AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

T HIS A GREEMENT AND P LAN OF M ERGER (“ Agreement ”) is made and entered into as of September 11, 2008, by and among: Q UEST S OFTWARE , I NC ., a California corporation (“ Parent ”); N IMBLE A CQUISITION C ORP ., a Delaware corporation and a wholly owned subsidiary of Parent (“ Merger Sub ”); N ET P RO C OMPUTING , I NC ., a Delaware corporation (the “ Company ”); and JMI E QUITY F UND IV, L.P . as the Stockholders’ Representative (the “ Stockholders’ Representative ”). Certain capitalized terms used in this Agreement are defined in Exhibit A .

R ECITALS

A. Parent, Merger Sub and the Company intend to effect a merger of Merger Sub into the Company (the “ Merger ”) in accordance with this Agreement and the Delaware General Corporation Law (the “ DGCL ”). Upon consummation of the Merger, Merger Sub will cease to exist, and the Company will become a wholly owned subsidiary of Parent.

B. This Agreement has been approved by the respective boards of directors of Parent, Merger Sub and the Company.

C. Concurrently with the execution of this Agreement, and as a condition and inducement to Parent’s willingness to enter into this Agreement, certain stockholders of the Company who are key employees of the Company are entering into Noncompetition Agreements in favor of Parent (the “ Noncompetition Agreements ”).

D. It is expected that immediately following the execution and delivery of this Agreement by the parties hereto, the Required Merger Stockholder Vote (as defined in Section 2.22(b)) will be obtained through an action by written consent in the form of Exhibit C (the “ Written Consent ”) to be executed by, at a minimum, the stockholders listed in part 2.22(c) of the Disclosure Schedule.

A GREEMENT

The parties to this Agreement, intending to be legally bound, agree as follows:

SECTION 1. D ESCRIPTION OF T RANSACTION

1.1 Merger of Merger Sub into the Company. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with and into the Company, and the separate existence of Merger Sub shall cease. The Company will continue as the surviving corporation in the Merger (the “ Surviving Corporation ”).

1.2 Effect of the Merger. The Merger shall have the effects set forth in this Agreement and in the applicable provisions of the DGCL.

1.3 Closing; Effective Time.

(a) The consummation of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Cooley Godward Kronish LLP , 3175 Hanover Street, Palo Alto, California, simultaneously with the execution and delivery of this Agreement. The date on which the Closing actually takes place is referred to in this Agreement as the “ Closing Date .”

(b) At the Closing, the Company shall cause to be delivered to Parent:

(i) a certified copy of resolutions of the board of directors of the Company referred to in Section 2.20;

(ii) a certified copy of resolutions of the stockholders referred to in Section 2.22;

(iii) agreements, satisfactory in form and substance to Parent amending, modifying or terminating (as applicable and as set forth opposite the name of the applicable Contract) the Contracts identified on Schedule 1.3(b)(iii) ;

(iv) a statement (in such form as may be reasonably requested by counsel to Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the United States Treasury Regulations, and (b) evidence reasonably satisfactory to Parent that the Company has mailed to the IRS the notification required under Section 1.897 - 2(h)(2) of the United States Treasury Regulations;

(v) the resignation of each officer and director of each of the Acquired Corporations;

(vi) evidence reasonably satisfactory to Parent that the Company has filed with the Secretary of State of the State of Delaware an amendment to the Company’s certificate of incorporation in the form of Exhibit B (the “ Certificate Amendment ”) and that the Certificate Amendment has taken effect;

(vii) an escrow agreement dated of even date herewith (the “ Escrow Agreement ”), executed by the Stockholders’ Representative;

(viii) a release, dated of even date herewith, executed by each officer and director of each of the Acquired Corporations;

(ix) the Certificate of Merger, executed by the Company;

(x) warrant termination agreements (each a “ Warrant Termination Agreement ”) executed by each holder of Company Warrants; and

(xi) the Noncompetition Agreements countersigned by each of the individuals listed on Schedule 1.3(b)(xi) .

 

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(c) At the Closing, Parent shall cause to be delivered to the Company the Escrow Agreement, duly executed by Parent and the Escrow Agent.

(d) Immediately following the Closing, Parent shall cause the following amounts in immediately available funds to be delivered as follows:

(i) to the Paying Agent, the Closing Consideration;

(ii) to the Escrow Agent, the Escrow Amount;

(iii) to the Stockholders’ Representative, the Expenses Fund; and

(iv) to the applicable Persons entitled thereto, the Transaction Expenses.

(e) Subject to the provisions of this Agreement, a certificate of merger (the “ Certificate of Merger ”) satisfying the applicable requirements of the DGCL and otherwise satisfactory in form and substance to Parent and the Company shall be duly executed by the Company and, concurrently with or as soon as practicable following the Closing, shall be delivered to the Secretary of State of the State of Delaware for filing. The Merger shall become effective at the time of the filing of such certificate of merger with the Secretary of State of the State of Delaware (the “ Effective Time ”).

1.4 Certificate of Incorporation and Bylaws; Directors and Officers. Unless otherwise determined by Parent prior to the Effective Time, at the Effective Time: (a) the Certificate of Incorporation of the Surviving Corporation shall be amended and restated as of the Effective Time to conform to the Certificate of Incorporation of Merger Sub as of immediately prior to the Effective Time (other than with respect to the name of the Surviving Corporation); (b) the Bylaws of the Surviving Corporation shall be amended and restated as of the Effective Time to conform to the Bylaws of Merger Sub as in effect immediately prior to the Effective Time; and (c) the directors and officers of the Surviving Corporation immediately after the Effective Time shall be those individuals who are directors and officers of Merger Sub immediately prior to the Effective Time.

1.5 Conversion of Shares.

(a) Subject to Sections 1.5(c), 1.8(a), 1.8(b), and 1.9, at the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company or any stockholder of the Company:

(i) each share of Series B Preferred Stock outstanding immediately prior to the Effective Time shall be converted into the right to receive: (A) an amount in cash equal to: (1) the Series B Preference Per Share Amount (as defined in Section 1.5(b)); plus (2) the Participating Per Share Amount (as defined in Section 1.5(b)); minus (3) the Escrow Contribution Amount (as defined in Section 1.5(b)); minus (4) the Expenses Fund Contribution Amount (as defined in Section 1.5(b)); plus (B) any consideration required to be released (if any)

 

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from the Escrow Fund with respect to such share of Series B Preferred Stock to the former holder thereof in accordance with Section 4.8 (as and when such consideration is required to be released to such former holder); plus (C) any consideration required to be released (if any) from the Expenses Fund with respect to such share of Series B Preferred Stock to the former holder thereof in accordance with Section 5.1(h) (as and when such consideration is required to be released to such former holder);

(ii) each share of Series A Preferred Stock outstanding immediately prior to the Effective Time shall be converted into the right to receive: (A) an amount in cash equal to: (1) the Participating Per Share Amount (as defined in Section 1.5(b)); minus (2) the Escrow Contribution Amount (as defined in Section 1.5(b)); minus (3) the Expenses Fund Contribution Amount (as defined in Section 1.5(b)); plus (B) any consideration required to be released (if any) from the Escrow Fund with respect to such share of Series A Preferred Stock to the former holder thereof in accordance with Section 4.8 (as and when such consideration is required to be released to such former holder); plus (C) any consideration required to be released (if any) from the Expenses Fund with respect to such share of Series A Preferred Stock to the former holder thereof in accordance with Section 5.1(h) (as and when such consideration is required to be released to such former holder);

(iii) each share of Company Common Stock outstanding immediately prior to the Effective Time shall be converted into the right to receive: (A) an amount in cash equal to: (1) the Participating Per Share Amount (as defined in Section 1.5(b)); minus (2) the Escrow Contribution Amount (as defined in Section 1.5(b)); minus (3) the Expenses Fund Contribution Amount (as defined in Section 1.5(b)); plus (B) any consideration required to be released (if any) from the Escrow Fund with respect to such share of Company Common Stock to the former holder thereof in accordance with Section 4.8 (as and when such consideration is required to be released to such former holder); plus (C) any consideration required to be released (if any) from the Expenses Fund with respect to such share of Company Common Stock to the former holder thereof in accordance with Section 5.1(h) (as and when such consideration is required to be released to such former holder); and

(iv) each share of the common stock, par value $0.01, of Merger Sub outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation.

The amount of cash that each Non-Dissenting Stockholder is entitled to receive for such Non-Dissenting Stockholder’s shares of Company Capital Stock in the Merger shall be rounded to the nearest whole cent.

(b) For purposes of this Agreement:

(i) The “ Adjustment Amount ” shall mean (A) the sum of the Company’s cash balance and accounts receivable (net of an allowance for doubtful accounts of $125,000) minus (B) the sum of the Company’s indebtedness for borrowed money (whether current or long-term), accounts payable, royalties payable, accrued liabilities (other than accrued liabilities for Transaction Expenses) and other short-term liabilities, in each case calculated as of

 

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the Closing Date in accordance with GAAP (applied on a basis consistent with the Company Financial Statements). For the avoidance of doubt, (i) short term and long term deferred (unearned) revenue shall not be included in the calculation of the Adjustment Amount and (ii) no assets or liabilities of Parent or Merger Sub shall be included in the calculation of the Adjustment Amount.

(ii) The “ Aggregate Participation Amount ” shall mean the Aggregate Transaction Value minus the Aggregate Series B Preference Amount.

(iii) The “ Aggregate Series B Preference Amount ” shall mean (A) the Series B Preference Per Share Amount multiplied by (B) the aggregate number of shares of Series B Preferred Stock outstanding immediately prior to the Effective Time.

(iv) The “ Aggregate Transaction Value ” shall mean (A) $73,838,087, minus (B) any portion of the Transaction Expenses that remain unpaid immediately prior to the Closing, and (C) (x) if the Adjustment Amount is a positive number, plus the lesser of (1) $10,000,000 or (2) the Adjustment Amount, or, (y) if the Adjustment Amount is a negative number, minus the absolute value of the Adjustment Amount.

(v) The “ Closing Consideration ” shall mean (A) the Aggregate Transaction Value, minus (B) the Escrow Amount, minus (C) the Expense Fund.

(vi) The “ Escrow Amount ” shall mean $13,500,000.

(vii) The “ Escrow Contribution Amount ” means an amount determined by multiplying : (A) the Escrow Amount; by (B) the fraction having a numerator equal to the Participating Per Share Amount and having a denominator equal to the Aggregate Participation Amount.

(viii) The “ Expenses Fund ” shall mean $300,000.

(ix) The “ Expenses Fund Contribution Amount ” means an amount determined by multiplying : (A) the Expenses Fund; by (B) the fraction having a numerator equal to the Participating Per Share Amount and having a denominator equal to the Aggregate Participation Amount.

(x) The “ Fully Diluted Company Share Number ” shall mean the sum, without duplication, of: (A) the aggregate number of shares of Company Common Stock outstanding immediately prior to the Effective Time; and (B) the aggregate number of shares of Company Preferred Stock outstanding immediately prior to the Effective Time; and (C) the aggregate number of shares (calculated on a net (cashless) exercise basis) of Company Common Stock purchasable under or otherwise subject to Vested Company Options (as defined in Section 1.6(a)) that are outstanding immediately prior to the Effective Time (but excluding all shares subject to Unvested Company Options (as defined in Section 1.6(b)); and (D) the aggregate number of shares (calculated on a net (cashless) exercise basis) of Series A Preferred Stock purchasable under or otherwise subject to Company Warrants outstanding immediately prior to

 

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the Effective Time (whether or not immediately exercisable); and (E) the aggregate number of shares of Company Common Stock issuable upon the conversion of any convertible securities of the Company (other than shares included in clauses “(B),” “(C)” or “(D)” of this sentence) outstanding immediately prior to the Effective Time (whether or not immediately exercisable).

(xi) The “ Merger Consideration ” shall mean the consideration that a Non-Dissenting Stockholder of the Company is entitled to receive pursuant to this Section 1.5 in exchange for such Non-Dissenting Stockholder’s shares of Company Capital Stock and the consideration that a holder of Company Vested Option or Company Warrant is entitled to receive pursuant to Section 1.6 in exchange of such holder’s Company Vested Options or Company Warrant (as applicable).

(xii) The “ Participating Per Share Amount ” shall mean the Aggregate Participation Amount divided by the Fully Diluted Company Share Number.

(xiii) The “ Series B Preference Per Share Amount ” shall mean, for each share of Series B Preferred Stock, an amount equal to (A) $0.829316, plus (B) eight percent (8%) of $0.414658, compounded annually from the date of issuance through the Closing Date, minus (C) any dividends actually declared and paid with respect to such share on or before the Effective Time, calculated in accordance with Article IV Section B.3.C of the Company’s certificate of incorporation as in effect on the date of this Agreement.

(c) Immediately following the Closing:

(i) Parent shall cause the Escrow Amount to be delivered to the Escrow Agent. The Escrow Fund (1) shall be held by the Escrow Agent in accordance with the terms of this Agreement and the terms of the Escrow Agreement, (2) shall be held as a trust fund segregated from the assets of Parent and the Escrow Agent and shall not be subject to any lien, attachment or other judicial process of any creditor or any Person, and (3) shall be held, invested and released solely for the purposes and in accordance with the terms of this Agreement and the Escrow Agreement; and

(ii) Parent shall cause the Expenses Fund to be delivered to the Stockholders’ Representative. The Expenses Fund (1) shall be held and utilized by the Stockholders’ Representative for the purposes and in accordance with the terms of this Agreement, and (2) shall be released by the Stockholders’ Representative in accordance with the terms of this Agreement.

(d) Schedule 1.5(d):

(i) sets forth: (A) the aggregate amount of all Transaction Expenses that remain unpaid immediately prior the Closing; and (B) the Adjustment Amount, in each case accompanied by detailed supporting documentation satisfactory to Parent (including written confirmation from all of the Company’s advisors as to all amounts owed and to be owed by each Acquired Corporation with respect to services performed by such advisors through the Closing Date);

 

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(ii) identifies each Person that is a holder of Company Capital Stock immediately prior to the Effective Time and setting forth: (A) the number of shares of Company Common Stock, the number of shares of Series A Preferred Stock and the number of shares of Series B Preferred Stock held by such Person immediately prior to the Effective Time; (B) the Closing Consideration that such Person is entitled to receive at Closing pursuant to Section 1.5(a); (C) the aggregate Escrow Contribution Amount with respect to all shares of Company Capital Stock held by such Person; and (D) the aggregate Expenses Fund Contribution Amount with respect to all shares of Company Capital Stock held by such Person;

(iii) sets forth the following information with respect to each holder of Company Options outstanding as of the Effective Time: (A) the number of shares of Company Common Stock subject to each Company Option held by such person immediately prior to the Effective Time (indicating the number of such shares subject to each such Company Option which constitute Vested Company Options, the number of shares which will be unvested and the Company Option Plan pursuant to which each such Company Option was granted), and the applicable exercise price per share of Company Common Stock subject to each such Company Option; (B) the amount of consideration that such holder is entitled to receive at the Closing pursuant to Section 1.6(a); (C) the aggregate Escrow Contribution Amount with respect to all Vested Company Options held by such holder; and (D) the aggregate Expenses Fund Contribution Amount with respect to all Vested Company Options held by such holder;

(iv) sets forth the following information with respect to each holder of Company Warrants outstanding as of the Effective Time: (A) the number of shares of Series A Preferred Stock subject to each Company Warrant held by such person immediately prior to the Effective Time, and the applicable exercise price per share of Company Series A Preferred Stock subject to each such Company Warrant; (B) the amount of consideration that such holder is entitled to receive at the Closing pursuant to Section 1.6(d); (C) the aggregate Escrow Contribution Amount with respect to all Company Warrants held by such holder; and (D) the aggregate Expenses Fund Contribution Amount with respect to all Company Warrants held by such holder; and

(v) sets forth for each Escrow Participant, such Escrow Participant’s Specified Percentage (each as defined in Section 4.8(g)).

1.6 Treatment of Stock Options and Warrants.

(a) Each Vested Company Option that is outstanding immediately prior to the Effective Time shall be cancelled and terminated at the Effective Time and the holder thereof shall be entitled to receive, upon delivery to Paying Agent of a duly executed Letter of Transmittal (as defined in Section 1.8(a)): (A) the product of (1) the number of shares of Company Common Stock issuable on a net (cashless) exercise basis pursuant to such Vested Company Option and (2) an amount in cash equal to (x) the Participating Per Share Amount (as defined in Section 1.5(b)); minus (y) the Escrow Contribution Amount (as defined in Section 1.5(b) minus (z) the Expenses Fund Contribution Amount (as defined in Section 1.5(b); plus (B) any consideration required to be released from the Escrow Fund with respect to the number of shares of Company Common Stock issuable on a net (cashless) exercise basis

 

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pursuant to such Vested Company Option to the former holder thereof in accordance with Section 4.8 (as and when such consideration is required to be released to such former holder); plus (C) any consideration required to be released from the Expenses Fund with respect to the number of shares of Company Common Stock issuable on a net (cashless) exercise basis pursuant to such Vested Company Option to the former holder thereof in accordance with Section 5.1(h) (as and when such consideration is required to be released to such former holder). “ Vested Company Option ” means each Company Option granted under the Company’s 1995 Stock Option Plan and each other Company Option that is exercisable in accordance with its terms immediately prior to the Effective Time as specified on Schedule 1.5(d). Prior to the Effective Time, the Company shall take all actions necessary to cause each Vested Company Option that is outstanding immediately prior to the Effective Time to be cancelled and terminated effective at the Effective Time, with only the payment of the consideration referred to in this paragraph, in accordance with the terms and conditions of such Vested Company Options, the Company Plans and this Agreement.

(b) Prior to the Effective Time, the Company shall take all actions necessary to cause each Unvested Company Option that is outstanding immediately prior to the Effective Time and that represents the right to acquire shares of Company Common Stock to be cancelled and terminated effective at the Effective Time, without the payment of any consideration, in accordance with the terms and conditions of such Unvested Company Options and the Company Plans. “ Unvested Company Option ” means a Company Option other than a Vested Company Option.

(c) Prior to the Effective Time, the Company shall take all actions necessary to terminate the Company Option Plans, such termination to be effective at the Effective Time.

(d) Prior to the Effective Time, the Company shall take all actions necessary to cause each Company Warrant that is outstanding immediately prior to the Effective Time to be cancelled effective as of the Effective Time and converted into the right to receive, upon delivery to the Paying Agent of a fully executed Letter of Transmittal (as defined in Section 1.8(a)): (A) the product of (1) the number of shares (calculated on a net (cashless) exercise basis) of Series A Preferred Stock purchasable under or otherwise subject to such Company Warrant; and (2) an amount equal to (X) the Participating Per Share Amount (as defined in Section 1.5(b)); minus (Y) the Escrow Contribution Amount (as defined in Section 1.5(b); minus (Z) the Expenses Fund Contribution Amount (as defined in Section 1.5(b); plus (B) any consideration required to be released from the Escrow Fund (if any) with respect to the number of shares (calculated on a net (cashless) exercise basis) of Series A Preferred Stock purchasable under or otherwise subject to such Company Warrant to the former holder thereof in accordance with Section 4.8 (as and when such consideration is required to be released to such former holder); plus (C) any consideration required to be released from the Expenses Fund (if any) with respect to such share of Company Capital Stock to the former holder thereof in accordance with Section 5.1(h) (as and when such consideration is required to be released to such former holder). The Company shall obtain and deliver to Parent, at or prior to the Closing, a Warrant Termination Agreement (a “ Warrant Termination Agreement ”) executed by each holder of Company Warrants. No Company Warrants or other rights to acquire shares of Company Capital Stock, whether vested or unvested, shall be assumed by Parent in the Merger, and at the

 

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Effective Time, each Company Warrant or other right to acquire shares of Company Capital Stock that has not been cancelled pursuant to a Warrant Termination Agreement or exercised prior to the Closing will, by virtue of the Merger, and without any further action on the part of any holder thereof, be deemed to have been exercised at Closing on a net exercise basis in accordance with its terms.

1.7 Closing of the Company’s Transfer Books. At the Effective Time: (a) all shares of Company Capital Stock outstanding immediately prior to the Effective Time shall automatically be canceled and retired and shall cease to exist, and all holders of certificates representing shares of Company Capital Stock that were outstanding immediately prior to the Effective Time shall cease to have any rights as stockholders of the Company; and (b) the stock transfer books of the Company shall be closed with respect to all shares of Company Capital Stock outstanding immediately prior to the Effective Time. No further transfer of any such shares of Company Capital Stock shall be made on such stock transfer books after the Effective Time. If, after the Effective Time, a valid certificate previously representing any shares of Company Capital Stock outstanding immediately prior to the Effective Time (a “ Company Stock Certificate ”) is presented to the Surviving Corporation or Parent, such Company Stock Certificate shall be canceled and shall be exchanged as provided in Section 1.8.

1.8 Surrender of Certificates.

(a) Promptly following the Closing, the Paying Agent will deliver to the holders of Company Capital Stock, Company Vested Options and Company Warrants (i) a letter of transmittal in customary form and containing such provisions as Parent may reasonably specify (a “ Letter of Transmittal ”), and (ii) instructions for use in effecting the surrender of Company Stock Certificates (with respect to Company Capital Stock) in exchange for Merger Consideration. Upon surrender of a Company Stock Certificate (with respect to Company Capital Stock) to Paying Agent for exchange, together with a duly executed Letter of Transmittal and such other documents as may be reasonably required by Parent, the holder of such Company Stock Certificate, Company Vested Option or Company Warrant shall be entitled to receive in exchange therefor the Merger Consideration that such holder has the right to receive pursuant to the provisions of this Section 1, and the Company Stock Certificate (with respect to Company Capital Stock) so surrendered shall be canceled. Until surrendered as contemplated by this Section 1.8, each Company Stock Certificate shall be deemed, from and after the Effective Time, to represent only the right to receive upon such surrender the Merger Consideration as contemplated by this Section 1. If any Company Stock Certificate shall have been lost, stolen or destroyed, Parent may, in its discretion and as a condition precedent to the delivery of any Merger Consideration, require the owner of such lost, stolen or destroyed Company Stock Certificate to provide an appropriate affidavit and to deliver a bond (in such sum as Parent may reasonably direct) as indemnity against any claim that may be made against Parent or the Surviving Corporation with respect to such Company Stock Certificate.

(b) Parent and the Surviving Corporation shall be entitled to deduct and withhold from any Merger Consideration or other consideration payable or otherwise deliverable to any holder or former holder of Company Capital Stock or Company Options pursuant to this Agreement such amounts as Parent or the Surviving Corporation determines in good faith are

 

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required to be deducted or withheld therefrom under the Code or under any other Legal Requirement relating to Taxes and Parent shall duly remit any such amounts to the appropriate Tax authority. To the extent 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.

(c) Neither Parent nor the Surviving Corporation shall be liable to any holder or former holder of Company Capital Stock or any other person with respect to any Merger Consideration delivered to any public official in good faith in accordance with any applicable abandoned property law, escheat law or similar Legal Requirement.

(d) If, after six months after the Effective Time, any holder of Company Capital Stock, Company Vested Option or Company Warrant has not yet surrendered the proper documentation necessary for payment of their respective Closing Consideration, Parent may demand that the Paying Agent deliver any undistributed portion of the Closing Consideration to Parent, together with all interest and other earnings, if any, on the Closing Consideration. The holder of Company Capital Stock, Company Vested Option or Company Warrant shall thereafter look only to Parent for satisfaction of such holder’s claims payable with respect to such holder’s respective Closing Consideration.

1.9 Dissenting Shares.

(a) Notwithstanding anything to the contrary contained in this Agreement, shares of Company Capital Stock held by a holder who has made a demand for appraisal of such shares of Company Capital Stock in accordance with Section 262 of the DGCL (“ Dissenting Shares ”) shall not be converted into or represent the right to receive Merger Consideration in accordance with Section 1.5, but shall be entitled only to such rights as are granted by the DGCL to a holder of Dissenting Shares. Non-Dissenting Stockholders shall not be entitled to any portion of the Merger Consideration otherwise payable with respect to any Dissenting Shares. Any portion of the Closing Consideration and the Escrow Fund attributable to holders of Dissenting Shares shall be released to Parent upon delivery to the Paying Agent and the Escrow Agent of a notice certifying that the specified shares of Company Capital Stock are Dissenting Shares and can no longer lose their status as such in accordance with the DGCL.

(b) Subject to Sections 1.5(c) and 1.8(b), if any Dissenting Shares shall lose their status as such (through failure to perfect or otherwise), then, as of the later of the Effective Time or the date of loss of such status, such shares shall automatically be converted into and shall represent only the right to receive Merger Consideration in accordance with Section 1.5, without interest thereon, upon surrender of the Company Stock Certificate representing such shares in accordance with Section 1.8.

1.10 Information Statement. Promptly after the Closing, the Company shall mail an information statement in a form acceptable to Parent (the “ Information Statement ”) to holders of Company Capital Stock who have not executed a written consent adopting this Agreement and approving the Merger. The Information Statement shall include all the information and disclosure required to be provided: (x) in order to constitute a notice of appraisal rights pursuant

 

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to Section 262 of the DGCL, and (y) in order to constitute a notice of the taking of corporate action pursuant to Section 228 of the DGCL, including, without limitation: (i) a summary of the Merger and the terms of this Agreement; (ii) a statement that appraisal rights may be available for the Company Capital Stock pursuant to Section 262 of the DGCL; and (iii) a copy of Section 262 of the DGCL.

1.11 Further Action. If, at any time after the Effective Time, any further action is reasonably determined by Parent to be necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation or Parent with full right, title and possession of and to all rights and property of Merger Sub and the Company, the officers and directors of the Surviving Corporation and Parent shall be fully authorized (in the name of Merger Sub, in the name of the Company and otherwise) to take such action.

SECTION 2. R EPRESENTATIONS AND W ARRANTIES OF THE C OMPANY

The Company represents and warrants, to and for the benefit of the Indemnitees, that each of the representations and warranties set forth in this Section 2 is accurate and complete, except as provided in the part or subpart of the Disclosure Schedule corresponding to the particular Section or subsection in this Section 2 in which such representation and warranty appears (it being understood, however, that a disclosure in a particular part or subpart of the Disclosure Schedule will also be deemed to qualify a representation and warranty that does not appear in the corresponding Section or subsection in this Section 2 if it is reasonably apparent from such disclosure that the disclosed information is intended to qualify such representation and warranty):

2.1 Subsidiaries; Due Organization; Etc.

(a) The Company has no Subsidiaries, except for the corporations identified in Part 2.1(a)(i) of the Disclosure Schedule; and neither the Company nor any of such corporations owns any capital stock of, or any equity interest of any nature in, any other Entity. None of the Acquired Corporations has agreed or is obligated to make, or is bound by any Contract under which it may become obligated to make, any future investment in or capital contribution to any other Entity. None of the Acquired Corporations has, at any time, been a general partner of, or has otherwise been liable for any of the debts or other obligations of, any general partnership, limited partnership or other Entity.

(b) Each of the Acquired Corporations is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation (which jurisdiction is set forth in Part 2.1(b) of the Disclosure Schedule) and has all necessary corporate power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own and use its assets in the manner in which its assets are currently owned and used; and (iii) to perform its obligations under all Contracts by which it is bound.

(c) None of the Acquired Corporations is required to be qualified, authorized, registered or licensed to do business as a foreign corporation in any jurisdiction other than the jurisdictions identified in Part 2.1(c) of the Disclosure Schedule, except where the failure to be

 

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so qualified, authorized, registered or licensed would not result in a Material Adverse Effect. The Acquired Corporations are in good standing as foreign corporations in each of the jurisdictions identified in Part 2.1(c) of the Disclosure Schedule.

(d) Except as set forth in Part 2.1(d) of the Disclosure Schedule, none of the Acquired Corporations has conducted any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name, assumed name, trade name or other name, other than the name “NetPro Computing, Inc.” and the names set forth in Part 2.1(a)(i) of the Disclosure Schedule.

(e) Part 2.1(e) of the Disclosure Schedule accurately sets forth: (i) the names of the members of the board of directors of each of the Acquired Corporations; and (ii) the names and titles of the officers of each of the Acquired Corporations.

2.2 Certificate of Incorporation and Bylaws; Records. The Company has delivered to Parent accurate and complete copies of: (a) the certificate or articles of incorporation, bylaws and other charter and organizational documents of each Acquired Corporation, including all amendments thereto; (b) the stock records of each Acquired Corporation; and (c) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the stockholders of each Acquired Corporation, the board of directors of each Acquired Corporation and all committees of the board of directors of each Acquired Corporation. Except as set forth in Part 2.2 of the Disclose Schedule, the books of account, stock records, minute books and other records of the Acquired Corporations are accurate, up-to-date and complete in all material respects.

2.3 Capitalization, Etc.

(a) The authorized capital stock of the Company consists of 20,000,000 shares of Company Common Stock, of which 6,201,272 shares have been issued and are outstanding as of the date of this Agreement, 3,580,931 shares of Series A Preferred Stock, of which 3,039,139 shares have been issued and are outstanding as of the date of this Agreement, and 2,610,583 shares of Series B Preferred Stock, of which 2,610,583 shares have been issued and are outstanding as of the date of this Agreement. Except as set forth in Part 2.3(a)(i) of the Disclosure Schedule, the Company does not hold any shares of its capital stock in its treasury. All of the outstanding shares of Company Capital Stock have been duly authorized and validly issued, and are fully paid and nonassessable. Except as set forth in Part 2.3(a)(ii) of the Disclosure Schedule: (i) none of the outstanding shares of Company Capital Stock is entitled or subject to any preemptive right, right of participation, right of maintenance or any similar right; (ii) none of the outstanding shares of Company Capital Stock is subject to any right of first refusal or similar right in favor of the Company or any other Person; and (iii) there is no Company Contract relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or granting any option or similar right with respect to), any shares of Company Capital Stock. Except as set forth in the certificate of incorporation of the Company, none of the Acquired Corporations is under any obligation, or is bound by any Contract pursuant to which it may become obligated, to repurchase, redeem or

 

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otherwise acquire any outstanding shares of Company Capital Stock or any other securities. Part 2.3(a)(iii) of the Disclosure Schedule provides an accurate and complete description of the terms of each repurchase option which is held by the Company and to which any of the shares of Company Capital Stock is subject.

(b) As of the date of this Agreement, 3,677,732 shares of Company Common Stock are subject to issuance pursuant to outstanding Company Options. Part 2.3(b)(i) of the Disclosure Schedule sets forth accurate and complete information with respect to the holder, the vesting, the exercise price, the expiration date, the shares underlying, the applicable Company Option Plan, and the tax status of each Company Option outstanding as of the date of this Agreement. Except as set forth in Part 2.3(b) of the Disclosure Schedule, no Company Option is held by a Person residing or domiciled outside of the United States. All outstanding Company Options were granted pursuant to the terms of one of the Company Option Plans. The Company has delivered or made available to Parent accurate and complete copies of the Company Option Plans, which are the only stock option plans pursuant to which any of the Acquired Corporations has ever granted stock options, and the forms of all stock option agreements evidencing such options. The Company Option Plans are binding upon and enforceable by the Company against all holders of Company Options, subject to (i) laws of general application relating to bankruptcy, insolvency, reorganization, moratorium and the enforcement of creditors’ rights generally, and (ii) general principles of equity, including rules governing specific performance, injunctive relief and other equitable remedies. As of the date of this Agreement, 500,000 shares of Series A Preferred are authorized for issuance pursuant to outstanding Company Warrants. There are no outstanding Company Warrants for any shares of Company Capital Stock other than for shares of Series A Preferred Stock as set forth in Part 2.3(b)(ii) of the Disclosure Schedule. Part 2.3(b)(ii) of the Disclosure Schedule sets forth accurate and complete information with respect to the holder, the vesting, the exercise price, the expiration date and the shares underlying each Company Warrant outstanding as of the date of this Agreement. The Company has delivered or made available to Parent accurate and complete copies of all Company Warrants.

(c) Except as set forth in Parts 2.3(b)(i), 2.3(b)(ii) and 2.3(c) of the Disclosure Schedule, there is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any shares of the capital stock or other securities of any of the Acquired Corporations; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares of the capital stock or other securities of any of the Acquired Corporations; (iii) Contract under which any of the Acquired Corporations is or may become obligated to sell or otherwise issue any shares of its capital stock or any other securities; or (iv) condition or circumstance that may give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive (A) any shares of capital stock or other securities of any of the Acquired Corporations, or (B) any portion of any Merger Consideration or other consideration payable in connection with the Merger.

(d) Except as set forth in Parts 2.3(d) of the Disclosure Schedule, all outstanding shares of capital stock, options, warrants and other securities of the Acquired Corporations have been issued and granted in compliance in all material respects with (i) all applicable securities laws and other applicable Legal Requirements, and (ii) all requirements set forth in applicable Contracts related to such issuance or grant.

 

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(e) All of the outstanding shares of capital stock of each of the Company’s Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof, and are owned beneficially and of record by the Company, free and clear of any Encumbrances.

(f) Except as set forth in Part 2.3(f) of the Disclosure Schedule, none of the Acquired Corporations has ever repurchased, redeemed or otherwise reacquired any shares of Company Capital Stock or other securities of any Acquired Corporation, other than Company Options forfeited by Company Employees in connection with the termination of their employment with an Acquired Corporation. All securities so reacquired by the Company or any other Acquired Corporation were reacquired in compliance in all material respects with (i) all applicable Legal Requirements, and (ii) all requirements set forth in applicable restricted stock purchase agreements and other applicable Contracts related to such issuance or grant.

2.4 Financial Statements; Financial Controls.

(a) The Company has delivered or made available to Parent the following financial statements and notes (collectively, the “ Company Financial Statements ”): (i) the audited consolidated balance sheets of the Company and its consolidated Subsidiaries as of December 31, 2005, 2006 and 2007 and the related audited consolidated statements of operations, statements of stockholders’ equity and statements of cash flows of the Company and its consolidated Subsidiaries for the years then ended, together with the independent auditor’s report therefor and notes thereto; and (ii) the unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as of June 30, 2008 (the “ Most Recent Balance Sheet ”), and the related unaudited statement of income, statement of stockholders’ equity and statement of cash flows of the Company and its consolidated Subsidiaries for the three months then ended.

(b) The Company Financial Statements are accurate and complete in all material respects and fairly present in all material respects in accordance with GAAP the financial position of the Company and its consolidated Subsidiaries as of the respective dates thereof and the results of operations and cash flows of the Company and its consolidated Subsidiaries for the periods covered thereby. The Company Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered (except that the financial statements referred to in Section 2.4(a)(ii) do not contain footnotes and are subject to normal and recurring year end adjustments, which will not, individually or in the aggregate, be material in magnitude).

(c) Each of the Acquired Corporations maintains books and records reflecting its assets and liabilities that are accurate and complete in all material respects and maintains adequate internal accounting controls which provide reasonable assurance that: (i) transactions are executed with management’s authorization; (ii) transactions are recorded as necessary to permit preparation of the consolidated financial statements of the Company and its consolidated

 

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Subsidiaries and to maintain accountability for the assets of the Acquired Corporations; (iii) access to the assets of the Acquired Corporations is permitted only in accordance with management’s authorization; (iv) the reporting of the assets of the Acquired Corporations is compared with existing assets at regular intervals; and (v) accounts, notes and other receivables are recorded accurately, and adequate procedures are implemented to effect the collection thereof on a current and timely basis.

2.5 Absence of Changes. Except as set forth in Part 2.5 of the Disclosure Schedule, since June 30, 2008: (a) there has not been any Material Adverse Effect, and no event has occurred or circumstance has arisen that, in combination with any other events or circumstances, could reasonably be expected to have or result in a Material Adverse Effect; (b) there has not been any material loss, damage or destruction to, or any material interruption in the use of, any of the assets of any of the Acquired Corporations (whether or not covered by insurance); (c) none of the Acquired Corporations has received any inquiry, proposal or offer relating to a possible Acquisition Transaction; (d) none of the Acquired Corporations has made any capital expenditure which, when added to all other capital expenditures made on behalf of the Acquired Corporations since June 30, 2008, exceeds $150,000 in the aggregate; (e) none of the Acquired Corporations has written off as uncollectible, or established any extraordinary reserve with respect to, any account receivable or other indebtedness in excess of $25,000 individually or $100,000 in the aggregate; (f) none of the Acquired Corporations has entered into any material transaction or taken any other material action outside the ordinary course of business or inconsistent with past practices; (g) none of the Acquired Corporations has changed any of its sales contract terms and conditions, pricing or discounting policies or practices, product return policies, product maintenance policies, service policies, product modification or upgrade policies, personnel policies or other business policies, or any of its methods of accounting or accounting practices in any material respect; and (h) none of the Acquired Corporations has agreed or committed to take any of the actions referred to in clauses “(c)” through “(g)” of this sentence.

2.6 Title to Assets. The Acquired Corporations own, and have good, valid and marketable title to, all assets purported to be owned by them, including: (a) all assets reflected on the Most Recent Balance Sheet (other than any assets sold in the ordinary course of business, consistent with past practices, since the date of the Most Recent Balance Sheet); (b) all assets referred to in Part 2.9 of the Disclosure Schedule (other than Intellectual Property Rights or Intellectual Property licensed to the Company, as identified in Part 2.9(a)(iii) of the Disclosure Schedule) and all of the Company’s rights under the Contracts identified in Part 2.10(a) of the Disclosure Schedule; and (c) all other assets reflected in the books and records of the Acquired Corporations as being owned by the Acquired Corporations. All of said assets are owned by the Acquired Corporations free and clear of any Encumbrances, except for (i) any lien for taxes not yet due and payable, (ii) liens that have arisen in the ordinary course of business and that do not (in any case or in the aggregate) materially detract from the value of the assets subject thereto or materially impair the operations of any Acquired Corporation, (iii) the matters described in Sections 2.9(c), and (iv) liens described in Part 2.6 of the Disclosure Schedule.

 

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2.7 Bank Accounts; Receivables; Customers.

(a) Part 2.7(a) of the Disclosure Schedule provides an accurate list of each account maintained by or for the benefit of the Acquired Corporations at any bank or other financial institution and provides, for each such account, the account number, the authorized signatories for such account, and the contact information for Acquired Corporation’s contacts at such bank or other financial institution.

(b) All existing accounts receivable of the Acquired Corporations (including those accounts receivable reflected on the Most Recent Balance Sheet that have not yet been collected and those accounts receivable that have arisen since June 30, 2008 and have not yet been collected): (i) represent valid obligations of customers of the Acquired Corporations arising from bona fide transactions entered into in the ordinary course of business; (ii) to the Knowledge of the Company, will be collected in full when due, without any counterclaim or set off (net of an allowance for doubtful accounts not to exceed $125,000 in the aggregate); and (iii) that existed as of September 10, 2008 are accurately reflected on the aging schedule (prepared as of such date) included in Part 2.7(b) of the Disclosure Schedule.

(c) Part 2.7(c) of the Disclosure Schedule contains an accurate and complete list as of the date of this Agreement of all loans and advances made by any of the Acquired Corporations to any employee, director, consultant or independent contractor, other than routine travel advances made to employees in the ordinary course of business.

(d) The Company has not received any written notice or, to the Knowledge of the Company, any other communication, indicating that any current customer from which the Acquired Corporations have received in excess of $100,000 in the 12-month period ending June 30, 2008 intends to cease dealing with any of the Acquired Corporations or otherwise intends to reduce the volume of business transacted by such Person with any of the Acquired Corporations below historical levels.

2.8 Equipment; Leasehold. All material items of equipment and other tangible assets owned by or leased to the Acquired Corporations are adequate for the uses to which they are being put, are in good condition and repair (ordinary wear and tear excepted) and are adequate for the conduct of the business of the Acquired Corporations in the manner in which such business is currently being conducted. No Acquired Corporation owns any real property or any interest in real property, except for the leaseholds created under the real property leases identified in Part 2.8 of the Disclosure Schedule.

2.9 Intellectual Property.

(a) Part 2.9(a) of the Disclosure Schedule accurately identifies and describes:

(i) in Part 2.9(a)(i) of the Disclosure Schedule, each Company Product currently being developed, manufactured, marketed, distributed, licensed, sold or made available (as part of service bureau, time-sharing, application service provided or similar arrangement or otherwise) by any of the Acquired Corporations;

 

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(ii) in Part 2.9(a)(ii) of the Disclosure Schedule: (A) each item of Registered IP in which any of the Acquired Corporations has or purports to have an ownership interest of any nature (whether exclusively, jointly with another Person or otherwise); (B) the jurisdiction in which such item of Registered IP has been registered or filed and the applicable registration or serial number; and (C) any other Person that has an ownership interest in such item of Registered IP and the nature of such ownership interest;

(iii) in Part 2.9(a)(iii) of the Disclosure Schedule: (A) all Intellectual Property Rights or Intellectual Property licensed to each of the Acquired Corporations (other than any non-customized software that: (1) is so licensed solely in executable or object code form pursuant to a nonexclusive, internal use software license, (2) is not incorporated into any Company Product, or used by any Acquired Corporation in the development of, any Company Product or compilation from source code to object or executable code, and (3) is generally available on standard terms for less than $25,000); (B) the corresponding Contract or Contracts pursuant to which such Intellectual Property Rights or Intellectual Property is licensed to such Acquired Corporation; and (C) whether the license or licenses so granted to the Acquired Corporations are exclusive or nonexclusive; and

(iv) in Part 2.9(a)(iv) of the Disclosure Schedule: (A) each Contract that has not expired or otherwise terminated pursuant to which any Person has been granted any license under, or otherwise has received or acquired any right (whether or not currently exercisable) or interest in, any Company IP (other than End User Licenses in the Company’s then current standard form thereof); and (B) whether the licenses or rights so granted are exclusive or nonexclusive.

(b) The Company has provided to Parent a complete and accurate copy of each standard form of Company IP Contract used by any of the Acquired Corporations, including each standard form of: (i) end user license agreement or terms; (ii) development agreement; (iii) distributor, reseller or sales representative agreement; (iv) maintenance or support agreement or terms; (v) employee agreement containing any assignment or license of Intellectual Property or Intellectual Property Rights or any confidentiality provision; (vi) consulting, independent contractor or professional services agreement; or (vii) confidentiality or nondisclosure agreement. Part 2.9(b) of the Disclosure Schedule accurately identifies each Company IP Contract that deviates in any material respect from the corresponding standard form agreement provided to Parent (other than Company IP Contracts that have expired or otherwise terminated in each case with no ongoing rights or obligations other than confidentiality provisions substantially similar to the confidentiality provisions in the Company’s applicable standard form).

(c) The Acquired Corporations exclusively own all right, title and interest to and in the Company IP (other than Intellectual Property Rights or Intellectual Property licensed to the Company, as identified in Part 2.9(a)(iii) of the Disclosure Schedule) free and clear of any Encumbrances (other than licenses granted pursuant to the Contracts listed in Part 2.9(a)(iv) of the Disclosure Schedule and other than End User Licenses in the Company’s standard form thereof). Without limiting the generality of the foregoing:

(i) all documents and instruments necessary to establish, secure and perfect the rights of the Acquired Corporations in the Company IP that is Registered IP have been validly executed, delivered and filed in a timely manner with the appropriate Governmental Body;

 

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(ii) each Person who is or was an employee or independent contractor of any of the Acquired Corporations and who is or was involved in the creation or development of any Company Product or any Company IP has signed a valid and enforceable agreement containing an irrevocable assignment of Intellectual Property Rights to the Acquired Corporation for which such Person is or was an employee or independent contractor and confidentiality provisions protecting the Company IP;

(iii) no Company Employee has any claim, right (whether or not currently exercisable) or interest to or in any Company IP;

(iv) to the Knowledge of the Company, no employee or independent contractor of any of the Acquired Corporations is: (A) bound by or otherwise subject to any Contract restricting him or her from performing his or her duties for such Acquired Corporation; or (B) in breach of any Contract with any former employer or other Person concerning Intellectual Property Rights or confidentiality as a result of his or her employment or activities with such Acquired Corporation;

(v) no funding, facilities or personnel of any Governmental Body or college, university or other education institution were used, directly or indirectly, to develop or create, in whole or in part, any Company Product or any Company IP;

(vi) each of the Acquired Corporations has taken all commercially reasonable steps to maintain the confidentiality of and otherwise protect and enforce its rights in all source code for Company Software and all other proprietary information held by any of the Acquired Corporations, or purported to be held by any of the Acquired Corporations, as a trade secret, and Part 2.9(c)(vi) of the Disclosure Schedule describes the protection procedures followed and other measures taken by the Acquired Corporations to maintain such confidentiality and protect and enforce such rights;

(vii) none of the Acquired Corporations has assigned or otherwise transferred ownership of, or agreed to assign or otherwise transfer ownership of, any Intellectual Property Right to any other Person;

(viii) except as set forth in Part 2.9(e)(viii) of the Disclosure Schedule, none of the Acquired Corporations is bound by, and no Company IP is subject to, any Contract containing any covenant or other provision that in any way limits or restricts the ability of any of the Acquired Corporations to use, exploit, assert, or enforce any Company IP anywhere in the world; and

(ix) the Acquired Corporations own or otherwise have, and after the Closing the Surviving Corporation will continue to have, all Intellectual Property Rights needed to conduct the business of the Acquired Corporations as currently conducted by any Acquired Corporation.

 

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(d) All Company IP is valid, subsisting and enforceable. Without limiting the generality of the foregoing:

(i) no trademark (whether registered or unregistered) or trade name owned, used, or applied for by any of the Acquired Corporations conflicts or interferes with any trademark (whether registered or unregistered) or trade name owned, used or applied for by any other Person;

(ii) each of the Acquired Corporations has taken all commercially reasonable efforts necessary to preserve the value of the goodwill associated with or inherent in any trademark (whether registered or unregistered) in which any of the Acquired Corporations has or purports to have an ownership interest;

(iii) except as set forth in Parts 2.9(d)(iii) of the Disclosure Schedule, each item of Company IP that is Registered IP is and at all times has been in compliance with all Legal Requirements, and all filings, payments and other actions required to be made or taken to maintain each such item of Company IP in full force and effect have been made by the applicable deadline;

(iv) Part 2.9(d)(iv) of the Disclosure Schedule accurately identifies and describes each filing, payment, and action that must be made or taken on or before the date that is 120 days after the date of this Agreement in order to maintain each item of Company IP that is Registered IP in full force and effect;

(v) the Company has provided to Parent complete and accurate copies of all applications, correspondence and other material documents related to each such item of Registered IP; and

(vi) no interference, opposition, reissue, reexamination or other Proceeding of any nature is or has been pending or, to the Knowledge of the Company, threatened, in which the scope, validity or enforceability of any Company IP is being, has been or would reasonably be expected to be contested or challenged.

(e) Neither the execution, delivery or performance of this Agreement or any of the agreements referred to in this Agreement nor the consummation of any of the transactions contemplated herein or therein will, with or without notice or the lapse of time, result in or give any other Person the right or option to cause or declare: (i) a loss of, or Encumbrance on, any Company IP; (ii) the release, disclosure or delivery of any Company IP by or to any escrow agent or other Person; or (iii) the grant, assignment or transfer to any other Person of any license or other right or interest under, to or in any of the Company IP.

(f) To the Knowledge of the Company, no Person has infringed, misappropriated, or otherwise violated, and no Person is currently infringing, misappropriating

 

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or otherwise violating, any Company IP. Part 2.9(f) of the Disclosure Schedule accurately identifies (and the Company has provided to Parent a complete and accurate copy of) each letter or other written or electronic communication or correspondence that has been sent or otherwise delivered by or to any of the Acquired Corporations or any Representative of any of the Acquired Corporations regarding any actual, alleged or suspected infringement or misappropriation of any Company IP and provides a brief description of the current status of the matter referred to in such letter, communication or correspondence.

(g) None of the Acquired Corporations has ever infringed (directly, contributorily, by inducement or otherwise), misappropriated or otherwise violated any Intellectual Property Right of any other Person. Without limiting the generality of the foregoing:

(i) no Company Product, no Company Software and no Company IP ever owned, used or developed by any of the Acquired Corporations, has ever infringed, misappropriated or otherwise violated any Intellectual Property Right of any other Person;

(ii) except as set forth on Part 2.9(g)(ii), no infringement, misappropriation or similar claim or Legal Proceeding is pending or, to the Knowledge of the Company, has been threatened against any of the Acquired Corporations or against any other Person who may be entitled to be indemnified, defended, held harmless or reimbursed by the Company with respect to such claim or Legal Proceeding;

(iii) except as set forth on Part 2.9(g)(iii) of the Disclosure Schedule none of the Acquired Corporations has ever received any notice or other communication (in writing or, to the Knowledge of the Company, otherwise) relating to any actual, alleged or suspected infringement, misappropriation or violation by any Acquired Corporation, Company Employee, Company Product or Company Software of any Intellectual Property Right of another Person;

(iv) none of the Acquired Corporations is bound by any Contract to indemnify, defend, hold harmless or reimburse any other Person with respect to any intellectual property infringement, misappropriation or similar claim (other than pursuant to the standard forms of Company IP Contracts described in Section 2.9(b) or as set forth on Part 2.9(g)(iv) of the Disclosure Schedule);

(v) none of the Acquired Corporations has ever assumed, or agreed to discharge or otherwise take responsibility for, any existing or potential liability of another Person for infringement, misappropriation or violation of any Intellectual Property Right (other than pursuant to the standard forms of Company IP Contracts described in Section 2.9(b) or as set forth on Part 2.9(g)(v) of the Disclosure Schedule); and

(vi) no claim or Legal Proceeding involving any Intellectual Property or Intellectual Property Right licensed to any of the Acquired Corporations is pending or, to the Knowledge of the Company, has been threatened, except for any such claim or Legal Proceeding that, if adversely determined, would not adversely affect: (A) the use or exploitation of such Intellectual Property or Intellectual Property Right by any of the Acquired Corporations; or (B) the development, manufacturing, distribution, support, provision or sale of any Company Product.

 

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(h) None of the Company Software that has been released, commercially used, sold or distributed (but excluding any beta version of Company Software released, commercially used, sold or distributed): (i) contains any bug, defect or error, other than those discovered and corrected in the normal course of the Acquired Corporation’s software maintenance procedures (including any bug, defect or error relating to or resulting from the display, manipulation, processing, storage, transmission or use of date data) that materially and adversely affects the use, functionality or performance of such Company Software or any product or system containing or used in conjunction with such Company Software; or (ii) fails to comply with any applicable warranty or other contractual commitment relating to the use, functionality or performance of such software or any product or system containing or used in conjunction with such Company Software. The Company has provided to Parent a complete and accurate list of all known bugs, defects and errors, other than those discovered and corrected in the normal course of the Acquired Corporation’s software maintenance procedures, in each version and component of the Company Software that has been released, commercially used, sold or distributed.

(i) Except as set forth on Part 2.9(i) of the Disclosure Schedule, none of the Company Software contains any “back door,” “drop dead device,” “time bomb,” “Trojan horse,” “virus,” or “worm” (as such terms are commonly understood in the software industry) or any other code designed or intended to have, or capable of performing, any of the following functions: (i) disrupting, disabling, harming or otherwise impeding in any manner the operation of, or providing unauthorized access to, a computer system or network or other device on which such code is stored or installed; or (ii) damaging or destroying any data or file without the user’s consent.

(j) Except as set forth on Part 2.9(j) of the Disclosure Schedule, none of the Company Software is subject to any “copyleft” or other obligation or condition (including any obligation or condition under any “open source” license such as the GNU Public License, Lesser GNU Public License or Mozilla Public License) that: (i) could or does require, or could or does condition the use or distribution of such Company Software on, the disclosure, licensing or distribution of any source code for any portion of such Company Software; or (ii) could or does otherwise impose any limitation, restriction or condition on the right or ability of the Company to use or distribute any Company Software.

(k) Except as set forth on Part 2.9(k) of the Disclosure Schedule, no source code for any Company Software has been delivered, licensed or made available to any escrow agent or other Person who is not, as of the date of this Agreement, an employee of one of the Acquired Corporations. None of the Acquired Corporations has any duty or obligation (whether present, contingent or otherwise) to deliver, license or make available the source code for any Company Software to any escrow agent or other Person. No event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) will, or could reasonably be expected to, result in the delivery, license or disclosure of any source code for any Company Software to any other Person.

 

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2.10 Contracts.

(a) Parts 2.10(a)(i) through (xx) of the Disclosure Schedule identifies each Company Contract that constitutes a “Material Contract” (other than (i) End User Licenses, (ii) Contracts consisting of option letters and option agreements pursuant to the Company Option Plans and executed pursuant to the Company’s standard forms without material deviation (the standard forms for which have been delivered or made available to Parent), (iii) Contracts consisting of offer letters and proprietary information, confidentiality and assignment agreements executed pursuant to the Company’s standard forms without material deviation (the standard forms for which have been delivered or made available to Parent), (iv) Contracts pursuant to which any Intellectual Property or Intellectual Property Right is licensed to an Acquired Corporation under a third party “shrink-wrap” or “click through” software license generally available to the public, and (v) Government Contracts on a standard form delivered or made available to Parent and any purchase order that does not modify the terms of such standard form, none of which need be identified on Part 2.10(a) of the Disclosure Schedule) and that is currently in effect, or pursuant to which any Acquired Corporation has or may obtain or become subject to any rights or obligations (contingent or otherwise). For purposes of this Agreement, each of the following shall be deemed to constitute a “ Material Contract ”:

(i) any Contract (A) relating to the employment of, or the performance of services by, any employee, consultant or independent contractor, (B) pursuant to which any of the Acquired Corporations is or may become obligated to make any severance, termination or similar payment to any current or former employee or director, or (C) pursuant to which any of the Acquired Corporations is or may become obligated to make any bonus or similar payment (other than payments constituting base salary, or payments constituting sales commissions payable in the ordinary course of business pursuant to plans disclosed under Part 2.15(h) of the Disclosure Schedule) in excess of $25,000 to any current or former employee or director;

(ii) any Company IP Contract (including End User Licenses) and any other Contract relating to the acquisition, sale, transfer or development of any Intellectual Property or Intellectual Property Right;

(iii) any Contract relating to the acquisition, sale, spinoff or outsourcing of any business unit or operation or any product line;

(iv) any Contract that provides for indemnification of any officer, director, employee or agent;

(v) any Contract imposing any restriction on the right or ability of any Acquired Corporation (A) to compete with, or solicit any customer of, any other Person, (B) to acquire any product or other asset or any services from any other Person, (C) to solicit, hire or retain any Person as an employee, consultant or independent contractor, (D) to develop, sell, supply, distribute, offer, support or service any product or any technology or other asset to or for any other Person, (E) to perform services for any other Person, or (F) to transact business or deal in any other manner with any other Person;

 

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(vi) any Contract that provides for aggregate payments over the course of the Contract of more than $50,000 creating or involving any agency relationship (including sales representative agreements), distribution or reseller arrangement or franchise relationship;

(vii) any Contract (other than Contracts evidencing Company Options) (A) relating to the acquisition, issuance, voting, registration, sale or transfer of any securities, (B) providing any Person with any preemptive right, right of participation, right of maintenance or similar right with respect to any securities, or (C) providing any of the Acquired Corporations with any right of first refusal with respect to, or right to repurchase or redeem, any securities;

(viii) any Contract relating to the creation of any Encumbrance with respect to any asset of any of the Acquired Corporations;

(ix) any Contract incorporating or relating to any guaranty, any warranty, any pledge, any performance or completion bond or any indemnity or similar obligation, except for Contracts substantially identical to the standard forms of end-user licenses previously delivered or made available by the Company to Parent;

(x) any Contract relating to any currency hedging;

(xi) any Contract creating or relating to any joint venture (identified as such in such Contract) or any partnership or otherwise providing for the sharing of revenues, profits, losses, costs or liabilities (other than the payment of liabilities of a third party by the Company pursuant to warranty or indemnity obligations of the Company entered into in the ordinary course of business consistent with past practice);

(xii) any real estate lease;

(xiii) any Contract constituting or relating to a Government Contract;

(xiv) any Contract (A) containing “standstill” or similar provisions relating to transactions involving the acquisition, disposition or other transfer of assets or securities of an Entity, or (B) providing any right of first negotiation, right of first refusal or similar right to any Person;

(xv) each Company Contract relating to the purchase or sale of any product or other asset by or to, or the performance of any services by or for, any Related Party (as defined in Section 2.18);

(xvi) any Contract contemplating payments or the delivery of other consideration during any 12-month period aggregating or having an aggregate value of more than $50,000 that has a term of more than 90 days and that may not be terminated by an Acquired Corporation (without penalty) within 90 days after the delivery of a termination notice by such Acquired Corporation (other than routine nondisclosure agreements entered into by an Acquired Corporation in the ordinary course of business);

 

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(xvii) any Contract under which the Merger or any of the other Contemplated Transactions would give rise to or expand any rights in favor of, or any obligations on the part of, any Acquired Corporation or any other Person;

(xviii) any Contract that contemplates or involves the payment or delivery of cash or other consideration in an amount or having a value in excess of $50,000 in the aggregate, or contemplates or involves the performance of services having a value in excess of $50,000 in the aggregate;

(xix) any Contract that could reasonably be expected to have or result in a material effect on (A) the business, condition, capitalization, assets, Intellectual Property, liabilities, results of operations or financial performance of any of the Acquired Corporations or (B) the ability of the Company to perform any of its obligations under this Agreement or to consummate any of the Contemplated Transactions; and

(xx) any other Contract, if a breach of such Contract or the termination of such Contract could reasonably be expected to have or result in a Material Adverse Effect.

The Company has delivered or made available to Parent an accurate and complete copy of each Company Contract that constitutes a Material Contract, including all amendments thereto.

(b) Each Company Contract that constitutes a Material Contract is valid and in full force and effect, and is enforceable against the Acquired Corporations and, to the Knowledge of the Company, the other parties thereto, in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency, reorganization, moratorium and the enforcement of creditors’ rights generally, and (ii) general principles of equity, including rules governing specific performance, injunctive relief and other equitable remedies.

(c) Except as set forth in Part 2.10(c) of the Disclosure Schedule: (i) none of the Acquired Corporations has violated or breached, or committed any default under, any Company Contract, and, to the Knowledge of the Company, no other Person has violated or breached, or committed any default under, any Company Contract; (ii) to the Knowledge of the Company, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) could reasonably be expected to (A) result in a violation or breach of any of the provisions of any Company Contract, (B) give any Person the right to declare a default or exercise any remedy under any Company Contract, (C) give any Person the right to receive or require a rebate, chargeback, penalty or change in delivery schedule under any Company Contract, (D) give any Person the right to accelerate the maturity or performance of any Company Contract, (E) result in the disclosure, release or delivery of any source code for any Company Software, or (F) give any Person the right to cancel, terminate or modify any Company Contract; (iii) since January 1, 2003, none of the Acquired Corporations has received any notice or, to the Knowledge of the Company, other communication (in writing or otherwise) regarding any actual or possible violation or breach of, or default under, any Company Contract; and (iv) none of the Acquired Corporations has waived any of its material rights under any Company Contract that constitutes a Material Contract.

 

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(d) Except as set forth in Part 2.10(d) of the Disclosure Schedule, each of the representations and warranties set forth in this Section 2.10(d) is accurate in all material respects:

(i) none of the Acquired Corporations has received any written determination of noncompliance, entered into any consent order or undertaken any internal investigation relating directly or indirectly to any Government Contract or Government Bid;

(ii) the Acquired Corporations have complied with all Legal Requirements with respect to all Government Contracts and Government Bids;

(iii) the Acquired Corporations have not, in obtaining or performing any Government Contract, violated (A) the Truth in Negotiations Act of 1962, as amended, (B) the Service Contract Act of 1963, as amended, (C) the Contract Disputes Act of 1978, as amended, (D) the Office of Federal Procurement Policy Act, as amended, (E) the Federal Acquisition Regulations (the “ FAR ”) or any applicable agency supplement thereto, or (F) any other applicable procurement law or regulation or other Legal Requirement;

(iv) all facts set forth in or acknowledged by any of the Acquired Corporations in any certification, representation or disclosure statement submitted by any of the Acquired Corporations with respect to any Government Contract or Government Bid were current, accurate and complete as of the date of submission or as of such other date as required by the Government Contract or Government Bid;

(v) none of the Acquired Corporations, and no current Company Employee (in such Company Employee’s capacity as an Company Employee performing services for an Acquired Corporation), has been debarred or suspended from doing business with any Governmental Body, and, to the Knowledge of the Company, no circumstances exist that would warrant the institution of debarment or suspension proceedings against one or more of the Acquired Corporations or any current Company Employee;

(vi) no written negative determination of responsibility has been issued against and provided to any of the Acquired Corporations in connection with any Government Contract or Government Bid;

(vii) no direct or indirect costs incurred by the Acquired Corporations have been questioned or disallowed, outside the ordinary course of business and in a writing provided to any Acquired Corporation, as a result of a finding or determination of any kind provided to an Acquired Corporation by any Governmental Body;

(viii) no Governmental Body, and no prime contractor or higher-tier subcontractor of any Governmental Body, has withheld or set off, or threatened in a writing provided to an Acquired Corporation to withhold or set off, outside the ordinary course of business, any amount due to any of the Acquired Corporations under any Government Contract;

(ix) there is not and has not been any irregularity, misstatement or omission relating to any Government Contract or Government Bid that has led to or could

 

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reasonably be expected to lead to (A) any administrative, civil, criminal or other Legal Proceeding or indictment involving any of the Acquired Corporations or any of their employees, (B) the questioning or disallowance of any costs submitted for payment by any of the Acquired Corporations, (C) the recoupment of any payments previously made to any of the Acquired Corporations, (D) a finding or claim of fraud, defective pricing, mischarging or improper payments on the part of any of the Acquired Corporations, or (E) the assessment of any penalties or damages of any kind against any of the Acquired Corporations;

(x) there is not and has not been any (A) outstanding claim, asserted in a writing provided to any of the Acquired Corporations, against any of the Acquired Corporations by, or dispute, referred to in a writing provided to any of the Acquired Corporations, involving any of the Acquired Corporations with, any prime contractor, subcontractor, vendor or other Person arising under or relating to the award or performance of any Government Contract, (B) fact known by any of the Acquired Corporations or any of their employees upon which any such claim could reasonably be expected to be based or which may give rise to