AGREEMENT AND PLAN OF MERGER

 

“ Affiliate ” shall, with respect to any person or entity, any person or entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such person or entity.

 

“ Adjusted Enterprise Value ” means the Base Value, minus the amount of any Closing Debt (as finally determined pursuant to Section 3.1(c) hereof), plus or minus , as the case may be, the Closing Adjustment Amount (as finally determined pursuant to Section 3.1(c) hereof).

 

“ Adjustment Escrow Shares ” means 5% of the Merger Shares.

 

“ Affiliated Group ” has the meaning ascribed to it in Section 1504 of the Code, and in addition includes any analogous combined, consolidated or unitary group, as defined under any applicable state, local, or foreign income Tax law.

 

“ Agreed Price Per Share ” means $6.75 per share of Parent Common Stock.

 

“ Base Consideration Shares ” means that number of shares of Parent Common Stock equal to the quotient obtained by dividing (i) the Estimated Enterprise Value by (ii) the Agreed Price Per Share.

 

“ Base Value ” means $19,980,000.00.

 

“ business day ” (whether such term is capitalized or not) means any day other than Saturday, Sunday or a legal holiday that banks located in Boston, Massachusetts are closed for business.

 

“ Carve Out Escrowed Adjustment Shares ” means 5% of the Carve Out Shares which shall be deposited and held in escrow pursuant to, and in accordance with, the provisions of the Payment Agreement and of the Escrow Agreement.

 

“ Carve Out Escrowed Indemnity Shares ” means 10% of the Carve Out Shares which shall be deposited and held in escrow pursuant to, and in accordance with, the provisions of the Payment Agreement and of the Escrow Agreement.

 

“ Carve Out Escrowed Shares ” means the Carve Out Escrowed Adjustment Shares and the Carve Out Indemnity Shares.

 

“ Carve Out Shares ” means 6.383% of the Base Consideration Shares.

 

“ Cash Consideration ” means Twenty Thousand Dollars ($20,000).

 

“ Closing Adjustment Amount ” means the amount by which the Closing Net Assets as determined pursuant Section 3.1(c) is greater than the Net Asset Ceiling, or, as the case may be, the amount by which the Closing Net Assets as determined pursuant to Section 3.1(c) is less than the Net Asset Floor.

 

“ Closing Debt ” means any Indebtedness of the Company that is outstanding immediately prior to the Effective Time and is referred to in any of clauses (a), (b), (c), (d) or (h) of the definition of the term Indebtedness.

 

“ Closing Net Assets ” means Net Assets of the Company as of immediately prior to the Effective Time.

 

“ Code ” means the Internal Revenue Code of 1986, as amended.

 

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“ Company Charter ” means the Company’s Certificate of Incorporation as amended and in effect as of the date hereof.

 

“ Company Common Stock ” means the Company’s Common Stock, $0.0001 par value per share.

 

“ Company Intellectual Property ” means all Intellectual Property owned by, or licensed to, the Company or that is used or is held for use in the business of the Company or its Subsidiaries.

 

“ Company Preferred Stock ” means the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.

 

“ Company Products ” means all products and services manufactured, sold, licensed, leased or delivered by the Company or its Subsidiaries.

 

“ Company Registered Intellectual Property ” means all of the Registered Intellectual Property owned by, assigned to, or filed in the name of, the Company or its Subsidiaries.

 

“ Company Stock ” means, collectively, the Company Common Stock and the Company Preferred Stock.

 

“ Contract ” means any written, oral or other legally binding agreement, contract, mortgage, indenture, lease, license, understanding, arrangement, instrument, note, guaranty, indemnity, representation, warranty, deed, assignment, power of attorney, certificate, purchase order, work order, statement of work, insurance policy, benefit plan, scheme or commitment.

 

“ Delaware Law ” means the General Corporation Law of the State of Delaware, as amended from time to time.

 

“ Disqualified Stockholder ” means (with respect to any Company Stock) Parent, Midco Merger Sub or any Subsidiary of Parent or Merger Sub or any of their respective Affiliates or any transferees of any such securities of the Company at any time held by any of the foregoing.

 

“ Dissenting Shares ” means shares of Company Stock that are outstanding immediately prior to the Effective Time of the Merger and which are held by stockholders who shall have not voted in favor of the Merger or consented thereto in writing and who shall have exercised dissenters’ rights or rights of appraisal for such shares of Company Stock in accordance with Delaware Law and who, as of the Effective Time, have not effectively withdrawn or lost such dissenters’ rights.

 

“ Escrowed Shares ” means the Merger Escrowed Shares and the Carve Out Escrowed Shares.

 

“ Estimated Adjustment Amount ” means the amount by which the Estimated Net Assets as determined pursuant Sections 3.1(a) and 3.1(b) is greater than the Net Asset Ceiling, or, as the case may be, the amount by which the Estimated Net Assets as determined pursuant to Sections 3.1(a) and 3.1(b) is less than the Net Asset Floor.

 

“ Estimated Enterprise Value ” means the Base Value, minus the amount of any Estimated Debt, plus or minus , as the case may be, the Estimated Adjustment Amount.

 

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“ GAAP ” means generally accepted accounting principles applied in the United States of America.

 

“ Governmental Authority ” means any United States (federal, state or local) or foreign government, or governmental, regulatory or administrative authority, agency or commission.

 

“ Indebtedness ,” as applied to any person, means (a) all indebtedness of such person for borrowed money, whether current or funded, or secured or unsecured and notes payable, (b) all indebtedness of such person for the deferred purchase price of property or services represented by a note or other security, (c) all indebtedness of such person created or arising under any conditional sale or other title retention agreement (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of specific property), (d) all indebtedness of such person secured by a purchase money mortgage or other Lien to secure all or part of the purchase price of property subject to such mortgage or other Lien, (e) all accounts payable and accrued expenses of such person, (f) all indebtedness or liabilities of such person that would be required to be reflected on a balance sheet or referred to in the notes thereto in accordance with GAAP, (g) all indebtedness, liabilities or obligations of such person that are identified in Schedule 4.12 of the Company Disclosure Schedule as “Indebtedness,” (h) all other obligations of such person under leases that have been or must be, in accordance with GAAP, recorded as capital leases in respect of which such person is liable as lessee, (i) any liability of such person in respect of banker’s acceptances or letters of credit, and (j) all indebtedness referred to in clauses (a), (b), (c), (d), (e), (f), (g), (h) or (i) hereof that is directly or indirectly guaranteed by such person or which such person has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which such person has otherwise assured a creditor against loss.

 

“ Indemnity Escrow Shares ” means 10% of the Merger Shares.

 

“ Intellectual Property ” means any or all of the following and all rights in, arising out of, or associated therewith: (a) all United States, international and foreign patents and applications thereof and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (b) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how,  computer software programs (in both source code and object code form), technology, technical data and customer lists, and all documentation relating to any of the foregoing; (c) all copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto throughout the world; (d) all industrial designs and any registration and applications therefor throughout the world; (e) all trade names, logos, common law trademarks and service marks, trademark and service mark registration and applications therefor throughout the world; (f) all databases and data collections and all rights therein throughout the world; (g) all moral and economic rights of authors and inventors, however denominated, throughout the world; (h) all Web addresses, sites and domain names and numbers; and (i) any similar or equivalent rights to any of the foregoing anywhere in the world.

 

“ knowledge ,” when used to qualify a representation or warranty in this Agreement, has the following meaning:  Where a representation or warranty is made to the Company’s knowledge, or with a similar qualification, the Company will be conclusively deemed to have knowledge of any matter with respect to which James Moran, Kenneth Kuenzel

 

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or Gregory Stott has actual knowledge.  Where a representation or warranty is made to the Parent’s knowledge, or with a similar qualification, Parent will be conclusively deemed to have knowledge of any matter with respect to which Parent’s Chief Executive Officer, Chief Financial Officer or Chief Technology Officer has actual knowledge.

 

“ Liens ” means any and all liens, claims, mortgages, security interests, pledges, options, rights of first offer or refusal, charges, encumbrances, limitations on voting rights, and restrictions on transfer of any kind, except (i) in the case of references to securities, those arising under applicable securities laws solely by reason of the fact that such securities were issued pursuant to exemptions from registration under such securities laws, (ii) mechanic’s, materialmen’s and similar liens, (iii) liens for Taxes not yet due and payable and (iv) liens arising under worker’s compensation, unemployment insurance, social security, retirement and similar legislation.

 

“ Material Adverse Effect ” means with respect to the Company or Parent, as the case may be, any change or effect that, when taken individually or together with all other adverse changes or effects, is or is reasonably likely to be materially adverse to the business, results of operations and financial condition of the Company or Parent, as the case may be, and their respective Subsidiaries, taken as a whole, except for any such changes or effects resulting from or arising as a result of (i) changes in general political or geopolitical conditions, (ii) changes in the telecommunications infrastructure equipment or telecommunications industries generally including, without limitation, (A) changes in laws, regulations, rules, ordinances, policies, mandates, guidelines or other requirements of any Governmental Authority generally applicable to such industries or (B) changes in GAAP or its application, (iii) changes generally applicable to the economy or securities market in the United States or the world economy or international securities markets, (iv) any action taken at the written request of Parent or Merger Sub or (v) any action required to be taken in connection with the transactions contemplated by this Agreement and any action taken in furtherance thereof, unless in any such instance such change described in clauses (i), (ii) or (iii) above impacts the Company or Parent, as the case may be, in a materially disproportionate manner relative to the majority of other similar entities impacted by such change. The failure to meet any projection or forecast by itself shall in no event constitute a Material Adverse Effect. A decline or any fluctuation in the trading price or prices of Parent Common Stock shall in no event constitute a Material Adverse Effect with respect to Parent.

 

“ Merger Certificate ” means the Certificate of Merger in the form attached as Exhibit B hereto.

 

“ Merger Closing Shares ” means the result obtained by subtracting (A) the sum of (i) the Carve Out Shares, plus (ii) the Merger Escrowed Shares, from (B) the Base Consideration Shares.

 

“ Merger Consideration ” means the (i) shares of Parent Common Stock issuable to the Participating Rights Holders pursuant to this Agreement, including Merger Escrowed Shares, (ii) the Cash Consideration, (iii) any cash paid in lieu of fractional shares in accordance with Section 3.2(h) hereof, and (iv) any cash paid as a post-closing adjustment pursuant to Section 3.1(c) hereof.

 

“ Merger Escrowed Shares ” means the Indemnity Escrow Shares and the Adjustment Escrow Shares.

 

“ Merger Shares ” means the result obtained by subtracting (A) the Carve Out

 

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Shares from (B) the Base Consideration Shares.

 

“ Net Assets ” means the amount, without double counting, equal to (i) the sum of (x) Company’s cash and cash equivalents (as defined below) plus (y) Company’s accounts receivable (as defined below) plus (z) an amount up to $483,257.69, to the extent such amount is not already included in the Company’s cash and cash equivalents and to the extent that the Company delivers to Parent checks representing such amount payable to employees and consultants of the Company in respect of severance payments required by Section 6.14(b), less (ii) Company’s current liabilities (as defined below) provided that for purposes of determining current liabilities under this definition, the following shall apply:  (A) any amounts relating to deferred revenue / maintenance accounts shall not be current liabilities, (B) any Indebtedness that is included in Estimated Closing Debt or Closing Debt shall not be a current liability, (C) any Indebtedness referred to in any of clauses (e), (f), (g), (i) or (j) of the definition of the term Indebtedness that would properly be classified as a current liability in accordance with GAAP, shall be current liabilities, (C) up to $450,000 of Specified Transaction Expenses shall not be current liabilities, (D) any amounts of Transaction Expenses in excess of $450,000 of Specified Transaction Expenses shall be current liabilities, (E) the amount of the Withholding Tax Liability shall not be a current liability, but all other Tax liabilities (including all reserves or accruals therefor) shall be current liabilities, (F) the amount of severance payable by Parent or the Surviving Corporation pursuant to Section 6.14(b) shall not be current liabilities (but all other amounts of severance that the Company is obligated to pay, whether such obligation arises by Contract, policy, plan, practice or arrangement in effect prior to the Effective Time,to persons that prior to the Effective Time were employees, contractors or consultants of the Company shall be current liabilities), (G) the issuance of the Carve-Out Shares to the Executive Payee under the Payment Agreement shall not be a current liability and (H) all commissions, incentive or other variable compensation which the Company is obligated to pay, whether such obligation arises by Contract, policy, plan, practice or arrangement  in effect prior to the Effective Time and whether such payment is to be made before or after the Effective Time, to an employee or consultant of the Company with respect to any period prior to the Effective Time shall be a current liability. Except as otherwise provided in the definition of Net Assets, the terms “cash and cash equivalents,” “accounts receivable” and “current liabilities” shall be determined in accordance with GAAP (including valuing accounts receivable net of any reserve for uncollectibility) as applied by the Company consistent with Company’s past practice.

 

“ Net Asset Ceiling ” means $10,251,000.

 

“ Net Asset Floor ” means $6,834,000.

 

“ Parent Common Stock ” means duly authorized, validly issued, fully paid and non-assessable shares of the common stock, $0.001 par value per share, of Parent.

 

“ Participating Rights Holders ” means (i) those persons (other than the holders of Dissenting Shares, the Company, any Disqualified Stockholder or any Subsidiary of the Company) who, immediately prior to the Effective Time of the Merger, were holders of shares of Company Preferred Stock and whose interests therein, as the result of the Merger, are converted into rights to receive a portion of the Merger Consideration and (ii) the Executive Payee.

 

“ person ” (whether such term is capitalized or not) means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.

 

“ Publicly Available Software ” shall mean any software or other material that is distributed as “free software”, “open source software” or under a similar licensing or distribution

 

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model (including but not limited to the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the Artistic License, the Netscape Public License, the Sun Community Source License (SCSL) the Sun Industry Standards License (SISL) and the Apache License).

 

“ Registered Intellectual Property ” means all United States, international and foreign Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued, filed with, or recorded by any Governmental Authority.

 

“ SEC ” means the United States Securities and Exchange Commission.

 

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“ Series A Aggregate Liquidation Preference ” means $6,055,838.

 

“ Series A Cash Consideration ” means $2,624.00.

 

“ Series A Merger Closing Shares ” means the product obtained by multiplying the Merger Closing Shares by the Series A Preference Percentage.

 

“ Series A Merger Escrowed Shares ” means the product obtained by multiplying the Merger Escrowed Shares by the Series A Preference Percentage.

 

“ Series A Preference Percentage ” means 13.1206997%

 

“ Series A Preferred Stock ” means the Company’s Series A Preferred Stock, $0.0001 par value per share.

 

“ Series A Pro Rata Portion ” means, with respect to each holder of Series A Preferred Stock, the quotient obtained by dividing (i) such holders’ aggregate liquidation preference under the Company Charter with respect to the shares of Series A Preferred Stock held by such holder by (ii) the Series A Aggregate Liquidation Preference.

 

“ Series B Aggregate Liquidation Preference ” means $10,099,000.80.

 

“ Series B Cash Consideration ” means $4,377.00.

 

“ Series B Merger Closing Shares ” means the product obtained by multiplying the Merger Closing Shares by the Series B Preference Percentage.

 

“ Series B Merger Escrowed Shares ” means the product obtained by multiplying the Merger Escrowed Shares by the Series B Preference Percentage.

 

“ Series B Preference Percentage ” means 21.8806971%

 

“ Series B Preferred Stock ” means the Company’s Series B Preferred Stock, $0.0001 par value per share.

 

“ Series B Pro Rata Portion ” means, with respect to each holder of Series B Preferred Stock, the quotient obtained by dividing (i) such holders’ aggregate liquidation preference under the Company Charter with respect to the shares of Series B Preferred Stock held by such holder by (ii) the Series B Aggregate Liquidation Preference.

 

“ Series C Aggregate Liquidation Preference ” means $15,000,000.06.

 

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“ Series C Cash Consideration ” means $6,499.00.

 

“ Series C Merger Closing Shares ” means the product obtained by multiplying the Merger Closing Shares by the Series C Preference Percentage.

 

“ Series C Merger Escrowed Shares ” means the product obtained by multiplying the Merger Escrowed Shares by the Series C Preference Percentage.

 

“ Series C Preference Percentage ” means 32.4993002%

 

“ Series C Preferred Stock ” means the Company’s Series C Preferred Stock, $0.0001 par value per share.

 

“ Series C Pro Rata Portion ” means, with respect to each holder of Series C Preferred Stock, the quotient obtained by dividing (i) such holders’ aggregate liquidation preference under the Company Charter with respect to the shares of Series C Preferred Stock held by such holder by (ii) the Series C Aggregate Liquidation Preference.

 

“ Series D Aggregate Liquidation Preference ” means $15,000,001.35.

 

“ Series D Cash Consideration ” means $6,500.00.

 

“ Series D Merger Closing Shares ” means the product obtained by multiplying the Merger Closing Shares by the Series D Preference Percentage.

 

“ Series D Merger Escrowed Shares ” means the product obtained by multiplying the Merger Escrowed Shares by the Series D Preference Percentage.

 

“ Series D Preference Percentage ” means 32.4993030%.

 

“ Series D Preferred Stock ” means the Company’s Series D Preferred Stock, $0.0001 par value per share.

 

“ Series D Pro Rata Portion ” means, with respect to each holder of Series D Preferred Stock, the quotient obtained by dividing (i) such holders’ aggregate liquidation preference under the Company Charter with respect to the shares of Series D Preferred Stock held by such holder by (ii) the Series D Aggregate Liquidation Preference.

 

“ Specified Option Holders ” means the persons set forth on Exhibit C hereto.

 

“ Specified Transaction Expenses ” means Company’s documented out-of-pocket third party (i) legal expenses incurred in connection with the preparation, execution, negotiation and consummation of this Agreement, the letter agreement between Parent and Company dated March 24, 2009, as amended, the Merger and the other transactions contemplated hereby; (ii) audit expenses in connection with audit of the Company’s financial statements for the year ended December 31, 2008 but only to the extent such audit expenses are in excess of the amount accrued on the Company’s books, records and financial statements as of March 24, 2009 for the completion of such audit; (iii) the D&O Tail Insurance Premium Amount; and (iv) expenses incurred in connection with establishing and maintaining a “virtual” due diligence dataroom with Merrill Corporation (the “ Dataroom ”).

 

“ Subsidiary or Subsidiaries ” (whether or not capitalized) of any person means (i) any corporation, partnership, joint venture or other legal entity of which such person (either above or through or together with any other subsidiary), owns, directly or indirectly, more than 50% of the stock or other equity interests the holders of which are generally entitled to vote for

 

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the election of the board of directors or other governing body of such corporation or other legal entity or (ii) any partnership, limited liability company, association, trust, or other entity in which such person (directly or indirectly through another Subsidiary or Subsidiaries) holds an equity interest.

 

“ Tax ” or “ Taxes ” (and with correlative meaning, “ Taxable ” and “ Taxing ”) means any federal, state, local, or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, import value added, excise, export, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, personal property, capital stock, net worth, intangibles, social security, unemployment, disability, payroll, license, employee, withholding tax, including, but not limited to, on salaries and wages, or other tax or levy or contribution, of any kind whatsoever, whether directly or indirectly owed, including any interest, penalties, special charges or additions to tax in respect of the foregoing.

 

“Tax Contest” means any Tax contest, audit or other proceeding relating to a Tax for which the Company or Company Stockholders may be liable pursuant to Section 9.2 hereof.

 

“ Tax Return ” means any return, declaration, report, claim for refund or information return (including any related or supporting estimates, elections, schedules, attachments or statements and any amendment to any of the foregoing) filed or required to be filed in connection with the determination, assessment, or collection of any Tax or the administration of any laws, regulations, or administrative requirements relating to any Tax.

 

“ Transaction Expenses ” means, whether paid or accrued, all expenses of each of the Company, its Subsidiaries and the Company Stockholders incurred by the Company or any of its Subsidiaries in connection with the preparation, execution, negotiation and consummation of this Agreement, the letter agreement between Parent and Company dated March 24, 2009, as amended, the Merger and the other transactions contemplated hereby, including, but not limited to, the Specified Transaction Expenses and all other fees and disbursements of attorneys, accountants and other advisors and service providers of the Company Stockholders or the Company or any of its Subsidiaries relating thereto.

 

“ Transmittal Materials ” means the transmittal materials, in the form attached hereto as Exhibit D , which Parent or its transfer agent will require from those Participating Rights Holders entitled to receive Merger Consideration at the Closing in respect of their shares of Company Preferred Stock.

 

“ Withholding Tax Shares ” means a number of shares of Parent Common Stock equal to the quotient of the Withholding Tax Liability divided by the Agreed Price Per Share.

 

“ Withholding Tax Liability ” means the total amount of state and federal income and payroll Tax withholding that will be required with respect to the payment of all of the Adjusted Carve Out Shares to the Executive Payee and the deemed payment of the Withholding Tax Shares to the Executive Payee.

 

(b)    The terms set forth below shall have the meanings ascribed thereto in the Sections of this Agreement referred to below:

 

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2008 Audited Financials		Section 4.7(a)
Accounting Referee		Section 3.1(d)
Additional Documents		Section 9.6(a)
Adjusted Carve Out Shares		Preamble
Adjustment Escrow Shares Release Date		Section 3.6(c)
Agreement		Preamble
Agreement Date		Preamble
Amended Company Disclosure Schedule		Section 7.31(b)
Amended Parent Disclosure Schedule		Section 7.31(a)
Capitalization Certificate		Section 8.3(d)
CERCLA		Section 4.16(b)
Certificates		Section 3.3(a)
Closing		Section 2.1
Closing Date		Section 2.1
Closing Date Balance Sheet		Section 3.1(c)
Company		Preamble
Company’s Balance Sheet		Section 4.7(a)
Company Board		Preamble
Company Covered Matter		Section 9.3
Company Covered Party		Section 9.3
Company Patents		Section 4.10(b)
Company Determination		Section 3.1(a)
Company Disclosure Schedule		Article 4
Company Employee Benefit Plan		Section 4.15(a)
Company Insured Parties		Section 6.11(b)
Company Option		Section 3.2(c)
Company Plan		Section 3.2(c)
Company Required Stockholder Approvals		Section 4.32
Company Stockholders		Preamble
Company Transaction		Section 7.26(e)
Company Warrants		Section 3.2(d)
Confidentiality Agreement		Section 6.12
Covered Matter		Section 9.4
Covered Parties		Section 9.4
Cutoff Date		Section 9.6(b)
D&O Tail Insurance		Section 6.11(b)
D&O Tail Insurance Premium Amount		Section 6.11(b)
Effective Period		Section 6.13(a)
Effective Time		Section 2.1
Environmental Laws		Section 4.16(b)
Environmental Permits		Section 4.16(f)
EPA		Section 4.16(c)
ERISA		Section 4.15(c)
Escrow Agent		Section 3.6(a)
Escrow Agreement		Section 3.6(a)
Estimated Debt		Section 3.1(a)
Estimated Net Assets		Section 3.1(a)
Executive Payee		Preamble

 

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Exchange Act		Section 5.5
Filing Date		Section 6.13(a)
Hazardous Substances		Section 4.16(c)
Indemnification Claim		Section 9.4
Indemnified Party		Section 9.5(b)
Indemnifying Party		Section 9.5(b)
Indemnity Escrow Shares Release Date		Section 3.6(d)
IRS		Section 4.15(b)
Licenses Out		Section 4.10(e)
Losses		Section 9.2
Loss Tax Benefit		Section 9.9
Material Contract		Section 4.19(a)
Merger		Preamble
Merger Sub		Preamble
Midco		Preamble
Outside Date		Section 10.1(i)
Parent		Preamble
Parent Covered Matter		Section 9.2
Parent Covered Party		Section 9.2
Parent Determination		Section 3.1(c)
Parent Disclosure Schedule		Article 5
Parent SEC Document		Section 5.5
Payment Agreement		Preamble
PBGC		Section 4.15(e)
Proposal		Section 7.26(e)
RCRA		Section 4.16(b)
Registrable Shares		Section 6.13(a)
Registering Stockholders		Section 6.13(a)
Representatives		Section7.26(a)
SARA		Section 4.16(b)
Section 280G		Section 6.4(b)
Section 280G Payments		Section 6.4(b)
Signing Date Financials		Section 4.7(a)
Specified Employees		Section 6.14(a)
Standard Support Agreement		Section 4.10(o)
Stock Rights		Section 4.31
Stockholder Questionnaire		Section 6.13(d)
Stockholder Representative		Preamble
Stockholder Registration Statement		Section 6.13(a)
Superior Proposal		Section 7.26(e)
Support Agreements		Section 4.10(o)
Supporting Materials		Section 4.7(b)
Surviving Corporation		Section 2.1
Surviving Corporation Charter		Section 2.4
Suspension Period		Section 6.13(b)
Transfer Taxes		Section 6.15(a)
Third Party Claim		Section 9.5(a)
Third Party Proceeding		Section 9.5(a)
Third Person		Section 9.5(a)

 

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ARTICLE 2

THE MERGER

 

2.1            The Merger .  Subject to the other terms and conditions of this Agreement, including those set forth in Article 8 hereof, and in accordance with Delaware Law, at the Effective Time, Merger Sub shall be merged with and into the Company.  As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the surviving corporation is referred to herein as the “ Surviving Corporation ”).

 

2.2            Consummation of the Merger; Effective Time .  Subject to the other terms and conditions of this Agreement, the closing of the transactions contemplated under this Agreement (the “ Closing ”) will be held at the offices of Bingham McCutchen LLP in Boston, Massachusetts (or such other place as the parties may agree) as soon as is reasonably practicable following the fulfillment or waiver of all of the conditions contained in this Agreement, including but not limited to those contained in Article 8.  The date on which the Closing is actually held is referred to herein as the “ Closing Date .”  On the Closing Date, Parent, Midco Merger Sub and the Company shall cause the Merger to be consummated by filing the Merger Certificate, with such changes that are not inconsistent with the other terms of this Agreement as may be requested by the Delaware Secretary of State, with the Delaware Secretary of State.  The term “ Effective Time ” means the date and time of the filing of the Merger Certificate with the Delaware Secretary of State (or such later time as may be agreed by each of the parties hereto and specified in the Merger Certificate in accordance with Delaware Law).

 

2.3            Effect of the Merger .  At the Effective Time, the effect of the Merger shall be as provided in the Merger Certificate and as provided by the applicable provisions of Delaware Law. Without limiting the generality of the foregoing, and subject thereto, upon the consummation of the Merger, all the property (including, but not limited to, Intellectual Property and licenses to Intellectual Property), rights, privileges, powers and franchises of the Company and the Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of each of those corporations shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.

 

2.4            Charter; Bylaws .

 

(a)    At the Effective Time, the certificate of incorporation of the Surviving Corporation (the “ Surviving Corporation Charter ”) shall be the certificate of incorporation of the Merger Sub, as amended by the Merger Certificate.

 

(b)    At the Effective Time, the bylaws of the Surviving Corporation shall be the bylaws of Merger Sub, as in effect immediately prior to the Effective Time (which shall contain substantially similar provisions as to exculpation and indemnification of directors and officers as Parent’s bylaws), until thereafter amended as provided by Delaware Law, the Surviving Corporation Charter and such bylaws.

 

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2.5            Directors and Officers .  The directors of the Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Surviving Corporation Charter and the bylaws of the Surviving Corporation, and until their respective successors are duly elected and qualified or until their earlier death, disability, resignation or removal.  The officers of the Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified or until their earlier death, disability, resignation or removal.

 

ARTICLE 3

DETERMINATIONS; CONVERSION OF SECURITIES; EXCHANGE OF

CERTIFICATES; PAYMENTS; ADJUSTMENTS

 

3.1            Determination of Closing Net Assets and Closing Adjustment Amount .

 

(a)                    Company Determination .  On the Business Day immediately prior to the Closing Date, the Company’s Chief Financial Officer shall deliver to Parent a certificate setting forth:

 

(i)             Company’s good faith estimation of the Closing Net Assets (the “ Estimated Net Assets ”)

 

(ii)            Company’s good faith estimation of Closing Debt (the “ Estimated Debt ”);

 

(iii)           Company’s good faith determination of the Specified Transaction Expenses and all other Transaction Expenses;

 

(iv)           Company’s good faith determination of the Estimated Adjustment Amount;

 

(v)            Company’s good faith determination of the Estimated Enterprise Value; and

 

(vi)           Company’s good faith determination of the number of Base Consideration Shares,

 

all in reasonable detail together with appropriate backup documentation (including final invoices with respect to all Transaction Expenses) to support such estimations and determinations (collectively, the “ Company Determination ”).

 

(b)    Base Consideration Shares . Notwithstanding anything to the contrary implied or expressed herein, in determining the number of Base Consideration Shares for determining the number of Merger Shares pursuant to the Company Determination, the Estimated Enterprise Value shall be deemed to not exceed $21,000,000, it being understood and agreed that any additional adjustment above $21,000,000 shall be determined and paid pursuant to Section 3.1(c) below.

 

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(c)                    Post-Closing Adjustment .

 

(i)             Within 60 days following the Closing Date, Parent shall prepare and deliver to the Stockholder Representative an unaudited consolidated balance sheet of the Company and its Subsidiaries as of immediately prior to the Effective Time (such balance sheet is referred to as the “ Closing Date Balance Sheet ”).  The Closing Date Balance Sheet shall be substantially in the form of the Company’s Balance Sheet and shall, except as otherwise provided in this Agreement, be prepared in accordance with GAAP (except for the absence of footnotes) and on a basis consistent with and utilizing the same principles, practices and policies as those used by the Company in preparing the Company’s Balance Sheet.  Together with the Closing Date Balance Sheet, the Parent’s Chief Financial Officer shall deliver to the Stockholder Representative a certificate setting forth:

 

(A)           Parent’s good faith determination of the Closing Net Assets;

 

(B)            Parent’s good faith determination of Closing Debt;

 

(C)            Company’s good faith determination of the Specified Transaction Expenses and all other Transaction Expenses;

 

(D)           Parent’s good faith determination of the Closing Adjustment Amount; and

 

(E)            Parent’s good faith determination of the Adjusted Enterprise Value

 

all in reasonable detail together with appropriate backup documentation to support such estimations and determinations (collectively, the “ Parent Determination ”).

 

(ii)            After the delivery of the Company Balance Sheet and the Parent Determination, Parent shall, and shall cause the Surviving Corporation to, cooperate with the Stockholder Representative in connection with his review of the Company Balance Sheet and the Parent Determination, including by providing the Stockholder Representative and his representatives reasonable access during business hours to the employees of Parent and the Surviving Corporation responsible for, and the books, records and other materials used in, the preparation of the Company Balance Sheet and the Parent Determination.  The Stockholder Representative may dispute any amounts reflected on the Closing Date Balance Sheet or the Parent Determination by notifying Parent in writing of each disputed item, specifying the amount thereof in dispute and setting forth, in reasonable detail, the basis for such dispute, within 30 days after the Stockholder Representative’s receipt of the Closing Date Balance Sheet and the Parent Determination.  If the Stockholder Representative delivers a notice of disagreement within such 30-day period, the Stockholder Representative and Parent shall, during the 30 days following such delivery, each use good faith efforts to reach agreement on the disputed items or amounts in order to finally determine the Adjusted Enterprise Value.  If the Stockholder Representative and Parent are unable to reach agreement concerning the Adjusted Enterprise Value during such 30-day period, they shall promptly thereafter submit the dispute to the Accounting Referee for resolution pursuant to Section 3.1(d). In the event of any dispute by the Stockholder Representative pursuant to this Section 3.1(c)(ii), the Adjustment Escrow Shares Release Date shall automatically be extended until the resolution of such dispute pursuant to this Section 3.1(c) or Section 3.1(d).

 

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(iii)           The Adjusted Enterprise Value shall be deemed conclusively determined for purposes of this Agreement upon the earlier to occur of (x) the failure of the Stockholder Representative to notify Parent of a dispute within 30 days of the Stockholder Representative’s receipt of the Closing Date Balance Sheet and Parent Determination and the other information provided in clause (c)(i) above, all as set forth in clause (c)(i) above, (y) the written resolution of all disputes pursuant to clause (c)(ii) above by Parent and the Stockholder Representative, and (z) the resolution of all disputes by the Accounting Referee pursuant to Section 3.1(d). Within three Business Days of such conclusive determination, if: (A) the Adjusted Enterprise Value is less than the Estimated Enterprise Value, Parent shall be entitled to receive from the Escrowed Shares that number of Escrowed Shares having a value, based on the Agreed Price Per Share, the absolute value of the difference between the Estimated Enterprise Value and the Adjusted Enterprise Value, or (B) the Adjusted Enterprise Value is greater than the Estimated Enterprise Value, Parent shall make a cash payment to the Stockholder Representative (for further distribution to the Participating Rights Holders) equal to the absolute value of the difference between the Estimated Enterprise Value and the Adjusted Enterprise Value.

 

(iv)           Notwithstanding anything herein to the contrary, any Escrowed Shares that the Parent shall be entitled to receive pursuant to Section 3.1(c)(iii) shall be out of the Adjustment Escrow Shares and the Carve-Out Escrowed Adjustment Shares, on a pro rata basis, shall be rounded down to the nearest whole share (in the case of fractional shares) and shall in no event exceed 5% of the Base Consideration Shares.  Any payment of Escrowed Shares to the Parent pursuant to Section 3.1(c)(iii) shall be deemed a decrease to the Merger Consideration.  The first 6.383% of any cash payment pursuant to Section 3.1(c)(iii) shall be allocated to the Executive Payee, and the remainder of any such payment shall be allocated among the various series of the Company’s Preferred Stock in proportion to their respective Preference Percentage and then to each holder of shares of Company Preferred Stock pursuant to such holders’ respective Pro Rata Portion of each such series of Company Preferred Stock.

 

(d)    Adjustment Dispute Resolution .  If the Stockholder Representative and Parent are unable to reach agreement concerning the Closing Date Balance Sheet and the Adjusted Enterprise Value pursuant to Section 3.1(c), they shall submit such dispute to KPMG LLP or, if KPMG LLP has a prior relationship with any of Parent, the Company or any of their respective Affiliates or is not available, a nationally recognized independent accounting expert mutually acceptable to Parent and the Stockholder Representative (the “ Accounting Referee ”) for resolution pursuant to this Section 3.1(d) and instruct the Accounting Referee to review the disputed items or amounts for the purpose of final determination of the Adjusted Enterprise Value.  In making such determination and calculations, the Accounting Referee shall consider only those items or amounts in the Closing Date Balance Sheet and/or the Parent Determination as to which line item determination(s) the Stockholder Representative has disagreed in writing.  Parent and the Stockholder Representative shall instruct the Accounting Referee to use its best efforts to deliver to the Stockholder Representative and Parent as promptly as practicable (but in no event later than 30 days after submission of the dispute to the Accounting Referee) a report setting forth the Accounting Referee’s calculation of the disputed amounts.  Such report shall be final and binding upon the Stockholder Representative, the Participating Rights Holders, Parent and the Surviving Corporation, and the resulting Closing Date Balance Sheet and calculation of the Adjusted Enterprise Value shall be final for all purposes of this Agreement.  The fees, costs

 

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and expenses of the Accounting Referee shall be borne (i) by Parent if the aggregate difference between the finally determined Adjusted Enterprise Value and Parent’s calculation of such amount at the time the disagreement(s) were submitted to the Accounting Referee is greater than the aggregate difference between the finally determined Adjusted Enterprise Value and the Stockholder Representative’s calculation of such amount at the time the disagreement(s) were submitted to the Accounting Referee, (ii) by Stockholder Representative if the aggregate difference between the finally determined Adjusted Enterprise Value and Stockholder Representative’s calculation of such amount at the time the disagreement(s) were submitted to the Accounting Referee is greater than the aggregate difference between the finally determined Adjusted Enterprise Value and Parent’s calculation of such amount at the time the disagreement(s) were submitted to the Accounting Referee, and (iii) in any other case, one-half by Parent and one-half by the Stockholder Representative.

 

3.2            Conversion of Securities .

 

(a)    Common Stock .  At the Effective Time, each share of Company Common Stock shall be cancelled without any conversion thereof and no payment of Merger Consideration shall be made with respect thereto, and, when so cancelled, shall no longer be outstanding and shall automatically be retired and shall cease to exist and each holder of a certificate representing any share of Company Common Stock shall cease to have any rights with respect thereto.

 

(b)    Preferred Stock .  Subject to the provisions of Sections 3.2(c), 3.2(f), 3.2(g), 3.2(i), 3.2(j), 3.5 and 3.6 below and the provisions of the Escrow Agreement:

 

(i)             Series A Preferred Stock . All of the shares of the Company’s Series A Preferred Stock issued and outstanding immediately prior to the Effective Time shall be converted into (i) the right to receive the Series A Merger Closing Shares and Series A Cash Consideration, which Series A Merger Closing Shares and Series A Cash Consideration shall be allocated among the holders of Series A Preferred Stock pursuant to such holders Series A Pro Rata Portion as set forth on Schedule 3.2(b)  attached hereto, (ii) the right to receive any cash payment allocable to the holders of Series A Preferred Stock pursuant to Section 3.1(c) hereof, which such cash payment shall be allocated among the holders of Series A Preferred Stock pursuant to such holders Series A Pro Rata Portion as set forth on Schedule   3.2(b)  attached hereto, and (iii) the right to receive the Series A Merger Escrowed Shares, which Series A Merger Escrowed Shares shall be allocated among the holders of Series A Preferred Stock pursuant to such holders’ Series A Pro Rata Portion as set forth on Schedule   3.2(b)  attached hereto.

 

(ii)            Series B Preferred Stock . All of the shares of the Company’s Series B Preferred Stock issued and outstanding immediately prior to the Effective Time shall be converted into (i) the right to receive the Series B Merger Closing Shares and Series B Cash Consideration, which Series B Merger Closing Shares and Series B Cash Consideration shall be allocated among the holders of Series B Preferred Stock pursuant to such holders Series B Pro Rata Portion as set forth on Schedule   3.2(b)  attached hereto, (ii) the right to receive any cash payment allocable to the holders of Series A Preferred Stock pursuant to Section 3.1(c) hereof, which such cash payment shall be allocated among the holders of Series B Preferred Stock pursuant to such holders Series B Pro Rata Portion as set forth on Schedule   3.2(b)  attached

 

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hereto, and (iii) the right to receive the Series B Merger Escrowed Shares, which Series B Merger Escrowed Shares shall be allocated among the holders of Series B Preferred Stock pursuant to such holders’ Series B Pro Rata Portion as set forth on Schedule   3.2(b)  attached hereto.

 

(iii)           Series C Preferred Stock . All of the shares of the Company’s Series C Preferred Stock issued and outstanding immediately prior to the Effective Time shall be converted into (i) the right to receive the Series C Merger Closing Shares and Series C Cash Consideration, which Series C Merger Closing Shares and Series C Cash Consideration shall be allocated among the holders of Series C Preferred Stock pursuant to such holders Series C Pro Rata Portion as set forth on Schedule   3.2(b)  attached hereto, (ii) the right to receive any cash payment allocable to the holders of Series A Preferred Stock pursuant to Section 3.1(c) hereof, which such cash payment shall be allocated among the holders of Series C Preferred Stock pursuant to such holders Series C Pro Rata Portion as set forth on Schedule   3.2(b)  attached hereto, and (iii) the right to receive the Series C Merger Escrowed Shares, which Series C Merger Escrowed Shares shall be allocated among the holders of Series C Preferred Stock pursuant to such holders’ Series C Pro Rata Portion as set forth on Schedule   3.2(b)  attached hereto.

 

(iv)           Series D Preferred Stock . All of the shares of the Company’s Series D Preferred Stock issued and outstanding immediately prior to the Effective Time shall be converted into (i) the right to receive the Series D Merger Closing Shares and Series D Cash Consideration, which Series D Merger Closing Shares and Series D Cash Consideration shall be allocated among the holders of Series D Preferred Stock pursuant to such holders Series D Pro Rata Portion as set forth on Schedule   3.2(b)  attached hereto, (ii) the right to receive any cash payment allocable to the holders of Series D Preferred Stock pursuant to Section 3.1(c) hereof, which such cash payment shall be allocated among the holders of Series D Preferred Stock pursuant to such holders Series A Pro Rata Portion as set forth on Schedule   3.2(b)  attached hereto, and (iii) (subject to the provisions of Section 3.6 hereof and of the Escrow Agreement) the right to receive the Series D Merger Escrowed Shares, which Series D Merger Escrowed Shares shall be allocated among the holders of Series D Preferred Stock pursuant to such holders’ Series D Pro Rata Portion as set forth on Schedule   3.2(b)  attached hereto.

 

(v)            Schedule 3.2(b)  attached hereto sets forth (i) the name of each holder of Company Preferred Stock, and, opposite each such holder’s name, (A) the percentage and amount of Merger Closing Shares and Cash Consideration allocated to such holder for each series of Company Preferred Stock held by such holder, and (B) the percentage of Merger Escrowed Shares allocated to such holder for each series of Company Preferred Stock held by such holder, and (ii) each holders’ Series A Pro Rata Portion, Series B Pro Rata Portion, Series C Pro Rata Portion and Series D Pro Rata Portion.

 

(vi)           All shares of Company Preferred Stock, when converted pursuant to this Section 3.2(b), shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any share of Company Preferred Stock shall cease to have any rights with respect thereto, except the right to receive the consideration set forth in this Section 3.2(b) upon the surrender of such certificate in accordance with Section 3.3 and this Section 3.2.

 

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(c)    Options . Except as otherwise provided on Schedule 3.2(c) , all options to purchase shares of Company Common Stock issued under the Company’s 2004 Stock Incentive Plan (the “ Company   Plan ”), whether or not exercisable, whether or not vested, and whether or not performance-based, which are then outstanding (each a “ Company Option ”), shall have been exercised or terminated at or prior to the Effective Time. Parent shall not assume any Company Options.

 

(d)    Warrants and Other Rights .  All warrants to purchase Company Stock and all other rights or options (other than Company Options) to purchase or acquire any securities of the Company (all of the foregoing, collectively, the “ Company Warrants ”), whether or not exercisable or vested, shall have been exercised or terminated prior to the Closing Date.  Parent shall not assume any Company Warrants.

 

(e)    Treasury Stock .  Notwithstanding anything to the contrary expressed or implied herein, each share of Company Stock held in the treasury of the Company or held by any Subsidiary of the Company immediately prior to the Effective Time shall be cancelled and extinguished at the Effective Time without any conversion thereof and no payment shall be made with respect thereto.

 

(f)     Stock Held by Disqualified Stockholders .  Notwithstanding anything to the contrary expressed or implied herein, each share of Company Stock held by any Disqualified Stockholder shall be cancelled and extinguished at the Effective Time without any conversion thereof and no payment shall be made with respect thereto.

 

(g)    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, par value $0.0001 per share, of the Surviving Corporation.

 

(h)    Fractional Shares .  No holder of Company Stock, after aggregation of all of the Parent Common Stock issuable to such holder at or after the Effective Time, shall be entitled to a fractional share of Parent Common Stock.  In lieu of the issuance of fractional shares of Parent Common Stock, cash adjustments will be paid (without interest) to any of such holders in respect of any fractional share of Parent Common Stock that would otherwise be issuable to them and the amount of such cash adjustments will be determined by multiplying each relevant holder’s fractional interest by the Agreed Price Per Share.

 

(i)     Equitable Adjustment .  Any references in this Agreement to share numbers or prices shall be equitably adjusted to reflect fully the effect of any stock split, reverse stock split, stock combination, stock dividend, reorganization, reclassification, recapitalization or other like change with respect to Parent Common Stock or Company Stock after the date hereof and prior to the Effective Date.

 

(j)     Legend .  In addition to any other legend required by law, any certificate issued pursuant to this Agreement or otherwise representing shares of Parent Common Stock that have not been registered under the Securities Act shall be imprinted with the following legend (or the substantial equivalent thereof):

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE

 

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SOLD OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, OTHER THAN PURSUANT TO REGISTRATION UNDER SAID ACT OR IN CONFORMITY WITH THE LIMITATIONS OF RULE 144 OR OTHER SIMILAR RULE OR EXEMPTION AS THEN IN EFFECT, WITHOUT FIRST OBTAINING (I) IF REASONABLY REQUIRED BY THE COMPANY, A WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, WHICH MAY BE COUNSEL TO THE COMPANY, TO THE EFFECT THAT THE CONTEMPLATED SALE OR OTHER DISPOSITION WILL NOT BE IN VIOLATION OF SAID ACT, OR (II) A ‘NO-ACTION’ OR INTERPRETIVE LETTER FROM THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT SUCH STAFF WILL TAKE NO ACTION IN RESPECT OF THE CONTEMPLATED SALE OR OTHER DISPOSITION.”

 

3.3            Exchange of Certificates and Instruments .

 

(a)    Exchange Procedures .

 

(i)             The Company shall distribute the Transmittal Materials to eligible Participating Rights Holders prior to the Effective Time.  As promptly as practicable following the Effective Time (but in any event within five (5) days after the Effective Time), Parent shall deliver to each Participating Rights Holder who has completed the Transmittal Materials and returned them to Parent at or prior to the Closing, together with the certificate or certificates representing outstanding shares of Company Preferred Stock (the “ Certificates ”), (A) a certificate representing any shares of Parent Common Stock issued in respect of such Certificates and (B) cash, by wire transfer of immediately available funds, in a amount equal to that portion of the Cash Consideration paid in respect of such Certificates.  Parent shall not be required to deliver any of the Merger Consideration to any Participating Rights Holder until receipt from such Participating Rights Holder of properly completed and executed Transmittal Materials and the applicable Certificate.

 

(ii)            As promptly as practicable after the Effective Time (but in any event within five (5) days after the Effective Time), Parent or its transfer agent will send to each Participating Rights Holder who does not submit completed Transmittal Materials to Parent at or before the Closing, as permitted by Section 3.3(a)(i) above, the Transmittal Materials. Until surrendered as contemplated by this Section 3.3, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the applicable amounts of Merger Consideration payable pursuant to Section 3.2. As promptly as practicable following receipt (but in any event within five (5) days after such receipt), of the completed Transmittal Materials and the applicable Certificates, Parent will (A) issue, to the Participating Rights Holder a certificate representing any shares of Parent Common Stock issued in respect of such Certificates and (B) cash, by wire transfer of immediately available funds, in an amount equal to that portion of the Cash Consideration paid in respect of such Certificates.  Parent shall not be required to deliver any of the Merger Consideration to any Participating Rights Holder until after receipt from such Participating Rights Holder of properly completed and executed Transmittal Materials and the applicable Certificate.

 

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(iii)           Parent shall be entitled to rely entirely on the information contained in the Schedule 3.2(b), the Capitalization Certificate or any other certificates delivered pursuant to this Agreement and in any transmittal materials delivered hereunder for purposes of satisfying the obligation of Parent to deliver the Merger Consideration hereunder.

 

(b)    No Further Rights in Certificates .  After the Effective Time, holders of Company Common Stock, Company Preferred Stock, Company Warrants or Company Options outstanding immediately prior to the Effective Time will cease to be, and will have no rights as, stockholders or right holders of the Company or the Surviving Corporation, other than (i) in the case of Company Preferred Stock (other than Dissenting Shares and other than any Disqualified Stockholder), the rights to receive the applicable portions of the Merger Consideration; (ii) in the case of Dissenting Shares, the rights afforded to the holders thereof under Delaware Law, and (iii) rights under this Agreement.

 

(c)    No Liability .  None of Parent, Midco, the Surviving Corporation nor the Company shall be liable to any holder of Company Stock for any portion of the Merger Consideration delivered to an appropriate public official in compliance with any abandoned property, escheat or similar law.

 

(d)    Withholding Rights .  Each of the Surviving Corporation and Parent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Preferred Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign Tax law.  To the extent that amounts are so withheld by the Surviving Corporation or Parent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the person in respect of which such deduction and withholding was made by the Surviving Corporation or Parent, as the case may be.

 

3.4            Stock Transfer Books .  At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of Company Stock thereafter on the records of the Company.  From and after the Effective Time, the holders of certificates representing such shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares except as otherwise provided herein or by any applicable laws.

 

3.5            Dissenting Shares .

 

(a)    Notwithstanding any provision of this Agreement to the contrary, Dissenting Shares shall not be converted into or represent the right to receive any portion of the amounts to be paid pursuant to Section 3.2, but the holders thereof shall only be entitled to such rights as are granted by Delaware Law.  All Dissenting Shares held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their dissenters’ rights shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the later of the Effective Time or the occurrence of such event, the right to receive an appropriate portion of the amounts to be paid pursuant to Section 3.2, without any interest thereon, upon surrender, in the manner provided in Section 3.3, of the Certificates that formerly evidenced such shares.

 

(b)    The Company shall give Parent (i) prompt notice of any demands for fair value of shares of Company Stock received by the Company, any withdrawals of such demands, and any other instruments served pursuant to Delaware Law, if any, and received by the

 

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Company, and (ii) the opportunity to participate, at its expense, in all negotiations and proceedings with respect to demands for fair value under Delaware Law, if any.  The Company shall cooperate with Parent concerning, and shall not, except with the prior written consent of Parent, make any payment in excess of the amounts that would otherwise be payable under this Agreement with respect to, any demands for the fair value of shares of Company Common Stock or Company Preferred Stock or settle or offer to settle any such demands other than by operation of law or pursuant to a final order of a court of competent jurisdiction. In the event that any Company Stockholder exercises his, her or its appraisal rights pursuant to Delaware Law, then Parent shall be entitled to seek indemnification from the Participating Rights Holders pursuant to, and in accordance with, the provisions of Article 9 hereof in connection with any Losses suffered or incurred by Parent in connection with such exercise of appraisal rights.

 

3.6            Escrowed Shares .

 

(a)    Notwithstanding any other provision of this Agreement, at the Closing, Parent, the Stockholder Representative and Wells Fargo Bank N.A. (the “ Escrow Agent ”), will enter into an Escrow Agreement in the form of the attached Exhibit   E (the “ Escrow Agreement ”) (with such additional revisions, prior to the Closing, as Parent and the Stockholder Representative may mutually agree after consultation with the Escrow Agent).

 

(b)    The Merger Escrowed Shares issued pursuant to the Merger shall not be distributed to the applicable Participating Rights Holders but shall instead be deposited with the Escrow Agent in accordance with the terms of the Escrow Agreement.  In addition to the Merger Escrowed Shares, pursuant to the terms of the Payment Agreement, the Carve Out Escrowed Shares shall also be deposited with, and held by, the Escrow Agent pursuant to the terms of the Escrow Agreement. All Escrowed Shares shall be issued in the name of the Escrow Agent.

 

(c)    The Adjustment Escrow Shares and the Carve Out Escrowed Adjustment Shares shall be held until the date that is 120 days after the Closing Date or, if earlier, the date on which Parent and the Shareholder Representative jointly agree to the release of such shares pursuant to the terms of the Escrow Agreement (the “ Adjustment Escrow Shares Release Date ”) in order to ensure the satisfaction of adjustment claims made pursuant to Section 3.1(c) of this Agreement.  Promptly following the Adjustment Escrow Shares Release Date, all of such Adjustment Escrow Shares and Carve Out Escrowed Adjustment Shares shall be released to the applicable Participating Rights Holders pursuant to, and in accordance with, Schedule 3.2(b)  hereof, the Escrow Agreement and the Payment Agreement, as applicable, except for that number of such shares required to be held pursuant to, and in accordance with, the provisions of the Escrow Agreement to satisfy any claims for an adjustment to Merger Consideration made on or prior to such date pursuant to Section 3.1(c) of this Agreement.

 

(d)    The Indemnity Escrow Shares and the Carve Out Escrowed Indemnity Shares shall be held until the date that is twelve (12) months after the Closing Date (the “ Indemnity Escrow Shares Release Date ”) in order to ensure the satisfaction of indemnification claims made pursuant to this Agreement.  Promptly following the Indemnity Escrow Shares Release Date, all of such Indemnity Escrow Shares and Carve Out Escrowed Indemnity Shares shall be released to the applicable Participating Rights Holders pursuant to, and in accordance with, the Escrow Agreement and the Payment Agreement, as applicable, except for (i) that number of such shares, required to be held pursuant to, and in accordance with, the provisions of the Escrow Agreement

 

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to satisfy any claims for indemnification made on or prior to such date pursuant to Article 9 of this Agreement and (ii) that number of such shares subject to claims of the Stockholder Representative for reimbursement of expenses incurred by the Stockholder Representative in accordance with the provisions of Section 3.7(c) hereof or for indemnification of the Stockholder Representative in accordance with the provisions of Section 3.7(d) hereof.

 

3.7            Stockholder Representative .

 

(a)    Appointment of Stockholder Representative .  Andrew P. Goldfarb is hereby appointed, effective from and after the Effective Time, to act as the Stockholder Representative under this Agreement in accordance with the terms of this Section 3.7 and the Escrow Agreement.  If Andrew P. Goldfarb is at any time unable to serve as Stockholder Representative as a result of his death, resignation, incapacity or removal, then the Participating Rights Holders holding a majority in interest of the Company Preferred Stock held by the Participating Rights Holders as of the Closing Date (immediately prior to the Effective Time) shall appoint a successor Stockholder Representative, and Parent shall be entitled to rely, without any investigation or inquiry, on the instruction of any such individuals.

 

(b)    Authority After the Effective Time .  From and after the Effective Time, the Stockholder Representative shall be authorized to:

 

(i)             take all actions required or permitted by, and exercise all rights granted to, the Stockholder Representative in this Agreement or the Escrow Agreement;

 

(ii)            receive all notices or other documents given or to be given to the Stockholder Representative by Parent pursuant to this Agreement or the Escrow Agreement;

 

(iii)           negotiate, undertake, compromise, defend, resolve and settle any suit, proceeding or dispute under this Agreement or the Escrow Agreement on behalf of the Participating Rights Holders;

 

(iv)           execute and deliver all agreements, certificates and documents required or deemed appropriate by the Stockholder Representative in connection with any of the transactions contemplated by this Agreement (including executing and delivering the Escrow Agreement);

 

(v)            engage special counsel, accountants and other advisors and incur such other expenses in connection with any of the transactions contemplated by this Agreement or the Escrow Agreement on behalf of the Participating Rights Holders;

 

(vi)           approve of and execute amendments to this Agreement in accordance with Section 11.15 hereof; and

 

(vii)          take, or refrain from taking, such other action as the Stockholder Representative may deem appropriate on behalf of the Participating Rights Holders, including:

 

(A)           agreeing to any modification or amendment of this Agreement or the Escrow Agreement and executing and delivering an agreement of such modification or amendment;

 

(B)            taking any actions required or permitted under the Escrow Agreement; and

 

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(C)            all such other matters as the Stockholder Representative may deem necessary or appropriate to carry out the intents and purposes of this Agreement and the Escrow Agreement.

 

(c)    Reimbursement of Expenses .  The Stockholder Representative shall be entitled to receive reimbursement out of the Escrowed Shares otherwise distributable to Participating Rights Holders upon release from escrow to the Participating Rights Holders, for any and all expenses, charges and liabilities, including reasonable attorneys’ fees, incurred by the Stockholder Representative in the performance or discharge of his or her rights and obligations under this Agreement.

 

(d)    Release from Liability; Indemnification; Authority of Stockholder Representative .  Each Participating Rights Holder hereby releases the Stockholder Representative from, and each Participating Rights Holder agrees to indemnify the Stockholder Representative against, liability for any error in judgment or action taken or not taken by him in his or her capacity as such agent, except for the liability to a Participating Rights Holder for loss which such holder may suffer from the willful misconduct or gross negligence of the Stockholder Representative in carrying out his or her duties hereunder.  By virtue of the adoption of this Agreement and the approval of the Merger by the stockholders of the Company, each Participating Rights Holder (regardless of whether or not such Participating Rights Holder votes in favor of the adoption of the Agreement and the approval of the Merger, whether at a meeting or by written consent in lieu thereof) hereby irrevocably appoints, as of the Agreement Date, the Stockholder Representative as his, her or its true and lawful agent and attorney-in-fact to enter into any agreement in connection with the transactions contemplated by this Agreement, to exercise all or any of the powers, authority and discretion conferred on him under any such agreement, to give and receive notices on their behalf and to be his, her or its exclusive representative with respect to any matter, suit, claim, action or proceeding arising with respect to any transaction contemplated by any such agreement, including, without limitation, the defense, settlement or compromise of any claim, action or proceeding for which Parent, Midco, the Merger Sub or the Surviving Corporation may be entitled to indemnification and, by virtue of its approval of the Agreement, the Stockholder Representative agrees to act as, and to undertake the duties and responsibilities of, such agent and attorney-in-fact.  This power of attorney is coupled with an interest, surviving death and is irrevocable.  All actions, decisions and instructions of the Stockholder Representative shall be conclusive and binding upon all of the Participating Rights Holders (regardless of whether or not such Participating Rights Holder votes in favor of the adoption of the Agreement and the approval of the Merger, whether at a meeting or by written consent in lieu thereof).  By virtue of the adoption of this Agreement and the approval of the Merger by the stockholders of the Company, each Participating Rights Holder (regardless of whether or not such Participating Rights Holder votes in favor of the adoption of the Agreement and the approval of the Merger, whether at a meeting or by written consent in lieu thereof) hereby agrees to the provisions of this Agreement, including, without limitation, the provisions of Sections 3.6 and 3.7 and Article 9 hereof.  The provisions of this Section 3.7 are independent and severable.

 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby represents and warrants to Parent and the Merger Sub as follows as

 

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of each of (a) the Agreement Date and (b) the Closing Date, subject in each case to such exceptions as are set forth in the Company Disclosure Schedule attached to this Agreement (the “ Company Disclosure Schedule ”):

 

4.1            Incorporation; Authority .  The Company and each of its Subsidiaries is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own or lease and operate its respective properties and to carry on its respective business as presently conducted and as presently proposed to be conducted. The Company has delivered (as hereinafter defined) to Parent complete and correct copies of its  and its Subsidiaries’ Certificate of Incorporation and by-laws (or similar constituent documents), in each case with all amendments thereto, which Certificate of Incorporation and by-laws (or similar constituent documents) are in full force and effect.  For the purposes of this Agreement, where appropriate, “ delivery ” shall be deemed to include the posting of an item in the Dataroom.

 

4.2            Authorization and Enforceability.   The Company has all requisite corporate power 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 have been duly authorized by all necessary corporate action on the part of the Company, subject only to the approval of the Merger and this Agreement by the Company’s stockholders.  The Company Board has (i) approved this Agreement and the transactions contemplated hereby and (ii) determined that this Agreement is advisable.  This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company, enforceable in accordance with its terms, except as such enforcement may be limited by (i) the effect of bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights, or (ii) the rules governing the availability of specific performance, injunctive relief or other equitable remedies and general principles of equity, regardless of whether considered in a proceeding in law or equity.

 

4.3            Governmental and Other Third-Party Consents, Non-Contravention, Etc.   No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company or any of its Subsidiaries is required in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, except for (i) the filing of Merger Certificate with the Delaware Secretary of State; and (ii) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state and federal securities laws and the securities laws of any foreign country in connection with the issuance of shares of Parent Common Stock in the Merger. The execution, delivery, and performance of this Agreement and the consummation of such transactions will not violate, or require any consent or approval under or in connection with, (a) any provision of the Company’s or its Subsidiaries’ certificate of incorporation or by-laws (or similar constituent documents), as amended and in effect, (b) any order, judgment, injunction, award or decree of any court or state or federal governmental or regulatory body applicable to the Company or any of its Subsidiaries, or (c) any judgment, decree, order, statute, rule, regulation, agreement, instrument, or other obligation to which the Company or any of its Subsidiaries is a party or by or to which it or any of its assets is bound or subject.

 

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4.4            Capitalization .  The authorized and outstanding capital stock and other securities of the Company are as set forth in Schedule   4.4  of the Company Disclosure Schedule.  All of such outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and non-assessable, and all of such outstanding shares and other securities are owned of record as set forth in Schedule   4.4  of the Company Disclosure Schedule, and were issued in compliance with all applicable laws, including securities laws, and all applicable preemptive or similar rights of any person.  The Company is not aware of any person who has a valid right to rescind any purchase of any shares of the Company’s capital stock or other securities. Other than as set forth on Schedule   4.4  of the Company Disclosure Schedule, there are no agreements or other obligations to which the Company is a party or by which it is bound to purchase or sell any shares of its capital stock or other securities, and no outstanding convertible or exchangeable securities, options, warrants or other rights to acquire from the Company any shares of its capital stock or other securities.  Schedule   4.4  of the Company Disclosure Schedule sets forth the name of each person who holds any option, warrant or other right to acquire shares of the Company’s capital stock or other securities, the number and type of shares or securities subject to such option or right, the per-share exercise price payable therefor and, in the case of warrants, the priority and amount of consideration to be payable upon exercise thereof.

 

4.5            Qualification .  The Company and each of its Subsidiaries is duly qualified and in good standing as a foreign corporation in all jurisdictions in which the character of its owned or leased properties or the nature of its activities makes such qualification necessary, except for such failures to be so qualified or in good standing as would not, either individually or in the aggregate, be reasonably likely to have a Material Adverse Effect on the Company.

 

4.6            Subsidiaries .  Except as set forth on Schedule 4.6 of the Company Disclosure Schedule, the Company does not have any Subsidiaries or own any legal and/or beneficial interests in or to any other business enterprise or other person.  Company is the sole record and beneficial owner of the issued and outstanding shares of capital stock of each of the Subsidiaries listed as owned by it, free and clear of all Liens.

 

4.7            Financial Statements .

 

(a)    Attached to Schedule 4.7 of the Company Disclosure Schedule are copies of (i) the audited consolidated balance sheet of the Company as of December 31, 2007 and the related audited consolidated statements of operations, stockholders’ equity and cash flows, respectively, of the Company, for the fiscal year ended on such date, certified by Deloitte & Touche LLP, independent public accountants, (ii) the audited consolidated balance sheet of the Company as of December 31, 2008 (the “ Company’s Balance Sheet ”) and the related audited consolidated statements of operations, stockholders’ equity and cash flows, respectively, of the Company, for the fiscal year ended on such date, certified by Deloitte & Touche LLP, independent public accountants (the “ 2008 Audited Financials ”), and (iii) the unaudited balance sheet of the Company as of March 31, 2009, and the related unaudited consolidated statements of operations, stockholders’ equity and cash flows of the Company for the three-month period ended on such date (all such financial statements, the “ Signing Date Financials ”).  Each of the Signing Date Financials comply in all material respects with all accounting requirements applicable to Company and have been prepared in accordance with GAAP applied on a basis consistent with prior periods; each of the balance sheets included therein presents fairly and

 

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accurately in all material respects the financial condition of the Company and its Subsidiaries as of its respective date; and each of the statements of operations, stockholders’ equity and cash flows, respectively, included therein presents fairly and accurately in all material respects the results of operations and retained earnings, or cash flows, as the case may be, of the Company and its Subsidiaries for the period covered thereby; in each case, subject, with respect to the unaudited consolidated financial statements referred to in clause (iii) of this section, to the absence of footnote disclosure and to normal, recurring adjustments, the effect of which, both individually and in the aggregate, is not and will not be material. No financial statements of any person other than Company are required by GAAP to be included in the Signing Date Financials.  The Signing Date Financials were derived from the books and records of Company, which books and records are maintained in all material respects in accordance with reasonable business practices.

 

(b)    Company and its Subsidiaries possess, and shall have delivered to Parent prior to Closing, all of the applicable materials, work papers, documents, books, records, information and other supporting materials, including financial, accounting and other information with respect to Company, its Subsidiaries and all of their respective predecessors that are necessary or required to produce the audited and unaudited consolidated financial statements of Company and its Subsidiaries for all periods prior to the Effective Time as well as the unaudited consolidated pro form financial statements of Company and Parent required to be disclosed and filed following the Effective Time by Parent pursuant to Item 2.01 of Form 8-K (or any successor form) and Rule 3-05 of Regulations S-X (appearing in Party 210 of Title 17 of the Code of Federal Regulations) (collectively, the “ Supporting Materials ”).

 

4.8            Absence of Certain Changes .  Since the date of the Company’s Balance Sheet, except as disclosed on Schedule   4.8  of the Company Disclosure Schedule, there has not been any:  (i) change in the assets, liabilities, sales, income, loss or business of the Company or any of its Subsidiaries or in their respective relationships with suppliers, customers, or lessors, other than changes that were both in the ordinary course of business and have not caused, either in any case or in the aggregate, a Material Adverse Effect on the Company; (ii) acquisition or disposition by the Company or any of its Subsidiaries of any material asset or property including but not limited to (A) the transfer, abandonment or sale by the Company or its Subsidiaries of any rights to the Company Intellectual Property or the entering into of any license agreement (other than non-exclusive end-user license agreements entered into by the Company or its Subsidiaries in the ordinary course of business consistent with past practices that do not include any rights with respect to source code or object code), distribution agreement, reseller agreement, security agreement, assignment or other conveyance or option for the foregoing, with respect to the Company Intellectual Property with any person, or (B) the purchase or other acquisition of any Intellectual Property or the entering into of any license agreement, distribution agreement, reseller agreement, security agreement, assignment or other conveyance or option for the foregoing, with respect to the Intellectual Property of any other person, other than commercially available, in-bound “shrink wrap” binary code end-user licenses; (iii) damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting, either in any case or in the aggregate, the business or any material property of the Company or any Subsidiary; (iv) declaration, setting aside or payment of any dividend or any other distributions in respect of any shares of capital stock of the Company; (v) issuance of any shares of the capital stock of the Company or any direct or indirect redemption, purchase, or other acquisition by the Company or

 

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any of its Subsidiaries of any such capital stock except upon exercise of a Company Option; (vi) except as contemplated herein, loss of the services of any officer or key employee or consultant, or any material increase in the compensation, pension, or other benefits payable or to become payable by the Company or any of its Subsidiaries to any of its officers or key employees or consultants, or any bonus payments or arrangements made to or with any of them; (vii) forgiveness or cancellation of any debts or claims by the Company or any of its Subsidiaries or any waivers of any rights with respect thereto; (viii) entry by the Company or any of its Subsidiaries into any transaction with any of its Affiliates; (ix) incurrence by the Company or any of its Subsidiaries of any obligations or liabilities, whether absolute, accrued, contingent or otherwise (including without limitation liabilities as guarantor or otherwise with respect to obligations of others), other than obligations and liabilities incurred in the ordinary course of business with persons other than Affiliates of the Company; (x) incurrence or imposition of any Lien on any of the assets, tangible or intangible, of the Company or any of its Subsidiaries; or (xi) discharge or satisfaction by the Company or any of its Subsidiaries of any Lien or payment by the Company or any of its Subsidiaries of any obligation or liability (fixed or contingent) other than (A) current liabilities included in the Company’s Balance Sheet, (B) current liabilities to persons other than Affiliates of the Company incurred since the date of the Company’s Balance Sheet in the ordinary course of business, and (C) current liabilities incurred in connection with the transactions contemplated hereby and as disclosed in Schedule   4.8  of the Company Disclosure Schedule.

 

4.9            Properties and Assets .

 

(a)    Except with respect to Intellectual Property, which is the subject of Section 4.10 below, each of the Company and is Subsidiaries has good and marketable title or leasehold title, as the case may be, to all of its assets and properties that it purports to own or lease, including without limitation all those reflected in the Company’s Balance Sheet (except for properties or assets sold, consumed, or otherwise disposed of in the ordinary course of business since the date of the Company’s Balance Sheet), all free and clear of Liens on the there respective interest therein.  All such properties and assets are in good condition and repair, reasonable wear-and-tear excepted, and are, and as of the Closing Date will be, adequate and sufficient to carry on the business of the Company and its Subsidiaries as presently conducted.  Schedule   4.9  of the Company Disclosure Schedule sets forth a complete and correct list of all capital assets of the Company and its Subsidiaries.

 

(b)    Neither the Company nor any of its Subsidiaries owns any real property.  Neither the Company nor any of its Subsidiaries has received any written notice or otherwise has knowledge that either the whole or any portion of any real property leased by it is to be condemned, requisitioned, or otherwise taken by any public authority or is to be the subject of any public improvements that may result in special assessments against or otherwise affect such real property.  Schedule   4.9  of the Company Disclosure Schedule sets forth a complete and correct description of all leases of real property to which the Company or any of its Subsidiaries is a party.  Complete and correct copies of all such leases have been delivered to Parent.  Each such lease is valid and subsisting and no event or condition exists that constitutes, or after notice or lapse of time or both could constitute, a default thereunder by the Company or any of its Subsidiaries, or to the best of its knowledge, any other person.  The leasehold interests of the Company and its Subsidiaries are subject to no Lien, and the Company or its Subsidiary, as the

 

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case may be, is in quiet possession of the properties covered by such leases. Company has notified the lessor of the Maynard Lease that Company is terminating the Maynard Lease when it expires on July 31, 2009.

 

4.10          Intellectual Property .

 

(a)    Schedule 4.10(a)  lists and separately identifies (i) all Company Registered Intellectual Property (setting forth, for each item, the applicable jurisdiction, status, application or registration number, and date of application, registration or issuance, as applicable) and (ii) all Company Products that are currently sold, published, offered for sale or under development by the Company and its Subsidiaries and (iii) all material unregistered trademarks. Except as set forth Schedule 4.10(a), no Company Intellectual Property is subject to any maintenance fees or taxes or actions falling due within ninety (90) days after the Closing Date.

 

(b)    With respect to each item of Company Registered Intellectual Property, necessary registration, maintenance and renewal fees in connection with such Company Registered Intellectual Property have been made and all necessary documents and certificates in connection with such Company Registered Intellectual Property have been filed with the relevant patent authorities in the United States for the purposes of maintaining such Company Registered Intellectual Property, except for Company Registered Intellectual Property that the Company has permitted to expire or has cancelled or abandoned in its reasonable business judgment. No information material to patentability under applicable law has been withheld from the examining office that would constitute fraud or inequitable conduct. The Company has no knowledge of any prior art references or prior public uses, sales, offers for sale or disclosures that would reasonably be expected to invalidate any patents and patent applications (including, but not limited to, any provisional applications and any international or foreign patents and patent applications) included in the Company Registered Intellectual Property (such patents and patent applications and any and all reissues, divisions, renewals, extensions, provisions, continuations, foreign counterparts, and continuations-in-part thereof, the “ Company Patents ”), or of any conduct the result of which would reasonably be expected to render the Company Patents or any claim thereof invalid or unenforceable. The original, first and joint investors of the subject matter claimed in any Company Patents are properly represented in the Company Patents.

 

(c)    Each item of Company Intellectual Property is either:  (i) owned solely by the Company or its Subsidiaries free and clear of any Liens; or (ii) rightfully used and authorized for use by the Company and its Subsidiaries and their respective permitted successors pursuant to a valid and enforceable written license. The Company Intellectual Property constitutes all the Intellectual Property necessary for the conduct of the businesses of the Company and its Subsidiaries as currently conducted or, to the Company’s knowledge, planned to be conducted.

 

(d)    To the extent that any work, invention, or material has been developed or created by a third party for the Company or any of its Subsidiaries, the Company or its Subsidiaries has a written agreement with such third party with respect thereto and the Company or its Subsidiaries has obtained ownership of, and is the exclusive owner of, or has a valid license to use, all Intellectual Property in such work, material or invention by operation of law or by valid assignment or by agreement, as the case may be.

 

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(e)    Except as set forth on Schedule   4.10(e)  of the Company Disclosure Schedule, neither the Company nor its Subsidiaries has transferred ownership of, or granted any license (other than licenses granted pursuant to customer agreements with aggregate fees payable that are less than $25,000 entered into in the ordinary course of business, substantially in the form of the Company’s form of customer agreement, copies of which have been provided to Parent), with respect to, any Company Intellectual Property to any third party.  Schedule 4.10(e)  lists (i) all Contracts to which Company or any of its Subsidiaries is a Party granting any right (whether contingent or otherwise) to use or practice any rights under any Company Intellectual Property (“ Licenses Out ”) and (ii) all Contracts to which the Company or its Subsidiaries hold or are granted any rights to any third party Intellectual Property, indicating for each such agreement whether the Company or one of its Subsidiaries is the licensee or licensor thereunder (excluding (A) licenses granted pursuant to customer agreements with aggregate fees payable that are less than $25,000 entered into in the ordinary course of business, substantially in the form of the Company’s form of customer agreement, copies of which have been provided to Parent, and (B) licenses to any fully-paid up, non-exclusive licenses to any generally available, off-the-shelf binary code software programs licensed by the Company or its Subsidiaries on standard terms which programs are not sold with, incorporated into, bundled with or used in the development of any Company Product). Except for the nonstandard customer agreements identified as such in Schedule 4.10(e) , all of the Licenses Out are in all material respects in the form of the Company’s form of customer agreement, copies of which have been provided to Parent.

 

(f)     The Contracts listed on Schedule   4.10(e) of the Company Disclosure Schedule are in full force and effect.  The consummation of the transactions contemplated by this Agreement will neither violate nor result in the breach, modification, cancellation, termination, or suspension of such Contracts listed on Schedule   4.10(e)  of the Company Disclosure Schedule.  The Company and each of its Subsidiaries is in material compliance with such Contracts listed on Schedule   4.10(e)  of the Company Disclosure Schedule and, to the knowledge of the Company, all other parties to such Contracts listed on Schedule   4.10(e)  of the Company Disclosure Schedule are in material compliance with such Contracts.  Except as set forth in Schedule   4.10(e)  of the Company Disclosure Schedule, consummation of the transactions contemplated by this Agreement will not require the consent of or prior notice to any party to such Contracts listed on Schedule   4.10(e)  of the Company Disclosure Schedule. Following the Closing Date, the Surviving Corporation will be permitted to exercise all of the Company’s and its Subsidiaries’ respective rights under the Contracts listed on Schedule   4.10(e)  of the Company Disclosure Schedule to the same extent the Company or its Subsidiaries would have been able to had the transaction contemplated by this Agreement not occurred and without the payment of any additional funds other than ongoing fees, royalties or payments which the Company or its Subsidiaries would otherwise be required to pay.

 

(g)    Schedule   4.10(g)  of the Company Disclosure Schedule lists all Contracts between the Company or its Subsidiaries and any third party wherein or whereby the Company or its Subsidiaries has agreed to, or assumed, any obligation or duty to warrant, indemnify, hold harmless or otherwise assume or incur any obligation or liability with respect to the infringement or misappropriation by the Company or its Subsidiaries of any third party’s Intellectual Property.

 

(h)    Except as set forth in Schedule   4.10(h)  of the Company Disclosure Schedule, to the Company’s knowledge no person has nor is infringing or misappropriating any Company

 

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Intellectual Property. The conduct of the business of the Company (including, without limitation, the distribution, sale or licensing of the Company Products) and its Subsidiaries and use of the Company Intellectual Property or any Intellectual Property that as formerly Company Intellectual Property by the Company and its Subsidiaries has not in the past and does not infringe or misappropriate any other Person’s Intellectual Property, other than the rights of any person under any patent, or give rise to any claim of unfair competition under any applicable law, rule or regulation. To the Company’s knowledge, neither the conduct of the business of the Company and its Subsidiaries (including, without limitation, the distribution, sale or licensing of the Company Products), nor the use of the Company Intellectual Property by the Company and its Subsidiaries, infringes or violates (or in the past infringed on or violated) the rights of any Person under any patent. No claims, litigation or governmental or other proceedings (i) challenging the validity, enforceability, effectiveness or ownership by the Company or its Subsidiaries of any of the Company Intellectual Property owned by them or (ii) to the effect that the use, reproduction, modification, manufacture, distribution, licensing, sublicensing, sale, or any other exercise of rights in any Company Intellectual Property by the Company or its Subsidiaries or by any licensee of the Company or its Subsidiaries infringed or misappropriated, does infringe or misappropriate or will infringe or misappropriate any Intellectual Property or other proprietary or personal right of any person, have been asserted against the Company or its Subsidiaries or, to the Company’s knowledge, are threatened by any person.

 

(i)     The Company and its Subsidiaries maintain reasonable security measures for the preservation of the secrecy and proprietary nature of such of the Company Intellectual Property as constitute trade secrets or other confidential information, including, without limitation, requiring all Company employees and consultants and other persons with access to Company trade secrets or other confidential information to execute a confidentiality agreement and, to the Company’s knowledge, there has not been any breach by any party to any such confidentiality agreement. To the Company’s knowledge, no officer, director, employee, or consultant of the Company or any of its Subsidiaries is obligated under or bound by any agreement or instrument, or any judgment, decree, or order of any court of administrative agency, that (i) conflicts or may conflict with his agreements and obligations to use his best efforts to promote the interest of the Company or its Subsidiaries, (ii) conflicts or may conflict with the business or operations of the Company or its Subsidiaries, or (iii) restricts or may restrict the use or disclosure of any information that may be useful to the Company or its Subsidiaries.  The Company and its Subsidiaries have obtained from all persons (including employees) who have created any portion of, or otherwise who would have any rights in or to, the Company Intellectual Property owned by the Company or its Subsidiaries, valid and enforceable written assignments of any such work, invention, improvement or other rights to the Company or its Subsidiaries, copies of which have been delivered to Parent. Each inventor named in Company Patents, alone or together with any joint owners, has executed an agreement assigning his or her entire right, title and interest in and to such Company Patents and the inventions described therein, to the Company or its Subsidiaries.

 

(j)     The transactions contemplated by this Agreement and the Related Agreements will not alter, impair or otherwise affect any rights of the Company or any of its Subsidiaries in any Company Intellectual Property.

 

(k)    Except as set forth on Schedule 4.10(k) , neither the Company nor any of its

 

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Subsidiaries has disclosed or delivered to any escrow agent or any other person any of the source code relating to any Company Intellectual Property, and no other person has the right, contingent or otherwise, to obtain access to or use any such source code.

 

(l)     The Company Intellectual Property that is owned by the Company or its Subsidiaries, and to the knowledge of the Company, all other Company Intellectual Property does not contain (i) any computer code intentionally designed to disrupt, disable or harm in any manner the operation of any software or hardware or (ii) any unauthorized feature (including any worm, bomb, backdoor, clock, timer or other disabling device, code, design or routine) that intentionally causes the software or any portion thereof to be erased, inoperable or otherwise incapable of being used, either automatically, with the passage of time or upon command by any person.

 

(m)   Schedule 4.10(m)  lists all Publicly Available Software contained in, incorporated into, linked to or called by the Company Products in any way and describes the manner in which such Publicly Available Software was used.  Except as set forth in Schedule 4.10(m) , the Company has not incorporated Publicly Available Software into, or combined Publicly Available Software with, any Company Product, used Publicly Available Software to provide any Company Product or distributed Publicly Available Software in conjunction with or for use with any Company Product.  The incorporation, linking, calling, modification, distribution or other use in or by any Company Product in any manner whatsoever of any such Publicly Available Software listed on Schedule 4.10(m)  does not obligate the Company to (A) disclose, distribute or offer to disclose or distribute, (B) license for the purpose of making derivative works, or (C) redistribute at no charge or with any restriction on the consideration charged therefor, the source code or make available, offer or deliver any portion of the source code of any Company Product or component thereof to any third party, other than the source code for the specific third party component identified in Schedule 4.10(m).   The Company and its Subsidiaries are in material compliance with all of the obligations and conditions of any licenses for Publicly Available Software used by it or them, including any notice, distribution and contribution obligations or conditions.

 

(n)    Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any Employee has participated in any standards setting activities or joined any standards setting organizations that would affect the proprietary nature of the Company Intellectual Property owned by the Company or any Subsidiary or restrict the ability of the Company or any of its Subsidiaries to enforce, license, or exclude others from using the Company Intellectual Property. No funds or facilities of any university or Governmental Authority were used in the development of any Company Intellectual Property owned or exclusively licensed to the Company. The Company has obtained all approvals necessary for exporting the Company Products outside the United States and importing the Company Products into any country in which the Company Products are now sold or licensed for use, and all such export and import approvals in the United States and throughout the world are valid, current, outstanding and in full force and effect.

 

(o)    Schedule 4.10(o)  lists all Contracts pursuant to which the Company or any of its Subsidiaries is currently obligated or has a future obligation to provide support or other services (“ Support Agreements ”).  Except for the nonstandard support agreements identified as

 

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such in Schedule 4.10(o) , all of the Support Agreements are in all material respects in the form of the contract identified as the Standard Support Agreement set forth in Schedule 4.10(o)  (the “ Standard Support Agreement ”).  The versions of the Company Products currently supported by the Company and its Subsidiaries are set forth on Schedule 4.10(o) .  Except as set forth on Schedule 4.10(o) , neither the Company nor any of its Subsidiaries nor any of their Affiliates has granted any other person the right to furnish support or maintenance services with respect to the Company Products to any third party.

 

4.11          Product Warranties .  Each Company Product at all times is and has been in conformity in all material respects with all contractual commitments and specifications as the Company and its Subsidiaries has warranted to its customers.  No Company Product is subject to any guaranty, warranty, or other indemnity beyond the Company’s applicable standard terms and conditions of sale, license or lease or beyond that implied or imposed by applicable law, rule or regulation. No customer of the Company or its Subsidiaries has made a claim in writing against the Company or its Subsidiaries requesting or demanding replacement or repair of any product sold by the Company to such customer or other damages in connection with such product, except for product warranty claims against the Company or its Subsidiaries in the ordinary course of business and consistent with the Company’s and its Subsidiaries’ past business experience and practices. No claim or liability asserted in writing is pending against the Company, and, to the Company’s knowledge, the Company has no liability, arising out of any injury to individual or any material property damage as a result of the ownership, possession or use of any Company Product, except for product warranty claims against the Company or its Subsidiaries in the ordinary course of business and consistent with the Company’s and its Subsidiaries’ past business experience and practices and except as disclosed on Schedule   4.11 .

 

4.12          Indebtedness .  The Company has no Indebtedness outstanding except as set forth in Schedule   4.12 of the Company Disclosure Schedule.  The Company is not in default with respect to any Indebtedness nor does any event or condition exist that after notice or lapse of time or both could constitute a default under any Indebtedness of the Company.   No Indebtedness of the Company or any agreement, instrument or other obligation relating thereto purports to limit the operation of its businesses.  Complete and correct copies of all agreements, instruments, and other obligations (including all amendments, supplements, waivers, and consents) relating to any Indebtedness of the Company have been furnished to Parent.  No approval or consent of any person that has not already been obtained and listed on Schedule   4.12 of the Company Disclosure Schedule is needed in order that any Indebtedness of the Company continue in full force and effect following the consummation of the Merger and the other transactions contemplated hereby, and no such Indebtedness or any agreement, instrument or other obligation relating thereto includes any provision, the effect of which may be to enlarge or accelerate any obligations of the Company in connection with such Indebtedness or under any such agreement or instrument, to terminate such Indebtedness (or give rise to a right of termination in connection with such Indebtedness or under any such agreement or instrument), or to give additional rights to any other person, as a result of the consummation of the Merger or the other transactions contemplated hereby.

 

4.13          Absence of Undisclosed Liabilities .  Except to the extent (a) reflected or reserved against in the Company’s Balance Sheet, (b) incurred in the ordinary course of business consistent with past practice since the date of the Company’s Balance Sheet or (c) described on

 

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Schedule   4.13 of the Company Disclosure Schedule, the Company does not have any liabilities or obligations of any nature, whether accrued, absolute, contingent, or otherwise (including, without limitation, liabilities, as guarantor or otherwise, in respect of obligations of others) that would be required to be reflected or reserved against in a balance sheet prepared in accordance with GAAP or referred to in the notes thereto.

 

4.14          Taxes .  For purposes of this Section 4.14 references to the Company shall include all Subsidiaries of the Company.

 

(a)    Filing of Tax Returns and Payment of Taxes .   Except as set forth on Schedule 4.14(a) , the Company has timely filed all income Tax Returns, sales Tax Returns and all other material Tax Returns required to be filed by it (taking into account any extension of time to file granted to or obtained on behalf of the Company).  All material Taxes due and payable by the Company, whether or not shown as due on a Tax Return, have been paid, and the Company will not be liable for any additional Taxes in respect of any taxable period or portion thereof ending on or before the Closing Date in an amount that exceeds the corresponding reserve for unpaid Taxes, if any, reflected in the unaudited balance sheet of the Company as of March 31, 2009, as adjusted for any Tax accruals and Tax payments in the ordinary course of business between March 31, 2009 and the Closing Date.  The Company has delivered to Parent accurate and complete copies of all Tax Return filed by or with respect to it with respect to taxable periods ended on or after December 31, 2005, and has delivered to Parent accurate and complete copies of all examination reports with respect thereto and all statements of deficiencies assessed against or agreed to by the Company with respect thereto.

 

(b)    Deficiencies .   No deficiency or proposed adjustment in respect of Taxes that has not been settled or otherwise resolved has been asserted or assessed by any Tax authority against the Company.

 

(c)    Liens .   There are no Liens for Taxes (other than Taxes not yet due and payable) on the assets of the Company.

 

(d)    Extensions to Statute of Limitations for Assessment of Taxes .  The Company does not currently have in effect any consent to extend the time in which any Tax may be assessed or collected by any Tax authority.

 

(e)    Extensions of the Time for Filing Tax Returns .   Except as set forth in Schedule   4.14(e)  of the Company Disclosure Schedule, the Company has not requested or been granted an extension of the time for filing any Tax Return that is currently in effect.

 

(f)     Pending Proceedings .   There is no action, suit, Tax authority proceeding, or audit with respect to any Tax now in progress, pending, or to the Company’s knowledge, threatened against or with respect to the Company.

 

(g)    Membership in Affiliated Groups, Etc.   The Company has never been a member of any Affiliated Group, or filed or been included in a combined, consolidated, or unitary Tax Return.

 

(h)    Adjustments under Section 481 .   The Company will not be required, as a

 

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result of a change in method of accounting for any period ending on or before the Closing Date other than as a result of the