EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PROS, INC.,
PANDORA MERGER SUB CORPORATION,
SIGNALDEMAND, INC.
AND
FORTIS ADVISORS LLC, AS STOCKHOLDERS’ AGENT

DECEMBER 16, 2013

    

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Table of Contents

1
Definitions
1
1.1
Certain Definitions
1
1.2
Additional Definitions
3
2
The Merger
12
2.1
The Merger
12
2.2
Closing; Effective Time
12
2.3
Effect of the Merger
12
2.4
Certificate of Incorporation; Bylaws
12
2.5
Directors and Officers
13
2.6
Effect on Capital Stock
13
2.7
Surrender of Certificates
14
2.8
Escrow
15
2.9
No Further Ownership Rights in Target Capital Stock
15
2.1
Lost, Stolen or Destroyed Certificates
15
2.11
Withholding Taxes
15
2.12
Taking of Necessary Action; Further Action
16
2.13
Working Capital Adjustment
16
3
Representations and Warranties of Target
17
3.1
Organization, Standing and Power, Subsidiaries and Investments
17
3.2
Authority
18
3.3
Governmental Authorization
18
3.4
Financial Statements
19
3.5
Capital Structure
19
3.6
Absence of Certain Changes
21
3.7
Absence of Undisclosed Liabilities
23
3.8
Litigation
23
3.9
Restrictions on Business Activities
23
3.1
Intellectual Property
23
3.11
Interested Party Transactions
26
3.12
Books and Records
27
3.13
Bank Accounts
27
3.14
Complete Copies of Materials
27
3.15
Material Contracts
27
3.16
Inventory
28
3.17
Accounts Receivable
28
3.18
Customers and Suppliers
28
3.19
Employees and Consultants
28
3.2
Tangible Personal Property
28
3.21
Environmental Matters
29
3.22
Taxes
29

    

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3.23
Employee Benefit Plans
32
3.24
Employee Matters
33
3.25
Insurance
34
3.26
Compliance With Laws
34
3.27
Compliance with International Trade Laws
34
3.28
Absence of Unlawful Payments
35
3.29
Brokers’ and Finders’ Fee
35
3.3
Privacy Laws and Regulations
35
3.31
Product or Service Liability
35
3.32
Product Warranty
35
3.33
State Takeover Laws; Charter Provisions
36
3.34
Fairness of Consideration
36
3.36
Representations Complete
36
4
Reserved
36
5
Representations and Warranties of Acquiror and Merger Sub
36
5.1
Organization, Standing and Power
37
5.2
Authority
37
5.3
Interim Operations of Merger Sub
37
5.4
Sufficient Funds
37
6
Additional Agreements
37
6.1
Preparation of Solicitation Statement
37
6.2
Confidentiality
38
6.3
Further Assurances
38
6.4
Target Options and Warrants
38
6.5
Employees
38
6.6
Expenses
38
6.7
Reserved
38
6.8
Reserved
38
6.9
Closing Capitalization Schedule; Closing Consideration Schedule
38
6.1
Reserved
39
6.11
Employee Benefits Matters
39
6.12
Tax Matters
40
6.13
Reserved
41
6.14
Tail Liability Insurance Policy
41
7
Conditions to the Merger
42
7.1
Condition to Obligations of Each Party to Effect the Merger
42
7.2
Additional Conditions to the Obligations of Acquiror and Merger Sub
42
7.3
Additional Conditions to Obligations of Target
44
8
Escrow and Indemnification
44
8.1
Escrow Fund
44
8.2
Indemnification
45
8.3
Escrow Period; Release From Escrow
49

    

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8.4
Claims Upon Escrow Fund
49
8.5
Objections to Claims
49
8.6
Resolution of Conflicts and Arbitration
50
8.7
Stockholders’ Agent
51
8.8
Actions of Stockholders’ Agent
52
9
General Provisions
52
9.1
Notices
52
9.2
Counterparts
53
9.3
Entire Agreement; Nonassignability; Parties in Interest
53
9.4
Severability
53
9.5
Remedies Cumulative
53
9.6
Governing Law; Waiver of Jury Trial
54
9.7
Arbitration
54
9.8
Enforcement
54
9.9
LIMITATION OF LIABILITY
55
9.1
Rules of Construction
55
9.11
Amendment; Waiver
55

    

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LIST OF EXHIBITS
Exhibit A    Escrow Agreement
Exhibit B    Certificate of Merger
Exhibit C    Certificate of Incorporation of Target (after the Effective Time)
Exhibit D    Offer Letter
Exhibit E    Employee Confidentiality and Proprietary Rights Agreement
Exhibit F    Legal Opinion
Exhibit G    Bonus Participant Release Agreements
Exhibit H    Stockholder Agreement

    

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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the “Agreement”) is made and entered into as
of December 16, 2013, by and among PROS, Inc., a Delaware corporation
(“Acquiror”), Pandora Merger Sub Corporation, a Delaware corporation (“Merger
Sub”) and wholly owned subsidiary of Acquiror, SignalDemand, Inc., a Delaware
corporation (“Target”) and Fortis Advisors LLC, a Delaware limited liability
company, as Stockholders’ Agent (“Stockholders’ Agent”).
RECITALS
A.    The Boards of Directors of Target, Acquiror and Merger Sub believe it is
in the best interests of their respective companies and the stockholders of
their respective companies that Target and Merger Sub combine into a single
company through the statutory merger of Merger Sub with and into Target (the
“Merger”) and, in furtherance thereof, have approved the Merger.
B.    Pursuant to the Merger, among other things, the outstanding shares of (a)
Target common stock, $0.0001 par value per share (“Target Common Stock”), (b)
Series A Preferred Stock, having a $0.0001 par value per share (“Series A
Preferred Stock”), (c) Series B Preferred Stock, having a $0.0001 par value per
share (“Series B Preferred Stock”), (d) Series C Preferred Stock, having a
$0.0001 par value per share (“Series C Preferred Stock”) and (e) Series D
Preferred Stock, having a $0.0001 par value per share (“Series D Preferred
Stock”) shall be converted into the right to receive the Merger Consideration
upon the terms and subject to the conditions set forth herein.
Target, Acquiror and Merger Sub desire to make certain representations and
warranties and other agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants and representations set forth
herein, and for other good and valuable consideration, the parties agree as
follows:
1.Definitions.
1.1    Certain Definitions. Each of the following terms shall have the meaning
set forth in the indicated sections:
Defined Term
Section
Acquiror
Introductory Paragraph
Agreement
Introductory Paragraph
Available Escrow Fund
Section 8.3(b)
Basket
Section 8.2(c)
Certificate of Merger
Section 2.1
Certificates
Section 2.7(a)
Closing
Section 2.2
Closing Balance Sheet
Section 2.13(a)
Closing Capitalization Schedule
Section 6.9(a)
Closing Certificate
Section 2.13(c)

    

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Defined Term
Section
Closing Consideration Spreadsheet
Section 6.9(b)
Closing Date
Section 2.2
COBRA
Section 3.23(e)
Confidential Information
Section 3.10(h)
Confidentiality Agreement
Section 6.2
Disputed Items
Section 2.13(d)
Dissenting Shares
Section 2.6(e)
Effective Time
Section 2.2
ERISA
Section 3.23(a)
ERISA Affiliate
Section 3.23(a)
Escrow Agent
Section 2.8
Estimated Working Capital Adjustment
Section 2.13(b)
Final Working Capital Amount
Section 2.13(d)
Fundamental Representations
Section 8.2(a)
Indemnified Person(s)
Section 8.2(b)(i)
Indemnifying Party
Section 8.2(b)(i)
Initial Termination Date
Section 8.2(a)
IP Representations
Section 8.2(a)
Issued Patents
Section 1.1(a)
JAMS
Section 8.6(a)
Merger
Recital A
Merger Sub
Introductory Paragraph
Offer Letter
Section 6.5
Patent Applications
Section 1.1(b)
Patents
Section 1.1(b)
Pre-Closing Tax Period
Section 9.2(b)(i)
Property Taxes
Section 6.12(e)
Related Party
Section 3.11
Release Date
Section 8.3(b)
Stockholders’ Agent
Introductory Paragraph
Solicitation Statement
Section 3.5(d)
Straddle Period
Section 6.12(e)
Surviving Corporation
Section 2.1
Target
Introductory Paragraph
Target Balance Sheet Date
Section 3.6
Target Capital Stock
Section 2.6(b)

    

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Defined Term
Section
Target Common Stock
Recital B
Target Current Facilities
Section 3.21
Target Employee Plans
Section 3.23(a)
Target Facilities
Section 3.21
Target Financial Statements
Section 3.4(a)
Target Intellectual Property
Section 3.10(b)
Target Option Plan
Section 3.5(a)
Target Options
Section 2.6(c)
Target Products
Section 3.10(b)(iii)
Target Tail Policy
Section 6.14(b)
Target Service
Section 3.10(m)
Target Warrants
Section 2.6(d)
Tax Matter
Section 6.12(d)
Third Party Intellectual Property
Section 3.10(c)
Trademarks
Section 1.1(d)
 

1.2    Additional Definitions. The following terms, when used in this Agreement,
shall have the meanings set forth below:
“Affiliate” means with respect to a Person (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person.
“Available Preferred Stock Consideration” means the lesser of (i) the Maximum
Preferred Stock Consideration Entitlement and (ii) the Net Aggregate
Consideration.
“Bonus Plan” means the Target’s Bonus Plan, effective as of October 23, 2013.
“Bonus Plan Participant” means the Participants (as defined in the Bonus Plan)
set forth on the Closing Consideration Spreadsheet.
“Bonus Plan Payments” means each aggregate amount to be paid to each of the
Bonus Plan Participants for the satisfaction and termination of all of such
Bonus Plan Participant’s rights and obligations under the Bonus Plan as in
effect as of the Closing in accordance with the Bonus Plan and applicable Law
and as set forth in the Closing Consideration Spreadsheet.
“Business Day” means any day other than a Saturday, Sunday or day on which banks
in Texas are authorized or required by applicable Law to close.
“CERCLA” means the Federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Section 9601, et seq., as amended.
“Change of Control Payments” means the aggregate amount of all change of
control, bonus, termination, severance or other similar payments, including the
Bonus Plan Payments, that are payable by

    

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the Target to any Person as a result of or in connection with the Merger or any
of the other transactions contemplated by this Agreement, together with any
employer-paid portion of any employment and payroll taxes related thereto
(including any employer-paid portion of any employment and payroll taxes related
to the Bonus Plan Payments), whether accrued, incurred or paid prior to, at or
after the Closing; provided, however, that in no event shall any retention
payments made pursuant to an Offer Letter (or the employer paid portion of any
employment or payroll Taxes related thereto) be considered Change of Control
Payments or otherwise reflected as a liability of the Target in calculating the
Closing Working Capital Amount and provided further than in no event shall any
severance, bonus or similar payments due or made after the Closing and which
relate to terminations by Acquiror or its Affiliate after the Closing of any
Person employed by Target at the Effective Time be considered Change of Control
Payments.
“Closing Working Capital Amount” means the estimated Working Capital Amount set
forth on the Closing Balance Sheet.
“Code” means the Internal Revenue Code of 1986, as amended.
“Common Stock Price Per Share” means an amount per share of Common Stock equal
to the Price Per Share.
“Copyrights” means copyrights, copyrightable works, semiconductor topography and
mask work rights, including all rights of authorship, use, publication,
reproduction, distribution, performance transformation, moral rights and rights
of ownership of copyrightable works, semiconductor topography works and mask
works, and all rights to register and obtain renewals and extensions of
registrations, together with all other interests accruing by reason of
international copyright, semiconductor topography and mask work conventions.
“Damages” means any and all losses, costs, damages, liabilities, debts, charge,
interest, penalties and expenses arising from claims, demands, actions or causes
of action, including legal fees; provided, however, for the purposes of the
indemnification obligations under Section 8 hereof, “Damages” shall not include
any incidental, consequential or punitive damages. Notwithstanding the
foregoing, nothing in this Agreement shall prevent an Indemnified Person for
claiming any incidental, consequential or punitive Damages to the extent such
damages are alleged or awarded in any third party claim pursuant to which the
Indemnified Persons may seek indemnification under Section 8.2(g).
“Data Room” means the secure on-line data room (or workspace) as of December 12,
2013 and designated as the workspace for “Project Pandora,” maintained by
Intralinks on behalf of Target, and to which designated personnel of Acquiror
and counsel to Acquiror have been given access.
“Delaware Law” means the Delaware General Corporation Law, as amended.
“Environmental Laws” means any applicable Laws, policies, permits, licenses,
certificates, approvals, directives, or requirements that pertain to the
protection of the environment, protection of public health and safety, or
protection of worker health and safety, or that pertain to the handling, use,
manufacturing, processing, storage, treatment, transportation, discharge,
release, emission, disposal, re-use, recycling, or other contact or involvement
with Hazardous Materials, including CERCLA and RCRA.
“Escrow Agreement” means that certain agreement by and among the Acquiror,
Target, and the Escrow Agent, to be entered into on the Closing Date, in the
form attached hereto as Exhibit A.

    

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“Escrow Fund” means $1,500,000 in cash of the Total Consideration held by the
Escrow Agent pursuant to the terms of the Escrow Agreement and this Agreement,
as adjusted pursuant to Section 8.3(b).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“FCPA” means the Foreign Corrupt Practices Act, as amended.
“GAAP” means U.S. generally accepted accounting principles applied on a
consistent basis.
“Governmental Entity” means any court, administrative agency or commission or
other governmental authority or instrumentality, in each case federal, state,
local, foreign or domestic.
“Hazardous Materials” means any material, chemical, compound, substance, mixture
or by-product that is identified, defined, designated, listed, restricted or
otherwise regulated under Environmental Laws as a “hazardous constituent,”
“hazardous substance,” “hazardous material,” “acutely hazardous material,”
“extremely hazardous material,” “hazardous waste,” “hazardous waste
constituent,” “acutely hazardous waste,” “extremely hazardous waste,”
“infectious waste,” “medical waste,” “biomedical waste,” “pollutant,” “toxic
pollutant,” “contaminant” or any other formulation or terminology intended to
classify or identify substances, constituents, materials or wastes by reason of
properties that are deleterious to the environment, natural resources, worker
health and safety, or public health and safety, including ignitability,
corrosivity, reactivity, carcinogenicity, toxicity and reproductive toxicity.
The term “Hazardous Materials” shall include without limitation any “hazardous
substances” as defined, listed, designated or regulated under CERCLA, any
“hazardous wastes” or “solid wastes” as defined, listed, designated or regulated
under RCRA, any asbestos or asbestos-containing materials, any polychlorinated
biphenyls, and any petroleum or hydrocarbonic substance, fraction, distillate or
by-product.
“HIPAA” means the Health Insurance Portability and Accountability Act of 1996 as
amended.
“Indebtedness” of any Person means (a) all obligations of such Person for
borrowed money or with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person upon which interest charges are
customarily paid, (d) all obligations of such Person under conditional sale or
other title retention agreements relating to property or assets purchased by
such Person, (e) all obligations of such Person issued or assumed as the
deferred purchase price of property or services, (f) all indebtedness of others
secured by (or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed, (g) all guarantees by such Person, (h) all capital lease
obligations of such Person, (i) all obligations of such Person in respect of
interest rate protection agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements and (j) all obligations of
such Person as an account party in respect of letters of credit and bankers’
acceptances. Notwithstanding the foregoing, the Indebtedness of the Target shall
not include the Note Repayment Amount, Change of Control Payments or Transaction
Fees.
“Independent Accounting Firm” means an independent accounting firm of national
reputation, which is selected by Acquiror and is reasonably acceptable to
Stockholders’ Agent, and excluding any firm then performing material services
for Acquiror, the Surviving Corporation or Stockholders’ Agent.
“Intellectual Property” means:

    

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(a)    all issued patents, reissued or reexamined patents, revivals of patents,
utility models, certificates of invention, registrations of patents and
extensions thereof, regardless of country or formal name (collectively, “Issued
Patents”);
(b)    all published or unpublished nonprovisional and provisional patent
applications, reexamination proceedings (and invention disclosure and records of
invention submitted to the applicable governmental patent authority, if any) in
connection with such patent applications (collectively “Patent Applications”
and, with the Issued Patents, the “Patents”);
(c)    all Copyrights;
(d)    trademarks, registered trademarks, applications for registration of
trademarks, service marks, registered service marks, applications for
registration of service marks, trade names, registered trade names and
applications for registrations of trade names (collectively, “Trademarks”) and
domain name registrations;
(e)    all technology, ideas, inventions, invention disclosures, designs,
proprietary information, manufacturing and operating specifications, know-how,
formulae, algorithms, routines, models, trade secrets, technical data, computer
programs, hardware, software and processes; and
(f)    all other intangible assets, properties and rights customarily known as
intellectual property rights (whether or not appropriate steps have been taken
to protect, under applicable Law, such other intangible assets, properties or
rights).
“International Trade Law” means all Laws applicable to international
transactions or related to the import and export of commodities, software, and
technology from and into the United States, and the payment of required duties
and tariffs in connection with same, including, but not limited to, the Export
Administration Act, the Export Administration Regulations, the FCPA, the Arms
Export Control Act, the International Traffic in Arms Regulations, the
International Emergency Economic Powers Act, the Trading with the Enemy Act, the
U.S. Customs laws and regulations, the Foreign Asset Control Regulations, and
any regulations or orders issued thereunder.
“IRS” means the Internal Revenue Service.
“Knowledge” means, with respect to Target, the actual knowledge of Mark Tice,
Melicent Castillo, Michael Freimer, Meghan Keough, Robert Martin and John
Russell, after reasonable inquiry, the actual knowledge of each director of
Target, and such knowledge of which Mark Tice, Melicent Castillo, Michael
Freimer, Meghan Keough, Robert Martin, John Russell and each of the directors of
Target would reasonably be expected to have knowledge.
“Laws” means any law (including common law), regulation, code, statute, rule,
regulation, ordinance, judgment, injunction, settlement, award, writ, order or
decree or other requirement of any Governmental Entity.
“Lien” means any lien, mortgage, charge, hypothecation, pledge, security
interest, prior assignment, option, warrant, lease, sublease, right to
possession, encumbrance, claim, right or restriction which affects, by way of a
conflicting ownership interest or otherwise, the right, title or interest in or
to any particular property, excluding Target license agreements.

    

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“Loan Agreement Repayment Amount” means the aggregate amount necessary to repay
and discharge all obligations under the Loan Agreement as of the Closing,
including all principal, premium, interest, fees and other amounts outstanding
or otherwise payable thereunder.
“Loan Agreement” means the Loan and Security Agreement, dated as of November 23,
2011, between Silicon Valley Bank and the Target, as amended.
“material” any reference to any event, change, condition or effect being
“material” with respect to any entity or group of entities means any material
event, change, condition or effect related to the financial condition,
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of such entity or group of entities. Any
event, change, condition or effect that has a value of greater than $250,000,
individually or in the aggregate, shall automatically be deemed material.
“Material Adverse Effect” means with respect to any entity or group of entities
means any event, change or effect that is materially adverse to the financial
condition, properties, assets, liabilities, business, operations or results of
operations of such entity and its subsidiaries, taken as a whole provided,
however, that none of the following, either alone or in combination, shall be
considered in determining whether there has been a breach of a representation,
warranty, covenant or agreement that is qualified by the term “Material Adverse
Effect”: (a) events, circumstances, changes or effects that generally affect the
industries in which the Target operates (including legal and regulatory
changes), (b) general economic or political conditions or events, circumstances,
changes or effects affecting the securities markets generally, (c) changes
arising prior to the Effective Time from the consummation of the transactions
contemplated hereby, including any actions of competitors, (d) any reduction in
the price of services or products offered by the Target in response to the
reduction in price of comparable services or products offered by a competitor,
or (e) any circumstance, change or effect that results from any action taken
pursuant to or in accordance with this Agreement or at request of the Acquiror
and (or changes caused by a material worsening of current conditions caused by
acts of terrorism or war (whether or not declared) occurring after the date
hereof.
“Material Contract” means any contract, agreement or commitment to which Target
is a party:
(a) with expected receipts or expenditures in excess of $100,000;
(b) required to be listed pursuant to Section 3.10(b)(iii) or Section 3.10(c);
(c) requiring Target to indemnify any Person, other than indemnification
provisions contained in Target’s standard sales agreement (or substantially
similar documents with substantially similar indemnification provisions) arising
in the ordinary course of business, the form of which has been made available in
the Data Room;
(d) granting any exclusive rights to any Person (including any right of first
refusal or right of first negotiation);
(e) evidencing indebtedness for borrowed or loaned money, including guarantees
of such indebtedness;
(f) involving any partnership, joint venture or limited liability company
agreement or concerning any equity or partnership interest in another Person;

    

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(g) relating to the acquisition or disposition of any business (whether by
merger, sale of stock, sale of assets or otherwise);
(h) containing confidentiality or non-disclosure obligations pursuant to which
Target is (i) licensing or purchasing Intellectual Property from a third-party
or (ii) providing Target Intellectual Property to a third-party, in each of the
forgoing cases (i) and (ii), other than agreements with customers or prospective
customers of Target or employees of Target;
(i) containing a ‘most favored nation’ or similar provision;
(j) prohibiting or limiting in any material respect, the right of Target to
engage in business with any Person or levying a fine, charge or other payment
for doing so; or
(k) that could reasonably be expected to have a Material Adverse Effect on
Target if breached by Target in such a manner as would (1) permit any other
Person to cancel or terminate the same (with or without notice of passage of
time); (2) provide a basis for any other Person to claim money in excess of
$100,000 (either individually or in the aggregate with all other such claims
under that contract) from Target; or (3) give rise to a right of acceleration of
any material obligation or loss of any material benefit under such Material
Contract.
Notwithstanding anything herein to the contrary, agreements and contracts for
MarketForecaster customers paying less than $12,000 per year for subscription
services or license shall not be deemed “Material Contracts.”
“Maximum Preferred Stock Consideration Entitlement” means any amount equal to
the sum of:
(i)     the product of (A) $0.53 multiplied by (B) the total number of shares of
Series A Preferred Stock issued and outstanding immediately prior to the
Closing, plus
(ii)     the product of (A) $0.71337 multiplied by (B) the total number of
shares of Series B Preferred Stock issued and outstanding immediately prior to
the Closing, plus
(iii)     the product of (A) $1.2222 multiplied by (B) the total number of
shares of Series C Preferred Stock issued and outstanding immediately prior to
the Closing, plus
(iv)     the product of (A) $2.30801 multiplied by (B) the total number of
shares of Series D Preferred Stock issued and outstanding immediately prior to
the Closing.
“Merger Consideration” means, with respect to each share of Target Capital
Stock, the Common Stock Price Per Share, the Series A Price Per Share, the
Series B Price Per Share, the Series C Price Per share, or the Series D Price
Per Share, as applicable.
“Net Aggregate Consideration” means the Total Consideration plus (a) the
positive or negative Working Capital Adjustment, if any, minus (b) the aggregate
unpaid Total Debt Amount as of the Closing Date, minus (c) the aggregate unpaid
Transaction Fees as of the Closing Date, minus (d) the aggregate unpaid Change
of Control Payments as of the Closing Date, minus (e) the aggregate amount of
Damages paid over to the Indemnified Persons pursuant to Section 8 minus (f) the
Target Tail Policy Premium.

    

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“Note Purchase Agreement” means that certain Note Purchase Agreement, dated as
of August 25, 2011, by and among the Target and the Note Purchasers, as amended
by Amendment No. 1 on February 6, 2012 and by Amendment No. 2 on April 16, 2012.
“Note Purchasers” means, collectively, Catamount Ventures II, L.P., Catamount
Ventures III, L.P., GC Entrepreneurs Fund III, L.P., General Catalyst Group III,
L.P., Hummer Winblad Venture Partners V, L.P., as nominee for Hummer Winblad
Venture Partners V-A, L.P., Interwest Partners IX, L.P., and Christopher A.
White.
“Note Repayment Amount” means the aggregate amount to be paid to the Note
Purchasers for the satisfaction and discharge of all obligations in respect of
the Promissory Notes as of the Closing (including all principal, interest,
premium and fees in respect of the Promissory Notes).
“Officer’s Certificate” means a certificate signed by any officer of Acquiror.
“Person” means an individual, firm, corporation (including any non-profit
corporation), partnership, limited liability company, joint venture,
association, trust, Governmental Entity or other entity or organization.
“Preferred Stock Price Per Share Factor” means the lesser of (i) 1.0 and (ii) a
fraction equal to (A) the Available Preferred Stock Consideration, divided by
(B) the Maximum Preferred Stock Consideration Entitlement.
“Price Per Share” means the amount equal to the greater of (i) $0 and (ii) (A)
the Net Aggregate Consideration minus the Maximum Preferred Stock Consideration
Entitlement, divided by (B) the Total Share Number.
“Privacy Regulations” means all applicable U.S. and foreign federal laws, rules
and regulations and Target’s internal privacy policies and state laws, rules and
regulations and all foreign laws, rules or regulations relating to (i) the
privacy of users of its Target Products and related products and all Internet
websites owned, maintained or operated by Target and (ii) the collection,
storage and transfer of any personally identifiable information collected by
Target.
“Pro Rata Percentage” means with respect to any holder of Target Preferred Stock
or any Indemnifying Party, a percentage calculated by dividing (a) such Person’s
aggregate Merger Consideration attributable to such Person’s ownership of Target
Preferred Stock, by (b) the aggregate Merger Consideration attributable to all
the Target Preferred Stock.
“Promissory Notes” means, collectively, the promissory notes issued by the
Target to the Note Purchasers pursuant to the Note Purchase Agreement.
“Public Software” means any software that contains, or is derived in any manner
(in whole or in part) from, any software that is distributed as free software
(as defined by the Free Software Foundation), open source software (e.g., Linux
or software distributed under any license approved by the Open Source Initiative
as set forth www.opensource.org) or similar licensing or distribution models
which requires as a condition of the use, modification or distribution of such
software that such software, or other software into which such software is
incorporated or with which such software is distributed or that is derived from
such software, be disclosed or distributed in source code form, delivered at no
charge or be licensed, distributed or conveyed under the same terms as such
license, including, but not limited to, software licensed or distributed under
any of the following licenses or distribution models, or licenses or
distribution models similar to any

    

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of the following: (i) GNU’s General Public License (GPL) or Lesser/Library GPL
(LGPL); (ii) the Artistic License (e.g., PERL); (iii) the Mozilla Public
License; (iv) the Netscape Public License; (v) the Sun Community Source License
(SCSL); (vi) the Sun Industry Standards License (SISL); (vii) the BSD License;
or (viii) the Apache License.
“RCRA” means the federal Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., as amended.
“Returns” means returns, estimates, information statements and reports required
to be filed by Target with the appropriate taxing authority.
“Securities Act” means the Securities Act of 1933, as amended.
“Series A Price Per Share” means an amount per share of Series A Preferred Stock
equal to the sum of (i) the product of (A) $0.53 multiplied by (B) the Preferred
Stock Price Per Share Factor plus (ii) the Price Per Share.
“Series B Price Per Share” means an amount per share of Series B Preferred Stock
equal to the sum of (i) the product of (A) $0.71337 multiplied by (B) the
Preferred Stock Price Per Share Factor plus (ii) the Price Per Share.
“Series C Price Per Share” means an amount per share of Series C Preferred Stock
equal to the sum of (i) the product of (A) $1.2222 multiplied by (B) the
Preferred Stock Price Per Share Factor plus (ii) the Price Per Share.
“Series D Price Per Share” means an amount per share of Series D Preferred Stock
equal to the sum of (i) the product of (A) $2.30801 multiplied by (B) the
Preferred Stock Price Per Share Factor plus (ii) the Price Per Share.
“Subsidiary” of any Person means any other Person (a) more than 50% of whose
outstanding shares of capital stock or other equity or voting interests
representing the right to vote for the election of directors or other managing
authority of such other Person are, now or hereafter, owned or controlled,
directly or indirectly, by such first Person, but such other Person shall be
deemed to be a Subsidiary only so long as such ownership or control exists, or
(b) which does not have outstanding shares of capital stock or other equity or
voting interests with such right to vote, as may be the case in a partnership,
joint venture or unincorporated association, but more than 50% of whose
ownership interest representing the right to make the decisions for such other
Person is, now or hereafter, owned or controlled, directly or indirectly, by
such first Person, but such other Person shall be deemed to be a Subsidiary only
so long as such ownership or control exists.
“Target Disclosure Schedule” means a document of even date herewith and
delivered by Target to Acquiror on the date hereof referring to the
representations and warranties in this Agreement.
“Target Preferred Stock” means, collectively, the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.
“Target Sites” means all of Target’s public sites on the world wide web.
“Target Tail Policy Premium” means the premium amount payable for the Target
Tail Policy.

    

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“Tax” and, collectively, “Taxes” means any and all federal, state and local
taxes of any country, assessments and other governmental charges, duties,
impositions and liabilities, including without limitation taxes based upon or
measured by gross receipts, income, profits, sales, use and occupation, and
value added, ad valorem, stamp, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, or other tax of any kind
whatsoever, including any interest, penalties and additions thereto, whether
disputed or not and including any obligations to indemnify or otherwise assume
or succeed to the tax liability of any other Person, including any liability
under Treasury Regulation Section 1.1502-6 (or any similar provision of any
other applicable Law).
“Terms and Conditions” means the visitor terms and conditions published on the
Target Sites governing Individuals’ use of and access to the Target Sites.
“Total Consideration” means $13,500,000.
“Total Debt Amount” means the aggregate amount of (a) all outstanding
Indebtedness of the Target on the Closing Date (including all principal and
prepayment penalties and premiums and all accrued interest and fees), (b) the
Loan Agreement Repayment Amount and (c) the Note Repayment Amount.
“Total Share Number” means the sum of (a) the total number of shares of Target
Common Stock issued and outstanding immediately prior to the Closing, plus (b)
the total number of shares of Target Common Stock that are issuable upon
conversion of all shares of Target Preferred Stock that are issued and
outstanding immediately prior to the Closing, plus (c) the total number of
shares of Target Common Stock that are issuable upon the exercise of all Target
Options (assuming full vesting and exercisability of all such Target Options)
outstanding immediately prior to the Closing.
“Transaction Fees” means the aggregate amount of all fees and expenses incurred
by the Target, regardless of when payable (including the fees and expenses of
Gunderson Dettmer or any other legal counsel or any accountant, agent, auditor,
broker, expert or other financial advisor or consultant retained by or on behalf
of the Target), arising from or in connection with this Agreement or the
transactions contemplated hereby outstanding as of the Closing.
“Working Capital Adjustment” means the amount, if any, by which the Closing
Working Capital Amount or the Final Working Capital Amount is greater than
negative $2,470,000 or less than negative $2,730,000. If the Closing Working
Capital Amount or the Final Working Capital Amount is less than negative
$2,730,000, then the Working Capital Adjustment shall be a negative number equal
to the difference between the Closing Working Capital Amount or the Final
Working Capital Amount, as applicable, and negative $2,730,000 (e.g., if the
Closing Working Capital Amount or the Final Working Capital Amount is negative
$3,730,000, the Working Capital Adjustment shall be negative $1,000,000). If the
Closing Working Capital Amount or the Final Working Capital Amount is greater
than negative $2,470,000, the Working Capital Adjustment shall be positive
number equal to the difference between the Closing Working Capital Amount or the
Final Working Capital Amount, as applicable, and negative $2,470,000 (e.g., if
the Closing Working Capital Amount or the Final Working Capital Amount is
negative $1,470,000, the Working Capital Adjustment shall be $1,000,000). For
the avoidance of doubt, if the Closing Working Capital Amount is between
negative $2,470,000 and negative $2,730,000, the initial Working Capital
Adjustment shall be $0 (e.g., if the Closing Working Capital Amount or the Final
Working Capital Amount is negative $2,500,000, the Working Capital Adjustment
shall be $0).
“Working Capital Amount” means an amount equal to (a) the amount of current
assets of the Target (including accounts receivable, prepaids, deferred
commissions, other receivables, and other current assets but excluding cash),
minus (b) the amount of total current liabilities of Target (including, for

    

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the avoidance of doubt, accounts payable, accrued expenses, employee
liabilities, deferred revenue and other current liabilities, but excluding the
Total Debt Amount and current deferred Tax liabilities), in the case of each of
clauses (a) and (b) at the Closing Date, without giving effect to any changes
resulting from the consummation of the transactions on the Closing Date (it
being understood that, notwithstanding anything herein to the contrary, (i) the
employer-paid portion of any employment or payroll taxes incurred by the Target
at or prior to the Closing Date (other than the employer paid portion of any
employment or payroll Taxes related to any retention payments made pursuant to
an Offer Letter), to the extent such taxes are not Change of Control Payments
and are not paid prior to the close of business on the date of the Closing
Balance Sheet, shall be set forth on the Closing Balance Sheet and shall be
deemed to be a liability of the Target in determining the Working Capital
Amount, and (ii) (A) all unpaid Change of Control Payments as of the Closing
Date, (B) the unpaid Total Debt Amount as of the Closing Date, (C) all unpaid
Transaction Fees as of the Closing Date and (D) unpaid Target Tail Policy
Premium as of the Closing Date shall be set forth on the Closing Balance Sheet
but shall not be deemed to be liabilities of the Target in determining the
Closing Working Capital Amount). The Closing Balance Sheet shall be prepared in
accordance with GAAP and on a basis consistent with, and with no changes in the
method of application of Target’s accounting policies or changes in the method
of applying Target’s use of estimates as compared with, the Target Financial
Statements (subject to the absence of footnotes).
2.    The Merger.
2.1    The Merger. At the Effective Time and subject to and upon the terms and
conditions of this Agreement, the Certificate of Merger attached hereto as
Exhibit B (the “Certificate of Merger”) and the applicable provisions of
Delaware Law, Merger Sub shall be merged with and into Target, the separate
corporate existence of Merger Sub shall cease and Target shall continue as the
surviving corporation (the “Surviving Corporation”).
2.2    Closing; Effective Time. The closing of the transactions contemplated
hereby (the “Closing”) shall take place on a date as soon as practicable, but no
later than one Business Day, after the satisfaction or waiver of each of the
conditions set forth in Section 7 hereof, or at such other time as the parties
hereto agree (the “Closing Date”). The Closing shall take place at the offices
of DLA Piper LLP (US), 401 Congress Avenue, Suite 2500, Austin, Texas, or at
such other location as the parties hereto agree. In connection with the Closing,
the parties hereto shall cause the Merger to be consummated by filing the
Certificate of Merger, together with any required certificates, with the
Secretary of State of the State of Delaware, in accordance with the relevant
provisions of Delaware Law (the time of the acceptance of such filing, or such
later time as may be mutually agreed in writing by Acquiror and Target and
specified in the Certificate of Merger, being the “Effective Time”).
2.3    Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Target and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Target and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
2.4    Certificate of Incorporation; Bylaws.
(a)    Certificate of Incorporation. At the Effective Time, the Certificate of
Incorporation of Target shall be amended to read in its entirety as set forth on
Exhibit C.

    

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(b)    Bylaws. The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation.
2.5    Directors and Officers. At the Effective Time, the directors and officers
of Merger Sub immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation, to serve until their respective
successors are duly elected or appointed and qualified.
2.6    Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, Target or the holders of any
of the following securities:
(a)    Conversion of Target Capital Stock. Each share of Target Capital Stock
issued and outstanding immediately prior to the Effective Time, subject to
Section 2.6(b), and excluding Dissenting Shares, shall be converted without any
action on the part of the holders thereof, into the right to receive the
applicable Merger Consideration in cash, without interest, subject to, and in
accordance with Section 8 and the Escrow Agreement. At the Effective Time, all
such shares of Target Capital Stock shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate that immediately prior to the Effective Time represented any such
shares of Target Capital Stock (a “Certificate”) shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration with
respect thereto, subject to Section 2.7 and Section 8 hereof. For the avoidance
of doubt, in the event the Merger Consideration applicable to any shares of
Target Capital Stock is $0, such shares of Target Capital Stock shall receive no
consideration, and at the Effective Time such shares shall no longer be
outstanding and shall automatically be canceled and cease to exist, and the
holders of the Certificates for such shares shall cease to have any rights with
respect thereto, subject to Section 2.6(f).
(b)    Cancellation of Target Capital Stock Owned by Acquiror and Target. At the
Effective Time, each share of Target Common Stock and Target Preferred Stock
(collectively, “Target Capital Stock”) owned by Acquiror, Target or any of their
respective direct or indirect wholly owned Subsidiaries immediately prior to the
Effective Time, in each case other than shares of Target Capital Stock held on
behalf of third parties, shall be canceled and extinguished without any
conversion thereof.
(c)    Target Stock Options. At the Effective Time, all options to purchase
Target Common Stock then outstanding under the Target Option Plan (“Target
Options”) at the Effective Time to the extent unexercised shall terminate and be
cancelled in accordance with the terms of the Target Option Plan and Section
6.4(a) and shall not be entitled to any Merger Consideration hereunder.
(d)    Target Warrants. At the Effective Time, all warrants to purchase Target
Preferred Stock or Target Common Stock then outstanding (“Target Warrants”)
shall be cancelled in accordance with Section 6.4(b).
(e)    Capital Stock of Merger Sub. At the Effective Time, each share of common
stock of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(f)    Dissenters’ Rights. Any holder of shares of Target Capital Stock who
perfects such holder’s dissenters’ rights in accordance with and as contemplated
by Section 262 of the Delaware Law shall be entitled to receive from the
Surviving Corporation the right to receive the consideration determined pursuant
to Section 262 of the Delaware Law for such shares (the “Dissenting Shares”);
provided, that no such payment shall be made on any Dissenting Shares unless and
until such holder of Dissenting

    

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Shares has complied with the applicable provisions of Section 262 of the
Delaware Law and surrendered to Target the certificate or certificates
representing the shares for which payment is being made. In the event that after
the Effective Time a holder of Target Capital Stock fails to perfect, or
effectively withdraws or loses, such holder’s right to appraisal of and payment
for such holder’s shares, the Acquiror shall issue and deliver the consideration
to which such holder of shares of Target Capital Stock is entitled under
Section 2.6(a) (without interest) upon surrender by such holder of the
Certificate or Certificates representing the shares of Target Capital Stock held
by such holder. The Target shall give Acquiror prompt notice (and in no event
more than two Business Days) of any demand received by the Target for appraisal
of Target Capital Stock or notice of exercise of a holder of Target Capital
Stock’s dissenters’ rights in accordance with Delaware Law. The Target agrees
that, except with Acquiror’s prior written consent, it shall not voluntarily
make any payment or offer to make any payment with respect to, or settle or
offer to settle, any such demand for appraisal or exercise of dissenters’
rights.
2.7    Surrender of Certificates.
(a)    Exchange Procedures. Promptly after the Effective Time, and in no event
later than four (4) Business Days after the Closing, the Surviving Corporation
shall cause to be mailed to each holder of record of a Certificate or
Certificates that immediately prior to the Effective Time represented
outstanding shares of Target Capital Stock, whose shares were converted into the
right to receive the applicable Merger Consideration pursuant to Section 2.6(a),
subject to Section 2.11 and Section 8 hereof and the Escrow Agreement: (i) a
letter of transmittal in a form mutually agreed by Acquiror and Target (which
(A) shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon receipt of the Certificates by Acquiror,
(B) shall acknowledge the indemnification obligations of the holders of Target
Preferred Stock, (C) shall contain a full release of Target, Surviving
Corporation and Acquiror and its Affiliates, and (D) shall be in such form and
have such other provisions as Acquiror and Target may reasonably specify);
(ii) such other customary documents as may be required pursuant to such
instructions; and (iii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration that a holder of
Certificate(s) is entitled to receive pursuant to Section 2.6(a), subject to
Section 2.11 and Section 8 hereof, if any. Upon surrender of a Certificate for
cancellation to Acquiror or to such other agent or agents as may be appointed by
Acquiror, together with such letter of transmittal and other customary
documents, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefore (i) the Merger Consideration that a holder of
Certificate(s) is entitled to receive pursuant to Section 2.6(a), subject to
Section 2.11 and Section 8 hereof, if any, and the Certificate so surrendered
shall forthwith be canceled and such Merger Consideration shall be promptly
delivered by Acquiror (in no event later than seven (7) days after the surrender
of such complete and fully executed documents by the holder) to such holder.
Until so surrendered, each outstanding Certificate that prior to the Effective
Time represented shares of Target Capital Stock will be deemed from and after
the Effective Time, for all corporate purposes, to evidence the right to receive
the Merger Consideration that a holder of Certificate(s) is entitled to receive
pursuant to Section 2.6(a), subject to Section 2.11 and Section 8 hereof, if
any.
(b)    Rights of Former Target Stockholders. At the Effective Time, the stock
transfer books of Target shall be closed immediately prior to the Effective Time
and no transfer of Target Capital Stock by any such holder shall thereafter be
made or recognized. Until surrendered for exchange in accordance with the
provisions of Section 2.7, each Certificate theretofore representing shares of
Target Capital Stock (other than shares to be canceled pursuant to
Section 2.6(b) or as to Dissenting Shares) shall from and after the Effective
Time represent for all purposes only the right to receive the consideration
provided in Section 2.6(a) in exchange therefor.

    

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(c)    Transfers of Ownership. If any cash payment of the Merger Consideration
is to be made to a Person other than to whom the Certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance thereof
that the Certificate so surrendered will be properly endorsed and otherwise in
proper form for transfer.
(d)    Escheat. Notwithstanding anything in this Agreement to the contrary,
neither Acquiror nor any other Person shall be liable to any holder of Target
Capital Stock or to any other Person for any amounts paid to a public official
pursuant to applicable abandoned property law, escheat law or similar applicable
Law. Any consideration or other amounts remaining unclaimed by holders of Target
Capital Stock or any other Person three years after the Effective Time (or such
earlier date immediately prior to such time as such amounts would otherwise
escheat to, or become property of, any Governmental Entity) shall, to the extent
permitted by applicable Law, become the property of Acquiror free and clear of
any Lien.
(e)    Dissenting Shares. The provisions of this Section 2.7 shall also apply to
Dissenting Shares that lose their status as such, except that the obligations of
Acquiror under this Section 2.7 shall commence on the date of loss of such
status and the holder of such shares shall be entitled to receive in exchange
for such shares the Merger Consideration subject to Section 8 and the Escrow
Agreement, to which such holder is entitled pursuant to Section 2.6(a).
(f)    Certificates. For purposes of this Section 2.7, the term “Certificate”
shall include a Replacement Certificate (as defined below).
2.8    Escrow. In connection with the Closing, the Acquiror, Target and
Stockholders’ Agent shall have executed and delivered to the other the Escrow
Agreement. The Escrow Fund shall be established by Acquiror and held by JP
Morgan Chase Bank, NA as escrow agent (the “Escrow Agent”) pursuant to the terms
of the Escrow Agreement and this Agreement.
2.9    No Further Ownership Rights in Target Capital Stock. The Merger
Consideration delivered upon the surrender for exchange of shares of Target
Capital Stock in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Target
Capital Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of Target Capital Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in Section 2.7.
2.10    Lost, Stolen or Destroyed Certificates. If any Certificate shall have
been lost, stolen, mislaid or destroyed, upon receipt of (i) an affidavit of
that fact from the holder claiming such Certificate to be lost, mislaid, stolen
or destroyed, (ii) such agreement of indemnity as the Acquiror may reasonably
require and (iii) any other documents necessary to evidence and effect the bona
fide exchange thereof (collectively, such documents, a “Replacement
Certificate”), the Surviving Corporation shall issue to such holder the
consideration into which the shares represented by such lost, stolen, mislaid or
destroyed Certificate shall have been converted. The Surviving Corporation may
establish such other reasonable and customary rules and procedures in connection
with its duties as it may deem appropriate (provided that no bond, security or
similar collateral or payment shall be requested).
2.11    Withholding Taxes. Each of Acquiror, the Surviving Corporation and the
Surviving Corporation Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Target Capital Stock and Bonus Plan Participants such amounts, if any,
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 any amounts are so withheld and paid

    

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over to the appropriate taxing authority by Acquiror, the Surviving Corporation
or the Surviving Corporation Agent, as the case may be, such withheld and paid
over amounts shall be treated for all purposes of this Agreement as having been
paid to the holder of the shares of Target Capital Stock and Bonus Plan
Participants in respect of which such deduction, withholding and payment was
made by Acquiror, the Surviving Corporation or the Surviving Corporation Agent,
as applicable, and Acquiror, the Surviving Corporation or the Surviving
Corporation Agent, as the case may be, shall deliver W-2s or 1099s, as
applicable, to the affected holder of the shares of Target Capital Stock and
Bonus Plan Participant including the amount so deducted, withheld or paid over.
2.12    Taking of Necessary Action; Further Action. Each of Acquiror, Merger Sub
and Target will take all such reasonable and lawful action as may be necessary
or desirable in order to effectuate the Merger in accordance with this Agreement
as promptly as possible. If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of Target and Merger
Sub, the officers and directors of Target and Merger Sub are fully authorized in
the name of their respective corporations or otherwise to take, and will take,
all such lawful and necessary action, so long as such action is not inconsistent
with this Agreement.
2.13    Working Capital Adjustment.
(a)    Target shall prepare and deliver to Acquiror at least three (3) Business
Days prior to the Closing an unaudited balance sheet of Target as of the close
of business on the Closing Date (the “Closing Balance Sheet”), which Closing
Balance Sheet shall (i) be true, correct and complete, (ii) be derived from and
be in accordance with the books and records of Target, (iii) fairly and
accurately present in all material respects the assets and liabilities
(including the equity position, all reserves and the unpaid Total Debt Amount,
unpaid Change of Control Payments, unpaid Transaction Fees and unpaid Target
Tail Policy Premium, each as of the Closing Date) of Target as of the date
thereof, and (iv) fairly and accurately present the Working Capital Amount.
Target shall provide to Acquiror any information and back-up
materials reasonably requested by Acquiror with respect thereto. The Closing
Balance Sheet shall set forth (A) the Closing Working Capital Amount, (B) the
unpaid Total Debt Amount, (C) all unpaid Transaction Fees, (D) all unpaid Change
of Control Payments and (E) unpaid Target Tail Policy Premium, each as of the
Closing Date, shall include a reasonably detailed summary of the calculations
made to arrive at such amounts, and shall be based upon the amounts reflected on
the Closing Balance Sheet. Target shall provide Acquiror with a certificate
dated as of the Closing Date and signed by the chief executive officer of Target
to such effect. The Closing Balance Sheet shall be used to make any preliminary
adjustment to the Net Aggregate Consideration on the Closing Date pursuant to
Section 2.13(b), subject to further adjustment in accordance with Section
2.13(e).
(b)    In the event that the Working Capital Adjustment is negative, the Total
Consideration shall be adjusted downward by such negative Working Capital
Adjustment, and in the event that the Working Capital Adjustment is positive the
Total Consideration shall be adjusted upward by such positive Working Capital
Adjustment (each, the “Estimated Working Capital Adjustment”).
(c)    Within ninety (90) days after the Closing Date, Acquiror shall prepare
and deliver to Stockholders’ Agent a certificate setting forth, in reasonable
detail, any proposed adjustment to the Working Capital Amount compared to the
Closing Working Capital Amount and any resulting Working Capital Adjustment (the
“Closing Certificate”). Acquiror shall provide to Stockholders’ Agent any
information and back-up materials used by Acquiror in preparing the Closing
Certificate reasonably requested by Stockholders’ Agent with respect thereto. If
Acquiror does not deliver the Closing Certificate within

    

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ninety (90) days after the Closing Date, Acquiror shall be deemed to have waived
its right to any subsequent Working Capital Adjustment, and the Estimated
Working Capital Adjustment shall be the final Working Capital Adjustment.
(d)    Stockholders’ Agent shall have forty-five (45) days from the date on
which the Closing Certificate have been delivered to it to raise any
objection(s) to the Closing Certificate, by delivery of written notice to
Acquiror setting forth such objection(s) in reasonable detail (the “Disputed
Items”). In the event that Stockholders’ Agent shall not deliver any such
objection(s) with respect to the Closing Certificate within such forty-five day
period, then the Closing Certificate shall be deemed final for purposes of this
Section 2.13. In the event that any such objection(s) is so delivered, the
Closing Certificate shall not be deemed final and Acquiror and Stockholders’
Agent shall attempt, in good faith, to resolve the Disputed Items and, if they
are unable to resolve all of the Disputed Items within thirty (30) days of
delivery of such notice, shall, within five (5) Business Days thereafter (or
such earlier date as mutually agreed), submit the Disputed Items to the
Independent Accounting Firm. Acquiror and Stockholders’ Agent shall provide to
the Independent Accounting Firm all work papers and back-up materials relating
to the Disputed Items requested by the Independent Accounting Firm to the extent
available to Acquiror or its Representatives or Stockholders’ Agent or its
Representatives, respectively. Acquiror and Stockholders’ Agent shall be
afforded the opportunity to present to the Independent Accounting Firm any
material related to the Disputed Items and to discuss the issues with the
Independent Accounting Firm. The determination by the Independent Accounting
Firm, as set forth in a notice to be delivered to Acquiror and Stockholders’
Agent within thirty (30) days after the submission of the Disputed Items to the
Independent Accounting Firm, shall be final, binding and conclusive on Acquiror,
Stockholders’ Agent and all holders of Target Capital Stock. The fees and
expenses of the Independent Accounting Firm shall be allocated to and borne
proportionately by Acquiror and Stockholders’ Agent (on behalf of the holders of
Target Capital Stock) to the extent Acquiror’s and Stockholders’ Agent’s
respective determinations of the Disputed Items differ from the Independent
Accounting Firm’s final determination of the Disputed Items (such proportional
responsibility to be determined conclusively by the Independent Accounting Firm
and included in its written determination). The Working Capital Amount reflected
in the Closing Certificate, as revised to reflect the resolution of any and all
disputes by Acquiror and Stockholders’ Agent and/or the Independent Accounting
Firm, shall be deemed to be the “Final Working Capital Amount.”
(e)    At such time as the Closing Certificate shall become final in accordance
with Section 2.13(c), the Estimated Working Capital Amount shall be compared to
the Final Working Capital Amount to calculate the final Working Capital
Adjustment. In the event the final Working Capital Adjustment exceeds the
Estimated Working Capital Adjustment, the holders of Target Preferred Stock
shall pay to Acquiror an amount equal to such excess amount within five (5)
Business Days from the date that the Closing Certificate is finally determined
pursuant to Section 2.13(c) by Acquiror’s deduction of such amount from the
Escrow Fund. In the event the final Working Capital Adjustment is less than the
Estimated Working Capital Adjustment, the Acquiror shall pay to the holders of
Target Preferred Stock, in accordance with their respective Pro Rata
Percentages, an amount equal to such overpayment within five (5) Business Days
from the date that the Closing Certificate is finally determined pursuant to
Section 2.13(c).
3.    Representations and Warranties of Target.
Target represents and warrants to Acquiror and Merger Sub that the statements
contained in this Section 3 are true and correct, except as disclosed in the
Target Disclosure Schedule. The Target Disclosure Schedule will be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Section 3 (except to the extent disclosure in any numbered and lettered
section of the Target Disclosure

    

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Schedule is specifically cross-referenced in another numbered and lettered
section of the Target Disclosure Schedule).
3.1    Organization, Standing and Power, Subsidiaries and Investments. Target is
a corporation duly organized, validly existing and in good standing under the
Laws of the state of Delaware. Target has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified and in good standing
could reasonably be expected to have a Material Adverse Effect on Target. Target
has made available in the Data Room a true and correct copy of the Certificate
of Incorporation and Bylaws or other charter documents, as applicable, of
Target, each as amended to date, to Acquiror. Target is not in violation of any
of the provisions of its Certificate of Incorporation or Bylaws. Target has no
Subsidiaries.
3.2    Authority. Target has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Target. The affirmative vote of (a) the holders
of at least sixty-five percent (65%) of the Target Preferred Stock and (b) the
holders of a majority of the shares of Target Capital Stock, voting as separate
classes, outstanding on the record date for the Written Consent of Stockholders
relating to this Agreement is the only vote of the holders of any of Target’s
Capital Stock necessary under Delaware Law and the Certificate of Incorporation
and Bylaws of Target to approve this Agreement and the transactions contemplated
hereby. The Board of Directors of Target has unanimously (a) approved this
Agreement and the Merger; (b) determined that in its opinion the Merger is
advisable and in the best interests of the stockholders of Target and is on
terms that are fair to such stockholders; and (c) recommended that the
stockholders of Target approve this Agreement and the Merger. This Agreement has
been duly executed and delivered by Target and constitutes the valid and binding
obligation of Target enforceable against Target in accordance with its terms,
except to the extent that enforceability may be limited by the effect, if any,
of (i) any applicable bankruptcy, reorganization, insolvency, moratorium or
other legal requirements affecting the enforcement of creditors’ rights
generally, and (ii) general principles of equity, regardless of whether such
enforceability is considered in a proceeding at law or equity. The execution and
delivery of this Agreement by Target does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (a) any provision of the Certificate
of Incorporation or Bylaws of Target, as amended; or (b) any mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license or Law applicable to Target or any of their properties or
assets, except for such conflicts or violations in the case of (b) as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any other
Person is required by or with respect to Target or its Subsidiaries in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for the filing of the
Certificate of Merger, as provided in Section 2.2.
3.3    Governmental Authorization. Target has obtained each federal, state,
county, local or foreign governmental consent, license, permit, grant, or other
authorization of a Governmental Entity (a) pursuant to which Target currently
operates or holds any interest in any of its properties; or (b) that is required
for the operation of Target’s business or the holding of any such interest and
all of such authorizations are in full force and effect. Target is not and has
not been in violation of or default under, and no condition exists that with
notice or the lapse of time or both would constitute a violation of or default
under such consents, licenses, permits, grants and other authorizations, except
for such violations or defaults as could not,

    

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individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. No proceeding is pending or, to Target’s Knowledge, threatened
to revoke or limit any such consents, licenses, permits, grants or other
authorizations.
3.4    Financial Statements.
(a)    Financial Statements. Target has made available in the Data Room its
audited financial statements for the fiscal year ended February 28, 2012, and
its unaudited financial statements (balance sheet, statement of operations and
statement of cash flows) on a consolidated basis for the fiscal year ended
February 28, 2013 and as at and for the six-month period ended August 31, 2013
(collectively, the “Target Financial Statements”). The Target Financial
Statements have been prepared in accordance with GAAP (except that the unaudited
financial statements do not contain footnotes and are subject to normal
recurring year-end audit adjustments, the effect of which will not, individually
or in the aggregate, be materially adverse) applied on a consistent basis
throughout the periods presented and consistent with each other. The Target
Financial Statements have been prepared from the books and records of Target and
fairly present in all material respects the consolidated financial condition,
operating results and cash flow of Target as of the dates, and for the periods,
indicated therein, subject to normal year-end audit adjustments which are not
material, individually or in aggregate, and which do not contain footnotes in
the case of the unaudited Target Financial Statements.
(b)    Accounting System. Target has maintained a system of internal accounting
controls sufficient to provide reasonable assurance that: (i) transactions are
executed with management’s general or specific authorizations; (ii) transactions
are recorded as necessary to permit preparation of financial statements of
Target in conformity with GAAP and to maintain accountability for assets;
(iii) access to Target’s assets is permitted only in accordance with
management’s authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences, except for such insufficiencies in
controls as could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. Target is not party to or otherwise involved
in any “off-balance sheet arrangements” (as defined in Item 303 of Regulation
S-K under the Exchange Act).
3.5    Capital Structure.
(g)    Capital Stock. The entire authorized capital stock of Target consists of
49,978,695 shares of Target Common Stock and 34,140,300 shares of Target
Preferred Stock, of which there are designated 6,045,435 shares of Series A
Preferred Stock, 10,786,829 shares of Series B Preferred Stock, 8,181,966 shares
of Series C Preferred Stock and 9,126,070 shares of Series D Preferred Stock.
There are issued and outstanding, 6,045,435 shares of Series A Preferred Stock,
convertible into 6,045,435 shares of Target Common Stock; 10,513,477 shares of
Series B Preferred Stock, convertible into 10,513,477 shares of Target Common
Stock; 8,181,966 shares of Series C Preferred Stock, convertible into 8,181,966
shares of Target Common Stock; 8,665,475 shares of Series D Preferred Stock,
convertible into 8,665,475 shares of Target Common Stock; and 5,609,201shares of
Target Common Stock. All outstanding shares of Target Common Stock and Target
Preferred Stock are duly authorized, validly issued, fully paid and
non-assessable and are free of any Liens other than any Liens created by or
imposed upon the holders thereof, and are not subject to preemptive rights or
rights of first refusal created by statute, the Certificate of Incorporation or
Bylaws of Target or any agreement to which Target is a party or by which it is
bound or of which it has Knowledge. There are 13,471,640 shares of Common Stock
reserved for issuance under the Target 2004 Stock Option/Stock Issuance Plan
(the “Target Option Plan”), of which 8,018,547 shares were subject to
outstanding options and 2,335,767 shares were reserved for future option grants.
There are 91,117 shares of

    

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Series B Preferred Stock reserved for issuance upon the exercise of outstanding
Target Warrants, and the Target Warrants are held in the amounts and by the
persons set forth in Section 3.5 of the Target Disclosure Schedule. Target has
made available in the Data Room true and complete copies of each warrant and
warrant agreement evidencing each Target Warrant and each form of agreement or
stock option plan evidencing each Target Option. Except for the rights created
pursuant to this Agreement and the rights disclosed in this Section 3.5(a),
there are no other options, warrants, calls, rights, securities, commitments or
agreements of any character to which Target is a party or by which it is bound,
obligating Target to issue, deliver, sell, repurchase or redeem or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of Target Capital
Stock or obligating Target to grant, extend, accelerate the vesting of, change
the price of, or otherwise amend or enter into any such option, warrant, call,
right, security, commitment or agreement. All shares of Target Common Stock
issuable upon conversion of the Target Preferred Stock or upon exercise of the
options described in this Section 3.5, and all shares of Series B Preferred
Stock issuable upon exercise of warrants described in this Section 3.5, will be,
when issued pursuant to the respective terms of such Target Preferred Stock,
options or warrants, duly authorized, validly issued, fully paid and
nonassessable. There are no other contracts, commitments or agreements relating
to voting, purchase or sale of Target Capital Stock (a) between or among Target
and any of its stockholders; and (b) to Target’s Knowledge, between or among any
of Target’s stockholders. All shares of outstanding Target Common Stock and
Target Preferred Stock and rights to acquire Target Capital Stock were issued in
compliance with all applicable Laws. Each Target Option or other right to
acquire Target Common Stock (i) has an exercise price that was not less than the
fair market value of the underlying equity as of the date such Target Option or
other right to acquire Target Common Stock was granted in accordance with all
governing documents and in compliance with all applicable Laws, (ii) has no
feature for the deferral of compensation other than the deferral of recognition
of income until the later of exercise or disposition of such Target Option or
other right, (iii) to the extent it was granted to an employee, director or
consultant after December 31, 2004, was granted with respect to a class of stock
of Target that is “service recipient stock” (within the meaning of applicable
regulations under Section 409A of the Code), and (iv) has at all times been
properly accounted for in accordance with GAAP in Target’s audited financial
statements provided to Acquiror or made available in the Data Room. The
applicable holders of Target Capital Stock and Target have entered into an
agreement or agreements terminating (or have validly consented to the
termination of), effective as of the Effective Time, the Third Amended and
Restated Investors' Rights Agreement dated as of March 28, 2008 by and among
Target and the holders of Target Capital Stock named therein. The Third Amended
and Restated Stockholders' Agreement dated as of March 28, 2008 by and among
Target and the holders of Target Capital Stock named therein will terminate in
accordance with its terms and without any action on the part of any party hereto
or any other Person at the Effective Time.
(h)    Capital Stock of Others. Except as set forth on Section 3.5(b) of the
Target Disclosure Schedule, Target does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar ownership interest in, any corporation,
partnership, joint venture or other business association or entity.
(i)    Bonus Plan. No Person is entitled to any amounts in respect of the Bonus
Plan other than the Bonus Plan Payment payable to each Bonus Plan Participant as
set forth on the Closing Consideration Spreadsheet. Target has provided to
Acquiror or made available in the Data Room a true and correct copy of the Bonus
Plan, as amended to the date hereof, including the names of all Participants and
the amounts to which they are entitled pursuant to the transactions contemplated
hereby. The amounts of the Bonus Plan Payments set forth on the Closing
Consideration Spreadsheet will be determined in accordance with the terms of the
Bonus Plan and any applicable Law. Target has provided to Acquiror or made
available in the Data Room complete and correct copies of each award agreement
executed by each Bonus Plan Participant prior to the date of this Agreement.
Upon the payment of the Bonus Plan Payments, all obligations in respect of the
Bonus Plan Participants will be paid in full.

    

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(j)    Solicitation Statement. Target has prepared and delivered to each of
Target’s stockholders a solicitation statement for the solicitation of approval
of Target’s stockholders describing this Agreement, the Certificate of Merger,
the Merger and the transactions contemplated hereby and thereby (the
“Solicitation Statement”). The Solicitation Statement contains the
recommendation of the board of directors of Target that Target’s stockholders
approve the Merger and this Agreement and the conclusion of the board of
directors of Target that the terms and conditions of the Merger are fair to and
in the best interests of Target’s stockholders. The Solicitation Statement
conforms in all material respects with all applicable Laws.
3.6    Absence of Certain Changes.
(g)    Since February 28, 2012, Target has conducted its business in the
ordinary course consistent with past practice and there has not occurred:
(i)    any change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by Target or any revaluation by
Target of any of its assets;
(ii)    any amendment of any term of any outstanding security of Target (other
than with respect to Target Options and Common Stock);
(iii)    any incurrence, assumption or guarantee by Target of any indebtedness
for borrowed money;
(iv)    any creation, assumption or allowance by Target of any Lien on any of
Target’s assets;
(v)    any relinquishment by Target of any Material Contract or other material
right, other than those contemplated by this Agreement;
(vi)    any labor dispute, other than routine and individual grievances that are
unlikely to result in any material claim or action, or any activity or
proceeding by a labor union or representative thereof to organize any employees
of Target, or any lockouts, strikes, slowdowns or work stoppages or threats
thereof by or with respect to such employees;
(vii)    a grant of credit to any customer, distributor or supplier of Target on
terms or in amounts materially more favorable than had been extended to such
customer, distributor or supplier in the past;
(viii)    any material adverse change in Target’s relations with any customers,
distributors, suppliers or agents;
(ix)    any settlement or compromise of any claim, suit, action, proceeding,
investigation or arbitration;
(x)    a default by Target or any default by another party under any material
lease, license or other occupancy arrangement or any receipt of notice of
noncompliance or violation thereof by Target from any Person;
(xi)    any delay or postponement by Target in the payment of accounts payable
and other liabilities outside the ordinary course of business; or

    

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(xii)    any negotiation or agreement by Target to do any of the things
described in the preceding clauses (a)(i) through (a)(xi) (other than
negotiations with Acquiror and its representatives regarding the transactions
contemplated by this Agreement).
(h)    Since December 1, 2012, Target has conducted its business in the ordinary
course consistent with past practice and there has not occurred:
(i)    a Material Adverse Effect on Target; or
(ii)    any change, event, development or condition (whether or not covered by
insurance) that has resulted in, or could reasonably be expected to result in, a
Material Adverse Effect on Target.
(iii)    any negotiation or agreement by Target to do any of the things
described in the preceding clauses (b)(i) through (b)(ii) (other than
negotiations with Acquiror and its representatives regarding the transactions
contemplated by this Agreement).
(i)    Since August 31, 2013 (the “Target Balance Sheet Date”), Target has
conducted its business in the ordinary course consistent with past practice and
there has not occurred:
(i)    any acquisition, sale or transfer of any material asset of Target other
than in the ordinary course of business and consistent with past practice;
(ii)    any declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of Target or any direct or indirect
redemption, purchase or other acquisition by Target of any of its shares of
capital stock (other than repurchase of unvested common stock in connection with
the termination of service of a holder thereof at the price paid per such share
of common stock);
(iii)    any Material Contract entered into by Target, other than in the
ordinary course of business and as provided to Acquiror, or any amendment or
termination of, or default under, any Material Contract;
(iv)    any amendment or change to the Certificate of Incorporation or Bylaws of
Target;
(v)    any increase in or modification of the compensation, employment terms, or
benefits (including any severance benefits) for any of Target’s directors or
employees;
(vi)    any making of any loan, advance or capital contribution to or investment
in any Person, excluding any advance to any employee not in excess of $10,000
made in the ordinary course of business consistent with past practices and
relating solely to advancement of travel and other business expenses;
(vii)    any condemnation, seizure, damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the assets, properties or
business of Target and, to Target’s Knowledge, no such loss is threatened;

    

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(viii)    any capital expenditure, or commitment for a capital expenditure, for
additions or improvements to property, plant and equipment in excess of $25,000
individually or $100,000 in the aggregate;
(ix)    except for capital expenditures and commitments referred to in Section
(a)(viii) above, any (i) acquisition, lease, license or other purchase of, or
(ii) disposition, assignment, transfer, license or other sale of, any tangible
assets or property or Intellectual Property in one or more transactions, or any
commitment in respect thereof, that, individually or in the aggregate, involved
or involve payments of $25,000 or more;
(x)    a cancellation or compromise of any material debt or claim or waiver or
release of any material right of Target;
(xi)    any negotiation or agreement by Target to do any of the things described
in the preceding clauses (c)(i)through (c)(x) (other than negotiations with
Acquiror and its representatives regarding the transactions contemplated by this
Agreement). At the Effective Time, there will be no accrued but unpaid dividends
on shares of Target’s capital stock.
3.7    Absence of Undisclosed Liabilities. Target has no material liabilities of
any nature (matured or unmatured, fixed or contingent) other than (a) those set
forth or adequately provided for in the Closing Balance Sheet; (b) those
incurred in the ordinary course of business since the Target Balance Sheet Date
and consistent with past practice; and (c) those incurred in connection with the
execution of this Agreement.
3.8    Litigation. There is no private or governmental action, suit, proceeding,
claim, arbitration or investigation pending before any Governmental Entity, or,
to Target’s Knowledge, threatened against Target or any of its properties or any
of its officers or directors (in their capacities as such). There is no
judgment, decree or order against Target, or, to Target’s Knowledge, any of its
respective directors or officers (in their capacities as such), that could
prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to have a
Material Adverse Effect on Target. All litigation to which Target is a party
(or, to Target’s Knowledge, threatened to become a party) is described in
Section 3.8 of the Target Disclosure Schedule.
3.9    Restrictions on Business Activities. There is no agreement, judgment,
injunction, order, decree or other instrument binding upon Target that has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of Target, any acquisition of property by Target
or the conduct of business by Target as currently conducted by Target. Except
for customary powers of attorney granted to Target’s accountants and tax
advisors, which are listed in Section 3.9 of the Target Disclosure Schedule, no
power of attorney granted by or with respect to Target is currently in force.
3.10    Intellectual Property.
(a)    Title.
(i)    Target owns and has good and marketable title to, or possesses legally
enforceable rights to use, all Intellectual Property used in the business of
Target as currently conducted by Target. The Intellectual Property owned by and
licensed to Target collectively constitutes all of the Intellectual Property
necessary to enable Target to conduct its business as such business is currently
being conducted. No current or former officer, director, stockholder, employee,
consultant or independent

    

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contractor has any right, claim or interest in or with respect to any Target
Intellectual Property (as defined below).
(ii)    Except as set forth on Section 3.10(a)(ii)(A) of the Target Disclosure
Schedule, no Person has had or has access to Target’s source code in its
entirety. Except as set forth on Section 3.10(a)(ii)(B) of the Target Disclosure
Schedule, no Person has access to Target’s current source code in its entirety.
Except as set forth on Section 3.10(a)(ii)(C) of the Target Disclosure Schedule,
no former consultant, contractor or joint employee of Target has had or has
access to Target’s current source code in its entirety. No Person who has had or
has access to Target’s source code in its entirety has disclosed, is disclosing
or will disclose any of such source code.
(b)    Target Intellectual Property. With respect to each item of Intellectual
Property purported to be owned by Target or incorporated into any product of
Target or otherwise used in the business of Target (except “off the shelf” or
other software widely available through regular commercial distribution channels
at a cost not exceeding $10,000 per year on standard terms and conditions, as
modified for Target’s operations) (“Target Intellectual Property”),
Section 3.10(b) of the Target Disclosure Schedule lists:
(i)    to the extent owned or purported to be owned by Target, all Issued
Patents and Patent Applications, all registered Trademarks, and pending
trademark registrations and all registered Copyrights, including the
jurisdictions in which each such Intellectual Property has been issued or
registered or in which any such application for such issuance and registration
has been filed, in each case listing, as applicable: (A) the name of the
applicant/registrant and current owner, (B) the jurisdiction where filed and (C)
the application or registration number;
(ii)    all Internet domain names; and
(iii)    the following to which Target is a party relating to each of the
products of Target, including each of Target’s proprietary software products
(the “Target Products”), or other Target Intellectual Property: all (A)
agreements granting any right to distribute or sublicense a Target Product on
any exclusive basis; (B) any exclusive licenses of Intellectual Property to or
from Target; (C) agreements pursuant to which the amounts payable under firm
commitments to Target are $50,000 or more; (D) joint development agreements;
(E) any agreement by which Target grants any ownership right to any Target
Intellectual Property owned by Target; (F) any option relating to any Target
Intellectual Property owned by Target; and (G) agreements pursuant to which any
Person is granted any rights to access Target’s source code or to use Target’s
source code to create derivative works of Target Products.
(c)    Licenses. Section 3.10(c) of the Target Disclosure Schedule contains an
accurate list of all licenses, sublicenses and other agreements to which Target
is a party and pursuant to which Target is authorized to use any Intellectual
Property owned by any third party, excluding “off the shelf” or other software
widely available through regular commercial distribution channels at a cost not
exceeding $10,000 per year on standard terms and conditions (“Third Party
Intellectual Property”).
(d)    Third Party Infringement. There is no unauthorized use, disclosure,
infringement or misappropriation of any Target Intellectual Property owned by
Target or, to Target’s Knowledge, any Third Party Intellectual Property
exclusively licensed to Target, by any third party, including any employee or
former employee of Target. Target has not entered into any agreement to
indemnify any other person against any charge of infringement of any
Intellectual Property, other than indemnification provisions contained in
Target’s standard sales agreement (or substantially similar documents with
substantially similar indemnification provisions) with end users arising in the
ordinary course of business,

    

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the forms of which have been made available in the Data Room. There are no
royalties, fees or other payments payable by Target to any Person by reason of
the ownership, use, sale or disposition of Intellectual Property.
(e)    No Breach. Target is not in breach of any license, sublicense or other
agreement relating to the Target Intellectual Property or Third Party
Intellectual Property that individually or in the aggregate could result in a
Material Adverse Effect. Neither the execution, delivery or performance of this
Agreement or any ancillary agreement contemplated hereby nor the consummation of
the Merger or any of the transactions contemplated by this Agreement will
contravene, conflict with or result in any limitation on the Acquiror’s right to
own or use any Target Intellectual Property.
(f)    Status. To Target’s Knowledge, all Issued Patents, registered Trademarks
and registered Copyrights held by Target are valid and subsisting. As of the
date hereof, all maintenance and annual fees have been fully paid and all fees
paid during prosecution and after issuance of any Patent have been paid in the
correct entity status amounts. Target is not infringing, misappropriating or
making unlawful use of, or received any notice or other communication (in
writing or otherwise) of any actual, alleged, possible or potential
infringement, misappropriation or unlawful use of any proprietary asset owned by
any third party. There is no proceeding pending or, to Target’s Knowledge,
threatened, nor has any claim or demand been made that challenges the legality,
validity, enforceability or ownership of any item of Target Intellectual
Property owned or purported to be owned by Target or Third Party Intellectual
Property exclusively licensed to Target or alleges against Target a claim of
infringement of any Patents, Copyrights or Trademarks, or violation of any trade
secret or other proprietary right of any third party. Target has not brought a
proceeding alleging infringement of Target Intellectual Property or breach of
any license or agreement involving Intellectual Property against any third
party.
(g)    Employee and Consultant Assignment. Except as set forth on
Section 3.10(g) of the Target Disclosure Schedule, all current and former
officers and direct and joint employees of Target have executed and delivered to
Target an agreement (containing no exceptions or exclusions from the scope of
its coverage) regarding the protection of proprietary information and the
assignment to Target of any Intellectual Property arising from services
performed for Target by such persons, the form of which has been supplied to
Acquiror. None of the individual listed in Section 3.10(g) of the Target
Disclosure Schedule has at any time been involved with the development of any
Target Intellectual Property or has had access to any source code of Target. All
current and former consultants and independent contractors to Target involved
directly or indirectly in the development, modification, marketing and servicing
of any Target Products or Target Intellectual Property have executed and
delivered to Target an agreement in the form provided to Acquiror (containing no
exceptions or exclusions from the scope of its coverage) regarding the
protection of proprietary information and the assignment to Target of any
Intellectual Property arising from services performed for Target by such
persons. No employee, consultant or independent contractor of Target is in
violation of any term of any patent disclosure agreement or employment contract
or any other contract or agreement relating to the services such employee,
consultant or independent contractor provides to Target. No current or former
officer, director, stockholder, employee, consultant or independent contractor
of Target has any right, claim or interest in or with respect to any Target
Intellectual Property owned or purported to be owned by Target.
(h)    Confidentiality. Target has taken commercially reasonable and customary
measures and precautions necessary to protect and maintain the confidentiality
of Target Intellectual Property owned or purported to be owned by Target (except
such disclosures where the value of such Target Intellectual Property was, is,
or would be unimpaired by public disclosure) and otherwise to maintain and
protect the value of Target Intellectual Property. All use, disclosure or
appropriation of Intellectual Property not otherwise protected by Patents or
Copyrights (other than Trademarks, domain names and information

    

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intentionally publicly disclosed where the value of such Target Intellectual
Property was, is or would be unimpaired by such public disclosure)
(“Confidential Information”) owned by Target by or to a third party has been
pursuant to the terms of a written agreement between Target and such third
party. All use, disclosure or appropriation by Target of Confidential
Information owned by a third party has been pursuant to the terms of a written
agreement between Target and such third party, or is otherwise lawful.
(i)    No Product Liability. No product liability claims have been communicated
in writing to or, to Target’s Knowledge, threatened against Target.
(j)    Software. A complete list of each of the Target Products is set forth in
Section 3.10(j) of the Target Disclosure Schedule. The Target Products (solely
as such Target Products (including the software therein) exist prior to the
Effective Time) conform in all material respects with all specifications,
documentation, performance standards, representations and statements provided
with respect thereto by or on behalf of Target, except for matters arising in
the normal course of business (including defects, bugs or errors in the normal
course of business), which in the aggregate, do not materially impair the
operation or functionality of any such Target Product.
(k)    Standard Form Target Intellectual Property Contracts. Target has made
available in the Data Room a complete and accurate copy of its standard form of:
(i) end user, software or program license agreement; (ii) form of purchase
order, and terms and conditions of sale for Target Products; (iii) distributor
or reseller agreement and (iv) employee agreement containing any assignment or
license of Intellectual Property or any confidentially provision. Section
3.10(k) of the Target Disclosure Schedule accurately identifies each Contract to
which Target is a party involving Target Intellectual Property that is not based
on, or deviates in any material respect form the corresponding standard form
agreement made available in the Data Room, including any agreement with an
employee, consultant or contractor in which the employee, consultant or
independent contractors expressly reserved or retained any Intellectual Property
related to Targets business, research or development.
(l)    No Proceedings. Target is not subject to any proceeding or outstanding
decree, order, judgment or stipulation restricting in any manner the use,
transfer or licensing of any Target Intellectual Property by Target, or which
may affect the validity, use or enforceability of such Target Intellectual
Property. Target is not subject to any agreement that restricts in any material
respect the use, transfer, delivery or licensing by Target of Target Products or
any Target Intellectual Property owned or purported to be owned by Target
(subject to customary restrictions contained in in-bound licenses for third
party intellectual property).
(m)    No Public Software. No Public Software is distributed as part of any
Target Product, services provided by Target (“Target Service”) or Target
Intellectual Property, and no Public Software was or is used in connection with
the development of any Target Product, Target Service or Target Intellectual
Property or is incorporated into, in whole or in part, or has been distributed
with, in whole or in part, any Target Product, Target Service or Target
Intellectual Property.
3.11    Interested Party Transactions. Target is not indebted to any director,
officer, employee or agent of Target (except for amounts due as normal salaries
and bonuses and in reimbursement of ordinary expenses), and no such person is
indebted to Target. No (a) stockholder, (b) officer, director or Affiliate of
Target, (c) immediate family member of any such officer, director or Affiliate,
or of a stockholder, and (d) Person controlled by any one or more of the
foregoing (excluding Target) (each a “Related Party”) presently or since the
Target Balance Sheet Date: (i) owns or has owned, directly or indirectly, any
interest in (excepting not more than five percent stock holdings for investment
purposes in securities of publicly

    

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held and traded companies), or is an officer, director, employee or consultant
of, any Person which is, or is engaged in business as, a competitor, lessor,
lessee, customer, distributor, sales agent, or supplier of Target; (ii) owns or
has owned, directly or indirectly, in whole or in part, any tangible or
intangible property that Target uses or the use of which is necessary or
desirable for the conduct of its business; (iii) has or had any claim whatsoever
or has brought any action, suit or proceeding against, or owes or owed any
amount to, Target; or (iv) on behalf of Target, has made any payment or
commitment to pay any commission, fee or other amount to, or purchase or obtain
or otherwise contract to purchase or obtain any goods or services from, any
corporation or other Person of which any officer or director of Target, or an
immediate family member of the foregoing, is a partner or stockholder (excepting
stock holdings solely for investment purposes in securities of publicly held and
traded companies). Target is not a party to any transaction with any Related
Party on other than arm’s-length terms.
3.12    Books and Records. Target has maintained business records with respect
to the assets and its business and operations which are true, accurate and
complete in all material respects, and there are no material deficiencies in
such business records. Target does not have any of its primary records, systems,
controls, data or information which are material to the operation of its
business recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether or not computerized) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of Target. The minute books of Target contain a complete and accurate
summary in all material respects of all meetings of directors and stockholders
or actions by written consent since the time of incorporation of Target through
the date of this Agreement, and reflect all transactions referred to in such
minutes accurately.
3.13    Bank Accounts. Section 3.13 of the Target Disclosure Schedule provides
the following information with respect to each account maintained by or for the
benefit of any of Target at any bank or other financial institution: (a) the
name of the bank or other financial institution at which such account is
maintained; (b) the account number; (c) the type of account; and (d) the names
of all Persons who are authorized to sign checks or other documents with respect
to such account.
3.14    Complete Copies of Materials. Target has delivered or made available in
the Data Room true and complete copies of each document that has been requested
by Acquiror in connection with their due diligence review of Target.
3.15    Material Contracts. Target has paid in full all amounts due under the
Material Contracts which are due and payable or accrued in accordance with GAAP
as consistently applied, all amounts due to others under the Material Contracts
(and has recognized revenues due from others thereunder in accordance with GAAP
as consistently applied), and has satisfied in full or provided for all of its
liabilities and obligations under the Material Contracts which are due and
payable, except amounts or liabilities disputed in good faith by Target for
which adequate reserves have been set aside and as shall be reflected in the
Working Capital Amount. Target is not a party to any material oral contract,
agreement or other arrangement. All of Target’s Material Contracts are listed in
Section 3.15 of the Target Disclosure Schedule. With respect to each Material
Contract:
(a)    The Material Contract is legal, valid, binding and enforceable and in
full force and effect with respect to Target, and, to Target’s Knowledge, is
legal, valid, binding, enforceable and in full force and effect with respect to
each other party thereto, in either case subject to the effect of bankruptcy,
insolvency, moratorium or other similar Laws affecting the enforcement of
creditors’ rights generally and except as the availability of equitable remedies
may be limited by general principles of equity (regardless of whether such
enforceability is considered in a proceeding at equity or at law);

    

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(b)    The Material Contract will continue to be legal, valid, binding and
enforceable and in full force and effect immediately following the Effective
Time in accordance with its terms as in effect prior to the Effective Time,
subject to the effect of bankruptcy, insolvency, moratorium or other similar
Laws affecting the enforcement of creditors’ rights generally and except as the
availability of equitable remedies may be limited by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
at equity or at law);
(c)    Neither Target nor, to Target’s Knowledge, any other party is in breach
or default, and no event has occurred that with notice or lapse of time would
constitute a breach or default by Target or, to Target’s Knowledge, by any such
other party, or permit termination, modification or acceleration, under such
Material Contract; and
(d)    Other than with respect to the Target Options, the Closing and the
transactions contemplated hereby will not require Target to give any notice or
receive any prior consent, will not constitute a breach or default by Target, or
permit termination, modification or acceleration, under such Material Contract.
3.16    Inventory. Target had no inventory as of, and has not acquired any
inventory since the Target Balance Sheet Date.
3.17    Accounts Receivable. Subject to any reserves set forth therein, the
accounts receivable, unbilled work in process and other debts due or recorded as
shown on the Target Financial Statements are valid and genuine, have arisen
solely out of bona fide sales and deliveries of goods, performance of services,
and other business transactions in the ordinary course of business in each case
with persons other than Affiliates, are not subject to any prior assignment or
Lien, and are not subject to valid defenses, set-offs or counter claims. The
accounts receivable are good and collectible in full in accordance with their
terms at their recorded amounts, subject only to the reserve for doubtful
accounts on the Target Financial Statements.
3.18    Customers and Suppliers. As of the date hereof, no customer and no
supplier of Target has canceled or otherwise terminated, or made any oral or
written threat to Target to cancel or otherwise terminate its relationship with
Target or decrease materially the provision of its services or supplies to
Target in the case of any supplier, or its use of the services or products of
Target in the case of any customer. Target has not breached any agreement with
or engaged in any fraudulent conduct with respect to, any customer or supplier
of Target, except for such breach as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
3.19    Employees and Consultants. Section 3.19 of the Target Disclosure
Schedule contains a list of the names of all employees (including part-time
employees and temporary employees), leased employees, independent contractors
and consultants of Target currently in service to the Target, together with
their respective salaries or wages, other compensation, any change in
compensation since the Target Balance Sheet Date, sick and vacation leave that
is accrued but unused, date of hire and current position. None of the officers
of Target, nor to Target’s Knowledge, none of the employees, contractors or
consultants of Target intends to resign, retire or discontinue his or her
relationship with Target as a result of the transactions contemplated by this
Agreement or otherwise. Target is not a party to any employment contract with
any of its officers or employees with respect to such person’s employment or any
service contract with any of its independent contractors other than a contract
that is terminable at will, without any penalty, liability or severance
obligation incurred by Target. To Target’s Knowledge, no employee or independent
contractor of Target is in violation of any term of any employment contract,
confidentiality or

    

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other proprietary information disclosure agreement or any other agreement or
contract relating to the right of any such employee to be employed by Target.
Target has fully complied with the requirements of the Immigration Reform and
Control Act of 1986, as amended, and other United States immigration Laws
related to the verification of citizenship or legal permission to work in the
United States with respect to all of the employees of Target.
3.20    Tangible Personal Property. Target has good and marketable, indefeasible
title to all of its properties, interests in properties and assets reflected in
the Target Balance Sheet or acquired after the Target Balance Sheet Date (except
properties, interests in properties and assets sold or otherwise disposed of
since the Target Balance Sheet Date in the ordinary course of business), or with
respect to leased properties and assets, valid leasehold interests therein, free
and clear of all Liens, except (a) the lien of current taxes not yet due and
payable; (b) such imperfections of title, Liens and easements as do not and will
not materially detract from or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations
involving such properties; (c) Liens securing debt that is reflected on the
Target Balance Sheet; and (d) such other Liens as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Target. The property and equipment of Target that are used in the operations of
Target’s business are in all material respects in good operating condition and
repair, subject to normal wear and tear and are usable in the ordinary course of
business consistent with past practices. All tangible assets and properties used
in the operations of Target are reflected in the Target Balance Sheet to the
extent required by GAAP and constitute all of the tangible assets and properties
necessary to conduct Target’s operations and business as currently conducted by
Target. All leases to which Target is a party are in full force and effect and
are valid, binding and enforceable in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar Laws affecting or relating to creditors’ rights
generally; and general principles of equity (regardless of whether asserted in a
proceeding in equity or at law). True and correct copies of all such leases (as
amended to date) have been provided or made available in the Data Room. Target
has never owned any real property.
3.21    Environmental Matters. Target is and has been in compliance with all
Environmental Laws relating to the properties or facilities used, leased or
occupied by Target at any time (collectively, “Target Facilities;” such
properties or facilities currently used, leased or occupied by Target are
defined herein as “Target Current Facilities”), and no discharge, emission,
release, leak or spill of Hazardous Materials has occurred at any Target
Facilities that may or will give rise to liability of Target under Environmental
Laws. To Target’s Knowledge, there are no Hazardous Materials (including
asbestos) present in the surface waters, structures, groundwaters or soils of or
beneath any Target Current Facilities. To Target’s Knowledge, there neither are
nor have been any aboveground or underground storage tanks for Hazardous
Materials at the Target Current Facilities. To Target’s Knowledge, no Target
employee or other person has claimed that Target is liable for alleged injury or
illness resulting from an alleged exposure to a Hazardous Material. No civil,
criminal or administrative action, proceeding or investigation is pending
against Target, or, to Target’s Knowledge, threatened against Target, with
respect to Hazardous Materials or Environmental Laws; and Target is not aware of
any facts or circumstances that could form the basis for assertion of a claim
against Target or that could form the basis for liability of Target, regarding
Hazardous Materials or regarding actual or potential noncompliance with
Environmental Laws.
3.22    Taxes.
(a)    Each of Target and its Subsidiaries have prepared and timely filed, or
caused to be prepared and timely filed, all Returns that Target and its
Subsidiaries were required to file under applicable Laws and regulations. All
such Returns are true and correct in all material respects and have been
completed in accordance with applicable Laws;

    

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(b)    All Taxes due and owing by Target or any of its Subsidiaries (whether or
not shown on any Return) have been paid. Each of Target and its Subsidiaries
have withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
(c)    There is no Tax deficiency outstanding or assessed or, to Target’s
Knowledge, proposed against Target that is not reflected as a liability on the
Target Balance Sheet, nor has Target executed any agreements or waivers
extending any statute of limitations on or extending the period for the
assessment or collection of any Tax;
(d)    Target has no liabilities for unpaid Taxes that have not been adequately
accrued for or reserved on the Target Balance Sheet and Target has no Knowledge
of any basis for the assertion of any such liability attributable to Target, its
assets or operations;
(e)    Target is not a party to any Tax-sharing or Tax allocation agreement with
any other party, and Target has not assumed any obligation to pay any Tax
obligations of, or with respect to any transaction relating to, any other person
or agreed to indemnify any other person with respect to any Tax;
(f)    Neither Target’s nor any of its Subsidiaries’ Returns have ever been
audited by a government or taxing authority, nor, to Target’s Knowledge, is any
such audit in process or pending, and neither Target nor its Subsidiaries have
been notified in writing of any request for such an audit or other examination
including any notice of deficiency or proposed adjustment, and no officer or
director of Target or its Subsidiaries has Knowledge that any taxing authority
intends to assess additional Taxes for any period for which Returns of Target or
its Subsidiaries have been filed;
(g)    Target has never been a member of an affiliated group of corporations
within the meaning of Section 1504(a) of the Code filing a consolidated federal
income tax return and neither Target nor its Subsidiaries has ever been a member
of an affiliated group of corporations filing a consolidated, combined or
unitary income tax return under provisions of state, local or non-U.S. tax law
comparable to Section 1504(a) of the Code;
(h)    Target 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 (A) change in method
of accounting for a taxable period ending on or prior to the Closing Date; (B)
“closing agreement” as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local, or non-U.S. income Tax law)
executed on or prior to the Closing Date; (C) intercompany transaction or excess
loss account described in Treasury Regulations under Section 1502 of the Code
(or any corresponding or similar provision of state, local, or non-U.S. income
Tax law); (D) installment sale or open transaction disposition made on or prior
to the Closing Date; (E) prepaid amount received on or prior to the Closing
Date; or (F) election under Section 108(i) of the Code;
(i)    Target has not distributed stock of another Person, or has had its stock
distributed by another Person, in a transaction that was purported or intended
to be governed in whole or in part by Section 355 or Section 361 of the Code;
(j)    Neither the Target nor any of its Subsidiaries (A) is or has been a
“controlled foreign corporation” as defined in Section 957 of the Code, (B) is
or has been a “passive foreign investment company” within the meaning of Section
1297 of the Code, or (C) has a permanent establishment (within

    

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the meaning of an applicable Tax treaty) or otherwise has an office or fixed
place of business in a country other than the country in which it is organized;
(k)    Target has disclosed to Acquiror (i) any Tax exemption, Tax holiday or
other Tax-sparing arrangement that Target has in any jurisdiction, including the
nature, amount and lengths of such Tax exemption, Tax holiday or other
Tax-sparing arrangement; and (ii) any expatriate tax programs or policies
affecting Target;
(l)    Target has made available in the Data Room copies of all Returns filed
for the five Tax periods prior to the Closing Date;
(m)    to Target’s Knowledge, Target has not engaged in any transaction that
would constitute a “tax shelter”, a “reportable transaction”, a transaction
substantially similar to a “tax shelter” or “reportable transaction” within the
meaning of Section 6011, 6662A or 6662 of the Code and the regulations
thereunder and similar state or local Tax statutes and that has not been
disclosed on an applicable Return;
(n)    Target has not submitted a request for a ruling to the IRS or a state Tax
authority;
(o)    Target has not at any time made, changed or rescinded any material
express or deemed election relating to Taxes that is not reflected in any
Return;
(p)    Each of the Target and its Subsidiaries has always been in compliance
with all applicable transfer pricing Laws, including the execution and
maintenance of contemporaneous documentation substantiating the transfer pricing
practices and methodology of the Target and any of its Subsidiaries; and
(q)    Reserved.
(r)    Target is not a party to any contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of Target that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
Sections 280G, 404 or 162 of the Code by Target or Merger Sub as an expense
under applicable Law. There is no agreement, plan, arrangement or other contract
covering any employee or other service provider of Target or any Subsidiary of
Target (or any other entity treated as a member of Target’s affiliated group for
purposes of Section 280G(d)(5) of the Code), including arrangements contemplated
by this Agreement, that, considered individually or in the aggregate with any
other such agreements, plans, arrangements or other contracts in existence,
will, or could reasonably be expected to, give rise directly or indirectly to
the payment of any amount that would be characterized as a “parachute payment”
within the meaning of Section 280G(b)(1) of the Code or similar provisions of
Law.  There is no agreement, plan, arrangement or other contract by which Target
or Subsidiary of Target is bound to compensate any Person for excise taxes paid
pursuant to Section 4999 of the Code.  Section 3.22(q) of the Target Disclosure
Schedule lists all Persons who are “disqualified individuals” (within the
meaning of Section 280G of the Code and the regulations promulgated thereunder).
(s)    No stock options, stock appreciation rights or other equity-based awards
issued or granted by Target or any Target Subsidiary are deferred compensation
arrangements subject to the requirements of Section 409A of the Code.  Each
“nonqualified deferred compensation plan” (as such term is defined under
Section 409A(d)(1) of the Code and the guidance thereunder) under which Target
or any Target Subsidiary makes, is obligated to make or promises to make,
payments (each, a “409A Plan”) complies

    

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in both form and operation, with the requirements of Section 409A of the Code
and the guidance thereunder.  Section 3.22(s) of the Target Disclosure Schedule
lists each 409A Plan under which Target or any Target Subsidiary makes, is
obligated to make or promises to make, payments. No compensation shall be
includable in the gross income of any current or former employee, director, or
consultant of Target or any Target Subsidiary as a result of the operation of
Section 409A of the Code and no payment to be made under any 409A Plan is or
will be subject to the penalties of Section 409A(a)(1) of the Code.
3.23    Employee Benefit Plans.
(a)    Benefit Plans. Section 3.23(a) of the Target Disclosure Schedule contains
a complete and accurate list of each plan, program, policy, practice, contract,
agreement or other arrangement providing for employment, compensation,
retirement, deferred compensation, loans, severance, separation, relocation,
repatriation, expatriation, visas, work permits, termination pay, performance
awards, bonus, incentive, stock option, stock purchase, stock bonus, phantom
stock, stock appreciation right, supplemental retirement, fringe benefits,
cafeteria benefits or other benefits, whether written or unwritten, including
each “employee benefit plan” within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), which is either
(1) sponsored, maintained, contributed to, or required to be contributed to by
Target or (2) with respect to which Target has any liability or ongoing
obligation and, with respect to any such plans which are subject to Code
Section 401(a), any trade or business (whether or not incorporated) that is or
at any relevant time was treated as a single employer with Target within the
meaning of Section 414(b), (c), (m) or (o) of the Code, (an “ERISA Affiliate”)
for the benefit of any person who performs or who has performed services for
Target or with respect to which Target or any ERISA Affiliate has or may have
any liability (including contingent liability) or obligation (collectively, the
“Target Employee Plans”) and identifies any such Target Employee Plans that
provides benefits to former service providers, employees or directors. Target
has not adopted in the past and does not maintain, whether formally or
informally, any Target Employee Plan for the benefit of employees outside the
United States.
(b)    Documents. Target has made available in the Data Room true and complete
copies of documents embodying each of the Target Employee Plans and related plan
documents, including trust documents, group annuity contracts, plan amendments,
insurance policies or contracts, participant agreements, employee booklets,
administrative service agreements, summary plan descriptions, tests for
compliance with all applicable Laws pertaining to coverage, nondiscrimination,
top heavy status, standard COBRA forms and related notices, registration
statements and prospectuses and, to the extent still in its possession, any
material employee communications relating thereto. With respect to each Target
Employee Plan that is subject to ERISA reporting requirements, Target has made
available in the Data Room copies of the Form 5500 reports filed for the last
three plan years. Target has made available in the Data Room the most recent IRS
determination, opinion, notification or advisory letter (a “Determination
Letter”) issued with respect to each such Target Employee Plan, and to Target’s
Knowledge nothing has occurred since the issuance of each such Determination
Letter that could reasonably be expected to cause the loss of the tax-qualified
status of any Target Employee Plan subject to Code Section 401(a).
(c)    Compliance. To the Target’s Knowledge: (i) Each Target Employee Plan has
been administered in compliance with its terms and in compliance in all respects
with the requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), except to the extent that such failure to comply
could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on Target; and to their Knowledge, Target and each ERISA
Affiliate have performed all material obligations required to be performed by
them under, are not in material respect in default under or violation of and
have no Knowledge of any material default or violation by any other party to,
any of the Target Employee Plans; (ii) any Target Employee Plan intended to be
qualified under Section 401(a) of the

    

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Code has either obtained from the IRS a favorable Determination Letter as to its
qualified status under the Code, including all currently effective amendments to
the Code, or has time remaining to apply under applicable Treasury Regulations
or IRS pronouncements for a Determination Letter and to make any amendments
necessary to obtain a favorable Determination Letter; (iii) there has been no
“prohibited transaction,” as such term is defined in Section 406 of ERISA or
Section 4975 of the Code, with respect to any Target Employee Plan; (iv) none of
Target or any ERISA Affiliate is subject to any liability or penalty under
Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any
Target Employee Plan; (v) all contributions and payments required to be made by
Target or any ERISA Affiliate to any Target Employee Plan have been paid or
accrued in accordance with prior funding and accruals, as adjusted to include
proportional accruals for the period ending at the Closing Date; (vi) with
respect to each Target Employee Plan, no “reportable event” within the meaning
of Section 4043 of ERISA (excluding any such event for which the thirty (30) day
notice requirement has been waived under the regulations to Section 4043 of
ERISA) nor any event described in Section 4062, 4063 or 4041 or ERISA has
occurred; (vii) each Target Employee Plan subject to ERISA has prepared in good
faith and timely filed all requisite governmental reports, which were true and
correct as of the date filed, and has properly and timely filed and distributed
or posted all notices and reports to employees required to be filed, distributed
or posted with respect to each such Target Employee Plan; and (viii) no suit,
administrative proceeding, action or other litigation has been brought, or to
Target’s Knowledge is threatened, against or with respect to any such Target
Employee Plan, including any audit or inquiry by the IRS or United States
Department of Labor
(d)    No Title IV or Multiemployer Plan. Neither Target nor any ERISA Affiliate
has ever maintained, established, sponsored, participated in, contributed to, or
is obligated to contribute to, or otherwise incurred any obligation or liability
(including any contingent liability) under any “multiemployer plan” (as defined
in Section 3(37) of ERISA) or to any “pension plan” (as defined in Section 3(2)
of ERISA) subject to Title IV of ERISA or Section 412 of the Code. None of
Target or any ERISA Affiliate has any actual or potential withdrawal liability
(including any contingent liability) for any complete or partial withdrawal (as
defined in Sections 4203 and 4205 of ERISA) from any multiemployer plan.
(e)    COBRA, FMLA, HIPAA, Cancer Rights. With respect to each Target Employee
Plan, Target has complied with (i) the applicable health care continuation and
notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”) and the regulations thereunder or any state Law governing health care
coverage extension or continuation; (ii) the applicable requirements of the
Family and Medical Leave Act of 1993 and the regulations thereunder; (iii) the
applicable requirements of HIPAA; and (iv) the applicable requirements of the
Cancer Rights Act of 1998, except to the extent that such failure to comply
could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on Target.
(f)    Effect of Transaction. The consummation of the transactions contemplated
by this Agreement will not (i) entitle any current or former employee or other
service provider of Target or any ERISA Affiliate to severance benefits or any
other payment (including unemployment compensation, excess parachute payment,
bonus or benefits under any Target Employee Plan), except as expressly provided
in this Agreement with respect to the Target Options and the Bonus Plan; or
(ii) accelerate the time of payment or vesting of any such benefits or increase
the amount of compensation due any such employee or service provider, except as
contemplated by this Agreement with respect to the Target Options and the Bonus
Plan. Each Target Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
material liability to Acquiror or Target other than ordinary administration
expenses typically incurred in a termination event. Target has no liability with
respect to post-retirement health, medical or life insurance benefits or other
welfare benefits for retired, former or current employees of Target, other than
pursuant to the terms of COBRA.

    

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3.24    Employee Matters. Target has complied with all Laws respecting terms and
conditions of employment, including, but not limited to, applicant and employee
background checking, immigration Laws, discrimination Laws, verification of
employment eligibility, employee leave Laws, classification of workers as
employees and independent contractors, wage and hour Laws, and occupational
safety and health Laws. To Target’s Knowledge, each third party that supplies
employees or contractors who directly or indirectly perform services for Target
has complied with all Laws respecting terms and conditions of employment,
including, but not limited to, applicant and employee background checking,
immigration Laws, discrimination Laws, verification of employment eligibility,
employee leave Laws, classification of workers as employees and independent
contractors, wage and hour Laws, and occupational safety and health Laws. There
are no proceedings pending or, to Target’s Knowledge, threatened, between Target
and any or all of its current or former employees, including any claims for
actual or alleged harassment or discrimination based on race, national origin,
age, sex, sexual orientation, religion, disability, or similar tortious conduct,
breach of contract, wrongful termination, defamation, intentional or negligent
infliction of emotional distress, interference with contract or interference
with actual or prospective economic disadvantage. There are no claims pending,
or, to Target’s Knowledge, threatened, against Target under any workers’
compensation or long-term disability plan or policy. Other than as required by
applicable law, Target has no material unsatisfied obligations to any employees,
former employees, or qualified beneficiaries pursuant to COBRA, HIPAA, or any
state Law governing health care coverage extension or continuation. Target is
not a party to any collective bargaining agreement or other labor union
contract, nor does Target know of any activities or proceedings of any labor
union to organize its employees. Target has provided all employees with all
wages, benefits, relocation benefits, stock options, bonuses and incentives, and
all other compensation that became due and payable through the date of this
Agreement. Target is not engaged in any unfair labor practice. There is no
unfair labor practice complaint pending or, to Target’s Knowledge, threatened
against Target before the National Labor Relations Board, Department of Labor,
Equal Employment Opportunity Commission or any other Governmental Entity. There
currently is no labor strike, slowdown, lockout or stoppage or union
organization campaign, election or similar action pending or, to Target’s
Knowledge, threatened against or affecting Target. As of the Closing Date,
Target has not incurred any liability or obligation under the Worker Adjustment
and Retraining Notification Act, as it may be amended from time to time, or
similar applicable state Law; nor has Target taken any action prior to the
Closing Date which could result in any such liability or obligation to Target
within the six-month period immediately following the Closing Date if, during
such six-month period, only terminations of employment in the normal course of
operations occur.
3.25    Insurance. Target has policies of insurance and bonds of the type and in
amounts customarily carried by persons conducting businesses or owning assets
similar to those of Target and all such insurance policies and bonds are in full
force and effect. Section 3.25 of the Target Disclosure Schedule sets forth the
name of each insurer, policyholder, covered insured, policy number, period of
coverage, scope (including whether the coverage was on a claims made, occurrence
or other basis) and amount for each insurance policy to which Target has been a
party, named insured, or loss payee since February 28, 2010. There is no
material claim pending under any of such policies or bonds as to which coverage
has been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid and Target is otherwise in compliance in all material respects with the
terms of such policies and bonds. There is no material premium increase with
respect to, or to Target’s Knowledge, threatened termination of, any of such
policies.
3.26    Compliance With Laws. Target has complied with, is not in violation of
and has not received any notices of violation and has not been under
investigation with respect to, any Law with respect to the conduct of its
business, or the ownership or operation of its business, properties and assets,

    

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other than such noncompliance, violation or investigation that could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
3.27    Compliance with International Trade Laws. Target is, and at all times
has been, in compliance with and has not been and is not in material violation
of any International Trade Law. Target has no basis to expect, nor has any of
them or any other person for whose conduct they are or may be held to be
responsible received, any actual or threatened order, notice, or other
communication from any governmental body of any actual or potential violation or
failure to comply with any International Trade Law.
3.28    Absence of Unlawful Payments. None of (a) Target, (b) any stockholder,
director or officer of Target, nor, (c) to the Target’s Knowledge, any
stockholder, employee, agent or other Person acting on behalf of Target: (i) has
used any corporate or other funds for unlawful contributions, payments, gifts or
entertainment; made any unlawful expenditures relating to political activity to
government officials or others or established or maintained any unlawful or
unrecorded funds; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; or
violated any provision of the FCPA or other similar law or regulation; or
(iii) has accepted or received any unlawful contributions, payments, gifts or
expenditures.
3.29    Brokers’ and Finders’ Fee. No Person is entitled to brokerage or
finders’ fees or agents’ commissions or investment bankers’ fees or any similar
charges in connection with the Merger, this Agreement or any transaction
contemplated hereby.
3.30    Privacy Laws and Regulations.
(a)    Compliance with Privacy Laws. Target complies with all applicable privacy
Laws and regulations regarding the collection, retention, use and disclosure of
personal information; and (ii) takes appropriate measures to protect and
maintain the confidential nature of the personal information provided to Target.
Target has commercially reasonable technological and procedural measures in
place to protect personal information collected from Individuals against loss,
theft and unauthorized access or disclosure. Target does not knowingly collect
information from or target children under the age of thirteen. Target does not
sell, rent or otherwise make available to third parties any personal information
submitted by individuals.
(b)    Right to Transfer. Target has the full power and authority to transfer
all rights Target has in all personal information in Target’s possession and/or
control to Acquiror. Target is not a party to any Material Contract, or is
subject to any other obligation that, following the Effective Time, would
prevent Acquiror and/or its affiliates from using (in the same manner as Target)
the information in a manner consistent with applicable privacy Laws and industry
standards regarding the disclosure and use of information.
(c)    Privacy Regulations. Target has been and is in compliance with applicable
Privacy Regulations, and neither the execution, delivery nor performance of this
Agreement nor any of the other agreements referred to in this Agreement nor the
consummation of any of the transactions contemplated by this Agreement or any
such other agreements, nor Acquiror’s possession or use (in the same manner as
Target) of the user data or any data or information in any database of Target,
will result in any violation of any Privacy Regulation.
3.31    Product or Service Liability. Since the Target Balance Sheet Date, there
has been no claim, suit, action, proceeding or investigation by or before any
Governmental Entity pending or, to

    

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Target’s Knowledge, threatened against or involving Target relating to (a) any
products of or services performed by Target and alleged to have been defective
or improperly rendered or not in compliance with contractual requirements, or
(b) any products or software delivered or sold by Target which are defective or
not in compliance with contractual requirements.
3.32    Product Warranty. Each Target Product sold, leased or delivered by
Target prior to the Effective Time has been in material conformity with all
applicable contractual commitments and all express and implied warranties, and
solely with respect to the Target Products (including the software therein) as
they exist as of the Effective Time Target has no liability as of the Effective
Time (and to Target’s Knowledge, there is no basis for any present or future
claim, suit, action or proceeding against it giving rise to any such material
liability) for replacement or repair thereof or other damages in connection
therewith, except for claims arising in the normal course of business (including
defects, bugs or errors in the normal course of business), which in the
aggregate, are not material to the financial condition of Target.
3.33    State Takeover Laws; Charter Provisions. Target has taken all necessary
action to exempt the transactions contemplated by this Agreement from, or if
necessary to challenge the validity or applicability of, any applicable
“moratorium,” “fair price,” “business combination,” “control share,” or other
anti-takeover Laws. Target has taken all action so that the entering into this
Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement do not and will not result in the grant of any
rights to any Person under the Certificate of Incorporation or Bylaws of Target
or restrict or impair the ability of Acquiror or Merger Sub to vote, or
otherwise to exercise the rights of a stockholder with respect to, shares of
Target Capital Stock that may be directly or indirectly acquired or controlled
by them.
3.34    Fairness of Consideration. The Merger Consideration has been negotiated
by Target at arm’s length, and Target is not under any compulsion to enter into
this Agreement, and based thereon and upon the warranties and representations of
the parties to this Agreement, Target in good faith believes that the Merger
Consideration to be tendered by Acquiror for each share of Target Capital Stock,
will be approximately equal to the fair market value of a share of Target
Capital Stock.
3.35    Effect of the Transaction. No creditor, customer or other Person having
a material business relationship with Target has informed Target that such
Person currently intends to change the relationship because of this Agreement or
because of any of the transactions contemplated hereby, nor, to Target’s
Knowledge, is there any such intent.
3.36    Representations Complete. None of the representations or warranties made
by Target herein or in any Schedule or exhibit hereto, including the Target
Disclosure Schedule, no certificate furnished by Target pursuant to this
Agreement, and no agreement, report, document or written statement furnished by
Target to Acquiror pursuant hereto or by Target to Acquiror in connection with
the transactions contemplated hereby, contain, or will contain at the Effective
Time, any untrue statement of a material fact, or omits or will omit at the
Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
3.37    Disclaimer of Additional Representations and Warranties. Except for the
representations and warranties of the Target expressly set forth in this
Agreement, neither the Target nor any other Person makes any express or implied
representation or warranty on behalf of the Target in connection with the Merger
or other transactions contemplated by this Agreement.
4.    Reserved.
5.    Representations and Warranties of Acquiror and Merger Sub.

    

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Acquiror and Merger Sub represent and warrant to Target that the statements
contained in this Section 5 are true and correct.
5.1    Organization, Standing and Power. Each of Acquiror and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware. Acquiror has the corporate power to own its properties
and to carry on its business as now being conducted and as proposed to be
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified and in good standing could
reasonably be expected to have a Material Adverse Effect on Acquiror. Neither
Acquiror nor Merger Sub is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws.
5.2    Authority. Acquiror and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been, or will have
been by the Closing, duly authorized by all necessary corporate action on the
part of Acquiror and Merger Sub. This Agreement has been duly executed and
delivered by Acquiror and Merger Sub and constitutes the valid and binding
obligations of Acquiror and Merger Sub enforceable against Acquiror and Merger
Sub in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors’ rights generally, and subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of the Certificate of Incorporation or
Bylaws of Acquiror Merger Sub, except for such conflicts or violations as could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Acquiror. No consent, approval, order or authorization of or
registration, declaration or filing with any Governmental Entity is required by
or with respect to Acquiror or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by Acquiror and Merger Sub or the
consummation by Acquiror and Merger Sub of the transactions contemplated hereby,
except for the filing of the Certificate of Merger, as provided in Section 2.2.
5.3    Interim Operations of Merger Sub. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
5.4    Sufficient Funds. Acquiror has, and will have available to it upon the
Closing Date, sufficient funds to consummate the transactions contemplated by
this Agreement.
6.    Additional Agreements.
6.1    Preparation of Solicitation Statement. Target covenants that the
Solicitation Statement did not, and at the Effective Time, the Solicitation
Statement will not, (i) contain any statement that is false or misleading with
respect to any material fact, (ii) omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they are made, not false or misleading, or (iii) omit to state any
material fact necessary to correct any statement in any earlier communication
that has become false or misleading. Notwithstanding the foregoing, Target makes
no representation, warranty or covenant with respect to any information supplied
by Acquiror or Merger Sub that is contained in any of the foregoing documents
and that is specifically designated in writing as “Acquiror-supplied materials”.
Anything to the contrary contained herein notwithstanding, Target shall not
include in the Solicitation Statement any information with respect to Acquiror
or its Affiliates or associates, the form

    

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and content of which information shall not have been approved by Acquiror prior
to such inclusion. Target shall deliver written consents of Target’s
stockholders from the holders of at least 75% of the shares of Target Capital
Stock entitled to vote on this Agreement and the Merger, voting together as a
single class, on an as converted to Target Common Stock basis on the Closing
Date.
6.2    Confidentiality. The parties acknowledge that Acquiror and Target have
previously executed a confidentiality agreement dated October 13, 2013 (the
“Confidentiality Agreement”), which Confidentiality Agreement is hereby
incorporated herein by reference and shall continue in full force and effect in
accordance with its terms.
6.3    Further Assurances. Acquiror and Target shall use all reasonable efforts
to take, or cause to be taken, all actions necessary to effectuate the Merger
and make effective the other transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, each party to this Agreement
shall: (i) make any filings and give any notices required to be made and given
by such party in connection with the Merger and the other transactions
contemplated by this Agreement; (ii) use all reasonable efforts to obtain any
consent required to be obtained (pursuant to any applicable legal requirement or
contract, or otherwise) by such party in connection with the Merger or any of
the other transactions contemplated by this Agreement; and (iii) use all
reasonable efforts to lift any restraint, injunction or other legal bar to the
Merger. Each party, at the reasonable request of the other party, shall execute
and deliver such other instruments and do and perform such other acts and things
as may be necessary or desirable for effecting completely the consummation of
this Agreement and the transactions contemplated hereby.
6.4    Target Options and Warrants.
(a)    Target Options. Each Target Option outstanding immediately prior to the
Effective Time, whether granted pursuant to the Target Option Plan or otherwise
shall be cancelled and terminated at the Effective Time. Target will take all
corporate action necessary to give effect to the foregoing as satisfactory to
Acquiror.
(b)    Cancellation of Warrants. Target shall obtain, prior to the Closing Date,
a binding written agreement, acceptable to Acquiror, from each holder of Target
Warrants whereby such holder agrees that if the Target Warrants held by such
holder have not been exercised prior to the Closing Date, then such Target
Warrants shall terminate upon and may not be exercised on or after the Closing
Date.
6.5    Employees. Target will use commercially reasonable efforts in
consultation with Acquiror to retain at least 90% of the existing employees of
Target through the Effective Time. Target shall use its reasonable efforts to
cause each of the employees set forth in Section 6.5 of the Target Disclosure
Schedule to (a) execute an offer letter in substantially the form attached
hereto as Exhibit D (the “Offer Letter”); and (b) execute an employee
confidentiality and proprietary rights agreement in substantially the form set
forth as Exhibit E.
6.6    Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense.
6.7    Reserved.
6.8    Reserved

    

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6.9    Closing Capitalization Schedule; Closing Consideration Schedule.
(f)    Target shall have prepared and delivered to Acquiror at least three (3)
Business Days prior to Closing a complete and correct schedule (the “Closing
Capitalization Schedule”) setting forth the number of shares of Target Capital
Stock issued and outstanding immediately prior to the Effective Time. The
Closing Capitalization Schedule shall also set forth the name of each holder of
Target Capital Stock immediately prior to the Effective Time and the number of
shares of Target Capital Stock held by each such holder immediately prior to the
Effective Time. The Closing Capitalization Schedule shall be complete and
correct in all respects. Target shall have provided Acquiror with a certificate
dated as of the Closing Date and signed by the chief executive officer and the
chief operating officer of Target to such effect.
(g)    Target shall have prepared and delivered to Acquiror at least three (3)
Business Days prior to Closing a complete and correct schedule (the “Closing
Consideration Spreadsheet”) setting forth (i) the respective amounts of the
Merger Consideration payable at the Closing to each holder of Target Capital
Stock pursuant to and in accordance with Section 2.6(a) (on a holder-by-holder
basis), (ii) the Bonus Plan Payments (on a Bonus Plan Participant-by-Bonus Plan
Participant basis), (iii) the Pro Rata Percentage for each holder of Target
Capital Stock, (iv) respective portion of the Escrow Fund to be withheld from
each of the Indemnifying Parties pursuant to and in accordance with Section 8
hereof (on a holder-by-holder basis), in each case, specifying whether such
amounts are reportable on IRS Form W-2, IRS Form 1099B or IRS Form 1099
Miscellaneous, together with the calculations, set forth in reasonable detail,
used to derive the foregoing amounts. The Closing Consideration Spreadsheet
shall be complete and correct in all respects. Notwithstanding anything to the
contrary contained herein, the sum of the aggregate consideration to be paid in
respect of all the shares of Target Capital Stock shall not under any
circumstances exceed an amount equal to the Net Aggregate Consideration. Target
shall have provided Acquiror with a certificate dated the Closing Date and
signed by the chief executive officer of Target certifying that (A) the
information set forth in the Closing Consideration Spreadsheet is complete and
correct in all respects, (B) the Merger Consideration set forth therein was
calculated pursuant to and in accordance with Section 2.6(a), Target’s
Certificate of Incorporation, (C) the amounts of the Bonus Plan Payments set
forth therein were determined in accordance with the terms of the Bonus Plan and
any applicable Law, and (D) the treatment of Target Options is consistent with
Section 6.4 of this Agreement and Target’s Certificate of Incorporation. In the
event that Target or Acquiror discovers an error in the Closing Consideration
Spreadsheet prior to the payment of the consideration contemplated thereby, such
party shall notify the other party and they shall thereafter cooperate to
correct such error (including by adjusting the amount of consideration payable
to the payees thereof).
6.10    Reserved.
6.11    Employee Benefits Matters.
(a)    All employees of the Target shall continue in their existing benefit
plans until such time as, in the Acquiror’s sole discretion, an orderly
transition can be accomplished to employee benefit plans and programs maintained
by the Acquiror for its and its Affiliates’ employees in the United States.
Pending such action, the Acquiror shall maintain the effectiveness of the
Target’s benefit plans.
(b)    All employees of the Target shall be given credit for all service with
the Target (or service credited by the Target) for purposes of eligibility and
vesting under all employee benefit plans, programs, policies and arrangements
and employment policies maintained by the Acquiror in which they become
participants. No employees of the Target (or their dependents) shall be excluded
from, or limited in, receiving any benefits or participating in a group health
plan of the Acquiror for which they would

    

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otherwise be eligible by reason of any waiting period, evidence of insurability
requirement, pre-existing condition exclusion or similar limitation.
6.12    Tax Matters.
(a)    Tax Returns. Target shall prepare and timely file, or shall cause to be
prepared and timely filed, all Returns in respect of Target and its Subsidiaries
that are required to be filed (taking into account any extension) on or before
the Closing Date and shall pay or cause to be paid all Taxes due with respect to
such Returns. Such Returns shall be prepared as required by, and in accordance
with, applicable Law. At least fifteen (15) days prior to filing any such
Return, Target shall submit a copy of such Return to Acquiror for Acquiror’s
review and approval, which approval shall not be unreasonably withheld. Acquiror
shall prepare or cause to be prepared and timely file or cause to be timely
filed all Returns of Target and its Subsidiaries for any Pre-Closing Tax Period
and that portion of any Straddle Period ending on the Closing Date that are
filed after the Closing Date and shall pay or cause to be paid all Taxes due
with respect to such Returns. Such Returns shall be prepared as required by, and
in accordance with, applicable Law. Acquiror shall permit Stockholders’ Agent to
review each such Return at least thirty (30) days prior to filing. Stockholders’
Agent shall be entitled to comment on such Returns which Acquiror shall consider
in good faith.
(b)    Amendment of Returns. Except as required by applicable Law, Acquiror
shall not amend, refile, revoke or otherwise modify any Return or Tax election
of Target or its Subsidiaries with respect to a Pre-Closing Tax Period, in each
case that would reasonably be expected to give rise to an indemnification claim
pursuant to this Agreement, without the prior written consent of Stockholders’
Agent.
(c)    Cooperation. Acquiror and, following the Closing, Stockholders’ Agent
agree to furnish or cause to be furnished to the other, upon request, as
promptly as practicable, such information and assistance relating to Taxes,
including access to books and records, as is reasonably necessary for the filing
of all Returns by Acquiror, the making of any election relating to Taxes, the
preparation for any audit by any Tax authority and the prosecution or defense of
any claim, suit or proceeding relating to any Tax. Each of Acquiror, Target and
Stockholders’ Agent shall retain all books and records in their possession with
respect to Taxes for a period of at least five years following the Closing Date.
(d)    Tax Contests. Notwithstanding Section 8.2(g), Acquiror shall promptly
notify Stockholders’ Agent upon receipt by Acquiror or Target of written notice
of any inquiries, claims, assessments, audits or similar events with respect to
Taxes relating to Pre-Closing Tax Period for which any of the Target
stockholders may be liable under this Agreement (any such inquiry, claim,
assessment, audit or similar event, a “Tax Matter”), and following the Closing,
Acquiror shall control the conduct of any such Tax Matter; provided, however,
Acquiror shall not enter into any settlement of or otherwise compromise any Tax
Matter that may increase the Tax liability of the Target stockholder or that
would reasonably be expected to give rise to an indemnification claim pursuant
to this Agreement without the consent of Stockholders’ Agent, which consent
shall not be unreasonably withheld or delayed. The Acquiror shall keep
Stockholders’ Agent fully and timely informed with respect to the commencement,
status and nature of any Tax Matter. The Acquiror shall, in good faith, allow
Stockholders’ Agent to make comments to Acquiror regarding the conduct of or
positions taken in any such proceeding.
(e)    Allocation of Straddle Period Taxes. With respect to Taxes of the Target
or its Subsidiaries relating to a taxable period that begins on or before the
Closing Date and ends after the Closing Date (a “Straddle Period”), the amount
of such Taxes allocable to the portion of the Straddle Period that is deemed to
end on the close of business on the Closing Date will be: (i) in the case of
Property Taxes,

    

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deemed to be the amount of such Taxes for the entire Straddle Period multiplied
by a fraction, the numerator of which is the number of calendar days of such
Straddle Period in the Pre-Closing Tax Period and the denominator of which is
the number of calendar days in the entire Straddle Period, and (ii) in the case
of all other Taxes, determined as though the taxable year of Target terminated
at the close of business on the Closing Date. For purposes of the preceding
sentence, “Property Taxes” shall mean all real property Taxes, personal property
Taxes and similar ad valorem Taxes and other similar Taxes imposed on a periodic
basis.
6.13    Reserved.
6.14    Tail Liability Insurance Policy.
(a)    For the coverage period of the Target Tail Policy, Acquiror and Surviving
Corporation agree to indemnify (including advancement of expenses) and hold
harmless all past and present officers and directors of the Target to the same
extent such persons are indemnified by the Target as of the date immediately
prior to the date of this Agreement pursuant to the Target’s Certificate of
Incorporation or Bylaws, employment agreements, indemnification agreements or
under applicable law for acts or omissions which occurred prior to the Effective
Time. This indemnification shall apply to any claim or action by any such
officer or director brought against the Target, Acquiror, Surviving Corporation
or any of their respective predecessors, successors, assigns, officers,
directors, stockholders, employees or agents in response to or in connection
with any claim brought by Indemnified Persons pursuant to Section 8 of this
Agreement or any other agreement contemplated by this Agreement. Notwithstanding
the provisions of this Section 6.14(a) to the contrary, neither Acquiror,
Surviving Corporation nor any successor of either Acquiror, Surviving
Corporation or Target shall be liable under this Section 6.14 for any amount in
excess of the proceeds actually received by such Person pursuant to the Target
Tail Policy in connection with such indemnification obligation.
(b)    Acquiror shall purchase for and on behalf of all past and present
officers and directors of the Target as of the date prior to the date of this
Agreement with its cash or through the deduction from the Total Consideration,
on or prior to the Closing Date (but which shall be effective as of the Closing
Date), a tail liability insurance policy providing coverage for such officers
and directors for a six year period from and after the Closing Date (“Target
Tail Policy”) in respect of acts or omissions occurring prior to the Effective
Time covering each such director and officer and without the prior written
consent of each such officer and director of the Target, neither Acquiror, the
Surviving Corporation (after the Effective Time) nor its Affiliates will amend,
modify or terminate such tail liability insurance policy or indemnification
agreements.
(c)    During the coverage period of the Target Tail Policy, Acquiror will not,
nor will Acquiror permit the Surviving Corporation to, sell all or substantially
all of the Acquiror’s or the Surviving Corporation’s assets unless, in the event
the acquiring Person (A) has a net worth less than $6,000,000, Acquiror
guarantees the obligations imposed by this Section 6.14 or (B) has a net worth
equal to or greater than $6,000,000, the acquiring Person assumes the
obligations imposed by this Section 6.14. If Acquiror or the Surviving
Corporation is party to any merger or consolidation that would require the
acquiring Person to assume the obligations imposed by this Section 6.14 in order
for such obligations to be binding on such acquiring Person by operation of law,
Acquiror shall in the event the acquiring Person (A) has a net worth less than
$6,000,000, guarantee the obligations imposed by this Section 6.14 or (B) has a
net worth equal to or greater than $6,000,000, provide for the acquiring Person
to assume the obligations imposed by this Section 6.14.
(d)    Notwithstanding anything herein to the contrary, the provisions of this
Section 6.14 are intended for the benefit of, and shall be enforceable by, the
past and present (as of immediately

    

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prior to the Effective Time) officers and directors of the Target subject to the
limitations set forth in this Section 6.14.
7.    Conditions to the Merger.
7.1    Condition to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of the following condition, which
may be waived, in writing, by agreement of all the parties hereto: no temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be and remain in
effect, nor shall any proceeding brought by any Governmental Entity seeking any
of the foregoing be pending, nor shall there be any action taken, or any Law
enacted, entered, enforced or deemed applicable to the Merger, which makes the
consummation of the Merger illegal.
7.2    Additional Conditions to the Obligations of Acquiror and Merger Sub. The
obligations of Acquiror and Merger Sub to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Acquiror:
(j)    Representations, Warranties and Covenants. Each of the representations
and warranties of the Target in Section 3 shall be true and correct in all
respects, in each case at and as of the Closing Date (except to the extent a
representation or warranty speaks specifically as of an earlier date, in which
case as of such date).
(k)    Performance of Obligations. Target shall have performed and complied in
all material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it as of the Closing.
(l)    Certificate of Officers. Acquiror and Merger Sub shall have received a
certificate executed on behalf of Target by the chief executive officer of
Target certifying that the conditions set forth in Sections 7.2(a) and 7.2(b)
have been satisfied.
(m)    Third Party Consents. The consents and approvals listed on
Schedule 7.2(d) shall have been obtained and shall be in full force and effect.
(n)    No Governmental Litigation. There shall not be pending or, to Target’s
Knowledge, threatened any legal proceeding in which a Governmental Entity is or
is threatened to become a party or is otherwise involved, and neither Acquiror
nor Target shall have received any communication from any Governmental Entity in
which such Governmental Entity indicates the probability of commencing any legal
proceeding or taking any other action: (i) challenging or seeking to restrain or
prohibit the consummation of the Merger; (ii) relating to the Merger and seeking
to obtain from Acquiror or any of its Subsidiaries, or Target, any damages or
other relief that would be material to Acquiror; (iii) seeking to prohibit or
limit in any material respect Acquiror’s ability to vote, receive dividends with
respect to or otherwise exercise ownership rights with respect to the stock of
Target; or (iv) that would materially and adversely affect the right of Acquiror
or Target to own the assets or operate the business of Target.
(o)    No Other Litigation. There shall not be pending any legal proceeding:
(i) challenging or seeking to restrain or prohibit the consummation of the
Merger or any of the other transactions contemplated by this Agreement;
(ii) relating to the Merger and seeking to obtain from Acquiror

    

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or any of its Subsidiaries, or Target, any damages or other relief that would be
material to Acquiror; (iii) seeking to prohibit or limit in any material respect
Acquiror’s ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to any of Target Capital Stock; or (iv)
which would affect adversely the right of Acquiror or Target to own the assets
or operate the business of Target.
(p)    Employees. All of the Target employees listed on Schedule 7.2(g) to whom
Acquiror has offered an Offer Letter shall have executed and delivered such
Offer Letter and the other documents listed in Section 6.5 to Acquiror, and all
such Offer Letters are in full force and effect.
(q)    Reserved.
(r)    Escrow Agreement. Acquiror, Merger Sub, Target, Escrow Agent and
Stockholders’ Agent shall have entered into an Escrow Agreement.
(s)    Dissenters’ Rights. Not more than twenty-five percent (25%) of the Target
Capital Stock outstanding immediately prior to the Effective Time shall be
eligible as Dissenting Shares.
(t)    Options. All Target Options outstanding immediately prior to the
Effective Time shall have been cancelled as provided in Section 6.4(a).
(u)    Warrants. All Target Warrants outstanding immediately prior to the
Closing Date shall have been cancelled as provided in Section 6.4(b).
(v)    Corporate Approval. Target shall have delivered to Acquiror certified
resolutions of its Board of Directors and stockholders evidencing approval of
this Agreement and the Merger.
(w)    Reserved.
(x)    FIRPTA Certificate. Target shall deliver to Acquiror, and authorize
Acquiror to file the following on behalf of Target after the Closing Date: a
FIRPTA Certificate, dated no more than 30 days prior to the date of Closing and
signed by a responsible corporate officer of Target, certifying that Target is
not, and has not been at any time during the five 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 (B) notice of such certification to the IRS
in a form reasonably satisfactory to Acquiror in accordance with the provisions
of Treasury regulations Section 1.897-2(h)(2).
(y)    Good Standing Certificates. Target shall deliver certificates from
appropriate authorities as to the good standing of, and payment of all required
fees and Taxes by the Corporation in each jurisdiction in which the Corporation
is required to be qualified as a foreign corporation, as of a recent date (but
no earlier than the third Business Day) prior to the Closing.
(z)    Certificate of Merger. Target shall deliver the Certificate of Merger
duly executed by an authorized officer of Target.
(aa)    Opinion. Counsel for Target shall have delivered to Acquiror an opinion
in the form attached hereto as Exhibit F.
(bb)    Reserved.
(cc)    Reserved.

    

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(dd)    Reserved.
(ee)    Bonus Participant Release. Each of the Bonus Plan Participants shall
have executed a Bonus Participant Release Agreement in the form attached hereto
as Exhibit G and such Bonus Participant Release Agreement shall be in full force
and effect.
(ff)    Stockholder Agreement. Each holder of Target Preferred Stock set forth
on Schedule 7.2(w) shall have executed a Stockholder Agreement in the form
attached hereto as Exhibit H and such Stockholder Agreement shall be in full
force and effect.
(gg)    Reserved.
(hh)    Resignations and Releases. Target shall (i) cause all directors of
Target, and all officers of Target who are not continuing as employees of Target
after the Closing, to deliver to Acquiror at the Closing duly executed
resignations, (ii) cause all directors of Target and all such officers to
deliver to Acquiror at the Closing duly executed releases in a form satisfactory
to Acquiror from all claims that such Persons may have against Target (such
resignations and releases to be effective immediately after the Closing) and
(iii) take all such other actions as are necessary to accomplish such
resignations and releases.
(ii)    Reserved.
7.3    Additional Conditions to Obligations of Target. The obligations of Target
to consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, by Target:
(c)    Representations, Warranties and Covenants. The representations and
warranties of Acquiror and Merger Sub in Section 5 of this Agreement shall be
true and correct in all respects as of the Closing Date (except for such
representations and warranties that speak specifically as of the date hereof or
as of another date, which shall be true and correct as of such date).
(d)    Performance of Obligations. Acquiror and Merger Sub shall have performed
and complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by them
as of the Closing.
(e)    Certificate of Officers. Target shall have received a certificate
executed on behalf of Acquiror and Merger Sub by an authorized officer of
Acquiror and Merger Sub, respectively, certifying that the conditions set forth
in Sections 7.3(a) and 7.3(b) have been satisfied.
(f)    Escrow Agreement. Acquiror, Merger Sub, Target, Escrow Agent and
Stockholders’ Agent shall have entered into an Escrow Agreement.
(g)    Certificate of Merger. Acquiror shall deliver the Certificate of Merger
duly executed by an authorized officer of Acquiror.
8.    Escrow and Indemnification.
8.1    Escrow Fund. The Escrow Fund shall be available to compensate Acquiror
pursuant to the indemnification obligations of the holders of Target Preferred
Stock.

    

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8.2    Indemnification.
(h)    Survival of Warranties. All representations and warranties of Acquiror
and Merger Sub contained in this Agreement or in any certificate delivered by
Acquiror pursuant to this Agreement shall survive, notwithstanding any
investigation made by or on behalf of any party hereto, until the Effective
Time. All representations and warranties of Target contained in this Agreement
or in any certificate delivered by Target pursuant to this Agreement shall (a)
survive the Closing, notwithstanding any investigation made by or on behalf of
any party hereto, and (b) be deemed to be made as of the date hereof and as of
the Closing Date (except to the extent that a representation or warranty
expressly states that such representation or warranty is as of a certain date)
in each case, subject to the limitations set forth in this Section 8.2. The
representations and warranties of Target contained in or made pursuant to this
Agreement shall terminate on, and no claim or action with respect thereto may be
brought after, the date that is 18 months after the Closing Date (the “Initial
Termination Date”); provided that (i) the representations and warranties under
Sections 3.1, 3.2, 3.5, 3.22 and 3.29 (the “Fundamental Representations”) and
indemnity obligations for any breaches thereof shall survive until the date that
is 60 days after the expiration of the respective applicable statute of
limitations for each such item or indefinitely if there is not statute of
limitations, and (ii) the representations and warranties under Section 3.10 (the
“IP Representations”) and the indemnity obligations for any breaches thereof
will survive until the third anniversary of the Closing. Notwithstanding any
other provision of this Agreement, if any claim for Damages set forth in an
Officer’s Certificate is delivered to the Escrow Agent and Stockholders’ Agent
by any Indemnified Person prior to the termination of the representation or
warranty pursuant to this Section 8.2, the indemnification obligations set forth
in this Section 8 shall continue with respect to such claim until the resolution
thereof.
(i)    Indemnification by Target Preferred Stockholders.
(i)    Subject to the limitations set forth in this Section 8, the holders of
Target Preferred Stock, each an “Indemnifying Party,” will, severally and not
jointly, pro rata in accordance with the Pro Rata Percentages, indemnify and
hold harmless Acquiror and the Surviving Corporation and their respective
officers, directors, agents, representatives, attorneys and employees, and each
person, if any, who controls or may control Acquiror or the Surviving
Corporation within the meaning of the Securities Act (individually an
“Indemnified Person” and collectively the “Indemnified Persons”) from and
against any Damages based upon, arising out of, or resulting from: (1) the
inaccuracy in or breach of any representation or warranty made by Target in this
Agreement (including all schedules and exhibits hereto), or in any certificate
delivered by Target hereunder, (in each case, as qualified by the Target
Disclosure Schedule); (2) any non-fulfillment or breach of any covenant or
agreement made by Target in this Agreement (including all schedules and exhibits
hereto), or in any certificate delivered by Target hereunder; (3) for avoidance
of doubt, without duplication of the facts or events giving rise to any other
indemnifiable claim under this Section 8.2(b)(i), any claim of any nature by any
of Target’s stockholders, option holders or warrant holders arising out of or in
connection with this Agreement, the Merger or the termination of the Target
Option Plan; (4) any amount payable in respect of any Dissenting Share in excess
of the Merger Consideration and any cost and expenses defending any claim
involving Dissenting Shares; (5) to the extent not included in the calculation
of the Working Capital Amount or Change of Control Payments, any liability for
(A) all Taxes (or the non-payment thereof) of Target and its Subsidiaries for
all taxable periods ending on or before the Closing Date and the portion through
the end of the Closing Date for any Straddle Period (“Pre-Closing Tax Period”),
or (B) any transfer or gains Tax, sales Tax, use Tax, stamp Tax, stock transfer
Tax, or other similar Tax imposed on the transactions contemplated by this
Agreement; provided, however, any Taxes incurred in connection with, and
directly related to, an election made under Section 338 of the Code (or any
similar provision of state, local or foreign law) shall not be included in the
calculation of Taxes under clauses (A) and (B) above; (6) to the extent not
included in the calculation of the Working Capital Amount or Change

    

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of Control Payments, any claim for a bonus payment payable prior to or upon the
closing of the Merger by a Bonus Plan Participant or any other Person in an
amount in excess of the Bonus Plan Payment set forth opposite such Person’s name
on the Closing Consideration Spreadsheet, or (7) enforcing the indemnification
provided for hereunder. In connection with any exercise by any Indemnified
Person of its rights hereunder, it shall be entitled to make all claims for
indemnification through, and deal exclusively with, Stockholders’ Agent.
(ii)    Nothing in this Agreement shall limit the liability in amount or
otherwise of Target with respect to fraud, intentional misconduct, or
intentional breach of any covenant contained in this Agreement. The right to
indemnification or any other remedy based on representations, warranties,
covenants and agreements in this Agreement shall not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Effective Time, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty, covenant
or agreement.
(j)    Limitations.
(i)    Subject to Section 8.2(c)(iv), no claim for any Damages asserted under
Section 8.2(b)(i)(1) with respect to an inaccuracy in or breach of any
representation or warranty shall be made by an Indemnified Person until the
aggregate amount of all Damages with respect to such claims exceeds $100,000
(the “Basket”), in which event such Indemnified Person shall be permitted to
make claims under Section 8.2(b)(i)(1) for all such Damages, including those
constituting the Basket.
(ii)    Subject to Sections 8.2(c)(iii) thru 8.2(c)(v), no Indemnifying Party
shall be liable for Damages in excess of such Indemnifying Party’s Pro Rata
Percentage of the Escrow Fund.
(iii)    Notwithstanding anything to the contrary, the Indemnifying Parties
shall not be liable for (A) breaches or inaccuracies of the Fundamental
Representations in excess of the amount of Merger Consideration actually
received by them, respectively, or (B) breaches or inaccuracies of the IP
Representations in excess of an amount for each Indemnified Person equal to the
product of (y) $6,000,000 less any amounts not distributed to Target
Stockholders from the Escrow Fund and (z) such Indemnifying Party’s Pro Rata
Percentage.
(iv)    Further, notwithstanding the foregoing, the Indemnifying Parties shall
not be liable for any claims based on a finding of fraud, intentional
misrepresentation or intentional misconduct in excess of their respective Pro
Rata Share of the Escrow Fund, respectively; provided, however, nothing
contained in this Agreement shall limit an Indemnifying Party’s liability
hereunder for fraud, intentional misrepresentation or intentional misconduct
perpetrated by such Indemnifying Party.
(v)    The Basket shall not apply to (A) any claims related to an inaccuracy or
breach of the Fundamental Representations and the IP Representations (other than
claims related to a breach of Section 3.10(a)(ii), for which section the Basket
shall apply); or (B) any claims based on a finding of fraud, intentional
misrepresentation or intentional misconduct.
(vi)    For the avoidance of doubt, and notwithstanding anything to the
contrary, in no event shall an Indemnifying Party’s aggregate indemnification
obligation exceed the consideration actually received by the Indemnifying Party
except in the case of fraud, intentional misrepresentation or intentional
misconduct perpetrated by such Indemnifying Party. For avoidance of doubt,
notwithstanding anything herein to the contrary, in no event shall an
Indemnifying Party have any obligation

    

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or liability of any kind pursuant to this Section 8 arising from or based on the
Stockholder Agreement or Offer Letter of another Person.
(k)    Additional Limitations.
(i)    Materiality standards or qualifications in any representation, warranty
or covenant shall only be taken into account in determining whether a breach of
or default in connection with such representation or warranty or covenant (or
failure of any representation or warranty to be true and correct) exists, and
shall not be taken into account in determining the amount of any Damages with
respect to such breach, default or failure to be true and correct.
(ii)    The Indemnifying Parties shall not be obligated to indemnify any
Indemnified Person with respect to any Damages to the extent that such Damages
were reflected as a liability in the Closing Balance Sheet for purposes of
calculation of the Working Capital Amount.
(iii)    For purposes of determining liability under this Section 8, the amount
of Damages required to be paid by the Indemnifying Parties shall be reduced by
(or if already paid by the Indemnifying Parties from the Escrow Fund or
otherwise, promptly deposited into the Escrow Fund, or if the Escrow Fund have
already been fully distributed, promptly reimbursed directly to the Indemnifying
Parties) the amount of any proceeds from insurance policies in effect
immediately prior to the Closing Date that are actually received by the
Indemnified Persons. In addition, the Indemnified Persons shall reasonably
cooperate with Stockholders’ Agent and the Indemnifying Parties and shall use
commercially reasonable efforts to take steps the Indemnified Persons reasonably
believe are required by any obligation the Indemnified Persons have under
applicable Law to mitigate the Damages; provided, however, that the Indemnified
Persons shall not be required to cooperate or use such efforts if they would
require the Indemnified Persons to incur any costs, expenses or liabilities that
would not be recoverable Damages. To the extent that any Damages are paid
hereunder to the Indemnified Persons, the Indemnified Persons shall take all
actions reasonably requested by Stockholders’ Agent and the Indemnifying Persons
to subrogate to Stockholders’ Agent and the Indemnifying Persons any rights of
recovery which the Indemnified Persons may have with respect to the Damages;
provided, however, that the Indemnified Persons shall not be required to take
any actions that would be detrimental in any respect to the Indemnified Persons
(including, if it would require any Indemnified Persons to incur any material
costs, expenses or liabilities).
(iv)    Any liability for indemnification hereunder shall be determined without
duplication of recovery by reason of the state of facts giving rise to such
liability constituting a breach or other violation of more than one
representation, warranty, covenant, agreement, certificate or certification.
(l)    Exclusive Remedy. Notwithstanding anything to the contrary, the remedies
provided in this Section 8 shall be the sole and exclusive post-Closing remedies
of the Indemnified Persons hereto in connection with any claim, cause of action,
suit, injunction, judgment, decree, settlement, litigation, investigation or
proceeding arising out of this Agreement (including all schedules and exhibits
hereto and any certificate delivered by Target hereunder), other than such items
alleging fraud or intentional misrepresentation or intentional misconduct;
provided, that nothing herein is intended to waive or bar any non-monetary
equitable remedies of any Indemnified Person; and provided further, that, for
the avoidance of doubt, in the case of fraud or intentional misrepresentation or
intentional misconduct, the process and procedures set forth in Sections 8.2(g),
8.2(f), 8.3, 8.4, 8.5 and 8.6, as applicable, shall apply to any and all such
claims for Damages and the limitations of liability set forth in Sections 8.2(c)
and 8.2(d) shall apply.

    

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(m)    Priority. Any and all indemnification obligations of the Indemnifying
Parties hereunder shall be satisfied first from the Escrow Fund.
(n)    Third Party Claims. In the event of the assertion or commencement by any
person of any claim or proceeding (whether against any Indemnified Person or any
other Person) with respect to which an Indemnifying Party may become obligated
to indemnify, hold harmless, compensate or reimburse any Indemnified Person
pursuant to this Section 8, the Indemnified Person shall have the right, at its
election, to proceed with the defense of such claim or proceeding on its own
with counsel reasonably satisfactory to Stockholders’ Agent. If the Indemnified
Person so proceeds with the defense of any such claim or proceeding:
(i)    subject to the other provisions of Section 8, all reasonable expenses
relating to the defense of such claim or proceeding shall be borne and paid
exclusively by the Indemnifying Party;
(ii)    the Indemnifying Party shall use commercially reasonable efforts to make
available to the Indemnified Person any documents and materials in their
possession or control that may be necessary to the defense of such claim or
proceeding;
(iii)    Stockholders’ Agent shall have the right to receive within seven (7)
days of Acquiror’s receipt, copies of all pleadings, notices and communications
with respect to third-party claims in which the amount in controversy is greater
than $100,000 (each, a “Significant Claim”) to the extent that receipt of such
documents does not affect any privilege relating to any Indemnified Person and
shall be entitled, at its expense, to participate in, but not to determine or
conduct, any defense of such Significant Claim or settlement negotiations with
respect to such Significant Claim, and, except with the consent of Stockholders’
Agent, which consent shall not be unreasonably withheld, conditioned or delayed
and which shall be deemed to have been given unless Stockholders’ Agent shall
have objected within 15 days after delivery to Stockholders’ Agent of a written
request for such consent by Acquiror, the Indemnified Person shall not settle,
adjust or compromise any such claim or proceeding; provided, that,
notwithstanding the foregoing, any such settlement, adjustment or compromise
shall neither be conclusive evidence that such Significant Claim or proceeding
is an indemnifiable claim pursuant to this Section 8 nor conclusive evidence of
the amount of Damages incurred by the Indemnified Person in connection with such
Significant Claim or proceeding.
(iv)    Stockholders’ Agent shall, upon a reasonable time after request, receive
copies of all pleadings, notices and communications with respect to any
non-Significant Claim to the extent that receipt of such documents does not
affect any privilege relating to any Indemnified Person. The Indemnified Person
shall have the right to settle, adjust or compromise any non-Significant Claim
or proceeding; provided, that if the Indemnified Person settles, adjusts or
compromises any such non-Significant Claim or proceeding without the consent of
Stockholders’ Agent, such settlement, adjustment or compromise shall neither be
conclusive evidence that such non-Significant Claim or proceeding is an
indemnifiable claim pursuant to this Section 8 nor conclusive evidence of the
amount of Damages incurred by the Indemnified Person in connection with such
non-Significant Claim or proceeding (it being understood that if the Indemnified
Person requests that Stockholders’ Agent consents to a settlement, adjustment or
compromise, Stockholders’ Agent shall not unreasonably withhold or delay such
consent and such consent shall be deemed to have been given unless Stockholders’
Agent shall have objected within 15 days after delivery to Stockholders’ Agent
of a written request for such consent by Acquiror); provided, further,
notwithstanding the foregoing, in no event shall any Indemnified Person have the
right to settle adjust or compromise any non-Significant Claim or proceeding
that includes any equitable remedies (including specific performance

    

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or injunction) applicable to Stockholders’ Agent or any Target stockholder
without the prior consent of Stockholders’ Agent.
(o)    Notice and Procedures. The Indemnified Person shall give the Indemnifying
Party prompt written notice of the commencement of any such proceeding against
such Indemnified Person; provided, that any failure on the part of the
Indemnified Person to so notify the Indemnifying Party shall not limit any of
the obligations of the Indemnifying Party under this Section 8 (except to the
extent such failure materially prejudices the defense of such proceeding).
8.3    Escrow Period; Release From Escrow.
(a)    Termination of Escrow. The Escrow Period shall terminate upon the
expiration of 18 months after the Effective Time; provided, that a portion of
the Escrow Fund that, in the reasonable judgment of Acquiror subject to the
objection of Stockholders’ Agent and the subsequent arbitration of the matter in
the manner provided in Section 8.6 hereto, is necessary to satisfy any
unsatisfied claims specified in any Officer’s Certificate delivered to the
Escrow Agent prior to termination of the Escrow Period shall remain in the
Escrow Fund until such claims have been resolved.
(b)    Release. Within three (3) Business Days after the Initial Termination
Date (the “Release Date”), the Escrow Agent shall release from escrow to the
Indemnifying Parties an amount equal to their Pro Rata Percentage multiplied by
the Available Escrow Fund. The “Available Escrow Fund” shall be determined by
deducting from the Escrow Fund, all amounts paid to the Indemnified Persons for
indemnification pursuant to this Section 8 and all amounts to be held in the
Escrow Fund beyond the end of the Escrow Period pursuant to Section 8.3(a).
After the initial release of the Available Escrow Fund, the Escrow Fund shall be
recalculated each time a portion of the Escrow Fund is released to the
Indemnifying Parties taking into consideration all amounts paid to the
Indemnified Persons for indemnification pursuant to this Section 8, all amounts
to be continued to be held in the Escrow Fund and all amounts previously paid to
the Indemnifying Parties. Any portion of the Escrow Fund held as a result of
Section 8.3(a) shall be released to the Indemnifying Parties or released to the
Indemnified Persons (as appropriate) promptly upon resolution of each specific
indemnification claim involved.
8.4    Claims Upon Escrow Fund. Upon receipt by the Escrow Agent on or before
the Release Date of an Officer’s Certificate stating that Damages exist with
respect to the indemnification obligations of the Indemnifying Parties set forth
in Section 8.2, and specifying in reasonable detail the individual items of such
Damages included in the amount so stated, the date each such item was paid, or
properly accrued or arose, and the nature of the misrepresentation, breach of
warranty, covenant or claim to which such item is related, the Escrow Agent
shall, subject to the provisions of this Section 8, deliver to Acquiror out of
the Escrow Fund, as promptly as practicable, immediately available funds having
a value equal to such Damages. The parties hereto agree that for federal, state
and local Tax purposes the funds placed in the Escrow Fund and any income earned
thereon shall not be treated as income of the Indemnifying Parties until such
time as such amounts are actually released to the Indemnifying Parties and
accordingly the parties agree to (a) effect all Tax reporting consistently
therewith and (b) not take any action or filing position inconsistent with the
foregoing.
8.5    Objections to Claims.
(n)    Written Notice. At the time of delivery of any Officer’s Certificate to
the Escrow Agent, a duplicate copy of such Officer’s Certificate shall be
delivered to Stockholders’ Agent. For a period of 45 days after such delivery,
the Escrow Agent shall make no delivery of any Escrow Funds pursuant to
Section 8.4 hereof unless the Escrow Agent shall have received written
authorization from

    

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Stockholders’ Agent to make such delivery. After the expiration of such 45 day
period, the Escrow Agent shall make delivery of the funds in the Escrow Fund in
accordance with Section 8.4 hereof, provided that no such payment or delivery
may be made if Stockholders’ Agent shall object in a written statement to the
claim made in the Officer’s Certificate, and such statement shall have been
delivered to the Escrow Agent and to Acquiror prior to the expiration of such 45
day period.
(o)    Negotiation and Resolution. In case Stockholders’ Agent shall so object
in writing to any claim or claims by Acquiror made in any Officer’s Certificate,
Acquiror shall have 30 days to respond in a written statement to the objection
of Stockholders’ Agent. If after such thirty 30-day period there remains a
dispute as to any claims, Stockholders’ Agent and Acquiror shall attempt in good
faith for 60 days to agree upon the rights of the respective parties with
respect to each of such claims. If Stockholders’ Agent and Acquiror should so
agree, a memorandum setting forth such agreement shall be prepared and signed by
both parties and shall be furnished to the Escrow Agent. The Escrow Agent shall
be entitled to rely on any such memorandum and shall distribute the Available
Escrow Fund in accordance with the terms thereof.
8.6    Resolution of Conflicts and Arbitration.
(a)    Arbitration. If no agreement can be reached after good faith negotiation
between the parties pursuant to Section 8.5, either Acquiror or Stockholders’
Agent may, by written notice to the other, demand arbitration of the matter
unless the amount of the Damages is at issue in pending litigation with a third
party, in which event arbitration shall not be commenced until such amount is
ascertained or both parties agree to arbitration; and in either such event the
matter shall be settled by arbitration conducted by one arbitrator. Acquiror and
Stockholders’ Agent shall agree on the arbitrator, provided that if Acquiror and
Stockholders’ Agent cannot agree on such arbitrator, either Acquiror or
Stockholders’ Agent can request that Judicial Arbitration and Mediation Services
(“JAMS”) select the arbitrator. The arbitrator shall set a limited time period
and establish procedures designed to reduce the cost and time for discovery
while allowing the parties an opportunity, adequate in the sole judgment of the
arbitrator, to discover relevant information from the opposing parties about the
subject matter of the dispute. The arbitrator shall rule upon motions to compel
or limit discovery and shall have the authority to impose sanctions, including
reasonable attorneys’ fees and costs, to the same extent as a court of competent
law or equity, should the arbitrator determine that discovery was sought without
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of the arbitrator shall be written,
shall be in accordance with applicable Law and with this Agreement, and shall be
supported by written findings of fact and conclusion of law which shall set
forth the basis for the decision of the arbitrator. The decision of the
arbitrator as to the validity and amount of any claim in such Officer’s
Certificate or Agent Certificate shall be binding and conclusive upon the
parties to this Agreement, and notwithstanding anything in Section 8 hereof, the
Escrow Agent and the parties shall be entitled to act in accordance with such
decision and the Escrow Agent shall be entitled to make or withhold payments out
of the Escrow Fund in accordance therewith.
(b)    Enforcement. Judgment upon any award rendered by the arbitrator may be
entered in any court having jurisdiction. Any such arbitration shall be held in
San Francisco, California under the commercial rules then in effect of JAMS. The
non-prevailing party to an arbitration shall pay the fees of the arbitrator and
any administrative fee of JAMS. For purposes of this Section 8.6(b), in any
arbitration hereunder in which any claim or the amount thereof stated in the
Officer’s Certificate is at issue, the party seeking indemnification shall be
deemed to be the non-prevailing party unless the arbitrators award the party
seeking indemnification more than one half (1/2) of the amount claimed in the
Officer’s Certificate; otherwise, the person against whom indemnification is
sought shall be deemed to be the non-prevailing party.

    

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8.7    Stockholders’ Agent.
(h)    Appointment. Stockholders’ Agent shall be the attorney-in-fact and agent
for and on behalf of the Target stockholders under this Agreement and the Escrow
Agreement to give and receive notices and communications, to authorize delivery
to Acquiror of the funds in the Escrow Fund in satisfaction of claims by
Acquiror, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders of
courts and awards of arbitrators with respect to such claims, to take all
actions necessary or appropriate in the judgment of Stockholders’ Agent for the
accomplishment of the foregoing and to do or refrain from doing any further act
or deed on behalf of the Target stockholders which Stockholders’ Agent deems
necessary or appropriate in his, her or its sole discretion relating to the
subject matter of this Agreement and the Escrow Agreement. Such agency may be
changed by the holders of a majority in interest of the Escrow Fund from time to
time upon not less than ten days’ prior written notice to Acquiror. No bond
shall be required of Stockholders’ Agent. Notices or communications to or from
Stockholders’ Agent shall constitute notice to or from each of the Target
stockholders. By virtue of the approval of the Merger and this Agreement by the
Target stockholders and without any further action of any of the Target
stockholders or the Target, each Target stockholder (i) agrees that all actions
taken by Stockholders’ Agent under this Agreement or the Escrow Agreement shall
be binding upon such Target stockholders and such Target stockholders successors
as if expressly confirmed and ratified in writing by such Target stockholder and
(ii) approves the appointment of Stockholders’ Agent pursuant to this Agreement
and the Escrow Agreement to act on behalf of the stockholders of Target.
(i)    No Liability. Certain Target stockholders have entered into a letter
agreement with Stockholders’ Agent to provide direction to Stockholders’ Agent
in connection with the performance of its services under this Agreement and the
Escrow Agreement (such Target stockholders, including their individual
representatives, hereinafter referred to as the “Advisory Group”). Neither
Stockholders’ Agent (and its members, managers, directors, officers,
contractors, agents and employees) nor any member of the Advisory Group shall be
liable for any act done or omitted hereunder as Stockholder’ Agent or any member
of the Advisory Group while acting in good faith and in the exercise of
reasonable judgment and any act done or omitted pursuant to the advice of
counsel or other professional shall be conclusive evidence of such good faith.
The Target stockholders shall severally but not jointly and pro rata, in
accordance with the Pro Rata Percentages, indemnify and hold Stockholders’ Agent
(and its members, managers, directors, officers, contractors, agents and
employees) and the Advisory Group harmless against any loss, liability claim,
damage, fee, cost, expense (including fees, disbursements and costs of counsel
and other skilled professionals and in connection with seeking recovery from
insurers), judgment, fine or amounts paid in settlement or expense incurred
(collectively, the “Agent Expenses”) without gross negligence, bad faith or
willful misconduct on the part of Stockholders’ Agent or any member of the
Advisory Group and arising out of or in connection with the acceptance or
administration of his, her or its duties hereunder. Such Agent Expenses may be
recovered first, from any distribution of the Escrow Fund otherwise
distributable to the Target stockholders at the time of distribution, and
second, directly from the Target stockholders based on their respective Pro Rata
Percentages. The Stockholder’ Agent shall not be required to expend or risk its
own funds or otherwise incur any financial liability in the exercise or
performance of any of its powers, rights, duties or privileges or administration
of the Stockholder’ Agent’s duties. The powers, immunities and rights to
indemnification granted to the Stockholder’ Agent and the Advisory Group under
this Agreement: (i) are coupled with an interest and shall be irrevocable and
survive the death, incompetence, bankruptcy or liquidation of the respective
Target stockholder and shall be binding on any successor thereto, and (ii) shall
survive the delivery of an assignment by any Target stockholder of the whole or
any fraction of his, her or its interest in the Escrow Fund. In addition, the
immunities and rights to indemnification shall survive the resignation or
removal of the Stockholder’ Agent or any member of the Advisory Group and the
Closing and/or any termination of this Agreement and the Escrow Agreement.

    

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(j)    Access to Information. Stockholders’ Agent shall have reasonable access
to information about Target and the Surviving Corporation, as applicable, and
the reasonable assistance of Target’s and the Surviving Corporation’s, as
applicable, officers and employees for purposes of performing his duties and
exercising his rights hereunder, provided that Stockholders’ Agent shall treat
confidentially and not disclose any nonpublic information from or about Target
to anyone (except on a need to know basis to individuals who agree to treat such
information confidentially).
8.8    Actions of Stockholders’ Agent. A decision, act, consent or instruction
of Stockholders’ Agent shall constitute a decision of all Target stockholders
and shall be final, binding and conclusive upon each such Target stockholder,
and the Escrow Agent and Acquiror may rely upon any decision, act, consent or
instruction of Stockholders’ Agent as being the decision, act, consent or
instruction of each and every such Target stockholder. The Escrow Agent and
Acquiror are hereby relieved from any liability to any person for any acts done
by them in accordance with such decision, act, consent or instruction of
Stockholders’ Agent. Stockholders’ Agent shall be entitled to: (i) rely upon the
Closing Consideration Spreadsheet, (ii) rely upon any signature believed by it
to be genuine, and (iii) reasonably assume that a signatory has proper
authorization to sign on behalf of the applicable Target stockholder or other
party.
9.    General Provisions.
9.1    Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly delivered: (i) upon receipt if delivered
personally; (ii) three Business Days after being mailed by registered or
certified mail, postage prepaid, return receipt requested; (iii) one Business
Day after it is sent by commercial overnight courier service; or (iv) upon
transmission if sent via facsimile or electronic mail with confirmation of
receipt to the parties at the following address (or at such other address for a
party as shall be specified upon like notice):
(p)    Addressees:
if to Acquiror, Merger Sub or the Surviving Corporation, to:
PROS, Inc.
3100 Main Street, Suite #900
Houston, TX 77002
Attention: General Counsel
Tel: (713) 335-5151
with a copy (which shall not constitute notice) to:
DLA Piper LLP (US)
401 Congress Ave., Suite 2500
Attention: John J. Gilluly III, PC
Fax: (512) 457-7001
Tel: (512) 457-7000

if to Target or Stockholders’ Agent, to:
Fortis Advisors LLC
Attention: Notice Department
Facsimile No.: (858) 408-1843

    

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Email: notices@fortisrep.com

with a copy (which shall not constitute notice) to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
1200 Seaport Blvd.
Redwood City, CA 94063
Attention: Brian C. Patterson
Fax: (650) 321-2800
Tel: (650) 321-2400

(q)    Interpretation. This Agreement shall be construed in accordance with the
following rules of construction: (i) the terms defined in this Agreement include
the plural as well as the singular; (ii) all references in the Agreement to
designated “Articles,” “Sections” and other subdivisions are to the designated
articles, sections and other subdivisions of the body of this Agreement;
(iii) pronouns of either gender or neuter shall include, as appropriate, the
other pronoun forms; (iv) the words “herein,” “hereof” and “hereunder” and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision; and (v) the words “includes”
and “including” are not limiting.
9.2    Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. Signatures delivered by electronic
methods shall have the same effect as signatures delivered in person.
9.3    Entire Agreement; Nonassignability; Parties in Interest. This Agreement
and the documents and instruments and other agreements specifically referred to
herein or delivered pursuant hereto, including the exhibits and schedules
hereto, including the Target Disclosure Schedule: (a) together constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof except for the
Confidentiality Agreement, which shall continue in full force and effect, and
shall survive the Closing, in accordance with its terms; and (b) are not
intended to confer upon any other person any rights or remedies hereunder and
shall not be assigned by operation of law or otherwise without the written
consent of the other party.
9.4    Severability. In the event that any provision of this Agreement or the
application thereof becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
9.5    Remedies Cumulative. Except as otherwise provided herein (including the
limitations with respect to remedies set forth in Section 8), any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and, except as otherwise provided herein (including the limitations
with

    

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respect to remedies set forth in Section 8), the exercise by a party of any one
remedy will not preclude the exercise of any other remedy.
9.6    Governing Law; Waiver of Jury Trial. This Agreement shall be governed by
and construed in accordance with the internal laws of Delaware applicable to
parties residing in Delaware, without regard applicable principles of conflicts
of law. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE, IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF
SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH
WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.6.
9.7    Arbitration. Subject to the provisions of Section 8.6, if no agreement
can be reached after good faith negotiation between the parties as provided
herein, either Acquiror or Stockholders’ Agent may, by written notice to the
other, demand arbitration of the matter; and in either such event the matter
shall be settled by arbitration conducted by one arbitrator. Acquiror and
Stockholders’ Agent shall agree on the arbitrator, provided that if Acquiror and
Stockholders’ Agent cannot agree on such arbitrator, either Acquiror or
Stockholders’ Agent can request that JAMS select the arbitrator. The arbitrator
shall set a limited time period and establish procedures designed to reduce the
cost and time for discovery while allowing the parties an opportunity, adequate
in the sole judgment of the arbitrator, to discover relevant information from
the opposing parties about the subject matter of the dispute. The arbitrator
shall rule upon motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys’ fees and costs, to the same
extent as a court of competent law or equity, should the arbitrator determine
that discovery was sought without substantial justification or that discovery
was refused or objected to without substantial justification. The decision of
the arbitrator shall be written, shall be in accordance with applicable Law and
with this Agreement, except as otherwise stated herein, may include remedies at
law or in equity (including specific performance) and shall be supported by
written findings of fact and conclusion of law which shall set forth the basis
for the decision of the arbitrator. The decision of the arbitrator shall be
binding and conclusive upon the parties to this Agreement, and the parties shall
be entitled to act in accordance with such decision. Any such arbitration shall
be held in San Francisco, California under the commercial rules then in effect
of JAMS. The non-prevailing party to an arbitration shall pay the fees of the
arbitrator and any administrative fee of JAMS.
9.8    Enforcement. Judgment upon any award rendered by the arbitrator may be
entered in any Federal court located in the State of Delaware or in Delaware
state court, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event that
any judgment upon any award rendered by the arbitrator is required, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a Federal court sitting
in the State

    

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of Delaware or a Delaware state court, and (d) agrees that process may be served
upon it in any manner authorized by the laws of the State of Delaware for such
persons. Notwithstanding Sections 8.6 and 9.7, each of the parties hereto agrees
that irreparable damage would occur and that the parties would not have any
adequate remedy at law in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement.
9.9    LIMITATION OF LIABILITY. IN NO EVENT SHALL ACQUIROR BE LIABLE FOR
INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
9.10    Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
9.11    Amendment; Waiver. Any amendment or waiver of any of the terms or
conditions of this Agreement must be in writing and must be duly executed by or
on behalf of the party to be charged with such waiver. The failure of a party to
exercise any of its rights hereunder or to insist upon strict adherence to any
term or condition hereof on any one occasion shall not be construed as a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
the terms and conditions of this Agreement at a later date. Further, no waiver
of any of the terms and conditions of this Agreement shall be deemed to or shall
constitute a waiver of any other term of condition hereof (whether or not
similar).
[Signature Pages Follow]

    

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IN WITNESS WHEREOF, Target, Acquiror, Merger Sub and Stockholders’ Agent have
caused this Agreement to be executed and delivered by each of them or their
respective officers thereunto duly authorized, all as of the date first written
above.
SIGNALDEMAND, INC.:
 
By: /s/ Mark Tice
 
Mark Tice
 
President and Chief Executive Officer
 
 
 
PROS, INC:
 
By: /s/ Andres Reiner
 
Andres Reiner
 
President and Chief Executive Officer
 
 
 
PANDORA MERGER SUB:
 
By: /s/ Andres Reiner
 
Andres Reiner
 
President and Chief Executive Officer
 
 
 
FORTIS ADVISORS LLC, SIGNING SOLELY IN ITS CAPACITY AS STOCKHOLDERS’ AGENT:
 
By: /s/ Ryan Simkin
 
       Ryan Simkin
 
       Managing Director
 

[Signature Page to Merger Agreement]