CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement, and the documents to which we refer you in this proxy statement, include forward-looking statements
based on estimates and assumptions. There are forward-looking statements throughout this proxy statement, including, without limitation, under the headings Summary, Questions and Answers about the Special Meeting and the
Merger, The Merger, The MergerOpinion of Financial Advisor, The MergerRegulatory Approvals, and The MergerLitigation Related to the Merger, and in statements containing words
such as believes, estimates, anticipates, continues, contemplates, expects, may, will, could, should or would or
other similar words or phrases. These statements, which are based on information currently available to us, are not guarantees of future performance and may involve risks and uncertainties that could cause our actual growth, results of operations,
performance and business prospects, and opportunities to materially differ from those expressed in, or implied by, these statements. These forward-looking statements speak only as of the date on which the statements were made and we expressly
disclaim any obligation to release publicly any updates or revisions to any forward-looking statement included in this proxy statement or elsewhere. In addition to other factors and matters contained or incorporated in this document, these
statements are subject to risks, uncertainties, and other factors, including, among others:
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the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;
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the outcome of any legal proceedings that have been or may be instituted against Pervasive and others relating to the Merger Agreement;
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the inability to complete the Merger due to the failure to obtain stockholder approval or the failure to satisfy other conditions to consummation of
the Merger;
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the inability to complete the Merger due to the failure to satisfy the minimum cash condition;
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the failure of the Merger to close for any other reason, including as a result of Parents termination of the Merger Agreement upon failure to
receive the proceeds of the debt financing or any alternative financing within the time period specified in the Merger Agreement;
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risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the
Merger;
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the effect of the announcement of the Merger on our customer relationships, operating results and business generally;
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the ability to recognize the benefits of the Merger;
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the amount of the costs, fees, expenses and charges related to the Merger and the actual terms of certain financings that will be obtained for the
Merger;
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and other risks detailed in our current filings with the SEC, including our most recent filings on Forms 10-Q and
10-K. See Where You Can Find More Information beginning on page 69. Many of the factors that will determine our future results are beyond our ability to control or predict. In light of the significant uncertainties inherent in the
forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect managements views only as of the date hereof. We cannot guarantee any future results, levels of activity,
performance or achievements. The statements made in this proxy statement represent our views as of the date of this proxy statement, and it should not be assumed that the statements made herein remain accurate as of any future date. Moreover, we
assume no obligation to update forward-looking statements or update the reasons that actual results could differ materially from those anticipated in forward-looking statements, except as required by law.
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THE PARTIES TO THE MERGER
Pervasive
Pervasive Software Inc.
12365-B Riata Trace Parkway
Austin, Texas 78727
(512) 231-6000
Pervasive Software, a Delaware corporation, was founded in 1994
and is headquartered in Austin, Texas with offices in Greenville, South Carolina; Brussels; Frankfurt; London; and Paris and is party to a joint venture in Japan. Pervasive is a global leader in cloud-based and on-premises data innovation. Pervasive
delivers software to manage, integrate and analyze data, in the cloud or on-premises, throughout the entire data lifecycle.
The Companys two flagship product families are Pervasive PSQL, which addresses data management, and Pervasive Data
Integrator, which addresses data integration and data quality. The Pervasive PSQL database provides embeddable data management and has been deployed via millions of licensed seats since the Companys inception in 1994. The full data
management product line also includes solutions for data movement and synchronization and addresses security challenges related to data integrity, accountability, continuity and availability throughout the data lifecycle. Pervasive Data Integrator
enables companies to connect data from multiple on-premises and cloud-based applications with reliable, automated integration.
Pervasive also offers Pervasive BusinessXchange, a fully managed business-to-business integration service that works with oil and gas trading partners to enable the electronic exchange of
procurement and supply chain-related documents and transactions; Pervasive DataRush, a software development platform that lets developers rapidly build parallel applications that deliver high throughput on big data; Pervasive
RushAnalyzer, a data preparation and analytics application; Pervasive DataCloud
®
, an elastic
platform-as-a-service for both Pervasive products and partner-designed solutions; and Pervasive Galaxy, a marketplace and community that sells products designed by Pervasive, partners and other third parties allowing applications, software and
clouds to interact.
Pervasive provides its solutions to a diverse and global customer base, serving tens of thousands of end
users in a wide range of industries and markets and selling products in countries throughout the world through direct sales and channel distribution. In addition to a large customer base of end users for the Companys integration products and
services, Pervasive products are often embedded within partners software through a well-developed channel of independent software vendors, software-as-a-service vendors, value-added resellers and systems integrators.
For more information about Pervasive, please visit our website at www.pervasive.com. Our website address is provided as an inactive
textual reference only. The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference. See also Where You Can Find More Information beginning on page 69. The Companys
Common Stock, par value $0.001 per share, is publicly traded on the NASDAQ under the symbol PVSW.
Parent
Actian Corporation
500 Arguello Street, Suite 200
Redwood City, CA 94063
(650) 587-5500
Actian Corporation, which we refer to as Parent, is a privately
held Delaware corporation (formerly Ingres Corp.) that enables organizations to transform big data into business value with data management solutions to
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transact, analyze, and take automated action across their business operations. Parent helps 10,000 customers worldwide take action on big data with Action Apps, Vectorwise, the analytic database,
and Ingres, the independent mission-critical online transaction processing database. Parent is headquartered in California with offices in New York, London, Paris, Frankfurt, Amsterdam and Melbourne.
Merger Sub
Actian Sub II, Inc.
c/o Actian Corporation
500 Arguello Street, Suite 200
Redwood City, CA 94063
(650) 587-5500
Actian Sub II, Inc., which we refer to as Merger Sub, is a Delaware corporation that was organized solely for the purpose of completing
the proposed Merger. Merger Sub is a wholly owned subsidiary of Parent and has not engaged in any business except for activities incidental to its formation and as contemplated by the Merger Agreement. Upon the consummation of the proposed Merger,
Merger Sub will cease to exist, and the Company will continue as the Surviving Corporation.
THE
SPECIAL MEETING
Time, Place and Purpose of the Special Meeting
This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by our board of directors for use at
the special meeting to be held on Wednesday, April 10, 2013, starting at 9:00 a.m. local time, at our corporate offices, 12365-B Riata Trace Parkway, Austin, Texas 78727, or at any postponement or adjournment thereof. The purpose of the special
meeting is for our stockholders to consider and vote upon adoption of the Merger Agreement (and to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies). Our stockholders must adopt the Merger
Agreement in order for the Merger to occur. If we do not receive the requisite vote of our stockholders to adopt the Merger Agreement, the Merger will not occur. A copy of the Merger Agreement is attached to this proxy statement as Annex A. You are
urged to read the Merger Agreement in its entirety. This proxy statement and the enclosed form of proxy are first being mailed to our stockholders on or about March 26, 2013.
Record Date and Quorum
We have fixed the
close of business on March 21, 2013 as the record date for the special meeting, and only holders of record of the Companys Common Stock on the record date are entitled to vote at the special meeting. On the record date, there were
approximately 16,905,473 shares of the Companys Common Stock outstanding and entitled to vote. Each share of the Companys Common Stock entitles its holder to one vote on all matters properly coming before the special meeting.
The holders of a majority of the Companys Common Stock issued and outstanding and entitled to vote at the special meeting,
present in person or represented by proxy, will constitute a quorum for the transaction of business at the special meeting. Shares of the Companys Common Stock represented at the special meeting but not voted, including shares of the
Companys Common Stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all
business. In the event that a quorum is not present at the special meeting, it is expected that the meeting will be adjourned or postponed to solicit additional proxies.
Vote Required for Approval
The adoption of the
Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares of the Companys Common Stock. For the proposal to adopt the Merger Agreement, you may
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vote FOR, AGAINST or ABSTAIN. Abstentions will not be counted as votes cast or shares voting on the proposal to adopt the Merger Agreement, but will count for
the purpose of determining whether a quorum is present.
If you abstain, it will have the same effect as a vote AGAINST the adoption of the Merger Agreement
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Under the rules of the NASDAQ, brokers who hold shares in street name for customers have the authority to vote on routine proposals when they have not received instructions from
beneficial owners. However, brokers are precluded from exercising their voting discretion with respect to approving non-routine matters such as the approval of the Merger and, as a result, absent specific instructions from the beneficial owner of
such shares, brokers are not empowered to vote those shares, referred to generally as broker non-votes.
These broker non-votes will be counted for purposes of determining a quorum, but will have the same effect as a vote
AGAINST the adoption of the Merger Agreement
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Proxies and Revocation
If you submit a proxy by returning a signed proxy card by mail, your shares will be voted at the special meeting as you indicate on your
proxy card or by such other method. If you sign your proxy card without indicating your vote, your shares will be voted FOR the adoption of the Merger Agreement and FOR the adjournment or postponement of the special meeting,
if necessary or appropriate, to solicit additional proxies, and in accordance with the recommendations of our board of directors on any other matters properly brought before the special meeting for a vote.
If your shares of the Companys Common Stock are held in street name, you will receive instructions from your broker,
bank or other nominee that you must follow in order to have your shares voted. If you do not instruct your broker to vote your shares, it has the same effect as a vote against adoption of the Merger Agreement.
Proxies received at any time before the special meeting, and not revoked or superseded before being voted, will be voted at the special
meeting. You have the right to change or revoke your proxy at any time before the vote taken at the special meeting in any one of the following ways:
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if you hold your shares in your name as a stockholder of record, by sending a written notice of revocation to our Secretary, Randall G. Jonkers,
12365-B Riata Trace Parkway, Austin, Texas 78727;
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by attending the special meeting and voting in person (your attendance at the meeting will not, by itself, revoke your proxy; you must vote in person
at the meeting);
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by submitting a later-dated proxy card by the date and time indicated on the applicable proxy card;
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if you authorized a proxy to vote by telephone or the Internet, by authorizing a proxy to vote a second time by telephone or Internet; or
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if you have instructed a broker, bank or other nominee to vote your shares, by following the directions received from your broker, bank or other
nominee to change those instructions.
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Please do not send in your stock certificates with your proxy
card.
When the Merger is completed, a separate letter of transmittal will be mailed to you that will enable you to receive the Merger consideration in exchange for your stock certificates.
Adjournments and Postponements
Although it is not currently expected, the special meeting may be adjourned or postponed for the purpose of soliciting additional proxies. Any adjournment may be made without notice (if the adjournment is
not for more than 30 days after the record date) if an announcement is made at the special meeting of the time, date and place
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of the adjourned meeting. Whether or not a quorum exists, holders of a majority of the combined voting power of the Companys Common Stock present in person or represented by proxy at the
special meeting and entitled to vote at the special meeting may adjourn the special meeting. Any signed proxies received by Pervasive in which no voting instructions are provided on such matter will be voted FOR an adjournment or
postponement of the special meeting, if necessary or appropriate, to solicit additional proxies. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow Pervasives stockholders who
have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or postponed.
Rights of Stockholders Who Object to the Merger
Stockholders are entitled to statutory appraisal rights under Delaware
law in connection with the Merger. This means that you are entitled to have the value of your shares determined by the Delaware Court of Chancery and to receive payment based on that valuation. The ultimate amount you receive as a dissenting
stockholder in an appraisal proceeding may be more than, the same as or less than the amount you would have received under the Merger Agreement.
To properly exercise your appraisal rights, you must submit a written demand for appraisal to the Company before the vote is taken on the Merger Agreement and you must not vote in favor of the adoption of
the Merger Agreement. Your failure to follow exactly the procedures specified under Delaware law will result in the loss of your appraisal rights. See Dissenters Rights of Appraisal beginning on page 65 and the text of the Delaware
appraisal rights statute reproduced in its entirety as Annex C.
Solicitation of Proxies
The Company will bear the entire cost of solicitation, including the preparation, assembly, printing, and mailing of this proxy statement,
the proxy, and any additional soliciting material furnished to stockholders. Copies of solicitation material will be furnished to brokerage houses, fiduciaries, and custodians holding shares in their names that are beneficially owned by others so
that they may forward this solicitation material to such beneficial owners. The Company may reimburse brokerage houses, fiduciaries and custodians representing beneficial owners of shares for their costs of forwarding the solicitation material to
such beneficial owners. The original solicitation of proxies by mail may be supplemented by solicitation by telephone, electronic transmission, or other means by directors, officers, employees or agents of the Company. No additional compensation
will be paid to these individuals for any such services. Except as described above, the Company does not presently intend to solicit proxies other than by mail.
Questions and Additional Information
If you
have more questions about the Merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please contact Pervasive Investor Relations by phone at (512) 231-6090
or via email to investor.relations@pervasive.com.
Availability of Documents
The reports, opinions or appraisals referenced in this proxy statement will be made available for inspection and copying by any interested
holder of the Companys Common Stock through the Investor Relations section of the Companys website at http://www.pervasive.com and at the principal executive offices of the Company during its regular business hours. Our
website address is provided as an inactive textual reference only. The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference.
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THE MERGER
This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy
statement as Annex A. You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.
Background of the Merger
Pervasives management and board of directors routinely assess strategic opportunities,
at times with the assistance of legal and financial advisers, as part of their evaluation of changes in the industry in which Pervasive operates and their review of opportunities to strengthen Pervasives business and maximize stockholder
value. In addition, because Pervasive and Parent operate in related fields of the software industry, the management teams of both companies are aware of the other.
On July 29, 2012, Pervasive received an unsolicited letter from Parent proposing to acquire all of the outstanding shares of the Common Stock of Pervasive for $8.50 per share. On August 1, 2012,
members of the management team of Pervasive met with members of the management team of Parent to discuss the proposal. On August 4, 2012, Pervasive received another unsolicited letter from Parent reconfirming its proposal to acquire all of the
outstanding shares of the Common Stock of Pervasive. On August 6, 2012, our board of directors met to discuss and consider the foregoing letters. In response to Parents proposals, the board discussed a possible sale of the Company in
light of the Companys current business performance and its strategic plans and prospects, including its research and development efforts and new product initiatives. After this discussion, the board determined that it was not an appropriate
time to sell the Company and it was in the best interests of the Company and its stockholders to continue the Companys pursuit of its current business and strategic plans and initiatives. Accordingly, the board requested that Mr. Farr
prepare and send a letter to Parent rejecting Parents offer to acquire the Company. Mr. Farr sent such letter to Parent on August 7, 2012. Also at its meeting on August 6, 2012, the board determined to engage an independent
financial advisor to advise the board on financial matters as it continued to pursue its strategic objectives and respond to any further approaches from Parent or any other third party. Accordingly, the board gave Mr. Farr authority to begin
discussions with, and solicit proposals from, several investment banking firms for this purpose.
On August 13, 2012,
Pervasive received another unsolicited letter from Parent proposing to acquire all of the outstanding shares of the Common Stock of Pervasive for $8.50 per share. Parent issued a press release on the same day that discussed and included a copy of
this letter. On August 16, 2012, our board of directors met to discuss and consider the foregoing letter. After discussion, the board determined to defer any decisions regarding Parents proposal until it had obtained the advice of a
financial advisor. Mr. Farr then gave the board an update regarding proposals he had received from several investment banking firms regarding a potential engagement and the board gave Mr. Farr feedback on the various proposals. The board
also formed a special transaction committee comprised of David Boucher and Jeff Hawn, each of whom was determined by the board to be independent and disinterested with respect to maintaining the Companys stand-alone business plan and any
potential strategic transaction involving a sale of the Company, to help the board review and evaluate a possible sale of the Company.
On August 18, 2012, the special transaction committee met to review various proposals that Mr. Farr had received from several investment banking firms regarding a potential engagement in
connection with a potential sale of the Company.
On August 23, 2012, representatives of Shea & Company attended
a meeting of our board of directors and made a presentation to the board regarding potential processes the board might consider in order to evaluate Parents proposal, including a potential market check process whereby the Company would solicit
alternative proposals to acquire the company. Representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation, the Companys legal counsel, referred to herein as WSGR, also made a presentation to the board regarding its
fiduciary duties and other issues for the board to consider in connection with its evaluation of a
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potential sale of the Company. Also at its meeting on August 23, 2012, the board approved the engagement of Shea & Company as the Companys independent financial advisors in
connection with the proposed strategic transaction involving the Company. The board approved the engagement of Shea & Company based upon the firms focus on the software industry and prior experience working with clients of a similar scale
to the Company.
On September 7, 2012, the special transaction committee met with representatives of Shea &
Company to review a preliminary valuation analysis of the Company that Shea & Company had prepared in advance of the board meeting to be held on September 12, 2012. The materials included a preliminary valuation analysis of the Company
based on precedent transaction analysis, comparable company trading analysis, revenue growth tranche analysis, acquisition premium analysis and discounted cash flow analysis consistent with the methodologies Shea & Company used in its final
valuation analysis. The representatives of Shea & Company discussed various data points to provide context for the preliminary valuation analyses, including the Companys financial results, revenue growth, the share cost basis of the
Companys largest stockholders, historical trading prices, trading volume and trading multiples for the Companys shares, comparisons of various financial metrics and valuation metrics between the Company and certain industry peers, and
draft stand-alone valuations of the Companys embedded database and data and application integration businesses. The representatives of Shea & Company then discussed with the special transaction committee a possible timeline of
acquisition-related events in order to provide the committee with an overview of a potential market check process.
On
September 12, 2012, the board discussed the Parent letter dated August 13, 2012 and instructed Shea & Company to solicit potential bids from interested parties and engage with those parties, including Parent, regarding their
interest in acquiring the Company. The board also met with representatives of Shea & Company, who presented the materials they had discussed with the special transaction committee on September 7, 2012. Later on September 12, 2012,
the Company issued a press release announcing the board meeting to consider the advice of Shea & Company with respect to the evaluation of the Parent letter and the boards instructions to Shea & Company regarding the
initiation of a market check process.
On September 14, 2012, the special transaction committee met to discuss a list of
potential acquirers of the Company and certain other matters. The list, which included approximately 150 potential acquirers, included all strategic and financial (e.g. private equity firms) buyers which had prior interactions with the Company
related to either a potential acquisition or strategic-level corporate partnerships, as well as a larger group of strategic and financial buyers which had previously made acquisitions of other software and technology vendors. Representatives of
Shea & Company presented a summary of each potential acquirers business and any relevant history between that party and the Company.
On September 21, 2012, representatives of Shea & Company provided an update to the special transaction committee regarding the status of their activities related to the possible sale of the
Company. The representatives of Shea & Company discussed with the committee the steps of a proposed process to solicit potential bids from a broad group of potentially interested parties. The special transaction committee also reviewed a
proposed process letter, which outlined the steps and response dates for potential acquirers to follow when submitting a proposal.
The proposed process, which was implemented by the Company, was as follows: i) Shea & Company provided each prospective interested party the process letter and an information memorandum, which
set forth an overview of the Company and its historical financial results, market opportunity, strategy, products, research and development, competition, employees, facilities and certain other information using publicly-available data sources; ii)
upon expression of interest in further evaluation of an acquisition of the Company, potential bidders were required to execute a nondisclosure and standstill agreement with the Company; iii) upon execution of the NDA and standstill, potential
bidders were provided access to a virtual data room containing confidential due diligence information on the Company and its business; and iv) the management team of the Company held meetings with potential bidders. Interested parties were asked to
complete this process and submit final, non-binding proposals to acquire the Company and markups to a draft merger agreement provided by Pervasive, by November 16, 2012.
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On September 28, 2012, the special transaction committee met with representatives of
Shea & Company to discuss an update regarding outreach to potential acquirers of the Company. As of the date of the meeting, the representatives of Shea & Company reported that they had contacted via email and telephone 104
potential financial acquirers and 47 potential strategic acquirers. The representatives of Shea & Company reviewed with the committee a presentation summarizing the status of their communications with each of the potential acquirers
that had been contacted, including whether a nondisclosure agreement had been sent to the potential acquirer, whether that nondisclosure agreement had been executed, whether data room access had been granted and whether a management presentation had
been scheduled.
On October 5, 2012, the special transaction committee again met with representatives of Shea &
Company to discuss a further update regarding outreach to potential acquirers of the Company. As of the date of the meeting, the representatives of Shea & Company reported that they had contacted 106 potential financial acquirers, 23 of
which had requested a nondisclosure agreement, 62 of which had indicated that they were not interested in pursuing a transaction with the Company and the remainder of which did not request an NDA and, in some cases, did not respond at all.
Representatives of Shea & Company also reported that they contacted 48 potential strategic acquirers, six of which had requested a nondisclosure agreement, 12 of which had indicated that they were not interested in pursuing a transaction with
the Company and the remainder of which did not request an NDA and, in some cases, did not respond at all. During the process, before any financial or strategic bidder was determined by Shea & Company to be non-responsive and non-interested, Shea
& Company contacted such bidder via email and/or telephone at least twice and, in some cases, five times. Of the nondisclosure agreements that were requested by and provided to bidders, nine were never executed, primarily as a result of the
respective potential bidders indicating they were no longer interested in moving forward with the bidding process after they finished their review of publicly-available information. The representatives of Shea & Company reviewed with the
committee a presentation summarizing the status of their communications with each of the potential acquirers that had been contacted, including whether a nondisclosure agreement had been sent to the potential acquirer, whether that nondisclosure
agreement had been executed, whether data room access had been granted and whether a management presentation had been scheduled.
On October 12, 2012, the special transaction committee met with representatives of Shea & Company to receive a further update regarding the potential acquirers that had been contacted and
the current status of each communication.
On October 18, 2012, Pervasive received an unsolicited letter from Parent
updating its offer to acquire all of the outstanding shares of the Company by increasing its offered price to $9.00 per share and providing comments to the Companys proposed form of nondisclosure agreement.
On October 19, 2012, the special transaction committee discussed appropriate disclosure of the letter the Company received from
Parent on October 18, 2012 and an update on the bid solicitation process as it related to the Companys upcoming earnings release. Representatives of Shea & Company gave a presentation to the special transaction committee
summarizing the status of their communications with each of the potential acquirers that had been contacted. The representatives of Shea & Company also presented to the special transaction committee an overview of the progress and next
steps for each portion of the acquisition process, including the initial material preparation, initial outreach, marketing and management presentation phase, diligence stages and outreach closure.
On October 26, 2012, Pervasive received a letter from Parent pursuant to the bid process letter that included a proposed term sheet
and details regarding Parents proposed purchase price, contemplated structure for the transaction, necessary approvals, anticipated sources of financing for the proposed transaction, due diligence requirements, outside advisors and additional
information. Later that same day, the special transaction committee met to discuss the letter and also received an update from representatives of Shea & Company regarding the outreach process, including the status of their communications
with each potential acquirer of the Company.
On each of November 1, 2012, November 7, 2012 and
November 15, 2012, the Company held in-person due diligence meetings between the management teams of Party A.
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On November 5, 2012, the special transaction committee met with representatives of
Shea & Company to discuss the current status of outreach to potential acquirers, including whether a nondisclosure agreement had been sent to the potential acquirer or had been signed, and to discuss the process. That same day, Parent
issued a press release disclosing that it had increased its offer from $8.50 per share to $9.00 per share and calling for an end to Pervasives outreach process.
On November 16, 2012, Pervasive received a letter from Parent reaffirming their proposal to acquire all of the outstanding shares of the Common Stock of Pervasive for $9.00 per share, and including a
markup of a draft merger agreement. The special transaction committee met with representatives of Shea & Company to discuss an update regarding progress of their outreach effort.
On November 20, 2012, Pervasive received a nonbinding letter from Party A proposing to acquire all of the outstanding shares of the
Common Stock of Pervasive for $9.25 per share, and including a markup of a draft merger agreement.
On November 26, 2012,
representatives of Shea & Company provided updates to the special transaction committee regarding the outreach and bid solicitation process.
On November 30, 2012, representatives of Shea & Company provided updates to the special transaction committee regarding the outreach and bid solicitation process.
On December 4, 2012, the board held a meeting to discuss the potential sale of the Company. Representatives of Shea &
Company provided the board with a detailed update on the process and the status of the outreach to potential acquirers, noting that two parties, Parent and Party A, had submitted letters of intent. The representatives of Shea & Company
discussed with the board the nondisclosure agreements that had been executed with certain of the potential acquirers and material differences in the nondisclosure agreement that was executed by Parent, including the fact that Parent had declined to
sign the Companys proposed one-year standstill agreement that other potential bidders had signed and had instead, on December 3, 2012, executed a nondisclosure agreement containing a two-month standstill agreement.
The board discussed with representatives of Shea & Company the terms of the submitted offers by Parent and Party A and the business and financial characteristics of both bidders, including, as applicable, each companys available cash
and financing options, acquisition history and exhibited level of interest. The representatives of Shea & Company also provided the board with a preliminary valuation analysis for the Company, including various data points to provide
context for the valuations, and details regarding communications with potential strategic and financial acquirers.
On
December 5, 2012, the Company held in-person due diligence meetings between the management teams of Parent and the Company. From October 17, 2012 through December 5, 2012, the Company held due diligence meetings with the management
teams of six other potential bidders in addition to the meetings it held with Parent and Party A, but none of those six other potential bidders submitted any letter of intent or other indication of interest in pursuing a transaction with the
Company.
On December 6, 2012, Shea & Company spoke with a representative from Party A, who informed
Shea & Company that, while Party A was still interested in the potential acquisition of Pervasive, Party A needed to focus on internal matters for a period of time.
On December 7, 2012, the special transaction committee discussed with representatives of Shea & Company an update on the
outreach and bid solicitation process. The representatives of Shea & Company also discussed with the committee the recent Parent in-person due diligence meetings.
On December 13, 2012, the board met and discussed the current status of the outreach process.
On December 14, 2012, the special transaction committee held a meeting and discussed with representatives of Shea & Company
the latest developments in the outreach and bid solicitation process, including an update
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regarding the in-person due diligence meetings with Party A. Representatives of WSGR described for the committee the terms of the transaction as proposed by Parent, including the fact that
Parents proposal did not contain a financing condition but included a customary reverse break fee structure that enabled Parent to terminate the merger agreement, and limited Parents liability to the Company, in the event that Parent was
unable to raise financing for the transaction. The committee discussed the fact that, aside from price, the financing-related provisions were the most material difference between Parents proposal and Party As proposal, which would be
funded with Party As cash on hand and was not conditional in any way upon the receipt of third party financing. Representatives of WSGR discussed with the committee the risks created by the financing-related arrangements proposed by Parent and
potential strategies for negotiating terms to either eliminate the financing related risks, or if that was not possible, to attempt to mitigate the effect of the financing related risks.
On December 14, 2012, WSGR distributed to each of Parent and Party A a revised draft of the merger agreement reflecting the
Companys responses to the proposed revisions from Parent and Party A and discussed such proposed revisions with respective legal counsel.
On each of December 21, 2012, January 4, 2013 and January 11, 2013, the special transaction committee held a meeting and discussed with representatives of Shea & Company an update
on the outreach and bid solicitation process. The updates at each meeting were primarily focused on the status of negotiations with Parent and Party A.
On January 14, 2013, Parent provided the Company with proposed revisions to the merger agreement, including an increase to Parents proposed purchase price per share to $9.10, and the
Companys disclosure letter. Also on January 14, 2013, representatives of Shea & Company discussed with a representative of Party A the fact that Party A had not made meaningful progress in the process since Party A had initially
proposed a letter of intent. During that conversation, the representative of Party A told the representatives of Shea & Company that Party A would not be able to consider the consummation of a potential acquisition of Pervasive for an
indeterminate period of time, and the representative of Party A was uncertain as to whether, if after the passage of time, Party A would have interest.
On January 17, 2013, the special transaction committee held a meeting and discussed with representatives of Shea & Company an update on the outreach and bid solicitation process. The update
was primarily focused on the status of negotiations with Parent and Party A, including the material differences between the transaction terms and conditions proposed by each of the parties and the recent communications with Party A.
Between January 19, 2013 and January 24, 2013, representatives of the Company and Parent and their respective legal advisors,
together with representatives of Shea & Company, negotiated the terms of the merger agreement with a view toward addressing the risks attendant to the financing-related arrangements proposed by Parent. As a result of significant
negotiations regarding the terms of the transaction, including the proposed price per share, the draft merger agreement that Parent sent to Pervasive on January 21, 2013 reflected Parents increase to its proposed price per share from
$9.10 to $9.20.
On January 23, 2013, the special transaction committee held a meeting and discussed and asked questions
of representatives of WSGR and Shea & Company regarding each of the material outstanding issues in the negotiations with Parent.
On January 25, 2013, the special transaction committee held an update call with our management and representatives of WSGR and Shea & Company to discuss the current status of negotiations
with Parent regarding the terms of the merger agreement, including the resulting proposed resolution of each of the financing-related issues discussed at the previous committee meeting. The special transaction committee discussed and asked questions
of representatives of WSGR and Shea & Company regarding each of such outstanding issues and considered strategic responses to Parents current position on each, including Parents currently proposed price. The special transaction
committee also discussed with Shea & Company that there had been no further indication from Party A that Party A would be in a position to continue discussions regarding a potential transaction at this time, as well as the significant risk to
the currently proposed transaction with Parent that would result from continuing to wait to determine if Party A might, at some point, be willing to engage in
26
further discussions. The special transaction committee also discussed with WSGR procedural steps toward signing the merger agreement, including the appropriate process for communicating and
meeting with the board to review and approve the merger agreement. After discussion, the special transaction committee unanimously determined to recommend to the board of directors that the board of directors approve the merger agreement and the
transactions contemplated thereby, including the proposed merger.
On January 26, 2013, our board of directors met
with management and representatives from Shea & Company and WSGR to consider the proposed transaction and to review and deliberate the final terms of the merger agreement. Representatives from Shea & Company provided the board with
a detailed financial analysis of the proposed transaction, and representatives from WSGR reviewed with the board the material terms of the proposed merger agreement. The board also discussed the fact that, as of that time, Parent was the only bidder
actively engaged in the process and there was no indication that any other bidders, including Party A, would be likely to present a proposed transaction that would be more valuable to the Companys stockholders than the currently proposed
transaction with Parent. The board discussed a variety of factors relating to the proposed merger and whether the transaction with Parent at this time was in the best interests of the Companys stockholders. In order to provide the members of
the board with additional time to review and consider the terms of the merger agreement, the board decided to reconvene the following day to discuss the proposed transaction with Parent.
On January 27, 2013, our board of directors met with management and representatives from Shea & Company and WSGR to
consider the proposed transaction. Shea & Company delivered its written opinion to our board of directors that, as of January 27, 2013 and based upon and subject to the considerations, limitations and other matters set forth in the
written opinion, the Merger consideration is fair to the holders of Company Common Stock from a financial point of view. The full text of the opinion of Shea & Company, dated as of January 27, 2013, which sets forth, among other
things, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Shea & Company in rendering its opinion, is attached as Annex B to this proxy statement and is incorporated
by reference in this proxy statement in its entirety. The members of the board asked various questions of Shea & Company and WSGR representatives regarding the terms of the Merger Agreement and the proposed transaction. After discussion,
the board unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Merger, determined that the Merger Agreement was advisable, fair to, and in the best interests of the Companys stockholders and
resolved to recommend that our stockholders approve the Merger at the special meeting of the stockholders. The Merger Agreement was executed on January 28, 2013.
Reasons for the Merger; Special Transaction Committee; Recommendation of Our Board of Directors
Special Transaction Committee
The special transaction committee of
the board of directors, consisting solely of independent directors, and, acting with the advice and assistance of the Companys independent legal and financial advisors, evaluated and actively participated in the negotiation of the Merger,
including the terms and conditions of the Merger Agreement, with Parent and Merger Sub. At the meeting held on January 25, 2013 described above, the special transaction committee unanimously recommended the terms of the Merger Agreement to the
board of directors.
Board of Directors
Our board of directors, at the meeting held on January 27, 2013 described above, (i) determined that the Merger Agreement is advisable, fair to, and in the best interests of the stockholders of
the Company; (ii) approved and authorized the Merger Agreement and the transactions contemplated thereby; (iii) directed that notice be given to the stockholders of a special meeting of the stockholders to be held for the purpose of voting
on the adoption of the Merger Agreement; (iv) resolved to recommend that the stockholders adopt the Merger Agreement at the special meeting of the stockholders; and (v) resolved that the approval of our board of directors constitute
approval under the provisions of Section 203 of the DGCL as a result of which the Merger Agreement and the transactions contemplated thereby are not and will not be subject to the restrictions on business combinations under the
provision of Section 203 of the DGCL.
27
In the course of reaching its determination, our board of directors considered the following
factors and potential benefits of the Merger:
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the current and historical market prices of the Companys Common Stock and the fact that the price of $9.20 per share represented a premium to
those historical prices;
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the current volatile state of the economy and general uncertainty surrounding forecasted economic conditions in both the near-term and the long-term,
globally as well as within the data management industry;
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the increasing costs of operating as a small public company;
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the increased competition from large-scale competitors;
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the results of the process conducted by the Company and its financial advisors to evaluate strategic alternatives available to the Company;
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the Companys historical performance and condition and strategic goals, business, prospects, operations, technology, management and competitive
position;
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the Companys historical share price relative to that of market indices, vendors of software products similar to those provided by the Company,
and vendors of software products with market capitalizations similar to that of the Company;
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the strategic benefits of the Merger with respect to the commercialization of the Companys products;
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the view of the management of the Company regarding the financial condition, results of operations and business of the Company before and after giving
effect to the Merger and managements views of the prospects for the Companys business both as an independent entity, including based on draft stand-alone valuations prepared by Shea & Company, and assuming the consummation of the
Merger;
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the prospects of the Company as an independent company;
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the impact of the Merger on the Companys customers and employees;
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the terms of the Merger Agreement and the related agreements, including:
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the representations, warranties and covenants of the parties in the Merger Agreement;
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the conditions to parties obligations to consummate the Merger;
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our ability, under certain limited circumstances, to furnish information to and conduct negotiations with third parties regarding other proposals;
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our ability to terminate the Merger Agreement in order to accept a financially superior proposal, subject to paying Parent a termination fee of
$4,857,965;
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Parents representation that the debt commitment letter, when taken together with the other financial resources of Parent and Merger Sub including
cash, cash equivalents and marketable securities of Parent, Merger Sub, the Company and the Companys subsidiaries on the closing date of the Merger, will be sufficient for Parent and Merger Sub to consummate the Merger upon the terms
contemplated by the Merger Agreement and pay all related fees and expenses, and that the Company is a named third party beneficiary of the equity commitment letter;
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our ability to enforce specifically the terms and provisions of the Merger Agreement to prevent certain breaches of the Merger Agreement, and
Parents affirmative obligation to cooperate with any such efforts;
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the fact that the Merger consideration is all cash, allowing the Companys stockholders to immediately realize a fair value for their investment,
while also providing such stockholders certainty of value for their shares;
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28
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the availability of appraisal rights to holders of the Common Stock who comply with all of the required procedures under Delaware law, which allows
such holders to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery;
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the financial presentation of Shea & Company, including the opinion of Shea & Company that, as of January 27, 2013 and based
upon and subject to the qualifications, limitations and assumptions stated in its written opinion and other matters as they see relevant, the Merger consideration to be paid to the holders of Company Common Stock is fair, from a financial point of
view, to such holders; and
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the unanimous recommendation by the special transaction committee of the terms and conditions of the Merger Agreement.
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Our board of directors also considered a variety of risks and other potentially negative factors concerning the Merger Agreement and the
Merger, including the following:
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the risks and costs to the Company if the Merger does not close, including the effect of substantial expenses incurred in connection with the Merger,
and the effect of a public announcement of the Merger on the Companys sales and operating results, the Companys ability to attract and retain key management, marketing and technical personnel, the Companys ability to raise
additional capital and the Companys ability to consummate an alternative strategic transaction;
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the fact that the Companys stockholders will not participate in any future earnings or growth of the Company and will not benefit from any
appreciation in value of the Company, including any appreciation in value that could be realized as a result of improvements to the Companys operations;
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the current volatile state of the economy and general uncertainty surrounding forecasted economic conditions, both globally and also within the data
management industry, and the related impact on the Companys current share price and overall valuation;
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the vote of the Companys stockholders required to adopt the Merger Agreement is the affirmative vote of the holders of a majority of the
outstanding shares of the Companys Common Stock;
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the requirement that we pay Parent a termination fee of $4,857,965 if our board of directors accepts a superior proposal;
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the restrictions on the conduct of the Companys business prior to the completion of the Merger, requiring the Company to conduct its business
only in the ordinary course, subject to specific limitations, which may delay or prevent the Company from undertaking business opportunities that may arise pending completion of the Merger; and
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the fact that an all cash transaction would be taxable to the Companys stockholders that are U.S. persons for United States federal income tax
purposes.
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The foregoing discussion summarizes the material factors considered by the board of directors in
its consideration of the Merger. After considering these factors, the board of directors concluded that the Merger Agreement and the Merger were in the best interests of our shareholders. In view of the wide variety of factors considered by the
board of directors, and the complexity of these matters, the board of directors did not find it practicable to quantify or otherwise assign relative weights to the foregoing factors. In addition, individual members of the board of directors may have
assigned different weights to various factors. The board of directors approved and recommends the Merger Agreement and the Merger based upon the totality of the information presented to and considered by it.
29
Our board of directors recommends that you vote FOR the adoption of the
Merger Agreement and FOR the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies.
Opinion of Financial Advisor
Pervasive retained Shea & Company to act as its financial advisor with respect to pursuing strategic alternatives for the Company, including a possible sale of the Company, and to render an
opinion to our board of directors as to the fairness, from a financial point of view, of the consideration to be received by Pervasives shareholders in connection with the Merger. On January 27, 2013, Shea & Company delivered its
oral opinion, subsequently confirmed in a written opinion of the same date, to the board of directors that, based on and subject to the limitations and assumptions stated in the opinion, as of the date of the opinion the Merger consideration to be
received by the holders of Pervasive Common Stock pursuant to the Merger Agreement was fair, from a financial point of view, to such holders.
The full text of Shea & Companys written opinion dated January 27, 2013, which contains the assumptions made, procedures followed, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of Shea & Companys opinion in this proxy statement is qualified in its entirety by
reference to the full text of the opinion and you are urged to read the opinion in its entirety.
Shea &
Companys opinion addresses solely the fairness, from a financial point of view, to the holders of Pervasive Common Stock of the Merger consideration as of the date of the opinion. Shea & Companys opinion was directed solely to
our board of directors in connection with its consideration of the Merger and was not intended to be, and does not constitute, a recommendation to any Pervasive stockholder as to how such stockholder should vote or how any such stockholder should
act with respect to the Merger or any other matter, including, but not limited to, exercise of appraisal rights. Shea & Companys opinion was not approved or issued by a fairness opinion committee.
In arriving at its opinion, Shea & Company, among other things, has:
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reviewed certain publicly available financial statements and other business and financial information of Pervasive, including analyst reports;
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reviewed certain internal financial statements and other financial and operating data concerning Pervasive prepared by management of Pervasive;
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analyzed certain financial forecasts prepared by our management, which forecasts Pervasive represented to Shea & Company are consistent with
the best judgments of our management as to the future financial performance of Pervasive and are the best available forecasts with respect to such future financial performance of Pervasive;
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discussed the past and current operations and financial condition and the prospects of Pervasive with senior executives of Pervasive;
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reviewed the reported prices and trading activity for Pervasives Common Stock;
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compared the financial performance of Pervasive and the prices and trading activity of Pervasives Common Stock with that of certain other
publicly traded companies and their securities that Shea & Company considered to be generally relevant;
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reviewed the financial terms, to the extent publicly available, of certain transactions that Shea & Company considered to be relevant;
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reviewed the draft of the Merger Agreement dated January 25, 2013 and certain related documents; and
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performed such other analyses, studies and investigations, and considered such other factors as Shea & Company has deemed appropriate.
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30
In addition, Shea & Company conducted such other inquiries, examinations and
analyses, and considered such other financial, economic and market criteria as Shea & Company deemed necessary in arriving at its opinion.
The following is a summary of the material financial analyses performed by Shea & Company in connection with the preparation of its fairness opinion, which was reviewed with, and formally
delivered to, our board of directors at a meeting held on January 27, 2013. The preparation of analyses and a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular circumstances. Therefore, this summary does not purport to be a complete description of the analyses performed by Shea & Company or of its presentation to our board
of directors on January 27, 2013.
This summary includes information presented in tabular format, which tables must be
read together with the text of each analysis summary and considered as a whole in order to fully understand the financial analyses presented by Shea & Company. The tables alone do not constitute a complete summary of the financial analyses.
The order in which these analyses are presented below, and the results of those analyses, should not be taken as an indication of the relative importance or weight given to these analyses by Shea & Company or our board of directors. Except
as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before January 25, 2013 (the last trading day prior to the opinion being rendered), and is
not necessarily indicative of current market conditions.
For purposes of its analyses, Shea & Company calculated
(i) Pervasives equity value implied by the Merger to be approximately $160.4 million, based on approximately 17.4 million fully-diluted shares of Pervasives Common Stock outstanding as of January 25, 2013, calculated
using the treasury stock method; and (ii) Pervasives enterprise value implied by the Merger (EV) to be approximately $114.7 million, based on Pervasives estimate of its cash and cash equivalents of $45.7 million as of
December 31, 2012 and no outstanding debt as of that date. For the purposes of this analysis, EV equates to implied equity value, plus debt, less cash.
Financial Analyses
Shea & Company performed the following
financial analyses in connection with rendering its opinion to our board of directors:
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selected mergers and acquisitions (M&A) transaction analysis;
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selected public company trading analysis;
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acquisition premiums paid analysis; and
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discounted cash flows analysis.
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Each of these analyses is summarized below.
Selected M&A Transaction
Analysis
Shea & Company reviewed M&A transactions involving target companies in the enterprise software
sector that were deemed, in Shea & Companys professional judgment, to have aspects similar to Pervasives business or financial profile. Shea & Company selected these transactions using the following criteria:
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pending or completed transactions announced since January 1, 2011;
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transactions in which the acquiring company purchased a controlling interest of the target;
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transaction value between $50 million and $500 million; and
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target companies in the enterprise software industry.
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31
Based on these criteria, Shea & Company identified and analyzed the following
transactions:
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Target
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Acquiror
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Pardot LLC
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ExactTarget, Inc.
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SenSage, Inc.
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KEYW Holding Corporation
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UC4 Software, Inc.
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EQT Partners
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Servigistics, Inc.
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PTC Inc.
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Folhamatic Group
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Sage Group plc
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Esterel Technologies, Inc.
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ANSYS, Inc.
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iContact Corp
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Vocus, Inc.
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Convio, Inc.*
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Blackbaud Inc.
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TaxACT
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InfoSpace, Inc.
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DemandTec, Inc.*
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International Business Machines Corporation
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Mobile Complete, Inc. (dba Device Anywhere)
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Keynote Systems, Inc.
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Multifamily Technology Solutions, Inc.
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RealPage, Inc.
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Global 360 Holding Corporation
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Open Text Corporation
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dynaTrace software, Inc.
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Compuware Corporation
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Apache Design Solutions, Inc.
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ANSYS, Inc.
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Interactive TKO, Inc.
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CA Technologies, Inc.
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Clearwell Systems, Inc.
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Symantec Corporation
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Realm Solutions Inc. (Argus Software)
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Altus Group
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Amcom Software, Inc.
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USA Mobility, Inc.
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Tollgrade Communications, Inc.*
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Golden Gate Capital Partners
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Vocollect, Inc.
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Intermec Inc.
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*
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publicly traded target company
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For each of the selected transactions, Shea & Company calculated valuation multiples based on the ratio of: (i) implied EV
to last twelve months (LTM) revenue and (ii) implied EV to LTM EBITDA. EBITDA is a non-GAAP financial measure, calculated as earnings before interest, taxes, depreciation and amortization, stock-based compensation
expense and transaction costs. For each of the two calculation methods, the valuation multiples were then grouped into two data sets one data set with the calculations for all the selected transactions and one data set with the calculations
for only the selected transactions in which the target company was publicly traded. Shea & Company then compared the data sets with the valuation multiples for Pervasive, which were calculated using the EV implied by the Merger
consideration.
The selected M&A transactions analysis showed that, based on the estimates and assumptions used in the
analysis, the implied valuation multiples of Pervasive based on the Merger consideration were within or above the range of valuation multiples for implied EV to LTM EBITDA for all of the selected transactions, and for the selected transactions
in which the target company was publicly traded; however, the valuation multiple of Pervasive was below the median valuation multiples for implied EV to LTM revenue for both data sets. Shea & Company noted that the target companies in these
selected transactions were generally growing faster than Pervasive, particularly with respect to revenue.
The selected
M&A transactions analysis indicated the following multiples:
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Selected M&A Transactions
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Pervasive (1)
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Minimum
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Mean
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Median
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Maximum
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Implied EV to LTM revenue for all selected transactions
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2.3x
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1.4x
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4.4x
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3.5x
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9.8x
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Implied EV to LTM revenue for selected transactions in which target company was publicly traded
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2.3x
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1.4x
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3.1x
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3.3x
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4.6x
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Implied EV to LTM EBITDA for all selected transactions (2)
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18.0x
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7.2x
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16.3x
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14.4x
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28.1x
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Implied EV to LTM EBITDA for selected transactions in which target company was publicly traded (2)
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18.0x
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7.2x
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16.6x
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16.6x
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25.9x
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32
(1)
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Based on the Merger consideration.
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(2)
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Information not available with respect to 11 transactions, and transactions with a multiple of implied EV to LTM EBITDA greater than 50x were considered outliers and
were not included in the data set.
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Selected Public Company Trading Analysis
Shea & Company reviewed selected historical financial data of Pervasive and estimated financial data of Pervasive based on
projections provided by our management and compared them to corresponding financial data, where applicable, for U.S. listed public companies in the enterprise software sector that Shea & Company deemed comparable to Pervasive. In its
analyses, Shea & Company reviewed two sets of selected public companies in the enterprise software sector: industry peers and comparable scale software vendors. For the set of industry peers, Shea & Company selected companies that
it deemed in its professional judgment to possess attributes similar to aspects of Pervasives business, such as vendors that provide software products and services similar in some aspects to the software products and services sold by
Pervasive. For the set of comparable scale software vendors, Shea & Company selected companies in the software industry that it deemed in its professional judgment to be of similar scale to Pervasive, based on Shea & Companys
review of the revenue and other financial aspects of those companies.
Based on these criteria, Shea & Company
identified and analyzed the following selected companies:
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Industry Peers
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Comparable Scale Software Vendors
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Actuate Corporation
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F-Secure Corporation
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Axway Software SA
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FalconStor Software, Inc.
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Informatica Corporation
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Guidance Software, Inc.
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Micro Focus International plc
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Intralinks Holdings, Inc.
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Pegasystems Inc.
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Magic Software Enterprises Ltd.
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Progress Software Corporation
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Radware Ltd.
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Software AG
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ReadSoft AB
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TIBCO Software Inc.
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For the selected public company trading analysis, Shea & Company compared four valuation
multiples for each of the industry peer set and the comparable scale software vendor set of selected public companies to comparable valuation multiples for Pervasive. The four valuation multiples were the ratios of: (i) EV to projected calendar
year (CY) 2012 revenue; (ii) EV to projected CY 2013 revenue; (iii) EV to projected CY 2012 EBITDA and (iv) EV to projected CY 2013 EBITDA. The Pervasive valuation multiples were derived using the EV implied
by the Merger consideration and the following items set forth in Pervasives historical and projected financial statements: (i) estimated revenue of $50.7 million for CY 2012 and $50.7 million for CY 2013 and (ii) estimated
EBITDA (calculated throughout as earnings before interest, taxes, depreciation and amortization, stock-based compensation expense, and one-time expenses identified by our management) of $6.4 million for CY 2012 and $4.5 million for
CY 2013. The valuation multiples for each of the selected companies was calculated using the EV based on such companys closing share price on January 18, 2013 and consensus projections for such companys revenue and EBITDA for
CY 2012 and CY 2013.
The selected public company trading analysis showed that, based on the estimates and
assumptions used in the analysis, for the comparable scale software vendors set of selected public companies, in all four valuation multiple categories, the implied valuation multiples of Pervasive based on the Merger consideration were within or
exceeded the range of calculated valuation multiples of the comparable scale software vendors set of selected public companies. For the industry peer set of selected public companies, the implied valuation multiples of Pervasive based on the Merger
consideration exceeded the range of calculated valuation multiples for the industry peer set of selected public companies when comparing the ratio of (i) EV to projected CY 2012 EBITDA and (ii) EV to projected CY 2013 EBITDA, but
were less than the median valuation multiples for the industry peer set of selected public companies when comparing the ratio of (iii) EV to projected CY 2012
33
revenue and (iv) EV to projected CY 2013 revenue. Shea & Company noted the public companies comprising the set of industry peers were of substantially greater scale in terms of
revenue and profitability, and generally faster-growing than Pervasive.
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Ratio
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EV to Projected CY 2012
Revenue
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EV to Projected CY 2013
Revenue
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EV to Projected CY 2012
EBITDA(1)
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EV to Projected CY 2013
EBITDA(1)
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Industry Peers
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Minimum
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1.5x
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1.4x
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6.9x
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7.1x
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Mean
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2.9x
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2.7x
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10.8x
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10.3x
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Median
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2.9x
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2.8x
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10.4x
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9.6x
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Maximum
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4.4x
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4.1x
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16.0x
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14.5x
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Comparable Scale Software Vendors
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Minimum
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0.7x
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0.7x
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7.1x
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5.4x
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|
Mean
|
|
|
1.7x
|
|
|
|
1.6x
|
|
|
|
12.5x
|
|
|
|
9.7x
|
|
Median
|
|
|
1.6x
|
|
|
|
1.5x
|
|
|
|
10.4x
|
|
|
|
9.2x
|
|
Maximum
|
|
|
3.0x
|
|
|
|
2.7x
|
|
|
|
23.8x
|
|
|
|
16.4x
|
|
Pervasive (2)
|
|
|
2.3x
|
|
|
|
2.3x
|
|
|
|
18.0x
|
|
|
|
25.6x
|
|
(1)
|
Data for two companies in the comparable scale software vendor set was excluded from calculation of the minimum, mean, median and maximum because projected EBITDA was
not available.
|
(2)
|
Based on the Merger consideration.
|
All projected financial information in the table above for the select public companies was based on equity research analyst consensus estimates.
In addition, as part of the selected public company trading analysis, Shea & Company compared valuation multiples of (i) EV
to projected CY 2012 revenue and (ii) EV to projected CY 2013 revenue, for Pervasive (using the EV implied by the Merger consideration) and a broad group of 110 mid- and large-cap enterprise software public companies, of which 21 had
a revenue growth rate of less than 5% for CY 2013. This analysis showed that, based on the estimates and assumptions used in the analysis, the implied valuation multiples of Pervasive based on the Merger consideration were within or exceeded
the range of valuation multiples for this set of mid- and large-cap enterprise software public companies with a revenue growth rate of less than 5% for 2013 when comparing the ratios of: (i) EV to projected CY 2012 revenue and (ii) EV
to projected CY 2013 revenue.
|
|
|
|
|
|
|
|
|
Ratio
|
|
EV to Projected CY 2012
Revenue
|
|
|
EV to Projected CY 2013
Revenue
|
|
Mean
|
|
|
1.8x
|
|
|
|
1.9x
|
|
Median
|
|
|
2.0x
|
|
|
|
2.0x
|
|
Pervasive (1)
|
|
|
2.3x
|
|
|
|
2.3x
|
|
(1)
|
Based on the Merger consideration.
|
Acquisition Premiums Paid Analysis
Shea & Company
reviewed publicly available information for selected completed merger transactions to determine the premiums paid in the transactions over recent trading prices of the target companies prior to announcement of the transaction (or, when applicable,
prior to the date that the acquirors offer or the targets review of strategic alternatives was made publicly known). Shea & Company selected transactions that it deemed in its professional judgment to include aspects similar to
Parents proposed acquisition of Pervasive using the following criteria:
|
|
|
completed transactions announced since January 1, 2011 involving targets traded on U.S. stock exchanges;
|
|
|
|
acquiror purchased all outstanding equity of target;
|
34
|
|
|
target EV greater than $50 million; and
|
|
|
|
target companies in the enterprise software industry.
|
Shea & Company performed its analysis on 19 transactions that satisfied these criteria, and the table below shows a comparison of premiums paid in these transactions to the premium that would be
paid to Pervasives stockholders based on the Merger consideration. The valuation multiple for Pervasive was within or exceeded the range of valuation multiples resulting from this analysis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Premiums Paid based on Enterprise Value
|
|
|
|
Pervasive (1)
|
|
|
Minimum
|
|
|
Mean
|
|
|
Median
|
|
|
Maximum
|
|
Premium to prior trading day price
|
|
|
40.5
|
%
|
|
|
13.9
|
%
|
|
|
32.5
|
%
|
|
|
32.4
|
%
|
|
|
56.6
|
%
|
Premium to 3-month average price
|
|
|
32.9
|
%
|
|
|
17.4
|
%
|
|
|
41.3
|
%
|
|
|
34.7
|
%
|
|
|
85.8
|
%
|
Premium to one-year average trading price
|
|
|
45.8
|
%
|
|
|
14.4
|
%
|
|
|
41.0
|
%
|
|
|
39.7
|
%
|
|
|
74.7
|
%
|
(1)
|
Pervasive premium is based on the last unaffected trading price of the Companys Common Stock, or $6.55, on August 10, 2012, the trading day prior to the
public announcement of Parents offer to acquire the Company.
|
Discounted Cash Flows Analysis
Using a discounted cash flows analysis, Shea & Company calculated an estimated range of theoretical values
for Pervasive using the projections provided by our management, based on the net present value of (i) free cash flows from December 31, 2012 to June 30, 2017, and (ii) a terminal value at June 30, 2017, based upon a multiple of
projected FY 2018 EBITDA that was discounted back to December 31, 2012. The free cash flows for each year were calculated from the projections provided by our management as operating income, plus depreciation and amortization, less capital
expenditures, plus/less change in net working capital and assuming a marginal tax rate of 35%. Using these free cash flows projections, Shea & Company calculated the range of net present values based on terminal value multiples ranging from
8.0x to 10.0x EBTIDA using a discount rate ranging from 4.0% to 8.0%, which was derived from an analysis of Pervasives weighted average cost of capital (based on an analysis of the stock performance of Pervasives industry peers). This
analysis, which is presented in the tables below, resulted in implied per share values of Pervasives Common Stock ranging from a low of $6.29 per share to a high of $7.86 per share. Shea & Company observed that the Merger
consideration of $9.20 per share was higher than the range of values derived from this analysis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow Valuation Period
|
|
|
TV
FY18E
|
|
Free Cash Flow
|
|
FY10
|
|
|
FY11
|
|
|
FY12
|
|
|
FY13E
|
|
|
2H FY13E
|
|
|
FY14E
|
|
|
FY15E
|
|
|
FY16E
|
|
|
FY17E
|
|
|
|
|
($ millions, except per share amounts)
|
|
Revenue
|
|
$
|
47.2
|
|
|
$
|
48.4
|
|
|
$
|
49.2
|
|
|
$
|
50.2
|
|
|
$
|
25.0
|
|
|
$
|
52.2
|
|
|
$
|
54.8
|
|
|
$
|
57.6
|
|
|
$
|
60.5
|
|
|
$
|
63.5
|
|
Growth rate
|
|
|
|
|
|
|
2.5
|
%
|
|
|
1.6
|
%
|
|
|
2.2
|
%
|
|
|
|
|
|
|
4.0
|
%
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
8.7
|
|
|
$
|
6.8
|
|
|
$
|
5.5
|
|
|
$
|
4.8
|
|
|
$
|
1.6
|
|
|
$
|
5.3
|
|
|
$
|
8.2
|
|
|
$
|
8.6
|
|
|
$
|
9.1
|
|
|
$
|
9.5
|
|
EBITDA margin
|
|
|
18.4
|
%
|
|
|
14.0
|
%
|
|
|
11.2
|
%
|
|
|
9.5
|
%
|
|
|
6.2
|
%
|
|
|
10.2
|
%
|
|
|
15.0
|
%
|
|
|
15.0
|
%
|
|
|
15.0
|
%
|
|
|
15.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Estimated taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.5
|
|
|
$
|
1.9
|
|
|
$
|
2.9
|
|
|
$
|
3.0
|
|
|
$
|
3.2
|
|
|
|
|
|
Marginal tax rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIAT (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.0
|
|
|
$
|
3.5
|
|
|
$
|
5.3
|
|
|
$
|
5.6
|
|
|
$
|
5.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: increase in NWC
|
|
$
|
(0.4
|
)
|
|
$
|
1.1
|
|
|
$
|
1.0
|
|
|
$
|
(0.0
|
)
|
|
$
|
(0.0
|
)
|
|
$
|
(0.0
|
)
|
|
$
|
(0.0
|
)
|
|
$
|
(0.0
|
)
|
|
$
|
(0.0
|
)
|
|
|
|
|
Less: capex
|
|
$
|
(0.6
|
)
|
|
$
|
(0.8
|
)
|
|
$
|
(0.9
|
)
|
|
$
|
(1.0
|
)
|
|
$
|
(1.0
|
)
|
|
$
|
(1.1
|
)
|
|
$
|
(1.1
|
)
|
|
$
|
(1.2
|
)
|
|
$
|
(1.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
$
|
7.7
|
|
|
$
|
7.1
|
|
|
$
|
5.7
|
|
|
$
|
3.8
|
|
|
$
|
(0.0
|
)
|
|
$
|
2.4
|
|
|
$
|
4.2
|
|
|
$
|
4.4
|
|
|
$
|
4.6
|
|
|
|
|
|
35
Discounted Equity Value ($ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal Value Multiple of FY18 EBITDA
|
|
Discount Rate
|
|
8.0x
|
|
|
8.5x
|
|
|
9.0x
|
|
|
9.5x
|
|
|
10.0x
|
|
8%
|
|
$
|
107.7
|
|
|
$
|
110.8
|
|
|
$
|
113.9
|
|
|
$
|
117.1
|
|
|
$
|
120.2
|
|
7%
|
|
$
|
110.7
|
|
|
$
|
114.0
|
|
|
$
|
117.2
|
|
|
$
|
120.5
|
|
|
$
|
123.8
|
|
6%
|
|
$
|
113.8
|
|
|
$
|
117.3
|
|
|
$
|
120.8
|
|
|
$
|
124.2
|
|
|
$
|
127.7
|
|
5%
|
|
$
|
117.2
|
|
|
$
|
120.8
|
|
|
$
|
124.5
|
|
|
$
|
128.1
|
|
|
$
|
131.8
|
|
4%
|
|
$
|
120.7
|
|
|
$
|
124.6
|
|
|
$
|
128.4
|
|
|
$
|
132.3
|
|
|
$
|
136.1
|
|
Discounted Per Share Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal Value Multiple of FY18 EBITDA
|
|
Discount Rate
|
|
8.0x
|
|
|
8.5x
|
|
|
9.0x
|
|
|
9.5x
|
|
|
10.0x
|
|
8%
|
|
$
|
6.29
|
|
|
$
|
6.46
|
|
|
$
|
6.64
|
|
|
$
|
6.81
|
|
|
$
|
6.98
|
|
7%
|
|
$
|
6.46
|
|
|
$
|
6.64
|
|
|
$
|
6.82
|
|
|
$
|
7.00
|
|
|
$
|
7.18
|
|
6%
|
|
$
|
6.63
|
|
|
$
|
6.82
|
|
|
$
|
7.01
|
|
|
$
|
7.20
|
|
|
$
|
7.39
|
|
5%
|
|
$
|
6.81
|
|
|
$
|
7.02
|
|
|
$
|
7.22
|
|
|
$
|
7.42
|
|
|
$
|
7.62
|
|
4%
|
|
$
|
7.01
|
|
|
$
|
7.22
|
|
|
$
|
7.44
|
|
|
$
|
7.65
|
|
|
$
|
7.86
|
|
Miscellaneous
The summary set forth above does not contain a complete description of the analyses performed by Shea & Company, but does summarize the material analyses performed by Shea & Company in
rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Shea & Company believes that its analyses and the summary set forth above must
be considered as a whole and that selecting portions of its analyses or of the summary, without considering the analyses as a whole or all of the factors included in its analyses, would create an incomplete view of the processes underlying the
analyses set forth in the Shea & Company opinion. In arriving at its opinion, Shea & Company considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Instead,
Shea & Company made its determination as to fairness on the basis of its experience and financial judgment after considering the results of all of its analyses. The fact that any specific analysis has been referred to in the summary above
is not meant to indicate that this analysis was given greater weight than any other analysis. In addition, the ranges of valuations resulting from any particular analysis described above should not be taken to be Shea & Companys view
of the actual value of Pervasive.
No company or transaction used in the above analyses as a comparison is directly comparable
to Pervasive or the Merger and the other transactions contemplated by the Merger Agreement. Accordingly, an analysis of the results of the comparisons is not mathematical; rather, it involves complex considerations and judgments about differences in
the companies and transactions to which Pervasive and the Merger were compared and other factors that could affect the public trading value or transaction value of the companies involved.
Shea & Company performed its analyses for purposes of providing its opinion to our board of directors. In performing its
analyses, Shea & Company made numerous assumptions with respect to industry performance, general business and economic conditions and other matters. Certain of the analyses performed by Shea & Company are based upon forecasts of
future results furnished to Shea & Company by our management, which are not necessarily indicative of actual future results and may be significantly more or less favorable than actual future results. These forecasts are inherently subject
to uncertainty because, among other things, they are based upon numerous factors or events beyond the control of the parties or their respective advisors. Shea & Company does not assume responsibility if future results are materially
different from forecasted results.
Shea & Company relied upon and assumed, without assuming liability or
responsibility for independent verification, the accuracy and completeness of all information that was publicly available or was furnished, or
36
otherwise made available, to Shea & Company or discussed with or reviewed by Shea & Company. Shea & Company further relied upon the assurances of our management that
the financial information provided to Shea & Company was prepared on a reasonable basis in accordance with industry practice, and that our management was not aware of any information or facts that would make any information provided to
Shea & Company incomplete or misleading. Without limiting the generality of the foregoing, for the purpose of Shea & Companys opinion, Shea & Company assumed that with respect to financial forecasts, estimates and
other forward-looking information reviewed by Shea & Company, that such information was reasonably prepared based on assumptions reflecting the best available estimates and judgments of our management as to the expected future results of
operations and financial condition of Pervasive. Shea & Company expressed no opinion as to any such financial forecasts, estimates or forward-looking information or the assumptions on which they were based. Shea & Company relied,
with our consent, on advice of our outside counsel and our independent registered public accounting firm, and on the assumptions of our management, as to all accounting, legal, tax and financial reporting matters with respect to Pervasive and the
Merger Agreement.
Shea & Companys opinion was one of many factors taken into consideration by our board of
directors in making the determination to approve the Merger Agreement. The Merger consideration was determined through arms-length negotiations between Parent and Pervasive and was approved by our board of directors. While Shea &
Company provided advice to our board of directors during Pervasives negotiations with Parent, Shea & Company did not recommend any specific consideration.
In arriving at its opinion, Shea & Company assumed that the executed Merger Agreement was in all material respects identical to the last draft reviewed by Shea & Company. Shea &
Company relied upon and assumed, without independent verification, that (i) the representations and warranties of all parties to the Merger Agreement and all other related documents and instruments that are referred to therein were true and
correct, (ii) each party to such agreements would fully and timely perform all of the covenants and agreements required to be performed by such party, (iii) the Merger would be consummated pursuant to the terms of the Merger Agreement
without amendments thereto and (iv) all conditions to the consummation of the Merger would be satisfied without waiver by any party of any conditions or obligations thereunder. Additionally, Shea & Company assumed that all the
necessary regulatory approvals and consents required for the Merger would be obtained in a manner that would not adversely affect Pervasive or the contemplated benefits of the Merger.
In arriving at its opinion, Shea & Company did not perform any appraisals or valuations of any specific assets or liabilities
(fixed, contingent or other) of Pervasive, and was not furnished or provided with any such appraisals or valuations, nor did Shea & Company evaluate the solvency of Pervasive under any state or federal law relating to bankruptcy, insolvency
or similar matters. The analyses performed by Shea & Company in connection with its opinion were going concern analyses. Shea & Company expressed no opinion regarding the liquidation value of Pervasive or any other entity. Without
limiting the generality of the foregoing, Shea & Company undertook no independent analysis of any pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which Pervasive or any of
its affiliates was a party or may be subject, and at the direction of Pervasive and with its consent, Shea & Companys opinion made no assumption concerning, and therefore did not consider, the possible assertion of claims, outcomes or
damages arising out of any such matters. Shea & Company also assumed that neither Pervasive nor Parent is party to any material pending transaction, including without limitation any financing, recapitalization, acquisition or merger,
divestiture or spin-off, other than the Merger.
Shea & Companys opinion was necessarily based upon the
information available to it and facts and circumstances as they existed and were subject to evaluation on the date of its opinion. Events occurring after the date of its opinion could materially affect the assumptions used in preparing its opinion.
Shea & Company did not express any opinion as to the price at which shares of Pervasives Common Stock may trade following announcement of the Merger or at any future time. Shea & Company did not undertake to reaffirm or
revise its opinion or otherwise comment upon any events occurring after the date of its opinion and does not have any obligation to update, revise or reaffirm its opinion.
37
Shea & Companys opinion addressed solely the fairness, from a financial point
of view, to the holders of Pervasive Common Stock of the Merger consideration, as set forth in the Merger Agreement, and did not address any other terms or agreement relating to the Merger or any other terms of the Merger Agreement. Shea &
Company was not requested to opine as to, and its opinion does not address, the basic business decision to proceed with or effect the Merger, the merits of the Merger relative to any alternative transaction or business strategy that may be available
to Pervasive, Parents ability to fund the Merger consideration payable in the Merger pursuant to the Merger Agreement or any other terms contemplated by the Merger Agreement. Furthermore, Shea & Company expressed no opinion with
respect to the amount or nature of the compensation to any officer, director or employee, or any class of such persons, relative to the compensation to be received by holders of Pervasives Common Stock in the Merger or with respect to the
fairness of any such compensation.
Shea & Company is regularly engaged as financial advisor in connection with
mergers and acquisitions, underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. Our board of directors selected Shea & Company to render its opinion in
connection with the transactions contemplated by the Merger Agreement on the basis of its experience and reputation in acting as financial advisor in connection with mergers and acquisitions.
Shea & Company acted as Pervasives financial advisor in connection with the Merger and will receive an estimated advisory
fee of approximately $1.25 million from Pervasive, all of which, except for the retainer fee and the opinion fee discussed below, is contingent upon the consummation of the Merger. Shea & Company is entitled to a fee of $350,000 for
providing its opinion to our board of directors, which will be credited against the advisory fee. The opinion fee was not contingent upon the consummation of the Merger or the conclusions reached in Shea & Companys opinion. In
addition, Pervasive agreed to pay Shea & Company a monthly retainer fee of $25,000 commencing on August 24, 2012, which was not contingent upon consummation of the Merger. The first three months retainer fees will be credited
against the advisory fee described above. Pervasive has agreed to indemnify Shea & Company against certain liabilities and reimburse Shea & Company for certain expenses in connection with its services. Shea & Company may
in the future, provide investment banking and financial advisory services to Pervasive, Parent and/or entities that are affiliated with Pervasive or Parent, for which Shea & Company would expect to receive compensation.
Certain Prospective Financial Information
Management Financial Projections.
Pervasives senior management does not as a matter of course make public projections as to future performance or earnings beyond the coming fiscal quarter and
generally does not make public projections for extended periods due to the unpredictability of the underlying assumptions and estimates. However, in connection with the exploration of strategic alternatives as described in this proxy statement,
management prepared a set of financial projections for fiscal years 2013 and 2014, and these projections were provided to our board of directors and Shea & Company. We have included below these projections concerning our total revenue, total
gross profit, operating income, net income and EBITDA for fiscal years 2013 and 2014.
These financial projections were
developed from historical financial statements and did not give effect to any changes or expenses as a result of the Merger or any other effects of the Merger. The projections included below were prepared solely for internal use and were not
prepared with a view toward public disclosure or compliance with published guidelines of the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information or U.S. generally accepted
accounting principles (GAAP). The inclusion of this information should not be regarded as an indication that our board of directors, Shea & Company or any other recipient of this information considered, or now considers, it to be a
reliable prediction of future results. Our independent registered certified public accounting firm has neither examined nor compiled this prospective financial information and, accordingly does not express an opinion or any other form of assurance
with respect to this information. None of Pervasive, Shea & Company, Parent, any of our or their respective affiliates or any other person assumes any responsibility for the validity, reasonableness, accuracy or completeness of the projections
described below.
38
Furthermore, while presented with numerical specificity, the projections necessarily are
based on numerous assumptions, many of which are beyond our control and difficult to predict, including with respect to industry performance, competitive factors, industry consolidation, general business, economic, regulatory, market and financial
conditions, as well as matters specific to our business, which assumptions may not prove to have been, or may no longer be, accurate. The projections do not take into account any circumstances or events occurring after the date they were prepared,
including the January 28, 2013 announcement of the Merger Agreement or subsequent integration planning activities. For instance, there can be no assurance that the announcement of the Merger will not cause our customers to delay or cancel purchases
of our products and services pending the consummation of the Merger or the clarification of Parents intentions with respect to the conduct of our business following the Merger. Any such delay or cancellation of customer sales would likely
adversely affect our ability to achieve the results reflected in the financial projections. In addition, the financial projections do not take into account the effect of any failure of the Merger to occur and should not be viewed as accurate or
continuing in that context.
The projections were prepared in January 2013 in the context of the business, economic,
regulatory, market and financial conditions that existed at that time, and have not been updated to reflect revised prospects for our business, changes in general business, economic, regulatory, market and financial conditions, or any other
transaction or event that has occurred or that may occur and that was not anticipated at the time the projections were prepared. The projections are not necessarily indicative of future performance, which may be more favorable or less favorable than
as set forth below. The projections cover multiple years, and such information by its nature becomes less reliable with each successive year. They should not be utilized as public guidance and will not be provided in the ordinary course of our
business in the future.
For the foregoing and other reasons, readers of this proxy statement are cautioned that the inclusion
of financial projections in this proxy statement should not be regarded as a representation or guarantee that the targets will be achieved and that they should not rely on the projections. The projections constitute forward-looking statements and
are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in such projections, including, but not limited to, our performance, the marketplace for our products and services, industry
performance, general business and economic conditions, customer requirements, competition, our ability to successfully manage costs in the future, adverse changes in applicable laws, regulations or rules and other risks and uncertainties described
in documents we have filed with the SEC. See also the section entitled Cautionary Statement Concerning Forward-Looking Information beginning on page 17 of this proxy statement.
Projected Financial Results (in millions)
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FY 2013
Projections
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FY 2014
Projections
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Total revenue
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$
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50.2
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$
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52.2
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Total gross profit
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|
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41.7
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|
|
|
43.6
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Operating income
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|
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1.0
|
|
|
|
1.7
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Net income
|
|
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0.9
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|
|
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1.2
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EBITDA (1)
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4.8
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5.3
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(1)
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EBITDA is a non-GAAP financial measure, calculated as earnings before interest, taxes, depreciation and amortization, stock-based compensation expense and transaction
costs.
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Publicly Available Financial Forecasts.
As stated in the previous section of this proxy statement
entitled Opinion of Pervasives Financial Advisor beginning on page 30, Shea & Company utilized certain publicly available financial forecasts published by equity research analysts relating to the future financial
performance of Pervasive (the street case). These publicly available estimates relating to Pervasive included assumptions concerning the Companys revenue growth and EBITDA margins, and resulted in estimated revenue of $50.7 million
for CY 2012 and $50.7 million for CY 2013, and estimated EBITDA of $6.4 million for CY 2012 and $4.5 million for CY 2013. These estimates are being provided only for informational purposes. Such estimates and underlying assumptions were not
prepared by Pervasive, Parent or any of their respective representatives and
39
are based on assumptions that may not be realized and are subject to significant uncertainties and contingencies. Readers of this proxy statement are cautioned that the inclusion of financial
forecasts in this proxy statement should not be regarded as a representation or guarantee that the targets will be achieved and that they should not rely on the forecasts. The forecasts constitute forward-looking statements and are subject to risks
and uncertainties that could cause actual results to differ materially from the results projected in such forecasts, including, but not limited to, our performance, the marketplace for our products and services, industry performance, general
business and economic conditions, customer requirements, competition, our ability to successfully manage costs in the future, adverse changes in applicable laws, regulations or rules and other risks and uncertainties described in documents we have
filed with the SEC. See also the section entitled Cautionary Statement Concerning Forward-Looking Information beginning on page 17 of this proxy statement.
Interests of the Companys Directors and Executive Officers in the Merger
Our directors and executive officers hold shares of Pervasive Common Stock and other equity awards. All such stock and equity awards held by our directors and executive officers will be treated the same
as stock and equity awards held by our other stockholders and employees, as described in the sections entitled The Merger AgreementMerger Consideration and The Merger AgreementTreatment of Options and Restricted Stock
Units.
The following table identifies, for each of our directors and executive officers, the number of shares of
Common Stock held by such individual, the aggregate number of shares of our Common Stock subject to outstanding Company stock-based awards as of March 13, 2013 and the value of such Common Stock and Company stock-based awards. The information in the
table assumes that all such Company stock-based awards remain outstanding on the closing date of the Merger.
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Name
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Shares of
Common
Stock
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Aggregate
Value of
Common
Stock
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Shares Subject
to Stock
Options
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Weighted
Average
Exercise Price
of Stock
Options
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Aggregate
Value of Stock
Options
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Aggregate
Value of
Common Stock
and Stock
Options
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Executive Officers
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John E. Farr
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1,038,750
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$
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9,556,500.00
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50,000
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$
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7.11
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$
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104,500.00
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$
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9,661,000.00
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Randall G. Jonkers
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192,914
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$
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1,774,808.80
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30,000
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$
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4.20
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$
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150,000.00
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$
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1,924,808.80
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Michael E. Hoskins
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1,180,000
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$
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10,856,000.00
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195,000
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$
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5.13
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$
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794,400.00
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$
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11,650,400.00
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Gilbert Van Cutsem
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50,000
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$
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460,000.00
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100,000
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|
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$
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5.97
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|
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$
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323,250.00
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$
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783,250.00
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Lance Speck
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80,444
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$
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740,084.80
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44,500
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$
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4.36
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$
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215,270.00
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$
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955,354.80
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Stephen Padgett
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122,895
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$
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1,130,634.00
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$
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$
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$
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1,130,634.00
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Non-Employee Directors
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David R. Bradford
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55,000
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$
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506,000.00
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30,000
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$
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5.25
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$
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118,600.00
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$
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624,600.00
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David A. Boucher
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111,674
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$
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1,027,400.80
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30,000
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|
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$
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5.25
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$
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118,600.00
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$
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1,146,000.80
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Shelby H. Carter, Jr.
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80,000
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$
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736,000.00
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80,000
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$
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6.51
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$
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215,100.00
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$
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951,100.00
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Jeffrey S. Hawn
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140,000
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$
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1,288,000.00
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10,000
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|
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$
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7.56
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$
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16,400.00
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$
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1,304,400.00
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Nancy R. Woodward
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204,822
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$
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1,884,362.40
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10,000
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$
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7.56
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$
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16,400.00
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$
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1,900,762.40
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Management Arrangements
As of the date of this proxy statement, we have not entered into any employment agreements with our management in connection with the
Merger. Parent has no obligation to retain any members of our management team following the Merger and has not informed us of whether or not it intends to do so. To the extent that Parent does retain certain members of our management team,
it is likely that such individuals will enter into arrangements with Parent or its affiliates regarding employment (and severance arrangements) with, and the right to purchase or participate in the equity of, Parent (and/or a subsidiary thereof),
although there can be no assurance that the parties will reach agreements. These matters will be subject to negotiation and discussion and no terms or conditions have been determined.
40
Existing Change of Control and Severance Benefits
None of our executive officers have employment agreements with the Company and their employment may be terminated at any time.
Indemnification and Insurance
The Merger Agreement provides that, for a period of six (6) years following the effective time of the Merger, the Surviving Corporation and its subsidiaries will (and Parent will cause the Surviving
Corporation and its subsidiaries to) honor and fulfill in all respects the obligations of the Company and its subsidiaries under any and all indemnification agreements between the Company or any of its subsidiaries and any of their respective
current or former directors and officers and any person who becomes a director or officer of the Company or any of its subsidiaries prior to the effective time of the Merger.
The Merger Agreement also provides that, for a period of six (6) years following the effective time of the Merger, the Surviving Corporation and its subsidiaries will cause the charters and bylaws of
the Surviving Corporation and its subsidiaries to contain provisions with respect to indemnification, exculpation and advancement of expenses that are at least as favorable as the indemnification, exculpation and advancement of expenses set forth in
the charters and bylaws of the Company and its subsidiaries as of the date of the Merger Agreement, and such provisions will not be repealed, amended or otherwise modified in any manner except as required by applicable law.
Moreover, during the period of six (6) years following the effective time of the Merger, the Surviving Corporation will (and Parent
will cause the Surviving Corporation to) maintain in effect the Companys current directors and officers liability insurance (D&O Insurance), in respect of acts or omissions occurring at or prior to the effective
time of the Merger, covering each person covered by the D&O Insurance, on terms with respect to the coverage and amounts that are equivalent to those of the D&O Insurance.
Parent has also agreed to indemnify and hold harmless the Company and its subsidiaries, and each of their respective directors, officers,
employees, agents and other representatives, from and against any and all losses, damages, claims, costs or expenses suffered or incurred by any of them in connection with the arrangement of the debt financing and any information utilized in
connection therewith (other than information provided by the Company or any of its subsidiaries expressly for use therein).
Continued Benefits
At its election, Parent may maintain any employee benefit plans Parent chooses to maintain or may provide that any continuing Company employees, including any of our executive officers that remain
employed by the Surviving Corporation, will participate in or be covered by Parents benefit plans, or a combination thereof. The Merger Agreement provides that, if continuing Company employees are moved to Parents benefit plans:
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Parent will give full credit for eligibility and vesting purposes and vacation accrual purposes (but not for any other benefit accrual purposes) for
each Company employees period of service at the Company and its subsidiaries before the effective time of the Merger, subject to applicable law and the terms and conditions of Parents benefit plans; and
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subject to approval by any insurance carrier and to the extent consistent with applicable law, the terms of Parents benefit plans and tax
qualification requirements, Parent will cause any and all pre-existing condition (or actively-at-work or similar) limitations, eligibility waiting periods and evidence of insurability requirements under any group medical plans to be waived with
respect to continuing Company employees and their eligible dependents and will provide them with credit for any co-payments, deductibles and offsets (or similar payments) made during the applicable plan year prior to the effective time of the Merger
for purposes of satisfying any applicable deductible, out-of-pocket, or similar requirement under any Parent group medical programs in which they are eligible to participate on and after the effective time of the Merger.
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41
All of the Companys executive officers currently participate or are eligible to
participate in the Companys benefit plans, which include medical, dental, vision, prescription drug, life insurance, accidental death and dismemberment insurance, short term and long term disability, employee assistance program, flexible
spending accounts, 401(k) Plan, bonus plans and other welfare fringe benefit plans.
Material U.S. Federal
Income Tax Consequences
The following is a summary of certain material United States federal income tax consequences to
our stockholders of the receipt of cash in exchange for shares of Common Stock pursuant to the Merger. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (which we refer to as the Code), applicable United
States Treasury Regulations, judicial authority and administrative rulings and practice, all as in effect on the date of this proxy statement. All of these authorities are subject to change, possibly on a retroactive basis. This discussion assumes
that the shares of Common Stock are held as capital assets (generally, as property held for investment). This discussion does not address all aspects of United States federal income taxation that may be relevant to a particular stockholder in light
of such stockholders unique investment circumstances, or to stockholders subject to special treatment under the United States federal income tax laws (for example, life insurance companies, dealers or brokers in securities or currencies,
tax-exempt organizations, financial institutions, partnerships, United States expatriates, controlled foreign corporations, passive foreign investment companies, U.S. holders (as defined below) whose functional currency is not the U.S.
dollar, stockholders who hold shares of Common Stock as part of a hedging, straddle, conversion or other integrated transaction, non-U.S. holders (as defined below) that own, or have owned, actually or constructively, more
than 5% of the Companys Common Stock, stockholders who acquired their shares of Common Stock through the exercise of employee stock options or other compensation arrangements or stockholders who receive cash pursuant to the exercise of
appraisal rights). In addition, this discussion does not address the application of the Medicare contribution tax or any aspect of state, local, alternative minimum, estate, gift or non-United States taxation that may be applicable to a particular
stockholder.
Stockholders should consult their own tax advisors to determine the particular tax consequences to them of the
receipt of cash in exchange for shares of Common Stock pursuant to the Merger (including the application and effect of any state, local or non-United States income and other tax laws).
If a partnership (or an entity or arrangement taxable as a partnership for United States federal income tax purposes) holds shares of
Common Stock, the tax treatment of a partner generally will depend on the status of the partner and activities of the partnership. If you are a partner of a partnership holding Common Stock, you should consult your own tax advisor.
For purposes of this discussion, the term U.S. holder means a beneficial owner of Common Stock that is:
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an individual that is a citizen or resident of the United States for United States federal income tax purposes;
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a corporation, or other entity taxable as a corporation for United States federal income tax purposes, created or organized in or under the laws of the
United States or any state thereof or the District of Columbia;
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a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to
control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or
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an estate that is subject to United States federal income tax on all of its income regardless of source.
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A non-U.S. holder is a beneficial owner (other than a partnership or other entity or arrangement taxable as a partnership for
United States federal income tax purposes) of Common Stock that is not a U.S. holder.
42
U.S. Holders
The receipt of cash in the Merger generally will be a taxable transaction to U.S. holders for United States federal income tax purposes.
Generally, a U.S. holder of shares of Common Stock will recognize gain or loss equal to the difference between the amount of cash received in the Merger and such holders adjusted tax basis in the shares of Common Stock converted into cash
pursuant to the Merger. Gain or loss will be determined separately for each block of shares (that is, shares acquired at the same cost in a single transaction) owned by a U.S. holder. If the shares of Common Stock have been held for more than one
year at the effective time of the Merger, the gain or loss generally will be long-term capital gain or loss, and will be short-term capital gain or loss if the shares have been held for one year or less. Long-term capital gains recognized by
non-corporate U.S. holders may be subject to reduced tax rates. The deductibility of capital losses is subject to limitation. An additional 3.8% tax will apply to certain U.S. persons on the lesser of (i) each such U.S. persons net
investment income (including net capital gain) for a taxable year or (ii) the excess of such U.S. persons modified adjusted gross income for such year over certain thresholds.
Information returns will be filed with the Internal Revenue Service in connection with payments to a U.S. holder pursuant to the Merger,
unless the U.S. holder is an exempt recipient. Under the United States federal income tax backup withholding rules, the payment agent generally will be required to withhold from all payments to which a U.S. holder is entitled in the Merger at the
applicable statutory rate, unless the U.S. holder (i) is exempt from backup withholding or (ii) provides its correct tax identification number (social security number, in the case of an individual, or employer identification number in the
case of other stockholders), certifies under penalties of perjury that the number is correct, certifies as to no loss of exemption from backup withholding and otherwise complies with the applicable requirements of the backup withholding rules. Each
U.S. holder should complete, sign and return to the payment agent for the Merger the Form W-9 that each stockholder will receive with the letter of transmittal following the effective time of the Merger in order to provide the information and
certification necessary to avoid backup withholding, unless an applicable exception exists and is proved in a manner satisfactory to the payment agent. Backup withholding is not an additional tax. Generally, any amounts withheld under the backup
withholding rules described above may be credited against a holders United States federal income tax liability, if any, or refunded by the Internal Revenue Service provided that the required information is furnished to the Internal Revenue
Service in a timely manner. Each U.S. holder should consult its own tax advisors as to the qualifications for an exemption from backup withholding and the procedures for obtaining such exemption.
Non-U.S. Holders
Any gain realized on the receipt of cash pursuant to the Merger by a non-U.S. holder generally will not be subject to U.S. federal income tax unless:
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the gain is effectively connected with a U.S. trade or business of such non-U.S. holder (and, if an applicable income tax treaty so provides, is also
attributable to a permanent establishment in the United States maintained by such non-U.S. holder), in which case the non-U.S. holder generally will be taxed at graduated U.S. federal income tax rates applicable to United States persons (as
defined under the Code), and, if the non-U.S. holder is a foreign corporation, an additional branch profits tax may apply to its effectively connected earnings and profits for the taxable year at the rate of 30% (or such lower rate as may be
specified by an applicable income tax treaty); or
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the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the Merger and
certain other conditions are met, in which case the non-U.S. holder will be subject to a 30% tax on the non-U.S. holders gain realized in the Merger (unless an exception is provided under an applicable treaty), which may be offset by U.S.
source capital losses of the non-U.S. holder, if any.
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A non-U.S. holder will be subject to information
reporting, and, in certain circumstances, backup withholding may apply to the cash received pursuant to the Merger, unless the non-U.S. holder certifies under penalties of perjury that it is a non-U.S. person (and the payor does not have actual
knowledge or reason to know that the holder is a United States person as defined under the Code) or such holder otherwise establishes an
43
exemption. To avoid backup withholding, non-U.S. holders generally must submit a properly executed Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax
Withholding or other applicable Form W-8. Backup withholding is not an additional tax. Generally, any amounts withheld under the backup withholding rules described above may be credited against a non-U.S. holders United States federal
income tax liability, if any, or refunded by the Internal Revenue Service provided that the required information is furnished to the Internal Revenue Service in a timely manner. Each non-U.S. holder should consult its own tax advisors as to the
qualifications for an exemption from backup withholding and the procedures for obtaining such exemption.
The foregoing
discussion of certain material United States federal income tax consequences is not intended to be, and should not be construed as, legal or tax advice to any holder of shares of the Companys Common Stock. You should consult your own tax
advisors to determine the particular tax consequences to you (including the application and effect of any state, local or non-United States income and other tax laws) of the receipt of cash in exchange for shares of Common Stock pursuant to the
Merger.
Delisting and Deregistration of the Companys Common Stock
If the Merger is completed, our Common Stock will be delisted from the NASDAQ and deregistered under the Exchange Act and we will no
longer file periodic reports with the SEC on account of our Common Stock.
Litigation Related to the Merger
On January 30, 2013, a purported stockholder class action was filed in the Court of Chancery of the State of Delaware
in connection with the announcement of the proposed Merger entitled The Joel Rosenfeld IRA. v. Pervasive, et al., Case No. 8265. The suit names as defendants Pervasive and our board of directors as well as Parent and Merger Sub. Among
other things, the complaint alleges that our directors breached fiduciary duties owed to our stockholders in approving the proposed Merger because they failed to take steps to maximize shareholder value. The complaint further alleges that the
defendants aided and abetted the alleged breaches of fiduciary duties. The complaint seeks class certification, damages and certain forms of equitable relief, including enjoining the consummation of the Merger.
Two substantially similar actions were also filed in the District Court of Travis County, Texas. A class action petition titled
Arunachalam v. Pervasive et al., was filed on January 30, 2013. A shareholder derivative petition titled Roselo v. Pervasive et al., was filed February 7, 2013. Plaintiff in the Arunachalam and Roselo lawsuits each filed virtually identical amended
class action petitions on March 1, 2013. The amended petitions name the Company, the members of our Board of Directors, Parent, and Merger Sub as defendants. The amended petitions assert generally that the members of the Board of Directors breached
their fiduciary duties by, among other things, failing to maximize stockholder value in the Merger and by failing to provide adequate disclosures in the Companys February 20, 2013 preliminary proxy statement. The amended petitions further
assert that Parent and Merger Sub aided and abetted those alleged breaches of fiduciary duties. Both amended petitions seek to enjoin the consummation of the Merger in addition to requesting various other equitable relief and/or damages.
44
THE MERGER AGREEMENT
This section of the proxy statement describes the material provisions of the Merger Agreement but does not purport to describe all of
the terms of the Merger Agreement. The following summary is qualified in its entirety by reference to the complete text of the Merger Agreement, which is attached as Annex A to this proxy statement and incorporated into this proxy statement by
reference. We urge you to read the full text of the Merger Agreement because it is the legal document that governs the Merger. It is not intended to provide you with any other factual information about us. Such information can be found elsewhere in
this proxy statement and in the public filings we make with the SEC, as described in the section entitled Where You Can Find More Information beginning on page
69.
The Merger
The Merger Agreement provides for
the Merger of Merger Sub with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement. Following the Merger, the Company will continue to exist as a wholly-owned subsidiary of Parent. The Company, as the
surviving corporation, is sometimes referred to herein as the Surviving Corporation. At the effective time of the Merger, all of the property, rights, privileges, powers and franchises of the Company and Merger Sub will vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation, all as provided under Delaware law. At the effective time of the Merger, the directors of
Merger Sub will be the initial directors of the Surviving Corporation and the officers of Merger Sub will be the initial officers of the Surviving Corporation. All the directors and officers of the Surviving Corporation will hold their positions in
accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified.
We, Parent or Merger Sub may terminate the Merger Agreement prior to the consummation of the Merger in some circumstances, whether before or after the adoption of the Merger Agreement by our stockholders.
Additional details on termination of the Merger Agreement are described in Termination of the Merger Agreement beginning on page 57.
Consummation of the Merger
The Merger will be
effective at the time the certificate of merger is filed and accepted with the Secretary of State of the State of Delaware in accordance with the applicable provisions of Delaware law, or such later time as may be agreed in writing by Parent, Merger
Sub and the Company and specified in the certificate of merger.
We expect to complete the Merger by the second calendar
quarter of 2013. However, we cannot predict the exact timing of the completion of the Merger or whether the Merger will be completed at an earlier or later time, as agreed by the parties, or at all. Unless otherwise agreed by the parties to the
Merger Agreement, the parties are required to close the Merger no later than the fourth business day after the satisfaction or waiver of the last to be satisfied or waived of the conditions described under Conditions to the Merger
beginning on page 54.
Merger Consideration
If the Merger is completed, each share of the Companys Common Stock issued and outstanding immediately prior to the effective time
of the Merger (other than (i) shares owned by the Company or Parent or any subsidiary thereof and (ii) shares held by stockholders, if any, who have properly exercised statutory appraisal rights) will be cancelled and extinguished and
converted into the right to receive $9.20 in cash, without interest and less any applicable withholding taxes.
After the
Merger is effective, each holder of a certificate representing any shares of our Common Stock (other than shares for which appraisal rights have been properly demanded and perfected) will no longer have any rights with respect to the shares, except
for the right to receive the Merger consideration. See Dissenters Rights of Appraisal beginning on page 65.
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Treatment of Stock Options and Restricted Stock Units
Stock Options
At the effective time of the Merger, each option to purchase shares of Company Common Stock outstanding immediately prior to the effective time (whether vested or unvested) will be cancelled and converted
into, and will become a right to receive, an amount in cash, without interest and subject to applicable withholding for taxes, equal to the product of (x) the excess, if any, of (A) $9.20, less (B) the exercise price per share
attributable to such option, multiplied by (y) the total number of shares of Company Common Stock issuable upon exercise in full of such option.
Restricted Stock Units
At the effective time of the Merger, each
restricted stock unit settled in shares of Company Common Stock outstanding immediately prior to the effective time will be cancelled and converted into, and will become a right to receive, an amount in cash, without interest and subject to
applicable withholding for taxes, equal to the product obtained by multiplying (x) $9.20 by (y) the total number of shares of Company Common Stock issuable upon settlement in full of such restricted stock unit.
The effect of the Merger upon our other employee benefit plans is described under Employee Benefits beginning on page
61.
Payment for the Shares of the Companys Common Stock
Parent will designate a payment agent reasonably acceptable to us to make payment of the Merger consideration as described above. From
time to time following the effective time of the Merger as required, Parent will deposit, or cause to be deposited, with the payment agent the funds necessary to enable the payment agent to pay any and all Merger consideration payable pursuant to
the Merger Agreement.
Promptly following the effective time of the Merger, Parent and Merger Sub will cause the payment agent
to mail to you a letter of transmittal and instructions advising you how to surrender your certificates or transfer your uncertificated shares in exchange for the right to receive the Merger consideration. You will be entitled to receive your Merger
consideration after you have surrendered your certificates for cancellation to the payment agent together with the duly completed and validly executed letter of transmittal and such other documents as may reasonably be requested by the payment
agent, or upon receipt of an agents message by the payment agent in the case of a book-entry transfer or uncertificated shares. Interest will not be paid or accrue in respect of the Merger consideration. YOU SHOULD NOT FORWARD YOUR
STOCK CERTIFICATES TO THE PAYMENT AGENT WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
If any portion of the funds deposited with the payment agent remains undistributed one (1) year following the effective time of the Merger, these undistributed funds will be delivered to Parent upon
demand, and any holder of Company Common Stock who has not exchanged his shares for the Merger consideration will thereafter look only to Parent for any payment of and claim to the applicable Merger consideration. Any unclaimed amounts in existence
two (2) years after the effective date of the Merger (or such earlier date, immediately prior to such time when these amounts would otherwise become property of any governmental authority), will, to the extent permitted by applicable law,
become the property of Parent free and clear of any prior claims or interest of any person previously entitled thereto.
If
you want the payment agent to pay some or all of your portion of the Merger consideration to someone other than you, as the registered owner of a stock certificate or of uncertificated shares, you must have your certificate(s) properly endorsed or
otherwise in proper form for transfer or uncertificated shares properly
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transferred, and you must pay to the payment agent any transfer or other similar taxes required as a result of such payment or establish to the paying agents satisfaction that the taxes
have been paid or are not required to be paid.
In the event that you have lost your certificate, or if it has been stolen or
destroyed, the payment agent will only issue to you your portion of the Merger consideration in exchange for such lost, stolen or destroyed certificates upon the making of an affidavit of that fact by you. Parent may, in its discretion and as a
condition precedent to the payment of your portion of the Merger consideration, require that you deliver a bond in an amount that Parent may reasonably direct as indemnity against any claim that may be made against Parent, the Surviving Corporation
or the payment agent with respect of the lost, stolen or destroyed certificate.
Representations and Warranties
The Merger Agreement contains representations and warranties made by us to Parent and Merger Sub and representations and
warranties made by Parent and Merger Sub to us. The assertions embodied in those representations and warranties were made solely for purposes of the Merger Agreement and may be subject to important qualifications and limitations agreed by the
parties in connection with negotiating its terms. Moreover, some of those representations and warranties may not be accurate or complete as of any particular date because they are subject to a contractual standard of materiality or a Company
Material Adverse Effect (defined below) different from that generally applicable to public disclosures to stockholders or because they are used for the purpose of allocating risk between the parties to the Merger Agreement rather than
establishing matters of fact. For the foregoing reasons, you should not rely on the representations and warranties contained in the Merger Agreement as statements of factual information.
In the Merger Agreement, the Company, Parent and Merger Sub each made representations and warranties relating to, among other things:
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such partys due organization, valid existence and good standing;
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corporate power and authority to enter into and perform such partys obligations under the Merger Agreement and the enforceability of the Merger
Agreement against such party;
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the absence of conflicts with corporate governing documents and applicable laws as a result of the entry into the Merger Agreement and the consummation
of the transactions contemplated by the Merger Agreement; and
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required regulatory filings and consents and approvals of governmental entities in connection with the transactions contemplated by the Merger
Agreement.
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In the Merger Agreement, Parent and Merger Sub also each made representations and warranties
relating to:
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its ownership of the Companys Common Stock;
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the absence of pending or threatened legal proceedings or orders that would prevent or materially delay the consummation of the transactions
contemplated by the Merger Agreement;
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the sufficiency of the contemplated funding sources for Parent and Merger Sub to consummate the Merger pursuant to the Merger Agreement;
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the availability and Parents compliance with the terms of the contemplated funding sources for the Merger; and
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the non-reliance on any representations and warranties apart from the Merger Agreement or any estimate, projection, data, financial information,
memorandum, presentation or other materials provided by the Company.
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In the Merger Agreement, the Company also made representations and warranties relating to:
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the approval and recommendation of the Merger Agreement by our board of directors;
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receipt by our board of directors of the fairness opinion from Shea & Company;
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the requisite stockholder approval;
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the absence of conflicts with or defaults under the Companys contracts or the creation of liens as a result of the entry into the Merger
Agreement and the consummation of the transactions contemplated by the Merger Agreement;
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the capitalization of the Company, including the number of authorized and outstanding shares of Common Stock and the number of shares of Common Stock
issuable upon the exercise of outstanding stock options and restricted stock units;
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the subsidiaries of the Company and their due organization, valid existence, good standing, power, authority and capitalization;
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documents filed with the SEC since July 1, 2010, including financial statements contained therein, internal controls and compliance with the
Securities Act of 1933, as amended, the Exchange Act and the Sarbanes-Oxley Act of 2002;
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the accuracy and completeness of the Companys proxy statements and the compliance of such proxy statements with the Exchange Act, except with
respect to items supplied by or on behalf of Parent or Merger Sub for such proxy statements;
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the financial statements of the Company and its subsidiaries;
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the absence of undisclosed liabilities;
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the conduct of business and absence of certain changes, except as contemplated by the Merger Agreement, since June 30, 2012, including the absence
of any Company Material Adverse Effect;
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matters with respect to the Companys material contracts;
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compliance by the Company and its subsidiaries with applicable laws, orders and permits since July 1, 2010;
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the absence of certain pending or threatened legal proceedings or orders;
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compliance with the Employee Retirement Income Securities Act of 1974, as amended, and other matters relating to employee benefit plans;
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sufficiency of and title to personal property;
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intellectual property matters;
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related party transactions;
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the absence of undisclosed brokers fees and transaction expenses;
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the absence of any stockholder rights or anti-takeover plan;
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compliance with anti-corruption and anti-bribery laws; and
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the absence of any representations and warranties apart from the Merger Agreement.
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Many of the Companys representations and warranties are qualified by a material
adverse effect standard. For purposes of the Merger Agreement, Company Material Adverse Effect is defined to mean any fact, event, violation, inaccuracy, circumstance, change or effect (any such item, an Effect) that,
individually or when taken together with all other Effects that exist or have occurred prior to or at the date of determination of the occurrence of the Company Material Adverse Effect, is or is reasonably likely to be materially adverse to the
business, operations, properties, assets (including intangible assets), condition (financial or otherwise) or results of operations of the Company and its subsidiaries taken as a whole;
provided, however
, that in no event will any Effect
resulting from any of the following, either alone or in combination, be taken into account when determining whether a Company Material Adverse Effect has occurred or may, would or could occur:
(i) general economic conditions in the United States or any other country or region in the world;
(ii) general conditions in the industries in which the Company or any of its subsidiaries conduct business;
(iii) changes in law or generally accepted accounting principles, as applied in the United States (GAAP), or
the interpretations thereof;
(iv) acts of war, terrorism or sabotage;
(v) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather
conditions and other force majeure events in the United States or any other country or region in the world;
(vi) the public announcement or pendency of the Merger Agreement or the transactions contemplated thereby;
(vii) any failure by the Company to meet published analysts estimates, projections or forecasts of revenues, earnings or
other financial or business metrics, in and of itself, or any failure by the Company to meet any internal budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations, in and of itself (it being
understood that the underlying cause(s) of any such failure may be taken into consideration);
(viii) any
decline in the market price or change in the trading volume of Company Common Stock, in and of itself (it being understood that the underlying cause(s) of any such failure may be taken into consideration);
(ix) any action taken pursuant to the terms of the Merger Agreement or the failure to take any action prohibited by the
terms of the Merger Agreement;
(x) any action taken at the request of Parent or with the prior consent or
approval of Parent;
(xi) the availability or cost of equity, debt or other financing to Parent or Merger Sub;
and
(xii) any legal proceedings made or brought by any of the current or former stockholders of the Company
(on their own behalf or on behalf of the Company) against the Company, including those arising out of the Merger or in connection with any other transactions contemplated by the Merger Agreement;
provided, however
, that, in each of clauses (i) through (v) any such Effects will not be taken into account only to the extent such
Effects have not had a disproportionate impact on the Company relative to other companies in the industries in which the Company and its subsidiaries operate or conduct business.
Conduct of Business Prior to Closing
We have
agreed in the Merger Agreement that, until the effective time of the Merger or the termination of the Merger Agreement pursuant to the termination provisions described below, we and our subsidiaries will:
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carry on business in the usual, regular and ordinary course in substantially the same manner as previously conducted and in compliance with all
applicable laws;
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use commercially reasonable efforts, consistent with past practices and policies, to (i) preserve intact our intellectual property rights,
business organization and material assets, (ii) keep available the services of our directors, officers and employees and (iii) preserve our present relationships with customers, suppliers, distributors, licensors, licensees and others with
which we have significant business dealings.
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We have also agreed that, until the effective time of the
Merger or the termination of the Merger Agreement pursuant to the termination provisions described below, except as expressly required by the Merger Agreement, as set forth in the disclosure letter delivered by the Company to Parent on the date of
the Merger Agreement or as approved by Parent, we will not do any of the following or permit our subsidiaries to do any of the following:
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amend our or our subsidiaries organizational documents;
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issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any
Company securities or any subsidiary securities, except for the issuance and sale of shares of Common Stock pursuant to Company options outstanding prior to the date of the Merger Agreement;
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acquire or redeem, directly or indirectly, or amend any Company securities or subsidiary securities;
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other than cash dividends made by any direct or indirect wholly-owned subsidiary of the Company to the Company or one of its subsidiaries, split,
combine or reclassify any shares of capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, shares or property or any combination thereof) in respect of any shares of capital stock, or make any other actual,
constructive or deemed distribution in respect of the shares of capital stock;
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adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its subsidiaries (other than the transactions contemplated by the Merger Agreement, including the Merger);
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incur or assume any long-term or short-term debt or issue any debt securities, except for short-term debt incurred to fund operations of the business
in the ordinary course of business consistent with past practice and loans or advances to direct or indirect wholly-owned subsidiaries;
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assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other
person except with respect to obligations of direct or indirect wholly-owned subsidiaries of the Company;
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make any loans, advances or capital contributions to or investments in any other person except for travel advances in the ordinary course of business
consistent with past practice to employees of the Company or any of its subsidiaries;
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mortgage or pledge any of the assets, tangible or intangible, of the Company or its subsidiaries or create or suffer to exist any lien thereupon (other
than permitted liens);
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except as may be required by applicable law, enter into, adopt, amend or terminate any employee benefit agreement or arrangement for the compensation,
benefit or welfare of any director, officer, consultant or independent contractor or, other than in the ordinary course of business consistent with past practice, any non-officer employee;
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except as may be required by applicable law, increase the compensation or fringe benefits of any director, officer or employee or pay any benefit not
required by any plan or arrangement as in effect on the date of the Merger Agreement, other than, with respect to non-officer employees, in the ordinary course of business consistent with past practice;
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except as may be required by applicable law, pay any special bonus or special remuneration to any director, officer, consultant, independent contractor
or employee;
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make contributions to or take any other action to fund or secure the payment of compensation or benefits under the employee plans of the Company or its
subsidiaries, any agreements subject to the employee plans or any other contract of the Company, other than deposits and contributions required pursuant to the terms thereof;
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acquire, sell, lease, license or dispose of any property or assets in any single transaction or series of related transactions, except for the sale of
goods or grants of non-exclusive licenses with respect to Company intellectual property in the ordinary course of business consistent with past practice;
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except as may be required by applicable law or GAAP, make any change in any utilized accounting principles;
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except as may be required by applicable law or GAAP, revalue in any material respect any of the properties or assets of the Company or its
subsidiaries, including writing-off notes or accounts receivable, in any case other than in the ordinary course of business consistent with past practice;
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(i) make, revoke or change any material tax election, (ii) file any federal income or other material tax return or any amended tax return,
(iii) settle or compromise any material liability for taxes or any tax claim, (iv) adopt or change any tax accounting method, (v) consent to any extension or waiver of any limitation period with respect to any claim or assessment for
taxes or (vi) request to enter into any ruling or agreement with a governmental authority with respect to taxes or otherwise enter into a tax sharing, indemnification or allocation agreement (or any other contract the primary purpose of which
is the sharing of taxes);
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(i) enter into any lease or sublease of real property (whether as a lessor, sublessor, lessee or sublessee) or (ii) modify, amend or exercise
any right to renew any lease or sublease of real property or waive or violate any term or condition thereof or grant any consents thereunder or grant or otherwise create or consent to the creation of any easement, covenant, restriction, assessment,
lien or charge affecting any real property or any part thereof;
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(i) sell, lease, license or transfer to any person or entity any rights to any intellectual property of the Company, (ii) purchase or license
any intellectual property rights or enter into any agreement or modify any existing agreement with respect to the intellectual property rights of any person or entity, (iii) enter into any agreement or modify any existing agreement with respect
to the development of any intellectual property or intellectual property rights with a third party, or (iv) abandon or cease to prosecute any of the registered intellectual property of the Company or any other intellectual property rights of
the Company that are material to the conduct of the Companys business;
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(i) acquire (by merger, consolidation or acquisition of stock or assets) any other person or any equity interest therein, (ii) enter into or
renew any material contract (other than in the ordinary course of business consistent with past practice) or amend any material contract or grant any release or relinquishment of any rights under any material contract or (iii) incur any new
capital expenditure(s), individually or in the aggregate, with obligations to the Company or any of its subsidiaries in excess of $100,000;
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settle or compromise any pending or threatened legal proceeding or pay, discharge or satisfy or agree to pay, discharge or satisfy any claim, liability
or obligation (absolute or accrued, asserted or unasserted, contingent or otherwise), other than the settlement, compromise, payment, discharge or satisfaction of legal proceedings, claims and other liabilities:
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reflected or reserved against in full in the Companys balance sheet or incurred since the date of the balance sheet in the ordinary course of
business consistent with past practice or;
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the settlement, compromise, discharge or satisfaction of which does not include any obligation (other than the payment of money) to be performed by the
Company or its subsidiaries following the effective time of the Merger that would be material to the Company and its subsidiaries taken as a whole;
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fail to keep in force insurance policies or replacement or revised provisions regarding insurance coverage with respect to the assets, operations and
activities of the Company and its subsidiaries as currently in effect;
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renew or enter into any non-compete, exclusivity, non-solicitation or similar agreement that would restrict or limit, in any material respect, the
operations of the Company or any of its subsidiaries;
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waive any material benefits of, or agree to modify in any adverse respect, or fail to enforce, or consent to any matter with respect to which its
consent is required under, any confidentiality agreement to which the Company or any of its subsidiaries is a party;
provided, however
, that the foregoing will not require the Company to take any of the foregoing actions in order to prevent a
third party from making an Acquisition Proposal (as defined below) or consummating an Acquisition Transaction (as defined below), even if such third party may have breached or otherwise violated the terms of any such confidentiality agreement in
connection therewith;
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enter into any new line of business outside of its existing business;
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alter in any material respect the Companys and its subsidiaries practices regarding collection of accounts receivable or payment of
accounts payable; or
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enter into a contract or otherwise commit to do any of the foregoing.
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Required Action and Forbearance
Upon the terms
and conditions set forth in the Merger Agreement, each of the parties to the Merger Agreement has agreed to use their reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other party or parties thereto in doing, all things reasonably necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by the Merger Agreement.
Financing
Parent has the right to terminate the Merger Agreement in certain instances if the proceeds of the debt financing or any alternative financing are not received within a specified time period. See
The Merger AgreementTermination of the Merger Agreement beginning on page 57.
Parent has agreed to use its
reasonable best efforts to obtain the debt financing on the terms and conditions set forth in the debt commitment letter, including:
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maintaining in effect the debt commitment letter;
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negotiating and entering into definitive agreements with respect to the debt financing on the terms and conditions set forth in the debt commitment
letter or on terms no less favorable, in the aggregate to Parent and the Company;
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satisfying on a timely basis all conditions applicable to Parent in such definitive agreements that are within Parents control;
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enforcing its rights under the debt commitment letter in the event of a material breach thereof by the counterparty thereof;
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consummating the debt financing at or prior to the closing of the Merger.
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Parent may not modify the debt commitment letter and/or substitute other debt or equity financing for all or any portion of the debt
financing without the prior written consent of the Company (such consent not to be unreasonably withheld, conditioned or delayed) if such modification or substitution adds to the conditions precedent to the debt financing, prevents, impedes or
delays the consummation of the Merger and the other
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transactions contemplated by the Merger Agreement, adversely impacts the ability of Parent to enforce its rights against the counterparty to the debt commitment letter, or imposes additional
material obligations on the Company and any of its subsidiaries.
In the event any portion of the debt financing becomes
unavailable on the terms and conditions set forth in the debt commitment letter for any reason, as promptly as practicable following the occurrence of such event, Parent will use its reasonable best efforts to obtain alternative financing from
alternative sources as promptly as practicable following the occurrence of such event in an amount sufficient to consummate the transactions contemplated by the Merger Agreement.
Cooperation with the Arrangement of the Debt Financing
Prior to the closing of the Merger, the Company has agreed to provide to Parent, and cause its subsidiaries to provide to Parent, any cooperation reasonably requested by Parent in connection with the
arrangement of the debt financing, including:
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participating in a reasonable number of customary one-on-one meetings with the parties acting as lead arrangers or agents for, and prospective lenders
and purchasers of, the debt financing and the chief executive officer, chief financial officer, chief operating officer and general counsel of the Company and other members of senior management and representatives of the Company;
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as promptly as practical, furnishing Parent, Merger Sub and the financing sources with financial and other pertinent information regarding the Company
and its subsidiaries as may be reasonably requested by Parent or, in any event, by the deadlines set forth therein, furnishing all financial information regarding the Company and its subsidiaries required to be timely delivered to satisfy a
condition precedent to the debt financing;
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using reasonable best efforts to obtain consents to the use of accountants audit reports relating to the Company and its subsidiaries, legal
opinions, appraisals, surveys, engineering reports, title insurance and other documentation and items required by the debt commitment letter or as are reasonably requested by Parent and, if requested by Parent or Merger Sub, cooperating with and
assisting Parent or Merger Sub in obtaining such documentation and items;
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executing and delivering, as of the effective time of the Merger, any definitive financing documents, including any credit or purchase agreements,
guarantees, pledge agreements, security agreements, mortgages, deeds of trust and other security documents or other certificates, documents and instruments relating to guarantees, the pledge of collateral and other matters ancillary to the debt
financing as may be reasonably requested by Parent in connection with the debt financing and otherwise reasonably facilitating the pledging of collateral (including cooperation in connection with the pay-off of existing indebtedness and the release
of related liens), and the replacement or backing of any outstanding letter of credit maintained or provided by the Company or its subsidiaries effective as of the closing date of the Merger;
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taking all actions reasonably necessary to (A) permit the financing sources to conduct audit examinations, appraisals and other evaluations with
respect to the Companys and its subsidiaries current assets and other collateral, and to evaluate its cash management and accounting systems, policies and procedures relating thereto for the purposes of establishing collateral
arrangements and (B) establish bank and other accounts and blocked account agreements and lock box arrangements in connection with the foregoing;
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using reasonable best efforts to obtain waivers, consents, estoppels and approvals from other parties to material leases, encumbrances and contracts to
which the Company or any subsidiary of the Company is a party to the extent necessary to consummate the debt financing; and
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taking all corporate actions necessary to permit the consummation of the debt financing and to permit the proceeds thereof, together with the cash at
the Company and its subsidiaries, to be made available to Parent on the closing date of the Merger in order to consummate the Merger.
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The parties have further agreed that neither the Company nor any of its subsidiaries will be
required to pay any commitment fee or similar fee or incur any liability with respect to the debt financing prior to the closing of the Merger. Upon request by the Company, Parent will promptly reimburse the Company or its subsidiaries for all
reasonable and documented out-of-pocket costs incurred by the Company or any of its subsidiaries in connection with such cooperation.
Conditions to the Merger
Conditions to Each Partys Obligations
. Each partys obligation to
consummate the Merger is subject to the satisfaction or waiver prior to the effective time of the Merger of each of the following conditions:
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the Merger Agreement will have been adopted by the affirmative vote of the holders of a majority of the outstanding shares of the Companys Common
Stock (sometimes referred to in this proxy statement as the requisite stockholder approval);
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all waiting periods (and extensions thereof) applicable to the Merger under the HSR Act will have expired or been terminated; and
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no governmental authority in a relevant jurisdiction will have (A) enacted, issued, promulgated, entered, enforced or deemed applicable to the
Merger any applicable law that is in effect and has the effect of making the Merger illegal in any of the relevant jurisdictions or which has the effect of prohibiting the consummation of the Merger in any of the relevant jurisdictions or
(B) issued or granted any order (whether temporary, preliminary or permanent) that has the effect of making the Merger illegal in any of the relevant jurisdictions or which has the effect of prohibiting the consummation of the Merger in any of
the relevant jurisdictions.
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Conditions to the Obligations of Parent and Merger Sub
. The
obligation of Parent and Merger Sub to consummate the Merger is subject to the satisfaction or waiver prior to the effective time of the Merger of each of the following additional conditions:
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our representations and warranties in the Merger Agreement regarding our organization and good standing, our authorization and the enforceability of
the Merger Agreement, the absence of any conflict between the Merger Agreement and the organizational documents of us or our subsidiaries and the absence of any stockholder rights or anti-takeover plan to which the Company is a party or is bound,
will be true and correct as of the date of the Merger Agreement and on the closing date as if made as of the closing date (except for those representations and warranties that address matters only as of a particular date, which need only be accurate
as of such particular date);
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our representations and warranties in the Merger Agreement regarding the accuracy and completeness of our proxy statements and the compliance of our
proxy statements with the provisions of the Exchange Act will be true and correct in all material respects as of the closing date as if made as of the closing date (except for those representations and warranties that address matters only as of a
particular date, which need only be accurate as of such particular date);
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our representations and warranties in the Merger Agreement regarding our capitalization will be true and correct on and as of the closing date as if
made on the closing date (except for those representations and warranties that address matters only as of a particular date, which need only be accurate as of such particular date), except for any failure as would not increase the aggregate
consideration payable in the Merger by more than $500,000;
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all other representations and warranties made by us in the Merger Agreement, with the exception of those listed above and disregarding any materiality
or material adverse effect qualifiers, will be true and correct on and as of the closing date with the same force and effect as if made on and as of such date (except for those representations and warranties that address matters only as of a
particular date, which need only be accurate as of such particular date), except for any failure as has not had, and would not reasonably be expected to have, a material adverse effect on the Company;
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54
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the Company will have performed in all material respects each of its covenants and other obligations under the Merger Agreement required to be
performed at or prior to the closing date;
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Parent will have received a certificate from the Company with respect to the satisfaction of the foregoing conditions;
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there will not be pending or threatened any legal proceeding by any governmental authority that seeks, directly or indirectly, to (A) challenge or
make illegal or otherwise prohibit the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement, (B) prohibit or limit the ownership, operation or control by the Company, Parent or any of their
subsidiaries, of any material portion of the business or assets of the Company, Parent or any of their subsidiaries, or to compel the Company, Parent or any of their subsidiaries to dispose of or hold separate any material portion of the business or
assets of the Company, Parent or any of their subsidiaries or (C) impose limitations on the ability of Parent to acquire or hold, or exercise full rights of ownership of, any shares of Common Stock (or shares of capital stock of the Surviving
Corporation), including the right to vote the shares purchased or owned by them on all matters properly presented to stockholders of the Company;
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there will not have occurred and be continuing any event, change, circumstance, occurrence, effect or state of facts that, individually or in the
aggregate, has had or would reasonably be expected to have a material adverse effect on the Company;
provided, however
, that this condition will automatically expire in the event that the conditions to the obligations of Parent and Merger Sub
to consummate the Merger have been satisfied and Parent and Merger Sub do not consummate the Merger within the fourth business day following the satisfaction of such conditions; and
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as of immediately prior to the closing of the Merger, the Company and its subsidiaries will have an aggregate of at least $42,000,000 of cash, cash
equivalents and marketable securities;
provided, however
, that this condition will automatically expire in the event that the conditions to the obligations of Parent and Merger Sub to consummate the Merger have been satisfied and Parent and
Merger Sub do not consummate the Merger within the fourth business day following the satisfaction of such conditions.
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Conditions to the Companys Obligations
. Our obligation to consummate the Merger is subject to the satisfaction or waiver prior to the effective time of the Merger of each of the
following additional conditions, which may be waived exclusively by us:
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the representations and warranties made by Parent and Merger Sub in the Merger Agreement, disregarding any materiality or material adverse effect
qualifiers, will be true and correct on and as of the closing date with the same force and effect as if made on and as of such date (except for those representations and warranties that address matters only as of a particular date, which need only
be accurate as of such particular date), except for any failure as has not had, and would not reasonably be expected to have, a material adverse effect on Parent;
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Parent and Merger Sub will have performed in all material respects each of their respective covenants and other obligations under the Merger Agreement
required to be performed at or prior to the closing date; and
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the Company will have received a certificate from Parent and Merger Sub with respect to the satisfaction of the foregoing conditions.
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Solicitations of Other Offers and Restrictions on Solicitations of Other Offers
The Merger Agreement provides that the Company, its subsidiaries and their respective representatives are not permitted
to:
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solicit, initiate, knowingly encourage, facilitate or induce the making, submission or announcement of, an Acquisition Proposal or the making of any
inquiry, offer or proposal that would reasonably be expected to lead to any Acquisition Proposal or Acquisition Transaction;
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furnish to any third party any non-public information relating to the Company or any of its subsidiaries, or afford access to the business, properties,
assets, books or records of the Company or any of its subsidiaries to any third party, or take any other action intended to assist or facilitate the making of any Acquisition Proposal or any inquiry, offer or proposal that would reasonably be
expected to lead to an Acquisition Proposal or Acquisition Transaction;
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participate or engage in discussions or negotiations with any third party that has made an Acquisition Proposal or that has made any inquiry, offer or
proposal that would reasonably be expected to lead to an Acquisition Proposal or Acquisition Transaction;
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approve, endorse or recommend an Acquisition Proposal or Acquisition Transaction;
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other than confidentiality agreements permitted by the Merger Agreement, execute or enter into any letter of intent, memorandum of understanding,
agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other contract constituting or relating to, or which is intended to or is reasonably likely to lead to, an
Acquisition Proposal or Acquisition Transaction; or
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resolve or agree to do any of the foregoing.
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Notwithstanding these restrictions, prior to obtaining the requisite stockholder approval of the Merger Agreement, the Company may (x) engage or participate in discussions or negotiations with a
third party and its representatives and/or (y) furnish any non-public information relating to the Company or any of its subsidiaries to such third party and its representatives if:
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the Company receives a written Acquisition Proposal that our board of directors believes in good faith to be bona fide;
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such Acquisition Proposal was not solicited after the date of the Merger Agreement and did not otherwise result from a breach of the solicitation
restrictions in the Merger Agreement;
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our board of directors determines in good faith (after consultation with outside counsel and its financial advisor) that such Acquisition Proposal
constitutes or is reasonably likely to lead to a Superior Proposal (as defined below); and
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our board of directors determines in good faith (after consultation with outside counsel) that the failure to take the actions referred to in
clause (x) or (y) above would reasonably be expected to be a breach of its fiduciary duties under applicable law;
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provided that, in the case of any action taken pursuant to the foregoing:
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the Company enters into a confidentiality agreement with such third party the terms of which relating to confidentiality are no less favorable to the
Company than those contained in the confidentiality agreement between the Company and Parent (it being expressly understood and agreed that such confidentiality agreement need not contain a standstill or other similar provision) and
containing additional provisions that expressly permit the Company to comply with the solicitation restrictions in the Merger Agreement (which confidentiality agreement will be provided to Parent for informational purposes immediately following the
execution and delivery thereof);
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the Company gives Parent prompt (and in any event, within 24 hours) written notice of the identity of such person and all of the terms and conditions
of such Acquisition Proposal (and if such Acquisition Proposal is in written form, the Company will give Parent a copy thereof) and of the Companys intention to engage or participate in discussions or negotiations with, or furnish non-public
information to, such third party; and
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contemporaneously with furnishing any non-public information to such person, the Company furnishes such non-public information to Parent (to the extent
such information has not been previously furnished by the Company to Parent).
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56
An Acquisition Proposal means any offer, proposal or indication of interest from
any third party relating to any Acquisition Transaction.
An Acquisition Transaction means any transaction or
series of related transactions (other than the transactions contemplated by the Merger Agreement) involving:
(i) any
acquisition or purchase by any third party, directly or indirectly, of more than fifteen percent (15%) of any class of outstanding voting or equity securities of the Company, or any tender offer (including a self-tender offer) or exchange offer
that, if consummated, would result in any third party beneficially owning more than fifteen percent (15%) of any class of outstanding voting or equity securities of the Company;
(ii) any merger, consolidation, share exchange, business combination, joint venture or other similar transaction involving the Company
pursuant to which the stockholders of the Company immediately preceding such transaction hold less than eighty-five percent (85%) of the equity interests in the surviving or resulting entity of such transaction; or
(iii) any sale, lease (other than in the ordinary course of business), exchange, transfer or other disposition of more than fifteen
percent (15%) of the consolidated assets of the Company and its subsidiaries (measured by the fair market value thereof).
A Superior Proposal means any unsolicited bona fide written Acquisition Proposal made by a third party after the date of the
Merger Agreement that was not solicited in violation of the Merger Agreement, and which our board of directors will have determined in good faith (after consultation with its financial advisor and its outside legal counsel, and after taking into
account the financial, legal, regulatory and other aspects of such Acquisition Proposal and the terms and conditions of such Acquisition Proposal) is (A) more favorable to the Companys stockholders from a financial point of view than the
transactions contemplated by the Merger Agreement (including any adjustment to the terms and conditions proposed by Parent in response to such proposal) and (B) reasonably likely of being completed on the terms proposed on a timely basis;
provided that, for purposes of this definition of Superior Proposal, references in the term Acquisition Proposal to 15% and 85% will be deemed to be references to 50%.
Termination of the Merger Agreement
The Merger Agreement may be terminated only as follows:
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by mutual written agreement of Parent and the Company;
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by either Parent or the Company if:
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the effective time of the Merger has not occurred on or before May 31, 2013;
provided, however,
that this termination right will not be
available to any party whose action or failure to fulfill any obligation under the Merger Agreement has been the principal cause of or resulted in the failure of the effective time of the Merger to occur on or before May 31, 2013; or
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the meeting of the Company stockholders has been held and the requisite stockholder approval was not obtained at the meeting or at any adjournment or
postponement of the meeting; or
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any governmental authority in any relevant jurisdiction has (i) enacted, issued, promulgated, entered, enforced or deemed applicable to the Merger
any applicable law that is in effect and has the effect of making the consummation of any of the Merger illegal in any of the relevant jurisdictions or which has the effect of prohibiting the consummation of the Merger in any of the relevant
jurisdictions, or (ii) issued or granted any order that has the effect of making the Merger illegal in any of the relevant jurisdictions or which has the effect of prohibiting the consummation of the Merger in any of the relevant jurisdictions
and such order will have become final and non-appealable; or
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57
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Parent or Merger Sub has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the Merger
Agreement, or if any representation or warranty of Parent or Merger Sub has become untrue, which breach or failure to perform or to be true, either individually or in the aggregate, if occurring or continuing at the effective time of the Merger
(A) would result in the failure of any of the conditions to the Companys obligations to consummate the Merger and (B) cannot be or has not been cured by the earlier of (1) May 31, 2013 and (2) thirty (30) days after
the giving of written notice to Parent of such breach or failure;
provided, however,
that this termination right will not be available if the Company is then in material breach of any of its covenants or agreements set forth in the Merger
Agreement such that the conditions to the obligations of Parent and Merger Sub to consummate the Merger would not be satisfied; or
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on or after the date on which (i) all the conditions to the obligations of Parent and Merger Sub to consummate the Merger have been satisfied or
waived (other than those conditions that by their terms are to be satisfied at the closing of the Merger), (ii) the Company has irrevocably confirmed to Parent in writing that if Parent and Merger Sub perform their obligations under the Merger
Agreement and the debt financing is funded, then the Company is prepared to consummate the Merger, and (iii) Parent and Merger Sub fail to consummate the Merger within the fourth business day following the satisfaction or waiver of the closing
conditions; or
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in order to enter into an agreement relating an Acquisition Proposal or Acquisition Transaction, provided that (i) the Superior Proposal was not
solicited in violation of the terms of the Merger Agreement, (ii) our board of directors has followed the terms and procedures set forth in the Merger Agreement in respect of such Superior Proposal and the termination of the Merger Agreement in
respect thereof, and (iii) immediately prior (and as a condition) to the termination of the Merger Agreement, the Company tenders to Parent (and pays to Parent if Parent agrees to accept such payment) a fee equal to $4,857,965; or
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the Company has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the Merger Agreement (other
than with respect to a breach of the Companys obligations regarding non-solicitation and acquisition proposals and the recommendation by our board of directors of the Merger Agreement to the Companys stockholders), or if any
representation or warranty of the Company has become untrue, which breach or failure to perform or to be true, either individually or in the aggregate, if occurring or continuing at the effective time of the Merger (A) would result in the
failure of any of the conditions to the obligations of Parent and Merger Sub to consummate the Merger and (B) cannot be or has not been cured by the earlier of (1) May 31, 2013 and (2) thirty (30) days after the giving of written
notice to the Company of such breach or failure;
provided, however
, that this termination right will not be available if the Company is then in material breach of any of its covenants or agreements set forth in the Merger Agreement such that
the conditions to the obligations of the Company to consummate the Merger would not be satisfied; or
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the Company has breached or failed to perform any of its obligations regarding non-solicitation and acquisition proposals and the recommendation by our
board of directors of the Merger Agreement to the Companys stockholders; or
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our board of directors or any committee of our board of directors has withheld, withdrawn or modified or publicly proposed to withhold, withdraw or
modify in a way that is adverse to Parent, its recommendation of the Merger Agreement to the Companys stockholders; or
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our board of directors or any committee of our board of directors has approved, endorsed, adopted or recommended or publicly proposed to approve,
endorse, adopt or recommend, an Acquisition Proposal or Acquisition Transaction; or
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58
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the Company fails to publicly restate its recommendation of the Merger within five (5) business days after the date any Acquisition Proposal or
any material modification thereto is first commenced, published or sent or given to the Companys stockholders upon a request to do so by Parent; or
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the Company or our board of directors (or any committee of our board of directors) has formally resolved or publicly authorized or proposed to take any
of the actions in the three preceding bullet points; or
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on or after the date on which (i) all the conditions to the obligations of Parent and Merger Sub to consummate the Merger have been satisfied or
waived (other than those conditions that by their terms are to be satisfied at the closing of the Merger), and (ii) Parent and Merger Sub have not received the proceeds of the debt financing (including any alternative financing) within the
fourth business day following the satisfaction or waiver of the closing conditions.
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Termination Fees and Expenses Payable by the Company
In the event of a valid termination of the Merger Agreement, the Merger Agreement will be of no further force or effect without liability
of any party or parties thereto (or any stockholder, director, officer, employee, agent, consultant or representative of such party or parties) to the other party or parties thereto, except for the provisions related to confidentiality, public
disclosure, termination and general provisions, which will survive termination of the Merger Agreement. No such termination will relieve the parties from liability for any willful or intentional breach of, or fraud in connection with, the Merger
Agreement.
Prior and as a condition to a termination of the Merger Agreement, we must pay to Parent a termination fee of
$4,857,965 if:
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the Company terminates the Merger Agreement pursuant to the terms of the Merger Agreement in order to enter into an agreement relating to an
Acquisition Proposal or Acquisition Transaction;
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Parent terminates the Merger Agreement because:
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we have breached or failed to perform any of our obligations regarding non-solicitation and acquisition proposals or the recommendation of our board of
directors of the Merger Agreement to our stockholders;
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our board of directors or any committee thereof has withheld, withdrawn or modified or publicly proposed to withhold, withdraw or modify in a way that
is adverse to Parent, its recommendation of the Merger Agreement to the Companys stockholders;
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our board of directors or any committee thereof has approved, endorsed, adopted or recommended or publicly proposed to approve, endorse, adopt or
recommend, an Acquisition Proposal or Acquisition Transaction;
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the Company fails to publicly restate its recommendation of the Merger within five (5) business days after the date any Acquisition Proposal or
any material modification thereto is first commenced, published or sent or given to the Companys stockholders upon a request to do so by Parent; or
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the Company or our board of directors (or any committee of the board of directors) has formally resolved or publicly authorized or proposed to take any
of the foregoing actions; or
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an offer or proposal for a Competing Acquisition Transaction (as defined below) is publicly announced or is otherwise communicated to our senior
management or our board of directors;
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the Merger Agreement is terminated by us or Parent because (i) the Merger has not occurred on or before May 31, 2013 or (ii) the
stockholder meeting has been held and the adoption of the Merger
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59
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Agreement by Pervasives stockholders has not been obtained at such meeting or at any adjournment or postponement thereof; and
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within twelve (12) months following the termination of the Merger Agreement, (i) we enter into a definitive agreement in respect of any
Competing Acquisition Transaction, (ii) we recommend or submit a Competing Acquisition Transaction to our stockholders for adoption, or (iii) a transaction in respect of any Competing Acquisition Transaction is consummated.
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Parent will pay to the Company a termination fee of $10,000,000 if:
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the Company terminates the Merger Agreement because:
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the Company has irrevocably confirmed to Parent in writing that if Parent and Merger Sub perform their obligations under the Merger Agreement and the
debt financing is funded, then the Company is prepared to consummate the Merger;
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all the conditions to the obligations of Parent and Merger Sub to consummate the Merger have been satisfied or waived (other than those conditions that
by their terms are to be satisfied at the closing of the Merger); and
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Parent and Merger Sub fail to consummate the Merger within the fourth business day following the satisfaction or waiver of such closing conditions; or
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Parent terminates the Merger Agreement because:
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all the conditions to the obligations of Parent and Merger Sub to consummate the Merger have been satisfied or waived (other than those conditions that
by their terms are to be satisfied at the closing of the Merger); and
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Parent and Merger Sub have not received the proceeds of the debt financing (including any alternative financing) within the fourth business day
following the satisfaction or waiver of such closing conditions; or
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the Merger Agreement is terminated by us or Parent (i) because the Merger has not occurred on or before May 31, 2013 or (ii) as a result
of Parents or Merger Subs breach or failure to perform, or the failure to be true, of any of its representations, warranties, covenants or agreements set forth in the Merger Agreement and pursuant to the terms of the Merger Agreement,
and prior to such termination:
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the Company irrevocably confirmed to Parent in writing that if Parent and Merger Sub perform their obligations under the Merger Agreement and the debt
financing is funded, then the Company is prepared to consummate the Merger;
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all the conditions to the obligations of Parent and Merger Sub to consummate the Merger have been satisfied or waived (other than those that by their
nature are to be satisfied at the closing of the Merger); and
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Parent and Merger Sub fail to consummate the Merger within the fourth business day following the satisfaction of such closing conditions.
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Competing Acquisition Transaction has the same meaning as Acquisition Transaction
defined above, except that all references therein to fifteen percent (15%) and eighty-five percent (85%) will be references to fifty percent (50%).
The parties have agreed that in no event will either party be required to pay the termination fee on more than one occasion, whether or
not the termination fee may be payable under more than one provision of the Merger Agreement at the same time or at different times.
Except as expressly set forth in the Merger Agreement, all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby (including the Merger) will be paid
by the party or parties, as applicable, incurring such expenses, whether or not the Merger is consummated.
60
Indemnification and Insurance
The Merger Agreement provides that, for a period of six (6) years following the effective time of the Merger, the Surviving
Corporation and its subsidiaries will (and Parent will cause the Surviving Corporation and its subsidiaries to) honor and fulfill in all respects the obligations of the Company and its subsidiaries under any and all indemnification agreements
between the Company or any of its subsidiaries and any of their respective current or former directors and officers and any person who becomes a director or officer of the Company or any of its subsidiaries prior to the effective time of the Merger.
The Merger Agreement also provides that, for a period of six (6) years following the effective time of the Merger, the
Surviving Corporation and its subsidiaries will cause the charters and bylaws of the Surviving Corporation and its subsidiaries to contain provisions with respect to indemnification, exculpation and advancement of expenses that are at least as
favorable as the indemnification, exculpation and advancement of expenses set forth in the charters and bylaws of the Company and its subsidiaries as of the date of the Merger Agreement, and such provisions will not be repealed, amended or otherwise
modified in any manner except as required by applicable law.
Moreover, during the period of six (6) years following the
effective time of the Merger, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) maintain in effect the Companys current D&O Insurance in respect of acts or omissions occurring at or prior to the effective
time of the Merger, covering each person covered by the D&O Insurance, on terms with respect to the coverage and amounts that are equivalent to those of the D&O Insurance.
Parent has also agreed to indemnify and hold harmless the Company and its subsidiaries, and each of their respective directors, officers,
employees, agents and other representatives, from and against any and all losses, damages, claims, costs or expenses suffered or incurred by any of them in connection with the arrangement of the debt financing and any information utilized in
connection therewith (other than information provided by the Company or any of its subsidiaries expressly for use therein).
Employee Benefits
At its election, Parent may maintain any employee benefit plans Parent chooses to maintain or may
provide that any continuing Company employees will participate in or be covered by Parents benefit plans, or a combination thereof. The Merger Agreement provides that, if continuing Company employees are moved to Parents benefit plans:
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Parent will give full credit for eligibility and vesting purposes and vacation accrual purposes (but not for any other benefit accrual purposes) for
each Company employees period of service at the Company and its subsidiaries before the effective time of the Merger, subject to applicable law and the terms and conditions of Parents benefit plans; and
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subject to approval by any insurance carrier and to the extent consistent with applicable law, the terms of Parents benefit plans and tax
qualification requirements, Parent will cause any and all pre-existing condition (or actively-at-work or similar) limitations, eligibility waiting periods and evidence of insurability requirements under any group medical plans to be waived with
respect to continuing Company employees and their eligible dependents and will provide them with credit for any co-payments, deductibles and offsets (or similar payments) made during the applicable plan year prior to the effective time of the Merger
for purposes of satisfying any applicable deductible, out-of-pocket, or similar requirement under any Parent group medical programs in which they are eligible to participate on and after the effective time of the Merger.
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Amendment, Extension and Waiver
The parties may amend the Merger Agreement at any time, except that after our stockholders have approved the Merger Agreement in
accordance with Delaware law, no amendment will be made to the Merger Agreement that requires further approval by our stockholders without such approval. All amendments to the Merger
61
Agreement must be in writing and signed by us, Parent and Merger Sub. Certain provisions related to the Parent termination fee, amendments to the Merger Agreement, third party beneficiaries,
jurisdiction and waiver of jury trial will not, without the prior written consent of the lenders under the debt financing or any alternative or replacement financing, as applicable, be amended, modified, waived or terminated in any manner adverse to
the entities that have committed to provide or otherwise entered into agreements in connection with the financing related to the transactions contemplated by the Merger Agreement.
At any time prior to the effective time of the Merger, each of the parties to the Merger Agreement may, by written instrument and to the
extent legally allowed:
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extend the time for the performance of any of the obligations or other acts of the other parties;
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waive any inaccuracies in the representations and warranties of the other parties contained in the Merger Agreement or in any document delivered
pursuant to the Merger Agreement; or
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waive compliance with any of the agreements or conditions contained in the Merger Agreement.
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Specific Performance
Parent and Merger Sub are entitled to seek an injunction to prevent or restrain breaches or threatened breaches of the Merger Agreement and to specifically enforce the terms of the Merger Agreement to
prevent breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of the Company under the Merger Agreement.
The Company is entitled to seek an injunction to prevent or restrain breaches or threatened breaches of the Merger Agreement and to specifically enforce the terms of the Merger Agreement to prevent
breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of Parent and Merger Sub under the Merger Agreement, but only substantially concurrent with the receipt of the debt financing and if:
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all the conditions to the obligations of Parent and Merger Sub to consummate the Merger have been satisfied or waived (other than those that by their
nature are to be satisfied at the closing of the Merger) and Parent and Merger Sub fail to consummate the Merger within the fourth business day following the satisfaction of such conditions;
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the debt financing (including, in the case alternative financing has been obtained in accordance with the Merger Agreement, such alternative financing)
has been funded or would be funded in accordance with the terms thereof at the closing of the Merger if Parent and Merger Sub consummate the Merger in accordance with the terms of the Merger Agreement; and
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we irrevocably confirmed to Parent in writing that if the debt financing were funded, we would take such actions that are within our control to
consummate the Merger in accordance with the terms of the Merger Agreement.
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62
MARKET PRICE OF COMMON STOCK
The Companys Common Stock is listed for trading on the NASDAQ Global Market under the symbol PVSW. The following table
sets forth, for the fiscal quarters indicated, the high and low closing prices per share for Companys Common Stock as reported on the NASDAQ.
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Common Stock
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High
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Low
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FISCAL YEAR ENDED JUNE 30, 2011
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First Quarter
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$
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5.05
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$
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4.59
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Second Quarter
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$
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5.30
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$
|
4.80
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Third Quarter
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$
|
6.97
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$
|
5.15
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Fourth Quarter
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$
|
7.20
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$
|
6.24
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FISCAL YEAR ENDED JUNE 30, 2012
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First Quarter
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$
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7.41
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$
|
6.00
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Second Quarter
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$
|
6.38
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$
|
5.51
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Third Quarter
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$
|
6.05
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$
|
5.40
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Fourth Quarter
|
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$
|
7.49
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$
|
5.60
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FISCAL YEAR ENDED JUNE 30, 2013
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First Quarter
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$
|
8.77
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$
|
6.37
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Second Quarter
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$
|
9.12
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$
|
8.49
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Third Quarter (through March 13, 2013)
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$
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9.17
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$
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8.93
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The closing sale price of the Companys Common Stock on the NASDAQ on January 28,
2013, the last trading day prior to the public announcement of the proposed Merger, was $9.05 per share. On March 13, 2013, the most recent practicable date before this proxy statement was printed, the closing price for the Companys Common
Stock on the NASDAQ was $9.14 per share. You are encouraged to obtain current market quotations for the Companys Common Stock in connection with voting your shares.
SUBMISSION OF STOCKHOLDER PROPOSALS
If the Merger is consummated, we will not have public stockholders and there will be no public participation in any future meeting of
stockholders. However, if the Merger is not completed or if we are otherwise required to do so under applicable law, we would hold a 2013 annual meeting of stockholders (the 2013 Annual Meeting). Stockholder proposals that are intended
to be presented at the 2013 Annual Meeting that are eligible for inclusion in the Companys proxy statement and related proxy materials for that meeting under the applicable rules of the Securities and Exchange Commission must be received by
the Company not later than June 5, 2013, or one hundred and twenty (120) calendar days before the one-year anniversary of the date on which we first released our proxy statement to stockholders in connection with the 2012 annual meeting of
stockholders (the 2012 Annual Meeting), in order to be included. Pursuant to Rule 14a-4(c) of the Exchange Act and our bylaws, as amended, stockholders who intend to present a proposal at the 2013 Annual Meeting without inclusion of such
proposal in the proxy materials are required to notify us of such proposal no less than sixty (60) days and no more than ninety (90) days before the one-year anniversary of the 2012 Annual Meeting;
provided, however
, in the event
the 2013 Annual Meeting has been advanced by more than thirty (30) days or delayed by more than sixty (60) days from the anniversary date of the 2012 Annual Meeting, notice by a stockholder of a proposal must be received not earlier than
ninety (90) days prior to such annual meeting and not later than the close of business on the later of sixty (60) days prior to the 2013 Annual Meeting or ten (10) days following the date on which public announcement of the date of
the 2013 Annual Meeting is first made. If we do not receive notification of the proposal within that time, the proxy holders will be allowed to use their discretionary voting authority to vote on such proposal when the proposal is raised at the 2013
Annual Meeting. Stockholder proposals should be addressed to Pervasive Software Inc., 12365-B Riata Trace Parkway, Austin, Texas 78727, Attn: Randall G. Jonkers, Corporate Secretary.
HOUSEHOLDING OF SPECIAL MEETING MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy
statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as householding,
potentially means extra convenience for stockholders and cost savings for companies.
Some banks, brokers and other nominee
record holders may be participating in the practice of householding proxy statements and annual reports. This means that only one copy of the Companys proxy statement may have been sent to multiple stockholders in your household. A
single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be
householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. The Company will promptly deliver a separate copy of the proxy statement to you if you
write or call the Company at the following address or phone number: Pervasive Software Inc., 12365-B Riata Trace Parkway, Austin, Texas 78727, Attn: Alison Raffalovich, Investor Relations, or (512) 231-6000. If, at any time, you no longer wish
to participate in householding and would prefer to receive a separate proxy statement and annual report, please notify your broker, direct your written request to Pervasive Software Inc., 12365-B Riata Trace Parkway, Austin, Texas 78727,
Attn: Randall G. Jonkers, Corporate Secretary, or contact our Corporate Secretary, Randall G. Jonkers, at (512) 231-6000. Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request
householding of their communications should contact their broker.
68
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we
file at the SECs public reference room located at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to
the public at the SECs website at http://www.sec.gov. You also may obtain free copies of the documents Pervasive Software, Inc. files with the SEC by going to the Investor Relations section of our website at
http://www.pervasive.com. Our website address is provided as an inactive textual reference only. The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference.
Any person, including any beneficial owner, to whom this proxy statement is delivered may request copies of this proxy statement or other
information concerning us, without charge, by written or telephonic request directed to Pervasive Software Inc., 12365-B Riata Trace Parkway, Austin, Texas 78727, Attn: Alison Raffalovich, Investor Relations, or (512) 231-6000, on the
Companys website at http://www.pervasive.com or from the SEC through the SECs website at the address provided above
THIS
PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS
DATED MARCH 26, 2013. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE
CONTRARY.
69
Annex A
AGREEMENT AND PLAN OF MERGER
by and among
ACTIAN CORPORATION
ACTIAN SUB II, INC.
and
PERVASIVE SOFTWARE, INC.
Dated January 28, 2013
TABLE OF CONTENTS
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Page
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ARTICLE I
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THE MERGER
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A-1
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1.1
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The Merger
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A-1
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1.2
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Closing and Effective Time.
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A-1
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1.3
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Conditions to Closing.
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A-2
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ARTICLE II
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EFFECTS OF THE MERGER
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A-4
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2.1
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General Effects of Merger
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A-4
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2.2
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Effect of Merger on Capital Stock of Constituent Corporations.
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A-4
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2.3
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Payment of Merger Consideration.
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A-5
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2.4
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Effect of Merger on Company Options
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A-6
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ARTICLE III
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THE SURVIVING CORPORATION
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A-7
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3.1
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Certificate of Incorporation and Bylaws of Surviving Corporation.
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A-7
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3.2
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Directors and Officers of Surviving Corporation.
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A-7
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ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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A-8
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4.1
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Organization and Standing
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A-8
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4.2
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Authorization and Enforceability.
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A-8
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4.3
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Conflicts
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A-9
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4.4
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Required Governmental Approvals
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A-9
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4.5
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Capitalization.
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A-9
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4.6
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Subsidiaries.
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A-10
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4.7
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SEC Reports.
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A-11
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4.8
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Financial Statements.
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A-12
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4.9
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No Undisclosed Liabilities
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A-13
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4.10
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Absence of Certain Changes
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A-14
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4.11
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Material Contracts and Suppliers.
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A-14
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4.12
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Compliance with Laws and Orders
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A-14
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4.13
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Permits
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A-14
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4.14
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Legal Proceedings and Orders.
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A-15
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4.15
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Taxes.
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A-15
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4.16
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Employee Benefit Plans.
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A-17
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4.17
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Labor Matters.
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A-18
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4.18
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Real Property.
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A-19
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4.19
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Personal Property
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A-20
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4.20
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Intellectual Property.
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A-20
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4.21
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Insurance
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A-22
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4.22
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Related Party Transactions
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A-23
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4.23
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Brokers
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A-23
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4.24
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No Rights Plan
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A-23
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4.25
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No Other Representations
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A-23
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ARTICLE V
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REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
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A-24
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5.1
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Organization and Good Standing.
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A-24
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5.2
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Authorization and Enforceability.
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A-24
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5.3
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Conflicts
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A-24
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5.4
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Required Governmental Consents
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A-24
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5.5
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Ownership of Company Common Stock
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A-24
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5.6
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Litigation
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A-24
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5.7
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Funds
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A-25
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5.8
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Financing.
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A-25
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5.9
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Non-Reliance
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A-25
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A-i
TABLE OF CONTENTS
(continued)
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Page
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ARTICLE VI
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CONDUCT OF COMPANY BUSINESS
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A-26
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6.1
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Conduct of Company Business
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A-26
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6.2
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Restrictions on Company Business
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A-26
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6.3
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No Control
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A-28
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ARTICLE VII
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NON-SOLICITATION OF ACQUISITION PROPOSALS
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A-29
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7.1
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Termination of Discussions
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A-29
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7.2
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Non-Solicitation.
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A-29
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7.3
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Notice and Information.
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A-30
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ARTICLE VIII
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ADDITIONAL COVENANTS AND AGREEMENTS
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A-31
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8.1
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Company Stockholder Approval.
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A-31
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8.2
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Regulatory Approvals
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A-33
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8.3
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Financing.
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A-34
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8.4
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Reasonable Best Efforts to Close
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A-35
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8.5
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Access to Company
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A-36
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8.6
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Notice of Breach.
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A-36
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8.7
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Confidentiality
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A-36
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8.8
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Public Disclosure
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A-36
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8.9
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Certain Litigation
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A-36
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8.10
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Section 16(b) Exemption
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A-37
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8.11
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Directors and Officers Exculpation, Indemnification and Insurance.
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A-37
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8.12
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Employee Matters
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A-38
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8.13
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Directors
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A-38
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8.14
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FIRPTA Certificate
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A-38
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8.15
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Takeover Laws
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A-39
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8.16
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Obligations of Merger Sub
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A-39
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ARTICLE IX
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TERMINATION OF AGREEMENT
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A-39
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9.1
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Termination
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A-39
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9.2
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Notice of Termination
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A-40
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9.3
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Effect of Termination
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A-40
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9.4
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Termination Fees.
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A-41
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ARTICLE X
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GENERAL PROVISIONS
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A-42
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10.1
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Expenses
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A-42
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10.2
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Amendment
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A-42
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10.3
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Waiver
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A-43
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10.4
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Certain Interpretations
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A-43
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10.5
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Notices
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A-43
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10.6
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Non-Survival of Representations, Warranties
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A-44
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10.7
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Assignment
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A-44
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10.8
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Entire Agreement
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A-44
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10.9
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Third Party Beneficiaries
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A-44
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10.10
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Severability
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A-45
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10.11
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Remedies.
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A-45
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10.12
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Governing Law
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A-46
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10.13
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Consent to Jurisdiction
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A-46
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10.14
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WAIVER OF JURY TRIAL
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A-47
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10.15
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Counterparts
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A-47
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A-ii
Annex A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this
Agreement
) is made and entered into as of January 28, 2013 by and among Actian Corporation, a Delaware corporation
(
Parent
), Actian Sub II, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (
Merger Sub
), and Pervasive Software, Inc., a Delaware corporation (the
Company
). All capitalized
terms that are not defined elsewhere in this Agreement shall have the respective meanings assigned thereto in
Annex A
.
W I T N E S S E T H:
WHEREAS, it is proposed that, upon the terms and subject to the conditions set forth herein, Merger Sub will merge with and into the Company (the
Merger
), and each share (each, a
Share
, and collectively, the
Shares
) of common stock, par value $0.001 per share, of the Company (the
Company Common Stock
) then outstanding will thereupon be cancelled and converted into the
right to receive Nine Dollars and Twenty Cents ($9.20) in cash, without interest (the
Merger Consideration
).
WHEREAS, the Board of Directors of the Company (the
Company Board
) has (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, are advisable, (ii) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to and in the best interests of the Company and its
stockholders, (iii) approved this Agreement and the transactions contemplated hereby, including the Merger, and (iv) resolved to recommend that the Company stockholders adopt this Agreement.
WHEREAS, the Boards of Directors of Parent and Merger Sub have (i) determined that this Agreement and the transactions contemplated
hereby, including the Merger, are advisable, and (ii) approved this Agreement and the transactions contemplated hereby, including the Merger.
NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements set forth herein, as well as other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and accepted, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
1.1
The Merger
. Upon the terms and subject to the conditions set forth in this Agreement and the applicable provisions of Delaware
Law, at the Effective Time, Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall thereupon cease and the Company shall continue as the surviving corporation of the Merger and as a wholly-owned
subsidiary of Parent. The Company, as the surviving corporation of the Merger, is sometimes hereinafter referred to as the
Surviving Corporation
.
1.2
Closing and Effective Time
.
(a) Parent, Merger
Sub and the Company shall consummate the Merger at a closing (the
Closing
) to occur at the offices of Wilson Sonsini Goodrich & Rosati, 900 South Capital of Texas Highway, Las Cimas IV, Fifth Floor, Austin, Texas, on a
date and at a time to be agreed upon by Parent, Merger Sub and the Company, which date shall be no later than the fourth
(4
th
) Business Day after the satisfaction or waiver
(to the extent permitted hereunder) of the last to be satisfied or waived of the conditions set forth in
Section 1.3
(other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or
waiver (to the extent permitted hereunder), of such conditions). The date upon which the Closing shall occur pursuant hereto is referred to herein as the
Closing Date
.
A-1
(b) Upon the terms and subject to the conditions set forth in this Agreement, on the Closing
Date, Parent, Merger Sub and the Company shall cause the Merger to be consummated under Delaware Law by filing a certificate of merger (the
Certificate of Merger
) with the Secretary of State of the State of Delaware (the
Delaware Secretary of State
) in accordance with the applicable provisions of Delaware Law. The time of such filing and acceptance by the Delaware Secretary of State, or such later time as may be agreed in writing by Parent, Merger
Sub and the Company and specified in the Certificate of Merger, is referred to herein as the
Effective Time
.
1.3
Conditions to Closing
.
(a)
Mutual Conditions
. The respective obligations of Parent, Merger Sub and the Company to consummate the Merger shall be subject to the satisfaction or waiver (where permissible under Applicable
Law) prior to the Effective Time, of each of the following conditions:
(i)
Requisite Stockholder
Approval
. The Requisite Stockholder Approval shall have been obtained.
(ii)
Requisite Regulatory
Approvals
. All waiting periods (and extensions thereof) applicable to the Merger under the HSR Act shall have expired or been terminated.
(iii)
No Legal Prohibition
. No Governmental Authority in a Relevant Jurisdiction shall have:
(A) enacted, issued, promulgated, entered, enforced or deemed applicable to the Merger any Applicable Law that is in effect and has the effect of making the Merger illegal in any of the Relevant
Jurisdictions or which has the effect of prohibiting the consummation of the Merger in any of the Relevant Jurisdictions; or
(B) issued or granted any Order (whether temporary, preliminary or permanent) that has the effect of making the Merger illegal in any of the Relevant Jurisdictions or which has the effect of prohibiting
the consummation of the Merger in any of the Relevant Jurisdictions.
(b)
Additional Parent and Merger Sub Conditions
.
The obligations of Parent and Merger Sub to consummate the Merger shall be further subject to the satisfaction or waiver prior to the Effective Time of each of the following conditions, any of which may be waived (in writing) exclusively by Parent
and Merger Sub:
(i)
Representations and Warranties
. (w) Each of the representations and warranties
of the Company set forth in
Sections 4.1, 4.2, 4.3(i) and 4.24
shall be true and correct as of the date of this Agreement and as of the Closing Date as if made as of the Closing Date (except for those representations and warranties which
address matters only as of a particular date (such as the date of this Agreement), the accuracy of which shall be determined only as of such particular date), (x) the representations and warranties of the Company set forth in
Sections
4.7(f)
shall be true and correct in all material respects as of the Closing Date as if made as of the Closing Date (except for those representations and warranties which address matters only as of a particular date (such as the time of the
mailings, amendments and supplements described therein and date of the Company Stockholder Meeting described therein), the accuracy of which shall be determined only as of such particular date), (y) the representations and warranties of the
Company Section forth in
Sections 4.5(a)
,
4.5(b)
and
4.5(c)
shall be true and correct on and as of the Closing Date as if made as of the Closing Date (except for those representations and warranties which address matters only as
of a particular date (such as the date of this Agreement), the accuracy of which shall be determined only as of such particular date), except for any failure to be so true and correct that would not increase the aggregate consideration payable
pursuant to
Article II
upon consummation of the Merger by more than $500,000 relative to the aggregate consideration that would have been payable pursuant to
Article II
upon consummation of the Merger but for such failure, and
(z) each of the other representations and warranties of the Company set forth in
Article IV
of this Agreement shall be true and correct on and as of the Closing Date with the same force and effect as if made on and as of such date
(except for those representations and warranties which address matters only as of a particular date (such as the date of this Agreement), the
A-2
accuracy of which shall be determined only as of such particular date), except for any failure to be so true and correct which has not had, and would not reasonably be expected to have, a Company
Material Adverse Effect (it being understood that, for purposes of determining the accuracy of such representations and warranties, all materiality and Material Adverse Effect qualifications and exceptions contained in such
representations and warranties shall be disregarded).
(ii)
Covenants
. The Company shall have performed
in all material respects each of its covenants and other obligations under this Agreement required to be performed at or prior to the Closing Date.
(iii)
Closing Certificate
. Parent shall have received a certificate signed on behalf of the Company by the chief executive officer and chief financial officer of the Company certifying as to the
satisfaction of the matters set forth in paragraphs (i), (ii) and (vi) of this
Section 1.3(b)
.
(iv)
No Litigation
. There shall not be pending or threatened any Legal Proceeding by any Governmental Authority that seeks, directly or indirectly, to (A) challenge or make illegal or
otherwise prohibit the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement, (B) to prohibit or limit the ownership, operation or control by the Company, Parent or any of their respective Subsidiaries
of any material portion of the business or assets of the Company, Parent or any of their respective Subsidiaries, or to compel the Company, Parent or any of their respective Subsidiaries to dispose of or hold separate any material portion of the
business or assets of the Company, Parent or any of their respective Subsidiaries or (C) to impose limitations on the ability of Parent to acquire or hold, or exercise full rights of ownership of, any Shares (or shares of capital stock of the
Surviving Corporation), including the right to vote the Shares purchased or owned by them on all matters properly presented to stockholders of the Company.
(v)
Company Material Adverse Effect
. Since the date of this Agreement there shall not have occurred and be continuing any event, change, circumstance, occurrence, effect or state of facts that,
individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect;
provided, however
, that in the event that the conditions to the obligations of Parent and Merger Sub to consummate the Merger
set forth in
Section 1.3(a)
and
Section 1.3(b)
have been satisfied (including the condition set forth in this
Section 1.3(b)(v)
) and Parent and Merger Sub do not consummate the Merger within the time period
required by
Section 1.2(a)
, then the condition set forth in this
Section 1.3(b)(v)
shall automatically expire, without any action on the part of any party hereto, and thereupon be of no further force or effect whatsoever.
(vi)
Company Closing Cash
. As of immediately prior to the Closing, the Company and its Subsidiaries
shall have an aggregate of at least US$42,000,000 of cash, cash equivalents and marketable securities;
provided, however
, that in the event that the conditions to the obligations of Parent and Merger Sub to consummate the Merger set forth in
Section 1.3(a)
and
Section 1.3(b)
have been satisfied (including the condition set forth in this
Section 1.3(b)(vi)
) and Parent and Merger Sub do not consummate the Merger within the time period required by
Section 1.2(a)
, then the condition set forth in this
Section 1.3(b)(vi)
shall automatically expire, without any action on the part of any party hereto, and thereupon be of no further force or effect whatsoever.
(c)
Additional Company Conditions
. The obligations of the Company to consummate the Merger shall be further subject to the
satisfaction or waiver prior to the Effective Time of each of the following conditions, any of which may be waived (in writing) exclusively by the Company:
(i)
Representations and Warranties
. Each of the representations and warranties of Parent set forth in
Article V
of this Agreement shall be true and correct on and as of the Closing Date with
the same force and effect as if made on and as of such date (except for those representations and warranties which address matters only as of a particular date (such as the date hereof), the accuracy of which shall be determined only as of such
particular date), except for any failure to be so true and correct which has not had, and would not reasonably be expected to have, a Parent Material Adverse Effect (it being understood that, for purposes of determining the accuracy of such
representations and warranties, all
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materiality and Material Adverse Effect qualifications and exceptions contained in such representations and warranties shall be disregarded).
(ii)
Covenants
. Each of Parent and Merger Sub shall have performed in all material respects each of their
respective covenants and other obligations under this Agreement required to be performed at or prior to the Closing Date.
(iii)
Closing Certificate
. The Company shall have received a certificate signed on behalf of Parent and Merger Sub by a duly authorized officer of Parent and Merger Sub as to the satisfaction of
the matters set forth in paragraphs (i) and (ii) of this
Section 1.3(c)
.
ARTICLE II
EFFECTS OF THE MERGER
2.1
General Effects of Merger
. At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of Delaware Law. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time all of the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.
2.2
Effect of Merger on
Capital Stock of Constituent Corporations
.
(a)
Capital Stock of Merger Sub
. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Sub or the Company, each share of common stock, par value $0.001 per share, of Merger Sub that is issued and outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation, and shall thereupon constitute the only outstanding shares of capital stock of the Surviving Corporation. Each certificate
evidencing ownership of such shares of common stock of Merger Sub shall thereafter evidence ownership of shares of common stock of the Surviving Corporation.
(b)
Capital Stock of Company
. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company, or the holders of any of the following
securities:
(i)
Company Common Stock
. Each Share issued and outstanding immediately prior to the
Effective Time (other than Owned Shares and Dissenting Shares) shall be canceled and extinguished and automatically converted into the right to receive an amount in cash equal to the Merger Consideration, without interest thereon, upon the surrender
of (A) certificates representing Shares (the
Certificates
) and (B) uncertificated Shares (the
Uncertificated Shares
) in the manner provided in
Section 2.3
(or in the case of a lost, stolen
or destroyed Certificate, upon delivery of an affidavit (and bond, if required) in the manner provided in
Section 2.3(d)
). From and after the Effective Time, all Shares shall no longer be outstanding and shall automatically be cancelled,
retired and cease to exist, and each holder of any Shares (other than Dissenting Shares) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration payable therefor upon the surrender thereof in
accordance with the provisions of
Section 2.3
. The Merger Consideration paid in accordance with the terms of this
Article II
shall be deemed to have been paid in full satisfaction of all rights pertaining to such Shares. From
and after the Effective Time, there shall be no further registration of transfers on the records of the Surviving Corporation of Shares that were issued and outstanding immediately prior to the Effective Time.
(ii)
Owned Shares
. Each Share owned by Parent, the Company, or any direct or indirect wholly-owned Subsidiary of
Parent or the Company, in each case immediately prior to the Effective Time (
Owned Shares
), shall be cancelled and extinguished without any conversion thereof or consideration paid therefor.
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(iii)
Dissenting Shares
.
(A) Notwithstanding anything to the contrary set forth in this Agreement, Shares issued and outstanding immediately prior
to the Effective Time (other than Owned Shares) and held by a holder who has not voted in favor of adoption of this Agreement or consented thereto in writing and who has properly exercised appraisal rights of such shares in accordance with
Section 262 of the DGCL (such shares being referred to collectively as the
Dissenting Shares
until such time as such holder fails to perfect, withdraws or otherwise loses such holders appraisal rights under Delaware Law
with respect to such shares) shall not be converted into a right to receive the Merger Consideration but instead shall be entitled to payment of the appraised value of such shares in accordance with Section 262 of the DGCL;
provided,
however
, that if, after the Effective Time, such holder fails to perfect, withdraws or otherwise loses such holders right to appraisal pursuant to Section 262 of the DGCL, such Shares shall be treated as if they had been converted as
of the Effective Time into the right to receive the Merger Consideration in accordance with
Section 2.2(b)(i)
, without interest thereon, upon surrender of such Certificate formerly representing such share or transfer of such
Uncertificated Share, as the case may be.
(B) The Company shall provide Parent prompt written notice of any
demands received by the Company for appraisal of Shares of Company Common Stock, any withdrawal of any such demand and any other demand, notice or instrument delivered to the Company prior to the Effective Time pursuant to Delaware Law that relates
to such demand, and Parent shall have the opportunity and right to participate in and direct all negotiations and Legal Proceedings with respect to such demands. Except with the prior written consent of Parent, the Company shall not make any payment
with respect to, or offer to settle or settle, any such demands.
(iv)
Adjustment to Merger
Consideration
. If, during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of the Company shall occur (other than an increase in the number of shares outstanding as a
result of the exercise of any Company Options in accordance with its terms), including by reason of any reclassification, recapitalization, stock split (including reverse stock split) or combination, exchange or readjustment of shares, or any stock
dividend, or any record date for any such purpose shall be established, the Merger Consideration and any other amounts payable pursuant to this Agreement shall be appropriately adjusted.
2.3
Payment of Merger Consideration
.
(a)
Payment Agent
. Prior to the Effective Time, Parent shall select a bank or trust company reasonably acceptable to the Company to act as the payment agent for the Merger (the
Payment
Agent
).
(b)
Payment Fund
. Promptly following the Effective Time, Parent shall deposit (or cause to be
deposited) with the Payment Agent, for payment to the holders of Shares pursuant to the provisions of this
Article II
, an amount of cash equal to the product obtained by multiplying (x) the Merger Consideration by (y) the
aggregate number of Shares issued and outstanding immediately prior to the Effective Time (excluding Owned Shares and Dissenting Shares) (such cash amount being referred to herein as the
Payment Fund
). From time to time following
the Effective Time as required, Parent shall deposit (or cause to be deposited) with the Payment Agent additional cash in any amount necessary to enable the Payment Agent to pay any and all Merger Consideration payable hereunder.
(c)
Payment Procedures
. Promptly following the Effective Time, Parent and Merger Sub shall cause the Payment Agent to mail to each
holder of record of Shares as of immediately prior to the Effective Time: (i) a letter of transmittal in customary form (which shall specify that delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of
the Certificates or transfer of the Uncertificated Shares to the Payment Agent); and (ii) instructions for use in effecting the surrender of the Certificates or transfer of the Uncertificated Shares in exchange for the Merger Consideration
payable in respect thereof pursuant to the provisions of this
Article II
. Each holder of Shares that have been converted into the right to receive the Merger
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Consideration shall be entitled to receive the Merger Consideration in respect of the Shares represented by a Certificate or Uncertificated Share, upon (x) surrender to the Payment Agent of
a Certificate, together with a duly completed and validly executed letter of transmittal and such other documents as may reasonably be requested by the Payment Agent, or (y) receipt of an agents message by the Payment Agent
(or such other evidence, if any, of transfer as the Payment Agent may reasonably request) in the case of a book-entry transfer of Uncertificated Shares. Until so surrendered or transferred, as the case may be, from and after the Effective Time each
such Certificate or Uncertificated Share shall represent for all purposes only the right to receive the Merger Consideration payable in respect thereof pursuant to the provisions of this
Article II
. If Certificates are presented to the
Surviving Corporation after the Effective Time for any reason, they shall be canceled and exchanged for the Merger Consideration as provided for, and in accordance with the procedures set forth, in this
Article I
. No interest shall be
paid or accrued on the cash payable upon the surrender or transfer of such Certificate or Uncertificated Share.
(d)
Lost,
Stolen or Destroyed Certificates
. In the event that any Certificates shall have been lost, stolen or destroyed, the Payment Agent shall issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, the Merger Consideration payable in respect thereof pursuant to
Section 2.2(b)(i)
;
provided, however
, that Parent may, in its discretion and as a condition precedent to the payment of such Merger
Consideration, require the owners of such lost, stolen or destroyed Certificates to deliver a bond in such sum as Parent may reasonably direct as indemnity against any claim that may be made against Parent, the Surviving Corporation or the Payment
Agent with respect to the Certificates alleged to have been lost, stolen or destroyed.
(e)
Transfers of Ownership
. If
any portion of the Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate or the transferred Uncertificated Share is registered, it shall be a condition to such payment that (i) either
such Certificate shall be properly endorsed or shall otherwise be in proper form for transfer or such Uncertificated Share shall be properly transferred and (ii) the Person requesting such payment shall pay to the Payment Agent any transfer or
other similar Tax required as a result of such payment to a Person other than the registered holder of such Certificate or Uncertificated Share or establish to the satisfaction of the Payment Agent that such Tax has been paid or is not payable.
(f)
Required Withholding
. Each of the Payment Agent, Parent and the Surviving Corporation shall be entitled to deduct
and withhold from any amounts payable pursuant to this Agreement such amounts as it reasonably determines may be required to be deducted or withheld therefrom under Applicable Law. To the extent that such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.
(g)
No Liability
. Notwithstanding anything to the contrary set forth in this Agreement, none of the Payment Agent, Parent, the Surviving Corporation or any other party hereto shall be liable to a
holder of Shares for any amount properly paid to a public official pursuant to any abandoned property, escheat or similar Applicable Law.
(h)
Distribution of Payment Fund to Parent
. Any portion of the Payment Fund that remains undistributed to the holders of the Shares on the date that is one (1) year after the Effective Time
shall be delivered to Parent upon demand, and any holders of Shares that were issued and outstanding immediately prior to the Merger who have not theretofore exchanged their Shares for the Merger Consideration pursuant to the provisions of this
Section 2.3
shall thereafter look only to Parent, as general creditors thereof, for any payment of and claim to the applicable Merger Consideration to which such holders may be entitled pursuant to the provisions of this
Article II
. Any amounts remaining unclaimed by holders of Shares two (2) years after the Effective Time (or such earlier date, immediately prior to such time when the amounts would otherwise escheat to or become property of any
Governmental Authority) shall become, to the extent permitted by Applicable Law, the property of Parent free and clear of any claims or interest of any Person previously entitled thereto.
2.4
Effect of Merger on Company Options and Company Restricted Stock Units
.
(a)
Company Options
. Parent shall not assume any Company Options in connection with the Merger. At the Effective Time, each Company
Option outstanding immediately prior to the Effective Time (whether
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vested or unvested) shall, without any action on the part of Parent, Merger Sub, the Company or the holder thereof, be cancelled and converted into, and shall become a right to receive, an amount
in cash, without interest, equal to the product of (x) the excess, if any, of (A) the Merger Consideration, less (B) the exercise price per share attributable to such Company Option, multiplied by (y) the total number of shares
of Company Common Stock issuable upon exercise in full of such Company Option (the
Option Consideration
). The payment of the Option Consideration will be subject to any applicable withholding for Taxes. The Company agrees to take
all action necessary to effect this cancellation of Company Options upon the Effective Time and to give effect to this
Section 2.4(a)
(including the satisfaction of the requirements of Rule 16b-3(e) under the Exchange Act). As soon as
practicable (and in no event more than twenty calendar days) following the Closing, the Company shall pay to each holder of a Company Option the Option Consideration (if any), less any applicable withholding Taxes, required to be paid to any such
holder of a Company Option pursuant to this
Section 2.4(a)
. The cancellation of a Company Option pursuant to this
Section 2.4(a)
shall be deemed the termination, and satisfaction in full of, any and all rights the holder had
or may have had in respect of such Company Option.
(b)
Company Restricted Stock Units
. Parent shall not assume any
Company RSUs in connection with the Merger. At the Effective Time, each Company RSU outstanding immediately prior to the Effective Time shall, without any action on the part of Parent, Merger Sub, the Company or the holder thereof, be cancelled and
converted into, and shall become a right to receive, an amount in cash, without interest, equal to the product obtained by multiplying (x) the Merger Consideration by (y) the total number of shares of Company Common Stock issuable upon
settlement in full of such Company RSU (the
RSU Consideration
). The payment of the RSU Consideration will be subject to any applicable withholding for Taxes. The Company agrees to take all action necessary to effect this
cancellation of Company RSUs upon the Effective Time and to give effect to this
Section 2.4(b)
(including the satisfaction of the requirements of Rule 16b-3(e) under the Exchange Act). As soon as practicable (and in no event more than
twenty calendar days) following the Closing, the Company shall pay to each holder of a Company RSU the RSU Consideration (if any), less any applicable withholding taxes, required to be paid to any such holder of a Company RSU pursuant to this
Section 2.4(b)
. The cancellation of a Company RSU pursuant to this
Section 2.4(b)
shall be deemed the termination, and satisfaction in full of, any and all rights the holder had or may have had in respect of such Company RSU.
ARTICLE III
THE SURVIVING CORPORATION
3.1
|
Certificate of Incorporation and Bylaws of Surviving Corporation
.
|
(a)
Certificate of Incorporation
. At the Effective Time, subject to the provisions of
Section 8.11
, the certificate of incorporation of the Company shall be amended and restated in its
entirety to read identically to the certificate of incorporation of Merger Sub, as in effect immediately prior to the Effective Time (provided that the name of the Surviving Corporation shall be the name of the Company prior to the Effective Time),
and such amended and restated certificate of incorporation shall become the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with the applicable provisions of Delaware Law and such certificate of
incorporation.
(b)
Bylaws
. At the Effective Time, subject to the provisions of
Section 8.11
, the bylaws of
Merger Sub, as in effect immediately prior to the Effective Time, shall become the bylaws of the Surviving Corporation until thereafter amended in accordance with the applicable provisions of Delaware Law, the certificate of incorporation of the
Surviving Corporation and such bylaws.
3.2
Directors and Officers of Surviving Corporation
.
(a)
Directors
. At the Effective Time, the directors of the Merger Sub shall become the initial directors of Surviving Corporation,
each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified.
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(b)
Officers
. At the Effective Time, the officers of the Merger Sub shall become the
initial officers of Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly appointed and qualified.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Except (i) as set forth in the section of the
disclosure letter delivered by the Company to Parent on the date of this Agreement (the
Company Disclosure Letter
) that relates to such Section or in any other section of the Company Disclosure Letter to the extent it is readily
apparent from the text of such disclosure that such disclosure is applicable to such other Section, and (ii) as disclosed in the Annual Report on Form 10-K of the Company for the fiscal year ended June 30, 2012 (the
Company Form
10-K
), the Quarterly Reports on Form 10-Q and the Current Reports on Form 8-K, in each case filed from the date of the filing of the Company Form 10-K to the date of this Agreement (other than disclosures in the Risk Factors or
Forward-Looking Statements sections of such reports and other disclosures that are similarly predictive, cautionary or forward-looking in nature) (
provided
,
however
, that the representations and warranties set forth in
Sections 4.2, 4.3, 4.5
and
4.20
shall not be deemed qualified by any SEC Report), the Company hereby represents and warrants to Parent and Merger Sub as follows:
4.1
Organization and Standing
. The Company is a corporation duly organized, validly existing and in good standing under Delaware Law. The Company has the requisite power and authority to carry on
its respective business as it is presently being conducted and to own, lease or operate its properties and assets. The Company is duly qualified to do business and is in good standing in each jurisdiction where the character of its properties owned
or leased or the nature of its activities make such qualification necessary (to the extent the good standing concept is applicable in the case of any jurisdiction outside the United States), except where the failure to be so qualified or
in good standing would not reasonably be expected to have a Company Material Adverse Effect. The Company has previously delivered or made available to Parent complete and correct copies of (a) the certificates of incorporation and bylaws, as
amended to date, of the Company and (b) the minutes of all meetings of the stockholders, the Company Board and each committee of the Company Board. The Company is not in violation of its certificate of incorporation or bylaws.
4.2
Authorization and Enforceability
.
(a) The Company has all requisite power and authority to execute and deliver this Agreement and, subject in the case of the Merger to obtaining the Requisite Stockholder Approval, to consummate the
transactions contemplated hereby and to perform its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby (including the Merger) have been duly
authorized by all necessary corporate action on the part of the Company and no additional corporate proceedings on the part of the Company are necessary to authorize this Agreement or the consummation of the transactions contemplated hereby
(including the Merger), other than in the case of the Merger obtaining the Requisite Stockholder Approval.
(b) This Agreement
has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Applicable Law affecting or relating to creditors rights generally and by general
principles of equity.
(c) At a meeting duly called and held prior to the execution of this Agreement, the Company Board
unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable, (ii) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to
and in the best interests of the Company and its stockholders, (iii) approved this Agreement
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and the transactions contemplated hereby, including the Merger, (iv) took all actions necessary so that the restrictions on business combinations and stockholder vote requirements contained
in Section 203 of the DGCL will not apply with respect to or as a result of the Merger, this Agreement and the transactions contemplated hereby, (v) directed that the adoption of this Agreement be submitted to a vote of the stockholders of
the Company at the Company Stockholders Meeting and (vi) resolved to recommend that the holders of Shares adopt this Agreement in accordance with the applicable provisions of Delaware Law.
(d) The Company and the Company Board have taken all action necessary to exempt the Merger, this Agreement and the other transactions
contemplated hereby from the restrictions on business combinations and voting requirements contained in Section 203 of the DGCL. No other control share acquisition, fair price, moratorium or other
antitakeover Applicable Law (such Applicable Law, including Section 203 of the DGCL,
Takeover Law
) applies to the Merger, this Agreement or any of the other transactions contemplated hereby.
(e) The Company Board has received the written opinion of Shea & Company, LLC to the effect that (subject to the assumptions,
qualifications, limitations and other matters set forth therein), as of the date of this Agreement, the Merger Consideration is fair to the holders of Company Common Stock from a financial point of view, and as of the date of this Agreement, such
opinion has not been withdrawn, revoked or modified.
(f) The affirmative vote of the holders of a majority of the outstanding
Shares voting to adopt this Agreement (the
Requisite Stockholder Approval
) is the only vote of the holders of any class or series of Company capital stock necessary (under Applicable Law or otherwise) to consummate the Merger and
the other transactions contemplated by this Agreement.
4.3
Conflicts
. The execution, delivery and performance by the
Company of this Agreement, the consummation by the Company of the transactions contemplated hereby (including the Merger) and the compliance by the Company with any of the provisions hereof do not and will not (i) violate or conflict with any
provision of the certificate of incorporation or bylaws or other constituent documents of the Company or any of its Subsidiaries, (ii) subject to obtaining the Consents set forth in
Section 4.4
, violate, conflict with, or result in
the breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the loss of any material benefit or the imposition of any additional payment or other Liability under, any Material Contract, (iii) assuming compliance with the matters referred to in
Section 4.4
and, in the case of the consummation of the Merger, subject to obtaining the Requisite Stockholder Approval, violate or conflict with any Applicable Law or Order or (iv) result in the creation of any Lien upon any of the properties or assets of
the Company or any of its Subsidiaries, except in the case of each of clauses (ii), (iii) and (iv) above, for such violations, conflicts, defaults, terminations, accelerations or Liens that would not reasonably be expected to have a
Company Material Adverse Effect.
4.4
Required Governmental Approvals
. No consent, approval, order or authorization of,
or filing or registration with, or notification to (any of the foregoing being a
Consent
), any Governmental Authority is required on the part of the Company or any of its Subsidiaries in connection with the execution, delivery and
performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby (including the Merger), except (a) the filing of the Certificate of Merger with the Delaware Secretary of State as required
by Delaware Law, (b) such filings and approvals as may be required by any federal or state securities laws, including compliance with any applicable requirements of the Exchange Act, (c) compliance with any applicable requirements of the
HSR Act and the Antitrust Laws of the Relevant Jurisdictions, and (d) such other Consents the failure of which to obtain would not reasonably be expected to have a Company Material Adverse Effect.
4.5
Capitalization
.
(a) The authorized capital stock of the Company consists of 75,000,000 shares of Company Common Stock. As of the close of business on January 25, 2013 (the
Capitalization Date
),
(A) 28,905,226 shares of Company Common Stock were issued and outstanding, of which 823,000 were restricted stock (
i.e.
, shares of Company Stock subject to a right of repurchase by the Company), and (B) 12,007,680 shares of Company
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Common Stock were held by the Company as treasury shares. Since the close of business on the Capitalization Date, the Company has not issued any shares of Company Common Stock other than pursuant
to the exercise of Company Options. All outstanding Shares are duly authorized, validly issued, fully paid, nonassessable and free of any preemptive rights.
(b)
Section 4.5(b)(i)
of the Company Disclosure Letter sets forth the number of Shares that are subject to issuance pursuant to Company Options outstanding as of the close of business on the
Capitalization Date.
Section 4.5(b)(ii)
of the Company Disclosure Letter sets forth the number of Shares that are subject to issuance pursuant to the settlement of Company RSUs outstanding as of the close of business on the
Capitalization Date. Since the close of business on the Capitalization Date, the Company has not granted, committed to grant or otherwise created or assumed any obligation with respect to any Company Options or Company RSUs, other than as permitted
by
Section 6.2
. All outstanding Company Options and Company RSUs have been validly granted and properly approved by the Company Board in accordance with all Applicable Law and the Company Equity Incentive Plan. All Shares reserved for
issuance upon the exercise of outstanding Company Options or the vesting and settlement of outstanding Company RSUs will be, when so issued, duly authorized, validly issued, fully paid and nonassessable and free of any preemptive rights.
(c) Except as set forth in this
Section 4.5
, there are (i) no outstanding shares of capital stock of, or other equity or
voting interest in, the Company, (ii) no outstanding securities of the Company convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, the Company, (iii) no outstanding options, stock
appreciation rights, warrants, restricted stock units, rights or other commitments or agreements to acquire from the Company, or that obligates the Company to issue, any capital stock of, or other equity or voting interest in, or any securities
convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, the Company, (iv) no obligations of the Company to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable
security or other similar agreement or commitment (whether payable in equity, cash or otherwise) relating to any capital stock of, or other equity or voting interest (including any voting debt) in, the Company (the items in clauses (i), (ii),
(iii) and (iv), together with the capital stock of the Company, being referred to collectively as
Company Securities
) and (v) no other obligations by the Company or any of its Subsidiaries to make any payments based on
the price or value of the Company Securities. There are no outstanding Contracts of any kind which obligate the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities.
(d) Neither the Company nor any of its Subsidiaries is a party to any Contracts restricting the transfer of, relating to the voting of,
requiring registration of, or granting any preemptive rights, anti-dilutive rights or rights of first refusal or similar rights with respect to any securities of the Company.
(e)
Section 4.5(e)
of the Company Disclosure Letter sets forth a true and complete list of all holders, as of the close of business on the Capitalization Date, of all outstanding Company
Options, Company RSUs and other similar rights to purchase or receive Shares granted under the Company Equity Incentive Plan or otherwise (collectively,
Company
Stock Awards
), indicating as applicable, with respect to each
Company Stock Award then outstanding, the type of award granted, the number of Shares subject to such Company Stock Award, the name of the plan under which such Company Stock Award was granted, the date of grant, exercise or purchase price, vesting
schedule, payment schedule (if different from the vesting schedule) and expiration thereof. Each Company Option intended to qualify as an incentive stock option under Section 422 of the Code so qualifies and the exercise price of
each other Company Option is no less than the fair market value of a Share as determined by the Company Board on the date of grant of such Company Option. The Company has made available to Parent true and complete copies of all Company Equity
Incentive Plans and the forms of all stock option agreements evidencing outstanding Company Options.
4.6
Subsidiaries
.
(a)
Section 4.6(a)
of the Company Disclosure Letter sets forth a complete and accurate list of each Subsidiary of
the Company and the jurisdiction of organization thereof. Except for the Companys Subsidiaries and marketable securities held for investment or cash management purposes, the Company does not own, directly or indirectly, any capital stock of,
or other equity or voting interest in, any Person.
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(b) Each of the Companys Subsidiaries is duly organized, validly existing and in good
standing under the Applicable Laws of the jurisdiction of its respective organization (to the extent the good standing concept is applicable in the case of any jurisdiction outside the United States). Each of the Companys
Subsidiaries has the requisite power and authority to carry on its respective business as it is presently being conducted and to own, lease or operate its respective properties and assets. Each of the Companys Subsidiaries is duly qualified to
do business and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification necessary (to the extent the good standing concept is applicable in
the case of any jurisdiction outside the United States), except where the failure to be so qualified or in good standing would not reasonably be expected to have a Company Material Adverse Effect. The Company has delivered or made available to
Parent complete and correct copies of the certificates of incorporation and bylaws (or equivalent organizational documents), as amended to date, of the Companys Subsidiaries.
(c) All of the outstanding capital stock of, or other equity or voting interest in, each Subsidiary of the Company (i) have been duly
authorized, validly issued and are fully paid and nonassessable and (ii) are owned, directly or indirectly, by the Company, free and clear of all Liens and free of any other restriction (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other equity or voting interest) that would prevent the operation by the Surviving Corporation of such Subsidiarys business as presently conducted.
(d) There are no outstanding (i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of
capital stock of, or other equity or voting interest in, any Subsidiary of the Company, (ii) options, stock appreciation rights, warrants, restricted stock units, rights or other commitments or agreements to acquire from the Company or any of
its Subsidiaries, or that obligate the Company or any of its Subsidiaries to issue, any capital stock of, or other equity or voting interest in, or any securities convertible into or exchangeable for shares of capital stock of, or other equity or
voting interest in, any Subsidiary of the Company, (iii) obligations of the Company to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment (whether payable
in equity, cash or otherwise) relating to any capital stock of, or other equity or voting interest (including any voting debt) in, any Subsidiary of the Company (the items in clauses (i), (ii) and (iii), together with the capital stock of the
Subsidiaries of the Company, being referred to collectively as
Subsidiary Securities
) or (iv) other obligations by the Company or any of its Subsidiaries to make any payments based on the price or value of any Subsidiary
Securities. There are no Contracts of any kind which obligate the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities.
4.7
SEC Reports
.
(a) Since July 1, 2010, the Company has filed or furnished (as applicable) all forms, reports, schedules, statements and documents with the SEC that have been required to be so filed or furnished (as
applicable) by it under Applicable Law at or prior to the time so required, and, after the date of this Agreement and until the Effective Time, the Company will file all forms, reports, schedules, statements and documents with the SEC that are
required to be filed by it under Applicable Law at or prior to the time so required (all such forms, reports, schedules, statements and documents, together with any other forms, reports, schedules, statements or other documents filed or furnished
(as applicable) by the Company with the SEC at or prior to the Effective Time that are not required to be so filed or furnished, the
SEC Reports
).
(b) Each SEC Report complied, or will comply, as the case may be, as of its filing date, 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 with all applicable provisions of the Sarbanes-Oxley Act, including, in each case, the rules and regulations promulgated thereunder, each as in effect on the date such SEC Report was, or will be, filed. As of their respective
filing dates (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), none of the SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
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(c) Neither the Company nor any of its Subsidiaries has received from the SEC or any other
Governmental Authority any written comments or questions with respect to any of the SEC Reports (including the financial statements included therein) or any registration statement filed by any of them with the SEC or any notice from the SEC or other
Governmental Authority that such SEC Reports (including the financial statements included therein) or registration statements are being reviewed or investigated, and, to the knowledge of the Company, there is not, as of the date of this Agreement,
any investigation or review being conducted by the SEC or any other Governmental Authority of any SEC Reports (including the financial statements included therein).
(d) None of the Companys Subsidiaries is required to file any forms, reports, schedules, statements or other documents with the SEC.
(e) No executive officer of the Company has failed to make the certifications required of him or her under Section 302 or 906 of the
Sarbanes-Oxley Act with respect to any SEC Report, except as disclosed in certifications filed with the SEC Reports, and at the time of filing or submission of each such certification, such certification was true and accurate and complied with the
Sarbanes-Oxley Act. Neither the Company nor any of its executive officers has received notice from any Governmental Authority challenging or questioning the accuracy, completeness, form or manner of filing of such certifications.
(f) The Proxy Statement will not, at the time it is first mailed to the Companys stockholders, at the time of any amendments or
supplements thereto and at the time of the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act. Notwithstanding the foregoing, the Company makes no representation or warranty with
respect to statements included or incorporated by reference in the Proxy Statement based on information supplied by or on behalf of Parent or Merger Sub specifically for inclusion or incorporation by reference therein.
4.8
Financial Statements
.
(a) The consolidated financial statements of the Company and its Subsidiaries filed in or furnished with the SEC Reports have been or will be, as the case may be, (i) prepared in accordance with GAAP
consistently applied by the Company during the periods and at the dates involved (except as may be indicated in the notes thereto), (ii) comply as to form in all material respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, and (iii) fairly present in all material respects, or will present in all material respects, as the case may be, the consolidated financial position of the Company and its Subsidiaries as of the
dates thereof and the consolidated results of operations and cash flows for the periods then ended (subject to normal year-end adjustments in the case of any unaudited interim financial statements that were not, or are not expected to be, material
in amount). Since January 1, 2009, the Company has not made any change in the accounting practices or policies applied in the preparation of its financial statements, except as required by GAAP, SEC rule or policy or Applicable Law.
(b) The Companys system of internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) is sufficient to provide reasonable assurance (i) that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, (ii) that receipts and expenditures are executed in
accordance with the authorization of management, and (iii) that any unauthorized use, acquisition or disposition of the Companys assets that would materially affect the Companys financial statements would be detected or prevented in
a timely manner.
(c) The Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) are designed to ensure that (i) all information (both financial and non-financial) required to be disclosed by the Company, including its consolidated Subsidiaries, in the reports that it files or submits under
the Exchange Act is recorded, processed, summarized and reported to the individuals responsible for preparing such reports within the time periods specified in the rules and forms of the SEC, and (ii) all such information is accumulated and
communicated to the Companys management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the principal executive officer and
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principal financial officer of the Company required under the Exchange Act with respect to such reports. The principal executive officer and principal financial officer of the Company have
evaluated the effectiveness of the Companys disclosure controls and procedures and, to the extent required by Applicable Law, presented in any applicable SEC Report that is a report on Form 10-K or Form 10-Q, or any amendment thereto, its
conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by such report or amendment based on such evaluation.
(d) Neither the Company nor any of its Subsidiaries (including any employee thereof) nor the Companys independent auditors has identified or been made aware of (i) any significant deficiency or
material weakness in the system of internal accounting controls utilized by the Company and its Subsidiaries, (ii) any fraud, whether or not material, that involves the Companys management or other employees who have a role in the
preparation of financial statements or the internal accounting controls utilized by the Company and its Subsidiaries or (iii) any claim or allegation regarding any of the foregoing.
(e) Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture,
partnership agreement or any similar Contract (including any Contract relating to any transaction, arrangement or relationship between or among the Company or any of its Subsidiaries, on the one hand, and any unconsolidated affiliate, including any
structured finance, special purpose or limited purpose entity or Person, on the other hand (such as any arrangement described in Section 303(a)(4) of Regulation S-K under the Securities Act)) where the result, purpose or effect of such
arrangement is to avoid disclosure of any material transaction involving the Company or any its Subsidiaries in the Companys consolidated financial statements.
(f) Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, employee, auditor, accountant, consultant or representative of the Company or any of its
Subsidiaries, has received or otherwise had or obtained knowledge of any substantive complaint, allegation, assertion or claim, whether written or oral, that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing
practices, methodologies or methods. No current or former attorney representing the Company or any of its Subsidiaries has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or
any of its officers, directors, employees or agents to the Company Board or any committee thereof or to any director or executive officer of the Company.
(g) To the knowledge of the Company, no employee of the Company or any of its Subsidiaries has provided or is providing information to any law enforcement agency regarding the commission or possible
commission of any crime or the violation or possible violation of any Applicable Law of the type described in Section 806 of the Sarbanes-Oxley Act by the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries nor,
to the knowledge of the Company, any director, officer, employee, contractor, subcontractor or agent of the Company or any such Subsidiary has discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against an
employee of the Company or any of its Subsidiaries in the terms and conditions of employment because of any lawful act of such employee described in Section 806 of the Sarbanes-Oxley Act.
(h) As of the date of this Agreement, there are no outstanding or unresolved comments in the comment letters received from the SEC staff
with respect to the SEC Reports. To the knowledge of the Company, none of the SEC Reports is subject to ongoing review or outstanding SEC comment or investigation.
(i) The Company is in compliance in all material respects with the applicable corporate governance rules and regulations of the Nasdaq.
(j) No Subsidiary of the Company is required to file any form, report, schedule, statement or other document with the SEC.
4.9
No Undisclosed Liabilities
. Neither the Company nor any of its Subsidiaries has any Liabilities other than
(a) Liabilities reflected or otherwise reserved against in the Balance Sheet, (b) Liabilities under this Agreement, (c) fees and expenses payable to any accountant, outside legal counsel or financial advisor which are incurred in
connection with the negotiation of this Agreement or the consummation of the transactions contemplated by this Agreement (including the Merger), (d) executory obligations under any Contract, and
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(e) Liabilities incurred in the ordinary course of business since the date of the Balance Sheet in amounts consistent with past practice that would not reasonably be expected to have a
Company Material Adverse Effect.
4.10
Absence of Certain Changes
. Since June 30, 2012 through the date hereof,
except for actions expressly contemplated by this Agreement, the business of the Company and its Subsidiaries has been conducted, in all material respects, in the ordinary course consistent with past practice, and there has not been or occurred and
there does not exist, as the case may be, (a) any Company Material Adverse Effect, or (b) any action that, if taken after the date of this Agreement without the prior written consent of Parent, would constitute a breach of
Section 6.2
. Since August 13, 2012 through the date hereof, the Company has not increased or accelerated the compensation arrangements of the Company, including by adopting any golden parachute payments.
4.11
Material Contracts and Suppliers
.
(a)
Section 4.11(a)
of the Company Disclosure Letter contains a complete and accurate list of all Material Contracts to which the Company or any of its Subsidiaries is a party. The Company has
delivered or made available to Parent complete and correct copies of each such Material Contract.
(b) Each Material Contract
is valid and binding on the Company (and/or each such Subsidiary of the Company, as the case may be) and is in full force and effect, and neither the Company nor any of its Subsidiaries party thereto, nor, to the knowledge of the Company, any other
party thereto, is in breach of, or default under, in any material respect, any such Material Contract, and no event has occurred that with notice or lapse of time or both would constitute such a breach or default thereunder in any material respect
by the Company or any of its Subsidiaries, or, to the knowledge of the Company, any other party thereto. Neither the Company nor any of its Subsidiaries has received any written notice or other communication regarding any actual or possible
violation or breach of or default under, or intention to cancel or modify, any Material Contract.
(c) During the last twelve
(12) months, neither the Company nor any of its Subsidiaries has received any notice of termination or written threat of termination from AG-TECH Corporation and Sage Software, Inc. or any information that AG-TECH Corporation or Sage Software,
Inc. intends to materially decrease the amount of business that it does with the Company or any Subsidiary, as the case may be.
4.12
Compliance with Laws and Orders
. The Company and each of its Subsidiaries, and, to the knowledge of the Company, their
respective properties (including the Assets and the Real Property), are and since July 1, 2010 have been in compliance in all material respects with all Applicable Laws and Orders. Neither the Company nor any of its Subsidiaries (a) has
received any written notice of any administrative, civil or criminal investigation or audit by any Governmental Authority relating to the Company or any of its Subsidiaries, (b) has received any written notice from any Governmental Authority
alleging or relating to a possible violation by the Company or any of its Subsidiaries of any Applicable Law or Order, nor (c) has provided any written notice to any Governmental Authority regarding any violation by the Company or any of its
Subsidiaries of any Applicable Law or Order, and no such notice referred to in clause (a), (b) or (c) of this
Section 4.12
remains outstanding or unresolved as of the date of this Agreement.
4.13
Permits
. The Company and its Subsidiaries are, and since July 1, 2010 have been in compliance with the terms of, all
permits, licenses, authorizations, consents, approvals and franchises from Governmental Authorities required to occupy and operate each Real Property and to conduct their businesses as currently conducted (
Permits
), there has
occurred no violation of, default (with or without notice or lapse of time or both) under or event giving to others any right of revocation, non-renewal, adverse modification or cancellation of, with or without notice or lapse of time or both, any
such Permit, nor would any such revocation, non-renewal, adverse modification or cancellation result from the consummation of the transactions contemplated hereby, and no suspension or cancellation of any such Permits is pending or, to the knowledge
of the Company, threatened, except for such noncompliance, suspensions or cancellations that, individually or in the aggregate, would not reasonably be expected to result in material Liability to the Company and its Subsidiaries, taken as a whole.
Neither the Company nor any of its Subsidiaries has received any written notice from any Governmental Authority regarding (a) any violation by the Company or any of its Subsidiaries of any Permits or the failure to
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have any required Permits, or (b) any revocation, cancellation or termination of any Permits held by the Company or any of its Subsidiaries, and no such notice in either case remains
outstanding or unresolved as of the date of this Agreement.
4.14
Legal Proceedings and Orders
.
(a) There is no Legal Proceeding pending or, to the knowledge of the Company, threatened against the Company, any of its Subsidiaries or
any of the respective properties of the Company or any of its Subsidiaries, including the Assets and the Real Property, or (to the knowledge of the Company) against third parties affecting such properties that (a) involves an amount in
controversy in excess of $250,000, (b) seeks material injunctive or other non-monetary relief, (c) seeks to impose any legal restraint on or prohibition against or limit the Surviving Corporations ability to operate the business of
the Company and its Subsidiaries substantially as it was operated immediately prior to the date of this Agreement, or (d) individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries nor any of their respective properties, including the Assets and the Real
Property, nor (to the knowledge of the Company) any third party owning or having any other interest in such properties is subject to any outstanding Order.
4.15
Taxes
.
(a) Each of the Company and its Subsidiaries has prepared and
timely filed with the appropriate Taxing authority all income, franchise and other material U.S. federal, state, local and non-U.S. Tax Returns required to be filed relating to any and all Taxes concerning or attributable to the Company, any of its
Subsidiaries or their respective operations, and such Tax Returns in all material respects are true and correct and have been completed in accordance with Applicable Law.
(b) Each of the Company and its Subsidiaries has (i) timely paid all material Taxes it is required to pay (whether or not shown on a Tax Return), and (ii) timely paid or withheld (and timely
paid over any withheld amounts to the appropriate Taxing authority) all federal and state income Taxes, Federal Insurance Contribution Act and Federal Unemployment Tax Act amounts, and any other Taxes (including, but not limited to, all Taxes
required to be reported and withheld on any U.S or non-U.S. stock options) required to be withheld.
(c) Neither the Company
nor any of its Subsidiaries had any Liabilities for material unpaid Taxes as of the date of the Balance Sheet that had not been accrued or reserved on the Balance Sheet in accordance with GAAP, and neither the Company nor any of its Subsidiaries has
incurred any Liability for Taxes since the date of the Balance Sheet other than in the ordinary course of business consistent with past practice.
(d) Neither the Company nor any of its Subsidiaries has executed any waiver of any statute of limitations on or extension of the period for the assessment or collection of any Tax that is still in effect.
(e) No audit, examination, inquiry, claim or legal, administrative or other proceeding with respect to Taxes or a Tax Return
(
Tax Claim
) relating to the Company or any of its Subsidiaries is presently in progress, nor has the Company or any of its Subsidiaries been notified of any request for such a Tax Claim. No material adjustment or Tax deficiency
relating to any Taxes of the Company or any of its Subsidiaries is outstanding, assessed or, to the knowledge of the Company or any of its Subsidiaries, proposed by any Governmental Authority. No claim has ever been made by any Governmental
Authority that the Company or any of its Subsidiaries is or may be subject to taxation in a jurisdiction in which it does not file Tax Returns.
(f) There are (and immediately following the Effective Time there will be) no Liens on the assets of the Company or any of its Subsidiaries relating or attributable to Taxes, other than Permitted Liens.
(g) Neither the Company nor any of its Subsidiaries has (i) ever been a member of an affiliated group (within the meaning
of Section 1504(a) of the Code) filing a consolidated federal income Tax Return or a combined, consolidated, unitary or similar group for any Tax purposes (other than a group the common parent of which was the Company), (ii) ever been a
party to any Tax sharing, indemnification or allocation agreement (or any other Contract the primary purpose of which is the sharing of Taxes), or any closing agreement under
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Section 7121 of the Code (or any predecessor provision thereof) or Applicable Law, nor does the Company or any of its Subsidiaries owe any amount under any such agreement, (iii) any
Liability for the Taxes of any person under Treas. Reg. § 1.1502-6 (or any similar provision of Applicable Law, including any arrangement for group or consortium relief or similar arrangement), as a transferee or successor, by Contract, by
operation of law or otherwise or (iv) ever been a party to any joint venture, partnership or other agreement that could be treated as a partnership for Tax purposes.
(h) Neither the Company nor any of its Subsidiaries has agreed or will be required to include any income or gain or exclude any deduction or loss from Taxable income for any period or portion thereof
after the Effective Time as a result of any transaction that occurred prior to the Effective Time, including (i) any change in method of accounting made prior to the Effective Time (including, without limitation, by reasons of Sections 481 or
263A of the Code), (ii) any closing agreement under Section 7121 of the Code entered into prior to the Effective Time, (iii) any deferred intercompany gain or excess loss account under Section 1502 of the Code attributable to
transactions occurring prior to the Effective Time (or in the case of clauses (i), (i) and (iii) above, under any similar provision of Applicable Law), (iv) any installment sale or open transaction disposition made prior to the
Effective Time or (v) any prepaid amount received prior to the Effective Time.
(i) Neither the Company nor any of its
Subsidiaries has constituted either a distributing corporation or a controlled corporation in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code.
(j) Neither the Company nor any of its Subsidiaries has engaged in a reportable transaction under Treas. Reg. § 1.6011-4(b),
including any transaction that is the same as or substantially similar to one of the types of transactions that the Internal Revenue Service has determined to be a tax avoidance transaction and identified by notice, regulation, or other form of
published guidance as a listed transaction, as set forth in Treas. Reg. § 1.6011-4(b)(2).
(k) The Company and each
of its Subsidiaries is in full compliance with all terms and conditions of any Tax exemption, Tax holiday or other Tax reduction agreement or order (each, a
Tax Incentive
). The consummation of the transactions contemplated by this
Agreement will not have any adverse effect on the continued validity and effectiveness of any such Tax Incentive and there is no material risk that any such Tax Incentive will expire, be revoked or otherwise terminate prior to the stated or
applicable term thereof.
Section 4.15(k)
of the Company Disclosure Letter sets forth each such Tax Incentive.
(l)
Neither the Company nor any of its Subsidiaries is subject to Tax in any country other than its country of incorporation or formation by virtue of having a permanent establishment, place of business, source of income or other connection in that
country.
(m) Each of the Company and its Subsidiaries is in compliance in all material respects with all applicable transfer
pricing laws and regulations, including the execution and maintenance of contemporaneous documentation substantiating its transfer pricing practices and methodology. The prices for any property or services (or for the use of any property) provided
by or to the Company or any of its Subsidiaries are arms length prices for purposes of the relevant transfer pricing Applicable Laws, including Treasury Regulations promulgated under Section 482 of the Code.
(n) No Subsidiary of the Company that is or was a controlled foreign corporation as defined in the Code owns or owned
(directly or indirectly) a material investment in United States property for purposes of Section 956 of the Code. Neither the Company nor any of its Subsidiaries (i) owns or has owned an interest in any entity treated as a
passive foreign investment company as defined in the Code or (ii) for the taxable year ending June 30, 2012 and the taxable year ending as a result of the Closing, has had, or will have, any items of income which could
constitute subpart F income within the meaning of Section 952 of the Code.
For purposes of this
Section 4.15
, references to
the Company or any Subsidiary shall include references to any predecessors of the Company or any Subsidiary to the extent an inaccuracy or breach of a representation as applied to such predecessor could result in a liability of the Company or any of
its Subsidiaries.
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4.16
Employee Benefit Plans
.
(a)
Sections 4.16(a)
of the Company Disclosure Letter sets forth a complete and accurate list of all material Employee Plans.
With respect to each Employee Plan, to the extent applicable, the Company has made available to Parent complete and accurate copies of (i) the most recent annual report on Form 5500 required to have been filed with the IRS for each
Employee Plan, including all schedules thereto; (ii) the most recent determination letter, if any, from the IRS for any Employee Plan that is intended to qualify under Section 401(a) of the Code; (iii) the plan documents and summary
plan descriptions, or a written description of the terms of any Employee Plan that is not in writing; (iv) any related trust agreements, insurance contracts, insurance policies or other documents of any funding arrangements; (v) any
notices to or from the IRS or any office or representative of the DOL or any similar Governmental Authority relating to any compliance issues in respect of any such Employee Plan; (vi) with respect to each International Employee Plan, to the
extent applicable, (A) the most recent annual report or similar compliance documents required to be filed with any Governmental Authority with respect to such plan and (B) any document comparable to the determination letter referenced
under clause (ii) above issued by a Governmental Authority relating to the satisfaction of Applicable Law necessary to obtain the most favorable tax treatment; and (vii) all other material Contracts relating to each Employee Plan,
including administrative service agreements.
(b) Each Employee Plan has been maintained, operated and administered in
compliance in all material respects with its terms and with all Applicable Law, including the applicable provisions of ERISA and the Code.
(c) Each Employee Plan that is intended to be qualified under Section 401 of the Code may rely on a prototype opinion letter or has received a favorable determination letter from the IRS
to such effect and nothing has occurred or exists since the date of such determination or opinion letter that would reasonably be expected to adversely affect the qualified status of any such Employee Plan.
(d) All contributions, premiums and other payments required to be made with respect to any Employee Plan have been timely made, accrued or
reserved for. Except as required by Applicable Law, neither the Company nor any of its Subsidiaries has any plan or commitment to amend or establish any new Employee Plan or to continue for any specified period or increase any benefits under any
Employee Plan.
(e) There are no Legal Proceedings (including any investigation, audit or other administrative proceeding)
pending or, to the knowledge of the Company, threatened on behalf of or against any Employee Plan, the assets of any trust under any Employee Plan, or the plan sponsor, plan administrator or any fiduciary or any Employee Plan with respect to the
administration or operation of such plans, other than routine claims for benefits that have been or are being handled through an administrative claims procedure.
(f) There has been no non-exempt prohibited transaction, as such term is defined in Section 4975 of the Code or Section 406 of ERISA, with respect to any Employee Plan.
(g) Neither the Company, any of the its Subsidiaries nor any of their respective ERISA Affiliates has ever maintained, participated in or
contributed to (or been obligated to contribute to) (i) an Employee Plan which was ever subject to Section 412 of the Code or Title IV of ERISA, (ii) a multiemployer plan (as defined in Section 3(37) of ERISA),
(iii) a multiple employer plan as defined in Section 210 of ERISA or Section 413(c) of the Code, (iv) a funded welfare plan within the meaning of Section 419 of the Code or (v) a voluntary
employees beneficiary association under Section 501(c)(9) of the Code. No Employee Plan provides material welfare benefits that are not fully insured through an insurance contract.
(h) No Employee Plan provides post-termination or retiree life insurance, health or other welfare benefits to any person, other than
pursuant to Section 4980B of the Code or any similar Applicable Law.
(i) No Employee Plan that is subject to
Section 409A of the Code has been materially modified (as defined under Section 409A of the Code) since October 3, 2004 and all such non-qualified deferred compensation plans or arrangements have been operated and administered in good
faith compliance with Section 409A of the Code from the period beginning December 31, 2004 through December 31, 2008 and thereafter in compliance with the Final Treasury Regulations issued under Section 409A of the Code. All
Company Options and Company Stock Appreciation Rights have been granted at a per share exercise price that is
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at least equal to the fair market value of a share of the underlying Company Common Stock as of the date the Company Option or Company Stock Appreciation Right was granted, as determined in
accordance with applicable Law, including Section 409A of the Code.
(j) Neither the execution or delivery of this
Agreement nor the consummation of the transactions contemplated by this Agreement (including the Merger) will, either alone or in conjunction with any other event, (i) result in any payment or benefit becoming due or payable, or required to be
provided, to any director, employee, consultant or independent contractor of the Company or any of its Subsidiaries, (ii) increase the amount or value of any benefit or compensation otherwise payable or required to be provided to any such
director, employee, consultant or independent contractor, (iii) result in the acceleration of the time of payment, vesting or funding of any such benefit or compensation or (iv) result in the payment of any amount that would not be
deductible by reason of Section 280G of the Code. There is no contract, agreement, plan or arrangement to which the Company or any of its Subsidiaries is a party or by which it is bound to compensate any current or former employee or other
disqualified individual for excise taxes which may be required pursuant to Section 4999 of the Code or any Taxes required by Section 409A of the Code.
(k) No deduction for federal income tax purposes has been nor is any such deduction expected by the Company to be disallowed for remuneration paid by the Company or any of its Subsidiaries by reason of
Section 162(m) or Section 404 of the Code, including by reason of the transactions contemplated hereby.
4.17
Labor Matters
.
(a) Neither the Company nor any of its Subsidiaries is a party to any Contract or arrangement between or
applying to, one or more employees or other service providers and a union, trade union, works council, group of employees or any other employee representative body, for collective bargaining or other negotiating or consultation purposes or
reflecting the outcome of such collective bargaining or negotiation or consultation with respect to their respective employees with any labor organization, union, group, association, works council or other employee representative body, or is bound
by any equivalent national or sectoral agreement (
Collective Bargaining Agreements
). There are no pending activities or proceedings or, to the knowledge of the Company, threatened or reasonably anticipated by any works council,
union, trade union, or other labor-relations organization or entity (
Labor Organization
) to organize any such employees. There are no lockouts, strikes, slowdowns, work stoppages or, to the knowledge of the Company, threats
thereof by or with respect to any employees of the Company or any of its Subsidiaries, nor have there been any such lockouts, strikes, slowdowns or work stoppages or threats thereof with respect to any employees or the Company or any of its
Subsidiaries. The consummation of the transactions contemplated by this Agreement (including the Merger) will not entitle any person (including any Labor Organization) to any payments under any Collective Bargaining Agreement, or require the Company
or any of its Subsidiaries to consult with, provide notice to, or obtain the consent or opinion of any Labor Organization. Neither the Company nor any of its Subsidiaries, nor to the knowledge of the Company any of their respective representatives
or employees, has committed any material unfair labor practice in connection with the operation of their respective businesses, and there is no charge, complaint or other action against the Company or any of its Subsidiaries by the National Labor
Relations Board or any comparable Governmental Authority pending or to the knowledge of the Company threatened.
(b) The
Company and its Subsidiaries have complied in all material respects with Applicable Laws and Orders relating to employment, employment practices, terms and conditions of employment, worker classification (including the proper classification of
workers as independent contractors and consultants and for overtime purposes), tax withholding, prohibited discrimination, equal employment, fair employment practices, meal and rest periods, immigration status, employee safety and health, wages
(including overtime wages), compensation, and hours of work, and in each case, with respect to employees: (i) has withheld and reported all amounts required by Applicable Law or by agreement to be withheld and reported with respect to wages,
salaries and other payments to employees; (ii) is not liable for any arrears of wages, severance pay or any taxes or any penalty for failure to comply with any of the foregoing; and (iii) is not liable for any payment to any trust or other
fund governed by or maintained by or on behalf of any governmental authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine
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payments to be made in the normal course of business and consistent with past practice). Neither the Company nor any of its Subsidiaries has any material Liability with respect to any
misclassification of: (x) any Person as an independent contractor rather than as an employee; (y) any employee leased from another employer; or (z) any employee currently or formerly classified as exempt from overtime wages. Neither
the Company nor any of its Subsidiaries is a party to a conciliation agreement, consent decree or other agreement or order with any Governmental Authority.
(c) Each of the Company and its Subsidiaries is in compliance in all material respects with WARN. In the past two years, (i) neither the Company nor any of its Subsidiaries has effectuated a
plant closing (as defined in WARN) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of its business, (ii) there has not occurred a mass layoff (as
defined in WARN) affecting any site of employment or facility of the Company or any of its Subsidiaries, and (iii) neither the Company nor any of its Subsidiaries has been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number, including as aggregated, to trigger application of any similar state, local or foreign law or regulation. Neither the Company nor its Subsidiaries has caused any of their respective employees to suffer an
employment loss (as defined in WARN) during the ninety (90) day period prior to the date hereof, and there has been no termination which would trigger any notice or other obligations under WARN.
4.18
Real Property
.
(a)
Section 4.18(a)
of the Company Disclosure Letter sets forth a complete and accurate list of all of the real property owned by the Company or any of its Subsidiaries (the
Owned
Real Property
). Except for the Owned Real Property, neither the Company nor any of its Subsidiaries has ever owned any real property, nor is party to any agreement to purchase or sell any real property. The Company owns the Owned Real
property free and clear of all Liens, except for Liens for Taxes not yet due or being contested in good faith by appropriate proceedings for which reserves have been established in accordance with GAAP on the Financial Statements. The Company has a
valid, enforceable title policy for the Owned Real Property in its full market value and has delivered a true and correct copy of such title policy and the agreement pursuant to which it purchased the Owned Real Property to Parent.
(b)
Section 4.18(b)(i)
of the Company Disclosure Letter contains a complete and accurate list of all of the existing leases,
subleases, licenses, or other agreements (collectively, the
Leases
) under which the Company or any of its Subsidiaries uses or occupies or has the right to use or occupy, now or in the future, any real property (such property, the
Leased Real Property
and, collectively with the Owned Real Property, the
Real Property
). The Company has heretofore made available to Parent true, correct and complete copies of all Leases (including all
modifications, amendments, supplements, consents, waivers and side letters thereto and all agreements in connection therewith, including all work letters, improvement agreements, estoppel certificates, and subordination agreements). The Company or
its Subsidiaries have and own valid leasehold estates in the Leases and the Leased Real Property, free and clear of all Liens.
Section 4.18(b)(ii)
of the Company Disclosure Letter contains a complete and accurate list of all of the
existing Leases granting to any Person, other than the Company or any of its Subsidiaries, any right to use or occupy, now or in the future, any of the Real Property. The Company and its Subsidiaries currently occupy all of the Real Property for the
operation of their business and there are no other parties occupying or with a right to occupy the Real Property.
(c) Each
Lease constitutes the entire agreement of the landlord and the tenant thereunder, and no term or condition thereof has been modified, amended or waived except as described in the copies of the Leases that have previously been delivered by the
Company to Parent. Neither the Company nor any of its Subsidiaries owes brokerage commissions or finders fees with respect to any Real Property nor is party to any agreement or subject to any claim that may require the payment of any real
estate brokerage commissions.
(d) Each Real Property and all of its operating systems are in good operating condition and
repair, water-tight and free from material structural, physical, mechanical, electrical, plumbing, roof or other defects, is maintained in a first-class manner consistent with industry standards generally followed with respect to similar property,
and is suitable for the conduct of the business of the Company and its Subsidiaries as presently conducted.
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(e) The Company has not received any notice from any insurance company of any defects or
inadequacies in any Real Property or any part thereof which could materially and adversely affect the insurability of such Real Property or the premiums for the insurance thereof. No notice has been given by any insurance company which has issued a
policy with respect to any portion of any Real Property or by any board of fire underwriters (or other body exercising similar functions) requesting the performance of any repairs, alterations or other work with which compliance has not been made.
(f) There is no pending or, to the knowledge of the Company, threatened condemnation or similar proceeding affecting any Real
Property or any portion thereof, and the Company has no knowledge that any such action is currently contemplated. There are no pending or, to the knowledge of the Company, threatened special assessments or improvements or activities of any public or
quasi-public body either planned, in process, or completed which may give rise to any special assessment against any Real Property.
4.19
Personal Property
. The machinery, equipment, furniture, fixtures and other tangible personal property and assets owned, leased or used by the Company or any of its Subsidiaries (the
Assets
) are, in the aggregate, sufficient and adequate to carry on their respective businesses in all material respects as presently conducted, and the Company and its Subsidiaries are in possession of and have good title to, or
valid leasehold interests in or valid rights under contract to use, such Assets that are material to the Company and its Subsidiaries, taken as a whole, free and clear of all Liens, except for Permitted Liens and defects in title that, individually
or in the aggregate, are not and would not reasonably be expected to have a Company Material Adverse Effect.
4.20
Intellectual Property
.
(a)
Section 4.20(a)
of the Company Disclosure Letter contains a complete and
accurate list of the Company Intellectual Property Rights that are Registered IP and material unregistered Trademarks (
Company Registered IP
), in each case listing, as applicable, (i) the name of the applicant/registrant,
inventor/author and current owner, (ii) the jurisdiction where the application/registration is located, (iii) the application or registration number, (iv) the filing date, and issuance/registration/grant date, and (v) the
prosecution status thereof.
(b) The Company Registered IP that is not an application is subsisting, valid and enforceable. The
Company has no knowledge of any information, materials, facts or circumstances, including any information or fact that would constitute prior art, that would render any of such Company Registered IP invalid or unenforceable, or would materially
affect any pending application for any Company Registered IP. The Company has not misrepresented, or knowingly failed to disclose, any facts or circumstances in any application or proceedings for any Company Registered IP that would constitute fraud
or a misrepresentation with respect to such application or that would otherwise affect the enforceability of any Company Registered IP.
(c) With respect to each item of Company Registered IP: (i) all necessary registration, maintenance and renewal fees have been paid, and all necessary documents and certificates have been filed with
the relevant patent, copyright, trademark, domain registrars or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Company Registered IP; (ii) is currently in compliance
with all formal legal requirements with respect thereto (including payment of filing, examination and maintenance fees and proofs of use); and (iii) is not subject to any unpaid maintenance fees or taxes.
(d) The Company or one of its Subsidiaries has valid and enforceable written agreements with respect to Company Intellectual Property
Rights, pursuant to which: (i) the Company or one of its Subsidiaries has obtained exclusive ownership of all such Company Intellectual Property Rights by valid assignment or otherwise (including the rights to recover unrecovered past, present
and future damages for infringement or misappropriation of such Intellectual Property Rights), (ii) the other parties thereto have not retained and do not have any rights or licenses with respect to the Company Intellectual Property Rights, and
(iii) the Company or one of its Subsidiaries has obtained waivers of Moral Rights to the fullest extent allowed under Applicable Law. This Agreement and the transactions contemplated hereunder, do not conflict with, or violate such third party
agreements and no basis exists for such third party to challenge or object to this Agreement. In each case in which the Company or any of its Subsidiaries has acquired ownership of any Company Registered IP, the Company or one of its Subsidiaries
has recorded each such acquisition with the U.S. Patent and Trademark
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Office, the U.S. Copyright Office, or their respective equivalents in the applicable jurisdiction, in each case in accordance with Applicable Law.
(e)
Section 4.20(e)
of the Company Disclosure Letter contain a complete and accurate list of all Contracts (i) under
which the Company or any of its Subsidiaries use or have acquired ownership or the right to use any Company IP, other than Shrink-Wrap Code or (ii) under which the Company or any of its Subsidiaries has licensed to others the right to use or
agreed to transfer to others any Technology or Intellectual Property Rights that are or were Company IP and/or Company Products, other than Contracts with customers entered into in the ordinary course of business on substantially the Companys
standard form of agreement as provided to Parent (such Contracts, the
Company IP Agreements
). The Company has delivered or made available to Parent complete and correct copies of each such Company IP Agreement. Each Company IP
Agreement is valid and binding on the Company (and/or each such Subsidiary of the Company party thereto) and is in full force and effect. Neither the Company nor any of its Subsidiaries party thereto, nor, to the knowledge of the Company, any other
party thereto, is in breach of, or default under, any such Company IP Agreement, and no event has occurred that with notice or lapse of time or both would constitute such a breach or default thereunder by the Company or any of its Subsidiaries, or,
to the knowledge of the Company, any other party thereto.
(f) To the knowledge of the Company, the Company and its
Subsidiaries own or have sufficient rights to all Intellectual Property Rights and Technology that are either used in, necessary for, or that would be infringed by, the conduct of the business of the Company and its Subsidiaries as currently
conducted and as currently contemplated to be conducted.
(g) The Company and its Subsidiaries exclusively own, free and clear
of all Liens other than Permitted Liens, all right, title and interest in the Company Registered IP and all other Intellectual Property Rights purported to be owned by the Company or any of its Subsidiaries. All Company Intellectual Property Rights
will be fully transferable, alienable or licensable by Parent without restriction and without payment of any kind to any third party.
(h) The Company and each of its Subsidiaries have taken all reasonable and appropriate steps to protect and preserve the confidentiality of the Trade Secrets that comprise any part of the Company
Intellectual Property Rights, and to the knowledge of the Company, there is no unauthorized use, disclosure or misappropriation of any such Trade Secrets by any Person. All current and former employees, consultants and contractors of the Company or
any of its Subsidiaries who have contributed to the development of material Intellectual Property Rights (which shall include any Intellectual Property Rights that are difficult or costly to replace or remediate) that is being used in the conduct of
the Companys and its Subsidiaries current businesses have executed and delivered proprietary information, confidentiality and assignment agreements substantially in the Companys standard forms.
(i) During the prior three (3) years, neither the Company nor any of its Subsidiaries has received any written notices or claims from
any third party with respect to infringement of any third partys Intellectual Property Rights by the Company or any of its Subsidiaries. The development, manufacture, sale, distribution or other commercial exploitation of the Companys
products, and the provision of any Companys services, by or on behalf of the Company or any of its Subsidiaries, and the operation of the business of the Company or any of its Subsidiaries, as it has been and is currently conducted, has not
during the prior three (3) years infringed upon, misappropriated, violated, diluted or constituted the unauthorized use of, and do not infringe upon, misappropriate, violate, dilute or constitute the unauthorized use of, any Intellectual
Property Rights of any third party. To the knowledge of the Company, no Person (or any of such Persons products or services or other operation of such Persons business) is infringing upon or otherwise violating any Company Intellectual
Property Rights, and neither the Company nor any of its Subsidiaries has asserted or threatened any claim against any Person alleging the same.
(j) There is not and has not been any Legal Proceeding made, conducted or brought by a third party that has been served upon, filed or threatened with respect to (i) any alleged infringement or other
violation by the Company or any of its Subsidiaries or any of its or their current products or services or other operation of the Companys or any of its Subsidiaries business of the Intellectual Property Rights of such third party or
(ii) any
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challenge to the validity or enforceability of, or contesting the Companys or any of its Subsidiaries rights with respect to, any of the Company IP or Company Intellectual Property
Rights. The Company and its Subsidiaries are not subject to any Order of any Governmental Authority that restricts or impairs the use, transfer or licensing of any Company IP or Company Intellectual Property Rights or other Intellectual Property
Rights.
(k) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby
(including the Merger) will not result in (i) the Company or its Subsidiaries granting to any third party any rights or licenses to any Company IP or Intellectual Property Rights, (ii) any right of termination or cancellation under any
Company IP Agreement, (iii) any payment of fees, penalties, royalties or expenses under any Company IP Agreement that would not have been payable absent this Agreement and the consummation of the transactions contemplated hereby,
(iv) change in the scope or nature of any Intellectual Property Rights granted to, or by, the Company or its Subsidiaries, (v) the imposition of any Lien on any Owned Company IP, or (vi) after the Merger, (A) Parent or any of its
Subsidiaries or Affiliates being required to grant any third party any rights or licenses to any of Parents or any of its Subsidiaries or Affiliates Technology or Intellectual Property Rights, (B) Parent or any of its
Subsidiaries or Affiliates being bound by, or subject to, any non-competition, non-solicitation, exclusivity or other material restriction on the operation or scope of their respective businesses, or (C) Parent or any of its Subsidiaries or
Affiliates being obligated to pay any incremental royalties or other material amounts, offer any incremental discounts or being bound by any most favored pricing terms to any third party.
(l) To the knowledge of the Company, no Software that constitutes Public Software was or is used in, incorporated into, integrated or
bundled with any Company Product, Company IP, or incorporated in or used in the development or compilation of any Company Products or otherwise distributed by the Company or its Subsidiaries. The Company and its Subsidiaries are in compliance in all
material respects with all Public Software license agreements to which the Company or a Subsidiary, as applicable, is a party, and the Companys and its Subsidiaries use or incorporation of Public Software has not and does not
(i) grant to any third party any rights in the Companys or a Subsidiarys products, services or intellectual property, (ii) require the licensing, disclosure, or distribution of any Software developed by or for the Company or a
Subsidiary, (iii) require the Company or a Subsidiary to license the use of its products or services to third parties without charge, (iv) create restrictions on or immunities to the Companys or its Subsidiaries enforcement of
its intellectual property rights, or (v) obligate the Company or any of its Subsidiaries to disclose, make available, offer or deliver any portion of the source code of any of the Companys proprietary software to any third party.
(m) Neither the Company nor any of its Subsidiaries has granted any Intellectual Property Rights or any licenses to use any
Source Code, including Confidential Technology escrow agreements. No condition has occurred that would be sufficient to entitle the beneficiary under any technology escrow arrangement under which the Company or any of its Subsidiaries has deposited
any material Confidential Technology for any Company Product to require release of such Confidential Technology. The consummation of the transactions contemplated hereby (including the Merger) will not constitute a condition sufficient to entitle
the beneficiary under any Confidential Technology escrow arrangement under which the Company or any of its Subsidiaries has deposited any material Confidential Technology for any Company Product to require release of such Confidential Technology.
(n) All data which has been collected, stored, maintained or otherwise used by the Company and its Subsidiaries has been
collected, stored, maintained and used in accordance with all Applicable Laws.
4.21
Insurance
. The Company and its
Subsidiaries have all material policies of insurance covering the Company, its Subsidiaries or any of their respective employees, properties or assets, including policies of life, property, title, fire, workers compensation, products
liability, directors and officers liability and other casualty and liability insurance, in each case in a form and amount that is customarily carried by persons conducting business similar to that of the Company and which is adequate for
the operation of its business. All such insurance policies are in full force and effect, no notice of cancellation has been received, and there is no existing default or event which, with the giving of notice or lapse of time or both, would
constitute a default, by any
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insured thereunder, except for such defaults that are not and would not reasonably be expected to be, individually or in the aggregate, material to the Company and its Subsidiaries, taken as a
whole.
4.22
Related Party Transactions
. Except as set forth in the SEC Reports, there are no transactions, agreements,
arrangements or understandings between the Company or any of its Subsidiaries, on the one hand, and any Affiliate (including any officer or director, but not including any wholly owned Subsidiary of the Company) (each of the foregoing, a
Related Party
) thereof or any stockholder that beneficially owns 5% or more of the Shares, on the other hand (an
Affiliate Transaction
). No Related Party of the Company or any of its Subsidiaries owns, directly
or indirectly, on an individual or joint basis, any interest in, or serves as an officer or director or in another similar capacity of, any supplier or other independent contractor of the Company or any of its Subsidiaries, or any organization which
has a Contract with the Company
or any of its Subsidiaries.
4.23
Brokers
. Except for Shea & Company, LLC, there is no investment banker, financial advisor, broker, finder, agent or other Person that has been retained by or is authorized to act on
behalf of the Company or any of its Subsidiaries who is entitled to any financial advisors, brokerage, finders or other fee or commission in connection with the transactions contemplated hereby (including the Merger). The Company has
furnished to Parent a true and complete copy of its agreement with Shea & Company with agreed redactions. Section 4.23 of the Company Disclosure Letter sets forth (a) all transaction fees and expenses incurred by the Company as of
the date of this Agreement and (b) the Companys best estimate, prepared in good faith as of the date of this Agreement, of all transaction fees and expenses to be incurred or payable by the Company upon consummation of the transactions
contemplated hereby (in each case, including all financial advisory, legal and accounting fees and expenses).
4.24
No
Rights Plan
. There is no stockholder rights plan, poison pill anti-takeover plan or other similar device in effect to which the Company is a party or is otherwise bound.
4.25
Federal Corrupt Practices Act
. Neither the Company or any Subsidiary of the Company nor, to the knowledge of the Company, any
director, officer, agent or employee of the Company or any Subsidiary of the Company has, on behalf of the Company or any Subsidiary of the Company (i) used any funds of the Company or any Subsidiary of the Company for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity or (ii) 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 other federal, foreign, or state anti-corruption or anti-bribery Law or requirement applicable to the Company or any Subsidiary of the Company.
4.26
No Other Representations
. Except for the representations and warranties of the Company expressly set forth in this
Article
IV
, (a) neither the Company nor any of its Subsidiaries (or any other Person) makes, or has made, any representation or warranty relating to the Company, its Subsidiaries or any of their respective businesses, operations, properties,
assets, liabilities or otherwise in connection with this Agreement or the transactions contemplated hereby, (b) no Person has been authorized by the Company or any of its Subsidiaries to make any representation or warranty relating to the
Company, its Subsidiaries or any of their businesses, operations, properties, assets, liabilities or otherwise in connection with this Agreement or the transactions contemplated hereby, and if made, such representation or warranty must not be relied
upon by Parent, Merger Sub or any of their respective Affiliates and Representatives as having been authorized by the Company or any of its Subsidiaries (or any other Person), and (c) any estimate, projection, prediction, data, financial
information, memorandum, presentation or any other materials or information provided or addressed to Parent, Merger Sub or any of their respective Affiliates or Representatives, including any materials or information made available in the electronic
data room hosted by the Company in connection with the transactions contemplated by this Agreement or in connection with presentations by the Companys management, are not and shall not be deemed to be or include representations or warranties
unless and to the extent any such materials or information is the subject of any express representation or warranty of the Company set forth in this
Article IV
.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company as follows:
5.1
Organization and Good Standing
.
(a) Each of Parent and Merger Sub is duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to conduct its
business as it is presently being conducted and to own, lease or operate its respective properties and assets.
(b) Merger Sub
has been formed solely for the purpose of engaging in the transactions contemplated hereby and, prior to the Effective Time, Merger Sub will not have engaged in any other business activities and will have incurred no material liabilities or
obligations other than as contemplated by this Agreement.
5.2
Authorization and Enforceability
.
(a) Each of Parent and Merger Sub has all requisite corporate power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby and to perform its obligations hereunder. The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby (including the
Merger) have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub, and no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby (including the Merger).
(b) This Agreement has been duly executed and delivered by each of
Parent and Merger Sub and, assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of each of Parent and Merger Sub, enforceable against each in accordance with its terms, except that
such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Applicable Laws affecting or relating to creditors rights generally and by general principles of equity.
5.3
Conflicts
. The execution, delivery or performance by Parent and Merger Sub of this Agreement, the consummation by Parent and
Merger Sub of the transactions contemplated hereby (including the Merger) and the compliance by Parent and Merger Sub with any of the provisions hereof do not and will not (i) violate or conflict with any provision of the certificates of
incorporation or bylaws of Parent or Merger Sub or, (ii) assuming compliance with the matters referred to in
Section 5.4
, violate or conflict with any Applicable Law or Order, except in the case of clause (ii) above, for such
violations or conflicts which would not reasonably be expected to have a Parent Material Adverse Effect.
5.4
Required
Governmental Consents
. No Consent of any Governmental Authority is required on the part of Parent, Merger Sub or any of their Affiliates in connection with the execution, delivery and performance by Parent and Merger Sub of this Agreement and
the consummation by Parent and Merger Sub of the transactions contemplated hereby (including the Merger), except (a) the filing of the Certificate of Merger with the Delaware Secretary of State, (b) such filings and approvals as may be
required by any federal or state securities laws, including compliance with any applicable requirements of the Exchange Act, (c) compliance with any applicable requirements of the HSR Act and the Antitrust Laws of the Relevant Jurisdictions,
and (d) such other Consents, the failure of which to obtain would not reasonably be expected to have a Parent Material Adverse Effect.
5.5
Ownership of Company Common Stock
. Neither Parent nor Merger Sub is, nor at any time during the last three years has it been, an interested stockholder of the Company as defined in
Section 203 of the DGCL.
5.6
Litigation
. There are no Legal Proceedings pending or, to the knowledge of Parent,
threatened against or affecting Parent or Merger Sub or any of their respective properties that would, individually or in the aggregate,
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prevent or materially delay the consummation of the transactions contemplated hereby (including the Merger) or the performance by Parent and Merger Sub of their respective covenants and
obligations hereunder. Neither Parent nor Merger Sub is subject to any outstanding Order that would, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated hereby (including the Merger) or the
performance by Parent and Merger Sub of their respective covenants and obligations hereunder.
5.7
Funds
. Subject to
the terms and conditions of the Debt Commitment Letter and subject to the satisfaction of the conditions contained in Sections 1.3(a) and 1.3(b), assuming the accuracy of the Companys representations and warranties set forth in Article IV and
assuming compliance by the Company with the covenants set forth herein, the aggregate proceeds contemplated by the Debt Commitment Letter, together with other financial resources of Parent and Merger Sub including cash, cash equivalents and
marketable securities of Parent, Merger Sub, the Company and the Companys Subsidiaries on the Closing Date, will be sufficient for Parent and Merger Sub to consummate the Merger upon the terms contemplated by this Agreement and pay all related
fees and expenses.
5.8
Financing
.
(a) Parent has delivered to the Company a complete and accurate copy of an executed commitment letter dated as of October 1, 2012, as amended prior to the date hereof, and a complete and accurate
copy of the executed fee letter related thereto dated as of October 1, 2012, as amended prior to the date hereof, with only fee provisions redacted, in each case from TC Lending, LLC, a subsidiary of TPG Specialty Lending, Inc. (collectively,
the
Debt Commitment Letter
), pursuant to which the lender party thereto has committed to provide, subject to the terms and conditions set forth therein, debt financing for the transactions contemplated by this Agreement in the
aggregate amount set forth therein (the
Debt Financing
). Parent has fully paid any and all commitment fees or other fees that have been incurred and are due and payable in connection with the Debt Commitment Letter prior to or in
connection with the execution of this Agreement pursuant to the terms thereof, and Parent will pay when due all other commitment fees and other fees arising under the Debt Commitment Letter as and when they become due and payable thereunder.
(b) As of the date of this Agreement, (i) the Debt Commitment Letter has not been amended or modified (and no such
amendment or modification is contemplated), and (ii) the commitments set forth in the Debt Commitment Letter have not been withdrawn or rescinded in any respect (and no such withdrawal or rescission is contemplated). As of the date of this
Agreement, the Debt Commitment Letter, in the form so delivered to the Company, is in full force and effect and is a legal, valid and binding obligation of Parent and, to the knowledge of Parent, the other party thereto, enforceable against the
parties thereto in accordance with its terms, except to the extent that enforceability may be limited by the applicable bankruptcy, insolvency, moratorium, reorganization or similar Applicable Law affecting the enforcement of creditors rights
generally or by general principles of equity. As of the date of this Agreement, to the knowledge of Parent, no event has occurred which, with or without notice, lapse of time or both, would constitute a default or breach on the part of Parent under
any term or condition of the Financing Commitment Letters. There are no conditions precedent or other contingencies related to the funding of the full amount of the Financing, other than as set forth in the Financing Commitment Letters in the form
so delivered to the Company. As of the date of this Agreement, Parent has no reason to believe that any term or condition to the Financing set forth in the Financing Commitment Letters will not be fully satisfied on a timely basis or that the
Financing will not be available to Parent at the Closing.
5.9
Non-Reliance
. Parent and Merger Sub hereby acknowledge
and agree (each for itself and on behalf of its respective Affiliates and Representatives) that, (a) none of the Company nor any of its Subsidiaries (or any other Person) makes, or has made, any representation or warranty relating to the
Company, its Subsidiaries or any of their respective businesses or operations or otherwise in connection with this Agreement and the transactions by this Agreement, and none of Parent, Merger Sub or any of their respective Affiliates or
Representatives is relying on any representation or warranty except for those representations and warranties of the Company expressly set forth in
Article IV
, (b) no Person has been authorized by the Company or any of its Subsidiaries to
make any
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representation or warranty relating to the Company, its Subsidiaries or any of their respective businesses or operations or otherwise in connection with this Agreement or the transactions
contemplated hereby, and if made, such representation or warranty may not be relied upon by Parent, Merger Sub or any of their respective Affiliates or Representatives as having been authorized by the Company or any of its Subsidiaries (or any other
Person), and (c) any estimate, projection, prediction, data, financial information, memorandum, presentation or any other materials or information provided or addressed to Parent, Merger Sub or any of their respective Affiliates or
Representatives, including any materials or information made available in the electronic data room hosted by the Company in connection with the transactions contemplated by this Agreement or in connection with presentations by the Companys
management, are not and shall not be deemed to be or include representations or warranties unless and to the extent any such materials or information are the subject of any express representation or warranty of the Company set forth in
Article
IV
. Parent and Merger Sub hereby acknowledge (each for itself and on behalf of its Affiliates and Representatives) that it has conducted, to its satisfaction, its own independent investigation of the business, operations and financial condition
of the Company and its Subsidiaries and, in making its determination to proceed with the transactions contemplated by this Agreement, each of Parent, Merger Sub and their respective Affiliates and Representatives have relied on the results of their
own independent investigation.
ARTICLE VI
CONDUCT OF COMPANY BUSINESS
6.1
Conduct of Company Business
.
Except as expressly required by this Agreement, as set forth in
Section 6.1
of the Company Disclosure Letter or as approved in advance by Parent in writing (which approval will not be unreasonably withheld, delayed or conditioned, except
that Parent may withhold consent in its sole discretion as set forth in
Section 6.2
), at all times during the period commencing with the execution and delivery of this Agreement and continuing until the earlier to occur of the
termination of this Agreement pursuant to
Article IX
and the Effective Time, each of the Company and each of its Subsidiaries shall (a) carry on its business in the usual, regular and ordinary course in substantially the same manner
as heretofore conducted and in compliance with all Applicable Laws, and (b) use commercially reasonable efforts, consistent with past practices and policies, to (i) preserve intact its Intellectual Property Rights, business organization
and material assets, (ii) keep available the services of its directors, officers and employees and (iii) preserve its present relationships with customers, suppliers, distributors, licensors, licensees and others with which it has
significant business dealings.
6.2
Restrictions on Company Business
. Except as expressly required by this Agreement,
as set forth in
Section 6.2
of the Company Disclosure Letter or as approved in advance by Parent in writing (which approval will not be unreasonably withheld, delayed or conditioned, except that Parent may withhold consent in its sole
discretion with respect to
Sections 6.2(a) (f)
,
6.2(i)
,
6.2(n)
,
6.2(o)(i)
,
6.2(q)
and
6.2(t)
), at all times during the period commencing with the execution and delivery of this Agreement and
continuing until the earlier to occur of the termination of this Agreement pursuant to
Article IX
and the Effective Time, the Company shall not do any of the following and shall not permit its Subsidiaries to do any of the following:
(a) amend its certificate of incorporation or bylaws or comparable organizational documents;
(b) issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase
or otherwise) any Company Securities or any Subsidiary Securities, except for the issuance and sale of Shares pursuant to Company Options outstanding prior to the date hereto;
(c) acquire or redeem, directly or indirectly, or amend any Company Securities or Subsidiary Securities;
(d) other than cash dividends made by any direct or indirect wholly-owned Subsidiary of the Company to the Company or one of its Subsidiaries, split, combine or reclassify any shares of capital stock,
declare, set
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aside or pay any dividend or other distribution (whether in cash, shares or property or any combination thereof) in respect of any shares of capital stock, or make any other actual, constructive
or deemed distribution in respect of the shares of capital stock;
(e) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries (other than the transactions contemplated hereby, including the Merger);
(f)(i) incur or assume any long-term or short-term debt or issue any debt securities, except for (A) short-term debt incurred to
fund operations of the business in the ordinary course of business consistent with past practice and (B) loans or advances to direct or indirect wholly-owned Subsidiaries, (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of any other Person except with respect to obligations of direct or indirect wholly-owned Subsidiaries of the Company, (iii) make any loans, advances or capital
contributions to or investments in any other Person except for travel advances in the ordinary course of business consistent with past practice to employees of the Company or any of its Subsidiaries or (iv) mortgage or pledge any of its or its
Subsidiaries assets, tangible or intangible, or create or suffer to exist any Lien thereupon (other than Permitted Liens);
(g) except as may be required by Applicable Law, (i) enter into, adopt, amend (including acceleration of vesting), modify or
terminate any bonus, profit sharing, compensation, severance, termination, option, restricted stock, restricted stock unit, appreciation right, performance unit, stock equivalent, share purchase agreement, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan, fund or other arrangement for the compensation, benefit or welfare of any director, officer, consultant or independent contractor or, other than in the ordinary course of
business consistent with past practice, any non-officer employee, (ii) increase in any manner the compensation or fringe benefits of any director, officer or, other than in the ordinary course of business consistent with past practice,
non-officer employee, (iii) pay any special bonus or special remuneration to any director, officer, consultant, independent contractor or employee, or (iv) pay any benefit not required by any plan or arrangement as in effect as of the date
hereof, other than, with respect to non-officer employees, in the ordinary course of business consistent with past practice;
(h) make any deposits or contributions of cash or other property to or take any other action to fund or in any other way secure the
payment of compensation or benefits under the Employee Plans or agreements subject to the Employee Plans or any other Contract of the Company other than deposits and contributions that are required pursuant to the terms of the Employee Plans or any
agreements subject to the Employee Plans in effect as of the date hereof;
(i) acquire, sell, lease, license or dispose of any
property or assets in any single transaction or series of related transactions, except for the sale of goods or grants of non-exclusive licenses with respect to Company IP in the ordinary course of business consistent with past practice;
(j) except as may be required by Applicable Law or GAAP, make any change in any of the accounting principles or practices used by it;
(k) except as required by Applicable Law or GAAP, revalue in any material respect any of its properties or assets, including
writing-off notes or accounts receivable, in any case other than in the ordinary course of business consistent with past practice;
(l)(i) make, revoke or change any material Tax election, (ii) file any federal income or other material Tax Return or any amended Tax Return, (iii) settle or compromise any material
Liability for Taxes or any Tax Claim, (iv) adopt or change any Tax accounting method, (v) consent to any extension or waiver of any limitation period with respect to any claim or assessment for Taxes or (vi) request to enter into any
ruling or agreement with a Governmental Authority with respect to Taxes or otherwise enter into a Tax sharing, indemnification or allocation agreement (or any other Contract the primary purpose of which is the sharing of Taxes);
(m)(i) enter into any lease or sublease of real property (whether as a lessor, sublessor, lessee or sublessee) or (ii) modify,
amend or exercise any right to renew any lease or sublease of real property or waive or
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violate any term or condition thereof or grant any consents thereunder; grant or otherwise create or consent to the creation of any easement, covenant, restriction, assessment, Lien or charge
affecting any real property or any part thereof;
(n)(i) sell, lease, license or transfer to any person or entity any
rights to any Company IP, (ii) purchase or license any Intellectual Property Rights or enter into any agreement or modify any existing agreement with respect to the Intellectual Property Rights of any person or entity, (iii) enter into any
agreement or modify any existing agreement with respect to the development of any Intellectual Property or Intellectual Property Rights with a third party, or (iv) abandon or cease to prosecute any of the Company Registered IP or any other
Company Intellectual Property Rights that are material to the conduct of the Business;
(o)(i) acquire (by merger,
consolidation or acquisition of stock or assets) any other Person or any equity interest therein, (ii) enter into or renew any Material Contract (other than in the ordinary course of business consistent with past practice) or amend any Material
Contract or grant any release or relinquishment of any rights under any Material Contract or (iii) incur any new capital expenditure(s), individually or in the aggregate, with obligations to the Company or any of its Subsidiaries in excess of
$100,000;
(p) settle or compromise any pending or threatened Legal Proceeding or pay, discharge or satisfy or agree to pay,
discharge or satisfy any claim, Liability or obligation (absolute or accrued, asserted or unasserted, contingent or otherwise), other than the settlement, compromise, payment, discharge or satisfaction of Legal Proceedings, claims and other
Liabilities (i) reflected or reserved against in full in the Balance Sheet or incurred since the date of the Balance Sheet in the ordinary course of business consistent with past practice or (ii) the settlement, compromise, discharge or
satisfaction of which does not include any obligation (other than the payment of money) to be performed by the Company or its Subsidiaries following the Effective Time that would be material to the Company and its Subsidiaries taken as a whole;
(q) fail to keep in force insurance policies or replacement or revised provisions regarding insurance coverage with respect to
the assets, operations and activities of the Company and its Subsidiaries as currently in effect;
(r) renew or enter into any
non-compete, exclusivity, non-solicitation or similar agreement that would restrict or limit, in any material respect, the operations of the Company or any of its Subsidiaries;
(s) waive any material benefits of, or agree to modify in any adverse respect, or fail to enforce, or consent to any matter with respect to which its consent is required under, any confidentiality
agreement to which the Company or any of its Subsidiaries is a party;
provided, however
, that the foregoing shall not require the Company to take any of the foregoing actions in order to prevent a Third Party from making an Acquisition
Proposal or consummating an Acquisition Transaction (even if such third party may have breached or otherwise violated the terms of any such confidentiality agreement in connection therewith);
(t) enter into any new line of business outside of its existing business;
(u) alter in any material respect the Companys and its Subsidiaries practices regarding collection of accounts receivable or
payment of accounts payable; or
(v) enter into a Contract or otherwise commit to do any of the foregoing.
6.3
No Control
. Notwithstanding the foregoing, nothing in this
Article VI
is intended to give Parent or Merger Sub,
directly or indirectly, the right to control or direct the business or operations of the Company or its Subsidiaries at any time prior to the Effective Time. Prior to the Effective Time, the Company and its Subsidiaries shall exercise, consistent
with the terms and conditions of this Agreement, control and supervision over their own business and operations.
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ARTICLE VII
NON-SOLICITATION OF ACQUISITION PROPOSALS
7.1
Termination of
Discussions
. The Company and its Subsidiaries shall, and shall cause their respective Representatives to, (i) immediately cease and cause to be terminated, and shall not authorize or permit any of the Companys or its
Subsidiaries Representatives to continue, any and all existing activities, discussions or negotiations with any Third Party conducted heretofore with respect to any Acquisition Proposal or Acquisition Transaction; and (ii) request the
prompt return or destruction of all confidential information previously furnished with respect to any Acquisition Proposal or potential Acquisition Proposal.
7.2
Non-Solicitation
.
(a) At all times during the period commencing with
the execution and delivery of this Agreement and continuing until the earlier to occur of the termination of this Agreement pursuant to
Article IX
and the Effective Time, the Company and its Subsidiaries shall not (and shall not
authorize or permit any of their Representatives to), directly or indirectly:
(i) solicit, initiate, knowingly
encourage, facilitate or induce the making, submission or announcement of, an Acquisition Proposal or the making of any inquiry, offer or proposal that would reasonably be expected to lead to any Acquisition Proposal or Acquisition Transaction;
(ii) furnish to any Third Party any non-public information relating to the Company or any of its Subsidiaries,
or afford access to the business, properties, assets, books or records of the Company or any of its Subsidiaries to any Third Party, or take any other action intended to assist or facilitate the making of any Acquisition Proposal or any inquiry,
offer or proposal that would reasonably be expected to lead to an Acquisition Proposal or Acquisition Transaction;
(iii) participate or engage in discussions or negotiations with any Third Party that has made an Acquisition Proposal or that has made any inquiry, offer or proposal that would reasonably be expected to
lead to an Acquisition Proposal or Acquisition Transaction;
(iv) approve, endorse or recommend an Acquisition
Proposal or Acquisition Transaction;
(v) other than a confidentiality agreement of a nature described in
Section 7.2(b)(i)
and entered into in accordance with
Section 7.2(b)
, execute or enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement,
joint venture agreement, partnership agreement or other Contract constituting or relating to, or which is intended to or is reasonably likely to lead to, an Acquisition Proposal or Acquisition Transaction (each, an
Alternative Acquisition
Agreement
); or
(vi) resolve or agree to do any of the foregoing.
(b) Notwithstanding the foregoing provisions of
Section 7.2(a)
, prior to obtaining the Requisite Stockholder Approval, if at
any time following the date of this Agreement and prior to obtaining the Requisite Stockholder Approval, (1) the Company receives a written Acquisition Proposal that the Company Board believes in good faith to be bona fide, (2) such
Acquisition Proposal was not solicited after the date hereof and did not otherwise result from a breach of
Section 7.2(a)
, (3) the Company Board determines in good faith (after consultation with outside counsel and its financial
advisor) that such Acquisition Proposal constitutes or is reasonably likely to lead to a Superior Proposal, and (4) the Company Board determines in good faith (after consultation with outside counsel) that the failure to take the actions
referred to in clause (x) or (y) below would reasonably be expected to be a breach of its fiduciary duties under applicable Law, the Company Board may, directly or indirectly through any Representative, subject to the Companys
compliance with the provisions of this
Section 7.2
, (x) engage or participate in discussions or negotiations with such Third Party and its representatives and/or (y) furnish any non-public information relating to the Company or
any of its Subsidiaries
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to such Third Party and its representatives, provided that in the case of any action taken pursuant to the foregoing clauses (x) or (y):
(i) the Company enters into a confidentiality agreement with such Third Party the terms of which relating to
confidentiality are no less favorable to the Company than those contained in the Confidentiality Agreement (it being expressly understood and agreed that such confidentiality agreement need not contain a standstill or other similar
provision) and containing additional provisions that expressly permit the Company to comply with the terms of this
Section 7.2
(which confidentiality agreement shall be provided to Parent for informational purposes immediately following
the execution and delivery thereof);
(ii) the Company gives Parent prompt (and in any event, within 24 hours)
written notice of the identity of such Person and all of the terms and conditions of such Acquisition Proposal (and if such Acquisition Proposal is in written form, the Company shall give Parent a copy thereof) and of the Companys intention to
engage or participate in discussions or negotiations with, or furnish non-public information to, such Third Party; and
(iii) contemporaneously with furnishing any non-public information to such Person, the Company furnishes such non-public information to Parent (to the extent such information has not been previously
furnished by the Company to Parent).
(c) The Company hereby acknowledges and agrees that any violation of the restrictions set
forth in this
Section 7.2
by any Subsidiary of the Company or any Representative of the Company or any of its Subsidiaries shall be deemed to be a breach of this
Section 7.2
by the Company.
(d) The Company shall not, and shall cause its Subsidiaries not to, enter into any confidentiality agreement with any Person subsequent to
the date of this Agreement that would restrict the Companys ability to comply with any of the terms of this
Section 7.2
.
(e) The Company shall not take any action to exempt any Person (other than Parent, Merger Sub and their respective Affiliates) from the restrictions on business combinations contained in
Section 203 of the DGCL (or any similar provision of any other Takeover Law) or otherwise cause such restrictions not to apply, or agree to do any of the foregoing, in each case unless such actions are taken substantially concurrently with a
termination of this Agreement pursuant to
Section 9.1(f)
.
7.3
Notice and Information
.
(a) The Company shall promptly (and in any event within 24 hours of receipt) notify Parent of (i) any Acquisition Proposal,
(ii) any request for information that could lead to an Acquisition Proposal or (iii) any inquiry with respect to, or which would reasonably be expected to lead to, any Acquisition Proposal, in each case together with a description of the
terms and conditions of such Acquisition Proposal, request or inquiry, and the identity of the Person or group making any such Acquisition Proposal, request or inquiry and a copy of any written proposal, offer or draft agreement provided by such
Person.
(b) The Company shall keep Parent reasonably informed on a timely basis (including, within 24 hours after the
occurrence of any amendment, modification, development, discussion or negotiation) of the status and material details (including all amendments or proposed amendments) of any such Acquisition Proposal, request or inquiry, and provide Parent with
copies of all documents and written or electronic communications relating to any Acquisition Proposal (including the financing thereof), request or inquiry exchanged between the Company, its Subsidiaries or any of their respective Representatives,
on the one hand, and the Person making the Acquisition Proposal, request or inquiry (or such Persons Affiliates or Representatives), on the other hand.
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ARTICLE VIII
ADDITIONAL COVENANTS AND AGREEMENTS
8.1
Company Stockholder
Approval
.
(a)
Company Stockholders Meeting
. The Company shall establish a record date for, call, give notice of,
convene and hold a meeting of the stockholders of the Company (the
Company Stockholders Meeting
) as promptly as reasonably practicable following the date of this Agreement for the purpose of voting upon the adoption of this
Agreement in accordance with Delaware Law. Notwithstanding the foregoing, (i) if there are insufficient shares of the Company Common Stock present in person or represented by proxies to constitute a quorum to conduct business at the Company
Stockholders Meeting, the Company may extend the date of the Company Stockholders Meeting to the extent (and only to the extent) necessary in order to obtain a sufficient number of shares present in person or represented by proxies to constitute a
quorum to conduct business at the Company Stockholders Meeting, (ii) the Company may delay the Company Stockholders Meeting to the extent (and only to the extent) the Company determines that a delay is required by Applicable Law to comply with
comments made by the SEC with respect to the Proxy Statement, and (iii) the Company may delay the Company Stockholders Meeting if and to the extent that the Company Board determines that the failure to delay the Company Stockholders Meeting
would be a breach of its fiduciary duties. The Company shall solicit from stockholders of the Company proxies in favor of the adoption of this Agreement in accordance with and subject to Delaware Law and
Section 8.1(c)
. Unless this
Agreement is earlier terminated pursuant to
Article IX
, the Company shall establish a record date for, call, give notice of, convene and hold the Company Stockholders Meeting for the purpose of voting upon the adoption of this Agreement in
accordance with Delaware Law, whether or not the Company Board at any time subsequent to the date hereof shall have effected a Company Board Recommendation Change permitted by
Section 8.1(c)
. Notwithstanding anything to the contrary set
forth in this Agreement, the Companys obligation to establish a record date for, call, give notice of, convene and hold the Company Stockholders Meeting pursuant to this Section 8.1(a) shall not be limited to, or otherwise affected by,
the commencement, disclosure, announcement or submission to the Company of any Acquisition Proposal.
(b)
Company Proxy
Statement
. As soon as practicable following the date of this Agreement (and in any event within fifteen (15) Business Days after the date hereof), the Company shall prepare and file with the SEC a preliminary proxy statement (as amended and
including the definitive form thereof, the
Proxy Statement
) for use in connection with the solicitation of proxies for use at the Company Stockholders Meeting to obtain the Requisite Stockholder Approval. The Company shall
thereafter prepare and file with the SEC a definitive Proxy Statement, and shall cause the mailing of the definitive Proxy Statement to the stockholders of the Company, (i) if the Company receives comments from the SEC with respect to the
preliminary Proxy Statement, as soon as practicable following clearance by the SEC with respect to such comments, or (ii) if the Company does not receive comments from the SEC with respect to the preliminary Proxy Statement, as soon as
practicable following the expiration of the 10-day waiting period provided in Rule 14a-6(a) promulgated under the Exchange Act. The Company shall cause the Proxy Statement to comply as to form and substance in all material respects with the
applicable requirements of the Exchange Act, Delaware Law and the rules of the Nasdaq. Parent shall furnish all information concerning Parent and Merger Sub as the Company may reasonably request in connection with the preparation of the Proxy
Statement and the filing thereof with the SEC. The Company shall advise Parent, promptly after it receives notice thereof, of any request by the SEC or its staff for an amendment or revisions to the Proxy Statement, or comments thereon and responses
thereto, or requests by the SEC or its staff for additional information in connection therewith, and shall provide Parent with copies of all correspondence between the Company or any of its advisors or representatives, on the one hand, and the SEC,
or its staff or any other government officials, on the other hand, with respect to the Proxy Statement. If at any time prior to the Company Stockholders Meeting, any information relating to the Company or Parent, or any of their respective
directors, officers or Affiliates, should be discovered by the Company or Parent which should be set forth in an amendment or supplement to the Proxy Statement so that the Proxy Statement does not include any untrue statement of a material fact or
omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other party or parties hereto,
as the case may be, and an appropriate amendment or
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supplement to the Proxy Statement describing such information shall be promptly prepared and filed with the SEC and, to the extent required by Applicable Law, disseminated to the stockholders of
the Company. Prior to filing or mailing the Proxy Statement (or any amendment or supplement thereto) or responding to any comments of the SEC with respect thereto, the Company shall give Parent, Merger Sub and their counsel a reasonable opportunity
to review and comment on such document or response and shall give due consideration to all reasonable additions, deletions or changes suggested thereto by Parent, Merger Sub and their counsel.
(c)
Company Board Recommendation
.
(i) Subject to the terms of this
Section 8.1(c)
, (A) the Company Board shall (x) recommend that the Companys stockholders adopt this Agreement in accordance with the applicable
provisions of Delaware Law (the
Company Board Recommendation
) and (y) include the Company Board Recommendation in the Proxy Statement, and (B) neither the Company Board nor any committee thereof shall (1) withhold,
withdraw, amend or modify the Company Board Recommendation in a manner that is adverse to Parent, or publicly propose to withhold, withdraw, amend or modify the Company Board Recommendation in a manner that is adverse to Parent, or (2) approve,
endorse, adopt or recommend, or publicly propose to approve, endorse, adopt or recommend, an Acquisition Proposal or Acquisition Transaction (the actions or inactions referred to in the preceding clauses (1) and (2) being referred to
herein as a
Company Board Recommendation Change
).
(ii) Notwithstanding anything to the
contrary set forth in this Agreement, at any time prior to obtaining the Requisite Stockholder Approval, the Company Board may, if the Company Board determines in good faith (after consultation with outside counsel) that the failure to do so would
be a breach of its fiduciary duties under Applicable Law (after taking into account all adjustments to the terms of this Agreement that may be offered by Parent pursuant to this
Section 8.1(c)
), (x) make a Company Board
Recommendation Change in response to either (I) a Superior Proposal or (II) an Intervening Event, or (y) solely in response to a Superior Proposal received after the date hereof that was unsolicited and did not otherwise result from a
breach of
Section 7.2
, cause the Company to terminate this Agreement in accordance with
Section 9.1(f)
and concurrently enter into a binding Alternative Acquisition Agreement with respect to such Superior Proposal;
provided, however
, that the Company may not make an Adverse Recommendation Change in response to a Superior Proposal or terminate this Agreement in response to a Superior Proposal unless:
(A) at least three Business Days before taking such action, the Company notifies Parent in writing of its intention to do
so and contemporaneously furnishes a copy of the proposed Alternative Acquisition Agreement (which shall include the identity of the Person making the proposal) and any other relevant transaction documents (it being understood and agreed that any
amendment to the financial terms or any other material term of such Superior Proposal shall require a new written notice by the Company and a new three Business Day period); and
(B) if Parent makes a binding proposal during such five Business Day period to adjust the terms and conditions of this
Agreement, the Company Board, after taking into consideration the adjusted terms and conditions of this Agreement as proposed by Parent, continues to determine in good faith (after consultation with outside counsel and its financial advisor) that
such Superior Proposal continues to be a Superior Proposal and that the failure to make a Company Board Recommendation Change or terminate this Agreement, as applicable, would be a breach of its fiduciary duties under applicable Law;
and provided further
, that the Company Board may not make a Company Board Recommendation Change in response to an Intervening Event
unless:
(A) at least three Business Days before making a Company Board Recommendation Change with respect to
such Intervening Event, the Company notifies Parent in writing of its intention to do so, specifies the reasons therefor and provides a description of such Intervening Event; and
(B) if Parent makes a binding proposal during such three Business Day period to adjust the terms and conditions of this
Agreement, the Company Board, after taking into consideration the
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adjusted terms and conditions of this Agreement as proposed by Parent, continues to determine in good faith (after consultation with outside counsel) that the failure to make such Company Board
Recommendation Change would result in a breach of its fiduciary duties under applicable Law.
(iii) During the
three Business Day period prior to its effecting a Company Board Recommendation Change or terminating this Agreement as referred to above, the Company shall, and shall cause its financial and legal advisors to, negotiate with Parent in good faith
(to the extent Parent seeks to negotiate) regarding any revisions to the terms of the transactions contemplated by this Agreement proposed by Parent.
(iv) Nothing in this Agreement shall prohibit the Company Board from taking and disclosing to stockholders of the Company a position contemplated by Rule 14e-2(a) under the Exchange Act or complying
with the provisions of Rule 14d-9 under the Exchange Act;
provided, however
, that any such disclosure (other than a stop, look and listen communication or similar communication of the type contemplated by
Section 14d-9(f) under the Exchange Act) shall be deemed to be a Company Board Recommendation Change (including for purposes of
Section 9.1(i)
) unless the Company Board expressly reaffirms its recommendation to the Companys
stockholders in favor of the approval of this Agreement and the Merger in such disclosure.
8.2
Regulatory Approvals
.
As soon as may be reasonably practicable (and in any event within ten (10) calendar days) following the execution and delivery of this Agreement, each of Parent and the Company shall file with the FTC and the Antitrust Division of the DOJ a
Notification and Report Form relating to this Agreement and the transactions contemplated hereby (including the Merger) as required by the HSR Act, as well as comparable pre-merger notification filings, forms and submissions with any foreign
Governmental Authority that may be required by the Antitrust Laws of any applicable foreign jurisdiction or be deemed desirable by Parent, in each case as Parent may deem necessary and/or appropriate. Each of Parent and the Company shall
(a) cooperate and coordinate with the other in the making of such filings, (b) supply the other with any information that may be required in order to effectuate such filings, and (c) supply any additional information that reasonably
may be required or requested by the FTC, the DOJ or the competition or merger control authorities of any other jurisdiction and that Parent reasonably deems necessary and/or appropriate. Each party hereto shall promptly inform the other party or
parties hereto, as the case may be, of any communication from any Governmental Authority regarding any of the transactions contemplated by this Agreement (including the Merger), including promptly furnishing the other with copies of notices or other
written communications received by the Company or Parent, as the case may be, or any of their respective Subsidiaries, from any Governmental Authority and/or third party with respect to such transactions. If any party hereto or Affiliate thereof
receives a request for additional information or documentary material from any such Governmental Authority with respect to the transactions contemplated by this Agreement (including the Merger), then such party shall use reasonable best efforts to
make, or cause to be made, as soon as reasonably practicable and after consultation with the other party, an appropriate response in compliance with such request. Subject to Applicable Law relating to the exchange of information, Parent and the
Company shall each have the right to review in advance, and to the extent practicable each shall consult with the other in connection with, all of the information relating to Parent or the Company, as the case may be, and any of their respective
Subsidiaries, that appears in any filing made with, or written materials submitted to any Governmental Authority in connection with the Merger and the other transactions contemplated by this Agreement. In exercising the foregoing rights, each of
Parent and the Company shall act reasonably and as promptly as practicable. To the extent practicable under the circumstances, each party shall provide the other party and its counsel with the opportunity to participate in any meeting with any
Governmental Authority in respect of any filing, investigation or other inquiry in connection with the transactions contemplated hereby. Notwithstanding any other provision of this Agreement to the contrary, in no event shall Parent or any of its
Affiliates be required to (i) agree or proffer to divest or hold separate (in a trust or otherwise), or take any other action with respect to, any of the assets or businesses of Parent or any of its Affiliates or, assuming the consummation of
the Merger, the Surviving Corporation or any of its Affiliates, (ii) agree or proffer to limit in any manner whatsoever or not to exercise any rights of ownership of
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any securities (including the Shares) or (iii) enter into any agreement that in any way limits the ownership or operation of any business of Parent, the Company, the Surviving Corporation or
any of their respective Affiliates.
8.3
Financing
.
(a) Parent shall use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to arrange and obtain the Debt Financing on the terms and conditions described in the Debt Commitment Letter (subject to the immediately succeeding sentence and subject to the terms of any Alternative Financing),
including by using its reasonable best efforts to (i) maintain in effect the Debt Commitment Letter, negotiating and entering into definitive agreements with respect to the Debt Financing on the terms and conditions set forth in the Debt
Commitment Letter or on other terms no less favorable, in the aggregate, to Parent and the Company, (ii) satisfy on a timely basis all conditions applicable to Parent in such definitive agreements that are within its control, and
(iii) enforce its rights under the Debt Commitment Letter in the event of a material breach thereof by the counterparty thereof, and (iv) consummate the Debt Financing at or prior to the Closing. Parent shall have the right from time to
time to amend, replace, supplement or otherwise modify, or waive any of its rights under, the Debt Commitment Letter, and/or substitute other debt or equity financing for all or any portion of the Debt Financing from the same and/or alternative
financing sources, provided that any such amendment, replacement, supplement or other modification to, or waiver of, any provision of the Debt Commitment Letter that amends the Debt Financing and/or substitution of all or any portion of the Debt
Financing shall not, without the prior written consent of the Company (such consent not to be unreasonably withheld, conditioned or delayed) (A) add to, or expand upon, the conditions precedent to the Debt Financing as set forth in the Debt
Commitment Letter in any respect, (B) prevent, impede or delay the consummation of the Merger and the other transactions contemplated by this Agreement, (C) adversely impact the ability of Parent to enforce its rights against the
counterparty to the Debt Commitment Letter, or (D) impose additional material obligations on the Company and any of its Subsidiaries. For purposes of this Agreement, references to
Debt Financing
shall mean and include the
financing contemplated by the Debt Commitment Letter as permitted to be amended, modified, replaced, supplemented or substituted by this
Section 8.3(a)
and references to
Debt Commitment Letter
shall include such
documents as permitted to be amended, modified, replaced, supplemented or substituted by this
Section 8.3(a)
. In the event any portion of the Debt Financing becomes unavailable on the terms and conditions set forth in the Debt Commitment
Letter for any reason, as promptly as practicable following the occurrence of such event Parent shall use its reasonable best efforts to obtain alternative financing from alternative sources (the
Alternative Financing
) as promptly
as practicable following the occurrence of such event in an amount sufficient to consummate the transactions contemplated by this Agreement. For all purposes of and under this Agreement, the term
Debt Financing
shall also mean and
include any Alternative Financing (including any amendment, modification, replacement, supplement or substitution of any such alternative financing as permitted by this
Section 8.3(a)
). Parent shall keep the Company fully and promptly
apprised as to the status of, and any material developments relating to, the Debt Financing.
(b) Prior to the Closing, the
Company shall and shall cause its Subsidiaries to provide to Parent any cooperation reasonably requested by Parent in connection with the arrangement of the Debt Financing, including (i) participating in a reasonable number of customary
one-on-one meetings with the parties acting as lead arrangers or agents for, and prospective lenders and purchasers of, the Debt Financing and the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and General Counsel of the
Company and other members of senior management and Representatives of the Company, (ii) (A) as promptly as practical, furnishing Parent, Merger Sub and the Financing Sources with financial and other pertinent information regarding the
Company and its Subsidiaries as may be reasonably requested by Parent or (B) in any event, by the deadlines set forth therein, furnish all financial information regarding the Company and its Subsidiaries required to be timely delivered to
satisfy a condition precedent to the Debt Financing (all such information in this clause (ii), the
Required Information
), (iii) using reasonable best efforts to obtain consents to the use of accountants audit reports
relating to the Company and its Subsidiaries, legal opinions, appraisals, surveys, engineering reports, title insurance and other documentation and items required by the Debt Commitment Letter (including documentation and other information required
by bank regulatory authorities under applicable know-your-
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customer and anti-money laundering rules and regulations, including the Patriot Act), or as are reasonably requested by Parent and, if requested by Parent or Merger Sub, cooperating with
and assisting Parent or Merger Sub in obtaining such documentation and items, (iv) executing and delivering, as of the Effective Time, any definitive financing documents, including any credit or purchase agreements, guarantees, pledge
agreements, security agreements, mortgages, deeds of trust and other security documents or other certificates, documents and instruments relating to guarantees, the pledge of collateral and other matters ancillary to the Debt Financing as may be
reasonably requested by Parent in connection with the Debt Financing and otherwise reasonably facilitating the pledging of collateral (including cooperation in connection with the pay-off of existing indebtedness and the release of related Liens),
and the replacement or backing of any outstanding letter of credit maintained or provided by the Company or its Subsidiaries effective as of the Closing Date, (v) taking all actions reasonably necessary to (A) permit the Financing Sources
to conduct audit examinations, appraisals and other evaluations with respect to the Companys and its Subsidiaries current assets and other collateral, and to evaluate its cash management and accounting systems, policies and procedures
relating thereto for the purposes of establishing collateral arrangements and (B) establish bank and other accounts and blocked account agreements and lock box arrangements in connection with the foregoing, (vi) using reasonable best
efforts to obtain waivers, consents, estoppels and approvals from other parties to material leases, encumbrances and contracts to which the Company or any Subsidiary of the Company is a party to the extent necessary to consummate the Debt Financing
and (vii) taking all corporate actions necessary to permit the consummation of the Debt Financing and to permit the proceeds thereof, together with the cash at the Company and its Subsidiaries, to be made available to Parent on the Closing Date
to consummate the Merger;
provided, however
, that (1) no obligation of the Company or any of its Subsidiaries under the financing documents and other certificates, documents, agreements and instruments referenced in clause
(iv) above shall be effective until Closing, (2) nothing herein shall require such cooperation to the extent it would interfere unreasonably with the business or operations of the Company or its Subsidiaries, and (3) neither the
Company nor any of the Companys Subsidiaries shall be required to pay any commitment fee or similar fee or incur any liability with respect to the Debt Financing prior to the Closing. Upon request by the Company, Parent shall promptly
reimburse the Company or its Subsidiaries, as the case may be, for all reasonable and documented out-of-pocket costs incurred by the Company or any of the Subsidiaries of the Company in connection with the foregoing cooperation and shall indemnify
and hold harmless the Company and the Subsidiaries of the Company, and each of their respective directors, officers, employees, agents and other representatives, from and against any and all losses, damages, claims, costs or expenses suffered or
incurred by any of them in connection with the arrangement of the Debt Financing and any information utilized in connection therewith (other than information provided by the Company or any of the Companys Subsidiaries expressly for use
therein). All non-public or other confidential information provided by the Company or any of its Subsidiaries in connection with the Debt Financing shall be subject to the Confidentiality Agreement.
8.4
Reasonable Best Efforts to Close
. In furtherance and not in limitation of the other covenants and agreements set forth in this
Agreement, each of Parent, Merger Sub and the Company shall use their reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party or parties hereto in doing,
all things reasonably necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement (including the Merger), including using reasonable best efforts to
(a) cause the conditions to the Merger set forth in
Section 1.3
to be satisfied or fulfilled, (b) obtain all necessary or appropriate consents, waivers and approvals under any Contracts to which the Company or any of its
Subsidiaries is a party in connection with this Agreement and the consummation of the transactions contemplated hereby (including the Merger) so as to maintain and preserve the benefits under such Contracts following the consummation of the
transactions contemplated hereby (including the Merger), and (c) subject to the terms of
Section 8.2
, obtain all necessary actions or non-actions, waivers, consents, approvals, orders and authorizations from Governmental
Authorities, the expiration or termination of any applicable waiting periods under the HSR Act and all other applicable Antitrust Laws.
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8.5
Access to Company
. At all times during the period commencing with the execution
and delivery of this Agreement and continuing until the earlier to occur of the termination of this Agreement pursuant to
Article IX
and the Effective Time, the Company shall afford Parent and its Representatives reasonable access during
normal business hours and after reasonable advance notice, to all assets, properties, books and records and personnel of the Company and its Subsidiaries as Parent may reasonably request;
provided, however
, that no information or knowledge
obtained by Parent in any investigation conducted pursuant to this
Section 8.5
shall affect or be deemed to modify any representation or warranty of the Company set forth herein or the conditions to the obligations of Parent and Merger
Sub to consummate the Merger; and
provided further
, that the terms and conditions of the Confidentiality Agreement shall apply to any information provided or made available to Parent pursuant to this
Section 8.5
.
8.6
Notice of Breach
.
(a) At all times during the period commencing with the execution and delivery of this Agreement and continuing until the earlier to occur of the termination of this Agreement pursuant to
Article IX
and the Effective Time, the Company shall give prompt notice to Parent upon becoming aware that any representation or warranty made by it in this Agreement (disregarding materiality qualifiers contained therein) has become untrue or inaccurate in
any material respect, or of any failure of the Company to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement;
provided, however
, that no such
notification shall affect or be deemed to modify any representation or warranty of the Company set forth herein or the conditions to the obligations of Parent and Merger Sub to consummate the Merger; and
provided further
, that the terms and
conditions of the Confidentiality Agreement shall apply to any information provided to Parent pursuant to this
Section 8.6(a)
.
(b) At all times during the period commencing with the execution and delivery of this Agreement and continuing until the earlier to occur of the termination of this Agreement pursuant to
Article IX
and the Effective Time, Parent shall give prompt notice to the Company upon becoming aware that any representation or warranty made by it or Merger Sub in this Agreement (disregarding materiality qualifiers contained therein)
has become untrue or inaccurate in any material respect, or of any failure of Parent or Merger Sub to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement;
provided, however
, that no such notification shall affect or be deemed to modify any representation or warranty of the Company set forth herein or the conditions to the obligations of Parent and Merger Sub to consummate the Merger; and
provided further
, that the terms and conditions of the Confidentiality Agreement shall apply to any information provided to the Company pursuant to this
Section 8.6(b)
.
8.7
Confidentiality
. Parent, Merger Sub and the Company hereby acknowledge that Parent and the Company have previously executed a
Confidentiality Agreement, dated July 31, 2012 (as amended, the
Confidentiality Agreement
), which shall continue in full force and effect in accordance with its terms.
8.8
Public Disclosure
. Parent and Merger Sub, on the one hand, and the Company, on the other hand, shall not, without the prior
written consent of the other party, issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby (including the Merger), except as may be required by Applicable Law or any
listing agreement with a national securities exchange, in which case the party proposing to issue any press release or otherwise make any public statement shall use its reasonable best efforts to consult with the other party prior to any such
release or public statement.
8.9
Certain Litigation
. The Company shall promptly advise Parent orally and in writing of
any Legal Proceeding commenced after the date hereof against the Company or any of its directors by any stockholder of the Company (on their own behalf or on behalf of the Company) relating to this Agreement or the transactions contemplated hereby
(including the Merger) and shall keep Parent reasonably informed regarding any such Legal Proceeding. The Company shall give Parent the opportunity to consult with the Company regarding the defense of any such stockholder litigation and shall
consider Parents views with respect to such stockholder litigation in good faith, and shall not settle such stockholder litigation without the prior written approval of Parent (which will not be unreasonably withheld, conditioned or delayed).
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8.10
Section 16(b) Exemption
. The Company shall take all actions reasonably
necessary to cause the transactions contemplated by this Agreement and any other dispositions of equity securities of the Company (including derivative securities) in connection with the transactions contemplated by this Agreement by each individual
who is a director or executive officer of the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.
8.11
Directors and Officers Exculpation, Indemnification and Insurance
.
(a) The Surviving Corporation and its Subsidiaries
shall (and Parent shall cause the Surviving Corporation and its Subsidiaries to) honor and fulfill in all respects the obligations of the Company and its Subsidiaries under any and all indemnification agreements between the Company or any of its
Subsidiaries and any of their respective current or former directors and officers and any person who becomes a director or officer of the Company or any of its Subsidiaries prior to the Effective Time (the
Indemnified Persons
). In
addition, during the period commencing at the Effective Time and ending on the sixth anniversary of the Effective Time, the Surviving Corporation and its Subsidiaries shall (and Parent shall cause the Surviving Corporation and its Subsidiaries to)
cause the charters and bylaws (and other similar organizational documents) of the Surviving Corporation and its Subsidiaries to contain provisions with respect to indemnification, exculpation and the advancement of expenses that are at least as
favorable as the indemnification, exculpation and advancement of expenses provisions set forth in the Charter and bylaws (or other similar organizational documents) of the Company and its Subsidiaries as of the date hereof, and during such six-year
period such provisions shall not be repealed, amended or otherwise modified in any manner except as required by applicable law.
(b) During the period commencing at the Effective Time and ending on the sixth anniversary of the Effective Time, the Surviving
Corporation shall (and Parent shall cause the Surviving Corporation to) maintain in effect the Companys current directors and officers liability insurance (
D&O Insurance
) in respect of acts or omissions
occurring at or prior to the Effective Time, covering each person covered by the D&O Insurance, on terms with respect to the coverage and amounts that are equivalent to those of the D&O Insurance;
provided, however
, that in satisfying
its obligations under this
Section 8.11(b)
, the Surviving Corporation shall not be obligated to pay annual premiums in excess of two hundred percent (200%) of the amount paid by the Company for coverage for its last full fiscal year
(such two hundred percent (200%) amount, the
Maximum Annual Premium
) (which premiums the Company represents and warrants to be as set forth in
Section 8.11(b)
of the Company Disclosure Letter);
provided,
however
, that that if the annual premiums of such insurance coverage exceed such amount, the Surviving Corporation shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding the Maximum Annual Premium.
Prior to the Effective Time, notwithstanding anything to the contrary set forth in this Agreement, the Company may purchase a six-year tail prepaid policy on the D&O Insurance. In the event that the Company elects to purchase such a
tail policy prior to the Effective Time, the Surviving Corporation shall (and Parent shall cause the Surviving Corporation to) maintain such tail policy in full force and effect and continue to honor their respective
obligations thereunder, in lieu of all other obligations of the Surviving Corporation (and Parent) under the first sentence of this
Section
8.11(b)
for so long as such tail policy shall be maintained in full force and
effect.
(c) If the Surviving Corporation (or Parent) or any of its successors or assigns shall (i) consolidate with or
merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfer all or substantially all of its properties and assets to any Person, then, and in each such case,
proper provisions shall be made so that the successors and assigns of the Surviving Corporation shall assume all of the obligations of the Surviving Corporation (or Parent) set forth in this
Section 8.11
.
(d) The obligations set forth in this
Section 8.11
shall not be terminated, amended or otherwise modified in any manner that
adversely affects any Indemnified Person (or any other person who is a beneficiary under the D&O Insurance or the tail policy referred to in
Section 8.11(b)
(and their heirs and representatives)) without the prior written
consent of such affected Indemnified Person or other person who is a beneficiary under the D&O Insurance or the tail policy referred to in
Section 8.11(b)
(and their heirs and representatives). Each of the Indemnified
Persons or other persons who are beneficiaries under the D&O Insurance or the tail policy
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referred to in
Section 8.11(b)
(and their heirs and representatives) are intended to be third party beneficiaries of this
Section 8.11
, with full rights of enforcement as
if a party thereto. The rights of the Indemnified Persons (and other persons who are beneficiaries under the D&O Insurance or the tail policy referred to in
Section 8.11(b)
(and their heirs and representatives)) under
this
Section 8.11
shall be in addition to, and not in substitution for, any other rights that such persons may have under the charters, bylaws or other equivalent organizational documents, any and all indemnification agreements of or
entered into by the Company or any of its Subsidiaries, or applicable law (whether at law or in equity).
(e) In the event that
the Surviving Corporation makes a distribution or dividend to Parent or another (direct or indirect) Subsidiary or Affiliate of Parent, then Parent shall fulfill the obligations of the Surviving Corporation pursuant to this
Section 8.11
to the extent of the amount of such distribution or dividend.
(f) Nothing in this Agreement is intended to, shall be construed
to or shall release, waive or impair any rights to directors and officers insurance claims under any policy that is or has been in existence with respect to the Company or any of its Subsidiaries for any of their respective directors,
officers or other employees, it being understood and agreed that the indemnification provided for in this
Section 8.11
is not prior to or in substitution for any such claims under such policies.
8.12
Employee Matters
.
(a) Parent hereby acknowledges that a change of control (or similar phrase) within the meaning of the Employee Plans, as applicable, will occur as of the Effective Time, as applicable.
(b) At its election, Parent may maintain any Employee Plans Parent chooses to maintain or may provide that any Continuing
Employees will participate in or be covered by Parents benefit plans, or a combination thereof. If Continuing Employees are moved to Parents benefit plans, (A) Parent shall give full credit for eligibility and vesting purposes and
vacation accrual purposes (but not for any other benefit accrual purposes) for each Company employees period of service at the Company and its subsidiaries before the Effective Time, subject to applicable law and the terms and conditions of
Parents benefit plans and (B) subject to approval by any insurance carrier and to the extent consistent with applicable law, the terms of Parents benefit plans and Tax qualification requirements, Parent shall cause any and all
pre-existing condition (or actively-at-work or similar) limitations, eligibility waiting periods and evidence of insurability requirements under any group medical plans to be waived with respect to Continuing Employees and their eligible dependents
and shall provide them with credit for any co-payments, deductibles and offsets (or similar payments) made during the applicable plan year prior to the Effective Time for purposes of satisfying any applicable deductible, out-of-pocket, or similar
requirement under any Parent group medical programs in which they are eligible to participate on and after the Effective Time.
(c) Notwithstanding anything to the contrary set forth in this Agreement, no provision of this Agreement shall be deemed to
(i) guarantee employment for any period of time for, or preclude the ability of Parent or the Surviving Corporation to terminate, any employee of the Company or Continuing Employee at any time for any reason, or (ii) subject to the
limitations and requirements specifically set forth in this
Section 8.12
, require Parent or the Surviving Corporation to continue any Company Plan or prevent the amendment, modification or termination thereof after the Effective Time.
8.13
Directors
. Prior to the Effective Time, the Company shall cause each member of the Company Board to execute and
deliver a letter effectuating his or her resignation as a director of the Company Board effective immediately prior to the Effective Time.
8.14
FIRPTA Certificate
. Prior to the Closing Date, the Company shall deliver to Parent (i) an affidavit, under penalty of perjury, prepared in accordance with the requirements set forth in
Treasury Regulation Sections 1.1445-2(c)(3)(i) and 1.897-2(h)(2) certifying that the Shares are not United States real property interests under Section 897(c) of the Code, and (ii) a letter of notice to the IRS prepared in
accordance with the requirements set forth in Treasury Regulation Section 1.897-2(h)(2).
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8.15
Takeover Laws
. The Company and the Company Board shall (a) take no action
to cause any Takeover Law to become applicable to this Agreement, the Merger or any of the other transactions contemplated hereby and (b) if any Takeover Law is or becomes applicable to this Agreement, the Merger or any of the other
transactions contemplated hereby, take all action necessary to ensure that the Merger and the other transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize
the effect of such Takeover Law with respect to this Agreement, the Merger and the other transactions contemplated hereby.
8.16
Obligations of Merger Sub
. Parent shall take all action necessary to cause Merger Sub and the Surviving Corporation to
perform their respective obligations under this Agreement and to consummate the transactions contemplated by this Agreement, including the Merger, upon the terms and subject to the conditions set forth in this Agreement.
ARTICLE IX
TERMINATION OF AGREEMENT
9.1
Termination
. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after receipt of the Requisite Stockholder Approval
(except as provided herein), only as follows:
(a) by mutual written agreement of Parent and the Company; or
(b) by either Parent or the Company if the Effective Time shall not have occurred on or before May 31, 2013 (the
Termination
Date
);
provided
,
however
, that the right to terminate this Agreement pursuant to this
Section 9.1(b)
shall not be available to any party hereto whose action or failure to fulfill any obligation under this
Agreement has been the principal cause of or resulted in the failure of the Effective Time to have occurred on or before the Termination Date; or
(c) by either Parent or the Company if the Company Stockholders Meeting shall have been held and the Requisite Stockholder Approval shall not have been obtained thereat or at any adjournment or
postponement thereof; or
(d) by either Parent or the Company if any Governmental Authority in any Relevant Jurisdiction shall
have (i) enacted, issued, promulgated, entered, enforced or deemed applicable to the Merger any Applicable Law that is in effect and has the effect of making the consummation of any of the Merger illegal in any of the Relevant Jurisdictions or
which has the effect of prohibiting the consummation of the Merger in any of the Relevant Jurisdictions, or (ii) issued or granted any Order that has the effect of making the Merger illegal in any of the Relevant Jurisdictions or which has the
effect of prohibiting the consummation of the Merger in any of the Relevant Jurisdictions and such Order shall have become final and non-appealable; or
(e) by the Company if Parent or Merger Sub shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement, or if any representation or
warranty of Parent or Merger Sub shall have become untrue, which breach or failure to perform or to be true, either individually or in the aggregate, if occurring or continuing at the Effective Time (A) would result in the failure of any of the
conditions set forth in
Section 1.3(c)
and (B) cannot be or has not been cured by the earlier of (1) the Termination Date and (2) thirty (30) days after the giving of written notice to Parent of such breach or
failure;
provided, however
, that the Company shall not have the right to terminate this Agreement pursuant to this
Section 9.1(e)
if it is then in material breach of any of its covenants or agreements set forth in this Agreement
such that
Section 1.3(a)
or
1.3(b)
would not be satisfied; or
(f) by the Company on or after the date on
which (i) all the conditions set forth in
Sections 1.3(a)
and
1.3(b)
have been satisfied or waived (other than those conditions that by their terms are to be satisfied at the Closing), (ii) the Company has irrevocably
confirmed to Parent in writing that if Parent and Merger Sub perform their obligations hereunder and the Debt Financing is funded, then the Company is prepared to consummate the
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Merger, and (iii) Parent and Merger Sub fail to consummate the Merger within the time period required by
Section 1.2(a)
; or
(g) by the Company in order to enter into an Alternative Acquisition Agreement, provided that (i) the Superior Proposal was not
solicited in violation of the terms of
Sections 7.1 or 7.2
, (ii) the Company Board has followed the terms and procedures set forth in
Section 8.1(c)
in respect of such Superior Proposal and the termination of this
Agreement in respect thereof, and (iii) immediately prior (and as a condition) to the termination of this Agreement, the Company tenders to Parent (and pays to Parent if Parent agrees to accept such payment) the Company Termination Fee payable
pursuant to
Section 9.4(a)(i)
; or
(h) by Parent if the Company shall have breached or failed to perform any of its
representations, warranties, covenants or agreements set forth in this Agreement (other than with respect to a breach of
Sections 7.1, 7.2
,
7.3
or
8.1(c)
, as to which
Section 9.1(h)
will apply), or if any
representation or warranty of the Company shall have become untrue, which breach or failure to perform or to be true, either individually or in the aggregate, if occurring or continuing at the Effective Time (A) would result in the failure of
any of the conditions set forth in
Section 1.3(b)
and (B) cannot be or has not been cured by the earlier of (1) the Termination Date and (2) thirty (30) days after the giving of written notice to the Company of such
breach or failure;
provided, however
, that Parent shall not have the right to terminate this Agreement pursuant to this
Section 9.1(g)
if Parent or Merger Sub is then in material breach of any of its covenants or agreements set
forth in this Agreement such that
Sections 1.3(a)
and
1.3(c)
would not be satisfied; or
(i) by Parent if the
Company shall have breached or failed to perform any of its obligations set forth in
Section 7.1, 7.2
,
7.3
or
8.1(c)
in any material respect; or
(j) by Parent if (i) the Company Board or any committee thereof shall have effected a Company Board Recommendation Change, (ii) the Company fails to publicly restate its recommendation of the
Merger within five (5) Business Days after the date any Acquisition Proposal or any material modification thereto is first commenced, published or sent or given to the Companys stockholders upon a request to do so by Parent, or
(iii) the Company or the Company Board (or any committee thereof) shall formally resolve or publicly authorize or propose to take any of the foregoing actions.
(k) by Parent on or after the date on which (i) all the conditions set forth in
Sections 1.3(a)
and
1.3(b)
have been satisfied or waived (other than those conditions that by their terms
are to be satisfied at the Closing), and (ii) Parent and Merger Sub have not received the proceeds of the Debt Financing (including any Alternative Financing) by the end of the time period within which Parent and Merger Sub are required to
consummate the Merger pursuant to
Section 1.2(a)
.
9.2
Notice of Termination
. A party terminating this
Agreement pursuant to
Section 9.1
(other than
Section 9.1(a)
) shall deliver a written notice to the other party setting forth the specific basis for such termination and the specific provision of
Section 9.1
pursuant to which this Agreement is being terminated. A valid termination of this Agreement pursuant to
Section 9.1
shall be effective upon receipt by the non-terminating party of the foregoing written notice.
9.3
Effect of Termination
. In the event of a valid termination of this Agreement pursuant to
Section 9.1
, this
Agreement shall be of no further force or effect without Liability of any party or parties hereto, as applicable (or any stockholder, director, officer, employee, agent, consultant or representative of such party or parties) to the other party or
parties hereto, as applicable, except (a) for the terms of
Section 8.7
,
Section 8.8
, this
Section 9.3
,
Section 9.4
and
Article X
, each of which shall survive the termination of this
Agreement, and (b) except as set forth in
Section 9.4
, that nothing herein shall relieve any party or parties hereto, as applicable, from Liability for any willful or intentional breach of, or fraud in connection with, this
Agreement. In addition to the foregoing, no termination of this Agreement shall affect the obligations of the parties hereto set forth in the Confidentiality Agreement, all of which obligations shall survive termination of this Agreement in
accordance with their terms.
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9.4
Termination Fees
.
(a)
Company Termination Fee
.
(i) Prior and as a condition to a termination of this Agreement pursuant to
Section 9.1(g)
, the Company shall tender to Parent (and pay to Parent if Parent agrees to accept such payment) a fee
equal to Four Million, Eight Hundred and Fifty Seven Thousand, Nine Hundred Sixty Five Dollars ($4,857,965) (the
Company Termination Fee
) by wire transfer of immediately available funds to an account or accounts designated in
writing by Parent.
(ii) In the event that this Agreement is terminated pursuant to either
Sections 9.1(i)
or
9.1(j)
, within one Business Day after demand by Parent the Company shall pay to Parent a fee equal to the Company Termination Fee by wire transfer of immediately available funds to an account or accounts designated in writing by Parent.
(iii) The Company shall pay to Parent a fee equal to the Company Termination Fee, by wire transfer of immediately available
funds to an account or accounts designated in writing by Parent, within one Business Day after demand by Parent, in the event that (A) after the execution and delivery of this Agreement, an offer or proposal for a Competing Acquisition
Transaction (whether or not conditional) shall be publicly announced, shall become publicly known or shall be otherwise communicated to senior management of the Company or the Company Board (it being understood and agreed that any amendment or other
alteration to, or re-proposal of, an offer or proposal for a Competing Acquisition Transaction that was publicly announced or publicly known, or otherwise communicated to senior management of the Company or the Company Board, prior to the execution
and delivery of this Agreement shall constitute an offer or proposal for a new Competing Acquisition Transaction for purposes of this
Section 9.4(a)(iii)
), (B) this Agreement is terminated pursuant to
Sections 9.1(b)
or
Section 9.1(c)
, and (C) within twelve (12) months following the termination of this Agreement pursuant to
Section 9.1(b)
or
Section 9.1(c)
, the Company enters into a definitive agreement in respect of
any Competing Acquisition Proposal, or recommends or submits a Competing Acquisition Proposal to its stockholders for adoption, or a transaction in respect of any Competing Acquisition Proposal is consummated, which, in each case, need not be the
same Competing Acquisition Proposal that was made, disclosed or communicated after the execution and delivery of this Agreement and prior to termination hereof.
(iv) The parties hereto acknowledge and hereby agree that in no event shall the Company be required to pay the Company Termination Fee on more than one occasion, whether or not the Company Termination Fee
may be payable under more than one provision of this Agreement at the same or at different times and the occurrence of different events.
(v) Parent shall be entitled to pursue a claim against the Company, either at law or in equity, arising out of this Agreement and the transactions contemplated hereby concurrently with a claim against the
Company seeking to obtain the Company Termination Fee,
provided, however
, that in the event that Parent shall accept or be awarded the Company Termination Fee in full pursuant to this
Section 9.4(a)
, then receipt of such fee shall
be deemed to be liquidated damages for any and all losses or damages suffered or incurred by Parent, Merger Sub, any of their respective Affiliates or any other Person in connection with this Agreement (and the termination hereof), the transactions
contemplated hereby (and the abandonment thereof) or any matter forming the basis for such termination, and none of Parent, Merger Sub, any of their respective Affiliates or any other Person shall be entitled to bring or maintain any other claim,
action or proceeding against the Company or any of its Affiliates arising out of this Agreement, any of the transactions contemplated hereby or any matters forming the basis for such termination. Upon payment of such Company Termination Fee, the
Company shall have no further liability or obligation relating to or arising out of this Agreement or the transactions contemplated hereby.
(b)
Parent Termination Fee
.
(i) In the event that this Agreement is
terminated pursuant to
Section 9.1(f)
or
Section 9.1(k)
, Parent shall pay (or cause to be paid) to the Company a fee equal to Ten Million Dollars ($10,000,000) in cash (the
Parent Termination Fee
) within
one Business Day after demand by the Company by wire transfer of immediately available funds to an account designated in writing by the Company.
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(ii) In the event that (A) this Agreement is terminated pursuant to
Section 9.1(b)
or
Section 9.1(e)
, and (B) prior to any such termination (1) all the conditions set forth in
Sections 1.3(a)
and
1.3(b)
have been satisfied or waived (other than those conditions that by
their terms are to be satisfied at the Closing), (2) the Company irrevocably confirmed to Parent in writing that if Parent and Merger Sub perform their obligations hereunder and the Debt Financing is funded, then the Company is prepared to
consummate the Merger, and (3) Parent and Merger Sub failed to consummate the Merger within the time period required by
Section 1.2(a)
, then Parent shall pay (or cause to be paid) to the Company a fee equal to the Parent Termination
Fee within one Business Day after demand by the Company by wire transfer of immediately available funds to an account designated in writing by the Company.
(iii) Notwithstanding anything to the contrary in this Agreement, in the event the Parent Termination Fee becomes payable and is paid by Parent in full in accordance with the terms of this
Section 9.4(b)
, (A) the Companys right to receive payment of the Parent Termination Fee pursuant to this
Section 9.4(b)
shall be the sole and exclusive remedy of the Company and any former, current or future direct
or indirect equity holder, controlling person, stockholder, director, officer, employee, member, manager, agent or affiliate thereof, or to any former, current or future direct or indirect equity holder, controlling person, stockholder, director,
officer, employee, member, manager, agent or Affiliate of any of the foregoing (each, a
Company Related Party
) against Parent, Merger Sub, the Financing Sources or their respective Affiliates for any breach, liability, loss or
other damage suffered or incurred by the Company or any of its Subsidiaries as a result of the failure of Parent and Merger Sub to consummate the Merger in accordance with the terms hereof, (B) neither Parent, Merger Sub, the Financing Sources
nor any of their Affiliates shall have any further liability or obligation to the Company or any Company Related Party, in any case relating to or arising out of this Agreement or the transactions contemplated hereby, in each case whether based on
contract, tort or strict liability, by the enforcement of any assessment, by any legal or equitable proceeding, by virtue of any statute, regulation or Applicable Law or otherwise and whether by or through attempted piercing of the corporate or
partnership veil, by or through a claim by or on behalf of a party hereto or another person or otherwise, and (C) the Company shall not be entitled to seek any specific performance remedies pursuant to
Section 10.11(b)
.
Notwithstanding the forgoing, the Company shall not be limited by this
Section 9.4(b)(iii)
in pursuing remedies against Parent and Merger Sub in the event of fraud in connection with this Agreement or the transactions contemplated
hereby.
(iv) The parties hereto acknowledge and hereby agree that in no event shall Parent be required to pay the Parent
Termination Fee on more than one occasion, whether or not the Parent Termination Fee may be payable under more than one provision of this Agreement at the same or at different times and the occurrence of different events.
ARTICLE X
GENERAL PROVISIONS
10.1
Expenses
. Except as set forth in
Section 9.4(c)
, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby (including the Merger)
shall be paid by the party or parties, as applicable, incurring such expenses, whether or not the Merger is consummated.
10.2
Amendment
. Subject to Applicable Law, this Agreement may be amended by the parties hereto at any time by execution of an instrument in writing signed on behalf of each of Parent, Merger Sub and the Company;
provided, however
, that in
the event that this Agreement has been approved by stockholders of the Company in accordance with Delaware Law, no amendment shall be made to this Agreement that requires the approval of such stockholders of the Company without such approval.
Notwithstanding anything in this Agreement to the contrary,
Sections 9.4(b)(ii)
, this
Section 10.2
and
Sections 10.9, 10.13
and
10.14
shall not be amended, modified, waived or terminated in any manner adverse to the
Financing Sources without the prior written consent of the lenders under the Debt Financing or any alternative or replacement financing, as applicable.
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10.3
Waiver
. At any time and from time to time prior to the Effective Time, any party
or parties hereto may, to the extent legally allowed and except as otherwise set forth herein, (a) extend the time for the performance of any of the obligations or other acts of the other party or parties hereto, as applicable, (b) waive
any inaccuracies in the representations and warranties made to such party or parties hereto contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions for the benefit of such
party or parties hereto contained herein. Any agreement on the part of a party or parties hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party or parties, as applicable.
10.4
Certain Interpretations
.
(a) The table of contents and headings set forth in this Agreement are for convenience of reference purposes only and shall not affect or be deemed to affect in any way the meaning or interpretation of
this Agreement or any term or provision hereof.
(b) Unless otherwise indicated, all references herein to Sections, Articles,
Annexes, Exhibits or Schedules, shall be deemed to refer to Sections, Articles, Annexes, Exhibits or Schedules of or to this Agreement, as applicable.
(c) Unless otherwise indicated, the words include, includes and including, when used herein, shall be deemed in each case to be followed by the words without
limitation.
(d) As used in this Agreement, the singular or plural number shall be deemed to include the other whenever
the context so requires.
(e) Unless otherwise specifically provided, all references in this Agreement to Dollars
or $ means United States Dollars.
(f) When reference is made herein to a Person, such reference shall be deemed to
include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires. Unless otherwise indicated, all references herein to the Subsidiaries of a Person shall be deemed to include all direct and
indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.
(g) The parties hereto
agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any Applicable Law or rule of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
10.5
Notices
. All notices and other
communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial delivery service, or sent via telecopy (receipt confirmed) to the parties at the following addresses or telecopy numbers (or at such
other address or telecopy numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Actian Corporation
500 Arguello Street, Suite 200
Redwood City, CA 94063
Attention: Chief Executive Officer
Telecopy No.:
with a copy (which shall not constitute notice) to:
Gibson, Dunn & Crutcher LLP
1880 Page Mill Road
Palo Alto, CA 94304
Attention: Joseph Barbeau
Telecopy No.: (650) 849-5333
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(b) if to the Company (prior to the Closing), to:
Pervasive Software, Inc.
12365-B Riata Trace Parkway
Austin, TX 78727
Attention: Chief Executive Officer
Telecopy No.: (512)231-6912.
with a copy (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati
900 South Capital of Texas Highway
Las Cimas IV, Fifth Floor
Austin, TX 78746
Attention: Brian Beard and Michael S. Ringler
Telecopy No.: (512) 338-5499
10.6
Non-Survival of Representations, Warranties
. The representations and warranties of the Company, Parent and Merger
Sub contained in this Agreement shall terminate at the Effective Time.
10.7
Assignment
. No party may assign either
this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other parties. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
10.8
Entire Agreement
. This Agreement and the documents
and instruments and other agreements among the parties hereto as contemplated by or referred to herein, including the Company Disclosure Letter, constitute the entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof;
provided, however
, the Confidentiality Agreement shall not be superseded, shall survive any termination of
this Agreement and shall continue in full force and effect until the earlier to occur of (a) the Effective Time and (b) the date on which the Confidentiality Agreement is terminated in accordance with its terms. EACH PARTY HERETO AGREES
THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER PARENT AND MERGER SUB, ON THE ONE HAND, NOR THE COMPANY, ON THE OTHER HAND, MAKES ANY REPRESENTATIONS OR WARRANTIES TO THE OTHER, AND EACH PARTY HEREBY
DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OR AS TO THE ACCURACY OR COMPLETENESS OF ANY OTHER INFORMATION, MADE (OR MADE AVAILABLE BY) BY ITSELF OR ANY OF ITS REPRESENTATIVES, WITH RESPECT TO, OR IN CONNECTION WITH, THE
NEGOTIATION, EXECUTION OR DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHERS REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY
ONE OR MORE OF THE FOREGOING.
10.9
Third Party Beneficiaries
. This Agreement is not intended to, and shall not, confer
upon any other Person any rights or remedies hereunder;
provided, however
, that notwithstanding the foregoing, (a) following the Effective Time, the rights of the holders of shares of Company Common Stock, Company Options and Company
RSUs to receive the consideration contemplated by
Article II
, (b) following the Effective Time, the rights of the Indemnified Persons under
Section 8.11
, (c) the provisions of
Section 9.4(b)(ii)
shall be
enforceable against the Company (but not Parent or Merger Sub) by each party to the Debt Commitment Letter and their successors and assigns and each party to the Debt Commitment Letter is an express third party beneficiary of the provisions of such
Section 9.4(b)(ii)
, and (d) the provisions of the second sentence of
Section 10.2
, this
Section 10.9
and
Sections 10.13
and
10.14
shall be enforceable against all parties to this Agreement
by each party to the Debt Commitment Letter and their successors and assigns and each party to the Debt Commitment
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Letter is an express third party beneficiary of the provisions of the second sentence of
Section 10.2
, this
Section 10.9
and such
Sections 10.13
and
10.14
.
10.10
Severability
. In the event that any provision of this Agreement, or the application thereof, becomes or is
declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so
as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.11
Remedies
.
(a) Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and
not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy.
(b) The parties hereto hereby agree that irreparable damage would occur in the event that any provision of this Agreement were not
performed in accordance with its specific terms or were otherwise breached, and that money damages or other legal remedies would not be an adequate remedy for any such damages. Accordingly, the parties hereto acknowledge and hereby agree that in the
event of any breach or threatened breach by the Company, on the one hand, or Parent and Merger Sub, on the other hand, of any of their respective covenants or obligations set forth in this Agreement, the Company, on the one hand, and Parent and
Merger Sub, on the other hand, shall be entitled to an injunction or injunctions to prevent or restrain breaches or threatened breaches of this Agreement, and to specifically enforce the terms and provisions of this Agreement to prevent breaches or
threatened breaches of, or to enforce compliance with, the covenants and obligations of the other under this Agreement. Parent and Merger Sub, on the one hand, and the Company, on the other hand hereby agree not to raise any objections to the
availability of the equitable remedy of specific performance to prevent or restrain breaches or threatened breaches of this Agreement by Parent or Merger Sub, on the one hand, or the Company, on the other hand, and to specifically enforce the terms
and provisions of this Agreement to prevent breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of Parent and Merger Sub, on the one hand, or the Company, on the other hand, under this Agreement. Any
party seeking an injunction or injunctions to prevent breaches or threatened breaches of, or to enforce compliance with this Agreement when expressly available pursuant to the terms of this Agreement shall not be required to provide any bond or
other security in connection with any such order or injunction. The parties hereto further agree that (x) by seeking the remedies provided for in this
Section 10.11(b)
, a party shall not in any respect waive its right to seek any
other form of relief that may be available to a party under this Agreement (including monetary damages) in the event that this Agreement has been terminated or in the event that the remedies provided for in this
Section 10.11(b)
are not
available or otherwise are not granted, and (y) nothing set forth in this
Section 10.11(b)
shall require any party hereto to institute any proceeding for (or limit any partys right to institute any proceeding for) specific
performance under this
Section 10.11(b)
prior or as a condition to exercising any termination right under
Article IX
(and pursuing damages after such termination), nor shall the commencement of any Legal Proceeding pursuant to
this
Section 10.11(b)
or anything set forth in this
Section 10.11(b)
restrict or limit any partys right to terminate this Agreement in accordance with the terms of
Article IX
or pursue any other remedies under
this Agreement that may be available then or thereafter. If a court of competent jurisdiction has declined to grant an injunction, or other appropriate form of specific performance or equitable relief, to cause Parent and Merger Sub to consummate
the Merger, or to cause the Company to consummate the Merger, in connection with an action brought pursuant to this
Section 10.11(b)
, then the non-breaching party shall have the right to seek the termination of this Agreement to the
extent provided in
Section 9.1
and be entitled to seek payment of the Company Termination Fee or the Parent Termination Fee, as applicable, to the extent payable in connection with such termination in accordance with
Section 9.4(a)
or
Section 9.4(b)
, as applicable.
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(c) Notwithstanding
Section 10.11(b)
, the Company shall only have the right to
obtain an injunction, or other appropriate form of specific performance or equitable relief, in each case, with respect to causing Parent and Merger Sub to consummate the Merger but only substantially concurrent with the receipt of the Debt
Financing if and only if: (i) all of the conditions precedent to the obligations of Parent and Merger Sub to consummate the Merger set forth in
Sections 1.3(a)
and
1.3(b)
have been satisfied or waived (other than those that by
their nature are to be satisfied at the Closing), (ii) the Debt Financing (including, in the case Alternative Financing has been obtained in accordance with
Section 8.3
, such Alternative Financing) has been funded or would be funded
in accordance with the terms thereof at the Closing if Parent and Merger Sub consummate the Merger in accordance with the terms hereof, (iii) Parent and Merger Sub fail to consummate the Merger within the time period required by
Section 1.2(a)
and (iv) the Company has irrevocably confirmed to Parent in writing that if the Debt Financing were funded, it would take such actions that are within its control to consummate the Merger in accordance with the terms
hereof. For the avoidance of doubt, in no event shall the Company be entitled to enforce or seek to enforce specifically the obligations of Parent and Merger Sub to consummate the Merger if the Debt Financing has not been funded (or would not be
funded in accordance with the terms thereof at the Closing if Parent and Merger Sub consummate the Merger in accordance with the terms hereof).
(d) Nothing in
Section 10.11
shall prohibit the Company from seeking an injunction, specific performance and/or other equitable relief pursuant to
Section 10.11(b)
prior to the
conditions to Closing set forth in
Sections 1.3(a)
and
1.3(b)
being satisfied (other than with respect to the Companys right to obtain an injunction, or other appropriate form of specific performance or equitable relief, in each
case, with respect to causing Parent and Merger Sub to consummate the Merger, which shall be subject to
Section 10.11(c)
). For the avoidance of doubt, while the Company may pursue both (i) an injunction, specific performance or
other equitable relief to the extent permitted by
Section 10.11(b)
, except as provided in
Section 9.4(b)
(iii), and (ii) the payment of the Parent Termination Fee to the extent permitted by
Section 9.4(b)
(and
either the Companys pursuit of a remedy pursuant to
Section 10.11(b)
shall in no way preclude the Company from pursuing payment of the Parent Termination Fee and vice versa), but under no circumstances shall the Company be
permitted or entitled to receive both such grant of an injunction, specific performance or other equitable relief and payment of the Parent Termination Fee.
(e) Rights of specific performance and equitable relief are subject to the limitations set forth in
Section 9.4(a)(v)
and
Section 9.4(b)(iii)
.
10.12
Governing Law
. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof.
10.13
Consent
to Jurisdiction
. Each of the parties hereto (a) irrevocably consents to the service of the summons and complaint and any other process in any action or proceeding relating to the transactions contemplated by this Agreement, for and on
behalf of itself or any of its properties or assets, in such other manner as may be permitted by Applicable Law, and nothing in this
Section 10.13
shall affect the right of any party to serve legal process in any other manner permitted
by Applicable Law; (b) irrevocably and unconditionally consents and submits itself and its properties and assets in any action or proceeding to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, only if the Court
of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any federal court within the State of Delaware) in the event any dispute or controversy arises out of this Agreement or the transactions contemplated
hereby (including the Merger), or for recognition and enforcement of any judgment in respect thereof; (c) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court;
(d) agrees that any actions or proceedings arising in connection with this Agreement or the transactions contemplated hereby (including the Merger) shall be brought, tried and determined only in the Court of Chancery of the State of Delaware
(or, only if the Court of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any federal court within the State of Delaware); (e) waives any objection that it may now or hereafter have to the venue of
any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;
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and (f) agrees that it will not bring any action relating to this Agreement or the transactions contemplated hereby (including the Merger) in any court other than the aforesaid courts. Each
of Parent, Merger Sub and the Company agrees that a final judgment in any action or proceeding in such courts as provided above shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by
Applicable Law. Without limiting
Section 9.4(b)(ii)
, each of the parties hereto agrees that it will not bring or support any action, cause of action, claim, cross-claim or third-party claim of any kind or description, whether in law or
in equity, whether in contract or in tort or otherwise, against the Financing Sources in any way relating to this Agreement or any of the transactions contemplated by this Agreement, including but not limited to any dispute arising out of or
relating in any way to the Debt Commitment Letter or the definitive agreements executed in connection therewith or the performance thereof, in any forum other than the Supreme Court of the State of New York, County of New York, or, if under
applicable law exclusive jurisdiction is vested in the federal courts, the United States District Court for the Southern District of New York (and appellate courts thereof).
10.14
WAIVER OF JURY TRIAL
. EACH OF PARENT, COMPANY AND MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
10.15
Counterparts
. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.
[
Remainder of Page Intentionally Left Blank
]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by their
respective duly authorized officers to be effective as of the date first above written.
|
|
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ACTIAN CORPORATION
|
|
|
By:
|
|
/s/ Steve Shine
|
Name: Steve Shine
|
Title: CEO & President
|
|
ACTIAN SUB II, INC.
|
|
|
By:
|
|
/s/ Fred Gallagher
|
Name: Fred Gallagher
|
Title: Director
|
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PERVASIVE SOFTWARE, INC.
|
|
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By:
|
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/s/ John Farr
|
Name: John Farr
|
Title: President & CEO
|
[AGREEMENT AND PLAN OF MERGER]
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ANNEX A
CERTAIN DEFINED TERMS
For all purposes of and under this Agreement, the
following capitalized terms shall have the following respective meanings:
Acquisition Proposal
means any
offer, proposal or indication of interest from any Third Party relating to any Acquisition Transaction.
Acquisition
Transaction
means any transaction or series of related transactions (other than the transactions contemplated by this Agreement) involving: (i) any acquisition or purchase by any Third Party, directly or indirectly, of more than
fifteen percent (15%) of any class of outstanding voting or equity securities of the Company, or any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in any Third Party beneficially owning more
than fifteen percent (15%) of any class of outstanding voting or equity securities of the Company; (ii) any merger, consolidation, share exchange, business combination, joint venture or other similar transaction involving the Company
pursuant to which the stockholders of the Company immediately preceding such transaction hold less than eighty-five percent (85%) of the equity interests in the surviving or resulting entity of such transaction; or (iii) any sale, lease
(other than in the ordinary course of business), exchange, transfer or other disposition of more than fifteen percent (15%) of the consolidated assets of the Company and its Subsidiaries (measured by the fair market value thereof).
Affiliate
means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by
or is under common control with such Person. For purposes of the immediately preceding sentence, the term control (including, with correlative meanings, the terms controlling, controlled by and under common
control with), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by
contract or otherwise.
Antitrust Laws
means applicable federal, state, local or foreign antitrust,
competition, premerger notification or trade regulation laws, regulations or Orders.
Applicable Law
means,
with respect to any Person, any international, national, federal, state, local, municipal or other law (statutory, common or otherwise), constitution, treaty, convention, resolution, ordinance, directive, code, edict, decree, rule, regulation,
ruling or other similar requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority that is binding upon or applicable to such Person, as amended unless
expressly specified otherwise.
Associate
has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act.
Balance Sheet
means the consolidated balance sheet of the Company and
its Subsidiaries as of September 30, 2012 included in the SEC Reports.
Business Day
means any day,
other than a Saturday, Sunday and any day which is a legal holiday under the Laws of the State of Arizona or New York or is a day on which banking institutions located in such States are authorized or required by Applicable Law or other governmental
action to close.
Business Facility
means any property including the land, improvements, soil, soil gas,
indoor air, groundwater, and surface water that is or at any time has been owned, operated, occupied, controlled or leased by the Company, its Subsidiaries or any of their predecessors in connection with the operation of their respective business.
Code
means the Internal Revenue Code of 1986, as amended, or any successor statute thereto.
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Company IP
means all Technology and Intellectual Property Rights that are
used, held for use, or otherwise licensed to or owned by the Company or any of its Subsidiaries.
Company
Intellectual Property Rights
means all of the Intellectual Property Rights owned by, or filed in the name of, or exclusively licensed to the Company or any of its Subsidiaries.
Company Material Adverse Effect
means any fact, event, violation, inaccuracy, circumstance, change or effect (any such
item, an
Effect
) that, individually or when taken together with all other Effects that exist or have occurred prior to or at the date of determination of the occurrence of the Company Material Adverse Effect, is or is reasonably
likely to be materially adverse to the business, operations, properties, assets (including intangible assets), condition (financial or otherwise) or results of operations of the Company and its Subsidiaries taken as a whole;
provided,
however
, that in no event shall any Effect resulting from any of the following, either alone or in combination, be taken into account when determining whether a Company Material Adverse Effect has occurred or may, would or could occur:
(i) general economic conditions in the United States or any other country or region in the world; (ii) general conditions in the industries in which the Company or any of its Subsidiaries conduct business; (iii) changes in Law or GAAP
or the interpretations thereof; (iv) acts of war, terrorism or sabotage; (v) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions and other force majeure events in the
United States or any other country or region in the world; (vi) the public announcement or pendency of this Agreement or the transactions contemplated hereby; (vii) any failure by the Company to meet published analysts estimates,
projections or forecasts of revenues, earnings or other financial or business metrics, in and of itself, or any failure by the Company to meet any internal budgets, plans or forecasts of its revenues, earnings or other financial performance or
results of operations, in and of itself (it being understood that the underlying cause(s) of any such failure may be taken into consideration); (viii) any decline in the market price or change in the trading volume of Company Common Stock, in
and of itself (it being understood that the underlying cause(s) of any such failure may be taken into consideration); (ix) any action taken pursuant to the terms of this Agreement or the failure to take any action prohibited by the terms of
this Agreement; (x) any action taken at the request of Parent or with the prior consent or approval of Parent; (xi) the availability or cost of equity, debt or other financing to Parent or Merger Sub and (xii) any legal proceedings
made or brought by any of the current or former stockholders of the Company (on their own behalf or on behalf of the Company) against the Company, including those arising out of the Merger or in connection with any other transactions contemplated by
this Agreement;
provided, however
, that, in each of clauses (i) through (v) any such Effects shall not be taken into account only to the extent such Effects have not had a disproportionate impact on the Company relative to other
companies in the industries in which the Company and its Subsidiaries operate or conduct business.
Company
Options
means any options to purchase shares of Company Common Stock.
Company Equity Incentive
Plan
means the Company Amended and Restated 2006 Equity Incentive Plan, as amended and restated.
Company
Products
means any and all items, products and services marketed, sold, licensed, provided or distributed by Company and its Subsidiaries, and refers also to (i) all User Documentation and related technical documentation and
(ii) all prior, present and future versions thereof (which includes works under development as of the date hereof and that the Company expects or intends to make available commercially after the date hereof).
Company RSUs
means restricted stock units settled in shares of Company Common Stock.
Competing Acquisition Transaction
has the same meaning as Acquisition Transaction except that all
references therein to 15% and 85% shall be references to 50%.
Confidential
Technology
means Source Code and other Technology embodied in or related to the Company Products that is preserved as a Trade Secret or is otherwise confidential.
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Continuing Employees
shall mean all current and former employees of the
Company who are offered and timely accept employment by Parent or any Subsidiary of Parent, who continue their employment with the Company at the request of Parent or, outside the U.S., who remain or become employees of the Company, Parent or any
Subsidiary of Parent as required by applicable Law.
Contract
means any contract, subcontract, agreement,
commitment, note, bond, mortgage, indenture, lease, license, sublicense, permit, franchise or other instrument, obligation or binding arrangement or understanding of any kind or character, whether oral or in writing.
Delaware Law
means the DGCL and any other Applicable Law of the State of Delaware.
DGCL
means the General Corporation Law of the State of Delaware.
DOJ
means the United States Department of Justice, or any successor thereto.
DOL
means the United States Department of Labor, or any successor thereto.
Employee Plans
means (i) all employee benefit plans (as defined in Section 3(3) of ERISA),
whether or not subject to ERISA and (ii) all other employment, consulting and independent contractor agreement, bonus, stock option, stock purchase or other equity-based, benefit, incentive compensation, profit sharing, savings, retirement
(including early retirement and supplemental retirement), disability, insurance, vacation, incentive, deferred compensation, supplemental retirement (including termination indemnities and seniority payments), severance, termination, retention,
change of control and other similar fringe, welfare or other employee benefit plans, programs, agreement, contracts, policies or arrangements (whether or not in writing) maintained or contributed to (or required to be contributed to) for the benefit
of or relating to any current or former employee, consultant or independent contractor or director of the Company, any of its Subsidiaries or any ERISA Affiliate, or with respect to which the Company or any of its Subsidiaries has or may have any
material Liability (contingent or otherwise).
ERISA
means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder, or any successor statue, rules and regulations thereto.
ERISA Affiliate
means any Person under common control with the Company or that, together with the Company or any of
its Subsidiaries, would be treated as a single employer with the Company or any of its Subsidiaries under Section 4001(b)(1) of ERISA or Section 414 of the Code and the regulations promulgated thereunder.
Exchange Act
means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
Financing Sources
means the entities that have committed to provide or otherwise entered into
agreements in connection with the Financing or other financings in connection with the transactions contemplated hereby, including the parties to the Debt Commitment Letter and any joinder agreements or credit agreements (including the definitive
agreements executed in connection with the Debt Commitment Letter) relating thereto.
FTC
means the United
States Federal Trade Commission, or any successor thereto.
GAAP
means generally accepted accounting
principles, as applied in the United States.
Governmental Authority
means any government, any governmental
or regulatory entity or body, department, commission, board, agency or instrumentality, and any court, tribunal or judicial body, in each case whether federal, state, county, provincial, and whether local or foreign.
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HSR Act
means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder, or any successor statute, rules and regulations thereto.
Intellectual Property Rights
means any or all of the following and all statutory and/or common law rights throughout
the world in, arising out of, or associated therewith: (i) all United States and foreign patents and utility models, including utility patents and design patents, and all registrations and applications therefore (including provisional
applications) and all reissues, divisions, renewals, extensions, re-examinations, corrections, provisionals, continuations and continuations in part thereof, and other derivatives and certificates associated therewith, and equivalent or similar
rights anywhere in the world in inventions and discoveries, including, without limitation, invention disclosures (collectively,
Patents
); (ii) all inventions (whether or not patentable, reduced to practice or made the subject
of a pending patent application), invention disclosures and improvements, all trade secrets, proprietary information, know-how and technology, confidential or proprietary information and all documentation therefore (collectively,
Trade
Secrets
); (iii) all works of authorship, copyrights (registered or otherwise), mask works, copyright and mask work registrations and applications and all other rights corresponding thereto throughout the world, and all rights therein
provided by international treaties or conventions (collectively,
Copyrights
); (iv) all industrial designs and any registrations and applications therefore; (v) all trade names, trade dress, logos, or other corporate
designations, trademarks and service marks, whether or not registered, including all common law rights, and trademark and service mark registrations and applications, including but not limited to all marks registered in the United States Patent and
Trademark Office, the Trademark Offices of the States and Territories of the United States of America, and the Trademark Offices of other nations throughout the world, and all rights therein provided by international treaties or conventions
(collectively,
Trademarks
); (vi) all other rights in databases and data collections (including knowledge databases, customer lists and customer databases) and Software and Technology; (vii) all rights to Uniform Resource
Locators, Web site addresses and domain names and applications and registrations therefore (collectively,
Domain Names
); (viii) all publicity rights and Moral Rights, however denominated; and (ix) any similar,
corresponding or equivalent rights to any of the foregoing.
Intervening Event
means a material event or
circumstance that was not known to the Company Board prior to the execution of this Agreement (or if known, the consequences of which were not known or reasonably foreseeable), which event or circumstance, or any material consequence thereof,
becomes known to the Company Board prior to the receipt of the Requisite Stockholder Approval;
provided
, that in no event shall the receipt, existence or terms of an Acquisition Proposal or any matter relating thereto or consequence thereof
constitute an Intervening Event.
IRS
means the United States Internal Revenue Service, or any successor
thereto.
Legal Proceeding
means any lawsuit, litigation, arbitration or other legal proceeding (including
any civil, criminal, administrative, investigative or appellate proceeding, public or private) by or before any Governmental Authority.
Liabilities
means any liability, indebtedness, obligation or commitment of any kind (whether accrued, absolute, contingent, matured, unmatured or otherwise and whether or not required
to be recorded or reflected on a balance sheet under GAAP).
Lien
means any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement, interference, option, right of first refusal, preemptive right, community property interest or restriction of any nature (including any restriction on the voting of any security,
any restriction on the transfer of any security or other asset, any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset).
Material Contract
means: (i) any material contract as such term is defined in Item 601(b)(10) of Regulation S-K under the Securities Act (other than those
agreements and arrangements described in
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