Exhibit 2.1
ASSET PURCHASE
AGREEMENT
This Asset Purchase Agreement (this
“ Agreement ”) is made and entered into as of
July 29, 2008, by and between Aladdin Knowledge Systems Ltd.,
an Israeli Company (“ Buyer ”), on behalf of
itself and its wholly owned Subsidiary (“ Buyer Sub
”) and Secure Computing Corporation, a Delaware corporation
(“ Seller ”). Buyer and Seller are referred to
collectively herein as the “ Parties
”.
This Agreement contemplates a
transaction in which Buyer will purchase from Seller, and Seller
shall sell to Buyer, certain assets (and assume certain
liabilities) of the BU (as defined below) in consideration for
cash. The Board of Directors of each of Buyer and Seller has
approved and adopted this Agreement and the consummation of the
transactions contemplated hereby.
Concurrently with the execution of
this Agreement, Seller is entering into a Transition Services
Agreement with Buyer and the individual set forth on Schedule 1 is
entering into an employment agreement with Buyer or a Subsidiary of
Buyer (the “ Individual ”).
Now, therefore, in consideration of
the premises and the mutual promises herein made, and in
consideration of the representations, warranties, and covenants
herein contained, the Parties agree as follows.
1. BASIC TRANSACTION
.
1.1. Purchase and Sale of
Assets . On and subject to the terms and conditions of this
Agreement, at the Closing, Buyer shall purchase from Seller, and
Seller shall sell, transfer, convey, and deliver to Buyer, all of
the Acquired Assets (as defined below) and all right, title and
interest therein and thereto, free and clear of any Lien, for the
consideration specified below in this Section 1. Other than
the Acquired Assets and rights with respect to Overlapping IP and
Primarily Non-BU Contracts (as such terms are defined below) as
more specifically set forth in this Agreement, Buyer shall not
obtain any right, title or interest to any of Seller’s assets
or properties. Notwithstanding anything to the contrary contained
in this Agreement, Seller may retain copies of any Contract, books
and records and any other document or materials that may be
reasonably required to be maintained under the Applicable Law or
for the performance of Seller’s obligations pursuant to the
Transition Services Agreement, provided that Seller maintain such
items in confidence using such efforts as Seller uses to maintain
its own books and records confidential.
1.2. Assumption of
Liabilities . On and subject to the terms and conditions of
this Agreement, at the Closing, Buyer shall assume and fully pay,
discharge, satisfy, perform and become responsible for all of the
Assumed Liabilities (as defined below). Buyer will not assume, pay,
discharge, satisfy, perform or have any responsibility or become
liable with respect to any other Liability of Seller that is not an
Assumed Liability.
1.3. Purchase Price; Escrow
Amounts .
1.3.1. At the Closing, Buyer shall
pay Seller the sum of $64,250,000 less the Transaction Costs
(the “ Purchase Price ”) less the
Indemnity Escrow Amount less the Financial Statements Escrow
Amount, by way of wire transfer of immediately available funds to
Seller’s bank account in accordance with the wire transfer
instructions that will be provided by Seller to Buyer not later
than three (3) business days prior to the Closing.
1.3.2. At the Closing, Buyer shall
deposit with Wells Fargo Bank or such other escrow agent as shall
be mutually agreed-upon by Buyer and Seller (the “ Escrow
Agent ”) (i) an amount equal to the product of
twelve percent (12%) multiplied by the Purchase
Price (the “ Indemnity Escrow Amount ”) and
(ii) an amount equal to $1,000,000 (the “ Financial
Statements Escrow Amount ”). The Indemnity Escrow Amount
plus any interest accrued thereon will be available to satisfy any
amounts owed by Seller to Buyer under Section 7 of this
Agreement in accordance with the terms of the Escrow Agreement
attached hereto as Exhibit A (the “ Escrow
Agreement ”). The Financial Statements Escrow Amount plus
any interest accrued thereon shall be held (in a segregated
sub-account), in accordance with the terms of the Escrow Agreement,
pending the earlier to occur of (a) the delivery by Seller to
Buyer of the Post-Closing Financial Statements in accordance with
Section 5.5 below or (b) the Financials Delivery Date.
Subject to and in accordance with the terms of this Agreement and
the Escrow Agreement, if the Post Closing Financial Statements are
delivered by Seller to Buyer in accordance with Section 5.5
below on or prior to the Financials Delivery Date, then all of the
Financial Statements Escrow Amount shall be released by the Escrow
Agent to Seller in accordance with the terms of the Escrow
Agreement. If the Post-Closing Financial Statements are not
delivered by Seller to Buyer on or prior to the Financials Delivery
Date, all of the Financial Statements Escrow Amount shall be
released by Escrow Agent to Buyer in accordance with the terms of
the Escrow Agreement.
1.3.3. Transaction Costs
.
(a) No later than three
(3) business days prior to the Closing, Seller shall prepare
and deliver to Buyer the Closing Balance Sheet (as defined below)
accompanied by a certificate (the “ Transaction Costs
Certificate ”) that sets forth (i) the respective
amounts of all unpaid third party fees, costs or expenses incurred
or expected to be incurred by Seller in connection with the
preparation, negotiation, execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
(including any fees and expenses of legal counsel, financial
advisors, auditor, broker, or other advisors or consultants),
whether or not invoiced or billed prior to the Closing Date, which
Seller has designated as transaction costs to be paid by Buyer and
taken into account in determining the Purchase Price under
Section 1.3 (collectively, the “ Transaction
Costs ”), and (ii) the wire transfer instructions to
such third party recipients’ bank accounts.
(b) At the Closing, Buyer shall pay
to each of the third party recipients set forth in the Transaction
Costs Certificate the respective portion of Transactions Costs
payable thereto pursuant to the Transaction Costs Certificate, by
way of a wire transfer of immediately available funds to such
recipient’s bank account in accordance with the wire transfer
instructions set forth in the Transaction Costs Certificate. If the
full amount of the Transaction Costs are not
paid to such third parties or if any portion of
the Transaction Costs are refunded to Buyer, then Buyer shall,
within two (2) business days, wire such amounts to Seller, in
which case Buyer shall not be required to make any payment nor
shall it have any other Liability in connection with any portion of
the Transaction Costs which has been transferred to Seller as
aforesaid. Nothing contained in this Agreement shall confer upon
any third party any right with respect to such Transaction Costs or
any portion thereof, whether or not listed in the Transaction Costs
Certificate, with respect to such Transaction Costs (or any portion
thereof) or any compensation or other benefit in connection with
the transactions contemplated by this Agreement.
1.3.4. Taxes . Sales taxes,
transfer taxes, stamp taxes, conveyance taxes, mortgage taxes,
intangible taxes, documentary recording taxes, license and
registration fees, value added taxes and recording fees and other
such taxes, fees and charges imposed by any Governmental Entity
(including any penalties and interest), if any, imposed upon the
transfer of the Acquired Assets and Assumed Liabilities hereunder
and the filing of any instruments shall be paid one half by each of
Buyer and Seller.
1.4. Closing; Deliveries at
Closing .
1.4.1. The closing of the
transactions contemplated by this Agreement (the “
Closing ”) shall take place remotely via the exchange
of documents and signatures, commencing at 9:00 a.m. (U.S. Central
Daylight Time) on the business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take
at the Closing itself) or such other date or time as the Parties
may mutually determine (which time is designated as the “
Closing Date ”).
1.4.2. At the Closing,
(i) Seller will deliver to Buyer the various certificates,
instruments, and documents referred to in Section 6.1 below;
(ii) Buyer will deliver to Seller the various certificates,
instruments, and documents referred to in Section 6.2 below;
(iii) Seller will execute, acknowledge (if appropriate), and
deliver to Buyer (A) assignments (including Intellectual
Property transfer documents, deeds, bills of sale and any other
instrument necessary or appropriate to duly assign and transfer to
Buyer all Acquired Assets), in form and substance reasonably
acceptable to Buyer and Seller, and (B) such other instruments
of sale, transfer, conveyance, and assignment as Buyer and its
counsel may reasonably request; and (iv) Buyer and Seller will
execute and deliver an assignment and assumption agreement in form
and substance reasonably acceptable to Buyer and Seller and any
other documents of assumption reasonably requested by Buyer and
Seller.
1.5. Allocation .
1.5.1. Buyer shall prepare (with the
cooperation and assistance of Seller), through a reputable U.S.
national or international accounting firm, an allocation of the
Purchase Price (and all other capitalized costs) among the Acquired
Assets in accordance with Code Section 1060 and the Treasury
regulations thereunder (and any similar provision of state, local
or foreign law, as appropriate), to be attached to this Agreement
following the Closing as Exhibit B .
1.5.2. Buyer shall bear the expenses
of preparing such Purchase Price allocation. Buyer shall consult
with Seller in the preparation of such allocation with respect to
the content thereof. Seller shall timely and properly prepare,
execute, file and deliver all such documents, forms and other
information as Buyer may reasonably request to prepare such
allocation.
1.5.3. Buyer shall deliver a draft
of Exhibit B for Seller’s review as soon as
practicable following the Closing, but in any event prior to
November 11, 2008; provided , however , that the
portion of Exhibit B relating to the fixed assets that are
Acquired Assets shall be delivered to Seller no later than
September 30, 2008. The Parties shall finalize Exhibit
B as soon as practicable, but in any event no later than
June 1, 2009.
1.5.4. Buyer and Seller and their
Affiliates shall report, act, and file tax returns (including, but
not limited to Internal Revenue Service Form 8594) in all respects
and for all purposes consistent with such allocation prepared by
Buyer. Neither Buyer nor Seller shall take any position (whether in
audits, tax returns or otherwise) that is inconsistent with such
allocation unless required to do so by Applicable Law.
1.6. Non-Assignable Contracts
.
1.6.1. Notwithstanding anything in
this Agreement to the contrary, this Agreement shall not constitute
an agreement to assign any Non-Assignable Contract (as defined
below) or any claim, right or benefit arising thereunder or
resulting therefrom if the agreement to assign or attempt to
assign, without the consent or approval of a third party, would
constitute a breach thereof or in any way adversely affect the
rights of Seller or Buyer (assuming such assignment, as compared to
Seller’s rights thereunder) thereunder.
1.6.2. It is the intention of the
Parties that (i) all BU Contracts which are not Primarily
Non-BU Contracts shall be assigned by Seller to Buyer,
(ii) Seller and the parties to each BU Contract (other than
Seller) which is a Primarily BU Contract shall enter into a
Contract, on terms and conditions reasonably acceptable to Seller,
vesting in Seller all claims, rights, benefits and obligations
constituting, used by or relating to Seller’s activities
outside of the BU under the respective original Primarily BU
Contract with respect to the period thereafter (such Contracts
described in this clause (ii) and clause (iv) below, the
“ Overlapping Substitute Contracts ”);
(iii) all BU Contracts which are Primarily Non-BU Contracts
shall be amended by Seller, Buyer and the other parties thereto, in
a manner reasonably acceptable to Buyer, to vest in Buyer all
claims, rights, benefits and obligations to the extent such are
constituting, used by or relating to the BU or the Products under
the respective original Primarily Non-BU Contract (“
Primarily Non-BU Contract Amendments ”), and
(iv) Buyer and the parties to each BU Contract (other than
Seller) which is an Primarily Non-BU Contract shall enter into a
Contract, on terms and conditions reasonably acceptable to Buyer,
vesting in Buyer all claims, rights, benefits and obligations
constituting, used by or relating to the BU or the Products under
the respective original Primarily Non-BU Contract with respect to
the period thereafter.
1.6.3. For such purpose, following
the execution of this Agreement, Buyer and Seller shall use
commercially reasonable best efforts to obtain all Third Party
Consents, to execute and deliver all Primarily Non-BU Contract
Amendments applicable to the BU Contracts, and to pursue and
facilitate the execution and delivery of all Overlapping Substitute
Contracts by
Buyer and the other applicable parties thereto.
Subject to the limitations within the definition of commercially
reasonable best efforts, Seller agrees to incur any reasonable
costs associated with obtaining such Third Party
Consents.
1.6.4. If any of the transactions
contemplated by Section 1.6.2 above are not completed prior to
the Closing, then, after the Closing and until such transactions
are completed: (i) Seller shall continue to perform all of the
obligations pursuant to such BU Contacts; (ii) Seller shall
not be entitled to terminate any of the BU Contracts without
Buyer’s prior written consent; and (iii), each of Buyer and
Seller will use commercially reasonably best efforts to provide to
Buyer all of the claims, rights and benefits of any such BU
Contracts. The Parties shall mutually agree on the process for
approaching parties to the BU Contracts so that such BU Contracts
will either be assigned to Buyer or amended as set forth
above.
1.6.5. To the extent that Buyer is
provided the benefits pursuant to Section 1.6.4 above of any
BU Contract, Buyer shall perform for the benefit of the other
persons that are parties thereto the obligations of Seller
thereunder and pay, discharge and satisfy any related liabilities
that, but for the lack of an authorization, approval, consent or
waiver to assign such liabilities to Buyer, would be Assumed
Liabilities, in each case in accordance with the provisions of the
applicable BU Contract.
1.6.6. Once authorization, approval,
consent or waiver for the transfer of any such asset not
transferred at the Closing is obtained, Seller shall transfer such
asset to Buyer at no additional cost to Buyer.
1.6.7. Notwithstanding anything in
this Agreement to the contrary, the failure to obtain an
authorization, approval, consent or waiver and the failure to
transfer any Non-Assignable Contracts or to amend any Primarily
Non-BU Contract shall not constitute a breach of this Agreement by
Seller, so long as Seller has used commercially reasonable best
efforts to obtain each of the foregoing. In exercising its
commercially reasonable best efforts to effect any action under
this Agreement, Seller shall not be required to pay any
consideration or compromise any rights not otherwise required by
this Agreement to be compromised for any such authorization,
approval, consent or waiver, other than filing, recordation or
similar fees, which shall be reimbursed by the Buyer. Except as set
forth in this Section 1.6, Buyer agrees that Seller and its
Affiliates shall not have any liability whatsoever (including any
liability under Section 7) to Buyer or its Affiliates arising
out of or relating to the failure to obtain any such
authorizations, approvals or consents that may be required in
connection with the actions set forth in this
Section 1.6.
1.7. Continued Employment
.
1.7.1. The Parties agree that the
continued services to Buyer after the Closing of certain employees
is a material factor in determining the valuation of the Acquired
Assets by Buyer.
(a) After execution of this
Agreement, but prior to the Closing, Buyer (or a Subsidiary of
Buyer) will make offers of employment on an “at will”
basis on terms reasonably determined by Buyer (or a Subsidiary of
Buyer) to be attractive to such employees
and consistent with this Agreement to commence
as of the Closing, including participation in equity and other
incentive compensation plans in accordance with Buyer’s
standard hiring and employment practices for similarly situated
employees, to the following employees:
(i) the key employees listed on
Schedule 1.7.1(a)(i) (the “ Key Employees
”);
(ii) subject to Section 5.9,
the sales employees listed on Schedule 1.7.1(a)(ii) (the “
Sales Employees ”); and
(iii) subject to Section 5.9,
the employees based in Seller’s Concord, CA facility who are
listed on Schedule 1.7.1(a)(iii) (the “ Other Concord
Employees ” and, together with the Individual, the Sales
Employees and the Key Employees, the “ Designated
Employees ”).
(b) Seller agrees to provide Buyer
with reasonable access to the Designated Employees during normal
working hours following the date of this Agreement to, among other
things, deliver offers of employment and to provide information to
the Designated Employees about Buyer. Seller shall use its
commercially reasonable best efforts to encourage the Designated
Employees to continue their employment with Seller until Closing
and thereupon to accept and retain employment with Buyer (or a
Subsidiary of Buyer), to effect the orderly transfer of such
employees to Buyer (or a Subsidiary of Buyer) along with all
personnel records for the Assumed Employees. For purposes hereof, a
Designated Employee shall only be deemed to have accepted
Buyer’s (or a Subsidiary of Buyer’s) offer of
employment if such individual executes and delivers to Buyer (or a
Subsidiary of Buyer) a written instrument, in form and substance
reasonably acceptable to Buyer, including Buyer’s form of
confidentiality, non-compete and invention assignment agreement,
accepting the offer of employment made to such person as approved
by Buyer, to be effective at the Closing Date and agreed in writing
to terminate such employee’s existing employment agreement
with Seller (to the extent terminable unilaterally by such
employee), and such agreements shall be in full force and effect as
of the Closing (an “ Assumed Employee
”).
(c) In addition to the covenants in
Section 5.7, Seller agrees that it will not employ or attempt
to hire or employ the Assumed Employees in any manner (i.e., as an
employee or independent contractor) immediately following the
Closing unless terminated by Buyer. Subject to Section 5.7,
Seller further agrees that it will not make any attempt to solicit
or encourage any of the Assumed Employees to terminate their
employment with Buyer (or a Subsidiary of Buyer). Buyer agrees that
Seller is permitted to provide any notices required to be sent to
the Designated Employees under Applicable Law. Seller will bear all
Liabilities arising, whether before or after the Closing Date,
related to the Assumed Employees to the extent such Liabilities
relate to such Assumed Employees’ employment with Seller.
Buyer will bear all Liabilities arising after the Closing Date
related to the Assumed Employees hired by Buyer (or a Subsidiary of
Buyer) to the extent such Liabilities relate to such Assumed
Employees’ employment with Buyer (or a Subsidiary of
Buyer).
(d) The Assumed Employees shall be
eligible to receive a closing bonus from Seller payable in the
amounts set forth in Schedule 1.7.1(d).
(e) The Assumed Employees shall be
eligible to receive retention payments in the amounts and in the
manner set forth in Section 1.7.2 below.
1.7.2. Retention
Amount
(a) Buyer (or a Subsidiary of Buyer)
shall pay to each of the Assumed Employees, subject to reduction
pursuant to Section 1.7.2(b) below or acceleration pursuant to
Section 1.7.2(c) below, a retention bonus in the amount set
forth opposite the name of such Assumed Employee on Schedule 1.7
attached hereto (the “ Retention Amount ”) as
follows:
(i) in the case of the Individual,
an amount equal to six (6) months of such Individual’s
base salary on the first year anniversary of the Closing
Date;
(ii) in the case of a Key Employee,
an amount equal to five (5) months of such Key
Employee’s base salary on the first year anniversary of the
Closing Date;
(iii) in the case of an Other
Concord Employee, an amount equal to two (2) months of such
Other Concord Employee’s salary on the six (6) month
anniversary of the Closing Date; or
(iv) in the case of a Sales
Employee, an amount equal to one (1) month of such Sales
Employee’s base salary on the six (6) month anniversary
of the Closing Date.
(b) Subject to Section 1.7.2(c)
below, each Retention Amount shall be paid to the respective
Assumed Employee on the applicable anniversary of the Closing Date
as contemplated by Section 1.7.2 only if such Assumed Employee
remains employed by Buyer (or a Subsidiary of Buyer) as of such
anniversary, and the Assumed Employee shall not be entitled to any
portion of the Retention Amount otherwise due and payable with
respect to any period after the date that the Assumed
Employee’s employment with Buyer (or a Subsidiary of Buyer)
terminates. Any portion of the Retention Amount which is not paid
to any Assumed Employee pursuant to this Section 1.7.2(b) or
Section 1.7.2(c) shall not be payable, Buyer shall have no
obligation to pay such amount, and neither Seller nor any other
Assumed Employee nor other party shall have any right to such
amount.
(c) Notwithstanding
Section 1.7.2(b) above, if any Assumed Employee’s
employment with Buyer (or a Subsidiary of Buyer) is terminated by
Buyer other than for Cause, such Assumed Employee shall be entitled
to receive a portion of the respective Retention Amount otherwise
payable to such Assumed Employee in accordance with
Section 1.7.2(a) above, in an amount equal to the product of
(A) such Retention Amount, multiplied by (B) the quotient
yielded by dividing (1) the number of whole months elapsed
between the Closing Date and the date of termination of such
Assumed Employee’s employment, by (2) twelve
(12) months in the case of the Individual or a Key Employee,
or six (6) months in the case of an Other Concord Employee or
Sales Employee, and the Assumed Employee shall not be entitled to
any other portion of the Retention Amount otherwise payable to the
Assumed Employee after such termination date. If any Assumed
Employee’s employment with Buyer (or a Subsidiary of Buyer)
is terminated by Buyer (or such Subsidiary of Buyer) for Cause,
such Assumed Employee shall not be entitled to receive any portion
of the respective Retention
Amount. As used herein, “ Cause
” means a termination of Assumed Employee’s employment
by the employer for any of the following reasons, as determined by
the employer in its reasonable discretion: (A) neglect or
failure or refusal of Designated Employee to perform his or her
duties, which is not cured within 10 business days after notice
thereof, (B) the Assumed Employee’s gross negligence in
connection with his or her employment, (C) the Assumed
Employee’s engaging in gross misconduct, (D) the Assumed
Employee’s being convicted of, or pleading guilty or no
contest to, a crime or serious offence, including any indictable
offence, (E) the Assumed Employee’s committing an act of
fraud against, or the misappropriation of property belonging to,
Buyer or any of its direct or indirect Affiliates, or (F) a
breach by the Assumed Employee of any confidentiality or
proprietary information agreement regarding Buyer or any of its
direct or indirect Affiliates.
1.7.3. No Third Party Beneficiary
Rights . Nothing contained in this Agreement shall confer upon
any Assumed Employee any right with respect to continuance of
employment with Buyer (or a Subsidiary of Buyer) after the Closing,
nor shall anything herein interfere with the right of Buyer to
terminate the employment of any Assumed Employee for any reason or
no reason at any time, with or without Cause and with or without
notice. No provision of this Agreement shall create any third party
beneficiary rights in any Assumed Employee, or any beneficiary or
dependents thereof, with respect to the compensation, terms and
conditions of employment and benefits that may be provided to any
Assumed Employee by Buyer (or a Subsidiary of Buyer) or under any
Employee Benefit Plan which Buyer (or a Subsidiary of Buyer) may
maintain.
1.8. Certain Definitions .
For purposes of this Agreement, the term:
“ Acquired Assets
” means all right, title, and interest in and to all of the
assets constituting, used by or relating to BU or the Products,
including without limitation all of its:
(a) BU Intellectual Property and
Software, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder
(including rights to prepare, reproduce and distribute copies,
compilations and derivative works), remedies against infringements
thereof, and rights to protection of interests therein under the
laws of all jurisdictions,
(b) Confidential Information,
technical, processing, manufacturing or marketing information,
including new developments, inventions, know-how, processes, ideas
and trade secrets and documentation thereof (including related
papers, blueprints, drawings, notebooks, specifications, designs,
schematics, program specifications, charts, procedures,
architecture, structure, object codes, input data, diagnostic and
other routines, data bases and report layouts and formats, record
file layouts, diagrams, functional specifications and narrative
descriptions and flow charts, display screens, layouts and
development tools), information systems, programs, software and
documentation thereof (including all electronic data processing
systems, program specifications, source codes, logs, input data and
report layouts and formats, record file layouts, diagrams,
functional specifications and narrative descriptions, flow charts
and other related material) which are used or intended to be used
by BU) and all claims and rights related thereto,
(c) the Product(s), Products
code(s), algorithm and user manuals, data sheets, marketing and
promotional material, and other documentation (both in written and
electronic form) relating to the Product(s), including any and all
Intellectual Property evidenced by or embodied therein and
Confidential Information relating thereto,
(d) the Concord Lease (as defined
below), if assigned pursuant to the terms set forth
herein,
(e) tangible personal property (such
as machinery, equipment, inventories of raw materials and supplies,
manufactured and purchased parts, goods in process and finished
goods, furniture, automobiles, trucks, tractors, trailers, tools,
jigs, and dies, molds, patterns, machinery and equipment, whether
owned or leased, whether in the possession of Seller or
vendors),
(f) Primary Contracts and, subject
to the terms of this Agreement, the Primarily BU Contracts and the
rights pursuant to Primarily Non-BU Contracts,
(g) rights under Seller’s or
any of its Subsidiaries’ agreements with Assigned Employees
or service providers concerning confidentiality, non competition
and the assignment of inventions to the extent applicable to the
Acquired Assets or BU,
(h) customer files, all lists of
customers, suppliers and vendors, all rights and claims under sales
or license Contracts, customer, distributor, OEM or VAR orders,
service agreements, purchase orders, dealer, distributorship, OEM,
VAR or reseller agreements and other similar commitments pertaining
solely to BU,
(i) prepaid expenses, deferred
charges and cash advanced by customers of BU and rights to volume
rebates due from suppliers,
(j) office furnishings, display
racks, shelves, decorations, equipment, telephone and telecopy
numbers, fixtures and supplies,
(k) claims, deposits, pre-payments,
refunds, causes of action, choses in action, rights of recovery,
rights of set-off, and rights of recoupment (including any such
item relating to the payment of taxes),
(l) Permits (to the extent
assignable), and
(m) books, records, ledgers, files,
documents, correspondence, lists, plats, drawings, and
specifications, creative materials, advertising and promotional
materials, studies, reports, and other printed or written
materials;
provided , however , that the Acquired Assets
shall not include (i) Cash, notes, and accounts receivable,
(ii) any of the rights of Seller under this Agreement (or
under any other agreement between Seller on the one hand and Buyer
or any of its Affiliates on the other hand entered into on or after
the date of this Agreement), or (iii) any title or interest
in, or rights to (other than pursuant to Section 5.6) the
Overlapping IP.
“ Affiliate ”
means, as applied to any party, (i) any other Person directly
or indirectly controlling, controlled by or under common control
with, that party, (ii) any other Person that owns or controls
twenty-five percent (25%) or more of any class of equity
interest (including any equity interest issuable upon the exercise
of any option) of that party, or (iii) any member, partner or
executive officer of such party. For the purposes of this
definition, “control” (including with correlative
meanings, the terms “controlling”, “controlled
by” and “under common control with”), as applied
to any party, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of that party, whether through ownership of voting equity
interests, by contract or otherwise.
“ Applicable Law
” means, with respect to any person, any domestic or
non-U.S., federal, state or local statute, law, ordinance, rule,
regulation, order, writ, injunction, judgment, decree or other
requirement of any Governmental Entity existing as of the date
hereof or as of the Closing applicable to such person or any of its
respective properties, assets, officers, directors, employees,
consultants or agents.
“ Assumed Liabilities
” all obligations of BU (but only to the extent they are
specifically set forth on Schedule 1.2 hereto) under the Primary
Contracts actually assigned to Seller at Closing, under the
Primarily BU Contracts upon their assignment to Buyer, whether at
or following the Closing, and under the Primarily Non-BU Contracts
upon their amendment as contemplated by Section 1.6.2, whether
at or following the Closing (i) to furnish goods, services,
and other non-Cash benefits to another party after the Closing in
the Ordinary Course of Business, (ii) to pay for goods,
services, and other non-Cash benefits that another party will
furnish to it after the Closing in the Ordinary Course of Business
and (iii) otherwise perform under the terms of such Contracts
with respect to all periods following the Closing. Anything in this
Agreement to the contrary notwithstanding, the Assumed Liabilities
shall not include (i) any Liability of Seller for taxes (with
respect to BU or otherwise), (ii) any Liability of Seller for
any income, transfer, sales, use, and other taxes arising in
connection with the consummation of the transactions contemplated
hereby, (iii) any Liability of Seller for the unpaid taxes of
any Person under Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract or otherwise, (iv) any obligation of
Seller to indemnify any Person (including any of Seller
stockholders) by reason of the fact that such Person was a
director, officer, employee, or agent of Seller or any of its
Subsidiaries or was serving at the request of any such entity as a
partner, trustee, director, officer, employee, or agent of another
entity (whether such indemnification is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses,
expenses, or otherwise and whether such indemnification is pursuant
to any statute, charter document, bylaw, agreement, or otherwise),
(v) any Liability of Seller for costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby in excess of the Transactions Costs set forth in the
Transaction Costs Certificate, (vi) any Liability of Seller
with respect to any litigation or claim outstanding or threatened
as of the Closing, (vii) any Liability of Seller arising out
of transactions, commitments, infringements, acts or omissions by
or on behalf of Seller or BU prior to the Closing (other than,
after the Closing, obligations to perform under the BU Contracts,
including without limitation, warranties, as set forth in the first
Sentence of this definition), (viii) any Liability due to
Products sold or services rendered by Seller or BU or any of their
predecessors or Affiliates at or prior to the Closing with respect
to any claim of infringement of a third-party’s Intellectual
Property; (ix) any Liability of Seller arising from or in
connection with any
administrative ruling or other order,
stipulation or decree of any state or local agency, or the
violation of any state or local act, statute, rule or regulation,
decree or ordinance, (x) any Liability of Seller relating to
Indebtedness or Guarantees, (xi) any Liability arising from or
relating to any agreement referred to in Section 1.6.1 below
which is not assignable to Buyer without the consent of another
party and to which assignment such other party’s consent has
not been obtained and no other arrangements have been made to
provide Buyer with the full benefits intended to be assigned to
Buyer under such agreements; (xii) any Liability attributable
to any assets, properties, rights or interests which are not
included in the Acquired Assets; or (xiii) any Liability or
obligation of Seller under this Agreement (or under any side
agreement between Seller on the one hand and Buyer on the other
hand entered into on or after the date of this
Agreement).
“ BU ” means
Seller’s identity and access management product line and
related business and operations.
“ BU Intellectual
Property ” means Intellectual Property: (i) related
to, connected with or required for the operation (including,
research, development, sales marketing and distribution) of the BU
as conducted and as presently proposed to be conducted; or
(ii) which is embodied in, or evidenced by, any of the
Products or which any of the Products utilize, based upon or driven
from (or, with respect to Products currently under development,
that is expected to embody, utilize, or be based upon or derived
from), other than, in the case of either clause (i) or
(ii) above, the Overlapping Intellectual Property.
“ Cash ” means
cash and cash equivalents (including marketable securities and
short-term investments) calculated in accordance with GAAP applied
on a basis consistent with the preparation of the Financial
Statements.
“ Code ” means
the Internal Revenue Code of 1986, as amended.
“ Confidential
Information ” means any information concerning the
business and affairs of BU that is not already generally available
to the public.
“ Contract ”
means any loan or credit agreement, bond, debenture, note,
mortgage, indenture, Guarantee, lease, purchase order, sale order,
or other claim, contract, commitment, agreement, instrument,
arrangement, understanding, obligation or undertaking, whether oral
or written (in each case, including all amendments
thereto).
“ Damages ” of
any Person shall mean any and all demands, claims, suits, actions,
causes of action, proceedings, assessments, losses, damages,
liabilities, taxes, costs and expenses incurred by such Person,
including interest, penalties and attorneys’ fees, third
party expert and consultant fees and expenses, fines, judgments,
awards and financial responsibility for investigation, removal and
cleanup costs, natural resource damages, government oversight
costs.
“ Employee Benefit Plan
” means any “employee benefit plan” (as such term
is defined in Section 3(3) of the ERISA) and any other
employee benefit plan, program or arrangement of any
kind.
“ Governmental Entity
” means any U.S. Federal, state or local, domestic or
foreign, government or any court or quasi-judicial or
administrative agency or commission of any federal, state, local,
or foreign jurisdiction or other governmental or regulatory
authority or agency, domestic or foreign.
“ Guarantee ” of
or by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing any Indebtedness of any other Person (the
“ Primary Obligor ”) in any manner, whether
directly or indirectly, and including any obligation of such
Person, direct or indirect, (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness
or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness, (ii) to
purchase property, securities or services for the purpose of
assuring the owner of such Indebtedness of the payment of such
Indebtedness or (iii) to maintain working capital, equity
capital or other financial statement condition or liquidity of the
Primary Obligor so as to enable the Primary Obligor to pay such
Indebtedness.
“ Intellectual Property
” means any or all of the following and all rights in,
arising out of, or associated therewith: (a) United States,
international and other patents and applications therefor and all
divisions, continuations, continuations-in-part, renewals,
extensions, revisions, reissues and re-examinations relative
thereto, and all patents, applications, documents and filings
claiming priority to or serving as a basis for priority thereof;
(b) copyrights and all works of authorship including all
translations, adaptations, combinations, compilations and
derivations of each of the foregoing, whether or not registered;
(c) registered and unregistered trademarks, trade names, brand
names, service marks, service names, trade dress, logos and
corporate names including all translations, adaptations,
combinations and derivations thereof, together with all common law
rights and all goodwill associated with each of the foregoing;
(d) technology, know-how, methods, processes, systems, trade
secrets, inventions (whether or not patentable, copyrightable or
susceptible to any other form of legal protection and whether or
not reduced to practice), proprietary data, formulae, research and
development data, and confidential information (including
conceptions, ideas, innovations, manufacturing, development and
production techniques, drawings, specifications, designs,
proposals, financial and accounting data, business and marketing
plans, customer and supplier lists and related information and
documentation), in each case irrespective of whether in human or
machine readable form; (e) computer software (including both
source and object code) and all related program listings and data,
systems, user and other documentation; (f) mask works;
(g) industrial designs; (h) databases and data
collections and all rights therein; (i) Internet addresses,
sites and domain names and numbers; (j) all applications,
registrations, renewals and extensions for any and each of the
foregoing throughout the world; and (k) any similar or
equivalent rights to any of the foregoing anywhere in the world,
and all other forms of right by which one may effectively exclude
another from using or otherwise enjoying any, some or all of the
foregoing.
“ Inventories ”
means finished goods, raw materials and ingredients,
work-in-process, consignment goods, wares, merchandise, wrapping,
packing materials and similar items.
“ Indebtedness ”
of any Person means (i) all obligations of such Person for
borrowed money or with respect to deposits or advances of any kind,
(ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all
obligations of such Person upon which interest charges are
customarily paid, (iv) all obligations of such Person
under
conditional sale or other title retention
agreements relating to property or assets purchased by such Person,
(v) all obligations of such Person issued or assumed as the
deferred purchase price of property or services, (vi) all
indebtedness of others secured by (or for which the holder of such
indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed,
(vii) all Guarantees by such Person, (viii) all capital
lease obligations of such Person, (ix) all obligations of such
Person in respect of interest rate protection agreements, foreign
currency exchange agreements or other interest or exchange rate
hedging arrangements and (x) all obligations of such Person as
an account party in respect of letters of credit and bankers’
acceptances.
“ Knowledge ” or
“known” means, with respect to any matter in question,
the knowledge of the matter that any employee listed in the
applicable section of the Disclosure Schedule or any executive
officer of Seller has or should have of such matter, in each case,
after due inquiry and investigation.
“ Leases ” means
all leases, subleases, licenses, concessions and other agreements
(written or oral), including all amendments, extensions, renewals,
guaranties, and other agreements with respect thereto, pursuant to
which BU holds the Concord Lease, including the right to all
security deposits and other amounts and instruments deposited by or
on behalf of BU thereunder.
“ Liability ”
means, with respect to any person, any liability or obligation of
such person of any kind, character or description, whether known or
unknown, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated, secured or unsecured, joint or several, due or to
become due, vested or unvested, executory, determined, determinable
or otherwise and whether or not the same is required to be accrued
on the financial statements of such person, including any liability
for taxes.
“ Lien ” means,
with respect to any asset (including any security), any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind
in respect of such asset.
“ Material Adverse
Effect ” means any state of facts, change, effect,
condition, development, event, occurrence or circumstance, which
individually or in the aggregate (i) has had or may reasonably
be expected to have a material adverse effect on, or a material
adverse change in, as the case may be, the results of operations,
prospects, assets, liabilities or business condition (financial or
other) of the BU or the Acquired Assets, taken as a whole, or
(ii) would prevent or materially delay Seller’s ability
to consummate the transactions contemplated hereby other than a
state of facts, change, effect, condition, development, event,
occurrence or circumstance relating to or arising from (either
alone or in combination) (A) the economy or the financial
markets in general, (B) changes in Applicable Laws after the
date hereof, (C) changes in GAAP or regulatory accounting
principles after the date hereof, (D) changes caused by the
announcement or performance of this Agreement and the transactions
contemplated hereby (including compliance with the covenants set
forth herein and any action taken or omitted to be taken by Seller
at the written request or with the prior written consent of Buyer),
(E) any natural disasters or acts of war, sabotage or
terrorism involving the United States of America or its interests,
or an escalation or worsening thereof, (F) any failure by
Seller to meet revenue or earnings projections, in and of itself,
and (G) any breach by Buyer of this Agreement; provided
,
however , that with respect to clauses (A), (B), (C),
(D) and (E), such change, effect, fact, event or circumstance
does not disproportionately affect in any material respect the BU,
taken as a whole, as compared to similarly situated companies in
the industry that are affected by such change, effect, fact, event
or circumstance. References in this Agreement to dollar amount
thresholds shall not be deemed to be evidence of a Material Adverse
Effect or materiality.
“ Non-Assignable Primary
Contracts ” means Primary Contracts which are not
assignable according to their terms.
“ Non-Assignable
Contracts ” means Non-Assignable Primary Contracts, and
Primarily Non-BU Contracts and Primarily BU Contracts which are not
assignable according to their terms.
“ Order ” means
any judgment, order, writ, injunction, legally binding agreement
with a Governmental Entity, stipulation, ruling, charge or
decree.
“ Ordinary Course of
Business ” means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency).
“ Overlapping IP
” means the Software used in the order fulfillment process as
described in Section 2.14.3 of the Disclosure
Schedule.
“ Person ” means
a natural person, corporation, partnership, limited liability
company, joint venture, association, trust, Governmental Entity,
unincorporated organization or other entity.
“ Primarily BU Contract
” means each Contract which is related or connected primarily
to the BU but also relates to other business units, activities or
product lines of Seller.
“ Primarily Non-BU
Contract ” means each Contract which is related or
connected to the BU but is primarily related to other business
units, activities or product lines of Seller (i.e., under which
billings related to the BU during the period from January 1,
2007 through June 30, 2008 were exceeded by billings related
to other business units, activities or product lines of
Seller).
“ Primary Contract
” means a Contract related or connected solely to the BU and
not to any other product lines of Seller outside of the
BU.
“ Product or Products
” each product currently being designed, developed,
manufactured, marketed, distributed, provided, licensed, or sold by
the BU, including without limitation the products listed in
Section 2.14.1 of the Disclosure Schedule.
“ Registered Intellectual
Property ” means any or all of the following and all
rights in, arising out of, or associated therewith: (a) United
States, international and other patents and applications therefor
and all divisions, continuations, continuations-in-part, renewals,
extensions, revisions, reissues and re-examinations relative
thereto, and all patents, applications, documents and filings
claiming priority to or serving as a basis for priority thereof;
(b) registered trademarks, trade names, brand names, service
marks, service names, trade dress, logos and corporate names
including all translations, adaptations, combinations and
derivations thereof (but
excluding any common law rights and all goodwill
associated with each of the foregoing); and (c) Internet
addresses, sites and domain names, provided that the foregoing will
only apply to the BU Intellectual Property.
“ Subsidiary ” or
“ Subsidiaries ” (whether or not capitalized) of
any person means any corporation, partnership, limited liability
company, association, trust, joint venture or other legal entity of
which such person (either alone or through or together with any
other Subsidiary), owns, directly or indirectly, more than 50% of
the stock or other equity interests, the holders of which are
generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other
legal entity.
“ taxes ” means
all (A) U.S. Federal, state and local, domestic and foreign,
taxes, assessments, duties, fees (including universal service fund
fees) or similar charges of any kind whatsoever, including all
corporate franchise, income, sales, use, ad valorem, receipts,
value added, profits, license, withholding, employment, excise,
property, net worth, capital gains, transfer, stamp, documentary,
social security, national insurance, payroll, environmental,
alternative minimum, occupation, recapture and other taxes, and
including any interest, penalties, and additions imposed with
respect to such amounts; (B) liability for the payment of any
amounts of the type described in clause (A) as a result of
being a member of an affiliated, consolidated, combined, unitary or
aggregate group; (C) liability for the payment of any amounts
as a result of an express or implied obligation to indemnify any
other Person with respect to the payment of any amounts of the type
described in clause (A) or (B); and (D) liability for the
payment of any amounts as a result of transferee or successor
liability with respect to the payment of any amounts of the type
described in clause (A), (B) or (C);
“ taxing authority
” means any U.S. Federal, state or local, domestic or
foreign, governmental body (including any subdivision, agency or
commission thereof), or any quasi-governmental body, in each case,
exercising regulatory authority in respect of taxes;
“ tax return ”
means all returns, declarations of estimated tax payments, reports,
estimates, information returns and statements, including any
schedules, exhibits, related or supporting information with respect
to any of the foregoing, filed or to be filed with any taxing
authority in connection with the determination, assessment,
collection or administration of any taxes.
“ Third Party Consents
” means the third party consents and amendments required for
the assignment or the amendment of the Non-Assignable
Contracts.
2. SELLER’S REPRESENTATIONS
AND WARRANTIES .
Seller represents and warrants to
Buyer that, except as set forth on the Disclosure Schedule attached
as Exhibit C to this Agreement (the “ Disclosure
Schedule ”), which exceptions shall be deemed to be part
of the representations and warranties made hereunder, the
statements contained in this Section 2 are correct and
complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement
throughout this Section 2), except as otherwise expressly
indicated. The Disclosure Schedule shall be arranged in sections
corresponding to the numbered and lettered sections and subsections
contained in this Section 2,
and the disclosures in any section or subsection
of the Disclosure Schedule shall qualify only each representation
and warranty set forth in this Section 2 that is specifically
identified (by cross-reference or otherwise) in the Disclosure
Schedule as being qualified by such exception, except to the extent
that relevance to another section or subsection is reasonably clear
on the face of such disclosure.
2.1. Organization, Standing,
Qualification and Corporate Power . Seller (i) is a
corporation duly organized and validly existing under the
Applicable Law of the State of Delaware and (ii) has all
requisite corporate power and authority to enable it to use its
corporate name and to own, lease or otherwise hold and operate its
properties or assets and to carry on its business as presently
conducted. Seller is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which such concept is
recognized and in which the nature of its business or the
ownership, leasing or operation of its properties or assets makes
such qualification or licensing necessary, other than where the
failure to be so qualified or licensed individually or in the
aggregate could not reasonably be expected to have a Material
Adverse Effect on the BU.
2.2. Authority;
Noncontravention . Seller has the requisite corporate power and
authority to execute and deliver this Agreement, to consummate the
transactions contemplated hereby and to comply with the provisions
hereof. The execution, delivery and performance of this Agreement
by Seller, the consummation by Seller of the transactions
contemplated hereby and the compliance by Seller with the
provisions of this Agreement have been duly authorized by all
necessary corporate action on the part of Seller, and no other
corporate proceedings on the part of Seller are necessary to
authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by Seller and, assuming the due authorization, execution
and delivery by Buyer, constitutes a valid and binding obligation
of Seller enforceable against Seller in accordance with its terms,
except to the extent that enforceability thereof may be limited by
bankruptcy, insolvency, reorganization and other similar Applicable
Laws affecting the enforcement of creditors’ rights generally
and by general principles of equity. The execution and delivery of
this Agreement, the consummation of the transactions contemplated
hereby and the compliance by Seller with the provisions of this
Agreement do not and will not conflict with, or result in any
violation or breach of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of, or result in,
termination, cancellation or acceleration of any obligation or to a
loss of a benefit under, or result in the creation of any Lien in
or upon any of the Acquired Assets under, or give rise to any
increased, additional, accelerated or guaranteed rights or
entitlements under, any provision of (a) Seller’s
charter documents (including its Certificate of Incorporation),
(b) any Contract or (c) subject to the governmental
filings and other matters referred to in the following sentence,
any (i) Applicable Law or (ii) Order, in each case
applicable to the BU or any of the Acquired Assets, other than, in
the case of clauses (b) and (c), any such conflicts,
violations, breaches, defaults, rights, losses, Liens or
entitlements that individually or in the aggregate could not
reasonably be expected to (A) have a Material Adverse Effect
on the BU, (B) impair in any material respect the ability of
Seller to perform its obligations under this Agreement or
(C) prevent or materially impede, interfere with, hinder or
delay the consummation of any of the transactions contemplated by
this Agreement. No consent, approval, Order or authorization of, or
registration, declaration or filing with any Governmental Entity,
is required by or with respect to Seller in connection with the
execution and delivery of this Agreement, the consummation of
the
transactions contemplated hereby or the
compliance with the provisions of this Agreement, except for such
consents, approvals, Orders, authorizations, registrations,
declarations and filings (x) which are listed on
Section 2.2 of the Disclosure Schedule or (y) the failure
of which to be obtained or made individually or in the aggregate
could not reasonably be expected to (A) have a Material
Adverse Effect on the BU, (B) impair in any material respect
the ability of Seller to perform its obligations under this
Agreement or (C) prevent or materially impede, interfere with,
hinder or delay the consummation of the transaction contemplated by
this Agreement. Seller is not subject to any rights of first
refusal, rights of first offer or other similar rights of any
Person that would be applicable to the transactions contemplated by
this Agreement. As of the Closing, Seller will have delivered to
Buyer complete and correct copies of any filing made by Seller with
any Governmental Entity at or prior to the Closing in connection
with this Agreement or the transactions contemplated hereby.
Correct and complete information regarding Seller’s (and
Seller’s Affiliates) sales for the period between
January 1, 2007 and June 30, 2008 (with a breakdown of
total sales and the sales relevant to the BU) in each of the
following jurisdictions were delivered to Buyer prior to the date
hereof: US, Israel, UK, Germany, France and Italy.
2.3. Financial Statements
.
2.3.1. Section 2.3.1 of the
Disclosure Schedule sets forth (a) the unaudited carved-out
contribution margin statement of the BU for the fiscal year ended
on December 31, 2007 (collectively, the “ 2007
Financial Statements ”), and (b) the unaudited
carved-out contribution margin statement of the BU for the
six-month period ended June 30, 2008 (collectively, the
“ Interim Financial Statements ”, and together
with the 2007 Financial Statements, the “ Financial
Statements ”). The Financial Statements (i) are true
and correct, (ii) were derived from and prepared in accordance
with the underlying books and records of Seller and Seller’s
financial statements, which were prepared in accordance with GAAP,
consistently applied, throughout the periods covered thereby, and
(iii) fairly and accurately present, in all material respects,
the results of operations of BU for the periods then ended. There
were no changes in the method of application of Seller’s
accounting policies or changes in the method of applying
Seller’s use of estimates in the preparation of the Interim
Financial Statements as compared with the Financial
Statements.
2.3.2. Internal Controls over
Financial Reporting . Solely with respect to the BU:
(a) The books, records and accounts
of Seller, all of which have been made available to Buyer, are
complete and accurate in all material respects and represent
actual, bona fide transactions and have been maintained in
accordance with sound business practices and GAAP.
(b) Seller’s system of
internal controls over financial reporting is sufficient to provide
reasonable assurance (A) that transactions are recorded as
necessary to permit preparation of financial statements in
conformity with GAAP, consistently applied, (B) that
transactions are executed only in accordance with the authorization
of management, and (C) regarding prevention or timely
detection of the unauthorized acquisition, use or disposition of
Seller’s assets.
2.4. Indebtedness . Seller
has no outstanding Indebtedness, and has not provided any
Guarantees, related to the BU.
2.5. Absence of Certain Changes
or Events . Since December 31, 2007:
2.5.1. Seller has conducted the BU
business in the Ordinary Course of Business so as to preserve the
Acquired Assets and the BU and the goodwill of the suppliers,
customers, distributors and others having business relations with
the BU;
2.5.2. there has not been any
Material Adverse Effect on Seller or the BU;
2.5.3. there has not been
(i) (A) any grant by Seller of any loan or increase in
compensation, perquisites or benefits or any bonus or award
opportunity, or (B) any payment by Seller of any bonus or
award, in each case to any current or former employee, contractor
or consultant (including employees or independent contractors or
consultants providing services to the BU) of the BU (each, a
“ Participant ”), (ii) any grant by Seller
to any Participant of any increase in severance, change in control,
termination or similar compensation or benefits, (iii) any
entry by Seller into, any amendment of or modification to or
agreement to amend or modify (or announcement of an intention to
amend or modify) or any termination of (A) any employment,
deferred compensation, severance, change in control, termination,
employee benefit, loan, indemnification, retention, share
repurchase, share option, share appreciation right, performance
unit, share-based award, consulting or similar Contract between
Seller, on the one hand, and any Participant, on the other hand,
(B) any Contract between Seller, on the one hand, and any
Participant, on the other hand, the benefits of which are
contingent, or the terms of which are altered, upon the occurrence
of a transaction involving Seller or the BU of the nature
contemplated by this Agreement (alone or in combination with any
other event) or (C) any trust or insurance Contract or other
agreement to fund or otherwise secure payment of any compensation
or benefit to be provided to any Participant (all such agreements
under this clause (iii), collectively, “ Benefit
Agreements ”), (iv) any payment to any Participant
of any benefit not provided for under any Employee Benefit Plan or
Benefit Agreement, other than the payment of cash compensation in
the Ordinary Course of Business, (v) any amendment to or
modification of or agreement to amend or modify (or announcement of
an intention to amend or modify) Seller stock incentive plans,
(vi) any action to accelerate, or which could reasonably be
expected to result in the acceleration of, the timing of vesting or
payment of any rights, compensation, benefits or funding
obligations, or any material determinations, under any collective
bargaining agreement, Employee Benefit Plan, Benefit Agreement or
otherwise (including in connection with this Agreement and the
transactions contemplated hereby) or (vii) any other grant by
Seller of any awards or rights under any Employee Benefit Plan or
Benefit Agreement (including the grant of stock options, share
appreciation rights, performance units, restricted shares or other
share-based awards, or the removal of existing restrictions in any
Contract, Employee Benefit Plan or Benefit Agreement or awards made
thereunder). Since December 31, 2007, Seller did not dismiss
or provided notice of termination of the employment to any
Participant.
2.5.4. Seller has continued all
pricing, sales, receivables, payables or Inventory production
practices in the Ordinary Course of Business and has not engaged in
(i) any trade loading practices or any other promotional sales
or discount activity with any customers, distributors, resellers or
other channels/ partners which could reasonably be expected to have
the
effect of accelerating to pre-Closing periods
sales to the trade or otherwise that would otherwise be expected
(based on past practice) to occur in post-Closing periods,
(ii) any practice which could reasonably be expected to have
the effect of accelerating to pre-Closing periods collections of
receivables that would otherwise be expected (based on past
practice) to be made in post-Closing periods, (iii) any
practice which could reasonably be expected to have the effect of
postponing to post-Closing periods payments by Seller that would
otherwise be expected (based on past practice) to be made in
pre-Closing periods or (iv) any other promotional sales,
discount activity, deferred revenue activity or Inventory
overstocking or understocking, in each case in this clause
(iv) in a manner outside the Ordinary Course of Business.
Since December 31, 2007, Seller has not overstocked or
understocked Inventory or produced Inventory in excess of, or
failed to produce Inventory in amounts comparable to, amounts that
would be expected to be produced by Seller in post-Closing periods
or otherwise in amounts in excess of or below those amounts of
Inventory produced by Seller in the Ordinary Course of
Business.
2.5.5. Seller has not: (i) made
any material change in the accounting methods or practices it
follows related to BU other than as required by Applicable Law or
GAAP; (ii) sold, assigned, transferred or licensed any
patents, trademarks, trade names, copyrights, trade secrets or
other intangible material assets, in each case, used primarily in
connection with the BU, except nonexclusive licenses in the
Ordinary Course of Business; (iii) sold, leased, licensed,
transferred, or otherwise disposed of any of its material
properties or assets primarily used in the BU, except Inventory
sold or transferred in the Ordinary Course of Business and obsolete
or worn out equipment sold or otherwise disposed of in a manner
consistent with past practice which was not otherwise material
(individually or in the aggregate) to the BU, or canceled any
material indebtedness or waived any material claims or rights of
material value; (iv) suffered any damage to or destruction or
casualty of (whether or not covered by insurance) any asset
individually or in the aggregate material to the operation of the
BU; (v) failed to pay any creditor any material amount arising
from the operation of the BU owed to such creditor when due, other
than good faith disputes and trade payables arising in the Ordinary
Course of Business and not past due more than sixty (60) days;
(vi) defaulted on any material obligation relating to the
conduct or operation of the BU without curing such default;
(vii) incurred or assumed any Liabilities with respect to the
BU, other than in the Ordinary Course of Business; or
(viii) amended, cancelled or terminated any Contract that is
an Acquired Asset or entered into any Contract primarily related to
the BU, other than in the Ordinary Course of Business;
2.5.6. there has not been any
agreement by Seller to do any of the things described in the
preceding subsections 2.5.1 through 2.5.5.
2.6. Litigation . There is no
suit, claim, action, arbitration, investigation or proceeding
(“ Litigation ”) pending or, to the Knowledge of
Seller, threatened by or against or affecting the BU or any
Participant, nor is there any Order or arbitrator outstanding
against, or, to the Knowledge of Seller, investigation by any
Governmental Entity involving the BU or any Participant.
2.7. Contracts .
2.7.1. Section 2.7 of the
Disclosure Schedule sets forth, with specific reference to each
subsection, each of the following Contracts to which Seller is a
party or bound, used by,
relating to or otherwise connected with, in
whole or in part, the BU (the “ BU Contracts ”);
provided , however , that, with respect to customer
and channel partner Contracts, this Section 2.7 shall only
require the top ten customer contracts and top 30 channel
contracts, in each case, on the basis of total billings of the BU
for the period from January 1, 2007 to June 30, 2008
(such BU Contracts, the “ Material Contracts ”),
to be listed:
(i) Each Primary Contract (Section
2.7(i) also indicates the contracting partner (e.g., direct
Customer, channel partner, supplier, etc.));
(ii) Each Primarily Non-BU Contract
(Section 2.7(ii) also indicates the contracting partner (e.g.,
direct Customer, channel partner, supplier, etc.));
(iii) Each Primarily BU
Contract;
(iv) Each Non-Assignable Primary
Contract;
(v) each BU Contract made outside
the Ordinary Course of Business;
(vi) each employment-related BU
Contract that is (A) of a nature for which Seller has a
standard form agreement but that deviates (except with respect to
salary payable thereunder) from such form agreement or (B) not
terminable at will by Seller without any penalty and without any
obligation of Seller to pay severance, termination or other amounts
(other than accrued base salary, accrued commissions, accrued
vacation pay and legally mandated benefits);
(vii)(A) each employee collective
bargaining agreement with any labor union or similar organization,
(B) each plan, program or BU Contract that provides for the
payment of bonus, severance, change in control, termination or
similar types of compensation or benefits related to a corporate
transaction involving Seller or upon the termination or resignation
of any Participant and (C) each plan, program or BU Contract
that provides for medical, life insurance or similar benefits for
Assumed Employees upon their retirement from, or termination of
employment with or services for, Seller;
(viii) each BU Contract pursuant to
which a Designated Employee has agreed to non-solicitation or
non-competition obligations, or any BU Contract in which Seller has
agreed not to engage in any activity or business, or pursuant to
which any benefit is required to be given or lost as a result of
such activity;
(ix) each BU Contract (including
consulting and services agreements) which provides for
“exclusivity” or any similar requirement in favor of
any Person other than Seller, or under which Seller is restricted
in any respect in the distribution, licensing, marketing,
purchasing, development or manufacturing of its products or
services in the United States or any foreign
jurisdiction;
(x) each BU Contract with
(A) any Affiliate of Seller or (B) any Participant or any
current or former director, officer or employee, contractor or
consultant of any Affiliate of Seller (other than employment BU
Contracts referred to in clause (ii) above, Employee Benefit
Plans and Benefit Agreements);
(xi) each BU Contract under which
Seller has agreed to indemnify any Person;
(xii) each BU Contract creating or
granting a Lien (including Liens upon properties acquired under
conditional sales, capital leases or other title retention or
security devices);
(xiii) each BU Contract that
requires consent, approval or waiver of, or notice to, a
Governmental Entity or other third party in the event of or with
respect to the asset purchase or the transactions contemplated by
this Agreement, including in order to avoid termination of or loss
of a benefit under any such BU Contract;
(xiv) each BU Contract providing for
future performance by Seller in consideration of amounts previously
paid to Seller, or which has resulted or will result in deferred
revenue under GAAP;
(xv) each BU Contract providing for
future performance by Seller with more than a 20% discount off the
standard or usual charges of Seller to be due for such performance
(it being understood that for purposes of this clause (xv), the
standard or usual charges shall be deemed to equal 75% of list
prices, to take into account customary channel partner
discounts);
(xvi) each BU Contract of a nature
for which Seller has a standard form agreement but that deviates
from such standard form agreement other than with respect to
pricing;
(xvii) each BU Contract containing
(whether in the BU Contract itself or by operation of Applicable
Law) any provisions (A) prohibiting, or imposing a restriction
on, a “change of control” of Seller or the BU,
(B) prohibiting or imposing any restrictions on the assignment
of such BU Contract or any portion thereof by Seller to any other
Person (without regard to any exception permitting assignments to
Subsidiaries or Affiliates), (C) having the effect of
providing that the consummation of any of the transactions
contemplated by this Agreement (alone or in combination with any
other event) or the execution, delivery or effectiveness of this
Agreement (alone or in combination with any other event) will
conflict with, result in a violation or breach of, or constitute a
default under (with or without notice or lapse of time, or both),
such BU Contract or give rise under such BU Contract to any right
of, or result in, a termination, right of first refusal, amendment,
revocation, cancellation or acceleration, or loss of a benefit, or
the creation of any Lien in or upon any of the properties or assets
of Seller or Buyer, or to any increased, guaranteed, accelerated or
additional rights or entitlements of any Person or (D) having
the effect of providing that the consummation of any of the
transactions contemplated by this Agreement (alone or in
combination with any other event) or the execution, delivery or
effectiveness of this Agreement (alone or in combination with any
other event) will require that a third party be provided with
access to source code or that any source code be released from
escrow and provided to any third party (any such provision of the
nature described in clause (A), (B), (C) or (D), a “
Restrictive Provision ”);
(xviii) each BU Contract providing
for payments of royalties, franchise fees, commissions, other
license fees or other transactional fees to third parties,
including Governmental Entities;
(xix) each BU Contract granting a
third party any license to Intellectual Property that is not
limited to the internal use of such third party;
(xx) each BU Contract granting the
other party to such Contract or a third party “most favored
nation” or similar status;
(xxi) each BU Contract that
guarantees or warrants that any of the products or services of the
BU is fit for any particular purpose or that guarantees a result or
commits to performance levels;
(xxii) each BU Contract pursuant to
which Seller has been granted any license to Intellectual
Property;
(xxiii) each BU Contract providing
for any license or franchise granted by Seller pursuant to which
Seller has agreed to provide any third party with access to source
code or to provide for source code to be put in escrow or to
refrain from granting license or franchise rights to any other
Person;
(xxiv) each BU Contract containing
any “non-solicitation” or similar provision that
restricts Seller;
(xxv) each BU Contract providing for
monetary liquidated damages;
(xxvi) each BU Contract entered into
by Seller in the last two years in connection with the settlement
or other resolution of any Litigation;
(xxvii) each BU Contract between
Seller and (i) the top 10 customers of Seller, being those who
have generated to Seller at least 80% of the total recognized
revenues from the sale of the Products to direct customers (i.e.,
other than to or through Resellers) during the period from
January 1, 2007 through June 30, 2008 (the “
Customers ”), (ii) the top 10 vendors and
suppliers of Seller (the “ Vendors ”),
(iii) the top 25 distributors or resellers of Seller, being
those who have generated to Seller at least 80% of the total
recognized revenues from the sale of the Products through business
partners (i.e. other than to or through Customers) during
the
