Form 8-K Exhibit Notice:
 
This Agreement is included as an exhibit to the Form 8-K to provide information
regarding its terms. Except for its status as the contractual document between
the parties with respect to the transaction described herein, it is not intended
to provide factual information about the parties. The representations and
warranties contained in this Agreement were made only for purposes of this
agreement and as of specific dates, were solely for the benefit of the parties
hereto, and may be subject to limitations agreed by the contracting parties,
including being qualified by disclosures between the parties. These
representations and warranties may have been made for the purposes of allocating
contractual risk between the parties to the agreement instead of establishing
these matters as facts, and may be subject to standards of materiality
applicable to the contracting parties that differ from those applicable to
investors. They should be viewed by investors in this context.
 
Schedules omitted in accordance with Item 601(b)(2) of Regulation S-K.
 
The Company will furnish supplementally a copy of such omitted schedule to the
Securities and Exchange Commission (the “Commission”) upon the Commission’s
request; provided, however that the Company may request confidential treatment
pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for
any schedule or exhibit so furnished.

 
 

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--------------------------------------------------------------------------------

 

 
AGREEMENT AND PLAN OF MERGER
 
 
by and among
 
 
PTC INC.,
 
 
TETONIC, INC.,
 
 
THINGWORX, INC.
 
 
RICHARD BULLOTTA, RUSSELL FADEL and JOHN RICHARDSON,
 
 
and
 
 
THE SECURITYHOLDERS’ REPRESENTATIVE
 
December 30, 2013

 

 
 

 

 
5964589v10
 
 

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AGREEMENT AND PLAN OF MERGER
 
 
This Agreement and Plan of Merger (this “Agreement”) dated as of the 30th day of
December, 2013 is by and among PTC Inc., a Massachusetts corporation (the
“Buyer”), Tetonic, Inc., a Delaware corporation and newly-formed, wholly-owned
subsidiary of the Buyer (the “Merger Sub”), ThingWorx, Inc., a Delaware
corporation (the “Company”), the undersigned Securityholders’ Representative,
and each of Richard Bullotta, Russell Fadel and John Richardson (each a
“Founder” and, collectively, the “Founders”).
 
 
RECITALS
 
 
A.           The Buyer, the Merger Sub and the Company intend to effectuate a
merger (the “Merger”) of the Merger Sub with and into the Company in accordance
with this Agreement and the General Corporation Law of the State of Delaware
(the “DGCL”).
 
 
B.           The Company Board has unanimously (i) determined that the Merger is
fair to and in the best interests of, the Company and the Stockholders, (ii)
adopted and approved this Agreement, the Merger and the other Transactions and
(iii) resolved to recommend that the Stockholders adopt and approve this
Agreement, the Merger and the other Transactions.
 
 
C.           The respective boards of directors of each of the Buyer and the
Merger Sub have determined that the Merger is fair to and in the best interests
of their respective corporations and stockholders, and have adopted and approved
this Agreement, the Merger and the other Transactions.
 
 
D.           Following execution and delivery of this Agreement, certain
Stockholders are delivering to the Buyer executed written consents sufficient to
evidence the Stockholder Approval.
 
 
NOW THEREFORE, in consideration of the covenants, promises and representations
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
 
 
SECTION 1
 
 
THE MERGER AND OTHER TRANSACTIONS
 
 
1.1 Certain Definitions.  For purposes of this Agreement:
 
 
“Accounts Receivable” has the meaning given in Section 2.8.
 
 
“Affiliate” means, with respect to the Person to which it refers, a Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such Person.
 
 
 
 

--------------------------------------------------------------------------------

 
“Aggregate Exercise Amount” shall mean the aggregate dollar amount payable upon
the exercise of Company Options and Company Warrants outstanding immediately
prior to the Effective Time.
 
 
“Agreement” has the meaning given in the preamble.
 
 
“Allocation Certificate” has the meaning given in Section 1.7(b).
 
 
“Alternative Transaction” has the meaning given in Section 4.5.
 
 
“Ancillary Agreements” means the Escrow Agreement and all other documents,
instruments and certificates entered into pursuant hereto or in furtherance of
the Transactions.
 
 
“Applicable Provision” has the meaning given in Section 2.
 
 
“Assumed Debt Amount” shall mean the sum of (i) the amount owed to Silicon
Valley Bank by the Company as of the Closing Date pursuant to that certain Loan
and Security Agreement, dated as of November 30, 2011, by and between Silicon
Valley Bank and the Company; and (ii) the amount owed to Safeguard Delaware,
Inc. by the Company as of the Closing Date pursuant to that certain subordinated
secured promissory note, dated as of December 3, 2013, by and between Safeguard
Delaware, Inc. and the Company, in each case, to a maximum amount set forth in
the Allocation Certificate.
 
 
“Audited Financial Statements” has the meaning given in Section 2.6(b).
 
 
“Balance Sheet” has the meaning given in Section 2.6(a).
 
 
“Balance Sheet Date” has the meaning given in Section 2.6(a).
 
 
“Bankruptcy Proceeding” has the meaning given in Section 1.8(f).
 
 
“Base Cash Purchase Price” means $110,000,000.00.
 
 
“Basket” has the meaning given in Section 11.5(a).
 
 
“Business” means the business conducted by the Company on the date hereof,
including without limitation, developing, manufacturing, enhancing, marketing
and/or distributing software products that are applications, or that may be used
to develop applications, that contain functionality to enable or enhance any of
the following: (i) machine to machine (M2M) connectivity, (ii) modeling
environment for data and services of connected devices, or (iii) data
visualization and application composition (commonly referred to as “mash-up
builder”).
 
 
“Business Day” means Monday through Friday, but excluding federal and state
holidays in Boston, Massachusetts.
 
 
“Buyer” has the meaning given in the preamble.
 
 
“Buyer Indemnitees” has the meaning given in Section 11.2(a).
 
 
 

--------------------------------------------------------------------------------

 
 
“Buyer Plans” has the meaning given in Section 5.6(a).
 
 
“Cash Purchase Price” has the meaning given in Section 1.7(a).
 
 
“Certificate” means a certificate evidencing shares of the Company Stock.
 
 
“Certificate of Merger” has the meaning given in Section 1.3.
 
 
“Change of Control” shall mean, with respect to the Buyer or the Surviving
Corporation: (i) the sale or other disposition of all or substantially all of
such party’s assets, except where such sale or other disposition by the
Surviving Corporation is to the Buyer or its Affiliate; (ii) a merger,
reorganization or consolidation involving such party in which the voting
securities of such party outstanding immediately prior thereto cease to
represent at least fifty percent (50%) of the combined voting power of the
surviving entity immediately after such merger, reorganization or consolidation
except any such merger, reorganization or consolidation of the Surviving
Corporation with or into the Buyer or its Affiliate; or (iii) a person or
entity, or group of persons or entities acting in concert, that are not
Affiliates of the Buyer acquire more than fifty percent (50%) of the voting
equity securities or management control of such party, in each case, directly or
indirectly.
 
 
“Change in Control Agreement” has the meaning given in Section 2.21(b).
 
 
“Change Notice” has the meaning given in Section 1.7(c)(i).
 
 
“Claim” shall have the meaning given in Section 11.4(a).
 
 
“Closing” has the meaning given in Section 1.3.
 
 
“Closing Date” has the meaning given in Section 1.3.
 
 
“Closing Deadline” shall have the meaning given in Section 12.1(f).
 
 
“Closing Net Working Capital Calculation” has the meaning given in Section
1.7(c)(i).
 
 
“Closing Taxable Periods” has the meaning given in Section 6.2.
 
 
“Closing Working Capital Statement” has the meaning given in Section 1.7(c)(i).
 
 
“COBRA” shall have the meaning given in Section 2.20(h).
 
 
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
 
 
“Company” has the meaning given in the preamble.
 
 
“Company Assets” has the meaning given in Section 2.18.
 
 
“Company Benefit Plan” has the meaning given in Section 2.20(a).
 
 
 
 

--------------------------------------------------------------------------------

 
“Company Board” means the board of directors of the Company.
 
 
“Company Bylaws” means the bylaws of the Company as in effect on the date of
this Agreement, and as may be amended before the Effective Time.
 
 
“Company Certificate of Incorporation” means the Certificate of Incorporation of
the Company as in effect on the date of this Agreement, and as may be amended
before the Effective Time.
 
 
“Company Common Stock” means the shares of common stock, par value $0.00001 per
share, of the Company.
 
 
“Company Debt Payoff Amount” has the meaning given in Section 1.7(b)(ii).
 
 
“Company D&O Tail Policy” has the meaning given in Section 5.4(b).
 
 
“Company Debt” means with respect to the Company (i) all obligations for
borrowed money or extensions of credit (including all sums due on early
termination and repayment or redemption calculated to the Closing Date and any
bank overdrafts and advances), (ii) all obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations to pay the
deferred purchase price of property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all obligations as lessee
capitalized in accordance with GAAP, (v) all obligations, contingent or
otherwise, directly or indirectly guaranteeing any obligations of any other
Person, (vi) all obligations to reimburse the issuer in respect of letters of
credit or under performance of surety bonds, or other similar obligations, (vii)
all obligations in respect of bankers’ acceptances and under reverse purchase
agreements, (viii) all obligations in respect of futures contracts, swaps, other
financial contracts and other similar obligations (determined on a net basis as
if such contract or obligation was being terminated early on such date), (ix)
all direct or indirect guarantee, support or keep well obligations in respect of
obligations of the kind referred to in clauses (i) through (viii) above, and (x)
all obligations of the kind referred to in clauses (i) through (ix) above
secured by (or for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) any lien on property (including,
without limitation, accounts and Contract rights) owned by the Company, whether
or not the Company has assumed or become liable for the payment of such
obligation.
 
 
“Company Disclosure Schedule” has the meaning given in the introduction to
Section 2.
 
 
“Company Indemnitees” has the meaning given in Section 5.4(a).
 
 
“Company Intellectual Property” has the meaning given in Section 2.16(a)(ii).
 
 
“Company Optionholder Acknowledgment Letter” has the meaning given in Section
1.10(d).
 
 
 

--------------------------------------------------------------------------------

 
 
“Company Options” means options to acquire shares of the Company Common Stock
issued pursuant to the ThingWorx, Inc. Amended and Restated 2011 Equity and
Compensation Plan.
 
 
“Company Owned Intellectual Property” has the meaning given in Section 2.16(a).
 
 
“Company Preferred Stock” means the preferred stock, par value $0.00001 per
share, of the Company.
 
 
“Company Products” has the meaning given in Section 2.16(a)(iv).
 
 
“Company Securities” means the Company Stock, the Company Options and the SVB
Warrant.
 
 
“Company Series A Stock” means the shares of Series A Preferred Stock, par value
$0.00001 per share, of the Company.
 
 
“Company Series B Stock” means the shares of Series B Preferred Stock, par value
$0.00001 per share, of the Company.
 
 
“Company Series C Stock” means the shares of Series C Preferred Stock, par value
$0.00001 per share, of the Company.
 
 
“Company Stock” means the shares of capital stock of the Company of all classes
and series.
 
 
“Company Stock Letter of Transmittal” shall have the meaning given in
Section 1.11(b)(i).
 
 
“Confidentiality Agreement” means the Mutual Confidentiality Agreement, dated as
of March 20, 2013, by and between the Company and the Buyer.
 
 
“Consent” means any filing with, notice to, or approval, consent or waiver of
any Governmental Entity or any other Person.
 
 
“Contest” shall have the meaning given in Section 6.4(a).
 
 
“Continuing Employees” shall mean those employees of the Company who remain
employed with the Buyer or the Surviving Corporation, as the case may be,
immediately following the Closing.
 
 
“Contracts” has the meaning given in Section 2.13(a).
 
 
“Covered Area” has the meaning given in Section 4.7(b).
 
 
“Covered Business” has the meaning given in Section 4.7(b).
 
 
“Covered Entity” has the meaning given in Section 4.7(b).
 
 
 

--------------------------------------------------------------------------------

 
 
“DFARS” has the meaning given in Section 2.16(w).
 
 
“DGCL” has the meaning given in the recitals.
 
 
“Dissenting Shares” and “Dissenting Stockholder” have the respective meanings
given in Section 1.12.
 
 
“Dissenting Share Payments” means (x) any payment in respect of Dissenting
Shares in excess of the consideration that otherwise would have been payable in
respect of such shares in accordance with this Agreement, and (y) any costs or
expenses (including reasonable attorneys’ fees, costs and expenses in connection
with any action or proceeding or in connection with any investigation) in
respect of Dissenting Shares.
 
 
“Earn-Out Acceleration Event” has the meaning given in Section 1.8(f).
 
 
“Earn-Out Calculation” has the meaning given in Section 1.8(b).
 
 
“Earn-Out Consideration” shall mean the amount, if any, determined pursuant to
Schedule 1.8, provided that in no event shall the aggregate Earn-Out
Consideration exceed Eighteen Million Dollars ($18,000,000.00).
 
 
“Earn-Out Objection” has the meaning given in Section 1.8(c).
 
 
“Earn-Out Period” has the meaning given in Schedule 1.8.
 
 
“Effective Time” has the meaning given in Section 1.4.
 
 
“Employee” means any current, former, or retired employee, officer, manager, or
director of the Company.
 
 
“Employee Benefit Plan” shall have the meaning given in Section 2.20(a).
 
 
“Employee Bonus” means the amounts specified on Schedule 1.1(C) payable by the
Company to the persons specified on such schedule.
 
 
“Encryption Functionality” has the meaning given in Section 2.16(p).
 
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
 
“ERISA Affiliate” shall have the meaning given in Section 2.20(a).
 
 
“Escrow Agent” means BNY Mellon, National Association, a national banking
association.
 
 
“Escrow Agreement” means an escrow agreement by and among the Buyer, the
Securityholders’ Representative and the Escrow Agent in substantially the form
of Exhibit A hereto.
 
 
 
 

--------------------------------------------------------------------------------

 
“Escrow Amount” means $11,000,000.
 
 
“Estimated Closing Working Capital Statement” has the meaning given in Section
1.7(b)(i).
 
 
“Estimated Company Debt” means the Company Debt estimated as of 11:59 PM Eastern
time on the Closing Date, without given effect to the consummation of the
Transactions, as set forth in the Allocation Certificate, which shall include
the Assumed Debt Amount.
 
 
“Estimated Net Working Capital” means Net Working Capital estimated as of 11:59
PM Eastern time on the Closing Date, as set forth in the Allocation Certificate.
 
 
“Expense Fund” means an amount equal to $250,000.
 
 
“FAR” has the meaning given in Section 2.16(w).
 
 
“Final Adjustment Amount” has the meaning given in Section 1.7(c)(ii).
 
 
“Financial Statements” has the meaning given in Section 2.6(b).
 
 
“Foreign Plan” means any plan, fund (including, without limitation, any
superannuation fund) or other similar program for the benefit of employees of
the Company or such Subsidiaries residing outside the United States, which plan,
fund or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment.
 
 
“Founder” or “Founders” has the meaning given in the preamble.
 
 
“Fully Diluted Shares Outstanding” means the sum of (i) the aggregate number of
shares of the Company Stock issued and outstanding at the Effective Time on an
as converted to Company Common Stock basis plus, without duplication, (ii) the
aggregate number of shares issued and outstanding, vested or unvested, under the
Company Equity Plan immediately before the Effective Time, plus, without
duplication (iii) the aggregate number of shares of the Company Stock issuable
upon conversion, vesting or exercise of the SVB Warrant on an as converted to
Company Common Stock basis.
 
 
“Fundamental Representations” has the meaning given in Section 11.1(a).
 
 
“GAAP” means generally accepted accounting principles in the United States of
America.
 
 
“Governmental Entity” means any foreign, federal, state, local or other court or
governmental, regulatory or administrative agency, body or authority.
 
 
“HIPAA” shall have the meaning given in Section 2.17(b).
 
 
“including” means “including but not limited to”.
 
 
 

--------------------------------------------------------------------------------

 
 
“Indemnifier” shall have the meaning given in Section 11.4(a).
 
 
“Indemnified Party” has the meaning given in Section 11.4(a).
 
 
“Independent Accountant” means Grant Thornton LLP.
 
 
“Insurance Policies” has the meaning given in Section 2.22.
 
 
“Interim Balance Sheet” has the meaning given in Section 2.6(a).
 
 
“Interim Balance Sheet Date” has the meaning given in Section 2.6(a).
 
 
“Interim Financials” has the meaning given in Section 2.6(a).
 
 
“Intellectual Property” has the meaning given in Section 2.16(a)(i).
 
 
“IP Indemnity Cap” means $22,000,000.
 
 
“IP Licenses” has the meaning given in Section 2.16(c).
 
 
“IP Representation” has the meaning given in Section 11.1(a).
 
 
“IRS” means the United States Internal Revenue Service.
 
 
“Knowledge” with respect to the Company means the knowledge of Russell Fadel,
Richard Bullotta, John Richardson and Daniel Zebrowski, after reasonable due
inquiry of any employees of the Company who would reasonably be expected to have
information about the matter in question in light of such employee’s employment
position with the Company.
 
 
“Law” means any United States or foreign federal, national, state, local or
other Governmental Entity Law, statute, ordinance, rule, order, regulation,
writ, injunction, directive, order, judgment, administrative interpretation,
treaty, decree, administrative or judicial decision and any other executive,
legislative, regulatory or administrative proclamation, and any amendment,
extension or re-enactment of any of the foregoing.
 
 
“Letter of Transmittal” shall mean the Company Stock Letter of Transmittal, SVB
Letter of Transmittal or the Company Optionholder Acknowledgment Letter, as
applicable.
 
 
“Liquidation Preference” shall mean the Series A Liquidation Preference, Series
B Liquidation Preference or Series C Liquidation Preference, as applicable.
 
 
“Liabilities” means any liabilities of any nature, whether accrued, absolute,
contingent or otherwise (including, liabilities as guarantor or otherwise with
respect to obligations of others, liabilities for taxes due or then accrued or
to become due, and contingent liabilities relating to activities of the Company
or the conduct of its Business, regardless of whether claims in respect thereof
have been asserted).
 
 
 
 

--------------------------------------------------------------------------------

 
“Lien” means any lien, charge, security interest, condition, restriction,
mortgage, pledge, community property interest, right of first refusal, option,
easement, reservation, tenancy, or any other encumbrance whatsoever.
 
 
“Loss” means, as to any Person, any actual claim, loss, royalty, liability,
damage, deficiency, Tax, diminution in value, interest and penalty, cost or
expense (including, without limitation, interest and penalties imposed or
assessed by any judicial or administrative body or arbitrator and reasonable
attorneys’, accountants’, or other experts’ or advisors’ fees and expenses),
whether arising out of Third-Party Claims or otherwise incurred, and including
all amounts paid in investigation, defense or settlement of the foregoing.  Any
calculation of Losses will not use “multiple of profits” or “multiple of cash
flow” or any similar valuation methodology in calculating the amount of any
Losses in the nature of “lost profits”.
 
 
“Made available” means posted to the virtual data room populated by the Company
and to which the Buyer has access prior to the date hereof.
 
 
“Majority Holders” has the meaning given in Section 13.13(g).
 
 
“Material Adverse Effect” means a material adverse effect on (i) the business,
assets, financial condition or results of operations of the Company and its
respective Subsidiaries, taken as a whole or (ii) the ability of the Company to
consummate the Merger and the other Transactions, in each case, other than any
changes, effects or circumstances reasonably attributable to, either alone or in
combination:  (A) economic conditions generally in the United States or in any
foreign jurisdiction in which the Company has material operations; (B)
conditions generally affecting the industries in which the Company participates;
(C) changes, after the date hereof, in applicable Law; (D) geopolitical
conditions, the outbreak or escalation of hostilities, any acts of war, sabotage
or terrorism, or any escalation or worsening of any such acts of war, sabotage
or terrorism threatened or underway as of the date hereof; (E) any natural
disaster or acts of God; (F) changes, after the date hereof, in GAAP as
applicable to the Company; and (G) public announcement of the entering into this
Agreement or the pendency of the Transactions; provided, that with respect to
each of clauses (A), (B), (C) and (F), such changes, effects or circumstances do
not have a disproportionate effect (relative to other industry participants) on
the Company.
 
 
“Material Contracts” has the meaning given in Section 2.13(a).
 
 
“Merger” has the meaning given in the recitals.
 
 
“Merger Consideration” has the meaning given in Section 1.7(a).
 
 
“Merger Sub” has the meaning given in the preamble.
 
 
“Most Favored Customer Provision” means a provision in a contract or other
agreement that would customarily be referred to as a “most favored customer,”
“most favored nation,” or “most favored pricing” provision, including any
provision wherein the Company (i) warrants that the Company is not selling or
licensing (or has not sold or licensed) products and/or services to any other
customer or group of customers at prices or on other terms better than the
pricing or terms being offered to the customer under such contract or (ii)
covenants that, if the
 
 
 

--------------------------------------------------------------------------------

 
Company enters into an agreement with any other customer providing such other
customer with more favorable pricing or other terms than the terms under such
contract, the pricing or other terms under such contract will be made equivalent
to or more favorable than such other customer’s more favorable agreement, or any
provision having an effect similar to that of clause (i) or (ii) above.
 
 
“Net Working Capital” means with respect to the Company  (i) inventory, accounts
receivable, prepaid expenses and other current assets (excluding deferred tax
assets) as of 11:59 PM Eastern time on the Closing Date (net of all applicable
reserves), minus (ii) the accounts payable, the amount by which cash and
equivalents is less than $0.00, accrued expenses, accrued Taxes and other
current liabilities (excluding deferred income tax liabilities) of the Company
as of 11:59 PM Eastern time on the Closing Date.  For the avoidance of doubt,
(i) accrued Taxes will reflect the anticipated deduction of Employee Bonuses and
Merger Consideration payable in respect of the Company Options; and (ii) cash
and cash equivalents shall include deposits in transit and outstanding checks or
other withdrawals which have not cleared the depository institution as of the
Closing.  The Closing Working Capital shall be determined in accordance with
GAAP without giving effect to the consummation of the Transactions; provided,
however, that current liabilities shall (i) include (A) all deferred revenues
(including non-current deferred revenues) of the Company (determined in
accordance with GAAP), (B) all accrued but unpaid vacation, holiday and other
paid time off, and (C) all other liabilities required to be accrued in
accordance with GAAP to the extent not paid prior to the Closing, and (ii)
exclude (A) all Company Debt, (B) the employer portion of employment Taxes with
respect to Employee Bonuses and Merger Consideration payable at Closing in
respect of the Company Options, (C) Transaction Expenses and (D) Employee
Bonuses.  Attached hereto as Schedule 1.1(A) is a calculation of Net Working
Capital as though November 30, 2013 were the Closing Date.
 
 
“Net Working Capital Adjustment Amount” means (i) the amount by which Net
Working Capital is a greater negative amount than negative $960,000.00 or (ii)
the amount by which Net Working Capital is greater than $0.00.
 
 
“Noncompetition Period” has the meaning given in Section 4.7(b).
 
 
“Open Source Material” means any and all software or other material that (a) is
distributed as “free software”, “open source software” or under a similar
licensing or distribution model, including, but not limited to, the GNU General
Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public
License (MPL), the Artistic License (e.g., PERL); the Netscape Public License;
the Sun Community Source License (SCSL); the Sun Industry Standards License
(SISL), or any other license described by the Open Source Initiative as set
forth on www.opensource.org; or (b) requires as a condition of use, modification
and/or distribution of such software or material that such software or material
or other software or material incorporated into, derived from or distributed
with such software or material (i) be disclosed or distributed in source code
form, (ii) be licensed for the purpose of making derivative works, or (iii) be
redistributable at no charge.
 
 
 
 

--------------------------------------------------------------------------------

 
“Order” means any consent, decree, injunction, judgment, order, ruling,
assessment or writ of any Governmental Entity or arbitration tribunal (in each
case, whether final or preliminary).
 
 
“Paying Agent” shall have the meaning given in Section 1.11(a).
 
 
“Paying Agent Agreement” shall have the meaning given in Section 1.11(a).
 
 
“Payoff Letter” shall have the meaning given in Section 9.11.
 
 
“PBGC” has the meaning given in Section 2.20(e).
 
 
“Permits” has the meaning given in Section 2.11(b).
 
 
“Permitted Liens” has the meaning given in Section 2.18.
 
 
“Per Share Closing Consideration” means an amount equal to the quotient obtained
by dividing (x) the Cash Purchase Price, as such may be adjusted as set forth
herein, plus the Aggregate Exercise Amount by (y) the Fully Diluted Shares
Outstanding.
 
 
“Per Share Merger Consideration” means an amount equal to the quotient obtained
by dividing (x) the Merger Consideration, as such may be adjusted as set forth
herein, by (y) the Fully Diluted Shares Outstanding.
 
 
“Per Share Net Closing Consideration” means, with respect to each share of
Company Stock issued and outstanding at the Effective Time, the Per Share
Closing Consideration net of the Pro Rata Share of the Escrow Amount and Expense
Fund with respect to such share.
 
 
“Per Company Option Closing Consideration” means on a per share basis in respect
of a Company Option, an amount equal to the Per Share Closing Consideration
minus the exercise price in respect of such Company Option.
 
 
“Per Company Option Merger Consideration” means on a per share basis in respect
of a Company Option, an amount equal to the Per Share Merger Consideration minus
the exercise price in respect of such Company Option.
 
 
“Per Company Option Net Closing Consideration” means on a per share basis in
respect of a Company Option, an amount equal to the Per Share Net Closing
Consideration minus the exercise price in respect of such Company Option.
 
 
 “Person” means any individual, company, partnership, joint venture,
corporation, limited liability company, trust, unincorporated organization,
group, Governmental Entity or other entity.
 
 
“Personal Information” has the meaning given in Section 2.17(a).
 
 
 
 

--------------------------------------------------------------------------------

 
“Post-Closing Company Debt Calculation” has the meaning given in
Section 1.7(c)(i).
 
 
“Post-Closing Net Working Capital Calculation” has the meaning given in
Section 1.7(c)(i).
 
 
“Pre-Closing Taxable Periods” shall have the meaning given in Section 6.2.
 
 
“Pro Rata Share” means, with respect to each Securityholder, the quotient
obtained by dividing (i) the amount of the Cash Purchase Price payable hereunder
to such Securityholder by (ii) the total amount of the Cash Purchase Price
payable hereunder to all Securityholders.
 
 
“Purchase Rights” shall have the meaning given in Section 2.2(b).
 
 
“Representative Expenses” shall have the meaning given in Section 13.13(e).
 
 
“Required Consents” means the Consents and notices listed on Schedule 1.1(B).
 
 
“Retention Bonus Amount” means the bonus payments set forth on Schedule 1.1(D).
 
 
“Securityholders” means, collectively, the Stockholders, the holder of the SVB
Warrant and the holders of the Company Options, in each case, as of immediately
prior to the Effective Time.
 
 
“Securityholders’ Representative” means the person or persons appointed as the
Securityholders’ Representative from time to time pursuant to Section 13.13(a).
 
 
“Series A Liquidation Preference” shall mean $2.00 plus any declared but unpaid
dividends (as adjusted for stock splits, reverse stock splits, stock dividends,
reorganizations, reclassifications, recapitalizations and other like changes).
 
 
“Series B Liquidation Preference” shall mean $5.79 plus any declared but unpaid
dividends (as adjusted for stock splits, reverse stock splits, stock dividends,
reorganizations, reclassifications, recapitalizations and other like changes).
 
 
“Series C Liquidation Preference” shall mean $6.599 plus any declared but unpaid
dividends (as adjusted for stock splits, reverse stock splits, stock dividends,
reorganizations, reclassifications, recapitalizations and other like changes).
 
 
“Stockholder Approval” has the meaning given in Section 4.3(a).
 
 
“Stockholders” means the holders of the Company Stock or, following the
Effective Time, the holders of the Company Stock immediately before the
Effective Time.
 
 
“Subsidiary” means any corporation or other organization, whether incorporated
or unincorporated, of which (i) at least 25% of the securities or other
interests having by their
 
 
 
 

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terms (A) ordinary voting power to elect a majority of the board of directors or
others performing similar functions with respect to such corporation or other
organization or (B) the right to appoint the manager, general partner, or other
person(s) controlling the management of such organization are directly or
indirectly owned or controlled by the Company or by any one or more of its
Subsidiaries, or by the Company and one or more of its Subsidiaries or (ii) the
Company or any other Subsidiary of the Company is a general partner or managing
member.
 
 
“Surviving Corporation” has the meaning given in Section 1.2.
 
 
“SVB” means Silicon Valley Bank.
 
 
“SVB Letter of Transmittal” shall have the meaning given in Section 1.11(b)(ii).
 
 
“SVB Warrant” means that certain warrant issued to SVB, dated as of November 23,
2011.
 
 
“SVB Warrant Closing Consideration” means an amount equal to the product of (a)
the maximum number of shares of the Company Series B Stock issuable pursuant to
the SVB Warrant multiplied by (b) the remainder of (x) the Per Share Closing
Consideration, minus (y) the per share exercise price provided for in the SVB
Warrant.
 
 
“SVB Warrant Merger Consideration” means an amount equal to the product of (a)
the maximum number of shares of the Company Series B Stock issuable pursuant to
the SVB Warrant multiplied by (b) the remainder of (x) the Per Share Merger
Consideration, minus (y) the per share exercise price provided for in the SVB
Warrant.
 
 
“SVB Warrant Net Closing Consideration” means an amount equal to the product of
(a) the maximum number of shares of the Company Series B Stock issuable pursuant
to the SVB Warrant multiplied by (b) the remainder of (x) the Per Share Net
Closing Consideration, minus (y) the per share exercise price provided for in
the SVB Warrant.
 
 
“Tax” or “Taxes” means any and all United States federal, state or local, or
foreign, taxes, charges, fees, duties, levies, deficiencies or other assessments
of whatever kind or nature, including all net income, gross income, profits,
capital stock, capital gains, gross receipts, alternative or add-on minimum,
excise, value added, real or personal property, sales, ad valorem, withholding,
social security, social insurance, retirement, escheat, employment,
unemployment, estimated, severance, stamp, property, occupation, environmental,
goods and services, windfall profits, use, service, net worth, payroll,
franchise, license, gains, customs, transfer, recording and other taxes, fees,
assessments or charges of any kind whatsoever, imposed by any taxing authority,
including any liability therefor for a predecessor entity or as a transferee
under Section 6901 of the Code or any similar provision of applicable federal,
state, local or foreign Law, as a result of U.S. Treasury Regulation §1.1502-6
or any similar provision of federal, state, local or foreign applicable Law, or
as a result of any Tax sharing or similar agreement, together with any interest,
penalties or additions to tax relating thereto.
 
 
“Tax Return” means any return, declaration, report, claim for refund,
information return, or statement, and any schedule, attachment, or amendment
thereto, including
 
 
 

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any consolidated, combined or unitary return or other document and any schedule,
attachment or amendment thereto filed, supplied or required to be filed or
supplied by any taxing authority in connection with the determination,
assessment, collection, imposition, payment, refund or credit of any federal,
state, local or foreign Tax or the administration of the Laws relating to any
Tax.
 
 
“Termination Fee” has the meaning given in Section 12.2.
 
 
“Third-Party Claim” has the meaning given in Section 11.4(a).
 
 
“Transaction Expenses” means any paid or accrued and unpaid expenses of the
Company relating to the negotiation and consummation of Agreement, the Ancillary
Agreements, the Merger and the other Transactions, including, without
limitation, fees and expenses of brokers, financial advisers, legal counsel and
accountants (other than any such expenses incurred after the Closing Date).
 
 
“Transactions” means the Merger and the other transactions contemplated by this
Agreement and the Ancillary Agreements.
 
 
“Unaudited Financial Statements” has the meaning given in Section 2.6(b).
 
 
1.2 The Merger.  Upon the terms and subject to the conditions hereof, and in
accordance with the DGCL, at the Effective Time, the Merger Sub shall be merged
with and into the Company and the separate corporate existence of the Merger Sub
shall cease.  Following the Merger, the Company shall continue as the surviving
corporation (sometimes referred to herein as the “Surviving Corporation”).  The
Merger shall have the effects provided in this Agreement and the applicable
provisions of the DGCL.
 
 
1.3 Closing.  Subject to the satisfaction or written waiver of the conditions
set forth in Sections 8 (Conditions to Each Party’s Obligation to Close), 9
(Conditions to the Obligation of the Buyer and the Merger Sub to Close) and 10
(Conditions to Company’s Obligation to Close), the closing of the Transactions
(the “Closing”) shall take place at the offices of Choate, Hall & Stewart LLP on
such date and at such time as the parties may agree, but not later than the
second (2nd) Business Day after the satisfaction or written waiver of the
conditions set forth in Sections 8 (Conditions to Each Party’s Obligation to
Close), 9 (Conditions to the Obligation of the Buyer and the Merger Sub to
Close) and 10 (Conditions to Company’s Obligation to Close), other than those
conditions that are to be satisfied at the Closing (the “Closing Date”).  At the
Closing, the parties shall (a) deliver to each other the various certificates,
instruments and other deliveries required to be made at Closing under this
Agreement, (b) execute a certificate of merger (the “Certificate of Merger”) in
accordance with the DGCL, (c) cause the Certificate of Merger to be filed with
the Secretary of State of Delaware in accordance with the DGCL, and (d) take all
such further actions as may be required or appropriate to make the Merger
effective.
 
 
1.4 Effective Time.  The Merger shall be effective at such time as the
Certificate of Merger is duly filed with the Secretary of State of Delaware or
at such later time as is specified in the Certificate of Merger (the “Effective
Time”).
 
 
 

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1.5 Certificate of Incorporation and Bylaws.  The Certificate of Incorporation
of the Merger Sub, as in effect immediately before the Effective Time, shall be
the certificate of incorporation of the Surviving Corporation until thereafter
amended.  The bylaws of the Merger Sub, as in effect immediately before the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended.
 
 
1.6 Directors and Officers.  The directors and officers of the Merger Sub
immediately before the Effective Time shall be the directors and officers of the
Surviving Corporation immediately after the Effective Time, each to hold office
in accordance with the Surviving Corporation’s Certificate of Incorporation and
Bylaws.
 
 
1.7 Merger Consideration.
 
 
(a) Merger Consideration.  The aggregate consideration to be paid by the Buyer
in respect of the Merger (the “Merger Consideration”) shall be an amount equal
to the Cash Purchase Price plus the Aggregate Exercise Amount plus the right to
receive the Earn-Out Consideration, if any, calculated in accordance with and
pursuant to Section 1.8 (Earn-Out) and Schedule 1.8.  For purposes of this
Agreement, the “Cash Purchase Price” shall be an amount equal to (A) the Base
Cash Purchase Price, minus (B) the Company Debt Payoff Amount, plus (C) the
Assumed Debt Amount, minus (D) the amount of any Transaction Expenses not
otherwise paid as of immediately prior to the Effective Time, plus or minus (E)
the Net Working Capital Adjustment Amount, as applicable, minus (F) the
aggregate amount of Employee Bonuses, minus (G) the employer portion of
employment taxes with respect to Employee Bonuses and the Merger Consideration
payable at Closing in respect of the Company Options.  The Merger Consideration
shall be subject to adjustment in accordance with Section 1.7(c) (Post-Closing
True-Up).
 
 
(b) Allocation Certificate.  At least two (2) Business Days prior to the Closing
Date, the Company shall deliver to the Buyer a certificate (the “Allocation
Certificate”) signed by the Chief Executive Officer of the Company certifying as
to the accuracy and completeness, in each case as of the Closing, of:
 
 
(i) a statement (the “Estimated Closing Working Capital Statement”) of the
Estimated Net Working Capital of the Company, as of 11:59 PM Eastern time on the
Closing Date, and the Net Working Capital Adjustment Amount based thereon, which
Estimated Closing Working Capital Statement shall be prepared in accordance with
GAAP, without giving effect to the consummation of the Transactions and subject
to the adjustments specified in the definition of Net Working Capital; attached
as Schedule 1.1(A), is a calculation of Net Working Capital as though November
30, 2013 were the Closing Date;
 
 
(ii) (A) the Estimated Company Debt not paid as of immediately prior to the
Effective Time, including a description and amount for each element thereof,
together with payoff letters, in form and substance satisfactory to the Buyer,
indicating
 
 
 

--------------------------------------------------------------------------------

 
 
the amount necessary to discharge in full such Company Debt at Closing (the
“Company Debt Payoff Amount”) and, if such Company Debt is secured, an
undertaking by such holder to discharge at Closing any Liens securing such
Company Debt, and (B) the Company’s estimate of Transaction Expenses not paid as
of immediately prior to the Effective Time, including a description and amount
for each element thereof;
 
 
(iii) the Company’s calculation of (A) the Cash Purchase Price; (B) in respect
of each share of the Company Stock, the Per Share Merger Consideration, the Per
Share Closing Consideration and the Per Share Net Closing Consideration; (C) in
respect of each Company Option, the Per Company Option Merger Consideration, the
Per Company Option Closing Consideration and the Per Company Option Net Closing
Consideration; (D) in respect of the SVB Warrant, the SVB Warrant Merger
Consideration, the SVB Warrant Closing Consideration and the SVB Warrant Net
Closing Consideration; (E) the Fully Diluted Shares Outstanding, and (F) each
Securityholder’s Pro Rata Share of the Escrow Amount and Expense Fund expressed
as a percentage; and
 
 
(iv) (A) the identity and mailing address of each record holder of the Company
Securities, and (B) wire instructions for the Company.
 
 
The Company shall give the Buyer timely access to all supporting records and
work papers used in preparation of the Estimated Closing Working Capital
Statement and the Allocation Certificate, which, when approved by the Buyer,
shall be used for purposes of the payments to be made at Closing, though remain
subject to adjustment pursuant to Section 1.7(c) (Post-Closing True-Up).
 
 
(c) Post-Closing True-Up.
 
 
(i) Within ninety (90) days after the Closing Date, the Buyer shall provide to
the Securityholders’ Representative a statement of Net Working Capital,
Transaction Expenses and the Company Debt of the Company as of 11:59 PM Eastern
time on the Closing Date, without giving effect to the consummation of the
Transactions (the “Closing Working Capital Statement”), which Closing Working
Capital Statement shall be prepared in accordance with GAAP, without giving
effect to the consummation of the Transactions and subject to the adjustments
specified in the definition of Net Working Capital, and include the Buyer’s
calculation of (A) the Company Debt (the “Post-Closing Company Debt
Calculation”), (B) the Net Working Capital (the “Post-Closing Net Working
Capital Calculation”), and (C) the Transaction Expenses.  The Buyer will make
available at the Securityholders’ Representative’s reasonable request all
records and work papers used in calculating such amounts.  If the
Securityholders’ Representative disagrees with either the Post-Closing Company
Debt Calculation, the Post-Closing Net Working Capital Calculation or the amount
of the Transaction Expenses, the Securityholders’ Representative may provide a
written notice of proposed changes to any such calculation (a “Change Notice”)
to the Buyer within forty five (45) days after the receipt of the Closing
Working Capital Statement (and in the event no Change Notice is provided during
such period, the Securityholders’ Representative will be deemed to have agreed
to and accepted each such calculation as of the end of such
 
 
 

--------------------------------------------------------------------------------

 
 
period).  The Buyer shall promptly cooperate with the Securityholders’
Representative in providing such information as the Securityholders’
Representative reasonably requests in connection with the review of the Closing
Working Capital Statement.  If the Securityholders’ Representative provides a
Change Notice to the Buyer within such period, the amount of the Company Debt,
Net Working Capital and Transaction Expenses shall be finally determined in
accordance with the resolution of dispute procedures set forth in Section 1.7(d)
(Resolution of Disputes).
 
 
(ii) Based on the foregoing, the following amount (the “Final Adjustment
Amount”) shall be determined equal to the sum of (A) the Company Debt, as
finally determined, as of immediately prior to the Effective Time minus the
Company Debt Payoff Amount, plus (B) if the Net Working Capital Adjustment
Amount would have been a greater positive amount based on the Net Working
Capital as finally determined, the amount of such change in the Net Working
Capital Adjustment Amount, minus (C) if the Net Working Capital Adjustment
Amount would have been a greater negative amount based on the Net Working
Capital as finally determined, the amount of such change in the Net Working
Capital Adjustment Amount, plus (D) the amount by which the Transaction Expenses
are greater than the Transaction Expenses specified in the Allocation
Certificate, plus (E) the employer portion of employment taxes with respect to
Employee Bonuses and the Merger Consideration payable at Closing in respect of
the Company Options as finally determined minus that amount included in the
Allocation Certificate in respect thereof.  If the Final Adjustment Amount is a
positive number, the Buyer shall be entitled to receive from the Escrow Amount
such Final Adjustment Amount.  In such event, the Buyer and the Securityholders’
Representative shall execute and deliver to the Escrow Agent disbursement
instructions for the Final Adjustment Amount in accordance with the Escrow
Agreement.  If the Final Adjustment Amount is a negative number, the Buyer shall
pay to the Paying Agent the Stockholders’ and SVB’s aggregate Pro Rata Share of
the Final Adjustment Amount for payment to the Stockholders and SVB in
accordance with their respective Pro Rata Shares, and shall pay the remaining
portion of the Final Adjustment Amount to the Surviving Corporation for payment
to the former holders of the Company Options in accordance with their respective
Pro Rata Shares.
 
 
(d) Resolution of Disputes.  The Buyer and the Securityholders’ Representative
will attempt in good faith promptly to resolve any differences with respect to
the calculations under Section 1.7(c) (Post-Closing True-Up) that are raised
within the applicable period.  If the Buyer and the Securityholders’
Representative resolve their disagreement, they shall set forth the agreement in
a written document executed by the Buyer and the Securityholders’ Representative
and such written document shall be deemed final and binding for all purposes of
this Agreement.  If they are unable to resolve any differences within thirty
(30) days after timely delivery of an applicable Change Notice, such remaining
differences will be submitted to an Independent Accountant for prompt
determination.  The Independent Accountant will determine those matters in
dispute and will render a written report as to the disputed matters, which
report shall be conclusive and binding upon the parties.  The fees and expenses
of the Independent Accountant shall initially be borne fifty percent (50%) by
the Securityholders and fifty percent (50%) by the Buyer; provided, that upon
resolution of the dispute by the Independent Accountant, the prevailing party,
if any, as determined by the
 
 
 

--------------------------------------------------------------------------------

 
 
Independent Accountant, shall be entitled to be reimbursed in proportion to the
amount by which the other party’s determinations of the items in dispute
differed from the amount determined by the Independent Accountant.  Such amount
shall be determined by the Independent Accountant.  Any fees and expenses of the
Independent Accountant to be paid by the Securityholders will be paid out of the
Escrow Amount, and the Buyer and the Securityholders’ Representative shall
execute and deliver to the Escrow Agent disbursement instructions for the amount
of such fees and expenses to be paid by the Securityholders from the Escrow
Amount pursuant to the Escrow Agreement.
 
 
(e) No Impairment of Other Rights.  The Allocation Certificate (and the
agreement thereto) and the determination of the Final Adjustment Amount under
this Section 1.7 shall not impair any other rights of a party under this
Agreement, including, without limitation, any rights to indemnification.
 
 
1.8 Earn-Out.  The following provisions shall apply with respect to the Earn-Out
Consideration, if any:
 
 
(a) Ongoing Reporting.  As soon as practical following the conclusion of each
fiscal quarter of Buyer during the Earn-Out Period, Buyer shall deliver to the
Founders and the Securityholders’ Representative a report that contains the
principal metrics related to the Earn-Out Consideration with respect to such
preceding fiscal quarter.
 
 
(b) Calculation of Earn-Out.  The amount of the Earn-Out Consideration, if any,
shall be calculated in accordance with and pursuant to Schedule 1.8 hereto.  As
soon as practical following the conclusion of the fiscal first quarter of
Buyer’s fiscal year 2015 and quarterly thereafter during the Earn-Out Period,
and in any event not later than ninety (90) days after such dates, the Buyer
shall prepare a calculation of the amount of the Earn-Out Consideration (the
“Earn-Out Calculation”), if any, payable with respect to the Earn-Out Period,
and shall deliver a copy of the Earn-Out Calculation with reasonable back-up
data and a statement showing the method of computing the applicable Earn-Out
Consideration, if any, to the Securityholders’ Representative.  The Buyer and
the Surviving Corporation shall keep complete and accurate records in sufficient
detail to enable the Securityholders’ Representative to calculate and determine
the Earn-Out Consideration, whether or not the Earn-Out Consideration for the
Earn-Out Period was earned.
 
 
(c) Earn-Out Consideration Disputes.  If the Securityholders’ Representative
disagrees with the Earn-Out Calculation, the Securityholders’ Representative
shall notify the Buyer in writing in reasonable detail of the Securityholders’
Representative and the basis therefor within thirty (30) days after receipt of
such Earn-Out Calculation (the “Earn-Out Objection”).  If the Earn-Out Objection
is not received by the Buyer within such period, the Earn-Out Calculation
prepared by the Buyer shall be deemed final and binding for all purposes of this
Agreement and the amount of any Earn-Out Consideration shall be paid by the
Buyer within five (5) Business Days following such thirty (30) day period.  If
the Buyer does receive an Earn-Out Objection within such period, the Buyer and
the Securityholders’ Representative shall attempt in good faith to promptly
resolve any differences within thirty (30) days after timely delivery of an
Earn-Out Objection.  If the Buyer and the Securityholders’ Representative
resolve their disagreement, they shall set forth the agreement in a written
document executed by the
 
 
 

--------------------------------------------------------------------------------

 
Buyer and the Securityholders’ Representative and such written document shall be
deemed final and binding for all purposes of this Agreement.  If the Buyer and
the Securityholders’ Representative are unable to resolve their disagreement
within such period, any remaining differences will be submitted to an
Independent Accountant for prompt determination.  The Independent Accountant
will be instructed by the Buyer and the Securityholders’ Representative to
determine those matters in dispute and render a written report as to the
disputed matters within thirty (30) days of such submission, which report shall
be conclusive and binding upon the parties.  The fees and expenses of the
Independent Accountant shall initially be borne fifty percent (50%) by the
Securityholders and fifty percent (50%) by the Buyer; provided, that upon
resolution of the dispute by the Independent Accountant, the prevailing party,
if any, as determined by the Independent Accountant, shall be entitled to be
reimbursed in proportion to the amount by which the other party’s determinations
of the items in dispute differed from the amount determined by the Independent
Accountant.  Such amount shall be determined by the Independent Accountant.  Any
fees and expenses of the Independent Accountant to be paid by the
Securityholders will first be paid out of the Escrow Amount, and the Buyer and
the Securityholders’ Representative shall execute and deliver to the Escrow
Agent disbursement instructions for the amount of such fees and expenses to be
paid by the Securityholders from the Escrow Amount pursuant to the Escrow
Agreement.  Earn-Out Consideration as finally determined by the Independent
Accountant shall be paid promptly upon delivery of the Independent Accountant’s
written report with interest accruing from the tenth (10th) Business Day
following such delivery in an amount equal to the lesser of the prime rate
reported in the Wall Street Journal on such date, or the maximum rate permitted
by applicable Law.
 
 
(d) Payment.  Subject to Section 11.5(d) (Set-Off), the Buyer shall pay the
Stockholders’ and SVB’s aggregate Pro Rata Share of the applicable Earn-Out
Consideration, if any, no later than the tenth (10th) Business Day after the
final resolution of the applicable Earn-Out Consideration pursuant to Section
1.8(c) (Earn-Out Consideration Disputes), by wire transfer of immediately
available funds to the Paying Agent for payment to the Stockholders and SVB, and
shall pay the remaining portion of such Earn-Out Consideration to the Surviving
Corporation for payment to the former holders of the Company Options, in each
case, in accordance with their respective Pro Rata Share no later than the tenth
(10th) Business Day after the final resolution of the applicable Earn-Out
Consideration pursuant to Section 1.8(c) (Earn-Out Consideration Disputes).
 
 
(e) Contract Right Only.  The right to receive the Earn-Out Consideration, if
any, payable pursuant to this Agreement is a contract right only and no
certificate evidencing such right shall be issued.  The right to receive the
Earn-Out Consideration, if any, payable pursuant to this Agreement shall not be
transferred or assigned and no beneficial interests therein may be pledged,
sold, assigned or transferred by any Securityholder.
 
 
(f) Earn-Out Acceleration Event.  If an Earn-Out Acceleration Event occurs and
if a portion of the Earn-Out Consideration appears reasonably likely to become
payable at the end of the Earn-Out Period, to be estimated by assuming that the
operating results for the immediately preceding three (3) month period would
continue for the remainder of the Earn-Out Period, then a proportionate amount
of the Earn-Out Consideration shall become due and payable immediately upon the
occurrence of any such event as though the Earn-Out Period had concluded upon
the occurrence of the Earn-Out Acceleration Event.  If following the
 
 
 

--------------------------------------------------------------------------------

 
consummation of the Earn-Out Acceleration Event any Earn-Out Consideration
becomes due and payable pursuant to this Agreement, an amount equal to the
Earn-Out Consideration then due and payable less the payment made pursuant to
the immediately preceding sentence shall then be payable to the Securityholders
in accordance with this Agreement.  “Earn-Out Acceleration Event” shall mean the
occurrence of any one of the following events prior to the conclusion of the
Earn-Out Period (i) the Buyer or the Surviving Corporation undergoes a Change of
Control and the Buyer (or the successor thereto) does not confirm in writing to
honor the terms of this Agreement, such confirmation to be provided no later
than twenty (20) days following the written request by the Securityholders’
Representative to the Buyer for such confirmation; (ii) the Buyer sells,
exclusively licenses or otherwise disposes of, its rights to a material portion
of the Company Products to any third party that is not an Affiliate of the
Buyer; (iii) the Buyer or the Surviving Corporation commences any proceeding in
bankruptcy or for dissolution, liquidation, winding-up, or other relief under
state or federal bankruptcy laws (a “Bankruptcy Proceeding”); (iv) a Bankruptcy
Proceeding is commenced against the Buyer or the Surviving Corporation, or a
receiver or trustee is appointed for the Buyer or the Surviving Corporation or a
substantial part of their respective property, and such proceeding or
appointment is not dismissed or discharged within sixty (60) days after its
commencement; (v) the Buyer or the Surviving Corporation is unable to, or admits
in writing its inability to, pay its debts when they become due and the Buyer
(or the successor thereto) does not confirm in writing to honor the terms of
this Agreement, such confirmation to be provided no later than twenty (20) days
following the written request by the Securityholders’ Representative to the
Buyer for such confirmation; (vi) the Buyer or the Surviving Corporation makes
an assignment for the benefit of creditors, or petitions or applies to any
tribunal for the appointment of a custodian, receiver or trustee for it or a
substantial portion of its assets or has a receiver, custodian or trustee
appointed for all or a substantial portion of its assets, or (vii) the Buyer or
the Surviving Corporation takes any action effectuating, approving or consenting
to any of the foregoing in clauses (iii) to (vi).  For the sake of clarity, the
merger or other roll-up or combination of the Surviving Corporation with the
Buyer or an Affiliate of the Buyer shall not be deemed to be an Earn-Out
Acceleration Event.
 
 
1.9 Effect of the Merger.
 
 
(a) At the Effective Time, by virtue of the Merger and without any action on the
part of the holder of any shares of capital stock of the Merger Sub or the
Company:
 
 
(i) Company Common Stock.  Each share of the Company Common Stock issued and
outstanding immediately before the Effective Time shall be converted into and
represent only the right to receive an amount in cash, without any interest
thereon, equal to the Per Share Merger Consideration.
 
 
(ii) Company Series A Stock.  Each share of the Company Series A Stock issued
and outstanding immediately before the Effective Time shall be converted into
and represent only the right to receive an amount in cash, without any interest
thereon, equal to the Per Share Merger Consideration.
 
 
 
 

--------------------------------------------------------------------------------

 
(iii) Company Series B Stock.  Each share of the Company Series B Stock issued
and outstanding immediately before the Effective Time shall be converted into
and represent only the right to receive an amount in cash, without any interest
thereon, equal to the Per Share Merger Consideration.
 
 
(iv) Company Series C Stock.  Each share of the Company Series C Stock issued
and outstanding immediately before the Effective Time shall be converted into
and represent only the right to receive an amount in cash, without any interest
thereon, equal to the Per Share Merger Consideration.
 
 
(v) Company Options.  Each vested and unvested share issuable pursuant to a
Company Option issued and outstanding immediately before the Effective Time
shall be converted into and represent only the right to receive an amount in
cash, without any interest thereon, equal to the Per Share Merger Consideration
minus the applicable exercise price therefor.
 
 
(vi) SVB Warrant.  The SVB Warrant issued and outstanding immediately before the
Effective Time shall be converted into and represent only the right to receive
an amount in cash, without any interest thereof, equal to the SVB Warrant Merger
Consideration Amount.
 
 
(vii) Cancellation of Treasury Stock.  Each share of the Company Stock held
immediately before the Effective Time by the Company as treasury stock shall be
cancelled and no payment shall be made with respect thereto.
 
 
(b) Cancellation of the Merger Sub Stock.  Each share of common stock, $0.01 par
value per share, of the Merger Sub issued and outstanding immediately before the
Effective Time shall be converted into and thereafter evidence one fully paid
and non-assessable share of common stock of the Surviving Corporation.
 
 
(c) Closing of Transfer Books.  At the Effective Time, the stock transfer books
of the Company shall be closed and no transfer of the Company Securities shall
thereafter be made.  Until surrendered in accordance with Section 1.11 (Exchange
of Certificates) and subject to Section 1.12 (Dissenters Rights), each
Certificate or other evidence of a Company Security shall be deemed from and
after the Effective Time, for all corporate purposes, to evidence only a right
to receive that portion of the Merger Consideration into which the Company
Security shall have been so converted pursuant to this Section 1.9.
 
 
1.10 Payments by the Buyer at Closing.  At the Closing:
 
 
(a) the Buyer shall deliver or cause to be delivered to the holders of the
Company Debt the amount set forth in the respective payoff letters delivered
pursuant to Section 1.7(b)(ii);
 
 
(b) the Buyer shall deliver or cause to be delivered the amounts set forth with
respect to Transaction Expenses specified in the Allocation Certificate;
 
 
 
 

--------------------------------------------------------------------------------

 
(c) the Buyer shall deliver or cause to be delivered to the Company an amount
equal to the aggregate Employee Bonuses and shall cause the Surviving
Corporation, as soon as practicable after the Effective Time, to pay to each
recipient of an Employee Bonus the applicable Employee Bonus;
 
 
(d) the Buyer shall deliver or cause to be delivered to the Paying Agent the sum
of (i) the aggregate Per Share Net Closing Consideration payable to the holders
of shares of the Company Stock in accordance with Section 1.11 (Exchange of
Certificates), and (ii) the aggregate SVB Warrant Net Closing Consideration
payable in respect of the SVB Warrant in accordance with Section 1.11 (Exchange
of Certificates);
 
 
(e) the Buyer shall deliver or cause to be delivered to the Company an amount
equal to the aggregate Per Company Option Net Closing Consideration payable at
Closing to holders of the Company Options and shall cause the Surviving
Corporation, as soon as practicable after the Effective Time, to pay to each
holder of outstanding Company Options, vested or unvested, upon receipt by the
Company of an executed Company Optionholder Acknowledgment Letter in the form
attached as Exhibit B-1 (the “Company Optionholder Acknowledgment Letter”), the
applicable aggregate Per Company Option Net Closing Consideration;
 
 
(f) the Buyer shall deliver to the Escrow Agent the Escrow Amount, to be held in
escrow pursuant to the provisions of the Escrow Agreement to provide for any
payments to the Buyer pursuant to Sections 1.7(c) (Post-Closing True-Up) and
1.7(d) (Resolution of Disputes) and 1.8(c) (Earn-Out Consideration Disputes) and
as security for the Securityholders’ indemnification obligations under Section
11 (Indemnification); and
 
 
(g) the Buyer shall deliver to the Securityholders’ Representative the Expense
Fund to be held pursuant to Section 13.13 (Securityholders’ Representative).
 
 
1.11 Exchange of Certificates.
 
 
(a) Paying Agent.  Prior to the Effective Time, the Buyer and U.S. Bank,
National Association or, if not U.S. Bank, National Association, then a United
States bank, trust company or other party reasonably acceptable to the Company
(the “Paying Agent”), shall enter into a Paying Agent Agreement, substantially
in the form attached hereto as Exhibit C (the “Paying Agent Agreement”).
 
 
(b) Procedures.
 
 
(i) Company Stock.  As soon as practicable after the date hereof, the Buyer
shall send or cause the Paying Agent to send to each holder of record of a
Certificate representing outstanding shares of the Company Stock (i) a letter of
transmittal in the form attached hereto as Exhibit B-2 (the “Company Stock
Letter of Transmittal”) specifying that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates and (ii) instructions for surrendering such Certificate in exchange
for the applicable Per Share Net Closing Consideration for each share of the
Company Stock represented by such Certificate.  
 
 
 

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Upon surrender of a Certificate for cancellation together with such Company
Stock Letter of Transmittal, properly completed and duly executed, and such
other documents as may be required pursuant to such instructions, the Buyer
shall cause the Paying Agent to pay, immediately subsequent to Closing, to each
Stockholder the Per Share Net Closing Consideration that such holder has the
right to receive in respect of the shares of the Company Stock formerly
represented by such Certificate, and the Certificate so surrendered shall
forthwith be canceled.  No interest will be paid or accrued on any portion of
Merger Consideration payable to holders of Certificates.  It shall be a
condition to the right of any person, other than the registered holder of a
Certificate, to receive the Per Share Merger Consideration payable with respect
to each share of the Company Stock represented by such Certificate that (i) the
Certificate be properly endorsed or otherwise be in proper form for transfer and
(ii) the person surrendering such Certificate shall pay the allocable share, as
determined under Section 6.6 (Certain Taxes) of any transfer or other similar
taxes required by reason of the payment of the Merger Consideration to a person
other than such registered holder or shall establish to the satisfaction of the
Buyer that such tax has been paid or is not applicable.  The Buyer shall
instruct the Paying Agreement to make payment of the foregoing consideration,
for any Stockholder who has submitted a Company Stock Letter of Transmittal duly
executed, and the related Certificates, prior to the Closing, by check or, if
wire instructions have been provided, by same day wire transfer, as soon as
practicable but in any event within one (1) Business Day after the Effective
Time, and for all other Stockholders, within two (2) Business Days following
receipt by the Paying Agent of a Company Stock Letter of Transmittal duly
executed, and the related Certificates.
 
 
(ii) SVB Warrant.  As soon as practicable after the Effective Time, the Buyer
shall send or cause the Paying Agent to send to SVB (i) a letter of transmittal
in the form attached hereto as Exhibit B-3 (the “SVB Letter of Transmittal”)
specifying that delivery shall be effected, and risk of loss and title to the
SVB Warrant shall pass, only upon proper delivery of the SVB Warrant and (ii)
instructions for surrendering the SVB Warrant in exchange for the applicable
Merger Consideration payable in respect thereof.  Upon surrender of the SVB
Warrant for cancellation together with such letter of transmittal, properly
completed and duly executed, and such other documents as may be required
pursuant to such instructions, SVB shall be entitled to receive in exchange
therefor the SVB Warrant Net Closing Consideration in respect thereof, and the
SVB Warrant so surrendered shall forthwith be canceled.  No interest will be
paid or accrued on any portion of the SVB Warrant Merger Consideration payable
to SVB.
 
 
(c) Certificate Lost, Stolen or Destroyed.  In the event the SVB Warrant or any
Certificate shall have been lost, stolen or destroyed, the Buyer shall issue or
cause to be issued the respective Merger Consideration in exchange for such
lost, stolen or destroyed SVB Warrant or Certificate only following delivery by
the holder thereof of an affidavit of that fact and such indemnities against any
claim that may be made against the Buyer with respect to the SVB Warrant or
Certificate alleged to have been lost, stolen or destroyed as are requested by
the Paying Agent.
 
 
(d) Return of Funds from Paying Agent.  Any portion of amounts deposited with
the Paying Agent that remain undistributed to the Securityholders six (6) months
after their
 
 
 

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deposit with the Paying Agent shall, at the request of the Surviving
Corporation, be delivered to the Surviving Corporation or otherwise according to
the instruction of the Surviving Corporation, and any holders of the Company
Securities who have not surrendered such Company Securities in compliance with
this Section 1.11 shall after such delivery to the Surviving Corporation, look
only to the Surviving Corporation solely as general creditors for the Merger
Consideration pursuant to Section 1.9 (Effect of the Merger).  To the extent
permitted under applicable Law, any such amounts deposited with the Paying Agent
remaining unclaimed by holders of Company Securities immediately prior to such
time as such amounts would otherwise escheat to or become property of any
Governmental Entity shall become the property of the Surviving Corporation free
and clear of any claims or interest of any Person previously entitled thereto.
 
 
(e) No Liability.  Notwithstanding anything to the contrary in this Section 1,
none of the Paying Agent, the Escrow Agent, the Buyer, the Surviving
Corporation, the Securityholders’ Representative or any party hereto shall be
liable to any Person for any amount properly paid to a public official in
compliance with any applicable abandoned property, escheat or similar Law.
 
 
1.12 Dissenters Rights.  Shares of the Company Stock held as of immediately
prior to the Effective Time by a Stockholder who has not voted such shares in
favor of the adoption of this Agreement and the Merger and with respect to which
appraisal shall have been duly demanded and perfected in accordance with
Section 262 of the DGCL and not effectively withdrawn or forfeited before the
Effective Time (collectively, the “Dissenting Shares”), shall not be converted
pursuant to Section 1.9 (Effect of Merger), but shall thereafter constitute only
the right to receive from the Surviving Corporation, in consideration of the
cancellation of such shares, such consideration as may be determined to be due
with respect to such Dissenting Shares pursuant to the DGCL.  If a holder of
Dissenting Shares (a “Dissenting Stockholder”) forfeits or withdraws such right
to appraisal of Dissenting Shares, then such holder’s Dissenting Shares shall
cease to be Dissenting Shares and shall be deemed to have been converted as of
the Effective Time into and to represent the right to receive the Merger
Consideration payable in respect of such shares of the Company Stock pursuant to
Section 1.9 (Effect of Merger), without interest.
 
 
1.13 Tax Withholding; Treatment of Additional Payments.  The Buyer, the Company,
the Surviving Corporation, the Paying Agent, or the Escrow Agent, as the case
may be, shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to or for the benefit of any Person
such amounts as it is required to deduct and withhold with respect to the making
of such payment under the Code or any provision of state, local or foreign tax
Law.  To the extent that amounts are so withheld, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to such Person in
respect of which such deduction and withholding was made.  The Company, the
Buyer, the Surviving Corporation, the Securityholders’ Representative and the
Securityholders agree to treat any adjustment to the Cash Purchase Price
pursuant to Section 1.7(c) (Post-Closing True-Up) and any payment of Earn-Out
Consideration, if any, as an adjustment to the Merger Consideration for all Tax
purposes and shall take no position contrary thereto unless required to
 
 
 

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do so by applicable Tax Law pursuant to a determination as defined in Section
1313(a) of the Code.  Payments of Earn-Out Consideration, if any, will be taxed
to holders of the Company Options just as any other income such holder of the
Company Options may receive as compensation for services.
 
 
1.14 Further Actions.  If, at any time after the Effective Time, any further
action is necessary or desirable to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and the Merger Sub, the officers and directors
from time to time of the Surviving Corporation are fully authorized in the name
of the Company and the Merger Sub, as the case may be, or otherwise to take, and
will take, all such lawful and necessary action as is consistent with this
Agreement.
 
 
SECTION 2
 
 
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
 
 
Subject to such exceptions as are disclosed in the disclosure schedule dated as
of the date hereof and delivered herewith by the Company to the Buyer (the
“Company Disclosure Schedule”) corresponding to the applicable section and
subsection or clause of this Agreement (the “Applicable Provision”) (or
disclosed in any other section, subsection or clause of the Company Disclosure
Schedule provided that it is reasonably apparent upon a reading of such
disclosure that it also qualifies or applies to such other sections, subsections
and clauses), the Company hereby represents and warrants to the Buyer as
follows, with references in this Section 2 (other than Sections 2.1
(Organization and Qualification), 2.2 (Capitalization; Subsidiaries) (other than
Section 2.2(c) (Subsidiaries)), 2.3 (Authority; Enforceability), 2.4 (No Breach;
Covenants), and 2.5(a) (Certificate of Incorporation and Bylaws; Corporate
Records)) to the “Company” meaning the Company and any predecessor entity to the
Company (including Burning Sky Partners, LLC which later changed its name to
ThingWorx, LLC) and any previously existing Subsidiary (including Palantiri
Systems, Inc., and its predecessor entities and any previously existing
Subsidiaries thereto) to any such entity:
 
 
2.1 Organization and Qualification.  The Company is a corporation duly
incorporated, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation or organization, and has full corporate power
and lawful authority to own, lease and operate its assets, properties and
business and to carry on its Business as now being conducted.  The Company is
duly qualified or otherwise authorized to transact business as a foreign
corporation in each jurisdiction (in the United States and outside of the United
States) in which such qualification or authorization is required by Law, except
where the failure to be so qualified or authorized, individually or in the
aggregate, would not have a Material Adverse Effect.  The Company has made all
corporate filings and filed all statutory accounts required by applicable
Law.  For clarity, corporate filings and statutory accounts do not include Tax
Returns.  Schedule 2.1 lists every state or foreign jurisdiction in which the
Company has facilities, maintains an office, branch or permanent establishment
or has a current Employee.  The Company has not conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or other name.
 
 
 
 

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2.2 Capitalization; Subsidiaries.
 
 
(a) Outstanding Capital Stock.  The authorized capital stock of the Company
consists of (a) 9,750,000 shares of the Company Common Stock of which 2,335,093
shares are issued and outstanding, (b) 6,010,000 shares of the Company Preferred
Stock, of which (i) 1,670,000 shares have been designated as the Company Series
A Stock, all of which are issued and outstanding, (ii) 1,800,000 shares have
been designated as the Company Series B Stock, of which 1,727,115 are issued and
outstanding, and (iii) 2,540,000 shares of the Company Series C Stock of which
2,424,608 are issued and outstanding.  No other class of capital stock of the
Company is authorized or outstanding, and no shares of the Company Stock are
held in the treasury of the Company.  The outstanding shares of the Company
Stock are held of record and beneficially by the persons and in the respective
amounts set forth in Schedule 2.2(a) of the Company Disclosure Schedule.  All of
the issued and outstanding shares of the Company Stock have been duly authorized
and validly issued, are fully paid and nonassessable, and were issued free of
(or pursuant to effective waivers) pre-emptive or similar rights of any party,
whether created by statute, the Company Certificate of Incorporation or the
Company Bylaws or any other agreement or instrument to which the Company is a
party.  None of the issued and outstanding shares of the Company Stock has been
issued in violation of the Securities Act or of any other federal, state or
foreign Law.  Except as set forth on Schedule 2.2(a) of the Company Disclosure
Schedule, there are no registration rights agreements or, to the Company’s
Knowledge, any shareholder agreements, voting trusts or agreements, proxies or
other agreements, instruments or understandings with respect to any shares of
the Company Stock.
 
 
(b) Purchase Rights; Convertible Securities.  Except as set forth in
Schedule 2.2(b) of the Company Disclosure Schedule (which lists the respective
holders, the numbers of underlying shares, the grant dates, the vesting
schedule, and the exercise price, if applicable), there are no outstanding
rights, subscriptions, phantom stock rights, warrants, calls, preemptive rights,
convertible or exchangeable securities, options (including Company Options) or
other agreements or commitments of any kind to purchase or otherwise to receive
from the Company, currently or after the passage of time or occurrence of any
other event, any of the outstanding, authorized but unissued, unauthorized or
treasury shares of the Company Stock or any other security of the Company or any
right to Merger Consideration (collectively, “Purchase Rights”).  The Company
has previously made available to the Buyer true and correct copies of all the
agreements and other instruments with respect to its outstanding Purchase
Rights.  No Purchase Right has been repurchased, redeemed, terminated or
forfeited other than for no consideration pursuant to its terms.
 
 
(c) Subsidiaries.  Except as set forth in Schedule 2.2(c) of the Company
Disclosure Schedule, the Company has no Subsidiaries and has never had a
Subsidiary or an equity or other right, subscription, phantom stock right,
warrant, call, preemptive right, convertible or exchangeable security, option or
other agreement or commitment of any kind to purchase or otherwise to receive
from a Person, currently or after the passage of time or occurrence of any other
event, any security of such Person.
 
 
(d) Distribution of Merger Consideration.  The distribution of Merger
Consideration set forth on the Allocation Certificate is in accordance with the
Company
 
 
 
 

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Certificate of Incorporation, and no holder of Company Preferred Stock is
entitled to be paid any Liquidation Preference in connection therewith.
 
 
2.3 Authority; Enforceability.  The Company has all requisite corporate power
and authority to enter into, execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder, and to consummate the Transactions.  The execution and
delivery of this Agreement and the Ancillary Agreements to which it is a party,
the performance by the Company of its obligations hereunder and thereunder and
the consummation of the Transactions have been duly authorized by all necessary
corporate action on the part of the Company except for the Stockholder
Approval.  This Agreement has been, and the Ancillary Agreements to which the
Company is a party, when delivered at the Closing will be, duly executed and
delivered by the Company and, assuming due authorization, execution and delivery
of this Agreement and the Ancillary Agreements to which the Company is a party,
by the Buyer and the Merger Sub, this Agreement constitutes, and the Ancillary
Agreements to which the Company is a party when executed and delivered, will
constitute, the valid and binding obligation of the Company, enforceable against
it in accordance with their respective terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting creditors’ rights generally and by general equitable principles.
 
 
2.4 No Breach; Consents.  The execution, delivery and performance of this
Agreement and the Ancillary Agreements, to which the Company is a party, by the
Company and the consummation of the Transactions do not and, with or without
notice or lapse of time or both, will not, in each case: (a) violate any
provision of the Company Certificate of Incorporation or the Company Bylaws; (b)
violate, conflict with or result in the material breach of any of the terms or
conditions of, result in material modification of the effect of, or otherwise
give any other contracting party the right to terminate or accelerate any rights
under, or constitute a default under, any Material Contract; (c) violate any
Order against, or binding upon, the Company or upon its securities, properties,
assets or business; (d) violate, in any material respect, any statute, Law or
regulation of any jurisdiction or any Permit; (e) require on the part of the
Company any filing with, notice to, or Consent of any Governmental Entity or of
any other Person, except for the filing of the Certificate of Merger under the
DGCL; or (g) result in the creation of any Lien on any of the material assets or
properties of the Company.
 
 
2.5 Certificate of Incorporation and Bylaws; Corporate Records.  The Company has
previously made available to the Buyer true and complete copies of (a) the
Company Certificate of Incorporation, certified by the Secretary of the State of
Delaware, and the Company Bylaws, in each case as amended and as presently in
effect, and (b) the minute books and stock records of the Company.  Such minute
books contain, respectively, records of all meetings and consents in lieu of
meetings of the board of directors or other governing body of the Company and of
the Stockholders since the time of the Company’s incorporation that are true and
complete in all material respects.  The Company is not in violation of the
Company Certificate of Incorporation or other organizational or governing
documents.
 
 
 

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2.6 Financial Statements; Internal Control.
 
 
(a) Attached as Schedule 2.6(a) of the Company Disclosure Schedule are copies of
the audited balance sheet of the Company as at December 31, 2012 and the
unaudited balance sheet of the Company as of December 31, 2011 and 2010 (the
December 31, 2012 balance sheet is sometimes referred to herein as the “Balance
Sheet” and the date thereof is sometimes referred to as the “Balance Sheet
Date”), and the audited statements of operations, stockholders’ equity and cash
flows of the Company for the fiscal year ended December 31, 2012 and the
unaudited statements of operations, stockholders’ equity and cash flows of the
Company for the fiscal year ended December 31, 2011 and 2010.  Also attached as
Schedule 2.6(a) of the Company Disclosure Schedule are copies of the unaudited
balance sheet of the Company as at September 30, 2013 (the “Interim Balance
Sheet” and the “Interim Balance Sheet Date”, as applicable) and the unaudited
statements of operations and cash flows of the Company for the nine-month period
then ended (collectively, the “Interim Financials”).
 
 
(b) As used in this Agreement, “Financial Statements” means the financial
statements referenced in Section 2.6(a) above, “Audited Financial Statements”
means the 2012 audited financial statements referenced in Section 2.6(a) above
and “Unaudited Financial Statements” means the 2011 and 2010 unaudited financial
statements referenced in Section 2.6(a).  Except as set forth in Schedule 2.6(b)
of the Company Disclosure Schedule, (i) the Audited Financial Statements and the
notes thereto, if any, and to the Company’s Knowledge, the Unaudited Financial
Statements fairly present in all material respects the financial condition of
the Company at the respective dates thereof and the results of operations for
the periods then ended, and (ii) the Audited Financial Statements and Interim
Financials were prepared in accordance with the books and records of the Company
in conformity with GAAP consistently applied during the periods covered thereby,
except, in the case of the Interim Financials, for the omission of footnotes and
normal year-end adjustments which are not, individually or in the aggregate,
material.  None of the Financial Statements contain any material, non-recurring
items, except as expressly set forth therein.
 
 
(c) The general ledgers and books of account of the Company are complete and
correct in all material respects.
 
 
(d) The Company maintains a reasonable system of internal accounting controls
for a private company of its size and industry in which it operates.
 
 
(e) To the Company’s Knowledge, no Employee has provided or is providing
information to any Governmental Entity regarding the commission or possible
commission of any crime or the violation or possible violation of any Law
applicable to the Company or its operations.
 
 
2.7 Absence of Undisclosed Liabilities.  The Company has no Liabilities that are
required to be reflected in financial statements prepared in accordance with
GAAP, except Liabilities (i) stated or adequately reserved against on the face
of the Interim Balance Sheet, (ii) incurred after the Interim Balance Sheet Date
in the ordinary course of
 
 
 

--------------------------------------------------------------------------------

 
business consistent with past practice or that do not exceed $10,000
individually or $20,000 in the aggregate; provided, however, that clause (ii) of
this Section 2.7 shall not apply to any Liability for Taxes, which are
separately addressed in Section 2.10 (Tax Matters).
 
 
2.8 Accounts and Notes Receivable.   Schedule 2.8 of the Company Disclosure
Schedule sets forth a true, correct and complete list of all notes and accounts
receivable of the Company (“Accounts Receivable”) as of the Interim Balance
Sheet Date and identifying the respective responsible entity and including the
aging thereof.  All such Accounts Receivable arose out of the provision of
services or the sales of goods in the ordinary course of business, are valid
obligations and are not subject to set-off or counterclaim, and, to the
Company’s Knowledge, are collectible in the face value thereof using normal
collection procedures, net of the reserve for doubtful accounts (a) set forth in
the Interim Balance Sheet with respect to Accounts Receivable reflected in the
Interim Balance Sheet or incurred after the Interim Balance Sheet Date in the
ordinary course of business or (b) set forth on Schedule 2.8 of the Company
Disclosure Schedule.  Except as set forth on Schedule 2.8 of the Company
Disclosure Schedule, no discount or allowance from any Accounts Receivable has
been made or agreed to since the Interim Balance Sheet Date, and none of the
Accounts Receivable shown on either the Interim Balance Sheet or Schedule 2.8 of
the Company Disclosure Schedule represents billings before actual receipt of a
purchase order.  To the Knowledge of the Company, none of the customers and
other debtors whose obligations comprise the Accounts Receivable shown on the
Interim Balance Sheet is subject to a bankruptcy or insolvency proceeding and,
to the Knowledge of the Company, none of such Accounts Receivable has been made
subject to an assignment for the benefit of creditors.  Since the Interim
Balance Sheet Date, (x) the collection of Accounts Receivable by the Company has
been pursued in the ordinary course consistent with past practice and without
any acceleration thereof, and (y) there has been no sale or other disposition to
a third party of any Accounts Receivable by the Company.
 
 
2.9 Absence of Certain Changes.  Since the Interim Balance Sheet Date, except as
set forth in Schedule 2.9 of the Company Disclosure Schedule, there has been no
change, event or circumstance in or affecting the assets, property, financial
affairs or business of the Company that would reasonably be expected to have a
Material Adverse Effect, whether or not covered by insurance, and except as set
forth in Schedule 2.9 of the Company Disclosure Schedule, there has been no:
 
 
(a) incurrence of any indebtedness for borrowed money, or cancellation or
modification of any material debt or claim owing to, or waiver of any material
right of, the Company;
 
 
(b) purchase, sale or other disposition of any properties or assets of or by the
Company with a value, individually in excess of $25,000 or in the aggregate in
excess of $50,000, other than in the ordinary course of business consistent with
past practices;
 
 
(c) declaration, setting aside or payment of any dividend or distribution by the
Company or the making of any other distribution in respect of any shares of the
Company Stock;
 
 
 
 

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(d) change in the compensation paid or payable by the Company to any of its
directors, officers, employees, agents or independent contractors other than
normal increases granted to employees making less than $50,000 per year in the
ordinary course of business consistent with past practice, or any obligation, or
liability incurred by the Company to any of its shareholders, directors,
officers or employees, or any loans or advances made by the Company to any of
its shareholders, directors, officers or employees, except normal compensation
and expense allowances payable in the ordinary course of business consistent
with past practices;
 
 
(e) adoption, amendment, or termination of any Employee Benefit Plan, any
material increase in benefits provided under any Employee Benefit Plan or any
promise or commitment to undertake any of the foregoing in the future;
 
 
(f) payment or discharge of a material Lien or Liability of the Company other
than in the ordinary course of business consistent with past practices;
 
 
(g) change in accounting methods or practices, or billing or collection
policies, used by the Company; or
 
 
(h) agreement or understanding, whether in writing or otherwise, obligating the
Company to take any of the actions specified above, except as specifically
contemplated hereby.
 
 
2.10 Tax Matters.
 
 
(a) All Tax Returns required to be filed by or with respect to the Company have
been filed within the time and in the manner prescribed by Law, including any
permitted extensions thereto.  All such Tax Returns are true, correct, and
complete in all material respects, and all Taxes owed by the Company, whether or
not shown on any Tax Return, have been paid when due.  The Company is not
currently the beneficiary of any extension of time within which to file any Tax
Return.  No claim has ever been made in writing by any taxing authority in any
jurisdiction in which the Company does not file that the Company is or may be
subject to taxation by that jurisdiction.  To the Knowledge of the Company,
except for the employment and withholding Tax liabilities of the Company
resulting from the payment of Sale Bonuses and consideration in respect of the
Company Options as provided herein, no Taxes will become payable by the Company
as a result of the execution, delivery or performance of this Agreement or the
consummation of the Merger and the other Transactions.
 
 
(b) No audit or other similar examination is currently pending with respect to
any Tax Return of the Company and the Company has not received any written
notice from any taxing authority that an audit or other review is
forthcoming.  No deficiency for any Taxes has been asserted, proposed, or
threatened in writing against the Company, which deficiency has not been paid in
full, and the Company is not aware of any such deficiency which is reasonably
likely to be asserted.  No issue relating to the Company or involving any Tax
for which the Company might be liable has been resolved in favor of any taxing
authority in any audit or examination that, by application of the same
principles, would reasonably be expected to result in a deficiency for Taxes of
the Company for any other period.  The Company has not
 
 
 

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participated or engaged in any “reportable transaction” within the meaning of
Treasury Regulation Section 1.6011-4 or any corresponding or similar provision
of state, local, or non-U.S. Tax Law.
 
 
(c) Schedule 2.10(c) of the Company Disclosure Schedule lists all United States
federal, state and local, and all foreign income Tax Returns filed with respect
to the Company, and indicates those Tax Returns that have been audited or
subject to similar examination by a taxing authority and those Tax Returns that
currently are the subject of audit or such examination.  There are no
outstanding agreements, waivers or arrangements extending the statutory period
of limitation (or any other period during which any Tax can be assessed)
applicable to any claim for, or the period for the collection or assessment of,
Taxes due from or with respect to the Company for any taxable period, and no
closing agreement (within the meaning of Section 7121 of the Code) relating to
the Taxes of the Company is currently in force.  The Company has delivered to
the Buyer, or made available the true, complete and correct copies of all Tax
Returns, audit reports, and statements of deficiencies for each of the last
three taxable years filed by or issued to or with respect to the Company (or,
insofar as such items relate to the Company, by or to any affiliated,
consolidated, combined, or unitary group of which the Company was then a
member).
 
 
(d) The unpaid Taxes of the Company for all taxable periods (or portions
thereof) ending (i) on or before the Interim Balance Sheet Date did not, as of
such date, exceed the reserve for tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Interim Balance Sheet (rather than in any
notes thereof) and (ii) on or before the Closing Date will not, as of the
Closing Date, exceed that reserve as adjusted to reflect the ordinary operations
of the Company after the Interim Balance Sheet Date and through the Closing Date
and the Transactions in accordance with the past customs and practice of the
Company in filing its Tax Returns.
 
 
(e) The Surviving Corporation will not be required to include any item of income
in, or exclude any item of deduction from, taxable income for any taxable period
(or portion thereof) ending after the Closing Date as a result of any (i) change
in method of accounting for a taxable period ending on or prior to the Closing
Date, (ii) “closing agreement” as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date, (iii) intercompany transactions or any
excess loss account described in Treasury Regulations under Section 1502 of the
Code (or any corresponding or similar provision of state or local income Tax
law), (iv) installment sale or open transaction disposition made on or prior to
the Closing Date, (v) prepaid amount received on or prior to the Closing Date,
or (vi) or election under Section 108(i) of the Code (or any corresponding or
similar provision of state, local or foreign income Tax law).
 
 
(f) No person holds the Company Stock that is subject to a substantial risk of
forfeiture (within the meaning of Section 83 of the Code) with respect to which
a valid election under Section 83(b) of the Code has not been made, and no
payment to any holder of the Company Stock of any portion of the consideration
payable hereunder will result in compensation or other income to such person
with respect to which the Buyer or the Surviving Corporation would be required
to deduct or withhold any Tax.  Schedule 2.10(f) lists (i) each person that has,
to the Knowledge of the Company, disposed of any Company Stock in a
 
 
 

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transaction that would constitute a “disqualifying disposition” (as defined in
Section 421(b) of the Code) together with a schedule of the stock disposed of in
such transaction and the exercise date of the option pursuant to which such
stock was acquired and (ii) each person for whom the Transactions would
constitute a disqualifying disposition.
 
 
(g) The Company has never been (i) a member of any affiliated group filing or
required to file a consolidated, combined, or unitary Tax Return or (ii) a party
to or bound by, nor does it have or has it ever had any obligation under, any
Tax sharing agreement or similar contract or arrangement.  The Company has no
liability for the Taxes of any other Person under U.S. Treasury Regulation
§1.1502-6 (or any similar provision of applicable federal, state, local, or
foreign Law), as a transferee or successor, by contract, or otherwise.
 
 
(h) The Company has not distributed to its stockholders or security holders
stock or securities of a controlled corporation in a transaction to which
Section 355 of the Code applies (i) in the two years before the date of this
Agreement or (ii) in a distribution which could otherwise constitute part of a
“plan” or “series of related transactions” (within the meaning of Section 355(e)
of the Code) that includes the Transactions, and the Company was not the subject
of any such distribution pursuant to any transaction with respect to which the
Company has agreed to or is otherwise obligated to indemnify any person for any
Tax resulting from or attributable to such transaction.
 
 
(i) The Company is not and has not been during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code, a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code.
 
 
(j) The Company is not a party to, or bound by, or has any obligation under, any
tax allocation or sharing agreement or similar contract or arrangement or any
agreement that obligates it to make any payment computed by reference to the
Taxes, taxable income or taxable losses of any other Person
 
 
(k) Schedule 2.10(k) sets forth all foreign jurisdictions in which the Company
is subject to Tax, are engaged in business or have a permanent
establishment.  The Company has not entered into a gain recognition agreement
pursuant to Treas. Reg. § 1.367(a)-8.  The Company has not transferred an
intangible the transfer of which would be subject to the rules of Section 367(d)
of the Code.
 
 
2.11 Compliance with Laws; Permits.
 
 
(a) The Company is not and has not been in violation of any Order binding upon
it, or of any federal, state, local or foreign Law, ordinance or regulation of
any governmental or regulatory body applicable to its Business or assets, except
for any such violations that, individually or in the aggregate, would not have a
Material Adverse Effect.  The Company has not received any notice or other
written communication from any Governmental Entity of any such violation or
noncompliance, and there has been no citation, fine or penalty imposed or
asserted against the Company for any violation of such laws, regulations or
ordinances.
 
 
 

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(b) The Company has in full force and effect, and is in compliance with, all
licenses, permits and other approvals (“Permits”) of any Governmental Entity
required for the conduct of the business of the Company as presently conducted,
except where the failure to have or so comply would not have a Material Adverse
Effect.  All such Permits are described in Schedule 2.11 of the Company
Disclosure Schedule, and true and correct copies thereof have previously been
made available to the Buyer.  No proceeding is pending or, to the Knowledge of
the Company, threatened to revoke or limit any such Permit.
 
 
2.12 Actions and Proceedings.  Except as set forth in Schedule 2.12 of the
Company Disclosure Schedule, there is no outstanding Order against or involving
the Company, any of its assets or properties, or any of its directors or
officers in their capacities as such.  There is no action, suit or claim, legal,
administrative or arbitration proceeding, or investigation pending or, to the
Knowledge of the Company, threatened against or involving the Company, any of
its assets or properties or any of its directors or officers in their capacities
as such or that in any manner challenges or seeks to prevent, enjoin, alter or
delay any of the Transactions.  To the Company’s Knowledge, there is no fact,
event or circumstance that would be expected to give rise to any suit, action,
claim, investigation or proceeding which individually or in the aggregate would
have a Material Adverse Effect.
 
 
2.13 Contracts and Other Agreements.
 
 
(a) Contracts and other agreements, whether written or oral (“Contracts”)
described in this subsection, to which the Company is a party or by or to which
it or any of its assets or properties are bound or subject are referred to
herein collectively as “Material Contracts”:
 
 
(i) contracts and other agreements (other than at-will employment agreements)
pursuant to which the Company or the other party thereto has current or future
obligations or liabilities in excess of $25,000 in any fiscal year and that are
required to be disclosed on Schedule 2.26 of the Company Disclosure Schedule;
 
 
(ii) contracts and other agreements with any labor union or association
representing any employee of the Company;
 
 
(iii) contracts and other agreements for the procurement by the Company
(including by purchase or license) of software, materials, supplies, equipment,
merchandise or services, or relating to capital expenditures, for an amount in
excess of $25,000 per annum;
 
 
(iv) contracts and other agreements for the sale or license by the Company to
any third party of software, materials, supplies, equipment, merchandise or
services, or relating to capital expenditures, that involves an amount or value
in excess of $50,000 per annum;
 
 
(v) contracts and other agreements for (A) the sale or (B) the exclusive license
of any of the assets or properties of the Company not described in clause (iv)
or
 
 
 

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for the grant to any person of any option, right of first refusal, or
preferential or similar right to purchase any of such assets or properties;
 
 
(vi) partnership, strategic alliance, joint development, joint marketing and
joint venture agreements;
 
 
(vii) contracts and other agreements that obligate the Company to purchase or
license all or substantially all of its requirements of a particular product
from a supplier, or for periodic minimum purchases or licenses of a particular
product from a supplier;
 
 
(viii) contracts and other agreements with customers, suppliers, partners or
collaborators for the sharing of fees, the rebating of charges or other similar
arrangements, including contracts containing any Most Favored Customer
Provision;
 
 
(ix) contracts or other agreements under which the Company agrees to indemnify
any party for Tax liabilities or to share the Tax liability of any party;
 
 
(x) contracts and other agreements containing any covenant limiting the freedom
of the Company or any of its present or future Affiliates to (A) engage in any
line of business or in any geographic territory or to compete with any Person,
or which grants to any Person any exclusivity with respect to any geographic
territory, any customer, or any product or service, (B) solicit for employment,
hire or employ any Person, or (C) acquire property (tangible or intangible);
 
 
(xi) contracts and other agreements relating to the acquisition or disposition
by the Company of any operating business or the capital stock or other
securities of any other Person;
 
 
(xii) contracts and other agreements requiring the payment to any person of a
commission, fee or royalty, other than to employees in the ordinary course of
business;
 
 
(xiii) contracts and other agreements pursuant to which the Company may collect
any Personal Information from any third parties;
 
 
(xiv) mortgages, indentures, loan or credit agreements, factoring agreements,
promissory notes and other agreements and instruments relating to the borrowing
of money or financing or sale of receivables;
 
 
(xv) research, development (whether contracted or shared), and manufacturing
agreements;
 
 
(xvi) reseller or distributorship agreements, original equipment manufacturer
(OEM) agreements, or systems integrator agreements;
 
 
(xvii) leases, financing agreements, subleases or other agreements under which
the Company is lessor or lessee of any real or personal property;
 
 
 
 

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(xviii) licenses, sublicenses and other agreements required to be listed in
Schedule 2.16(c) of the Company Disclosure Schedule; and
 
 
(xix) contracts with Governmental Entities.
 
 
(b) Schedule 2.13 of the Company Disclosure Schedule contains a true, correct
and complete list of all Material Contracts numbered as appropriate under
subsection (a) hereof.  The Company has made available to the Buyer true and
complete copies of all Material Contracts and all amendments or other
modifications thereto or, in the case of oral Material Contracts, complete and
accurate descriptions.  All of the Material Contracts are valid, in full force
and effect, and binding upon the Company and, to the Knowledge of the Company,
on the other party(ies) thereto.  No written notice of termination or amendment
of any Material Contract has been given to the Company by any other party
thereto.  Neither the Company nor, to the Knowledge of the Company, any other
party thereto, is in default under any Material Contract, and, to the Knowledge
of the Company, no event has occurred nor does any condition exist that with
notice or lapse of time or both would constitute a default by the Company or any
such other party thereunder.
 
 
(c) There is no Contract or Order to which the Company is a party, subject or
otherwise bound, that would reasonably be expected to prohibit, impair or
otherwise limit:  (a) any business practice of the Company or any of its present
Affiliates or Buyer; (b) any acquisition of property (tangible or intangible) by
the Company or any of its present Affiliates or Buyer; (c) the conduct of
business by the Company; or (d) the freedom of the Company or any of its present
Affiliates or Buyer to engage in any line of business or to compete or do
business with any Person, in each case whether arising as a result of a change
in control of the Company or any of its present Affiliates or Buyer or
otherwise.  Without limiting the generality of the foregoing, the Company has
not (x) entered into any Contract under which the Company or any of its present
Affiliates or Buyer is restricted from selling, licensing, manufacturing or
otherwise distributing any of its technology or products or from providing
services to customers or potential customers or any class of customers, in any
geographic area, during any period of time, or in any segment of the market, (y)
granted any Person exclusive rights to sell, license, manufacture or otherwise
distribute any of the Company’s or any of its present Affiliates’ or Buyer’s
technology or products in any geographic area or with respect to any customers
or potential customers or any class of customers during any period of time or in
any segment of the market or (z) entered into any Contract that will bind the
Buyer or any of its Affiliates with respect to the Buyer’s or the Buyer’s
Affiliates’ own customers, products or services.
 
 
2.14 Real Estate.  The Company does not own any real property or any buildings
or other structures or have any options or any contractual obligations to
purchase or acquire any interest in real property.  All leasehold interests of
the Company are set forth in Schedule 2.13(a)(xvii) of the Company Disclosure
Schedule, and such interests are subject to no Liens other than Permitted
Liens.  With respect to such leasehold interests: (a)  there are no disputes
between the Company and the respective landlord, oral agreements or forbearance
programs in effect as to the lease or sublease; (b) the Company has not
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in the leasehold or subleasehold; (c) to the Knowledge of the Company,
all facilities leased or subleased thereunder have received all
 
 
 

--------------------------------------------------------------------------------

 
approvals of the applicable Governmental Entities (including Permits) required
to be obtained in connection with the operation thereof and have been operated
and maintained in accordance with applicable Laws; and (d) all facilities leased
or subleased thereunder are supplied with utilities and all other services
necessary for the operation of the Business of the Company as currently
conducted and for the operation of said facilities.
 
 
2.15 Tangible Property.  The equipment, furniture, leasehold improvements,
fixtures, vehicles, and any related capitalized items, in each case whose book
value is a material part of the Interim Balance Sheet (except to the extent
disposed of on an arms’-length basis since the Interim Balance Sheet Date), and
all other tangible property material to the Business of the Company, are in good
operating condition and repair, reasonable wear and tear excepted, and have
received commercially reasonable maintenance, and the Company has not received
any written notice that any of such property is in violation of any existing Law
or any building, zoning, health, safety or other ordinance, code or regulation.
 
2.16 Intellectual Property.
 
(a) As used in this Agreement, the following terms have the meanings indicated:
 
(i) “Intellectual Property” means all intellectual property rights of every kind
including all: (A) patents, patent applications, provisional patents and utility
models and applications therefor and equivalent or similar rights anywhere in
the world in inventions and discoveries, including invention disclosures; (B)
trademarks, service marks, trade dress, trade names, logos and corporate names
(in each case, whether registered or unregistered) and registrations and
applications for registration thereof; (C) copyrights (registered or
unregistered) and registrations and applications for registration thereof; (D)
rights in data, databases or other compilations of fact; (E) industrial designs
and any registrations and applications therefor, and all other rights
corresponding thereto throughout the world; (F) trade secrets and other
confidential or proprietary information (including without limitation, ideas,
formulae, compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, marketing and other business systems, research and
development information, drawings, specifications, designs, plans, proposals,
financial and marketing plans and customer and supplier lists and information);
(G) uniform resource locator and World Wide Web addresses and domain names and
applications and registrations therefor; (H) works of authorship including
without limitation, computer programs, source code and executable code, whether
embodied in software, firmware or otherwise, documentation, designs, files,
records, data and mask works; (I) moral right or other right to claim authorship
to or to object to any distortion, mutilation, or other modification or other
derogatory action in relation to a work, whether or not such would be
prejudicial to the author’s reputation, and any similar right, existing under
common or statutory law of any country in the world or under any treaty; and (J)
goodwill associated with any of the foregoing.
 
 
 

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(ii) “Company Intellectual Property” means all Intellectual Property owned,
licensed or used by the Company or necessary for the creation, production,
distribution, marketing, offering or sale of any Company Products.
 
(iii) “Company Owned Intellectual Property” means Intellectual Property owned,
purported to be owned, or exclusively licensed by the Company.
 
(iv) “Company Products” means all of the products marketed, licensed, sold or
offered for sale by the Company (including, without limitation, all content,
components, elements, toolkits, computer programs, software (both in object code
and source code), firmware, middleware, databases, interfaces, systems, devices,
hardware, equipment, and other items designed, developed, manufactured,
assembled, sold, leased, installed, licensed, hosted or otherwise made available
by or on behalf of the Company) and all prior versions and releases thereof, and
any services performed by or on behalf of the Company.
 
(b) Schedule 2.16(b) of the Company Disclosure Schedule hereto contains a
complete and accurate list of (i) all Company Owned Intellectual Property
included in clauses (A) through (C) and (G) of the definition of Intellectual
Property that is registered, or subject to an application for registration, with
any Governmental Agency; and (ii) all other material Company Intellectual
Property.
 
(c) Schedule 2.16(c) of the Company Disclosure Schedule contains a complete and
accurate list of (i) all licenses and other rights granted (expressly, through
implication or otherwise) by the Company to any Person with respect to any
Company Intellectual Property (including license agreements with current
customers) and (ii) all licenses and other rights granted (expressly, through
implication or otherwise) by any Person to the Company with respect to any
Company Intellectual Property (excluding commercial off-the-shelf software
licensed to the Company in the ordinary course of business and easily obtainable
without material expense), in the case of clause (ii) identifying the subject
Company Intellectual Property, describing the material terms of such licenses,
the royalties paid or received by the Company under such licenses and whether or
not each such license is exclusive or non-exclusive (collectively for clauses
(i) and (ii), the “IP Licenses”).  The Company is in compliance with all of its
obligations pursuant to the IP Licenses.  Except as set forth on Schedule
2.16(c) of the Company Disclosure Schedule, the Company is not and will not be
required to pay any currently due, future or ongoing royalties or other
compensation to any third parties in respect of its ownership or use of any
Company Intellectual Property (other than sales commissions paid to employees).
 
(d) Except as set forth on Schedule 2.16(d)(i), the Company owns exclusively or
is a party to valid and binding, express, perpetual, royalty free, fully paid
up, non-terminable licenses (sufficient for the conduct of its Business as
currently conducted) to, all Intellectual Property necessary for or currently
used in the conduct of its Business or for the manufacture, production,
distribution, marketing or sale of any Company Products.  The Company has not
violated, misappropriated or infringed, is not violating, misappropriating or
infringing and, by conducting its Business as currently conducted, will not
violate, misappropriate or infringe, any Intellectual Property of any other
Person.  To the Knowledge of the Company, there are no
 
 
 

--------------------------------------------------------------------------------

 
violations, misappropriations or infringements by any Person of any Company
Intellectual Property owned or licensed by the Company.  Except as set forth on
Schedule 2.16(d)(ii) of the Company Disclosure Schedule, the Company has not
received any notice or communication from any Person claiming any violation,
misappropriation or infringement by the Company of another Person’s Intellectual
Property rights (and to the Knowledge of the Company, there is no basis for any
such claim).
 
(e) Each item of Company Owned Intellectual Property is in compliance with all
legal requirements and is valid and subsisting.  All necessary registration,
maintenance and renewal fees in connection with such Company Owned Intellectual
Property have been paid to the extent applicable, and all necessary documents
and certificates in connection with such Company Owned Intellectual Property
have been filed with the relevant authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such Company
Intellectual Property.  To the Knowledge of the Company, there is no threatened
or reasonably foreseeable loss or expiration of any Company Intellectual
Property.
 
(f) Except as set forth on Schedule 2.16(f)(i) of the Company Disclosure
Schedule, none of the software owned or used by the Company incorporates,
includes, is distributed together with, was developed with or is compiled with,
linked with or otherwise dependent on any Open Source Materials, and there are
no current plans to include or use any Open Source Material in or with the
Company Products.  Schedule 2.16(f)(i) of the Company Disclosure Schedule
describes the license under which each of the Open Source Materials is licensed
to the Company; and with which the Company Product(s) the Open Source Materials
were used or distributed.  The Company has complied with all of the requirements
of each license applicable to any Open Source Materials used or distributed by
it.  Except as set forth on Schedule 2.16(f)(i) of the Company Disclosure
Schedule, the Company has not provided (nor is it obligated to provide, nor will
the closing of the Transactions obligate the Company to provide) the source code
for any of its software to any other Person.  The Company has not, by license,
transfer, escrow or otherwise, permitted any other Person to reverse engineer,
disassemble or decompile any of its software to create such source code, except
as may be required by law.  All copies of any Company software distributed in
connection with the Business have been distributed solely in object code
form.  Except as set forth on Schedule 2.16(f)(ii) of the Company Disclosure
Schedule, there has been no disclosure of any Company software by the Company,
or to the knowledge of the Company, by any other Person, other than through
licensing of object code versions.  Each copy so distributed by the Company was
at the time of distribution, and to the Knowledge of the Company is, the subject
of a valid, existing and enforceable license agreement.
 
(g) The Company has taken reasonable steps to protect its rights in, and the
confidentiality of, the Intellectual Property and all other confidential or
proprietary information belonging to the Company, developed by the Company, or
provided by any other Person to the Company.  Without limiting the foregoing,
the Company has, and enforces, a policy requiring each of its employees, agents,
consultants and contractors to execute enforceable proprietary information,
assignment of inventions and confidentiality agreements assigning all rights in
any Company Intellectual Property to the Company, copies of which have been made
available to the Buyer, and all current employees and former employees and all
agents, consultants and contractors of the Company, have executed such an
agreement.  The Company has recorded all
 
 
 

--------------------------------------------------------------------------------

 
assignments of any registered Intellectual Property assigned to the Company with
the relevant Governmental Entity in accordance with applicable laws and
regulations in each jurisdiction in which such assignment is required to be
recorded.  To the Knowledge of the Company, no employee of the Company is
obligated under any agreement or commitment, or subject to any judgment, decree
or order of any court or administrative agency, that could interfere with such
employee’s duties to the Company, or that could conflict with the conduct of the
Business.
 
(h) Except as set forth in Schedule 2.16(h) of the Company Disclosure Schedule,
no Person has claimed or, to the Knowledge of the Company, has reason to claim
that any Person employed by or affiliated with the Company has (i) violated or
may be violating any of the terms or conditions of such Person’s employment,
non-competition, non-disclosure or similar agreement with such third Person;
(ii) disclosed or may be disclosing or utilized or may be utilizing any trade
secret or proprietary information or documentation of such third Person; or
(iii) interfered or may be interfering in the employment relationship between
such third Person and any of its employees.  To the Knowledge of the Company, no
Person employed by or affiliated with the Company has used or proposes to use
any trade secret or any information or documentation proprietary to any other
Person in connection with the Business or any Company Products.
 
(i) The Company has taken all reasonable steps to protect its Intellectual
Property and its rights thereunder, and, to the Knowledge of the Company, no
such rights to Intellectual Property have been lost or are in jeopardy of being
lost through failure to act by the Company.  The Company is not and, to the
Knowledge of the Company, no other party to any licensing, distributorship or
other similar arrangement with the Company relating to Intellectual Property is,
in breach of, or default (with or without notice or lapse of time, or both)
under, its obligations under such arrangements.  The Company has implemented and
maintained in effect reasonable security measures, consistent with general
industry practices, with respect to third-party source code or other third party
Intellectual Property.  If the terms of any such licensing arrangement require
that customers of the Company enter into license or sublicense agreements with
the Company, then the Company has procured all such licenses or sublicenses from
its customers.
 
(j) The Company has the right to use, pursuant to valid licenses, all software,
development tools, library functions, compilers and all other software and
materials that are used to create, modify, compile, operate or support any
software that is Company Owned Intellectual Property or is incorporated into any
Company Product.  The Company owns or has valid licenses for, and possesses, all
of the source code for all Company Products owned, distributed or presently
supported by the Company.  The Company has written its software in a way that
such software may be understood in a commercially reasonable manner by
reasonably competent programmers certified in the applicable programming
languages.  For the avoidance of doubt, the software referred to in the
preceding sentence shall include any and all bug tracking, source code
management and other information technology systems that have been programmed,
designed or otherwise developed in any way by or on behalf of the Company.
 
(k) Except as set forth in Schedule 2.16(k) of the Company Disclosure Schedule,
the Company has not (i) transferred ownership of, or entered into any agreement
under which it has, or may have, the obligation to transfer any ownership of, or
granted any exclusive license to use or distribute (or entered into any
agreement under which it has, or may have, the obligation to grant any exclusive
 
 
 

--------------------------------------------------------------------------------

 
license to use or distribute), or authorized the retention of any exclusive
rights to use or joint ownership of, any Company Intellectual Property, to any
other Person, (ii) permitted the rights of the Company in any such Company
Intellectual Property to lapse or enter the public domain, (iii) entered into
any agreement under which it has granted any covenant not to sue, assert or
exploit any such Company Intellectual Property, or (iv) entered into any
agreement under which it has granted any Person the right to bring a lawsuit for
infringement or misappropriation of any such Company Intellectual Property. The
execution, delivery and performance of this Agreement and the consummation of
the Transactions (alone or in combination with any other event) and compliance
with the provisions of this Agreement do not and will not conflict with, or
result in any violation or breach of, or default (with or without notice or
lapse of time, or both) under, or result in any release of any source code or
materials from escrow under, or give rise to a right of, or result in,
termination, cancelation or acceleration of any Intellectual Property right or
obligation set forth in any IP License to which the Company is a party or to
which any of their respective properties or assets is subject, or to a loss of a
benefit related thereto, or result in the creation of any Lien in or upon, any
Intellectual Property related thereto, or give rise to any increased,
additional, accelerated or guaranteed rights, entitlements, licenses or Liens
relating to Company Intellectual Property.
 
(l) Except as set forth in Schedule 2.16(l) of the Company Disclosure Schedule,
to the extent that any Intellectual Property has been developed or created by
any Person for the Company and is incorporated into any Company Products, the
Company has a written agreement with such Person with respect thereto and the
Company thereby either (i) has obtained ownership of, and is the exclusive owner
of, all rights in such Intellectual Property; or (ii) has obtained a perpetual,
royalty-free, fully paid-up, non-terminable license (sufficient for the conduct
of its Business as currently conducted and as currently proposed to be
conducted) to all such Person’s rights in such Intellectual Property.
 
(m) The Company has not (i) provided any services pursuant to Contracts that
contemplate an engagement for services that would lead to ownership by a third
party of Intellectual Property created in connection with such services (whether
“works for hire” or otherwise) or (ii) created any customized Intellectual
Property for any of its customers pursuant to any Contracts with such customers
or otherwise that is used in the products or services of the Company and for
which such customer could claim or has claimed ownership.
 
(n) No government, military or quasi-governmental funding, facilities of a
university, college, other educational institution or research center was used
in the development of any Company Owned Intellectual Property.  To the Knowledge
of the Company, no current or former employee, agent, consultant or independent
contractor of the Company, who was involved in, or who contributed to, the
creation or development of any Company Owned Intellectual Property, has (i)
performed services for the government, university, college or other educational
institution or research center, or any other Person during a period of time
during which such employee, consultant or independent contractor was also
performing services for the Company, or (ii) entered into a contract with such
an entity providing for any license to such Company Owned Intellectual Property.
 
 
 

--------------------------------------------------------------------------------

 
(o) The Company Products conform in all material respects to the written
documentation and specifications therefor and, to the Knowledge of the Company,
are free from significant or material defects.  To the Knowledge of the Company,
the Company Products do not contain any “time bombs,” “Trojan horses,” “back
doors,” “trap doors,” “worms,” viruses, bugs, faults or other devices or effects
that (i) enable or assist or could enable or assist any Person to access without
authorization the Company Products; or (ii) disrupt the operation of the Company
Products, except as expressly disclosed in its documentation; or (iii) have or
could have an adverse impact on the operation of other Software or operating
systems.
 
(p) Except as set forth in Schedule 2.16(p) of the Company Disclosure Schedule,
none of the Company Owned Intellectual Property or the Company Products includes
any cryptographic programs, algorithms, hardware or technology (whether used for
confidentiality, authentication or any other purpose) (collectively, “Encryption
Functionality”) or makes any function or interface calls to Encryption
Functionality provided by external software or hardware.
 
(q) To the Knowledge of the Company, all permits, exemptions, or licenses
required for the Company and for any third party to import, use and distribute
any Company Owned Intellectual Property or the Company Products have been
obtained for all jurisdictions outside the United States to or in which the
Company currently sells or distributes, or may be deemed to sell or distribute
pursuant to the laws of such jurisdiction, such Company Owned Intellectual
Property or the Company Products, including with respect to any Encryption
Functionality.
 
(r) The Company Owned Intellectual Property and the Company Products are
authorized for export from the United States to all destinations (other than
Cuba, Iran, North Korea, Sudan and Syria) except as listed in Schedule 2.16(r)
of the Company Disclosure Schedule and any U.S. government review or
authorization required for such export has been obtained, and the Company
otherwise complies with all United States export license and export license
exception requirements.
 
(s) Except as listed in Schedule 2.16(s) of the Company Disclosure Schedule, the
Company Owned Intellectual Property and the Company Products are authorized for
export from the United States under the U.S. Export Administration Regulations
with No License Required, and with no requirement of pre-export review by, or
post-export reporting to, the U.S. Department of Commerce.
 
(t) To the Knowledge of the Company, the Company has not exported any of the
Company Intellectual Property or the Company Product from the United States in
violation of applicable Laws, including but not limited to the U.S. Export
Administration Regulations.
 
(u) To the Knowledge of the Company, the Company has not exported any of the
Company Intellectual Property or the Company Products from the United States to
any person or destination in violation of a U.S. trade embargo or sanctions
administered by the U.S. Office of Foreign Assets Control, including but not
limited to exports to (i) Cuba, Iran, North Korea, Sudan or Syria, (ii) Persons
on the U.S. Department of Commerce Denied Persons List or
 
 
 

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Entity List, or (iii) Persons on the U.S. Department of Treasury List of
Specially Designated Nationals and Blocked Persons.
 
(v) All of the Company Intellectual Property that is owned by the Company
constitutes U.S.-origin technology pursuant to the U.S. Export Administration
Regulations of the United States of America.
 
(w) For all United States government customers (each of which is listed on
Schedule 2.16(s) of the Company Disclosure Schedule), such government customers
have been provided adequate notice as required by the United States Federal
Acquisition Regulations (“FAR”) and Defense Federal Acquisition Regulation
Supplement (“DFARS”) that places such government customers and end users on
notice that the Company Intellectual Property and the Company Products are only
available as a commercial item as such term is understood under FAR and DFARS
and that any software included with a Company Product is commercial computer
software as such term is understood under FAR and DFARs.
 
(x) No moral rights have been asserted or, to the Company’s Knowledge, are
likely to be asserted which would affect the use of the Intellectual Property
owned or used by the Company.
 
2.17 Protection of Personal Information; Information Technology Systems.
 
(a) The Company has written privacy and security policies that govern its
collection, storage, use, disclosure and transfer (including across national
borders) of Personal Information that satisfy applicable Laws and the Company is
in compliance with its privacy and security policies and applicable Laws
relating to Personal Information, including with respect to any Personal
Information collected by the Company or by any third party having authorized
access to the records of the Company.  The Company has not collected any
Personal Information from any third parties, except for Personal Information
collected from employees and vendors in the ordinary course of business and as a
service provider for its respective customers pursuant to Contract disclosed in
Schedule 2.13(a)(xiii).  All required consents to the collection, use or
disclosure of Personal Information in connection with the conduct of the
Business (including disclosure to Affiliates of the Company) have been
obtained.  The Company has not received any written claim or complaint regarding
its collection, use or disclosure of Personal Information.  As used in this
Agreement, “Personal Information” means information in the possession or under
the control of the Company regarding any Person, including personally
identifiable information, financial information and protected health information
(as such term is defined under HIPAA), the use or disclosure of which is
protected by applicable Laws.
 
(b) Without limiting the generality of the foregoing, the Company has complied
in all material respects with all applicable Laws governing the use, disclosure,
privacy and security of, and standard transactions related to, “protected health
information” as defined under HIPAA.  Whether acting as a “covered entity”,
“business associate”,  or subcontractor to a “business associate”, in each case
as defined under HIPAA, the Company has developed and implemented appropriate
policies and procedures and training programs to comply with HIPAA
 
 
 

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and applicable state privacy and security laws and has maintained workforce
training logs to document that such training has been conducted.  To the extent
required by HIPAA, the Company has Business Associate Agreements in place with
each of its customers and with each of its subcontractors and its other
“business associates,” as defined under HIPAA, and each such Business Associate
Agreement covers all applicable obligations of business associates and covered
entities under HIPAA.  The Company has not received from any governmental entity
or any customer, subcontractor, or business associate of the Company, any
written complaint, notice or other notification of a complaint regarding the
Company’s compliance with HIPAA or any other Law applicable to Personal
Information.  Except as set forth on Schedule 2.17(b) of the Company Disclosure
Schedule, the Company has not received written notice of, or is not otherwise
aware of, any complaints, breaches, non-permitted uses or disclosures, or other
incidents of alleged compromises to the privacy or security of individually
identifiable health information or other Personal Information.  As used in this
Agreement, “HIPAA” means the Administrative Simplification provisions of the
Health Insurance Portability and Accountability Act of 1996, including the
Standards for Privacy of Individually Identifiable Health Information (45 CFR
Part 160 and Part 164, Subparts A, D and E), the Transactions and Code Set
Standards (45 CFR Part 162), and Security Standards for the Protection of
Electronic Protected Health Information (45 CFR Part 164, Subparts A and C), as
in effect on the date hereof, and the Health Information Technology for Economic
and Clinical Health Act provisions of the American Recovery and Reinvestment Act
of 2009 set forth at 42 USC § 17931 et seq., and all implementing regulations
thereof, including all provisions that have been enacted as of the date hereof.
 
(c) There has been no material breach of security or other unauthorized access
by third parties to the Personal Information or confidential information in the
Company’s possession, custody or control and there have been no successful
unauthorized intrusions or breaches of the security of information technology
systems of the Company.  The Company has written policy guidelines for all
parties with access to its computer systems regarding use of its computer
systems, including use of the Internet and e-mail, and, to the Knowledge of the
Company, such policy guidelines have been and are being complied with.  With
respect to all Personal Information gathered or accessed in the course of the
operations of the Company, the Company has taken commercially reasonable steps,
consistent with industry standards and Laws, to protect such Personal
Information against loss and against unauthorized access, use, modification,
disclosure or other misuse.
 
(d) The Company has in place disaster recovery plans, procedures and facilities
that satisfy applicable Laws.  The disaster recovery and security plans,
procedures and facilities specified meet all representations made to, and
obligations with, all customers, and the Company is in compliance in all
material respects therewith.
 
 
2.18 Title to Assets; Liens.  The Company owns outright and has good title to,
or, in the case of leased properties and assets, has valid leasehold interests
in, all of its assets and properties, including, without limitation, all of the
assets and properties reflected on the Interim Balance Sheet and all other
assets and properties that are reasonably necessary for the conduct of its
Business (collectively, the “Company Assets”), free and clear of any Lien,
except for (a) assets and properties disposed of, or subject to purchase or
sales orders, in the ordinary course
 
 
 

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of business since the date of the Interim Balance Sheet and (b) liens or other
encumbrances securing the claims of materialmen, carriers, landlords and like
persons, or for Taxes, all of which are not yet due and payable (“Permitted
Liens”).  At the Effective Time, the Surviving Corporation will own all right,
title and interest in the Company Assets, free and clear of Liens except
Permitted Liens.
 
 
2.19 Business Relationships; Resellers; Warranties.
 
 
(a) Schedule 2.19(a) of the Company Disclosure Schedule sets forth a list of all
customers that accounted for at least $50,000 of consolidated net sales by the
Company during the twelve calendar months ended as of September 30, 2013.  To
the Knowledge of the Company, (a) all such customers will continue purchasing,
without significant reductions, products and services from the Company and (b)
all suppliers, vendors and service providers which are material to the Company
will continue after the Closing to sell the products and provide the services to
the Surviving Corporation currently sold and provided by them.  Since January 1,
2013, no customer representing more than $50,000 of consolidated annualized
revenues and no significant supplier, vendor or service provider (x) has
terminated or, to the Knowledge of the Company threatened to terminate, its
relationship with the Company, (y) has decreased or limited materially or, to
the Knowledge of the Company, threatened to decrease or limit materially, the
services, supplies or materials supplied to or purchased from the Company, or
(z) has materially changed or, to the Knowledge of the Company, threatened to
change materially, its business relationship with the Company.
 
 
(b) To the Company’s Knowledge, it has not sold, transferred, licensed,
disclosed, made available to the public or otherwise released for distribution
any of its customer files and other customer information relating to the
Company’s current and former customers or agreed to do any of the
foregoing.  Except for information made available to sales representatives
(which information is subject to a customary non-disclosure agreement), no
Person other than the Company possesses or has any claims or rights with respect
to use of such customer files and other customer information.
 
 
(c) Since January 1, 2012, there have been no material claims against the
Company alleging any material defects in the Company’s services or products, or
alleging any failure of such products or services of the Company to meet
applicable specifications, warranties or contractual commitments.  To the
Company’s Knowledge, the Company’s products and services are free from material
defects and perform in all material respects in accordance with all applicable
specifications, warranties and contractual commitments.
 
 
2.20 Employee Benefit Plans.
 
 
(a) Schedule 2.20 of the Company Disclosure Schedule contains complete and
accurate lists of all Employee Benefit Plans (as defined below) currently
maintained or contributed to by the Company or any ERISA Affiliate (as defined
below), or pursuant to which the Company has any Liability (“Company Benefit
Plan”).  For purposes of this Agreement, “Employee Benefit Plan” means (i) any
“employee pension benefit plan” (as defined in Section
 
 
 

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3(2) of ERISA), (ii) any “employee welfare benefit plan” (as defined in Section
3(1) of ERISA), and (iii) any other formal or informal, written or oral plan,
program, agreement or any arrangement designed to provide employee benefits or
compensation, including salary, wages (including commissions), insurance
coverage, survivor benefits, severance benefits, disability benefits, deferred
compensation, bonuses (discretionary or otherwise), stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement or post-termination compensation, in each case
relating to any current or former director, officer, employee, consultant,
member, partner, independent contractor or agent of the Company or any ERISA
Affiliate.  For purposes of this Agreement, “ERISA Affiliate” means (i) any
corporation included with the Company in a controlled group of corporations
within the meaning of Section 414(b) of the Code; (ii) any trade or business
(whether or not incorporated) that is under common control with the Company
within the meaning of Section 414(c) of the Code; (iii) any member of an
affiliated service group of which the Company is a member within the meaning of
Section 414(m) of the Code; or (iv) any other person or entity treated as
aggregated with the Company under Section 414(o) of the Code or Section 4001(b)
of ERISA.
 
 
(b) The Company has made available the Buyer with current, accurate and complete
copies (as amended to date) of (i) each Company Benefit Plan that has been
reduced to writing (and, with respect to any 401(k) Plan, all prior amendments
to such plan), (ii) an accurate summary of the material terms of each Company
Benefit Plan that has not been reduced to writing, (iii) the Summary Plan
Description for each Company Benefit Plan subject to Title I of ERISA, and in
the case of each other Company Benefit Plan, any similar employee summary
(including but not limited to any employee handbook description), submitted to
any governmental agency or distributed to participants or beneficiaries
thereunder in the current or any of the three (3) preceding calendar years, (iv)
for each Company Benefit Plan intended to be qualified under Section 401(a) of
the Code, the most recent determination or opinion letter or exemption
determination issued by the IRS, (v) for each Company Benefit Plan with respect
to which a Form 5500 series annual report/return is required to be filed, the
most recently filed such annual report/return and annual report/return for the
three (3) preceding years, together with all schedules and exhibits, (vi) all
insurance contracts, administrative services contracts, trust agreements,
investment management agreements or similar agreements maintained in connection
with any Company Benefit Plan, and (vii) for each Company Benefit Plan that is
intended to be qualified under Code Section 401(a), copies of compliance testing
results (nondiscrimination testing (401(a)(4), ADP, ACP, multiple use), 402(g),
415 and top-heavy tests) for the most recent plan year.  No employee benefit
handbook or similar employee communication relating to any Company Benefit Plan
nor any written communication of benefits under such Company Benefit Plan
describes the Company Benefit Plan in a manner inconsistent in any material
respect with the documents and summary plan descriptions relating to such
Company Benefit Plan that have been delivered pursuant to the preceding
sentence.
 
 
(c) There is no entity (other than the Company) that together with the Company
would be treated as a single-employer within the meaning of Section 414(b), (c),
(m) or (o) of the Code or Section 4001(b) of ERISA.
 
 
(d) Each Company Benefit Plan that is intended to be qualified under
Section 401(a) of the Code either (i) has been determined to be so qualified by
the IRS and has received a favorable determination letter from the IRS to that
effect, or (ii) with respect to any
 
 
 

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Company Benefit Plan that is a standardized prototype plan, has been determined
to be so qualified by the IRS and has received a favorable opinion letter from
the IRS to that effect, and to the Knowledge of the Company, there are no
current circumstances that should result in revocation of any such favorable
determination letter or opinion letter.  Each Company Benefit Plan has been
administered in all material respects in accordance with the terms of such plan
and the provisions of any and all statutes, Orders or governmental rules or
regulations, including without limitation ERISA, the Code, or HIPAA, whether as
a matter of substantive Law or as necessary to secure favorable tax treatment,
and nothing has been done or not done with respect to any Company Benefit Plan
that could reasonably be expected to result in any material Liability on the
part of the Company under Title I of ERISA or Chapter 43 of the Code.  All
reports, forms and notices required to be filed with respect to each Company
Benefit Plan, including without limitation Form 5500 series annual
reports/returns and PBGC Form 1s, have been timely filed.  All contributions,
premiums and other amounts due to or in connection with each Company Benefit
Plan under the terms of the Company Benefit Plan or applicable Law have been
timely made, and provision has been made in the Interim Balance Sheet for such
contributions, premiums and other amounts that were due as of the Interim
Balance Sheet Date but were attributable to service before such date.
 
 
(e) No Company Benefit Plan is or has been subject to Title IV of ERISA, Section
312 of the Code or Section 302 of ERISA.  No Liability to the Pension Benefit
Guaranty Corporation (“PBGC”) or any multi-employer plan has been incurred by
the Company or any ERISA Affiliate (other than insurance premiums satisfied in
due course).
 
 
(f) There is no pending or, to the Knowledge of the Company, threatened
proceeding relating to any Company Benefit Plan and, except for routine benefit
claims, to the Knowledge of the Company, there is no basis for any such
proceeding.  To the Knowledge of the Company, no fiduciary or any Person who is
a party in interest in respect of a Company Benefit Plan within the meaning of
Section 3(14) of ERISA has engaged in a transaction with respect to any Company
Benefit Plan that, assuming the taxable period of such transaction expired as of
the date hereof, could subject the Company to a material tax or penalty imposed
by either Section 4975 of the Code or Sections 409, 502(i) or 502(1) of ERISA or
a material violation of Section 406 of ERISA.  The Transactions will not result
in the assessment of a material tax or penalty under Section 4975 of the Code or
Sections 409, 502(i) or 502(l) of ERISA nor result in a material violation of
Section 406 of ERISA.
 
 
(g) All Company Benefit Plans providing welfare benefits are in compliance with
the applicable terms of ERISA, the Code, and any other applicable laws,
including the Americans with Disabilities Act of 1990, the Family Medical Leave
Act of 1993 and HIPAA, and such plans have been operated in compliance with such
laws and the written the Company Benefit Plan documents and all required reports
and descriptions of the Company Benefit Plans (including IRS Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions and Summaries of
Material Modifications) have been (when required) timely filed with the IRS, the
Department of Labor or other governmental authority and distributed as required,
and all notices required by ERISA, the Code, HIPAA or any other legal
requirement required to be given by the Company with respect to the Company
Benefit Plans have been appropriately given.
 
 
 

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(h) All claims for welfare benefits incurred by participants and beneficiaries
on or before the Closing Date are or will be fully covered by fully-funded or
paid-up third-party insurance policies or programs, and no insured arrangement
involves any retrospective premium, minimum premium, or similar arrangement with
any of the Company’s insurers.  Except for continuation of health coverage to
the extent required under Section 4980B of the Code or Section 601 et seq. of
ERISA (“COBRA”), or applicable state and foreign laws, there are no obligations
under any Company Benefit Plan providing welfare benefits after termination of
employment.
 
 
(i) Each Company Benefit Plan can be amended, modified or terminated without
advance notice to or consent by any Employee or beneficiary, and without
liability for any payment or penalty.  Neither the Company nor any ERISA
Affiliate (i) has undertaken to maintain any Company Benefit Plan for any period
of time, or (ii) has announced its intention, or undertaken (whether or not
legally bound) to modify or terminate any Employee Benefit Plan or adopt any
arrangement or program which, once established, would come within the definition
of Employee Benefit Plan.
 
 
(j) Neither the Company nor any ERISA Affiliate has ever maintained, sponsored,
contributed to, been required to contribute to, or incurred any liability under
any: (i) multi-employer plan as defined in Section 3(37) or Section 4001(a)(3)
of ERISA, (ii) multiple employer plan as defined in Section 413(c) of the Code,
or any plan that has two or more contributing sponsors at least two of whom are
not under common control, within the meaning of Section 4063(a) of ERISA, (iii)
welfare benefit fund within the meaning of Section 419(e) of the Code, or (iv)
voluntary employees’ beneficiary association, within the meaning of
Section 501(c)(9) of the Code.
 
 
(k) Except as otherwise disclosed on Schedule 2.20(k) of the Company Disclosure
Schedule, no Employee of, consultant to, or other provider of services to the
Company or any ERISA Affiliate will be entitled to any additional benefit or the
acceleration of the payment or vesting of any benefit under any Company Benefit
Plan by reason of the Merger or any of the other Transactions.
 
 
(l) The Company is not a party to any contract or agreement, plan, or
arrangement, including without limitation this Agreement, that, individually or
collectively with other agreements, and taking into account any transactions or
payments contemplated by this Agreement, could reasonably be expected to give
rise to the payment to any Person of any amount that would not be deductible by
the Company by reason of Section 280G of the Code.  The Company has no
obligation to make any reimbursement or other payment to any such person with
respect to any Tax imposed under Section 4999 of the Code.
 
 
(m) To the Knowledge of the Company, the Company has no material Liability,
including under a Company Benefit Plan, arising out of the treatment of any
service provider as a consultant or independent contractor and not as an
Employee, or vice-versa.
 
 
(n) None of the Company Benefit Plans is a “nonqualified deferred compensation
plan” within the meaning of Section 409A(d)(1) of the Code.
 
 
 
 

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(o) With respect to each Company Benefit Plan for which a separate fund or
assets is or is required to be maintained, full and timely payment has been made
of all amounts required of the Company, under the terms of each such Company
Benefit Plan or applicable Law (as determined without regard to any waiver of
legally applicable funding requirements), as applied through the Closing
Date.  The fair market value of the assets of each Company Benefit Plan, as of
the end of the most recently ended plan year of that Company Benefit Plan,
equals or exceeded the present value of all benefits Liabilities under that
Company Benefit Plan.  None of the assets of any Company Benefit Plan include
any capital stock or other securities issued by the Company or any ERISA
Affiliate.
 
 
(p) The Company has maintained all Employee Benefit Plans required to be
maintained by applicable Law.  With respect to each Foreign Plan: (i) such
Foreign Plan and the manner in which it has been administered satisfies all
applicable laws in all material respects, including providing all benefits
required by applicable Law, (iii) all contributions to such Foreign Plan
required through the Closing Date of this Agreement have been or will be made by
the Company, (iii) such Foreign Plan is either fully funded (or fully insured)
based upon generally accepted local actuarial and accounting practices and
procedures or adequate accruals for such Foreign Plan have been made in the
Company’s financial statements, and (iv) the consummation of the Transactions
will not by themselves create or otherwise result in any liability with respect
to such Foreign Plan.
 
 
2.21 Employment Matters.
 
 
(a) Schedule 2.21(a) of the Company Disclosure Schedule lists the name, title
and date of hire of (i) each current Employee of the Company, (ii) each current
independent contractor of the Company, (iii) the rate of compensation of each
individual disclosed in (i) and (ii), and (iv) each person who has accepted an
offer of employment or to whom such an offer is outstanding.  The employment of
all Employees of the Company is “at will” and may be terminated by the Surviving
Corporation without payment of any severance or other compensation other than
accrued compensation.  The Company has made available to the Buyer accurate and
complete records of service credit of all Employees and other persons subject to
any Employee Benefit Plan.
 
 
(b) Schedule 2.21(b) of the Company Disclosure Schedule sets forth (a) each
plan, Contract, scheme or the Company Benefit Plan (i) pursuant to which any
amounts may become payable (whether currently or in the future, either
automatically or in connection with a change in employment circumstance) to any
Person (including any Employee) as a result of or in connection with the
Transactions, or (ii) which provides for the acceleration or early vesting of
any right or benefit or lapse of any restriction as a result of or in connection
with the Merger, in each case including any such plan, scheme, Contract or the
Company Benefit Plan with respect to which the Merger constitutes a partial or
“single trigger” of a “double trigger” arrangement (each a “Change in Control
Agreement”), and (b) a summary of the nature and amounts that may become payable
pursuant to each such Change in Control Agreement.
 
 
(c) The Company (i) is and has been in compliance in all material respects with
all applicable Laws respecting Employees, consultants, independent contractors,
 
 
 

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employment, employment practices, terms and conditions of employment and wages
and hours, (ii) has withheld all amounts required by Law or by agreement to be
withheld from the wages, salaries and other payments to its respective current
and former Employees and transmitted such funds to the appropriate entities,
(iii) is not liable for any arrears of wages or any Taxes or any penalty for
failure to comply with any of the foregoing, and (iv) is not liable for any
payment to any trust or other fund or to any Governmental Entity with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees other than routine payments to be made in the normal
course of business and consistent with past practice as reflected in the
Financial Statements.
 
 
(d) No work stoppage or labor strike is pending against the Company or, to the
Knowledge of the Company, threatened, and to the Company’s Knowledge, no event
has occurred or circumstances exist or existed that could provide the basis for
any work stoppage or other labor dispute.  There is and has been no lockout of
any Employees and no such action is contemplated by the Company.  The Company is
not involved in or, to the Knowledge of the Company, threatened with, any labor
dispute, grievance, or litigation relating to labor, safety or discrimination
matters involving any Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints.  The Company has not engaged in
any unfair labor practices within the meaning of the National Labor Relations
Act or comparable activity proscribed by foreign Law.  The Company is not
presently, nor has it been in the past, a party to, or bound by (i) any
collective bargaining agreement or union contract (and no collective bargaining
agreement is being negotiated by the Company) or (ii) any statutory works
council or other agreement, statute, rule or regulation that mandates employee
approval, participation, consultation or consent with regard to any corporate
matter, including without limitation the Transactions.
 
 
(e) To the Knowledge of the Company, (i) no Employee of or consultant to the
Company is, and no former Employee or consultant was during the term of his or
her service, in violation of any term of any employment contract, intellectual
property disclosure agreement, non-competition agreement, or any restrictive
covenant (A) to a former employer relating to the right of any such Employee or
consultant to be employed by or to consult with the Company because of the
nature of the business conducted or presently proposed to be conducted by the
Company or (B) relating to the use of trade secrets or proprietary information
of others, and (ii) no Employee of the Company listed on Schedule 2.21(a) of the
Company Disclosure Schedule has given notice of his or her intent to terminate
his or her employment with the Company.
 
 
(f) There are, and have been, no charges or other claims of employment
discrimination pending or, to the Company’s Knowledge, threatened against the
Company at the Equal Employment Opportunity Commission or any comparable local,
state or foreign human rights agency within the past three (3) years, and none
currently are pending.
 
 
(g) To the Company’s Knowledge, there has been no investigation or claims
pending or threatened against the Company by the United States Department of
Labor or comparable state or foreign agency within the past three (3) years
regarding wage and hour issues, including, but not limited to the Fair Labor
Standards Act and the Family and Medical Leave Act.
 
 
 

--------------------------------------------------------------------------------

 
 
(h) There are no occupational health and safety claims against the Company
brought by an Employee, former Employee, the Occupational Health and Safety
Administration (OSHA) or any local, state or foreign equivalent, and, to the
Company’s Knowledge, there have been no such filed or threatened claims.
 
 
(i) The Company has not effectuated either (i) a “plant closing” (as defined in
the federal WARN Act and/or an equivalent state, local or foreign Law) affecting
any site of employment or one or more facilities or operating units within any
site of employment or facility of the Company or (ii) a “mass layoff” (as
defined in the federal WARN Act and/or an equivalent state, local or foreign
Law) affecting any site of employment or facility of the Company.  The Company
has not been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar Law and
none of the Employees of the Company has suffered an “employment loss” (as
defined in the federal WARN Act and/or an equivalent state or local Law) during
the six months prior to the date hereof.
 
 
(j) The Company currently is in and in the past has been in compliance with the
terms and provisions of the Immigration Reform and Control Act of 1996, as
amended, and all related regulations promulgated thereunder.
 
 
(k) Neither the Company nor ERISA Affiliate has any “leased employees” within
the meaning of Section 414(n) of the Code or any independent contractors or
other individuals who provide employee-type services but who are not recognized
by the Company as employees of the Company.
 
 
2.22 Insurance.  Schedule 2.22 of the Company Disclosure Schedule sets forth a
list of all policies or binders of fire, theft, general liability, product
liability, professional liability, worker’s compensation, vehicular, directors
and officers and other insurance held by or on behalf of the Company, and of all
life insurance policies maintained on the lives of any of their Employees,
specifying the type and amount of coverage, the premium, the insurer and the
expiration date of each such policy (collectively, the “Insurance
Policies”).  True, correct and complete copies of all Insurance Policies have
been previously made available to the Buyer.  The Insurance Policies are in full
force and effect and are valid and enforceable in accordance with their
terms.  All premiums due on the Insurance Policies or renewals thereof have been
paid, and there is no default under any of the Insurance Policies.  The Company
has no outstanding claim or any dispute with any insurance carrier regarding
claims, settlements or premiums.
 
 
2.23 Brokers.  No broker, finder, agent or similar intermediary has acted on
behalf of the Company or any of its Securityholders in connection with this
Agreement or the Transactions, and there are no commissions, finders’ fees or
similar fees or commissions payable in connection therewith.
 
 
2.24 Environmental Compliance. The ownership and use of the Company’s premises
and assets, the occupancy and operation thereof by the Company, and the conduct
of the Company’s operations and business, are in compliance in all material
respects with all
 
 
 

--------------------------------------------------------------------------------

 
applicable Laws relating to pollution, environmental protection, hazardous
substances and related matters. The Company has not received any notice from any
Governmental Entity or any other Person of any alleged violation or
noncompliance of such Laws.  To the Company’s Knowledge, there is no liability
attaching to the Company or such premises or assets or the ownership or
operation thereof as a result of any hazardous substance that may have been
discharged on or released from such premises, or disposed of on-site or off-site
occurring prior to the Closing or existing as of the Closing. For purposes of
this Section, “hazardous substance” shall mean any substance which is included
within the definition of a “hazardous substance”, “pollutant”, “toxic
substance”, “toxic waste”, “hazardous waste”, “contaminant” or other words of
similar import in any applicable federal, state or local environmental law,
statute, ordinance, rule or regulation.
 
 
2.25 Unlawful Payments.  Neither the Company nor, to the Knowledge of the
Company, any of its directors, officers, agents, Employees or other persons
acting on behalf of the Company has, in violation of applicable United States or
non-United States Law: (a) used any corporate or other funds for contributions,
payments, gifts, or entertainment, (b) made any unlawful expenditures relating
to political activity to government officials or others, (c) established or
maintained or failed to record any funds or accounts, (d) accepted or received
any contributions, payments, gifts or expenditures, (e) made any offer, payment
or promise to pay any money or to make any gift to any official or Employee of a
Governmental Entity or any political party or official thereof or any candidate
for political office, or (f) engaged in any conduct constituting a violation of
the Foreign Corrupt Practices Act of 1977.
 
 
2.26 Related Party Transactions. Except as set forth on Schedule 2.26 of the
Company Disclosure Schedule, (a) the Company is not a party to any contract or
arrangement with, or indebted, either directly or indirectly, to any of its
officers, directors or Securityholders, or any of their respective relatives or
Affiliates, other than (i) the compensation disclosed with respect to Employees
on Schedule 2.21 of the Company Disclosure Schedule, (ii) contracts involving
the purchase of Company Stock from the Company by such Person identified on
Schedule 2.2(a) and contracts involving the grant by the Company to such Person
of Purchase Rights identified on Schedule 2.2(b), (iii) at-will employee offer
letters and (iv) the agreements set forth on Schedules 5.4 and 9.7 of the
Company Disclosure Schedule; (b) none of such Persons is indebted to the
Company, or, to the Company’s Knowledge, has any direct or indirect ownership
interest in, or any contractual or business relationship with, any Person with
which the Company is or was affiliated or with which the Company has a business
relationship, or any Person which, directly or indirectly, competes with the
Company; and (c) none of the Company’s officers, directors or Securityholders
has any interest in any property, real or personal, tangible or intangible,
including inventions, copyrights, trademarks, or trade names, used in or
pertaining to the business of the Company, or any supplier, distributor or
customer of the Company.
 
 
2.27 Bank and Brokerage Accounts; Powers of Attorney.  Schedule 2.27 of the
Company Disclosure Schedule (a) identifies all bank and brokerage accounts used
in connection with the operations of the Company, whether or not such accounts
are held in the name of the Company and lists the respective signatories
therefor and (b)
 
 
 

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lists the names of all persons holding a power of attorney from the Company and
a summary statement of the terms thereof.
 
2.28 Full Disclosure.   Neither this Agreement (including the Company Disclosure
Schedule, the exhibits hereto), nor any other document delivered by the Company
to Buyer or its attorneys or agents in connection herewith or therewith or with
the transactions contemplated hereby or thereby, contain any untrue statement of
a material fact nor, to the Knowledge of the Company, omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading.
 
 
2.29 Exclusivity of Representations and Warranties.  The representations and
warranties made by the Company in this Section 2 are the exclusive
representations and warranties made by the Company in this Agreement.  The
Company hereby disclaims and other express or implied representations or
warranties with respect to such matters.
 
 
SECTION 3
 
 
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
 
 
The Buyer and the Merger Sub represent and warrant to the Company that:
 
 
3.1 Organization; Authority.  The Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of The Commonwealth of
Massachusetts.  The Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.  Each of
the Buyer and the Merger Sub has all requisite corporate power and authority to
enter into this Agreement and the Ancillary Agreements, as applicable, and to
perform fully its obligations hereunder and thereunder and to consummate the
Transactions.
 
 
3.2 Binding Effect.  The execution and delivery of this Agreement and the
Ancillary Agreements, as applicable, the performance of the obligations
hereunder and thereunder and the consummation of the Merger and the other
Transactions have been duly authorized by all necessary corporate action on the
part of the Buyer and the Merger Sub, respectively.  This Agreement has been,
and the Ancillary Agreements will have been, duly executed and delivered by each
of the Buyer and the Merger Sub, as the case may be, and, assuming due
authorization, execution and delivery of this Agreement and the Ancillary
Agreements to which the Buyer or the Merger Sub, as the case may be, may be a
party, by the Company and the Founders, this Agreement constitutes, and the
Ancillary Agreements will constitute, the valid and binding obligation of the
Buyer or the Merger Sub, as the case may be, enforceable against them in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ rights generally and by general equitable principles.
 
 
 

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3.3 No Breach; Consents.  The execution, delivery and performance of this
Agreement and the Ancillary Agreements by the Buyer and of this Agreement by the
Merger Sub, and the consummation of the Transactions by the Buyer and the Merger
Sub, do not and, with or without notice or the lapse of time or both, will not
(a) violate any provision of the Articles of Organization or Bylaws of the Buyer
or the Certificate of Incorporation or Bylaws of the Merger Sub; (b) violate any
Order of any Governmental Entity against, or binding upon, the Buyer or the
Merger Sub; (c) violate any statute, Law or regulation; (d) violate any Permit
of the Buyer; or (e) require on the part of the Buyer the making or obtaining of
any Consent of any Governmental Entity or of any other Person other than the
filing of the Certificate of Merger under the DGCL.
 
 
3.4 Actions and Proceedings.  There is no action, suit or claim, legal,
administrative or arbitration proceeding, or investigation pending or, to the
Knowledge of the Buyer, threatened against or involving the Buyer or any of its
directors, officers or employees in their capacities as such that in any manner
challenges or seeks to prevent, enjoin, alter or delay any of the Transactions.
 
 
3.5 Brokers.  No broker, finder, agent or similar intermediary has acted on
behalf of the Buyer or Merger Sub in connection with this Agreement or the
Transactions, and there are no commissions, finders’ fees or similar fees or
commissions payable in connection therewith.
 
 
3.6 Adequacy of Funds.  The Buyer has, and will have prior to or at the Closing,
adequate financial resources to satisfy its monetary and other obligations under
this Agreement, including, without limitation, the obligation to pay the Merger
Consideration in accordance herewith.
 
 
3.7 Reliance.  Neither the Buyer nor the Merger Sub has relied on and is not
relying on any representations or warranties regarding the Company or the
Business other than those representations and warranties expressly set forth in
this Agreement or in any certificate, document or other instrument delivered by
or on behalf of the Company pursuant to this Agreement.
 
 
SECTION 4
 
 
COVENANTS OF THE COMPANY AND THE FOUNDERS
 
 
4.1 Conduct of the Business.   Unless otherwise approved in writing by the
Buyer, the Company will comply with the following covenants until the earlier of
the Effective Time and the termination of this Agreement.
 
 
(a) The Company will:
 
 
(i) maintain its legal existence;
 
 
(ii) use all reasonable efforts to preserve the Business and its business
organization intact, retain its licenses, permits, authorizations, franchises
and
 
 
 

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certifications, and preserve the existing contracts and goodwill of its
customers, suppliers, vendors, service providers, personnel and others having
business relations with it;
 
 
(iii) conduct its business only in the ordinary course (including without
limitation the collection of receivables and the payment of payables and capital
expenditures); and
 
 
(iv) use all reasonable efforts to operate in such a manner as to assure that
the representations and warranties of the Company set forth in this Agreement
will be true and correct as of the Closing Date with the same force and effect
as if such representations and warranties had been made on and as of the Closing
Date.
 
 
(b) The Company will not:
 
 
(i) change its method of management or operations in any material respect;
 
 
(ii) dispose, acquire or license any assets or properties, or make any
commitment to do so, other than in the ordinary course of business;
 
 
(iii) except as set forth on Schedule 4.1 of the Company Disclosure Schedule,
incur any indebtedness for borrowed money, make any loans or advances, assume,
guarantee or endorse or otherwise become responsible for the obligation of any
other Person, or subject any of its properties or assets to any Lien other than
Permitted Liens, in each case other than in the ordinary course of business;
 
 
(iv) modify, amend, cancel or terminate any Material Contract or any Company
Benefit Plan;
 
 
(v) make any change in the compensation paid or payable to any officer,
director, manager, employee, agent, representative or consultant as shown or
required to be shown on Schedule 2.21(a) of the Company Disclosure Schedule;
 
 
(vi) promote, change the job title of, or otherwise alter in any material
respect the responsibilities or duties of, any management employee or officer of
the Company;
 
 
(vii) other than in the ordinary course of business consistent with past
practice, enter into any licensing, distribution, sponsorship, advertising,
merchant program or other similar contracts, agreements, or obligations which
may not be cancelled without penalties by the Company upon notice of 30 days or
less;
 
 
(viii) (A) sell, assign, lease, terminate, abandon, transfer or otherwise
dispose of or grant any security interest in and to any item of Company
Intellectual Property, in whole or in part, (B) grant any license with respect
to any Company Intellectual Property, other than license of Company Products to
customers and resellers of the Company to whom the Company licenses such Company
Products in the ordinary course of business, (C) develop, create or invent any
Intellectual Property jointly with
 
 
 

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any third party, (D) disclose, or allow to be disclosed, any confidential
Company Intellectual Property, unless such Company Intellectual Property is
subject to a confidentiality or non-disclosure covenant protecting against
disclosure thereof or (E) allow any Company Intellectual Property owned by the
Company to become abandoned, dedicated, disclaimed, or lapse, provided that the
Company shall not be required to make any filings, registrations or take any
prosecution actions with respect to such Company Intellectual Property that it
would not take in the ordinary course of business consistent with past practice;
 
 
(ix) enter into any contract or agreement which would otherwise be considered a
Material Contract other than contracts or agreements with customers and
resellers to whom the Company licenses Company Products in the ordinary course
of business;
 
 
(x) make or cause to be made any dividend, distribution, redemption, repurchase,
recapitalization, reclassification, issuance, split, combination or other
transaction involving the capital stock or other equity securities of the
Company (other than in the connection with the exercise of Purchase Rights
outstanding as of the date hereof), or any option, warrant or right to acquire
any such capital stock or equity securities;
 
 
(xi) make any change in its accounting practices or procedures;
 
 
(xii) file or make any change to any material Tax election or any Tax Return,
except as required by law;
 
 
(xiii) change its customer pricing or offer any rebates, discounts or
promotions, other than in the ordinary course of business;
 
 
(xiv) acquire any business or Person, whether by merger or consolidation,
purchase of assets or equity securities or any other manner;
 
 
(xv) cancel or waive any rights of substantial value, or pay, discharge or
settle any claim of substantial value;
 
 
(xvi) make any capital expenditures that, individually or in the aggregate,
exceed $25,000; or
 
 
(xvii) commit to do any of the foregoing referred to in clauses (i) - (xvi).
 
 
4.2 Access.  Until the Closing Date, if requested by the Buyer and at its
expense, the Company will permit the Buyer and its representatives, during
normal business hours, access to (a) the assets, properties, records, books of
account, contracts and other documents of the Company and (b) any employees,
advisors, consultants, other personnel, customers, service providers, vendors or
suppliers of, or others having material business relations with, the
Company.  Until the Closing Date, the Company will furnish promptly to the Buyer
such additional data and other information
 
 
 

--------------------------------------------------------------------------------

 
as to its affairs, assets, business, properties or prospects as the Buyer or its
representatives may from time to time reasonably request.
 
 
4.3 Stockholder Approval; Dissenters’ Rights.
 
 
(a) The Company will, as soon as practicable following the execution of this
Agreement, solicit the adoption and approval by the Stockholders of this
Agreement, the Merger and the Transactions, including the Escrow Agreement and
the appointment of the Securityholders’ Representative, in accordance with the
DGCL and the Company Certificate of Incorporation and the Company Bylaws (the
“Stockholder Approval”).  It is anticipated that the requisite Stockholders will
provide the Stockholder Approval by written consent within forty eight (48)
hours following the execution of this Agreement by the Company.  The Buyer and
the Merger Sub shall provide to the Company any information for inclusion in
preparation for the Stockholder Approval that may be required under applicable
Law and that is reasonably requested by the Company.
 
 
(b) Any materials to be submitted to the Stockholders in connection with their
approval of the Transactions and this Agreement shall be subject to review and
reasonable approval by the Buyer, which shall not be unreasonably withheld,
conditioned or delayed.
 
 
(c) The Company shall use its commercially reasonable efforts to obtain the
approval or consent of as many of its Stockholders as possible as promptly as
practicable following the date hereof.
 
 
(d) The Company shall give the Buyer (i) prompt notice of any written demands
for appraisal under the DGCL with respect to any shares of the Company Stock,
any withdrawal of any such demands and any other instruments served pursuant to
the DGCL and received by the Company and (ii) the right to participate in all
negotiations and proceedings with respect to any demands for appraisal under the
DGCL with respect to any shares of the Company Stock.
 
 
4.4 Efforts; Cooperation.
 
 
(a) The Company will use all reasonable efforts to cause the conditions
specified in Section 8 (Condition to Each Party’s Obligation to Close) and
Section 9 (Conditions to the Obligation of the Buyer and the Merger Sub to
Close) to be satisfied as soon as practicable.
 
 
(b) The Company will use all reasonable efforts to obtain the Required Consents.
 
 
(c) Should any Person require as a condition to it consenting to the
Transactions or otherwise providing a Required Consent, (i) the amendment,
modification or replacement of any material term of any authorization,
certification, franchise, license, permit or contract, or (ii) any new material
terms to any authorization, certification, franchise, license, permit or
contract, the Company shall not agree to the same without the prior written
approval of
 
 
 

--------------------------------------------------------------------------------

 
the Buyer.  Any fee or other cost required to be incurred to obtain any Required
Consent shall be borne by the Company or, if required to paid after the Closing,
the Securityholders.
 
 
4.5 Nonsolicitation.   Prior to the Closing, neither the Company nor any of the
Founders will, directly or indirectly, (a) engage in any negotiations with or
provide any information to any other Person with respect to any offers for (i)
the purchase of the Company or the purchase of all or any substantial portion of
the securities or assets (including by merger or in any other form of
transaction) of the Company, or (ii) an investment in the Company or the
purchase of any securities of the Company except as set forth on Schedule 4.1 of
the Company Disclosure Schedule (each an “Alternative Transaction”); (b) solicit
any such Alternative Transaction; or (c) dispose, acquire or license a material
portion of the Company’s assets or make any commitment to do so, other than in
the ordinary course of business.  The Company and the Founders shall notify
Buyer promptly (but in no event later than twenty-four (24) hours) after it
receives or any of its representatives receive any proposal with respect to an
Alternative Transaction, or any request for non-public information relating to
the Company or for access to the business, properties, assets, books or records
of the Company, in each case to the extent requested in connection with an
Alternative Transaction.  In such notice, the Company and the Founders shall
identify the Person making, and the material terms and conditions of, any such
Alternative Transaction.
 
 
4.6 Confidentiality; Non-Disparagement.  Prior to the Closing, the Company shall
abide by the terms of the Confidentiality Agreement.  At all times following the
Closing, no Founder shall:
 
 
(a)  directly or indirectly, disclose, divulge or make use of any trade secrets
or other information of a business, financial, marketing, technical or other
nature pertaining to the Buyer, the Surviving Corporation, the Company or the
Business, including information of others that the Buyer, the Surviving
Corporation or the Company has agreed to keep confidential, except (i) to the
extent that such information shall have become public knowledge other than by
breach of this Agreement by any of the Securityholders, (ii) as required in
connection with the performance of such Founder’s duties as an employee of the
Surviving Corporation, and (iii) to the extent that disclosure of such
information is required by law or legal process (but only after the Founder has
provided the Company with reasonable notice and opportunity to take action
against any legally required disclosure).
 
 
(b) make any disparaging statements regarding the Company, the Surviving
Corporation, the Buyer, any of their respective Affiliates or the Business.
 
 
4.7 Noncompetition.
 
 
(a) During the Noncompetition Period, no Founder will, directly or indirectly,
or as a stockholder, partner, member, manager, employee, consultant or other
owner or participant in any Person, other than the Surviving Corporation, (i)
engage in or assist any other Person to engage in any Covered Business or
provide services (whether as an employee,
 
 
 

--------------------------------------------------------------------------------

 
contractor, agent or otherwise) or assist any other Person to provide services
to a Covered Entity anywhere in the Covered Area, (ii) solicit or endeavor to
entice away from the Surviving Corporation, or offer employment or a consulting
position to, hire or otherwise interfere with the business relationship of the
Surviving Corporation with, any Person who is, or was within the one-year period
prior thereto, an employee of or consultant to the Surviving Corporation, or
(iii) solicit or endeavor to entice away from the Surviving Corporation,
endeavor to reduce the business conducted with the Surviving Corporation by, or
otherwise interfere with the business relationship of the Surviving Corporation
with, any Person who is, or was within the one-year period prior thereto, a
customer or client of, supplier, vendor or service provider to, or other Person
having material business relations with, the Surviving Corporation; provided,
however, nothing herein shall preclude any Founder from (i) performing his
duties as an employee or consultant of Surviving Corporation or as a director
for any business set forth on Schedule 4.7 of the Company Disclosure Schedule to
the extent the scope of the duties or the nature of the business conducted by
such entity or its Affiliates does not materially change from that conducted as
of the date hereof, or (ii) owning, directly or indirectly, (A) equity interests
in any business set forth on Schedule 4.7 of the Company Disclosure Schedule
provided the extent the nature of the business conducted by such entity or its
Affiliates does not materially change from that conducted as of the date hereof,
or (B) in the aggregate less than 3% of any business (other than Covered
Entity), whether or not such business constitutes a Covered Business, that is
subject to the reporting obligations of the Securities Exchange Act of 1934, as
amended, provided that such investment is passive and Founder does not provide
services or advice to such entity or its Affiliates.
 
 
(b) For purposes of this Section 4.7, the following terms shall have the
following meanings:
 
 
“Covered Area” means anywhere in the United States or anywhere else in the world
where the Surviving Corporation does business or plans to do business as of the
Closing or during the Noncompetition Period.
 
 
“Covered Business” means the Business.
 
 
“Covered Entity” means Dassault Systems S.A. and its affiliates.
 
 
“Noncompetition Period” means, for any Founder who is an employee of the
Surviving Corporation after the Closing, the period commencing as of the Closing
and ending as of the later of (i) the three year anniversary of the Closing and
(ii) the two year anniversary of the termination of such Founder’s employment,
whether by the Surviving Corporation or the Founder.  For any Founder who is not
an employee of the Surviving Corporation after the Closing, such term shall mean
the period commencing as of the Closing and ending as of the three year
anniversary of the Closing.
 
 
“Surviving Corporation” shall mean and include the Surviving Corporation, the
Company (prior to the Effective Time), the Buyer and each of their respective
subsidiary, parent and affiliated companies, whether now existing or existing in
the future, and all of their respective successors and assigns.
 
 
 

--------------------------------------------------------------------------------

 
 
4.8 Injunctive Relief.  The Company and each Founder acknowledge that any breach
or threatened breach of the provisions of Section 4.5 (Nonsolicitation), 4.6
(Confidentiality; Non-Disparagement) or 4.7 (Noncompetition) of this Agreement
will cause irreparable injury to the Buyer, the Surviving Corporation, the
Company and/or their respective Subsidiaries for which an adequate monetary
remedy does not exist.  Accordingly, in the event of any such breach or
threatened breach, the Buyer (in the case of Section 4.5 (Nonsolicitation)) and
the Buyer, the Surviving Corporation, the Company and/or such Subsidiaries (in
the cases of Sections 4.6 (Confidentiality; Non-Disparagement) and 4.7
(Noncompetition)) shall be entitled, in addition to the exercise of other
remedies, to seek and (subject to court approval) obtain injunctive and other
equitable relief, without necessity of posting a bond, restraining the Company
and/or the Founders, as the case may be, from committing such breach or
threatened breach.  The right provided under this Section 4.8 shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Buyer, the Surviving Corporation, the Company or such Subsidiaries.
 
 
4.9 Reasonable Restrictions.  Each Founder (a) has carefully read and
understands all of the provisions of this Agreement and has had the opportunity
for this Agreement to be reviewed by counsel, (b) acknowledges that the
duration, geographical scope and subject matter of Sections 4.5
(Nonsolicitation), 4.6 (Confidentiality; Non-Disparagement), 4.7
(Noncompetition) and 4.8 (Injunctive Relief) are reasonable and necessary to
protect the goodwill, customer relationships, legitimate business interests,
trade secrets and confidential and proprietary information of the business, (c)
acknowledges that the Buyer would not have closed the Transactions without the
benefits contained in this Agreement, (d) will be able to earn a satisfactory
livelihood without violating this Agreement and (e) understands that this
Agreement is assignable by the Buyer and the Surviving Corporation and shall
inure to the benefit of their respective successors and permitted assigns.
 
 
SECTION 5                      
 
 
COVENANTS OF THE BUYER
 
 
5.1 Representations and Warranties.  Until the earlier of the Effective Time and
termination of this Agreement, the Buyer will not take any action that would
cause any of the representations and warranties made by the Buyer in this
Agreement not to be true and correct in all material respects on and as of the
Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date.
 
 
5.2 Efforts.  Pending the Closing, the Buyer will use all reasonable efforts to
cause the conditions specified in Section 8 (Conditions to Each Party’s
Obligation to Close) and Section 10 (Conditions to Company’s Obligation to
Close) to be satisfied as soon as practicable.
 
 
5.3 Confidentiality.  Prior to the Effective Time, the Buyer shall abide by the
terms of the Confidentiality Agreement.
 
 
 
 

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5.4 Director and Officer Indemnification.
 
 
(a) The Buyer agrees that, for a period of six (6) years from and after the
Effective Time, (i) all rights to indemnification, advancement of expenses and
exculpation by the Company now existing in favor of each Person who is now, or
has been at any time prior to the date hereof or who becomes prior to the
Closing Date, an officer or director of the Company, as provided in the Company
Certificate of Incorporation, Company Bylaws, the agreements set forth on
Schedule 5.4 of the Company Disclosure Schedule and to the extent permitted by
applicable Law, and solely in their capacity as such (and not as a
Securityholder) (the “Company Indemnitees”), in each case as in effect on the
date of this Agreement shall continue in full force and effect in accordance
with their respective terms, and (ii) the Surviving Corporation or its successor
shall, and the Buyer shall cause the Surviving Corporation or its successor to,
fulfill and honor in all respects all such rights to indemnification,
advancement of expenses and exculpation by the Company in favor of the Company
Indemnitees described above in clause (i) of this Section 5.4(a).
 
 
(b) Prior to the Closing, the Company shall purchase a fully prepaid “tail”
policy under the Company’s existing directors’ and officers’ liability insurance
policy, which (i) has an effective term of six (6) years from the Effective
Time, (ii) covers only those persons who are currently covered by the Company’s
existing directors’ and officers’ liability insurance policy in effect as of the
date of this Agreement and only for matters occurring at or prior to the
Effective Time, and (iii) contains coverage terms comparable to those applicable
to the current directors and officers of the Company (the “Company D&O Tail
Policy”). The entire cost of the Company D&O Tail Policy, including any and all
premiums, expenses, fees and other costs, will be treated as a Transaction
Expense hereunder. Prior to the Closing, the Company shall deliver to the Buyer
evidence of the amount of all such costs, including a statement from the
insurance carrier that such costs represent any and all costs due or to become
due in connection with such Company D&O Policy. If the Merger is consummated,
then the Buyer shall maintain the Company D&O Tail Policy in full force and
effect, and continue to honor the obligations thereunder, provided the
obligations contained in this sentence shall not require the Buyer to incur any
expenses in connection therewith.
 
 
(c)             The provisions of this Section 5.4 are intended to be for the
benefit of, and shall be enforceable by, the Company Indemnitees and their
respective heirs, personal representatives, successors and assigns.  No party to
this Agreement shall take any action as to materially and adversely affect any
Company Indemnitees to whom this Section 5.4 applies without the prior written
consent of such Company Indemnitee.
 
 
(e)             In the event the Buyer, the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers or conveys 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 Buyer or the Surviving Corporation, as the case may be, assume the
obligations set forth in this Section 5.4.
 
 
 

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5.5 Payment of Company Debt.  At or immediately following the Effective Time,
the Buyer shall, or shall cause the Surviving Corporation, to pay the Company
Debt Payoff Amount set forth on the Allocation Certificate to the applicable
third parties.
 
 
5.6 Employment and Benefits Arrangements.
 
 
(a) As promptly as reasonably practicable after the Effective Time, the Buyer
shall enroll the Continuing Employees in the Buyer’s employee benefit plans
(including any severance plans) for which such employees are eligible (the
“Buyer Plans”), providing for benefits that, in the Buyer’s discretion, are
substantially similar in the aggregate to the benefits provided by the Buyer to
its employees (excluding the Continuing Employees) who are generally similarly
situated to such Continuing Employees, and the Buyer shall, to the extent
permissible under such Buyer Plan, recognize the prior service with the Company
of each of the Continuing Employees for purposes of eligibility to participate
and vesting (but not benefit accruals) under the Buyer Plans.  Each applicable
Buyer Plan shall waive, to the extent permitted by applicable Law and the
relevant insurance carriers, eligibility waiting periods, evidence of
insurability requirements and pre-existing condition limitations.  To the extent
permitted by applicable Law and the relevant insurance carriers and to the
extent applicable in the plan year that contains the Closing Date and subject to
the reasonable cooperation of the applicable Continuing Employee, the Continuing
Employees shall be given credit under the applicable Buyer Plan for amounts paid
during the calendar year in which the Closing Date occurs under a corresponding
benefit plan of the Company for purposes of applying deductibles, co-payments
and out of pocket maximums, as though such amounts had been paid in accordance
with the terms and conditions of the Buyer Plan.
 
 
(b) This Section 5.6 (i) is not intended, and shall not be deemed, to confer any
rights or remedies upon any Continuing Employee in their capacity as such, to
create any agreement of employment with any Person or to otherwise create any
third-party beneficiary hereto and (ii) shall not be construed to mean the
employment of any Continuing Employee is other than “at will” and not terminable
by the Buyer at any time.
 
 
5.7 Retention Bonus Amount.  Subject to the terms set forth in Schedule 1.1(D),
Buyer shall pay or cause to be paid the Retention Bonus Amount.
 
 
SECTION 6
 
 
TAX COVENANTS
 
 
6.1 Consistent Tax Reporting.  The Securityholders, the Company, the Surviving
Corporation and the Buyer shall (a) treat and report the Transactions
contemplated by this Agreement in all respects consistently with the provisions
of this Agreement for purposes of any federal, state, local or foreign Tax and
(b) not take any actions or positions inconsistent with the obligations of the
parties set forth herein.
 
 
6.2 Tax Periods Ending on or Before the Closing Date.  The Securityholders’
Representative shall prepare or cause to be prepared and file or cause to be
filed
 
 
 

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all Tax Returns of the Company for taxable periods ending on or before the
Closing Date (“Pre-Closing Taxable Periods”) that have not been filed prior to
the Closing Date, including, without limitation, Form 4466 (if applicable), and
the Securityholders’ Representative shall be permitted to amend any Tax Return
for any Pre-Closing Tax Period to carry-back any loss arising with respect to
the taxable period ending on the Closing Date. The Securityholders’
Representative shall permit the Buyer to review and comment on each such Tax
Return described in the prior sentence at least ten (10) days prior to filing
and shall make such revisions to such Tax Returns as are reasonably requested by
the Buyer.  The Buyer shall not amend any Tax Return for any Pre-Closing Tax
Period or extend the statute of limitations period in respect of any such Tax
Return without the written consent of the Securityholders’ Representative, which
shall not be unreasonably withheld, conditioned or delayed.  All Tax Returns to
be prepared by or for the Securityholders’ Representative pursuant to this
Section 6.2 shall be prepared in a manner consistent with the past practice of
the Company, except as otherwise required by law, except that the Tax Returns to
be filed by the Securityholders’ Representative shall request refunds of all
overpaid Tax amounts rather than applying such overpayments to a subsequent
taxable period.  The Securityholders shall be responsible for all Taxes of the
Company for all Pre-Closing Taxable Periods including, without limitation, Taxes
resulting from any Contest, and shall pay to (or as directed by) the Company any
Taxes of the Company for all Pre-Closing Taxable Periods except to the extent
that such Taxes are taken into account in the final determination of Net Working
Capital.  Such payments shall be made no later than five (5) Business Days prior
to the due date for paying such amount of Taxes to the relevant tax authority.
 
 
6.3 Tax Periods That Include But Do Not End on the Closing Date.  The Surviving
Corporation shall cause to be prepared and filed any Tax Returns of the
Surviving Corporation for taxable periods that include but do not end on the
Closing Date.  The Buyer shall permit the Securityholders’ Representative to
review and comment on each such Tax Return at least ten (10) Business Days prior
to filing and shall make such revisions to such Tax Returns as are reasonably
requested by the Securityholders’ Representative.  The Securityholders shall be
responsible for all Taxes that relate to such Taxable periods as determined
under this Section 6.3, including, without limitation, Taxes resulting from any
Contest, and shall pay to (or as directed by) the Surviving Corporation amounts
equal to such Taxes and such payments shall be made in each applicable case by
no later than five (5) Business Days prior to the due date for paying such
amount of Taxes to the relevant Tax authority.  For purposes of this Section
6.3, in the case of any Taxes that are imposed on a periodic basis and are
payable for a taxable period that includes (but does not end on) the Closing
Date, the portion of such Tax that relates to the pre-Closing period shall (a)
in the case of any property Taxes and Taxes other than Taxes based upon or
related to income, payroll, sales or receipts, be deemed to be the amount of
such Tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the Closing Date and
the denominator of which is the number of days in the entire taxable period, and
(b) in the case of any Tax based upon or related to income, payroll, sales or
receipts, be deemed equal to the amount which would be payable if the relevant
Taxable period ended on the Closing Date.  Any credits relating to a taxable
period that begins before and ends after the Closing Date shall be allocated on
a basis consistent with the allocations made pursuant to the preceding
sentence.  The Securityholders shall not be required to pay any Taxes pursuant
 
 
 

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to this Section 6.3 to the extent that such Taxes are taken into account in the
final determination of Net Working Capital.
 
 
6.4 Cooperation on Tax Matters.
 
 
(a) The Buyer, the Surviving Corporation, the Securityholders and the
Securityholders’ Representative shall cooperate fully, to the extent reasonably
requested by the others, in connection with the filing of Tax Returns pursuant
to Sections 6.2 (Tax Periods Ending on or Before the Closing Date) and 6.3 (Tax
Periods That Include But Do Not End on the Closing Date) or otherwise, and any
audit, examination, litigation, or other proceeding with respect to Taxes (each,
a “Contest”) and will provide prompt written notice thereof.  Such cooperation
shall include the retention and (upon the other party’s request) the provision
of records and information which are reasonably relevant to any such Tax Return
filing or Contest and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder.
 
 
(b) The Securityholders and the Securityholders’ Representative agree that all
books and records in their possession with respect to Tax matters pertinent to
the Company, the Surviving Corporation are the property of the Company and,
subsequent to the Effective Time, the Surviving Corporation.  The
Securityholders shall deliver all such books and records to the Company prior to
Closing.  After the Closing, the Surviving Corporation shall make available to
the Securityholders’ Representative such books and records to the extent
reasonably necessary for the Securityholders’ Representative’s filing of Tax
Returns pursuant to Section 6.2 (Tax Periods Ending on or Before the Closing
Date) or for any other reasonable purpose related to the Securityholders’
ownership of the Company prior to the Closing, provided, however, that in no
event will any Securityholder be entitled to information under this Section in
connection with any litigation or dispute among the parties.
 
 
(c) If requested by the Buyer, the Company, the Securityholders and the
Securityholders’ Representative will cooperate with the Buyer to obtain any
certificate or other document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed upon the Company or the Surviving Corporation (including, but not
limited to, with respect to the Transactions contemplated hereby).
 
 
(d) The Buyer, the Company, the Surviving Corporation, the Securityholders and
the Securityholders’ Representative further agree, upon request, to provide the
other parties with all information that any party may be required to report
pursuant to Section 6043 of the Code and all Treasury Department Regulations
promulgated thereunder.
 
 
6.5 Control of Audits.  After the Closing Date, except as set forth in the next
sentence, the Surviving Corporation shall control the conduct, through counsel
of its own choosing, of any Contest involving any asserted Tax liability or
refund with respect to the Surviving Corporation or any of its Subsidiaries.  In
the case of a Contest after the Closing Date that relates solely to Pre-Closing
Tax Periods, the Securityholders’ Representative shall control
 
 
 

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the conduct of such Contest, using counsel reasonably satisfactory to the
Surviving Corporation, but the Surviving Corporation shall have the right to
participate in such Contest at its own expense, and neither the Securityholders
nor the Securityholders’ Representative shall settle, compromise and/or concede
any portion of such Contest that could affect the Tax liability of the Surviving
Corporation for any taxable period (or portion thereof) after the Closing Date
without the written consent of the Surviving Corporation (not to be unreasonably
withheld); provided that, if the Securityholders’ Representative declines to
assume control of the conduct of any such Contest within 15 days following the
receipt by the Securityholders’ Representative of notice of such Contest, the
Surviving Corporation shall have the right to assume control of such Contest and
shall be entitled to settle, compromise and/or concede any portion of such
Contest.  In the event of any conflict between the provisions of this Section
6.5 and the provisions of Section 11.4 (Notice and Opportunity to Defend), the
provisions of this Section 6.5 shall control.
 
 
6.6 Certain Taxes.  All transfer, documentary, sales, use, real property gains,
stamp, registration, and other such Taxes and fees incurred in connection with
this Agreement shall be shared equally by the Buyer and the
Securityholders.  The Surviving Corporation will file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, real property gains, stamp, registration, and other such Taxes and fees,
and, if required by applicable law, the Buyer and the Securityholders will join
in the execution of any such Tax Returns and other documentation.  The
Securityholders shall pay their share of such Taxes to the Surviving Corporation
when due.
 
 
6.7 Refunds and Tax Benefits.  Any refunds that are received by Buyer or the
Surviving Corporation, and any amounts credited against Tax to which the Buyer
or the Surviving Corporation become entitled, that relate to a Pre-Closing
Period or that portion of a Straddle Period ending on or before the Closing Date
of the Company shall be for the account of the Securityholders, and Buyer shall,
to the extent the aggregate amount of such refunds or credits exceed $50,000,
pay over to Sellers any such refund or the amount of any such credit (net of any
Taxes of the Buyer or the Surviving Corporation attributable to such refund or
credit) within five days after receipt or entitlement thereto.
 
 
6.8 Allocation of Merger Consideration.  The Merger Consideration (and
liabilities treated as assumed for Tax purposes and other capitalized costs)
shall be allocated among the assets of the Company and the covenants set forth
in Section 4.7 (Noncompetition) of this Agreement in accordance with Code
Section 1060 and the Treasury Regulations thereunder (and any similar provision
of applicable Law, as appropriate); provided that the Buyer shall allocate no
more than one percent (1%) of the Merger Consideration to the covenants set
forth in Section 4.7 (Noncompetition); provided, that the parties agree that
such allocation is solely for Tax purposes and is not intended, and shall not in
any manner be construed, to limit, diminish or impair in any way the remedies
that may be pursued by a Buyer Indemnitee, including injunctive or monetary
relief, in the event of a breach of a covenant in Section 4.7
(Noncompetition).  The parties and their respective Affiliates shall report, act
and file Tax Returns (including Internal Revenue Service Form 8594) in all
respects and for all purposes consistent with such allocation.
 
 
 

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SECTION 7
 
 
COVENANTS AND AGREEMENTS
 
 
7.1 Continuing Obligation to Inform.  Until the earlier of the Effective Time
and the termination of this Agreement, the Company shall promptly deliver or
cause to be delivered to the Buyer in writing and with reasonable specificity
all information coming to the Company’s attention after the date hereof that
would result in the Company’s failure to satisfy the condition set forth in
Section 9.1 (Compliance; CEO Certificate); provided that none of such
supplemental information shall constitute an amendment of any statement,
representation or warranty in this Agreement or any schedule, exhibit or
document furnished pursuant hereto.
 
 
SECTION 8
 
 
CONDITIONS TO EACH PARTY’S OBLIGATION TO CLOSE
 
 
The respective obligations of each Party to consummate the Merger are subject to
the satisfaction, at or before the Closing, of the following conditions:
 
 
8.1 Stockholder Approval.  The Stockholder Approval shall have been obtained.
 
 
8.2 Legal Proceedings.  No proceeding by or before any Governmental Entity shall
be pending or threatened wherein an unfavorable Order would (i) prevent
consummation of the Transactions, (ii) cause the Transactions to be rescinded
following consummation or (iii) have, individually or in the aggregate, a
Material Adverse Effect, and no such Order shall be in effect.
 
 
SECTION 9
 
 
CONDITIONS TO THE OBLIGATION OF BUYER AND MERGER SUB TO CLOSE
 
 
The obligation of the Buyer and the Merger Sub to consummate the Merger is
subject to the satisfaction, at or before the Closing, of the following
conditions, any of which may be waived by the Buyer in its discretion:
 
 
9.1 Compliance; CEO Certificate.  The representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date (unless any such representation or warranty
is made only as of a specific date, in which event such representation and
warranty shall be true and correct in all material respects, as the case may be,
as of such specified date), except that those representations and warranties
that by their terms are qualified by materiality or a “Material Adverse Effect”
(or words of similar effect) and the representations and warranties in Section
2.9 (Absence of Certain Changes) shall be true and correct in all respects; the
Company and the Founders shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by it on or before the Closing Date; and the Company
shall have delivered to the Buyer a certificate of its chief executive officer,
dated the Closing Date, to the foregoing effect.
 
 
 

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9.2 Secretary Certificate.  The Company shall have delivered to the Buyer a
certificate of the Secretary of the Company dated the Closing Date as to (a) the
Company Certificate of Incorporation and the Company Bylaws, each as in effect
on and as of the Closing Date, (b) the resolutions of the Company Board and the
Stockholders authorizing and approving the execution, delivery and performance
by the Company of this Agreement and all Transactions, and (c) the incumbency of
the officers of the Company executing this Agreement or any other agreement or
instrument delivered in connection herewith.
 
 
9.3 Escrow Agreement.  The Securityholders’ Representative and the Escrow Agent
shall have entered into the Escrow Agreement.
 
 
9.4 Required Consents.  The Company shall have obtained and delivered to the
Buyer all the Required Consents.
 
 
9.5 Certificates.  The Company shall have provided the Buyer with certificates
of appropriate governmental officials in the State of Delaware and the
Commonwealth of Pennsylvania as to the due qualification and good standing of
the Company in each such jurisdiction.
 
 
9.6 Resignation of the Company Directors and Officers.  Each director and
statutory officer of the Company shall have submitted his or her resignation to
be effective at the Effective Time.
 
 
9.7 Termination of Certain Securityholder Rights.  The Buyer shall have received
evidence reasonably satisfactory to it that the ThingWorx, Inc. Amended and
Restated 2011 Equity and Compensation Plan, all Purchase Rights, and the
agreements set forth on Schedule 9.7 of the Company Disclosure Schedule have
been terminated.
 
 
9.8 Opinion of Counsel to the Company.  The Company shall have delivered an
opinion of counsel to the Company, in the form reasonably satisfactory to the
Buyer, dated the Closing Date, addressed to the Buyer and the Merger Sub, with
respect to the matters set forth on Exhibit D hereto.
 
 
9.9 FIRPTA Certificate.  The Buyer shall have received (i) certification from
the Company, dated no more than thirty (30) days before the Effective Date and
signed by a responsible corporate officer of the Company, that the Company is
not, and has not been at any time during the five (5) years preceding the date
of such certification, a United States real property holding company, as defined
in Section 897(c)(2) of the Code, and (ii) a copy of the  notice of such
certification provided by the Company to the IRS in accordance with the
 
 
 

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provisions of Treasury Regulations §1.897-2(h)(2) and a certified mail receipt
indicating the mailing of such notice.
 
 
9.10 No Bank Debt or Liens.  The Company shall not be party to any loan, line of
credit or other Company Debt to any financial institution, and there shall be no
Liens (other than Permitted Liens) in favor of any Person on any assets of the
Company, other than Company Debt identified on the Allocation Certificate and
the Liens associated therewith.
 
 
9.11 Payoff Letters.  The Buyer shall have received a Payoff Letter in form and
substance reasonably acceptable to the Buyer (a “Payoff Letter”) executed by
each Person for whom any Company Debt is outstanding immediately before the
Closing.
 
 
9.12 Appraisal Rights.  Stockholders holding at least 90% of the Company Stock
on an as-converted basis shall have approved this Agreement, the Merger and the
other Transactions.  Stockholders holding not more than 2% of the outstanding
shares of the Company Stock on an as-converted basis shall have exercised
appraisal rights under the DGCL with respect to the Merger.
 
 
9.13 Employee Matters.
 
(a) Not more than 10% of the Employees of the Company on the date of this
Agreement shall have left, or notified the Company following the date hereof of
their intention to leave, the employ of the Company following the Effective
Time.
 
(b) No Founder shall have terminated any agreement entered into with Buyer prior
to the date hereof.
 
 
SECTION 10
 
 
CONDITIONS TO COMPANY’S OBLIGATION TO CLOSE
 
 
The obligation of the Company to consummate the Merger is subject to the
satisfaction, at or before the Closing, of the following conditions, any of
which may be waived by the Company in its discretion:
 
 
10.1 Compliance; Officer Certificates.  The representations and warranties of
the Buyer contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date (unless any such representation or warranty
is made only as of a specific date, in which event such representation and
warranty shall be true and correct in all material respects, as the case may be,
as of such specified date), except that those representations and warranties
that by their terms are qualified by materiality or a “Material Adverse Effect”
(or words of similar effect) shall be true and correct in all respects; each of
the Buyer and the Merger Sub shall have performed and complied with all
covenants and agreements required by this Agreement to be performed or complied
with by them on or before the Closing Date; and the
 
 
 

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Buyer and the Merger Sub shall each shall have delivered to the Company a
certificate of an executive officer, dated the Closing Date, to the foregoing
effect.
 
 
10.2 Secretary Certificates.  (a) The Merger Sub shall have delivered to the
Company a certificate of its Secretary dated the Closing Date as to (i) its
Certificate of Incorporation and Bylaws, as in effect on and as of the Closing
Date and (ii) the resolutions of its Board of Directors and stockholder
authorizing and approving its execution, delivery and performance of this
Agreement and all Transactions and (b) the Buyer shall have delivered to the
Company a certificate of its Secretary or Assistant Secretary dated the Closing
Date as to the resolutions of its Board of Directors authorizing and approving
the execution, delivery and performance by the Buyer of this Agreement and all
Transactions.
 
 
10.3 Paying Agent Agreement.  The Buyer and the Paying Agent shall have entered
into the Paying Agent Agreement.
 
 
10.4 Escrow Agreement.  The Buyer and the Escrow Agent shall have entered into
the Escrow Agreement.
 
 
SECTION 11
 
 
INDEMNIFICATION
 
 
11.1 Survival of Representations, Warranties and Covenants.
 
 
(a) Representations.  The representations and warranties set forth in this
Agreement or in any certificate, document or other instrument delivered by or on
behalf of a party pursuant to this Agreement shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of the Buyer, the
Merger Sub, the Company, the Founders, or any of their respective Affiliates,
and the Effective Time.  No action for a breach of the representations and
warranties contained herein shall be brought more than twenty-four (24) months
after the Closing Date, except for (a) claims arising out of the representations
and warranties contained in Sections 2.1 (Organization and Qualification), 2.2
(Capitalization; Subsidiaries), 2.3 (Authority; Enforceability), and 2.23
(Brokers), which shall survive indefinitely after the Closing Date, (b) claims
arising out of the representations and warranties contained in Sections 2.10
(Tax Matters) or 2.20 (Employee Benefit Plans), which shall survive until thirty
(30) days after the expiration of the statute of limitations period (including
all extensions thereof) applicable to the underlying subject matter being
represented and (c) claims arising out of the representations and warranties
contained in Section 2.16 (Intellectual Property), which shall survive for a
period of three (3) years following the Closing Date.  The representations and
warranties contained in Sections 2.1 (Organization and Qualification), 2.2
(Capitalization; Subsidiaries), 2.3 (Authority; Enforceability), 2.10 (Tax
Matters), 2.20 (Employee Benefit Plans), and 2.23 (Brokers) are sometimes
referred to herein as the
 
 
 

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“Fundamental Representations”.  The representations and warranties contained in
Section 2.16 (Intellectual Property) are sometimes referred to herein as the “IP
Representations”.
 
 
(b) Covenants.  The respective covenants, agreements and obligations of the
Company, the Buyer, the Merger Sub, the Surviving Corporation, the Founders and
the Securityholders’ Representative set forth in this Agreement or in any
certificate, document or other instrument delivered pursuant to this Agreement
shall survive the execution and delivery of this Agreement, any investigation by
or on behalf of any party hereto, and the Effective Time without limitation and
shall terminate on the expiration of all applicable statutes of limitation (as
the same may be extended or waived), except as otherwise expressly set forth in
this Agreement or in such certificate, document or other instrument delivered
pursuant hereto.
 
 
(c) Effect of Survival Periods.  The survival periods set forth in this
Section 11.1 are intended to operate only as the time periods within which a
party must deliver to the other party a written notice of Loss, claim or breach,
and following such delivery the notifying party shall be entitled to pursue its
available remedies with respect thereto pursuant to the provisions of and
subject to the limitations in this Agreement regardless of the survival periods
set forth in this Section 11.1.  It is the express intent of the parties that,
if an applicable survival period as contemplated by this Section 11.1 is shorter
than the statute of limitations that would otherwise have been applicable, then,
by contract, the applicable statute of limitations shall be reduced to the
shortened survival period contemplated hereby.
 
 
11.2 Obligation of the Securityholders to Indemnify.
 
 
(a) General Matters.  Subject to the limitations set forth in Section 11.5
(Limitations on Indemnification; Other Remedies) hereof, after the Effective
Time, as an integral term of the Merger, the Securityholders shall, severally
and not jointly based on their respective Pro Rata Share, indemnify and hold
harmless the Buyer, the Surviving Corporation and their respective Subsidiaries,
and their respective directors, officers, employees, agents, Affiliates and
assigns (collectively, the “Buyer Indemnitees”) from and against any and all
Losses incurred or suffered by any Buyer Indemnitee directly or indirectly, as a
result of, with respect to or in connection with:
 
 
(i) any inaccuracy or breach of a representation or warranty of the Company in
this Agreement or any certificate, document or other instrument delivered
pursuant hereto, either as of the date of this Agreement or as of the Closing
(disregarding for purposes of this Section 11.2(a)(i) any “material”, “in all
material respects”, “Material Adverse Effect” or similar qualifiers for purposes
of calculating Losses);
 
 
(ii) any failure by the Company (prior to the Effective Time) or the
Securityholders’ Representative to fully perform or comply with any covenant or
agreement set forth herein or in any certificate, document or other instrument
delivered pursuant to this Agreement;
 
 
(iii) any Dissenting Share Payments;
 
 
 
 

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(iv) the failure of any item set forth in the Allocation Certificate to be
accurate, true and correct in all respects as of the Closing (regardless of any
approval of such Allocation Certificate by the Buyer pursuant to Section
1.7 (Merger Consideration);
 
 
(v) any claims by any current or former holder or alleged current or former
holder of any equity or ownership interest or equity security of the Company
(including any predecessor), including any Purchase Rights with respect thereto,
relating to or arising out of the allocation or disbursement of the Merger
Consideration;
 
 
(vi) any Taxes due with respect to periods prior to the Closing, as determined
pursuant to Section 6 (Tax Covenants);
 
 
(vii) any claims by the Commonwealth of Pennsylvania for repayment of the grant
awarded to the Company in the amount equal to $200,000 pursuant to the
Opportunity Grant Program Contract between the Department of Community and
Economic Development and the Company; and
 
 
(viii) the items set forth on Schedule 11.2(a)(viii).
 
(b) Founder.  Subject to the limitations set forth in Section 11.5 (Limitations
on Indemnification; Other Remedies) hereof, after the Effective Time, as an
integral term of the Merger, each Founder shall, severally and not jointly,
indemnify and hold harmless the Buyer Indemnitees from and against any and all
Losses incurred or suffered by any Buyer Indemnitee as a result of, with respect
to or in connection with any breach of or noncompliance with the covenants
contained in Section 4.5 (Nonsolicitation), 4.6 (Confidentiality;
Non-Disparagement), or 4.7 (Noncompetition) by such Founder.
 
(c) Individual Securityholders.  Subject to the limitations set forth in
Section 11.5 (Limitations on Indemnification; Other Remedies) hereof, after the
Effective Time, as an integral term of the Merger, each Securityholder shall,
severally and not jointly, indemnify and hold harmless the Buyer Indemnitees
from and against any and all Losses incurred or suffered by any Buyer Indemnitee
as a result of, with respect to or in connection with any breach of or
noncompliance with the representations, warranties, covenants or agreements
contained in the such Securityholder’s Letter of Transmittal by such
Securityholder.
 
 
11.3 Obligation of the Buyer to Indemnify.  Subject to the limitations set forth
in Section 11.5 (Limitations on Indemnification; Other Remedies) hereof, after
the Effective Time, as an integral term of the Merger, the Buyer shall indemnify
and hold harmless the Securityholders from and against any and all Losses
incurred or suffered by any Securityholder directly or indirectly, as a result
of, with respect to or in connection with any breach or violation of the
representations, warranties, covenants or agreements of the Buyer, the Merger
Sub or, subsequent to the Effective Time, the Surviving Corporation set forth in
this Agreement.
 
 
11.4 Notice and Opportunity to Defend.
 
 
 
 

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(a) A party or parties entitled to indemnification hereunder (the “Indemnified
Party”) with respect to a third party claim (a “Third-Party Claim”) will give
the party or parties required to provide such indemnification (the
“Indemnifier”) prompt written notice of any legal proceeding, claim or demand
instituted by any third party (in each case, a “Claim”) in respect of which the
Indemnified Party is entitled to indemnification hereunder; provided that the
failure to provide prompt notice shall not relieve the Indemnifier of its
indemnification obligations hereunder, except to the extent (and only to the
extent) that the Indemnifier is actually and materially prejudiced by the
failure of the Indemnified Party to provide such prompt notice.
 
(b) If the Indemnifier provides written notice to the Indemnified Party stating
that the Indemnifier is responsible for the entire Claim within twenty (20) days
after the Indemnifier’s receipt of written notice from the Indemnified Party of
such Claim, the Indemnifier shall have the right, at the Indemnifier’s expense,
to defend against, negotiate, settle or otherwise deal with such Claim and to
have the Indemnified Party represented by counsel, reasonably satisfactory to
the Indemnified Party, selected by the Indemnifier; provided, that (i) the
Indemnified Party may participate in any proceeding with counsel of its choice
and at its expense, (ii) the Buyer or any of its Affiliates, at any time when
the Buyer believes in good faith that any Claim is having or would reasonably be
expected to have a material adverse effect on the Buyer or the Business, or
involves a Tax liability for a post-Closing period, or relates to the IP
Representations, may assume the defense and otherwise deal with such Claim in
good faith, with counsel of its choice, (iii) the Buyer or any of its
Affiliates, at any time when the Buyer believes that a claim for indemnification
relates to or arises in connection with any criminal matter, may assume the
defense and otherwise deal with such Claim in good faith with counsel of its
choice, (iv) the Indemnifier may not assume the defense of any Claim if a
material conflict of interest exists between the Indemnifier and the Indemnified
Party that precludes effective joint representation or the amount of any claims
exceeds or reasonably could exceed the limitations set forth in Section 11.5(b),
if applicable, and (v) the Indemnified Party may take over the defense and
prosecution of a Claim from the Indemnifier if the Indemnifier has failed or is
failing to diligently prosecute or defend such Claim following the provision of
written notice to the Indemnifier of such failure and the failure of the
Indemnifier to cure such failure within fifteen (15) days of receipt of such
notice; and provided further, that the Indemnifier may not enter into a
settlement of any Claim without the written consent of the Indemnified Party,
which will not be unreasonably withheld, delayed or conditioned, unless such
settlement provides the Indemnified Party with a full release from such Claim
and requires no more than a monetary payment for which the Indemnified Party is
fully indemnified.  If the Indemnified Party has assumed the defense of any
Third Party Claim and the Indemnifying Party has previously provided written
notice to the Indemnified Party that the Indemnifying Party is responsible for
the entire Third Party Claim, neither the Indemnified Party nor any of its
Affiliates may settle or otherwise dispose of any Third Party Claim for which
the Indemnifier may have a liability under this Agreement without the prior
written consent of the Indemnifier, which consent shall not be unreasonably
withheld, conditioned or delayed.  If the Indemnified Party has assumed the
defense or is otherwise negotiating any such Third Party Claim, the Indemnifier
may participate in any proceeding or negotiation with counsel of its choice and
at its expense subject to Schedule 11.2(a)(viii).
 
 
 

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(c) Any notice that a Buyer Indemnitee shall be required to give to the
Securityholders shall be satisfied by the delivery of notice by the Buyer
Indemnitee to the Securityholders’ Representative, and the Securityholders’
Representative may respond to the Buyer Indemnitee on behalf of all
Securityholders.
 
 
11.5 Limitations on Indemnification; Other Remedies.  The indemnification
provided by Section 11 (Indemnification) shall, except as provided in
Section 11.5(h) (Fraud), be subject to the following limitations:
 
 
(a) Basket.  No indemnification shall be payable pursuant to Section 11.2(a)(i)
(other than with respect to a Fundamental Representation) or Section
11.2(a)(viii) unless the total amount of all indemnifiable Losses incurred by
the Buyer Indemnitees, including those subject to all previous claims, exceeds
$750,000 (the “Basket”), whereupon indemnification shall, except as set forth on
Schedule 11.2(a)(viii) be payable for the amount of such Losses without
deduction (and not merely the excess over the Basket).
 
 
(b) Cap.  Subject to the remaining provisions of this Section 11.5, (i) each
Securityholder’s aggregate liability for all claims for indemnification under
Section 11.2(a)(i) (other than with respect to a Fundamental Representation and
a IP Representation) shall not exceed their respective Pro Rata Share of the
Escrow Amount, (ii) each Securityholder’s aggregate liability for all claims for
indemnification under Section 11.2(a)(i) with respect to any inaccuracy or
breach of an IP Representation and under Section 11.2(a)(viii) shall not exceed
their respective Pro Rata Share of the IP Indemnity Cap, and (iii) and in no
event may the liability of a Securityholder for Losses indemnifiable under any
other subsection of Section 11.2(a) exceed the Merger Consideration actually
received by the Securityholder, including deemed receipt of the applicable
amount of the Escrow Amount.
 
 
(c) Escrow Amount.  All claims for indemnification under Section 11.2
(Obligations of the Securityholders to Indemnify) shall be satisfied first from
the Escrow Amount to the full extent thereof.  For clarity, indemnifiable Losses
under Section 11.2(a)(i) (other than with respect to a Fundamental
Representation or IP Representation) shall be satisfied solely out of the Escrow
Account and recovery against the Escrow Amount constitutes the sole and
exclusive remedy of the Buyer Indemnitees for any and all such Losses.
 
 
(d) Set-off.  Subject to the limitations set forth in this Section 11.5, if at
any time there shall be an outstanding Claim that exceeds the Escrow Amount then
available, the Buyer shall have the right to withhold from, reduce, set-off
against and retain from any required payments of Earn-Out Consideration, at the
Buyer’s sole discretion, the good faith estimate of any indemnification to which
a Buyer Indemnitee is entitled hereunder; provided that if the final amount of
Losses for such Claim is less than the amount by which the portion of the
Earn-Out Consideration was withheld, reduced, set-off or retained, then the
Buyer shall make payment of such difference in accordance with Section 1.8
(Earn-Out); provided further, however, the Buyer shall not set off any Losses
(but may withhold any such payment) for which it may be entitled until such
Claim has been finally resolved in accordance with this Section 11.
 
 
 
 

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(e) Reduction for Insurance.  The amount of any Losses that are subject to
indemnification under this Section 11 shall be reduced by the amount by which
(a) any insurance proceeds received by the Indemnified Party relating to such
Loss exceeds (b) the amount of expenses incurred by such Indemnified Party in
procuring such insurance recovery, including reasonable legal fees and expenses
and any increased premiums or costs as a result of such claim for which
insurance proceeds are received.
 
 
(f) Mitigation.  Each party shall take commercially reasonable efforts to
mitigate the Losses that any such party reasonably expects will result from such
event or circumstance and for which it may seek indemnification (it being
understood that nothing herein shall limit the right to seek indemnification
hereunder with respect to any costs of such mitigation) upon becoming aware of
any event which would reasonably be expected to, or does, give rise thereto,
provided that the Indemnifier shall not be required to materially alter its
conduct in connection therewith.  Nothing in this Agreement shall relieve either
party of any common Law or other duty to mitigate any loss, liability or damage
suffered by it.
 
 
(g) Sole Remedy.  Subject to Section 11.5(h) (Fraud), the sole and exclusive
remedy for money damages for any matter arising under this Agreement shall be
the rights to indemnification set forth in this Agreement.  To the extent that a
portion of any indemnifiable Loss is specifically included as a liability in the
calculation of Net Working Capital, then the amount specifically included as a
liability will be subtracted from the total indemnifiable Losses payable in
respect of such indemnifiable Loss.  For the avoidance of doubt, the Buyer
Indemnitees shall not be entitled to indemnification for any Loss to the extent
such Loss consists of liabilities that were included in the determination of Net
Working Capital.
 
 
(h) Fraud.  Notwithstanding anything to the contrary in this Agreement, the
survival periods, limitations, thresholds and other provisions set forth in this
Section 11 (Indemnification) shall not apply with respect to (i) fraud,
intentional misrepresentation or willful breach or willful misconduct, (ii) any
claim against a Securityholder with respect to a breach or violation of a
representation or warranty that was actually known to the Company’s Knowledge to
be inaccurate as of the date hereof, or (iii) any equitable remedy, including a
preliminary or permanent injunction or specific performance; provided, that no
claim of fraud may be brought pursuant to this Agreement subsequent to five (5)
years after the Closing Date and any other claim with respect to the matters in
clauses (i) or (ii) above brought subsequent to the five (5) years after the
Closing shall be subject to the survival periods, limitations, thresholds and
other provisions set forth in this Section 11 (Indemnification); provided,
however, that in no event may the liability of a Securityholder in respect of
all such claims brought pursuant to this Agreement exceed the Merger
Consideration actually received by the Securityholder, including deemed receipt
of the applicable amount of the Escrow Amount.
 
 
(i) Limitation of Liabilities.  UNLESS SUCH DAMAGES ARE ACTUALLY PAID TO A THIRD
PARTY IN COMPLIANCE WITH THIS SECTION 11 IN CONNECTION WITH A THIRD PARTY CLAIM,
IN NO EVENT WILL ANY PARTY BE LIABLE TO ANY PARTY OR OTHER PERSON FOR (I) ANY
SPECIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOST PROFITS AND OTHER
CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT, COLLATERAL DAMAGES OF ANY KIND OR
(II) PUNITIVE DAMAGES OF ANY KIND, IN EACH CASE REGARDLESS OF WHETHER
 
 
 

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SUCH PARTY WILL BE ADVISED, WILL HAVE OTHER REASON TO KNOW, OR IN FACT WILL KNOW
OF THE POSSIBILITY OF THE FOREGOING.
 
 
SECTION 12
 
 
TERMINATION
 
 
12.1 Termination.  This Agreement may be terminated and the Merger and the other
Transactions abandoned at any time before the Effective Time, regardless of any
approval by Stockholders as follows and in no other manner:
 
 
(a) by written agreement of the Company and the Buyer;
 
 
(b) by the Buyer, if the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements under this
Agreement, or if any of the representations and warranties of the Company set
forth in this Agreement shall not be true and correct such that the condition
set forth in Section 9.1 (Compliance; CEO Certificate) would not be satisfied,
and such breach, failure or misrepresentation is not cured to the Buyer’s
reasonable satisfaction within thirty (30) days after the Buyer gives the
Company written notice identifying such breach, failure or misrepresentation;
 
 
(c) by the Company, if the Buyer shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements under this
Agreement, or if any of the representations and warranties of the Buyer set
forth in this Agreement shall not be true and correct such that the condition
set forth in Section 10.1 (Compliance; Officer Certificates) would not be
satisfied, and such breach, failure or misrepresentation is not cured to the
Company’s reasonable satisfaction within thirty (30) days after the Company
gives the Buyer written notice identifying such breach, failure or
misrepresentation;
 
 
(d) by the Buyer, if the conditions set forth in Section 9 (Conditions to the
Obligation of Buyer and Merger Sub To Close) become incapable of satisfaction;
 
 
(e) by the Company, if the conditions set forth in Section 10 (Conditions to
Company’s Obligation To Close) become incapable of satisfaction;
 
 
(f) by either the Buyer or the Company if the Closing shall not have occurred on
or before December 31, 2013, which date may be extended by mutual agreement of
the Company and the Buyer (the “Closing Deadline”); provided that the right to
terminate this Agreement under this Section 12.1(f) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
a principal cause of or resulted in the failure of the Closing to occur on or
before the Closing Deadline;
 
 
(g) by either the Buyer or the Company if any court of competent jurisdiction or
other Governmental Entity shall have issued an Order or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger, and
such Order or ruling shall have become final and nonappealable;
 
 
 

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(h) by the Buyer, by written notice given at any time before the Closing
Deadline, if the Stockholder Approval has not been obtained within three (3)
Business Days after the date hereof.
 
 
12.2 Effect of Termination.  If this Agreement is terminated in accordance with
Section 12.1 (Termination), it shall forthwith be void and have no effect,
without liability or obligation as a result of such termination on the part of
any party, its directors, officers or stockholders, except that the
Confidentiality Agreement, this Section 12.2, and Section 13 (Miscellaneous)
shall survive termination; provided, that nothing contained in this Agreement
shall relieve any Person from liability for any material breach of this
Agreement occurring before such termination; provided, further, that if the
Agreement is terminated subsequent to breach of Section 4.5 (Nonsolicitation),
the Company shall, in addition to any other amounts owed by Company hereunder,
be obligated to make a payment of $2,000,000 (the “Termination Fee”) in
immediately available funds to Buyer within five Business Days of termination of
this Agreement.  The Company acknowledges that the agreements contained in this
Section 12.2 are an integral part of the transactions contemplated by this
Agreement, that without these agreements Buyer would not have entered into this
Agreement, and that any amounts payable pursuant to this Section 12.2 do not
constitute a penalty.
 
 
SECTION 13
 
 
MISCELLANEOUS
 
 
13.1 Notices.  Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally, sent by facsimile
transmission with confirmation retained, sent by overnight courier, postage
prepaid with proof of delivery from the courier requested, or sent by certified,
registered or express mail, postage prepaid.  Any such notice shall be deemed
given when received, as follows:
 
 
 
if to the Buyer, to it at:

 

PTC Inc.
140 Kendrick Street
Needham, MA 02492
Attn:  General Counsel
Facsimile: (781) 370-5735
 
with a copy (which shall not constitute notice) to:
 
 
Choate, Hall & Stewart LLP
             Two International Place
             Boston, MA  02110
             Attn:  John Pitfield
             Facsimile:  (617) 502-5093
 
 
 

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if to the Company, to:
 
ThingWorx, Inc.
350 Eagleview Blvd
Suite 150
Exton, PA 19341
Attn:  Russell Fadel and John Richardson
Facsimile:  (610) 594-6200
 
with a copy (which shall not constitute notice) to:
 
Morgan, Lewis & Bockius LLP
502 Carnegie Center
Princeton, NJ  08540
Attention:  Steven Cohen
Facsimile:  (609) 919-6701
 
or if to the Securityholders’ Representative, a Securityholder or a Founder, to:
 
Safeguard Delaware, Inc.
1105 N. Market St.
Suite 1300
Wilmington, DE 19801
Attn: Erik Rasmussen
Facsimile: (610) 482-9105
 
with a copy (which shall not constitute notice) to:
 
Safeguard Scientifics, Inc.
435 Devon Park Drive, Building 800
Wayne, PA 19087
Attn: General Counsel
Facsimile: (610) 482-9105
 
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder,
provided that any party receiving such a designation shall not be required to
send any notice hereunder to the new address or person before the fifth (5th)
Business Day after receipt thereof.
 
 
13.2 Entire Agreement; Amendment; Waiver.
 
 
(a) This Agreement (including the schedules and exhibits hereto), the Ancillary
Agreements and the Confidentiality Agreement constitute the entire agreement
among the parties with respect to the Transactions, and supersede all prior
agreements and understandings, written or oral, with respect thereto, including
the Letter of Intent, dated October 16, 2013, other than the Confidentiality
Agreement.
 
 
 

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(b) This Agreement may be amended at any time, notwithstanding the adoption
hereof by the Stockholders but subject to the limitations of Section 251(d) of
the DGCL, only by an instrument signed by each party hereto.  Any provision
hereof may be waived only by an instrument signed by each party benefited by
such provision.
 
 
(c) This Agreement (including the schedules and exhibits hereto), and the
 
 
Ancillary Agreements are not intended to confer upon any person any rights or
remedies hereunder, except as specifically provided, following the Effective
Time, in Section 5.4 (Director and Officer Indemnification) or Section 11
(Indemnification).
 
 
(d) No party may assign either this Agreement or any of its rights, interests or
obligations hereunder without the prior written consent of the other parties,
except that the Buyer may assign its rights and delegate its obligations
hereunder to its Affiliates, so long as the Buyer remains ultimately liable for
all of the Buyer’s obligations hereunder.
 
 
13.3 Governing Law; Venue; Waiver of Jury Trial.
 
 
(a) This Agreement shall be governed 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 laws thereof, as to all matters,
including matters of validity, construction, effect, performance and remedies.
 
 
(b) The parties (i) hereby irrevocably and unconditionally submit to the
jurisdiction of the state courts of Delaware and to the jurisdiction of the
United States District Court for the District of Delaware for the purpose of any
suit, action or other proceeding arising out of or based upon this Agreement,
(ii) agree not to commence any suit, action or other proceeding arising out of
or based upon this Agreement except in the state courts of Delaware or the
United States District Court for the District of Delaware and (iii) hereby
waive, and agree not to assert, by way of motion, as a defense, or otherwise, in
any such suit, action or proceeding, any claim that it is not subject personally
to the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Agreement or the subject matter hereof may
not be enforced in or by such court.
 
 
(c) Each of the parties irrevocably waives the right to trial by jury in
connection with any matter based upon or arising out of this Agreement, the
Escrow Agreement or the Transactions.
 
 
13.4 No Prejudice.  The representations, warranties, covenants and agreements of
the Company and the Founders, and the rights and remedies that may be exercised
by the Buyer Indemnitee based on such representations, warranties, covenants and
agreements, will not be limited or affected by any investigation conducted by
the Buyer or the Merger Sub or any agent thereof with respect to, or any
knowledge acquired (or capable of being acquired) by the Buyer or the Merger Sub
or any agent thereof at any time, whether before or after the execution and
delivery of this Agreement or the Closing, with respect to the accuracy or
inaccuracy of or compliance
 
 
 

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with or performance of any such representation, warranty, covenant or
obligation, and no Buyer Indemnitee shall be required to show that it relied on
any (and each Buyer Indemnitee shall be deemed to have relied on each) such
representation, warranty, covenant or obligation of the Company in order to be
entitled to indemnification pursuant hereto.  The waiver by the Buyer or the
Merger Sub of any of the conditions set forth in Sections 8 (Conditions to Each
Party’s Obligation to Close) or 9 (Conditions to the Obligation of Buyer and
Merger Sub to Close) will not affect or limit the provisions of Section 11
(Indemnification).
 
 
13.5 Specific Performance and Other Remedies.  Each party hereby acknowledges
that the rights of each party to consummate the Transactions and the covenants
of the parties are special, unique and of extraordinary character and that, in
the event that any party violates or fails or refuses to perform any covenant or
agreement made by it herein, the non-breaching party may be without an adequate
remedy at Law.  In the event that any party violates or fails or refuses to
perform any covenant or agreement made by such party herein, the non-breaching
party shall be entitled, in addition to the exercise of other remedies, to seek
and (subject to court approval) obtain injunctive and other equitable relief,
without necessity of posting a bond, restraining such party from committing such
breach or threatened breach.
 
 
13.6 Binding Effect.  This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and legal representatives
 
 
13.7 Counterparts.  This Agreement may be executed by the parties hereto in
separate counterparts, including by facsimile or pdf transmission, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute one and the same instrument.
 
 
13.8 Exhibits and Schedules.  The exhibits and schedules (including the Company
Disclosure Schedule) are a part of this Agreement as if fully set forth
herein.  All references herein to Sections, subsections, clauses, exhibits and
schedules shall be deemed references to such parts of this Agreement, unless the
context shall otherwise require.
 
 
13.9 Headings.  The headings in this Agreement are for reference only, and shall
not affect the interpretation of this Agreement.
 
 
13.10 Expenses.  Except as set forth herein, all fees and expenses incurred in
connection with the Transactions, including all legal, accounting, tax and
financial advisory, consulting, investment banking and all other fees and
expenses of third parties shall be the obligation of the party incurring such
fees and expenses.  Notwithstanding the foregoing, if any action, claim or
proceeding relating to this Agreement or any Ancillary Agreements or the
enforcement of any provision thereof is brought against any party, the
prevailing party shall be entitled to recover
 
 
 

--------------------------------------------------------------------------------

 
reasonable attorneys’ fees, costs and disbursements, in addition to any other
relief to which the prevailing party may be entitled.
 
 
13.11 Severability.  Nothing contained herein shall be construed to require the
commission of any act contrary to Law.  Should there be any conflict between any
provisions hereof and any present or future statute, Law, ordinance, regulation,
or other pronouncement having the force of Law, the latter shall prevail, but
the provision of this Agreement affected thereby shall be curtailed and limited
to the extent necessary to bring it into compliance therewith, and the remaining
provisions of this Agreement shall remain in full force and effect.
 
 
13.12 No Strict Construction.  The parties hereto have participated jointly in
the negotiation and drafting of this Agreement and the other agreements and
documents contemplated herein.  In the event an ambiguity or question of intent
or interpretation arises under any provision of this Agreement or any other
agreement or documents contemplated herein, this Agreement and such other
agreements or documents shall be construed as if drafted jointly by the parties
thereto, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of authoring any of the provisions of this
Agreement or any other agreements or documents contemplated herein.
 
 
13.13 Securityholders’ Representative.
 
 
(a) Immediately upon the approval of this Agreement by the Stockholder Approval,
and without the requirement of further action on the part of any Securityholder,
each Securityholder shall be deemed to, and shall, have consented to the
appointment of Safeguard Delaware, Inc. as the Securityholders’ Representative,
as the agent and attorney-in-fact for and on behalf of the Securityholders other
than the Dissenting Stockholders, if any (the “Securityholders’
Representative”).  The Securityholders’ Representative shall, on behalf of the
Securityholders:
 
 
(i) take all action permitted in connection with the implementation of those
provisions of this Agreement and the Escrow Agreement that require or permit
action by the Securityholders’ Representative,
 
 
(ii) take all action permitted in connection with the defense and/or settlement
of any and all claims for which the Securityholders may be required to provide
indemnification pursuant to Section 11 (Indemnification) hereof (including
rejecting, contesting, negotiating, settling and resolving any such claims) and
any claims that may be made against the Escrow Amount,
 
 
(iii) comply with Orders of courts and determinations and awards of arbitrators
with respect to claims,
 
 
(iv) review and take action with respect to Tax Returns,
 
 
 

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(v) give and receive all notices and service of process required or permitted to
be given or received by the Securityholders or the Securityholders’
Representative under this Agreement or the Escrow Agreement,
 
 
(vi) execute and deliver all amendments and waivers to this Agreement and the
Escrow Agreement that the Securityholders’ Representative deemed necessary or
appropriate, whether prior to, at or after the Closing, and
 
 
(vii) take any and all such additional action as is contemplated to be taken by
or on behalf of the Securityholders by the terms of this Agreement or of the
Escrow Agreement or as may be necessary or appropriate in the judgment of the
Securityholders’ Representative for the accomplishment of the foregoing.
 
 
(b) All notices provided to and/or legal process served upon the
Securityholders’ Representative in accordance with this Agreement or the Escrow
Agreement shall be deemed to be provided to and/or served upon the
Securityholders and shall be conclusive and binding upon the
Securityholders.  All decisions, actions, agreements, and instructions by the
Securityholders’ Representative, including any consent, waiver, or agreement
between the Securityholders’ Representative and any Buyer Indemnitee relating to
the defense or settlement of any claim for which the Securityholders may be
required to provide indemnification pursuant to Section 11 (Indemnification)
hereof, shall be conclusive and binding upon the Securityholders; and the Buyer,
each other Buyer Indemnitee and the Escrow Agent shall be entitled to rely
conclusively thereon.  The Buyer, each other Buyer Indemnitee and the Escrow
Agent shall have no duty to inquire into the authority of any person reasonably
believed to be the Securityholders’ Representative and no responsibility or
liability for any action or omission thereof, and no party shall have any cause
of action against the Buyer, any other Buyer Indemnitee or the Escrow Agent for
any action or omission by such party in reliance upon the instructions or
decisions of any person reasonably believed to be the Securityholders’
Representative.
 
 
(c) In the event that more than one Person shall at any time serve collectively
as the Securityholders’ Representative, decisions of such Persons shall, as
between them and with respect to the rights of the Securityholders in relation
to the Securityholders’ Representative, be made by majority vote; provided,
however, that they shall designate a single Person as “Securityholders’
Representative” for all purposes involving the Buyer, any other Buyer
Indemnitee, or the Escrow Agent.
 
 
(d) The Securityholders’ Representative is authorized to act on behalf of the
Securityholders notwithstanding any dispute or disagreement among the
Securityholders.  In taking any actions as Securityholders’ Representative, the
Securityholders’ Representative may rely conclusively, without any further
inquiry or investigation, upon any certification or confirmation, oral or
written, given by any person he or it reasonably believes to be authorized
thereunto.  The Securityholders’ Representative may, in all questions arising
hereunder, rely on the advice of counsel, and the Securityholders’
Representative shall not be liable to any Securityholder for anything done,
omitted or suffered in good faith by the Securityholders’ Representative based
on such advice.  The Securityholders’ Representative undertakes to perform such
duties and only such duties as are specifically set forth in this Agreement
and/or
 
 
 

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the Escrow Agreement and no implied covenants or obligations shall be read into
this Agreement or the Escrow Agreement against the Securityholders’
Representative.
 
 
(e) As of the Effective Time, Buyer shall cause the Payment Agent to wire to the
Securityholders’ Representative the Expense Fund, which will be held by the
Securityholders’ Representative as agent and for the benefit of the
Securityholders and will be used for the purposes of paying any professional
fees and expenses of any attorney, accountant or other advisors retained by the
Securityholders’ Representative and other reasonable out-of-pocket expenses
incurred by the Securityholders’ Representative in connection with the
performance of the Securityholders’ Representative’s duties under this Agreement
(“Representative Expenses”).  The Securityholders acknowledge that the
Securityholders’ Representative is not providing any investment supervision,
recommendations or advice.  The Securityholders’ Representative shall not have
any liability to any Securityholder for any action taken, suffered or omitted by
him or it as Securityholders’ Representative without gross negligence.  The
Securityholders shall, in accordance with their respective Pro Rata Shares,
indemnify, defend and hold the Securityholders’ Representative harmless from and
against any loss, damage, Tax, Liability and expense that may be incurred or
paid by the Securityholders’ Representative arising out of or in connection with
the acceptance or administration of his or its duties (except as caused by the
Securityholders’ Representative’s gross negligence), including the legal costs
and expenses of defending the Securityholders’ Representative against any claim
or Liability in connection with the performance of his or its duties, to the
extent such losses, damages, Taxes, Liabilities and expenses exceed the Expense
Fund.  The Securityholders will not receive any interest or earnings on the
Expense Fund. The Securityholders’ Representative shall be entitled to recover
from the Securityholders any Representative Expenses reasonably incurred by the
Securityholders’ Representative in connection with actions taken by the
Securityholders’ Representative pursuant to the terms of this Agreement or the
Escrow Agreement, without the requirement of any consent or approval by Buyer or
any other Person.  All of the indemnities, immunities and powers granted to the
Securityholders’ Representative under this Agreement shall survive the Merger or
any termination of this Agreement.
 
(f) If not paid directly to the Securityholders’ Representative by the
Securityholders, the Representative Expenses shall be satisfied (i) from the
Expense Fund, (ii) to the extent the amount of the Representative Expenses
exceeds the amounts then available in the Expense Fund, from any amounts payable
to the Securityholders from the Escrow Amount and the Earn-Out Consideration
solely to the extent the Securityholders would otherwise then be paid such
amounts from the Escrow Amount or the Earn-Out Consideration in accordance with
the terms of this Agreement and the Escrow Agreement (as applicable) and (iii)
to the extent the amount of the Representative Expenses exceeds amounts
immediately available to the Securityholders’ Representative under (i) and (ii),
from each Securityholder, severally and not jointly and in proportion to its Pro
Rata Share; provided, that while this section allows the Securityholders’
Representative to be paid from the Expense Fund, the Escrow Amount and the
Earn-Out Consideration, this does not relieve the Securityholders from their
obligation to promptly pay such Representative Expenses as they are suffered or
incurred, nor does it prevent the Securityholders’ Representative from seeking
any remedies available to it at law or otherwise.
 
 
 

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(g) The Securityholders’ Representative shall have the power to designate his or
its successor hereunder.  In the event that the Securityholders’ Representative
resigns from such position or is unable to continue in such position without
having designated a successor, Securityholders holding among them the rights to
receive at least a majority of the amount then remaining in the Escrow Amount to
be distributed to the Securityholders (or, if no Escrow Amount remains,
representing a majority in interest of the Pro Rata Shares) (the “Majority
Holders”) shall promptly appoint another representative to fill such vacancy,
and such substituted representative shall be deemed to be the Securityholders’
Representative for all purposes of this Agreement; provided that a resigning
Securityholders’ Representative shall continue to perform his or its duties and
obligations until his or its successor is appointed and has become a party to
this Agreement and the Escrow Agreement.  In the absence of such appointment,
the Securityholders’ Representative or the Buyer may apply to a court of
competent jurisdiction for the appointment of a successor Securityholders’
Representative, and the costs, expenses and reasonable attorneys’ fees incurred
in connection with such proceeding shall be paid from the Expense Fund or, to
the extent exhausted, the Securityholders.  The Securityholders’ Representative
may be removed at any time upon the written consent of the Majority Holders with
not less than thirty (30) days’ prior written notice to the Buyer; provided
however, that a successor Securityholders’ Representative must be concurrently
appointed and become a party to this Agreement and the Escrow Agreement.
 
 
(h) The provisions of this Section 13.13 are independent and severable, are
irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any Securityholder may have in
connection with the Transactions.  Remedies available at Law for any breach of
the provisions of this Section 13.13 will be inadequate; therefore, the Buyer
and each other Buyer Indemnitee shall be entitled to temporary and permanent
injunctive relief without the necessity of proving damages or posting any bond
if such person brings an action or proceeding to enforce the provisions of this
Section 13.13.
 
 
13.14 Waiver of Conflict of Interest.  If the Securityholder Representative so
desires, acting on behalf of the Securityholders and without the need for
additional consent or waiver by the Surviving Corporation or Buyer, Morgan,
Lewis & Bockius LLP shall be permitted to represent the Securityholder
Representative after the Closing with respect to any matters related to this
Agreement or any disagreement or dispute relating thereto.
 
 
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5964589v10
 
 

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IN WITNESS WHEREOF, the parties, intending to be bound hereby, have executed
this Agreement under seal as of the date first written above.
 

 
PTC INC.
                   
By:
/s/  James E. Heppelmann
   
Name:  James E. Heppelmann
   
Title:  President and Chief Executive Officer
             
TETONIC, INC.
                   
By:
/s/  Aaron C. von Staats
   
Name:  Aaron C. von Staats
   
Title:  Secretary
             
THINGWORX, INC.
                   
By:
/s/  Russell Fadel
   
Name:  Russell Fadel
   
Title:  CEO
                     
/s/  Richard Bullotta
   
Richard Bullotta, Individually
                     
/s/  Russell Fadel
   
Russell Fadel, Individually
                     
/s/  John Richardson
   
John Richardson, Individually
     

 

 
 

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SECURITYHOLDERS’ REPRESENTATIVE:
 
SAFEGUARD DELAWARE, INC
   
/s/  Brian J. Sisko
Name:  Brian J. Sisko
Title:  Vice President