interest in real property as a transfer of the interest in real property. Neither the Company nor any of its Subsidiaries has any liability for the payment of any amount as a result of being party to any Tax sharing agreement or with respect to the payment of any amount imposed on any Person of the type described in clause (i) or (ii) of the definition of “Tax” as a result of any existing express or implied agreement or arrangement (including an indemnification agreement or arrangement).

Section 2.8 Intellectual Property .

(a) Definitions . For the purposes of this Agreement, the following terms have the following meanings:

(i) “ Intellectual Property ” shall mean all of the following and all worldwide rights therein, arising therefrom, or associated therewith: (i) trademarks, trade names, trade dress, service marks, logos, business names, and all registrations thereof and applications for registration therefor (including all goodwill associated thereto); (ii) copyrights, copyright registrations, and applications for registration therefor; (iii) trade secrets, proprietary information, technology, know-how, processes, technical data and customer lists; (iv) patents, patent applications, and all reissues, divisions, renewals, reexaminations, extensions, provisionals, continuations and continuations-in-part thereof, and inventions and improvements (whether or not patented or patentable); (v) computer software, including all source code, object code, firmware, development tools, files, records and data, all media on which any of the foregoing is recorded, all Web addresses, sites and domain names; and (vi) databases and data collections.

(ii) “ Company Intellectual Property ” shall mean all of the Intellectual Property owned by or exclusively licensed to the Company or any of its Subsidiaries and includes, but is not limited to the Company Registered Intellectual Property (including the Intellectual Property set out in Section 2.8(b) of the Company Disclosure Letter), and any Intellectual Property embodied in the Company Software, as defined below.

(iii) “ Company Registered Intellectual Property ” shall mean all Intellectual Property registered by or to, (or the subject of a pending application for registration) or exclusively licensed to, in each case, the Company and its Subsidiaries, in the United States or any foreign country or that is the subject of a pending application for registration in the same.

 

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(iv) “ Company Software ” shall mean the computer programs, computer software, and applications and products currently marketed, distributed, sold or licensed (or currently under development and intended for distribution, marketing, sale, or licensing within the next 12 months) by the Company or its Subsidiaries to a third party, except for any open source software used by the Company but which is not distributed with such Company Software.

(b) Section 2.8(b) of the Company Disclosure Letter contains a complete and accurate list of the Company Registered Intellectual Property; in each case, listing, as applicable, (A) the name of the applicant/registrant and current owner, (B) the jurisdiction where the application/registration is located and (C) the application or registration number. To the Knowledge of the Company, all Company Registered Intellectual Property is valid and subsisting and enforceable.

(c) To the Knowledge of the Company, the Company Intellectual Property and the Intellectual Property licensed to the Company and its Subsidiaries under the Company Intellectual Property Agreements together constitute all of the Intellectual Property rights necessary for the conduct of the business of the Company and its Subsidiaries as currently conducted (excluding generally commercially available, off-the-shelf software programs for which the annual license fee payable by the Company or any of its Subsidiaries is less than $50,000, “ Commercial Software ”) (the “ Necessary Intellectual Property ”), except where the absence of such Intellectual Property rights would not have a Company Material Adverse Effect.

(d) The Company may exercise, transfer, or license the Intellectual Property owned by the Company without restriction or payment to a third party. The Company has no obligation to pay any third party any future royalties for continued use or exercise of the Necessary Intellectual Property. The Company is not obligated to transfer or license any Necessary Intellectual Property, or any Intellectual Property later obtained by the Company, to a third party. To the Knowledge of the Company, no third party is infringing any Company Intellectual Property and no third party that has received a license to use Company Intellectual Property is in material breach thereof, except where such breach would not have a Company Material Adverse Effect.

(e) The Intellectual Property owned by the Company and the Company Registered Intellectual Property is solely and exclusively owned by the Company or its Subsidiaries, free and clear of any Liens. To the Knowledge of the Company, no third party has any claim of legal or beneficial ownership or any exclusive license to any Intellectual Property owned by the Company or any of the Company Registered Intellectual Property nor, to the Knowledge of the Company, is there a reasonable basis for any claim that the Company or its Subsidiaries do not own such Company Intellectual Property.

(f) The Company and each of its Subsidiaries has taken reasonable and appropriate steps (including by implementing trade secret and confidentiality procedures with respect to employees and third parties) to protect and preserve the confidentiality of material confidential information that they wish to, or are obligated by third parties to, protect as trade secrets, and, to the Knowledge of the Company, there has been no misappropriation of such information by any Person nor any unauthorized disclosures

 

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of such information to any Person, except where such misappropriation would not have a Company Material Adverse Effect.

(g) To the Knowledge of the Company, the conduct of the business of the Company or any of its Subsidiaries, taken as a whole, as currently conducted, does not infringe, misappropriate or otherwise violate the Intellectual Property of any third party, except where such infringement would not have a Company Material Adverse Effect.

(h) As of the date of this Agreement, there is no suit, claim, action, investigation or proceeding made, conducted or brought by a third party that has been served upon or, to the Knowledge of the Company, filed or threatened with respect to, and the Company has not been notified in writing of, any alleged infringement, misappropriation or other violation in any material respect by the Company or any of its Subsidiaries or any of its or their current products or services or other operation of the Company’s or its Subsidiaries’ business of the Intellectual Property of such third party. As of the date of this Agreement, to the Knowledge of the Company, there is no pending or threatened claim challenging the validity or enforceability of, or contesting the Company’s or any of its Subsidiaries’ rights with respect to, any of the Necessary Intellectual Property. As of the date of this Agreement, to the Knowledge of the Company, the Company and its Significant Subsidiaries are not subject to any order that restricts or impairs the use of any Necessary Intellectual Property, other than restrictions or impairments that would not have a Company Material Adverse Effect.

(i) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not result in (i) the Company or its Subsidiaries granting to any third party any rights or licenses to any Intellectual Property, (ii) any right of termination or cancellation of any of the Company’s or its Subsidiaries’ rights under any Company Intellectual Property Agreement or any breach thereof, (iii) the imposition of any Lien on any Company Intellectual Property or (iv) any restriction, impairment or extinguishment of any rights the Company or any of its Subsidiaries has in the Necessary Intellectual Property, except where any of the foregoing (in clauses (i) through (iv)) would not have a Company Material Adverse Effect.

(j) Except as set forth on Section 2.8(j) of the Company Disclosure Letter, to the Knowledge of the Company, none of the Company’s or its Subsidiaries’ products or portion thereof constituting Company Software are being distributed, in whole or in part, or are being used by the Company or its Subsidiaries in conjunction with any Public Software in a manner that requires disclosure or otherwise making available such Company Software or its source code. No individual, company or entity other than the Company or its Subsidiaries possesses any current or contingent rights to any material portion of the source code owned by the Company or its Subsidiaries for any Company Software, arising from the use of Public Software or otherwise. “ Public Software ” shall mean any software that contains, or is derived in any manner (in whole or in part) from, any software that requires as a condition of use, modification, or distribution of such software that such software or other software incorporated into, derived from, or distributed with such software be: (a) disclosed or distributed in source code form; (b) licensed to a third party for the purpose of making derivative works; or (c) redistributable at no or minimal charge. For the

 

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avoidance of doubt, Public Software shall include but is not limited to software licensed under the General Public License (GPL) or Lesser General Public License (LGPL).

(k) To the Knowledge of the Company, none of the Company Software, to the extent currently, marketed, distributed, sold or licensed by the Company or its Subsidiaries, contains any worm, bomb, backdoor, clock, timer, or other disabling device code, design or routine which can cause software to be erased, inoperable, or otherwise incapable of being used, either automatically or upon command by any person, in each case where such item would materially effect the use or operation of such Company Software. For the avoidance of doubt, this Section 2.8(k) shall not apply to any Company Software that is currently under development and that has not yet been sold or licensed to any third party.

(l) To the Knowledge of the Company, the IT Assets operate and perform in a manner that permits the Company and its Subsidiaries to conduct their respective businesses as currently conducted and to the Knowledge of the Company, no Person has gained unauthorized access to the IT Assets; and the Company and its Subsidiaries have implemented reasonable backup and disaster recovery technology consistent with standard industry practices. For purposes of this Agreement, the term “ IT Assets ” means computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communication lines and all other information technology equipment and all associated documentation owned by the Company or its Subsidiaries or licensed or leased by the Company or its Subsidiaries pursuant to a written agreement (excluding any public networks).

Section 2.9 Compliance; Permits .

(a) Compliance . Neither the Company nor any of its Subsidiaries is in any material respect in conflict with, or in default or in violation of, and to the Company Knowledge, no condition or state of facts exists that is reasonably likely to give rise to a violation of, or a liability or default under, any Legal Requirements applicable to the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries or any of their respective businesses or properties is bound or affected, except for those conflicts, defaults or violations that, individually or in the aggregate, would not be reasonably likely to have a Company Material Adverse Effect. There is no material judgment, injunction, order or decree binding upon the Company or any of its Subsidiaries which has or would reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received any written notice since January 1, 2006, (i) of any material administrative or civil, or criminal investigation or audit (other than Tax audits) by any Governmental Entity relating to the Company or any of its Subsidiaries, or (ii) from any Governmental Entity alleging that the Company or any of its Subsidiaries are not in compliance in any material respect with any Legal Requirement that, individually or in the aggregate, would be reasonably likely to have a Company Material Adverse Effect.

(b) Certain Business Practices . Neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any director, officer, agent or employee of the Company or any of its Subsidiaries (i) used any funds for unlawful contributions, gifts, entertainment or other expenses relating to political activity or for the business of the Company or any of its Subsidiaries, (ii) made any bribe or kickback, illegal political contribution, payment from corporate funds which was incorrectly recorded on

 

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the books and records of the Company or any of its Subsidiaries, (iii) made any unlawful payment from corporate funds to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or (iv) violated any provision of the Foreign Corrupt Practices Act of 1977, or (v) made any other unlawful payment. Each of the Company and its Subsidiaries has conducted its business in compliance with Title 31, Chapter V of the Code of Federal Regulations.

(c) Permits . The Company and its Subsidiaries hold, to the extent legally required, all permits, licenses, variances, clearances, consents, commissions, franchises, exemptions, orders and approvals from Governmental Entities (“ Permits ”) that are material to the operation of the business of the Company taken as a whole, except for such Permits, which the failure to hold would not be reasonably likely to have a Company Material Adverse Effect (collectively, “ Company Permits ”). As of the date hereof, no suspension or cancellation of any of the Company Permits is pending or, to the Knowledge of the Company, threatened. The Company and its Subsidiaries are in compliance in all material respects with the terms of the Company Permits.

Section 2.10 Litigation . As of the date hereof, there are no claims, suits, actions or proceedings pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries, before any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator that seeks to restrain or enjoin the consummation of the transactions contemplated hereby or which would reasonably be expected, either singularly or in the aggregate with all such claims, actions or proceedings, to have a Company Material Adverse Effect or prevent or materially delay the ability of the Company and its Subsidiaries to perform their obligations under this Agreement or to consummate the transactions contemplated hereby in accordance with the terms hereof. As of the date hereof, neither the Company nor any of its Subsidiaries is subject to any material order by a Governmental Entity against the Company or any of its Subsidiaries or naming the Company or any of its Subsidiaries as a party or by which any of the employees or representatives of the Company or any of its Subsidiaries is prohibited or restricted from engaging in or otherwise conducting the business of the Company or any of its Subsidiaries as presently conducted that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or prevent or materially delay the ability of the Company and its Subsidiaries to perform their obligations under this Agreement or to consummate the transactions contemplated hereby in accordance with the terms hereof.

Section 2.11 Brokers’ and Finders’ Fees; Fees and Expenses .

(a) Except for Covington & Associates pursuant to an engagement letter dated March 25, 2008, a copy of which engagement agreement (and all indemnification and other agreements related to such engagement) has been made available to Parent, there is no investment banker, broker, finder or other intermediary that has been retained by, or is authorized to act on behalf of, the Company or any of its Subsidiaries, Affiliates, or any of their respective officers or directors in their capacity as officers or directors, who might be entitled to any banking, broker’s, finder’s or similar fee or commission in connection with the Merger and the other transactions contemplated by this Agreement.

 

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(b) Section 2.11(b) of the Company Disclosure Letter sets forth a good faith estimate, as of the date hereof, of the aggregate fees and expenses of the Company’s accountants, brokers, financial advisors, consultants, legal counsel or other persons retained by the Company or any of its Subsidiaries, Affiliates or any of their respective officers or directors, incurred or to be incurred in connection with this Agreement and the transactions contemplated hereby.

Section 2.12 Opinion of Financial Advisor . The Company Board has received the opinion of Covington & Associates, financial advisor to the Company, dated as of the date hereof, to the effect that, as of the date of such opinion, the Merger Consideration is fair to the Company’s stockholders from a financial point of view, a written copy of which opinion has been delivered or will be delivered promptly after the date hereof to Parent for informational purposes only.

Section 2.13 Employee Benefit Plans .

(a) Schedule . Section 2.13(a) of the Company Disclosure Letter sets forth a list as of the date hereof of each material Company Benefit Plan (as defined in Section 2.13(b)).

(b) Benefit Plan Compliance .

(i) Each bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, stock-related or performance award, retirement, vacation, severance, disability, death benefit, hospitalization, medical, loan (other than travel allowances and relocation packages), fringe benefit, disability, severance, sabbatical and other agreement, plan or arrangement providing benefits to any current or former employees of the Company or its Subsidiaries (each, an “ Employee ”) or consultants or directors pursuant to which the Company or its Subsidiaries have or could have liability (“ Company Benefit Plans ”) has been, in all material respects, administered and operated in accordance with its terms, with the applicable provisions of the Employee Retirement Income Security act of 1974, as amended (“ ERISA ”), the Code and all other applicable material Legal Requirements.

(ii) With respect to each Company Benefit Plan, to the extent applicable the Company has made available to Parent complete and accurate copies of (A) the most recent annual report on Form 5500 required to have been filed with the United States Internal Revenue Service (the “ IRS ”), for each Company Benefit Plan, including all schedules thereto; (B) the most recent determination letter, if any, from the IRS for any Company Benefit Plan that is intended to qualify under Section 401(a) of the Code; (C) the plan documents and summary plan descriptions, or a written description of the terms of any Company Benefit Plan that is not in writing; (D) any related trust agreements, insurance contracts, insurance policies or other documents of any funding arrangements; (E) any notices to or from the IRS or any office or representative of the United States Department of Labor (the “ DOL ”) or any similar Governmental Entity relating to any compliance issues in respect of any such Company Benefit Plan; and (F) with respect to each material Company Benefit Plan that is maintained in any non-U.S. jurisdiction (the “ International Employee Plans ”), to the extent applicable, (x) the most recent annual report or similar compliance documents required

 

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to be filed with any Governmental Entity with respect to such plan and (y) any document comparable to the determination letter reference under clause (B) above issued by a Governmental Entity relating to the satisfaction of Legal Requirements necessary to obtain the most favorable tax treatment.

(iii) Each Company Benefit Plan that is intended to be “qualified” under Section 401 of the Code has received a favorable determination letter from the IRS to such effect and, to the Knowledge of the Company, no fact, circumstance or event has occurred or exists since the date of such determination letter that would reasonably be expected to adversely affect the qualified status of any such Company Benefit Plan; to the extent applicable, each International Employee Plan has been approved by the relevant taxation and other Governmental Entities so as to enable: (A) the Company or any of its Subsidiaries and the participants and beneficiaries under the relevant International Employee Plan and (B) in the case of any International Employee Plan under which resources are set aside in advance of the benefits being paid (a “ Funded International Employee Plan ”), the assets held for the purposes of the Funded International Employee Plans, to enjoy the most favorable taxation status possible and the Company is not aware of any ground on which such approval may cease to apply; except as required by applicable Legal Requirements or this Agreement, no condition or term under any relevant International Employee Plan exists which would prevent Parent or the Surviving Corporation or any of its Subsidiaries from terminating or amending any International Employee Plan without liability to Parent or the Surviving Corporation or any of its Subsidiaries (other than ordinary administration expenses or routine claims for benefits).

(iv) To the Knowledge of the Company, no oral or written representation or commitment with respect to any material aspect of any Company Benefit Plan has been made to an Employee or any of its Subsidiaries by an authorized employee of the Company that is not materially in accordance with the written or otherwise preexisting terms and provisions of such Company Benefit Plans.

(v) There are no material unresolved claims or disputes under the terms of, or in connection with, any Company Benefit Plan (other than routine undisputed claims for benefits), and no action, legal or otherwise, has been commenced with respect to any such material claim, and there are no material audits or examinations pending or, to the Knowledge of the Company, threatened with respect to any Company Benefit Plan.

(c) Defined Benefit, Multiple Employer and Multiemployer Plans . At no time has the Company, any Subsidiary or any other Person under common control within the meaning of Section 414(b), (c), (m) or (o) of the Code with the Company or any of its Subsidiaries maintained, established, sponsored, participated in, or contributed to, any (i) Company Benefit Plan subject to Title IV of ERISA, (ii) multiemployer plan (as defined in Section 3(37) of ERISA) or (iii) “multiple employer plan” as defined in ERISA or the Code.

(d) Continuation Coverage . No Company Benefit Plan provides health benefits (whether or not insured), with respect to Employees after retirement or other termination of service (other than

 

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coverage mandated by applicable Legal Requirements or benefits, the full cost of which is borne by the Employee) other than individual arrangements the amounts of which are not material.

(e) Effect of Transaction . Except as expressly provided in this Agreement, the execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not (either alone or in connection with the termination of employment or engagement of change of position of any Employee following or in connection with the consummation of the Merger) constitute an event under any Company Benefit Plan that will result in any payment (whether of severance pay or otherwise), acceleration of payment, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Employee, contractor or director.

There is no contract, agreement, plan or arrangement to which the Company or any of its Subsidiaries is a party as of the date of this Agreement, that, individually or collectively and as a result of the transactions contemplated hereby (whether alone or in connection with the termination of employment or engagement of change of position of any Employee following or in connection with the consummation of the Merger), would reasonably be expected to give rise to the payment of any amount that would not be deductible pursuant to Section 280G of the Code.

(f) Labor . The Company is not a party to any collective bargaining agreement or union contract with respect to Employees and no collective bargaining agreement is being negotiated by the Company or any of its Subsidiaries and no employee of the Company or its Subsidiaries, while so employed, has been a member of a collective bargaining unit with respect to the Company or its Subsidiaries. To the Knowledge of the Company, there are no threatened attempts to organize for collective bargaining, and there is no labor dispute, strike or work stoppage against the Company or any of its Subsidiaries pending, threatened or reasonably anticipated which may materially interfere with the respective business activities of the Company or any of its Subsidiaries. To the Knowledge of the Company, none of the Company, any of its Subsidiaries or any of their respective representatives or Employees has committed any unfair labor practice in connection with the operation of the respective businesses of the Company or any of its Subsidiaries, except as would not have a material negative impact on the business operations of the Company or result in material liability to the Company. There are no material actions, suits, claims, labor disputes or grievances pending, or, to the Knowledge of the Company, threatened, relating to any labor, safety or discrimination matters involving any Employee, including, without limitation, charges of unfair labor practices or discrimination complaints.

(g) Employment Matters . The Company and each of its Subsidiaries is in compliance in all material respects with all applicable foreign, federal, state and local laws, rules and regulations respecting employment, employment practices, terms and conditions of employment, employee safety and wages and hours, except as would not reasonably be expected to result in a Company Material Adverse Effect.

Section 2.14 Real Property . Neither the Company nor any of its Subsidiaries own any real property. Section 2.14 of the Company Disclosure Letter sets forth a complete and correct list of the premises currently leased, subleased or licensed by or from the Company or its Subsidiaries (the “ Leased Real Property ”). Neither the Company nor any of its Subsidiaries owns or has previously owned in fee