AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

 

 

AGREEMENT AND PLAN OF MERGER

 

among:

 

G LOBAL H EALTHCARE E XCHANGE , LLC,

a Delaware limited liability company;

 

L EAPFROG M ERGER C ORPORATION ,

a Delaware corporation; and

 

N EOFORMA , I NC .,

a Delaware corporation

 

 

Dated as of October 10, 2005

 

 

 

i

 

ii

 

iii

 

iv

EXECUTION COPY

 

AGREEMENT AND PLAN OF MERGER

 

T HIS A GREEMENT AND P LAN OF M ERGER (“ Agreement ”) is made and entered into as of October 10, 2005, by and among: G LOBAL H EALTHCARE E XCHANGE , LLC , a Delaware limited liability company (“ Parent ”); L EAPFROG M ERGER C ORPORATION , a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”); and N EOFORMA , I NC . , a Delaware corporation (the “ Company ”). Certain capitalized terms used in this Agreement are defined in Exhibit A .

 

R ECITALS

 

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

 

B. The respective boards of directors of Merger Sub and the Company have approved this Agreement and the Merger and have deemed the Merger to be advisable and fair to, and in the best interests of their respective corporations and stockholders.

 

C. The board of directors of Parent has approved this Agreement and the Merger and have deemed the Merger to be advisable and in the best interests of Parent.

 

D.  The board of directors of the Company has established a special committee of independent directors (the “ Special Committee ”) to, among other things, consider and evaluate the fairness to the Company and its stockholders (other than VHA, UHC and their respective Affiliates and Associates) of the Merger and to report its recommendation concerning the Merger to the full board of directors of the Company.

 

E.  The Special Committee has received the written opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated (“ Merrill Lynch ”) that the Cash Consideration (as defined in Section 1.5(iii)) per share paid in the Merger to the Company stockholders (other than VHA and UHC) is fair, from a financial point of view to such stockholders, and has unanimously recommended that the board of directors of the Company approve and authorize this Agreement and the transactions contemplated hereby.

 

F.  The board of directors of the Company, based in part upon the recommendation of the Special Committee, has determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable and fair to, and in the best interests of, the Company’s stockholders other than VHA, UHC and their respective Affiliates and Associates.

 

G. In order to induce Parent to enter into this Agreement and cause the Merger to be consummated, VHA and UHC are executing, concurrently with the execution of this Agreement, (i) voting agreements in favor of Parent, each substantially in the form attached hereto as Exhibit B (the “ Significant Stockholder Voting Agreements ”) and (ii) exchange agreements, each substantially in the form attached hereto as Exhibit C (the “ Exchange Agreements ”) pursuant to which each of VHA and UHC shall exchange (the “ Share Exchanges ”), immediately prior to the Effective Time, such shares of Company Common Stock as specified therein for that number of membership interests of Parent specified therein.

H. The directors of the Company and the executive officers listed on Exhibit D are executing, concurrently with the execution of this Agreement, voting agreements in favor of Parent, each substantially in the form attached hereto as Exhibit E (the “ Management Stockholder Voting Agreements ” and, together with the Significant Stockholder Voting Agreements, the “ Company Stockholder Voting Agreements ”).

 

I. Concurrently with the execution of this Agreement, Parent, VHA, UHC, Novation, LLC and Healthcare Purchasing Partners International, LLC are entering into an Outsourcing Agreement (the “ New Outsourcing Agreement ”), such agreement subject to and to become effective upon the closing of the Merger.

 

A GREEMENT

 

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

 

Section 1. D ESCRIPTION OF T RANSACTION

 

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

 

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

 

1.3 Closing; Effective Time . The consummation of the Merger (the “ Closing ”) shall take place at the offices of Fenwick & West LLP, 275 Battery Street, San Francisco, California, on a date to be mutually agreed upon by Parent and the Company, which shall be no later than the second business day after the satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in Sections 6 and 7 (other than conditions that by their terms are to be satisfied on the Closing Date). The date on which the Closing actually takes place is referred to as the “ Closing Date .” Subject to the provisions of this Agreement, a certificate of merger that satisfies the applicable requirements of the DGCL shall be duly executed by the Company and concurrently with or as soon as practicable following the Closing shall be filed on the Closing Date with the Secretary of State of the State of Delaware. The Merger shall become effective at the time of the filing of such certificate of merger with the Secretary of State of the State of Delaware or at such later time as may be agreed by Parent and the Company and specified in such certificate of merger (the time as of which the Merger becomes effective being referred to as the “ Effective Time ”).

 

1.4 Certificate of Incorporation and Bylaws; Directors and Officers . At the Effective Time:

 

(a) except as provided in Section 5.5(a), the certificate of incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Corporation until amended in accordance with applicable Legal Requirements (as hereinafter defined);

 

2

(b) except as provided in Section 5.5(a), the bylaws of the Surviving Corporation shall be amended and restated as of the Effective Time to conform to the bylaws of Merger Sub as in effect immediately prior to the Effective Time;

 

(c) the directors and officers of the Surviving Corporation immediately after the Effective Time shall be the respective individuals who are directors and officers of Merger Sub immediately prior to the Effective Time.

 

1.5 Conversion of Shares .

 

(a) At the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company or any stockholder of the Company:

 

(i) any shares of Company Common Stock held by any wholly-owned Subsidiary of the Company (or held in the Company’s treasury) immediately prior to the Effective Time shall be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor;

 

(ii) any shares of Company Common Stock held by Parent, Merger Sub or any other wholly-owned Subsidiary of Parent immediately prior to the Effective Time shall be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor;

 

(iii) except as provided in clauses “(i)” and “(ii)” above and subject to Section 1.5(b), each share of Company Common Stock outstanding immediately prior to the Effective Time (including any shares of Company Common Stock issued upon exercise of Company Options or acquired under the Company ESPP before the Effective Time but excluding any Dissenting Shares) shall be converted into the right to receive $10.00 in cash, without interest (the “ Cash Consideration ”);

 

(iv) each outstanding and unexercised Company Option (including each unvested Company Option that is accelerated in full as contemplated by Section 5.3(a) of this Agreement) will be converted into the right to receive an amount in cash equal to the difference, if any, between (A) the Per Share Merger Consideration (as defined below) multiplied by the number of shares of Company Common Stock underlying such Company Option, and (B) the aggregate exercise price with respect to such Company Option (the “ Option Cash Consideration ”) and all rights outstanding under the Company ESPP shall be treated as set forth in Section 5.3(b) of this Agreement;

 

(v) each share of the common stock, $.01 par value per share, of Merger Sub outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation; and

 

3

(vi) each security (other than Company Options, which shall be treated in accordance with Section 1.5(a)(iv)) convertible into or exercisable or exchangeable for shares of Company Common Stock shall be, to the fullest extent permitted by applicable law, canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.

 

The amount of Per Share Merger Consideration or Option Cash Consideration each holder of shares of Company Common Stock or Company Options, as applicable, is entitled to receive for the shares of Company Common Stock or Company Options, as applicable, held by such holder shall be rounded down to the nearest cent and computed after aggregating the cash amounts payable for all shares of Company Common Stock or Company Options, as applicable, held by such holder. The per share Cash Consideration specified in Section 1.5(a)(iii) (as such per share Cash Consideration may be adjusted in accordance with Section 1.5(b)) is referred to as the “ Per Share Merger Consideration .”

 

(b) If, during the period from the date of this Agreement through the Effective Time, the outstanding shares of Company Common Stock are changed into a different number or class of shares by reason of any stock split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of shares, reclassification, recapitalization or other similar transaction, or if a stock dividend is declared by the Company during such period, or a record date with respect to any such event shall occur during such period, then the Per Share Merger Consideration shall be adjusted to the extent appropriate.

 

(c) If any shares of Company Common Stock outstanding immediately prior to the Effective Time are restricted, not fully vested or are subject to a repurchase option under any applicable restricted stock purchase agreement or other Contract with the Company or under which the Company has any rights (“ Unvested Company Shares ”), then such repurchase option shall lapse in full as of the Effective Time and all Unvested Company Shares will become fully vested and unrestricted.

 

(d) Notwithstanding anything contained herein to the contrary, any Dissenting Shares shall not be converted into the right to receive the cash amount provided for in Section 1.5(a), but shall instead be converted into the right to receive such consideration as may be determined to be due with respect to any such Dissenting Shares pursuant to the provisions of Section 262 of the DGCL. Each holder of Dissenting Shares who, pursuant to the provisions of Section 262 of the DGCL, becomes entitled to payment thereunder for such shares shall receive payment therefor in accordance with Section 262 of the DGCL (but only after the value therefor shall have been agreed upon or finally determined pursuant to such provisions). If, after the Effective Time, any Dissenting Shares shall waive, withdraw or lose their status as Dissenting Shares, then any such shares shall immediately be converted into the right to receive the cash payable pursuant to Section 1.5(a) in respect of such shares as if such shares never had been Dissenting Shares, and Parent shall issue and deliver to the holder thereof, as promptly as reasonably practicable following the satisfaction of the applicable conditions set forth in Section 1.7, the amount of Per Share Merger Consideration to which such holder would be entitled in respect thereof under Section 1.5(a) as if such shares never had been Dissenting Shares (and all such cash shall be deemed for all purposes of this Agreement to have become deliverable to such holder pursuant to Section 1.5(a)). The Company shall give Parent (i) prompt notice of any

 

4

demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to the applicable provisions of the DGCL and received by the Company, and (ii) the right to participate in all negotiations and proceedings with respect to demands for appraisal under the applicable provisions of the DGCL. The Company shall not, except with the prior written consent of Parent (which consent shall not be unreasonably withheld) or as otherwise required under the applicable provisions of the DGCL, voluntarily make any payment or offer to make any payment with respect to, or settle or offer to settle, any claim or demand in respect of any Dissenting Shares.

 

1.6 Payment Fund . On or prior to the Closing Date, Parent shall select a reputable bank or trust company reasonably acceptable to the Company (the “ Paying Agent ”) to act as paying agent hereunder for the purpose of distributing the Per Share Merger Consideration and the Option Cash Consideration. At or prior to the Effective Time, Parent shall deposit with the Paying Agent, in trust for the benefit of the holders of shares of Company Common Stock and Company Options outstanding immediately prior to the Effective Time, cash in an aggregate amount equal to (i) the product of the Per Share Merger Consideration and the number of shares of Company Common Stock issued and outstanding immediately prior to the Effective Time plus (ii) the aggregate Option Cash Consideration (the “ Payment Fund ”). The Payment Fund will be invested by the Paying Agent in direct obligations of the United States government having maturities of 90 days or less, money market funds that invest solely in direct obligations of the United States government, the Paying Agent’s FDIC insured money market account or similar investments (it being understood that any and all interest or income earned on funds made available to the Paying Agent pursuant to this Agreement shall be remitted to Parent).

 

1.7 Payment Procedures .

 

(a) As soon as practicable after the Effective Time (but in no event later than five (5) days following the Effective Time), Parent shall cause the Paying Agent to mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Company Common Stock (including Unvested Company Shares) (the “ Certificates ”): (i) a letter of transmittal as reasonably agreed by the parties prior to Closing which shall specify that delivery shall be effective, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent, and which letter shall be in customary form and have such other provisions as Parent and the Company shall reasonably agree prior to the Effective Time, and (ii) instructions for effecting the surrender of such Certificates in exchange for the Per Share Merger Consideration. Upon surrender of a Certificate to the Paying Agent (or receipt of an “agent’s message by the Paying Agent (or any other evidence of transfer that the Paying Agent may reasonably request) in the case of the transfer of Company Common Stock held in book-entry form) together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, the holder of such Certificate shall be entitled to receive in exchange therefor the applicable Per Share Merger Consideration, without interest, and the Certificate so surrendered shall forthwith be cancelled. Until surrendered as contemplated by this Section 1.7, each Certificate (other than Certificates representing Dissenting Shares) shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, equal to the Per Share Merger Consideration.

 

5

(b) As soon as reasonably practicable after the Effective Time (but in no event later than five (5) days following the Effective Time), the Surviving Corporation shall cause the Paying Agent to mail to each holder of Company Options: (i) a letter confirming that the vesting of each such Company Option has been accelerated and that the holder thereof is entitled to receive the Option Cash Consideration, and (ii) instructions for countersigning such letter and for receiving the Option Cash Consideration.

 

(c) No interest will be paid or will accrue on any Per Share Merger Consideration or Option Cash Consideration. In the event of a transfer of ownership of Company Common Stock which is not registered in the transfer records of the Company, the applicable Per Share Merger Consideration shall be payable to such transferee if the Certificate representing such Company Common Stock is presented to the Paying Agent, accompanied by all documents reasonably required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid.

 

1.8 Termination of Payment Fund . Any portion of the Payment Fund that remains undistributed to the holders of shares of Company Common Stock or Company Options on the first anniversary of the Effective Time shall be delivered to Parent, and any holders of shares of Company Common Stock or Company Options who have not theretofore been paid the Per Share Merger Consideration or Option Cash Consideration payable to such holder under this Section 1 shall thereafter look only to Parent for the Per Share Merger Consideration with respect to the shares of Company Common Stock formerly represented thereby or the Option Cash Consideration, as applicable, to which such holders are entitled pursuant to this Section 1 and Parent shall, upon the request of any such former stockholder or former holder of Company Options, promptly pay to such former stockholder of the Company or former holder of Company Options the Per Share Merger Consideration or Option Cash Consideration, as applicable, to which he, she or it is entitled. Any such portion of the Payment Fund remaining unclaimed by holders of shares of Company Common Stock or Company Options on the date that is five years after the Effective Time (or such earlier date immediately prior to such time as such amounts would otherwise escheat to or become property of any Governmental Body pursuant to applicable Legal Requirements) shall, to the extent permitted by applicable Legal Requirements, become the property of Parent free and clear of any claims or interest of any Person previously entitled thereto.

 

1.9 Closing of the Company’s Transfer Books . At the Effective Time: (a) all shares of Company Common Stock outstanding immediately prior to the Effective Time shall automatically be canceled and retired and shall cease to exist (in exchange for the right to receive the Per Share Merger Consideration, without interest), and all holders of certificates representing shares of Company Common Stock that were outstanding immediately prior to the Effective Time shall cease to have any rights as stockholders of the Company; and (b) the stock transfer books of the Company shall be closed with respect to all shares of Company Common Stock outstanding immediately prior to the Effective Time. No further transfer of any such shares of Company Common Stock shall be made on such stock transfer books after the Effective Time.

 

1.10 Lost Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by Parent, the posting by such person of a

 

6

bond in a reasonable amount and for a reasonable period of time as indemnity against any claim that may be made against Parent or the Surviving Corporation with respect to such Certificate, the Paying Agent will deliver in exchange for such lost, stolen or destroyed Certificate the applicable Per Share Merger Consideration, without interest, with respect to the shares of Company Common Stock formerly represented thereby.

 

1.11 No Liability . None of Parent, Merger Sub, the Company, the Surviving Corporation or the Paying Agent shall be liable to any Person in respect of any Per Share Merger Consideration or Option Cash Consideration from the Payment Fund delivered to a public official pursuant to and in full compliance with any applicable abandoned property, escheat or similar Legal Requirement.

 

1.12 Withholding Rights . Each of the Surviving Corporation, Parent and the Paying Agent shall be entitled to deduct and withhold from the Per Share Merger Consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock and the Option Cash Consideration payable pursuant to this Agreement to any holder of Company Options such amounts as it is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code, as amended (the “ Code ”), the rules and regulations promulgated thereunder or any applicable Legal Requirement. To the extent that amounts are so withheld by the Surviving Corporation, Parent or the Paying Agent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock or the Company Options in respect to which such deduction and withholding was made by the Surviving Corporation, Parent or the Paying Agent, as the case may be.

 

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

 

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

 

The Company represents and warrants to Parent and Merger Sub as follows, subject to: (a) the exceptions and disclosures set forth in the part or subpart of the Company Disclosure Schedule corresponding to the particular Section or subsection in this Section 2 in which such representation and warranty appears; (b) any exceptions or disclosures cross-referenced to another part or subpart of the Company Disclosure Schedule; and (c) any exception or disclosure set forth in any other part or subpart of the Company Disclosure Schedule to the extent it is reasonably apparent that such exception or disclosure qualifies such other representation or warranty:

 

2.1 Subsidiaries; Due Organization.

 

(a) Part 2.1(a) of the Company Disclosure Schedule identifies each Subsidiary of the Company and indicates its jurisdiction of organization. No Subsidiary of the

 

7

Company constitutes a “significant subsidiary” as such term is defined in Rule 1-02(w) of Regulation S-X. Neither the Company nor any of the Entities identified in Part 2.1(a) of the Company Disclosure Schedule owns any capital stock of, or any equity interest of any nature in, any other Entity, other than the Entities identified in Part 2.1(a) of the Company Disclosure Schedule. The Company has not agreed and is not obligated to make, nor or is it bound by any Contract under which it may become obligated to make, any future investment in or capital contribution to any other Entity. All of the outstanding shares of capital stock or other equity interests of each Subsidiary of the Company are owned by the Company, free and clear of all Encumbrances.

 

(b) The Company and each Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all necessary corporate power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own or lease and use its assets in the manner in which its assets are currently owned or leased and used; and (iii) to perform its obligations under all Contracts by which it is bound that are material to the Company and its Subsidiaries taken as a whole. The Company has made available to Parent complete and correct copies of the certificate of incorporation and bylaws of the Company and each of its Subsidiaries.

 

(c) The Company (in jurisdictions that recognize the following concepts) is qualified to do business as a foreign corporation, and is in good standing, under the laws of such jurisdictions where the nature of its business requires such qualification, except as would not reasonably be expected to have a Company Material Adverse Effect.

 

2.2 Capitalization, Etc.

 

(a) The authorized capital stock of the Company consists of: (i) 300,000,000 shares of Company Common Stock, of which 20,713,395 shares were issued and outstanding as of October 7, 2005; and (ii) 5,000,000 shares of Company Preferred Stock, of which no shares are issued or outstanding. As of October 7, 2005, (A) 2,750,664 shares of Company Common Stock were subject to issuance pursuant to outstanding Company Options issued pursuant to the Company Option Plans and (B) 71,236 shares of Company Common Stock were reserved for issuance in accordance with the Company ESPP. The Company does not hold any shares of its capital stock in its treasury. There are no outstanding stock appreciation rights, equity equivalents or phantom stock with respect to the capital stock of the Company.

 

(b) Part 2.2(b) of the Company Disclosure Schedule sets forth the following information with respect to each Company Option and warrant exercisable for capital stock of the Company outstanding as of the date of this Agreement: (i) the name of the optionee or warrantholder; (ii) the particular plan or agreement pursuant to which such Company Option or warrant exercisable for capital stock of the Company was granted; (iii) the number of shares of Company Common Stock subject to such Company Option or such warrant; and (iv) the exercise price of such Company Option or such warrant.

 

(c) All of the outstanding shares of Company Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable. None of the

 

8

outstanding shares of Company Common Stock is entitled or subject to any preemptive right, right of participation, right of maintenance or any similar right. None of the outstanding shares of Company Common Stock is subject to any right of first refusal in favor of the Company. Except as set forth in Part 2.2(c) of the Company Disclosure Schedule, there is no Company Contract currently in effect relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or granting any option or similar right with respect to), any shares of Company Common Stock. Except as set forth in Part 2.2(c) of the Company Disclosure Schedule, the Company is not under any obligation, nor is it bound by any Contract to repurchase, redeem or otherwise acquire any outstanding shares of Company Common Stock or other securities, except for the Company’s right to recover restricted shares of Company Common Stock held by a Company Employee upon termination of such Company Employee’s employment. Each share of Company Common Stock that may be issued pursuant to any Company Option Plan, when issued, upon the receipt of the consideration set forth in such Company Option Plan and related agreements, if applicable, will be duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. Except for options and shares granted pursuant to the Company Option Plans and the Company ESPP and as set forth in Parts 2.2(b) or 2.2(c) of the Company 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 of them is bound obligating the Company or any of its Subsidiaries to issue, deliver or sell or create, or cause to be issued, delivered or sold or created, additional shares of capital stock or other voting or equity securities or interests of the Company or of any Subsidiary or obligating the Company or any Subsidiary to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking or relating to the voting of capital stock or equity securities or interests of the Company or any Subsidiary.

 

2.3 SEC Filings; Financial Statements.

 

(a) As of the time it was filed with or furnished to the SEC: (i) each registration statement, proxy statement, report, schedule, form, certification and other document filed by the Company with, or furnished by the Company with or to, the SEC since January 1, 2004, including all amendments thereto (collectively, the “ Company SEC Documents ”), complied as to form, and all documents filed by the Company with, or furnished by the Company with or to, the SEC between the date of this Agreement and the date of Closing (the “ Interim SEC Documents ”) will comply as to form, in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be); and (ii) none of the Company SEC Documents contained or, in the case of the Interim SEC Documents, will contain any untrue statement of a material fact or omitted or, in the case of the Interim SEC Documents, will omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, except to the extent corrected: (A) in the case of Company SEC Documents filed or furnished on or prior to the date of this Agreement that were amended or superseded on or prior to the date of this Agreement, by the filing or furnishing of the applicable amending or superseding Company SEC Document; and (B) in the case of Interim SEC Documents that are amended or superseded prior to the Effective Time, by the filing or furnishing of the applicable amending or superseding Interim SEC Document. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by Parent or Merger Sub for inclusion in

 

9

any Interim SEC Document. All statements, reports, schedules, forms, certifications and other documents required to have been filed or furnished by the Company with or to the SEC since January 1, 2004 have been so filed or furnished.

 

(b) The financial statements (including any related notes) contained or incorporated by reference in the Company SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered (except as may be indicated in the notes to such financial statements or, in the case of unaudited financial statements, as permitted by Form 10-Q, Form 8-K or any successor form under the Exchange Act, and except that the unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments), and (iii) fairly presented in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows of the Company and its Subsidiaries for the periods covered thereby.

 

(c) Except for those liabilities that are reflected or reserved against on the Company Unaudited Balance Sheet (as defined in Section 2.5 of this Agreement) (including any notes thereto) and for liabilities incurred in the ordinary course of business consistent with past practice since June 30, 2005, neither the Company nor any of its Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due) that has had or is reasonably likely to have, either individually or in the aggregate, a Company Material Adverse Effect.

 

2.4 Absence of Changes. Except as set forth on Part 2.4 of the Company Disclosure Schedule, since June 30, 2005, the Company and its Subsidiaries have conducted their respective businesses in all material respects in the ordinary course consistent with past practice, and, without limiting the generality of the foregoing:

 

(a) there has not been any Company Material Adverse Effect;

 

(b) neither the Company nor any of its Subsidiaries has: (i) declared, accrued, set aside or paid any dividend or made any other distribution in respect of any shares of capital stock, other than (A) distributions of Company Common Stock issued upon the exercise of Company Options, (B) pursuant to the Company ESPP and (C) dividends by a wholly-owned Subsidiary of the Company; or (ii) repurchased, redeemed or otherwise reacquired any shares of its capital stock or other securities, other than pursuant to the Company’s right to repurchase restricted shares of Company Common Stock held by a Company Employee upon termination of such Company Employee’s employment;

 

(c) there has been no amendment to the certificate of incorporation or bylaws of the Company or any Subsidiary of the Company;

 

(d) neither the Company nor any of its Subsidiaries has written off as uncollectible, or established any extraordinary reserve with respect to, any material account receivable or other material indebtedness;

 

10

(e) neither the Company nor any of its Subsidiaries has made any pledge of any of its material assets or permitted any of its material assets to become subject to any Encumbrances

 

(f) neither the Company nor any of its Subsidiaries has lent money to any Person in excess of $10,000 in the aggregate (other than (1) routine travel and business expense advances and sales commissions draws made to Company Employees in the ordinary course of business and (2) routine deferred collections of withholding taxes from Company Employees who are not executive officers of the Company (as defined in Rule 3b-7 under the Exchange Act) in connection with the vesting of restricted shares issued under the Company Option Plans) or incurred, guaranteed, assumed or otherwise became responsible for any indebtedness in excess of $100,000 in the aggregate;

 

(g) neither the Company nor any of its Subsidiaries has changed any of its methods of accounting or accounting practices in any material respect, except as required by concurrent changes in GAAP or SEC rules and regulations;

 

(h) neither the Company nor any of its Subsidiaries has (i) made or changed any material Tax election, (ii) entered into any settlement or compromise of any material Tax liability or (iii) surrendered any right to claim a material Tax refund;

 

(i) neither the Company nor any of its Subsidiaries has prepared or filed any Tax Return inconsistent with past practice or, on any such Tax Return, taken any position, made any election, or adopted any method that is inconsistent with positions taken, elections made or methods used in preparing or filing similar Tax Returns in prior periods;

 

(j) neither the Company nor any of its Subsidiaries has settled or compromised any pending or threatened suit, action, claim, arbitration, mediation, inquiry, Legal Proceeding or investigation of or against the Company or any Subsidiary of the Company, unless in connection with such settlements or compromises (A) there was no finding or admission of any violation of any Legal Requirement or the rights of any Person and (B) the sole relief provided was monetary damages not in excess of $100,000 in the aggregate; and

 

(k) neither the Company nor any of its Subsidiaries has agreed or committed to take any of the actions referred to in clauses “(b)” through “(j)” above.

 

2.5 Title to Assets. The Company owns, and has good and valid title to, all material assets purported to be owned by it, including all material assets reflected on the balance sheet of the Company as of June 30, 2005 contained in the Company SEC Documents (the “ Company Unaudited Balance Sheet ”) (except for assets sold or otherwise disposed of since the date of the Company Unaudited Balance Sheet). All of said assets are owned by the Company free and clear of any Encumbrances, except for liens described in Part 2.5 of the Company Disclosure Schedule. The Company or its Subsidiaries are the lessees of, and hold valid leasehold interests in, all material assets purported to have been leased by them, including

 

11

all material assets reflected as leased on the Company Unaudited Balance Sheet (it being understood that the representations and warranties contained in this Section 2.5 do not apply to ownership of, or Encumbrances with respect to, Intellectual Property Rights, which matters are addressed solely in the representations and warranties set forth in Section 2.7). Except as would not be material to the Company and the Subsidiaries as a whole, the assets owned or leased by the Company or its Subsidiaries constitute all the assets used in the business of the Company and its Subsidiaries (including all books, records, computers and computer programs and data processing systems) and are in good condition (subject to normal wear and tear and immaterial impairments of value and damage) and are generally suitable for the uses for which they are used in the operation of the business of the Company and its Subsidiaries.

 

2.6 Real Property; Leasehold.

 

(a) Neither the Company nor any of its Subsidiaries own any real property.

 

(b) Part 2.6(b) of the Company Disclosure Schedule sets forth an accurate and complete list of each lease pursuant to which any real property is being leased to the Company or any of its Subsidiaries. (All real property leased to the Company or any of its Subsidiaries is referred to as the “ Leased Real Property ”).

 

(c) Part 2.6(c) of the Company Disclosure Schedule contains an accurate and complete list of all subleases, occupancy agreements and other Company Contracts: granting to any Person (other than the Company or any of its Subsidiaries) a right of use or occupancy of any of the Leased Real Property.

 

(d) Except as would not be material to the Company, the Company has the right to quiet enjoyment of all the real property described in the Company Disclosure Schedule of which it is the lessee for the full term of each such lease or similar agreement (and any related renewal option) relating thereto. The leasehold or other interest of the Company in such real property is not subject or subordinate to any Encumbrance.

 

2.7 Intellectual Property.

 

(a) The Company owns and has sole and exclusive right to use each material item of Company Owned IP free and clear of any Encumbrances, except: (i) non-exclusive licenses granted by the Company in connection with the sale or license of Company Products in the ordinary course of business; and (ii) as would not reasonably be expected to materially interfere with the use of such Company Owned IP as used in the ordinary course of business. Without limiting the generality of the foregoing:

 

(i) except as would not be material to the Company and its Subsidiaries taken as a whole, the Company has secured from each Company Associate or natural person who is or was an independent contractor or consultant of the Company, in each case who is or was involved in the creation or development of any Company Owned IP, an agreement containing: (A) an assignment of Intellectual Property Rights to the Company and (B) confidentiality provisions protecting the Company Owned IP that is maintained as confidential information of the Company and Subsidiaries;

 

12

(ii) to the knowledge of the Company, no Company Associate has any claim, right (whether or not currently exercisable) or interest to or in any Company Owned IP;

 

(iii) the Company has taken reasonable steps to maintain the confidentiality of and otherwise protect and enforce its rights in all material Know-How owned by it or any of its Subsidiaries, or purported to be owned by any of the Company or any of its Subsidiaries, as a trade secret; and

 

(iv) to the knowledge of the Company, the Company owns or otherwise has, and immediately after the Closing the Surviving Corporation will continue to have, all Intellectual Property Rights needed to conduct the business of the Company and its Subsidiaries as presently conducted.

 

(b) All Company Registered IP (except where the Company has elected not to maintain or continue the prosecution of any Company Registered IP) is subsisting and, to the knowledge of the Company, is valid and enforceable. Without limiting the generality of the foregoing (except where the Company has elected not to maintain or continue the prosecution of any Company Registered IP), to the knowledge of the Company, all filings, payments and other actions required to be made or taken by the Company or any of its Subsidiaries prior to and for ninety (90) days after the date of this Agreement to maintain each item of Company Registered IP have been made and taken.

 

(c) Neither the execution, delivery or performance of this Agreement nor the consummation of any of the Contemplated Transactions would reasonably be expected to, with or without notice or the lapse of time, and as a result of any Company Contract, result in or give any other Person the right or option to cause, create, impose or declare: (i) a loss of, or Encumbrance on, any Company IP; or (ii) the grant, assignment or transfer to any other Person of any license or other right or interest under, to or in any of the Company IP, except, in each case, as would not reasonably be expected to have a Company Material Adverse Effect.

 

(d) To the knowledge of the Company, no Person has infringed, misappropriated or otherwise violated, and no Person is infringing, misappropriating or otherwise violating, any Company Owned IP except as would not be material to the Company.

 

(e) To the knowledge of the Company, neither the Company nor any of its Subsidiaries has infringed, misappropriated or otherwise violated in any material respect any Intellectual Property Right of any other Person, except as would not be material to the Company and the Subsidiaries as a whole.

 

(f) Except as disclosed on Part 2.7(f) of the Company Disclosure Schedule, no Company Source Code has been licensed or made available by the Company to any escrow agent or other Person (other than Company Associates, independent contractors or consultants of the Company).

 

(g) Part 2.7(g) of the Company Disclosure Schedule sets forth a true, correct and complete list of all Company Registered IP.

 

13

2.8 Contracts .

 

(a) Subsections (i) through (xiii) of Part 2.8 of the Company Disclosure Schedule identifies each Company Contract that constitutes a Company Significant Contract as of the date of this Agreement. For purposes of this Agreement, each of the following shall be deemed to constitute a “ Company Significant Contract ”:

 

(i) any Contract constituting a Company Employment Agreement pursuant to which the Company or any of its Subsidiaries is or may become obligated to make any severance, termination, bonus or similar payment in excess of $50,000 to any Company Associate (except as may be required by applicable Legal Requirements and other than payments constituting base salary or commissions paid in the ordinary course of business);

 

(ii) except as set forth in Part 2.8 of the Company Disclosure Schedule, any Contract pursuant to which the Company is licensee or licensor (or sublicensee or sublicensor) of any material Company IP or any software license agreement (other than software license agreements for any third-party non-customized software that is generally available to the public at a cost of less than $50,000 or non-disclosure agreements entered into by the Company in the ordinary course of business);

 

(iii) any Contract relating to a partnership, joint venture or other similar arrangement or agreement involving a sharing of profits, losses, costs or liabilities;

 

(iv) any Contract with any vendor, distributor or other reseller or sales representative that explicitly provides exclusive rights to such third party;

 

(v) any Contract involving the payment of royalties or other amounts calculated based upon the revenues, income or similar measures of results of the Company or any of its Subsidiaries or based upon income, revenues, unit sales or similar measures of results related to any product or service of the Company or any of its Subsidiaries which, in any case, is reasonably likely to involve payments of more than $50,000 during the 12-month period commencing on the date of this Agreement;

 

(vi) any Contract that provides for: (A) reimbursement of any Company Associate for, or advancement to any Company Associate of, legal fees or other expenses associated with any Legal Proceeding or the defense thereof; or (B) indemnification of any Company Associate;

 

(vii) any Contract granting to any Person a right of first refusal or right of first offer on the sale of any part of the business of the Company or any of its Subsidiaries or imposing any restriction on the right or ability of the Company or any Affiliate to: (A) engage in any type or line of business or compete with any other Person; (B) acquire any product or other asset or any services from any other Person; (C) develop, sell, supply, distribute, offer, support or service any product or any technology or other asset to or for any other Person; or (D) transact business with any other Person;

 

14

(viii) any material Contract imposing any restriction on the right or ability of the Company or any Affiliate to: (A) solicit, hire or retain any Person as a director, an officer or other employee, a consultant or an independent contractor or (B) perform services for any other Person;

 

(ix) any Contract in effect as of the date hereof evidencing indebtedness of the Company or any of its Subsidiaries or guaranteeing the obligations of other Persons in excess of $50,000;

 

(x) any Contract relating to any currency hedging;

 

(xi) any Contract relating to the lease or sublease of Leased Real Property, other than leases or subleases that do not involve aggregate payments in excess of $100,000 over either the 12-month period commencing on the date of this Agreement or the 12-month period ending on the date of this Agreement;

 

(xii) any Contract constituting or relating to a Government Contract or Government Bid that contemplates or involves the payment or delivery of cash or other consideration in an amount or having a value in excess of $25,000 in the aggregate, or contemplates or involves the performance of services having a value in excess of $25,000 in the aggregate;

 

(xiii) any Contract (except for Company employment agreements or consulting agreements) that involves the payment or delivery of cash or other consideration from the Company or any of its Subsidiaries in an amount or having a value in excess of $50,000 in the fiscal year beginning January 1, 2005 or any fiscal year thereafter which is not terminable without penalty by the Company on less than 90 days’ notice; and

 

(xiv) any Contract that involves the payment or delivery of cash or other consideration to the Company or any of its Subsidiaries in an amount or having a value (A) in excess of $100,000 in the four fiscal quarters ending June 30, 2005 or (B) reasonably expected to be in excess of $100,000 in the four fiscal quarters commencing July 1, 2005.

 

The Company has delivered or made available to Parent an accurate and complete copy of each Company Contract that constitutes a Company Significant Contract.

 

(b) Each Company Significant Contract is (1) to the knowledge of the Company, a valid and binding obligation of the other parties thereto and (2) in full force and effect in all material respects.

 

(c) Except as set forth in Part 2.8(c) of the Company Disclosure Schedule: (i) the Company has not materially violated or materially breached, or committed any default under, any Company Significant Contract; (ii) to the knowledge of the Company, no other Person has materially violated or materially breached, or committed any default under, any Company Significant Contract; (iii) to the knowledge of the Company, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) would

 

15

reasonably be expected to: (A) result in a material violation or material breach of any Company Significant Contract; (B) give any Person the right to declare a default under any Company Significant Contract; (C) give any Person the right to receive or require a rebate, chargeback, penalty or any additional material rights under any Company Significant Contract; (D) give any Person the right to accelerate the maturity or performance of any Company Significant Contract; or (E) give any Person the right to cancel, terminate or modify in any material respect any Company Significant Contract; and (iv) since January 1, 2004, the Company has not received any written notice regarding any actual or possible material violation or material breach of, or default under, any Company Significant Contract.

 

2.9 Compliance with Legal Requirements .

 

(a) The Company is in compliance in all material respects with all applicable Legal Requirements. Since January 1, 2004, the Company has not received any written notice from any Governmental Body or other Person regarding any actual or possible violation in any material respect of, or failure to comply in any material respect with, any Legal Requirement.

 

(b) The Company has been and is in compliance in all material respects (i) since January 1, 2004, with the applicable listing and corporate governance rules and regulations of The NASDAQ Stock Market and (ii) since the enactment of the Sarbanes-Oxley Act, with the applicable provisions of the Sarbanes-Oxley Act at the time that such provisions became effective.

 

(c) The Company has designed and implemented disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to provide reasonable assurance that material information relating to the Company, including its consolidated Subsidiaries, is made known to the chief executive officer and the chief financial officer of the Company by others within those entities.

 

(d) The Company has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s auditors and the audit committee of the board of directors of the Company (i) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 

(e) To the knowledge of the Company, since January 1, 2004, the Company has not received any complaint, allegation, assertion or claim, in each case, in writing regarding any deficiency or irregularity in the accounting practices, procedures, methodologies or methods of the Company or its internal accounting controls other than ordinary course correspondence from the Company’s independent auditors in connection with its annual audit or quarterly review of the Company’s financial statements.

 

16

(f) To the knowledge of the Company, since the filing of its Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 through the date hereof, the Company has not identified any material weaknesses in the design or operation of internal control over financial reporting.

 

(g) There are no outstanding loans made by the Company or any of its Subsidiaries to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of the Company in material violation of the Sarbanes-Oxley Act.

 

2.10 Certain Business Practices . Neither the Company nor, to the knowledge of the Company, any Representative of the Company with respect to any matter relating to the Company or its Subsidiaries, has: (a) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; or (b) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or any rules or regulations promulgated thereunder.

 

2.11 Governmental Authorizations .

 

(a) The Company holds all material Governmental Authorizations necessary to enable the Company to conduct its business substantially in the manner in which its business is currently being conducted. All such Governmental Authorizations are valid and in full force and effect, except as would not be materially adverse to the Company and its Subsidiaries taken as a whole. Since January 1, 2004, the Company has not received any written notice from any Governmental Body regarding: (i) any actual or possible violation of or failure to comply with any term or requirement of any material Governmental Authorization; or (ii) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any material Governmental Authorization. To the knowledge of the Company, no event has occurred or condition or state of facts exists which constitutes or, after notice or lapse of time or both, would constitute a breach or default under any such Governmental Authorization that would affect in any material respect the ability of the Company to conduct business as currently conducted.

 

(b) The Company is in compliance in all material respects with all of the terms and requirements of each grant, incentive or subsidy provided or made available to or for the benefit of the Company by any U.S. federal, state or local Governmental Body or any foreign Governmental Body or otherwise. Neither the execution or delivery of this Agreement, nor the consummation of the Merger or any of the other Contemplated Transactions, with or without notice or lapse of time, gives any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify any such grant, incentive or subsidy, the effect of which would reasonably be expected to be material to the Company and its Subsidiaries taken as a whole.

 

2.12 Tax Matters .

 

(a) Each of the material Tax Returns required to be filed by or on behalf of the Company or any Subsidiary of the Company with any Governmental Body: (i) has

 

17

been filed on or before the applicable due date (including any extensions of such due date); (ii) has been prepared in all material respects in compliance with all applicable Legal Requirements and (iii) when filed, was complete and accurate and disclosed all Taxes required to be paid by the Company or any Subsidiary of the Company for the periods covered thereby. Each of the Tax Returns required to be filed by or on behalf of the Company or any Subsidiary of the Company with the United States or the States of California or Pennsylvania, to the extent related to income Taxes, has been examined by the appropriate Governmental Body or the period for assessment of the Taxes in respect of which each such Tax Return was required to be filed (taking into account all applicable extensions and waivers) has expired. All material Taxes (whether or not shown on any Tax Return) owed by the Company or any Subsidiary of the Company have been timely paid.

 

(b) The Company Unaudited Balance Sheet accrues all liabilities for all material Taxes of the Company or any Subsidiary of the Company with respect to all periods through the date thereof in accordance with GAAP, and no liabilities for material Taxes have been incurred since the date of the Company Unaudited Balance Sheet other than in the operation of the business of the Company or such Subsidiary in the ordinary course of business. The Company has established, in the ordinary course of business and consistent with its past practices, reserves adequate for the payment of all material Taxes of the Company or any Subsidiary of the Company since the date of the Company Unaudited Balance Sheet.

 

(c) To the knowledge of the Company, no material Tax Return of the Company or any Subsidiary of the Company is currently subject to an audit by any Governmental Body. No extension or waiver of the limitation period applicable to any material Tax Return of the Company or any Subsidiary of the Company has been granted by the Company or any Subsidiary of the Company, and no such extension or waiver has been requested from the Company or any subsidiary of the Company.

 

(d) No claim or Legal Proceeding is pending or, to the knowledge of the Company, proposed or threatened with respect to the Company or any Subsidiary of the Company in respect of any material Tax. There are no unsatisfied liabilities for material Taxes with respect to any notice of deficiency or similar document received by the Company or any Subsidiary of the Company with respect to any material Tax (other than liabilities for Taxes asserted under any such notice of deficiency or similar document which are being contested in good faith by the Company and with respect to which reserves for payment have been established on the Company Unaudited Balance Sheet). There are no liens for material Taxes upon any of the assets of the Company or any Subsidiary of the Company except liens for current Taxes not yet due and payable.

 

(e) There are no Contracts relating to allocating or sharing of Taxes to which the Company or any Subsidiary of the Company is a party. Neither the Company nor any Subsidiary of the Company (i) is liable for Taxes of any other Person (under Treas. Reg. §1.1502-6, as successor, as transferee or otherwise), (ii) is currently under any contractual obligation to indemnify any Person with respect to Taxes (except for customary agreements to indemnify lenders or security holders in respect of Taxes) or (iii) is a party to any Contract providing for payments by the Company or any Subsidiary of the Company with respect to any amount of Taxes of any other Person.

 

18

(f) Neither the Company nor any Subsidiary of the Company has constituted either a “distributing corporation” or a “controlled corporation” within the meaning of Section 355(a)(1)(A) of the Code within the past two years.

 

(g) Neither the Company nor any Subsidiary of the Company has been a member of any Company Group, other than a Company Group of which the Company is the common parent.

 

(h) All material Taxes which the Company or any Subsidiary of the Company are required by law to withhold or to collect for payment have been duly withheld and collected and have either been paid or accrued, reserved against and entered on the books of the Company.

 

(i) No transaction contemplated by this Agreement is subject to withholding under Section 1445 of the Code.

 

(j) As a direct or indirect result of the transactions contemplated by this Agreement, no payment or other benefit, and no acceleration of the vesting of any options, payments or other benefits, will be an “excess parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code and the Treasury Regulations thereunder.

 

(k) Neither the Company nor any Subsidiary of the Company has participated in any transaction that is the same as or substantially similar to one of the types of transactions that the Internal Revenue Service has identified (by notice, regulation, other form of published guidance or otherwise) as a “listed transaction” pursuant to Treasury Regulation § 1.6011-4(b)(2).

 

(l) No material item of income or gain of the Company or any Subsidiary of the Company has been deferred pursuant to Treasury Regulation §§ 1.1502-13 or -14, or any similar or predecessor Treasury Regulation, whether proposed, temporary or final.

 

(m) Neither the Company nor any Subsidiary of the Company is or has been required to pay Taxes to, or file Tax Returns in, a jurisdiction outside the United States and no written claim has ever been made by a Governmental Body in a jurisdiction outside the United States where the Company or any Subsidiary of the Company has never paid Taxes or filed Tax Returns asserting that the Company or such Subsidiary is or may be subject to Taxes assessed by such jurisdiction.

 

2.13 Employee and Labor Matters; Benefit Plans .

 

(a) To the knowledge of the Company, no Company Employee is a party to or is bound by any noncompetition agreement or other Contract (with any Person) that may have a material effect on the business or operations of the Company.

 

(b) As of the date of this Agreement, the Company is not a party to, nor does it have a duty to bargain for, any collective bargaining agreement or other Contract with a labor organization representing any Company Employee, and there are no labor organizations representing, purporting to represent or, to the knowledge of the Company, seeking to represent

 

19

any Company Employee. There is not now pending, and, to the knowledge of the Company, no Person has threatened in writing to commence, any strike, slowdown, work stoppage, lockout, job action, picketing, labor dispute, question regarding representation or union organizing activity or any similar activity. There is no material claim or grievance pending or, to the knowledge of the Company, threatened in writing relating to any employment Contract, wages and hours, plant closing notification, labor dispute, immigration or discrimination matters involving any Company Associate, including charges of unfair labor practices or harassment complaints.

 

(c) None of the current or former independent contractors of the Company or any of its Subsidiaries could reasonably be reclassified as an employee, except as would not have and would not reasonably be expected to have a Company Material Adverse Effect.

 

(d) As of the date of the Agreement, Part 2.13(d) of the Company Disclosure Schedule sets forth an accurate and complete list of each Company Employee Plan and each Company Employee Agreement: (i) involving obligations in excess of $100,000 per annum or (ii) that constitutes a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K promulgated by the SEC). Except as provided in this Agreement, the Company does not intend, nor has it committed, to establish or enter into any new Company Employee Plan or Company Employee Agreement, or to modify any Company Employee Plan or Company Employee Agreement (except (A) to the extent such new Company Employee Plan or Company Employee Agreement, or modification thereof would not (i) involve obligations in excess of $100,000 per annum or (ii) constitute a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K promulgated by the SEC) or (B) to conform any such Company Employee Plan or Company Employee Agreement to the requirements of any applicable Legal Requirements).

 

(e) The Company has delivered or made available to Parent accurate and complete copies of, as of the date of this Agreement: (i) documents setting forth the material terms of each Company Employee Plan, including all amendments thereto and all related trust documents; (ii) the most recent annual report (Form Series 5500 and all schedules and financial statements attached thereto), if any, required under applicable Legal Requirements in connection with each Company Employee Plan; (iii) if the Company Employee Plan is subject to the minimum funding standards of Section 302 of ERISA, the most recent annual and periodic accounting of Company Employee Plan assets, if any; (iv) the most recent summary plan description required under ERISA with respect to each Company Employee Plan; (v) all administrative service agreements and group insurance contracts; (vi) all material correspondence since January 1, 2004 to or from any Governmental Body relating to any Company Employee Plan; (vii) all discrimination tests required under the Code for each Company Employee Plan intended to be qualified under Section 401(a) of the Code for the most recent plan year; and (viii) the most recent IRS determination or opinion letter issued with respect to each Company Employee Plan intended to be qualified under Section 401(a) of the Code.

 

(f) Each of the Company and Company Affiliates has performed all obligations required to be performed by it under each Company Employee Plan, and each

 

20

Company Employee Plan has been established and maintained in accordance with its terms and in compliance with ERISA and, where applicable, the Code, except as would not reasonably be expected to result in a Company Material Adverse Effect. Any Company Employee Plan intended to be qualified under Section 401(a) of the Code has obtained a favorable determination letter (or opinion letter, if applicable) as to its qualified status under the Code and to the knowledge of the Company, no circumstance has occurred or exists which might cause such plan to cease being so qualified. To the knowledge of the Company, no “prohibited transaction,” within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred with respect to any Company Employee Plan. Each Company Employee Plan (other than any Company Employee Plan to be terminated prior to the Effective Time in accordance with this Agreement) can be amended, terminated or otherwise discontinued after the Closing in accordance with its terms, without material liability to Parent, the Company or any Company Affiliate (other than any liability for ordinary administration expenses). There are no audits or inquiries pending or, to the knowledge of the Company, threatened in writing by the IRS, the DOL or any other Governmental Body with respect to any Company Employee Plan. There is no pending or, to the knowledge of the Company, threatened claim in respect of any of the Company Employee Plans other than claims for benefits in the ordinary course of business. Neither the Company nor any Company Affiliate has ever incurred any material penalty or Tax with respect to any Company Employee Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.

 

(g) Neither the Company nor any Company Affiliate has ever maintained, established, sponsored, participated in or contributed to any: (i) Company Pension Plan subject to Title IV of ERISA; (ii) “multiemployer plan” within the meaning of Section (3)(37) of ERISA; or (iii) plan described in Section 413 of the Code. No Company Employee Plan is or has been funded by, associated with or related to a “voluntary employees’ beneficiary association” within the meaning of Section 501(c)(9) of the Code. Neither the Company nor any Company Affiliate has ever maintained, established, sponsored, participated in or contributed to any Company Pension Plan in which stock of the Company or any Company Affiliate is or was held as a plan asset. There are no material liabilities of the Company with respect to any Company Employee Plan that are not properly accrued and reflected in the financial statements of the Company in accordance with GAAP.

 

(h) Neither the Company nor any Company Affiliate maintains, sponsors or contributes to any Company Employee Plan that is an employee welfare benefit plan (as such term is defined in Section 3(1) of ERISA) and that is, in whole or in part, self-funded or self-insured. No Company Employee Plan provides (except at no cost to the Company or any Company Affiliate), or reflects or represents any liability of the Company or any Company Affiliate to provide, post-termination or retiree life insurance, post-termination or retiree health benefits or other post-termination or retiree employee welfare benefits to any Person for any reason, except as may be required by COBRA or other applicable Legal Requirements. Each of the Company and the Company Affiliates has complied with the health care continuation requirements of Part 6 of Title I of ERISA, except as would not reasonably be expected to result in a Company Material Adverse Effect.

 

(i) Except as expressly required or provided by this Agreement, neither the execution of this Agreement nor the consummation of the Contemplated Transactions

 

21

will or would reasonably be expected to (either alone or upon the occurrence of termination of employment) constitute an event under any Company Employee Plan, Company Employee Agreement, trust or loan that will or may result (either alone or in connection with any other circumstance or event) in any material payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Company Associate.

 

(j) Each of the Company and Company Affiliates: (i) is, and at all times has been, in compliance in all material respects with any Order or arbitration award of any court, arbitrator or any Governmental Body respecting employment, employment practices, terms and conditions of employment, wages, hours or other labor related matters; and (ii) is not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any Governmental Body with respect to unemployment compensation benefits, social security, social charges or other benefits or obligations for Company Associates (other than routine payments to be made in the normal course of business and consistent with past practice), except in each case as would not reasonably be expected to result in any liability that is material to the Company and its Subsidiaries taken as a whole.

 

(k) Except as set forth in Part 2.13(k) of the Company Disclosure Schedule, as of the date of this Agreement, there is no agreement, plan, arrangement or other Contract covering any Company Employee, that, considered individually or considered collectively with any other such Contracts or payments, will, or would reasonably be expected to, be characterized as a “parachute payment” within the meaning of Section 280G(b)(2) of the Code or give rise directly or indirectly to the payment of any amount that would not be deductible pursuant to Section 162(m) of the Code (or any comparable provision under state or foreign Tax laws). The Company is not a party and does not have any obligation under any Contract to compensate any Person for excise taxes payable pursuant to Section 4999 of the Code.

 

(l) The Company ESPP permits the Company to take the actions set forth in Section 5.3(b) without the approval or consent of any participant in the Company ESPP.

 

(m) The Company is in compliance in all material respects with the Workers Adjustment and Retraining Notification Act (“ WARN ”) and any similar state statute and has no liabilities pursuant to WARN or any similar state statute.

 

2.14 Transactions with Affiliates . Except as set forth in the Company SEC Documents filed prior to the date of this Agreement, as of the date of this Agreement, there are no transactions, agreements, arrangements or understandings between (i) the Company or any of its Subsidiaries, on the one hand, and (ii) any Affiliate of the Company or Company Associate (other than any of its Subsidiaries), on the other hand, of the type that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act.

 

2.15 Legal Proceedings; Orders .

 

(a) Except as set forth in the Company SEC Documents filed prior to the date hereof, there is no pending Legal Proceeding to which the Company or its Subsidiaries

 

22

is a party or, to the knowledge of the Company, to which any other Person is a party, and (ii) to the knowledge of the Company, no Governmental Body or other Person has threatened in writing to commence any Legal Proceeding to which the Company or its Subsidiaries is a party or was so threatened to become a party or, to the knowledge of the Company, to which any other Person is a party or was so threatened to become a party, in each case (1) that would reasonably be expected to have a Company Material Adverse Effect or (2) that challenges, or that seeks to prevent, delay, make illegal or otherwise materially interfere with, the Merger.

 

(b) There is no Order to which the Company, or any of the material assets owned or used by any the Company, is subject, except as would not reasonably be expected to have a Company Material Adverse Effect.

 

2.16 Authority . The Company has the corporate right, power and authority to enter into and to perform and, subject to obtaining the affirmative vote of the holders of a majority of the voting power of the shares of Company Common Stock outstanding on the record date for the Company Stockholders’ Meeting, consummate its obligations under this Agreement. The board of directors of the Company, based on the recommendation of the Special Committee (at a meeting duly called and held or acting by unanimous written consent), as of the date of this Agreement has: (a) determined that the Merger is advisable and fair to, and in the best interests of, the Company and its stockholders other than VHA, UHC and their respective Affiliates and Associates; (b) authorized and approved the execution, delivery and performance of this Agreement by the Company and approved the Merger; and (c) recommended the adoption of this Agreement by the holders of Company Common Stock and directed that this Agreement and the Merger be submitted for consideration by the Company’s stockholders at the Company Stockholders’ Meeting, which recommendation, as of the date hereof, has not been rescinded, modified or withdrawn in any way.

 

2.17 Non-Contravention; Consents . Assuming compliance with the applicable provisions of the Securities Act, the Exchange Act, the DGCL, state securities or “blue sky” laws, the HSR Act, any other Antitrust Laws (either foreign or domestic) and the rules and regulations of The NASDAQ Stock Market, except as set forth in Part 2.17 of the Company Disclosure Schedule, neither (1) the execution and delivery of this Agreement by the Company, nor (2) the consummation of the Merger or any of the other Contemplated Transactions, will or would reasonably be expected to, directly or indirectly (with or without notice or lapse of time):

 

(a) contravene, conflict with or result in a violation of any of the provisions of the certificate of incorporation or bylaws of the Company;

 

(b) contravene, conflict with or result in a violation of, any Legal Requirement or any Order to which the Company or any of its material assets is subject;

 

(c) contravene, conflict with or result in a material violation, a material breach or a default of, or forfeiture of any rights under, any of the terms or requirements of any Governmental Authorization that is held by the Company or that otherwise relates to the business of the Company as currently conducted;

 

23

(d) contravene, conflict with or result in a violation or breach of in any material respect, or result in a default under, any provision of any Company Significant Contract, or give any Person the right to: (i) declare a default or exercise any remedy under any such Company Significant Contract; (ii) a rebate, chargeback, penalty or change in delivery schedule under any such Company Significant Contract; (iii) accelerate the maturity or performance of any such Company Significant Contract; or (iv) cancel, terminate or modify any right, benefit, obligation or other term of such Company Significant Contract; or

 

(e) result in the imposition or creation of any Encumbrance upon or with respect to any asset owned or used by the Company,

 

except, in the case of clauses “(b),” “(c)” and “(e)” of this sentence, as would not reasonably be expected to have a Company Material Adverse Effect. Except: (A) as may be required by the Securities Act, the Exchange Act, the DGCL, the HSR Act, any foreign Antitrust Law and the rules and regulations of The NASDAQ Stock Market; and (B) as would not reasonably be expected to have a Company Material Adverse Effect, the Company was not, is not and will not be required to make any filing with or give any notice to, or to obtain any Consent from, any Person in connection with: (1) the execution, delivery or performance of this Agreement; or (2) the consummation of the Merger or any of the other Contemplated Transactions.

 

2.18 Information Supplied . The preliminary and definitive proxy statements to be filed by the Company with the SEC (including information incorporated by reference therein) (collectively, the “ Proxy Statement ”) shall not, on each relevant filing date, on the date of mailing to the Company’s stockholders and at the time of the Company Stockholders’ Meeting, and any other filings, schedules or materials required under the Exchange Act to be filed with the SEC in connection with obtaining the Required Company Stockholder Vote (as defined in Section 6.3) (each such filing, a “ Required Filing ”) shall not, as of the date thereof, the date of any amendment or supplement thereto and at the time of the Company Stockholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of t