AGREEMENT AND PLAN OF MERGER

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Exhibit 99.1

 

EXECUTION COPY

 

 

 

 

 

 

 

 

 

A GREEMENT A ND P LAN OF M ERGER

 

BY AND AMONG

 

COUGAR HOLDINGS, INC.,

 

COUGAR MERGER SUB, INC.,

 

A ND

 

CCC INFORMATION SERVICES GROUP INC.

 

 

 

 

 

 

 

 

Dated as of September 21, 2005

 

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INTRODUCTION

 

The respective Boards of Directors of each of Buyer, Merger Sub and the Company have unanimously (i) approved, and declared advisable and in the best interests of Buyer, Merger Sub and the Company and their respective stockholders, the merger of Merger Sub with and into the Company (the “ Merger ”) in accordance with the provisions of the Delaware General Corporation Law, as amended (the “ DGCL ”), and subject to the terms and conditions of this Agreement and (ii) approved this Agreement.

 

As a condition to and inducement to Buyer’s and Merger Sub’s willingness to enter into this Agreement, certain stockholders of the Company are entering into a Stockholders’ Agreement with Buyer and Merger Sub.

 

Certain capitalized terms have the meanings set forth in Section 9.1.

 

In consideration of the mutual representations, warranties, covenants and other agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

 

T HE M ERGER

 

SECTION 1.1     The Merger . At the Effective Time, subject to the terms and conditions of this Agreement and in accordance with the DGCL, (i) Merger Sub shall be merged with and into the Company, (ii) the separate corporate existence of Merger Sub shall cease and (iii) the Company shall be the surviving corporation (the “ Surviving Corporation ”) and shall continue its legal existence under the DGCL.

 

SECTION 1.2     Effective Time; Closing Date . Subject to the terms and conditions of this Agreement, the Company and Merger Sub shall cause the Merger to be consummated by filing a certificate of merger with the Secretary of State of the State of Delaware (the “ Certificate of Merger ”) and all other filings or recordings required by the DGCL in connection with the Merger. The Merger shall become effective at such time as the Certificate of Merger is duly filed in accordance with the provisions of Section 251 of the DGCL, or at such later time as may be stated in the Certificate of Merger (the “ Effective Time ”). The closing of the Merger (the “ Closing ”) shall take place at the offices of Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New York, two Business Days after the date on which the last of the conditions set forth in Article VI shall have been satisfied or waived, or on such other date, time

 

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and place as the Company and Buyer may mutually agree (such date on which the Closing actually occurs being referred to herein as the “ Closing Date ”).

 

SECTION 1.3     Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers, franchises and assets of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations and duties of the Company and Merger Sub shall become the debts, liabilities, obligations and duties of the Surviving Corporation.

 

SECTION 1.4     Certificate of Incorporation; Bylaws .

 

(a)    The certificate of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended in its entirety at the Effective Time to read in the form attached as Exhibit A hereto, and as so amended, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided by Law and such certificate of incorporation.

 

(b)    The by-laws of the Company, as in effect immediately prior to the Effective Time, shall be amended in their entirety at the Effective Time to contain the same provisions as the by-laws of Merger Sub as in effect immediately prior to the Effective Time, and as so amended, shall be the by-laws of the Surviving Corporation, until thereafter amended as provided by Law and such by-laws.

 

SECTION 1.5     Board of Directors and Officers . The Board of Directors of Merger Sub and the officers of the Company immediately prior to the Effective Time shall, from and after the Effective Time, be the Board of Directors and officers, respectively, of the Surviving Corporation, each to hold office until his or her respective successors are duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and by-laws of the Surviving Corporation.

 

SECTION 1.6     Further Assurances . If at any time after the Effective Time the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, its right, title or interest in, to or under any of the properties, rights, privileges, powers, franchises or assets of either the Company or Merger Sub or (b) otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of the Company or Merger Sub, all such deeds, bills of sale, assignments and assurances and do, in the name and on behalf of the Company or Merger Sub, all such other acts and things necessary, desirable or proper to vest, perfect or confirm its right, title or interest in, to or under any of the properties, rights, privileges, powers, franchises or assets of the Company or Merger Sub, as applicable, and otherwise to carry out the purposes of this Agreement.

 

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ARTICLE II

 

E FFECTS OF THE M ERGER ; C ONSIDERATION

 

SECTION 2.1     Conversion of Company Securities . At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Merger Sub, Buyer, the Stockholders, the Warrant Holders or the Option Holders:

 

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

 

(b)    Each Share that is owned by (i) the Company as treasury stock, (ii) Buyer, (iii) Merger Sub, (iv) any other wholly-owned Subsidiary of Buyer or (v) any wholly-owned Subsidiary of the Company shall be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto;

 

(c)    Except as otherwise provided in clause (b) above and subject to Section 2.4, each share of Common Stock outstanding immediately prior to the Effective Time shall be converted into the right to receive $26.50 in cash, payable to the holder thereof, without interest (the “ Common Stock Consideration ”);

 

(d)    Except as otherwise provided in clause (b) above and subject to Section 2.4, each share of Series F Preferred Stock that is issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive a sum in cash equal to the Liquidation Preference (as defined in the Company’s amended and restated certificate of incorporation, as amended through the date of this Agreement) plus any accrued and unpaid dividends, if any, through the Effective Time, payable to the holder thereof, without interest;

 

(e)    Each Warrant issued and outstanding immediately prior to the Effective Time shall become exercisable (by way of a cashless exercise) into the right to receive a sum in cash equal to the Warrant Cancellation Payment, without interest. Upon surrender of such Warrants in accordance with this Agreement, such Warrants shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each former Warrant Holder shall cease to have any rights with respect thereto, other than the right to receive the consideration set forth herein. The Company shall use its commercially reasonable efforts to take all actions necessary to effectuate the foregoing. Any payments made pursuant to this Section 2.1(e) shall be net of all applicable withholding and excise taxes;

 

(f)    Each Option issued and outstanding immediately prior to the Effective Time, whether or not then exercisable, shall fully vest and become exercisable (by way of a cashless exercise) into the right to receive a sum in cash equal to the Option Cancellation Payment, without interest. Upon surrender of such Options in accordance with this Agreement, such Options shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each former Option Holder shall cease to have any rights with respect thereto, other than the right to receive the consideration set forth herein. The Company shall use its commercially reasonable efforts to take all actions necessary to effectuate the foregoing. Any

 

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payments made pursuant to this Section 2.1(f) shall be net of all applicable withholding and excise taxes. As of the Effective Time, the Option Plan shall terminate and all rights under any provision of any other plan, program or arrangement of the Company or any Subsidiary of the Company providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any Subsidiary of the Company shall be cancelled;

 

(g)    Prior to the Effective Time, the Company shall terminate the Company’s Employee Stock Purchase Plan (the “ESPP” ) and on such date of termination the Company shall use participants’ contributions under the ESPP to purchase Common Stock and no further purchases will be made thereunder. In addition, the Company shall amend the ESPP to provide that all shares held in a deposit account under the ESPP shall be released from such restrictions on transfer as contained in the ESPP, effective as of the Effective Time, such that such shares shall have the same rights and be subject to the same conditions (including the conditions set forth in Section 2.2) hereunder as each share of Common Stock not subject to any restrictions as provided in this Section 2.1;

 

(h)    The restrictions on each share of Restricted Stock shall lapse immediately prior to, and effective upon the occurrence of, the Effective Time, and each share of Restricted Stock shall be fully vested in each holder thereof at such time, and each such share of Restricted Stock will be treated at the Effective Time the same as, and have the same rights and be subject to the same conditions (including the conditions set forth in Section 2.2) hereunder as, each share of Common Stock not subject to any restrictions as provided in Section 2.1; and

 

(i)    After the Effective Time, all capital stock of the Company, and all Options and Warrants relating thereto, shall no longer be outstanding and shall automatically be canceled and retired, or converted in accordance with this Section 2.1, as the case may be, and each holder of a certificate representing any such Shares, Options or Warrants shall cease to have any rights with respect thereto, other than the right to receive the consideration provided herein, subject to Section 2.4.

 

SECTION 2.2     Exchange Procedures .

 

(a)    Prior to the Effective Time, Buyer shall appoint the Paying Agent to act as agent for the holders of Shares and Warrants in connection with the Merger and to receive the funds to which such holders shall become entitled pursuant to this Article II.

 

(b)    At the Effective Time, or as soon as practicable thereafter (but not later than two Business Days thereafter), the Surviving Corporation shall cause to be mailed, or otherwise make available, to each holder of record of Shares or Warrants entitled to receive consideration pursuant to Section 2.1 the form of the Letter of Transmittal. After the Effective Time, each holder of certificates or other instruments formerly evidencing Shares or Warrants (the “Certificates” ), upon surrender of such Certificates to the Paying Agent, together with the completed Letter of Transmittal, shall be entitled to receive from the Paying Agent, in exchange therefor, the aggregate consideration for such Shares or Warrants, as the case may be, in cash as contemplated by this Agreement, and the Certificates so surrendered shall be cancelled. The Surviving Corporation, the Paying Agent and Buyer shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares or

 

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Warrants, as the case may be, such amounts as the Surviving Corporation, the Paying Agent or Buyer is required to deduct and withhold with respect to the making of such payment under any provision of applicable Tax Law. To the extent that amounts are so withheld by the Surviving Corporation, the Paying Agent or Buyer, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares or Warrants, as the case may be, in respect of which such deduction and withholding was made by the Surviving Corporation, the Paying Agent or Buyer, as the case may be. Until surrendered as contemplated by this Section 2.2 (other than Certificates representing Dissenting Shares), each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive the aggregate consideration for such Shares or Warrants, as the case may be, in cash as contemplated by this Agreement, without interest thereon.

 

(c)    In the event of a transfer of ownership of any Shares or Warrants, as the case may be, that is not registered in the transfer books of the Company, subject to any applicable deductions or withholdings as described in Section 2.2(b) above, payment may be made to a Person other than the Person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer. Notwithstanding the foregoing, if any Certificate shall be lost, stolen or destroyed, upon the making of an affidavit of that fact and an undertaking of indemnity by the Person claiming such Certificate to be lost, stolen or destroyed, the Surviving Corporation will issue in exchange for such lost, stolen or destroyed Certificate the consideration deliverable in respect thereof pursuant to this Agreement.

 

(d)    At any time following the expiration of six (6) months after the Effective Time, the Surviving Corporation shall, in its sole discretion, be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) which had been made available to the Paying Agent and which have not been disbursed to holders of Certificates, and such funds shall thereafter become the property of the Surviving Corporation. Such funds may be commingled with the general funds of the Surviving Corporation and shall be free and clear of any claims or interests of any Person. Thereafter, such holders shall be entitled to look to the Surviving Corporation (subject to any applicable abandoned property, escheat or similar Law) only as general creditors thereof with respect to the applicable consideration payable as contemplated by this Agreement (net of any amounts that would be subject to withholding) upon due surrender of their Certificates, without any interest thereon. Any portion of such remaining cash unclaimed by holders of Shares or Warrants, as the case may be, as of a date which is immediately prior to such time as such amounts would otherwise escheat to or become property of any Governmental Entity shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation free and clear of any claims or interest of any Person previously entitled thereto.

 

(e)    At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfer in the stock transfer books of the Surviving Corporation of the Shares, Warrants or Options, as the case may be, that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent for any reason, they shall be canceled and exchanged as provided in this Section 2.2.

 

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(f)    At the Effective Time, or as soon as practicable thereafter (but not later than two Business Days thereafter), the Surviving Corporation shall, in exchange for the Options that became entitled to receive the consideration specified in Section 2.1, make the Option Cancellation Payment in respect of each such Option to each Option Holder. The Surviving Corporation and Buyer shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any Option Holder such amounts as the Surviving Corporation or Buyer is required to deduct and withhold with respect to the making of such payment under any provision of applicable Tax Law or with respect to the making of other payments hereunder in connection with other equity interests in the Company held by such Option Holder (provided that such amounts have not been previously deducted and withheld). To the extent that amounts are so withheld by the Surviving Corporation or Buyer, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Option Holder in respect of which such deduction and withholding was made by the Surviving Corporation or Buyer, as the case may be.

 

SECTION 2.3     Payments at Closing . At the Closing, Buyer will make (or cause to be made) payment to (i) the Paying Agent, by wire transfer of immediately available funds to the account or accounts designated by the Company in writing no later than two Business Days prior to the Closing Date, in an amount equal to the sum of (x) the aggregate Common Stock Consideration and (y) the aggregate Warrant Cancellation Payments, and (ii) the Surviving Corporation, by wire transfer of immediately available funds to the account or accounts designated by Company in writing no later than two Business Days prior to the Closing Date, in an amount equal to the aggregate Option Cancellation Payments, in each case to the extent payable as provided in Section 2.1.

 

SECTION 2.4     Dissenting Shares .

 

(a)    Notwithstanding any provision of this Agreement to the contrary, shares of the Company’s capital stock that are outstanding immediately prior to the Effective Time and which are held by holders who shall not have voted in favor of the Merger or consented thereto in writing and who shall have demanded properly in writing appraisal for such shares in accordance with Section 262 of the DGCL (collectively, the “Dissenting Shares” ) shall not be converted into or represent the right to receive the consideration set forth in Section 2.1. Such holders shall be entitled to receive such consideration as is determined to be due with respect to such Dissenting Shares in accordance with the provisions of Section 262 of the DGCL, except that all Dissenting Shares held by holders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such shares under Section 262 of the DGCL shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the consideration specified in Section 2.1 (as adjusted, if applicable), without any interest thereon, upon surrender, in the manner provided in Section 2.2, of the certificate or certificates that formerly evidenced such Dissenting Shares.

 

(b)    The Company shall give Buyer (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands and any other instruments served pursuant to the DGCL and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. The

 

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Company shall not, except with the prior written consent of Buyer, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.

 

ARTICLE III

 

R EPRESENTATIONS AND W ARRANTIES OF THE C OMPANY

 

Except as set forth in the Company SEC Reports filed prior to the date hereof, the Company hereby represents and warrants to Buyer and Merger Sub as follows:

 

SECTION 3.1     Organization, Standing and Power . Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of the Company and its Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction in which such qualification is necessary because of the property owned, leased or operated by it or because of the nature of its business as now being conducted, except for any failure to so qualify or be in good standing which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. Section 3.1 of the disclosure schedule delivered by the Company prior to, or concurrently with, the execution of this Agreement (the “Disclosure Schedule” or the “Schedules” ) lists the jurisdictions of incorporation and foreign qualifications of the Company and each of its Subsidiaries. The Company has made available to Buyer complete and correct copies of the constitutive documents of each of the Company and its Subsidiaries, in each case as amended to the date of this Agreement, and has made available to Buyer each such entity’s minute books and stock records. Section 3.1 of the Disclosure Schedule contains a true and correct list of the directors and officers of each of the Company and its Subsidiaries as of the date of this Agreement.

 

SECTION 3.2     Authority; Approvals .

 

(a)    The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby are within its corporate powers and have been duly and validly authorized by all necessary corporate action on the part of the Company (other than the adoption of this Agreement by the Required Company Stockholders, and the filing of a Certificate of Merger pursuant to the DGCL). This Agreement has been duly executed and delivered by the Company, and (assuming due authorization, execution and delivery by Buyer and Merger Sub) constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditor’s rights generally and by the application of general principles of equity.

 

(b)    The Board of Directors of the Company (the “Company Board” ) has unanimously (i) determined that this Agreement and the Merger are fair to, and in the best interests of, the Company and its stockholders, (ii) resolved that the Merger is fair to, and in the bests interests of, the Company and its stockholders and declared this Agreement and the Merger to be advisable, (iii) resolved to approve this Agreement and (iv) resolved to recommend that the

 

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Company’s stockholders adopt this Agreement, and, as of the date hereof, none of the aforesaid actions by the Board of Directors of the Company has been amended, rescinded or modified.

 

(c)    The affirmative vote of the holders of a majority in voting power of (i) outstanding shares of Common Stock, and (ii) outstanding shares of Series F Preferred Stock, voting together as a single class (the “Required Company Stockholders” ), to adopt this Agreement are the only votes of the holders of any class or series of the Company’s capital stock necessary to approve the Merger.

 

SECTION 3.3     Capitalization; Equity Interests .

 

(a)    The authorized capital stock of the Company consists of 40,000,000 shares of Common Stock and 100,000 shares of preferred stock, par value $1.00 per share. As of the date of this Agreement, (i) 16,677,109 shares of Common Stock and 100 shares of Series F Preferred Stock, respectively, were issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable, (ii) 4,460,501 shares of Common Stock are held in the treasury of the Company and (iii) no shares of Common Stock are held by wholly-owned Subsidiaries of the Company.

 

(b)    Section 3.3(b) of the Disclosure Schedule sets forth a complete list of all of the Company’s Subsidiaries as of the date of this Agreement, together with their respective jurisdictions of incorporation, authorized capital stock, number of shares issued and outstanding and record ownership of such shares. Except as set forth in Section 3.3(b) of the Disclosure Schedule, the Company does not have any Subsidiaries or own or hold any equity or other security interest in any other Person. Except as set forth in Section 3.3(b) of the Disclosure Schedule, all issued and outstanding shares of capital stock of the Company’s Subsidiaries have been duly authorized, were validly issued, are fully paid and nonassessable and subject to no preemptive rights and are directly or indirectly owned beneficially and of record by the Company, free and clear of all Encumbrances, and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock).

 

(c)    Except for (i) issued and outstanding Common Stock and Series F Preferred Stock referenced in Section 3.3(a)(i) and 3.3(a)(ii), (ii) 1,459,017 shares of Common Stock reserved for issuance upon exercise of Options granted under the Option Plans, (iii) 1,689,764 shares of Common Stock reserved for issuance upon exercise of the Warrants, (iv) shares reserved for issuance pursuant to the ESPP, and (v) as otherwise set forth in Section 3.3(c) of the Disclosure Schedule, at the time of execution of this Agreement, no shares of capital stock or other voting securities of the Company or any of its Subsidiaries are issued, reserved for issuance or outstanding. All outstanding shares of capital stock of the Company have been duly authorized, were validly issued, are fully paid and nonassessable and subject to no preemptive rights. Except for the Common Stock and Series F Preferred Stock, or as otherwise set forth in Section 3.3(c) of the Disclosure Schedule, there are no bonds, debentures, notes or other indebtedness or securities of the Company or any of its Subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company or such Subsidiary may vote. Except for the Options, Warrants, Restricted Stock and rights under the ESPP or as otherwise set forth in Section 3.3(c) of the Disclosure Schedule, there are no securities, options, warrants, calls, rights, commitments,

 

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agreements, arrangements or undertakings of any kind to which the Company or any of its Subsidiaries is a party relating to the issued or unissued capital stock of the Company or any Subsidiary or obligating the Company or any Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, the Company or any Subsidiary. Except for the Options, Warrants, Restricted Stock and rights under the ESPP or as otherwise set forth in Section 3.3(c) of the Disclosure Schedule, there are no securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the Company or any of its Subsidiaries is a party or by which any such Person is bound obligating such Person to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of such Person or obligating such Person to issue, grant, extend or enter into any such security, option, warrant, call right, commitment, agreement, arrangement or undertaking. Except as set forth in Section 3.3(c) of the Disclosure Schedule, there are no outstanding rights, commitments, agreements, arrangements or undertakings of any kind obligating the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock or other voting securities of the Company or any of its Subsidiaries or any securities of the type described in this Section 3.3(c).

 

SECTION 3.4     Conflicts; Consents . The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) assuming the Required Company Stockholders adopt this Agreement, conflict with or result in a breach of the certificates of incorporation, by-laws or other constitutive documents of the Company or any of its Subsidiaries, (ii) except as set forth in Section 3.4 of the Disclosure Schedule, conflict with, breach or result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the provisions of any note, bond, lease, mortgage, indenture, or any license, franchise, permit, agreement or other instrument or obligation to which any of the Company or its Subsidiaries is a party, or by which any such Person or its properties or assets are bound, (iii) violate any Laws applicable to the Company or any of its Subsidiaries or any such Person’s properties or assets or (iv) result in the creation or imposition of any Encumbrance upon any property or assets used or held by the Company or any of its Subsidiaries, except where the occurrence of any of the foregoing described in clauses (ii), (iii) or (iv) above, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect or prevent or materially delay the consummation of the Merger. Except for (1) the filing of a premerger notification and report form under the Hart-Scott-Rodino Act of 1976, as amended, and the rules and regulations promulgated thereunder (the “HSR Act” ) and the expiration or early termination of the applicable waiting period thereunder, (2) any filings as may be required under the DGCL or the Exchange Act in connection with the Merger and (3) such consents, approvals, notifications, registrations or filings the failure to obtain which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect or prevent or materially delay consummation of the Merger, no consent or approval by, or notification of or registration or filing with, any Governmental Entity is required in connection with the execution, delivery and performance by the Company of this Agreement or the consummation of the transactions contemplated hereby, except as set forth in Section 3.4 of the Disclosure Schedule.

 

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SECTION 3.5     Financial Information and SEC Reports; Undisclosed Liabilities .

 

(a)    The Company has previously made available to Buyer true and complete copies of all reports filed by the Company and its Subsidiaries with the Securities and Exchange Commission (the “SEC” ) since January 1, 2003 (collectively, the “Company SEC Reports” ). Each of the balance sheets (including the related notes) included in the Company SEC Reports presents fairly, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries as of the date thereof, and each of the other related financial statements (including the related notes) included in the Company SEC Reports presents fairly, in all material respects, the results of operations, changes in financial position and cash flows of the Company and its consolidated Subsidiaries for the period or as of the date set forth therein, all in conformity with GAAP consistently applied during the periods involved, except as otherwise noted therein and subject, in the case of the unaudited interim financial statements, to normal year-end adjustments, the absence of notes and any other adjustments described therein. Each Company SEC Report, as of its date (as amended through the date of this Agreement), (i) complied in all material respects with the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act” ) and the applicable rules and regulations promulgated thereunder and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading.

 

(b)    Except as set forth in Section 3.5(b) of the Disclosure Schedule, as reflected in the consolidated balance sheet of the Company and its Subsidiaries at June 30, 2005, which balance sheet was filed with the SEC by the Company on July 29, 2005 in its Quarterly Report on Form 10-Q and made available to Buyer, or as reflected in the Company SEC Reports filed since June 30, 2005, the Company and its Subsidiaries do not have, and as a result of the transactions contemplated by this Agreement, will not have, any liabilities or obligations (whether absolute, accrued, contingent or otherwise, and whether due or to become due), except for liabilities and obligations (i) incurred in the ordinary course of business consistent with past practice since June 30, 2005, (ii) which would not be required to be disclosed in an audited balance sheet (or disclosed in the notes thereto) that is prepared in accordance with GAAP, (iii) which are disclosed on any Schedule to this Agreement or (iv) which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.

 

(c)    To the knowledge of the Company, no material weaknesses exist with respect to the Company’s internal control over financial reporting that would be required to be disclosed pursuant to Item 308(a)(3) of Regulation S-K of the SEC that have not been disclosed in the Company SEC Reports filed prior to the date hereof.

 

SECTION 3.6     Disclosure Documents .

 

(a)    The Proxy Statement and any Other Filings, and any amendments or supplements thereto, that the Company is responsible for filing at (A) the time the Proxy Statement or such Other Filing (or any amendment thereof or supplement thereto) is first mailed to the Company’s stockholders, and (B) the time of the Company Stockholders’ Meeting, as

 

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applicable, will comply as to form in all material respects with the applicable requirements of the Exchange Act and other applicable Law.

 

(b)    None of the information supplied by the Company for use in the Proxy Statement, at (A) the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the Company’s stockholders, and (B) the time of the Company Stockholders’ Meeting, in each case, will contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. None of the information supplied by the Company for use in any Other Filing, at the time such Other Filing (or any amendment thereof or supplement thereto) is first mailed to the Company’s stockholders, will contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

 

(c)    The representations and warranties contained in this Section 3.6 will not apply to failure of the Proxy Statement or any Other Filing to comply as to form as a result of, or statements or omissions included in the Proxy Statement or any Other Filings based upon, information supplied in writing to the Company by Buyer or Merger Sub specifically for use therein.

 

SECTION 3.7     Absence of Changes . Except as set forth in Section 3.7 of the Disclosure Schedule, since June 30, 2005, the Company and its Subsidiaries have been operated in the ordinary course consistent with past practice and there has not been (i) any Company Material Adverse Effect or (ii) any action taken by the Company or its Subsidiaries that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of Section 5.1(b).

 

SECTION 3.8     Assets and Properties . Section 3.8 of the Disclosure Schedule sets forth a true and complete list of all real property owned or leased by the Company or any of its Subsidiaries. Except as set forth in Section 3.8 of the Disclosure Schedule, each of the Company and its Subsidiaries has good fee simple title to, or a valid leasehold interest in, as applicable, all of its owned or leased real property (including all rights, title, privileges and appurtenances pertaining or relating thereto) free and clear of any and all Encumbrances, except for defects in title or failures to be in full force and effect which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. Each of the Company and its Subsidiaries has good title to, or a valid leasehold interest in, as applicable, all personal property used in their respective businesses, except for defects in title or failures to be in full force and effect which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. Such personal property and the structural elements of the owned and leased property (taken as a whole) are in good operating condition and repair, ordinary wear and tear and deferred maintenance excepted, and except for such failures to be in good operating condition and repair which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.

 

SECTION 3.9     Other Agreements . Section 3.9 of the Disclosure Schedule is a true, correct and complete list, as of the date of this Agreement, of each written contract (other

 

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than purchase orders in the ordinary course of business), agreement, commitment or lease of the Company and its Subsidiaries currently in effect which by its terms is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC). True, correct and complete copies of all such documents have previously been made available to Buyer. All of such contracts, agreements, commitments and leases are in full force and effect, except where the failure to be in full force and effect, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, and all are enforceable against the Company or its applicable Subsidiary and, to the knowledge of the Company, the other parties thereto in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditor’s rights generally and by the application of general principles of equity. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any other party to such contracts, agreements, commitments and leases is in breach of or default under any obligation thereunder or has given notice of default to any other party thereunder and, to the knowledge of the Company, no condition exists that with notice or lapse of time would constitute a default thereunder, in each case which breach or default, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.

 

SECTION 3.10     Environmental Matters . Each of the Company and its Subsidiaries holds all licenses, permits and other governmental authorizations required under all applicable Environmental Laws, except for such licenses, permits and other governmental authorizations the failure to hold which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. None of the Company or any of its Subsidiaries is in violation of any requirements of any Environmental Laws in connection with the conduct of its business or in connection with the use, maintenance or operation of any real property owned or leased by the Company or any of its Subsidiaries, except for violations which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. To the Company’s knowledge, there are no conditions relating to the Company or any of its Subsidiaries or relating to any real property owned or leased by the Company or any of its Subsidiaries currently or during the last five years that in any such case would reasonably be expected to lead to any material liability of the Company or any of its Subsidiaries under any Environmental Law.

 

SECTION 3.11     Litigation . Except as set forth in Section 3.11 of the Disclosure Schedule, there are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Company, threatened by or before any court or other Governmental Entity against the Company or any of its Subsidiaries which bring into question the validity of this Agreement or, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect or prevent or materially delay consummation of the Merger. No injunction, writ, temporary restraining order, decree or any order of any nature has been issued by any court or other Governmental Entity seeking or purporting to enjoin or restrain the execution, delivery and performance by the Company of this Agreement or the consummation by the Company of the transactions contemplated hereby. Neither the Company nor any of its Subsidiaries has received any notice of any condemnation or eminent domain proceeding affecting any owned or leased real property, and, to the knowledge of the Company, no such action or proceeding has been threatened.

 

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SECTION 3.12     Compliance; Licenses and Permits .

 

(a)    Except as set forth in Section 3.12 of the Disclosure Schedule, each of the Company and its Subsidiaries is in compliance with all Laws applicable to the Company, any of its Subsidiaries or their respective businesses, except for failures to comply which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.

 

(b)    Each of the Company and its Subsidiaries holds all federal, state, local and foreign governmental licenses and permits that are necessary to conduct their respective businesses as presently being conducted, except for such licenses and permits the failure to hold which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. Except as set forth in Section 3.12 of the Disclosure Schedule and except for breaches, violations, revocations, limitations, non-renewals and failures to be in full force and effect which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, (i) such licenses and permits are in full force and effect, (ii) no material violations are or have been recorded in respect of any thereof, (iii) no proceeding is pending or, to the knowledge of the Company, threatened in writing, to revoke or limit any thereof and (iv) the consummation of the Merger and the transactions contemplated by this Agreement will not result in the non-renewal, revocation or termination of any such license or permit.

 

SECTION 3.13     Intellectual Property .

 

(a)    Except as set forth in Section 3.13 of the Disclosure Schedule or which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, each of the Company and its Subsidiaries owns all right, title and interest in or has licensed or otherwise has a valid and enforceable right to use all Intellectual Property used in the operation of their businesses, free and clear of any Lien or other adverse claims or interests and such Intellectual Property owned by the Company is valid and enforceable, without any qualification, limitation or restriction thereon or on the use thereof ( provided , however , no representation or warranty is made regarding the validity or enforceability of any Patent application).

 

(b)    Except as set forth in Section 3.13 of the Disclosure Schedule or which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, to the knowledge of the Company, no Intellectual Property presently owned, sold, licensed from or to third parties or used by the Company or any of its Subsidiaries, and no products, Software, processes, services or other technology or materials used, distributed, sold or offered by the Company or any of its Subsidiaries infringes upon, misappropriates or otherwise violates Intellectual Property owned by others.

 

(c)    Except as set forth in Section 3.13 of the Disclosure Schedule or which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, there is no pending or, to the knowledge of the Company, threatened (whether written, oral or otherwise) claim, action or proceeding against the Company or any of its Subsidiaries contesting or questioning the validity or enforceability of any Intellectual Property

 

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or the right of the Company or any of its Subsidiaries to own, sell, license or use any Intellectual Property presently owned, sold, licensed or used by the Company or any of its Subsidiaries or asserting that any other person has any claim of legal or beneficial ownership with respect thereto.

 

(d)    Except as set forth in Section 3.13 of the Disclosure Schedule, or which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, (i) the Company and its Subsidiaries have not taken any action or failed to take any action that would result in the abandonment, cancellation, forfeiture, relinquishment, invalidation or unenforceability of any of the Intellectual Property owned, sold, licensed or used by the Company or any of its Subsidiaries; (ii) the Company and its Subsidiaries have taken reasonable steps (based on standard industry practices) to protect and maintain the Company’s rights in and to such Intellectual Property; (iii) the Company and its Subsidiaries have paid all filing, examination, issuance, post registration, license, royalty and maintenance fees, annuities and the like associated with or required with respect to such Intellectual Property; (iv) neither the Company nor its Subsidiaries have disclosed, nor are under any obligation to disclose, to another person any Trade Secrets, except pursuant to an enforceable confidentiality and non-disclosure agreement, and, to the knowledge of the Company, no person has materially breached any such agreement; (v) except for source code escrow agreements that have not resulted in disclosure to the beneficiary of the escrow agreement, the source code owned by the Company and its Subsidiaries and the technical documentation associated therewith have not been licensed or otherwise provided to another person, have been safeguarded and protected as confidential and proprietary information of the Company; (vi) none of the Software developed by or for the Company or its Subsidiaries contains any Software that embodies, uses or is covered by Intellectual Property rights of another person, except for Software that was obtained by the Company or its Subsidiaries from another person who has expressly licensed the Company to utilize such Software in the manner it has been and is being utilized by the Company; (vii) the Intellectual Property rights presently licensed by the Company and its Subsidiaries shall be exercisable by the Surviving Corporation on and after the Closing to the same extent as by the Company prior to the Closing; and (viii) all officers and key managers, as well as other current employees responsible for the development of Intellectual Property as part of their position at the Company, except the Company’s sales and marketing personnel, have entered into enforceable confidentiality, invention assignment and proprietary information agreements with the Company.

 

(e)    Except as set forth in Sections 3.11 and 3.13 of the Disclosure Schedule, to the knowledge of the Company, no third party is misappropriating or infringing any material Intellectual Property owned by the Company or any of its Subsidiaries in any material respect.

 

(f)    As of the date hereof and except as set forth in Section 3.11 or Section 3.13 of the Disclosure Schedule, to the knowledge of the Company and except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, there is no pending written customer notification under the Company’s Pathways Services Agreement asserting that the Company is in breach of the Limited Warranty and Limitations on Liability clause in such agreement. The Company has taken all actions customary in the software industry to document the Software and its operations, such that the Software, including the source code and documentation, have been written in a professional

 

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manner so that it may be understood, modified and maintained in an efficient manner by reasonably competent programmers.

 

(g)    Section 3.13 sets forth an accurate and complete list of all registered Marks, Patents and all registered Copyrights, as well as all pending applications for registration of the foregoing, owned (in whole or in part) by the Company or any of its Subsidiaries.

 

SECTION 3.14     Tax Matters . Except as set forth in Section 3.14 of the Disclosure Schedule:

 

(a)    Each of the Company and its Subsidiaries has timely filed (taking into account applicable extensions) all material Tax Returns required to be filed by it and paid all Taxes shown to be due on such Tax Returns. All such Tax Returns are true, correct and complete in all material respects. The Company and each of its Subsidiaries has made adequate provision (or adequate provision has been made on its behalf), in accordance with GAAP, for all accrued Taxes not yet due.

 

(b)    The Company and its Subsidiaries have withheld and paid over all material Taxes required to have been withheld and paid over, and complied in all material respects with the rules and regulations relating to the withholding or remittance of Taxes.

 

(c)    None of the Company or any of its Subsidiaries has requested any extension of time within which to file any Tax Return, which Tax Return has not since been filed. There are no outstanding waivers or comparable consents that have been given by the Company or any of its Subsidiaries regarding the application of any statute of limitations with respect to any Taxes or Tax Returns of the Company or any such Subsidiary. There are no audits, administrative proceedings or court proceedings relating to Taxes or Tax Returns of the Company or any Subsidiary currently pending, or, to the knowledge of the Company, threatened in writing against the Company or any of its Subsidiaries. There are no material Liens on any assets of the Company or any Subsidiary with respect to Taxes, other than Liens for Taxes not yet due and payable or for Taxes that the Company or any of its Subsidiaries is contesting in good faith through appropriate proceedings. To the knowledge of the Company, no claim has been made by a taxing authority in a jurisdiction where the Company or any of its Subsidiaries has not filed a Tax Return that the Company or such Subsidiary is required to file a Tax Return in such jurisdiction.

 

(d)    Neither the Company nor any of its Subsidiaries has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company) or has any liability for the Taxes of any Person other than a member of the Company Group under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law) as a transferee or successor, by contract or otherwise. Neither the Company nor any of its Subsidiaries is a party to any Tax sharing or Tax indemnity agreement or any other agreement of a similar nature that remains in effect.

 

(e)    None of the Company or any of its Subsidiaries has engaged in a “reportable transaction” or “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b).

 

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SECTION 3.15     Labor Relations; Employees

 

(a)    Except as set forth in Section 3.15(a) of the Disclosure Schedule, as of the date hereof, to the knowledge of the Company: (i) the Company is in compliance in all material respects with all applicable Laws respecting employment and employment practices, terms and conditions of employment, wages, hours or work and occupational safety and health, and is not engaged in any act or practice which constitutes or would reasonably be expected to constitute an unfair labor practice as defined in the National Labor Relations Act or other applicable Laws, (ii) there is no unfair labor practice charge or complaint against the Company pending or threatened in writing before the National Labor Relations Board or any similar state or foreign agency, (iii) there is no labor strike, dispute, slowdown, stoppage or lockout pending, affecting or threatened in writing against the Company, (iv) the Company is not a party to or bound by any collective bargaining or similar agreement and (v) there are no union organizing activities among the employees of the Company.

 

(b)    Section 3.15(b) of the Disclosure Schedule contains a list of each written pension, profit-sharing or other retirement, bonus, employment or termination agreement, deferred compensation, stock option, stock appreciation, stock purchase, performance share, bonus or other incentive, severance or termination pay, health, and group insurance plan, program or arrangement, as well any other “employee benefit plan” (within the meaning of Section 3(3) of ERISA) that the Company and its Subsidiaries sponsor, maintain, or contribute to with respect to employees of the Company and its Subsidiaries, or with respect to which the Company or any Subsidiary has any liability (each such plan, program or arrangement being hereinafter referred to in this Agreement individually as a “ Plan ”).

 

(c)    The Company has made available to Buyer or Buyer’s counsel a true and complete copy of each Plan, all amendments thereto, the most recent IRS determination letter (if any), and the most recent annual report (if any) required to be filed in connection with such Plan.

 

(d)    Each Plan that is intended to be “qualified” within the meaning of Section 401(a) of the Code has received a favorable determination letter from the IRS that remains in effect on the date hereof. To the knowledge of the Company, no event has occurred since such favorable determination letter was issued that is reasonably likely to jeopardize the tax-qualified status of such Plan.

 

(e)    Except as set forth in Section 3.15(e) of the Disclosure Schedule, all contributions due with respect to any Plan that is subject to Title I of ERISA have been made as required under ERISA and, as June 30, 2005, have been accrued on the Company Financials, in accordance with GAAP (except as indicated in the notes thereto). The reserves reflected in the Company Financials for the obligations of the Company under all Plans were determined in accordance with GAAP .

 

(f)    No Plan is subject to the provisions of Section 412 of the Code, Part 3 of Subtitle B of Title I of ERISA, or Title IV of ERISA.

 

(g)    No Plan constitutes a “multiemployer plan” (within the meaning of Section 3(37) of ERISA), and, with respect to the Company, neither the Company nor any of its

 

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ERISA Affiliates has, in the past five years, contributed to or otherwise had any obligation or liability in connection with any multiemployer plan (within the meaning of Section 3(37) of ERISA).

 

(h)    Neither the Company nor any of its ERISA Affiliates has engaged in a “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA) that would reasonably be expected to have a Company Material Adverse Effect with respect to any Plan. To the knowledge of the Company, no “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA) that would reasonably be expected to have a Company Material Adverse Effect has occurred with respect to any Plan.

 

(i)    To the knowledge of the Company, each Plan has been operated substantially in accordance with its material terms and applicable Laws, and will continue to be so operated until the Effective Time.

 

(j)    Other than routine claims for benefits, to the knowledge of the Company, there are no actions, claims, lawsuits or arbitrations pending or threatened in writing with respect to any Plan.

 

(k)    Except as set forth in Section 3.15(k) of the Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not (A) result in any material payment becoming due to any employee of the Company, (B) materially increase any benefits otherwise payable under any Plan, or (C) result in the acceleration of time of payment or vesting of any such benefits to any material extent.

 

(l)    Except as set forth in Section 3.15(l) of the Disclosure Schedule, no Plan provides welfare benefits after termination of employment except to the extent required by applicable law.

 

(m)    Except as set forth on Section 3.15(m) of the Disclosure Schedule, no amount that could be received (whether in cash or property or the vesting of property) in connection with the consummation of the transactions contemplated by this Agreement by any employee, officer or director of the Company who is a “disqualified individual” (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any Plan could be characterized as an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code).

 

SECTION 3.16     Transactions with Related Parties . Except as set forth in Section 3.16 of the Disclosure Schedule, since January 1, 2005 and prior to the date hereof, no event has occurred that would be required to be reported as a Certain Relationship or Related Transaction pursuant to Item 404 of Regulation S-K promulgated by the SEC

 

SECTION 3.17     Brokers . Except for Credit Suisse First Boston LLC, no agent, broker, investment banker, person or firm acting on behalf of the Company or any of its Subsidiaries or under the authority of the Company or any of its Subsidiaries is or will be entitled to any broker’s or finder’s