The SEC has adopted rules that permit companies and intermediaries (for example, brokers) to satisfy the delivery requirements for
proxy statements with respect to two or more stockholders sharing the same address if we believe the stockholders are members of the same family by delivering a single proxy statement addressed to
those stockholders. Each stockholder will continue to receive a separate proxy card or voting instruction card. This process, which is commonly referred to as "householding," potentially means extra
convenience for stockholders and cost savings for companies by reducing the volume of duplicate information.
A
number of brokers with account holders who are our stockholders will be "householding" our proxy materials. A single proxy statement will be delivered to multiple stockholders sharing
an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or us that they will be "householding" communications to your
address, "householding" will continue until you are notified otherwise or until you revoke your consent. If your household received a single proxy statement, but you would prefer to receive your own
copy, please notify your broker and direct your written request to Epocrates, Inc., Attention: Investor Relations, 1100 Park Place, Suite 300, San Mateo, California 94403, or contact our
Investor Relations Department at (650) 227-1700. If you would like to receive your own set of our proxy materials in the future, please contact your broker and
Epocrates, Inc., Investor Relations and inform them of your request. Be sure to include your name, the name of your brokerage firm and your account number.
Conversely, if you and another person sharing your same address are receiving multiple copies of annual reports or proxy statements and you would like to request that you only receive one copy, please
contact your broker and Epocrates, Inc., Investor Relations and inform them of your request. Be sure to include your name, the name of your brokerage firm and your account number.
A list of Epocrates stockholders entitled to vote at the Special Meeting will be available for inspection at our principal executive
offices located at 1100 Park Place, Suite 300, San Mateo, California 94403, at least 10 days prior to the date of the Special Meeting and continuing through the Special Meeting for any
purpose germane to the meeting. The list will also be available at the meeting for inspection by any stockholder present at the meeting.
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PROPOSAL 1ADOPTION OF THE MERGER AGREEMENT
THE MERGER
The discussion under the sections of this proxy statement entitled "The Merger" and "The Merger Agreement" summarizes the material
terms of the merger. Although we believe that the description covers the material terms of the merger, this summary may not contain all of the information that is important to you. We urge you to read
this proxy statement, the merger agreement and the other documents referred to herein carefully for a more complete understanding of the merger. The discussion of the merger in this proxy statement is
qualified in its entirety by reference
to the merger agreement, which is attached as Annex A to this proxy statement and incorporated by reference into this proxy statement.
Background of the Merger
Over the past several years, our board of directors has discussed and evaluated various potential strategic alternatives to enhance
stockholder value, including selling Epocrates in its entirety. During this period of time, we entered into non-disclosure agreements with numerous potential acquirers, including
athenahealth, and our management team and our financial advisor, Piper Jaffray, spoke with these potential acquirers to assess their interest in a transaction with us, including potential strategic
business combinations.
Most
recently, on April 26, 2012, a board member of a potential acquirer, which we refer to as Company A, called Andrew Hurd to congratulate him on his becoming our president and
chief executive officer. On May 30, 2012, this board member of Company A called Mr. Hurd to inform him that Epocrates should expect to receive an offer from Company A to purchase
Epocrates at $13.50 to $14.00 per share in cash, and on that same date Company A submitted a preliminary, non-binding term sheet to Epocrates with an all-cash offer of $13.50
to $14.00 per share.
On
June 2, 2012, our board of directors met to review the preliminary, non-binding term sheet, at which meeting representatives of Cooley LLP, our outside legal
counsel, advised our board of directors of their fiduciary duties in connection with a potential sale of the company and discussed with our board of directors the preliminary, non-binding
term sheet. After discussion, the board of directors directed Mr. Hurd to call the board member of Company A to discuss the terms of the preliminary, non-binding term sheet.
Mr. Hurd called the board member of Company A and discussed the terms of the preliminary, non-binding term sheet and also expressed to the board member of Company A our board of
directors' concerns about multiple past offers by Company A to acquire Epocrates that were changed or retracted and his concern for management distraction if the offer was not a serious and meaningful
offer. The concern arose from Company A having previously engaged in discussions with us on several occasions over several years regarding a potential acquisition and Company A subsequently changing
the terms or breaking off those discussions after preliminary negotiations and diligence.
On
June 12, 2012, Mr. Hurd and the board member of Company A spoke by telephone and further discussed Company A's offer, during which Mr. Hurd expressed his concerns
that Company A's full board, including Company A's chief executive officer, may not support a transaction with us. The board member of Company A gave assurances that the full board of Company A and
its chief executive officer fully supported the potential transaction.
On
June 12, 2012, Mr. Hurd, Matthew Kaminer, our General Counsel, and a representative of Cooley spoke with the board member of Company A and Company A's outside legal
counsel to discuss the preliminary, non-binding term sheet and address concerns about Company A's full board support and regulatory issues. Later that day our board of directors met, with
representatives of Cooley present, to receive an update on the discussions to date with Company A, to further discuss Company A's preliminary, non-binding offer, and to discuss whether and
how to move forward with the process,
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following
which our board of directors directed our management and the representatives of Cooley to continue discussions with Company A.
On
June 16, 2012, our board of directors met, with a representative of each of Piper Jaffray and Cooley present, to discuss a preliminary analysis prepared by Piper Jaffray to
assess the potential value of a potential transaction with Company A. The preliminary analysis prepared by Piper Jaffray was based on the then current forecasts prepared by Epocrates' management, and
compared Company As' offer to implied values of Epocrates using various methodologies, including public company comparables, merger transaction comparables, premiums paid, and discounted cash flow
analysis.
On
June 20, 2012, our board of directors met again, with a representative of Cooley present, to discuss the current status of discussions with Company A and to give direction to
management and the representatives of Cooley as to future discussions with Company A, specifically instructing management and the representative of Cooley to propose a desired purchase price of $15.00
per share and that the closing conditions in any transaction with Company A should be limited to ensure certainty of closing.
On
June 21, 2012, Mr. Hurd spoke with the board member of Company A regarding a desired purchase price of $15.00 per share, and the board member of Company A rejected that
possibility.
On
June 22, 2012, Mr. Hurd updated our board of directors by email as to his discussions with the board member of Company A, including the rejection of our counter offer of
$15.00 per share.
On
June 26, 2012, our board of directors met, with a representative of Cooley present, to discuss the rejection of our counter offer of $15.00 per share, and authorized our
management to enter into a non-disclosure agreement with Company A, engage in negotiations with Company A with a price range of $13.50 to $14.00 per share, and engage Piper Jaffray to act
as our financial advisor in connection with a potential acquisition of Epocrates.
On
June 27, 2012, a representative of Cooley, on our behalf, sent to outside legal counsel to Company A a preliminary, non-binding term sheet for Company A to acquire
Epocrates at a cash purchase price of $13.50 to $14.00 per share, and a draft non-disclosure agreement.
On
June 28, 2012, our board of directors met to discuss company strategy unrelated to the acquisition process, and during that meeting reviewed and discussed Mr. Hurd's
strategic plan for our business as a stand-alone entity.
On
June 29, 2012, a representative of Cooley received a revised draft non-disclosure agreement from outside legal counsel to Company A, and on July 1, 2012, the
representative of Cooley sent a revised draft non-disclosure agreement to outside legal counsel to Company A.
On
July 9, 2012, the representative of Cooley received a revised draft, non-binding term sheet from outside legal counsel to Company A, as well as a revised
non-disclosure agreement, which he forwarded on to Mr. Hurd and Mr. Kaminer. Mr. Hurd then sent an email to our board of directors describing this term sheet and the
revised non-disclosure agreement.
On
July 10, 2012, the chairman of Company A and the board member of Company A called Mr. Hurd to cancel a scheduled meeting to be held the next day with Epocrates to begin
the formal diligence process, and on July 11, 2012, the board member of Company A sent an email to Mr. Hurd informing us that Company A would not be moving forward with the acquisition
of Epocrates, purportedly based on the belief that the interactions between us and Company A indicated that the chance of completing a deal was unlikely.
On
July 12, 2012, the chairman of Company A and Patrick Jones, Epocrates' chairman of the board at that time, spoke to discuss the shutdown of the process and reasons for
shutdown, which were primarily the respective companies' inability to agree on terms and the different views regarding the process for preparation of a definitive agreement.
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On August 1, 2012, our board of directors met for a regularly scheduled meeting with a representative of Cooley present, and the representative of Cooley
provided our board of directors with a summary of the discussions with Company A, following which our board of directors discussed the perceived inconsistent actions and positions taken by
Company A as well as the numerous past offers and retractions of offers that Company A had made to Epocrates in previous years.
On
August 16, 2012, the chairman of the board of Company A called Mr. Jones to reinitiate discussions between Company A and Epocrates with a purchase price of
$13.50 to $14.00 per share. On August 18, 2012 our board of directors met, with representatives of Cooley present, to discuss Company A's offer to reinitiate discussions. To maximize
stockholder value and increase the likelihood of success, our board of directors instructed management and Piper Jaffray to approach other potential acquirers of Epocrates, both strategic and
financial, to assess whether there was interest from other potential acquirers to acquire Epocrates. Following this meeting, a representative from Piper Jaffray presented to Mr. Hurd a list of
companies with which they had either discussed a potential transaction with us or which they thought may be interested in a potential transaction with us based on their knowledge of the industry,
recent merger and acquisition activity and likely potential synergies. After discussion of the list, Mr. Hurd and the representative from Piper Jaffray identified five companies, plus one
company identified by our board of directors, to contact based on the view that those companies would be most likely to be interested in discussing a potential transaction with us.
On
August 19, 2012, Mr. Hurd called Jonathan Bush, the chief executive officer of athenahealth, one of the companies included on the list from Piper Jaffray, to inform him
that Epocrates had received an unsolicited offer to acquire Epocrates and to inquire as to whether athenahealth would be interested in a potential acquisition of Epocrates.
On
August 19, 2012, Mr. Jones spoke to the chairman of the board of Company A to inform him that Epocrates' board of directors was interested in a potential
acquisition in the price range of $13.50 to $14.00 per share.
On
August 20, 2012, Timothy Adams, chief financial officer of athenahealth, called Mr. Hurd to say that athenahealth was open to engaging in discussions regarding a
potential acquisition of Epocrates by athenahealth. That same day, the chairman of the board of Company A called Mr. Jones to set up a due diligence call between Epocrates and
Company A. Further, on that same day Epocrates authorized Piper Jaffray to contact the six potential acquirers of Epocrates (other than Company A), regarding an acquisition of Epocrates.
Of the parties contacted by Piper Jaffray, as well as Company A, three participated in face-to-face meetings (Company A, athenahealth, and a third company we
refer to as Company B), one participated in a telephonic meeting (a company we refer to as Company C), and three parties declined to participate.
On
August 20, 2012, Mr. Brandt, our chairman of the board, who had a relationship with Company B, contacted Company B regarding the possibility of a transaction with us and
Company B.
On
August 21, 2012, a representative of Company A sent to Mr. Jones and Mr. Kaminer by email a diligence request list. On August 22, 2012,
Messrs. Hurd, Kaminer and Jones engaged in a telephone call with the chairman of the board, the board member with whom Mr. Hurd has initiated contact, the General Counsel and another
officer of Company A to discuss the diligence request list.
On
August 23, 2012, Mr. Hurd spoke to the chief executive officer of Company B, and the chief executive officer of Company B expressed interest in Company B acquiring
Epocrates and agreed to send to Epocrates a non-disclosure agreement for Company B to sign so that we could begin negotiations and due diligence with Company B. On August 23, 2012,
we sent the draft non-disclosure agreement to Company B, and between August 23, 2012, and August 30, 2012, we negotiated the terms of the non-disclosure
agreement.
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On
August 27, 2012, Piper Jaffray on our behalf sent to Chip Linnemann, a long-term advisor and consultant to athenahealth, a draft non-disclosure
agreement for athenahealth to sign so that we could begin negotiations and due diligence with athenahealth.
On
August 30, 2012, we received executed copies of the Company A non-disclosure agreement and Company B non-disclosure agreement.
On
September 1, 2012, we received an initial list of due diligence questions from athenahealth.
On
September 4, 2012, Mr. Kaminer received an email from a representative of athenahealth, transmitting athenahealth's comments to our draft non-disclosure
agreement, following which we negotiated the terms of the non-disclosure agreement.
On
September 5, 2012, we received from athenahealth an executed non-disclosure agreement.
From
September 5, 2012, through September 11, 2012, members of our management, including Mr. Kaminer, Heather Gervais, our senior vice president of commercial, Sean
Handel, our senior vice president of product management, David Ward, our executive vice president, business development, Mike Facendola, our vice president of finance, and Mohan Ganesan, our vice
president of financial planning and analysis, met with representatives of Company A, Company B and athenahealth. During these meetings, our management gave presentations to, and we entered into
due diligence discussions with, each of these interested potential acquirers.
On
September 13, 2012, members of our management, including Mr. Kaminer, Ms. Gervais, Mr. Handel, Mr. Ward, Mr. Facendola and
Mr. Ganesan, had a telephonic meeting with representatives of Company C, arranged by Piper Jaffray, in which our management gave presentations to, and we entered into due diligence discussions,
with the representatives of Company C.
On
September 25, 2012, a representative of Company C called a representative of Piper Jaffray and conveyed that Company C was no longer interested in acquiring Epocrates.
On
September 26, 2012, Mr. Hurd met with Mr. Bush and a member of the Mergers and Acquisitions Committee of the board of directors of athenahealth in our San Mateo
office, in which meeting Mr. Bush reiterated athenahealth's interest in acquiring Epocrates.
On
October 12, 2012, Mr. Linnemann called a representative of Piper Jaffray and stated that athenahealth was willing to purchase Epocrates for $12.00 per share, subject to
due diligence, and that if Epocrates was not interested in being acquired at this price, then athenahealth would be willing to discuss entering into a commercial relationship with Epocrates in
connection with which athenahealth would consider making a minority investment in Epocrates.
On
October 12, 2012, Mr. Hurd advised our board of directors by email of the recent offer from athenahealth to acquire Epocrates for $12.00 per share and, based on prior
discussions with our board of directors, Mr. Hurd informed the representative from Piper Jaffray that we were rejecting the offer, and instructed Piper Jaffray to communicate this to
athenahealth. That day a representative of Piper Jaffray communicated this to athenahealth.
During
the period of October 12, 2012 through October 21, 2012, members of the athenahealth management team and Mr. Linnemann participated in various discussions
regarding athenahealth's recent offer to acquire Epocrates and whether athenahealth would be willing to increase its offer amount, including discussions with the members of the athenahealth board of
directors. athenahealth directed Mr. Linnemann to communicate to Epocrates that athenahealth would be willing to increase its offer to $12.50 per share.
On
October 21, 2012, Mr. Linnemann, acting on behalf of athenahealth, called a representative of Piper Jaffray and communicated an all cash oral offer from athenahealth to
acquire Epocrates for
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$12.50
per share, subject to completion of due diligence, including a review of third quarter operating results.
On
October 23, 2012, the chairman of the board of Company A called Mr. Jones to confirm that Company A was willing to continue negotiations of an acquisition
of Epocrates by Company A with a price in range of $13.50 to $14.00 per share. Later that day, Mr. Hurd and Mr. Kaminer received a draft merger agreement from legal counsel to
Company A for the acquisition of Epocrates by Company A.
On
October 26, 2012, our board of directors met, with representatives of Cooley and Piper Jaffray present, and, during the course of the meeting, reviewed and discussed the
current status of discussions with athenahealth, Company A, Company B and Company C, as well as the draft agreement received from Company A, and gave direction to our management to
continue discussions with each of these potential acquirers.
On
October 26, 2012, Mr. Linnemann, on behalf of athenahealth, sent to a representative of Piper Jaffray a written, preliminary, non-binding offer from
athenahealth to acquire Epocrates for $12.50 per share.
On
October 28, 2012, Mr. Hurd sent to Mr. Bush a first draft of the merger agreement between Epocrates and athenahealth.
From
November 2012 to December 2012 members of our management engaged in ongoing telephonic and in person due diligence discussions with members of management of athenahealth.
On
November 1, 2012, Piper Jaffray received from Mr. Linnemann, on behalf of athenahealth, a draft of a letter agreement, referred to as the diligence letter, relating to
the diligence process and requiring, among other things, Epocrates to provide diligence documents to athenahealth during the term of the agreement and to reimburse athenahealth for its expenses
incurred in connection with the diligence in the event that Epocrates enters into an alternative transaction with a third party before November 30, 2012. On November 2, 2012,
Mr. Kaminer sent a representative of athenahealth edits to the due diligence letter, including addition of a termination right by either party.
On
November 2, 2012, Mr. Kaminer spoke with a representative of athenahealth regarding the terms of the due diligence letter. Later that day a representative of
athenahealth sent Mr. Kaminer edits to the draft of the due diligence letter.
On
November 2, 2012, Mr. Hurd received from Mr. Adams by email a revised diligence request list as well as a proposed timeline for the acquisition of Epocrates by
athenahealth.
On
November 5, 2012, a representative of Piper Jaffray had a call with a representative of Company B to discuss overall process and timing for negotiations of a potential
transaction with Company B. Neither Epocrates nor the representative from Piper Jaffray received any further communications from Company B or its representatives following this conversation.
On
November 5, 2012, Mr. Kaminer sent Mr. Adams a signed diligence letter, which included an obligation of Epocrates to reimburse athenahealth for its expenses up to
$500,000 if Epocrates enters into an alternative transaction before November 30, 2012.
On
November 5, 2012, the chairman of the board of Company A and the board member of Company A with whom we had been interacting held a telephone call with
Messrs. Hurd and Jones in which the chairman of the board of Company A and the board member of Company A stated that Company A was
retracting its offer to purchase Epocrates because, among other things, Company A's internal analysis did not support a transaction within the previously discussed price range.
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On
November 6, 2012, a representative of Cooley sent a letter to Company A requiring Company A to destroy all Epocrates confidential information received by
Company A under the non-disclosure agreement between Company A and us.
On
November 7, 2012, and November 8, 2012, representatives of athenahealth visited our New Jersey location to conduct due diligence, and again on November 12, 2012,
representatives of athenahealth (Mr. Adams, Mr. Linnemann, Karl Zachar, vice president of business development of athenahealth, and Robert Cosinuke, senior vice president and chief
marketing officer of athenahealth) and Epocrates (Mr. Kaminer, Ms. Gervais, Adam Budish, our senior vice president of sales, Mr. Ward, Mr. Facendola and Mr. Ganesan)
met at a hotel conference center located in New Jersey to conduct due diligence, during which we shared with the representatives of athenahealth, among other things, our third quarter operating
results, which fell short of our forecasts, and our fourth quarter bookings forecast.
On
November 13, 2012, Mr. Kaminer received an email from an officer of Company A certifying that Company A had destroyed all Epocrates confidential
information as required pursuant to the non-disclosure agreement between Epocrates and Company A.
On
November 21, 2012, Mr. Adams called Mr. Hurd to discuss the timing of due diligence as well as the time of the transaction, expressing athenahealth's desire to
execute the definitive merger agreement in early January 2013.
On
December 7, 2012, Mr. Adams called Mr. Hurd to talk about the status of the process and to review our fourth quarter and 2012 performance and its potential impact
on the price and timing of completion of due diligence and the transaction.
On
December 9, 2012, representatives of Goodwin Procter LLP ("Goodwin"), counsel to athenahealth, sent comments to the merger agreement to Cooley, and together with
Epocrates and athenahealth, began negotiations regarding the terms of the definitive merger agreement and related documentation and agreements. Those negotiations continued through January 6,
2013.
On
December 14, 2012, our board of directors met for regularly scheduled meeting and discussed our current operations, products, research and development activities, finances and
budget, as well as the status of discussions with athenahealth, timing and pricing for athenahealth transaction. At this meeting Mr. Hurd expressed his belief that based on recent discussions
with representatives of athenahealth, that athenahealth was likely to reduce its offer to purchase Epocrates from $12.50 per share to a lower price.
On
December 21, 2012, members of our management, including Mr. Hurd, Mr. Kaminer, Mr. Ward, Mr. Facendola and Mr. Ganesan, held a telephonic
conference call with members of management and representatives of athenahealth, including Mr. Linnemann, Mr. Adams and Mr. Zachar, and representatives from Cooley and Goodwin, in
which the participants discussed Epocrates' fourth quarter 2012 bookings estimate and year-end cash forecast, which were lower than previously forecasted, as well as certain terms of the
merger agreement. Subsequent to this meeting Mr. Hurd updated our board of directors regarding this teleconference call.
On
December 26, 2012, our board of directors met, with representatives of Cooley and Piper Jaffray present, and discussed the status of discussions with athenahealth as well as
timing of a transaction with athenahealth and schedules for upcoming board meetings to discuss the transaction. At this meeting Piper Jaffray made a presentation to our board of directors regarding
various matters related to the transaction, including an updated preliminary valuation analysis of Epocrates.
On
December 28, 2012, members of our management, including Mr. Hurd, Mr. Kaminer, Mr. Ward, Mr. Facendola and Mr. Ganesan, held a telephonic
conference call with members of management and representatives of athenahealth, including Mr. Linnemann, Mr. Adams and
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Mr. Zachar,
in which the participants continued discussions about Epocrates' fourth quarter 2012 bookings estimate and year-end cash forecast.
On
January 2, 2013, our board of directors met, at which representatives of Cooley and Piper Jaffray were present, and discussed Epocrates' operations, including bookings, trends
and further updated projections. The board further discussed the status of negotiations with athenahealth, as well as the current process and an update on athenahealth's potential valuation of the
transaction. Representatives of Cooley discussed with the board the outstanding issues in the negotiation of the merger agreement, including athenahealth's termination rights in certain scenarios, the
exceptions to the board's obligation not to change its recommendation to the stockholders of Epocrates to vote in favor of the merger and the termination fee. A representative of Cooley further
advised the board of its fiduciary duties with respect to such matters. Our board of directors directed management to proceed forward with negotiations of outstanding issues in the agreement for
review by the board of directors.
On
January 2, 2013, after discussions with athenahealth management, Mr. Linnemann called a representative of Piper Jaffray and stated that based on Epocrates' fourth
quarter 2012 bookings estimate and year-end cash forecast, which were below the forecasts that Epocrates had previously provided to athenahealth, and based on the results of its due
diligence, among other matters, athenahealth was reducing the purchase price in the potential acquisition to $11.50 per share.
On
January 3, 2013, our board of directors met, at which representatives of Cooley and Piper Jaffray were present, to discuss the revised offer of $11.50 per share compared to the
alternative of continuing to operate as a stand-alone entity and authorized and directed management to present a counter offer at $12.10 per share, provided that athenahealth agree to certain
revisions to the merger agreement with respect to significant issues presented by Cooley to Goodwin relating to athenahealth's termination rights and the exceptions to Epocrates' board of directors
obligation not to change its recommendation to the Epocrates stockholders to vote in favor of the merger. Such revisions rejected the request by athenahealth to have a termination right in the event
of any material breach by Epocrates of any of its no-solicitation obligations set forth in the merger agreement or any of its covenants not to change the board recommendation to vote in
favor of the merger and instead proposed that athenahealth will have a termination right only in the event of a material breach of the no-solicitation obligations made intentionally. In
addition, such revisions broadened the circumstances in which the Epocrates board will be allowed to change its recommendation to the Epocrates stockholders to vote in favor of the merger. Following
this meeting a representative of Piper Jaffray called Mr. Linnemann and presented this counter offer.
On
January 3, 2013, representatives of the athenahealth management team, Mr. Linnemann and representatives from Goodwin met in person and by telephone to discuss the $12.10
per share counter offer and the proposed revisions to the merger agreement. In light of the fourth quarter 2012 bookings estimate, year-end cash forecast and other due diligence results,
athenahealth decided to increase its offer to $11.75 per share, provided that athenahealth be afforded certain rights in the merger agreement, including a termination right in the event of an
intentional and material breach by Epocrates of any of its no-solicitation obligations set forth in the merger agreement.
Later
on January 3, 2013, Mr. Linnemann called a representative of Piper Jaffray and presented a revised proposal by athenahealth of a purchase price of $11.75 per share
and agreed to some of the revisions proposed by Epocrates to the merger agreement with respect to athenahealth's termination right in the event of a breach by Epocrates of its
no-solicitation obligations and with respect to the exceptions to the Epocrates board's ability to change its recommendation to the Epocrates stockholders to vote in favor of the merger.
On
January 4, 2013, our board of directors met, with a representative of Cooley and Piper Jaffray present, to discuss the status of the negotiations with athenahealth and the
outstanding issues.
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On
January 5, 2013, our board of directors met, with a representative of Cooley and Piper Jaffray present, to discuss the status of the negotiations with athenahealth and the
outstanding issues. Following discussion the board of directors directed management to proceed forward with negotiations with a purchase price of $11.75 share and certain other terms and directed
management to complete negotiations on the merger agreement for review by the board of directors.
Also
on January 6, 2013, the athenahealth board of directors held a meeting at which representatives of Goodwin and Mr. Linnemann were present. The athenahealth board of
directors reviewed the terms of the merger agreement and, after discussion, approved the merger agreement and authorized management to execute the merger agreement.
On
January 6, 2013, the Epocrates board of directors held a meeting at which representatives of Cooley and Piper Jaffray were present, Piper Jaffray presented its fairness opinion
to the Epocrates board of directors and then left the meeting, a representative of Cooley advised the members of the Epocrates board of directors regarding their fiduciary duties in connection with
the approval of the merger agreement and merger, and the Epocrates board of directors reviewed the final terms of the merger agreement and unanimously approved the merger agreement, declared that it
was advisable to the Epocrates stockholders, recommended that the merger agreement be approved by the Epocrates stockholders.
Following
its board of directors meeting, Epocrates delivered the executed voting agreements to athenahealth, and Epocrates and athenahealth executed the merger agreement, with signature
pages delivered by the parties at approximately 12:01 a.m. Eastern Time on January 7, 2013. Before the opening of the market in New York, NY, on January 7, 2013, the parties
announced the execution of the merger agreement.
Reasons for the Merger
Reasons for the Recommendation of the Board of Directors
In considering the merger with athenahealth, our board of directors consulted with Piper Jaffray regarding the financial aspects of the
merger and sought and received Piper Jaffray's written opinion as to the fairness, as of the date of such opinion, from a financial point of view, of the consideration to be received by the holders of
Epocrates common stock in the merger, which opinion is described below under "The MergerOpinion of Epocrates' Financial Advisor." Our board of directors also consulted with
representatives of Cooley, outside counsel to Epocrates, regarding the fiduciary duties of the members of the board of directors, legal due diligence matters and the terms of the merger agreement, the
voting agreements and matters related thereto. Based on these consultations and opinions, and the factors discussed below, our board of directors determined that the merger and the merger agreement
were fair to, and in the best interests of, Epocrates' stockholders and unanimously approved the merger agreement and the transactions contemplated thereby, including the merger and the voting
agreements, and unanimously recommended that Epocrates' stockholders vote to adopt the merger agreement and thereby approve the merger.
In
the course of reaching that determination and recommendation, our board of directors considered a number of potentially positive factors in its deliberations, including the
following:
-
-
the belief that we obtained the highest price per Epocrates share that athenahealth was willing to pay and that was
reasonably available from any potential acquirer with the degree of assurance that the transaction would be completed that our board of directors deemed necessary;
-
-
the fact that the merger consideration of $11.75 per Epocrates share was a 22% premium to the closing trading price of our
common stock ($9.62) on the trading day prior to the day our board of directors approved the merger agreement and the transactions contemplated thereby,
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January 4,
2013, and the premiums that the merger consideration represented to the historical trading prices of our common stock as described in "The MergerOpinion of Epocrates'
Financial Advisor" (page 27);
-
-
the fact that the merger consideration is all cash, which provides certainty of value to our stockholders;
-
-
the likelihood that the merger would be consummated, including the absence of a financing condition and the limited number
and nature of the conditions to complete the merger;
-
-
the business, market and execution risks associated with remaining independent;
-
-
historical information regarding (a) Epocrates' business, financial performance and results of operations,
(b) market prices, volatility and low trading volume with respect to the Epocrates common stock, and (c) market prices with respect to other industry participants and general market
indices;
-
-
the prospects and likelihood of realizing superior benefits through remaining an independent company, risks associated
with remaining an independent company, and possible alternative business strategies;
-
-
current information regarding (a) Epocrates' business, prospects, financial condition, operations, management,
competitive position and strategic business goals and objectives, (b) general economic, industry and financial market conditions, and (c) opportunities and competitive factors within
Epocrates' industry;
-
-
the timing of the merger and the risk that if Epocrates does not accept the athenahealth offer now (as provided for in the
merger agreement), it may not have another opportunity to do so or a comparable opportunity;
-
-
the financial analyses of Piper Jaffray presented to our board of directors on January 6, 2013, and the opinion of
Piper Jaffray delivered to our board of directors that, as of January 6, 2013, based upon and subject to the various qualifications, considerations and assumptions set forth in their opinion,
the merger consideration to be received by the holders of our common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders (the full text of the written
opinion setting forth the assumptions made, matters considered and limitations in connection with the opinion is attached to this proxy statement as Annex B, which stockholders are urged to
read in its entirety);
-
-
the fact that our board of directors or any committee thereof, in the exercise of its fiduciary duties, would be permitted
in accordance with the terms of the merger agreement to authorize Epocrates' management to provide information to and engage in negotiations with a third party following receipt of a bona fide written
unsolicited proposal or offer that our board of directors (or any committee thereof) determines in good faith is reasonably likely to lead to a superior proposal in the manner provided in the merger
agreement, subject to specified conditions;
-
-
the fact that our board of directors or any committee thereof, in the exercise of its fiduciary duties, would be permitted
in accordance with the terms of the merger agreement to terminate the merger agreement following receipt of a bona fide written superior proposal in the manner provided in the merger agreement,
subject to specified conditions, including the payment of a $9.0 million termination fee to athenahealth, which is approximately 3.0% of the total merger consideration; and
-
-
the fact that the merger would be subject to the approval of our stockholders.
25
Table of Contents
Our
board of directors also considered a number of potentially countervailing factors in its deliberations concerning the merger, including the
following:
-
-
the potential for other third parties to enter into strategic relationships with or to seek to acquire Epocrates,
including the likelihood that a third party would offer a better strategic fit or a higher price than the $11.75 offered by athenahealth;
-
-
the fact that Epocrates will no longer exist as an independent public company and Epocrates stockholders will
forego any future increase in its value as an independent public company that might result from its possible growth;
-
-
the possible negative effect of the merger and public announcement of the merger on Epocrates' financial performance,
operating results and stock price and Epocrates' relationships with suppliers, other business partners, management and employees;
-
-
the fact that the merger agreement (i) precludes Epocrates from actively soliciting competing acquisition proposals
and (ii) obligates Epocrates (or its successor) to pay athenahealth a termination fee of up to $9.0 million under specified circumstances, which could discourage the making of a
competing acquisition proposal or adversely impact the price offered in such a proposal;
-
-
the fact that the merger agreement imposes restrictions on the conduct of Epocrates' business in the
pre-closing period, which may adversely affect Epocrates' business in the event the merger is not completed (including by delaying or preventing Epocrates from pursuing business
opportunities that may arise or precluding actions that would be advisable if Epocrates were to remain an independent company);
-
-
the risks involved with the merger and the likelihood that Epocrates and athenahealth will be able to complete the merger,
the possibility that the merger might not be consummated and Epocrates' prospects going forward without the combination with athenahealth;
-
-
the substantial transaction expenses to be incurred in connection with the completion of the merger and the negative
impact of such expenses on Epocrates' cash reserves and operating results;
-
-
the availability of appraisal rights to stockholders of Epocrates in connection with the merger;
-
-
all known interests of directors and executive officers of Epocrates in the merger that may be different from, or in
addition to, their interests as stockholders of Epocrates or the interests of Epocrates' other stockholders generally; and
-
-
the fact that any gains from the exchange of our shares for cash in the merger would be taxable to our stockholders for
U.S. federal income tax purposes.
The
interests of our directors and executive officers in the merger, which existed as of the time of our board of directors' determination and recommendation, are described herein under
"The MergerInterests of Our Directors and Executive Officers in the Merger."
The
preceding discussion is not meant to be an exhaustive description of the information and factors considered by our board of directors but is believed to address material information
and factors considered. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, our board of directors did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative weights to the various factors considered in reaching its determination. In considering the factors described above,
individual members of our board of directors may have given different weight to different factors.
26
Table of Contents
After
its consideration of the preceding factors and deliberations, our board of directors determined that the merger and the merger agreement were fair to, and in the best interests of,
Epocrates' stockholders and unanimously approved the merger agreement and the transactions contemplated
thereby, including the merger and the voting agreements, and unanimously recommended that Epocrates' stockholders vote to adopt the merger agreement and thereby approve the merger.
Opinion of Epocrates' Financial Advisor
Epocrates retained Piper Jaffray to render a fairness opinion to Epocrates' board of directors in connection with the merger. On
January 6, 2013, Piper Jaffray delivered its oral opinion, subsequently confirmed in a written opinion of the same date, to the board of directors that, based on and subject to the limitations
and assumptions stated in the opinion, as of the date of the opinion the merger consideration to be received by the holders of Epocrates common stock pursuant to the merger agreement was fair, from a
financial point of view, to such holders.
The
full text of Piper Jaffray's written opinion dated January 6, 2013, which contains the assumptions made, procedures followed, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of Piper Jaffray's opinion in this proxy statement
is qualified in its entirety by reference to the full text of the opinion. You are urged to read the opinion in its entirety and this summary is qualified by reference to the written opinion. Piper
Jaffray's opinion addresses solely the fairness, from a financial point of view, to the holders of Epocrates common stock of the merger consideration as of the date of the opinion. Piper Jaffray's
opinion was directed solely to Epocrates board of directors in connection with its consideration of the merger and was not intended to be, and does not constitute, a recommendation to any Epocrates
stockholder as to how such stockholder should vote or how any such stockholder should act with respect to the merger or any other matter, including, but not limited to, exercise of appraisal rights.
Piper Jaffray's opinion was approved for issuance by Piper Jaffray's Fairness Opinion Committee.
In
arriving at its opinion, Piper Jaffray, among other things, has:
-
-
reviewed and analyzed the financial terms of a draft of the merger agreement dated January 6, 2013;
-
-
reviewed and analyzed certain financial and other data with respect to Epocrates which was publicly available;
-
-
reviewed and analyzed certain information relating to the business, including financial forecasts, earnings, cash flow,
assets, liabilities and prospects of Epocrates that were publicly available, as well as those that were furnished to Piper Jaffray by Epocrates;
-
-
conducted discussions with members of senior management and representatives of Epocrates concerning the matters described
above, as well as its business and prospects before and after giving effect to the merger;
-
-
reviewed the current and historical reported prices and trading activity of Epocrates' common stock and similar
information for certain other companies deemed by Piper Jaffray to be comparable to Epocrates;
-
-
compared the financial performance of Epocrates with that of certain other publicly traded companies that Piper Jaffray
deemed relevant; and
-
-
reviewed the financial terms, to the extent publicly available, of certain business combination transactions that Piper
Jaffray deemed relevant.
27
Table of Contents
In
addition, Piper Jaffray conducted such other inquiries, examinations and analyses, and considered such other financial, economic and market criteria as Piper Jaffray deemed necessary
in arriving at its opinion.
The
following is a summary of the material financial analyses performed by Piper Jaffray in connection with the preparation of its fairness opinion, which was reviewed with, and formally
delivered to, Epocrates' board of directors at a meeting held on January 6, 2013. The preparation of analyses and a fairness opinion is a complex analytic process involving various
determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, this summary does not purport to
be a complete description of the
analyses performed by Piper Jaffray or of its presentation to the Epocrates board of directors on January 6, 2013.
This
summary includes information presented in tabular format, which tables must be read together with the text of each analysis summary and considered as a whole in order to fully
understand the financial analyses presented by Piper Jaffray. The tables alone do not constitute a complete summary of the financial analyses. The order in which these analyses are presented below,
and the results of those analyses, should not be taken as an indication of the relative importance or weight given to these analyses by Piper Jaffray or Epocrates' board of directors. Except as
otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before January 4, 2013 (the last trading day
prior to the opinion being rendered), and is not necessarily indicative of current market conditions.
For
purposes of its analyses, Piper Jaffray calculated (i) Epocrates' equity value implied by the merger to be approximately $306.8 million, based on approximately
26.1 million fully-diluted shares of Epocrates' common stock outstanding as of January 3, 2013, calculated using the treasury stock method, and including approximately 400,000 restricted
stock units, and the merger consideration; and (ii) Epocrates' enterprise value implied by the merger ("EV") (for the purposes of this analysis, EV equates to implied equity value, plus debt,
less cash) to be approximately $228.5 million, based on Epocrates' estimate of its cash and cash equivalents as of December 31, 2012 and no outstanding debt as of that date.
Financial Analyses
Piper Jaffray performed the following financial analyses in connection with rendering its opinion to Epocrates' board of
directors:
-
-
selected public companies analysis;
-
-
selected mergers and acquisitions ("M&A") transaction analysis;
-
-
premiums paid analysis; and
-
-
discounted cash flows analysis.
Each
of these analyses is summarized below.
Selected Public Companies Analysis
Piper Jaffray reviewed selected historical financial data of Epocrates and estimated financial data of Epocrates based on projections
provided by Epocrates' management and compared them to corresponding financial data, where applicable, for U.S. listed public companies in the health care information technology ("HCIT") and
pharmaceutical services sectors that Piper Jaffray deemed comparable to Epocrates. Piper Jaffray selected companies in these industries based on information obtained by searching standard industrial
classification ("SIC") codes and companies Piper Jaffray deemed similar to aspects of Epocrates' business or financial profile based on its professional judgment.
28
Table of Contents
The
selected companies in the HCIT sector were divided into a low-growth HCIT sector, a subset of the broader HCIT group with a growth profile Piper Jaffray deemed similar to Epocrates'
growth profile, and the broader HCIT sector, which includes additional companies not in the low-growth subset. The low-growth HCIT comparable companies included only companies
with estimated revenue growth less than or equal to 12.5% for 2012 and 2013 based on consensus equity analyst estimates.
Based
on these criteria, Piper Jaffray identified and analyzed the following selected companies:
|
|
|
|
|
Low-Growth HCIT
|
|
Broader HCIT
|
|
Pharmaceutical Services
|
Allscripts Healthcare Solutions, Inc.
|
|
Accretive Health, Inc.
|
|
BioClinica, Inc.
|
Computer Programs and Systems, Inc.
|
|
The Advisory Board Company
|
|
Medidata Solutions, Inc.
|
MedAssets, Inc.
|
|
Allscripts Healthcare Solutions, Inc.
|
|
PDI, Inc.
|
Quality Systems Inc.
|
|
athenahealth, Inc.
|
|
WebMD Health Corp.
|
WebMD Health Corp.
|
|
Cerner Corporation
|
|
|
|
|
Computer Programs and Systems, Inc.
|
|
|
|
|
Greenway Medical Technologies, Inc.
|
|
|
|
|
HMS Holdings Corp.
|
|
|
|
|
MedAssets, Inc.
|
|
|
|
|
Quality Systems Inc.
|
|
|
|
|
Vocera Communications, Inc.
|
|
|
|
|
WebMD Health Corp.
|
|
|
For
the selected public companies analysis, Piper Jaffray compared four valuation multiples for Epocrates to valuation multiples for selected public companies. The Epocrates valuation
multiples were derived using the following factors: (i) merger consideration; (ii) Adjusted EBITDA (calculated throughout as earnings before interest, taxes, depreciation and
amortization, stock-based compensation expense, income/loss from discontinued operations, acquisition earn-out charges and one-time expenses identified by Epocrates' management
as set forth in Epocrates' historical and projected financial statements) for the four consecutive quarters for which results were most recently publicly reported as of September 30, 2012 (the
"LTM" period); (iii) Epocrates' management projections for Adjusted EBITDA for 2012 and 2013; and (iv) Adjusted Earnings (calculated throughout as net income before gain/loss from
discontinued operations, amortization, stock-based compensation, one-time expenses identified by Epocrates' management and related tax adjustments as set forth in Epocrates' historical and
projected financial statements) per basic share ("Adjusted EPS") for 2013. Piper Jaffray then compared the Epocrates multiples to valuation multiples for the selected public companies derived from
their closing price per share on January 4, 2013; their LTM Adjusted EBITDA; consensus projections for Adjusted EBITDA for 2012 and 2013; and Adjusted EPS for 2013.
The
selected public companies analysis showed that, based on the estimates and assumptions used in the analysis, the implied valuation multiples of Epocrates based on the merger
consideration were within or exceeded the range of minimum and maximum valuation multiples of the selected public companies when comparing the ratio of (i) EV to LTM Adjusted EBITDA,
(ii) EV to projected Adjusted EBITDA for 2012, (iii) EV to projected Adjusted EBITDA for 2013, and (iv) price per share to projected Adjusted EPS for 2013.
29
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measurement
|
|
EV to LTM
Adjusted EBITDA(1)
|
|
EV to Projected 2012
Adjusted EBITDA(2)
|
|
EV to Projected 2013
Adjusted EBITDA(3)
|
|
Price/Projected 2013
Adjusted EPS(4)
|
|
Low-Growth HCIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
8.2x
|
|
|
5.9x
|
|
|
6.5x
|
|
|
12.1x
|
|
Mean
|
|
|
10.2x
|
|
|
8.8x
|
|
|
8.4x
|
|
|
14.2x
|
|
Median
|
|
|
9.9x
|
|
|
9.7x
|
|
|
9.2x
|
|
|
14.1x
|
|
Maximum
|
|
|
12.7x
|
|
|
11.1x
|
|
|
10.5x
|
|
|
16.5x
|
|
Broader HCIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
8.2x
|
|
|
5.9x
|
|
|
6.5x
|
|
|
12.1x
|
|
Mean
|
|
|
16.2x
|
|
|
14.9x
|
|
|
12.9x
|
|
|
31.9x
|
|
Median
|
|
|
13.2x
|
|
|
13.6x
|
|
|
10.5x
|
|
|
29.1x
|
|
Maximum
|
|
|
32.8x
|
|
|
31.3x
|
|
|
25.0x
|
|
|
63.1x
|
|
Pharmaceutical Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
6.0x
|
|
|
9.7x
|
|
|
10.5x
|
|
|
14.4x
|
|
Mean
|
|
|
14.9x
|
|
|
16.3x
|
|
|
14.6x
|
|
|
25.1x
|
|
Median
|
|
|
14.9x
|
|
|
16.3x
|
|
|
14.3x
|
|
|
25.1x
|
|
Maximum
|
|
|
23.8x
|
|
|
22.9x
|
|
|
19.0x
|
|
|
35.9x
|
|
Epocrates(5)
|
|
|
34.8x
|
|
|
18.6x
|
|
|
13.4x
|
|
|
39.2x
|
|
-
(1)
-
Data
for one company in the low-growth HCIT sector, three companies in the broader HCIT sector and two companies in the pharmaceutical services
sector was excluded from calculation of the minimum, mean, median and maximum because Adjusted EBITDA was not positive or the information was deemed not to accurately reflect the basis for the
market's valuation of the subject company based on Piper Jaffray's professional judgment and therefore was not meaningful.
-
(2)
-
Data
for two companies in the broader HCIT sector and one in the pharmaceutical services sector was excluded from calculation of the minimum, mean, median
and maximum because the information was deemed not to accurately reflect the basis for the market's valuation of the subject company based on Piper Jaffray's professional judgment and therefore was
not meaningful. Information for one company in the pharmaceutical services sector was not available for this metric.
-
(3)
-
Data
for one company in the broader HCIT sector was excluded from calculation of the minimum, mean, median and maximum because the information was deemed
not to accurately reflect the basis for the market's valuation of the subject company based on Piper Jaffray's professional judgment and therefore was not meaningful. Information for one company in
the pharmaceutical services sector was not available for this metric.
-
(4)
-
Data
for one company in the low-growth HCIT sector, one company in the broader HCIT sector and two companies in the pharmaceutical services
sector was excluded from calculation of the minimum, mean, median and maximum because projected 2012 Adjusted EPS was not positive or the information was deemed not to accurately reflect the basis for
the market's valuation of the subject company based on Piper Jaffray's professional judgment and therefore was not meaningful.
-
(5)
-
Based
on the merger consideration.
All
projected financial information in the table above for the comparable companies was based on equity research analyst consensus estimates.
30
Table of Contents
Selected M&A Transaction Analysis
Piper Jaffray reviewed merger and acquisition transactions involving target companies in the HCIT sector that it deemed comparable to
Epocrates. Piper Jaffray selected these transactions based on target companies' SIC codes and target companies Piper Jaffray deemed similar to aspects of Epocrates' business or financial profile based
on its professional judgment. Piper Jaffray selected these transactions based on the following criteria:
-
-
pending or completed transactions announced since January 2009;
-
-
transactions in which the acquiring company purchased a controlling interest of the target;
-
-
share repurchases and acquisitions of minority interests were excluded;
-
-
transaction value greater than $100 million; and
-
-
target company involved had equity research analyst consensus projected annual revenue growth equal to or less than 12.5%.
Based
on these criteria, Piper Jaffray identified and analyzed the following transactions:
|
|
|
Target
|
|
Acquiror
|
M*Modal
|
|
One Equity Partners
|
eResearch Technologies
|
|
Genstar Capital
|
Emdeon
|
|
Blackstone
|
Sage Software Healthcare
|
|
Vista Equity
|
M*Modal
|
|
MedQuist Holdings
|
Medical Present Value
|
|
Experian plc
|
Vital Images
|
|
Toshiba Medical Systems
|
Health Grades
|
|
Vestar
|
NetSmart
|
|
Genstar Capital
|
Eclipsys
|
|
Allscripts
|
inVentive Health
|
|
Thomas Lee Partners
|
Phase Forward
|
|
Oracle
|
Healthvision
|
|
Lawson
|
QuadraMed
|
|
Francisco Partners
|
Piper
Jaffray calculated the ratio of: (i) implied EV to LTM revenue, (ii) implied EV to equity research analyst consensus projected revenue for the next four quarters or
next calendar year (the "FWD" period) following each transaction, (iii) implied EV to LTM Adjusted EBITDA, and (iv) implied EV to FWD Adjusted EBITDA. Piper Jaffray then compared the
results of these calculations with similar calculations for Epocrates based on the merger consideration.
The
selected transactions analysis showed that, based on the estimates and assumptions used in the analysis, the implied valuation multiples of Epocrates based on the merger
consideration were within or above the range of minimum and maximum valuation multiples of the selected transactions when comparing these ratios.
31
Table of Contents
The
analysis indicated the following multiples:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected M&A Transactions
|
|
|
|
Epocrates(1)
|
|
Minimum
|
|
Mean
|
|
Median
|
|
Maximum
|
|
Implied EV to LTM Revenue
|
|
|
2.1x
|
|
|
0.8x
|
|
|
2.8x
|
|
|
2.5x
|
|
|
5.9x
|
|
Implied EV to Projected FWD Revenue(2)
|
|
|
2.0x
|
|
|
0.7x
|
|
|
2.7x
|
|
|
2.3x
|
|
|
5.3x
|
|
Implied EV to LTM Adjusted EBITDA(3)
|
|
|
18.6x
|
|
|
7.3x
|
|
|
11.5x
|
|
|
10.6x
|
|
|
18.4x
|
|
Implied EV to Projected FWD Adjusted EBITDA(4)
|
|
|
13.4x
|
|
|
6.5x
|
|
|
10.5x
|
|
|
9.6x
|
|
|
16.7x
|
|
-
(1)
-
Based
on the merger consideration.
-
(2)
-
Information
not available with respect to one transaction.
-
(3)
-
Information
not available with respect to one transaction and information for one other transaction was deemed not to accurately reflect the basis for the
acquiror's valuation of the target company based on Piper Jaffray's professional judgment and therefore was excluded from calculation of the minimum, mean, median and maximum because it was not
meaningful.
-
(4)
-
Information
not available with respect to two transactions and information for one other transaction was deemed not to accurately reflect the basis for the
acquiror's valuation of the target company based on Piper Jaffray's professional judgment and therefore was excluded from calculation of the minimum, mean, median and maximum because it was not
meaningful.
Premiums Paid Analysis
Piper Jaffray reviewed publicly available information for selected completed merger transactions to determine the premiums paid in the
transactions over recent trading prices of the target companies prior to announcement of the transaction. Piper Jaffray selected these transactions based on the following
criteria:
-
-
completed transactions announced since January 2009 involving U.S.-based targets;
-
-
acquiror purchased all outstanding equity of target;
-
-
target EV between $50 million and $1 billion;
-
-
target pre-offer per share price of at least $5.00;
-
-
no negative premiums for 1-day, 1-week, and 4-week premiums; and
-
-
target companies in the following industries: biotechnology,
e-commerce/business-to-business commerce, healthcare equipment and supplies, healthcare providers and services, hospitals, internet infrastructure, internet
software and services, information technology consulting and services, other healthcare, other high technology, pharmaceuticals, and software.
Piper
Jaffray performed its analysis on 77 transactions that satisfied these criteria, and the table below shows a comparison of premiums paid in these transactions to the premium that
would be paid to Epocrates' stockholders based on the merger consideration. The premiums paid analysis showed that, based on the estimates and assumptions used in the analysis, the premium that would
be paid to
32
Table of Contents
Epocrates'
stockholders is within the range of minimum and maximum premiums paid in selected completed merger transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Premiums Paid based on Stock Price
|
|
|
|
Epocrates
|
|
Minimum
|
|
Mean
|
|
Median
|
|
Maximum
|
|
Premium 1 day prior
|
|
|
22.1
|
%
|
|
0.2
|
%
|
|
35.4
|
%
|
|
32.6
|
%
|
|
119.9
|
%
|
Premium 1 week prior
|
|
|
35.7
|
%
|
|
2.1
|
%
|
|
36.6
|
%
|
|
31.2
|
%
|
|
132.8
|
%
|
Premium 4 weeks prior
|
|
|
24.6
|
%
|
|
1.0
|
%
|
|
33.6
|
%
|
|
29.7
|
%
|
|
133.1
|
%
|
Using a discounted cash flows analysis, Piper Jaffray calculated an estimated range of theoretical values for Epocrates using the
projections provided by Epocrates' management and summarized in the section below, based on the net present value of (i) free cash flows from December 31, 2012 to December 31,
2016, (ii) a terminal value at December 31, 2016 based upon a multiple of projected Adjusted EBITDA for 2016 consistent with transaction analysis multiples discounted back to
December 31, 2012 and (iii) Epocrates' federal and state net operating loss carryforwards ("NOLs") and California state research and development tax credits discounted back to
December 31, 2012 based on management's projections for the periods for which Epocrates could use the NOLs and tax credits for earnings taxed by the applicable jurisdiction. The free cash flows
for each year were calculated from Epocrates' projections as operating income, less taxes, plus depreciation and amortization, plus stock-based compensation, plus non-recurring items, less
capital expenditures, plus/less change in net working capital. Using such projections, Piper Jaffray calculated working capital as current assets less current liabilities, which is different than
Epocrates' calculation of working capital as discussed below under "Certain Financial Forecasts Utilized by Epocrates in Connection with the Merger." Using the projections provided by Epocrates'
management, Piper Jaffray calculated the range of net present values based on terminal value multiples ranging from 9.0x to 12.0x and using a discount rate ranging from 11.0% to 15.0%, which was
derived from an analysis of Epocrates' weighted average cost of capital, after adjusting upward to account for small company premiums as provided by Ibbotson and inherent business risk relative to
Epocrates, a tax rate of 37.0% through December 31, 2016 based on Epocrates' projections with respect to free cash flows, a federal tax rate of 34.0% for all periods for which Epocrates'
federal NOLs were projected to be used by management and a state tax rate of 8.84% (representing the California corporate tax rate) for all periods for which Epocrates' state NOLs and research and
development tax credits were projected to be used by management. This analysis resulted in implied per share values of Epocrates' common stock ranging from a low of $10.14 per share to a high of
$13.12 per share. Piper Jaffray observed that the merger consideration of $11.75 per share was within the range of values derived from this analysis.
The summary set forth above does not contain a complete description of the analyses performed by Piper Jaffray, but does summarize the
material analyses performed by Piper Jaffray in rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary
description. Piper Jaffray believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses or of the summary, without considering
the analyses as a whole or all of the factors included in its analyses, would create an incomplete view of the processes underlying the analyses set forth in the Piper Jaffray opinion. In arriving at
its opinion, Piper Jaffray considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Instead, Piper Jaffray made its determination as to
fairness on the basis of its experience and financial judgment after considering the results of all of its analyses. The fact that any specific analysis has been referred to in the summary above is
not meant to indicate that this analysis was given greater weight than any other analysis. In addition, the ranges of
33
Table of Contents
valuations
resulting from any particular analysis described above should not be taken to be Piper Jaffray's view of the actual value of Epocrates.
No
company or transaction used in the above analyses as a comparison is directly comparable to Epocrates or the merger and the other transactions contemplated by the merger agreement.
Accordingly, an analysis of the results of the comparisons is not mathematical; rather, it involves complex considerations and judgments about differences in the companies and transactions to which
Epocrates and the merger were compared and other factors that could affect the public trading value or transaction value of the companies involved.
Piper
Jaffray performed its analyses for purposes of providing its opinion to Epocrates' board of directors. In performing its analyses, Piper Jaffray made numerous assumptions with
respect to industry performance, general business and economic conditions and other matters. Certain of the analyses performed by Piper Jaffray are based upon forecasts of future results furnished to
Piper Jaffray by Epocrates' management, which are not necessarily indicative of actual future results and may be significantly more or less favorable than actual future results. These forecasts are
inherently subject to uncertainty because, among other things, they are based upon numerous factors or events beyond the control of the parties or their respective advisors. Piper Jaffray does not
assume responsibility if future results are materially different from forecasted results.
Piper
Jaffray relied upon and assumed, without assuming liability or responsibility for independent verification, the accuracy and completeness of all information that was publicly
available or was furnished, or otherwise made available, to Piper Jaffray or discussed with or reviewed by Piper Jaffray. Piper Jaffray further relied upon the assurances of Epocrates' management that
the financial information provided to Piper Jaffray was prepared on a reasonable basis in accordance with industry practice, and that Epocrates' management was not aware of any information or facts
that would make any information provided to Piper Jaffray incomplete or misleading. Without limiting the generality of the foregoing, for the purpose of Piper Jaffray's opinion, Piper Jaffray assumed
that with respect to financial forecasts, estimates and other forward-looking information reviewed by Piper Jaffray, that such information was reasonably prepared based on assumptions reflecting the
best currently available estimates and judgments of Epocrates' management as to the expected future results of operations and financial condition of Epocrates. Piper Jaffray expressed no opinion as to
any such financial forecasts, estimates or forward-looking information or the assumptions on which they were based. Piper Jaffray relied, with Epocrates' consent, on advice of the outside counsel and
the independent registered public accounting firm to Epocrates, and on the assumptions of Epocrates' management, as to all accounting, legal, tax and financial reporting matters with respect to
Epocrates and the merger agreement.
Piper
Jaffray's opinion was one of many factors taken into consideration by Epocrates' board of directors in making the determination to approve the merger agreement. While Piper Jaffray
provided advice to the Epocrates board of directors during Epocrates' negotiations with athenahealth, Piper Jaffray did not recommend any specific consideration.
In
arriving at its opinion, Piper Jaffray assumed that the executed merger agreement was in all material respects identical to the last draft reviewed by Piper Jaffray. Piper Jaffray
relied upon and assumed, without independent verification, that (i) the representations and warranties of all parties to the merger agreement and all other related documents and instruments
that are referred to therein were true and correct, (ii) each party to such agreements would fully and timely perform all of the covenants and agreements required to be performed by such party,
(iii) the merger would be consummated pursuant to the terms of the merger agreement without amendments thereto and (iv) all conditions to the consummation of the merger would be
satisfied without waiver by any party of any conditions or obligations thereunder. Additionally, Piper Jaffray assumed that all the necessary regulatory approvals and consents required for the merger
would be obtained in a manner that would not adversely affect Epocrates or the contemplated benefits of the merger.
34
Table of Contents
In
arriving at its opinion, Piper Jaffray did not perform any appraisals or valuations of any specific assets or liabilities (fixed, contingent or other) of Epocrates, and was not
furnished or provided with any such appraisals or valuations, nor did Piper Jaffray evaluate the solvency of Epocrates under any state or federal law relating to bankruptcy, insolvency or similar
matters. The analyses performed by Piper Jaffray in connection with its opinion were going concern analyses. Piper Jaffray expressed no opinion regarding the liquidation value of Epocrates or any
other entity. Without limiting the generality of the foregoing, Piper Jaffray undertook no independent analysis of any pending or threatened litigation, regulatory action, possible unasserted claims
or other contingent liabilities, to which Epocrates or any of its affiliates was a party or may be subject, and at the direction of Epocrates and with its consent, Piper Jaffray's opinion made no
assumption concerning, and therefore did not consider, the possible assertion of claims, outcomes or damages arising out of any such matters. Piper Jaffray also assumed that neither Epocrates nor
athenahealth is party to any material pending transaction, including without limitation any financing, recapitalization, acquisition or merger, divestiture or spin-off, other than the
merger.
Piper
Jaffray's opinion was necessarily based upon the information available to it and facts and circumstances as they existed and were subject to evaluation on the date of its opinion.
Events occurring after the date of its opinion could materially affect the assumptions used in preparing its opinion. Piper Jaffray did not express any opinion as to the price at which shares of
Epocrates' common stock may trade following announcement of the merger or at any future time. Piper Jaffray did not undertake to reaffirm or revise its opinion or otherwise comment upon any events
occurring after the date of its opinion and does not have any obligation to update, revise or reaffirm its opinion.
Piper
Jaffray's opinion addressed solely the fairness, from a financial point of view, to the holders of Epocrates common stock of the merger consideration, as set forth in the merger
agreement, and did not address any other terms or agreement relating to the merger or any other terms of the merger agreement. Piper Jaffray was not requested to opine as to, and its opinion does not
address, the basic business decision to proceed with or effect and the merger, the merits of the merger relative to any alternative transaction or business strategy that may be available to Epocrates,
athenahealth's ability to fund the merger consideration payable in the merger pursuant to the merger agreement or any other terms contemplated by the merger agreement. Furthermore, Piper Jaffray
expressed no opinion with respect to the amount or nature of the compensation to any officer, director or employee, or any class of such persons, relative to the compensation to be received by holders
of Epocrates' common stock in the merger or with respect to the fairness of any such compensation.
Piper
Jaffray is a nationally recognized investment banking firm and is regularly engaged as financial advisor in connection with mergers and acquisitions, underwritings, secondary
distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. Epocrates' board of directors selected Piper Jaffray to render its fairness
opinion in connection with the transactions contemplated by the merger agreement on the basis of its experience and reputation in acting as financial advisor in connection with mergers and
acquisitions.
Piper
Jaffray acted as Epocrates' financial advisor in connection with the merger and will receive an estimated fee of approximately $3.1 million from Epocrates, all of which,
except for the opinion fee discussed below, is contingent upon the consummation of the merger. The opinion fee paid to Piper Jaffray will be credited against the fee for financial advisory services
described in the preceding sentence. Piper Jaffray received a fee of $750,000 for providing its fairness opinion to the Epocrates board of directors. The opinion fee was not contingent upon the
consummation of the merger or the conclusions reached in Piper Jaffray's opinion. Epocrates has agreed to indemnify Piper Jaffray against certain liabilities and reimburse Piper Jaffray for certain
expenses in connection with its services. In the ordinary course of its business, Piper Jaffray and its affiliates may actively trade securities of Epocrates for its own account or the account of its
customers and, accordingly, may at any time hold a long or short position in such securities. Piper Jaffray may also, in the future, provide investment banking and
35
Table of Contents
financial
advisory services to Epocrates, athenahealth and/or entities that are affiliated with Epocrates or athenahealth, for which Piper Jaffray would expect to receive compensation. Piper Jaffray
also recently received a financial advisory fee in connection with the sale of a company that shares a common board member with athenahealth.
Consistent
with applicable legal and regulatory requirements, Piper Jaffray has adopted policies and procedures to establish and maintain the independence of Piper Jaffray's research
department and personnel. As a result, Piper Jaffray's research analysts may hold opinions, make statements or
investment recommendations and/or publish research reports with respect to the merger and other participants in the merger that differ from the opinions of Piper Jaffray's investment banking
personnel.
Certain Financial Forecasts Utilized by Epocrates in Connection with the Merger
Epocrates made available to its financial advisor certain non-public business and financial information about Epocrates as
a stand-alone company, including financial forecasts through the fiscal year ending December 31, 2016. The financial forecasts were prepared and delivered in December 2012 and were based on
numerous assumptions made at that time by Epocrates' management, including (i) Epocrates' expected revenue growth based on historical and estimated pharma and subscription renewal rates,
revenue recognition, historical and estimated bookings levels, expected market growth, competition and the expected impact of new products on revenue, (ii) expected operating expenses,
including headcount necessary to support ongoing product development and sales and marketing and (iii) an assumed tax rate of 37%. A summary of the financial forecasts is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012E
|
|
2013E
|
|
2014E
|
|
2015E
|
|
2016E
|
|
Revenue
|
|
$
|
109.7
|
|
$
|
115.0
|
|
$
|
134.9
|
|
$
|
144.6
|
|
$
|
152.9
|
|
Growth (%)
|
|
|
-3
|
%
|
|
5
|
%
|
|
17
|
%
|
|
7
|
%
|
|
6
|
%
|
Cost of Revenue
|
|
|
43.8
|
|
|
45.0
|
|
|
48.9
|
|
|
52.2
|
|
|
55.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
65.9
|
|
|
70.0
|
|
|
86.0
|
|
|
92.4
|
|
|
97.7
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research & Development
|
|
|
21.1
|
|
|
21.1
|
|
|
23.3
|
|
|
24.6
|
|
|
25.7
|
|
Sales & Marketing
|
|
|
27.2
|
|
|
27.0
|
|
|
29.3
|
|
|
31.1
|
|
|
32.8
|
|
General & Administrative
|
|
|
18.3
|
|
|
15.7
|
|
|
17.0
|
|
|
17.9
|
|
|
18.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
66.6
|
|
|
63.7
|
|
|
69.5
|
|
|
73.5
|
|
|
77.3
|
|
EBITA (excl. FAS123R Expese)
|
|
|
8.3
|
|
|
12.6
|
|
|
19.8
|
|
|
22.2
|
|
|
24.0
|
|
Less: FAS123R
|
|
|
(4.5
|
)
|
|
(3.5
|
)
|
|
(3.3
|
)
|
|
(3.4
|
)
|
|
(3.5
|
)
|
Less: Amortization of Intangibles
|
|
|
(4.0
|
)
|
|
(2.8
|
)
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (incl. FAS123R)
|
|
|
(0.1
|
)
|
|
6.4
|
|
|
16.5
|
|
|
18.8
|
|
|
20.5
|
|
Plus: Depreciation & Amortization
|
|
|
7.9
|
|
|
7.2
|
|
|
4.5
|
|
|
4.7
|
|
|
4.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJ. EBITDA (incl. FAS123R Expense)
|
|
|
7.8
|
|
|
13.5
|
|
|
20.9
|
|
|
23.6
|
|
|
25.3
|
|
ADJ. EBITDA (excl. FAS123R Expense)
|
|
|
12.3
|
|
|
17.0
|
|
|
24.3
|
|
|
27.0
|
|
|
28.8
|
|
Growth (%)
|
|
|
-39
|
%
|
|
38
|
%
|
|
42
|
%
|
|
11
|
%
|
|
7
|
%
|
Margin (%)
|
|
|
11
|
%
|
|
15
|
%
|
|
18
|
%
|
|
19
|
%
|
|
19
|
%
|
Net Interest & Other Income
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
Pre-Tax Income
|
|
|
(2.4
|
)
|
|
6.3
|
|
|
16.5
|
|
|
18.8
|
|
|
20.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income
|
|
|
(2.1
|
)
|
|
4.0
|
|
|
10.4
|
|
|
11.9
|
|
|
12.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP EPS ($)
|
|
$
|
(0.09
|
)
|
$
|
0.15
|
|
$
|
0.38
|
|
$
|
0.42
|
|
$
|
0.45
|
|
Free Cash Flow
|
|
$
|
(10.8
|
)
|
$
|
6.8
|
|
$
|
13.4
|
|
$
|
14.5
|
|
$
|
15.1
|
|
The
operating expenses included in EBITDA exclude stock-based compensation expense and amortization and impairment of intangibles and are non-GAAP financial measures. EBIDTA
referred
36
Table of Contents
to
above as "EBIDTA (incl. FAS123R Expense)" is a non-GAAP financial measure that Epocrates defines as operating income, excluding, if applicable, (i) depreciation expenses,
(ii) amortization and impairment of intangibles, (iii) goodwill impairment and (iv) one-time items. Adjusted EBITDA, referred to above as "EBIDTA (excl. FAS123R
Expense)" is a non-GAAP financial measure that Epocrates defines as EBITDA, excluding non-cash compensation expense. Free cash flow has been calculated as operating cash flow,
including changes in working capital, less capital expenditures. Epocrates' calculation of working capital includes long term liabilities. We understand that Piper Jaffray did not include long term
liabilities in the calculation of working capital used for its discounted cash flow analysis included in its opinion. EBITDA, Adjusted EBITDA and Free Cash Flow do not include the impact of any
synergies or costs related to the Merger.
Epocrates
does not, as a matter of course, make public any financial forecasts as to future performance or earnings, other than annual and quarterly forecasts relating to revenue,
non-GAAP EPS, Adjusted EBITDA and net loss. The financial forecasts set forth above are included in this proxy statement only because this information was provided to Piper Jaffray. The
Epocrates financial forecasts presented above were reviewed with the Epocrates' board of directors and were used by Epocrates' financial advisor in connection with its financial analysis of the merger
consideration.
The
financial forecasts were not prepared with a view to public disclosure or compliance with the published guidelines of the SEC or the guidelines established by the American Institute
of Certified Public Accountants regarding projections or forecasts. The financial forecasts do not purport to present operations in accordance with GAAP, and Epocrates' independent registered public
accounting firm has not examined, compiled or otherwise applied procedures to the financial forecasts and accordingly assumes no responsibility for them. Epocrates' internal financial forecasts, upon
which the financial forecasts were based in part, are, in general, prepared solely for internal use, such as budgeting, strategic planning and other management decisions, and are subjective in many
respects. As a result, these internal financial forecasts are susceptible to interpretations and periodic revision based on actual experience and business developments. The financial forecasts reflect
numerous assumptions made by the management of Epocrates at the time they were prepared, and general business, economic, market and financial conditions and other matters, all of which are difficult
to predict and many of which are beyond Epocrates' control. Accordingly, there can be no assurance that the assumptions made in preparing the financial forecasts will prove accurate or that any of the
financial forecasts will be realized.
There
will likely be differences between actual and projected results, and actual results may be materially greater or less than those contained in the financial forecasts due to
numerous risks and uncertainties, including but not limited to the important factors listed under "Risk Factors" in Epocrates' Quarterly Report on Form 10-Q for the quarter ended
September 30, 2012. All financial forecasts are forward-looking statements, and these and other forward-looking statements are expressly qualified in their entirety by the risks and
uncertainties identified in Epocrates' Quarterly Report on Form 10-Q for the quarter ended September 30, 2012.
The
inclusion of the financial forecasts herein should not be regarded as an indication that Epocrates, athenahealth or any of their respective affiliates or representatives considered
or consider the financial forecasts to be necessarily indicative of actual future events, and the financial forecasts should not be relied upon as such. Neither Epocrates nor athenahealth intends to
update or otherwise revise the financial forecasts to reflect circumstances existing or arising after the date such financial forecasts were generated or to reflect the occurrence of future events,
even in the event that any or all of the assumptions underlying the financial forecasts are shown to be in error.
You
are cautioned not to place undue reliance on the financial forecasts.
37
Table of Contents
Vote Required and Recommendation of the Board of Directors
At a special meeting of our board of directors held on January 6, 2013, our board of directors unanimously approved the merger
agreement, the merger and the other transactions contemplated thereby, determined that it was advisable and in the best interests of Epocrates and its stockholders that Epocrates enter into the merger
agreement and consummate the merger on the terms and subject to the conditions set forth in the merger agreement, directed that the merger agreement be submitted to a vote for adoption at the Special
Meeting, and unanimously recommended that our stockholders adopt the merger agreement and thereby approve the merger.
Adoption
of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Epocrates common stock at the close of business on the record
date. Abstentions and broker non-votes, if any, will have the same effect as "against" votes with respect to the proposal to adopt the merger agreement.
Our board of directors recommends that the Epocrates stockholders vote "FOR" the adoption of the merger agreement, and thereby the approve the
merger.
Epocrates Voting Agreements
In connection with the execution of the merger agreement, each member of our board of directors, consisting of Peter C. Brandt,
Philippe O. Chambon, M.D., Ph.D., Gary G. Greenfield, Thomas L. Harrison, Andrew Hurd, Patrick S. Jones, Erick N. Tseng and Mark A. Wan, as well as certain executive officers consisting of Heather A.
Gervais, Senior Vice President, Commercial Operations, Matthew A. Kaminer, General Counsel and Secretary, Adam Budish, Senior Vice President, Sales, and significant stockholders of Epocrates
consisting of DLJ ESC II, L.P., DLJ Capital Corporation, Sprout Capital IX, L.P., Sprout Entrepreneurs' Fund, L.P. and Three Arch Partners II, L.P. executed a voting
agreement with, and delivered an irrevocable proxy to, athenahealth relating to the shares of Epocrates common stock owned by them (which also covers any shares of Epocrates common stock that may be
issued upon the exercise of any options and restricted stock units held by such individuals). As of January 7, 2013, the individuals and entities who entered into the voting agreements
collectively hold an aggregate of 4,383,961 shares of our common stock (representing approximately 17.5% of our outstanding common stock), options to purchase 1,519,628 shares of our common stock, and
restricted stock units to acquire 214,755 shares of our common stock, collectively representing beneficial ownership by this group of 19.5% of our outstanding common stock calculated pursuant to SEC
rules.
Under
the voting agreements, these individuals agreed to vote their shares of Epocrates common stock (including any newly acquired
shares):
-
-
in favor of adoption and approval of the merger agreement and all other transactions contemplated by the merger agreement
as to which stockholders of Epocrates are called upon to vote or consent; and
-
-
against any Competing Transaction (as defined below), or any agreement, transaction, or other matter that is intended to,
or would reasonably be expected to, impede, interfere with, materially delay, postpone, or materially and adversely affect the consummation of the merger or any of the other transactions contemplated
by the merger agreement.
Each
of these stockholders also agreed not to:
-
-
sell, assign, transfer, tender, or otherwise dispose of any of the securities or options or restricted stock units of
Epocrates owned by such stockholder except, subject to certain conditions, for transfers to the stockholder's immediate family or to a trust for the benefit of the stockholder or any member of the
stockholder's immediate family
38
Table of Contents
-
-
deposit any of the securities or options or restricted stock units of Epocrates owned by such stockholder into a voting
trust or enter into a voting agreement or similar arrangement with respect to such securities or grant any proxy or power of attorney with respect thereto (except as provided herein);
-
-
enter into any contract, option, commitment, or other arrangement or understanding with respect to the direct or indirect
sale, transfer, assignment, or other disposition of any of the securities or options or restricted stock units of Epocrates owned by such stockholder other than as contemplated by the merger agreement
or as described above; or
-
-
take any action that would make any representation or warranty of such stockholder contained in the voting agreement
untrue or incorrect or have the effect of preventing, impairing, or disabling such stockholder from performing such stockholder's obligations under the merger agreement.
The
voting agreements terminate upon the earlier of:
-
-
the consummation of the merger;
-
-
the termination of the merger agreement;
-
-
effectiveness of a mutual written agreement of the parties to the voting agreement to terminate the voting agreement; and
-
-
such date and time as any amendment, waiver by Epocrates or change to the merger agreement is effected without such
stockholder's consent that (i) reduces the merger consideration, (ii) changes the form of the merger consideration or (iii) materially and adversely affects the stockholder.
Upon
termination of the voting agreement, no party shall have any further obligations; provided, however, that such termination shall not relieve any party from liability for any willful
breach of the voting agreement prior to termination hereof.
Interests of Our Directors and Executive Officers in the Merger
In considering the recommendation of our board of directors in favor of the merger, you should be aware that there are provisions of
the merger agreement and other arrangements that will result in some of our directors and executive officers having interests in the merger that are different from, or in addition to, the interests of
stockholders generally. Our board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the merger. Stockholders should take these
benefits into account in deciding whether to vote for adoption of the merger agreement and thereby approve the merger. They are set forth below.
39
Table of Contents
Change of Control Benefits Agreements
Each of our current executive officers is entitled to change of control benefits pursuant to their employment offer letter and option
or restricted stock unit grant notice, the terms of which are as follows:
|
|
|
|
|
Executive Officer
|
|
Change of Control Without
Termination of Employment
|
|
Termination Without Cause or Resignation for
Good Reason in Connection With or Within
12 Months Following a Change of Control
|
Andrew Hurd President, Chief Executive Officer and Interim Chief Financial Officer
|
|
Vesting of 50% of unvested equity awards
|
|
18 months base
salary
Up to 12 months COBRA
premiums
Vesting of 100% of unvested equity
awards
One-year post-termination
exercisability of underwater equity awards
|
Matthew Kaminer, General Counsel and Secretary
|
|
None
|
|
9 months base
salary
Up to 9 months COBRA
premiums
Vesting of 100% of
unvested equity awards
|
Heather Gervais, Senior Vice President, Commercial Operations
|
|
None
|
|
9 months base salary
Up to 9 months COBRA
premiums
Vesting of 100% of unvested equity
awards
|
Adam Budish, Senior Vice President, Sales
|
|
None
|
|
9 months base
salary
Up to 9 months COBRA
premiums
Vesting of 100% of unvested equity
awards
|
David Ward, Executive Vice President, Business Development
|
|
None
|
|
9 months base salary
Up to 9 months COBRA
premiums
Vesting of 100% of unvested equity
awards
|
Amy Ferretti, Senior Vice President, Marketing
|
|
None
|
|
9 months base
salary
Up to 9 months COBRA
premiums
Vesting of 100% of
unvested equity awards
|
For
purposes of the benefits described above:
"Change
of control" for the purposes of Andrew Hurd's benefits means: the consummation of any of the following transactions effecting a change in ownership or control of Epocrates:
(i) a merger, consolidation or reorganization, unless securities representing more than fifty percent (50%) of the total combined voting power of the voting securities of the successor
corporation are immediately thereafter beneficially owned, directly or indirectly, and in substantially the same proportion, by the
40
Table of Contents
persons
who beneficially owned Epocrates' outstanding voting securities immediately prior to such transaction; (ii) any transfer, sale or other disposition of all or substantially all of
Epocrates' assets; or (iii) the acquisition, directly or indirectly, by any person or related group of persons (other than Epocrates or a person that directly or indirectly, controls, is
controlled by, or is under common control with, Epocrates), of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, of
securities possessing more than fifty percent (50%) of the total combined voting power of the Epocrates' outstanding securities pursuant to a tender or exchange offer made directly to the Epocrates'
stockholders.
"Change
of Control" for the purposes of each other executive officer means the consummation by Epocrates of a change of control transaction, whereby fifty percent (50%) or more of the
voting stock of Epocrates changes ownership pursuant to such transaction.
"Cause"
means any of the following conduct by the executive: (i) embezzlement, misappropriation of corporate funds, or other material acts of dishonesty; (ii) the
conviction, plea of guilty, or nolo contendere to any felony (not involving the operation of a motor vehicle), or of any misdemeanor involving moral turpitude; (iii) engagement in any activity
that executive knows or should know could materially harm the business or reputation of Epocrates, provided that this subsection (iii) shall not apply to any activity done in a good faith
belief by executive that the action taken or omission was in the best interest of Epocrates; (iv) material violation of any statutory, contractual, or common law duty or obligation owed by
executive to Epocrates, including, without limitation, the duty of loyalty which causes demonstrable injury to Epocrates; (v) material breach of the confidentiality agreement executed by
executive; or (vi) repeated failure, in the reasonable judgment of Epocrates, to substantially perform executive's assigned duties or responsibilities after written notice from Epocrates
describing the failure(s) in reasonable detail and executive's failure to cure such failure(s) within thirty (30) days of receiving such written notice, provided that written notice only must
be provided if the failure(s) are capable of cure.
"Good
Reason" shall mean one or more of the following conditions that arose without executive's written consent: (i) a relocation of executive's assigned office which results in
an increase in executive's one-way commuting distance by more than thirty-five (35) miles; (ii) a material decrease in executive's base salary (except for salary
decreases generally applicable to Epocrates' other executive executives); or (iii) a material reduction in the scope of executive's duties or responsibilities from executive's duties and
responsibilities in effect immediately prior to the closing date. Notwithstanding the foregoing, executive shall not be deemed to have terminated executive's employment for "Good Reason" unless
(i) such termination occurs within ninety (90) days following the initial existence of one or more of the conditions that constitute Good Reason, (ii) executive provides written
notice to Epocrates (or any successor entity) of the existence of the Good Reason condition within thirty (30) days following the initial existence of the condition, and (iii) Epocrates
(or its successor entity) fails to cure such condition within a period of thirty (30) days following such written notice.
To
be eligible for the benefits upon termination described above, the executive must execute a general release of claims against Epocrates. Subject to certain exceptions for compliance
with tax regulations, cash severance benefits shall be paid ratably in equal installments over the applicable period pursuant to Epocrates' regularly scheduled payroll periods commencing on the first
regular payroll paydate following the effective date of a participant's "separation from service" and shall be subject to all applicable withholding for federal, state and local taxes.
Amounts
payable pursuant to the change of control benefits agreements discussed above would be reduced under certain circumstances in the event that the provisions of Section 280G
and Section 4999 of the Internal Revenue Code would impose an excise tax but for such reduction. Epocrates believes that payments to Mr. Kaminer and Ms. Gervais as a result of the
merger pursuant to their change of control benefits agreements could result in the imposition of an excise tax on their change of control
41
Table of Contents
benefits
and, therefore, Epocrates believes that a reduction of the severance payments, if paid, will be made. Epocrates believes that the payments to Mr. Hurd as a result of the merger
pursuant his change of control benefits agreement could result in the imposition of an excise tax; however, because the amounts payable to Mr. Hurd as a result of the merger after giving effect
to the imposition of the excise tax would exceed the amounts payable to Mr. Hurd had such payment been reduced to an amount that would not result in the imposition of an excise tax, Epocrates
believes the full amounts will be payable to Mr. Hurd.
Additional Retention Bonuses
On January 6, 2013, the Epocrates compensation committee approved the payment of retention bonuses to Mr. Kaminer of
$200,000, to Ms. Gervais of $200,000 and to Mr. Budish of $30,000 (the "Retention Bonuses"). The Retention Bonuses shall be paid upon the earlier of (i) December 31, 2013,
or (ii) the date the employee's employment with Epocrates is either (A) terminated by Epocrates or a successor entity without "cause", or (B) terminated by the employee for "good
reason"; provided, that, no payment shall be made if the employee's employment is terminated prior to December 31, 2013, (x) by Epocrates or a successor entity for "cause" or
(y) by the employee for other than "good reason".
For
purposes of these Retention Bonuses:
"cause"
is defined as any of the following conduct by the employee: (i) embezzlement, misappropriation of corporate funds, or other material acts of dishonesty; (ii) the
conviction, plea of guilty, or nolo contendere to any felony (not involving the operation of a motor vehicle), or of any misdemeanor involving moral turpitude; (iii) engagement in any activity
that employee knows or should know could materially harm the business or reputation of Epocrates, provided that this subsection (iii) shall not apply to any activity done in a good faith belief
by employee that the action taken or omission was in the best interest of Epocrates; (iv) material violation of any statutory, contractual, or common law duty or obligation owed by employee to
Epocrates, including, without limitation, the duty of loyalty which causes demonstrable injury to Epocrates; (v) material breach of the confidentiality agreement executed by employee; or
(vi) repeated failure, in the reasonable judgment of Epocrates, to substantially perform employee's assigned duties or responsibilities after written notice from Epocrates describing the
failure(s) in reasonable detail and employee's failure to cure such failure(s) within thirty (30) days of receiving such written notice, provided that written notice only must be provided if
the failure(s) are capable of cure; and
"good
reason" is defined as one or more of the following conditions that arose without employee's written consent: (i) a relocation of employee's assigned office which results in
an increase in employee's one-way commuting distance by more than thirty-five (35) miles; (ii) a material decrease in employee's base salary (except for salary
decreases generally applicable to Epocrates' other executive employees); or (iii) a material reduction in the scope of employee's duties or responsibilities from employee's duties and
responsibilities in effect immediately prior to the closing date. Notwithstanding the foregoing, employee shall not be deemed to have terminated employee's employment for "good reason" unless
(i) such termination occurs within ninety (90) days following the initial existence of one or more of the conditions that constitute Good Reason, (ii) employee provides written
notice to Epocrates (or any successor entity) of the existence of the Good Reason condition within thirty (30) days following the initial existence of the condition, and (iii) Epocrates
(or its successor entity) fails to cure such condition within a period of thirty (30) days following such written notice.
Accelerated Vesting of Stock Options and Restricted Stock Units
All outstanding stock options and restricted stock units will be assumed by athenahealth and will become converted into stock options
and restricted stock units for shares of athenahealth's stock as described in this proxy statement in the sections titled "Effect on Epocrates Stock Options" and
42
Table of Contents
"Effect
on Epocrates Restricted Stock Units." Upon the closing of the merger, 50% of the shares subject to Mr. Hurd's outstanding stock options and restricted stock units will accelerate in
full. In addition, immediately prior to the closing of the merger, 100% of the equity awards held by Epocrates'
non-employee directors will accelerate. All outstanding equity awards held by each of Mr. Hurd, Mr. Kaminer, Ms. Gervais, Ms. Ferretti, Mr. Budish, and
Mr. Ward will accelerate in the event he or she is terminated without cause or resigns for good reason within 12 months following the closing of the merger, as these terms are described
above. Other than Mr. Brandt, our former Interim Chief Executive Officer, who continues to serve on our board of directors, no person that served as an executive officer of Epocrates during
2012 that no longer serves as an executive officer continues to hold stock options or restricted stock units.
Executive OfficersNo Termination of Employment Occurs in Connection With, or Within 12 Months Following, the Merger
The table below sets forth, as of January 4, 2013, the number of shares subject to stock options and restricted stock units held
by Mr. Hurd, including those for which accelerated vesting will occur, assuming for purposes of these calculations that the merger occurs on March 7, 2013, and Mr. Hurd's
employment with Epocrates is not terminated in connection with, or within 12 months following, the merger. The value of the options is calculated by multiplying the number of shares subject to
the options by the difference between the per share merger consideration, $11.75, and the weighted average exercise price of the options. The value of the RSUs is calculated by multiplying the number
of shares subject to the RSUs by the per share merger consideration, $11.75. No accelerated vesting will occur for any of our other executive officers in connection with the merger if their employment
with Epocrates is not terminated in connection with, or within 12 months following, the merger.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Shares of
Common
Stock
Subject to
Options
that Vest
as a
Result of
the Merger
|
|
Total
Shares of
Common
Stock
Subject
to All
Options
|
|
Shares of
Common
Stock
Subject
to RSUs
that Vest
as a
Result of
the
Merger(1)
|
|
Shares of
Common
Stock
Subject
to All
RSUs(1)
|
|
Cash
Value Of
Options
that Vest
as a
Result of
the Merger
|
|
Cash
Value Of
All
Options
|
|
Cash
Value Of
RSUs
that Vest
as a
Result of
the
Merger(1)
|
|
Cash
Value Of
All
RSUs(1)
|
|
Andrew Hurd
|
|
|
400,000
|
|
|
800,000
|
|
|
63,216
|
|
|
126,432
|
|
$
|
1,316,000
|
|
$
|
2,632,000
|
|
$
|
742,787
|
|
$
|
1,485,574
|
|
-
(1)
-
All
RSUs are unvested.
Executive OfficersTermination of Employment Occurs in Connection With, or Within 12 Months Following, the Merger
The table below sets forth, as of January 4, 2013, the number of shares subject to stock options and restricted stock units held
by our executive officers, including those for which accelerated vesting will occur, assuming for purposes of these calculations that the merger occurs
on March 7, 2013, and the executive officer's employment with Epocrates is terminated in connection with, or within 12 months following, the merger. The value of the options is
calculated by multiplying the number of shares subject to the options by the difference between the per share merger consideration, $11.75, and
43
Table of Contents
the
weighted average exercise price of the options. The value of the RSUs is calculated by multiplying the number of shares subject to the RSUs by the per share merger consideration, $11.75.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Shares of
Common
Stock
Subject to
Options
that Vest
as a
Result of
the Merger
|
|
Total
Shares of
Common
Stock
Subject
to All
Options
|
|
Shares of
Common
Stock
Subject to
RSUs
that Vest
as a
Result of
the
Merger(1)
|
|
Shares of
Common
Stock
Subject
to All
RSUs(1)
|
|
Cash
Value Of
Options
that Vest
as a
Result of
the Merger
|
|
Cash
Value Of
All
Options
|
|
Cash
Value Of
RSUs
that Vest
as a
Result of
the Merger(1)
|
|
Cash
Value Of
All
RSUs(1)
|
|
Andrew Hurd
|
|
|
800,000
|
|
|
800,000
|
|
|
126,432
|
|
|
126,432
|
|
$
|
2,632,000
|
|
$
|
2,632,000
|
|
$
|
1,485,574
|
|
$
|
1,485,574
|
|
Matthew Kaminer
|
|
|
100,000
|
|
|
100,000
|
|
|
31,150
|
|
|
31,150
|
|
$
|
88,000
|
|
$
|
88,000
|
|
$
|
366,011
|
|
$
|
366,011
|
|
Heather Gervais
|
|
|
27,790
|
|
|
27,790
|
|
|
24,197
|
|
|
24,197
|
|
$
|
28,160
|
|
$
|
28,160
|
|
$
|
284,319
|
|
$
|
284,319
|
|
Adam Budish
|
|
|
15,000
|
|
|
15,000
|
|
|
12,839
|
|
|
12,839
|
|
$
|
45,150
|
|
$
|
45,150
|
|
$
|
150,858
|
|
$
|
150,858
|
|
David Ward
|
|
|
150,000
|
|
|
150,000
|
|
|
28,180
|
|
|
28,180
|
|
$
|
570,000
|
|
$
|
570,000
|
|
$
|
331,114
|
|
$
|
331,114
|
|
Amy Ferretti
|
|
|
50,000
|
|
|
50,000
|
|
|
9,464
|
|
|
9,464
|
|
$
|
173,500
|
|
$
|
173,500
|
|
$
|
111,202
|
|
$
|
111,202
|
|
-
(1)
-
All
RSUs are unvested.
Non-Employee Directors
The table below sets forth, as of January 4, 2013, the number of shares subject to stock options held by our
non-employee directors, including those for which accelerated vesting will occur, assuming for purposes of these calculations that the merger occurs on March 7, 2013. The value of
the options is calculated by multiplying the number of shares subject to the options by the difference between the merger consideration, $11.75, and the weighted average exercise price of the options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Shares of
Common Stock
Subject to
Options that
Vest as a
Result of
the Merger
|
|
Total Shares of
Common Stock
Subject to All
Options
|
|
Cash Value of
Options that Vest
as a Result of
the Merger
|
|
Total Cash Value
of All Options
|
|
Philippe O. Chambon
|
|
|
7,860
|
|
|
55,020
|
|
$
|
28,375
|
|
$
|
67,400
|
|
Gary Greenfield
|
|
|
7,860
|
|
|
31,440
|
|
$
|
28,375
|
|
$
|
42,562
|
|
Thomas L. Harrison
|
|
|
7,860
|
|
|
187,329
|
|
$
|
28,375
|
|
$
|
1,058,125
|
|
Patrick S. Jones
|
|
|
7,860
|
|
|
132,309
|
|
$
|
28,375
|
|
$
|
496,213
|
|
Erick Tseng
|
|
|
7,860
|
|
|
31,440
|
|
$
|
28,375
|
|
$
|
61,033
|
|
Mark A. Wan
|
|
|
7,860
|
|
|
55,020
|
|
$
|
28,375
|
|
$
|
67,400
|
|
Peter Brandt
|
|
|
7,860
|
|
|
193,230
|
|
$
|
28,375
|
|
$
|
494,062
|
|
New Management Arrangements
As of the date of this proxy statement, neither Epocrates nor athenahealth have entered into employment agreements with our executive
officers in connection with the merger. Prior to the effective time of the merger, athenahealth or its affiliates may initiate negotiations of agreements with
44
Table of Contents
our
executive officers regarding compensation and benefits, and may enter into agreements regarding continued employment, in each case on a prospective basis following the completion of the merger.
Stockholder Proposals
Epocrates intends to hold an Annual Meeting of Stockholders in 2013 (the "2013 Annual Meeting") only if the merger is not completed in
2013. Stockholders who want to make a proposal to be considered for inclusion in the 2013 Annual Meeting proxy materials, must submit their proposal in writing by June 4, 2013, to: Secretary,
Epocrates, Inc., 1100 Park Place, Suite 300, San Mateo, California 94403; however, if Epocrates' 2013 Annual Meeting of Stockholders is not held on or between September 2, 2013
and November 1, 2013, then the deadline will be a reasonable time prior to the time we begin to print and mail our proxy materials. If you wish to submit a proposal that is not to be included
in the proxy materials for the 2013 Annual Meeting or nominate a director, you must do so no earlier than June 4, 2013, and no later than July 4, 2013; provided, however, that in the
event that the date of the 2013 Annual Meeting of Stockholders is held more than 30 days prior to or more than 30 days after October 2, 2013, your notice must be delivered not
earlier than the close of business on the 120
th
day prior to the 2013 Annual Meeting of Stockholders and not later than the close of business on the later of the
90
th
day prior to the 2013 Annual Meeting of Stockholders or the 10
th
day following the day on which public announcement of the date of the 2013 Annual
Meeting of Stockholders is first made. Stockholders are also advised to review our Bylaws, which contain additional requirements with respect to advance notice of stockholder proposals and director
nominations.
Where You Can Find More Information
Epocrates files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information that we file with the SEC at the SEC public reference room at the following location: Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. These SEC filings are also available to the public from commercial
document retrieval services and at the website maintained by the SEC at www.sec.gov.
athenahealth
has supplied all information contained in this proxy statement relating to athenahealth and Merger Sub and Epocrates has supplied all information relating to Epocrates.
74
Table of Contents
If
you have any questions about this proxy statement, the Special Meeting or the acquisition by athenahealth after reading this proxy statement, or if you would like additional copies of
this proxy statement, please contact us at:
Epocrates, Inc.
Investor Relations
1100 Park Place, Suite 300
San Mateo, California 94403
Telephone:
(
650) 227-1700
Email: ir@epocrates.com
This
proxy statement contains references to the availability of certain information from our website, www.epocrates.com. By making such references, we do not incorporate into this
document the information included on our website.
You should rely only on the information contained in this proxy statement. We have not authorized anyone to provide you with information that is different from
what is contained in this proxy statement. This proxy statement is dated [ ], 2013. You should not assume
that the information contained in this proxy statement
is accurate as of any date other than that date. Neither the mailing of this proxy statement to stockholders nor the issuance of cash in the merger creates any implication to the
contrary.
Directions to the Special Meeting Location
The Special Meeting will be held at the Epocrates, Inc. executive offices located at 1100 Park Place, Suite 300, San
Mateo, California 94403 at [ ] [ ].m. Pacific Time on
[ ],[ ], 2013. Directions to this location are as follows:
From San Francisco, CA
:
Take
Highway 101 south approximately 19 miles
Take Exit 414A for Hillsdale Blvd
Keep right at the fork, and follow signs for Hillsdale Boulevard/San Mateo
Stay right onto Franklin Pkwy W.
Turn right onto Saratoga Dr.
Take the first right onto Park Place
Our office is on the right.
Directions
may also be found on our website at: http://epocrates.com/contact
75
Table of Contents
ANNEX A
AGREEMENT
AND PLAN OF MERGER
among
ATHENAHEALTH, INC.,
ECHO
MERGER SUB, INC.
and
EPOCRATES, INC.
Dated
as of January 7, 2013
Table of Contents
TABLE OF CONTENTS
A-i
Table of Contents
A-ii
Table of Contents
A-iii
Table of Contents
AGREEMENT AND PLAN OF MERGER, dated as of January 7, 2013 (this "
Agreement
"), among
ATHENAHEALTH,
INC.
, a Delaware corporation ("
Parent
"),
ECHO MERGER
SUB, INC.
, a Delaware corporation and a wholly owned subsidiary of Parent ("
Merger Sub
"), and
EPOCRATES, INC.
, a Delaware
corporation (the "
Company
").
WHEREAS,
upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the
"
DGCL
"), Parent and the Company will enter into a business combination transaction pursuant to which Merger Sub will merge with and into the Company
(the "
Merger
");
WHEREAS,
the Board of Directors of the Company (the "
Company Board
") has (i) determined that the Merger is fair to, and in the best
interests of, the Company and its stockholders and has approved and adopted this Agreement and declared its advisability and approved the Merger and the other transactions contemplated by this
Agreement and (ii) has recommended the approval and adoption of this Agreement by the stockholders of the Company upon the terms and subject to the conditions set forth in this Agreement and in
accordance with the relevant provisions of the DGCL;
WHEREAS,
the Board of Directors of Parent (the "
Parent Board
") has determined that the Merger is consistent with and in furtherance of the
long-term business strategy of Parent and fair
to, and in the best interests of, Parent and its stockholders and has approved and adopted this Agreement, the Merger and the other transactions contemplated by this Agreement; and
WHEREAS,
as an inducement and condition to Parent entering into this Agreement, Parent and certain stockholders of the Company have entered into Voting Agreements, dated as of the date
hereof (the "
Voting Agreements
"), providing that, among other things, such stockholders will vote their shares of Company Common Stock in favor of the
adoption of this Agreement and approval of the Merger and the other transactions contemplated by this Agreement;
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Sub and the Company
hereby agree as follows:
ARTICLE I
THE MERGER
Upon the terms and subject to the conditions set forth in Article VII, and in accordance with the DGCL, at the Effective Time
(as defined in Section 1.02), Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation of the Merger (the "
Surviving Corporation
").
The closing of the Merger (the "
Closing
") shall take place at 5:30 a.m., Pacific
time, on a date to be specified by the parties hereto, which shall be no later than the third business day after the satisfaction or (to the extent permitted by Law) waiver of all of the conditions
set forth in Article VII (other than those conditions that by their nature are to be satisfied at the Closing, it being understood that the occurrence of the Closing shall remain subject to the
satisfaction
or waiver of such conditions at the Closing), at the offices of Cooley LLP, 3175 Hanover Street, Palo Alto, California, unless another time, date or place is agreed to in writing by the parties
hereto. The date on which the Closing is to take place is referred to in this Agreement as the "
Closing Date
." At the Closing, the parties hereto shall
cause the Merger to be consummated by filing a certificate of merger (the "
Certificate of Merger
") with the Secretary of State of the State of Delaware,
in such form as is required by, and executed in
A-1
Table of Contents
accordance
with, the relevant provisions of the DGCL (the date and time of such filing of the Certificate of Merger (or such later time as may be agreed by each of the parties hereto and specified in
the Certificate of Merger) being the "
Effective Time
").
At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
a. At
the Effective Time, subject and giving effect to Section 6.06(a), the Certificate of Incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by law and such Certificate of Incorporation.
b. Unless
otherwise determined by Parent prior to the Effective Time, and subject and giving effect to Section 6.06(a), at the Effective Time, the By-laws
of Merger Sub, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation and such By-laws.
The directors and officers of Merger Sub immediately prior to the Effective Time shall be the initial directors and officers of the
Surviving Corporation, respectively, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation until their respective successors are
duly elected or appointed and qualified or until the earlier of their death, resignation or removal.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
At the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, the Company or the holders of any of
the following securities:
a. each
share of Company Common Stock (all issued and outstanding shares of Company Common Stock being hereinafter collectively referred to as the
"
Shares
") issued and outstanding immediately prior to the Effective Time (other than any Shares to be cancelled pursuant to Section 2.01(b) and
any Dissenting Shares (as hereinafter defined)) shall be cancelled and shall be converted automatically, subject to Section 2.02, into the right to receive $11.75 in cash, without interest (the
"
Merger Consideration
"), payable upon surrender of the documents described in Section 2.02, in the manner provided in Section 2.02;
b. each
Share held in the treasury of the Company and each Share owned by Merger Sub, Parent or any direct or indirect wholly owned subsidiary of Parent or of the Company
immediately prior to the Effective Time shall be cancelled without any conversion thereof and no payment or distribution shall be made with respect thereto; and
A-2
Table of Contents
c. each
share of common stock, par value $0.001 per share, 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, par value $0.001 per share, of the Surviving Corporation.
SECTION 2.02
Exchange of Certificates.
a.
Rights of Converted Shares.
Each Share converted into the right to receive the Merger Consideration as
provided in Section 2.01(a) shall automatically be cancelled and shall cease to exist, and the holders immediately prior to the Effective Time of outstanding shares of Company Common Stock not
represented by certificates ("
Book-Entry Shares
") and the holders of certificates that, immediately prior to the Effective Time, represented
outstanding Shares ("
Certificates
") shall cease to have any rights with respect to such Shares other than the right to receive, upon the surrender of
such Certificates or transfer of such Book-Entry Shares in accordance with this Section 2.02, the Merger Consideration, without any interest thereon, for each such Share.
b.
Paying Agent.
Prior to the Effective Time, Parent shall appoint Computershare LLC or such other bank
or trust company that may be designated by Parent and is reasonably satisfactory to the Company to act as paying agent (the "
Paying Agent
") for the
payment of the Merger Consideration. At the Effective Time, Parent shall deposit, or cause the Surviving Corporation to deposit, with the Paying Agent, for the benefit of the holders of Shares, cash
in an amount sufficient to pay the aggregate Merger Consideration required to be paid pursuant to Section 2.01(a) (such cash being hereinafter referred to as the
"
Exchange Fund
"). Except as contemplated by Section 2.02(e) hereof, the Exchange Fund shall not be used for any other purpose.
c.
Exchange Procedures.
As promptly as practicable after the Effective Time, Parent shall cause the Paying Agent
to mail to each person who was, at the Effective Time, a holder of record of Certificates
entitled to receive the Merger Consideration pursuant to Section 2.01(a): (i) a letter of transmittal (which shall be in customary form and shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates (or affidavits of loss in lieu thereof pursuant to Section 2.02(h) hereof) to the Paying
Agent) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. The form and substance of the letter of transmittal and
instructions thereto shall be in such form and have such other provisions as the Parent and Company may mutually agree. Upon surrender to the Paying Agent of a Certificate (or affidavit of loss in
lieu thereof pursuant to Section 2.02(h) hereof) for cancellation, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and
such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor the amount of cash which such holder has the
right to receive in respect of the Shares formerly represented by such Certificate pursuant to Section 2.01(a), and the Certificate so surrendered shall forthwith be cancelled. In the event of
a transfer of ownership of Shares that is not registered in the transfer records of the Company, payment of the Merger Consideration may be made to a person other than the person in whose name the
Certificate so surrendered is registered if the Certificate representing such Shares is presented to the Paying Agent, accompanied by all documents required to evidence and effect such transfer and by
evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 2.02, each Certificate shall be deemed at all times after the Effective Time
to represent only the right to receive upon surrender the Merger Consideration to which the holder of such Certificate is entitled pursuant to Section 2.01(a). Upon receipt of an "agent's
message" by the Paying Agent (or such other evidence, if any, of transfer as the Paying Agent may reasonably request) in the case of Book-Entry Shares, the holder of such
Book-Entry Shares shall, without being required to deliver a Certificate or a completed and executed Letter of Transmittal to the Paying Agent, be entitled to receive in exchange therefor
the amount of cash which such holder has the right
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to
receive in respect of the Book-Entry Shares pursuant to Section 2.01(a), and such Book-Entry Shares shall forthwith be cancelled. No interest shall be paid or will
accrue on any cash payable to holders of Certificates or Book-Entry Shares pursuant to the provisions of this Article II. The Paying Agent shall invest any cash included in the
Exchange Fund as directed by Parent;
provided, however
, that such investments shall be in obligations of or guaranteed by the United States. Any net
profit resulting from, or interest or income produced by, such investments, shall be placed in the Exchange Fund and be payable to Parent or the Surviving Corporation, as Parent shall determine.
d.
No Further Rights in Company Common Stock.
All cash paid upon the surrender of a Certificate or
Book-Entry Shares in accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares formerly represented
by such Certificate or Book-Entry Shares.
e.
Termination of Exchange Fund.
Any portion of the Exchange Fund that remains undistributed to the holders of
the Shares for six months after the Effective Time shall be delivered to Parent, upon
demand, and any holders of Shares who have not theretofore complied with this Article II shall thereafter look only to Parent for the cash to which they are entitled pursuant to
Section 2.01(a). Any portion of the Exchange Fund remaining unclaimed by holders of Shares as of a date which is immediately prior to such time as such amounts would otherwise escheat to or
become property of any Governmental Authority shall, to the extent permitted by applicable law, become the property of Parent free and clear of any claims or interest of any person previously entitled
thereto.
f.
No Liability.
None of the Paying Agent, Parent or the Surviving Corporation shall be liable to any person in
respect of Merger Consideration or other cash delivered to a public official pursuant to any abandoned property, escheat or similar Law.
g.
Withholding Rights.
Each of the Paying Agent, Surviving Corporation and Parent shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares such amounts as it determines is required to be deducted and withheld with respect to the
making of such payment under the United States Internal Revenue Code of 1986, as amended (the "
Code
"), or any provision of state, local or foreign tax
Law. To the extent that amounts are so withheld by the Paying Agent, Surviving Corporation or Parent, as the case may be, and paid over to the appropriate Governmental Authority, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by the Paying Agent, Surviving
Corporation or Parent, as the case may be.
h.
Lost Certificates.
If any Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such person of a bond, in such reasonable
amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will pay in respect of such lost, stolen
or destroyed Certificate the Merger Consideration to which the holder thereof is entitled pursuant to Section 2.01(a).
At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers
of Shares thereafter on the records of the Company. From and after the Effective Time, the holders of Certificates representing Shares or Book-Entry Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares or Book-Entry Shares, except as otherwise provided in this Agreement or by Law. On or after the Effective
Time, any Certificates presented to the Paying Agent or Parent for any reason shall be cancelled and exchanged as provided in Section 2.02.
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a. All
options (the "
Company Stock Options
") outstanding, whether or not exercisable and whether or not vested, at the
Effective Time under the 1999 Stock Option Plan, the 2008 Equity Incentive Plan, and the 2010 Equity Incentive Plan, in each case as such may have been amended, supplemented or modified (collectively,
the "
Company Stock Option Plans
"), shall remain outstanding following the Effective Time. At the Effective Time, the Company Stock Options shall, by
virtue of the Merger and without any further action on the part of the Company or the holder thereof, be assumed by Parent subject to, and in accordance with, the terms of the applicable Company Stock
Option Plan and any option agreement or other document evidencing such Company Stock Option (each, an "
Assumed Option
"). From and after the Effective
Time, all references to the Company in the Company Stock Option Plans and the applicable stock option agreements issued thereunder shall be deemed to refer to Parent, which shall have assumed the
Company Stock Option Plans as of the Effective Time by virtue of this Agreement and without any further action. Each Assumed Option shall be exercisable upon the same terms and conditions as under the
applicable Company Stock Plan and the applicable option agreement issued thereunder, except that (i) each such Assumed Option shall be exercisable for, and represent the right to acquire, that
whole number of shares of Parent Common Stock (rounded down to the nearest whole share) equal to the number of shares of Company Common Stock subject to the Assumed Option immediately prior to the
Effective Time multiplied by the Conversion Ratio, and (ii) the option price per share of Parent Common Stock issuable upon exercise of each Assumed Option shall be determined by dividing the
per share exercise price of Company Common Stock subject to such Assumed Option, as in effect immediately prior to the Effective Time, by the Conversion Ratio, and rounding the resulting exercise
price to the nearest whole cent. It is the intention of the parties hereto that the assumption by Parent of each Assumed Option pursuant hereto satisfies the requirements of Treasury Regulation
Section 1.424-1 (to the extent such options were incentive stock options) and of Treasury Regulation Section 1.409A-1(b)(5)(v)(D) and the provisions of this
Section 2.04(a) shall be interpreted and applied consistent with such intention. Such Assumed Options shall otherwise be subject to the same terms and conditions as such Company Stock Options.
b. All
restricted stock unit awards outstanding and unvested at the Effective Time under the Company Stock Option Plans (the "
Company
RSUs
") shall remain outstanding after the Effective Time. At the Effective Time, the Company RSUs shall, by virtue of the Merger and without any further action on the part of
the Company or the holder thereof, be assumed, subject to, and in accordance with, the terms of the applicable Company Stock Option Plan and any restricted stock unit agreement or other document
evidencing such Company RSU (each, an "
Assumed RSU
"). Each Assumed RSU will continue to have, and be subject to, the same terms and conditions related
to the applicable Assumed RSU (including as set forth in the restricted stock unit agreement evidencing such Assumed RSU) immediately prior to the Effective Time (including any vesting provisions),
except that each Assumed RSU shall be converted into the right to receive that number of whole shares of Parent Common Stock (or an amount in cash in respect thereof for a cash settled Assumed RSU)
equal to the product of: (i) the number of shares of Company Common Stock subject to the Assumed RSU immediately prior to the Effective Time; multiplied by (ii) the Conversion Ratio,
rounded to the nearest whole number of shares of Parent Common Stock. It is the intention of the parties hereto that the assumption by Parent of each Assumed RSU pursuant hereto satisfies the
requirements of Treasury Regulation Section 1.409A-1(b)(5)(v)(D) and the provisions of this Section 2.04(b) shall be interpreted and applied consistent with such intention.
All outstanding rights that the Company may hold immediately prior to the Effective Time with respect to the forfeiture of shares of Company Common Stock subject to any Assumed RSU described in this
Section 2.04(b) shall be assigned to Parent and shall thereafter be held by Parent upon the same terms and conditions in effect immediately prior to the Effective Time, except that the shares
forfeitable pursuant to such rights shall be appropriately adjusted to reflect the Merger Consideration.
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c. As
soon as reasonably practicable (but in no event later than20 business days) after the Effective Time, Parent shall deliver, or cause to be delivered, to each holder of
an Assumed Option or an Assumed RSU an appropriate notice setting forth such holder's rights pursuant thereto and such Assumed Option or Assumed RSU shall continue in effect on the same terms and
conditions (including any anti-dilution provisions, and subject to the adjustments required by this Section 2.04 after giving effect to the Merger). Parent shall comply with the
terms of all such Assumed Options and Assumed RSUs and ensure, to the extent required by, and subject to the provisions of, the Company Stock Option Plans, that Assumed Options that qualified as
incentive stock options under Section 422 of the Code prior to the Effective Time continue to qualify as incentive stock options after the Effective Time. Parent shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of common stock of the Parent for delivery upon exercise of Assumed Options or settlement of Assumed RSUs pursuant to the terms set
forth in this Section 2.04. As soon as practicable (but in no event more than 20 business days) after the Effective Time, the shares of common stock of the Parent subject to Assumed Options and
Assumed RSUs shall be covered by an effective registration statement on Form S-8 (or any successor form) or another appropriate form, and Parent shall maintain the effectiveness of
such registration statement or registration statements for so long as Assumed Options and Assumed RSUs remain outstanding. In addition, Parent shall cause the shares of common stock of Parent subject
to Assumed Options and Assumed RSUs to be listed on the NASDAQ Select Global Market.
a. Notwithstanding
any provision of this Agreement to the contrary and to the extent available under the DGCL, Shares that are outstanding immediately prior to the Effective
Time and that are held by stockholders who shall have neither voted in favor of the Merger nor consented thereto in writing and who shall have demanded properly in writing appraisal for such Shares in
accordance with Section 262 of the DGCL (collectively, the "
Dissenting Shares
") shall not be converted into, or represent the right to receive,
the Merger Consideration. Such Dissenting Shares shall cease to exist and be converted into and represent solely the right to receive payment of the appraised value of such Shares held by them in
accordance with the provisions of such Section 262, except that all Dissenting Shares held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their
rights to appraisal of such Shares under such Section 262 shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to
receive the Merger Consideration, without any interest thereon, upon surrender, in the manner provided in Section 2.02, of the certificate or certificates that formerly evidenced such Shares.
b. The
Company shall give Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served
pursuant to the DGCL and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company shall not,
except with the prior written consent of Parent, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Parent and Merger Sub to enter into this Agreement, the Company hereby represents and warrants to Parent and Merger
Sub as of the date hereof and as of the Closing Date that, except: (1) as set forth in the Company Disclosure Schedule, which has been prepared by the Company and delivered by the Company to
Parent and Merger Sub prior to the execution and delivery of this Agreement, (the "
Company Disclosure Schedule
") (with specific reference to the
particular section or subsection of this Agreement to which the information in the Company Disclosure Schedule relates, it being agreed that disclosure of any item in any Section of the Company
Disclosure Schedule shall be deemed disclosure with respect to any other Section of this Agreement to the extent such other Section is cross-referenced or the relevance of such item to such other
Section is readily apparent on its face); or (2) other than with respect to Section 3.03 and Section 3.08, except as disclosed in the Company SEC Reports filed during the period
from February 1, 2011 through the date of this Agreement (and then (i) only to the extent readily apparent in the Company SEC Reports that such disclosed item is applicable to a
representation or warranty set forth in this Article III and (ii) other than in "risk factors" or any language in such filings that is cautionary, predictive or
forward-looking):
a. The
Company is a corporation duly organized, validly existing and in good standing under Delaware law and has the requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as it is now being conducted. The Company is duly qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not, individually or in the aggregate, have a Company Material Adverse Effect. Section 3.01(a) of the Company Disclosure
Schedule lists all names under which the Company or any of its Subsidiaries has done business.
b. Section 3.01(b)
of the Company Disclosure Schedule sets forth the name and jurisdiction of organization of each Subsidiary of the Company. Each of the Company's
Subsidiaries is duly organized, validly existing and, if applicable, in good standing under the laws of the jurisdiction of its organization. Each of the Company's Subsidiaries has all requisite power
and authority to own, lease or operate all of its properties and assets and to carry on its business as it is now being conducted. Each of the Company's Subsidiaries is duly licensed or qualified to
do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased, or operated by it makes such licensing or
qualification necessary, except for such failures to be so qualified or licensed and in good standing that would not, individually or in the aggregate, have a Company Material Adverse Effect. Except
as provided in Section 3.01(b) of the Company Disclosure Schedule, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity.
c. Section 3.01(c)
of the Company Disclosure Schedule sets forth a true, complete and correct list of each officer and director of the Company and each of the
Company's Subsidiaries.
The Company has heretofore furnished to Parent a true, complete and correct copy of the Certificate of Incorporation and the
By-laws, each as amended to date, of the Company (collectively, the "
Governing Documents
"). Such Governing Documents are in full force and
effect. The Company is not in violation of any of the provisions of its respective Governing Documents. The articles or
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certificate
of incorporation and bylaws or equivalent organizational documents of each of the Subsidiaries of the Company, copies of which have previously been made available to Parent and Purchaser,
are true, correct, and complete copies of such documents as currently in effect.
a. The
authorized capital stock of the Company consists of (i) 100,000,000 shares of Company Common Stock, par value $0.001 per share and (ii) 10,000,000
shares of preferred stock, par value $0.001 per share ("
Company Preferred Stock
"). As of the date of this Agreement, (i) 24,902,387 shares of
Company Common Stock are issued and outstanding, all of which are validly issued, fully paid and nonassessable, (ii) zero shares of Company Common Stock are held in the treasury of the Company,
(iii) zero shares of Company Common Stock are held by the Subsidiaries, and (iv) 12,335,123 shares of Company Common Stock are reserved for future issuance pursuant to outstanding
Company Stock Options, Company restricted stock unit awards and other purchase rights (the "
Company Stock Awards
") granted pursuant to the Company Stock
Option Plans. As of the date of this Agreement, no shares of Company Preferred Stock are issued and outstanding. The Company has no shares of Company Common Stock reserved for issuance other than as
described above. Except as set forth in this Section 3.03, or the Voting Agreements, there are no options, warrants or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Company or any Subsidiary or obligating the Company or any Subsidiary to issue or sell any shares of capital stock of, or other equity interests
in, the Company or any Subsidiary.
b. Section 3.03(b)
of the Company Disclosure Schedule sets forth the following information with respect to each Company Stock Award outstanding as of the date of this
Agreement: (i) the name of the Company Stock Award recipient; (ii) the particular Company Stock Option Plan pursuant to which such Company Stock Award was granted; (iii) the
number of shares of Company Common Stock subject to such Company Stock Award; (iv) the exercise or purchase price, if any, of such Company Stock Award; (v) the date on which such Company
Stock Award was granted; (vi) the applicable vesting schedule; (vii) the date on which such Company Stock Award expires; and (viii) whether the exercisability of or right to
settlement of such Company Stock Award will be accelerated in any way by the transactions contemplated by this Agreement, and indicates the extent of acceleration. The Company has made available to
Parent true, accurate and complete copies of all Company Stock Option Plans pursuant to which Company has granted the Company Stock Awards that are currently outstanding and the form of all stock
award agreements evidencing such Company Stock Awards. All shares of Company Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof
except as required by Law. As of the date of this Agreement there are no outstanding contractual obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any shares of
Company Common Stock or any capital stock of any Subsidiary or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary or any other
person. All outstanding shares of Company Common Stock, all outstanding Company Stock Awards, and all outstanding shares of capital stock of each subsidiary of the Company have been issued and granted
in compliance with (i) all applicable securities laws and other applicable Laws (as defined below) and (ii) all requirements set forth in applicable contracts. The Company Stock Option
Plans are the only such plans under which any stock options, restricted stock unit awards and other similar purchase rights and equity instruments are outstanding.
c. Each
outstanding share of capital stock of, or other equity interests in, each Subsidiary is duly authorized, validly issued, fully paid and nonassessable, and each such
share is owned by the Company or another Subsidiary free and clear of all security interests, liens, claims, pledges, options, rights of
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first
refusal, agreements, limitations on the Company's or any Subsidiary's voting rights, charges and other encumbrances of any nature whatsoever.
d. As
of the date of this Agreement, no bonds, debentures, notes or other Indebtedness of the Company having the right to vote (or convertible into or exercisable for
securities having the right to vote) on any matters on which stockholders of the Company may vote are issued or outstanding. There are no voting trusts or other agreements (other than the Voting
Agreements) to which the Company or any of its Subsidiaries is a party with respect to the voting of any shares of any capital stock of, or other equity interest of, the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries has granted any preemptive rights, anti-dilutive rights or rights of first refusal, registration rights or similar rights with
respect to its shares of capital stock that are in effect.
e. With
respect to the Company Stock Options, (i) each Company Stock Option that is intended to qualify as an "incentive stock option" under Section 422 of the
Code so qualifies, (ii) each grant of a Company Stock Option was duly authorized no later than the date on which the grant of such Company Stock Option was by its terms to be effective (the
"
Grant Date
") by all necessary corporate action, including, as applicable, approval by the Company Board (or a duly constituted and authorized committee
thereof) and any required stockholder approval by the necessary number of votes or written consents, and the award agreement governing such grant (if any) was duly executed and delivered by each party
thereto, (iii) each such grant was made in accordance with the terms of the applicable Company Stock Option Plan and all other applicable Laws and regulatory rules or requirements,
(iv) the per share exercise price of each Company Stock Option was no less than the fair market value (within the meaning of Section 422 of the Code, in the case of each Company Stock
Option intended to qualify as an "incentive stock option," and within the meaning of Section 409A of the Code, in the case of each other Company Stock Option granted to holders of Company Stock
Options who are subject to U.S. Taxes) of a share of Company Common Stock on the applicable Grant Date and (v) each such grant was properly accounted for in accordance with GAAP in the
financial statements (including the related notes) of the Company.
The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder
and to consummate the Merger and any of the transactions contemplated by this Agreement (collectively, the "
Transactions
") subject to approval and
adoption by the Company's stockholders of this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the Transactions have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Transactions (other than,
with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the then-outstanding shares of Company Common Stock and the filing and recordation
of appropriate merger documents as required by the DGCL). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by
Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms (subject, as to enforcement of remedies, to
(a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar Laws of general applicability relating to or affecting the rights and remedies of creditors
generally and (b) general principles of equity). The Company Board has approved this Agreement and the Transactions and such approvals are sufficient so that the restrictions on business
combinations set forth in Section 203(a) of the DGCL shall not apply to the Merger or any of the Transactions. No other state takeover statute is applicable to the Merger or the other
transactions contemplated by this Agreement.
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The Company is not a party to any stockholder rights plan or "poison pill" agreement.
a. The
execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company, including the consummation of the Merger and
the other Transactions, will not, (i) conflict with or violate the Governing Documents of the Company or any Subsidiary, (ii) conflict with or violate any United States federal or state,
local or foreign statute, law, writ, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order ("
Law
") applicable
to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected, (iii) (A) require the Company or any Subsidiary to give notice
to, or obtain any consent from, any person under, (B) result in any breach of or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or
(C) give to others any right of termination, amendment or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Company or any Subsidiary
pursuant to, any note, bond, mortgage, indenture, lease, license, permit or franchise or other similar instrument or (iv) result (or, with the giving of notice, the passage of time or
otherwise, would result) in the creation or imposition of any Lien or other encumbrance on any property or asset of the Company or any of its Subsidiaries, except, with respect to clauses "(ii)",
"(iii)" and "(iv)", for any such filings, notices, permits, authorizations, consents, approvals, conflicts, violations, breaches, defaults or other occurrences which would not, individually or in the
aggregate, have a Company Material Adverse Effect.
b. The
execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any United States federal or state or local or foreign government, regulatory or administrative authority, agency, instrumentality or
commission or any court, tribunal, or judicial or arbitral body (a "
Governmental Authority
"), except for (i) the pre merger notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "
HSR Act
"), (ii) compliance with the
applicable requirements of the Securities Exchange Act of 1934, as amended (the "
Exchange Act
"), (iii) compliance with the applicable
requirements of the Securities Act of 1933, as amended (the "
Securities Act
"), (iv) compliance with any applicable state securities, takeover or
"blue sky" laws ("
Blue Sky Laws
"), (v) filings with the SEC as may be required by the Company in connection with this Agreement and the
transactions contemplated hereby, (vi) such filings or notifications as may be required under the rules and regulations of the Nasdaq Stock Market, LLC
("
NASDAQ
"), (vii) the filing and recordation of the Certificate of Merger as required by the DGCL and (viii) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, have a Company Material Adverse Effect.
a. Each
of the Company and the Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Authority necessary for each of the Company or the Subsidiaries to own, lease and operate its properties and assets or to carry on its business
as it is now being conducted (the "
Company Permits
"), except where the failure to have, or the suspension or cancellation of, any of the Company Permits
would not, individually or in the aggregate, have a Company Material Adverse Effect. No suspension or cancellation of any of the Company Permits is pending or, to the knowledge of the Company,
threatened, except where the failure to have, or the suspension or cancellation of, any of the Company Permits would not, individually or in the aggregate, have a Company Material Adverse Effect.
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b. Neither
the Company nor any Subsidiary is in conflict with, or in default, breach or violation of, (i) any Law applicable to the Company or any Subsidiary or by
which any property or asset of the Company or any Subsidiary is bound or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, Company Permit, franchise or
other instrument or obligation to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any property or asset of the Company or any Subsidiary is bound, except
for any such conflicts, defaults, breaches or violations that would not, individually or in the aggregate, have a Company Material Adverse Effect. Except as set forth in Section 3.07(b) of the
Company Disclosure Schedule, the execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company, including the consummation of the Merger and
the other Transactions, will not (A) require the Company or any Subsidiary to give notice to, or obtain any consent from, any person under, (B) result in any breach of or constitute a
default (or an event which, with notice or lapse of time or both, would become a default) under, or (C) give to others any right of termination, amendment or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the Company or any Subsidiary pursuant to, any contract, agreement or other obligation, except for such notices, authorizations,
consents or approvals which would not, individually or in the aggregate, have a Company Material Adverse Effect.
a. The
Company has timely filed or furnished, as applicable, all forms, reports and documents required to be filed or furnished by it with the Securities and Exchange
Commission (the "
SEC
") since February 1, 2011, and has heretofore delivered to Parent, in the form filed or furnished with the SEC,
(i) its Annual Reports on Form 10-K for the fiscal year ended December 31, 2011, (ii) its Quarterly Reports on Form 10-Q for the periods
ended March 31, 2012, June 30, 2012, and September 30, 2012, (iii) all proxy statements and additional materials relating to the Company's meetings of stockholders (whether
annual or special) held since February 1, 2011, and (iv) all other forms, reports and registration statements filed or furnished by the Company since July 1, 2010 with the SEC
(the forms, reports, registration statements and other documents referred to in clauses "(i)", "(ii)", "(iii)" and "(iv)" above being, collectively, the "
Company SEC
Reports
"). The Company SEC Reports (i) were or will be prepared in all material respects in accordance with either the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations promulgated thereunder, and (ii) did or will not, at the time they were or are to be filed or furnished, or, if amended, as of the date of
such amendment, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. No Subsidiary is required to file any form, report or other document with the SEC.
b. Each
of the consolidated financial statements (including, in each case, any notes thereto) contained or to be contained in the Company SEC Reports was (or, for future
filings, will be) prepared in accordance with United States generally accepted accounting principles ("
GAAP
") applied on a consistent basis throughout
the periods indicated (except as may be indicated in the notes thereto) and each fairly presents (or, for future filings, will present), in all material respects, the consolidated financial position,
results of operations and cash flows of the Company and its consolidated Subsidiaries as at the respective dates thereof and for the respective periods indicated therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments which would not have had, and would not have, individually or in the aggregate, a materially adverse effect on the
financial statements).
c. The
Company has heretofore furnished to Parent true, complete and correct copies of all amendments and modifications that have not been filed by the Company with the SEC
to the
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agreements,
documents and other instruments that previously had been filed by the Company with the SEC and are currently in effect.
d. The
Company has made available to Parent all comment letters received by the Company from the SEC or the staff thereof and all written responses to such comment letters
filed by or on behalf of the Company.
e. Each
director and executive officer of the Company, and, to the Company's knowledge, each holder of more than 10% of the Company's capital stock, has filed with the SEC
on a timely basis all statements required by Section 16(a) of the Exchange Act and the rules and regulations thereunder since February 1, 2011.
f. The
Company has timely filed and made available to Parent all certifications and statements required by (i) Rule 13a-14 or
Rule 15d-14 under the Exchange Act or (ii) 18 U.S.C. § 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) with respect to any Company SEC Report.
The Company maintains disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange Act; such controls and procedures are designed
to provide reasonable assurances that all material information concerning the Company and its Subsidiaries is made known on a timely basis to the individuals responsible for the preparation of the
Company's SEC filings and other public disclosure documents. No executive officer of the Company has failed to make any of the certifications required of him or her under Section 302 or 906 of
the Sarbanes-Oxley Act with respect to any Company SEC Report. Neither the Company nor any of its executive officers has received notice from a Governmental Authority challenging or questioning the
accuracy, completeness, form or manner of filing of such certifications. The Company is in compliance in all material respects with all provisions of the Sarbanes-Oxley Act to which it is subject and
neither the Company nor any member of the Company Board has received or otherwise had or obtained knowledge of any substantive complaint, allegation, assertion or claim, whether written or oral, of
the violation or possible violation of any applicable Laws of the type described in Section 806 of the Sarbanes-Oxley Act by the Company or any of its Subsidiaries.
g. The
Company maintains a standard system of accounting established and administered in accordance with GAAP. The Company and its Subsidiaries maintain a system of internal
accounting controls designed to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company and its Subsidiaries have designed a system of internal control over financial reporting to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP and have disclosed, based on its most recent evaluation, to the Company's outside auditors and the
audit committee of the Company Board, (A) any significant deficiencies or material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely
to adversely affect in any material respect the Company's ability to record, process, summarize and report financial information, and (B) any fraud, whether or not material, that involves sales
or management.
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h. Since
February 1, 2011, none of the Company, any Subsidiary, or any director, officer or employee, nor, to the Company's knowledge, any auditor, accountant or
representative of the Company or any Subsidiary, has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim regarding the accounting or auditing practices,
procedures, methodologies or methods of the Company or any Subsidiary or their respective internal accounting controls, including any complaint, allegation, assertion or claim that the Company or any
Subsidiary has engaged in questionable accounting or auditing practices. No current or former attorney representing the Company or any Subsidiary, whether or not employed by the Company or any
Subsidiary, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the
Company Board or any committee thereof or to any director or officer of the Company.
i. Since
February 1, 2011, to the knowledge of the Company, no employee of the Company or of any Subsidiary has provided or is providing information to any law
enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any applicable Law. Neither the Company nor any Subsidiary nor any officer,
employee, contractor, subcontractor or agent of the Company or any such Subsidiary has discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against an employee of
the Company or any Subsidiary in the terms and conditions of employment because of any act of such employee described in 18 U.S.C. § 1514A(a).
j. All
accounts receivable of the Company and its Subsidiaries reflected on the 2012 Balance Sheet or arising thereafter have arisen from bona fide transactions in the
ordinary course of business consistent with past practices and in accordance with SEC regulations and GAAP applied on a consistent basis and are not subject to valid defenses, setoffs or
counterclaims. The Company's reserve for contractual allowances and doubtful accounts is adequate and has been calculated in a manner consistent with past practices. Since the date of the 2012 Balance
Sheet, neither the Company nor any of its Subsidiaries has modified or changed in any material respect its sales practices or methods including, without limitation, such practices or methods in
accordance with which the Company or any of its Subsidiaries sell goods, fill orders or record sales.
Between September 30, 2012 and the date of this Agreement, except as expressly contemplated by this Agreement, (a) the
Company and the Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice; (b) there has not been any Company Material Adverse
Effect and (c) none of the Company or any Subsidiary has taken any action that, if taken after the date of this Agreement, would constitute a breach of any of the covenants set forth in
Section 5.01, except for Sections 5.01(b)(ii), (vi), (vii), (viii) and (xiv).
Neither the Company nor any of its Subsidiaries has any liabilities or obligations (whether or not accrued, contingent or otherwise) of
the type required to be reflected or described in the Company's balance sheet (including the notes thereto) prepared in accordance with GAAP, other than liabilities (a) reflected on, or
reserved for, in the financial statements in the Company SEC Reports filed with the SEC prior to the date of this Agreement, (b) set forth in Section 3.10 of the Company Disclosure
Schedule, (c) that, individually or in the aggregate, are not material to the Company, or (d) incurred since September 30, 2012 in the ordinary course of business, consistent with
past practice.
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Except as set forth on Section 3.11 of the Company Disclosure Schedule, (a) there is no litigation, suit, claim,
complaint, action, proceeding, investigation, arbitration, alternative dispute resolution action or any other judicial administrative or arbital proceeding (an
"
Action
") pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary, or any property or asset of the Company or any
Subsidiary and (b) neither the Company nor any of its Subsidiaries, or any property or asset of the Company or any Subsidiary, is subject to any outstanding or continuing order of, consent or
other decree, writ, judgment, injunction, settlement agreement, determination of award or other similar agreement with, or continuing investigation by, any Governmental Authority of competent
jurisdiction, which, in the case of (a) or (b), individually or in the aggregate, (i) has had a Company Material Adverse Effect or (ii) would materially delay or prevent the
consummation of any of the Transactions or would otherwise prevent or materially delay performance by the Company of any of its material obligations under this Agreement.
a. Section 3.12(a)
of the Company Disclosure Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("
ERISA
")) and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all employment, termination, severance or other contracts or agreements, whether
legally enforceable or not, to which the Company or any Subsidiary is a party, with respect to which the Company or any Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Company or any Subsidiary for the benefit of any current or former employee, officer or director of the Company or any Subsidiary, (ii) each employee benefit plan for which the
Company or any Subsidiary could incur liability under Section 4069 of ERISA in the event such plan has been or were to be terminated, (iii) any plan in respect of which the Company or
any Subsidiary could incur liability under Section 4212(c) of ERISA, and (iv) any contracts, arrangements or understandings between the Company or any Subsidiary and any employee of the
Company or any Subsidiary including, without limitation, any contracts, arrangements or understandings relating in any way to a sale of the Company or any Subsidiary (collectively, the
"
Plans
"). Each Plan is in writing and the Company has furnished to Parent a true and complete copy of each Plan and has delivered to Parent a true and
complete copy of each material document, if any, prepared in connection with each such Plan, including, without limitation, (i) a copy of each trust or other funding arrangement,
(ii) each summary plan description and summary of material modifications, (iii) the most recently filed Internal Revenue Service ("
IRS
")
Form 5500, (iv) the most recently received IRS determination letter for each such Plan, and (v) the most recently prepared actuarial report and financial statement in connection
with each such Plan. Neither the Company nor any Subsidiary has any express or implied commitment, whether legally enforceable or not, (i) to create, incur liability with respect to or cause to
exist any other employee benefit plan, program or arrangement, (ii) to enter into any contract or agreement to provide compensation or benefits to any individual, or (iii) to modify,
change or terminate any Plan, other than with respect to a modification, change or termination required by ERISA, the Code or other applicable Law.
b. None
of the Plans is a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a "
Multiemployer
Plan
") or a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which the Company or any Subsidiary could incur liability under
Section 4063 or 4064 of ERISA (a "
Multiple Employer Plan
"). None of the Plans (i) provides for the payment of separation, severance,
termination or similar-type benefits to any person, (ii) obligates the Company or any Subsidiary to pay separation, severance, termination or similar-type benefits
solely or partially as a result of any transaction contemplated by this Agreement, (iii) obligates the Company or
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any
Subsidiary to make any payment or provide any benefit as a result of a "change in the ownership or effective control," within the meaning of such term under Section 280G of the Code or
(iv) provides for any tax "gross-up" or similar "make-whole" payments to any employee, director or consultant of the Company or any Subsidiary. None of the Plans
provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of the Company or any Subsidiary, except as required by
applicable law. No Plan provides health or disability benefits that are not fully insured through an insurance contract. Each of the Plans is subject only to the Laws of the United States or a
political subdivision thereof.
c. Each
Plan is now and always has been operated in all material respects in accordance with its terms and the requirements of all applicable Laws including, without
limitation, ERISA and the Code. The Company and the Subsidiaries have performed in all material respects all obligations required to be performed by them under, are not in any respect in default under
or in violation of, and have no knowledge of any default or violation by any party to, any Plan. No Action is pending or, to the knowledge of the Company, threatened with respect to any Plan (other
than claims for benefits in the ordinary course) and, to the knowledge of the Company, no fact or event exists that could reasonably be expected to give rise to any such Action.
d. Each
Plan that is intended to be qualified under Section 401(a) of the Code or Section 401(k) of the Code has timely received a favorable determination
letter from the IRS covering all of the provisions applicable to the Plan for which determination letters are currently available that the Plan is so qualified and each trust established in connection
with any Plan which is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination letter from the IRS that it is so exempt, and , to the
knowledge of the Company, no fact or event has occurred since the date of such determination letter or letters from the IRS to adversely affect the qualified status of any such Plan or the exempt
status of any such trust.
e. There
has not been any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan. Neither the
Company nor entity that would have ever been considered a single employer with the Company under Section 4001(b) of ERISA or part of the same "controlled group" as the Company for purposes of
Section 302(d)(3) of ERISA (each, an "
ERISA Affiliate
") has ever incurred any liability under, arising out of or by operation of Title IV of
ERISA (other than liability for premiums to the Pension Benefit Guaranty Corporation arising in the ordinary course), including, without limitation, any liability in connection with (i) the
termination or reorganization of any employee benefit plan subject to Title IV of ERISA, or (ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and no fact or event
exists which could reasonably be expected to give rise to any such liability.
f. All
contributions, premiums or payments required to be made with respect to any Plan have been made on or before their due dates. All such contributions have been fully
deducted for income tax purposes and no such deduction has been challenged or disallowed by any Governmental Authority and no fact or event exists which could reasonably be expected to give rise to
any such challenge or disallowance.
g. All
directors, officers, management employees, and technical and professional employees of the Company and the Subsidiaries are under written obligation to the Company
and the Subsidiaries to maintain in confidence all confidential or proprietary information acquired by them in the course of their employment and to assign to the Company and the Subsidiaries all
inventions made by them within the scope of their employment during such employment and for a reasonable period thereafter.
h. Each
Plan that constitutes in any part a nonqualified deferred compensation plan within the meaning of Section 409A of the Code has been operated and
maintained in all material respects in operational and documentary compliance with Section 409A of the Code and applicable guidance thereunder.
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i. No
Plan, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to Section 162(m) of the Code or any
other provision of the Code or any similar foreign law, as a result of the transactions contemplated by this Agreement alone or together with any other event.
j. In
addition to the foregoing, with respect to each Plan that is not subject to United States law (a "
Non-U.S. Benefit
Plan
"):
i. all
employer and employee contributions to each Non-U.S. Benefit Plan required by law or by the terms of such Non-U.S. Benefit Plan have been
made, or, if applicable, accrued in accordance with normal accounting practices, and a pro rata contribution for the period prior to and including the date of this Agreement has been made or accrued;
ii. the
fair market value of the assets of each funded Non-U.S. Benefit Plan, the liability of each insurer for any Non-U.S. Benefit Plan funded
through insurance or the book reserve established for any Non-U.S. Benefit Plan, together with any accrued contributions, is sufficient to procure or provide for the benefits determined on
any ongoing basis (actual or contingent) accrued to the date of this Agreement with respect to all current and former participants under such Non-U.S. Benefit Plan according to the
actuarial assumptions and valuations most recently used to determine employer contributions to such Non-U.S. Benefit Plan, and no Transaction shall cause such assets or insurance
obligations to be less than such benefit obligations; and
iii. each
Non-U.S. Benefit Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities.
Each Non-U.S. Benefit Plan is now and always has been operated in full compliance with all applicable non-United States laws.
SECTION 3.13
Labor and Employment Matters.
a. Except
as set forth on Section 3.13(a) of the Company Disclosure Schedule, (i) there are no controversies pending or, to the knowledge of the Company,
threatened between the Company or any Subsidiary and any of their respective employees; (ii) neither the Company nor any Subsidiary is a party to any collective bargaining agreement or other
labor union contract, or work rules or practices agreed to with any labor union, binding on the Company with respect to any of the Company's operations, nor, to the knowledge of the Company, are there
any activities or proceedings of any labor union to organize any such employees; (iii) neither the Company nor any Subsidiary has breached or otherwise failed to comply with any provision of
any such agreement or contract, and there are no grievances outstanding against the Company or any Subsidiary under any such agreement or contract; (iv) there are no and in the past three years
there has been no unfair labor practice complaints pending against the Company or any Subsidiary before the National Labor Relations Board or any current union representation questions involving
employees of the Company or any Subsidiary; and (v) there is no, and during the past three years there has not been any strike, picketing of any nature, labor dispute, slowdown or any other
concerted interference with normal operations, work stoppage or lockout, or, to the knowledge of the Company, threatened against or affecting the business of the Company. The consent of the labor
unions which are a party to the collective bargaining agreements listed in Section 3.13(a) of the Company Disclosure Schedule is not required to consummate the Transactions.
b. The
Company is in material compliance with all federal, state, city, or other laws, regulations or requirements arising from its status as a government contractor,
including, without limitation, its equal opportunity and affirmative action obligations pursuant to Executive Order 11246 and the regulations implemented by the Office of Federal Contract Compliance
Programs. The Company is also in material compliance with the terms of any contract with any government agency.
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c. Except
as set forth in Section 3.13(c) of the Company Disclosure Schedule, the Company and the Subsidiaries are in compliance in all material respects with all
applicable laws and regulations respecting labor, employment, fair employment practices, work place safety and health, terms and conditions of employment, wages and hours, including those related to
wages, hours, collective bargaining and the payment and withholding of taxes and other sums as required by the appropriate Governmental Authority and have withheld and paid to the appropriate
Governmental Authority or are holding for payment not yet due to such Governmental Authority all amounts required to be withheld from employees of the Company or any Subsidiary and are not liable for
any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing. The Company maintains a discretionary vacation and paid time off policy that does not permit
employees to accrue vacation or paid time off. No employees have accrued vacation or paid time off and therefore no employee would or will be entitled to receive cash payments for accrued but unused
vacation or paid time off if such employee were to be terminated. The Company and the Subsidiaries have paid in full to all employees or adequately accrued for in accordance with GAAP consistently
applied all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such employees and there is no claim and within the last three years there has been no claim
with respect to payment of wages, salary, vacation, paid time off or overtime pay or unfair labor practices that has been asserted or is now pending or threatened before any Governmental Authority
with respect to any persons currently or formerly employed by the Company or any Subsidiary. Neither the Company nor any Subsidiary is a party or within the last three years has been a party to, or
otherwise bound by, any consent decree with, or order, injunction, judgment or citation by, any Governmental Authority or private settlement contract relating to employees or employment practices.
There is no and within the last three years there has been no charge or proceeding with respect to a violation of any occupational safety or health standards that has been asserted or is now pending
or threatened with respect to the Company. There is no and within the last three years there has been no charge of discrimination in employment or employment practices, for any reason, including,
without limitation, age, gender, race, religion or other legally protected category, which has been asserted or is now pending or threatened before the United States Equal Employment Opportunity
Commission, or any other Governmental Authority in any jurisdiction in which the Company or any Subsidiary has employed or employs any person. None of the employment policies or practices of the
Company are currently being audited or investigated, or to the knowledge of the Company, subject to imminent audit or investigation by any Governmental Authority.
d. Section 3.13(d)
of the Company Disclosure Schedule contains a true, complete and accurate list of all of the directors, officers and other employees of Company and
its respective Subsidiaries, describing for each such employee the title, whether classified as exempt or non-exempt for wage and hour purposes, annual base salary, whether paid on a
salary, hourly or commission basis and the actual rates of compensation, average scheduled hours per week, bonus potential, date of hire, business location, status (i.e., active or inactive and
if inactive, the type of leave and estimated duration), the total amount of bonus, severance and other amounts to be paid to such employee if such employee were terminated at or following the Closing
and, for any employee whose authority to work in the United States arises from a visa, the class of visa, date of expiration and copy of such visa. Section 3.13(d) of the Company Disclosure
Schedule also contains a true, complete and accurate list of all of the independent contractors, consultants, freelancers, temporary employees, leased employees or other servants or agents currently
employed or used with respect to the operation of the business of the Company or its Subsidiaries and earning more than $20,000 on an annualized basis or involved in the development of Company Owned
Intellectual Property and classified as other than employees or compensated other than through wages paid by the Company or its Subsidiaries through such Company's or such Subsidiary's payroll
department and reported on a form W-4 ("
Contingent Workers
") and indicating whether such Contingent Worker has a written agreement
with the Company. Except as contemplated by this Agreement or as set forth on Section 3.13(d) of the Company Disclosure Schedule, to the knowledge of Company, (i) no Key Employee has
expressed any plans to terminate his
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or
her employment or service arrangement with the Company or its Subsidiaries and (ii) since January 1, 2012 no employee of the Company has been terminated or voluntarily resigned for
any reason. The Company made available to Parent true and correct copies of all written agreements with the current Contingent Workers.
e. All
employees are employed at-will and no employees are subject to any contract with the Company. The Company is in compliance in all material respects with
the requirements of the Immigration Reform Control Act of 1986 and, among other things, has a fully completed Form I-9 for each employee.
f. To
the extent that any Contingent Workers are employed, the Company or any Subsidiary of the Company has properly classified and treated them in accordance with
applicable laws and for purposes of all employee benefit plans and perquisites, except for any misclassifications or mistreatments that, individually or in the aggregate, has had a Company Material
Adverse Effect.
g. Except
as set forth in Section 3.13(g) of the Company Disclosure Schedule, the Company or any Subsidiary of the Company has not experienced a "plant closing,"
"business closing," or "mass layoff" as defined in the WARN Act or any similar state, local or foreign law or regulation affecting any site of employment of the Company or one or more facilities or
operating units within any site of employment or facility of the Company or any Subsidiary of the Company, and, during the ninety-day period preceding the date hereof, no employee has
suffered an "employment loss," with respect to the Company or any Subsidiary of the Company as defined in the WARN Act. Section 3.13(g) of the Company Disclosure Schedule sets forth for each
employee who has suffered such an "employment loss" during the ninety-day period preceding the date hereof (i) the name of such employee, (ii) the date of hire of such
employee, (iii) such employee's regularly scheduled hours over the six-month period prior to such "employment loss," (iv) the reason for the "employment loss," and
(v) such employee's last job title(s), location, assignment(s) and department(s).
h. Neither
the Company nor any Subsidiary of the Company has made any representation, promise or guarantee, express or implied, to any employee or Contingent Worker
regarding (i) whether the Parent intends to retain or offer to retain such individual, or (ii) to terms and conditions on which the Parent may retain or offer to retain such individual.
The Proxy Statement (and any amendment thereof or supplement thereto), when filed with the SEC, when first published, distributed,
disseminated or otherwise made available to the stockholders of the Company, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by the Company
with respect to statements made in the Proxy Statement based on information supplied by Parent or Merger Sub (or any of Parent or Merger Sub's directors, officers, employees, agents or other
representatives) for inclusion in the Proxy Statement. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and any other applicable federal
securities Laws.
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a. The
Company does not own any, nor has the Company ever owned any, real property, nor is the Company party to any agreement to purchase or sell any real property.
Section 3.15(a) of the Company Disclosure Schedule lists each parcel of real property currently leased or subleased by the Company or any Subsidiary, with the name of the lessor and the date of
the lease, sublease, assignment of the lease, any guaranty given or leasing commissions payable (and unpaid) by the Company or any Subsidiary in connection therewith and each amendment to any of the
foregoing (collectively, the "
Lease Documents
"). True, correct and complete copies of all Lease Documents have been delivered to Parent. To the
Company's knowledge, all such current leases and subleases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of such leases,
any existing material default or event of default (after the giving of any required notice and the expiration of any applicable cure period) by the Company or any Subsidiary or, to the Company's
knowledge, by the other party to such lease or sublease.
b. There
are no material contractual or legal restrictions that preclude or restrict the ability to use any real property owned or leased by the Company or any Subsidiary
for the purposes for which it is currently being used. To the Company's knowledge there are no material latent defects or material adverse physical conditions affecting the real property, and
improvements thereon, owned or leased by the Company or any Subsidiary other than those that would not, individually or in the aggregate, have a Company Material Adverse Effect.
c. Each
of the Company and the Subsidiaries has valid leasehold or subleasehold interests in all of its real properties and assets used or held for use in its business, free
and clear of any liens except for (i) liens with an aggregate value of less than $250,000 or (ii) statutory liens for Taxes or other governmental charges not yet due and payable, or
mechanics' or similar liens arising in the ordinary course of business that are not individually or in the aggregate material in amount.
Except as would not have a Material Adverse Effect, the Company has good and valid title to all of the personal properties and assets,
tangible and intangible, that it purports to own, and valid leasehold interests in all of the material personal properties and assets, tangible and intangible (other than Intellectual Property, which
is covered in Section 3.17), that it purports to lease, in each case including the personal properties and material assets reflected in the Company's most recent balance sheet included in the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2012, filed with the SEC, but excluding any personal property or assets that are no longer
used or useful for the conduct of the business of the Company as presently conducted or that have been disposed of in the ordinary course of business since September 30, 2012.
a. Section 3.17(a)
of the Company Disclosure Schedule contains a true, complete and accurate list of all (i) Patents owned by or exclusively licensed to the
Company and the Subsidiaries ("
Company Patents
"), registered Marks owned by or exclusively licensed to the Company or any Subsidiary
("
Company Marks
") and registered Copyrights owned by or exclusively licensed to the Company or any Subsidiary ("
Company
Copyrights
"), (ii) Licenses-In, (iii) Licenses-Out, and (iv) products, computer programs and/or services currently being
manufactured, performed, licensed, sold, distributed and/or otherwise made commercially available by the Company or any Subsidiary (the "
Products
").
b. The
conduct of the business of the Company and the Subsidiaries as currently conducted does not infringe upon or misappropriate the Intellectual Property rights of any
third party, and to the Company's knowledge as of the date of this Agreement, no claim is pending or has been asserted in writing to the Company that the conduct of the business of the Company and the
Subsidiaries as
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currently
conducted infringes upon or may infringe upon or misappropriates the Intellectual Property Rights of any third party.
c. With
respect to each item of Intellectual Property owned by the Company or a Subsidiary ("
Company Owned Intellectual
Property
"), (i) the Company or a Subsidiary is the owner of the entire right, title and interest in and to such Company Owned Intellectual Property and is entitled to
use such Company Owned Intellectual Property in the continued operation of its respective business without any limitations or restrictions (other than those imposed by applicable Laws), and
(ii) to the Company's knowledge as of the date of this Agreement the Company Owned Intellectual Property is valid and enforceable, and has not been adjudged invalid or unenforceable in whole or
in part.
d. With
respect to each item of Intellectual Property licensed to the Company or a Subsidiary ("
Company Licensed Intellectual
Property
"), (i) to the Company's knowledge as of the date of this Agreement, the Company or a Subsidiary has all necessary rights to use such Company Licensed
Intellectual Property in the continued operation of its respective business as presently conducted in accordance with the terms of the license agreement governing such Company Licensed Intellectual
Property, and, (ii) to the knowledge of the Company as of the date of this Agreement, (A) such Company Licensed Intellectual Property is valid and enforceable, (B) such license
agreement is binding on all parties to such license and is in full force and effect, and (C) no party to such license of the Company Licensed Intellectual Property is in material breach thereof
or material default thereunder.
e. To
the knowledge of the Company as of the date of this Agreement, no person is engaging in or, during the three (3) year period preceding the date of this
Agreement, has engaged in any activity that infringes upon the Company Owned Intellectual Property, nor has there been any misappropriation by any person or entity of any of the Company Owned
Intellectual Property, and neither the Company nor any of the Subsidiaries have received any notice of such activities.
f. All
of the Key IP Employees, and all former and current employees, consultants and contractors of the Company and the Subsidiaries who have been materially involved in
the development of Company Owned Intellectual Property or Products during the preceding five (5) years or who have been involved in the development of any current Products, have executed
written instruments with the Company or such Subsidiary that assign to the Company or such Subsidiary all rights, title and interest in and to any and all inventions, improvements, discoveries,
writings and other works of authorship, and information developed by such employees, consultants, and contractors within the scope of their engagement by the Company or its Subsidiaries and
Intellectual Property rights relating thereto; and in each case where a Company Patent is owned by the Company or any Subsidiary by assignment, the assignment has been duly recorded with the U.S.
Patent and Trademark Office and all similar offices and agencies anywhere in the world in which foreign counterparts owned by the Company or any Subsidiary are registered or issued.
g. Neither
the execution of this Agreement nor the consummation of any Transaction shall adversely affect any of the Company's rights with respect to any Company Owned
Intellectual Property or the termination of the Company's license rights to any Company Licensed Intellectual Property that is material to the business of the Company as currently conducted.
h. Neither
the Company nor any Subsidiary has granted any current or contingent right, license or interest in or to the source code of the Products, and, since the Company
and the Subsidiaries developed the source code of the Products, neither the Company nor any Subsidiary has provided or disclosed the source code of the Products to any person or entity other than an
employee of the Company or any Subsidiary or a contractor performing services for the benefit of the Company or any Subsidiary, in each case such disclosure being subject to valid and enforceable
confidentiality restrictions.
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i. Except
as would not, individually or in the aggregate, produce a Company Material Adverse Effect, the Products perform in accordance with their documented specifications
and as the Company and the Subsidiaries have warranted to their customers.
j. To
the Company's knowledge as of the date of this Agreement, the Products do not contain any "viruses," "worms," "time-bombs," "key-locks," or any
other devices that are designed to maliciously disrupt or interfere with the operation of the Products or equipment upon which the Products operate, or the integrity of the data, information or
signals the Products produce in a manner adverse to the Company, any Subsidiary or any customer, licensee or recipient.
k. The
Company has not, in connection with the Products currently being sold, licensed or distributed by the Company or by any Subsidiary: (i) distributed Open Source
Materials in violation of the applicable license to such Open Source Materials in conjunction with any other software developed or distributed by the Company; or (ii) used Open Source Materials
in a manner that creates, or purports to create, obligations for the Company to grant to any third party, any rights or immunities under Company Owned Intellectual Property rights (including, but not
limited to, using any Open Source Materials in a manner that requires, as a condition of such use, that other software incorporated into, derived from or distributed with such Open Source Materials be
(A) disclosed or distributed in source code form, (B) licensed for the purpose of making derivative works or (C) redistributable at no charge or minimal charge). As used herein,
"
Open Source Materials
" means all software, documentation or other material that is distributed as "free software," "open source software" or under a
similar licensing or distribution model, including, but not limited to, the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public License (MPL), or any other
license described as an "Open Source License" by the Open Source Initiative as set forth on www.opensource.org
a. The
Company and the Subsidiaries have timely filed all material United States federal, state, local and non-United States Tax Returns and reports required to
be filed by them and have paid and discharged all Taxes required to be paid or discharged (whether or not shown on any Tax Return), other than such Taxes the non-payment of which would
not, individually or in the aggregate, have a Company Material Adverse Effect. All such Tax Returns are true, accurate and complete in all material respects and were prepared in substantial compliance
with all applicable laws and regulations. Section 3.18(a) of the Company Disclosure Schedule lists all material United States federal, state, local, and non-U.S. income Tax Returns
filed with respect to any of the Company or its Subsidiaries for taxable periods ended on or after December 31, 2009, indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit and with respect to which, to the knowledge of the Company, an audit has been threatened. The Company has delivered to Parent correct and complete
copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by the Company or any of its Subsidiaries filed or received since
December 31, 2009. Neither the Company nor any of its Subsidiaries currently is the beneficiary of any extension of time within which to file any Tax Return. No written claim has ever been made
by an authority in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that the Company or any of its Subsidiaries is or may be subject to taxation by that
jurisdiction. Each of the Company 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, other than any such Taxes for which the failure to withhold and pay over would not, individually or in the aggregate, have a
Company Material Adverse Effect. Neither the IRS nor any other United States or non-United States taxing authority or agency is now asserting or, to the knowledge of the Company,
threatening to assert against the Company or any Subsidiary any deficiency or claim for any material amount of Taxes or interest
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thereon
or penalties in connection therewith. Neither the Company nor any Subsidiary has granted any waiver of any statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax. The accruals and reserves for Taxes reflected in the 2012 Balance Sheet are adequate to cover all Taxes accruable through such date (including interest and penalties, if any,
thereon) in accordance with GAAP, other than such Taxes the non-payment of which would not, individually or in the aggregate, have a Company Material Adverse Effect. There are no Tax liens
upon any property or assets of the Company or any of the Subsidiaries except liens for current Taxes not yet due. Neither the Company nor any of the Subsidiaries has been required to include in income
any adjustment pursuant to Section 481 of the Code by reason of a voluntary change in accounting method initiated by the Company or any of the Subsidiaries, and the IRS has not initiated or
proposed any such adjustment or change in accounting method, in either case which adjustment or change would have a Company Material Adverse Effect. Neither the Company nor any Subsidiary has been a
"distributing corporation" or a "controlled corporation" in a distribution intended to qualify under Section 355(e) of the Code within the past five years.
b. Neither
the Company nor any of its Subsidiaries is a party to any agreement, contract, arrangement or plan that has resulted or could result, separately or in the
aggregate, in the payment of (i) any "excess parachute payment" within the meaning of Code §280G (or any corresponding provision of state, local, or non-U.S. Tax law)
and (ii) any amount that will not be fully deductible as a result of Code §162(m) (or any corresponding provision of state, local, or non-U.S. Tax law). Neither the
Company nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of Code §897(c)(2) during the applicable period specified in Code
§897(c)(1)(A)(ii). Neither the Company nor any of its Subsidiaries is or has been a party to any "reportable transaction," as defined in Code §6707A(c)(1) and Reg.
§1.6011-4(b). Each of the Company and its Subsidiaries have disclosed on their federal income Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code §6662. Neither the Company nor any of its Subsidiaries is a party to or bound by any Tax allocation or sharing agreement,
other than any such agreement to which only the Company and any of its Subsidiaries are parties. Neither the Company nor any of its Subsidiaries (A) has been a member of an affiliated group
filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company) or (B) has any Liability for the Taxes of any Person (other than the Company or
any of its Subsidiaries) under Reg. §1.1502-6 (or any similar provision of state, local, or non-U.S. law), as a transferee or successor, by contract, or otherwise.
c. Neither
the Company nor any of its Subsidiaries will be required to include any material item of income in, or exclude any material item of deduction from, taxable income
for any taxable period (or portion thereof) ending after the Closing Date as a result of any:
i. change
in method of accounting for a taxable period ending on or prior to the Closing Date;
ii. "closing
agreement" as described in Code §7121 (or any corresponding or similar provision of state, local, or non-U.S. income Tax law) executed
on or prior to the Closing Date;
iii. intercompany
transaction or excess loss account described in Treasury Regulations under Code §1502 (or any corresponding or similar provision of state,
local, or non-U.S. income Tax law);
iv. installment
sale or open transaction disposition made on or prior to the Closing Date;
v. prepaid
amount received on or prior to the Closing Date; or
vi. election
under Code §108(i).
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Except as would not, individually or in the aggregate, have a Company Material Adverse Effect, (a) none of the Company nor any
of the Subsidiaries has violated or is in violation of any Environmental Law; (b) to the Company's knowledge none of the properties currently or formerly owned, leased or operated by the
Company or any Subsidiary (including, without limitation, soils and surface and ground waters) are contaminated with any Hazardous Substance; (c) none of the Company or any of the Subsidiaries
is actually, potentially or allegedly liable for any off-site contamination by Hazardous Substances; (d) none of the Company or any of the Subsidiaries is actually, potentially or
allegedly liable under any Environmental Law (including, without limitation, pending or threatened liens); (e) each of the Company and each Subsidiary has all permits, licenses and other
authorizations required under any Environmental Law ("
Environmental Permits
"); and (f) neither the execution of this Agreement nor the
consummation of the Transactions will require any investigation, remediation or other action with respect to Hazardous Substances, or any notice to or consent of Governmental Authorities or third
parties, pursuant to any applicable Environmental Law or Environmental Permit.
a. Subsections (i)
through (xvii) of Section 3.20 of the Company Disclosure Schedule list all of the following types of contracts, commitments,
arrangements, leases and agreements (whether or not written) (a "
Contract
") to which the Company or any Subsidiary is a party (such Contracts as are
required to be set forth in Section 3.20 of the Company Disclosure Schedule being the "
Material Contracts
"):
i. each
"material contract" (as such term is defined in Item 610(b)(10) of Regulation S-K of the SEC) with respect to the Company and its
Subsidiaries;
ii. each
Contract which is likely to involve consideration of more than $600,000, in the aggregate, over the remaining term of such contract or agreement;
iii. joint
venture contracts, partnership arrangements or other agreements involving a sharing of profits, losses, costs or liabilities by the Company or any Subsidiary
with any third party and having a prospective value in excess of $150,000;
iv. executive
management Contracts including any Contracts involving the payment of royalties or other amounts calculated based upon the revenues or income of the Company
or any Subsidiary or income or revenues related to any product of the Company or any Subsidiary to which the Company or any Subsidiary is a party;
v. any
(a) employment, consulting or other Contract of the Company or any of its Subsidiaries with (A) any member of Company Board or a member of the board of
directors of any Subsidiary of the Company, (B) any executive officer of the Company or any of its Subsidiaries or (C) any other employee of the Company or any of its Subsidiaries
earning an annual salary equal to or in excess of $200,000, other than arrangements terminable by the Company without severance or other costs to the Company, or (b) any consulting agreement
with a third party providing for compensation in excess of $150,000;
vi. Contracts
evidencing Indebtedness in excess of $250,000;
vii. Contracts
with any Governmental Authority to which the Company or any Subsidiary is a party that provides for payment to or from the Company in excess of $200,000;
viii. Contracts
that limit, or purport to limit, the ability of the Company or any Subsidiary to compete in any line of business or with any person or entity or in any
geographic area or during any period of time;
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ix. Contracts
that provide for the grant of "most favored nation" pricing or terms, establish an exclusive sale or distribution obligation for the Company or exclusive
purchase obligation for the Company or contain any minimum purchase requirement for the Company;
x. Contracts
providing for benefits under any Plan;
xi. Contracts
that result in any person or entity holding a power of attorney from the Company or any Subsidiary that relates to the Company, any Subsidiary or their
respective businesses (other than powers of attorney granted in the ordinary course of business);
xii. Contracts
with the Company's top twenty-five customers based on bookings for fiscal 2012 and top twenty-five vendors (each, a
"
Top Supplier
"), in each case during the twelve-month period ended as of the date of this Agreement;
xiii. Contracts
(A) under which the Company or any Subsidiary is granted rights by others to use any material Intellectual Property (other than Contracts granting the
Company or any of its Subsidiaries rights to use readily available commercial software utilized by the Company or any Subsidiary)
("
Licenses-In
"), (B) under which the Company or any Subsidiary has granted rights to others in any material Company Owned
Intellectual Property (other than customer, distributor, or supplier agreements) ("
Licenses-Out
"); or (C) restricting the Company's
rights to use or register any material Company Owned Intellectual Property;
xiv. Contracts
pursuant to which the Company or any of its Subsidiaries provides source code to any third party for any Company product, including any contract to put such
source code in escrow with a third party on behalf of a licensee or contracting party;
xv. Contracts
with any affiliate (as such term is defined in Rule 405 of the Securities Act of 1933);
xvi. Contracts
providing for indemnification by the Company or any of its Subsidiaries of any person, except for revenue generating, customer, vendor, commercial or
licensing contracts entered into in the ordinary course of business; or
xvii. Contracts
involving the acquisition from another person, or disposition to another person, directly or indirectly (by merger or otherwise), of assets or capital stock
or other equity interests of another person which (A) was entered into after December 31, 2011, or that has not yet been consummated and which provides for aggregate consideration under
such Contract (or series of related Contracts) in excess of $250,000 or the issuance of Company Common Stock (other than acquisitions or dispositions
of assets in the ordinary course of business), or (B) contains representations, covenants, indemnities or other obligations that would reasonably be expected to result in payments in excess of
$100,000.
b. Except
as would not, individually or in the aggregate, have a Company Material Adverse Effect, (i) each Material Contract is a legal, valid and binding agreement,
and none of the Material Contracts is in default by its terms or has been cancelled by the other party; (ii) to the Company's knowledge, no other party is in breach or violation of, or default
under, any Material Contract; (iii) the Company and the Subsidiaries have not received any claim of default under any such agreement; and (iv) neither the execution of this Agreement nor
the consummation of any other Transaction hereunder shall constitute a default under, give rise to cancellation rights under, or otherwise adversely affect any of the rights of the Company or any
Subsidiary under any Material Contract. The Company has furnished or made available to Parent true and complete copies of all Material Contracts, including any amendments thereto.
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a. Section 3.21
of the Company Disclosure Schedule sets forth, with respect to each insurance policy under which the Company or any Subsidiary has been an insured, a
named insured or otherwise the principal beneficiary of coverage at any time within the past three years, (i) the names of the insurer, the principal insured and each named insured,
(ii) the policy number, and (iii) the period, scope and amount of coverage. All material insurable risks of the Company and the Subsidiaries in respect of the businesses of each are
covered by such insurance policies and the types and amounts of coverage provided therein are usual and customary in the context of the businesses and operations in which the Company and the
Subsidiaries are engaged.
b. With
respect to each such insurance policy: (i) the policy is legal, valid, binding and enforceable in accordance with its terms and, except for policies that have
expired under their terms in the ordinary course, is in full force and effect; (ii) neither the Company nor any Subsidiary is in material breach or default (including any such breach or default
with respect to the payment of premiums or the giving of notice), and no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, or permit termination or
modification, under the policy; and (iii) to the knowledge of the Company, no insurer on the policy has been declared insolvent or placed in receivership, conservatorship or liquidation.
c. At
no time subsequent to October 1, 2009, has the Company or any Subsidiary (i) been denied any insurance or indemnity bond coverage which it has requested,
(ii) made any material reduction in the scope or amount of its insurance coverage, or (iii) received notice from any of its insurance carriers that any insurance premiums will be subject
to increase in an amount materially disproportionate to the amount of the increases with respect thereto (or with respect to similar insurance) in prior years or that any insurance coverage listed in
Section 3.21 of the Company Disclosure Schedule will not be available in the future substantially on the same terms as are now in effect.
a. The
Company Board, by resolutions duly adopted at a meeting duly called and held and not subsequently rescinded or modified in any way, has duly (i) determined
that this Agreement and the Merger are fair to and in the best interests of the Company and its stockholders, (ii) approved this Agreement and the Merger and declared their advisability, and
(iii) recommended that the stockholders of the Company approve and adopt this Agreement and directed that this Agreement and the transactions contemplated hereby be submitted for consideration
by the Company's stockholders at the Company Stockholders' Meeting (as defined below).
b. The
only vote of the holders of any class or series of capital stock of the Company necessary to approve this Agreement, the Merger and the other Transactions is the
Requisite Company Stockholder Approval.
(a) Section 3.23(a)
of the Company Disclosure Schedule sets forth the Company's customers who represent approximately 70% of the Company's revenue for fiscal 2012
(each a "
Top Customer
" and, together the "
Top Customers
").
(b) Except
as set forth on Section 3.23(b) of the Company Disclosure Schedule, since January 1, 2012, no Top Customer and no Top Supplier, (i) has
cancelled or otherwise terminated any Contract with the Company or any Subsidiary prior to the expiration of the Contract term, (ii) has returned a substantial amount of any of the products,
equipment, goods and services purchased from the Company or any Subsidiary, (iii) has threatened, or indicated its intention, in each case in writing, to cancel or
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otherwise
terminate its relationship with the Company or its Subsidiaries or to reduce substantially its purchase from or sale to the Company or any Subsidiary of any products, equipment, goods or
services, or (iv) has delivered or otherwise communicated to the Company or any of its representatives in writing any material complaint or notice of dispute with respect to any products,
equipment, goods or services. Neither the Company nor any Subsidiary has (i) materially breached any Contract with or (ii) engaged in any fraudulent conduct with respect to any such
customer or supplier of the Company or a Subsidiary. To the knowledge of those individuals listed on Schedule 3.23(b), since January 1, 2012, none of the Top Customers has orally
(x) threatened or indicated its intention to cancel or otherwise terminate its relationship with the Company or its Subsidiaries or to reduce substantially its purchase from or sale to the
Company or any Subsidiary of any products, equipment, goods or services, or (y) communicated to the Company or any of its representatives any material complaint or notice of dispute with
respect to any products, equipment, goods or services.
None of the Company, any Subsidiary or any directors or officers or, to the Company's knowledge, employees of the Company or any
Subsidiary, has (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity; (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended or any similar
applicable foreign, federal or state Law; or (iii) made any payment in the nature of criminal bribery.
Except as set forth on Section 3.25 of the Company Disclosure Schedule, no director, officer or other affiliate of the Company
or any Subsidiary has or has had, directly or indirectly, (i) a material economic interest in any person that has furnished or sold, or furnishes or sells, services or products that the Company
or any Subsidiary furnishes or sells, or proposes to furnish or sell; (ii) an economic interest in any person that purchases from or sells or furnishes to, the Company or any Subsidiary, any
goods or services; (iii) a beneficial interest in any Contract disclosed in Section 3.20 or 3.23 of the Company Disclosure Schedule; or (iv) any contractual or other arrangement
with the Company or any Subsidiary;
provided
,
however
, that ownership of no more than 1% of the
outstanding voting stock of a publicly traded corporation shall not be deemed an "economic interest in any person" for purposes of this Section 3.25. The Company and the Subsidiaries have not,
since February 1, 2011, (A) extended or maintained credit, arranged for the extension of credit or renewed an extension of credit in the form of a personal loan to or for any director or
executive officer (or equivalent thereof) of the Company, or (B) materially modified any term of any such extension or maintenance of credit.
a. There
is no Action brought against the Company or any of its Subsidiaries pending or, to the knowledge of the Company, threatened involving any: (1) alleged
violation by the Company of a Privacy Law or (2) Processing by the Company of Personally Identifiable Information.
b. The
Company is not subject to any Order promulgated by a court or other judicial body relating to Privacy Laws or such Company's Processing of Personally Identifiable
Information.
c. To
the Company's knowledge, within the three years prior to the date of this Agreement, (i) the Company has not experienced a material Information Security
Incident and (ii) no service provider that Processes Personally Identifiable Information on behalf of the Company or any of its
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Subsidiaries,
has experienced a material Information Security Incident involving such Personally Identifiable Information.
a. Section 3.28(a)
of the Company Disclosure Schedule sets forth, as of December 27, 2012, the following information: (i) the total number of Registered
Users; (ii) the number of physician Registered Users versus non-physician Registered Users; (iii) the number of Registered Users physicians broken down by their specialty;
and (iv) the number of U.S. physician Registered Users versus non-U.S. physician Registered Users.
b. Section 3.28(b)
of the Company Disclosure Schedule sets forth, as of December 27, 2012, the following information: (i) the total number of Active
Registered Users; (ii) the number of physician Active Registered Users versus non-physician Active Registered Users; (iii) the number of Active Registered Users broken down
by their specialty; and (iv) the number of U.S. physician Active Registered Users versus non-U.S. physician Active Registered Users.
c. Except
as set forth on Section 3.28(c) of the Company Disclosure Schedule, within the five years prior to the date of this Agreement, the Company has maintained
reasonable procedures to assure all Personally Identifiable Information on the Registered Users held by the Company is strictly confidential, and the Company has not sold (other than in connection
with the transaction contemplated hereby or as is consistent with the Company's privacy policy), rented or disclosed any such Personally Identifiable Information to any person and has complied with
all applicable Privacy Laws concerning data protection and privacy in the jurisdictions where the Company does substantial business.
d. The
Company is the owner of the Database and all applicable copyrights, trade secrets and other similar Intellectual Property rights covering the Database. For purposes
of this Agreement, the "
Database
" means the database of data pertaining to the Registered Users of the Company's products and services that was gathered
by the Company from such Registered Users or elsewhere.
To the knowledge of the Company, no author or editor of any content created by an employee of the Company used in the Company's
products and services (the "
Content
") has been paid any amount by any pharmaceutical manufacturer or any other person (other than the Company) in
connection with or related to the subject matter of that portion of the Content authored or edited, as applicable, by such author or editor.
Each of the accounts and notes receivable of any of the Company and its Subsidiaries reflected in the Company's financial statements
dated September 30, 2012, (i) has arisen from a bona fide sales transaction in the ordinary course of business and is payable on ordinary trade terms, (ii) is the legal, valid and
binding obligation of the respective debtor, enforceable against such debtor in accordance with its respective terms, (iii) is not subject to any valid set off or counterclaim, and
(iv) is not the subject of any pending Actions brought by or on behalf of the Company or any of its Subsidiaries. There are no security arrangements or collateral securing the repayment or
other satisfaction of receivables of the Company or any of its Subsidiaries.
The Company has received the written opinion of Piper Jaffray, dated the date of this Agreement, to the effect that, as of the date of
this Agreement, based on the assumptions, qualifications and
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limitations
contained therein, the Merger Consideration is fair, from a financial point of view, to the Company's stockholders (other than Parent and Merger Sub), a copy of which opinion will be
delivered (solely for informational purposes) to Parent promptly after receipt thereof by the Company.
No broker, finder or investment banker (other than Piper Jaffray) is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger and other Transactions based upon arrangements made by or on behalf of the Company. The Company has heretofore furnished to Parent a true, complete and correct copy of all
agreements between the Company and Piper Jaffray pursuant to which such firm would be entitled to any payment relating to the Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As an inducement to the Company to enter into this Agreement, Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company that:
Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization and has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted.
Each of Parent and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the Transactions have
been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement or to consummate
the Transactions (other than, with respect to the Merger, the filing and recordation of appropriate merger documents as required by the DGCL). This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of each of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance with its terms (subject, as to enforcement of remedies, to (a) bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar Laws of general applicability relating to or affecting the rights and remedies of creditors generally and (b) general principles of equity).
a. The
execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance of this Agreement by Parent and Merger Sub will not, (i) conflict
with or violate the Certificate of Incorporation or By-laws (or any equivalent organizational document) of either Parent or Merger Sub, (ii) assuming that all consents, approvals,
authorizations and other actions described in Section 3.06(b) have been obtained and all filings and obligations described in Section 3.06(b) have been made, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Parent or Merger Sub or by which any property or asset of either of them is bound or affected, or (iii) result in any breach of,
or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any material
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property
or asset of Parent or Merger Sub pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or
Merger
Sub is a party or by which Parent or Merger Sub or any material property or asset of either of them is bound or affected, including the Credit Agreement, dated as of October 20, 2011, by and
among athenahealth, Inc., Bank of America, N.A., in its capacity as administrative agent, and the other parties thereto (as amended, restated, refinanced, supplemented or otherwise modified
from time to time, the "
Credit Agreement
") and the commitment letter, dated as of January 4, 2013 (as amended, restated, supplemented or
otherwise modified from time to time, the "Commitment Letter"), by and between athenahealth, Inc. and Bank of America, N.A. ("
Bank of
America
").
b. The
execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance of this Agreement by Parent and Merger Sub will not, require any
consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except (i) for applicable requirements, if any, of the HSR Act, the Exchange Act,
the Securities Act, Blue Sky Laws, (ii) filings or notifications as may be required under the rules and regulations of NASDAQ, and (iii) filing and recordation of appropriate merger
documents as required by the DGCL.
Parent will have at the Closing sufficient funds available (through existing borrowing facilities, commitments from lenders or
otherwise) to permit it to consummate the Transaction in accordance with the terms of this Agreement. To the extent funding under the Credit Agreement is required at the Closing to pay the Merger
Consideration, the conditions precedent to funding under the Credit Agreement (and, if applicable, the Commitment Letter) will be met at the time of the Closing (after giving effect to the
Transactions). The consummation of the Merger will be a Permitted Acquisition (as defined in the Credit Agreement) at the time of the Closing.
No broker, finder or investment banker (other than Linnemann Associates) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by or on behalf of Parent or Merger Sub.
None of the information provided (or to be provided) by or on behalf of Parent or Merger Sub or any of their directors, officers,
employees, affiliates, agents or other representatives for inclusion or incorporation by reference in the Proxy Statement will contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
Prior to the Company Board approving this Agreement, the Merger and the other transactions contemplated hereby for purposes of the
applicable provisions of the DGCL, neither Parent nor Merger Sub, alone or together with any other Person, was at any time, or became, an "interested shareholder" thereunder or has taken any action
that would cause any anti-takeover statute under the DGCL to be applicable to this Agreement, the Merger or any transactions contemplated by this Agreement.
Parent and Merger Sub each acknowledge that neither the Company nor any Subsidiary of the Company has made or is making any
representations or warranties whatsoever in connection with the
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transactions
contemplated by this Agreement, express or implied, except as provided in Article III, and that neither Parent nor Merger Sub is relying or has relied on any representations or
warranties whatsoever in connection with the transactions contemplated by this Agreement, express or implied, except as provided in Article III.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
a. The
Company covenants and agrees that, between the date of this Agreement and the Effective Time, except as set forth in Section 5.01 of the Company Disclosure
Schedule or as expressly contemplated by any other provision of this Agreement, unless Parent shall otherwise provide prior consent in writing, which may not be unreasonably withheld, conditioned or
delayed, provided, however, that the Company shall not be required to obtain consent if doing so may violate antitrust Law (provided that the Company provides notice of such belief to Parent
promptly):
i. the
businesses of the Company and the Subsidiaries shall be conducted only in, and the Company and the Subsidiaries shall not take any action except in, the ordinary
course of business and in a manner consistent with past practice; and
ii. the
Company and each of its Subsidiaries shall use their commercially reasonable efforts to preserve substantially intact the business organization goodwill and other
existing assets of the Company and the Subsidiaries, to keep available the services of the current officers, employees and consultants of the Company and the Subsidiaries, to maintain and preserve
intact the current relationships of the Company and the Subsidiaries with customers, suppliers, distributors, creditors and other persons with which the Company or any Subsidiary has significant
business relations, and to comply in all material respects with applicable Law.
b. By
way of amplification and not limitation, except as expressly contemplated by any other provision of this Agreement or as set forth in Section 5.01 of the
Company Disclosure Schedule, neither the Company nor any Subsidiary shall, between the date of this Agreement and the Effective Time, directly or indirectly, do, or propose to do, any of the following
without the prior written consent of Parent, which may not be unreasonably withheld, conditioned or delayed, provided, however, that the Company shall not be required to obtain consent if doing so may
violate antitrust Law (provided that the Company provides notice of such belief to Parent promptly):
i. amend
or otherwise change its Certificate of Incorporation or By-laws or equivalent organizational documents;
ii. issue,
sell, pledge, dispose of, grant, award or encumber, or authorize the issuance, sale, pledge, disposition, grant, award or encumbrance of, any shares of any class
of capital stock of the Company or any Subsidiary, or any options, warrants, convertible securities or other rights or equity of any kind to acquire any shares of such capital stock, or any other
ownership interest (including, without limitation, any phantom interest), of the Company or any Subsidiary (except for the issuance of Shares issuable pursuant to employee stock options outstanding on
the date hereof);
iii. sell,
pledge, dispose of, grant or encumber, or permit an encumbrance to exist on, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of any
material assets of the Company or any of its Subsidiaries;
iv. declare,
set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock;
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v. adjust,
reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its capital stock;
vi. (A)
acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets or any other business combination) any corporation, partnership,
other business organization or any division thereof or any material amount of assets; (B) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse,
or otherwise become responsible for, the obligations of any person, or make any loans or advances, or grant any security interest in any of its assets except in the ordinary course of business and
consistent with past practice; (C) enter into any contract or agreement other than in the ordinary course of business and consistent with past practice and provided such contract or agreement
shall not involve any discounts in excess of 25%; (D) authorize, or make any commitment with respect to, any single capital expenditure which is in excess of $100,000 or capital expenditures
which are, in the aggregate, in excess of $450,000 for the Company and the Subsidiaries taken as a whole, except as consistent with Company business plans that have been disclosed to Parent; or
(E) enter into or amend any contract, agreement, commitment or arrangement with respect to any Contract or matter set forth in this Section 5.01(b)(vi);
vii. (A)
hire any employees in the position of Vice President or above; (B) take any action which could reasonably be expected to give rise to a claim for "good
reason" or any similar claim by any employee; or (C) terminate the employment of employees in the position of Vice President or above (other than for cause, so long as prior notice of such
termination is given to Parent);
viii. hire
any additional employees or increase the compensation payable or to become payable or the benefits provided to its directors, officers, employees or independent
contractors, or grant any severance or termination pay to, or enter into any employment or severance agreement with, any director, officer employee or other independent contractors of the Company or
of any Subsidiary, or establish, adopt, enter into or amend any collective bargaining, bonus, profit-sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer, employee or independent contractor, or loan or
advance any money or property to any director, officer, employee or independent contractor, or grant any equity or equity-based awards;
ix. exercise
its discretion with respect to or otherwise voluntarily accelerate the lapse of restriction or vesting of any Company Stock Option or Company RSU as a result
of the Merger, any other change of control of the Company (as defined in the Company Stock Option Plans) or otherwise;
x. terminate,
discontinue, close or dispose of any plant, facility or other business operation, or lay off any employees (other than layoffs of less than 10 employees in
any six-month period in the ordinary course of business consistent with past practice) or implement any early retirement or separation program, or any program providing early retirement
window benefits or announce or plan any such action or program for the future;
xi. take
any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice, with respect to accounting policies or
procedures;
xii. make,
change or rescind any material Tax election, settle or compromise any material United States federal, state, local or non-United States income tax
liability, change an annual accounting period, adopt or change any accounting method, file any material amended Tax Return, enter into any closing agreement, surrender any right to claim a refund of
material Taxes, or consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment relating to the Company or any of its Subsidiaries;
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xiii. pay,
discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business and consistent with past practice, of liabilities reflected or reserved against in the 2012 Balance Sheet or subsequently incurred in the ordinary
course of business and consistent with past practice;
xiv. enter
into, amend, modify, in a manner that is adverse to the Company, or consent to the termination of any Material Contract (other than terminations consented to in
the ordinary course of business, consistent with past practice and without financial penalty to the Company or any Subsidiaries), or enter into, amend, waive, modify, in a manner that is adverse to
the Company, or consent to the termination of the Company's or any Subsidiary's rights thereunder (other than terminations consented to in the ordinary course of business, consistent with past
practice and without financial penalty to the Company or any Subsidiaries);
xv. commence,
compromise, settle or come to an arrangement regarding, or agree or consent to compromise, settle or come to an arrangement regarding, any Action;
xvi. permit
any item of Company Owned Intellectual Property to lapse or to be abandoned, dedicated, or disclaimed, fail to perform or make any applicable filings, recordings
or other similar actions or filings, or fail to pay all required fees and taxes required or advisable to maintain and protect its interest in each and every item of Company Owned Intellectual
Property;
xvii. (A)
abandon, disclaim, dedicate to the public, sell, assign or grant any security interest in, to or under any Company Owned Intellectual Property or Company Licensed
Intellectual Property, including failing to perform or cause to be performed all applicable filings, recordings and other acts, or to pay or cause to be paid all required fees and material Taxes, to
maintain and protect its interest in Company Owned Intellectual Property or Company Licensed Intellectual Property; (B) grant to any third party any license, or enter into any covenant not to
sue, with respect to any Company Owned Intellectual Property or Company Licensed Intellectual Property, except in the ordinary course of business consistent with past practice; (C) develop,
create or invent any Intellectual Property jointly with any third party, except under existing arrangements that have been disclosed to Parent; (D) disclose or allow to be disclosed any
confidential information or confidential Company Owned Intellectual Property or Company Licensed Intellectual Property to any person, other than employees of the Company or its Subsidiaries that are
subject to a confidentiality or non-disclosure covenant protecting against further disclosure thereof, except under existing arrangements that have been disclosed to Parent; or
(E) fail to notify Parent promptly of any infringement, misappropriation or other violation of or conflict with any material Company Owned Intellectual Property or Company Licensed Intellectual
Property of which the Company or any of its Subsidiaries becomes aware and to consult with Parent regarding the actions (if any) to take to protect such Company Owned Intellectual Property or Company
Licensed Intellectual Property;
xviii. fail
to make in a timely manner any filings with the SEC required under the Securities Act or the Exchange Act or the rules and regulations promulgated thereunder;
xix. fail
to maintain (with insurance companies substantially as financially responsible as its existing insurers) insurance in at least such amounts and against at least
such risks and losses as are consistent in all material respects with the Company's and its Subsidiaries' past practice;
xx. write
down or write up or fail to write down or write up the value of any receivables or revalue any assets of the Company, other than in the ordinary course of business
and in accordance with GAAP;
xxi. form
any Subsidiary;
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xxii. enter
into any agreement, understanding or arrangement with respect to the voting or registration of the capital stock of the Company or any of its Subsidiaries;
xxiii. take
any action to render inapplicable, or to exempt any third party from, the provisions of any antitakeover Laws of any Governmental Authority;
xxiv. knowingly
take or fail to take any action in breach of this Agreement or for the purpose of materially delaying or preventing (or which would be reasonably expected to
materially delay or prevent) the consummation of the transactions contemplated hereby;
xxv. authorize,
recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution of the Company or any of its Subsidiaries; or
xxvi. announce
an intention, authorize, resolve, enter into any formal or informal agreement or otherwise make a commitment, to do any of the foregoing or any other action
inconsistent with the foregoing.
c. In
addition, between the date of this Agreement and the Effective Time, the Company and its Subsidiaries shall (i) prepare and timely file all material Tax returns
required to be filed (and shall provide Parent with copies of such material Tax returns a reasonable period of time prior to filing for Parent's review, but not approval, and shall incorporate in any
final draft Parent's reasonable comments, to the extent consistent with applicable law), (ii) timely pay all Taxes shown to be due and payable on such material Tax Returns, and
(iii) promptly notify Parent of any notice of any suit, claim, action, investigation, audit or proceeding in respect of any Tax matters (or any significant developments with respect to ongoing
suits, claims, actions, investigations, audits or proceedings in respect of such material Tax matters).
ARTICLE VI
ADDITIONAL AGREEMENTS
a. As
promptly as practicable after the execution of this Agreement, the Company shall prepare and file with the SEC the preliminary proxy statement to be sent to the
stockholders of the Company relating to the Company Stockholders' Meeting (as defined in Section 6.02) (such proxy statement, as amended or supplemented, being referred to herein as the
"
Proxy Statement
"), it being understood and agreed that the preliminary proxy statement shall in no event be filed with the SEC later than the twentieth
calendar day following the date of this Agreement. The Company shall respond as promptly as practicable to any comments of the SEC with respect to the Proxy Statement. Parent shall furnish all
information concerning it to the Company as may be reasonably requested in connection with the preparation, filing and distribution of the Proxy Statement. The Company shall promptly (but in any event
within one business day) notify Parent upon the receipt of any comments from the SEC or its staff or any request from the SEC or its staff for amendments or supplements to the Proxy Statement and
shall provide Parent with copies of all written correspondence between it and its representatives, on the one hand, and the SEC and its staff, on the other hand. Prior to filing or mailing the Proxy
Statement (or any amendment or supplement thereto) or responding to any comments of the SEC with respect thereto, the Company (i) shall provide Parent a reasonable opportunity to review and
comment on such document or response, (ii) shall include in such document or response all comments reasonably proposed by Parent and (iii) shall not file or mail such document or respond
to the SEC prior to receiving the approval of Parent, which approval shall not be unreasonably withheld or delayed, except as to each of clauses "(i)" through "(iii)" subject to the right of the
Company to make a Change in the Company Recommendation in accordance with Section 6.04(c) of this Agreement (and with respect to every disclosure relating thereto). After all of the comments
received from the SEC have been cleared by the SEC staff (or, if applicable, after the expiration of the applicable period for comment) and all
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information
required to be contained in the Proxy Statement has been included therein by the Company, the Company shall file the definitive Proxy Statement with the SEC and cause the Proxy Statement
to be disseminated (including by electronic delivery if permitted) as promptly as reasonably practicable, to its stockholders of record, as of the record date established by the Company Board and
shall furnish the information required to be provided to the stockholders of the Company pursuant to the DGCL and any other applicable Law. If at any time prior to the Company Stockholders' Meeting,
any information relating to the Company, Parent or any of their respective affiliates, officers or directors, is discovered by the Company or Parent which should be set forth in an amendment or
supplement to the Proxy Statement so that the Proxy Statement shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they are made, not misleading, the party which discovers such information shall promptly notify the other parties hereto
and an appropriate amendment or supplement describing such information shall be filed with the SEC and, to the extent required by applicable Law, disseminated to the stockholders of the Company.
b. Subject
to Sections 6.04(c) and 6.04(d), the Proxy Statement shall include the recommendation of the Company Board to the stockholders of the Company in favor of
approval and adoption of this Agreement (the "
Company Recommendation
"). Except as provided in Section 6.04(c) or in Section 6.04(d), the
Company covenants that none of the Company Board or any committee thereof shall withdraw, amend, change or modify in a manner adverse to Parent or Merger Sub, the Company Recommendation or propose
publicly to withdraw, amend, modify or change in a manner adverse to Parent or Merger Sub the Company Recommendation (a "
Change in the Company
Recommendation
").
c. Parent
represents that the information supplied by Parent for inclusion in the Proxy Statement shall not, at (i) the time the Proxy Statement (or any amendment
thereof or supplement thereto) is filed with the SEC, (ii) the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the Company, and
(iii) the time of the Company Stockholders' Meeting, contain any untrue statement of a material fact or fail to state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were made, not misleading.
d. The
Company represents that the information supplied by the Company for inclusion in the Proxy Statement shall not, at (i) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is filed with the SEC, (ii) the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the
Company, and (iii) the time of the Company Stockholders' Meeting, contain any untrue statement of a material fact or fail to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All documents that the Company is responsible for filing with the SEC in connection
with the Merger or the other transactions contemplated by this Agreement including the Proxy Statement will comply as to form and substance in all material respects with the applicable requirements of
the Securities Act and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder.
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The Company shall, as promptly as practicable after the date of this Agreement, establish a record date (which will be as promptly as
reasonably practicable following the fifth business day immediately following the date of the public announcement of the execution of this Agreement) for, duly call, give notice of, convene and hold a
meeting of its stockholders, which meeting the Company shall cause to occur as soon as commercially practicable (taking into account applicable Law and desirable time for solicitation of votes) but in
any event within 35 days following the mailing of the Proxy Statement to the extent practicable taking into account applicable Law (and taking into account any instruction and/or advice
provided by the SEC), such date to be selected after consulting with Parent (the "
Company Stockholders' Meeting
"), for the purpose of voting upon the
approval and adoption of this Agreement;
provided
,
however
, that (a) if the Company is unable to
obtain a quorum of its stockholders at such time, the Company may extend the date of the Company Stockholders' Meeting by no more than ten business days and the Company shall use its commercially
reasonable efforts during such ten business day period to obtain such a quorum as soon as practicable and (b) the Company shall not, without the prior written consent of Parent, delay the
Company Stockholders' Meeting except to the extent (and only to the extent) the Company reasonably determines that such delay is required by applicable Law to comply with written or oral comments made
by the SEC with respect to the Proxy Statement. Subject to Section 6.04(c), the Company Board
shall recommend to holders of the Shares that they adopt and approve this Agreement, and shall include such recommendation in the Proxy Statement. Without limiting the generality of the foregoing, the
Company agrees that its obligations pursuant to this Section 6.02 shall not be affected by the commencement, public proposal, public disclosure or communication to the Company or any other
person of any Competing Transaction. The Company shall use its reasonable best efforts to solicit from its stockholders proxies in favor of the approval and adoption of this Agreement and shall take
all other action necessary or advisable to secure the required vote or consent of its stockholders, except in the event and to the extent that the Company Board, in accordance with
Section 6.04(c), makes a Change in the Company Recommendation.
a. Except
as prohibited by applicable Law (including antitrust Law), from the date of this Agreement until the Effective Time, the Company shall: (i) provide to
Parent (and Parent's officers, directors, employees, accountants, consultants, legal counsel, agents and other representatives, collectively,
"
Representatives
") reasonable access, at reasonable times during normal business hours and upon prior reasonable notice, to the officers, employees,
agents, properties, offices and other facilities of the Company and its Subsidiaries and to the books and records thereof; and (ii) furnish promptly to Parent such information concerning the
business, properties, contracts, assets, liabilities, personnel and other aspects of such party and its subsidiaries as Parent or its Representatives may reasonably request, except for
(x) documents prepared in connection with the consideration of a Competing Transaction that did not result from a breach of Section 6.04, or (y) materials prepared in connection
with the Company Board's consideration of the Transactions (unless otherwise required to be furnished pursuant to this Agreement or applicable Law);
provided
,
however
, that the Company shall have no obligation to provide such access or furnish such
information to the extent it may result in the loss of attorney-client privilege. The parties hereto will use commercially reasonable efforts to make appropriate substitute disclosure arrangements
under circumstances in which the restrictions of the preceding sentence apply.
b. All
information obtained by Parent pursuant to this Section 6.03 shall be kept confidential in accordance with that certain confidentiality letter agreement, dated
August 30, 2012, between Parent and the Company (the "
Confidentiality Agreement
").
c. No
investigation pursuant to this Section 6.03 shall affect any representation or warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto.
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a. The
Company agrees that neither it nor any Subsidiary nor any of the directors or officers of it or any Subsidiary will, and that it will cause its and its Subsidiaries'
agents, advisors and other representatives (including, without limitation, any investment banker, attorney or accountant retained by it or any Subsidiary), not to, and shall not authorize or permit
its employees to, directly or indirectly: (i) solicit, initiate, knowingly facilitate or knowingly encourage (including by way of furnishing nonpublic information or assistance), or take any
other action intended to induce or facilitate, any inquiries with respect to, or the making of any indication of interest, proposal or offer (including, without limitation, any indication of interest,
proposal or offer to its stockholders) that constitutes, or may reasonably be expected to lead to, any Competing Transaction (as defined below); (ii) enter into or maintain or continue
discussions or negotiations with any person or entity in furtherance of such inquiries or to obtain a proposal or offer for a Competing Transaction; (iii) agree to, approve, endorse or
recommend any Competing Transaction or enter into any letter of intent or other contract, agreement or commitment contemplating or otherwise relating to or reasonably likely to lead to any Competing
Transaction (except for a confidentiality agreement as contemplated by Section 6.04(b)(A)(iii)) or enter into any contract, arrangement or agreement in principal requiring the Company to
abandon, terminate or fail to consummate the Merger or any other Transaction contemplated by this Agreement or resolve, propose or agree to do any of the foregoing; (iv) terminate, amend, waive
or fail to use commercially reasonable efforts to enforce any rights under any "standstill" or other similar agreement between the Company or any of its Subsidiaries and any person, or
(v) authorize or permit any of the officers, directors or employees of the Company or any of its Subsidiaries, or any investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any of its Subsidiaries, to take any such action (the obligations described in the foregoing clauses "(i)" through "(iii)" and the foregoing
clause "(v)" (as it relates to the foregoing clauses "(i)" through "(iii)") shall be referred to herein collectively as the "
Specified No Solicitation
Obligations
"). The Company shall notify Parent as promptly as practicable (and in any event within twenty-four hours after the Company attains knowledge thereof if
such knowledge is obtained in writing or one business day if such knowledge is obtained in any other manner), orally and in writing, if any proposal or offer, or any inquiry or contact with any person
with respect thereto, regarding a Competing Transaction is made, such notice to include the identity of the person making any such inquiry, request, proposal or expression of interest and the material
terms and conditions of such inquiry, request, proposal or expression of interest (including, if in written form, a copy of such inquiry, request, proposal or expression of interest). The Company
immediately shall cease and cause to be terminated all existing activities, discussions or negotiations with any parties conducted heretofore with respect to or which would reasonably be expected to
lead to a Competing Transaction. The Company shall promptly request each person that has heretofore executed a confidentiality agreement in connection with its consideration of acquiring (whether by
merger, acquisition of stock or assets or otherwise) the Company or any Subsidiary, if any, to return (or if permitted by the applicable confidentiality agreement, destroy) all confidential
information heretofore furnished to such person by or on behalf of the Company or any Subsidiary. Any violation of this Section 6.04 by any representative of the Company, or by any Subsidiary
or representative of any Subsidiary of the Company, shall constitute a breach hereof by the Company. For the avoidance of doubt, the fact that a representative of the Company has referred a third
party to a publicly filed copy of this Agreement, without more, shall not in itself be deemed a breach of the Specified No Solicitation Obligations.
b. Notwithstanding
anything to the contrary in this Agreement, from the date hereof and prior to the Company Stockholders' Meeting, the Company Board may furnish information
to, and enter into discussions and negotiations with, a person who has made an unsolicited, written, bona fide proposal or offer regarding a Competing Transaction (a "
Qualified
Bidder
") if, and only if, (A) such proposal or offer did not result from a breach of the provisions of this Section 6.04; (B) the Company Board has
(i) determined, in its good faith judgment (after having received the advice of a financial advisor of
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internationally
recognized reputation), that such proposal or offer constitutes or would reasonably be expected to lead to a Superior Proposal (as defined below) and the Company Board determines in
good faith (after consultation with outside legal counsel) that, the failure of the Company Board to take such action would be inconsistent with the Company Board's fiduciary duties under applicable
Law; (ii) provided written notice to Parent of its intent to furnish information or enter into discussions and negotiations with such Qualified Bidder at least one business day prior to taking
any such action and shall provide Parent with at least forty-eight hours prior written notice (or such shorter period of time as given to the members of the Company Board) of any meeting of the
Company Board or any committee thereof at which the Company Board or such committee is expected to consider any Competing Transaction; and (iii) obtained from such Qualified Bidder (if one does
not already exist) an executed confidentiality agreement (the terms of which are no less favorable to the Company than those contained in the Confidentiality Agreement) and (C) the Company
simultaneously provides or makes available to Parent any non-public information concerning the Company or its Subsidiaries provided or made available to such Qualified Bidder which was not
previously provided or made available to Parent. The Company shall update the Parent as to any material developments with respect to such discussions and negotiations.
c. Except
as set forth in this Section 6.04(c) or in Section 6.04(d), neither the Company Board nor any committee thereof shall make a Change in the Company
Recommendation or approve or recommend, or cause or permit the Company to enter into any letter of intent, or other contract, agreement or obligation with respect to, any Competing Transaction (other
than a confidentiality agreement contemplated by subsection (b)(A)(iii) of this Section 6.04). Notwithstanding the foregoing or anything to the contrary contained elsewhere in this
Agreement, at any time prior to the time of the Company Stockholders' Meeting, the Company may make a Change in the Company Recommendation and thereafter may terminate this Agreement pursuant to
Section 8.01(a)(v) and, concurrently with such termination may enter into a definitive agreement to execute a Superior Proposal, only if: (i) a Superior Proposal is made and such
Superior Proposal did not result from a breach by the Company of this Section 6.04; (ii) the Company Board determines, in its good faith judgment after consultation with independent
legal counsel (who may be the Company's regularly engaged independent legal counsel), that failure to make a Change in the Company Recommendation in response to such Superior Proposal and terminate
this Agreement pursuant to Section 8.01(a)(v) or enter into a definitive agreement to execute a Superior Proposal, would be inconsistent with its fiduciary obligations to the Company and its
stockholders under applicable Law, (iii) the Company Board provided written notice to Parent (a "
Notice of Superior Proposal
") advising Parent
that the Company Board has received a Superior Proposal, specifying the material terms and conditions of such Superior Proposal and identifying the person making such Superior Proposal and indicating
that the Company Board intends to make a Change in the Company Recommendation, terminate this Agreement pursuant to Section 8.01(a)(v) or enter into a definitive agreement to execute a Superior
Proposal, and, if so, which actions and the manner in which it intends to do so, (iv) if Parent does not, within five business days of Parent's receipt of the Notice of Superior Proposal (the
"
Response Window
"), make an offer or a counteroffer that the Company Board determines, in its good faith judgment (after having received the advice of a
financial advisor of internationally recognized reputation) to be at least as favorable to the Company's stockholders as such Superior Proposal (it being understood and agreed that any material
amendments to such Superior Proposal, including the financial terms of such Superior Proposal, shall each require the delivery of a new Notice of Superior Proposal and the commencement of a new
Response Window, but such Response Window shall be for a period of three business days) and (v) the Company pays the Termination Fee pursuant to Section 8.03 to Parent prior to or
concurrently with terminating this Agreement.
d. Notwithstanding
the foregoing or anything to the contrary contained elsewhere in this Agreement, at any time prior to the time of the Company Stockholders' Meeting, the
Company may make a Change in the Company Recommendation (other than due to a proposal for a Competing
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Transaction,
which is governed by Section 6.04(c) above) in response to or as a result of a material event, material development or material change in circumstances that does not relate to any
Competing Transaction and that was not known or reasonably foreseeable by the Company Board on the date of this Agreement, occurring or arising after the date of this Agreement (or if known or
foreseeable, the consequences of which are not known to or reasonably foreseeable by the Company Board as of the date hereof), which event, development or change in circumstance, or any material
consequences thereof, becomes known to the Company Board prior to the time of the Company Stockholders' Meeting (any such material event, material development or material change in circumstances
unrelated
to a Competing Transaction being referred to as an "
Intervening Event
"), but only if: (i) no member of the Company Board had knowledge, as of the
date of this Agreement, that such Intervening Event was reasonably likely to occur or arise after the date of this Agreement (or if known or foreseeable, the consequences of which are not known to or
reasonably foreseeable by the Company Board as of the date hereof); (ii) the Company Board provided Parent at least five business days advance written notice prior to making such Change in the
Company Recommendation providing reasonable details of the Intervening Event and advising Parent that the Company Board intends to make a Change in the Company Recommendation; and (iii) prior
to any Change in the Company Recommendation, the Company Board determines, in its good faith judgment (after having received the advice of a financial advisor of internationally recognized reputation)
and after taking into account the Parent's offers or counteroffers made during such five business days that failure to make a Change in the Company Recommendation would be inconsistent with its
fiduciary obligations to the Company and its stockholders under applicable Law.
e. Nothing
in this Section 6.04 or elsewhere in this Agreement shall be deemed to prohibit the Company from, (x) complying with Rule 14e-2,
Rule 14d-9 or Item 1012(a) of Regulation M-A promulgated under the Exchange Act, or (y) making any disclosure to its stockholders if the Company
Board determines in good faith (after consultation with outside legal counsel) that the failure to do so would be inconsistent with its fiduciary duties under applicable Law; provided that:
(i) this Section 6.04(e) shall not be deemed to permit the Company Board to make a Change in the Company Recommendation except, in each case, to the extent permitted by
Section 6.04(c) or Section 6.04(d); and (ii) nothing in this Section 6.04(e) shall change any disclosure made in accordance with the provisions of this
Section 6.04(e) from being a Change in the Company Recommendation if such disclosure meets the definition of a Change in the Company Recommendation.
f. A
"
Competing Transaction
" means any of the following transactions or series of related transactions (other than the
Transactions): (i) any merger, tender offer, consolidation, share exchange, business combination, recapitalization, reorganization, liquidation, dissolution or other similar transaction
involving the Company; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets that constitute at least 15% of the assets of the Company and its Subsidiaries,
taken as a whole; (iii) any sale, exchange, transfer or other disposition of 15% or more of any class of equity securities of the Company; or (iv) any tender offer or exchange offer
that, if consummated, would result in any person beneficially owning 15% or more of any class of equity securities of the Company.
g. A
"
Superior Proposal
" means an unsolicited written bona fide offer or proposal made by a third party with respect to a
Competing Transaction on terms and conditions that the Company Board determines, in its good faith judgment, after having received the advice of a financial advisor of internationally recognized
reputation and outside legal counsel, and taking into account all legal, financial and regulatory and other aspects of the proposal (including timing) and any changes to the terms of this Agreement
proposed by Parent in response to such offer or proposal or otherwise, to be more favorable, including from a financial point of view, to the stockholders of the Company than the Merger and which is
reasonably likely to be consummated. For purposes of the definition of "Superior
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Proposal,"
each reference to "15%" in the definition of "Competing Transaction" shall be replaced with "50%".
For the period commencing at the Effective Time and ending December 31, 2013, Parent shall cause the Surviving Corporation and
its subsidiaries to maintain for each employee of the Company and its Subsidiaries as of immediately prior to the Effective Time (each, a "
Continuing
Employee
") employee benefit plans, programs, arrangements and policies that are comparable in the aggregate to the employee benefit plans, programs, arrangements and policies
available to the Continuing Employees immediately prior to the Effective Time. Upon their transition to any employee benefit plan, program, arrangement or policy established or maintained by the
Surviving Corporation or any of its subsidiaries, employees of the Company or any Subsidiary shall receive credit for purposes of eligibility to participate and vesting (but not for benefit, vacation,
or paid time off accruals) under any such employee benefit plan, program or arrangement for service accrued or deemed accrued prior to the Effective Time with the Company or any Subsidiary; provided,
however, that such crediting of service shall not operate to duplicate any benefit or the funding of any such benefit. In addition, Parent shall waive, or cause to be waived, any limitations on
benefits relating to any pre-existing conditions to the same extent such limitations are waived under any comparable plan of Parent or its subsidiaries and recognize, for purposes of
annual deductible and out-of-pocket limits under its medical and dental plans, deductible and out-of-pocket expenses paid by employees of the Company
and its subsidiaries in the calendar year in which the Effective Time occurs.
a. The
Certificate of Incorporation and By-laws of the Surviving Corporation shall contain provisions no less favorable with respect to indemnification than are
currently set forth in the Certificate of Incorporation of the Company and the By-laws of the Company, which provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the Effective Time, were directors, officers, employees,
fiduciaries or agents of the Company, unless such modification shall be required by law.
b. For
not less than six (6) years from and after the Effective Time, Parent shall cause the Surviving Corporation to indemnify and hold harmless all past and present
directors, officers and employees of the Company (the "
Indemnified Persons
") with respect to all acts or omissions by them in their respective
capacities occurring at or prior to the Effective Time to the same extent such Persons are indemnified as of the date of this Agreement by the Company pursuant to (i) the Company Governing
Documents as in effect on the date of this Agreement and (ii) indemnification agreements, if any, in existence on the date of this Agreement with any directors, officers or employees of the
Company.
c. The
Surviving Corporation shall maintain, in effect for six years from and after the Effective Time, insurance "tail" or other insurance policies with respect to
directors' and officers' liability insurance relating to matters occurring prior to the Effective Time, in an amount and scope at least as favorable as the coverage applicable to directors and
officers of the Company as of the Effective Time; provided, however, that if such "tail" or other policies are not available at an annual cost not greater than 200% of the last annual premium paid
prior to the date hereof under such policy (the "
Insurance Cap
"), then the Surviving Corporation shall cause to be obtained as much comparable insurance
as can reasonably be obtained in its good faith judgment at a cost up to but not exceeding the Insurance Cap.
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a. Upon
the terms and subject to the conditions of this Agreement, each of the parties hereto shall (i) make promptly, and in no event later than ten business days
after the date hereof, its respective filings, and thereafter shall make promptly all other required submissions and provide such other information as may reasonably be requested, under the HSR Act or
other applicable foreign, federal or state antitrust and competition Laws with respect to the Transactions and (ii) promptly use its reasonable best efforts to take, or cause to be taken, any
and all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws or otherwise to consummate and make effective the Transactions, including,
without limitation, using its reasonable efforts to obtain all Permits, consents, approvals, authorizations, qualifications and orders of Governmental Authorities and parties to contracts with the
Company and the Subsidiaries, to resolve any objections which may be asserted by any Governmental Authority with respect to the Transaction, and to cause all applicable waiting periods under the HSR
Act and other foreign, federal and state antitrust and competition Laws to expire or be terminated, as are necessary for the consummation of the Transactions and to fulfill the conditions to the
Merger and using its reasonable efforts to defend against any Action that restricts, prevents or prohibits consummations of the Transactions.
b. In
no event shall Parent or Merger Sub be obligated pursuant to this Agreement to divest or hold separate any assets or to take or commit to take any action that would be
reasonably likely to impose material limitations on Parent's ownership or operation (or that of any Parent's Subsidiaries or affiliates) of all or a material portion of the Company's business or
assets.
c. Subject
to the Confidentiality Agreement and to reasonable restrictions limiting access to counsel, each party shall promptly (i) notify the other parties of and
provide a copy of any material communication it provides to or receives from any Governmental Authority relating to any filings, or submissions, or any investigation, under the HSR Act or other
applicable foreign, federal or state antitrust or competition Laws relating to the Transactions; (ii) consult with and consider in good faith the views of the other parties before communicating
in writing or orally with, or submitting any analyses, presentations, memoranda, briefs, white papers, arguments, opinions or proposals to, or making any appearance before, any Governmental Authority
regarding any filing or investigation under the HSR Act or other applicable foreign, federal or state antitrust or competition Laws, and to the extent permitted by any Governmental Authority, permit
the other parties to be present during any meeting or conference relating to the Transaction or any such investigation; and (iii) provide all reasonable assistance and cooperation to allow the
other parties to prepare and submit any filings, or submissions under the HSR Act or other applicable foreign, federal or state antitrust or competition Laws, including providing information that the
other parties may from time to time require for the purpose of any filing, notification, application or request for further information made in respect of any such filing or investigation. No party
shall withdraw any HSR filing, agree to extend any applicable waiting period, or agree with any Governmental Authority not to consummate the Transaction for any period of time, without the consent of
the other parties. Any HSR filing fees shall be paid 50% by the Company and 50% by Parent.
Parent shall take all action necessary to cause Merger Sub to perform its obligations under this Agreement and to consummate the Merger
on the terms and subject to the conditions set forth in this Agreement.
The Company shall, if practicable, provide prior notice to Parent prior to making publicly available its financial results for any
period after the date of this Agreement and prior to filing any report or
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document
with the SEC after the date of this Agreement, it being understood (for the avoidance of doubt) that: (i) Parent's consent shall not be required in order to make any such filings; and
(ii) Parent shall have no liability by reason of such consultation.
The initial press release relating to this Agreement shall be a joint press release the text of which has been agreed to by each of
Parent and the Company. Thereafter, for so long as this Agreement is in effect, neither Parent nor the Company shall, nor shall either permit any of its Subsidiaries to, issue or cause the publication
of any press release or other public announcement with respect to, or otherwise make any public statement concerning, the transactions contemplated by this Agreement without the consent of the other
party, which consent shall not be unreasonably withheld or delayed, except as may be required by applicable Law or the applicable rules of any stock exchange, in which event such party shall endeavor,
on a basis reasonable under the circumstances, to provide a meaningful opportunity to the other parties and their counsel to review and comment upon such press release or other announcement and shall
in good faith give due consideration to all reasonable additions, deletions or changes suggested thereto, except that the Company shall not be required to consult with Parent with respect to any
public statements relating to Change in the Company Recommendation or Competing Transaction. Notwithstanding anything to the contrary in this Section 6.10, each of Parent and the Company may
make any press release or public statement with respect to the Transactions to the extent repeating or affirming disclosure made in any prior press release or public statement validly made in
accordance with this Section 6.10.
a. Notwithstanding
anything to the contrary contained in this Agreement, each of the parties hereto: (i) agrees that it will not bring or support any person in any
action, suit, proceeding, cause of action, claim, cross-claim or third-party claim of any kind or description, whether in law or in equity, whether in contract or in tort or otherwise, against any of
lender under any existing loan facility of Parent or Merger Sub or provider of any commitment for any loan facility to Parent or Merger Sub (the "
Financing
Sources
") in any way relating to this Agreement or any of the transactions contemplated by this Agreement, including, but not limited to, any dispute arising out of or relating
in any way to any commitment letters or any loan agreement related to any financing, or financing commitment, provided or to be provided by any Financing Source (any such financing a
"
Financing
" and any such agreement or commitment a "
Facility Commitment
") or the performance thereof or
the financings contemplated thereby, in any forum other than the federal and New York state courts located in the Borough of Manhattan within the City of New York; (ii) agrees that, except as
specifically set forth in any Facility Commitment, all claims or causes of action (whether at law, in equity, in contract, in tort or otherwise) against any of the Financing Sources in any way
relating to any Facility Commitment or the performance thereof or the financings contemplated thereby, shall be exclusively governed by, and construed in accordance with, the internal laws of the
State of New York, without giving effect to principles or rules or conflict of laws to the extent such principles or rules would require or permit the application of laws of another jurisdiction; and
(iii) hereby irrevocably and unconditionally waives any right such party may have to a trial by jury in respect of any litigation (whether in law or in equity, whether in contract or in tort or
otherwise) directly or indirectly arising out of or relating in any way to any Facility Commitment or the performance thereof or the financings contemplated thereby.
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b. Prior
to the Closing Date, if Parent wishes to borrow cash to fund the Merger Consideration from a reputable bank, the Company shall, at Parent's sole expense, cause its
Subsidiaries to, and shall use commercially reasonable efforts to cause its Representatives (including its legal and accounting Representatives) to, provide reasonable cooperation in connection with
the arrangement of the such financing as may be reasonably requested by Parent, including without limitation (i) providing reasonable and customary due diligence materials to the sources of
such financing and any rating agencies, including financial statements and financial and other information, as soon as reasonably practicable after request therefor, that are reasonably and
customarily required in connection with such financing; (ii) assisting Parent with the preparation of rating agency presentations and similar documents and materials in connection with the
financing and permitting the use of the Company name and logo in the offering materials; (iii) participating in a reasonable number of meetings, presentations and due diligence sessions in
connection with the financing, (iv) assisting in the preparation of customary offering materials and private placement memorandum and/or bank information memorandum with respect to the
financing, as may be reasonably requested by Parent; and (v) facilitating and providing pertinent information for the pledging of collateral for the financing (the
"
Required Financial Information
"); provided, that: (1) such requested assistance and cooperation does not unreasonably interfere with the ongoing
operation of the Company and its Subsidiaries and does not create undue burden for the operation of the Company; (2) the Company shall not be required to pay any commitment or other fee or
incur any liability or expense in connection with any financing; (3) the effectiveness of any documentation executed by the Company shall be subject to the consummation of the Closing Date;
(4) the Company shall not be required to provide access to or disclose information to any party or entity unless such person or entity is bound by confidentiality obligations reasonably
satisfactory to the Company; and (5) the Company shall not be required to provide access to or disclose information where the Company reasonably determines that such access or disclosure would
jeopardize the attorney-client privilege of the Company or any of its Subsidiaries or contravene ant Law or any contract to which the Company or any of its Subsidiaries is a party. Notwithstanding
anything to the contrary in this Agreement, the Required Financial Information required to be delivered pursuant to this Section 6.11(e) shall be prepared in accordance with GAAP (except, in
the case of unaudited financial statements, for the absence of footnotes and normal, recurring year-end adjustments).
c. Parent
shall, and shall cause its affiliates to, (i) promptly upon request by the Company, reimburse the Company for all reasonable and documented
out-of-pocket costs incurred by the Company in connection with cooperation provided for in Section 6.11(a) (such reimbursement to be made promptly and in event within
three business days of delivery of reasonably acceptable documentation evidencing such expenses); and (ii) indemnify and hold harmless the Company and its Representatives from and against any
and all Losses (as defined below) suffered or incurred by them in connection with the arrangement of any financing, and any information utilized in connection therewith. All non-public or
otherwise confidential information regarding the Company and its Subsidiaries obtained by Parent, its affiliates or their respective Representatives pursuant to this Section 6.11 shall be
subject to the terms of the Confidentiality Agreement. Loss shall mean any include any loss, damage, injury, liability, claim, demand, settlement, judgment, award, fine, penalty, tax, fee (including
reasonable attorney's fees), charge, cost (including cost of investigation) or expense of any nature.
d. For
the avoidance of doubt, the obligation of Parent and Merger Sub to close the transactions contemplated by this Agreement is not conditioned upon the consummation of
any financing and, accordingly, the parties agree that a failure of Parent and Merger Sub to close the transactions contemplated by this Agreement resulting from a failure or inability to consummate
any financing constitutes a breach for purposes of this Agreement, notwithstanding compliance by Parent with Section 6.11.
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In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement
or to vest the Surviving Corporation with full title to the rights, privileges and powers of any of the parties to the Merger, the proper officers and directors of each party to this Agreement and
their respective Subsidiaries shall take all such necessary action as may be reasonably requested by, and at the sole expense of, Parent.
Parent and the Company agree that, in order to most effectively compensate and retain those officers and directors of the Company who
are subject to the reporting requirements of Section 16(a) of the Exchange Act in connection with the Merger, both prior to and after the Effective Time, it is desirable that such persons not
be subject to a risk of liability under Section 16(b) of the Exchange Act to the fullest extent permitted by applicable Law in connection with the transactions contemplated by this Agreement,
and for that compensatory and retentive purpose agree to the provisions of this Section 6.13. Promptly after the date hereof and prior to the Effective Time, the Company shall take all such
steps as may be required to cause any dispositions of shares of Company Common Stock resulting from the transactions contemplated by this Agreement by each individual who is subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act, to the extent permitted by
applicable Law.
If any "control share acquisition," "fair price" or other anti-takeover laws or regulations enacted under state or federal
laws becomes or is
deemed to become applicable to the Company, the Merger, the Voting Agreements or any other transaction contemplated hereby, then the Company Board shall take all action necessary to render such
statute inapplicable to the foregoing.
The Company shall promptly notify Parent of any litigation commenced after the date hereof against the Company or any of its officer or
directors by any Company stockholder (on such stockholder's own behalf or on behalf of the Company) relating to this Agreement or the transactions contemplated hereby (including the Merger) and shall
keep Parent reasonably informed regarding the litigation. The Company shall give Parent the opportunity to participate in the defense or settlement of any such litigation brought by stockholders of
the Company.
The Company shall promptly notify Parent of any change or event having a Company Material Adverse Effect;
provided
,
however
, that the delivery of any notice pursuant to this Section 6.16 shall not limit
or otherwise affect the remedies available hereunder to Parent. Parent shall promptly notify the Company of any change or event having a material adverse effect on Parent, or which may otherwise
preclude Parent from consummating the Merger;
provided
,
however
, that the delivery of any notice
pursuant to this Section 6.16 shall not limit or otherwise affect the remedies available hereunder to the Company.
The Company shall, promptly but in any event within five business days, notify Parent in writing if and when the Company becomes aware
of any claim or threatened claim (in writing) that the conduct
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of
the business of the Company or any Subsidiary infringes upon or misappropriates the Intellectual Property Rights of any third party.
ARTICLE VII
CONDITIONS TO THE MERGER
The obligations of the Company, Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where
permissible) of the following conditions:
a.
Company Stockholder Approval.
This Agreement shall have been approved and adopted by the Requisite Company
Stockholder Approval.
b.
No Order.
No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any law,
rule, regulation, judgment, decree, executive order or award (an "
Order
") (whether temporary, preliminary or permanent) which is then in effect and has
the effect of enjoining, restraining, prohibiting, making illegal or otherwise prohibiting the consummation of the Merger or the other Transactions.
c.
No Proceeding or Litigation.
No proceeding or litigation initiated by any Governmental Authority against
Parent, Merger Sub or the Company or their respective affiliates seeking to prohibit the Merger or any of the Transactions shall be pending.
d.
U.S. Antitrust Waiting Periods.
Any waiting period (and any extension thereof) applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated.
SECTION 7.02
Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where permissible under
applicable Law) of the following additional conditions:
a.
Representations and Warranties.
The representations and warranties of the Company contained in this Agreement
shall be true and correct (without giving effect to any limitation as to "materiality" or "Company Material Adverse Effect" set forth therein), in each case as of the date hereof and as of the
Effective Time, as though made as of the Effective Time (except to the extent expressly made as of a specific date, in which case as of such date), except where the failure of such representations and
warranties of the Company to be so true and correct, individually or in the aggregate, has not had and does not have a Company Material Adverse Effect.
b.
Agreements and Covenants.
The Company shall have performed or complied in all material respects with the
agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time.
c.
Officer Certificate.
The Company shall have delivered to Parent a certificate, dated as of the Closing,
signed by the chief executive officer of the Company, certifying as to the satisfaction of the conditions specified in Sections 7.02(a) and 7.02(b).
d.
Material Adverse Effect.
No Company Material Adverse Effect shall have occurred since the date of this
Agreement.
e.
FIRPTA Certificate.
The Company shall have delivered to Parent a properly completed certificate satisfying
the requirements of Reg. Section 1.1445-2(c)(3).
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The obligations of the Company to consummate the Merger are subject to the satisfaction or waiver (where permissible) of the following
additional conditions:
a.
Representations and Warranties.
The representations and warranties of Parent and Merger Sub contained in this
Agreement shall be true and correct (without giving effect to any limitation as to "materiality" or similar qualifications set forth therein) in each case as of the date hereof and as of the Effective
Time, as though made as of the Effective Time (except to the extent expressly made as of a specific date, in which case as of such date), except where the failure of such representations and
warranties of Parent or Merger Sub to be so true and correct, individually or in the aggregate, has not had, does not have and would not reasonably be expected to have a material adverse effect as to
Parent or as to Parent's ability to consummate the transactions contemplated herein without any material delay.
b.
Agreements and Covenants.
Parent and Merger Sub shall have performed or complied in all material respects
with the agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time.
c.
Officer Certificate.
Parent shall have delivered to the Company a certificate, dated the date of the Closing,
signed by the chief executive officer of Parent, certifying as to the satisfaction of the conditions specified in Sections 7.03(a) and 7.03(b).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
a. This
Agreement may be terminated and the Merger and the other Transactions may be abandoned at any time prior to the Effective Time by action taken or authorized by the
Board of Directors of the terminating party as follows:
i. by
mutual written consent of Parent and the Company duly authorized by the Boards of Directors of Parent and the Company;
ii. by
either Parent or the Company if the Effective Time shall not have occurred on or before May 15, 2013 (the "
Outside
Date
") (which Outside Date shall be extended to June 14, 2013, to the extent necessary to satisfy the condition set forth in Section 7.01(d) and so long as all
other conditions have been satisfied or shall be capable of being satisfied); provided that that the right to terminate this Agreement under this Section 8.01(a)(ii) shall not be available to
any party if such party has breached this Agreement and such breach has been the principal cause of, or resulted in, the failure of the Merger to be consummated on or before the Outside Date;
iii. by
either Parent or the Company if any Governmental Authority shall have enacted, issued, promulgated, enforced or entered into any Order which is then in effect and
has the effect of permanently enjoining, restraining, prohibiting, making illegal or otherwise prohibiting the consummation of the Transactions;
iv. by
Parent if a Company Triggering Event (as defined below) shall have occurred;
v. prior
to the time of the Company Stockholders' Meeting, by the Company if (A) the Company Board shall have determined to terminate this Agreement to enter into a
transaction with a person that has submitted a Superior Proposal in accordance with Section 6.04(c) and (B) the Company shall not have otherwise breached Section 6.04;
vi. by
either Parent or the Company if this Agreement shall fail to receive the requisite vote for approval at the Company Stockholders' Meeting;
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vii. by
Parent upon a breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement, or if any representation or
warranty of the Company shall have become untrue, in either case such that the conditions set forth in Section 7.02(a) and Section 7.02(b)
would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue ("
Terminating Company
Breach
"); provided, however, that, if such Terminating Company Breach is curable by the Company, Parent may not terminate this Agreement under this Section 8.01(a)(vii),
unless such breach is not cured within fifteen days after notice of such breach is provided by Parent to the Company;
viii. by
the Company upon a breach of any representation, warranty, covenant or agreement on the part of Parent and Merger Sub set forth in this Agreement, or if any
representation or warranty of Parent and Merger Sub shall have become untrue, in either case such that the conditions set forth in Section 7.03(a) and Section 7.03(b) would not be
satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue ("
Terminating Parent Breach
");
provided, however, that, if such Terminating Parent Breach is curable by Parent and Merger Sub, the Company may not terminate this Agreement under this Section 8.01(a)(viii), unless such breach
is not cured within fifteen days after notice of such breach is provided by the Company to Parent; or
ix. by
Parent if the Company shall have knowingly and intentionally breached the Specified No Solicitation Obligations in a material respect.
b. For
purposes of this Agreement, a "
Company Triggering Event
" shall be deemed to have occurred: (i) upon a Change in
the Company Recommendation; (ii) if the Company Board approves or adopts, recommends to the Company's stockholders to approve or adopt, or enters into an agreement for any Competing
Transaction; (iii) if the Company shall have failed to include in the Proxy Statement the recommendation of the Company Board in favor of the approval and adoption of this Agreement and the
approval of the Merger; (iv) if a tender offer or exchange offer for 15% or more of the outstanding shares of capital stock of the Company is commenced, and the Company Board does not recommend
against acceptance of such tender offer or exchange offer by its stockholders within ten business days following commencement of such offer; or (v) if the Company Board fails to reaffirm
unanimously and publicly its recommendation of this Agreement and the Merger within five business days after Parent requests in writing that such recommendation be reaffirmed publicly; provided that
Parent shall be limited to two such reaffirmation requests that are not made following the disclosure, announcement, commencement, submission or receipt of a proposal for a Competing Transaction,
following the delivery to Parent of a Notice of Superior Proposal pursuant to Section 6.04(c) or following a report from a shareholder or similar advisory service that recommends against
approving and adopting this Agreement.
In the event of the termination of this Agreement pursuant to Section 8.01, this Agreement shall forthwith become void, and
there shall be no liability under this Agreement on the part of any party hereto or any Financing Source, except (a) that Subsection (b) of Section 6.03 (Access to Information;
Confidentiality), Subsection (a) of Section 6.11 (Financing), this Section 8.02, Section 8.03 (Fees and Expenses), Section 9.06 (Parties in Interest; Third Party
Beneficiaries), Section 9.08 (Governing Law) and Section 9.11 (Waiver of Jury Trial), and all other obligations of the parties specifically intended to be performed after the termination
of this Agreement shall survive any termination of this Agreement and (b) nothing herein shall relieve any party from liability for any willful and intentional breach of any of its
representations, warranties, covenants or agreements set forth in this Agreement prior to such termination. For clarity and the avoidance of doubt, the Confidentiality Agreement shall survive the
termination of this Agreement.
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a. Except
as set forth in this Section 8.03, all expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid
by the party incurring such expenses, whether or not the Merger or any other transaction is consummated.
b. The
Company agrees that:
i. if
Parent shall terminate this Agreement pursuant to Section 8.01(a)(iv) or Section 8.01(a)(ix);
ii. if
the Company shall terminate this Agreement pursuant to Section 8.01(a)(v); or
iii. if
(A) Parent or the Company shall terminate this Agreement pursuant to Sections 8.01(a)(ii) or 8.01(a)(vi) or 8.01(a)(vii), (B) prior to the
Company Stockholders' Meeting a proposal for a Competing Transaction has been expressed publicly or to the Company and not clearly withdrawn and (C) the Company enters into an agreement
providing for or consummates a Third Party Acquisition within twelve months after the date of such termination;
then
the Company shall pay to Parent promptly (but in any event no later than one business day after the first of such events shall have occurred) a fee of $9,000,000.00 (the
"
Termination Fee
") less, if applicable, the amount of any Reimbursable Expenses previously paid by the Company to Parent or Merger Sub, which amount
shall be payable in immediately available funds to an account designated by
Parent,
provided
,
however
, that if the Termination Fee is payable as a result of a termination pursuant
to Section 8.01(a)(v), then the Termination Fee shall be payable prior to or simultaneous with such termination.
c. The
parties acknowledge and agree that the provisions for payment of any Termination Fee or Parent's or Merger Sub's Reimbursable Expenses are an integral part of the
transactions contemplated by this Agreement and are included herein in order to induce Parent and Merger Sub to enter into this Agreement and to reimburse Parent and Merger Sub for incurring the costs
and expenses related to entering into this Agreement and attempting to consummate the transactions contemplated by this Agreement. Accordingly, if the Company shall fail to pay in a timely manner the
amounts due pursuant to this Section 8.03 and, in order to obtain such payment, Parent or Merger Sub makes a claim that results in a judgment against the Company, the Company shall pay to
Parent and Merger Sub, as applicable, such Parent's and Merger Sub's reasonable costs and expenses incurred in connection with such suit, together with interest on the amounts set forth in this
Section 8.03 at the prime rate of Citibank N.A. in effect on the date such payment was required to be made. Similarly, if Parent shall fail to pay in a timely manner any Reimbursable Expenses
due to the Company pursuant to this Section 8.03 and, in order to obtain such payment, the Company makes a claim that results in a judgment against Parent, Parent shall pay to the Company the
Company's reasonable costs and expenses incurred in connection with such suit, together with interest on the amounts set forth in this Section 8.03 at the prime rate of Citibank N.A. in effect
on the date such payment was required to be made.
d. "
Third Party Acquisition
" means any of the transactions included in the definition of "Competing Transactions"; however,
for purposes of the definitions of "Third Party Acquisition," each reference to "15%" in the definition of "Competing Transaction" should be replaced with "50%."
e. If
this Agreement is terminated (A) by Parent pursuant to Section 8.01(a)(vi) or Section 8.01(a)(vii) or (B) by the Company pursuant to
Section 8.01(a)(vi), the Company shall pay to Parent an amount equal to Parent's and Merger Sub's Reimbursable Expenses up to a maximum amount of $1,500,000. If the Company terminates this
agreement pursuant to Section 8.01(a)(viii), Parent shall pay to the Company an amount equal to the Company's Reimbursable Expenses up to a
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maximum
amount of $1,500,000. Any payments pursuant to this Section 8.03(e) shall be made within one business day of termination.
This Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time;
provided
,
however
, that, after the approval and adoption of this Agreement
by the stockholders of the Company, no amendment may be made which by Law requires further approval by the stockholders of the Company without obtaining such approval;
provided
further,
that Section 6.11(a), the last sentence of Section 9.06 and this proviso may not be amended without the written approval of Financing Sources
representing the required lenders under the Financing. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.
At any time prior to the Effective Time, any party hereto may, to the extent legally allowed (a) extend the time for the
performance of any obligation or other act of any other party hereto, (b) waive any inaccuracy in the representations and warranties of any other party contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any agreement of any other party or any condition to its own obligations contained herein
provided
,
however
, that, after the approval and adoption of this Agreement by the stockholders of the
Company, no extension or waiver may be made which by Law requires further approval by the stockholders of the Company without obtaining such approval. Any such extension or waiver shall be valid if
set forth in an instrument in writing signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01
Non-Survival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time.
Notwithstanding the foregoing, this Section 9.01 shall not limit any covenant or agreement of the parties which by its terms contemplates performance at or after the Effective Time or
Article I and Article II with respect to payment obligations.
All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed
to have been duly given upon receipt) by delivery in person, by telecopy or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.02):
if
to Parent or Merger Sub:
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with
a copy to:
if
to the Company:
with
a copy to:
a. For
purposes of this Agreement:
"
2012 Balance Sheet
" means the consolidated balance sheet of the Company and the consolidated Subsidiaries as at September 30,
2012, including the notes thereto.
"
Active Registered User
" means a user who: (i) downloaded a Company application and performed an update in the last
180 days; (ii) is currently a premium subscriber to the Company application; (iii) accessed epoc online in the last 30 days; (iv) completed a market research survey
within the last 12 months; or (v) launched an Epocrates App Network application within the last 180 days.
"
affiliate
" of a specified person means a person who, directly or indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, such specified person.
"
beneficial owner
" means, with respect to any Shares, has the meaning ascribed to such term under Rule 13d-3(a) of the
Exchange Act.
"
business day
" means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not required or authorized to close in The City of New York.
"
Closing Date
" means the date on which the Closing occurs.
"
Company Common Stock
" means shares of the Company's common stock, par value $0.001 per share.
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"
Company Material Adverse Effect
" means any event, circumstance, change or effect
("
Effect
") that, individually or in the aggregate with all other Effects, is or is reasonably likely to be (i) materially adverse to the
business, condition (financial or otherwise), assets, liabilities or results of operations of the Company taken as a whole or (ii) prevent or materially delay the performance in all material
respects by the Company of its obligations under this Agreement or the consummation the transactions contemplated hereby;
provided
,
however
, that the
foregoing clause "(i)" shall not include any Effect occurring after the date hereof and resulting from any of the following (either
alone or in combination) and no such Effect occurring after the date hereof and resulting from any of the following shall be taken into account in determining whether a Company Material Adverse Effect
has occurred: (A) changes in general economic, business, financial, technological or regulatory conditions or changes in securities or credit markets in general to the extent not having a
disproportionate effect (relative to other industry participants) on the Company, (B) general changes in the industries in which the Company and the Subsidiaries operate that do not
disproportionately and adversely affect the Company as compared to other entities operating in such industries, (C) the announcement, pendency or anticipated consummation of any of the
transactions contemplated hereby, including, but not limited to, loss of employees, customers or suppliers of the Company to the extent related to or arising or resulting from the announcement,
pendency or anticipated consummation of any of the transactions contemplated hereby, (D) acts of armed hostility, sabotage, terrorism or war, including any escalation or worsening thereof,
natural disasters, weather conditions, explosions or fires or other force majeure events in any country or region in the world, except to the extent disproportionately affecting the Company compared
to other entities operating in such industries (E) the failure by the Company to meet any industry or internal estimates, expectations, forecasts, projections or budgets for any period (except
that any Effect that caused or contributed to such failure to meet projections, forecasts or predictions shall not be excluded pursuant to this clause "(E)"), (F) changes in the stock price or
trading volume of the Company Common Stock (it being understood, however, unless otherwise
prohibited by clauses "(A)" through "(I)" of this proviso, that the facts or circumstances giving rise to any such change in stock price or trading volume may be taken into account in determining
whether there has been a Company Material Adverse Effect), (G) any adverse effect arising from or otherwise related to changes in Law or applicable accounting regulations or principles or
interpretations thereof to the extent not having a disproportionate affect (relative to other industry participants) on the Company, (H) any shareholder class action or derivative litigation
commenced against the Company since the date of this Agreement and arising from allegations of breach of fiduciary duty of the Company's directors relating to their approval of this Agreement or from
allegations of false or misleading public disclosure by the Company with respect to this Agreement or (I) any action required by this Agreement or the failure to take any action prohibited by
this Agreement or taken or not taken at the direction of Parent.
"
control
" (including the terms "
controlled by
" and "
under common
control with
") means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise.
"
Conversion Ratio
" shall be equal to the fraction having a numerator equal to Merger Consideration and having a denominator equal to the
average of the closing sale prices of a share of Parent Common Stock as reported on the NASDAQ Select Global Market for each of the ten consecutive trading days ending on the second trading day prior
to the Closing Date.
"
Environmental Laws
" means any United States federal, state or local or non-United States laws relating to (i) releases
or threatened releases of Hazardous Substances or materials containing Hazardous Substances; (ii) the manufacture, handling, transport, use, treatment, storage or disposal of Hazardous
Substances or materials containing Hazardous Substances; or (iii) pollution or protection of the environment, health, safety or natural resources.
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"
furnished
" or "
delivered
" or "
made
available
" means with respect to any document or other materials relating to the Company, that such documents or other materials: (i) were actually delivered by the
Company to Parent or its counsel prior to the date hereof, (ii) were located in the electronic data room organized by the Company in connection with the diligence investigation conducted by
Parent, or (iii) were available on EDGAR prior to the date of this Agreement.
"
Hazardous Substances
" means (i) those substances defined in or regulated under the following United States federal statutes and
their state counterparts, as each may be amended from time to time, and all regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and
Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum products, including crude oil and any fractions thereof; (iii) natural gas, synthetic gas, and any mixtures thereof;
(iv) polychlorinated biphenyls, asbestos and radon; (v) any other contaminant; and (vi) any substance, material or waste regulated by any Governmental Authority pursuant to any
Environmental Law.
"
Indebtedness
" means, with respect to any person, without duplication: i) all indebtedness of such person, whether or not
contingent, for borrowed money, including all obligations of such person evidenced by notes, bonds, debentures or other similar instruments; (ii) all obligations of such person for the deferred
purchase price of securities, other property or services (for the avoidance of doubt, specifically not including deferred obligations relating to services or benefits received over time after the
Closing such as leases (other than capital leases) and long term supply contracts); (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with
respect to property acquired by such person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property),
synthetic leases or hedging arrangements; (iv) all obligations of such person as lessee under Leases Documents and other Contracts that have been or should be, in accordance with GAAP, recorded
as capital leases; (v) all obligations, contingent or otherwise, of such person under acceptance, letter of credit or similar facilities; (vi) all indebtedness of others referred to in
clauses "(i)" through "(v)" above guaranteed (or in effect guaranteed) directly or indirectly in any manner by such person, and (vii) all Indebtedness of others referred to in clauses "(i)"
through "(vi)" above 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 (including accounts and contract
rights) owned by such person, even though such person has not assumed or become liable for the payment of such indebtedness.
"
Information Security Incident
" means any theft or unauthorized Processing, unauthorized use, unauthorized disclosure or unauthorized
acquisition of, or unauthorized access to, Personally Identifiable Information.
"
Intellectual Property
" means (i) United States, non-United States and international patents, patent applications and
statutory invention registrations, (ii) trademarks, service marks, trade dress, logos, trade names, corporate names and other source identifiers, and registrations and applications for
registration thereof, (iii) copyrightable works, copyrights, and registrations and applications for registration thereof, and (iv) confidential and proprietary information, including
trade secrets and know-how.
"
Key Employee
" means any employee with the title of Vice President (or comparable designation) or above.
"
Key IP Employees
" means the individuals listed on Schedule 9.03A.
"
knowledge of the Company
" means the actual knowledge, after reasonable inquiry, of the individuals listed on Schedule 9.03B.
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Table of Contents
"
person
" means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.
"
Personally Identifiable Information
" means any specific and unique information relating to an identified or identifiable natural person
(such as name, postal address, email address, telephone number, date of birth, Social Security number (or its equivalent), driver's license number, account number, credit or debit card number,
identification number, health or medical information (including medical account numbers).
"
Privacy Laws
" means all applicable Laws relating to the privacy, confidentiality or security of Personally Identifiable Information.
"
Process
" or "
Processing
" means any operation or set of operations performed upon
Personally Identifiable Information, whether or not by automatic means, such as creating, collecting, procuring, obtaining, accessing, recording, organizing, storing, adapting, altering, retrieving,
consulting, using, disclosing or disposal.
"
Registered User
" means a user that has registered for the Company's products or services.
"
Reimbursable Expenses
" means any and all out-of-pocket fees and expenses (including, without limitation, legal,
investment banking, accounting, banking and consulting fees and expenses) actually incurred in connection with the due diligence investigation, the Merger, this Agreement and the consummation of the
Transactions contemplated hereby (subject to reasonable documentation).
"
Requisite Company Stockholder Approval
" means the adoption of this Agreement by holders of a majority of the issued and outstanding
Shares, entitled to vote in accordance with the DGCL and the Governing Documents in favor of adopting this Agreement.
"
Subsidiary
" or "
Subsidiaries
" shall mean, when used with reference to a party, any
corporation or other organization, whether incorporated or unincorporated, of which such party or any other subsidiary of such party is a general partner (excluding partnerships the general
partnership interests of which held by such party or any subsidiary of such party do not have a majority of the voting interests in such partnership) or serves in a similar capacity, or, with respect
to such corporation or other organization, at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others
performing similar functions is directly or indirectly owned or controlled by such party or by any one or more of its subsidiaries, or by such party and one or more of its subsidiaries.
"
Taxes
" shall mean any and all taxes, fees, levies, duties, tariffs, imposts and other similar charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority or taxing authority, including, without limitation: taxes or other
charges on or with respect to income, franchise, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration and documentation
fees; and customers' duties, tariffs and similar charges.
"
Tax Return
" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
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Table of Contents
b. The
following terms have the meaning set forth in the Sections set forth below:
|
|
|
Defined Term
|
|
Location of Definition
|
Action
|
|
§ 3.11
|
Agreement
|
|
Preamble
|
Assumed Option
|
|
§ 2.04(a)
|
Assumed RSU
|
|
§ 2.04(b)
|
Blue Sky Laws
|
|
§ 3.06(b)
|
Book-Entry Shares
|
|
§ 2.02(a)
|
Certificate of Merger
|
|
§ 1.02
|
Certificates
|
|
§ 2.02(a)
|
Change in the Company Recommendation
|
|
§ 6.01(b)
|
Closing
|
|
§ 1.02
|
Closing Date
|
|
§ 1.02
|
Code
|
|
§ 2.02(g)
|
Company
|
|
Preamble
|
Company Board
|
|
Recitals
|
Company Copyrights
|
|
§ 3.17(a)
|
Company Disclosure Schedule
|
|
Article III (Intro.)
|
Company Licensed Intellectual Property
|
|
§ 3.17(d)
|
Company Marks
|
|
§ 3.17(a)
|
Company Owned Intellectual Property
|
|
§ 3.17(c)
|
Company Patents
|
|
§ 3.17(a)
|
Company Permits
|
|
§ 3.07(a)
|
Company Preferred Stock
|
|
§ 3.03(a)
|
Company Recommendation
|
|
§ 6.01(b)
|
Company RSUs
|
|
§ 2.04(b)
|
Company SEC Reports
|
|
§ 3.08(a)
|
Company Stock Awards
|
|
§ 3.03(a)
|
Company Stock Options
|
|
§ 2.04(a)
|
Company Stock Option Plans
|
|
§ 2.04(a)
|
Company Stockholders' Meeting
|
|
§ 6.02
|
Company Triggering Event
|
|
§ 8.01(b)
|
Competing Transaction
|
|
§ 6.04(f)
|
Confidentiality Agreement
|
|
§ 6.03(b)
|
Contingent Workers
|
|
§ 3.13(d)
|
Continuing Employee
|
|
§ 6.05
|
Content
|
|
§ 3.29
|
Contract
|
|
§ 3.20(a)
|
Database
|
|
§ 3.28(d)
|
Delaware Courts
|
|
§ 9.08
|
DGCL
|
|
Recitals
|
Dissenting Shares
|
|
§ 2.05(a)
|
Effect
|
|
§ 9.03(a)
|
Effective Time
|
|
§ 1.02
|
Environmental Permits
|
|
§ 3.19
|
ERISA
|
|
§ 3.12(a)
|
ERISA Affiliate
|
|
§ 3.12(e)
|
Exchange Act
|
|
§ 3.06(b)
|
Exchange Fund
|
|
§ 2.02(b)
|
Facility Commitment
|
|
§ 6.11(a)
|
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Table of Contents
|
|
|
Defined Term
|
|
Location of Definition
|
Financing
|
|
§ 6.11(a)
|
Financing Source
|
|
§ 6.11(a)
|
GAAP
|
|
§ 3.08(b)
|
Governing Documents
|
|
§ 3.02
|
Governmental Authority
|
|
§ 3.06(b)
|
Grant Date
|
|
§ 3.03(e)
|
HSR Act
|
|
§ 3.06(b)
|
Intervening Event
|
|
§ 6.04(d)
|
IRS
|
|
§ 3.12(a)
|
Insurance Cap
|
|
§ 6.06(c)
|
Law
|
|
§ 3.06(a)
|
Lease Documents
|
|
§ 3.15(a)
|
Licenses-In
|
|
§ 3.20(a)(xiii)
|
Licenses-Out
|
|
§ 3.20(a)(xiii)
|
Material Contracts
|
|
§ 3.20(a)
|
Merger
|
|
Recitals
|
Merger Consideration
|
|
§ 2.01(a)
|
Merger Sub
|
|
Preamble
|
Multiemployer Plan
|
|
§ 3.12(b)
|
Multiple Employer Plan
|
|
§ 3.12(b)
|
Non-U.S. Benefit Plan
|
|
§ 3.12(j)
|
Notice of Superior Proposal
|
|
§ 6.04(c)
|
NASDAQ
|
|
§ 3.06(b)
|
Open Source Materials
|
|
§ 3.17(k)
|
Order
|
|
§ 7.01(b)
|
Outside Date
|
|
§ 8.01(a)(ii)
|
Parent
|
|
Preamble
|
Parent Board
|
|
Recitals
|
Paying Agent
|
|
§ 2.02(b)
|
Plans
|
|
§ 3.12(a)
|
Products
|
|
§ 3.17(a)
|
Proxy Statement
|
|
§ 6.01(a)
|
Qualified Bidder
|
|
§ 6.04(b)
|
Representatives
|
|
§ 6.03(a)
|
Required Financial Information
|
|
§ 6.11(a)
|
Respective Financing
|
|
§ 6.11(e)
|
Response Window
|
|
§ 6.04(c)
|
SEC
|
|
§ 3.08(a)
|
Securities Act
|
|
§ 3.06(b)
|
Shares
|
|
§ 2.01(a)
|
Specified No Solicitation Obligations
|
|
§ 6.04(a)
|
Superior Proposal
|
|
§ 6.04(g)
|
Surviving Corporation
|
|
§ 1.01
|
Terminating Company Breach
|
|
§ 8.01(a)(vii)
|
Terminating Parent Breach
|
|
§ 8.01(a)(viii)
|
Termination Fee
|
|
§ 8.03(b)(iii)
|
Third Party Acquisition
|
|
§ 8.03(d)
|
Top Customer
|
|
§ 3.20(a)(xii)
|
Top Supplier
|
|
§ 3.20(a)(xii)
|
Transactions
|
|
§ 3.04
|
Voting Agreements
|
|
Recitals
|
2012 Balance Sheet
|
|
§ 3.08(c)
|
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Table of Contents
If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any
manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Transactions be consummated as originally contemplated
to the fullest extent possible.
This Agreement, the Voting Agreements and the Confidentiality Agreement constitute the entire agreement among the parties with respect
to the subject matter hereof and thereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned (whether pursuant to a merger, by operation of law or otherwise), except that Parent and Merger Sub may assign all or any of their rights and obligations hereunder to
any affiliate of Parent,
provided
that no such assignment shall relieve the assigning party of its obligations hereunder.
This Agreement shall be binding upon and inure solely to the benefit of each party hereto and no other person shall have third party
beneficiary rights except as expressly set forth herein. Notwithstanding the foregoing, the Financing Sources, who shall be express third party beneficiaries of, and shall be entitled to enforce and
rely on, Sections 6.11(a), 8.02 and 8.04 and this Section 9.06.
The parties hereto agree that irreparable damage would occur in the event that the provisions contained in 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, without the posting of any
bond, to prevent breaches of this Agreement and to enforce specifically the terms and provisions thereof (including consummation of the Merger, the Closing and the Effective Time) in the Delaware
Courts, this being in addition to any other remedy to which they are entitled at law or in equity. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of
any other remedy.
Subject to Section 6.11(a), this Agreement shall be governed by, and construed in accordance with, the laws of the State of
Delaware applicable to contracts executed in and to be performed in that State. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in
any in the Court of Chancery of the State of Delaware in New Castle County, Delaware (unless the federal courts have exclusive jurisdiction over the matter, in which case the United States District
Court for the District of Delaware). The parties hereto hereby (a) submit to the exclusive jurisdiction of the Court of Chancery of the State of Delaware in New Castle County, Delaware (the
"
Delaware Courts
") (unless the federal courts have exclusive jurisdiction over the matter, in which case the United States District Court for the
District of Delaware) for the purpose of any Action arising out of or relating to this Agreement brought by any party hereto, and (b) irrevocably waive, and agree not to assert by way of
motion, defense, or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from
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attachment
or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement or the Transactions may not be enforced in or by any of
the above-named courts.
The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
Each of the parties hereto hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury
with respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement or the Transactions. Each of the parties hereto (a) certifies that 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 that foregoing waiver and
(b) acknowledges that it and the other hereto have been induced to enter into this Agreement and the Transactions, as applicable, by, among other things, the mutual waivers and certifications
in this Section 9.11.
The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against any party. Except where expressly stated otherwise in this Agreement, including any schedules, annexes or exhibits hereto, the following rules of
interpretation apply: (a) "either" and "or" are not exclusive and "include," "includes" and "including" are not limiting and shall be deemed to be followed by the words "without limitation;"
(b) "hereof," "hereto," "hereby," "herein" and "hereunder" and words of similar import refer to this Agreement as a whole, including any schedules, annexes or exhibits hereto, and not to any
particular provision; (c) "date hereof" refers to the date set forth in the initial caption of this Agreement; (d) "extent" in the phrase "to the extent" means the degree to which a
subject or other thing extends, and such phrase does not mean simply "if;" (e) definitions are applicable to the singular as well as the plural forms of such terms; (f) pronouns shall
include the corresponding masculine, feminine or neuter forms; (g) references to a person are also to such person's permitted successors and assigns; (h) references to an "Article,"
"Section," "Exhibit," "Annex" or "Schedule" refer to an Article or Section of, or an Exhibit, Annex or Schedule to, this Agreement; (i) references to "$" or otherwise to dollar amounts refer to
the lawful currency of the United States; (j) references to a federal, state, provincial, local or foreign statute or Law include any rules, regulations and delegated legislation issued
thereunder; (k) references to a communication by a regulatory agency include a communication by the staff of such regulatory agency. For purposes of this Agreement, the Company shall not be
deemed to be an affiliate or Subsidiary of Parent or Merger Sub. Unless otherwise provided herein, delivery, notice, information being communicated or disclosed, or materials being made available or
otherwise directed to Parent or Merger Sub shall be deemed to have been so delivered, noticed, communicated, disclosed, made available or otherwise directed, as the case may be, to each and both
Parent and Merger Sub. No summary of this Agreement prepared by any party shall affect the meaning or interpretation of this Agreement. All references to this Agreement shall be deemed to include
references to the "plan of merger" contained herein (as such term is used in the DGCL).
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers
thereunto duly authorized.
|
|
|
|
|
|
|
athenahealth, Inc.
|
|
|
By:
|
|
/s/ Jonathan Bush
Name: Jonathan Bush
Title: Chairman, President & CEO
|
|
|
Echo Merger Sub, Inc.
|
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By:
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/s/ Jonathan Bush
Name: Jonathan Bush
Title: Chairman, President & CEO
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Epocrates, Inc.
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By:
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/s/ Andrew Hurd
Name: Andrew Hurd
Title: President and Chief Executive Officer
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[Signature Page to Merger Agreement]
A-57
ANNEX B
January 6,
2013
Board
of Directors
Epocrates, Inc.
1100 Park Place, Suite 300
San Mateo, CA 94403
Members
of the Board:
You
have requested our opinion as to the fairness, from a financial point of view, to the holders of common stock, par value $0.001 per share (the "Company Common Stock"), of
Epocrates, Inc., a Delaware corporation (the "Company"), of the Merger Consideration (as defined below), pursuant to a draft of the Agreement and Plan of Merger, dated as of January 6,
2013 (the "Agreement"), to be entered into among the Company, athenahealth, Inc., a Delaware corporation (the "Acquiror"), and
Echo Merger Sub, Inc., a Delaware corporation and newly formed wholly-owned subsidiary of the Acquiror ("Merger Sub"). Capitalized terms used herein shall have the meanings used in the
Agreement unless otherwise defined herein.
The
Agreement provides for, among other things, the merger (the "Merger") of the Merger Sub with and into the Company, pursuant to which each outstanding share of Company Common Stock
(other than shares of Company Common Stock held in treasury or owned by the Acquiror to be cancelled, or the Dissenting Shares) will be converted into the right to receive $11.75 in cash (the "Merger
Consideration"). The terms and conditions of the Merger are more fully set forth in the Agreement.
In
connection with our review of the Merger, and in arriving at our opinion, we have: (i) reviewed and analyzed the financial terms of a draft of the Agreement dated
January 6, 2013; (ii) reviewed and analyzed certain financial and other data with respect to the Company which was publicly available, (iii) reviewed and analyzed certain
information, including financial forecasts, relating to the business, earnings, cash flow, assets, liabilities and prospects of the Company that were publicly available, as well as those that were
furnished to us by the Company; (iv) conducted discussions with members of senior management and representatives of the Company concerning the matters described in clauses (ii) and
(iii) above, as well as its business and prospects before and after giving effect to the Merger; (v) reviewed the current and historical reported prices and trading activity of Company
Common Stock and similar information for certain other companies deemed by us to be comparable to the Company; (vi) compared the financial performance of the Company with that of certain other
publicly-traded companies that we deemed relevant; and (vii) reviewed the financial terms, to the extent publicly available, of certain business combination transactions that we deemed
relevant. In addition, we have conducted such other analyses, examinations and inquiries and considered such other financial, economic and market criteria as we have deemed necessary in arriving at
our opinion.
We
have relied upon and assumed, without assuming liability or responsibility for independent verification, the accuracy and completeness of all information that was publicly available
or was furnished, or otherwise made available, to us or discussed with or reviewed by us. We have further relied upon the assurances of the management of the Company that the financial information
provided has been prepared on a reasonable basis in accordance with industry practice, and that they are not aware of any information or facts that would make any information provided to us incomplete
or misleading. Without limiting the generality of the foregoing, for the purpose of this opinion, we have assumed that with respect to financial forecasts, estimates and other forward-looking
information reviewed by us, that such information has been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments of the management of the Company as
to the expected future results of operations and financial condition of the Company. We express no opinion as
B-1
to
any such financial forecasts, estimates or forward-looking information or the assumptions on which they were based. We have further assumed that the Merger will have the tax consequences described
in
the proxy statement relating to the Merger. We have relied, with your consent, on advice of the outside counsel and the independent accountants to the Company, and on the assumptions of the management
of the Company, as to all accounting, legal, tax and financial reporting matters with respect to the Company and the Agreement.
In
arriving at our opinion, we have assumed that the executed Agreement will be in all material respects identical to the last draft reviewed by us. We have relied upon and assumed,
without independent verification, that (i) the representations and warranties of all parties to the Agreement and all other related documents and instruments that are referred to therein are
true and correct, (ii) each party to such agreements will fully and timely perform all of the covenants and agreements required to be performed by such party, (iii) the Merger will be
consummated pursuant to the terms of the Agreement without amendments thereto and (iv) all conditions to the consummation of the Merger will be satisfied without waiver by any party of any
conditions or obligations thereunder. Additionally, we have assumed that all the necessary regulatory approvals and consents required for the Merger will be obtained in a manner that will not
adversely affect the Company or the contemplated benefits of the Merger.
In
arriving at our opinion, we have not performed any appraisals or valuations of any specific assets or liabilities (fixed, contingent or other) of the Company, and have not been
furnished or provided with any such appraisals or valuations, nor have we evaluated the solvency of the Company under any state or federal law relating to bankruptcy, insolvency or similar matters.
The analyses performed by us in connection with this opinion were going concern analyses. We express no opinion regarding the liquidation value of the Company or any other entity. Without limiting the
generality of the foregoing, we have undertaken no independent analysis of any pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which
the Company or any of its affiliates is a party or may be subject, and at the direction of the Company and with its consent, our opinion makes no assumption concerning, and therefore does not
consider, the possible assertion of claims, outcomes or damages arising out of any such matters. We have also assumed that neither the Company nor the Acquiror is party to any material pending
transaction, including without limitation any financing, recapitalization, acquisition or merger, divestiture or spin-off, other than the Merger.
This
opinion is necessarily based upon the information available to us and facts and circumstances as they exist and are subject to evaluation on the date hereof; events occurring after
the date hereof could materially affect the assumptions used in preparing this opinion. We are not expressing any opinion herein as to the price at which shares of Company Common Stock may trade
following announcement of the Merger or at any future time. We have not undertaken to reaffirm or revise this opinion or otherwise comment upon any events occurring after the date hereof and do not
have any obligation to update, revise or reaffirm this opinion.
We
have been engaged by the Company to act as its financial advisor and we will receive a fee from the Company for providing our services, a significant portion of which is contingent
upon the consummation of the Merger. We will also receive a fee for rendering this opinion. Our opinion fee is not contingent upon the consummation of the Merger or the conclusions reached in our
opinion. The Company has also agreed to indemnify us against certain liabilities and reimburse us for certain expenses in connection with our services. We have, in the past, provided financial
advisory and
financing services to the Company and the Acquiror and may continue to do so and have received, and may receive, fees for the rendering of such services. In addition, we recently received a financial
advisory fee in connection with the sale of a company that shares a common board member with the Acquiror. Finally, in the ordinary course of our business, we and our affiliates may actively trade
securities of the Company and the Acquiror for our own
account
or the account of our customers and,
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accordingly,
may at any time hold a long or short position in such securities. We may also, in the future, provide investment banking and financial advisory services to the Company, the Acquiror or
entities that are affiliated with the Company or the Acquiror, for which we would expect to receive compensation.
Consistent
with applicable legal and regulatory requirements, Piper Jaffray has adopted policies and procedures to establish and maintain the independence of Piper Jaffray's Research
Department and personnel. As a result, Piper Jaffray's research analysts may hold opinions, make statements or recommendations, and/or publish research reports with respect to the Company and the
Merger and other participants in the Merger that differ from the views of Piper Jaffray's investment banking personnel.
This
opinion is provided to the Board of Directors of the Company in connection with its consideration of the Merger and is not intended to be and does not constitute a recommendation to
any stockholder of the Company as to how such stockholder should act or vote with respect to the Merger or any other matter. Except with respect to the use of this opinion in connection with the proxy
statement relating to the Merger and all other filings under the Securities Exchange Act of 1934, as amended, in accordance with our engagement letter with the Company, this opinion shall not be
disclosed, referred to, published or otherwise used (in whole or in part), nor shall any public references to us be made, without our prior written approval. This opinion has been approved for
issuance by the Piper Jaffray Opinion Committee.
This
opinion addresses solely the fairness, from a financial point of view, to holders of Company Common Stock of the proposed Merger Consideration set forth in the Agreement and does
not address any other terms or agreement relating to the Merger or any other terms of the Agreement. We were not requested to opine as to, and this opinion does not address, the basic business
decision to proceed with or effect the Merger, the merits of the Merger relative to any alternative transaction or business strategy that may be available to the Company, Acquiror's ability to fund
the Merger Consideration, or any other terms contemplated by the Agreement or the fairness of the Merger to any other class of securities, creditor or other constituency of the Company. Furthermore,
we express no opinion with respect to the amount or nature of compensation to any officer, director or employee of any party to the Merger, or any class of such persons, relative to the consideration
to be received by holders of Company Common Stock in the Merger or with respect to the fairness of any such compensation.
Based
upon and subject to the foregoing and based upon such other factors as we consider relevant, it is our opinion that the Merger Consideration is fair, from a financial point of
view, to the holders of Company Common Stock as of the date hereof.
Sincerely,
/s/
PIPER JAFFRAY & CO.
PIPER JAFFRAY & CO.
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ANNEX C
§ 262. Appraisal rights.
(a) Any
stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with
respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a
holder of record of stock in a corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in 1 or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal
rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to § 251(g) of this title), § 252, § 254, § 255,
§ 256, § 257, § 258, § 263 or § 264 of this title:
(1) Provided,
however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in
respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of the meeting of stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock
of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in § 251(f) of
this title.
(2) Notwithstanding
paragraph (b)(1) of this section, appraisal rights under this section shall be available for the shares of any class or series of stock of a
constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 255, 256, 257, 258, 263
and 264 of this title to accept for such stock anything except:
a. Shares
of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;
b. Shares
of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository
receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders;
c. Cash
in lieu of fractional shares or fractional depository receipts described in the foregoing paragraphs (b)(2)a. and b. of this section; or
d. Any
combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing
paragraphs (b)(2)a., b. and c. of this section.
(3) In
the event all of the stock of a subsidiary Delaware corporation party to a merger effected under § 253 or § 267 of this title is
not owned by the parent immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.
(c) Any
corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its
stock as a result of an amendment
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to
its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the
certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal
rights shall be perfected as follows:
(1) If
a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for notice of such meeting (or such members who received notice in
accordance with § 255(c) of this title) with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) of this section that
appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section and, if 1 of the constituent corporations is a
nonstock corporation, a copy of § 114 of this title. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the
taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or
(2) If
the merger or consolidation was approved pursuant to § 228, § 253, or § 267 of this title, then either a
constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any
class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all
shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section and, if 1 of the constituent corporations is a nonstock corporation, a
copy of § 114 of this title. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date
of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby
to demand the appraisal of such holder's shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation
shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to
appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within
10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent
to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
For purposes of determining the stockholders entitled to
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receive
either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is
given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on which the notice is given.
(e) Within
120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) of this section hereof and who is otherwise entitled to appraisal rights, may commence an appraisal proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation,
any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party shall have the right to withdraw such stockholder's demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) of this section hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) of this section hereof, whichever is later.
Notwithstanding subsection (a) of this section, a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, in such
person's own name, file a petition or request from the corporation the statement described in this subsection.
(f) Upon
the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within
20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have
demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed
for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall
also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.
(g) At
the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The
Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.
(h) After
the Court determines the stockholders entitled to an appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Court of Chancery,
including any rules specifically governing appraisal proceedings. Through such proceeding the Court shall determine the fair value of the shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation, together with interest, if any, to be paid upon the amount
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determined
to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. Unless the Court in its discretion determines otherwise for good cause shown,
interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any
surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the
stockholders entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has
submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is
not entitled to appraisal rights under this section.
(i) The
Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders
entitled thereto. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the
surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any state.
(j) The
costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a
stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
(k) From
and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section
shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record
at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e)
of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just; provided, however that this provision shall not affect the right of any stockholder who
has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or
consolidation within 60 days after the effective date of the merger or consolidation, as set forth in subsection (e) of this section.
(l) The
shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or
consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation. (k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other
distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the
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merger
or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an
appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may
be conditioned upon such terms as the Court deems just.
(l) The
shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or
consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.
C-5
FOLD AND DETACH HERE
EPOCRATES
, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
[ ]day, [ ], 2013
[ ]:[ ][ ].m. (local time)
Office of Epocrates, Inc.
1100 Park Place, Suite 300
San Mateo, California 94403
Epocrates
, Inc.
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1100 Park Place, Suite 300
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proxy
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San Mateo, California 94403
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This proxy is solicited by the Board of Directors for the Special Meeting of Stockholders to be held on [ ], 2013.
The undersigned revokes all previous proxies, acknowledges receipt of the Notice of the Special Meeting of Stockholders to be held [ ], 2013, and the Proxy Statement and hereby appoints Andrew Hurd and Matthew A. Kaminer, and each of them, each with the power to appoint his or her substitute and hereby authorizes them, as attorneys-in-fact and proxies of the undersigned, to represent and to vote as designated on the reverse side, all shares of common stock of Epocrates, Inc. (the Company) held of record by the undersigned on [ ], 2013, at the Special Meeting of Stockholders to be held at the executive offices of Epocrates, Inc., 1100 Park Place, Suite 300, San Mateo, California 94403, on [ ], 2013, at [ ]:[ ][ ].m. local time, and at any and all postponements, continuations and adjournments thereof, with all powers that the undersigned would possess if personally present, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR PROPOSAL 1, FOR PROPOSAL 2, AND, IF NECESSARY, FOR PROPOSAL 3, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT.
IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
Please view, date and promptly return this proxy in the enclosed return envelope
which is postage prepaid if mailed in the United States.
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COMPANY #
Vote by Internet, Telephone or Mail
24 Hours a Day, 7 Days a Week
Your phone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
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INTERNET/MOBILE
www.eproxy.com/epoc
Use the Internet to vote your proxy until
11:59 p.m. (ET) on [ ], 2013.
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PHONE
1-800-
[ ]
Use a touch-tone telephone to vote your proxy until 11:59 p.m. (ET) on [ ], 2013.
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MAIL
Mark, sign and date your proxy
card and return it in the postage-paid
envelope provided.
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If you vote your proxy by Internet or by Telephone, you do NOT need to mail back your Proxy Card.
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TO VOTE BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW,
SIMPLY SIGN, DATE, AND RETURN THIS PROXY CARD.
Please detach here
The Board of Directors Recommends a Vote FOR Proposals 1, 2 and 3.
1. To adopt the Agreement and Plan of Merger, dated as of January 7, 2013, by and among athenahealth, Inc., Echo Merger Sub, Inc., a direct wholly-owned subsidiary of athenahealth, Inc., and Epocrates, Inc., as it may be amended from time to time (the merger agreement).
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2. To approve, on an advisory basis, the merger-related compensation for Epocrates named executive officers.
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3. To vote to adjourn the Special Meeting, if necessary, for the purpose of soliciting additional proxies to vote in favor of adoption of the merger agreement.
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTRED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED AS THE BOARD RECOMMENDS.
Address Change? Mark box, sign, and indicate changes below:
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Please sign exactly as your name(s) appears on Proxy. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy.
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Grafico Azioni Epocrates, Inc. (MM) (NASDAQ:EPOC)
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Da Ago 2024 a Set 2024
Grafico Azioni Epocrates, Inc. (MM) (NASDAQ:EPOC)
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Da Set 2023 a Set 2024